Why Ukraine isn’t ready for Putin’s peace talks

WITH three major Ukraine-focused summits this week — in Germany, Italy and Switzerland —, I thought I’d ask a few people who know what they’re talking about whether it’s time to wind down support for the war and encourage Ukraine to strike the best deal with Russia it can. The conversations didn’t go quite as expected.

“Forget about Ukraine,” said Harvard University professor Serhii Plokhy, one of two prominent historians sought out for a wider perspective. “It’s not about Ukraine, it’s about you, it’s about us.”

We need always to remember this is the biggest war in Europe, and by some measures the world, since 1945. Size matters, because very large wars are breaking points whose outcomes define how nations will live for generations. This one will be no different. And judging by the maximalist demands President Vladimir Putin made on Friday for even a temporary ceasefire and the start of peace talks — including Ukraine’s withdrawal from swathes of territory and major cities Russia has so far failed to capture — the conflict will continue for some time yet.

Consider the Westphalian international system that emerged after Europe’s 30 Years’ War which ended in 1648. It governed relations among states for long after the conflict was forgotten, reducing the risk of further religious free-for-alls. World War II, equally, produced a raft of institutions to govern a new world order — at least in areas conquered or liberated by the Western allies. Things turned out quite differently in areas that ended the war under Soviet control — and let’s not even entertain the what-ifs of a Nazi victory.

Yale University’s Timothy Snyder took a different approach, though to a similar end. People often think about Ukraine as a frontier or borderland (in Russian, the country’s name points you in that direction),  and yet it isn’t. “Historically it’s been more of a fulcrum, of central importance to larger systems,” he said.

The 10-year security agreements the US and Japan signed with Ukraine during the G7 meeting in Italy on Wednesday went some way to recognizing that centrality. US President Joe Biden called the deal — coupled with a preliminary agreement to use frozen Russian assets to secure a $50-billion loan for Kyiv — proof that the Kremlin can’t just wait for Western support for Ukraine to crumble. The measures are good if belated steps, but more concrete commitments are needed.

Snyder had just delivered a lecture at Estonia’s Lennart Meri security conference, in which he wanted to counter the narrow claims of Ukraine’s Russian nature by a certain amateur historian in the Kremlin. The story he laid out was infinitely more complex than Putin’s — and, frankly, more plausible.

Archaeologists have in recent years discovered the world’s oldest cities, older than Babylon, on the territory of modern Ukraine, Snyder said. The first people known to ride horses also came from what’s now Ukraine, galloping deep into Europe on the strength of this vast technological advantage, and brought with them the family of Indo-European languages that has dominated the continent ever since.

Athens rose on the back of grain shipped home from a part-Greek, part-Scythian settlement on the Crimean shores of the Kerch Strait. Goths, who settled in Ukraine in the second and third centuries BC, were then driven west by the Huns, from where they later brought down the Roman Empire.

Then came the Vikings, on an eastern salient of a migration that took them everywhere from Greenland to the Black Sea. The kingdom of Rus, which they founded on the Dnipro River at today’s Kyiv, forms Putin’s origin story for Russia, which retrospectively gave Rus’ early Viking princes Slavicized names. Moscow, like Athens, needed the produce of Ukraine’s black earth to sustain its empire, fighting multiple wars to control the territory over centuries. Nazi Germany invaded the then-Soviet Union in part for the same reason.

So if people say the shape of the world order will depend on what happens in Ukraine, don’t dismiss it as hyperbole. “It matters who controls the Dnipro to the Black Sea; it matters who controls the Black Earth; and it matters deeply who controls the Kerch Strait,” says Snyder.

What does all this mean for the reconstruction, funding, and peace under discussion at this week’s summits? Well, everything, so long as both the West and Ukrainians understand the stakes and are willing to do what it takes to prevail. Just talking the talk would cost lives and destruction to no purpose. On the Ukrainian side, at least, that seems understood.

Talk to Vasile Tofan, a senior partner at Kyiv-based Horizon Capital investment fund, which has $1.6 billion of assets under management, primarily in Ukraine. He and his business partners risk losing a fortune from the war’s continuation, yet Tofan is more fearful of a premature peace deal that in the long term would leave Ukraine uninvestable and unable to pursue a European future. It would forever be under threat of attack and destabilization by Russia.

Tofan is frustrated that more foreign investors aren’t already coming to Ukraine, unaware that even with a war on, they’re statistically less likely to suffer a missile strike in Kyiv than a road accident in London. (It’s hard to find comparable data, but at about 100 road deaths and several thousand serious injuries in London a year, the numbers are lot closer than most people would imagine). Like many Ukrainians, he’s disillusioned, too, that so many in the West don’t understand the conflict as a common struggle.

For sure, Ukraine has a very sticky past, including deep issues with corruption. But much of the stereotype is now out of date, and a new business model is likely to emerge from the war, making the country a low-cost back office for Europe. It has one of the continent’s largest pools of software engineers, a third of European lithium deposits, and is again exporting more grain than before the February 2022 invasion, or about 10% of the global trade.  It may be no coincidence that the regions occupied by Russian forces also hold large deposits of rare-earth metals.

Tofan is perhaps congenitally optimistic. He recalls putting together a client presentation in the first, darkest days of the Russian onslaught, which included slides showing Tokyo bombed to destruction in 1945 and thriving just five years later. He proved at least half right.

Tofan’s clients included Rozetka, a cross between Amazon.com, Inc. and Britain’s Argos stores, which saw the Russian troops come within a few hundred meters of its main warehouse, just outside Kyiv, in March 2022. As Tofan was making PowerPoint slides, Rozetka’s monthly revenue fell from 4 billion hryvnia ($136 million at the time), to just 23 million hryvnia ($782,000). Given all we know of the war’s impact — the lost territory, lost power generation, lost consumers in the form of 6 million-plus refugees and decimated workforce — you might expect the retailer still to be deep in the red. Far from it.

Rozetka now has almost 500 physical stores, double the prewar number. Women now make up 75% of staff, filling gaps in the workforce. Revenue is up, and the company is expanding into Poland.

“Of course, I want to live in peace, but I think there is only one way out — to build our military infrastructure, to build up our ability to keep the Russians back and to find an asymmetrical answer to their threat,” says Rozetka’s founder and Chief Executive Officer Vladyslav Chechotkin. “It’s like dealing with criminals, if you show weakness, you will be constantly beaten.”

Aurora Multimarket, a chain of dollar stores tells a similar story, with severe losses quickly followed by expansion from 817 stores before the war to 1368 now. Profit doubled last year, according to founder Lev Zhydenko, and Aurora just moved into Romania. He, too, wants peace only “in such a way that the war ends soon and never restarts.” Most Ukrainians, when polled, say they agree.

Ukraine is in deep trouble. Its military is on the back foot, and President Volodymyr Zelenskiy’s government has lost some of its shine. But when deciding whether it makes sense to continue backing this unfortunate nation’s existential fight with Russia, I’m inclined to be guided by people who actually understand its history or have their own businesses and families at stake. Their answers are as clear as ever.

BLOOMBERG OPINION