Ukraine and Russia Are Both Struggling to Finance Their War

Trump administration envoy Steve Witkoff has drafted the outline of a new peace deal between Russia and Ukraine—even as U.S. sanctions on two Russian oil companies went into effect recently. Congress is considering a new package of sanctions that could pass later this year. Ukraine, for its part, is facing a dire budget shortfall for next year. And a growing corruption scandal threatens to engulf the Ukrainian government.

Trump administration envoy Steve Witkoff has drafted the outline of a new peace deal between Russia and Ukraine—even as U.S. sanctions on two Russian oil companies went into effect recently. Congress is considering a new package of sanctions that could pass later this year. Ukraine, for its part, is facing a dire budget shortfall for next year. And a growing corruption scandal threatens to engulf the Ukrainian government.

Are U.S. sanctions on Russia working? How severe is Ukraine’s budget shortfall? And is corruption inevitable in Ukraine under conditions of total war?

Those are a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.

Cameron Abadi: Are U.S. sanctions on Russian oil companies already showing signs of working?

Adam Tooze: Hitting Rosneft and Lukoil and their associated subsidiaries is a big deal. The Americans hadn’t done anything quite like this before, and certainly [President Donald] Trump hadn’t done anything quite like this before. So it’s a big step. And the real question will be whether or not they really intend to prosecute the secondary sanctions push. So in other words, to hurt the Indians, if the Indians go on consuming this oil. Because the point was to sanction Russia whilst providing the Indians with a benefit.