Recent developments do not change our expectations for the Russia-Ukraine war

The war in Ukraine will continue to dictate Europe’s prospects in 2023. It will shape local and EU politics, energy security, industrial policy, and international relations. In this article, we outline our expectations for the next phase of the war and offer an optimistic prospect for peace negotiations to lead to a cessation of hostilities in the second half of the year.

Much has happened in recent weeks in the Russia-Ukraine war. The United States has raised the prospect of negotiations, the Russian military left Kherson, emboldening Ukrainians, while a missile killed two in Poland highlighting how easily the war could escalate beyond Ukraine. Expectations are rising that Ukraine is now more willing to sit down for talks given the US change in rhetoric and Russia’s destruction of critical infrastructure ahead of the cold winter months.

Despite these developments, we are not changing our assumptions for the war. Risks remain tilted to the downside, as most scenarios lead to a negative outcome for Europe (in combination a 60% likelihood). Despite the downside pressures, it remains our base case expectation – at 35% likelihood – that a ceasefire in 2023 (most likely towards year-end) could lead to an end of the war.

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