Putin’s War Budget Faces Growing Strains as Peace Talks Resume

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To be sure, Russia’s planned budget deficit this year is low by international standards. Still, the government drastically revised its deficit target last year from 0.5% to 2.6% of GDP, and had to slash spending in December to meet that goal. It plugged the spending gap by issuing a record level of increasingly costly debt in the form of OFZ bonds.

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Putin wants Ukraine to cede control of its eastern Donbas comprising Donetsk and Luhansk regions as part of what Russia says are the “Anchorage understandings” reached at his August summit with Trump in Alaska. Fighting would be frozen along the current lines of contact in the southern regions of Kherson and Zaporizhzhia.

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The Kremlin considers this a concession by Putin, who has laid claim to all four regions of Ukraine, according to the people with knowledge of the situation. That’s even as his forces have never fully occupied those territories. 

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Ukraine rejects demands to withdraw its forces from heavily fortified areas of eastern Donetsk, which Russian forces have failed to conquer in fighting dating back to 2014, unless Putin also pulls his troops back in equal measure. US proposals have suggested turning the unoccupied area into a de-militarized or free economic zone under special administration. 

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There’s “general agreement” on postwar security guarantees for Ukraine, Rubio told the US Senate’s Foreign Relations Committee hearing. “Those security guarantees basically involve the deployment of a handful of European troops, primarily French and the UK, and then a US backstop,” he said. “But in fact, the security guarantee is the US backstop.” 

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Putin’s foreign policy aide Yuri Ushakov told reporters on Thursday those guarantees hadn’t been agreed upon with Russia. While territory is the main issue, there are other unresolved questions, he said. 

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An earlier round of talks in Abu Dhabi were constructive and focused on issues including implementation of a ceasefire if one could be agreed, according to people familiar with the matter. Military officials plan to continue those talks, though there’s little optimism about a truce without movement on the territorial question, the people said, asking not to be identified discussing private deliberations. 

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Putin met with UAE President Sheikh Mohamed bin Zayed Al Nahyan at the Kremlin on Thursday and thanked him for hosting the talks.

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US presidential envoys Steve Witkoff and Jared Kushner, Trump’s son-in-law, attended those negotiations after flying to Abu Dhabi from Moscow, where they held nearly four hours of talks with Putin. 

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Europe isn’t at the table in Miami and has little insight into whether there’s been any shift in the Russian position according to a European diplomat. 

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German Foreign Minister Johann Wadephul offered a pessimistic assessment during a visit to Latvia this week, criticizing “Russia’s stubborn insistence on the crucial territorial question.” 

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“If there is no flexibility here, I fear that the negotiations could drag on for a long time or not be successful at all,” he said.

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—With assistance from Alberto Nardelli, Daryna Krasnolutska, Eric Martin, Arne Delfs and Chris Miller.

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