Ukraine 2026: The coming collapse driving the peace process

Russian advances throughout Ukraine suggest that dramatic changes on the frontlines are likely in coming months, driving Trump to seek peace and changing risks to insurable assets.

Commercial Summary: Below is a brief analysis of why Trump is proposing a peace plan, a review of the insurance implications in Ukraine, and a more detailed analysis of the frontline situation. We argue that a general collapse in Ukraine is increasingly likely.

Analysis

Across Ukraine, Russia is slowly dismantling Ukrainian defensive lines or flanking them, ahead of launching a major new offensive. Russia has been on the offensive for two years, avoiding major new fronts, but focussing on overwhelming Ukraine on existing frontlines.

Trump’s latest push for a 28-point peace plan between Russia and Ukraine should be seen in this context. At almost every frontline, the Russians are close to major breakthroughs, with Ukrainian defensive lines either collapsing or being outflanked.

However, the cost of exploiting these can be very high for the Russians: the next step is to fight for major cities like Pavlohrad, Dnipro, Zaporozhia, Kherson, and Kharkiv. While Russia’s battlefield successes tempt it to continue the war, this next phase can be quite costly: fixed and stable defensive lines and gradual advances are less risky than large attacks, as the Russians learned in the initial advance on Kiev in 2022. And attacking cities is extremely costly, requiring far bigger numbers of soldiers and costing more casualties.

To that end, under the proposed peace plan, Russia is willing to forfeit USD100 billion of its frozen assets to rebuild Ukraine - though that may mean rebuilding the parts of Ukraine ceded to it under the proposed agreement. And to counter and contain China, on which Russia has become exceedingly dependent, the Russians are willing to use the remaining frozen assets for joint investments with the USA.

On the other hand, Ukraine’s gradually deteriorating position can turn into a rout, especially if the Russians make a thrust towards Kiev: they do not have to capture the city. They just have to compel Ukrainians to redeploy forces from other frontlines and accelerate the collapse. This may enable them to capture cities at a lower cost.

The general gradual Ukrainian collapse, as well as the intransigence of Zelensky, are also the actual cause for the surfacing Ukrainian corruption allegations, implicating much of Zelensky’s inner circle. The allegations are coming mainly from a US-linked anti-corruption agency, signalling that this is political. The cost to Ukraine has been that the defence minister’s whereabouts are not clear, and the energy minister, as well as one of Zelensky’s closest aides, have fled the country.

Simply, the Trump Administration is trying to abandon project Ukraine, and, most likely, NATO. Reducing America’s exposure in Europe, and separating Russia from China, are critical for America’s ability to confront China. Whether or not this effort will succeed in the teeth of opposition from the establishment is a different question.

Insurable assets: