Trump, Putin squeeze Zelensky on road to peace – Firstpost

It always winds down to business after a war. A powerful aggressor reaps the benefits as the victim is forced to compromise.

Three years ago, Vladimir Putin attacked Ukraine on the pretext of its ambition to join NATO, the bloc’s eastward expansion, the Volodymyr Zelensky government being “neo-Nazi”, the “illegitimacy” of the country as a state, to support the Russian-backed breakaway republics of Donetsk and Luhansk and “demilitarise and denazify” its neighbour.

The US and other NATO members poured billions in military assistance into Ukraine to counter Putin’s imperialistic ambitions and in the name of democracy.

However, it’s the economy, stupid, as they say.

The year 2024 was cataclysmic for Ukraine. Putin won a fourth term and is on the path to becoming Russia’s longest-serving leader. Donald Trump returned to the Oval Office in a thunderous victory.

Now, the two leaders are on course to upend decades-old US-Russia relations and usher in a new dawn. In the tectonic shift, “dictator” Zelensky has been shoved aside and left in the cold.

Impact of war on Russia and America

Ukraine is a meatgrinder. Neither Russia can prolong his grinding war of attrition forever nor the US can afford to spend billions.

The unprecedented, sweeping sanctions imposed by the US, EU, the UK, Canada, Australia and Japan targeted Russia’s financial, military and energy sectors, business elites and access to American technology and the dollar. America and its allies also blocked $300-$350 billion of sovereign Russian assets in Europe.

The Russian economy bounced back from the initial jolt of -1.2 per cent growth in 2022. Russia transitioned to a wartime economy by increasing military production, China and India continued to import massive amounts of Russian crude and the US and its allies didn’t impose worldwide sanctions on Moscow’s energy trade to maintain a stable global energy market.

In 2023 and 2024, Russia’s growth increased to 3.6 per cent and 4 per cent, respectively.

However, as the economic pressure builds, GDP is estimated to slow to about 1-2 per cent this year.

Inflation was 9.5 per cent last year, the rouble plunged 21 per cent as of last November, the fiscal deficit galloped to $19.21 billion in January and interest rates are at a steep 21 per cent.

Russia has spent more than $200 billion on the war with the daily expenditure being $300 million. From $86.4 billion (4.4 per cent of GDP) in 2022, the defence budget is projected to jump to $145 billion (6.3 per cent of GDP) this year, impacting health care and education.

Putin can’t continue the war and compromise on growth, inflation, living standards and social and infrastructure programmes.

The Russian president also wants peace, which could end the sanctions and Russia’s isolation and ease the pressure on the economy—but he wants it on his terms.

On the other hand, the US has spent $65.9 million on supplying weapons to Ukraine since 2022. Trump, who never favoured helping Ukraine, also wants an end to the war.

Trump can’t afford further supply chain disruptions, particularly in commodities and manufacturing, and higher energy prices, which increase inflation. American businesses reliant on imports or exports to and from Europe have been affected.

Semiconductor production has been hit as Ukraine supplies  90 per cent of the neon and Russia 35 per cent of palladium used in American semiconductor production.

Since the war, more than 1,000 Western companies have pulled out of Russia.

According to the 
KSE Institute, 475+ companies, including 91 American, have completely exited Russia and 559+ have withdrawn, 785+ have suspended and 364+ scaled back operations and 141+ have paused investment.

The American companies include ExxonMobil, Halliburton, Ford, McDonald’s, KFC, Google, Oracle and American Express.

In March 2024, a Reuters analysis of company filings and statements showed that foreign companies lost more than $107 billion in write-downs and revenue since 2022.

US companies have lost $324 billion (IT and media $123 billion, consumer and health care $94 billion and finance $71 billion) by exiting Russia, according to Russian Direct Investment Fund (RDIF) chief Kirill Dmitriev.

Business comes first, peace second

The recent dialogue between the US and Russia in Saudi Arabia about ending the war was solely for business, not peace.

The talks were significant for three reasons.

First, both sides had one representative each with business, not political. background. The US delegation comprised secretary of state Marco Rubio, national security adviser Mike Waltz and Trump’s Middle East (West Asia) envoy Steve Witkoff. The Russian delegates were foreign minister Sergei Lavrov and Kremlin foreign policy adviser Yuri Ushakov and Dmitriev.

Shockingly, the person who should have played the most important role on the US side was absent. Keith Kellogg, Trump’s special envoy for Russia and Ukraine, was sidelined and sent to Ukraine to console an aggrieved Zelensky.

Instead, Witkoff replaced him despite Russia and Ukraine not being part of his portfolio. Kellog, who supports peace via peace only if Ukraine gets security guarantees for Ukraine, met Zelensky in Kyiv and praised “the embattled and courageous leader of a nation at war”. The comment was in stark contrast to Trump terming the Ukrainian president as a “dictator” and blaming him for the war.

Second, the 
press release issued by the State Department showed that talks focused on “historic” economic and investment opportunities and removing “irritants” in the US-Russia relationship.

The US and Russia agreed to “lay the groundwork for future cooperation on matters of mutual geopolitical interest and historic economic and investment opportunities. Such opportunities will “emerge from a successful end to the conflict in Ukraine”. Peace, of course, is important but only to further the economic interests of the two countries.

Third, both Witkoff and Dmitriev are deal-makers like Trump and facilitated the recent US-Russia prisoner swap. The US real estate mogul had met Putin in early February regarding the prisoner exchange. “I spent a lot of time with President Putin, talking, developing a friendship and a relationship with him,” he said.

Dmitriev, earlier employed with Goldman Sachs and McKinsey, managed the US capital-backed private equity firm Delta Equity Partners in Russia before heading Russia’s sovereign wealth fund. He was instrumental in building early contacts between Russia and Trump’s team in 2016. In 2019, he was involved in the release of American investment banker Michael Calvey from a Russian prison.

After the US-Russia dialogue in Riyadh, Putin appointed him a special envoy on international economic and investment cooperation, signalling his crucial role in improving US-Russia business ties. “He will continue to develop investment and economic cooperation with both the countries of the Global South and Western nations, including the United States of America,” the RDIF said after his appointment.

Oil’s well between Russia and US

Notably, Dmitriev was absent from the political discussion in Riyadh but was present when the two sides explored business opportunities.

Dmitriev has already dangled the prospect of US firms, especially oil giants, returning to Russia. “They had a very successful business in Russia. Why would they forgo these opportunities that Russia gave them to access Russian natural resources?” he asked.

Russia is the world’s third-largest crude oil producer after the US and Saudi Arabia. Oil and gas are the most important source of revenues for Russia, accounting for around 30-50 per cent of the federal budget proceedings for the last decade.

The massive Western sanctions 
hit Russian fossil fuel export revenues though Moscow started recovering in the last two years. Fossil fuel export revenues totalled $274 billion in 2021, $374 billion in 2022, $262 billion in 2023 and $254 billion in 2024, per the Centre for Research on Energy and Clean Air. European imports of Russian oil and gas have decreased considerably with gas imports dropping from 45 per cent in 2021 to 18 per cent in 2024.

Russia was aided by China, India and Turkey, which continued to import huge quantities of crude at discounted prices. From December 5, 2022, to January this year, China bought 47 per cent of Russia’s crude exports, India 37 per cent and the EU and Turkey 6 per cent each.

In 2024, Russian crude accounted for 50 per cent of Chinese imports and 36 per cent of Indian imports. However, China and India have halted Russian crude imports following the latest US sanctions in January, which targeted Russia’s 183 ‘shadow oil tankers’.

These ships often change ownership and flags and operate outside the official maritime system to avoid sanctions. Russia has more than 600 such tankers which carry an estimated 70 per cent of its oil exports.

According to Morgan Stanley, the sanctioned tankers carried around 1.5 million barrels of crude oil daily. Russia can use Western ships to sell crude below the $60 per barrel cap imposed by the West after the war but Moscow’s flagship Urals blend is priced around $70.

Moreover, as the latest sanctions hit exports of unprocessed crude, Russian refineries have been compelled to process more crude oil to boost fuel exports.

On the other hand, America is the largest oil consumer followed by China and India. Trump wants lower oil prices and wants Russian and Saudi assistance.

The US imported a small amount of crude and more petroleum products (from Russia before the March 2022 ban. America imported 245 million barrels of Russian crude oil and petroleum products in 2021, 53 million in 2022 and only 10,000 barrels in 2023. However, in 2024, the US imported 36,800 barrels ($74) in October and 9,900 barrels ($76) in November, much above the $60 price cap.

The world’s five largest listed oil companies—BP, Shell, Chevron, ExxonMobil and TotalEnergies—made $281 billion since the war as oil became costlier.

However, US oil and gas giants also sustained losses after winding down operations fully/partially in Russia.

Chevron paused transactions and sales of refining products, lubricants and chemicals in Russia but continues to pump oil through the country.

The company is the third-largest shareholder (15 per cent) in the Caspian Pipeline Consortium (CPC), one of the largest pipelines in the world that runs from Kazakhstan’s Tengiz oilfield to the Novorossiysk-2 Marine Terminal in the Black. CPC’s largest shareholder is the Russian state-owned Transneft (24 per cent), the world’s largest oil pipeline company. Chevron also has a 50 per cent stake in the Tengizchevroil joint venture (JV) and Exxon (25 per cent). The company is dependent on CPC to earn profits from the JV.

Exxon, whose affiliate Exxon Neftegaz was the fifth-largest shareholder (7.5 per cent) in CPC, suffered a major loss of $4 billion in assets by exiting Russia, including the Sakhalin-1 oil and gas project. In October 2022, Putin seized Exxon’s shares (30 per cent stake) and established a Russian company under Rosneft subsidiary Sakhalinmorneftegaz-shelf to control investor rights in Sakhalin-1. However, he extended Exxon’s stake sale by one year to January 1, 2026.

Halliburton, one of the largest providers of products and services for oil and gas exploration, also ended its operations in September 2022 and sold BurService to a Russia-based management team of its former employees.

During the Saudi talks, Russia also offered the US mutually beneficial joint projects in the Arctic. Exxon and Russian state oil major Rosneft explored hydrocarbons in the Arctic but the US company exited in 2018 after the Crimea invasion.

The Russian Arctic has more than 35,700 billion cubic meters (BCM) of natural gas and more than  2,300 million metric tonnes (MMT) of oil and condensate mainly in the Yamal and Gydan peninsulas. There are nine oil fields containing reserves of 150-550 MMT. There are 24 fields with reserves of 525-6,300 BCM, per The Arctic Institute.

Moreover, the January sanctions on tankers also disrupted Russia’s Artic daily output of 300,000 barrels of Novy Port, ARCO and Varandey oil grades, according to Reuters.

Russia needs US equipment and technology, like hydraulic fracturing, for drilling and exploration in the Arctic. For example, despite the initial sanctions and ending its operations, Halliburton supplied equipment, such as pumps and wrenches, worth $7.1 million to Russia in the same year.

Ukraine faces big mineral squeeze

Left with no choice, Zelensky has agreed to a minerals and reconstruction deal with Trump with no concrete security guarantees. The details will be finalised when the leaders meet in Washington this week.

Ukraine would contribute 50 per cent of future proceeds from minerals, oil and gas to a joint fund with the US which will be used for reconstruction and rebuilding the economy.

Putin has offered the US access to rare earth minerals in Russia and the Ukraine territories under Russian occupation. “We would be ready to offer [cooperation] to our American partners … also companies if they showed interest in working together,” he said adding, “Yes, by the way, regarding new territories [occupied], the same thing. We are ready to work with our foreign partners, including the Americans, there.”

Rare earth minerals comprise 17 nearly indistinguishable lustrous silvery-white soft heavy metals used in defence, aerospace, technology and energy production.

Ukraine has 5 per cent of the global rare earth minerals reserves. The majority of these deposits are located in 20 per cent of territory occupied by Russia—mainly the southeast, including Donetsk and Luhansk (Donbas), Zaporizhzhia, Kherson and Crimea. Moreover, 70 per cent of Ukraine’s critical mineral resources valued at $14.8 trillion are in Donetsk, Dnipropetrovsk and Luhansk. Russia controls around 80 per cent of Donbas.

According to Canadian geopolitical risk firm SecDev, Russia has seized, at least, $12.4 trillion worth of Ukraine’s energy, metal and mineral deposits.

Ukraine has reserves of 20 critical minerals and metals. The country produces 7 per cent of the world’s titanium and 3 per cent of lithium and has 20 per cent of graphite reserves. Ukraine is among the top 10 producers of copper, lead, zinc and silver.

The writer is a freelance journalist with more than two decades of experience and comments primarily on foreign affairs. Views expressed in the above piece are personal and solely those of the writer. They do not necessarily reflect Firstpost’s views.