First, see the post from the BBC correspondent, Steve Rosenberg: X avatar for @BBCSteveR
On Saturday, Vladimir Putin seemed to suggest the war in Ukraine was “coming to an end.” Today one Russia paper claims that “trying to interpret what he meant is like fortune-telling.” And will there, or won’t there, be talks with Europe? #ReadingRussia
But then note an alternative view provided herein by the FT [here].
I could perhaps marry the two by highlighting that I think critical angle here is that Moscow and Kyiv have cooled on a US led peace process, but I think there are reasons to suspect that both sides might appreciate a European led process.
From the Ukrainian side, I think they never really trusted Trump, and saw him just as a Russian asset trying to impose a Moscow plan on Ukraine. They were never going to accept that and were just buying time in the US negotiations until a time where they were sufficiently militarily self sufficient so that they could tell Trump to go and F**k himself. That time is now.
And even Moscow has I think run out of patience with Trump – and the half baked and half arsed negotiation process. There is no point from Moscow’s perspective if Trump is trying to impose a bad deal on Ukraine if he cannot deliver it and by pushing such a pro Russian deal it just serves to rally Europe behind Ukraine.
That is actually what has happened. I think Moscow is also even more distrustful of US intentions after decapitation operations in Venezuela and Iran, following similar endgames in Syria, Iraq, and perhaps the Kremlin thinks that Havana, and Moscow could be next.
So the US is being sidelined now in negotiations and I think that creates a window for Europe to step in. Putin is hinting of that by suggesting Schroeder as a potential peace arbiter – that will never fly. But I have also heard Merkel mentioned. The point for Europe is that it was whinging about being sidelined in the US – Russia talks on peace in Ukraine, but with the US now sidelined, there is a vacuum that it needs to fill. If Europe wants to shape the end game in Ukraine, and the negotiation process, it needs to step up and start negotiations.
But why does Russia finally interested in a peace in Ukraine? Well, the irony here is that many people thought the war in Iran would play to the advantage of Russia, boosting oil and energy prices, and providing Russia with a get out of jail card as there was much to suggest that sanctions had finally been having an effect in late 2025, early 2026, with the budget deficit rising, the trade surplus narrowing and growth slowing – the economy was in recession. Indeed, even with the positive short term oil price shock, the Russian government just shaved close to a full percentage point off its full year 2026 real GDP growth forecast to just 0.4%.
Actually the economy is in recession and I still expect a negative full year print.
The reality though is that the war in Iran might have boosted oil and energy prices in the short term, but that it has fractured OPEC, with the UAE opting to exit the organisation and promising to pump baby pump. From Moscow’s perspective this might well suggest a future oil price war, with more supply coming on stream a year or so out, just at the time when current short term higher oil prices will destroy demand as the global economy slows.
For Russia this would be catastrophic as it could suggest a year out from now oil prices could be lower than at the start of the Iran war, and if Russia then suffers still from the one third Urals price discount from sanctions then that could suggest $30-40 a barrel price for Urals.
Meanwhile, if the outlook is for an oil supplier free for all, in terms of trying to take market share, Russia is in a terrible position, as a combination of sanctions and Ukrainian deep strike drone attacks means that Russia has not even been able to meet its existing OPEC production quota.
Combine that with years of underinvestment and Russia is in no position to make up for lower oil prices with increased production. Such an oil price/supply scenario would mean a melt down for the Russian economy – think 1998 style crash. Indeed, I think this is what Russian economists and advisers to Putin are telling him, hence his new found willingness to talk peace.
But I think other factors are coming to mind for Putin: First there is Russia’s increasingly difficult battlefield position, with Ukraine’s use of technology and drones having stabilised the battlefield in its favour, while still causing huge monthly casualties for Russia. Likely these are still running at tens of thousands a month, with Russia now seeming to be struggling to make up for with recruitment.
Ukraine has used tech/drones to make up for its manpower deficiencies and it is now gaining territory, albeit at a slow pace also. Seemingly Ukraine’s own defense industry is in SuperDrive and further powered up by increasing cooperation/integration with Europe. Ukrainian innovation – winning the war of iteration – is combining with European manufacturing capability to deliver Ukraine scale manufacturing in drones to overwhelm Russia.
That’s the outlook at least as seen from Moscow. Rusisa has lost offensive momentum, is struggling to defend the territory it hold and perhaps is worried about a potential collapse in its front lines when faced with a superior drone force.
Second, Putin is perhaps understanding that because of his war on Ukraine, Europe is finally getting its defense spending and military industrial complex in order. Germany is set to rack up its defense spending to well over €100 billion this year, and if European NATO averages a 2.5% of GDP defense spending, on a $35 trillion European economy, that is already close to $900 billion, over four times Russia’s defense spending. And with Turkey spending 4% of GDP, Poland and the Balts close to 6%, the actual total is likely to be much higher. And that’s not even including Ukraine which is spending perhaps $80-100 billion a year at present.
Note also that with Russia’s defense spending it has to cover broader defense commitments, including looking East to guard against China, and its own ambitions in Africa, Central Asia and the South Caucasus. So what it can deploy West to counter its now even longer border with NATO (after Finland joined) is much less. It feels very similar now to the 1980s arms race between the Soviet Union and NATO, which ultimately Moscow lost, and which led to catastrophic consequences for Moscow in terms of the collapse of the USSR.
Already Russia’s over-reach in Ukraine has seen it unable to support its strategic interests in Armenia, Syria, Africa – note recent developments in Mali. And upfront on Russia’s borders, its neighbours, Finland, Poland, Ukraine and Türkiye are now spending big on defense and already have very capable military machines. Russia is losing the war in Ukraine and the war for military industrial supremacy in Europe, and that situation is only going to get worse if oil prices eventually go much lower, as seems likely.
The danger for Moscow is that continuing the war in Ukraine risks a defeat in Ukraine but also a strategic defeat in Europe, which could extend to domestic unrest and regime change in Russia itself. The war is Ukraine risks becoming existential for Russia, if it was not seen as existential for Putin himself.
Meanwhile, my own contacts suggest that UAE is finally increasing KYC constraints on Russian capital operating out of Dubai et al, I think annoyed at
Russian support for Iran, but also I think responding to Russian requests. This could further tighten the broader sanctions regime around Russia, making it increasingly difficult to transact this war.
Putin started a war of choice on Ukraine, but this war looks increasingly likely to sink the Russian economy and Putin with it.
Linked here I think is the realisation in Europe, that with the US backstop weakening, and given the existential threat from Russia, the keys to European security lie in Ukraine being able to last out as long as possible so as to enable Europe to invest in defense to secure autonomous defense capability.
This has changed the whole narrative around Ukraine needing NATO membership to one of European NATO needing Ukraine for its security. NATO membership for Ukraine is now almost irrelevant as it is Ukraine that increasingly provides the defense solutions for Europe.
And herein is why the EU was so quick in December to agree on the €90 billion funding facility for Ukraine, and others, including Norway, the U.K., Canada et al are now writing big cheques for Ukraine. Ukraine’s financing for a long war is assured for the next 2-3 years, at least, and with the Russian economic outlook deteriorating, that must be unnerving the Kremlin as its financing outlook looks to be clouded with uncertainty.
Perhaps in all this, the defeat of Victor Orban in Hungary has also made Putin realise that he no longer really has routes to stall funding to Ukraine.
Third, the war in Iran seems to have unchained Ukraine from holding to any constraint in terms of launching deep strikes on Russia.
Note that while Ukraine was dependent on supplies of long range missiles (Storm Shadow, Scalp, HIMARS, ATACMS) from the US, and the West, it was compelled to operate these within the constraints set by the West. These were typically not to attack assets in Russia, which could impact on global markets, and particularly oil and energy prices and markets.
But over time Ukraine has developed its own deep strike missile capability and, even prior to the war in Iran, had ratcheted up attacks on Russian energy infrastructure. These attacks though were still tempered by Western lobbying to limit impact on global oil prices.
However, such constraint disappeared with Trump’s attacks on Iran as Ukraine understood that if the US no longer appeared to have concerns about its actions raising oil prices why should Ukraine have cares – and especially when the US seemed to be acting against Ukrainian interests by lifting sanctions on Russian oil companies.
The gloves were off but also reflected Ukraine’s increasing defense autonomy from the US, and the reduced leverage then of the Trump regime over Ukraine. The result is that Ukraine has the ability to bring the war home to Russia – and that was seen in Putin’s call to Trump to request a ceasefire with Ukraine to secure Moscow’s Victory day parade.
Fourth, perhaps the US strike against Iranian leaders, has made Putin fearful that he might also be a target now for Ukraine – this comes as there is evidence that Putin is becoming increasingly paranoid about his own security, and domestic gripes about the Kremlin’s tightening restrictions on the internet.
Fifth, Putin has probably given up on the prospect of Trump forcing Zelensky to bow to Russia’s demands. Importantly there is a new confidence in Ukraine, as it has diversified away from reliance on US financing and kit, and is now able to tell Trump to go and …. himself if he tries again to force a peace on Ukraine.
But also I think Putin might be minded to think that US midterms will weaken Trump and his ability to push any deal supportive to Russia. The next Congress is likely to be much more pro Ukrainian in outlook. This likely means that Putin will want to try and cut a deal before midterms.
Sixth, I just wonder here whether Putin is looking to use the cover of a US defeat in Iran, to mask the ignominy of his own defeat in Ukraine. A good time to bury bad news. And it makes the pain of a Russian defeat in Ukraine less painful if the US is suffering similar humiliation at the hands of Iran.
All the above suggests to me that Putin finally wants to talk peace – and seriously. Obviously trying to nominate Schroeder as his European envoy is not going anywhere – he is already seen to have taken Putin’s forty pieces of silver. But European politicians have indicated in recent days a willingness also to talk to Moscow – see comments from the Finnish President, Stubb.
Notable here though is the recognition that the US brokered peace procsss is dead – Witkoff, Kushner, et al, are just not taken seriously in Ukraine, Europe, or perhaps even also now in Moscow. One useful arbiter for peace talks would be Turkey – a partner still trusted by both Kyiv and Moscow. It will be interesting here if we see some rehabilitation of the Istanbul peace process, but with a stronger European presence.
In terms of what the shape of any deal could be, I think it’s likely close to what I have long argued which is the front lines remain as is, frozen, NATO membership for Ukraine is no longer an issue if it is given State of Israel type guarantees of assured arms supplies from the West – it is given whatever it takes to defend itself, and has. Or constraints placed on its own conventional military capability.
And as noted above, the debate has moved on from what NATO can do for Ukraine to what Ukraine can do for NATO. And some deal to fast track Ukrainian EU membership, or at least give it a timeframe (2030 membership is realistic) with financing assurances.
Moscow could get some sanctions moderation but with strong snap back provisions for breaking the terms of a peace. And Russia should be made to pay reparations – the $330 billon in immobilised CBR assets in Western jurisdictions would be a good starting point there.
On this latter point note suggestions in a recent Politico piece that the Dutch government is looking to resurrect the debate in the EU on the use of these assets to support Ukraine.
Watch that space – why should European taxpayers pay for Putin’s war on Ukraine when Russian taxpayer cash is sitting doing nothing in Western jurisdictions.
Reprinted from the author’s @tashecon blog. See the original here.
The views expressed in this opinion article are the author’s and not necessarily those of Kyiv Post.