The chair of the world’s most powerful financial watchdog has called on western leaders to “think twice” before imposing sanctions on Russia, warning that some penalties risked undermining global financial stability.

Klaas Knot, chair of the Financial Stability Board, told the Financial Times that suspending Russia’s access to the Swift international payments system, which underpins trillions of dollars of transactions a year, could result in a “severe disruption in payment flows”.

“When applying severe measures, one should always think twice and also be aware of the consequences” — Klaas Knot

Vladimir Putin has eased tensions in the crisis and drawn down some Russian troops from border areas to enable “dialogue” with the west while still keeping the threat of invasion hanging over his neighbour.

US and European shares rallied after Putin said he was prepared to hold negotiations if the US and Nato agreed to discuss Moscow’s grievances, including its demand that the transatlantic alliance never admit Ukraine.

Analysts treated with caution Moscow’s latest announcement was it was ready to de-escalate, as Kyiv revealed another round of cyber attacks against government websites and banks.

Washington has disclosed more intelligence about an alleged Russian coup plot for Ukraine, but President Joe Biden reiterated yesterday there was still “plenty of room for diplomacy“.

• Explainer: Can the Minsk accords help de-escalate Russia-Ukraine tensions? French and German leaders are keen to revive stalled talks. Poland, meanwhile, is preparing for an influx of refugees fleeing Ukraine.

Thanks for reading FirstFT Europe/Africa. Have feedback on today’s newsletter? Share your thoughts with me at [email protected] — Jennifer

Five more stories in the news

1. Prince Andrew settles suit from Epstein accuser Prince Andrew has settled a lawsuit brought by Virginia Giuffre, an accuser of Jeffrey Epstein, who alleged the British royal sexually assaulted her when she was 17. The settlement includes a “substantial donation” to Giuffre’s victims charity.

2. Alexei Navalny trial at prison colony The Russian dissident could face another 15 years in prison in a trial that began yesterday. Prosecutors allege that Navalny, who denies the charges, stole Rbs356mn ($4.7mn) of donations to his Anti-Corruption Foundation, which Moscow banned last year.

3. UK beats global stocks in early 2022 A broad MSCI index tracking British companies has added 3.6 per cent in dollar terms this year, more than 9 percentage points ahead of the MSCI World index, in a sign that investors are hunting for bargains as they exit higher-growth businesses whose appeal has been tarnished by expected interest rates rises.

4. Iran calls for US commitment on nuclear deal In an interview with the FT, Iran’s foreign minister Hossein Amirabdollahian sought assurances that Washington would not abandon the nuclear accord as it did under Donald Trump, as Tehran proposed that Congress make a “political statement” on the deal.

5. Norton Rose Fulbright plans ‘pivot to China’ One of the oldest UK law firms in Hong Kong has laid out plans to refocus its business on work for Chinese companies and banksaccording to people at the firm, as the city comes under pressure from Beijing to align with the mainland.

Coronavirus digest

• The European Central Bank must consider “unprecedented” house price rises in assessing high inflation levels, executive board member Isabel Schnabel said.

• The UK is revamping its biosecurity strategy after the coronavirus pandemic exposed shortcomings in its response to biological threats.

• Prime Minister Boris Johnson’s allies are confident he can avoid being fined over lockdown-breaking Downing Street parties.

• British Airways has offered a one-off bonus to 20,000 pilots and crew in an effort to rebuild employee relations as the industry recovers.

• Opinion: We must face the looming threat of prolonged and messy but necessary debt restructuring, writes Martin Wolf.

• The FT View: A generation of British students have lost a chance to make friends, explore who they are and learn in person, writes our editorial board.

The day ahead

Nato defence ministers meet The alliance gathers in Brussels for two days to decide whether to deploy troops to south-eastern Europe amid tensions over the Ukraine-Russia border. (Reuters)

EU rule-of-law funding decision The European Court of Justice is set to decide on the legality of regulations allowing Brussels to withhold funds in the event of rule of law breaches. The FT wrote here about Poland’s latest olive branch in the dispute.

France’s dinner for military partners Emmanuel Macron will host France’s military partners in the Sahel at the Elysée Palace on the eve of an EU-Africa summit in Brussels as Paris attempts to reorganise its counter-terrorism operation in west Africa.

Inflation The UK and Canada report January consumer price index data. Economists polled by Reuters forecast Britain’s annual pace of inflation to land at 5.4 per centas it did in December, a 30-year record. Stay up to date with our inflation tracker.

• In the US: Retail sales are expected to have rebounded last month on online orders and auto purchases. Minutes from the Federal Reserve’s January meetingwhen the central bank signalled rate rises, are also out. (WSJ, FT)

What else we’re reading

Unilever’s tea business tests PE’s conscience Workers on a Kenyan tea estate are still seeking medical compensation from the consumer goods group after seven people were killed and 56 women raped in a 2007 attack fuelled by ethnic tensions. Now, CVC’s $4.5bn deal to buy brands such as PG Tips means it will also be responsible for plantations in Africa.

Citi’s Jane Fraser ditches big league dreams Citigroup has conceded its ambition of becoming a top-three Wall Street investment bank in order to focus on businesses that offer growth opportunities while being less capital intensive. But making the case for the strategy will put its chief executive’s communication skills to the test.

French billionaires face spotlight A new soap opera has been a big hit in France, but it’s not on Netflix or TF1, the biggest television network. The spectacle, which one might call The Billionaire Paradeis available via the French Senate in the form of a parliamentary investigative commission on the influence of wealthy industrialists and media magnates.

BP’s bruised but buoyant ‘worrier’ chief Shortly after taking the helm, Bernard Looney’s plan to turn the 112-year-old oil major into an integrated energy company stalled and its shares fell to a 25-year low. But Looney is still optimistic, if a little chastened from his bruising introduction.

Why the infancy of NFTs may last a long time Measured in financial terms, the market looks big: about $24bn worth of non-fungible tokens have been traded to date. But when you count users instead of dollars, the industry is tinywrites the FT’s global tech correspondent Tim Bradshaw.

Television

Apple TV Plus’s Severance is set at Lumon Industries, a mysterious company where a number of employees have been fitted with a brain implant that essentially creates two distinct minds in one body. Read our full review of the brilliant alternate-reality thriller.