The war in Ukraine is entering its fifth year. Despite expectations of a possible diplomatic breakthrough following US diplomatic efforts, the conflict is likely to last for several more months, possibly well into 2027.
As Europe increasingly shoulders responsibility for supporting Ukraine, developments on the ground are having far-reaching implications for the broader European security landscape.
State of play: a ceasefire remains elusive
The US-led push for a ceasefire has been ongoing since Donald Trump began his presidential term in January 2025. Multiple rounds of talks have raised hopes, only to stall amid diplomatic wrangling. The latest round, launched in January 2026, shows similar signs.
Our assessment remains consistent: any settlement requiring Ukraine to relinquish territory would necessitate robust security guarantees. This remains unacceptable to Russia, whose core objective is not territorial control but Ukraine’s political neutrality. Any Western military presence in Ukraine is therefore a non-starter for Moscow.
Overall, Russia remains the chief obstacle. The Kremlin seeks far more from a peace settlement than Ukraine and Europe are prepared to concede, even after significant compromises. The gap between negotiating positions remains too wide to bridge.
Russia’s intractability reflects its belief that it can still accomplish its strategic objectives militarily. This is likely over-optimistic. Despite being on the offensive since early 2024, territorial gains have been incremental and the drone-heavy nature of the current warfare, precluding troop and equipment concentrations, largely rules out breakthroughs.
Attacks on Ukraine’s infrastructure have gotten much more vicious since 2025 but have not swung the Ukrainian public opinion towards capitulation. Indeed, many studies show that terrorising civilians with bombings rarely has this effect. Still, the Kremlin’s war of attrition persists, likely encouraged by overly optimistic reporting from its military leadership. Russian advances on the battlefield may accelerate during 2026, but a strategic breakthrough remains unlikely.
Russia’s economy and Putin’s political decisions
Questions mount over Russia’s capacity to sustain the war economically. In 2022-24, the war bill could be footed largely from the high oil revenues and past oil windfall cash. Both sources are insufficient as of 2026, necessitating a switch to internal reserves. In practice, this means higher taxes and less state support for civilians and businesses. The impact is clear in the 2025 economic data – budget deficit is up, inflation persists, non-payments are proliferating among companies, and lending and cargo transportation have dropped. Russian leadership can still fund the war, but only by accepting mounting costs to the civilian sector, a trade-off the Kremlin appears willing to make.
In this situation, Moscow’s participation in talks is primarily instrumental, aimed at managing relations with Trump rather than securing compromise. Engagement has helped limit further US pressure: there have been new sanctions under Trump, but they could have been significantly more expansive. Talking with the US prevents that, but Russia is not negotiating with the intent of genuinely seeking a compromise.
Bringing the war to a stalemate
This is war, which means heightened uncertainty. An end to the conflict in 2026 remains possible if economic pressure, sanctions enforcement and battlefield dynamics converge unfavourably for Moscow.
- The dynamics of the Russian economy matter. A major collapse remains unlikely – there is still plenty of structural resilience – but the speeding deterioration is an ongoing concern. This is driven by both the growing push from the domestic elites to stop the costly and economically harmful war and the Kremlin’s possibly exaggerated fear of public unrest. If the decline becomes more pronounced over 2026, Russian President Vladimir Putin may find it prudent to fix his gains.
- Sanctions play a key role. Pressure persists, with Europe carefully, but steadily expanding its regime. The US, unlikely to impose radical measures such as the 500% tariffs on buyers of Russian oil, can still tighten restrictions and, crucially, their enforcement. As India seeks closer relations with the EU, the incentive to buy cheaper Russian oil may diminish. The sanctions premium is eating into Russian revenues and the impact is tangible, if slow to materialise.
- Battlefield dynamics are likewise important. Current estimates suggest Russia will need between one and two years to capture the remainder of Donetsk region - a timeline that, if it trends toward the longer estimate, would likely deal a political blow to the Kremlin. Sustaining a recruitment tempo sufficient to offset mounting losses through volunteer intake alone poses an additional challenge, as this increasingly becomes a question of economic capacity. Should Putin conclude that maintaining the war effort requires initiating a new mobilisation, the heightened political risks associated with such a step would likely force a reassessment of Russia’s broader strategic calculus.
All this suggests that the Kremlin may ultimately conclude it has reached its limit and opt to pursue a ceasefire, regardless of its current red lines.
If so, timing would then likely revolve around the US midterm elections in November. By delivering a foreign policy success to Trump, Putin would expect to secure his goodwill, an asset the Kremlin sees as essential to prevent new sanctions and lift at least some of the existing ones.
However, if the Russian economy remains resilient, new sanctions are dodged, and progress in Donetsk is deemed acceptable, the Kremlin would be incentivised to continue the war. This may involve pushing further to capture the southern Kherson and Zaporizhzhia regions or opening new fronts. Under this scenario, the war continues well into 2027 and beyond.
The regional dimension and business implications
Although fighting remains confined to Ukraine, the war has already become regional in effect. The US aspires to neutrality and is seeking distance from the war altogether. In fact, the US wants the war to end but shows little concern for the specific terms on which it ends.
Europe now has a leading role supporting Ukraine - militarily, economically and diplomatically - a dynamic likely to persist until the 2028 US presidential election. Moscow’s rhetoric has changed in recent months to vilify Europe while pandering to the US.
This geopolitical antagonism will persist even if the war in Ukraine is ended in 2026. There is a consensus in Europe that Russia is a strategic threat, even if individual countries may waver and grow sceptical. The implications of this, driven by the US’ ambiguity over its role in NATO, already have a price tag: EUR 800bn, the cost of the European rearmament plan through 2030. The defence sector will be seeing heightened activity in the coming years.
But there are also plenty of threats. Hybrid activity – sabotage, espionage, disinformation – is poised to intensify as resources are freed from the frontline. The border with NATO is also over 1,000km longer following Finland’s accession and Russia’s remilitarisation will increasingly be oriented towards this theatre.
Businesses in defence and critical infrastructure sectors are prominent targets of Russia’s hybrid warfare, but everyone stands to be impacted - such as by acts of sabotage interfering with power, logistics or communications; border tensions leading to the recruitment of employees who are reservists; or staff seeking relocation from places seen as higher-risk, such as the Baltics.
Whether or not Russia and Ukraine bury the hatchet by the US midterms, risk management, internal security – both physical and cyber – monitoring of the geopolitical situation and contingency planning for negative scenarios will remain critical for businesses with operations in Europe.