Trump’s quick fixes hit a wall
U.S. President Donald Trump appears disappointed and irritated that his fast-track approach to brokering a Russia-Ukraine peace deal has stalled from the start. It’s evident that the new U.S. administration lacks a strategic plan for countering Russian aggression. Instead, the strategy seems to involve applying pressure here and there, to see how different players react. Isn't everyone expected to respond promptly to the U.S. president's demands and threats?
Russian President Vladimir Putin has decided to play along and, for now, appears to have outmaneuvered the Ukrainian leadership. Russia has managed to put unrealistic demands into Trump’s mouth. We now find ourselves in a position where Trump demands that Ukraine “repay” $500 billion (despite receiving only one-fifth of that sum from the United States) and insists on elections as a precondition for any peace deal. It’s clear why Ukraine President Volodymyr Zelenskiy rejects signing a minerals deal without security guarantees—and for a sum several times larger than the support Ukraine received. After all, we're not living in the 17th century!
The Ukrainian leadership has never outright rejected the possibility of elections. The country has endured two revolutions—sacrificing dozens of lives in 2014 during the Revolution of Dignity—to protect its democratic choice. The real issue is timing. Holding elections while Russian forces bomb cities daily, when key allies seem hesitant or even leaning toward your enemy, is perilous. Genuine elections would require easing martial law, which would create a destabilizing situation, with slim chances for Ukraine to survive as a state. The Russians understand this well. Facing challenges on the battlefield, they now seek to destabilize from within—and have planted this idea in Trump’s mind. Accepting elections before any peace deal is settled would be national suicide for Ukraine, and the leadership simply cannot agree to it, despite accusations that it is clinging to power.
Our view of Trump’s peace initiative remains unchanged—its chances of success are slim, especially if the U.S. administration continues to follow its shallow approach. Unfortunately, Trump appears to be positioning Zelenskiy as the “bad guy” derailing the deal. However, this pressure is unlikely to change reality. It’s improbable that Zelenskiy will accept terms that could harm the country.
Amid growing U.S. pressure, the Ukrainian economy remains strong, thanks to financial support secured before Trump took office on January 20th. In 2025, Ukraine will need about $38.4 billion in external funding, expected to be fully covered by the EU Ukraine Facility (€12.5 billion in 2025) and the ERA arrangement ($21.9 billion). Meanwhile, consumer inflation is accelerating (+1.2% m/m and +12.9% y/y in January), largely due to the lingering effects of the poor 2024 crop yields. The NBU continues its tightening policy, raising the prime rate to 14.5%, with further increases likely. The CAD is expanding on the back of sliding remittances and rising interest payments, but for 2025 the gap will be covered by external loans and grants. Gross international reserves remained robust at $43 billion, or 5.3 months of imports, by the end of January.
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