U.S. steps up pressure to end war as aid burden mounts
Frozen assets and energy deals included in negotiations
Peace talks seek to ease both fiscal and inflation pressures

Russian hardliners welcomed U.S. President Donald Trump's public clash with Ukrainian President Volodymyr Zelensky, believing that discord between Washington and Kyiv could create negotiating conditions favorable to Russia. However, the U.S. plan to end the war appears intended to reduce the West's burden of supporting the war and secure economic benefits from frozen assets and energy deals. Making allies pay for weapons purchases and expanding diesel supplies through dealings with Russia are also seen as choices that prioritize U.S. interests in curbing government spending and stabilizing prices.

Trump and Zelensky Clash Head-On over Sanctions Relief

According to Reuters on the 20th (all dates hereafter are local time), Russian hardliners have welcomed the recent public clash between Trump and Zelensky. They expect deteriorating U.S.–Ukraine relations to benefit Russia's war effort and negotiations to end the conflict. The dispute between the two leaders erupted on the 9th, when Trump announced that he had agreed with Russian President Vladimir Putin on diesel supplies and would temporarily ease related sanctions. The plan was to lower fuel prices by supplying Russian diesel to the U.S. and global markets. Zelensky immediately objected, saying that allowing Russian diesel sales amounted to “investing in a war that must be ended.” His concern was that sanctions relief could encourage attacks, since Russia could use its energy export earnings to finance the war.

In response to Zelensky's criticism, Trump escalated his attacks by taking issue with Ukraine's strikes on Russian oil refineries. His argument was that even if Russian diesel supplies were increased, attacks on refineries would disrupt production, making it difficult to lower fuel prices. After using this reasoning to press for an end to attacks on energy facilities, he went so far as to demand Zelensky's replacement on the 10th, saying, “It is time for Ukraine to have a new president.” Zelensky countered that Ukraine could not unilaterally stop its attacks while Russian airstrikes continued. He stipulated that Russia must stop attacking Ukrainian energy facilities or the United States must provide additional Patriot interceptor missiles.

As the conflict between the two leaders intensified, Russian hardliners echoed Trump's remarks and joined the offensive against Zelensky. Dmitry Medvedev, deputy chairman of Russia's Security Council, mocked Zelensky on Telegram, saying that a leader once hailed as “Person of the Year” and “the new Churchill” had been branded an obstacle to U.S. interests and peace. He accused Zelensky of having “bitten the hand that fed him until it bled.” Kirill Dmitriev, Putin's special envoy for economic negotiations with the United States, also claimed that “Zelensky became too greedy” and would pay the price for attacking Trump. He shared an image of a bear symbolizing Russia and an eagle symbolizing the United States facing off against Britain's lion and the European Union (EU), with the caption “Things are different now.”

Ukraine's Soaring War Costs Increase the Burden on Western Backers

Although Trump's successive remarks appear to bolster Russia, they are interpreted as reflecting an underlying calculation to reduce U.S. war costs and secure economic benefits. Ukraine's war costs have now grown to a level that is difficult to cover even with its own finances and Western support combined. At the end of last month, the Ukrainian government put this year's total war costs at USD 155 billion (approximately USD 160 billion), including domestic budget spending and in-kind Western aid such as air-defense missiles, ammunition and aircraft. Even if it devotes its entire annual budget revenue target of USD 70 billion (approximately USD 72.2 billion) to defense, it must still depend on military and financial support from the United States and Europe. At the time, the government estimated its funding shortfall at USD 27 billion (approximately USD 27.8 billion). It said it would cover USD 7 billion (approximately USD 7.22 billion) through deferred spending, budget reallocations and other measures, and discuss ways to raise the remaining USD 20 billion (approximately USD 20.6 billion) with donor countries. The immediate shortfall must be filled before Ukraine can order weapons for use early next year, making additional support directly critical to holding the front line.

As the war drags on, European countries face the burden of raising additional funds to cover Ukraine's war-financing shortfall. On the 16th, Zelensky told EU leaders that next year's war costs would require EUR 155 billion (approximately USD 178 billion) and requested at least EUR 70 billion (approximately USD 80.3 billion) in additional support. European Commission President Ursula von der Leyen confirmed a funding gap of the same size, making ways to cover it an immediate priority for the EU. EU leaders accordingly instructed the Commission to present funding options by the end of November. With the United States also shifting the cost of weapons aid onto its allies, Europe must fund both financial assistance and weapons purchases. In July last year, Trump announced a plan under which NATO allies would buy U.S.-made weapons and deliver them to Ukraine. The arrangement supplies Ukraine with the weapons it needs while limiting additional U.S. spending and leaving European allies to cover the purchase costs.

Table 1. Ukraine's War Costs and Western Support

U.S. Funding Has Also Sustained Ukraine's Basic State Functions

Europe will also likely have to take on more debt to provide additional support. The EU is raising funds in the markets, backed by its common budget, for the EUR 90 billion (approximately USD 103 billion) loan to Ukraine agreed late last year. Joint borrowing is also being discussed as a way to cover the new shortfall. Estonian Prime Minister Kristen Michal said on the 16th that additional loans were a likely solution. Borrowing conditions have worsened since the previous aid package was drawn up. The yield on the EU's 10-year bonds rose from 2.8% in January this year to 3.44% in September, increasing the interest payable on the same amount of borrowing. A proposal to ease the burden by using frozen Russian assets has also stalled because Belgium, which holds most of the assets, opposes it over legal and financial risks. European countries seeking to maintain support for Ukraine must now weigh both the interest burden of additional borrowing and the risk of losses associated with using frozen assets.

The United States has also committed substantial funds to keeping Ukraine's government running. According to the U.S. Government Accountability Office (GAO), most of the USD 30.2 billion (approximately USD 31.1 billion) in direct budget support managed by the U.S. Agency for International Development (USAID) had been disbursed to Ukraine through the World Bank by the end of 2024. The funds helped Ukraine maintain basic state functions while concentrating its own resources on defense. As support has continued, the U.S. government's burden of monitoring how the money is used and reporting to Congress has also grown. GAO reviews found that figures for aid spending varied across reports and that materials submitted to Congress contained inaccurate information.

Territorial Concessions from Ukraine, Frozen-Asset Relief for Russia

Ukraine is appealing for support by emphasizing that stopping Russian expansion is directly linked to the security of Europe as a whole. But donor countries, whose fiscal burdens have grown as the war drags on, are also finding it increasingly difficult to approve additional spending. Zelensky has maintained that withdrawing from the Donbas would hand key defensive positions to Russia and leave Ukraine vulnerable to another invasion. His argument is that holding the front line with Western support is a way to reduce Europe's security costs. U.S. negotiators, however, maintain that a Ukrainian decision to withdraw could bring an agreement closer. On the 11th of last month, Trump's envoy Jared Kushner said that if Ukraine withdrew to the line demanded by Putin, the rest of the agreement was ready. He added that Ukraine did not want to do so, appearing to blame the negotiating impasse on Zelensky's refusal to make territorial concessions.

The United States is currently seeking an agreement to end the war by putting both Ukrainian territorial concessions and economic incentives for Russia on the negotiating table. At a meeting of U.S., Ukrainian and European officials in Miami early this month, U.S. negotiators reportedly proposed unfreezing some Russian assets and transferring them to a U.S.-supervised financial institution. The idea is to advance negotiations by including the frozen-assets issue, a matter of interest to Russia, in a peace agreement. A U.S. official also explained that the process for unfreezing the assets and the use of the funds were being discussed as part of a comprehensive peace agreement. If the proposal succeeds, the United States would be able to participate in the process of releasing funds in accordance with the terms for ending the war. The move is seen as an attempt to encourage Russia's participation in negotiations while also securing authority over the management of substantial funds.

U.S. Export Benefits Also Factor into Adjustments to Russia Sanctions

The economic benefits the United States hopes to secure through negotiations are also evident in energy deals. A prime example is its consideration of easing sanctions on vessels carrying Russian diesel after allowing its export. The Trump administration reportedly discussed selling sanctioned oil tankers linked to Russia and Iran to regular commercial operators and lifting operating restrictions on those vessels. Energy Secretary Chris Wright identified a shortage of tankers as a major factor driving up shipping costs. The reasoning is that increasing vessel supply to lower freight rates could improve conditions for U.S. crude oil exports while also reducing the fuel prices consumers pay. U.S. interests in energy exports and domestic prices are thus being reflected in the process of adjusting sanctions on Russia.

Efforts to lower fuel prices also appear to reflect concerns that high inflation could translate into interest-rate pressures. Diesel is widely used in freight transport, agriculture and construction, so sustained price increases raise goods transportation and production costs. If those costs are passed on to consumers, price stabilization could be delayed and the scope for interest-rate cuts could narrow. Energy prices are also a major factor in the bond market. On the 20th, the yield on the 10-year U.S. Treasury note fell 0.019 percentage points from the previous day to 5.116%, as oil prices declined and housing data came in weaker than expected. For Trump, with the midterm elections approaching, stabilizing fuel costs would be an achievement that could ease the burden on households and businesses while soothing voters' frustration over the cost of living.