(Bloomberg) — Russian forces continued their push toward Ukraine’s capital and President Vladimir Putin urged the Ukrainian military to mutiny, even as he held out the possibility that he might be willing to negotiate.
With the war in its second day, the Kremlin said the Russian leader was ready to authorize negotiations with Ukraine about the country adopting a “neutral” status. Putin says he invaded Ukraine to stop it from getting closer to NATO, the Western military alliance, and to force it to “demilitarize.”
The ruble and Russian stocks extended gains after Putin aide Dmitry Peskov conveyed the offer of talks in Minsk, the capital of Russia’s close ally Belarus, one of several locations from which Russian troops invaded Ukraine. Peskov later said Ukraine had rejected that offer and suggested meeting in NATO member Poland instead, before going silent on the matter.
While President Volodymyr Zelenskiy also called for negotiations, there was no indication of Ukraine acceding to Russian demands to surrender. Nor was there any sign of a halt to the fighting. Sirens warned Kyiv residents to take shelter from early morning as Ukraine’s armed forces said their units were engaging Russian armor to the north.
Zelenskiy said that Russian aircraft were attacking residential areas of the capital. Kyiv Mayor Vitali Klitschko said it had “entered the defense phase,” with shots and explosions heard across the city. “The enemy is already in Kyiv,” he said.
The offensive proceeded despite the U.S. and the European Union ratcheting up the pressure on the Kremlin with a coordinated set of sanctions overnight aimed at inflicting a heavy toll on the Russian economy. The goal, said French Finance Minister Bruno Le Maire, is “to financially isolate Russia.” The EU went further on Friday, moving to freeze assets on Putin and his foreign minister, Sergei Lavrov.
Russian markets shrugged off the moves after President Joe Biden and EU leaders shied away from the most drastic action, stopping short of barring Russia from the SWIFT international banking network and allowing exemptions for energy exports.
Read more: How War in Ukraine Threatens the World’s Economic Recovery
They were further buoyed by the suggestion of negotiations, however unclear the prospects for dialogue remains. The benchmark MOEX index was up 20% after losing as much as 45% on Thursday, while the ruble strengthened 2.7% against the dollar after hitting a record low.
Chinese President Xi Jinping told Putin in a call earlier on Friday that he supported negotiations between Russia and Ukraine, according to China Central Television. It cited Putin as saying that he was ready to conduct high-level talks.
Taking power
Still, Putin’s condition appears to be a replacement of Ukraine’s leadership, which he has called a “junta.” On Friday, the Russian president asked Ukrainian troops to help him overthrow the government.
“Take power into your own hands,” he said, addressing Ukraine’s military in a video statement before a meeting of his security council in Moscow.
Lavrov said that Moscow will only talk if Ukraine’s army surrenders. “We’re ready for negotiations at any time, as soon as the Ukrainian armed forces respond to our president’s call, stop resistance and lay down their weapons,” he said.
Russian Foreign Ministry spokeswoman Maria Zakharova dismissed Zelenskiy and his government as “puppets.” Despite the offer of talks, the assault on Ukraine is ongoing to secure the “de-militarization” of the country, she said.
In Kyiv, the Defense Ministry said that “thousands” of volunteers were signing up to fight the invasion, with 18,000 rifles handed out alone on Thursday. Russian forces continued to advance closer to the capital on the western bank of the Dnieper river, where they were being engaged by Ukrainian forces, presidential spokesman Oleksiy Arestovych said during the morning.
Watch: Biden Says Putin Has ‘Larger Ambitions Than Ukraine’
Zelenskiy said that his intelligence services had identified him as Russia’s top target, but that he is staying in Kyiv and his family will remain in the country. “They want to destroy Ukraine politically by destroying the head of state,” he said.
In a later address, he said that Ukraine was not afraid “to talk about neutral status,” but went on to demand security guarantees and say that the country’s fate depended on its army.
French President Emmanuel Macron said that he’d had a frank, direct – and rapid – conversation with Putin at Zelenskiy’s request. Macron said Zelenskiy, who hasn’t been able to reach the Russian leader, wanted him to ask Putin to stop the fighting and engage in diplomacy.
“It didn’t produce any effect so far as you can see, because the Russian president has chosen war,” Macron said.
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