Ok. It’s time to revisit the Ukraine war and set the record straight regarding the peace efforts. Everyone and their mother have a theory on what is happening and what will happen - from pure warmongers that see either side being totally obliterated as the only viable solution to nationalist pacifists that think it’s high time the war ends.

But they are so deeply biased by their own politics, that they fail to see the real game being played right in front of our eyes. And it’s not about peace or saving lives - it’s about priorities on the grand chessboard of the current Cold War.

So today I will show you:

1. Why the current peace effort is so bizarre.
2. What will come out of it.
3. When (or if?) we can expect peace.

What The Hell Is Going On?

In the last 2 weeks we’ve seen a very plausibly Russian 28-point peace plan being floated as American, Trump forcing it on Zelensky only to back down 2 days later, Rubio admitting to knowing nothing about it, only to backtrack on his words 2 days later. On top of that we have a leaked call between Witkoff and Ushakov where Witkoff coaches Ushakov on how to handle Trump. And this is only in the US.

In Europe we have a discussion about using Russian frozen assets to finance Ukraine. Same Russian assets that would be divided between the US and Russia in the 28-point peace plan. And in Ukraine we have the biggest corruption scandal in years that is costing Zelensky the majority (if not all) of his political capital - even Yermak was forced to resign to protect Zelensky.

Lastly, we had MBS visit to the White House, which funnily coincides with the first 28-point plan leak.

Who’s War Is It?

Let’s go back to 2022. We all now laugh when we remind ourselves of the 3-day special operation to conquer Ukraine. But many forget that Putin was close to making it. Initially his attack was a success. So much so that Zelensky felt he has no choice but to negotiate a surrender. But some NATO countries (especially the eastern flank) were smarter than that - they supplied Ukraine with equipment early on and pressured the rest to support the nation in distress.

And the culmination of that was Boris Johnson coming to Turkey to personally tell Zelensky not to sign the deal and keep on fighting with Western support. At this moment this war stopped being a Russian gambit to permanently influence Europe and became the first proxy war between the US (with team west) agains what I call team east (ie. China, Russia, Iran, North Korea and others).

It is an important distinction as it means that it is not “Ukrainian war” in a sense that Ukraine actually has little say in how it goes.

What Is Sovereignty?

I will have as many critics as applauders for the ending of the last paragraph. But the reality on the ground is simple:

1. Ukraine is toast without western intelligence and equipment.
2. Ukraine is toast without western financing.
3. In effect: Ukraine would take any deal it is given if any of the two disappear.

But it doesn’t mean Ukraine has zero sovereignty. Liberals did one thing right - everything is a spectrum. And on the spectrum of sovereignty Ukraine has its people.

Thus Zelensky’s main job was making sure that Ukrainian people are willing to fight while team west supplied everything that is needed for Ukraine to hold the ground. He did his job remarkably well, up until now. The corruption crisis is threatening to consume him as it now forced his second in command, Yermak, to resign.

However I don’t see it as a major issue - team west did prepare for it a long time ago by propping up Zaluzhny. The media turned him into a hero and then made a very public feud with Zelensky to create distance between the two. And now Zaluzhny lives in London as Ukrainian ambassador to Great Britain, where he follows developments closely ready to step in once Zelensky is finished.

So if this is a team west vs team east proxy war, then why do we hear about Ukraine not being able to accept the terms of the peace brought by the US, the leader of team west?

The answer is that team west is currently fighting its own internal war.

Nationalists vs Deep State

The Ukraine war was brought to you by the Deep State (ie. the administrative state), as part of the (then only starting to get shape) grand strategy to counter team east. However with Donald Trump in the White House we have an entirely different set of ideas on how to formulate a grand strategy.

MAGA wants to fix America first, then move on to save the world. The idea is that Americans won’t be able to take on the burden of the Cold War in the current state - with no national unity, low manufacturing capacity, drugs wrecking havoc in the society and neighbors doing whatever they want. Thus we have a new grand strategy:

1. Unite the people under a nationalist ideology to make them more immune to the burden they will need to carry.
2. Tariff the whole world to offset some of the costs of being a hegemon and see who is on team west (and will get lower tariffs) and who is looking more towards team east (and will get higher tariffs + sanctions).
3. Near-shore most industries according to tariff calculus.
4. Re-shore key industries (eg. semiconductors).
5. Fix the neighborhood (ie. western hemisphere) to solve migration issues and drugs.

As you see there is no point saying “fight proxy wars all over the globe”. Reason is that to do all of the above and at the same time be ready to counter China in the Indo-Pacific, the US cannot spare any military capacity.

Thus the conflict. The Deep State along with its European partners wants the war to continue as:

1. It is part of a wider plan to destroy Russia economically using Ukraine.
2. It is essential for European sovereignty, as with Russia being a key decision maker in European affairs, the whole block would slowly drift towards team east.

And the nationalists want it to end as they would rather use its financial and military capacity for their projects. The fix is being implemented as Europe is now building its war economy designed to sustain Ukrainian war effort. But it is expensive and time consuming.

Peace Attempts?

So why do we have peace attempts? Trump wants to boost his popularity by ending another war that many Americans are tired of. He is using the fact that Europe is still not ready to fully take it over to pressure it to take a bad deal.

The pressure won’t work if Europe is united, but it isn’t… So how can we describe this peace effort? This time we have a few variables that are different than the last time:

1. Pressure on Zelensky (NABU).
2. Gigantic financing gap in Ukraine’s budget.
3. Recent Russian gains on the ground.
4. Looming strikes on Venezuela.
5. MBS visit to the Washington.

Let Me Tell You A Story

MBS went to Washington for many reasons. But one of them was to discuss oil production capacity. It turned out that there is not enough capacity to fully offset Venezuelan oil disappearing for several months when the strikes on Venezuela begin.

The consequence is simple - as Venezuelan oil was exported mainly to China, China will have to find a new source of oil. And Russia can’t wait to fill the gap, additionally taking advantage of higher prices created by lower supply. You see, striking Venezuela is good from Russian perspective.

From European perspective though, it is a disaster. Amid Russian gains on the ground and Ukraine’s budget gap, giving Russia a financial boost now would risk a major breakthrough in the war. Europe has only one counter at the moment - seizing Russian assets and using them to finance Ukraine (giving it a financial boost it desperately needs). However, despite many attempts, there is a strong opposition to do it. Mainly from Brussels that is the main custodian of these assets.

Seeing that MBS can’t save the day and Europeans can’t agree on a path forward a faction inside Europe that is the most supportive of war leaked a 28-point peace plan. It is nothing else than a document created mainly by Russians that outlines their minimum demands in the current moment.

The aim of this document was to align Trump’s and Russian position ahead of Zelensky ousting due to the corruption scandal. I believe that Trump administration wanted to get rid of him and install a new leader that is more receptive to a somewhat bad peace deal.

By leaking it, the faction showed to the rest of the world - this is what we will get if we don’t start to cooperate soon. Rubio confirmed that it was the case to the Senators, but he was later forced to backtrack on it due said Senators spilling the beans.

But isn’t this story a bit too far fetched?

Is It?

I filled some gaps in the above. I might have missed some details that I’m not privy of. But the main idea driving the story is true and screaming at us - there are at least 2 factions in team west that are openly in conflict about the future of the Ukraine war.

One of them wants to see Russia fall while the other wants to see the war to end as soon as possible. Thus you might have a feeling that the Trump administration is cooperating with Putin - because it is! Not because Trump is a Russian agent or anything even remotely close - he just has a different grand strategy, focusing on the western hemisphere first, which of course is not exactly great for Europe.

So, Will We Have Peace Soon?

To answer this question we have to look at leverage. Trump (and Putin) succeed only if Europe fails to cooperate on financing for Ukraine. Trump also wins if he is able to topple Zelensky and install someone else than Zaluzhny.

For now it seems the corruption scandal will end at Yermak, who was sacrificed to protect Zelensky. It is not optimal and I expect Zaluzhny is now being prepared to take over just in case, but it holds for now.

Financing starts to become a major issue, however it os not as dire as presented in some sources. Ukrainian sources might be heavily biased, but they present a case with more than enough liquidity till the end of Q1 2026 at least. This is supported by the recent IMF loan extension, signaling that even without tapping Russian reserves Ukraine might be good for another several months on the financial front.

This essentially moots the current peace effort. Europe will manage to prop up the Ukrainian zombie state for a while. Russia is also holding pretty well and with Venezuela strikes looming, it is looking to do even better, at least financially. I won’t put here another 1,000 words on the state of Russia, you’re better off reading Ivan’s deep dive on the topic where he covers the state of the Russian economy, society and politics better than I could ever do.

If Not Soon, Then When?

There are only two solutions here:

1. Russia facing a serious collapse will scramble to negotiate peace.
2. Europe fails to prop up the Ukrainian zombie state at some point, giving Trump a path towards peace.

Putin sees this and thinks he is winning and has time. But he would be happy to lock in the gains through a temporary ceasefire. Source: Black Bird Group

Considering that Russian economy is in a vastly better state than Ukrainian, and the fact that it is propped up by Chinese and North Korean production, we should focus on the latter if we are considering peace before 2028. And here a Ukrainian writer for Al Jazeera summed it up perfectly:

He is right - Europe has no balls to conduct the second option at the moment and will continue with the third for the foreseeable future. But the time will come again when Trump will once again have enough leverage to try peace. And then we shall see if they have what it takes and make Ukraine a proper military state it is inevitably going to be. That would also be the time to install Zaluzhny.

Because if you look at the prospect of peace, what is left there? Population - gone. Industry - gone outside of military. Infrastructure - in ruin. It’s a sad picture. And it will wreck havoc on European states that are refocusing their economies on a long war.

When I think about signs of peace, it is basically Europe failing to cooperate on the key issues. For now, such failure is potentially manifesting itself upcoming spring.

Prediction Markets

Thus obviously I still hold my No on ceasefire till the end of the year:

My fair odds are 2/98, 2% I give are for a very unlikely Christmas truce, but looking at precedent even if it happens it probably won’t qualify.

I am also looking at end of Q1 market, but currently I don’t hold any positions there:

I plan to deploy my capital form end of year position towards it at the moment, but I’ll update you once it happens. Here I’d give 15/85 odds at the moment, with financial situation of Ukraine being key to moving them in either direction.

I am not currently thinking about derivatives or markets like this one:

Ukraine might as well sign a useless document that it agrees to some kind of peace. But it is detached from the actual odds of peace and thus pretty much impossible to predict.

Wrap up

And that’s all for today. I didn’t really plan to write out another Ukraine deep dive initially, but the level of absurd that was reached during this process forced me to clarify what is going on.