The two major conflict hotspots, in Ukraine and Iran, have different origins but expose a shared strategic problem. The longer compromise is delayed, the greater the cost — and the worse the terms become.
The worst part for Europe and the United States, respectively, is that the passage of time makes it ever clearer that painful compromises are the only realistic way out.
The issue is already in the news, as a new US effort to reach a compromise with Russia over Ukraine appears to be taking shape. Against this backdrop, it is particularly significant that an earlier effort, from 2022-23, has just come to light through the Financial Times. It included terms far more favourable to Ukraine than Russia’s current demands, but went nowhere.
Ukraine: Four missed opportunities
The first opportunity emerged in Istanbul in March 2022. Negotiators reached a framework for an agreement on Ukraine’s permanent neutrality, backed by multilateral security guarantees, with an open path to EU membership, while the question of Crimea and Donbas would be left for resolution at a later stage.
The talks collapsed, however. Encouraged by developments on the battlefield and Western support for continuing the war, Ukraine did not go ahead with an agreement.
The second opportunity came in November 2022, after Kherson was recaptured. The US chairman of the Joint Chiefs of Staff, General Mark Milley, said publicly that a military victory was not achievable and that the opportunity to negotiate should be seized. Antony Blinken and Jake Sullivan disagreed, while Ukrainians accused Milley of “defeatism”.
The third opportunity was unfolding at the same time, behind the scenes. According to the FT (read the full story in translation on Euro2day.gr), Putin read line by line a plan delivered to him through an informal “channel”. It included Russia withdrawing from large parts of the territories it had just annexed, recognition of Crimea as territory under Russian control, and Ukraine remaining outside NATO, with security guarantees and the door to the EU left open.
Emboldened by its fleeting successes on the battlefield, Kyiv rejected the plan. Washington, according to the Russian account, sent a message that it did not support the initiative. Former Biden administration officials are now playing down the issue. But what else could they say? That they had missed the opportunity?
The fourth opportunity came in Anchorage, at the Trump-Putin meeting in August 2025. Russia was now demanding all of Donbas in exchange for freezing the front line in Zaporizhzhia and Kherson.
Zelensky refused, with Europe’s full support. The trajectory from 2022-23 to 2025, however, shows that each time Russia appears to be in a position to demand more.
Iran: The same mistake, but moving faster
In Iran, Washington chose war, following Netanyahu’s plan for regime change and an almost certain victory. Trump was persuaded that the war would be short and ignored the warnings.
As this column pointed out from the outset, it was a major strategic blunder, with serious consequences for the US position and the global economy.
A way out appeared in June, with the memorandum signed by the two sides on 17 June. Ten days later, however, they were exchanging strikes again, and the memorandum formally expired the following August.
There are now strong indications that the US is planning new strikes on Iran, probably with Israeli support. According to a recent New York Times report, the two countries have already drawn up operational plans for after the US midterm elections on 3 November, although no final decision has been made.
Meanwhile, the war has taken on a regional dimension, with the Houthis hitting Saudi Arabia hard, while oil and petroleum products have remained at prices that are driving inflation sharply higher for eight months, and food is next in line for a new wave of price rises.
Refusing to compromise drives up the cost
The conflict in the Persian Gulf could cost Trump and his party the midterm elections, because of fuel costs and rising inflation.
Meanwhile, the US Pentagon puts the cost of the war at $43.6bn through 3 September, without including the extensive damage inflicted on US bases in the region.
US allies in the Gulf are under constant threat, while the superpower that was supposed to dictate terms is being forced to strike diesel deals with Moscow.
From Beijing to Riyadh, all the major players are “taking notes”, while US stocks of critical munitions, particularly interceptor missiles, have fallen to alarming levels.
For Europe, the blow is coming from several directions. The IMF expects the eurozone to grow by 1.1% this year, with inflation at 3.1%, while prices for refined petroleum products are 70% to 95% above pre-war levels and natural gas stocks are below normal ahead of winter.
Industry is losing competitiveness, while budgets are being asked to shoulder the burden of Ukraine and new major arms spending at the same time, as we discussed in our previous column.
The bill is being paid in the bond markets and at the ballot box. The turmoil in France and the rise of anti-establishment forces in France, Germany and many other European countries are linked to events on the battlefields.
The establishment will not lose everywhere. But it looks set to lose significant ground in several 2027 elections and even more influence over society.
What the market mirror shows
Europe’s hardline rhetoric on Ukraine, Russia and defence spending created expectations that European defence stocks would continue their upward trajectory.
That is not happening. Rheinmetall closed at €1,019 on Friday, 48% below its January high. Leonardo closed at €48.46, almost 27% below its March all-time high.
The Financial Times sought to explain why the rally had “run out of steam”. Budget headroom is shrinking, procurement systems are cumbersome and many programmes are being cancelled.
The sector, the FT concludes, is being transformed from a symbol of Europe’s strong intentions into proof of its inability to deliver. In practice, markets may already be factoring in the prospect of a compromise, even as governments avoid discussing it at all.
In Ukraine, all the signs suggest that the compromise discussed sooner or later will be far worse for Kyiv than what could have been agreed in Istanbul.
In Iran, the conditions for a resolution are already more difficult than they were in June. But nothing guarantees that the next escalation by the US and/or Israel will produce a better outcome. The opposite is more likely, specialist analysts argue.
The choices no longer seem to be between compromise and victory, if they ever were. They are between a painful compromise now and an even more painful one later.