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Like the US, they should seek to intermediate in talks, not promote the interests of one side in a losing war I am aiming to cut through the warmongering propaganda with balanced analysis and a desire to fill the diplomacy vacuum in our troubled world. If you find my work helpful, please consider becoming a paid subscriber or buying me a coffee . Alternatively, I’d be delighted if you purchased a copy of the memoir of my diplomatic posting to Russia, A Misfit in Moscow . Thank you very much. President Zelensky now attends every major European meeting of Heads. While perhaps understandable, that means the agenda gets hijacked by Ukrainian talking points and limits Europe’s ability to play an impartial role in peace talks. European leaders met again in Paris on 27 March to discuss ideas for a coalition of the willing, specifically, a group of European nations that would be willing to provide security guarantees to Ukraine as part of a future peace process. That meeting produced no new breakthroughs and the co-hosts, President Macron of France and Prime Minister Starmer of Britain, held separate press conferences at the end. Yet again, it wasn’t possible to reach a consensus on the controversial topic of using frozen Russian assets for reconstruction in Ukraine, given the significant legal and financial risks around this. No new determination was reached on the controversial notion of deploying western ‘reassurance’ troops to Ukraine in the future. Some European countries including Greece and Italy have made it clear that they see this as an unworkable and dangerous step. Unworkable, because the deployment of, essentially, NATO troops to Ukraine, will almost certainly face resistance from Russia. Dangerous because, even the most optimistic western commentators are talking about a deployed European force of 30,000 troops, which is tiny when set against the 600,000 Russian troops thought to be in Ukraine right now. But there is a deeper problem. Proposals to deploy troops to Ukraine, however unworkable and dangerous, are addressing the wrong question. The United States and, indirectly, the NATO Secretary General, have admitted that Ukraine’s desire to join the military alliance is off of the table. The Paris summit would have better focused on the detail of what security guarantees for Ukraine might look like as part of any peace deal. This might be along the lines of an Article 5 type of commitment by willing European states, as recommended by the Italian Prime Minister, Giorgia Meloni. Leaders like Macron and Starmer can’t claim the threat of a military force is a tactic to put pressure on Russia to strike for peace, given the proposed force’s limited size and the reality that it would take months, at the current rate of progress, for troops to arrive in Ukraine, if they ever did. Yet again, this talks to Europe’s inability to fight wars by committee. Big meetings in Paris give European leaders their moment to say the right things, express solidarity and offer every type of support short of assistance. But, and fundamentally, they offer no new ideas and inject no new energy or momentum into efforts to bring peace to Ukraine. In fact, in terms of the substance, the events have become a distraction from and a delaying tactic to, real peace. A contributing factor, it seems to me, is the inability of Europe’s leaders to hold a meeting without inviting President Zelensky of Ukraine. He appears, in his cargo pants and black sweatshirt, to be treated like royalty. And, of course, it may be understandable that people feel a sense of solidarity with Ukraine at a time of war and feel a personal affinity to Zelensky. But the question remains, what role does Zelensky play at these talks? Clearly, he arrives with his own talking points and a package of narratives to deploy during his many press engagements in Europe. These include the need to impose more sanctions on Russia, that Europe should force Putin to make peace, that only strengthening Ukraine with more weapons will help. You’ve probably heard these lines countless times before because they are aggressively deployed by every Ukrainian official and media outlet. As Ukraine is fighting Russia on the battlefield, I understand their need to pursue an aggressive public communications posture as part of their wider war effort, including to prop up morale at home. In Zelensky’s shoes, I might pursue a similar tactic. And yet, the lines he advances, on sanctions and applying pressure on Russia all appear, most likely, to extend the war, not end it. They certainly offer nothing new, in the context where Ukraine is losing on the battlefield, and the tried and tested tools to thwart Russia have all failed. Yet, because Zelensky attends every major European meeting now on the war effort, his narratives dominate the agenda of the day, whether or people believe that his proposals will work. So, during his press conference in Paris, and following Zelensky’s script, Starmer said that the west should impose more sanctions on Russia as part of efforts to force President Putin to make peace. This despite the fact that eleven years after the first sanctions were introduced, Russia’s economy still outperforms those in Europe. (Indeed, this week the UK Office of Budget Responsibility halved its estimate of UK economic growth in 2025 from 2% to 1%.) Or that, with Russia still retaining the upper hand on the battlefield in Ukraine, imposing further sanctions now will merely, and self-evidently, discourage President Putin from agreeing any peace deal. An extremely small potential package of sanctions relief on the Russian Agricultural Bank hangs in the balance, despite the US agreeing with the Ukrainian and Russian delegations in Saudi this week to unlock the Black Sea deal. President Macron has said that there can be no sanctions relief until there is complete peace. The European Commission Press Spokesperson has said that sanctions can’t be removed until the compete withdrawal of Russia troops in Ukraine, a position that clearly hasn’t been discussed or agreed with other EU Member States. These British, French and wider European pronouncements might be well-meaning, but they are usually unhelpful. On top of the already challenging bureaucratic straitjacket on Europe making a constructive input into peace talks, the presence of Zelensky at all of their meetings inevitably drags them towards agreeing and promoting his agenda. And, of course, it also means that Russia does not see Europe as an independent actor in any peace talks, as it has become an extension of Ukraine and unable to adopt an impartial position. Not least as European leaders seldom, if ever, engage directly with President Putin. That’s why Putin has been open to engaging in peace talks with Trump, because he sees that the US is trying to intermediate in talks, rather than simply taking sides with Ukraine. Zelensky has now ‘insisted’ that Britain and France should be represented at any future peace talks for Ukraine. In truth, if Starmer and Macron want to play a more prominent role in the process, they should invite Zelensky to fewer meetings.

It's time to sell, baby, sell! I am aiming to cut through the warmongering propaganda with balanced analysis and a desire to fill the diplomacy vacuum in our troubled world. If you find my work helpful, please consider becoming a paid subscriber or buying me a coffee . Alternatively, I’d be delighted if you purchased a copy of the memoir of my diplomatic posting to Russia, A Misfit in Moscow . Thank you very much. As President Trump threatens the world with sweeping tariffs, he is trying to change the fundamental laws of economics through force of will. He shouldn’t succeed. Reciprocal tariffs will hurt developing countries more than the USA; they should instead sell off U.S. debt. The Austrian American economist Ludwig von Mises once said that ‘the balance of payments theory forgets that the volume of trade is completely dependent on prices.’ The United States has such a gigantic trade deficit, at over $1 trillion each year, because it can buy foreign goods cheaper than it can produce them domestically. Some countries subsidise production to lower prices for export advantage while others export goods further down the value chain. But, the U.S. dollar is so powerful, that it renders American exports more expensive, irrespective of the distortions and disadvantages of its trading partners. This is part of the exorbitant privilege in which the U.S. dollar remains the world’s leading reserve currency, amounting to 58% of total reserves. Foreign countries put their capital into the U.S. precisely because it is a stable and safe, raising the price of the dollar on exchange markets because demand is always high. A strong greenback makes imports cheaper and that helps manage inflation in America. President Trump clearly wants to boost his support in the blue collar heartlands of America, driving job creation in traditional American industry that has been undercut by foreign imports over many years. But he can’t have two cakes and eat them both. He can’t simultaneously slash the huge U.S. balance of payments deficit – helping blue collar workers – while at the same time maintaining the U.S. as the destination of choice for foreign capital. That would be to defy the logic of economics. To oversimplify slightly, America has built its bloated Federal apparatus on the back of cheap imports. The huge current account surpluses that exporting powerhouses like China, India, some European and ASEAN countries run produces a torrent of easy capital that props up the U.S. state. The U.S. has a debt mountain of around $35 trillion which is roughly the equivalent sum of debt held by foreign investors. Of that debt, around $8.5 trillion is in the form of U.S. Treasuries, literally loans to the U.S. government, with a similar amount invested in corporate debt and the rest largely in equity. That’s why Trump is going in so hard with Elon Musk’s DOGE initiative. He’s desperate to reduce the size of the U.S. state apparatus because he knows that the Federal house of cards is built on fiscal quicksand. He probably figures that the political benefits of promoting employment among among the working class are higher than cutting the federal workforce. If his plan works. Because the real challenge to the U.S. is not the federal debt itself but its ability to service its debt. The exorbitant privilege, coupled with the massively disinflationary tidal wave of the global financial crisis, ushered in a period of historically low inflation and low interest rates. That era has ended, as ratings agency Moody’s pointed out this week. U.S. interest rates are now higher, at 4.25-4.5% driving up the costs of servicing the country’s enormous debt mountain. The threat to the U.S. right now is inflation and what that means for its debt servicing bill, if interest rates are held or, even, forced higher. That’s why the idea of a BRICS currency is so terrifying to Trump, because BRICS now accounts for 41% of the global economy by purchasing power parity. A BRICS currency (a highly speculative idea, frankly, at this stage) might pose a longer-term risk of making the dollar less appealing and, therefore, weaker, driving up inflation. There are parallels here for the 1970s, when rampant inflation, triggered by a number of factors including the oil crisis and America’s move to a fiat currency, led U.S. interest rates to soar at one point to 20%. During this period, foreign countries withdrew their investments, and the dollar slumped to 45% of total global foreign exchange reserves. And herein Trump’s challenge. He can’t export more without a weak dollar, and a weak dollar will make U.S. debt harder to services. Tariffs are simply his attempt to bully less developed economies for America’s political and economic advantage. They impose a cost on foreign exporters that is unrelated to the price of the goods, as determined by the rate of exchange at any time. And there is little value for an individual country in responding with reciprocal tariffs, precisely because they export more to the U.S. than they import. On the escalation ladder of tariffs, developing countries will always lose out. And economic war, like real war, hinges on which belligerent can accept the most pain and continue to fight on. But developing countries have more power than they realise. Countries that export more than they import, build up stocks of foreign exchange that they invest overseas. If you look at the size of countries’ trade surpluses with the U.S. it is insightful. China’s surplus runs out at almost $300 billion each year, for the EU and ASEAN it’s over $220 billion. These countries/blocs all park significant volumes of their capital in the U.S. Rather than fighting a losing tariff, the should accelerate the divestment of long-term debt holdings in U.S. treasuries and corporate debt, undermining the strength of the dollar and adding inflationary pressure. U.S. exports may rise. Exporting countries may need to seek to reinvest in other jurisdictions or repatriate capital (as Russia did in 2014, following the imposition of sanctions). However, and as happened in the 1970s, inflation would become an increasing risk to the U.S. economy over a period of years, as the price of foreign imports rose in the face of a weakening dollar. That would force up interest rates, as the U.S. government sought to shore up demand for the dollar to reduce inflationary pressure. And that would raise the cost of servicing America’s debt mountain. In the art of the deal, threatening to crash the U.S. economy would bring Trump to the table far quicker than a tariff war. As the U.S. President himself might say, ‘sell, baby, sell.’

I recently published the piece below in Responsible Statecraft . The Paris Summit on 27 March produced nothing that indicated European leaders are focused on the issue of longer-term funding. This is worrying, not least as the Paris Summit appeared designed to prolong, not end, the war. Do the Europeans still have their collective heads in the sand? I hope you find my article interesting! I am aiming to cut through the warmongering propaganda with balanced analysis and a desire to fill the diplomacy vacuum in our troubled world. If you find my work helpful, please consider buying me a coffee . Alternatively, I’d be delighted if you purchased a copy of the memoir of my diplomatic posting to Russia, A Misfit in Moscow . Thank you very much. BEGINS There is no plan in place to fund the Ukrainian budget after 2025. Even if the war ends by the summer of 2025, it will take some time to reduce military expenditures, leaving European nations on the hook. It’s not clear that European elites have fully understood the political costs, however much longer the war continues. With intensive, U.S.-brokered negotiations ongoing in Saudi Arabia  involving separate Ukrainian and Russian delegations, hopes are rising that the Trump administration  will finally be able to bring an end to the war. But even if the war ends tomorrow, it would be unwise to assume that Ukraine could reduce military spending close to prewar levels. Ukraine now has almost 900,000 men and women at arms , a threefold increase from peacetime, and that doesn’t take into account irrecoverable losses through death and injury. Estimates vary widely, but the casualty rate is commonly thought to number in the hundreds of thousands, with compensation provided to the injured and families of the deceased . The war in Ukraine has therefore come at a vast financial cost to that country. Ukraine’s defense spending has risen tenfold since the 2021 budget was announced , when social welfare payments were the country’s biggest expenditure. This has left a gaping hole in Ukraine’s finances that no amount of tax increases or Western donations will be able to fill over a sustained period without political consequences. Since 2022, Ukraine has run an average budget deficit of over 22% of GDP. Based on the current exchange rate, Ukraine’s budget shortfall in 2025 amounts to around $41.5 billion. And that assumes defense spending falling slightly this year. In the hopefully unlikely event that war continues to the end of the year, the Ukrainian state would need to revise its budget upwards  as it did in 2024. Today, Ukraine’s domestic revenue, including taxes, excise, and duties, just about covers the cost of the defense effort, which in 2024 accounted for 64% of its total budget expenditure. That includes significant tax increases  as the war has gone on. Total tax revenue will have risen by more than 100% since the war started and personal income taxes by over 200%. This in a country in which, according to the Wilson Center, 50% of the population lives at a basic subsistence  level. As Ukraine is cut off from international capital markets, it has had to meet the difference through aid and loans from Western nations. Put simply, Western donations and loans have paid the salaries of Ukrainian state officials and kept the lights on in their buildings. At the start of the war, donations took the form of free financial aid to meet the country’s budgetary and military needs. According to the Kiel Institute,  the United States has provided just above $50 billion in direct budgetary assistance. The European Union  provided $51.5 billion in financial assistance – i.e., budgetary support – between 2022 and 2024. However, since the start of 2024, free aid has progressively shifted to lending as Western governments have felt the political and economic cost of unlimited financial assistance. So, Ukraine has increasingly resorted to borrowing money. In some regards, that is to be expected. Governments tend to borrow heavily at times of war. The UK only settled its World War II war debts  to the United States and Canada in 2006. Ukrainian debt has therefore soared to over 100% of GDP and, critically, the cost of servicing its debt has tripled, and now makes up the second largest line of expenditure in Ukraine’s budget, after military spending. To put that into context, Ukraine will spend more  than twice the amount on servicing its debt in 2025 than it spends on the health of its population. That ratio will only widen the longer the war continues. Ukraine should just about be able to make ends meet in 2025 thanks to the G7 Extraordinary Revenue Acceleration loan agreed in June 2024. As part of a last-ditch compromise by the outgoing Biden Administration, the $20 billion U.S. contribution  to the G7 loan was directed through the World Bank to provide specific project-based support – i.e., to help rebuild power infrastructure - rather than generalized budgetary support. The crucial point is that I’ve seen no plans for how Ukraine’s budgetary needs will be met from 2026 onward. Even if the war ends tomorrow, Ukraine may still be at risk of running out of money in 2026 if Western donor countries falsely assume that it will be able to return to prewar spending on Day One. Therefore, the big question is how quickly Ukraine can reduce military spending in 2026 and who will cover the shortfall. To balance the books in 2026, Ukraine would need to reduce its military spending by 80%, or around $41 billion. But decision-makers in Kyiv may understandably push to maintain a big army against the threat of future Russian aggression. While the huge expenditure in weapons and ammunition from war fighting may fall away, maintaining a standing army, even if its numbers are reduced, would still carry a heavy price. Even if Ukraine’s future budget deficit wasn’t as high as $41 billion, it is easy to imagine that it might be $20 billion. The International Monetary Fund also doesn’t expect Ukraine to be able to access international lending markets before 2027. That will leave the Ukrainian state reaching out to donor nations for additional funding. With the Trump administration looking to pare back its financial commitments to Ukraine and focus instead on investing, including in minerals, the pressure will be on European states. There is significant political risk here. In the past few days, the Europeans struggled to agree to an additional weapons package of $5 billion for Ukraine . Funding $20 billion in budgetary support to Ukraine in 2026 following a ceasefire this year may still herald a backlash from those on the nationalist left and right who believe the war should have ended in 2022. I assess the UK and Europe  would find it economically and politically unsustainable to prop up the war beyond this year without the United States. That’s another reason why European leaders should get behind ongoing peace negotiations.