Will Trump seize authoritarian power or face major economic crisis? – Anders Åslund

I would like to begin our conversation with what is, perhaps, the most important issue for Ukrainians at this moment — the extremely puzzling and unclear policy of the United States. I do not fully understand the position of President Trump himself. There was also a rather unusual interview with Steve Witkoff, who appears to be performing a role somewhat similar to the one Henry Kissinger once held, although Witkoff represents a distinctly anti-Kissinger approach. In Ukraine, we are deeply concerned that the United States might leave us alone to face Russia in a direct, one-on-one confrontation. Of course, we have allies and friends within the European Union, but the assistance of the United States remains vital and irreplaceable. I would like to ask you to describe how you see the current historical moment.

Unfortunately, I think that’s an accurate understanding. The best way to describe President Trump’s policy on Russia is that he acts in every respect as a junior partner to Putin.

By "junior," I mean that Trump does whatever Putin wants or approves of, and he contributes nothing of his own to the policy.

In the first Trump administration, his son-in-law Jared Kushner handled all foreign affairs and troubleshooting. This time, it’s Steve Wittkopf.

Steve Wittkopf is currently far more influential than Secretary of State Mario Rubio or National Security Advisor Mike Waltz, whom many here refer to as a “dead man walking,” since he has lost several of his top aides and appears unlikely to last much longer in his position.

Trump’s policy has been quite clear. He has twice voted alongside Russia, Belarus, and North Korea against resolutions condemning Russia’s aggression in Ukraine. Even Iran and China abstained in those votes. Only about a dozen countries supported Russia, yet the U.S. aligned itself with them — a significant and troubling shift.

And more than 100 countries, in both cases, voted in favor of condemning Russia’s aggression in Ukraine.

Does Putin like USAID? No, shut it down.  

Does he like NATO? No, undermine it.  

Does he like Radio Free Europe, Radio Liberty, or Voice of America? No, shut them down.  

Does he support democracy promotion abroad? No, shut that down too.

Trump is very predictable in that he does what Putin wants.

There is one limitation: in the US, about two-thirds of the population support Ukraine, including about half of Republicans. So he cannot go too far. He needs to appear as though he’s doing something to discipline Russia. He has made a couple of statements like "this is too much, stop the bombing, Vladimir," but nothing more. You shouldn’t take that seriously.

It’s interesting that Trump has not lifted any major sanctions on Russia, and some have even been extended. So he doesn’t dare go so far that too many people, like me, would say that Trump acts like a junior partner to Putin.

And what should Ukraine do then? I think the Ukrainian government is essentially doing exactly the right thing: on the one hand, engaging with the US so it doesn’t block all arms licenses for Ukraine; on the other hand, refusing to sign any of these agreements.

My guess is that Trump will soon declare victory and walk away, whatever the outcome, and it’s important that Ukraine hasn’t lost anything substantial when that happens.

Do you see any realistic prospects for a diplomatic resolution to Russia’s aggression against Ukraine? We keep hearing a variety of messages, many of which contradict one another. Meanwhile, Russia continues to advance and bombard our cities. At the same time, we are aware that a portion of our population still holds on to the illusion that some sort of agreement might be possible. The Russians keep repeating their ultimatums — demanding the occupation of Ukrainian territories that they have not yet seized, along with so-called “denazification,” “demilitarisation,” and other unacceptable conditions. Lavrov continues to echo Putin’s ultimatum from three years ago. And yet, the Russians keep repeating their mantra about negotiations. How would you interpret this complex game?

Unfortunately, I'm quite pessimistic. I think there are essentially two options now. Either Ukraine signs something completely humiliating and unacceptable, essentially just a temporary ceasefire, or the war continues. The second option is better because Ukraine is holding up quite well.

Europe is strongly behind Ukraine. Since the humiliation of President Zelensky at the White House on February 28, Europe, minus Hungary, has completely united behind Ukraine.

The military industry in Europe, together with excellent startups in Ukraine, is now gearing up to deliver more arms and to do so faster. This year, Ukraine will receive about 100 billion dollars in Western financing.

So the financing is already secured, but I don’t see any possibility that something reasonable will come out of these talks. It’s notable that when Wittkopf was in Moscow, he had no aides with him, while Putin received him with Yuri Ushakov and Kirill Dmitriev. I know both of them.

Dmitriev is quite skillful. Sergey Lavrov no longer really plays the role of Foreign Minister, as little as Marco Rubio does here in Washington. Instead, Lavrov speaks like a propagandist, and you might as well listen to him, or to Vladimir Solovyov or Margarita Simonyan.

It’s pretty much the same situation. Lavrov is not involved in any real negotiations, as far as I understand. But we also shouldn’t assume that any real negotiations are taking place. On the contrary, Putin is simply charming Witkoff, and through him, Trump.

These seem to be the only two decision-makers on US policy toward Russia.

Unfortunately, the best option seems to be to keep the dialogue going and make sure Ukraine does not sign anything truly damaging. I listened to Prime Minister Shmyhal here in Washington on Saturday.

He said there should be an intergovernmental agreement on mineral exploitation in Ukraine, followed by a general agreement and then specific agreements on individual projects. That sounds like a normal commercial process. Ukraine is also no longer expected to repay the grant assistance it has already received from the United States.

So that seems to be moving in the right direction, whereas previously the situation was very bad. Unfortunately, the peace or ceasefire negotiations appear to be leading nowhere, and we should expect Trump to declare victory on no basis whatsoever and walk away from all of this.

And what are your thoughts on the evolving agreement regarding Ukrainian mineral resources? Initially, the Trump administration had sky-high ambitions, but now those expectations seem to have diminished significantly. In your opinion, how could such a scheme actually function? One key achievement stands out: we do not owe the United States. In other words, the assistance provided to Ukraine by President Joseph Biden’s administration — with the approval of both Congress and the Senate — came free of charge. Certain resources were transferred to Ukraine, and although the financial mechanisms differ, there were attempts to portray us as debtors. How serious do you think this minerals deal really is? After all, the U.S. government signed a similar agreement with Afghanistan not long before it waved goodbye and withdrew its troops.

I don’t think it’s right to draw the comparison with Afghanistan. The US proposal has clearly changed a lot. What is clear now is that there’s no suggestion Ukraine should pay for what it has already received — that is gone.

The idea that Ukraine should give the US the right of first offer has also been removed. When I listened to Prime Minister Shmyhal here on Saturday, he emphasized two rules.

First, it must not violate EU accession, and I think Ukraine should involve the EU as much as possible in this, which seems to be the case. Second, it must not violate the Ukrainian Constitution and, by extension, other Ukrainian laws.

It seems that this intergovernmental agreement, which would essentially be a bilateral investment treaty, is on the right track. Then it’s a matter of reaching concrete commercial agreements under it, but they should not include preference for the US. These should be normal investment agreements.

And it appears to me that the Ukrainian government is insisting on the right principles and that we are now moving in that direction.

All the earlier talk from Trump about Ukraine having to pay back some fantastical amount it supposedly received from the US, which is not true, has been dropped. And of course, as you said, the Biden administration provided grants to Ukraine, not loans.

But Trump behaves like an extortionist. This is something that must be firmly resisted. And it appears to me that the Ukrainian government is doing that very well.

I would like to ask you about the broader trade war. I would like to believe that, in time, things will stabilise and evolve into a framework of deliberate and meaningful action. However, we have witnessed a series of strange decisions and unpredictable reactions, only for them to be reversed later — with the public receiving updates through posts on the X platform. Meanwhile, the global economy is in turmoil, and naturally, there are those looking to profit from the chaos, or to use it as leverage to pressure certain governments. In your view, is this process being guided by any coherent strategy, or is the Bretton Woods system now beginning to unravel in a state of growing disorder?

Well, I think one should focus on this trade policy as such. The basis for it is completely absurd. The US has benefited greatly from massive financing from the entire world.

Thirty-two trillion dollars of foreign money is held in US securities, meaning bonds and stocks. This is because the US has been seen as a safe haven. That is no longer the case, so we should expect much of this money to leave. And why does the US have a trade deficit?

Part of the answer is that it has a large services surplus. The other part is that foreigners have been willing to finance the large US budget deficit, which is about six and a half percent of GDP each year.

It should go down to half of that to be reasonable, but there is no sign that this is going to happen. So Trump complains that the whole world has ripped off the US.

Well, the reality is that the whole world has been kind enough to provide massive financing to the United States. The country that will most likely be hurt by these tariffs is the United States itself, because it’s Americans who have to pay them.

Trump lies constantly, claiming that it’s the Chinese who will pay, which is simply not true. Whatever Trump says are lies, and these reciprocal tariffs you’re now seeing were largely invented without any clear basis.

The most striking example is that an island with only penguins would have to pay a 20 percent tariff. It’s completely absurd.

Last night in Detroit, Trump repeated most of his lies in a very aggressive tone. He’s not going to change course.

This is, above all, a tragedy for the United States, but also for the global economy. As you mentioned, Trump thrives on chaos. The president has the power to impose tariffs. He claims this will be challenged in court, because it’s based on an emergency decree.

There is absolutely no emergency situation in the United States, but Trump is trying to create one.

And altogether, if the US were to introduce a 10% tariff on everything, that would amount to about 1% of GDP. With a few other tariffs added, perhaps 2% of GDP.

On the one hand, these are significant figures, but they are not enough to finance the federal government. I’m sure that Trump will keep everyone uncertain. He thrives on fear, so you must not fear Trump. He will continue to create complete instability.

We just got the numbers showing that US GDP fell by 0.3% in the first quarter of this year. I would expect GDP to fall even faster because of Trump’s policies. There is now complete uncertainty in everything. No sensible company can undertake significant investment in the US under these circumstances.

The tariffs will raise prices, so inflation is likely to increase. Many companies will find they can no longer operate profitably under these conditions and will shut down. The dollar has already fallen by 10% in relation to the euro and is likely to fall further.

The stock market is down by about 20% and will likely decline even more. Trump’s economic policies are a disaster for both the United States and the world. His basic principle is to attack, deny, declare victory, but never change course.

I think this situation will continue to worsen. The question is whether Trump will succeed in consolidating authoritarian power or whether he will face a serious economic downturn before that. And will there even be democratic elections to Congress next year?

I see this as a serious crisis, both democratic and economic.

Unfortunately, we have witnessed how the very democratic institutions that are meant to uphold and advance democracy have failed to protect the rule of law, even in the birthplace of modern democracy, the United States. We want to believe that the European continent will remain resilient. Yet at the same time, we are observing in real time the formation of a military strategic alliance between North Korea and Russia. We cannot predict the decisions that may be made by the People’s Republic of China. But the world is clearly teetering on the edge.

The global challenges we face are undeniably serious and urgent. However, we also live in Ukraine, and I would like to ask you, in light of the current geopolitical configuration: at a time when the United States may gradually detach itself from the European continent, when the threat of war looms not only over Eastern Europe but also over what we once called Old Europe, including the Baltic States, Finland, and Sweden, what should Ukraine do? Let us not forget that Putin’s ultimatum called for the Euro-Atlantic alliance to retreat to its previous borders. Yet Sweden and Finland are now NATO members, a decision taken in part by President Joseph Biden. In your opinion, what course of action should Ukraine pursue in this situation? It is something that must be done urgently.

Unfortunately, what I hear is perfectly true, and I think that Ukraine is doing what is most sensible for both itself and for Europe right now. Ukraine is truly the bastion that holds. Europe should provide financing and arms to Ukraine as much as it can.

Unfortunately, the European militaries have been very weak. Ukraine now has the strongest army in Europe, followed by Turkey. Europe needs these countries as close allies, and Ukraine should be able to count on as much support as Europe is capable of providing.

I specifically find it a disgrace that Germany and France have not been able to mobilize the political will to seize 200 billion dollars of frozen Russian assets in Belgium and deliver it as support to Ukraine. This could change the outcome of the war within a year, but it has to be done.

And I truly hope that there will be a change now, when Friedrich Merz probably becomes Chancellor of Germany on May 6. Germany needs to take the lead in Europe and provide wholehearted support for Ukraine, which was not the case before.

France and Britain are perfectly on the right track, and the strongest support, I would say, comes from the Nordic-Baltic Eight countries, as well as Sweden and, of course, Poland.

Europe is becoming increasingly committed to Ukraine, but it needs to go all the way, because what Ukraine has accomplished in the last three years is truly heroic and very impressive.

What is the current state of the Russian economy? It is well known that the Russians have redirected a significant portion of their industrial capacity toward military production, but as the saying goes, someone has to foot the bill. At one point, unfortunately, Ms Nabiullina, the head of the Central Bank of the Russian Federation, managed what some called an economic miracle. The Russian economy survived. I recently spoke with our mutual acquaintance, Daniel Fried, who once led the sanctions division at the U.S. State Department, and he admitted that the sanctions imposed by the United States and the European Union turned out to be too weak.

To what extent is the Russian economy capable of bearing the weight of a prolonged war effort? Can we say that there are still untapped levers that the collective West, or Donald Trump, or even divine intervention could use to bring the Russian economy to a halt? I simply cannot understand what allows them not only to keep functioning but to actively sustain their aggression. Could it be that they are down to their last few months?

Yeah, I agree. Daniel Fried is an excellent person. The sanctions have, you could say, achieved three things. The economic sanctions, first of all, have cut off financing to Russia, and they’ve done that quite efficiently. Russia cannot raise any international financing.

Second, there are the technology sanctions, which mean that Russia cannot access much technology. They can smuggle a bit by various means, but they are clearly suffering.

The third has been the oil sanctions, which were not initially effective but are becoming much more effective now.

Part of the reason was that the Biden administration was very concerned about high oil prices in the US. Now, on the contrary, we are seeing the global oil price falling below $60. The price of Urals crude is $50 per barrel, which is $20 per barrel less than what is forecast in the Russian budget.

This will cost the Russian budget 2.5% of GDP. Russia is also running out of its liquid reserves in the National Welfare Fund, and only about 2% of GDP remains there.

So this means that in the second half of this year, Russia will have to cut public expenditures by around 4% of GDP. That’s a significant adjustment. Military spending in Russia amounts to about 10% of GDP, while Ukraine’s military spending is at 50% of GDP. Russia can still do more; it is not operating under a full war economy.

But as Elvira Nabiullina has said, she expects stagflation this year, with 1 to 2% growth. It’s not a collapse, but it’s a rather mediocre performance. Russia now produces only 300 tanks a year at Uralvagonzavod, and that’s not very much.

The air force also seems to be largely depleted. So Russia is not strong, but it’s not collapsing either.

Will the Ukrainian economy be able to withstand potential negative policies from the United States if the Americans choose to withdraw from the game?

President Biden organized about $20 billion of U.S. assistance that is now being delivered this year through a trust fund at the World Bank.

Trump can’t do anything about it because the money is already out the door here in Washington. Europe, the UK, Japan, and Canada are all providing assistance as well.

Over the last two years, Ukraine has received about $100 billion in assistance each year, and Ukraine will receive similar support this year. You could even say that the budget is overfinanced, but of course, Ukraine needs much more for arms in order to win the war.