Full Breakdown
U.S. Carrot-and-Stick Policy Toward Russia Amid the Ukraine War
By Drooid · · How we work
Background and Recent Diplomatic Moves
In early September, Russian sovereign-wealth fund head Kirill Dmitriev travelled to Washington for talks with officials from the U.S. Treasury and Energy departments. The discussions covered a possible cease-fire in Ukraine and the prospect of future U.S.–Russia energy cooperation, should an agreement be reached. The meeting followed a broader pattern of engagement, including a September visit by President Donald Trump’s envoys to Moscow. At the same time, the European Union removed several Russian businessmen from its sanctions list, a step that Ukrainian President Volodymyr Zelensky condemned as “self-defeating and counterproductive,” arguing that wars end through resolve, not concessions.
Official Statements and Policy Actions
U.S. Treasury Secretary Scott Bessent told the G20 summit in August that no diplomatic progress is possible until the war ends, echoing the stance of U.S. officials who briefed Dmitriev earlier in the week. President Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act on September 18, expanding sanctions on Russian officials, banks and state-linked entities, banning new U.S. investment in Russia’s energy sector, and authorizing tariffs of up to 100 percent on goods from major buyers of Russian oil and gas. On October 1, the United Kingdom added 31 new sanctions targeting Moscow’s shadow-fleet vessels and Kremlin-linked disinformation networks, while the EU extended asset freezes on more than 3,000 individuals and entities until September 2029.
Economic and Defense Spending Data
The Bank of Russia is keeping its key interest rate at 14 percent as inflation rises and projected 2026 GDP growth stalls at 0.6 percent. President Vladimir Putin has warned that sanctions on oil, insurance and freight are hindering Russian diesel exports. Russia’s 2027 draft budget allocates over 17.1 trillion rubles (about $205 billion) to defense—roughly a 27 percent increase over the prior plan—and would consume about 35 percent of total federal spending. The Kremlin expects deficits exceeding 5 trillion rubles each year for the next three years and plans additional taxes on metal, mining and fertilizer sectors.
Implications for Ukraine and International Relations
Analysts note that Russia’s shift toward a war-focused economy, despite mounting sanctions, strengthens Kyiv’s case for sustained pressure. While the United States and NATO continue to provide more than $10 billion in military aid to Ukraine, both Biden and Trump administrations have ruled out deploying U.S. troops, citing the risk of direct conflict with Moscow. The dual approach of tightening sanctions while keeping diplomatic channels open reflects a long-term gamble that Russia may eventually seek a negotiated settlement, but the immediate effect remains a deepening economic strain on the Kremlin and an ongoing need for Western support to Ukraine.