Shaky ceasefire

Putin’s financial crisis could prevent ceasefire

Putin has maneuvered himself into a dead end.

(Bild: Mikhail Metzel/AP)

Will there be a 30-day ceasefire in Ukraine? The offer from Washington and Kiev is on the table, so the Kremlin is under pressure to make a move. But everything points to Russia rejecting it ...

The smoothing of US-Ukrainian relations has apparently caught Moscow off guard. The deal negotiated in Saudi Arabia on Tuesday requires clear commitments from President Vladimir Putin for the first time. Instead of the daily loudspeaker announcements, restraint now reigns in the Kremlin.

Moscow needs more details in order to come to a decision, Kremlin spokesman Dmitry Peskov meekly announced. "You see, you are anticipating something, we don't want that," Putin's mouthpiece told journalists when asked about a possible agreement, according to the state-affiliated Kommersant media outlet.

The USA would have to explain the details. A telephone call between Putin and US President Donald Trump could also be organized quickly. Only then would it be possible to say how Russia would react to the proposal. This only gives limited cause for hope. An initial phone call between the two presidents in mid-February marked the starting point of the transatlantic estrangement between the USA and Europe. Rubio wants to make contact with Russian government representatives "today". The chief diplomat already made it clear on Tuesday that the proposed deal should put Russia's willingness to negotiate to the test.

Bad omens for ceasefire
However, the signs are pointing to rejection! A high-ranking Russian source told the Reuters news agency that Russia would have to negotiate the terms of a ceasefire itself and receive some kind of guarantees. "It is difficult for Putin to agree to this in its current form," said the source, who wished to remain anonymous due to the sensitivity of the situation.

The current situation on the battlefield makes a ceasefire and, in a further step, a lasting peace unattractive for the Russian aggressors. "Putin has a strong position because Russia is on the advance". Even in the Russian region of Kursk, where Ukraine has conquered territory for a better negotiating position, Russian flags are increasingly being raised again in the city centers.

Putin's warmongering has also long since affected his financial room for maneuver. The Kremlin has converted the entire country to a war economy. Russia's economic growth is now strongly linked to military spending. The war is currently keeping the engine running.

"Russia's dependence on military spending, low-tech exports and high inflation could lead to the kind of economic stagnation seen in the Soviet Union in the 1980s," analyzes the transatlantic think tank CEPA. Economists are certain that peace on Western terms could further exacerbate this domino effect.

Can Russia afford peace?
Russia's finances are in a bad state anyway. The state deficit doubled in the first two months of the year in order to boost economic growth in the short term. Falling oil prices are a major problem for Russia, as the energy sector generates around a third of all Russian budget revenues.

The Russian central bank has been trying for months to stem the galloping inflation. It has set the key interest rate at 21 percent - the highest level for more than 20 years. This has made investments in the private sector practically impossible, as loans are becoming unaffordable. Putin has also made himself dependent on China, as Western companies have almost completely withdrawn from Russia. Beijing is helping Moscow to circumvent the 16,000 or so sanctions against Russia.

Putin has maneuvered himself into a dead end.

(Bild: Mikhail Metzel/AP)

The USA naturally knows where Russia's weaknesses lie. By agreeing to a ceasefire, Putin would have to publicly admit them. While US President Trump was cautious, US Senator Lindsey Graham threatened the Kremlin with new punitive measures: "If Russia refuses, we should impose massive sanctions against them." 

However, the USA would then have to target China and other Russian partners, as Trump's favored customs strategy hardly carries any weight for Putin. Russia only exports very few goods to the USA - now less than one percent of its total export volume.

One phone call changed everything
There had been plans for US sanctions that would actually hurt the Kremlin. But then the US president picked up the phone: "Trump spoke to Putin on the phone and then completely fell over. It has now taken a month to row the USA back from the position of Russia's vicarious agent. There is no plan, no sensible strategy on how to proceed and how this war can be brought to a sensible end - neither in the USA nor in Europe," military expert Gustav Gressel told the news portal "t-online".

Putin could therefore continue to rely on the factors of attrition and Trump: The Kremlin chief can probably only agree to a ceasefire anyway if he has negotiated it himself in order to secure himself economically. However, this means he has to advance on the battlefield in order to further improve his position. The hole he has dug himself is simply too deep ...