Trump and Putin Squeeze Zelensky on the Road to Peace

 

The Business of War and Peace

War always leads to business negotiations, where the aggressor often dictates terms while the victim is forced into compromise. Three years ago, Vladimir Putin launched an invasion of Ukraine under multiple pretexts, including NATO expansion, the "neo-Nazi" nature of the Zelensky government, and the supposed illegitimacy of Ukraine as a state. His objectives were to support the Russian-backed breakaway republics of Donetsk and Luhansk and to "demilitarize and denazify" Ukraine.

In response, the United States and its NATO allies funneled billions in military aid to Ukraine, ostensibly to counter Russian imperialism and defend democracy. However, as the saying goes—it's the economy, stupid.

Political Shifts and Changing Alliances

The year 2024 proved to be a turning point for Ukraine. With Putin securing a fourth term and Donald Trump returning to the White House, US-Russia relations entered a new phase. In this geopolitical shift, Ukrainian President Volodymyr Zelensky found himself increasingly sidelined.

Economic Consequences of War: Russia and the US

The Russian Economy Under Strain

Ukraine has become a battlefield of attrition, with neither side able to sustain the war indefinitely. Western sanctions targeted Russia’s financial, military, and energy sectors, while billions in Russian sovereign assets were frozen in Europe. However, Moscow adapted by shifting to a wartime economy, ramping up military production, and securing crude oil exports to China and India.

Despite an initial economic contraction (-1.2% growth in 2022), Russia's economy rebounded, growing by 3.6% in 2023 and 4% in 2024. However, economic challenges persist: GDP growth is projected to slow to 1-2% in 2025, inflation soared to 9.5% in 2024, and the ruble has depreciated by 21%. Russia has already spent over $200 billion on the war, diverting significant funds from social and infrastructure programs.

The US Economic Burden

The US has spent $65.9 billion on military aid to Ukraine since 2022, an expense that Trump has long opposed. Rising inflation, supply chain disruptions, and the war’s impact on commodity prices have hurt American businesses. Semiconductor production, dependent on Ukrainian neon and Russian palladium, has suffered, while over 1,000 Western companies have withdrawn from Russia, resulting in significant financial losses. According to estimates, US companies have lost $324 billion due to their exit from the Russian market.

Business First, Peace Second

Saudi Arabia Negotiations: A Business-Centric Dialogue

The recent US-Russia dialogue in Saudi Arabia focused primarily on economic interests rather than political resolutions. Notably, the discussions were led by business figures rather than diplomats. The US delegation included Secretary of State Marco Rubio, National Security Adviser Mike Waltz, and Trump’s Middle East envoy Steve Witkoff, while Russia was represented by Foreign Minister Sergei Lavrov, Kremlin adviser Yuri Ushakov, and RDIF chief Kirill Dmitriev.

The absence of Keith Kellogg, Trump’s special envoy for Russia and Ukraine, underscored the business-centric nature of the talks. Instead of leading negotiations, Kellogg was sent to Ukraine to reassure Zelensky. Meanwhile, official statements emphasized "historic economic and investment opportunities" rather than security or territorial disputes.

Oil Diplomacy: Russia’s Key Bargaining Chip

Dmitriev played a crucial role in the discussions, promoting the prospect of US oil companies re-entering the Russian market. With Russia being the world's third-largest crude oil producer, its energy sector remains a major economic pillar. Despite Western sanctions reducing fossil fuel export revenues, Moscow has continued to thrive, largely due to Chinese and Indian purchases. However, the latest US sanctions targeting Russia’s "shadow fleet" of oil tankers have disrupted this trade.

US energy companies, particularly Chevron and ExxonMobil, face financial losses due to their partial withdrawal from Russia. Chevron retains a 15% stake in the Caspian Pipeline Consortium, while Exxon exited the Sakhalin-1 project, incurring a $4 billion loss. During the Saudi negotiations, Russia proposed joint ventures in the Arctic, an area rich in untapped oil and gas reserves, signaling a potential thaw in US-Russia energy relations.

Ukraine’s Mineral Wealth: The Ultimate Bargaining Chip

With limited options, Zelensky has agreed to a minerals and reconstruction deal with Trump in exchange for US support. Under this arrangement, Ukraine would allocate 50% of future revenues from minerals, oil, and gas to a joint US-Ukraine fund for reconstruction.

Meanwhile, Putin has extended an olive branch to US businesses, offering access to rare earth minerals in Russia and occupied Ukrainian territories. Ukraine possesses approximately 5% of the world’s rare earth mineral reserves, with the majority located in regions now under Russian control. These critical resources, essential for defense, aerospace, and technology industries, are valued at $14.8 trillion. Russia now controls an estimated $12.4 trillion worth of Ukraine’s energy, metal, and mineral deposits.

Conclusion: The Economics of War and Peace

The war in Ukraine, initially framed as a battle for democracy and sovereignty, has ultimately boiled down to economic interests. While geopolitical considerations remain important, both the US and Russia are prioritizing business opportunities over ideological conflicts. With Zelensky increasingly marginalized, economic deals, not military strategies, are shaping the future of Ukraine.