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The Middleman Steps In

President Donald Trump held a phone call with Russian President Vladimir Putin this week to broker peace between Russia and Ukraine, later discussing the conversation on Truth Social. The call—likely part of a leaked peace plan from earlier this month—addressed pressing issues including the war in Ukraine, energy, and the U.S. dollar.

Before that call, as a gesture of goodwill, the U.S. and Russia executed a prisoner swap on February 11. American teacher Marc Fogel—63, detained in Russia in 2021 for carrying prescribed medical marijuana for chronic back pain and sentenced to 14 years (a sentence later deemed wrongful by the U.S. in December 2024)—was freed after negotiations led by Trump envoy Steve Witkoff. Upon his return, he met President Trump at the White House, calling himself “the luckiest man on Earth”. Meanwhile, Russian cybercriminal Alexander Vinnik, operator of the BTC-e exchange that laundered over $4 billion for criminal networks, pleaded guilty to U.S. money laundering charges in 2024, forfeited $100 million, and was returned to Russia as part of the swap.

In parallel with these prisoner swaps, a Trump peace plan has emerged, proposing 100 days of negotiations aimed at de-escalation. The plan envisions a summit between Putin and Zelensky, scheduled for late February or early March, with a ceasefire set to be declared on Easter Sunday (April 20). However, Ukraine has dismissed the leaked proposal—alleging it would allow Russia to gain territory—and neither the Kremlin nor the White House has commented on it. The plan also promises to ease sanctions on Russia over a three-year period while imposing special duties on Russian energy exports to Ukraine to help fund the country's rebuilding efforts.

With the U.S. attempting to broker peace between the two countries, the Russian ruble has surged to 93.95 per USD—the highest level since September of last year and 15% stronger than the January 3rd low of 110.45 per USD. The market is now factoring in the potential for eased sanctions, which could lead to increased ruble activity and the export of Russian crude and Liquefied Natural Gas (LNG) at normal market prices, further supporting the nation's currency. Currently, Russian crude is being delivered at a $19 per barrel discount compared to dated Brent, with China and India serving as the primary buyers. Goldman Sachs has estimated that a U.S.-brokered peace deal could result in a 36–56% decline in European gas prices, lowering them to €22–€32/MWh. Meanwhile, sanctions on Russian LNG have driven European prices to multi-year highs, compounded by restricted pipeline flows.

The Russian currency has strengthened against major trading currencies like the Chinese Yuan, Indian Rupee, and Euro, with much of the rally driven by market optimism amid the conflict. In 2024, Russia’s defense spending surged to 6% of GDP, according to Carnegie Politika, intensifying inflation and boosting import demand. A peace deal could free up funds for economic stabilization, easing inflationary pressures and further supporting the ruble. However, the ruble also faces potential downside risks. Capital controls and forced forex sales by exporters (e.g., the 2023 mandates) have artificially propped up the currency. If these controls are lifted prematurely following a peace deal, it could trigger a sell-off if underlying weaknesses persist.

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Is The Ruble Pricing in Peace?

Trading Economics reported that the Russian ruble strengthened past 100 per USD, rebounding sharply from 115 per USD on January 1—the lowest level on record, excluding the immediate post-invasion selloff. The recovery was driven by the Finance Ministry’s decision to defer foreign exchange purchases under its budget balance scheme, signaling Moscow’s intervention to support the ruble. There are of course other factors as markets are pricing in the potential for peace with a so called tone of ‘caution’ outlined below.

Factors Influencing the Ruble in a Post-Peace Scenario

Sanctions, particularly on oil and gas exports, have severely reduced Russia’s foreign currency earnings. The U.S. targeting of Gazprombank in late 2024 disrupted gas revenue flows, further weakening the ruble. Falling oil prices and the G7 price cap have also strained export revenues. A ceasefire or treaty could lead to partial sanctions relief, allowing Russia to restore energy exports to Europe at higher prices. Increased foreign currency inflows would help stabilize the ruble, providing much-needed support to the economy.

War-related risks have eroded investor confidence in the ruble, leading to capital flight. Peace talks could ease instability concerns, attracting foreign investment. The ruble’s 18% rebound in early 2025 was partly tied to reduced wartime volatility. Historical parallels, such as Syria’s currency fluctuations during peace negotiations, suggest that reduced conflict risks can help stabilize exchange rates. Additionally, Russia’s defense spending surged to 6% of GDP in 2024 as previously mentioned, driving inflation and increasing import demand. A peace deal could free up funds for economic stabilization, easing inflationary pressures and supporting the ruble.

Beyond immediate financial stabilization, peace could allow Russia to expand trade partnerships beyond China and India, reducing reliance on discounted energy sales. Greater use of the digital ruble and alternative payment systems may also lessen dependency on the yuan. However, structural challenges—such as overreliance on energy exports and limited economic diversification—remain significant hurdles. A credible agreement could boost domestic and international confidence, reducing speculative foreign currency purchases and further stabilizing the ruble.

Risks Facing the Ruble in a Post-Peace Scenario

If peace talks are seen as temporary pauses—similar to the Minsk Agreements—markets may remain cautious, keeping a geopolitical risk premium priced into Russian assets. Recent Russian missile strikes on Kyiv during negotiations have already cast doubt on the process. Additionally, even with a ceasefire, sanctions tied to territorial disputes like Crimea or human rights violations could persist, limiting foreign investment and trade recovery. The ruble’s 20% decline since 2022 has been partly driven by these sanctions, which have reduced Russia’s energy revenues.

Russia’s economy remains under strain, with interest rates at 21% and inflation nearing 8%. While a ceasefire could reduce military spending, persistent structural issues—such as labor shortages and reliance on discounted oil sales to China and India—would keep the ruble vulnerable. Capital controls and forced forex sales by exporters have artificially propped up the currency, but lifting these measures too soon could trigger a sell-off if underlying economic weaknesses remain. Furthermore, any peace deal requiring territorial concessions could destabilize Putin’s regime.

While 54% of Russians now support negotiations according to the Chicago Council of Global Affairs, such compromises could provoke domestic unrest, unsettling investors. Meanwhile, Ukraine’s demands for reparations or war crimes tribunals could strain Russia’s already pressured finances, with the National Wealth Fund down to just $31 billion. Even if a peace deal normalizes Russian oil flows, oversupply risks—such as a surge in U.S. production—might push prices lower. Russia’s budget relies on oil at $100 per barrel, yet recent export prices have fallen to $64.40. While partial sanctions relief is possible, restrictions on critical sectors like technology imports could remain, slowing economic recovery.

Bilateral Trade Flows with Russia

Indian Rupee

If Russia's war with Ukraine ends following peace talks, India and China will likely experience shifts in trade flows. Recent developments, including a White House meeting between U.S. President Donald Trump and Indian Prime Minister Narendra Modi, suggest the U.S. is already working to redirect trade away from Russia. During their February 14, 2025, meeting, Trump and Modi focused on strengthening bilateral energy and trade ties, with Trump urging India to purchase more U.S. oil and gas to help reduce a $50 billion trade deficit. Modi committed to making the U.S. India's top energy supplier, aligning with India's broader efforts to balance trade and energy security.

This discussion comes amid a $190 billion bilateral trade relationship in 2023 and India's heavy reliance on imported crude—over 85% sourced from Russia, Iraq, Saudi Arabia, and the UAE. Modi also emphasized India's need for strategic flexibility, ensuring affordable imports while continuing to benefit from discounted Russian crude under the US-led price cap framework. Modi may be anticipating that the Russian crude discount could soon disappear as the ruble strengthens.

Chinese Yuan

China may be more difficult for the U.S. to sway. In 2023, Russia supplied 19% of China’s oil imports, with bilateral trade reaching $244.8 billion in 2024. Energy exports—including oil, gas, and coal—dominate Russia’s trade with China, while China primarily exports vehicles, electronics, and dual-use goods. If a peace deal restores Russian gas flows to Europe via Ukrainian pipelines, Russia may become less dependent on China as its primary energy buyer according to MUFG Research. This could push China to diversify its imports, turning to sources like Middle Eastern oil. However, long-term contracts and existing infrastructure, such as the Power of Siberia pipeline, would sustain some level of trade between the two countries.

U.S. sanctions on Russian oil tankers and producers, such as Gazprom Neft, may compel China to limit imports if enforcement tightens. Conversely, a peace deal that eases Western sanctions could allow Russia to rebalance exports toward Europe, weakening China’s leverage in pricing negotiations. Additionally, China’s exports of dual-use goods—such as semiconductors and machinery—that have been critical to Russia’s war effort could decline if hostilities cease, though infrastructure and consumer goods trade would likely persist. BBC reported that over 90% of bilateral trade between the nations is currently settled in yuan or rubles, insulating transactions from dollar volatility. A stabilized ruble post-peace deal could encourage a more balanced currency mix, though China may continue prioritizing yuan dominance in trade.

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