We’re getting whiplash from how fast the narratives coming out of the Russia-Ukraine talks are changing.

The day started on an optimistic note as the Financial Times reported that the two sides had made “significant progress” on a peace plan. A 15-point draft document discussed by negotiators on Monday would see Russian troops withdrawn from the country in return for Kyiv promising not to join Nato and host foreign military bases and weapons on its territory.

Talk of a breakthrough was bolstered by Russian Foreign Minister Sergei Lavrov who said that the two sides were close to an agreement, and Ukrainian President Voloymyr Zelensky who said that the negotiations were becoming “more realistic.”

But then… Ukrainian presidential adviser Mykhailo Podolyak played down the FT’s talk of progress, writing on Twitter that the draft “represents the requesting position of the Russian side. Nothing more. The Ukrainian side has its own positions.”

Zelensky calls on US lawmakers to back no-fly zone: In a speech to US senators and representatives yesterday, the Ukrainian president urged lawmakers to back a no-fly zone over the country and send air defense systems to counter Russia’s air force.

The idea of a no-fly zone might be gaining traction in Congress, writes Axios. Some lawmakers are putting forward proposals they claim are less likely to trigger WW III, such as jamming Russia’s radars or establishing a limited no-fly zone over a part of the country. One senator is promoting an international airlift, first pitched in this op-ed in the Wall Street Journal which proposes that Egypt and other countries not hostile to Russia fly medical and food supplies into the country.

Just a reminder: A no-fly zone isn’t a no-fly zone unless you’re willing to shoot down the other guy’s aircraft — and that sounds an awful lot like Nato countries entering into a shooting war with Moscow.

The Biden administration signed off on USD 800 mn in new military aid following Zelenskiy’s speech, the White House announced.

The rhetoric coming out of Washington and Moscow doesn’t exactly shout ‘diplomacy at work’: Biden branded Putin a “war criminal” after signing off on the aid package, a remark described as “unacceptable and inexcusable rhetoric” by Kremlin spokesperson Dmitry Peskov.

PLANET WAR FINANCE-

Russia is on the brink of default: Interest payments due on USD bonds sent yesterday might not reach the bondholders, leaving the government staring down the barrel of a sovereign default, the FT says. The government sent USD 117 mn in coupon payments for processing but Russian Finance Minister Anton Siluanov was unable to guarantee whether the US bank would clear the transaction, Russian newswire Ria Novosti said. The government will officially be in default if the payment doesn’t go through in the next 30 days.

Sanctions do not interfere with bond payments -US treasury: The Biden administration’s raft of sanctions on Russia’s financial system and central bank do not prevent the government from repaying its USD debt, a treasury spokesperson said yesterday, according to Bloomberg.

SANCTIONS-

• Japan is set to revoke Russia’s most-favored nation trade status, a move that would allow Japan to slap aggressive tariffs on Russian goods without contravening WTO rules.
• Switzerland has expanded its sanctions on Russia, adding further restrictions on more than 200 companies and individuals.