President Vladimir Putin says there is still a chance of a peace deal with Ukraine, and that contacts between the two countries are continuing, mainly through their security services.

"Russia and Ukraine must in the first place reach an agreement amongst themselves. All other countries are ready to support and help. Not only the United States, but also the countries represented here," he said. Asked whether there were prospects, he answered: "In my view, yes, there are."

Putin was speaking at the plenary session of the Eastern Economic Forum in Vladivostok, TASS reported on September 3. He was careful about what the contacts amount to: "It is difficult for me to say at the moment if these can lead to a peace agreement, given the statements we have heard recently from Ukraine's top officials."

Everything else he said pointed the other way. In the same session Putin defended a decree obliging companies to pay for the defence of their own facilities, dismissed talk of a new mobilisation as an enemy “disinformation operation,” and told the audience that a budget deficit which grew by 40% in the first half was not a “critical” problem for the economy. Putin’s nod to ceasefire talks was framed by orders and the results of an expansion of the war economy.

"We need some people there"

Putin’s speech came a day after a Shanghai Cooperation Organisation summit in Kyrgyzstan. Asked whether President Volodymyr Zelenskiy and other senior Ukrainian officials were effectively immune from Russian strikes, Putin said: "As you can see, we do not carry out such strikes." Moscow needed officials willing to settle rather than to "destroy our economy in 40 days", "bring Russia to its knees" or inflict a "strategic defeat", he said, RBC-Ukraine reported.

"We need some people there," Putin said.

There is still talk to Washington resuming its mediation effort, although no meetings have happened since the US attack on Iran in February. President Volodymyr Zelenskiy said preliminary dates had been set for a visit by American negotiators: "We expect to see representatives of the US president here in Kyiv. There will be a meeting with them in Moscow and in Kyiv." Foreign Minister Andrii Sybiha told reporters he saw a "new dynamic" coming, with more active political and diplomatic engagement, Reuters reported.

But new talks are unlikely anytime soon, as the brutal tit-for-tat missile war continues to escalate. By targeting Russia’s economic assets, Putin warned that Kyiv has opened a “Pandora’s box” and Russian retaliations have been disproportionately powerful. Seizures of civilian vessels, strikes on merchant ships and threats to attack civilian aircraft amount to "state terrorism", Putin said, and "certainly complicates the possibility of conducting bilateral peace talks". Ukraine's Western allies, by staying silent about them, "become accomplices in international terrorism".

Business pays for its own air defence

However, the Russian president has now publicly admitted that Ukraine is scoring hits and causing real pain. Putin confirmed that a new decree obliges Russian companies to protect their own critical infrastructure as the state concedes that it cannot protect all of Russia’s vast territory.

"This has nothing to do with any alleged plans for nationalization. The state never had any intention of nationalizing anything," he said. "We asked our colleagues, in this case from the oil and gas sector, to take care of protecting their enterprises." Companies had started spending on it, he added, and it was "already producing the necessary results and effects".

The reason is a campaign that has moved from military targets to the civilian economy on both sides. Ukrainian forces attacked three Russian oil refineries on the night of September 1, Putin said, and all of the attacks were repelled. Energy Minister Sergey Tsivilev had reported the day before that repair work remained to be done at about 10% of facilities.

"While the special military operation continues, there is only one option: to strengthen the air defence system," Putin said. Retaliatory strikes on Ukraine were meant to make it "think twice".

No mobilisation, again

"There is no scenario today that would require mobilization," Putin said, dismissing wide-spread speculation that the Kremlin will issue a call up for 300,000-500,000 fresh troops after September’s general election.

"This is simply a planned information operation." Reports of a call-up were an information attack aimed at the results of the State Duma elections, he said, and Russians sign contracts voluntarily, unlike Ukrainians, who he said are forced to the front.

He also said Russia had no problems recruiting, and that Ukraine's armed forces were shrinking by 8,000 to 12,000 personnel a month. He gave no evidence for the figure.

Russian pro-war Telegram channels reported in July that a forced call-up could involve as many as 1.2mn people, and Ukrainian intelligence says Moscow is preparing to recruit 300,000 this year and another 300,000 next, Kyiv Post reported. Ukrainian figures put Russian losses at around 240,000 between January and July, including at least 140,000 irrecoverable, against about 232,000 contract recruits over the same period.

Western estimates cited in the same report have Russia recruiting roughly 6,000 fewer troops a month than it loses, and the Institute for the Study of War puts total Russian losses above 40,000 in August, the second consecutive month at that level.

A deficit that is fine, apparently

Russia's budget deficit grew by 40% in the first half of this year to 2.8% of GDP, against an official full-year target of 1.6%.

"Considering that we have one of the lowest levels of national debt in the world, there is nothing critical here," he said, The Moscow Times reported. That is true, but what Putin didn’t mention is the cost of servicing that debt is now eating up about 9% of budget spending – an unsustainable level that the Ministry of Finance is struggling to fund.

The rate debate is another economic sore point. The central bank's key rate stands at 14% and businesses have spent months pressing for a cut, with a board meeting due next week; analysts polled by Reuters expect a hold. Putin said it mattered that high borrowing costs should not hold back investment too much, while adding that monetary policy still had to deal with inflation risks. Annual inflation was 6.3% as of August 31, according to the Economic Development Ministry, having ticked up about 50bp from an August low on the back of rising food costs and a 2pp increase in the rate of VAT in January.

The Far East, and a quantum network

The forum is an annual event, and the Far East is a key development region. About RUB25trn ($287bn) of capital investment has gone into Russia's Far Eastern regions over 11 years, Putin said, and the region's gross product has more than tripled. Unemployment has fallen fourfold to 2.2%, a record low for the region and level with the national average.

He announced an updated development strategy running ten years to 2036, and a unified preferential regime for business across the Far East and the Arctic from January 1, 2027, with support tied to types of activity rather than to a particular special zone.

The oddest commitment was a communications one. Russia's main quantum network already runs to more than 7,800 km and connects 27 regions, including 13 cities of more than 1mn people, and Putin instructed the government and Russian Railways to extend it to every regional capital in the Far East by 2030. He also said the first oil from the Vostok Oil project would be shipped shortly, and that he wanted to "pass the ball to the new convocation of the State Duma" on improving the business climate.

The forum closed with 318 agreements worth almost RUB7trn ($81bn), excluding deals covered by commercial confidentiality, presidential adviser Anton Kobyakov said.