The Money Equation In Ukraine

In November 2023, the Economist published an interview with Valery Zaluzhny, the commander-in-chief of the Ukraine armed forces, who acknowledged that the war with Russia had become a stalemate. “There will most likely be no deep and beautiful breakthrough,” Zaluzhny said. “The simple fact is that we see everything that the enemy is doing and they see everything we are doing. In order for us to break this deadlock we need something new, like the gunpowder which the Chinese invented and which we are still using to kill each other.”

The interview made headlines, but nothing happened. The war continued, with Ukraine receiving support from the Biden administration. Zaluzhny was one of a series of military commanders to be fired by President Volodymr Zelensky. (A presidential election scheduled for 2024 did not take place, and Zelensky has stayed in office, as Ukraine has been under martial law.)

I wrote at the time that Zaluzhny’s stunning words had been planned in advance, as the Economist editors couldn’t have known, via a series of indirect contacts between Zaluzhny and Russian General Valery Gerasimov, who has been chief of staff of the Russian army since 2012.

I was told by an involved American official that the objective of the interview was to apply public pressure on the US and Russia to end a trench war in which there was no victory to be had. Generals from Ukraine and Russia are still talking, I was told this week, and the prospects of a settlement are much better because the input from the US comes not from the rigid Biden administration but from President Donald Trump, who has been far more open to contact with Russia. “Too many Americans,” the official added, “see Ukraine as one of the original thirteen colonies and Putin as King George III,” the mad British king who lost the American colonies during the Revolutionary War.

Unlike his predecessor, Trump is interested in doing business with Russian President Vladimir Putin. Russia has billions of dollars in sanctioned gas and oil reserves along with millions of tons of rare earth minerals and metals that remain unmined.

I saw no mention of Trump’s economic ambitions in the White House press accounts of his telephone conversation this week with Putin. The most significant outcome was Putin’s agreement to avoid striking energy targets in Ukraine if Zelensky would do the same. The war has continued apace, with both sides continuing firing missiles, rockets, and bombs at each other in the last twenty-four hours. Russia killed two Ukrainians in one attack in eastern Ukraine, and Ukraine struck, among other targets, a Russian airfield and a warehouse housing drones and glide bombs.

I was told by the official that Trump’s main ambition was to lift the current economic sanctions on Russia and form a partnership with Putin to turn Crimea into a major international resort. They might do the same in Donbas, one of four Ukrainian provinces where the Russian army has made significant territorial gains, at great cost in loss of life on both sides. Russia is now estimated to have won as much as twenty percent of Ukraine’s territory. Current borders in areas taken by Russia where elections have been held and reconstruction is under way are not negotiable, say the Russians, in any future peace talks.

Unlike Ukraine, Russia has vast reserves of oil and natural gas and, despite severe international sanctions, has managed to find sufficient markets for its oil and natural gas to hold off economic collapse over the past three years of war. The official told me that he welcomed Trump’s interest in bringing the Ukraine war to an end. “The Democrats don’t understand that Trump is not some loony guy” when it comes to the intricacies of dealing with international banks and real estate. “He’s an economic winner.”

Trump’s point man in the recent talks with Russia, I was told, has been Vice President JD Vance. Vance has been in contact with a group of Russian generals who sent him a message, echoing what General Zaluzhny did with the Economist two years ago: “We want the shooting stopped. We need a break. Don’t let World War II happen again. Everything going east from Berlin was rubble.” Putin’s biggest mistake, the official told me, came late last summer when he authorized the first of what came to be 12,000 North Koreans troops to the front lines in a failed effort to bolster troop morale. Putin needed a victory to prove the sacrifice was worth it, and the Russian military kept on saying, “Don’t let this happen again.” The poorly trained North Koreans suffered enormous losses in a failed attempt to block Ukrainian troops from making inroads in the Russian region of Kursk. Russian troops recently retook most of the area.

The timing was right for a grand bargain, the official said. “Trump knows that Putin has control of the politicians but not the military. The army wanted out. The war is a diminishing return, and Trump is not a politician. He’s a businessman, and he is saying that Putin has a problem, and he is telling Putin that you’ve got to come out of his war more powerful than when you went in. And you got to make some money—get some financial benefit.

“And then comes talk about Russia’s unmined reservoirs of rare earth minerals. Open it now and China will destroy it.” China has the largest supply of rare earth minerals and metals in the world and a near monopoly on refining them. The official said Trump’s message to Putin is: “Take my money and be a business partner.”

“Zelensky has been told this is his last chance,” the official said. “The US has ended [its policy of] ‘All it takes, as long as it takes.’ He can either keep what he has now—without the slice of Kursk—or slowly lose territory until Kiev is occupied. Putin has been told, “Lots of apples on the tree. Yours to harvest, but we still own the orchard.”