U.S. Warns Conflict Would Hurt China’s Interests: Ukraine Update

(Bloomberg) -- The U.S. said any conflict would hurt China’s international interests. NATO’s chief rejected a demand made by Russian President Vladimir Putin and Chinese President Xi Jinping that the military alliance halt any expansion eastward, reasserting that European states have the right to choose their own paths. 

Putin, in Beijing for the opening of the Winter Olympics, met with the Chinese leader on Friday to exchange views and pledge a bilateral friendship with “no forbidden zones.” Meanwhile, Russia’s foreign minister brushed off U.S. claims that Moscow plans to release a fake video as a way to justify an invasion. 

Moscow has repeatedly denied that it plans to attack Ukraine, while the U.K. and U.S. say it has massed almost 130,000 troops close to the border. Russia has decried the use of NATO forces near Russia’s frontiers. 

Key Developments

• Putin’s Financial Fortress Blunts Impact of Threatened Sanctions
• Putin Courts China’s Xi for Help in Showdown With the West
• Russia Signs Energy Deals With China as Relations With West Sour
• Ukraine Briefing Spurs Greater Urgency on Sanctions in Congress
• What we know so far about potential U.S.-EU sanctions on Russia
• Where military forces are assembling around Russia and Ukraine

All times CET

U.S. Says Conflict Would Hurt China’s Interests (7:14 p.m.)

Biden administration officials have cautioned Beijing that conflict between Ukraine and Russia would affect China’s international interests, White House Press Secretary Jen Psaki said following the meeting between Xi and Putin. 

“We’ve also conveyed that a destabilizing conflict in Europe would impact China’s interests all over the world and certainly China should know that,” Psaki told reporters on Friday after she was asked about U.S. reaction to the meeting between the two American adversaries.

The Biden administration, she said, has its own relationship with China in which “we engage directly at a very high level.” But she added that “our focus right now is continuing to unite with allies and partners to respond decisively if Russia further invades Ukraine.”

Lithuania Seeks Greater Deterrence Efforts (6:28 p.m.)

Lithuanian Foreign Minister Gabrielius Landsbergis called on NATO to step up deterrence on the eastern flank of the alliance as Russia moves more troops to Belarus.

“The growing number of Russian military forces in Belarus raises questions not only about the future of Belarus as an independent state but also increases the threat to the security of Lithuania and the Baltic region,” Landsbergis said in a statement.

Stoltenberg Dismisses Russia-China Demand to Halt NATO (3:29 p.m.) 

NATO Secretary General Jens Stoltenberg rejected claims that the 30-member alliance has expansion ambitions as “wrong.” “This is about respecting the sovereign right of independent nations to choose their own path,” he said in an interview with Bloomberg Television. 

Stoltenberg also said that the alliance is keeping an eye on China and Russia as they coordinate more closely militarily. “They are operating more together, they have more exercises together,” he said. “Just a few days ago they had a joint naval exercise with also Iran. So of course this is something we follow and monitor.”

Baltic Leaders Show Common Front on Energy Security (2:46 p.m.) 

NATO’s Baltic members have gas reserves and a liquid natural gas terminal, making them resilient to any potential shutoff of supplies by Russia, Latvian Prime Minister Krisjanis Karins said at a press conference with his Estonian and Lithuanian counterparts. 

The three prime ministers discussed energy security at their meeting in Riga, the Latvian capital. Estonian Prime Minister Kaja Kallas said she wasn’t convinced Russia would hold off using gas supplies as a weapon.

Russia Funneling Fuel, Hardware, Drones to Donbas, Kyiv Says (1:55 p.m.) 

Ukrainian intelligence services indicated that Russia continues to supply Kremlin-backed militants and Russian military personnel in the separatist-controlled areas in the eastern Donbas region, the Defense Ministry in Kyiv said in a statement.

Russian authorities dispatched 9,000 tons of fuel, several tanks, armored vehicles, self-propelled artillery units, Russian-made drones and other weapons by rail and road to Donetsk and Luhansk on Ukraine’s eastern border, the ministry said.

U.K. Backs U.S. Claim of Fake Video (1 p.m.)

U.K. Prime Minister Boris Johnson’s office said U.S. claims that Russia plans to make a graphic video of a Ukrainian attack to justify an invasion were “credible and extremely concerning.” 

“We’ve conducted our own analysis on this intelligence and share the US’s conclusion,” Johnson spokesman Max Blain told reporters at a regular briefing. The U.K. is “considering options for further military deployments to support NATO’s eastern flank”, Blain added. 

“We have high confidence Russia is planning to engineer a pretext blaming Ukraine for the attack in order to justify a Russian incursion into Ukraine,” Blain said. Russian Foreign Minister Sergei Lavrov earlier called the U.S. allegations “delusional.” 

Finland Bemoans EU Inaction (12:55 p.m.) 

Finland’s President Sauli Niinisto said the European Union must recognize that when its members are pulled into the Russia-Ukraine fray, it is also affected. 

Speaking to reporters in Helsinki, Niinisto referred to Russia’s demand that NATO agree not to expand eastward, which would effectively close the door to the military alliance for Finland and Sweden -- although neither Nordic country has applied to join NATO. The EU’s lack of response on the subject stands in contrast to the solidarity that typically emerges quickly during financial crises, Niinisto said. 

NATO Chief to Depart After Central Bank Appointment (11:51 a.m.) 

NATO’s Stoltenberg has been appointed governor of Norway’s central bank and will take up the post later this year.  

NATO chief since 2014, Stoltenberg has pledged to serve out his term, which ends Oct. 1. The U.S. and Germany were among countries that had asked Stoltenberg, who’s leading the alliance’s talks with Russia over its military buildup near Ukraine, to stay on, Norwegian newspapers had reported.

Kremlin Says No Basis for Putin-Zelenskiy Meeting (11:40 a.m. CET)

There’s no basis yet for a meeting between Putin and Ukrainian President Volodymyr Zelenskiy on the tensions, Kremlin spokesman Dmitry Peskov said. 

“For this there needs to be an understanding of what will come out of it and what will be discussed, and there isn’t one yet,” Peskov said on a conference call. The same goes for another so-called Normandy summit that would include the leaders of France and Germany to discuss eastern Ukraine, he said. 

Turkish President Recep Tayyip Erdogan reiterated his offer to mediate between the two sides but Peskov said any visit by Putin to Turkey would be focused on bilateral issues. 

Putin, Xi See ‘No Forbidden Zones’ (11:17 a.m.) 

Putin and Xi see no limits to the Russia-China friendship and “no forbidden zones” in cooperation between their countries, the two leaders said in a joint statement after talks in Beijing -- their first face-to-face meeting since 2019.  

China “treats with understanding and supports” Russia’s demands for binding security guarantees from the U.S. and NATO, and the two states oppose further expansion of the military alliance, according to the statement.

The pair also said in the statement that Russia opposes Taiwan’s independence in any form. The two leaders described the “new type” of relations between Moscow and Beijing as superior to the Cold War-era blocs.

YouTube Blocks Separatist Accounts (10:55 a.m.)

YouTube blocked several accounts associated with separatists in two eastern Ukraine regions, Tass reported, citing media representatives of the self-proclaimed republics. 

The Luhanskinformcenter in the unrecognized Russian-backed Luhansk People’s Republic and the Ministry of Information in the Donetsk People’s Republic were among the channels affected, Tass said. 

The moves could expose Alphabet’s Google, which owns YouTube, to new criticism in Russia, where it’s under increasing pressure from the government. The company is facing potentially huge fines for blocking a Russian TV channel’s account on the video service and in December was hit with a $95 million penalty for not removing content. 

Russia Blamed for German Energy Cyber Attack (11:00 a.m.)

A Russia-linked cybercrime gang was allegedly responsible for ransomware attacks that took down a swath of Germany’s fuel-distribution system this week. Hackers using “Black Cat” ransomware infected computers at Mabanaft GmbH and Oiltanking GmbH Group, say people familiar with an investigation of the breaches.

While there’s no confirmed link to the Russian state, the attacks come as the U.S., U.K. and others warn of the risk of cyberattacks as part of a campaign to put pressure on Europe for its support of Ukraine. 

Lavrov Calls U.S. Claim of Fake Video ‘Delusional’ (10:10 a.m.)

Foreign Minister Sergei Lavrov dismissed claims by the U.S. that Russia plans to produce a graphic propaganda video that purports to show a terrorist attack on Russian-speaking people.

“I read on the internet that the State Department made some statements that Russia is allegedly preparing a fake video with an apparent attack by Ukrainian soldiers on Donbas,” Lavrov said in a clip posted by Ren TV. “This kind of fantasy is delusional in my opinion, and they are more and more of them every day.”

U.S. officials warned previously that Moscow may be planning a false flag event that would create a justification for sending troops into Ukraine, and have said it used similar tactics when it occupied Crimea and fought a war with Georgia.

Carlsberg CEO Downplays Impact on Business (9:30 a.m.)

The Danish brewer Carlsberg A/S said its business won’t be hit too hard by a possible Russia-Ukraine conflict. Carlsberg gets less than 8% of its profit from the two countries, CEO Cees ‘t Hart said in a Bloomberg Television interview. A decade ago, eastern Europe accounted for almost half of the company’s earnings. 

Putin, Xi Meet; Russia will Supply Gas From Far East (9:13 a.m.) 

In their first in-person meeting since 2019, Putin told China’s Xi that Russia will supply 10 billion cubic meters of gas per year to China from the Far East under a new contract. 

During the summit, timed to show solidarity on the sidelines of the Winter Olympics, Putin said conditions between the two countries were of an “unprecedented nature and an example of a dignified relationship.” 

EU Warned of New Russian Cyber Threat (8:40 a.m.) 

European Union institutions were warned Thursday of a new Russian-backed cyber threat that’s been running credential harvesting activity since mid-2021, according to an alert seen by Bloomberg News. 

The alert says it’s possible the capabilities will be used for cyberespionage purposes. No institutions have been targeted yet. The alert didn’t mention Ukraine. 

The group, known as Reuse Team or Callisto, has been involved in state-sponsored espionage and criminal activity since the early 2000s, the alert said. The group has recently targeted an EU body and was involved in a campaign that targeted a European ministry of foreign affairs in 2020. It has gathered intelligence related to foreign policy in Eastern Europe and the South Caucasus, according to a 2017 report by F-Secure, a cyber security research firm. 

Gazprom Reliability in Doubt, Von Der Leyen Says (8:31 a.m.) 

Gazprom is abiding by its contracts with the EU but unlike other suppliers isn’t shipping more gas than planned to Europe, and that’s casting doubt on its reliability, European Commission President Ursula von der Leyen said in an interview with Les Echos and Handelsblatt.

Gazprom’s behavior is “weird,” and Russia is using gas deliveries as a way to put pressure on Europe, she said.

Von der Leyen also described the EU’s sanctions package in the event of a Russian invasion of Ukraine, which includes including shutting Moscow off from foreign capital, and controlling exports of critical goods to Russia needed in areas such as artificial intelligence, weapons, quantum computing, lasers and space technologies.

Macron to Visit Russia, Ukraine Next Week (8:21 a.m.) 

French President Emmanuel Macron will travel to Moscow on Monday and Ukraine on Tuesday, an Elysee official said, as he continues an active diplomatic role in the crisis. 

The trips will follow three calls in the past week between Macron and Vladimir Putin to discuss the Ukrainian situation.    

U.S. Lawmakers Briefed by Top Security Team (11:00 p.m.) 

U.S. lawmakers are rushing to draft a new round of potential sanctions on Russia intended as a deterrent to any aggression against Ukraine. The sense of urgency in Congress escalated following day-long briefings Thursday by top national security officials. 

Negotiations had been slowed as Democrats and the Biden administration resisted Republican efforts to impose more sanctions on Russia now. Both sides agree on the need for more punishing penalties should Russia invade Ukraine, which the Kremlin denies it plans to do. 

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