This is a shortened version of The Dragon Daily, with trading comments and market data. Full coverage will resume on Tuesday, August 26.

Russian Foreign Minister Sergei Lavrov said yesterday the latest US-European plan for security guarantees to Ukraine was a “road to nowhere” if agreed without Russian participation. He once again referred to a draft Ukrainian-Russian agreement discussed in Istanbul in the early stage of the war in 2022 as a possible model for such guarantees. A day earlier, the Russian Foreign Ministry stated that Russia remained firmly opposed to any guarantees for Ukraine that would involve deploying NATO members’ military contingents in the country.

The Verkhovna Rada approved amendments to the 2025 budget law yesterday, redistributing UAH 37bn in non-military spending and raising planned revenues by reallocating UAH 8bn in bank profit tax receipts from Kyiv’s municipal budget to the state budget. The latter amount is expected to be directed as state support to Ukrainian Railways (RAILUA).

Another US diplomatic push to end the war in Ukraine has gained momentum in recent weeks, resulting, on Aug. 15, in the first face-to-face meeting between the US and Russian presidents since the start of the war. While there have been no major tangible results as yet and we are still to see indications that Russia is willing to engage in good-faith negotiations, the diplomatic process is ongoing and may produce direct talks between the Ukrainian and Russian leaders in the coming weeks. Against this backdrop, we reassess what upside potential could be unlocked in Ukrainian sovereign and corporate bonds in case a durable and sustainable settlement is negotiated, and compare it to downside risks stemming from a potential break-up of negotiations and consequent reversal of market sentiment toward an extended-war scenario and another sovereign restructuring.

This is a shortened version of The Dragon Daily, with trading comments and market data. Full coverage will resume on Tuesday, August 26.

Ukraine’s Finance Minister Serhiy Marchenko said yesterday that the 2026 state budget will be drafted under the conservative assumption that the war will last throughout the year. He expects next year’s budget deficit at $42bn in 2026 and external financing needs at $45bn, of which $35bn are already secured.

Key highlights: Ukrainian forces successfully counterattacked in Donetsk region following a localized Russian breakthrough north of Pokrovsk, erasing much of the Russian-held 15-km salient. Russian personnel losses have visibly dropped this year due to a shift in offensive tactics, while recruitment remains stable. Russia suspended mass aerial strikes on Ukraine ahead of the Alaska summit, but Ukraine continued attacking energy infrastructure inside Russia.

Ukraine’s merchandise trade deficit widened to a provisional $4.4bn in July, up from $3.9bn in June and $2.8bn in May, as imports surged 10% m-o-m to $7.6bn (+29% y-o-y), fully offsetting a 5.4% m-o-m recovery in exports to $3.3bn (+6.8% y-o-y).

Ukraine’s iron ore exports totaled 19.1 Mt in 7M25 (-8% y-o-y), implying 3.0 Mt in July, up 16% m-o-m and 21% y-o-y. In value terms, iron ore exports amounted to $1.5bn in 7M25 (-20% y-o-y), implying a 2% m-o-m drop in July to $191m (-17% y-o-y).  Steel exports dropped 9.3% y-o-y to 2.2 Mt in 7M25, implying an 8.6% m-o-m increase in July to 334 kt (-18% y-o-y). In value terms, steel exports totaled $1.3bn in 7M25 (-10% y-o-y), suggesting a 0.5% m-o-m pickup in July to $191m (-17% y-o-y).

US President Donald Trump said he aimed to negotiate a ceasefire at Friday’s meeting with Russian President Vladimir Putin and warned that Russia would face “very severe consequences” otherwise.

Naftogaz has secured a EUR 500m revolving loan from the EBRD to finance gas purchases, supported by an EU guarantee under the Ukraine Investment Framework (UIF), which covers 90% of the loan. The company did not disclose the loan terms. According to EBRD Alternate Board Director Artem Shevalev, the loan will be supplemented by a similarly structured loan of EUR 300m from the EIB and a new undisclosed grant from Norway.

The average baseload day-ahead (DAHD) electricity price stood at UAH 5,184/MWh in July, up 11.1% m-o-m but down 6.9% y-o-y, equivalent to EUR 106/MWh (+8.7% m-o-m, -15% y-o-y). August baseload electricity supply contracts at the Ukrainian Energy Exchange are currently priced at UAH 5,416/MWh, up 16% m-o-m and 7% y-o-y.

Daily crude steel production in Ukraine fell 9.6% m-o-m in July to 18.7 kt, reversing a 1.0% increase in June, bringing monthly output to 581 kt (-6.6% m-o-m, -18% y-o-y) and cumulative 7M25 output to 4.3 Mt (-7.0% y-o-y). Finished and semi-finished steel production totaled 552 kt in July (-2.0% m-o-m, -6.2% y-o-y) and 3.6 Mt in 7M25 (-2.8% y-o-y). Hot metal production reached 692 kt in July (+4.6% m-o-m, +11% y-o-y) and 4.4 Mt in January–July (+6.7% y-o-y).

Russian forces have broken through Ukrainian defenses north of Pokrovsk in Donetsk region, reportedly advancing by over 15 km in the past three days, according to Ukrainian and foreign OSINT sources. The Ukrainian military command indirectly confirmed the Russian advances, its Monday battlefield updates mentioning Russian attacks near several new villages and admitting Russian small-group infiltrations behind Ukrainian lines in the Pokrovsk sector.