After years of economic pain, Russia reverses course on the US

For the past three years, Russia has had the United States as its number one enemy, attacking its leadership, economy, and influence at every turn. Moscow framed Washington as an imperialist force trying to dominate the global order, and Washington, in turn, took every opportunity to paint Russia as a collapsing power.

US sanctions crippled Russia’s economy, cutting off trade, blocking financial access, and punishing key sectors. But suddenly, everything is changing.

With President Donald Trump back in the White House and the first real Russia-US talks since early 2022, the Kremlin is making a complete U-turn. After years of hostility, Vladimir Putin is dropping the adversarial stance and engaging in negotiations.

This, of course, comes as Trump publicly clashed with Ukraine’s President Volodymyr Zelenskyy, calling him a “dictator” on Wednesday. Just hours later, Putin broke his silence, confirming that Moscow is now seriously engaging with Washington.

Russia reopens negotiations as Trump and Zelenskyy clash

Russia and the US met in Riyadh, Saudi Arabia, on Tuesday, the first formal sit-down between officials since the start of the Ukraine war. The meeting, which took place without Ukraine’s involvement, was framed as a step toward ending the conflict. Kremlin officials immediately responded positively, and Putin told the media on Wednesday that:

“I rate [the negotiations in Saudi Arabia] highly, there is a result. In general, as I was told, it [the mood] was very friendly. On the American side, there were entirely different people who were open to the negotiation process without any bias, without any prejudice to what was done in the past.”

Putin then praised Trump’s “restraint”, accusing European leaders of hysteria over being excluded from the discussions. Just yesterday, Kremlin Spokesperson Dmitry Peskov said that the talks were not just about Ukraine but about reviving US-Russia relations as a whole.

While Ukraine was left out, China was paying close attention. A peace deal in Ukraine would move America’s military focus entirely to Beijing—something that President Xi Jinping is trying so hard to avoid.

China braces for impact as US changes focus

Beijing has kept its distance from the Trump administration, avoiding direct confrontation while dealing with a crippling property crisis, weak economic growth, and US trade tariffs. The last thing China wants is full-scale American military attention.

While China publicly welcomed the US-Russia talks, Beijing is preparing for what comes next. Trump’s team has made it clear that once Ukraine is out of the way, Washington will turn its focus to countering China.

Pentagon chief Pete Hegseth and Trump’s son, Donald Trump Jr., have both made it clear that China is the next target. Unlike during Trump’s first term, Xi is playing it safe. Beijing avoided an aggressive response to Trump’s 10% tariffs, taking a more cautious approach.

Xi even met with Alibaba’s Jack Ma this week, signaling an end to China’s tech crackdown as Beijing tries to stabilize the economy. Trump himself has also toned down his rhetoric on China, saying on Wednesday that a trade deal was “possible” and reaffirming his “very good relationship” with Xi.

However, his administration is stacked with China hawks, including Trade Representative Jamieson Greer and Secretary of State Marco Rubio, both of whom have pledged to confront Beijing’s influence in the South China Sea.

For China, the worst-case scenario is a NATO-style coalition in the Pacific. Under Biden, the US strengthened military ties with Japan and South Korea.

Russia’s economy looks to recover as sanctions ease

For Moscow, the biggest incentive for peace talks isn’t just diplomacy—it’s the economy. Russia has spent the last three years pouring money into war production, shifting workers to military factories, and dealing with rising inflation. The Kremlin has publicly downplayed sanctions, but the numbers tell a different story.

Russia’s GDP grew by 3.8% in 2024, according to the International Monetary Fund (IMF). But that number is set to plummet to 1.4% in 2025 as private consumption and investment decline. Even Putin himself admitted the economy was “overheating,” predicting a 2-2.5% growth rate next year.

A peace deal could open the door for a partial lifting of sanctions, giving Russia access to Western financial systems and international markets again. Moscow has relied on China and India to keep its economy afloat, but the ability to export to the US and Europe again would be a massive boost.

According to Liam Peach, a senior economist at Capital Economics, the talks could bring a major shift in global energy markets.

“The decision by the US and Russia to ‘lay the groundwork’ to end the war in Ukraine marks a potentially significant turning point after three years of conflict,” Peach said in a note on Tuesday.

He added that a peace deal could result in higher Russian natural gas exports and lower global energy prices. However, he also noted that any economic benefit to Europe—outside of Russia and Ukraine—would likely be limited.

Even if sanctions aren’t lifted entirely, the potential for a partial rollback is already changing Russia’s economic outlook. Moscow could regain access to the US financial system and increase energy exports to Europe, easing economic pressure.

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