Timothy Ash, senior sovereign strategist at BlueBay Asset Management in London, says European policymakers are belatedly waking up to the fact that the war in Ukraine is set to be prolonged — and that they alone may have to foot the bill.

“I cannot remember a period over the past 3.5 years plus when we appeared further from any peace,” Ash said after meetings with Ukrainian and Nato security officials. “There is dawning recognition here that a) Putin is just not serious about peace (if he ever was) and; b) If he was, the Trump administration seems to have so badly screwed up peace talks.” He argued that Donald Trump had “gifted Putin all the early leverage” and was now creating “obstacles, or excuses, to delay rolling out more sanctions on Russia.”

According to Ash, Ukrainians are resigned to a long conflict but determined to continue. “They know it is a zero-sum war for them — it is about survival,” he said, citing a KIIS poll showing that 62% of Ukrainians are willing to endure a protracted war, with only 14% favouring negotiations on Russia’s terms.

The financial burden is now falling squarely on Europe. “Europe has finally understood that with the cost of keeping up Ukraine’s defence against Russian aggression running at $100bn a year (I would argue that $150bn a year is needed), and the US not writing any cheques, that the full cost of supporting Ukraine has to fall on Europe,” Ash said. With European budgets strained and populist pressure to spend at home, “the harsh reality is that the only source of sufficient funds for Ukraine is now immobilised CBR assets.”

He pointed to shifting political signals: European Commission president Ursula von der Leyen has endorsed a reparations loan plan, while German chancellor Friedrich Merz is reported to support “the creative use of immobilised CBR assets.” Ash argued that “the problem so far is this whole debate has been driven by the legal complexities, not the economics. The legal complexities have given the politicians cover not to do the right thing. Now the economics is driving the politics and the legal has to follow.”

Beyond financing, the conflict is evolving technologically. “One phrase I heard this week … sums up the war in Ukraine: it’s now a ‘war of iteration’,” Ash said. While the front line is mired in attrition, “the war could perhaps ultimately be decided by which side innovates, or iterates, best in the drone/tech war.” He warned that Russia currently has the advantage in scaling up production.

Ukraine’s ability to match this may depend on Western support for industrial production. “The obvious place which could deliver the manufacturing scale, quickly for Ukraine, would be Türkiye,” Ash suggested. “Perhaps all this could be funded from immobilised CBR assets. Oh the irony of Russian tax payer money being used to buy reparation bonds to fund Ukraine’s military industrial production to defeat Russia in this war.”

Timothy Ash is the senior sovereign strategist at BlueBay Asset Management in London and a veteran observer of Russia, Ukraine, Turkey and other Emerging European markets. His note first appeared on the @tashecon substack blog.