Weekly Overview Cables - Ukraine war updates, Trump's tough talk on Russia.
1) Trump adopts a posture of ‘‘or else’’ on Russia.
Throughout 2024 we have argued that the worry of Trump throwing Ukraine completely under the bus was always overblown.
Leaving aside all the political constraints from Congress and the GOP establishment, and even if one was to assume that Trump didn’t consider Ukraine’s success in this war to matter all too much to U.S. interests, there was still at least one other reason why Trump would care: his own reputation.
That’s right: perhaps the most powerful factor going for Ukraine, is that Trump doesn’t want a legacy of Ukraine’s collapse under his watch.
Perceptions of strength, and reputation and legacy for the same matters a lot to Trump.
Having endlessly attacked Biden for allowing the invasion to happen in the first place (frequently arguing that Putin would never dare to do the same under his watch) Trump could not possibly accept an even worse outcome to materialize during his Presidential term.
The image of the Russian army pushing through further to the West of the current frontlines, and/or total breakdown and collapse of Ukraine’s frontlines would be a crushing blow to his legacy.
As such, the main risk to Ukraine under President Trump is not that he would let them get rolled over (unlikely) but that he would pressure them into a very bad deal (quite likely).
And Trump’s first week in office confirms our earlier perceptions.
Shortly after the inauguration, President Trump addressed the situation in Ukraine, expressing criticism of Russian President Vladimir Putin's actions.
He stated that Putin is "destroying Russia" by not pursuing a peace deal to end the conflict
Trump also said that Putin would face “high levels of taxes, tariffs and sanctions” if he did not “make a deal” to end the war in Ukraine.
(side note: Ukraine’s foreign minister, Andriy Sybiha, said the “strong” message was “welcome”.)
Now, given his previous track record and declared interest in ending the war (over securing Ukraine’s win), it is not plausible that Trump would make statements that were significantly better than those pronounced last week.
In fact, one could say that this was the best possible (and realistic) start for Ukraine.
And similar tough statements came from his Ukraine envoy: former Lieutenant-General (three stars) Keith Kellogg.
Mr Kellog talked about dropping oil prices to $45 (from the current average of $78) to weaken Russia’s ability to wage war.
(side note: and perhaps more importantly, Kellogg also reiterated the possibility of letting Ukraine use frozen Russian assets to buy U.S. weapons. This is a political move to not spend ‘‘taxpayer money” on the war.)
Naturally, such a significant drop any time soon is very unlikely to happen.
And even achieving 50% of that stated ideal price point (and pushing down prices to say high 50s) would require a significant supply of oil from major producers.
But at 13.2 million barrels per day (bpd) the U.S. is already operating at its max.
And in spite of Trump’s promises to ‘‘drill baby drill’’, it is not likely that there is much spare capacity left in the U.S. production.
As of today, The US EIA (Energy Information Administration) forecasts continued growth - but projecting an average production of only 13.55 million bpd in 2025 and 13.62 million bpd in 2026.
So then, the expected growth rate for this year is a mere 2.65% - this is as reasonably good as it gets.
But needless to say, nowhere near enough to bring about radical drops in oil prices.
And despite these projections, recent data indicates a decline in the number of active drilling rigs.
As of January, 2025, the U.S. oil and gas rig count fell to 576, the lowest since December 2021, with oil rigs decreasing by six to 472.
Now, Trump did declare a national energy emergency on January 20, 2025 - aiming to boost domestic oil and gas production by expediting permits and rolling back certain regulations.
(side note: for example, Trump rescinded the Lease Cancellations in the Arctic National Wildlife Refuge (ANWR), ordered streamlines environmental reviews, and placed Alaska at the heart of his administration’s renewed push for fossil fuel development. We shall discuss these in more detail later.)
But suffice it to say for now: all of these are medium to long-term solutions and are not going to bring about drastic drops in the price of oil anytime soon.
What about Saudi Arabia?
In his Davos address, Trump pushed the Saudis to increase their production.
Trump even implied Saudi complicity in Russia’s invasion - claiming that this invasion would not have happened if only SA would preemptively bring down the prices by pumping more oil into the market.
(side note: this is largely nonsense. Again, even if the Saudis wanted to harm their own national interests to such an extent, it wouldn’t have produced a dent large enough to dissuade Putin - unless the Kingdom was really set on bankrupting itself for Ukraine.)
It is good that we finally have an admin that is willing to put pressure on the Saudis.
Unlike Biden, Trump is not walking on eggshells: he shows who is the dominant party in this relationship.
(side note: and Saudis largely submit - they have already announced plans to invest up to $600bn into the U.S. market. The figure is highly unrealistic, and probably bogus (even if directionally, there are some moves/amount to signal seriousness), but makes for good headlines for Trump - earning goodwill to the Kingdom.)
And all of this one week blitz of ‘‘new sheriff in town’’ has already caused Putin to Respond.
In response to Trump’s threats, Russia said it was ready for a “mutually respectful dialogue” with America.
Putin even went so far as to praise Trump personally for being a ‘‘pragmatic’’ man that he could do business with (and with whom he always had good relations).
He even confirmed Trump’s previous assertions that had the elections not been ‘‘stolen’’ from Trump in 2020, and had he been the President at the time of the ‘‘crisis’’ in Ukraine the war could have been prevented.
Naturally, what Putin is doing here is nothing but a psyop: he knows exactly which buttons to push.
He is inflaming Trump’s ego, and lending external support to the conspiracy theories surrounding the 2020 elections - further flaming the internal discord in the U.S.
The danger here is that Putin succeeds in getting exactly what he wants: that he manages to delay the imposition of costs on Russia for long enough to maximize the gains on the battlefield in Ukraine, and possibly, even achieving a breakthrough moment.
And this new status quo would then allow Putin to dictate terms in the future negotiations - insisting on increasingly unpalatable concessions around Ukraine’s territory and sovereignty as a state.
Putin’s army is at a unique point: they are advancing on the battlefield, and Ukraine is continuing to lose men (without being able to replenish them at sufficient numbers/rate), and still not receiving additional significant military aid from either Europe or the U.S.
On the other hand, his economy will slow this year, and by the end of the year, things will start to bite: interests rates will either have to rise (causing major costs to civilians), or fail to do so and cause inflation (once again, putting the strain on ordinary Russians), and the budgetary strain of continuous investments into military and recruitment (already, sign up bonuses are being reduced) will start to become unsustainable.
As such, Putin has a window of opportunity here: few months where Washington hasn’t yet introduced new restrictions and sanctions (and potentially, new military aid to Ukraine), and/or where the full effect of such new restrictions/sanctions/support for Ukraine are too early to make a difference on the battleground.
Consequently, Putin’s current incentive is to delay delay delay - play nice and pretend to ‘‘negotiate’’ with Trump, while maximizing the gains on the battlefield.
There is only one way for Trump to avoid falling into this trap: reverse the sequence of events.
Washington must put on max restrictions now (with corresponding help to Ukraine), and signal openness to remove/freeze these quickly as Russia proceeds to show genuine willingness to negotiate in good faith.
Such a strategy would prevent Putin’s ability to delay and maximize his gains on the battlefield.
Unfortunately however, there aren’t signs of this strategy being pursued.
In fact, there are some worrying signs that the very opposite is about to happen: the U.S. suspended all foreign aid (including military aid) and has only exempted Israel and Egypt from these measures.
There is now confusion around this affecting Ukraine as well.
On the one hand, USAID has reportedly frozen its work in Ukraine.
But then again, on Saturday, Zelensky confirmed that military aid was uninterrupted: “I am focused on military aid; it has not been stopped, thank God,”.
Needless to say, this is of utmost importance and urgency - Ukraine relies on the U.S. for 40% of its military needs.
Suspending aid to Ukraine would not only undermine Trump’s own credibility and threats that there would be costs for Russia failing to stop and negotiate, but on a more immediate and practical point, it could lead to immediate devastating impact on Ukraine’s military capacity to maintain further Russian onslaught.
It would also cause major morale loss in both Ukraine’s public and the army.
As such, to preserve Trump’s own credibility, maintain the U.S. leverage over Russia, and to preclude catastrophe in Ukraine, not only must the Trump admin resume (and ideally, as discussed above, amp up) aid to Ukraine (if it was indeed frozen), but it must also highlight the continuation of this aid in public.
Too much is at stake and the last thing that Trump needs is to send unplanned and unintended signals to Putin, Ukraine, and the rest of the world observing in angst.
2) Russian advance continues.
In the eastern Donetsk region, Russian forces have intensified their offensive operations, claiming advances in areas such as Velyka Novosilka.
Ukrainian military reports indicate increased drone attacks resulting in casualties and infrastructure damage in Kharkiv and Kyiv.
Notably, Russian troops have captured the village of Vozdvyzhenka in Donetsk Oblast.
3) Russia’s 2024 casualties were significantly higher than in 2023.
Reports indicate that Russia has suffered significant casualties in 2024, with estimates of 434,000 total casualties, including 150,000 deaths, marking a substantial increase from previous years.
According to Ukrainian and Western intelligence, Russia suffered approximately 200,000 total casualties, with 60,000–70,000 fatalities by the end of 2023.
These figures included personnel losses across both regular Russian armed forces and Wagner Group mercenaries, particularly during the battles for Bakhmut and other contested areas in eastern Ukraine.
The number of Russian deaths increased by more than 100% from 2023 to 2024.
Total Casualties Nearly doubled, reflecting both higher intensity on the battlefield and weaker Russian troop replenishment and training systems.
The sharp rise in casualties in 2024 points to a grueling war of attrition, with Russia bearing the brunt of Ukraine’s counteroffensives and Western-backed military capabilities.
The following are likely the key factors that explain this drastic increase:
1) Ukraine’s counteroffensives in the south (Zaporizhzhia) and the east (Donetsk) were more aggressive and tactically advanced, leading to higher Russian losses.
The Kursk offensive also caught Russia off-guard - forcing the Kremlin to direct even more inexperienced (and relatively combat-ineffective) soldiers to stymie Ukraine’s invasion.
2) The prolonged battles for strategic regions and the deployment of undertrained Russian reservists contributed to unsustainable casualty rates.
3) Increased use of Western-supplied weapons by Ukraine, including ATACMS, Storm Shadow missiles, and HIMARS, targeted Russian logistics and manpower effectively.
For all intents and purposes, 2025 is likely to be yet another grueling year for Russia.
(side note: corresponding numbers of Ukraine are harder to find. But a good rule of thumb is to estimate them at around 60-80% of Russian losses - less than Russia due to defender status. Obviously, there is a major difference between 60% and 80%, but given Ukraine’s 3.8x smaller pool of manpower (18.2 million vs 69 million), both are bad numbers for Kyiv.)
Unfortunately, I doubt there’s much chance of Ukraine re-claiming Crimea in any “negotiation.” Another sore point would be making them renounce future NATO membership. EU membership should be feasible.