As Istanbul hosted the second round of talks on resolving the Russia–Ukraine conflict on 2 June, both belligerents set out their demands with a view to a peace agreement. Common ground, however, remains elusive, as Russia maintains the same prerogatives it asserted three years ago, notably concerning the cession of annexed territories that Ukraine is determined to retain. With a third meeting scheduled for the end of the month, the door to negotiations is only ajar, while hostilities look set to continue. Against this backdrop, what could the terms of an agreement between the Kremlin and Kyiv look like? What are the current dynamics of the balance of power on the battlefield? In the context of a prolonged conflict, what are Russia’s economic, military and diplomatic capacities over the long term? An update with Igor Delanoë, Associate Research Fellow at IRIS and an expert in Russian geopolitics.
To what extent did this second round of peace negotiations held in Istanbul highlight the incompatibility between Vladimir Putin’s demands and the aspirations of Ukraine and the Western powers? On this basis, what might the terms of an agreement between Ukraine and Russia look like?
The contents of the two memoranda exchanged by the Russian and Ukrainian delegations illustrate the gulf between Kyiv and Moscow in their approaches to resolving the conflict. Let us recall that during the first round of talks on 16 May, the Russians and Ukrainians agreed to each draw up a memorandum outlining their vision of the conditions and timeline that might lead to an end to hostilities (peace is not yet on the agenda…). Unsurprisingly, the provisions of the Russian document are similar to those of the draft Russia–Ukraine agreement from March–April 2022, which ultimately failed. In spirit, it also closely resembles the two draft agreements sent as ultimatums by Russia to the United States and the North Atlantic Treaty Organisation (NATO) in December 2021. In essence, the Kremlin has set out in this memorandum what it regards as solutions to what are referred to in Moscow as the “roots of the crisis” in Ukraine: the abandonment by Ukraine of its ambitions to join NATO, guarantees for Russian-speaking communities and the Russian language, and a ban on the glorification of controversial historical figures (such as Stepan Bandera). Added to this are limitations on the size and capabilities of the Ukrainian army, as well as recognition of Russia’s sovereignty over the territories annexed in 2014 (Crimea) and in 2022 (the four regions of Kherson, Zaporizhzhia, Donetsk and Luhansk), even though the Russian army does not fully control these areas. The Ukrainian document is markedly different, as it focuses on establishing a total and unconditional ceasefire prior to opening substantive negotiations on the crisis. It also calls for a meeting between Volodymyr Zelensky and Vladimir Putin, something the Kremlin opposes, as well as security guarantees for Ukraine.
In other words, the Russian document seeks to formalise Ukraine’s capitulation—one that would also symbolise a geopolitical defeat for the West, which would not have been the case had the draft agreement in Istanbul in April 2022 been successful. Yet Ukraine does not consider itself defeated. In short, at this stage, the most we can realistically expect from these talks—with a third round set for the end of June—is an agreement on prisoner and body exchanges. Concessions on specific points might be conceivable, as in any negotiation, but the red line for the Russians remains Ukraine’s non-aligned status (which had been enshrined in its constitution until it was amended after 2014) and the exclusion of foreign bases and troops. Likewise, it is hard to imagine Kyiv signing a document that legally recognises the loss of its territories. To summarise: as things stand, both Russia and Ukraine continue to rely on the battlefield to bolster their respective negotiating positions.
In this context, marked by the intensification of the war in Ukraine and the “Spider’s Web” operation launched by Kyiv on 1 June, what is the current state of military power relations between Russia and Ukraine?
Overall, the balance of power tilts in favour of the Russian army, which retains strategic initiative and is attacking with varying intensity depending on the sector of the front. In the Black Sea, the situation remains largely unchanged, despite Ukraine’s recent attempt to blow up the Crimean Bridge. Russian operational activity is relatively limited in the Kherson region, while Moscow’s troops have ramped up pressure in the Donbas since the end of winter. In recent days, Russian forces have reportedly seized up to 50 km² of territory per day. This acceleration has prompted speculation that a summer offensive is under way. Further north, there are incursions into the Kharkiv and Sumy regions, where the Russians are attempting to establish what they call a “buffer zone” to shield Russia’s border regions from Ukrainian artillery and raids. Even though Russian forces are seemingly able not only to replace their losses but also to form new units, this has not yet been sufficient to break through the Ukrainian defensive system—even with the added firepower of Russian artillery.
On the Ukrainian side, the army is in better shape than it was last year, when US aid was blocked by Congress: equipment is arriving, the Americans are maintaining real-time intelligence sharing with the Ukrainians, and Ukrainian forces are in the process of reorganising their units. However, their main challenge remains the replenishment and training of personnel. Ukraine is partially offsetting its manpower shortfall by making extensive use of drones, which are now integrated into its defence system—whether for deep strikes or to target assault groups. Operations such as “Spider’s Web”, while having little impact on the battlefield’s overall dynamics, are primarily intended to expose Russian vulnerabilities, extend the conflict deep into Russian territory, raise troop morale and rally Kyiv’s supporters.
After more than three years of conflict, what impact has the war in Ukraine had on Russia—geopolitically, economically, militarily, and in terms of energy? In this regard, is Moscow still in a position to assert its demands?
Judging by the Russian memorandum handed to the Ukrainians in Istanbul in early May, Russia still maintains the same demands as in 2021. Moscow continues to believe—rightly or wrongly—that time is on its side, and it is still banking on Ukraine’s gradual exhaustion and on the erosion of Western support for Kyiv. The Russian economy—while not in a wartime footing strictly speaking, but rather in a state of mobilisation—grew by just over 4% last year. This growth is largely driven by a neo-Keynesian stimulus policy based on public investment in Russia’s military-industrial complex. According to the Minister of Industry and Trade, this sector employed 3.8 million people as of last summer, with 700,000 hired since February 2022. These investments are resulting in the production of shells, artillery pieces and tanks, which do not in themselves generate wealth. However, they are accompanied by a significant rise in wages, which supports household consumption—a driver of growth. Real average wages rose by nearly 10% in 2024, after an almost 9% increase in 2023. The main black spot remains inflation, currently averaging around 10%, which has prompted the Central Bank of Russia to keep its key interest rate at 21% for most of 2024. That said, a slowdown in the Russian economy has been apparent since spring: job offers are declining (though unemployment remains historically low at 2.3%), and inflation, if not falling, has at least stabilised. Growth for 2025 is estimated at 1.5%. This slowdown is explained by the extremely high cost of investment for businesses, which cannot afford to borrow at rates around 25%. This has led the Central Bank in recent days to lower its rate to 20%.
Russian defence spending has increased significantly: according to the Stockholm International Peace Research Institute (SIPRI), it amounted to 7.1% of GDP in 2024, with a budget of $149 billion (+38%), accounting for just under 20% of total federal expenditure. Expressed in purchasing power parity—given that the Russian Ministry of Defence spends nothing in dollars—this figure is even higher. A few days ago, NATO’s Secretary General stated that Russia produces as many shells in three months as all NATO countries do in a year—a point previously made by Supreme Allied Commander Europe (SACEUR) General Cavoli during his recent testimony before the US Congress.
In short, with a budget deficit of 1.7% of GDP, the overall picture gives the impression that the authorities have the situation under control. However, this “model” is not sustainable in the long term, or even the medium term. A Russian economy fuelled by wartime investment is not a viable path for national development—nor is it good news for Russia’s Western neighbours. The Soviet Union, which spent even more on its military, paid a heavy price. Foreign private investment has collapsed since 2022, and Russia will need foreign technological solutions for its civil aviation industry, its car industry, and to develop certain hydrocarbon reserves buried in the Far North. This brings us to the issue of sanctions, and their possible gradual and partial lifting as part of the negotiation process…
