Putin’s Russia needs a carrot as big as the stick

Russia has spent four and a half years proving it can live without the West as it demolishes Ukraine. Washington wants Russian President Vladimir Putin to imagine what life might look like if it no longer had to.

That sounds perverse, with Russian troops claiming Ukrainian soil as jet-powered drones scream overhead to batter civilian buildings. Yet the Trump administration is taking a carrot-and-stick approach to the Kremlin: tightening the vice on Moscow while welcoming Putin’s envoys to discuss prospective energy deals and economic cooperation once a ceasefire has been settled.

It’s a bet with extremely long odds, and one that Ukrainian President Volodymyr Zelensky won’t like one bit.

But America knows Russia can survive out in the cold. The White House is hoping it might still look twice at the sight of a hot drink and a fire crackling in the window.

Sweet and Sour

Russian envoy Kirill Dmitriev spent Monday in Washington discussing not only how Russia’s war in Ukraine might end, but what the relationship between Moscow and Washington could look like afterward.

Dmitriev, who also heads Russia’s sovereign wealth fund, met representatives of the U.S. Treasury and Energy departments for talks that reportedly covered a possible peace settlement and the potential for U.S.-Russia energy initiatives and economic deals once an agreement is signed in Ukraine.

The meeting fits a broader pattern. Earlier in September, U.S. President Donald Trump’s golden boys Steve Witkoff and Jared Kushner spent more than three hours with Putin in Moscow, during which Witkoff laid it on thick, telling the Russian president: “When we retire, we’ll have all these incredible stories and incredible memories, and yours will be right at the top of it all.”

It’s not difficult to understand why residents of Kyiv might not be best pleased about this, given that Putin’s invasion order produced a war that has killed and wounded hundreds of thousands, driven millions from their homes, and left Ukraine with close to $600 billion in reconstruction and recovery needs. Drones continue to demolish Ukrainian cities and slaughter innocent civilians—Moscow’s forces launched more than 3,100 jet-powered UAVs into Ukraine in September, according to a British government assessment.

Viewed from Ukraine, any action perceived as favorable to Russia is unjustifiable. After the EU removed several Russian businessmen from its sanctions list in September, Zelensky himself criticized the move as “self-defeating and counterproductive,” arguing that wars end through “resolve and strength, not concessions.”

But dangling a carrot in front of Putin’s nose doesn’t make a stroke from the stick any less painful. Nor do discussions over future collaboration amount to a great Russia reset at Kyiv’s expense.

Treasury Secretary Scott Bessent made that abundantly clear at the G20 summit in August when Russian Finance Minister Anton Siluanov reportedly tried to start a discussion on areas of mutual interest.

“Nothing is possible until the war is over,” Bessent was quoted as saying. U.S. officials reportedly made as much clear to Dmitriev earlier this week.

Meanwhile, the U.S. and its partners appear prepared to steadily tighten the screws on the Kremlin.

Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act on September 18, expanding sanctions against Russian officials, banks and state-linked entities, banning new U.S. investment in Russia and its energy sector, and authorizing tariffs of up to 100 percent on goods from the largest buyers of Russian oil and gas or countries helping Moscow evade oil sanctions.

The law also allows duties of up to 500 percent on Russian imports into the United States.

Across the Atlantic, NATO Secretary-General Mark Rutte said last month that allies had allocated more than $10 billion in military aid to Ukraine over the past year, with American weapons continuing to arrive “uninterrupted.” On October 1, the United Kingdom added 31 new sanctions targeting Moscow’s shadow-fleet vessels and Kremlin-linked disinformation networks, while the EU has extended asset freezes on more than 3,000 individuals and entities until September 2029.

Glutton for Punishment

Russia’s war machine has proven far more resilient to Western sanctions, but four and a half years of ever-increasing pressure is taking its toll.

The government now expects this year’s federal budget deficit to reach 3.2 percent of GDP, double the 1.6 percent originally planned. It has also cut expected oil-and-gas revenues from 8.9 trillion rubles to 7.58 trillion ($91 billion) after revenues for the first eight months of this year fell 16.7 percent year on year. Meanwhile, the Bank of Russia is holding interest rates at 14 percent as Moscow struggles with worsening inflation, and projected GDP growth for 2026 languishes at 0.6 percent.

Putin himself has admitted the bite of sanctions. Speaking at the Valdai Discussion Club on Thursday, the Russian president complained that restrictions on Russian oil and petroleum products, insurance and increasingly expensive freight were preventing Russia’s exporters from delivering to international markets.

“How will our diesel get to the world market while sanctions remain? No way,” he said, forgetting to acknowledge how widespread fuel shortages caused by Ukraine’s highly successful strike campaign on refineries are also to blame.

But perhaps this discussion over punishments and incentives is moot.

Russian Prime Minister Mikhail Mishustin submitted the government’s draft 2027 budget to parliament this week, and in doing so made one thing painfully clear: neither carrot nor stick has changed Russia’s course. In fact, the Kremlin is doubling down.

The budget formally allocates more than 17.1 trillion rubles ($205 billion) to national defense in 2027, around 27 percent above the 13.5 trillion initially earmarked. Another 16.6 trillion is penciled in for 2028 and roughly 16.3 trillion for 2029, taking defense spending above 50 trillion rubles—more than $600 billion at today’s exchange rate—over three years. That works out at an average of well over half a billion dollars every day.

If the budget is approved, which it will be, given United Russia’s gigantic majority in the State Duma, defense alone would consume roughly 35 percent of Russian federal spending next year.

This outrageous spending spree will come at enormous cost. The Kremlin acknowledges it will likely sustain deficits in excess of 5 trillion rubles each of the next three years amid a dramatic increase in government borrowing. Putin is also planning a huge windfall tax on Russia’s metal, mining and fertilizer companies, having already introduced woefully unpopular VAT rate increases and cut the revenue threshold at which businesses become liable for VAT earlier this year.

Coming in From the Cold

Evidence of the Kremlin’s commitment to transform Russia into a full-scale war economy over the coming years arguably strengthens Kyiv’s case for uncompromising pressure: if Moscow is prepared to absorb this much physical and economic strain, the West must make the punishment worse and help Ukraine to inflict yet more damage.

After all, Washington has repeatedly demonstrated the will to move beyond limits it set earlier in the conflict. Under former President Joe Biden, Bradley infantry fighting vehicles were followed by approval for European allies to transfer F-16s, and eventually by long-range strike weapons like ATACMS. Under Trump, U.S.-made weaponry continues to reach Ukraine through NATO’s PURL mechanism, financed principally by European and Canadian allies.

Meanwhile, Moscow has proven adept at mitigating the impact of sanctions by cultivating alternative partnerships and revenue streams outside Western financial systems or investment. Trade with China topped $185 billion in the first eight months of 2026, up 28 percent year on year, while Russia remained India’s largest oil supplier in August at roughly 2.1 million barrels per day. Putin routinely waxes lyrical about leading the trend away from a Western-led international system toward a multipolar world order.

But in reality, no amount of destruction sustained by Ukraine will motivate Washington to move beyond sanctions and material support for Kyiv. Biden and Trump explicitly ruled out U.S. troops or military assets in Ukraine because of the risk of direct war with Moscow; even Zelensky’s most fervent European allies have only committed to installing their soldiers on Ukrainian soil once a “credible cessation of hostilities” is in place.

Kyiv must therefore continue pressing Washington and Europe for everything available below that threshold: more weapons, more sanctions, tighter enforcement, disruption of the shadow fleet and closure of the loopholes and alternative routes by which Russia fuels its war machine. Washington can still do that while Trump and his dealmakers paint Putin a picture of a brighter post-war future.

Deeper ties with China, India and the Global South give Moscow resilience, but they can’t reproduce Russia’s former access to Western capital, technology, investors, financial markets and a broader pool of commercial partners.

Discussing the possibility of a richer, less isolated postwar Russia might never change Putin’s calculations. It does, however, give the Kremlin an added incentive, one that will grow stronger as the Russian economy and society continue to creak.