This is the most concerted effort to end the war in Ukraine since the failed Istanbul peace deal in 2022. But after the initial optimism, the chance of a deal going through are fading.

The problem is a clash between principles and pragmatism.

I count six versions of the peace deal now and the US and EU versions are fundamentally different and incompatible. It boils down to: do you choose pragmatism and make some unpleasant compromises to get an agreement, or do you stick to your principles and insist on what is “right” under international law etc.

Roughly speaking the original US 28-point peace plan (28PPP) deal is a pragmatic attempt to end the war. The EU versions, exemplified by the European Parliament non-binding resolution (EPR) passed yesterday, is pure principle.

The Russians have made it crystal clear they will accept the pragmatic version, but will rejected the EU versions out of hand. So, if you want to end the war, then you have to choose the pragmatic version – all that needs to be done then is decide what compromises you (Zelenskiy) are willing to accept. Right? Actually, it’s not obvious, is it?

Full disclosure: I'm biased. I'm a pragmatist. I have been arguing all week that principles are for the start of wars, but at the end you need to be pragmatic.

And that means looking at the situation on the ground and working out what is possible. I think that Kyiv should take this deal because they are losing the war, and the EU is about to run out of money to support it next year. That is the decisive factor.

“The reality is that ever since the failed 2023 offensive Ukraine has been losing something every single day - lives of its soldiers and civilians, swathes of territory as well as a population fleeing to the EU and Russia, pieces of valuable infrastructure (especially heating facilities crucial for surviving the winter), elements of Western support on the fiscal and military sides, and enthusiasm for the Ukrainian cause both at home and abroad,” journalist and bne IntelliNews columnist Leonid Ragozin said in a comment for us today. “As far as a peace settlement goes, it means that every continuing day of war translates into a more comprehensive defeat when the time arrives for acknowledging the reality.”

However, the pro-Ukraine lobby are arguing given enough Western support, we can keep them in the war, and we should do that precisely for the need for a principled end to the conflict. Hence all the talk about Reparation Loans.

Pragmatic: the deal has to start with what Russia wants, and then try and accommodate Ukraine’s wishes as much as possible.

Principle: look at what Ukraine should have, and then try to force Moscow to accommodate that.

Which approach should you follow?

The key is ability to impose your view on the warring parties. And that is the problem. The EU could impose its maximalist point of view on Russia if Ukraine was winning the war. But it isn’t. The EU started in 2022 with a principled “Ukraine victory” and “as long as it takes” rhetoric, but that has all been dropped now. The West began to abandon its principles when former US President Joe Biden switched from “as long as it takes” to “as long as we can” speech in January 2024.

You can see why the EU is sticking to the principles approach as the EU project is all about principles. It worked very well when things were going well in the noughties as ruling by consensus works well when things are calm. But in times of crisis when you need strong, decisive leadership it breaks down. Orban is in Moscow today…

The only tools the EU has to impose its will on Russia is to ensure a Ukrainian victory. But that was never the plan. From the start both the US and Brussels have followed a “some, but not enough” strategy that guaranteed Ukraine could not win, just not lose. If this had been different then we could insist on principles now, but that also risked WWIII.

Initially, Brussels was banking on its extreme sanctions regime that would force Moscow to capitulate. But the EU overestimated its ability to inflict damage on Russia. It soon became clear that not only did the sanctions not work – read my deep dive into oil price discounts as an example – they have backfired. Sanctions have done more damage to Europe in a boomerang effect than they have done to Russia. Which is not to say Russia is not hurting: see our piece today on the growing debt crisis.

It is for this reason that Europe should abandon its principled stand and cut some sort of pragmatic Finlandisation deal with Moscow.

And a pragmatic deal is within easy reach. The US plan is entirely pragmatic, deal-based and makes little reference to international law or sovereign rights. Moreover, the Kremlin has made it clear that Russian President Vladimir Putin and US President Donald Trump already signed off on most of it at the Alaska summit on August 15 and there is not much work to do, or much less work to do, to get it over the line.

Trump has not only shown himself to be purely transactional, he is also totally unprincipled. Put aside the fact that he is America's first ever convicted felon to hold office, he openly boasted on camera how much money his inner circle made from shorting stocks the day before the White House released the Liberation Day tariff list – hundreds of millions of dollars.

Unlike the EU, the US does have some levers to enforce its deal. Trump has threatened to cut off intelligence and arms sales for Ukraine and enforce its new oil sanctions if a deal is not done soon.

But this clash of world view between the US and EU is starting to be a real problem. Trump has tried to compromise a bit and reportedly cut his list from 28 points to 22 points (reportedly taking out Nato references and territories), but if anything the EU versions are getting more extreme; the latest EPR version, which is very similar to European Commission President Ursula von der Leyen’s 24-point peace plan (24PPP), has at least a dozen points that are specific and known deal-killers for the Kremlin. Indeed, both Yuri Ushakov, Putin’s top foreign policy advisor, and Russian Foreign Minister Sergei Lavrov have made it crystal clear that the 28PPP plan is acceptable, and all the EU’s plans are unacceptable.

The Western allies are now openly in conflict on how to proceed. Given Trump has already agreed his plan with Putin, according to Lavrov, Washington is likely to abandon its efforts to include the European view soon. Note that in the leak of the original story, a US official was cited saying: “We don’t care about the Europeans very much.” Indeed, Politico reported this morning that the US will keep subsequent versions of the plan secret from the EU.

Where does this leave Ukrainian President Volodymyr Zelenskiy? Clearly, and understandably, he is also sticking to the principled version of the plan and looking to the EU to take over from the US.

His position has noticeably hardened. As we reported, previously Ukraine agreed to give up its Nato ambitions and return to neutrality in 2022 (Point 7), and Zelenskiy also floated the idea of a referendum in 2024 to give himself the authority to give away some land (Point 21). The EU is insisting the door to Nato for Ukraine remains open and Ukraine gives no land away – both included in Bankova’s demands now and both points the Kremlin will never accept.

As we have been reporting, it’s all going to come down to money. One of Trump’s most pragmatic suggestions was Point 14: two investment funds be set up, including a $100bn Ukraine recovery fund to pay for rebuilding using the CBR frozen money. Poignantly, Putin has not objected to this idea, but says some of the money needs to be spent on fixing Russian occupied cities.

This is reparations. And moreover, it is a legal way to seize and use Russia’s money, with the Kremlin’s approval. The EU plan to make a €140bn Reparation Loan using the same money remains illegal, regardless of the ruses the EU comes up with, and will do untold damage to the reputation of both the euro and the European banking system. The Reparation Loans plan took another blow yesterday when Belgium’s De Wever dialled up opposition to the Russian frozen assets deal, Politico reports, saying that not only is it illegal but it will kill off any chance for cutting a ceasefire deal with Russia.

Without this money, Ukraine is screwed, as we detailed in a side-by-side comparison of the Ukrainian and Russian budgets. It appears that the EU wants to hang on to the whole sum and use all of it to pay for Ukraine’s reconstruction. Another point in the EPR is that Russia must repay the entire cost of Ukraine’s restoration, without saying how this will be funded or enforced.

Can Zelenskiy afford to be principled? Putin laid out Russia’s position more clearly yesterday in a press conference in Bishkek and again both highlighted that he backs the 28PPP but also said Russia is happy to keep fighting if need be. Ragozin detailed the slow collapse of the Armed Forces of Ukraine (AFU) defences in his comment.

So, everything comes down to the next EU summit on December 18 when there will be a second attempt to get the Reparation Loans through. Zelenskiy will be watching closely. If the decision is adopted, then he can afford to stick to his principled position and fight on. If it is rejected, he is facing a macroeconomic collapse and certain defeat and should cut his losses, switch to a pragmatic approach, and do the deal with Russia. The reality will probably be somewhere between these poles after the EU scraps a few tens of billions together to keep Kyiv going.

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