Neither Putin Nor Zelensky Are Ready for a Deal

by Greg Valliere, AGF Management Ltd.

Insights and Market Perspectives

AFTER ALL THE ANALYSIS of Vladimir Putin’s mental state, the key to ending this horrific war may be Volodymyr Zelensky, who knows Ukraine can win the battle for Kyiv. So why should he accept a deal any time soon that would hand Russia much of eastern Ukraine?

THE WESTERN MEDIA LOVES ZELENSKY, the charismatic superstar who thinks Ukraine can win this war; he is more reluctant to compromise than generally portrayed. But he’s likely to lose the battle for Muriopol, perhaps within days, and Russia will then slog on this spring toward northern and western Ukraine. Thousands of civilians and troops will die.

WE’VE BELIEVED FOR THE PAST MONTH that the inept Russian Army is incapable of winning this war, and we still think Ukrainian patriots will hold Kyiv. But the toll will be horrific, as Russians bomb civilian targets with increasingly lethal weapons. At what point will this force Zelensky’s hand?

NEGOTIATIONS ARE CONTINUING, with Turkey as the key intermediary. This week’s NATO meetings, with Joe Biden in attendance, will be a pep rally — but the more important development will be negotiations that could result in a deal by the end of this month.

HOW MUCH IS ZELENSKY WILLING TO COMPROMISE? A promise to not join NATO or the European Union — while giving up much of eastern Ukraine — could infuriate many Ukrainians after the sacrifices they have made. A huge majority of Ukrainians think they will win this war; they could sour on Zelensky if he compromises.

WESTERN NATIONS WILL PROVIDE MORE ARMS, but the Russian bombardments — deliberately targeting civilians — will persist. The battle for Kyiv could last for months, with enormous casualties. NATO members understand this, and they want a deal.

BUT WE THINK Russia isn’t ready for a truce — despite huge troop casualties and an imminent economic Depression. And Zelensky isn’t ready for a truce, as Ukraine’s cities are reduced to rubble. It’s an ugly scenario; at what point will Zelensky take what he can get? A deal is unlikely in the next few days.
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THE OTHER NEWS: Hearings begin today on the nomination of Ketanji Brown Jackson to join the Supreme Court. The fiercely ambitious Sen. Josh Hawley (R-Mo.), never subtle, will rant that she’s soft on child pornographers, but our sense is that virtually all Democrats and a handful of Republicans will vote for her.

THE OTHER BIG STORY: With surprisingly little publicity, covid and its variants are making a comeback in China and Western Europe. No one wants to deal with this again, but millions of people in the U.S. are still not vaccinated.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

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This post was first published at the AGF Perspectives Blog.