0745GMT//Russia to increase VAT to pay for war in Ukraine; Trump says Ukraine can win back all of its territory; Russia denies it flew drones at EU airports

VAT INCREASE TO FUND WAR IN UKRAINE: The Kremlin plans to increase VAT in Russia to 22% from 20% to fund its war in Ukraine. The VAT increase will be introduced on Jan. 1 on all goods other than "basic goods" such as bread, dairy products, meat, baby products and medicines. These "basic goods" are covered by a VAT rate of 10%, which hasn't been increased. (COMMENT: Economists had been expecting this VAT increase. It will raise cash for Russia's military but it will also push up inflation across Russia. Again, Russia's civilian economy has been subverted to its military. This is a direct tax on ordinary Russians to pay for the army.)

TRUMP SAYS UKRAINE CAN 'WIN BACK' ALL TERRITORY: Donald Trump said that Ukraine can "win all of Ukraine back in its original form", an apparently major shift in policy. Trump has previously told Volodymyr Zelensky to negotiate with Putin with an eye on securing the borders as they currently stand – with the Kremlin controlling most of the eastern Donbas region and much of Zaporizhzhia and Kherson regions, as well as Crimea. "I think Ukraine, with the support of the European Union, is in a position to fight and WIN all of Ukraine back in its original form," Trump wrote on his Truth social media platform after meeting with Zelensky at the UN General Assembly in New York. (COMMENT: This appears to be yet another astonishing U-turn from Trump, who has previously tried to appease Vladimir Putin. Trump has become frustrated with what he now appears to see as Putin's reluctance to end the war in Ukraine. It's unclear, though, whether these words will be matched by deeds and whether the US will give Ukraine more arms or not.)

RUSSIA ACCUSED OF DRONE FLIGHTS NEAR EU AIRPORTS: Russia denied accusations that it ordered drones to be flown near Oslo and Copenhagen airports, forcing them to close on Monday evening for several hours. Danish PM Mette Frederiksen said that she "couldn't rule out" Russian involvement. Denmark's intelligence agency said that the country was "facing a high threat of sabotage". In Ukraine, Zelensky directly blamed the Kremlin for the attacks, although he didn't offer any evidence. (COMMENT: There isn't yet any concrete evidence that these drone flights near Oslo and Copenhagen airports were linked to Russia, although they fit with the Kremlin's "hybrid war" against the West. Russia has also been testing NATO's eastern border with drone flights into Poland and Romania.)

RUSSIA ACCUSES EU OF PLANNING MOLDOVA 'INVASION': Russia's Foreign Intelligence Service (SVR) accused the EU of planning to "occupy" Moldova after a parliamentary election at the weekend. In a statement, the SVR said that the EU was massing NATO soldiers in Romania to then move into Moldova on the pretext of quashing unrest. (COMMENT: Tension is rising in and around Moldova. Moldova's pro-EU president has already accused the Kremlin of bribing people to vote for pro-Russia candidates in the election. The accusation by the SVR is an escalation. Defending Moldova's large ethnic Russian minority is exactly the sort of pretext that the Kremlin could use to order its own invasion. Importantly, though, Russia doesn't share a border with Moldova. The SVR accusation is probably just sabre rattling and tension building, but it is worth noting.)

AVTOVAZ 'HALTS' EXECUTIVE CAR PRODUCTION: AvtoVAZ may have stopped producing the Lada Aura saloon car launched by Putin last year. Mash, a Russian-language Telegram channel, said that sales were so low that production had all but stopped at the AvtoVAZ plant. AvtoVAZ has denied this. (COMMENT: This is an embarrassing reflection on Russia's economy for the Kremlin. Putin has personally pushed the project. The Lada Aura was launched as an executive car, but Russians just don't want to buy it. Since Russia's invasion of Ukraine in 2022, inflation has pushed up the price of cars and Renault has also ended its association with AvtoVAZ. Instead, AvoVAZ has built up relations with Chinese carmakers. The problem for AvtoVAZ is that Russian consumers just don't want to buy expensive Russian/Chinese cars.)

FUEL SHORTAGES SPREAD: Fuel shortages appear to be spreading in Russia. Ukrainian drone strikes against oil refineries have knocked out around 20% of Russia's refining capacity. Russia has large stockpiles of diesel fuel but not of petrol. This means that drivers in Russia's regions, and increasingly in central Russia, are experiencing shortages of Ai92 and Ai95 grade petrol. Large chain petrol stations are generally still operating as usual, but independent petrol stations have closed as they can't afford to stockpile petrol at inflated prices. (COMMENT: Ukraine's drone strikes against Russia's oil refineries have been one of its standout strategic successes of the war. By knocking out Russia's oil refining capacity, Ukraine is bringing the war to ordinary Russians.)