The return of Realpolitik. True to his promise, President Trump and his team have actively engaged with the Kremlin and, as per yesterday’s statements, appear to have reached the broad outline of a roadmap towards a peace process and agreement on key terms for a deal.

EU leaders’ reaction is unclear for now. The reactions of Kyiv and European leaders are unknown but will be much clearer after this weekend as senior Trump administration members, including the vice president, are in Munich for the Security Conference, and are meeting with EU and Ukraine officials.

Consistent with our base case scenario. These latest events are consistent with our Active Engagement Scenario (see our Sanctions and Geopolitics Scenario Monitor) to which we assign a 45% probability. One of the assumptions in this scenario is that Putin and Trump meet (probably in Riyadh) in March or April.

May 9 is symbolic in Russia. There is a strong view that President Putin wants to be able to declare a “mission accomplished” at this year’s May 9 parade in Red Square. This year is the 80^th anniversary of the end of the so-called Patriotic War (WWII) and several world leaders, including President Xi, are expected to attend. Kremlin officials will, however, be mindful of US President Bush’s similar but premature claim in 2003.

Investor optimism – ruble and RTS gain. The RTS Equity Index has gained 21% since the start of the year as optimism about a peace deal has grown. The ruble, although now entirely managed by the Central Bank, has also rallied by about 15% versus the US dollar and the euro since January 1. The CBR is unlikely to allow the ruble to rally too far, as a RUB/$ rate in the “mid-90s” is better for the budget.

Considerable risk remains. It is too early to assume everything is agreed. While Moscow appears happy to continue the process based on the broad outline, there remain some very difficult negotiations ahead. It is already clear that not all those with either “power or influence” (see our regularly updated Power & Influence diagrams) are happy with a move to a peace process before the full aims of the so-called SMO (special military operation) have been achieved. The Kremlin may have equally difficult negotiations at home. But there is no doubt most of the population will welcome any move towards peace. 

The EU plans another big transfer to Kyiv. Euroclear said it is preparing to transfer several billion euros of income earned on the frozen CBR money, to Kyiv this quarter. But there is still no progress putting the $50bn loan together, i.e. as had been promised at the G7 summit last June.

The EU wants the 16th sanctions package by February 24. The EC is preparing another package of sanctions and expects to publish details just ahead of the third anniversary of the start of the SMO. 

Legislation to allow foreign asset confiscation. In response to the US Repo Act and the transfer of money to Kyiv, Russia is advancing legislation which will allow it to confiscate an equal amount by way of foreign owned assets under its jurisdiction. This includes company and private citizen-owned assets.

Oil receipts rise in 2024 and in January. Taxes on the extraction and export of oil and gas condensate brought the budget RUB903.6bn in January 2025, which is 17.2% more than a year earlier. Through 2024, the budget received $246.2bn from oil and gas, up $3.8bn on 2023. Exports of crude and product averaged 7.2 mbpd, down 2.8% y/y in compliance with the OPEC+ deal.

The economy gains 4.1% in 2024. Preliminary data shows GDP expanded by 4.1% in 2024. The main drivers were the manufacturing sector (military industrial spending) and the consumer sectors. Both are expected to be slower this year. Based on current trends, growth is expected to be half that rate at 2%.