00:00US President Donald Trump has just announced what he's calling an energy ceasefire between
00:05Russia and Ukraine. The only thing is the Ukrainians don't seem to know anything about it.
00:11Here's what Trump posted to his Truth Social Network on Sunday. Take a look.
00:16Effective immediately, there is an energy ceasefire in the war between Russia and Ukraine.
00:22Both parties have agreed. Do not break it. Thank you for your attention to this matter,
00:27President Donald J. Trump. There aren't really any more details apart from that. Shortly afterwards,
00:34President Vladimir Zelensky of Ukraine told the news site Axios that it was news to him,
00:39but that he'd agree to it if Vladimir Putin did as well. There's been no response yet from Moscow.
00:45But Zelensky said Russia had attacked an energy plant in the Kharkiv region
00:50after Donald Trump's announcement. Here's some more of Zelensky's evening address on Sunday.
00:57Ukraine has proposed many de-escalatory steps. Putin had one answer to all of them.
01:03Yet, we do hope that he will finally say something different to America, Ukraine,
01:08and the entire world. Something other than killings and deception. Something that will lead to a real
01:14and dignified peace. We are awaiting clear details of the dialogue between America and Russia,
01:23and we expect Putin to follow through on what President Trump said. I thank our warriors and
01:28everyone around the world who stands with Ukraine. And to help us unpack this is Anastasia Fedik,
01:40an Assistant Professor of Finance at the Huss School of Business at UC Berkeley in California.
01:45Anastasia, great to see you. Likewise. Look, just tell us from your perspective,
01:52how convincing or credible is this statement by Donald Trump of an energy ceasefire,
01:58if Vladimir Zelensky says he knows nothing about it?
02:02Yeah, so of course, to put it into perspective, we have had several attempts at ceasefires in the last
02:07nearly two years, including some of them specifically aimed at energy, some of them
02:12likewise kind of limited scope ceasefires in the air. For example, air and sea attempted ceasefires
02:17at the beginning of President Trump's terms. And of course, what has happened so far is that none of
02:23these have worn fruit. So that naturally makes people skeptical of any newly promised ceasefires,
02:30especially without more details about what exactly is being promised on the Russian side.
02:34If Vladimir Zelensky says he knows nothing about this arrangement, could it look more like an
02:40understanding reached with Moscow than one reached with Kyiv?
02:46Partially. I think partially there may also be sort of a response to President Zelensky saying that,
02:53hey, we are willing to stop any attacks on the Russian energy infrastructure in response to Russia
02:59actually taking steps to stop attacks on the Ukrainian infrastructure. So it is also possible
03:03that President Trump interpreted some of those statements because, of course,
03:06that has been a back and forth between him and President Zelensky since Friday with the diesel
03:10deal that President Trump reached with Russia. So it could be a response to those kind of implicitly
03:17assuming that Ukraine is open to ceasefires as long as Russia is. And of course, there does seem to
03:25be communication between the US and Russia outside of having Ukraine outside of that loop, given that we
03:31saw that announcement on Friday of the diesel deal. Yeah, let's talk a little bit more about that deal.
03:37This was a deal in which, if I remember correctly, sanctions would be lifted temporarily in order for
03:45Russia to be able to sell diesel to the United States. Could this announcement of Donald Trump's,
03:52what he's calling an energy ceasefire, this agreement to sell diesel from Russia to the US,
03:59could this be part of that?
04:03Certainly, because, of course, there are logistical sort of necessities for that diesel deal to even go
04:08through. One, of course, is the timing, when exactly that would come in, the volumes. So
04:16questionable about whether those volumes are actually large enough to at all move the needle
04:20on the prices in the US. And the other is, well, Ukraine has been quite successful in terms of its
04:27attack on Russian refineries. And that may hinder any ability to execute that diesel deal. So I think,
04:34by all means, those two things, the diesel deal from Friday, and then this supposed announcement
04:39of the ceasefire today are very much linked. You've mentioned a couple of times, and it's
04:43well known, Ukraine has been striking Russian energy infrastructure for quite some time now.
04:49How much does that constrain Russia's ability to export diesel under the terms of a deal like this
04:56and other fuels? Yeah, I think it's exactly these types of exports that are actually most
05:02constrained, because it's more on the refinery side. So the kind of products that are further down the
05:07line, like these diesel exports are exactly the type of exports that are being most impacted. And so
05:13right from that perspective, if this is one of the actually sort of most successful Ukrainian counter
05:20attacks right outside of the front line, this is something that Russia probably cares about very much.
05:26And so they would be incentivized to form a deal such as this one with the United States, for
05:30example, for its diesel exports, to put more pressure on Ukraine to stop some of the most successful
05:35counter attacks. You're talking about incentives here. If Moscow believes it's winning the war,
05:44and it has shown no signs of really letting up its attacks, particularly on Kyiv, does it really,
05:50is it really incentivized in this case to stop doing that?
05:57Yeah, so it's complicated in terms of what, to what extent they believe that they're winning.
06:03I think they are definitely, they do not perceive themselves as losing sufficiently to stop. I think
06:11they are kind of taking things all together. And one of the sort of more difficult points for them
06:18is the economic repercussions, especially, right, in terms of their energy experts. So I think for them,
06:24if they can limit that side, right, if they can kind of limit the repercussions that they're feeling
06:30back home while continuing, right, those unrelenting attacks in Ukraine, both on the front line,
06:36right, where they're sort of very slowly but grinding, right, kind of on, but also their attacks
06:43on the civilian infrastructure in Ukraine. The energy infrastructure is one of those, but they've also
06:47been targeting food supply chains and other sort of civilian infrastructure that is promising to make
06:54life for the Ukrainian civilians increasingly more difficult and is already probably at the most difficult
07:00stage of the full-scale war. Then they think the combination of those factors will very much play in their
07:05favour.
07:05So you think there is some strategic logic possibly for Russia to possibly agree to something like this?
07:13There is strategic logic for Russia to promise to do a great many things. I think just based on
07:19history so far, it is still extremely unlikely that they would actually be going through with any
07:24ceasefire deals in a meaningful sense.
07:27Yeah. Look, there's a report today in the Financial Times that Donald Trump is threatening to cut off
07:34the NATO-managed procurement system that provides Ukraine with weapons to pressure Kyiv to halt its
07:41deep strikes on Russian energy infrastructure. If that reporting is true, and there's no reason to
07:47doubt it, how significant a source of leverage would that be over Kyiv?
07:53Yeah. So of course, with the US support over the last year and a half, it has already gradually
07:59trickled down. So direct procurement, new aid has been largely halted. A lot of it has been
08:05transferred to sort of a third-party procurement where European allies are the ones that are sort of
08:11financially responsible for arming Ukraine and the US is basically selling to them to then give
08:19on to Ukraine. So I'd say the leverage is still there. It is eroded kind of gradually over the
08:29course of the last year and a half in the sense of the United States has threatened or stopped
08:35various forms of aid at several points within the last year. And so I think at this point,
08:41both Ukraine and Europe are much more sort of expecting of that or perhaps prepared for that.
08:46Hmm. Would this pressure coming from the US change Ukraine in its strategy of trying to target
08:56things like Russian energy infrastructure and thereby weaken its negotiating position in any future talks?
09:04Yeah. At the end of the day, a negotiation is in large part about expectations about future actions
09:09and trust. And the question here is if Ukraine feels that the United States is threatening this in a way
09:17that appears to be siding with Russia, then it is likely that they would not perceive that much benefit
09:23into stopping the most effective basically leverage that they currently have, that Ukraine currently has,
09:29these long-range strikes on Russia in exchange for aid that is increasingly uncertain.
09:35Right. With kind of whatever repeated threat of removal, it becomes that much less rate of a dependency.
09:46Now, Anastasia, you're based in the US. From where you're sitting, to what extent are the domestic
09:52political considerations in the US right now shaping these energy-related announcements? I'm looking
09:59particularly to the midterms that are happening in just a few weeks' time.
10:04I mean, honestly, they absolutely appear to be, given the timing and given what is going on in the
10:09Middle East. Things are not going well. Energy prices have risen. This is, I think, a very large
10:15point of concern with domestic politics in the United States, especially with Trump's kind of
10:22based on the Republican Party. So it very much appears to be a motivating factor. The kind of
10:30question is the distance between this motivating factor of sort of saying, hey, I'm doing something
10:34to lower energy prices and whether or not the something will actually lower energy prices in
10:40practice by that much, which I think most energy analysts seem to agree that it will not have that
10:45much impact for various reasons. One is the volumes, while large enough that they will provide quite
10:52a substantial financial sort of cushion to Russia, are not that large in the grand scheme of things of
10:59US energy consumption. And the timing, right? We were talking about sort of the type of exports that
11:06are not the most common, right? Russia to US is not the most common energy.
11:11A route that would require a potential, right, kind of recommissioning, routing. Also,
11:18while the United States is doing this temporary lifting of sanctions, the EU, European countries
11:24are not, right? So many companies that are engaged in this have to be careful, right? That they're sort
11:29of not accidentally violating any of the other third party kind of countries' sanctions and so on.
11:35So timing-wise, it's just very unlikely to even have an effect before the midterms, given how close we
11:41are to the midterms. And volume-wise, compared to the grand scheme of things, right, with the
11:48action in the Middle East and so on, it's just not likely to be that large of an effect.
11:53Okay, understand. Now, I just would like to ask you finally, we're talking to you in the context of
11:58this announcement by Donald Trump of an energy ceasefire. From your perspective,
12:04what would have to happen for an energy ceasefire between Russia and Ukraine to be,
12:09I guess, credible and enforceable and trackable?
12:15Yeah. So, of course, the main question, right, is if there is a third party, right,
12:20that's not involved in conflict directly in the United States that is sort of promoting the ceasefire,
12:26the most effective way to have a ceasefire happening is to actually have leverage on both
12:32sides, right? And we've talked a little bit about the leverage that the US has been exerting on Ukraine
12:36in terms of, right, kind of what more can they shut down in terms of, right, the procurement process
12:42and so on. And the big question, I think the question that's kind of been the unknown this entire
12:46time is what leverage, if any, does the US have and is it willing to apply to the Russian side?
12:53And I think that's also what President Zelenskyy has alluded to in terms of, well, if you can
12:57actually get Russian to commit to the ceasefire, great, like, we are always willing. But to get
13:03them to commit, not just verbally, but actually go through with it, there have to be some credible
13:07repercussions. Like, what would happen if there is a ceasefire and then Russia violates? And I think
13:12that's a question that really nobody has a clear answer to. And that is the reason that it is difficult
13:19to expect, right, or to believe that Russia would honor a ceasefire given a history of prior
13:25ceasefires and be that there isn't really a clear sort of consequence or repercussion to any violation.
13:30Thank you so much for your insights today, Anastasia. We've been speaking with Anastasia Fedik,
13:35Assistant Professor of Finance at the Haas School of Business at UC Berkeley in California.
