Ukraine - be very wary of a bad peace
I spent the last few days in Washington with meetings around the IMF AGM.
Of note, the consensus on Ukraine was that a Trump win the US elections and that there is some peace process between Russia and Ukraine in the weeks that follow the US election. Markets have been buying into that view for some weeks now with Ukrainian Eurobonds rallying five points plus since early October and as opinion polls began to move in favour of Trump.
I don’t buy this line from Trump that he can bring peace in Ukraine within days, even hours of taking office, as it’s a bit more complicated than all that. And the most important question is what kind of a peace is secured for Ukraine and how sustainable that it.
The Trump/Vance line seems to be that wars are bad, let’s stop the killing at all cost, so let’s just end it there. Applying the same logic in WW2, should the US have forced the UK into peace with Germany in 1941, rather than entering the war, and just accepted that Trump’s hero, Hitler, retained the whole of occupied Europe, including France, the Netherlands, Belgium et al? And that he was allowed to carry on with the holocaust? Does Trump really think Hitler would have stopped there, and held back from invasions of the UK and the Soviet Union? Really? Similarly does the Trump/Vance axis really think that Putin would be content with what he has in Ukraine and abide by any peace deal that Trump imposes? That is just naive when one considers Putin’s long track record of malign actions against Ukraine, and the West.
Take the script from a post by Pekka Kallioniemi:
https://x.com/p_kallioniemi/status/1850142464536887582?s=61&t=wYv4c8R2e5qI1ZTyZPsQiw
Russia during Putin's reign:
- Invaded Chechnya and completely destroyed Grozny
- Murdered Litvinenko in London with polonium
- Shot down MH17, killing 298
- Poisoned the Skripalis with Novichok in Salisbury
- Murdered thousands of civilians and aid workers in Syria
- Invaded Georgia
- Invaded Moldova (earlier into Transdniestr);
- Invaded Ukraine, annexed Crimea
- Bombed theater full of civilians in Mariupol
- Slaughtered civilians in Bucha
- Bombed children's hospital
- Meddled with domestic politics in Georgia, Ukraine, Moldova, and various other countries
- Conducted large-scale cyberattacks against Western nations
- Threatened the US and Europe with nuclear war
- Financed sabotage missions in Europe
- Meddled with US elections at least since 2016
-Provided Houthis targeting data of global ships
- Conduct large-scale hack-and-leak operations against US and Europe
- Use mercenaries to destabilize countries in Northern Africa
- Killed and imprisoned hundreds of journalists and activists
- Arrested and imprisoned US citizens and trade them to Russian spies and criminals
I could add many more, including Russia’s intervention in Syria in 2015 to force a migrant crisis on Ukraine, plots to kill German industrialists, waging an energy war on Europe in the lead up to the full scale invasion of Ukraine and after, backed far right and far left populist parties in the West and used bots to generally undermine democracy - albeit the latter was in support of populists like Trump, Le Pen, et al.
But we should all know that Putin is just a bad guy, not to be adulated and much less appeased if history teaches us anything.
On Ukraine specifically I do think we see peace talks whoever wins the US elections.
Both Ukraine and Russia can wage a long war, but I don’t think that is what either wants at this stage.
Ukraine has clearly suffered an enormous human and economic cost from this war - which was not of its making. The Ukrainian leadership, unlike Putin, values life, while it is uncertain about the scale of Western support in the event of a Trump victory in US elections. It could fight on, but without the advantage of US military support - which simply cannot be made up for from Europe - the human costs of an extended war could begin to rise exponentially.
Much is made of Russia’s advantage in being able to outlast Ukraine and the West in a long war which might be somewhat true, but it still brings significant risks to the Putin regime - more blood and treasure lost, risks of a repeat of the Prigozhin affair and potential rupture with key allies, particularly China. On the latter note, much has been made of reports that 12,000 troops from North Korea have appeared in Russia and are about to be sent to the frontline in Kursk. Putin might like to imply that this shows Russia’s continued ability to dig deep (albeit by calling on allies) to continue the war. But actually if anything it’s shows the weakness of Russia - that Putin has near exhausted Russian reserves - and shows some desperation by being forced to ask for help from North Korea at risk to the much more critical strategic relationship with China. Actually the deployment of North Korea troops by Putin smells of his typical approach to negotiations - try and escalate in the run up to talks to try to go into those talks from a position of strength and with some leverage. But for me, this signals that Putin wants to talk.
Putin also perhaps needs to think that Ukraine might still spurn a Trump imposed peace and using the considerable military resources frontloaded now from the Biden administration fight on. What we have seen from Russia is an inability to take and hold much of Ukraine. Ukraine is a huge country, and it would take years to conquer and quell unrest against a dogged and still determined Ukrainian resistance.
Actually I think both sides are waiting for the result of the US election, so as to try and better leverage to go into the talks. Zelensky, clearly hopes for a Harris win, which will cement US, and Western support, and allow him to go into talks with Putin suggesting that Western resources will back him for as long as it takes. Meanwhile, Putin I think imagines that his friend Trump will sell out on Ukraine and allow him near total victory in Ukraine - as noted above Ukraine is unlikely to accept that, and there is not small risk it rejects a bad deal and does fight on.
I heard the optimistic angle on Trump while in D.C. from those who have had Trump’s ear in the past. Their line is that upon taking office Trump will call Putin and demand an immediate creasefire and peace, or risk the US doubling up on support for Ukraine, with no holes barred. But the assumption still from comments from Trump and JD Vance is that Putin is ok get to keep what he currently occupies, and there is a lack of clarity what Ukraine will get in exchange. The potential permanent loss of Crimea, Donbas, much of Zaporizhiya and Kherson, will be a bitter political pill for Ukraine to swallow. It could set in motion damaging and centrifugal social and political forces in Ukraine which could permanently destabilise Ukraine. But of course that is what Putin wants as it will set the scene for future Russian interventions into Ukraine - on that point I have zero doubt and indeed that has been the track record of Putin on Ukraine throughout his period in office going back over twenty five years.
So if Ukraine is to suffer the de facto, if not de jure, loss of large swathes of its territory, it needs substantive things in exchange which have to include security assurances from the West, commitments in terms of future financing for recovery and reconstruction and I think a clear Western perspective which has to mean EU accession. Putin will inevitably try and obstruct all these.
On security, the best assurance would be NATO membership for Ukraine, or at least the territory it currently holds - imagine a kind of West Germany status for Ukraine within NATO. This would be the ultimate deterrent for Russia. But I just doubt that Trump would have the balls there to stand up to Putin on this issue, and I think there would also be resistance from Germany. A second best, and actually the only other workable solution for Ukraine would be a State of Israel style guarantee where the West commits to provide whatever military armaments Ukraine needs to defend itself short of nuclear. It gets the full range of Western military technology - think up to F35s, THAADS, Patriots, whatever, to provide an iron fist for Ukraine to cripple any future Russian attack. One might also imagine NATO assuring Ukraine of air defence, as has recently been afforded to Israel. Putin will obviously also resist this, likely demanding limitations on Ukraine’s future military capability.
On financing, the West so far has short changed Ukraine - the $100 billion a year provided to date has been just enough to keep Ukraine in the war but not win, and is short of the $150 billion a year I estimate would be needed to open the way for a Ukrainian military victory. The sum of near $150 billion would come close to matching Russian military spending. You might point to the recent $50 billion ERA facility, but that is small change really compared with Ukraine’s annual financing needs - either half a year or 3-4 months of required financing. The ERA has also taken steam away from efforts to secure the full $330 billion in immobilised CBR assets for Ukraine - the provision to Ukraine earlier would have surely ensured victory in the war. As is, I think Putin will demand all the immobilised Russian assets back as a price for peace - and Trump might roll over there, and force other Western allies to follow. The loss of the CBR assets back to Russia would blow a hole in the ERA and raise huge questions how Ukraine’s reconstruction will be funded. The US, under Trump, will inevitably step back and say, Ukraine’s recovery and reconstruction is Europe’s problem. Recovery and reconstruction costs for Ukraine are variably assessed at something around the half a trillion dollars mark. What we have seen so far with the EU only providing a four year EUR50 billion MFA facility for Ukraine, and Germany hinting it will limit future funding, intending to instead draw on the ERA and MFA’s suggests the political appetite for providing the scale of support to Ukraine’s recovery and reconstruction are just not there. Indeed, if the war ends, and Ukraine is off the front page of European newspapers, Ukraine will struggle to compete for financing with other European priorities, and especially with a global cost of living crisis and populist parties exploiting all this.
The West already missed the boat by dithering on allocating the full $330 billion in CBR assets to Ukraine, and the real danger is those assets are returned to Russia, and Ukraine will not secure future reparations, or at least not under a Putin presidency.
The reality is that Ukraine recovery and reconstruction will be underfunded, and the million plus troops returning home will be disappointed. Such a scenario would present a huge risk to social and political stability in Ukraine, post war.
On this third requirement, EU accession, yes, its is absolutely critical, but past history - the Western Balkans - suggests the EU can sometimes speak with forked tongues. And obviously Putin has plenty of agents in the EU - in Hungary, Slovakia et al who can delay or even torpedo the project.
Ukraine can absolutely succeed post war, but it needs a real reform anchor (that requires a cast iron EU accession perspective, perhaps even with a firm date of entry), adequate funding and security. Without all these I fear suboptimal economic and social outcomes, political fracture and perhaps state failure, which will be further exploited by Putin. I fear that Trump et al will force a bad peace on Ukraine which will ultimately deliver Ukraine on a plate to Putin which would have enormous security implications for Europe. Imagine here the combined military industrial complexes of Ukraine and Russia and in the hands of Moscow and targeted back at Western Europe at a time when the U.S., under Trump, is increasingly disengaged from Europe and focused on Asia. It presents a castrophic outlook for Europe.
Where is the Western and European leadership in all this?
Where have our leaders clearly expressed the existential threat to Europe and the West from Russia, and the importance then of ensuring a Ukrainian victory?
Where have our leaders explained the costs of supporting Ukraine to win the war to their own electorates? And where have they explained the huge and higher costs should Ukraine lose the war?
Where have our leaders identified alternative sources of financing a Ukrainian victory - from immobilised Russian assets?
Where have our leaders created the right institutional setting for successful Ukrainian recovery and reconstruction? Herein Ukraine needs a recovery and reconstruction agency, to plan, manage, fund, partner with private capital to take the country to EU accession. I suggested such a construct over two years ago now - blank faces and zero leadership from Western governments.
This war has lasted for more than two and a half years because of a fundamental lack of leadership in the West - the ultimate end result might be a bad peace which will pose huge existential risks still to Ukraine but also Europe and the Western alliance.