WESTERN PERSPECTIVE

Russia retaliated on Tuesday against a price cap on its oil imposed by Western countries, while its forces were involved in heavy fighting around the eastern Ukrainian city of Bakhmut.

Moscow will ban oil sales to countries that abide by the price cap that was imposed on Dec. 5, President Vladimir Putin decreed.

The price cap, unseen even in the times of the Cold War between the West and the Soviet Union, is aimed at crippling Moscow's military efforts in Ukraine - without upsetting markets by actually blocking Russian supply.

Under the cap, oil traders who want to retain access to Western financing for such crucial aspects of global shipping as insurance must promise not to pay above $60 per barrel for Russian seaborne oil.

That is close to the current price for Russian oil, but far below the prices at which Russia was able to sell it for much of the past year, when windfall energy profits helped Moscow offset the impact of financial sanctions.

The decree from Putin, published on a government portal and the Kremlin website, was presented as a direct response to "actions that are unfriendly and contradictory to international law by the United States and foreign states and international organisations joining them".

The Kremlin ban would halt crude oil sales to countries participating in the price cap from Feb. 1-July 1, 2023. A separate ban on refined oil products such as gasoline and diesel would take effect on a date to be set by the government. Putin would have authority to overrule the measures in special cases.

Russia is the world's second largest oil exporter after Saudi Arabia, and any actual disruption to its sales would have far-reaching consequences for global energy supplies.

GHOST TOWN

On the ground in eastern and southern Ukraine, Russian forces again shelled and bombed towns and cities on Tuesday. After a number of dramatic Ukrainian gains in the autumn, the war has entered a slow, grinding phase as bitter winter weather has set in at the front.

The heaviest fighting has been around the eastern city of Bakhmut, which Russia has been trying for months to storm at huge cost in lives, and further north in the cities of Svatove and Kreminna, where Ukraine is trying to break Russian defensive lines.

In Bakhmut, home to 70,000 people before the war and now mostly a bomb-wracked ghost town, Reuters reporters saw fires burning in a large residential building, while debris littered the streets and most buildings had had their windows blown out.

"Our building is destroyed. There was a shop in our building, now it's not there anymore," said Oleksandr, 85, adding he was the only remaining resident there.

Nearby, 73-year-old Pilaheia said she had long got used to the "constant explosions".

Britain's Ministry of Defence said in an update: "Russia continues to initiate frequent small-scale assaults in these areas (of Bakhmut and Svatove), although little territory has changed hands."

In Kherson, abandoned by Russian troops last month, Russian forces shelled the maternity wing of a hospital, said Kyrylo Tymoshenko, Ukrainian President Volodymyr Zelenskiy's deputy chief of staff, on Telegram. No one was hurt and the staff and patients had been moved to a shelter, Tymoshenko said.

Reuters was unable to immediately verify the reports.

The Kremlin's military campaign had set out to subdue Ukraine within days of a February invasion, but its forces were defeated on the outskirts of Kyiv in the spring and forced to flee other areas in the autumn.

Putin has responded by summoning hundreds of thousands of reservists for the first time since World War Two to fight in his "special military operation".

In the latest setback for Russia's military, a suspected Ukrainian drone reached the main base for Russia's long-range strategic bomber fleet, hundreds of kilometres inside Russian air space, on Monday. Moscow said it had shot the drone down but added at least three servicemen were killed.

It was the second time the base had been hit since the start of December, a sign that Russia has yet to plug the gap in its air defences that made the audacious attack possible.

Putin has repeatedly spoken of a desire for peace talks in comments in recent days. But his foreign minister Sergei Lavrov made clear Moscow still has a list of preconditions, including that Ukraine recognise Russia's conquest by force of around a fifth of Ukrainian territory, which it says it has annexed.

Kyiv says it is winning the war and will never agree to relinquish land.

In a late night address on Tuesday, Zelenskiy said a meeting of the military command had "established the steps to be taken in the near future."

"We will continue preparing the armed forces and Ukraine's security for next year. This will be a decisive year. We understand the risks of winter. We understand what needs to be done in the spring," he said.

RUSSIAN PERSPECTIVE

Russia is no longer planning to initiate joint projects with the European Union given that the West has been effectively waging a hybrid war against Moscow, Russian Foreign Minister Sergey Lavrov said in an interview with TASS.

According to Russia’s chief diplomat, relations between Moscow and the EU are "at historic lows" for what he said were well-known reasons. "Soon after the special military operation was launched, the EU's Brussels followed in the footsteps of the US and NATO to wage a hybrid war against us. The EU’s diplomacy chief Josep Borrell was one of the first to call for Russia’s defeat on the battlefield," Lavrov recounted.

"Naturally, there will be no more ‘business as usual’ with such counterparties. We do not intend either to knock on closed doors or initiate any joint projects," Russia’s top diplomat emphasized. "Thank God, the world is not just the European Union for us and we have lots of friends and like-minded nations elsewhere," he pointed out.

Lavrov blasted the ruling elites in the EU for harming the vital interests and well-being of their citizens. "They have been following the anti-Russian lead of the hegemon across the ocean almost in full obedience and sometimes even outdoing [the US]," he said as he pointed to the ban Washington imposed on European countries to maintain energy dialogue with Russia which, he said, had guaranteed Europeans unprecedented prosperity for decades.

** German ex-chancellor Merkel rules out her participation in Ukrainian peace process

Former German chancellor Angela Merkel, who held the post in 2005-2021, said on Tuesday the question of her participation in the potential Ukrainian reconciliation process "has not been raised."

"Such question has not been raised," she said in an interview to Italian weekly magazine Sette.

Merkel said she had no idea of how the conflict in Ukraine will end.

"It will eventually end in negotiations. Wars normally end at the negotiating table," the ex-chancellor said. "But there is a difference between a peace that was imposed - which many people, including me, do not want to happen - and open, friendly negotiations. I don’t have anything else to add."

Commenting on her government's policy towards Russia and Ukraine, Merkel said the logic of her decision-making process "still seems rational" to her.

"It was all about preventing a war, similar to the conflict that is unfolding now. We failed, but it does not mean that it was wrong to try," she said.

After the coup d'etat in Ukraine in February 2014, mass protests began in the east of the country, where the Russian-speaking majority disagreed with Kiev’s new course. In response, the Ukrainian authorities in mid-April of the same year launched a military operation in the Donbass with the use of aviation and massive bombardments of residential areas. The Minsk agreements, reached in 2014-2015, were expected to furnish the basis for a settlement in the Donbass. They were signed with the mediation of the OSCE, Russia, Germany and France.

In an interview with the German weekly Die Zeit, published on December 7 this year, Merkel said the conclusion of the Minsk agreements was an attempt to give Ukraine time to get stronger. She argued it was clear to everyone that the conflict was frozen and the problem had not been resolved, "but this is what gave Ukraine invaluable time." She expressed doubt that at that time the NATO countries were able to provide support to Kiev to the extent that they do now.

Reuters/TASS