By Haddon Libby
After the unexpected public blow-up between Ukrainian President Volodymyr Zelensky, President Donald Trump and Vice President JD Vance last week, I thought it might be a good time to put the Ukraine situation into context with other critical negotiations facing the US.
While we cannot know for sure what Trump thinks, it is fair to say that he sees Ukraine as a country that paid off the Biden family for years (Hunter Biden’s million-dollar gig on the Board of a Ukrainian power company). The payoff gave Ukraine powerful friends in DC if they needed support against Russia. Additionally, Zelensky campaigned for Kamala Harris against Trump in the last election.
As for President Zelensky, his life has been at risk for three years due to many Russian attempts on his life. Zelensky firmly believes that Trump is partial toward Russia and its President Vladimir Putin. To agree to another ceasefire with Putin sickens him given all that he and his country have been through due to Russian aggression.
The harsh truth is that Ukraine is running out of troops and cannot continue the fight without robust help from the EU and US. At the same time, Russia’s economy has been hurt badly due to sanctions while its people quietly question the loss of so much life.
From Trump’s perspective, the deal with Ukraine was a good one for Ukraine. Ukraine would give mineral rights to the US in return for its support. As the US would have to spend hundreds of millions to extract the minerals (an amount Ukraine cannot afford), this would provide a level of assurance that Russia would not invade. By agreeing to the deal, the US would have a vested financial and strategic interest in Ukraine. At the same time, the US would have to convince Russia to agree to a cease fire and the basic terms of a peace agreement. Peace would mean that Russia keeps the parts of Ukraine it currently controls.
As Russia is less than trustworthy from Ukraine’s perspective, Zelensky wants assurances that Russia will not break its word again. Ukraine is looking for a defense agreement with the US and EU – something that cannot happen if we want Russia to agree to peace.
While unstated, the US federal deficit is a big issue weighing on the Ukraine situation. At present, the US federal deficit equals 7% of annual Gross Domestic Product (GDP) – a dangerously high level. To resolve this, we need to move beyond Ukraine and get to areas where we can put a major dent in the deficit – the $850 billion annual defense budget.
If the US can deliver a solution to Russia, we can begin negotiating a lowering of tensions between the US, China and Russia. As these countries rack up trillions in debt annually, the Trump administration has floated the idea of reduced defense spending – a win-win situation for all. At present, Russia spends 6% of GDP on defense versus the US at 3.5% and Canada, China and the EU at 1.5%.
In addition to putting the US on better financial footing, an overarching objective of the Trump administration is to stem the flow of fentanyl into the US. To do this, we need Canada and Mexico to join us as we demand that China help root out those helping the Chinese and Mexican gangs responsible for the deadly drug. We also need our neighbors to stop making a buck by helping China in evading US trade sanctions like those on steel.
Whether you and I agree or disagree with the international relations approach of President Trump, he is doing what he said he was going to do. More than half of all voters supported this vision.
Haddon Libby is the Founder and Chief Investment Officer of Winslow Drake Investment Management, an RIA firm. For more information on our services, please visit www.WinslowDrake.com.
