Timothy Ash, senior sovereign strategist at BlueBay Asset Management in London, says European policymakers are belatedly waking up to the fact that the war in Ukraine is set to be prolonged \u2014 and that they alone may have to foot the bill.<\/p>\n
\u201cI cannot remember a period over the past 3.5 years plus when we appeared further from any peace,\u201d Ash said after meetings with Ukrainian and Nato security officials. \u201cThere is dawning recognition here that a) Putin is just not serious about peace (if he ever was) and; b) If he was, the Trump administration seems to have so badly screwed up peace talks.\u201d He argued that Donald Trump had \u201cgifted Putin all the early leverage\u201d and was now creating \u201cobstacles, or excuses, to delay rolling out more sanctions on Russia.\u201d<\/p>\n
According to Ash, Ukrainians are resigned to a long conflict but determined to continue. \u201cThey know it is a zero-sum war for them \u2014 it is about survival,\u201d he said, citing a KIIS poll showing that 62% of Ukrainians are willing to endure a protracted war, with only 14% favouring negotiations on Russia\u2019s terms.<\/p>\n
The financial burden is now falling squarely on Europe. \u201cEurope has finally understood that with the cost of keeping up Ukraine\u2019s defence against Russian aggression running at $100bn a year (I would argue that $150bn a year is needed), and the US not writing any cheques, that the full cost of supporting Ukraine has to fall on Europe,\u201d Ash said. With European budgets strained and populist pressure to spend at home, \u201cthe harsh reality is that the only source of sufficient funds for Ukraine is now immobilised CBR assets.\u201d<\/p>\n
He pointed to shifting political signals: European Commission president Ursula von der Leyen has endorsed a reparations loan plan, while German chancellor Friedrich Merz is reported to support \u201cthe creative use of immobilised CBR assets.\u201d Ash argued that \u201cthe problem so far is this whole debate has been driven by the legal complexities, not the economics. The legal complexities have given the politicians cover not to do the right thing. Now the economics is driving the politics and the legal has to follow.\u201d<\/p>\n
Beyond financing, the conflict is evolving technologically. \u201cOne phrase I heard this week \u2026 sums up the war in Ukraine: it\u2019s now a \u2018war of iteration\u2019,\u201d Ash said. While the front line is mired in attrition, \u201cthe war could perhaps ultimately be decided by which side innovates, or iterates, best in the drone\/tech war.\u201d He warned that Russia currently has the advantage in scaling up production.<\/p>\n
Ukraine\u2019s ability to match this may depend on Western support for industrial production. \u201cThe obvious place which could deliver the manufacturing scale, quickly for Ukraine, would be T\u00fcrkiye,\u201d Ash suggested. \u201cPerhaps all this could be funded from immobilised CBR assets. Oh the irony of Russian tax payer money being used to buy reparation bonds to fund Ukraine\u2019s military industrial production to defeat Russia in this war.\u201d<\/p>\n