Trump’s big promise to reach peace deal with Putin to end Ukraine war is questionable
The World Bank estimates the total cost of reconstruction and recovery in Ukraine to be US$486 billion over the next decade
[LONDON] The Russia-led war in Ukraine has already passed the 1,000-day mark, and there is some talk that a peace deal can somehow be reached in 2025 – with observers hoping that negotiations can start soon after Donald Trump is sworn in for a second term as US president in January.
On Dec 8, Ukraine President Volodymyr Zelensky said after a meeting with Trump in Paris that Ukraine needed a “just and enduring” peace that Russia could not “destroy in a few years”. Trump himself has declared that he could end the war “in 24 hours” after he takes office, although he has not explicitly said how he would do so.
The US president-elect’s declaration has caused some concern in Ukraine that the country will be forced to make major territorial concessions in exchange for peace.
Last month, Zelensky said that Russia could control Ukraine’s eastern Donbas region on the condition that the North Atlantic Treaty Organization (Nato) grants Ukraine membership and protects the war-torn country. It seems unlikely at this stage, however, that Russian President Vladimir Putin will agree to any intervention by Nato.
“Stopping the war is, of course, anything but straightforward,” said Fredrik Wesslau, a distinguished policy fellow at the Stockholm Centre for Eastern European Studies.
“Even if Trump manages to reach a deal with Putin, which is by no means a given, an agreement without Ukraine and Europe on board may not mean much,” he said.
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Frozen assets remain in limbo
Of course, the big question in a post-war era is what will happen to the billions of dollars’ worth – some estimates put it at over US$300 billion – of sanctioned Russian assets that have been frozen in various central banks around the world.
The US, the UK and the European Union are likely to propose that these assets finance the reconstruction of Ukraine, said Adrian Karatnycky, a senior fellow at the Atlantic Council’s Eurasia Center and the author of Battleground Ukraine: From Independence to the War with Russia.
Much will depend on the many likely legal hurdles, and there will be massive pressure to unlock the assets to pay for the devastation in Ukraine, Karatnycky wrote in a recent op-ed piece for the Wall Street Journal.
The World Bank has estimated the total cost of reconstruction and recovery in Ukraine to be US$486 billion over the next decade, up from US$411 billion estimated last year.
“Any settlement that leaves 20 per cent of Ukraine’s territory in Russia’s hands will be hard for Ukrainians to accept,” said Karatnycky.
“But most war-ravaged Ukrainians are likely to accept (a settlement) that enhances their country’s sovereignty through bilateral security guarantees.”
Impact on commodities
An armistice may also have a significant impact on the global commodities markets.
Russia is not only the world’s third-largest producer of crude oil after the US and Saudi Arabia, but it is also a major natural gas producer. Trump has long been known to favour fracking, and analysts expect oil and gas prices to weaken when US producers ramp up their output next year.
US Senator Ted Cruz – who previously instigated sanctions against Russia but failed to get approval from the Senate – said a slide in oil and gas revenue will pressure Putin into agreeing on a peace deal of some form.
On Ukraine’s part, many businesses around the world hope that the country – dubbed “Europe’s bread basket” because of its fertile black earth – will be able to boost its agricultural production and exports.
More than half of Ukraine’s land area is arable, according to the United Nations (UN). Before the war began in February 2022, Ukraine was the world’s seventh-largest exporter of wheat, the fourth-largest exporter of barley, and the largest exporter of sunflower seeds.
Before the invasion, Ukraine’s sunflower oil accounted for 50 per cent of the world’s total exports. The UN estimates that the proportion for barley was 18 per cent; for corn, 16 per cent; and for wheat, 12 per cent.
Food is a major source of revenue for Ukraine. In 2021, it made US$27.8 billion from exports of foodstuffs.
Based on a recent European Parliament paper, Ukraine’s agricultural sector has sustained roughly US$80 billion in damages and losses from the start of the war until the end of 2023.
The paper estimated that rebuilding Ukraine’s agriculture industry alone is expected to cost US$56 billion. There are many minefields and it will cost an extra US$32 billion to get rid of them, it added.
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