What is the significance of the "ice-breaking" meeting? Potential effects of the meeting between the United States and Russia.

The negotiation between the United States and Russia in Alaska is undoubtedly a significant event, but how should we view this less than 3-hour "ice-breaking journey"? Is it exceeding expectations or falling short? Trump and Putin labeled the meeting as "constructive" and "mutual respect" in a brief press conference after the talks translated, this means there were breakthroughs in the negotiations, but not complete agreement, and the dialogue will continue. In our view, the fact that the two leaders were able to sit down and negotiate peacefully is a major breakthrough in itself. Negotiation experiences between major powers in the past year have shown us that leader meetings usually set the tone and break the ice, while more complex and specific issues often require multiple discussions and negotiations to reach a consensus. Therefore, it is not surprising that there is no agreement, and our opinions mainly focus on three points: Firstly, the Alaska talks are an important step in easing the Russia-Ukraine conflict, but it is just the beginning. The short-term impact is to buy time: allowing Trump to explain to domestic audiences and allies; and also giving Russia some breathing room to delay sanctions. Secondly, the significance of the Alaska talks may lie more in the process rather than the content restarting the high-level direct dialogue, which is the most effective way to solve geopolitical problems. Therefore, it is natural that subsequent talks will gradually involve Ukraine, the EU, and other parties in the high-level dialogue mechanism. Thirdly, the key to breaking the deadlock in the Russia-Ukraine issue may not lie in Russia and Ukraine themselves. With the conflict lasting for over three years, any compromise from either side may be interpreted as "surrenderism", thus the final agreement must be multilateral. The bargaining point for Russia and Ukraine lies in using peace talks as an opportunity to negotiate for more benefits and leverage from the US and the EU. While there are many details worth reflecting on from the conference, the importance of the meeting can be seen from its location and the participants. Choosing Alaska as the venue carries both historical and contemporary implications: in 1867, the United States bought Alaska from Russia for 7.2 million dollars, creating a subtle echo between the historical "territorial transaction" and today's "sanctions game." Furthermore, geographically, Alaska avoids sensitive areas in Europe and the mainland US, reducing external interference and domestic political pressure from various parties. In terms of participants, the meeting was planned to involve two rounds and different groups for negotiations, but it was simplified to "3 on 3." Russian key participants included Lavrov (Foreign Minister), Ushakov (Presidential Foreign Affairs Assistant), Belousov (Defense Minister), Siluanov (Finance Minister), and Dmitriev (Chairman of the Sovereign Wealth Fund). Putin also brought a group of accompanying businessmen, aiming to play the economic and trade card, which was politely declined by Trump. The final meeting took the form of "leader + foreign minister," with the US represented by President Trump, Secretary of State Pompeo, and White House envoy Whittaker, while the Russian side included President Putin, Lavrov, and Ushakov. The meeting lasted only about two and a half hours, and Trump and Putin concluded the talks with a very brief press conference, indicating limited exchange on specific issues during the meeting and reflecting the US's firm stance on a ceasefire agreement. On the core issue, the negotiations between Russia and Ukraine involve complex multilateral games. The main goal of this meeting was clear to push the Russia-Ukraine conflict towards a "substantial ceasefire." However, there are significant differences in positions surrounding this goal, forming three intertwined lines of negotiation: The US stance aims to boost Trump's diplomatic influence and domestic support through a quick breakthrough in the Russia-Ukraine ceasefire. onFocus, the White House emphasized that this meeting would be a "listening tour," seeking to understand Putin's "bottom line" demands through direct dialogue. Additionally, there was an implicit element of deterrence if Putin refuses to agree to a ceasefire, he will face "serious consequences" (potentially involving new rounds of sanctions or escalated military assistance). Of particular note is the US suggestion of "accepting land swaps" (i.e., Ukraine exchanging some disputed territories for a ceasefire), and plans to quickly move towards trilateral talks between the US, Russia, and Ukraine if progress is made to convert the consensus into an actionable agreement framework. The overt demands from the Russian side aim to secure a long-term geopolitical security space. They require Ukraine to withdraw troops completely from Donetsk, Luhansk, Zaporizhia, and Kherson, ensuring their practical control over the "new territories." Russia also emphasizes that Ukraine needs to remain neutral and give up joining NATO. Additionally, negotiations are sought with the US on the lifting of financial and energy sanctions. European red lines, although not directly participating in the meeting, sent a clear message to the US and Russia through "five red lines." A ceasefire must be the top priority; territorial discussions should be based on current frontlines (opposing the cession of controlled areas); Russia must accept Western legally binding security guarantees; Ukraine must be fully involved in the negotiations; and any final agreement must be jointly approved by the US, EU, and Ukraine. Europe's concern is that if the US and Russia privately trade off Ukrainian territory, it will undermine the foundation of European security order. Our view on the US-Russia summit in Alaska can be summed up in one sentence: the direction is correct, but "let the bullets fly a little longer." Without a clear resolution to the conflict, it will be challenging to reach a consensus at the negotiation table, making this summit more likely to be a "starting point for the peace process," rather than the "end point for a comprehensive agreement." Firstly, "striving for peace," but an agreement is unlikely in the short term. The words "pursuing peace" on the backdrop of the press conference clearly express the core theme of this meeting. However, the US has already lowered expectations by characterizing the meeting as a "listening tour" and Trump suggesting in interviews that there should not be expectations of a consensus on Ukraine, implying that the initial contact between the US and Russian leaders will yield limited results. Secondly, buying time in the short term. Putin may be willing to negotiate a "phase ceasefire" in exchange for a delay in new US and EU sanctions, or even a relaxation of some economic sanctions (such as restrictions on energy exports or financial settlement barriers); while Trump could use a "ceasefire commitment" as leverage to showcase diplomatic achievements to European allies and ease domestic criticism. Thirdly, paving the way for future negotiations. Using high-level bilateral negotiations between the US and Russia as an opportunity, pushing for a trilateral high-level dialogue mechanism between the US, Russia, and Ukraine, and further involving the EU and other relevant economic entities. Fourthly, looking ahead, the key to Russia-Ukraine negotiations may not lie solely in Russia and Ukraine. In a conflict without a clear winner, it is difficult to reach peace easily. Any compromise by the involved parties may be seen as appeasement or admitting strategic mistakes. Therefore, the final agreement must be multilateral, with Russia and Ukraine leveraging negotiations to gain significant benefits from the US and EU. For Ukraine, rather than Russian troop withdrawal, more crucial may be financial assistance for post-conflict reconstruction from the US and EU, military security support, technology transfer, and market access. According to estimates from the UN in April this year, Ukraine will need at least $524 billion over the next ten years for reconstruction, whereas Ukraine's GDP in 2024 is projected to be only $190.7 billion. For Russia, the urgent need is the gradual lifting of economic and financial sanctions imposed by the US and EU, which is why Putin brought important economic officials and businessmen to the meeting. However, the possibility of Russia fully regaining its frozen foreign reserves is low. The EU's support for Ukraine's reconstruction will be an important source of revenue for Russia. Regarding territorial issues, they might not be so urgent. Following the wisdom of the ancestors, shelving disputes, maintaining the status quo, and letting time resolve them is reasonable, especially when there is no clear loser, the likelihood of establishing non-military zones is not small. How should we look at the other economic and market impacts? For the major economies in the Indo-Pacific: if negotiations between Russia and Ukraine progress, US diplomatic efforts may gradually shift towards the Indo-Pacific region; but the easing of tensions between Europe and Russia will also bring new diplomatic and cooperation opportunities. However, the additional 25% tariffs imposed by the US on India (partly due to the import of Russian crude oil) are unlikely to be lifted in the short term, at least not completely; India will need to offer more concessions for the tariffs to be reduced. In terms of the market, in the long run, the main assets that will benefit the most will be European assets. The spill-over effects of the Russia-Ukraine talks will mostly benefit Europe, boosting the euro and European stock markets in terms of risk appetite, defense and military, and post-war reconstruction. Furthermore, the logic of Europe's fiscal expansion shift will not weaken due to the start of Russia-Ukraine negotiations, but rather be reinforced by the complexities of the negotiations. The rise of European assets may not necessarily lead to a decline in US stocks, but it will likely weaken the US dollar. This is one of the important logics for our medium-term bearish view on the US dollar. Regarding the stock market, focus on the post-war reconstruction theme, but do not neglect defense stocks. According to estimates by the United Nations and the World Bank, Ukraine is expected to need at least $524 billion over the next ten years for reconstruction. Housing reconstruction accounts for the highest demand area, at 17% of total estimates. Reconstruction in transportation, energy, industry, commerce, and agriculture sectors are also crucial. Considering the long-term nature of the Russia-Ukraine issue and the US strategic withdrawal, Europe's self-reliance in defense will be an essential medium-to-long-term demand. For commodities, due to the resource endowment of Russia and Ukraine, the negative impact will be on oil and grain prices. Benefiting from the strengthening euro and expectations for reconstruction demand, copper and industrial metals will see a boost. Risk warning: significant changes in US economic and trade policies; increased risks in the Russia-Ukraine conflict; geopolitical events leading to global market fluctuations. Source: WeChat public account "Global Macro Insights," authors Shao Xiang and Wu Shuo. GMTEight editing by Chen Qiuda.