Ukrainian President Volodymyr Zelenskyy said that the current draft peace framework includes 15 years of security guarantees from the U.S., with Kyiv pushing for that to be extended for up to 50 years. At a meeting in Florida on Sunday, Zelenskyy said U.S. President Donald Trump confirmed strong security guarantees for Kyiv, with both leaders expressing optimism that they were on the precipice of a peace deal to end the war in Ukraine. “Yesterday we confirmed this with [Trump], that we will have strong security guarantees from the United States. Indeed, now it is not forever. In the documents it is for 15 years with the possibility of extending these security guarantees,” Zelenskyy told reporters via WhatsApp chat on Monday. “I raised this issue with the President. I told him that we are already at war, and it has been for almost 15 years. Therefore, I really wanted the guarantees to be longer. I told him that we would really like to consider the possibility of 30, 40, 50 years,” Zelenskyy added. The exact shape of the security guarantees remains unclear, though the U.S. has indicated it would mirror NATO’s Article 5 protections. Zelenskyy said he believes they would be credible if backed by the U.S. and supported by European allies. “I believe that the presence of international troops is a real security guarantee, it is a strengthening of the security guarantees that our partners are already offering us,” the Ukrainian leader said. Zelenskyy also said that the current 20-point plan needs to be supported by a referendum in Ukraine, but that would require 60 days of ceasefire — something Russia “does not want to give us.” On Saturday, Russia launched one of its heaviest attacks in recent weeks on Kyiv. But an impasse remains over several issues, including the fate of Donbas, which Zelenskyy has proposed be turned into a demilitarized free economic zone, while Russian President Vladimir Putin has pushed to claim the entire region. Kremlin spokesman Dmitry Peskov on Monday reiterated that Ukraine “must leave Donbas to stop the hostilities” and said that Putin will hold another call with Trump “very soon.” Zelenskyy said he wants to host a meeting between U.S., Ukrainian and European officials in Kyiv in the coming days. Zelenskyy also confirmed that a meeting of Ukraine’s European allies will take place in Paris for early January, adding that a meeting with Russia is possible if the U.S. and Europe agree on a peace framework.

The European Union is “the main obstacle to peace” in Ukraine, Russian Foreign Minister Sergey Lavrov said on Sunday ahead of a fresh round of peace talks between Ukrainian President Volodymyr Zelenskyy and U.S. President Donald Trump. In an interview with the Russian state-owned media agency TASS, Lavrov said the EU is “making no secret of the fact that they are getting ready to fight it out with Russia on the battlefield.” “We see that Zelenskyy’s regime and his European curators are not ready to engage in constructive talks,” he said, adding that the Kremlin “appreciates efforts by President of the United States Donald Trump and his team to achieve a peace settlement.” Lavrov’s comments were published as Zelenskyy headed in Florida to meet with Trump at his Mar-a-lago estate to resume talks on proposals to end the conflict with Russia. The meeting is expected to start at 1 p.m. Florida time (7 p.m. in Brussels). The meeting follows weeks of negotiations by envoys from the U.S., Ukraine and Russia since Trump proposed a 28-point peace plan in November. The proposal has been revised to 20 points, with Zelenskyy presenting the details to journalists in Kyiv last week. Early Saturday, Moscow pummeled the Ukrainian capital with one of its heaviest air assaults in recent weeks. The Russian strikes killed one person, AP reported. Zelenskyy spoke with several EU leaders ahead of the U.S. visit during a meeting with Canadian Prime Minister Mark Carney on Saturday.

Germany’s Chancellor Friedrich Merz compared Russian President Vladimir Putin to Adolf Hitler in a speech Saturday evening, warning that the Kremlin leader’s ambitions won’t stop with Ukraine. “Just as the Sudetenland was not enough in 1938, Putin will not stop,” Merz said, referring to a part of Czechoslovakia that the Allies ceded to the Nazi leader with an agreement. Hitler continued his expansion into Europe after that. “If Ukraine falls, he won’t stop there,” Merz said, referring to Putin. German, British and French officials are set to meet in Berlin this weekend to discuss proposals to end the war in Ukraine. U.S. envoy Steve Witkoff is also expected to meet with Ukraine’s President Volodymyr Zelenskyy. The talks are in preparation for a planned summit of leaders including Merz, Britain’s Keir Starmer, France’s Emmanuel Macron and Zelenskyy on Monday over stopping Russia’s aggression against Ukraine. A U.S.-backed 20-point peace plan is in the works, which includes territorial concessions on Ukraine’s part. Under one proposal being discussed, the Donbas region would be made into a free-trade zone were American companies can freely operate. Merz was speaking at a party conference of the Christian Social Union of Bavaria, which is closely aligned with his own party, the Christian Democrats.

The EU is seeking to boost the bloc’s powers to board vessels in Russia’s shadow fleet for inspections, according to a document prepared for Monday’s meeting of EU foreign ministers and seen by POLITICO. The issue of ships transporting Russian oil sailing under different flags to escape EU sanctions has wide implications for the bloc as those vessels not only help to boost Moscow’s war economy but also “pose threats to the environment and to navigation safety,” according to the five-page document prepared by the European External Action Service, the EU diplomatic arm. The shadow fleet ships also are a risk for critical infrastructure and “can be used as platforms for hybrid attacks against EU territory,” the document states. The vessels are in some cases suspected to be launch pads for Russian drones used to reconnoiter critical Western sites and disrupt civilian airports. The EEAS this month initiated a discussion at the technical level on the basis of a draft declaration of the EU and its member states on reinforcing the International Law of the Sea framework, according to the EEAS document. That effort “would provide an additional tool to member states to boost the effectiveness of enforcement actions, including providing a basis to board shadow fleet ships,” the document says. The draft declaration proposes “possible bilateral agreements between the flag states and the EU on pre-authorized boardings for inspections,” the EEAS wrote in the document. The objective is to finalize the draft declaration by the end of November and to adopt it at the following meeting of EU foreign ministers. Once the declaration is be supported by member states, the EU’s top diplomat Kaja Kallas will “seek the authorization of the Council to open negotiations for bilateral agreements with identified flag states,” according to the document.    EU member states “increasingly demonstrate a renewed momentum for more robust enforcement actions tackling the shadow fleet,” according to the document, which makes the example of French soldiers that at the start of the month boarded an oil tanker, the Boracay, believed to be part of Russia’s shadow fleet, which was off the coast of Denmark when unidentified drones forced the temporary closure of several airports and also was anchored off western France for a few days. The EU “could support member states in their efforts if they agree to grant the EU the right to negotiate agreements on their behalf for pre-authorized boardings for inspections,” the document says.   The EU is already reaching out to priority flag states and coastal states that provide or enable logistical support and bunkering services to the shadow fleet and, among other actions, it also “aims to mobilize its various tools to provide support and incentives to flag states to deregister sanctioned vessels,” according to the EEAS document. Panama, the largest ship registry, “has agreed to deregister vessels sanctioned by the EU and recently decided to stop registering vessels older than 15 years,” the EEAS says in the document.   In terms of further sanctions, the EU “will continue to propose additional listings of vessels and shadow fleet ecosystem operators such as insurers and flag registries,” the document states, building on measures taken already in the current sanctions packages. And “possible additional measures could include targeting the provision of logistical support to shadow fleet vessels, such as oil bunkering,” the document says.  

“Details, details. Things to do. Things to get done. Don’t bother me with details, just tell me when they’re done.”  That’s Jimmy Price, a cocaine baron in the 2004 U.K. movie “Layer Cake.” But the mobster’s instructions to underlings, delivered in his Mar-a-Lago equivalent of a country club in the leafy outskirts of London, eventually shape the circumstances for his undoing.  Donald Trump also isn’t a details man — except perhaps when it comes to fashioning his luxury brand with a reported obsessiveness about the flashy décor of his hotels, golf clubs and casinos. While Trump may fidget about which curtains to hang in his hotel rooms, when it comes to diplomacy upon which tens of thousands of lives may hang, he has less interest in details, focusing instead on the personal interactions of leaders.  Details are for subordinates, like his Secretary of State “Little Marco” and his golfing pal and envoy-to-everywhere Steve Witkoff, who unfortunately also has a shaky grasp of details and displays a tendency to hear what he wants to hear. Trump is just waiting for them to tell him when peace is oven-ready.  Whether he knows it or not, Trump is a practitioner of the “great man theory,” an idea popularized by Victorian essayist and hero-worshipper Thomas Carlyle that sees history as driven by exceptional leaders. This eschews the more complicated dynamics of culture and history, politics and economics.  And for Trump, everything is individualized — and it’s all about personal chemistry.  During his meeting last week with half a dozen European leaders and Volodymyr Zelenskyy, Trump was caught on a hot mic explaining to France’s Emmanuel Macron that Putin wants to “make a deal for me.” “I think he wants to make a deal with me. Do you understand that? As crazy as it sounds,” Trump said. Hence his remark this week about the difficulties in arranging a bilateral summit between Vladimir Putin and Zelenskyy. Again, this is all about personal chemistry. His take is that Putin is averse to meeting his Ukrainian counterpart because he “doesn’t like him,” adding, “They don’t like each other, really.” Last week, Trump talked about them being like the immiscible liquids oil and vinegar. No doubt the pair don’t like each other. Zelenskyy has every right to despise Putin, the imperial czar responsible for an invasion of his country that’s featured war crimes and seen tens of thousands of Ukrainian combatants and civilians killed and injured, as well as around 20,000 children spirited off to Russia to be indoctrinated. Likely, too, Putin isn’t enthusiastic about Zelenskyy. After all, he’s the annoying leader of a country that refuses to give in, has defied mighty imperial Russia and whose spirit of resistance has so far been unbreakable. But that isn’t why Putin isn’t ready to meet Zelenskyy. For one thing, a summit meeting with the Ukrainian would confer political legitimacy to Zelenskyy when the Kremlin has long argued he has none — Russian Foreign Minister Sergey Lavrov had a flourish of that in his recent interview with NBC’s “Meet the Press,” suggesting Putin would not be able to strike a deal with him as Moscow considers him “illegitimate.” But there’s also another reason. Piling up obstacles to a summit is part and parcel of the Kremlin’s strategy of stringing Trump along while avoiding — or at least reducing, it hopes — sparking Trump’s wrath and possibly prompting him to follow through on his threat of “severe consequences” unless Russia is serious about ending Europe’s biggest war since 1945.  Trump hasn’t laid out what those consequences would be — “I don’t have to say,” he sniffed at a press conference on Aug. 13. Likely, if Trump ever intended to do anything, the consequences would entail secondary sanctions on countries trading with Russia in a bid to choke off the purchasing of Russian fossil fuels. That wouldn’t bring Russia to its knees — the effectiveness of sanctions is generally overestimated — but it would be highly inconvenient, with Russia’s economy heading into a recession and already having overshot its budget deficit target for the year. Trump was caught on a hot mic explaining to France’s Emmanuel Macron that Putin wants to “make a deal for me.” | Ukrainian Presidency/Handout/Anadolu via Getty Images Short of something Putin could call a victory, continuing with the war on Ukraine is useful for the Russian president. To end the conflict abruptly could imperil his regime, as a rapid shift out of a war economy would raise the prospect of some dangerous sociopolitical infighting. And, according to Ella Paneyakh, a sociologist and research fellow at the New Eurasian Strategies Centre think tank, this would trigger “cruel and vicious competition for diminishing resources at every level of society.” War is also helpful in justifying political repression — patriotism can be a helpful tool.  Prolonging the conflict also has the benefit of further straining cash-strapped European nations, and risks fracturing an already brittle transatlantic alliance. A weakened, distracted and divided West also serves the purposes of Putin’s ally Xi Jinping as he ponders how and when to swallow Taiwan. And with Ukraine’s severe manpower shortage, there’s always the chance there could be a frontline breakthrough that Ukraine is unable to reverse. In short, Putin could get more by persisting — more land, Western security guarantees so watered down they’re worthless, and a cap on the size of a postwar Ukrainian army. That would handily set the stage for a later resumption of Russian hostilities at a time of Moscow’s choosing. As Trump’s former Russia czar Fiona Hill argued, the Russian leader “wants a neutered Ukraine, not one that is able to withstand military pressure. Everybody sees this, apart from Trump.” So how best to play Trump along without stoking his anger while keeping him onside? You’ve guessed it: Entangle Rubio and Witkoff in details and never-ending complications — talk about the “root causes” of the war, pile on deflections and digressions and trot America’s interlocutors down rabbit holes in a drawn-out exercise of skillful manipulation that lugubrious Lavrov is masterful at accomplishing. All the while framing Zelenskyy and Kyiv for the failure of any progress toward ending the war. That was what Lavrov was doing in his “Meet the Press” interview — pointing the finger of blame at Zelenskyy and banking that the charge will stick with Trump, a man impatient of details.  Recall that it was Lavrov who soon after the invasion recited on Russian television “To the Slanderers of Russia” by Pushkin, a poet beloved by Russian nationalists, who wrote about how conflict between Slavic nations was a family matter and no one else’s concern. “T’is but Slavonic kin among themselves contending, An ancient household strife, oft judged but still unending, A question which, be sure, ye never can decide.” 

The European Union is drafting new measures designed to squeeze Russia’s ailing war economy. But, having already committed to a phaseout of oil and gas imports, the bloc is increasingly aware it is Washington, not Brussels, that is best placed to turn the screws. According to four European diplomats, granted anonymity to shed light on closed-door discussions, the latest round of sanctions is not expected to include major new restrictions on the energy sales that fund Russia’s war against Ukraine. The package, the 19th to be imposed on Moscow since it launched its full-scale invasion in February 2022, is set to be unveiled next month and will instead target ‘shadow fleet’ vessels and companies helping Russia circumvent existing rules. The most painful consequences for Moscow would come if secondary sanctions — on companies or countries that do business with Russia — are imposed, but the real impact of those will come from the U.S. Many observers argue Russian President Vladimir Putin only engaged with Donald Trump in Alaska after Washington introduced high tariffs against India over its purchase of Russia’s economic lifeblood: oil. The dramatic next step would be to escalate similar sanctions to throttle Russia’s all-important trade with China. Trump appears to be leaving this option on the table if peace talks fall through.  “Over the next two weeks, we’re going to find out which way it’s going to go. And I better be very happy,” Trump said on Friday, threatening  “massive sanctions or massive tariffs or both” if Moscow doesn’t play ball. RUNNING OUT OF THINGS TO SANCTION? EU member countries in June gave the green light to a lower price cap on Russia’s oil; a ban on fuel refined from its crude; and the blacklisting of companies linked to the Nord Stream gas pipelines. Along with a new roadmap to phase out all energy imports from the country, that leaves the bloc with few remaining tools of its own to squeeze Moscow harder. “We don’t expect there will be much room for any material Russian oil sanctions in the EU’s 19th sanctions package,” said Ajay Parmar, lead crude market analyst at commodities intelligence firm ICIS. “The last sanctions package was a significant one for Russian oil and we think there is little scope for further sanctions at this point.” Maria Shagina, a sanctions expert at the International Institute for Strategic Studies, said that while the Russian economy looks “superficially resilient,” it is already creaking under Western pressure. Many observers argue Russian President Vladimir Putin only engaged with Donald Trump in Alaska after Washington introduced high tariffs against India over its purchase of Russia’s economic lifeblood: oil. | Kremlin pool photo by Gavriil Grigorov via Sputnik/EPA “Lower oil prices, the stagnation in the military-industrial sector, looming banking crisis and ever-growing military expenses put the Russian economy on the course of recession,” she said. “Sanctions on the Russian shadow fleet is one of many factors.” Secondary sanctions of the kind that could be imposed by the U.S. on companies dealing with Russian firms “would dramatically exacerbate the existing problems of the Russian economy. However, the Kremlin doesn’t buy the Trump administration’s threats, so it thinks it can weather the storm for now.” ‘CARTHAGE MUST BE DESTROYED’ Yet, other measures to degrade Russia’s capabilities are being considered, including a ban on its diplomats being allowed to travel without restrictions around the Schengen free travel area. Proponents say that total freedom makes it harder to track intelligence officers who could be planning hostile acts far from the country that issued their visa. “Just like Cato the Elder kept repeating that Carthage must be destroyed, I will keep proposing to end the free movement of Russian diplomats in Schengen,” Czech Foreign Minister Jan Lipavský told POLITICO. “It is an unnecessary advantage we give to the Russian regime, and it is being abused to facilitate sabotage operations.” Foreign ministers from across the bloc will meet at an informal summit later this week, where a discussion is scheduled with the EU’s top diplomat, Kaja Kallas, on how to sharpen economic restrictions on Russia. In the meantime, Ukraine is taking concrete action to drain Moscow’s war chest, hitting refineries across Russia and tipping its key source of state funds into crisis. Over the weekend, drones hit a pumping station on the Druzhba pipeline, halting deliveres of Russian oil to Kremlin-friendly EU states Hungary and Slovakia. Budapest and Bratislava have written to the European Commission demanding it intervene to prevent future attacks. Officials have made it clear they are unlikely to weigh in. “What is important, is the suspension does not affect the security of supply, which was always a priority for the European Commission,” said spokesperson Eva Hrnčířová. While Slovakia and Hungary have consistently opposed the expansion of sanctions on Russia, and are fighting a political battle over the planned phaseout, diplomats are confident they can pressure them to give the unanimous support needed for the 19th package. “Just look at what’s happened the last 18 times,” said one envoy.

European Commission President Ursula von der Leyen took aim on Tuesday at China’s industrial overproduction, export restrictions and its support for Russia’s war against Ukraine. In a statement to the European Parliament in Strasbourg, Von der Leyen stressed that “our relations with China must be rooted in a clear-eyed assessment of the new reality.” The remarks set the stage for a contentious summit later this month at which EU leaders will raise Beijing’s “no-limits partnership” with Vladimir Putin’s Russia. “We can say that China is de facto enabling Russia’s war economy, and we cannot accept this,” she told European lawmakers. On the economic front, the relationship between Europe and China will need rebalancing, de-risking and a diplomatic boost when it comes to climate change and environmental issues, Von der Leyen argued.  She started by complimenting China as great global civilization that over the past 50 years has become a great global power. But her praise quickly gave way to criticism, as she accused Beijing of operating outside of international rules and flooding global markets “with subsidized overcapacity — not just to boost its own industries, but to choke international competition.” China runs “the largest trade surplus in the history of mankind,” she went on to say, while European companies were finding it harder to do business on the Chinese market where they faced systematic discrimination. The increasing barriers faced by European companies in China include requiring foreign companies to keep localized staff; host research and development functions; and keep all IT data in the country, according to an EU Chamber of Commerce in China survey. “I’ve always said it: Europe is fully committed to result-oriented engagement with China,” von der Leyen said, calling on Beijing to engage in a meaningful dialogue that leads to actual change. “If our partnership is to go forward, we need a genuine rebalancing.”  For all von der Leyen’s finger wagging, the EU is looking to copy some of China’s more successful industrial policies, including its own technology transfers and procurement laws.  Under its newly revised rules on state aid, EU governments are being encouraged to include European preference criteria in their bidding processes, as well as other forms of aid, particularly as the bloc looks to create a domestic battery sector. In the Automotive Action Plan — the EU’s strategy for making its carmakers competitive — the executive has said it would look into direct support for European manufacturers. The EU is making public funds available for battery makers, including for non-EU companies so long as they are in a joint venture with a domestic partner and sharing know-how, technical expertise and technology. The EU-China summit, called to mark 50 years of diplomatic relations, will be held in Beijing on July 24. A second summit day has been canceled. President Xi Jinping is not expected to attend, and the Chinese delegation will be led by premier Li Qiang.

LONDON — Keir Starmer has made a big play of getting the U.K. “ready for war” — but his spending plans are anything but. Speaking ahead of the launch of Monday’s strategic defense review (SDR), the prime minister said he would move the country to “warfighting readiness, as the central purpose of our armed forces.” The SDR, a major piece of work outlining the biggest threats facing the U.K. and how to meet them, set out more than 60 new measures designed to strengthen the country’s ability to fight and to help protect its allies. It recommended the U.K. expand its submarine program, which should create 30,000 new jobs; spend £1.5 billion on technology to speed up decisions on the battlefield; and develop the Royal Navy as a “hybrid” force, blending drones with warships, submarines and aircraft. The report said the U.K. should be focused on responding to common threats facing European allies, described as a “NATO-first approach.” The weight of those words was somewhat undercut by Starmer’s tepid language on defense spending. While the PM has committed to boosting the budget to 2.5 percent of GDP by 2027, the “ambition” of raising that to 3 percent remains “subject to economic and fiscal conditions.” The equivocation has drawn concern among MPs and in defense circles that the U.K. lacks a plan to meet the most serious challenge the SDR flagged: The threat posed by Russian aggression. As the report spelled out: “State conflict has returned to Europe, with Russia demonstrating its willingness to use military force, inflict harm on civilians, and threaten the use of nuclear weapons to achieve its goals.” ‘MOBILIZING THE NATION’ Starmer visited the Govan shipyard in Glasgow as he prepared for the SDR to land, telling journalists that his aim was to bring “unity of purpose to the whole of the United Kingdom” and to “mobilize the nation in a common cause.” He painted a vision of a country engaged in a war mindset, later fleshed out in the text of the review, which spoke of the need for a “whole-of-society” approach.  The SDR’s recommendations included a renewed focus on home defense, an expansion of the Cadet force, and a “defence readiness bill” granting the government powers to mobilize reserves and industry should crisis escalate into conflict. Separately, Defense Secretary John Healey promised the U.K. would have 76,000 regular army troops by 2034. At every stage, Healey and Starmer were at pains to show that bolstering both the U.K.’s defenses and those of its European neighbors will create new jobs at home and aid the quest for economic growth. “That’s what underpins all of the PM’s thinking about defense,” said one No. 10 official, granted anonymity to speak candidly.  But Starmer is caught in a bind even as he seeks to link the nation’s defense to economic growth, with the ambition of his plans constrained by the Treasury and Chancellor Rachel Reeves. When Starmer announced he would move to up defense spending to the equivalent of 2.5 percent of GDP — currently around £85 billion — Healey’s allies claimed this commitment was partly down to careful and consistent lobbying by the defense secretary. Healey has not yet won the battle to set a firm commitment on reaching 3 percent, however. Starmer’s spokesman said that would come “in the next parliament,” which could stretch as late as 2034.  A PROBLEM DELAYED Politicians and defense analysts alike have argued this falls short of what’s needed to underwrite the promises in the SDR. James Cartlidge, the shadow defense secretary, said: “All of Labour’s Strategic Defence Review promises will be taken with a pinch of salt unless they can show there will actually be enough money to pay for them.” The Liberal Democrats’ defense spokesperson, Helen Maguire, warned the review “risks becoming a damp squib.” Marion Messmer, a senior research fellow at Chatham House, said it was “surprising” that the U.K. “would increase defense spending a little bit, but then kick the commitment to 3 percent so far down the road.” The timeline is also significant because of varying assessments as to how quickly Russia could pose a threat to NATO countries after the war in Ukraine ends. While the SDR does not make its own assessment, it notes: “Russia’s war economy, if sustained, will enable it to rebuild its land capabilities more quickly in the event of a ceasefire in Ukraine.” Setting out the SDR in parliament, Healey responded to his critics: “I see the way the chancellor is fixing the economic foundations after 14 years of failure under the Conservative government, and I have no doubt that we will meet our ambition to hit 3 percent of spending on defense in the next parliament.” Whitehall officials pointed out they could not be expected to give a firm timeline for the higher spending commitment beyond the terms of the spending review being undertaken by Reeves, which only covers the next five years. They highlighted Starmer’s assurance that he was “100 percent confident” that the measures set out in the review “can be delivered” — subject to the state of public finances. The deadline for raising spending is also not the most important aspect of the U.K.’s response. Messmer said the government’s ability to speed up procurement to secure equipment such as drones would give a clue as to their seriousness about responding to the threat from Russia — something emphasized throughout the SDR.  Ministers cannot avoid questions over the 3 percent figure altogether, though, since they are the ones who dangled it in the first place. These questions will only grow more pertinent in the run-up to the NATO summit at the end of June, where the U.K. and its allies will come under pressure to commit to spend 3.5 percent or even 5 percent of GDP on their militaries.

Cracks are appearing in the European Central Bank’s united front as the urgent need for cash to rearm Europe threatens to overpower legalistic and technocratic concerns about how the single currency should be managed. The implicit withdrawal of American security guarantees from Europe last week following a heated Oval Office clash between U.S. President Donald Trump and Ukrainian President Volodomyr Zelenskyy has sent European leaders scrambling for ways to bolster defense spending quickly. Largely strapped for cash and already groaning under heavy debt burdens, Europe’s politicians are now mulling whether to seize some €200 billion in Russian central bank reserves currently frozen in Belgium and being used as collateral for a €50 billion loan from the G7 to Ukraine. Traditionally, the Frankfurt-based ECB has warned against any more aggressive action, saying it could damage the standing of the euro in global financial markets. But on Friday, Mārtiņš Kazāks, governor of the Bank of Latvia, was the first member of the ECB’s Governing Council to endorse the move for outright seizure, telling POLITICO that it was a “viable option to help Ukraine in its fight for freedom and against aggression.” The comments, conspicuously from a country on Europe’s front line with Russia, are an acknowledgement that more radical action is needed, even at the cost of sending yet another shock through global markets. They hint that rapidly shifting reality on the ground may force a new consensus in Frankfurt. In addition to Kazāks, officials at other Baltic central banks also privately endorse outright seizure, even if their official position is different, said one person familiar with the matter. Neither the Estonian nor Lithuanian central banks responded to a request for comment. In conversations with POLITICO, several Eurosystem officials — granted anonymity to discuss a sensitive matter freely — suggested that the shock of Trump’s abandonment of Europe had weakened their position, and reluctantly accepted that politicians would likely do as they pleased. CHANGING REALITIES However, in public at least, ECB President Christine Lagarde is still trying to hold the line. In guarded comments on Thursday, the Frenchwoman as usual highlighted the legal risks of confiscation. But she acknowledged that the ECB’s role is merely advisory and that the decision is in the hands of governments. “We have made our position quite clear,” Lagarde told reporters. “I would certainly submit that the international law basis on which any decision is made will matter as far as other investors are concerned, and I’m sure it’s another element that will be taken into account” by decision makers. The ECB’s long-standing opposition is well-rooted in both law and tradition. Skeptics say that seizing the Russian funds would imply that assets held in Europe by other central banks are not safe, undermining faith in the single currency as a reserve currency and risking a loss of credibility, particularly among countries in the global south. That would undo years of European efforts to try to build the euro up into an alternative to the dollar — just at the moment when the U.S.’s increasingly erratic behavior on the international stage is making the need for an alternative more urgent. Last week’s heated clash between U.S. President Donald Trump and Ukrainian President Volodomyr Zelenskyy has sent European leaders scrambling for ways to bolster defense spending quickly. | Pool image by Jim Lo-Scalzo/EFE via EPA And it’s not just what the move would say about the euro, but what it would say about the eurozone as a place to do business. Judith Arnal, an associate research fellow at CEPS, said the move would also erode faith in the region’s clearing and settlement systems, which act as custodians not just for euro assets but also for dollar ones (including some held by China). Seizure, and the precedent it would set, could further isolate the EU at a time when the U.S. is aiming to reconcile with Russia, Arnal said. “Without U.S. backing, the move could face greater international scrutiny, making it harder to justify and implement, while amplifying the risk of retaliatory measures from non-Western actors,” she said. A HARSHER WIND BLOWS But needs must when the devil drives, and the temptation to plunder one of the biggest cash piles on the planet is growing daily. Harijs Rokpelnis, a top official in the Greens and Farmer’s Union, a member of Latvia’s ruling coalition, said the urgency of the moment requires that politicians ignore the ECB’s advice, however sound it may be. “Looking from the purely technocratic view of economics, they have a point,” he acknowledged, while pushing for seizure nonetheless. The ECB, in turn, can maintain its technocratic position to save face, and both sides can agree to disagree, he added. Certain central bankers may privately agree with seizing the assets, said two other people, and are more than happy for politicians to go along with it. Some argue the ECB has the tools to deal with any problems that seizure might cause. Elina Ribakova, an analyst with the Peterson Institute for International Economics in Washington, argued that the invocation of financial stability risks has typically been a euphemism for the dumping of eurozone government bonds by countries such as China or Saudi Arabia. But the ECB, she said, could counter this with its emergency bond-buying tool, known as the Transmission Protection Instrument, which exists explicitly to stop unjustified distortions in bond markets. TOUGH CHOICE How politicians and central bankers resolve the issue will say a lot about the balance of power between the two, at a time when the traditional authority and independence of the ECB has been weakened by a prolonged overshoot of inflation. Lagarde and the ECB’s body of experts in Frankfurt may yet prevail. The influence of regional central bank governors — who participate in monetary policy decisions but don’t have much say on Frankfurt’s institutional stance — is limited. But the debate reveals how political concerns can chip away at its ability to defend the currency. It’s a particularly sensitive moment for the Eurosystem’s national governors, who are appointed by their respective governments. Six of the 20 on the ECB Governing Council have terms expiring this year. Those seeking reappointment, and candidates looking to succeed outgoing governors, may be more than usually unwilling to risk offending their capitals. It isn’t that the ECB is allergic to getting involved in politics. The central bank has come under fire for its focus in recent years on climate change, as well as its forging ahead on the so-called digital euro, a pan-European payments platform that some see as de facto industrial policy. But its first reflex — and its legal mandate — has always been to protect the value of the currency, and to shy away from anything that jeopardizes it. “All in all, even if there is increasing political will to seize Russian sovereign assets, financial stability risks remain,” said Arnal at CEPS. “Political priorities do not change the substance of things.”

Agathe Demarais is a senior policy fellow at the European Council on Foreign Relations (ECFR). As U.S. President Donald Trump and Russian President Vladimir Putin consider meeting in the coming weeks, it may be useful to ask why it is that Moscow now appears inclined to end the war in Ukraine. Three years into the conflict, Putin has shown the world he doesn’t care about bloodshed. And if his goal was to install a Russia-friendly government in Kyiv, he remains far from achieving it. However, there is a third, less explored hypothesis that explains why the Russian president might finally be coming to the negotiating table: Moscow could soon struggle to finance the war. The usual narrative about Moscow’s fiscal situation tends to note that Russia records a small budget deficit and that Russian public debt is low (at about 20 percent of GDP), which makes for sound fiscal metrics. This analysis holds true for most economies, but in Russia’s case, there’s an important catch: With Western sanctions constraining Moscow’s ability to tap into international debt markets, the Kremlin has limited room for maneuver to finance its small — but nonetheless real — fiscal deficit. With external debt out of the equation, Moscow’s initial plan B was to get Russian banks to buy sovereign debt. This strategy worked reasonably well in 2022 and 2023, but cracks started to emerge last year. Faced with competing pressures from the Kremlin to extend hundreds of billions in cheap loans to defense firms while also buying huge amounts of sovereign bonds, domestic banks have become so cash-strapped that they’re now reluctant to pile on more debt. Late last year, the Kremlin had to cancel several auctions for domestic debt issuance because there were no buyers. So, with domestic borrowing increasingly out of the equation, Moscow has turned to plan C: tapping into the reserves of the Russian National Welfare Fund (NWF). On paper, this looks like a reasonable strategy. Totaling nearly 10 trillion rubles (about $110 billion) in early 2022, the liquid portion of these reserves initially looked sufficient to cover the war-fueled budget deficit for several years. However, even the largest of savings eventually dries up, and three years into the conflict, the NWF’s liquid reserves have already shrunk by around 60 percent.  For the Kremlin, it thus looks like this year is set to be difficult on the fiscal front. In January, the country’s monthly budget deficit was about 45 percent higher than the full-year target for 2025. Seen from Moscow, this data probably looks alarming: If fiscal expenses remain at their January levels throughout the remainder of the year, the NWF reserves could vanish in just three months. And even if they don’t — as is more likely — 2025 is probably the last year Moscow will be able to fully cover its fiscal deficit by tapping into those savings. This begs the question, what would happen if Russia ran out of money to finance its budget shortfall? U.S. President Donald Trump and Russian President Vladimir Putin are considering meeting in the coming weeks. | Kent Nishimura/Getty Images With domestic banks choking on debt, a sovereign default could well trigger a full-blown financial crisis. If that happened, the Kremlin would be hard pressed to support its banking sector. With the NWF reserves running low, there would be no pot of money available to proceed with recapitalizations. The house of cards that the Russian economy has become would quickly start shaking. Fiscally speaking, Russia is running out of time. The Kremlin has no plan D to finance its budget deficit, raising questions about its ability to fund the war. From this perspective, fiscal breathing room could well be what Putin is really looking for in his talks with the U.S., whether through sanctions relief (for instance, relaxing U.S. restrictions on Russia’s ability to place external debt) or a pause in the conflict (which would allow Moscow to replenish its coffers via a reduction in defense spending). Back in September 2024, Kyrylo Budanov, Ukraine’s defense intelligence chief, predicted that mired in economic problems, Moscow would try to force an end to the war in 2025. These words may now be proving prescient. The reason Putin might finally be ready to negotiate seems to be remarkably simple: He wants to avoid a humiliating bankruptcy.