European leaders appear somewhat perplexed by Trump’s decisive victory in US elections. This is all the more surprising given that, if you believed the polls, there was at least an even chance of him returning to office. The continent now faces a plethora of challenges. Think of soaring tariffs, trade wars, and NATO troubles. But perhaps most pressingly, think Ukraine.
Trump and his vice president-elect, JD Vance, have made clear their lack of enthusiasm for Ukraine’s war of national survival; in particular, they seem deeply skeptical of continuing to fund a conflict that has so far cost the US around $100bn, and Europe close to $200bn, in both payments and future promises. Trump has said that he can stop the war in hours with an as yet undefined plan (there are, in fact, several possible versions of this, and none has Trump’s blessing as yet.)
Regardless of the exact details, Europe faces numerous awkward questions.
First, will any Trump plan be acceptable to Kyiv, or Europe for that matter, if it involves imposing a settlement on Ukraine? The subsidiary question is what such a plan might mean for future Ukrainian and, by association, European security. And if Ukraine opts to fight on, will Europe be able to step in to cover the shortfall in support from the US?
Second, assuming peace is agreed upon by Kyiv and Moscow (and assuming this involves solid security guarantees), how would any peace be funded? Remember that the numbers are eye-popping — the World Bank et al. have estimated the costs of Ukrainian recovery and reconstruction at about $500bn and rising daily every time a Russian missile hits civilian housing or national infrastructure.
We do broadly know the costs of funding Ukraine’s current defense — the Kiel Institute for the World Economy data suggests the West has spent $237bn supporting Ukraine from February 2022 to August 2024. Including disbursements from the IMF and other international financial institutions, the total sum is closer to $250bn. Give or take, this has been running at an annualized rate of close to $100bn, and of this, the US has provided around one-third of the funding, the bulk of its military aid.
If the US did simply walk away, I wonder how far Europe would be able and willing to shoulder the extra burden of $35-40bn annually. The political mix in Europe is challenging, as reflected in the recent collapse of the German government, in part because of arguments about increasing the national debt. While the global cost of living crisis weighs on politics globally, do Europeans really have the political determination to continue writing blank cheques for Ukraine?
Perhaps, if they actually spent time explaining the national security narrative, that Ukraine is our front-line defense against Russian aggression and expansionism and that funding Ukraine is the cheapest way to assure our own protection.
Better spend $100bn a year now given that an extra 1% of GDP in defense spending would cost around $200bn per year. And the fall of Ukraine would mean much more than a 1% rise in military budgets. But Europeans have dismally failed in the PR campaign to take this argument to their people. The UK’s long-awaited budget statement on October 20 offered a small sum in extra defense spending, but almost the entire statement was focused on tax rises and the National Health Service.
Our leaders no doubt will highlight they are close now to agreement over the new G7 $50bn Extraordinary Revenue Acceleration (ERA) facility for Ukraine, which leverages off the interest on the $330bn in Russian central bank assets immobilized in Western jurisdictions (mostly in Europe.)
Unfortunately, this money is sufficient for just six months of Ukraine funding, and it still begs the question of why the underlying assets were not transferred to Zelenskyy’s government long ago.
Surely, allowing Ukraine full access to the $330bn would have enabled Ukraine to fund its own defense, and with better funding, it may well have already been able to win the war. It’s fair to assume Ukraine wouldn’t be in the parlous position it now finds itself.
There was an opportunity here to explain to European voters that not all Ukraine funding must come from them and that Russia can be made to pay. That would be popular but also the right thing to do. That opportunity still exists.
Sold smartly, this could become a serenade written for Trump’s ears. Give money to Ukraine at zero cost to US taxpayers and then earmark a significant share to future US weapons purchases.
Ukraine might inaugurate a new $150bn Trump Ukraine Victory Fund for defense purchases from the US over the next decade. This would secure Ukraine’s defense, depress Putin, and create US jobs and political support.
Importantly, it ensures that Russia pays for its aggression because it hasn’t been asked to pay anything like enough. Yet.
Timothy Ash is a Senior Emerging Markets Sovereign Strategist at RBC BlueBay Asset Management. He is an Associate Fellow at Chatham House on their Russia and Eurasian program.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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