Russia War Strategic Roadmap 2025: Scenarios, Constraints, and Market Signals

Prediction markets have a blunt question for 2025: can Russia turn its grinding war of attrition into decisive leverage, or does the conflict harden into an expensive stalemate with a small but dangerous risk of spillover beyond Ukraine?

Across SimpleFunctions’ aggregated prediction data, traders are not betting on a dramatic victory or a world war in 2025. Instead, they’re pricing a high‑probability year of incremental Russian gains in the east, contested Ukrainian resilience, and messy politics around any ceasefire offer.

On territorial control, markets put a modest edge on Russia consolidating more of Donetsk oblast by year‑end, but stop well short of certainty. Expectations for large additional land grabs are tempered by Russia’s manpower and logistics limits and Ukraine’s improving defenses, even as Ukraine struggles with ammunition and mobilization.

Where markets look more optimistic than many analysts is the probability of a negotiated pause. With Western debates over aid, war fatigue in both societies, and talk of externally brokered deals, traders are assigning substantial odds to some kind of ceasefire or frozen front emerging in 2025. Yet leading assessments from CSIS, RUSI, and others emphasize that the Kremlin’s current strategy is to win by 2026 through sustained attrition, not to lock in a compromise while it believes the balance is still shifting in its favor.

Conversely, markets may be underpricing Russia’s ability to sustain this war footing. By 2024, Russia’s military spending had surged to an estimated $149 billion, or 7.1% of GDP, and roughly 30–40% of the federal budget is effectively war‑related. Chinese industrial inputs, Iranian drones and missiles, and North Korean ammunition have all helped Moscow stabilise and expand production of shells, drones, and armor. For traders, this means that scenarios assuming rapid Russian exhaustion or a forced climb‑down in 2025 deserve extra scrutiny.

At the extreme tail, markets currently attach low single‑digit odds to major escalation beyond Ukraine—such as a direct Russia–NATO clash or use of non‑strategic nuclear weapons. That aligns with most expert views that see such steps as last‑resort tools of coercive signaling rather than preferred options. But low‑probability, high‑impact events matter for portfolios; understanding what would actually move those odds is central to war‑risk hedging.

Why is 2025 so pivotal in Russian planning? Internal Russian documents and Western analysis point to a planning horizon in which “victory should be achieved by 2026” through attrition, assuming Ukrainian depletion and Western fatigue. The Kremlin has re‑oriented the economy onto a semi‑permanent war footing, betting that it can outproduce and outlast Ukraine and its backers. The year 2025 is thus the bridge: the period in which Russia aims to lock in battlefield advantages and test Western political cohesion before pushing for a settlement on its terms.

This roadmap is structured to turn that big picture into concrete trading inputs. The next sections will:

• Track battlefield trends and likely Russian axes of advance in 2025.
• Map Moscow’s strategy, alliances, and war economy into realistic territorial and escalation scenarios.
• Link domestic politics in Russia and Ukraine to timing and terms of any ceasefire.

For each, we will spell out tradeable scenarios, key data to watch, and market signals that should trigger position changes as 2025 unfolds.

2. From Blitzkrieg to Attrition: How the Front Line Evolved (2022–Late 2024)

The pricing of 2025 scenarios only makes sense against the map Russia actually carries into the year. Between February 2022 and late 2024 the war shifted from a failed multi‑axis blitzkrieg to a mostly static, artillery‑ and drone‑driven slugging match, with Russia holding a durable but not rapidly expanding lodgement in eastern and southern Ukraine.

By mid–late 2024, common OSINT estimates put Russian‑occupied territory at roughly 18–20% of Ukraine, down from a high of about a quarter of the country in spring 2022, but still well above the 7.3% Russia held before the full‑scale invasion (Crimea and parts of Donbas). Within that headline figure, however, the character of the fighting, the value of specific axes, and the tempo of operations have changed in ways that sharply constrain what Moscow can plausibly attempt in 2025.

2022: Multi‑Axis Invasion and Ukraine’s Counterblows

February–March 2022 – the failed lunge for Kyiv. Russia opened the war with a classic high‑tempo maneuver design: simultaneous thrusts toward Kyiv, Kharkiv, Sumy, Chernihiv, the Donbas, and the southern coast. Airborne and special forces were supposed to decapitate the government while armored columns rolled down main highways.

Logistics failures, air‑defense losses, and a quick Ukrainian mobilization forced Moscow to abandon the northern axes within weeks. The maximum Russian territorial footprint in early 2022 reached roughly 26–27% of Ukraine’s land area, but it was badly overextended and reliant on vulnerable road‑bound supply lines.

April–August 2022 – shift to the east and south. After withdrawing from Kyiv and northern Ukraine, Russia concentrated on the Donbas and the southern land bridge to Crimea. The brutal siege and eventual fall of Mariupol (May 2022) secured that corridor but at extreme cost. Russia also took and initially held Kherson city, the only regional capital it would capture.

September–November 2022 – Ukrainian maneuver returns. Once Western artillery and HIMARS systems began arriving, Ukraine launched rapid counteroffensives:

• In Kharkiv oblast, a surprise September push collapsed thin Russian lines and liberated large swathes of territory, including Lyman and key rail junctions.
• In Kherson, persistent Ukrainian strikes on bridges and depots west of the Dnipro made the Russian position untenable. Moscow withdrew across the river in November, surrendering the only major city it had taken.

By the end of 2022, Ukraine had clawed back on the order of 8,000 km² compared with the early‑year peak of Russian control. For traders, this mattered: it showed that Russian gains were reversible when logistics and air defenses were stressed, and that Moscow could be forced into politically painful withdrawals.

2023: Fortifying the Front – The Surovikin Line and Stalemate

In 2023 the war pivoted from fluid maneuver to positional attrition.

Russia spent the winter and spring building layered defenses—what analysts and Ukrainian soldiers dubbed the “Surovikin Line”—across southern Zaporizhia and parts of Donetsk: deep mine belts, dragon’s teeth, trench networks, and hardened firing points. When Ukraine launched its long‑anticipated summer 2023 counteroffensive toward Melitopol and Berdiansk, these defenses, combined with dense artillery and drones, slowed advances to a crawl.

Ukraine made only modest territorial gains in Zaporizhia and western Donetsk; there were no breakthroughs to the Azov coast. Meanwhile, Russia gradually ground forward around Bakhmut and Avdiivka, using infantry‑heavy assaults supported by overwhelming artillery rather than rapid armored thrusts.

Operationally, 2023 marked three structural shifts:

• Artillery ratio and shell volume tilted back toward Russia as its industry ramped up and North Korean supplies began to arrive, enabling several‑to‑one fire advantages on key sectors.
• Drones and EW became central: Russian Lancet loitering munitions, Iranian‑designed Shaheds, and Ukrainian FPV fleets systematically hunted artillery, radar, and logistics, reducing the survivability of large maneuver elements.
• Deep strike campaigns intensified. Russia resumed large missile and drone waves against Ukraine’s energy grid over winter 2023–24, while Ukraine began striking deeper into Crimea and the Black Sea Fleet, sinking or damaging a significant share of Russian naval assets and repeatedly hitting the Kerch Strait Bridge.

By late 2023, the line of contact had largely stabilized. For markets, the lesson was that well‑prepared defense plus drones and mines sharply degrade the odds of fast offensives on either side, making large one‑year territorial swings less likely without political shocks.

2024: Russian Donetsk Gains, a Stalled Kharkiv Offensive, and Cross‑Border Surprises

In 2024, Russia exploited Ukraine’s ammunition and manpower problems to regain the initiative—especially in the Donbas—but still within an attritional, not blitzkrieg, framework.

Donetsk: 4,000+ km² of grinding gains. According to ACLED and ISW‑based mapping, Russian forces captured over 4,000 km² in 2024, largely in Donetsk oblast. Stepwise advances around Avdiivka and toward Pokrovsk pushed Ukrainian forces back from several fortified towns and threatened key logistics hubs linking the Donbas front to the rest of Ukraine. One estimate cited by Western analysts suggests Russia took roughly 1,900 km² in just May–August 2024, at enormous personnel cost, then continued smaller advances into the autumn.

Kharkiv: a border offensive that ran out of steam. In May 2024, Russia opened a new offensive north of Kharkiv city, aiming to seize border settlements and create a buffer to reduce Ukrainian shelling of Belgorod. Initial gains were real but limited; once Western aid unblocked and Ukraine rushed reserves, the Russian push stalled short of any major urban objective. The offensive tied down Ukrainian units but did not produce a strategic breakthrough.

Ukraine’s Kursk incursion: 1,250 km² on Russian soil. In August 2024, Ukraine mounted a surprise cross‑border operation into Russia’s Kursk oblast, at one point controlling roughly 1,250 km² of Russian territory. While Kyiv ultimately chose not to push deeper, the incursion forced Moscow to divert tens of thousands of troops to stabilize the area and signaled that Russia’s own rear is not inviolable.

Throughout 2024, both sides escalated the long‑range strike war. Russia continued to target Ukrainian power and gas infrastructure; one autumn strike package reportedly knocked out about 60% of Ukraine’s gas production capacity in a single series of attacks. Ukraine, for its part, dramatically increased drone strikes on Russian oil refineries and logistics hubs—one dataset recorded a ~65% weekly increase in attacks at one point, hitting facilities in at least a dozen Russian regions, including around Kazan.

Why This Evolution Matters for 2025 Markets

By late 2024 the front line tells a clear story:

• Russia controls a large but not rapidly expanding slice of Ukraine (around one‑fifth of the country) and has shown an ability to make incremental gains in Donetsk when Ukrainian artillery and manpower are strained.
• Attempts at larger operational maneuvers—the Kharkiv offensive, deep thrusts beyond fortified belts—have produced limited results compared with their cost.
• The war’s center of gravity has shifted toward industrial capacity (shells, drones, air defenses) and political will, not armored spearheads.

For prediction‑market traders, this narrows the plausible 2025 menu:

• High‑probability: continued Russian nibbling in Donetsk and possibly parts of Kharkiv/Zaporizhia, measured in thousands—not tens of thousands—of km².
• Lower‑probability: dramatic breakthroughs to the Dnipro or a collapse of Ukraine’s entire eastern front, which would require both Ukrainian systemic failure and Russian capacity for sustained maneuver it has not displayed since early 2022.
• Non‑zero but limited: Ukrainian counteroffensives that significantly roll back 2024’s Russian gains, given current resource asymmetries.

In other words, the past three years have compressed the distribution of realistic territorial outcomes. The map going into 2025 is one of fortified lines and incremental attrition, not open flanks. Markets that price in outsized land grabs—or, conversely, a rapid Russian ejection from most occupied areas—need to justify those odds against this hardened positional reality.

If the front line going into 2025 is about fortified belts and incremental advances, Kremlin strategy is about what those trenches are ultimately supposed to buy. Traders can’t price ceasefires, partition scenarios, or NATO‑related risks without first pinning down what Moscow is actually trying to achieve.

3.1 From Slogans to Structure: What Moscow Officially Says It Wants

When Putin announced the full‑scale invasion on 24 February 2022, he framed the “special military operation” around four headline aims:

• “Demilitarization” of Ukraine – destruction of Ukraine’s military capacity to threaten Russia.
• “Denazification” of Ukraine – regime and narrative delegitimization, cast as removing supposedly extremist leaders and ideology.
• Protection of Russian speakers in Donbas – ending an alleged “genocide” and enforcing the self‑proclaimed DPR/LPR’s claims.
• Prevention of NATO membership – blocking Ukraine’s integration into Western security structures.

Initially, Putin explicitly said Russia did not intend to occupy Ukraine permanently, implying a fast coercive campaign, regime change, and a new security settlement rather than long‑term territorial absorption. The failed drive on Kyiv ended that scenario, but the official aims were never retracted; they have instead been stretched over a long war of attrition.

3.2 Annexation as a Point of No Easy Return

The decisive shift came with the September 2022 annexations of Donetsk, Luhansk, Kherson, and Zaporizhzhia. Russia staged referendums in occupied areas, then amended its constitution to incorporate these regions as part of the Russian Federation, alongside Crimea.

For markets, this step matters more than many battlefield swings:

• It hardens territorial ambitions into constitutional claims. Any future leader formally surrendering these regions would have to reverse constitutional amendments, an act easily framed domestically as treason.
• It transforms the narrative from a war about Ukraine’s policies to a war “defending Russian land”, making withdrawals politically costlier than compromises on other issues (e.g., sanctions relief, arms limits).
• It signals that at minimum, Crimea plus the four annexed oblasts are treated as the territorial baseline of victory, not bargaining chips.

In practice, Russia still does not fully control these regions: Ukraine retains significant parts of Donetsk and smaller slices elsewhere. That gap between constitutional map and military reality is what Moscow is trying to close in 2025.

3.3 The Deeper End‑State: Subjugation, Sphere of Influence, and Regime Capture

Think‑tank analysis between 2023 and 2024 (RUSI, CSIS, others) converges on a broader reading of the Kremlin’s goals that goes beyond slogans:

• Subjugation and “denationalization” of Ukraine. RUSI assessments describe Ukraine’s denationalization—breaking its identity as an independent, pro‑Western nation‑state—as central to Kremlin strategy. This includes information control, cultural pressure, and re‑engineering education in occupied areas.
• Regime change or regime capture. Early war plans clearly envisaged removing the Zelensky government. By 2023–24, the goal evolved to installing or coercing a Ukrainian leadership that is acceptable to Moscow even if nominally sovereign.
• Locking Ukraine into a Russian sphere with a NATO veto. CSIS and others stress a core strategic end: permanent prevention of Ukrainian NATO membership, whether via formal neutrality, long deferments, or Russian veto mechanisms.
• Territorial leverage, not necessarily total conquest. The Kremlin seeks to hold enough land to permanently weaken Ukraine economically, constrain its political choices, and retain bargaining chips for any future settlement.

These aims are now embedded in an attritional concept of victory. Russian planning documents and Western assessments point to a horizon where “victory should be achieved by 2026” through cumulative exhaustion of Ukraine and its backers rather than a single decisive campaign.

3.4 2024–2025 “Victory Terms”: What Back‑Channels Suggest

Various 2024 analyses of diplomatic feelers and back‑channel discussions (summarized by RUSI and other policy outlets) paint a picture of maximalist but structured Russian demands. While details differ and cannot be independently verified, a recurring package looks like this:

• Territory:
  • Ukraine formally concedes all areas currently occupied by Russia; in some variants, this is extended to include Kharkiv and, more ambitiously, Odesa, cutting Ukraine off from the Black Sea.
• Security alignment:
  • Legally binding renunciation of NATO membership and some form of permanent neutrality.
  • Possible limits on Ukrainian force size and long‑range weapons (“demilitarization lite”).
• Political control:
  • A Ukrainian head of state and/or government that Moscow explicitly or implicitly approves, giving Russia de facto veto power over Kyiv’s leadership.
• European integration:
  • A grudging willingness in some scenarios to tolerate what remains of Ukraine joining the EU, indicating EU membership is negotiable, whereas NATO membership is not.

These reported terms should not be read as a fixed offer sheet, but they do clarify which levers the Kremlin keeps reaching for: land, alignment, and leadership.

3.5 Turning Aims into 2025 Objectives

Against this backdrop, Russia’s practical objectives for 2025 look less like a quest for outright victory and more like positioning for a later diktat or coerced bargain.

1. Territorial priorities

• Seize the rest of Donetsk oblast. CSIS notes that Ukraine still held roughly a quarter of Donetsk as of late 2024. Russian deployments and operational focus make completing the oblast the most realistic, politically salient target in 2025.
• Consolidate existing gains elsewhere. This means deepening defensive lines in Luhansk, Zaporizhzhia, and the land bridge to Crimea, and hardening them against a hypothetical future Ukrainian rearmament.
• Probe for additional salients in Kharkiv or Zaporizhzhia when Ukrainian manpower or Western aid dips, but without assuming a 2022‑style sweep.

2. Political and administrative consolidation

• Accelerate integration of occupied areas into Russian systems: passports, ruble usage, taxation, conscription, and staged local elections.
• Intensify cultural and informational control to lock in the “Russian world” narrative and make any post‑war status negotiations harder to reverse on the ground.

3. Strategic attrition of Ukraine and the West

• Sustain a high‑tempo strike campaign against Ukraine’s energy grid, logistics, and industry using domestic and Iranian‑supported drone/missile stocks.
• Maintain artillery‑heavy pressure along the line to inflict casualties and equipment losses that outpace Western replenishment.
• Exploit Western political cycles—above all the U.S. 2024–25 transition and European war‑fatigue—to seek a window where a ceasefire on Russian terms becomes more palatable in Western capitals.

In other words, the 2025 end‑state the Kremlin is aiming for is not peace, but a militarily and politically weakened Ukraine, stripped of NATO prospects, increasingly resigned to the loss of large territories, and facing a West tempted by a “stabilizing” freeze.

3.6 What Moscow Won’t Trade – And What It Might

For prediction‑market traders, the key is separating non‑negotiable Russian aims from potential bargaining chips. This distinction should anchor pricing for ceasefire, territorial‑control, and NATO‑related contracts.

Likely non‑negotiables for the Kremlin in 2025

• No NATO membership for Ukraine. In every version of public and reported private demands, blocking NATO is central. A settlement that leaves the door open to near‑term NATO accession is very unlikely to be accepted in Moscow.
• De facto control of Crimea and most of the annexed territories. Formal international recognition could be finessed, but Putin is highly unlikely to sign any deal that forces full Russian withdrawal from Crimea, Donetsk, Luhansk, or the land bridge to Crimea.
• Regime survival in Moscow. Any terms perceived domestically as capitulation—e.g., returning all 2022 gains—cut against elite and nationalist expectations and thus against Putin’s own security.

Elements that are more tradeable

• Exact front‑line boundaries within Kherson and Zaporizhzhia, and possibly limited areas of Luhansk/Donetsk, could be adjusted in corridor swaps or demilitarized zones.
• Maximalist claims on Kharkiv and Odesa look more like bargaining overreach than red lines; they may be scaled back if Russia can lock in recognition or long‑term control of what it already holds.
• Depth of Ukrainian “demilitarization”—force limits, missile ranges, basing restrictions—is flexible and could be tuned to secure Western and Ukrainian buy‑in.
• EU membership appears negotiable for Moscow, especially if it comes packaged with iron‑clad NATO exclusion.

For markets, this mapping means:

• Ceasefire‑by‑2025 contracts should be priced assuming any deal likely freezes lines close to Russia’s existing control and formalizes Ukraine’s non‑NATO status.
• Contracts implying a return to pre‑2022 borders or unhindered NATO accession by 2025–26 are effectively pricing a scenario of Russian political collapse, not a negotiated compromise.
• Territorial‑control markets on full Russian capture of Donetsk by year‑end 2025 align relatively well with Moscow’s priorities and thus merit close scrutiny as leading indicators of whether the Kremlin’s 2026 victory horizon is on track.

The next sections will drill into how Russia’s alliances and war economy support—or constrain—these aims, and what that means for the odds of Moscow actually reaching its preferred 2025–26 end‑state.

4. Russia’s 2025 War Strategy: Core Scenarios and Their Odds

If section 3 explained what Moscow wants, 2025 is about how it tries to get there. Across CSIS, RUSI, CEPA, MAX Security, and ISW assessments, the picture is consistent: Russia will fight a high‑intensity war of attrition centered on Donetsk, leveraging its manpower and industrial edge while avoiding large, maneuver‑heavy gambles that proved disastrous in 2022.

Think of 2025 as a year where the Kremlin tries to “grind its way to a better map by 2026”, not win in a single campaign. That frame supports four core scenarios traders should price.

4.1 Scenario 1 – Grinding Forward: Continued Attritional Advances (Baseline)

Analyst probability range: ~40–55% (central case)

Concept. Russia keeps doing what worked in 2024—stepwise gains in Donetsk, limited pressure in Kharkiv and Zaporizhia—without a decisive breakthrough or collapse of Ukrainian lines.

Operational features

• Main effort: Donetsk, especially the Pokrovsk axis and adjacent towns, aiming to close the gap between Russia’s constitutional claim to the oblast and current control.
• Tempo: Rolling, brigade‑scale assaults supported by heavy artillery and drones; no multi‑army deep operation toward the Dnipro.
• Strikes: Sustained missile/drone attacks on Ukraine’s energy grid, gas production, and rail logistics, enabled by Iranian‑linked UAV production and imported components.
• Force posture: Gradual rotation of newly contracted soldiers; limited fresh mobilization; reinforcement of defensive belts in Luhansk/Zaporizhia.

Political conditions

• Russia: War remains unpopular but tolerated; polls showing ~60% favoring a ceasefire coexist with high willingness to back whatever Putin signs. The regime can sustain 7%+ of GDP on defense and absorb casualties as long as big‑city living standards don’t collapse.
• Ukraine: Continued Western aid, but often delayed and politically contested; mobilization is painful yet still feasible.
• West: U.S. and EU remain committed but divided on long‑range weapons and sanction tightening; no coherent push for a peace deal on Russian terms.

Timing nuances

• Russia likely pushes hardest before and immediately after key Western political transitions (e.g., U.S. administration bedding in, European electoral cycles), hoping to shape perceptions while decision‑makers are distracted.

Market take

• SimpleFunctions‑style composites on “Russia controls ≥80% of Donetsk by 31 Dec 2025” are typically pricing ~30–40%, while most military analysts see this as at least a coin‑flip if current artillery and manpower trends hold.
• Territorial‑gain markets that assume only marginal Russian movement may therefore be too pessimistic on Russia’s attritional capacity.

4.2 Scenario 2 – Gains Then a Freeze: Incremental Advances + Negotiated Pause

Analyst probability range: ~25–35%

Concept. Russia grinds out more territory in Donetsk (and possibly limited salients in Kharkiv or Zaporizhia), then accepts a ceasefire or “provisional settlement” that largely freezes existing lines—especially if a new U.S. or European political configuration leans hard on Kyiv to “stop the bleeding.”

Operational features

• 2025 H1: Aggressive push in Donetsk to lock in politically marketable gains before negotiations; elevated casualty rates accepted as the cost of shaping the map.
• 2025 H2: Tempo tapers; Russia shifts some effort from new offensives toward fortification, local administration, and infrastructure in occupied areas—typical pre‑settlement behavior.
• Strikes: Continued but somewhat more calibrated strikes, used as leverage in talks (e.g., pausing grid strikes during negotiations).

Political conditions

• Russia: Kremlin calculates that the balance of advantage is good enough; it can sell a freeze as defending new “Russian lands” while rearming for the longer confrontation with NATO.
• Ukraine: Leadership comes under intense pressure from domestic fatigue, manpower shortages, and Western partners signaling that aid at current levels is not indefinite.
• West: A U.S. or European leadership—possibly more skeptical of open‑ended aid—frames a ceasefire as a pragmatic step to “save Ukraine” and refocus on China or domestic priorities.

Timing nuances

• Any serious push for a freeze is likelier after a visible Russian operational peak (significant town captured, Ukrainian brigade attrited) and a Western political moment that lowers the reputational cost of advocating compromise.

Market take

• Many ceasefire‑by‑2025 markets are pricing ~40–50% odds of some formal ceasefire or armistice.
• That is meaningfully higher than most think‑tank assessments, which put a negotiated pause in the 25–35% band and stress that Russian planning assumes continued fighting into 2026.
• These markets look rich unless you explicitly believe in a strong U.S./EU push to impose a freeze.

4.3 Scenario 3 – Hard Stalemate: Prolonged 2025 Front‑Line Freeze

Analyst probability range: ~10–20%

Concept. Western ammunition and manpower support arrive in time for Ukraine to harden defenses; Russia’s 2024–early‑2025 offensives exhaust the offensive potential of its current force. The result is a Korean‑style battlefield stalemate without a treaty: few meaningful territorial changes, but continued shelling and strikes.

Operational features

• Front line: Mostly static; both sides spend heavily on fortifications, mines, and counter‑battery radars.
• Tempo: Frequent local attacks and raids, but no sustained multi‑brigade pushes; casualty ratios improve slightly for Ukraine as Russian assault units degrade.
• Strikes: Heavy but more symmetric. Ukrainian long‑range drones continue to hit Russian refineries and logistics hubs, while Russia keeps up grid and gas‑field strikes.

Political conditions

• Russia: War weariness grows but is managed by repression and propaganda; elite cohesion holds because the regime can argue that Russia is not losing.
• Ukraine: Society remains mobilized; Western security guarantees and long‑term rearmament packages shore up morale.
• West: Aid becomes more structured, multi‑year, and NATO‑centered; less drama in parliaments, more quiet institutionalization.

Market take

• Many territory markets implicitly assume continued Russian net gains. Contracts that pay off on “no net change >X km² in 2025” or “Russia controls ≤current share of Ukraine by Dec 2025” can be underpriced optionality if you think Western aid coherence improves from the chaotic 2023–24 pattern.

4.4 Scenario 4 – Discontinuity: Collapse or Dramatic Escalation

Analyst probability range (all tails combined): ~5–10%

This bucket covers low‑probability, high‑impact breaks from the attrition pattern:

• Ukrainian front collapse: A severe ammunition or manpower crisis leads to loss of a major urban belt (e.g., large parts of Dnipro or Kharkiv regions), giving Russia a de facto victory in the east.
• Russian internal crisis: A major elite split, mutiny, or regional unrest forces the Kremlin into a disorderly halt or opens the door to a more radical leadership.
• Escalation beyond Ukraine: Use of non‑strategic nuclear weapons, or direct clashes with NATO forces (e.g., downed AWACS, strike on NATO soil) that fundamentally re‑price global risk.

Most military and policy analysts keep nuclear or NATO‑Russia war odds in the low single digits, but they matter heavily for risk‑management portfolios.

Market take

• Prediction markets often cluster these tails at 2–5%, which is broadly aligned with expert views.
• For traders with exposure to European energy, defense stocks, or broader risk assets, these contracts are primarily hedging instruments, not alpha plays.

4.5 How the 2026 Horizon Shapes 2025 Choices

Russian planning documents and Western analysis converge on a horizon where “victory should be achieved by 2026” via exhaustion of Ukraine and Western support. That timing shapes Moscow’s 2025 calculus:

• It raises the Kremlin’s tolerance for ongoing attrition (Scenarios 1 and 3). If leaders believe time and industry favor Russia, locking in a freeze too early looks sub‑optimal.
• It lowers the Kremlin’s appetite for an early compromise (Scenario 2) unless: a) domestic stress spikes (budget deficit, elite discontent), or b) Western‑pushed terms look unusually favorable (clear NATO veto for Ukraine, recognition of gains).
• It keeps tail escalation in reserve for moments when Russia fears losing the attrition race, not as a tool of first resort.

For markets, this means that “Russia caves in 2025” scenarios require either a major internal shock or an unexpected Western diplomatic gambit, not just continued battlefield pain.

4.6 Structuring Portfolios Around These Scenarios

Translating this into trades:

1. Baseline attrition basket (Scenario 1 overweight)

   • Long: markets on expanded Russian control in Donetsk and possibly limited gains in adjoining sectors.
   • Hedge: small exposure to ceasefire‑by‑2025 “Yes” as insurance against a diplomatic surprise.

2. Ceasefire skepticism (short rich peace odds)

   • Underweight or short: high‑priced ceasefire/armistice contracts that implicitly assume Moscow is eager to freeze lines in 2025.
   • Pair with: long sanctions‑persistence and high Russian defense‑spending markets; both are structurally compatible with continued war.

3. Stalemate and rearmament (Scenario 3 hedge)

   • Long: contracts paying off if front lines are broadly unchanged and if Western defense budgets remain elevated into 2026.
   • Rationale: even without big Russian gains, a hard stalemate is bullish for long‑run NATO rearmament trades.

4. Tail‑risk overlay (Scenario 4)

   • Small, asymmetric positions in nuclear‑use, Russia–NATO clash, or extreme oil‑price spike markets as portfolio insurance.

The key is to treat the four scenarios not as mutually exclusive silos, but as a probability‑weighted map. Most portfolios should be anchored in Scenario 1, cautiously priced for a non‑trivial Scenario 2, and hedged for small but consequential Scenario 4 risks. Scenario 3 functions as a middle path that supports long‑duration defense and energy themes even if the front line barely moves in 2025.

5. Likely 2025 Axes of Russian Operations

Section 4 mapped how Russia intends to fight 2025: high‑intensity attrition with Donetsk as the main prize. This section drops down one level—to where that strategy is most likely to play out on the map, and what traders should watch in each theater.

5.1 Eastern Donetsk: Pokrovsk as the Main Ground Objective

By late 2024, Russia had taken over 4,000 km² in Donetsk and still faced a glaring political‑military gap: Ukraine continued to hold a substantial slice of the oblast, including the logistics hub of Pokrovsk and a belt of towns tying the Donbas to central Ukraine.

Multiple assessments (CSIS, ACLED, ISW) converge on the same 2025 picture:

• Primary ground effort: eastern Donetsk, with a focus on encircling and ultimately seizing Pokrovsk.
• Secondary thrusts: tightening the noose via incremental gains near Lyman, Kostiantynivka, and Huliaipole, straightening the front and degrading Ukrainian maneuver space.

Pokrovsk matters because it is:

• A rail and road node feeding Ukrainian forces in central and northern Donetsk.
• A gateway toward Myrnohrad, Dobropillia, and the Sloviansk–Kramatorsk agglomeration.

Expect Russia to continue the 2024 pattern rather than unveil a new doctrine:

• Rotating assault brigades, heavy artillery and glide bombs, methodical village‑by‑village pushes on the northern shoulder (from the Lyman–Siversk axis) and southern shoulder (from areas west of Avdiivka and around Kostiantynivka).
• Engineering work—field depots, repair yards, bridge upgrades—creeping westward, enabling sustained logistics as the line moves.

Key trading indicators around Pokrovsk and eastern Donetsk

• Force concentration: OSINT reports of additional Russian divisions/brigades deploying west of Avdiivka or south of Lyman; satellite imagery of new equipment parks and ammunition dumps.
• Rail and road repairs: visible efforts to restore/expand rail spurs feeding the Pokrovsk sector.
• Ukrainian withdrawals: orderly step‑backs from smaller settlements (especially north and south of Pokrovsk) usually precede assaults on larger hubs.

Location‑specific markets that align well with Russia’s declared 2025 objectives include:

• “Russian control of Pokrovsk by 31 Dec 2025” (city‑level binary).
• “Russia controls ≥80% of Donetsk oblast by 31 Dec 2025” (oblasti‑level share).
• Tiered Donetsk gain bands (e.g., +1,000–3,000 km² vs. >3,000 km²). These capture the difference between a slow grind and a more serious Ukrainian local collapse.

5.2 Kharkiv Axis: Buffer, Diversion, or Something More?

Russia’s May 2024 Kharkiv offensive aimed to grab a border buffer, suppress Ukrainian fires on Belgorod, and force Kyiv to redeploy reserves away from Donetsk. It achieved limited territorial gains but stalled for three main reasons:

• Overstretched logistics on narrow, artillery‑exposed roads from Belgorod.
• Insufficient mass to assault Kharkiv city itself or encircle major settlements.
• The arrival of delayed Western ammunition and air defenses, which allowed Ukraine to stabilize the line.

For 2025, most expert forecasts treat Kharkiv as a secondary but live axis:

• Most likely use case: periodic offensives north and northeast of Kharkiv city to widen the buffer and fix Ukrainian brigades that might otherwise reinforce Pokrovsk.
• Less likely but possible: a push toward Vovchansk–Kupiansk, trying to stress Ukrainian lines along the Oskil and divert attention from Donetsk.
• Low‑probability tail: any direct attempt to fight into Kharkiv city limits; urban combat there would demand forces and ammunition Russia is more likely to devote to Donetsk.

Conditions for a renewed or escalated Kharkiv push

• Ukraine is forced to strip the Kharkiv front of reserves to plug holes elsewhere.
• Russian forces build up substantial artillery stocks and engineering assets in Belgorod without corresponding withdrawals from Donetsk.
• Increased Russian political emphasis on creating a broader “sanitary zone” along the border, framed as a response to Ukrainian cross‑border strikes.

From a market perspective, the Kharkiv axis lends itself to low‑probability, high‑payout contracts, such as:

• “Russian forces occupy any part of Kharkiv city proper in 2025.”
• Net additional Russian‑controlled km² in Kharkiv oblast by year‑end (banded contracts).

These are largely hedges against a Ukrainian force‑generation crisis rather than central scenarios.

5.3 Secondary Ground Axes: Lyman, Kostiantynivka, Huliaipole, Zaporizhzhia, Sumy

Beyond Pokrovsk and Kharkiv, Russia is likely to maintain continuous opportunistic pressure along a series of lesser axes:

• Lyman axis (northern Donetsk):

  • Objective: further secure the Oskil–Siverskyi Donets line, complicating any future Ukrainian counteroffensive from the Kharkiv direction.
  • Expect ongoing attempts to nibble west and southwest of Lyman, not a dramatic breakout.

• Kostiantynivka axis (central Donetsk):

  • Attacks here threaten to outflank Ukrainian positions covering Sloviansk–Kramatorsk from the south and southwest.
  • In a bad‑case Ukrainian scenario, losses around Kostiantynivka plus Pokrovsk could force a broader realignment of the entire central Donbas front.

• Huliaipole / western Donetsk–Zaporizhzhia seam:

  • Russian advances in 2024 around Huliaipole and nearby villages suggest a medium‑term goal of pushing Ukrainian forces off the high ground that overlooks key supply routes in southern Zaporizhzhia.
  • Any substantial Russian progress here would increase pressure on Ukrainian defenses around Orikhiv and the Robotyne salient, neutralizing much of Kyiv’s 2023 counteroffensive gains.

• Zaporizhzhia and Sumy opportunism:

  • CSIS and other analysts note Russian hints—maps and rhetoric—about potential moves into Sumy or deeper into Zaporizhzhia. Force constraints make large‑scale drives unlikely, but localized incursions or new “security zones” along the border cannot be ruled out if Ukrainian lines thin.

Traders should treat these axes as volatility generators rather than primary trend drivers. Useful markets here include:

• Banded net‑gain contracts for “Other Fronts” (Zaporizhzhia + Sumy + northern Luhansk combined km² gains).
• Event‑style contracts on whether any new oblast capital (beyond current occupied cities) falls to Russia in 2025—low probability under most expert baselines.

5.4 The Strike War: Energy, Logistics, and Urban Pressure

Parallel to ground operations, Russia is set to continue and refine its drone‑ and missile‑centric strike campaign.

Key features of evolving doctrine:

• Persistent pressure over spectacular one‑off salvos: near‑daily Shahed‑type UAV waves and smaller missile packets to wear down Ukrainian air defenses.
• Energy grid targeting, especially in winter: one autumn 2024 strike series reportedly knocked out about 60% of Ukraine’s gas production capacity in a single set of attacks, illustrating Moscow’s preference for high‑impact infrastructure nodes.
• Logistics and rail hubs: strikes on Dnipro, Kramatorsk, and other junctions to slow Ukrainian reinforcement of Donetsk and Kharkiv.
• Urban terror and political signaling: intermittent large packages against Kyiv, Kharkiv, Odesa, and Dnipro to sustain psychological pressure and complicate governance.

For traders, this suggests markets around infrastructure degradation and blackout frequency are increasingly relevant:

• Percentage of national generation capacity offline at peak winter 2025–26.
• Number of nation‑wide blackout days (e.g., days when >50% of oblasts report rolling outages).
• Volume and share of strikes aimed at energy vs. purely military targets, as captured by open‑source tallies.

Leading indicators include spikes in Russian Iranian‑style drone production, identification of new launch airfields, and visible Ukrainian transformer and air‑defense redeployments—all of which are now regularly tracked by OSINT.

5.5 How Ukrainian Cross‑Border Operations Shape Russian Choices

Ukraine’s August 2024 incursion into Kursk oblast, which at one point held roughly 1,250 km² of Russian territory, demonstrated that the Kremlin must now budget forces for rear and border security. Combined with a sharp increase in Ukrainian drone strikes on Russian oil refineries and logistics hubs—one dataset recorded a ~65% weekly increase in such attacks at one stage—this will shape Russian deployments in 2025:

• Static security commitments: more troops, artillery, and short‑range air defenses held back in Belgorod, Kursk, Bryansk, and deep economic regions to protect refineries, depots, and railheads.
• Political pressure to expand “buffer zones”: Kremlin rhetoric about pushing the line further into Kharkiv or Sumy to prevent future incursions can be used to justify new local offensives.
• Resource trade‑offs: every battalion guarding a refinery or patrolling Kursk is a battalion not available for Pokrovsk. A visible build‑up of fortifications and units on the Russian side of the border is, paradoxically, a mildly bullish signal for Ukrainian resilience on the main Donetsk front.

Traders should track:

• Frequency and success rate of Ukrainian deep strikes on Russian energy and military infrastructure.
• Russian border‑fortification projects observable in satellite imagery.
• Redeployments of elite units (VDV, naval infantry) from Ukraine into rear security roles inside Russia.

These cross‑border dynamics are particularly relevant for two sets of markets:

• Contracts on Russian net territorial gains, which must be discounted if Moscow keeps diverting combat‑ready units to border defense.
• Contracts tied to Russian oil exports or refinery throughput, given that sustained Ukrainian strikes could tighten energy markets even without new Western sanctions.

Overall, the 2025 map of likely Russian operations is a Donetsk‑centered grinding advance, supported by a nationwide strike war and localized pressure in Kharkiv and secondary sectors. Location‑specific markets that mirror this structure—and that are updated as force concentrations and strike patterns shift—will give traders the best leverage on Russia’s next moves.

Russian operations in 2025 hinge on one hard constraint: how many reasonably able-bodied men Moscow can keep in the trenches without provoking a domestic backlash it can’t control. The Donetsk‑centered grind outlined in Sections 4–5 is fundamentally a manpower management problem.

6.1 What We Know About Mobilization Since 2022

Formal mobilization has been small; everything else is “by stealth.”

• In September 2022, Putin announced a “partial mobilization” of around 300,000 reservists. This was the only overt mass call‑up so far and triggered visible protests in multiple regions and a large male exodus.
• Independent estimates suggest hundreds of thousands of draft‑age men left Russia in late 2022–23, with cumulative wartime emigration of men likely in the 500,000–1,000,000 range.
• To avoid repeating that shock, the Kremlin shifted to:
  • High‑pay contract recruitment: large signing bonuses and monthly pay several times the regional average.
  • Convict recruitment (first via Wagner, now under MoD control).
  • Forced enlistment in occupied territories and among migrants seeking Russian passports.

Official figures are probably inflated but still indicative of scale:

• In 2023, Russian officials repeatedly claimed >250,000–300,000 new contract soldiers signed up over the year.
• Through 2024, Defense Ministry statements suggested a similar order of magnitude in fresh contracts, enough to offset losses and keep force levels in Ukraine roughly steady.

Legally, the state has tightened the screws:

• A digital conscription system (2023) makes it harder to evade draft notices.
• The upper draft age was raised from 27 to 30, expanding the pool of conscripts.
• Travel and employment restrictions now apply once a summons is issued.

The result is a system that can probably generate 200,000–300,000 new bodies per year for front‑line and support roles without announcing another nationwide mobilization—but at the cost of drawing disproportionately from poorer regions, ethnic minorities, and prisoners.

6.2 Casualties and the Quality Squeeze

Official Moscow gives no credible casualty data, but Western and Ukrainian ranges are stark:

• By late 2024, Western intelligence estimates often put Russian total casualties (killed + wounded) in the 300,000–450,000 range, with perhaps 70,000–120,000 killed.
• Ukrainian General Staff figures are much higher (400,000+ “eliminated”), almost certainly inflated but directionally consistent with heavy attrition.

High losses have several concrete operational effects:

• Compressed training: many 2023–24 mobilized and contract soldiers reportedly received only weeks, not months, of training before deployment.
• Fragile cohesion: units are repeatedly “topped up” with strangers, eroding small‑unit trust—especially in assault formations.
• Thin rotation cycles: with limited manpower slack, many units see extended front‑line tours and short recovery periods.

This helps explain Russian adaptations noted earlier in the article:

• Small storm groups (“meat assaults”) supported by drones and artillery, rather than large, coordinated maneuvers.
• Heavy reliance on cheap expendable infantry to locate Ukrainian positions, followed by massed fires.
• Use of penal or lower‑quality units in the bloodiest assault roles, preserving more capable troops for defense and key axes.

Russia is deliberately trading quality for quantity to keep the attritional machine running without politically explosive new call‑ups.

6.3 Social Sensitivity: How Much More Can Society Take?

Polling from independent Russian Field and Levada‑type surveys shows a population that is tired but compliant:

• Around 60% of respondents favor an immediate ceasefire without preconditions.
• Over 80% say they would support Putin if he signed a peace deal—a sign loyalty is to the leader more than to maximalist war aims.

At the same time, open resistance is rare. After the 2022 mobilization protests and the mass exodus of men, repression and new laws have raised the cost of dissent. The Kremlin has so far succeeded in keeping the war distant from large urban middle classes by:

• Over‑recruiting from peripheral and poorer regions.
• Offering outsized economic incentives to volunteers.
• Maintaining something like normal life in Moscow and St. Petersburg.

That doesn’t mean an unlimited tolerance for more mobilization. Indicators of strain include:

• Rising numbers of draft‑evasion and desertion cases in Russian courts.
• Localized protests and public complaints over “mistaken” call‑ups or poor conditions.
• Growing use of psychiatric drugs and mental‑health indicators associated with chronic stress.

For 2025, most analysts judge that the Kremlin will avoid a second overt mobilization wave unless faced with either:

• A serious front‑line crisis (e.g., collapse in part of Donbas or a major Ukrainian incursion on Russian soil that threatens key cities), or
• A decision to attempt a much larger offensive than the current incremental model—something not visible in current planning.

More likely is continued “mobilization by stealth”: aggressive contract recruitment, tighter legal controls, and pressure on occupied areas, all while insisting there is no new draft.

6.4 Why This Points to a 2025 Grind, Not a Surge

Put together, Russia’s manpower picture favours sustained but limited offensives, not a 2022‑style mass campaign:

• The state can probably replace annual losses on the order of low hundreds of thousands in killed, wounded, and discharged.
• It cannot easily assemble and train fresh, high‑quality corps‑level formations without either a politically risky mobilization or a long pause in operations—neither fits current strategy.

This strongly reinforces the baseline Scenario 1 from Section 4: a year of grinding advances in Donetsk, occasional probes elsewhere, but no clean, decisive offensive that suddenly rolls up Ukrainian lines.

6.5 Tradable Signals: Watching the Manpower Constraint

For traders, manpower stress is a leading indicator for both battlefield tempo and domestic risk. Key watchpoints that should trigger reassessment of 2025 positions:

• Formal mobilization signals

  • New federal decrees on mass call‑ups or expansion of conscription age again.
  • Sudden travel bans on draft‑age men or broader exit controls.
  • Large‑scale, visible training activity at major Russian ranges detectable by OSINT.

• Recruitment and casualty clues

  • Regional media boasting of excessive recruitment quotas, or protests about “cannon fodder” from particular oblasts.
  • Spikes in published court cases for desertion or draft evasion.
  • Sharp increases in reported funerals and obituaries in specific regions—a proxy for casualty concentration.

• Domestic‑instability risk

  • Renewed street protests in non‑metropolitan regions tied to mobilization.
  • Elite‑level grumbling from nationalist milbloggers about “not enough troops” or from regional leaders about “unfair quotas.”

These are directly tradeable through markets such as:

• “Russia announces a new nationwide mobilization in 2025” (binary).
• “Significant anti‑war unrest in Russia in 2025” (e.g., sustained protests in ≥5 regions).
• Contracts on operational tempo—for example, banded estimates of net Russian territorial gains that implicitly hinge on whether current recruiting streams hold.

As long as Moscow can keep its covert mobilization pipeline flowing and avoid visible mass call‑ups, the attritional grind in Donetsk remains the high‑probability path. Any break in that pipeline—or a decision to risk a second mobilization shock—would be a major regime‑confidence signal that should force traders to re‑price both battlefield and domestic‑stability scenarios.

Russia’s ability to keep grinding forward in 2025 ultimately rests on whether it can keep paying for shells, drones, and soldiers at scale. Section 6 showed that manpower is tight but still manageable. On the economic and industrial side, the picture is similar: highly strained, but not yet breaking.

7.1 Spending at 7% of GDP: A De Facto War Budget

SIPRI’s latest estimates make clear how far Moscow has already gone down the war‑economy path.

• 2023: Russian military expenditure rose 24% to about $109 billion, roughly 5.9% of GDP and about 16% of total government spending.
• 2024: It jumped another 38% to around $149 billion, about 7.1% of GDP and 19% of government expenditure.

Crucially, these figures cover only the formal “national defence” line. If you add:

• Classified spending (roughly 30% of the 2024 federal budget is now opaque),
• The “national security and law enforcement” chapter (internal troops, border guards, repression apparatus), and
• Targeted subsidies and social payments linked to the war,

then 30–40% of all federal spending in 2024–25 is effectively war‑related.

This is what an entrenched war economy looks like:

• Defense firms receive large state orders, cheap credit, and direct bailouts.
• Soldiers and their families receive substantial cash incentives and compensation, which both support recruitment and cushion unpopular casualty news.
• The military‑industrial complex (MIC) gets priority access to labor, raw materials, transport, and foreign exchange.

For 2025, Russia’s draft budget continues this pattern: elevated defence outlays, high internal‑security spending, and tight caps on most civilian programmes. The Kremlin is clearly prioritising guns over growth for at least another year.

Market implication: As long as Russia keeps defence near 7%+ of GDP and war‑related lines near one‑third of the budget, traders should not base positions on imminent fiscal exhaustion. The constraint is long‑term growth and living standards, not whether Moscow can pay its 2025 war bills.

7.2 What’s Coming Out of the Factory Gates?

Hard data on Russian output is scarce, but Western intelligence, industry reporting, and battlefield evidence point in the same direction: substantial expansion since 2022, especially when combined with foreign inputs.

Artillery shells and rockets

• Pre‑war, Russia is thought to have produced on the order of 1–2 million shells a year. Western estimates now suggest several million annually, plus millions more supplied by North Korea.
• This has restored and often widened Russia’s firepower advantage over Ukraine on key sectors, underpinning the Donetsk‑centric grind described earlier.

Missiles

• Russia burned through large stocks of cruise and ballistic missiles in 2022–23, but ramped up production using imported electronics and machine tools, heavily sourced from China and other third countries.
• Western officials have suggested monthly output of major cruise‑missile families roughly doubled or more versus pre‑war rates, enough to sustain frequent infrastructure strike packages while slowly rebuilding reserves.

Armored vehicles

• Russian plants have combined new production of modernised T‑72/90 variants with refurbishment of hundreds of stored tanks and infantry vehicles each year.
• Independent tracking (e.g., IISS, Oryx) suggests that by 2023–24 Russia was able to replace a large share—though not all—of its annual tank losses, keeping front‑line units mechanically viable even as crews degrade.

Drones and loitering munitions

• With Iranian assistance, Russia has localized production of Shahed‑type one‑way attack drones (Geran‑2) at plants in Tatarstan and elsewhere, turning them into a cheap, high‑volume strike asset.
• Indigenous systems like Lancet loitering munitions are being produced in the thousands, heavily used for counter‑battery and anti‑armor missions.
• Chinese commercial drone platforms and components supplement this with FPV and quadcopter fleets, despite export controls.

The upshot for 2025: even if precise numbers are uncertain, there is broad expert consensus that Russia can sustain high‑intensity artillery and drone usage plus regular missile strikes, matching or exceeding 2024 levels—unless cut off from key foreign inputs.

Market implication: Traders should be cautious about scenarios that assume Russia runs out of shells or missiles in 2025. More realistic inflection points come from supply‑chain shocks (sanctions on electronics/machine tools) or budget reprioritization, not simple stock depletion.

7.3 Energy Revenues: Still Financing the War, But Under Fire

Oil and gas remain the cash engine of Russia’s war economy.

• Despite EU embargoes and the G7 price cap, Russia has re‑routed most oil exports to China, India, and other buyers using a growing “shadow fleet” and non‑Western shipping/insurance.
• Volumes of crude exports have stayed near pre‑war levels, albeit at discounts to Brent. Even discounted barrels generate enough revenue—amplified by a weak ruble—to fund large chunks of the budget.
• Gas exports to Europe have collapsed, but Russia has partially offset this via higher oil volumes, some LNG growth, and drawing on fiscal buffers and domestic borrowing.

Ukraine is trying to change that calculus with deep strikes on Russian energy infrastructure:

• Since 2023 and especially in 2024, Ukrainian drones have hit refineries, storage depots, and export terminals from the Black Sea to the Volga.
• Analyses of refinery outages suggest that at points in 2024, over 10–15% of Russia’s refining capacity was temporarily knocked offline.
• These hits squeeze domestic fuel markets and product exports, raising local prices and complicating logistics, even when crude exports continue to flow.

So far, this campaign has not broken Russia’s fiscal backbone. But it has:

• Increased logistics and security costs for moving oil and fuel.
• Reduced exportable refined volumes, which matters if sanctions later tighten on crude.
• Forced Russia to divert air defenses and troops to protect economic nodes—an indirect tax on its front‑line capacity.

Market implication: Contracts tied to Russian oil export volumes, Urals–Brent discounts, and price‑cap enforcement are direct proxies for the Kremlin’s fiscal room to maneuver. A sustained fall in export volumes or a sharp rise in the Urals discount—especially if linked to new sanctions or successful Ukrainian strike waves—would be an early warning that war‑funding capacity is eroding.

7.4 2025 Risk Factors for the War Economy

Three clusters of risk could meaningfully weaken Russia’s war economy in 2025, even if none by itself is likely to cause collapse.

1. Tighter controls on dual‑use imports

• The MIC’s ramp‑up depends on foreign machine tools, chips, optics, bearings, and vehicles, much of it routed through China, Turkey, the Gulf, and the Caucasus.
• The U.S. and EU are increasingly using secondary sanctions against banks and traders that facilitate these flows, and are pressuring Asian partners to tighten export controls.
• If enforcement bites—especially on Chinese intermediaries—Russia may face bottlenecks in missile, drone, and high‑precision‑munition production, even if heavy‑industry items like shells remain plentiful.

2. Sanctions on energy logistics and shipping

• Moves to sanction parts of the shadow fleet, restrict access to ports, or strictly enforce the price cap could raise Russia’s transport and insurance costs or force discounted sales.
• Combined with Ukrainian strikes, this raises the probability of lower net fiscal take per barrel, pushing Moscow toward higher deficits or deeper domestic cuts.

3. Cumulative macro strain

• Defence at 7%+ of GDP plus large internal‑security and social‑war spending crowds out civilian investment.
• Labour markets are tight after mobilization, emigration, and MIC expansion, pushing up wages and costs; the central bank has kept interest rates high to fight inflation.
• Over time, this means slower growth, aging capital stock, and rising fiscal risk. In 2025 that’s a drag, not a crisis, but by 2026–27 it could start to bite even the war machine.

Market implication: Watch for:

• New U.S./EU sanctions packages explicitly targeting Chinese or other third‑country suppliers.
• Gaps between Russia’s budgeted and actual oil & gas revenues.
• Signals from the Russian central bank (rate hikes, capital‑control talk) and any unusual restrictions on FX or dividend outflows.

These are the levers most likely to force future reductions in defence outlays, or at least cap their growth.

7.5 How to Trade Russia’s War Economy in 2025

For prediction‑market traders, the war economy shows up in a few key proxy contracts:

• Russian oil export volume and price‑cap contracts
  Higher sustained exports and weak enforcement support the view that Russia can finance continued high‑tempo attrition into 2026. Any combination of tighter sanctions and successful Ukrainian infrastructure strikes should push you to downgrade Russia’s escalation capacity and upgrade odds of a negotiated pause or de‑facto freeze.

• Ruble stability and macro‑stress markets
  Contracts on USD/RUB bands, capital controls, or even Russian sovereign default are indirect gauges of how much strain the war budget is imposing. A sharp ruble slide or re‑imposed severe capital controls would signal that the fiscal‑monetary patchwork is fraying.

• Defence‑spending level markets
  If markets exist for “Russia’s defence spending ≥X% of GDP in 2025” or “war‑related spending ≥Y% of the budget”, these are essentially betting lines on how long Moscow will keep the attritional strategy funded at current intensity. A credible drop below ~6% of GDP would be a major signal that the Kremlin is preparing for some form of de‑escalation or freeze, voluntary or forced.

The core message for 2025 is that Russia’s magazine is deep enough to sustain its current war plan, but not so deep that it can ignore sanctions tightening or energy shocks forever. The next sections will zoom out to the external side of that equation: how China, Iran, North Korea, and others help keep this war economy supplied—and where their own red lines lie.

Russia’s war economy, as outlined in Section 7, only works because it is plugged into a set of external lifelines. China, Iran, and North Korea don’t just help Moscow dodge sanctions; they shape what kind of war Russia can fight in 2025—and what it probably cannot.

8.1 China: Industrial Lifeline and Strategic Partner, Not Co‑Belligerent

Among Russia’s partners, China is the irreplaceable one. After the loss of Ukrainian and Western inputs, Chinese firms have become Russia’s primary source of:

• Machine tools and CNC equipment used in missile and armor factories.
• Electronics, optics, bearings, and vehicle components that go into guidance systems, drones, logistics trucks, and EW systems.
• Dual‑use drones and commercial platforms that can be repurposed as FPV and reconnaissance UAVs.

Analysts describe Beijing as effectively backfilling Russia’s import needs for high‑value components.[1][8] This is the quiet backbone of the missile, armor, and drone output we discussed in Section 7: without these inputs, sustaining high‑tempo strikes on Ukraine’s grid and replenishing armor losses would be much harder.

Financially, China is also Moscow’s key sanctions shock absorber:

• China is now Russia’s largest trade partner.
• Bilateral trade is increasingly settled in yuan, reducing Russia’s exposure to dollar‑based sanctions and enabling Russian and Chinese banks to route payments outside Western oversight.[8]

For 2025, that means:

• As long as Chinese machine tools, chips, optics, and payments channels stay open, Russia can likely maintain or modestly grow current output of shells, missiles, and drones.
• Any sudden clampdown—especially via secondary sanctions on Chinese banks or exporters—would be an early warning that Russia’s 2025–26 industrial plan is in trouble.

Signaling at Sea and in the Air

China does not help Russia fight in Ukraine directly, but military cooperation is widening the theater in which the West has to pay attention.

From 2017–2024, Russia and China conducted over 100 joint exercises, with tempo and complexity peaking by 2024.[3][7] Highlights include:

• "Ocean‑2024", Russia’s largest naval exercise in 30 years, involving more than 400 warships, 120 aircraft and 90,000 personnel, with Chinese participation.[3]
• Regular joint bomber patrols that enter the U.S. air defense identification zone near Alaska and fly as close as ~200 miles from Alaska’s coast.[3][7]
• Anti‑submarine and surface warfare drills across the Pacific and Arctic, rehearsing coordination against U.S. and allied forces.

These drills are about signaling and interoperability, not preparing Chinese forces to intervene in Ukraine. But they do help Russia by:

• Forcing the U.S. and its allies to spread naval and air assets across the Arctic–Pacific, not just focus on Europe.
• Demonstrating a political front of Sino‑Russian alignment that complicates Western planning.

As one U.S. Army War College study put it, the defence relationship is a “partnership short of alliance”—deep and growing, but deliberately non‑binding.[1][2]

Beijing’s Red Lines

Beijing’s behavior since 2022 makes its constraints clear:

• No overt, large‑scale lethal aid like labeled Chinese artillery ammo or tanks for Russia.
• No direct combat involvement or deployments that would look like co‑belligerency in Ukraine.
• Cautious calibration to avoid Western secondary sanctions on major Chinese banks or key export sectors.

The political logic is straightforward:

• China wants to bleed and distract the U.S. and Europe, keep Russia in the game, and test Western staying power.
• It does not want a direct NATO–Russia or U.S.–China conflict that could trigger sweeping sanctions on China’s own economy or cut off European markets.

Implications for 2025 war options:

• China will likely sustain Russia’s war in Ukraine and enable incremental upgrades (better guidance, more drones, more EW), but
• It is unlikely to give Moscow the material or diplomatic cover to open a major new conventional front (e.g., against NATO territory) or escalate in ways that invite all‑out confrontation with the West.

For traders, this makes contracts on extreme Russian adventurism backed by China (e.g., direct naval clashes with NATO framed as a joint Sino‑Russian move) structurally low‑probability while China continues to prize economic stability.

8.2 Iran: Drones, Missiles, and Infrastructure Attrition

If China keeps Russia’s factories running, Iran shapes how Russia wages its strike war.

Since late 2022, Iran has:

• Supplied Russia with large numbers of Shahed‑type one‑way attack drones, now re‑branded and launched as Geran‑2s.
• Helped set up local production in Russia (e.g., in Tatarstan), providing designs, components, and technicians.
• Moved toward or begun supplying short‑range ballistic missiles (Fateh/Zolfaghar family), according to Western reporting in 2023–24.

The result is a cheap, persistent strike capability:

• Shahed‑type drones are low‑cost, mass‑produced, and ideal for saturating Ukrainian air defenses and targeting energy infrastructure, gas fields, and logistics hubs.
• Iranian‑origin or derivative ballistic missiles add another tool for high‑value, time‑sensitive targets, especially when Russia wants to punch through Patriot and NASAMS coverage.

This dovetails perfectly with Moscow’s 2025 concept of victory: grinding down Ukraine’s economy and grid, not racing armored columns to Kyiv.

But Iran also has reasons to limit escalation:

• It fears a unified Western response that could include an EU‑wide designation of the IRGC as a terrorist organization, broader sanctions on its energy and shipping sectors, or cyber/kinetic action against its own infrastructure.
• Its industrial capacity is finite; it cannot suddenly flood Russia with heavy armor or advanced air defense systems.

So in 2025, the most likely pattern is continued high‑volume drone support plus limited missile transfers, not an unlimited pipeline. For markets, that supports:

• Relatively high odds that Russia sustains frequent infrastructure strikes on Ukraine through 2025.
• Moderate odds that an Iranian escalation (e.g., confirmed large SRBM transfers) triggers new EU or U.S. sanctions packages, which in turn might appear as contracts on IRGC designation, expanded oil sanctions, or naval interdiction.

8.3 North Korea: Ammunition for a Long War

North Korea’s support is narrower but crucial for Russia’s core artillery‑heavy attrition model.

Since 2023, U.S. and South Korean intelligence and satellite imagery have documented shipments of:

• Millions of 122mm and 152mm artillery shells.
• Large quantities of rocket artillery munitions.
• Short‑range ballistic missiles tested against Ukrainian targets in late 2023–2024.

Most transfers move through Far Eastern Russian ports and rail links, shielded by opaque logistics chains.

In practice, this has:

• Helped restore and maintain Russia’s several‑to‑one artillery fire advantage on key sectors of the Donbas front.
• Allowed Russia to burn ammunition at rates that would otherwise be unsustainable even with its own industrial ramp‑up.

Pyongyang gains food aid, hard currency, and technology, but it also courts risk:

• The more blatant the missile component becomes, the higher the chance of new UN or ad‑hoc coalitions targeting North Korean shipping and financial channels.

For 2025, most analysts expect the shell pipeline to continue, as long as China and Russia can shield it diplomatically at the UN. This is a direct input into any market that prices Russian daily shell expenditure or net territorial gains in Donetsk.

8.4 Enablers and Shackles: How Partners Shape Russia’s Option Set

Taken together, these partnerships:

• Extend Russia’s endurance in an attritional war of shells, drones, and missiles.
• Lower the economic pain of sanctions by diversifying trade and finance.
• Allow Russia to harass the West in multiple theaters (Pacific exercises with China, Middle East tension via Iran, sanctions‑busting via North Korea).

But they also bind Russian behavior:

• None of these states wants a direct NATO–Russia war.
• China and, to a lesser degree, Iran still value European markets and financial links.
• All three benefit most from a long, grinding conflict that absorbs Western attention and resources, not from a sudden nuclear crisis or uncontrolled escalation.

That’s why these external enablers are more consistent with Scenario 1 (continued attritional advances) and Scenario 3 (hard stalemate) from Section 4 than with sudden, large‑scale expansions of the war beyond Ukraine.

8.5 Trading the Sanctions–Support Feedback Loop

For prediction‑market traders, the key is to watch how far the West pushes back on these support networks, and how partners respond. Useful contract themes include:

• Secondary sanctions on Chinese entities
  Contracts on “U.S. or EU impose secondary sanctions on at least one major Chinese bank for Russia‑related dealings in 2025” are effectively bets on whether the West is willing to risk a U.S.–China financial clash to cut Russia’s industrial lifeline. A “Yes” outcome would justify downgrading odds on Russia maintaining 2024‑level missile and drone output into 2026.

• EU‑level escalation on Iran
  Markets on “EU designates the IRGC as a terrorist organization in 2025” or “New EU sanctions on Iranian UAV/missile sectors” are direct proxies for how costly Iran’s support becomes. A tougher EU stance raises the chance that Iran narrows or masks transfers, modestly tightening Russia’s strike capacity.

• North Korean transfer controls
  Contracts framed as “New UN or G7 maritime enforcement mechanism targeting DPRK arms shipments in 2025” track whether ammunition flows remain largely unconstrained. Strong enforcement would be a leading signal to mark down Russian artillery‑fire superiority assumptions for late 2025–26.

In all three cases, the feedback is two‑way:

• More aggressive Western sanctions raise Russia’s logistical and financial friction, but also increase incentives for partners to innovate around controls.
• Measured Western responses imply that markets can safely assume continued external support, reinforcing the baseline view of sustained high‑intensity attrition in Ukraine through 2025 rather than a forced Russian climb‑down.

Section 9 will turn from external suppliers to the other side of that ledger: how Ukraine’s own alliances and rearmament plans interact with these constraints, and what that balance means for the front line—and for markets—by the end of 2025.

9. Domestic Constraints: Public Opinion, Elite Cohesion, and Social Strain

External enablers give Moscow the means to keep fighting; the home front decides how far it can push those means. In 2025, Russia’s internal politics look stable on the surface but are shot through with conditional support and quiet fatigue—a mix that narrows, but does not eliminate, the Kremlin’s strategic options.

9.1 Public Opinion: Conditional Backing, Not Mobilized Enthusiasm

Independent polling paints a remarkably consistent picture from late 2024 into 2025:

• Around 60% of Russians say they would prefer an immediate ceasefire without preconditions (Russian Field, Levada-type surveys).
• Roughly 80–82% say they would support Putin if he signed a peace deal, whatever its terms.
• Only a small minority (≈10–15%) insist on fighting until “complete victory”.
• The share of respondents who consider nuclear use even theoretically justified has fallen (one series shows a drop from ~39% in late 2024 to ~24% by mid‑2025).

At the same time, many respondents still tell pollsters that the “special military operation” is going successfully and that Russia should not back down unilaterally. The reconciliation of these positions is straightforward:

• Most people accept the war as reality, believe the state is broadly winning, and
• Would welcome a ceasefire or peace—but only if Putin declares it on “honourable” terms.

This is loyalty to the leader, not to maximalist war aims. For traders, it means:

• The Kremlin does not face a mass‑opinion veto on a negotiated pause.
• Nor does it face a population clamouring for total victory at any price.

9.2 Why the Street Stays Quiet: Repression, Media, and Emigration

The gap between private fatigue and public quiescence is bridged by three forces:

1. Repression and legal risk. Post‑2022 laws criminalize “discrediting” the army and spreading “fake news” about the war. Activists, local politicians, and even ordinary citizens have faced fines or prison for anti‑war statements. The result is strong self‑censorship, especially outside small activist circles.

2. Information control. State TV and major online platforms frame the conflict as a defensive struggle against NATO, downplay casualties, and highlight payments to soldiers’ families. Independent media has been labelled “foreign agents” or forced abroad, shrinking the domestic alternative narrative.

3. Emigration of dissenters. Hundreds of thousands of mostly urban, educated Russians left after the 2022 mobilization and subsequent waves of pressure. Much of the demographic most inclined to protest no longer lives in Russia, making large‑scale mobilization of dissent vastly harder.

Localized protests still erupt—over botched draft notices, unpaid benefits, or local casualties—but they remain short‑lived and geographically scattered. For 2025, that means:

• No realistic scenario of a bottom‑up anti‑war movement forcing policy change.
• But visible spikes in local unrest, especially around new mobilization measures, are valuable early stress indicators for traders.

9.3 Elite Cohesion: Loyal in Public, Tense Beneath the Surface

At the top, Putin’s system remains formally united:

• No senior figure has publicly broken with the war line since the Prigozhin mutiny was crushed in 2023.
• Security chiefs (Patrushev, Bortnikov, Shoigu’s successor cadre) and regional bosses are dependent on Kremlin patronage and the war economy.

Yet analysts consistently point to latent fractures within the elite:

• Hardline ideologues and security hawks (the siloviki and nationalist camp) favour escalation and openly talk about a longer, larger confrontation with NATO.
• Economic technocrats and regional managers worry about sanctions, fiscal strain, and labour shortages; they generally prefer controlled attrition and eventual stabilization over open‑ended expansion.

As long as Russia avoids a clear defeat or uncontrolled economic crisis, these tensions are likely to stay managed, not explosive. But for markets, they define a low‑probability, high‑impact tail:

• A sharp battlefield reversal (e.g., loss of the land bridge to Crimea) or a disastrous mobilization that triggers mass unrest could catalyse elite blame games, reshuffles, or in extreme cases a palace‑coup narrative.

Such scenarios remain far from the base case, but are exactly the kind of tails that regime‑stability contracts are meant to capture.

9.4 Social Strain and the New “Normal”

Economically, Russia is not collapsing, but living standards are stagnating:

• Real incomes outside major cities are flat or declining once inflation is factored in.
• Consumer variety and quality have dropped as Western brands exited.
• War spending crowds out civilian investment and services.

Paradoxically, surveys still record high self‑reported “happiness” or life satisfaction, a pattern Time and NORC researchers link to adaptation and lowered expectations rather than genuine well‑being. One proxy for strain is rising antidepressant use and mental‑health consultations, especially in larger cities.

The burden of the war is highly uneven:

• Combat deaths and casualties fall disproportionately on poorer, peripheral regions and ethnic minorities, along with residents of occupied Ukrainian territories.
• Big‑city middle classes are shielded by design: they see the war mainly through screens and higher wages in the military‑industrial complex, not through mobilization offices.

The emerging social contract is clear:

• Most Russians will tolerate a long war as long as costs remain diffuse and “someone else’s problem.”
• Attempts to shift those costs directly onto major urban centres—through large new mobilization waves or visibly deteriorating living standards—would be politically risky for the Kremlin.

9.5 How Domestic Factors Shape 2025 Choices

These domestic realities narrow the Kremlin’s feasible menu in 2025.

Negotiated pause or ceasefire.
Because most people both want a ceasefire and trust Putin to define acceptable terms, the regime can almost certainly sell a freeze or “temporary pause” at home if it can claim:

• Some territorial gains (e.g., more of Donetsk), and
• That Russia forced the West to “respect our red lines” (e.g., NATO exclusion).

Domestic politics are therefore not an obstacle to a 2025 ceasefire; the constraint is strategic calculus, not public resistance.

New large‑scale mobilization.
By contrast, a second overt wave like September 2022 carries serious political risk:

• It would re‑awaken emigration, local protests, and elite anxiety.
• It would undermine the narrative that the state can wage war without touching the urban middle class.

Expect Moscow to rely on stealth methods—contract recruitment, legal tightening, and pressure in occupied territories—unless there is a major front‑line crisis. A sudden announcement of broad mobilization or a formal declaration of war (replacing the “special operation” label) would be a strong signal that the regime feels strategically cornered.

Nuclear and extreme escalation.
Declining public willingness to contemplate nuclear use reinforces what most analysts already assume: tactical nuclear weapons are a last‑ditch deterrent and coercive signal, not a popular tool of victory. Domestic opinion would not prevent use in an existential crisis, but it does not encourage adventurous nuclear brinkmanship either.

9.6 Market Implications: What to Watch on the Home Front

For prediction‑market traders, Russia’s domestic picture translates into several contract families and indicators:

• Regime stability & leadership change

  • High base probability that Putin remains in power through end‑2025; regime‑collapse or coup contracts should stay priced as tails unless you see:
    • Sudden, unexplained purges of senior security officials,
    • Coordinated elite criticism on state‑aligned channels, or
    • Large‑scale protests in multiple regions.

• Policy‑shift contracts (war declaration, new mobilization, ceasefire)

  • “Russia announces a new nationwide mobilization in 2025” should trade at modest odds, sensitive to:
    • Front‑line crises,
    • Rising court cases for draft evasion,
    • Visible protest spikes in regions hit hardest by casualties.
  • “Formal ceasefire / armistice in 2025” contracts should not be discounted on domestic grounds; if you are bearish on a deal, your thesis should rest on Kremlin strategy or Western politics, not Russian public opposition.

• Escalation‑risk markets (nuclear use, martial law, mass unrest)

  • Falling popular support for nuclear use and the regime’s success in suppressing dissent both argue for low but non‑zero probabilities on extreme‑escalation and mass‑unrest contracts.

The core inference is straightforward: domestic Russia in 2025 is a constraint at the margins, not a ticking time bomb. It makes a risky, manpower‑intensive surge less likely and a negotiated pause domestically sellable—but it does not, by itself, force the Kremlin either to escalate or to capitulate. Traders should treat home‑front indicators as scenario‑tilters, not as an independent engine of abrupt regime change.

10. Occupation and Long-Term Strategy: Russia’s Vision Beyond 2025

The domestic picture in Section 9 explains how long Russia can keep fighting. The occupation apparatus explains what it is trying to lock in while it does. By 2025, Moscow is not behaving like a temporary occupier in much of the territory it holds; it is acting like a state that assumes at least part of Ukraine is gone for good.

10.1 How Russia Is Embedding Itself: Passports, Rubles, Schools, Wires

Across occupied areas of Donetsk, Luhansk, Zaporizhzhia, Kherson, and Crimea, the same toolkit is visible:

• Passportization. Residents are pushed—often coerced—into taking Russian passports to access salaries, pensions, medical care, and freedom of movement. Reports from Ukrainian and Western officials suggest that a large share of remaining residents in core urban centers now hold Russian documents, which then make men eligible for Russian conscription.

• Rubleization and institutional lawfare. The hryvnia has been largely pushed out; salaries and benefits are paid in rubles through branches of Russian state banks. Russian tax, property, and corporate law are imposed; Ukrainian assets are nationalized or handed to Russian firms. This anchors local economies into Russia’s legal and financial system and complicates any future reversal.

• Curriculum and media control. Schools are re-registered under the Russian Education Ministry, Ukrainian-language instruction is curtailed or banned, and pupils are taught Russian narratives about history and the war. Russian TV, VK/Telegram channels, and state-approved religious institutions crowd out Ukrainian media and churches. RUSI and CSIS both describe this as a deliberate “denationalization” effort—erasing a distinct Ukrainian civic identity in occupied zones.

• Security-service penetration. FSB officers, Rosgvardia units, Chechen formations, and imported police forces run filtration, surveillance, and counter‑partisan operations. Local “ministries of internal affairs” are staffed with collaborators vetted by Russian security agencies.

• Infrastructure ties to Russia proper. Rail and road links from Rostov and Crimea into occupied Donbas and southern Ukraine are being upgraded; energy and telecom grids are being re-routed toward Russia. Reconstruction in Mariupol, Melitopol, and parts of Luhansk is designed around east–west connectivity to Russia, not north–south links back to Ukrainian-controlled areas.

The consistent signal to traders: Moscow is investing in irreversibility. Whatever the battlefield map in 2025–26, Crimea, most of Luhansk and Donetsk, and the land bridge to Crimea are being treated as permanently Russian.

10.2 Coercive Governance: Filtration, Collaborators, and Rosgvardia

The soft tools sit on top of a hard security architecture:

• Filtration and repression. Since 2022, residents have been subjected to filtration checks, interrogations, and, in many cases, detention or disappearance if suspected of pro‑Kyiv sympathies. Human‑rights reporting points to systematic torture and forced confessions.

• Use of collaborators. Moscow relies heavily on local elites—former Ukrainian officials, business figures, criminal networks—to staff administrations, police, and “volunteer battalions.” This reduces the number of regular Russian troops tied down in day‑to‑day governance, but makes local structures brittle and dependent on constant Russian backing.

• Rosgvardia as occupation backbone. The National Guard and other internal-security units guard key infrastructure, manage checkpoints, and suppress dissent. Tens of thousands of such personnel are effectively ring‑fencing the rear areas, freeing more regular army units for the Donbas front—but also representing a significant share of Russia’s deployable manpower that cannot easily be shifted into offensive operations.

For 2025 scenarios, this matters in two ways:

• It lowers the probability that Russia voluntarily abandons major urban centers it has already integrated, absent regime‑level shocks.
• It caps how many combat‑ready troops can be concentrated for fresh large‑scale offensives; a sizable garrison force must remain in the rear to hold what has already been taken.

10.3 Paying for Empire: Occupation Costs in a War Economy

Long‑term control is expensive. Occupied regions are, on net, fiscal sinks:

• Russia must pay pensions, public‑sector wages, and security‑force salaries closer to Russian levels to maintain minimal loyalty.
• It funds reconstruction projects (notably in Mariupol and some Donbas towns) to showcase “liberation,” even as much of the housing stock and infrastructure remains ruined.
• It bears the cost of heavy security presence and counter‑insurgency operations, which add to the already large internal‑security line of the federal budget.

Given that 30–40% of Russia’s federal spending is already war‑related (defence plus internal security and associated subsidies), these territories deepen the structural shift toward a permanent security state. Politically, that spending is framed as defending the russkiy mir (“Russian world”) and “historical lands”; economically, it is a long‑run drag Moscow appears willing to accept to avoid visible defeat.

For markets, the key point is durability: these sunk costs and narratives make future Russian leaders more, not less, likely to cling to occupied areas, because withdrawal would both waste resources and undercut regime legitimacy.

10.4 Russia’s Post‑2025 Territorial Playbook

Occupation policy also signals how Moscow imagines the map beyond 2025. Three broad pathways are visible:

1. Frozen conflict with entrenched de facto borders.
   The front stabilizes near 18–20% of Ukraine under Russian control; low‑level fighting continues, but Moscow consolidates annexed regions as ordinary Russian oblasts. Western states refuse legal recognition but gradually normalize some economic ties, especially if energy markets tighten.

2. Phased annexation of incremental gains.
   If Russia captures the rest of Donetsk (and possibly additional slices of Kharkiv or Zaporizhzhia), expect staged “elections” and constitutional formalization of new boundaries, followed by accelerated passportization and infrastructure spending. The model is Crimea 2014 replayed at smaller scale.

3. Negotiated settlement that locks in core gains.
   In a ceasefire or political deal, Russia could accept de facto abandonment of some forward positions in exchange for:

   • Western and Ukrainian acceptance of its control over Crimea and most of Donbas, and possibly the land bridge;
   • Formal or de facto NATO exclusion for what remains of Ukraine.
     In this scenario, the occupation toolkit becomes bargaining leverage: the more integrated and “Russian” the territories look by 2025–26, the easier it is for Moscow to insist they are off the table.

None of these futures returns the situation to pre‑2022 norms. All assume that, absent regime change in Moscow, some form of Russian control over parts of Ukraine persists into the 2030s.

10.5 How Traders Can Read Occupation Signals

For prediction markets, the entrenchment of Russian rule is primarily a time‑horizon question: how permanent will it look by 2025–26?

Key contract themes and indicators:

• Territorial‑status and recognition markets.
  Long‑dated binaries on “any G7 state recognizes Russian sovereignty over Crimea/Donetsk/Luhansk by 2030” or “Ukraine regains control over Mariupol by 2030” should price in that every new round of passportization, elections, and infrastructure linkage makes reversal less likely without a political earthquake in Russia.

• Sanctions persistence.
  EU and G7 have tied core sanctions to territorial integrity. As occupied areas are more tightly integrated, it becomes politically harder for Western governments to lift sanctions without visible Russian withdrawals. Traders should treat deepening occupation measures as bullish for “sanctions still in place by 2028/2030” contracts.

• Reconstruction‑flow markets.
  Large‑scale Western and multilateral reconstruction money will overwhelmingly target Kyiv‑controlled Ukraine under a frozen‑conflict scenario, not Russian‑held regions. Contracts on “full‑scale international reconstruction program covering occupied cities by 2030” imply a comprehensive political settlement, not just a ceasefire.

• Occupation‑depth indicators.
  Useful OSINT‑trackable metrics include:

  • Number/percentage of residents with Russian passports;
  • Extent of Russian banking and telecom penetration;
  • Frequency of Russian national or regional elections run in occupied areas.
    Sharp increases in these variables in 2025–26 should push traders to lengthen their expected duration of Russian control in territorial‑status markets.

Taken together, the occupation regime tells you that Russia is fighting not just for leverage in 2025, but for a rerouted political and cultural map of southern and eastern Ukraine that it expects to hold for decades. That assumption of permanence is the backdrop for any pricing of long‑dated contracts on borders, sanctions, and reconstruction.

The next section will shift from Russia’s designs to what comes after the shooting slows: how different end‑states would shape post‑war economic geography, reconstruction, and regional security architecture—and where markets are already making long‑term bets.

11. Trading the Russia War Strategic Roadmap 2025

For traders, the value of this roadmap is not the narrative—it’s the tradeable structure it implies. Russia enters 2025 with a war it can probably sustain, partners that keep the machine running, a society that will tolerate a grind but not a surge, and Western politics that could either harden or crack support for Kyiv.

11.1 Anchor on the Four Drivers

Across the previous sections, four drivers consistently determine which 2025 scenario you’re really betting on:

1. Attritional capacity (manpower + production).
   Russia can likely keep feeding 200–300k new soldiers a year into the system and sustain high‑volume artillery/drone fire, backed by defence outlays around 7% of GDP and expanded shell/missile output. This favours continued 2024‑style gains in Donetsk, not dramatic offensives or a sudden collapse.

2. Foreign enablers (China, Iran, North Korea).
   As long as Chinese machine tools and electronics, Iranian UAVs/missiles, and North Korean shells flow, Moscow can maintain the current tempo of strikes and artillery. The main risk is Western secondary sanctions on Chinese and Iranian networks, not voluntary cut‑offs.

3. Domestic tolerance.
   Around 60% of Russians say they want an immediate ceasefire, yet >80% would back any peace Putin signs. That gives the Kremlin political space for a negotiated pause if it chooses—but offers no bottom‑up push to end the war, and strong incentives to avoid another visible mass mobilization.

4. Western political calendars.
   U.S. and European elections and budget cycles are the single biggest swing factor for 2025: a supportive configuration points to Scenario 1/3 (continued grind or stalemate); an aid‑skeptical one raises odds of Scenario 2 (gains then externally‑pushed freeze).

Your portfolio should start with an explicit view on each of these four levers and treat any new information—aid votes, sanctions rounds, mobilization decrees, customs data on Chinese exports—as a reason to rebalance.

11.2 Where Markets Look Mispriced

Putting those drivers against current SimpleFunctions‑style composites points to several themes where odds look off relative to mainstream analysis.

• Full (or near‑full) Donetsk capture by end‑2025.
  With Russia already taking 4,000+ km² in 2024 and concentrating forces on the Pokrovsk axis, most military analysts see a genuine coin‑flip or better on Russia controlling ≥80% of Donetsk by year‑end if Western aid doesn’t markedly improve. Markets clustered in the high‑30s look modestly underpriced on Russian attritional capacity.

• Ceasefire / negotiated pause in 2025.
  Many markets put a 40–50% chance on a formal ceasefire this year. That’s higher than the ~25–35% band suggested by RUSI/CSIS‑style assessments that emphasise a Russian planning horizon of “victory by 2026.” Unless you strongly believe in a Western diplomatic push (especially from Washington) to freeze the front, these ceasefire contracts look rich.

• Major escalation beyond Ukraine.
  Nuclear use or a direct Russia–NATO clash typically trades at low single‑digit odds—in line with most experts. These tails belong in portfolios as cheap convex hedges, not as core alpha bets.

• Sanctions and enforcement trajectory.
  Given how deeply occupation is now embedded, the political cost for the EU/G7 of lifting core sanctions without Russian withdrawals is very high. Markets that implicitly assume meaningful sanctions rollback by the late 2020s are, in effect, pricing in Russian regime change or a large territorial reversal, not a simple ceasefire.

11.3 A Portfolio Framework: Directional Bets + Macro Hedges

A practical way to trade this roadmap is to structure around the four scenarios from Section 4, then layer macro and sanctions hedges on top.

1. Directional layer – battlefield & diplomacy

   • Territory: Take positions in banded contracts on Russian‑controlled share of Donetsk and net km² gains elsewhere. Overweight modest gains (Scenario 1), underweight dramatic breakthroughs.
   • Ceasefire timing: Express a view via calendar spreads—for example, short "ceasefire by end‑2025" while long "de‑facto freeze or settlement by end‑2026," if you think the war runs another winter before a deal.

2. Hedge layer – war economy & sanctions
   Pair your territorial and ceasefire views with:

   • Russian oil export / price‑cap markets. A bet on sustained high exports is effectively a bet on adequate war funding; long oil‑volume + long Russian gains in Donetsk is a coherent structure.
   • Russian budget‑stress contracts (e.g., defence spending share, ruble bands, capital‑control probabilities) as insurance against the scenario where sanctions or energy shocks start biting faster than expected.
   • Chinese secondary‑sanctions risk. Long "U.S./EU sanction a major Chinese bank for Russia dealings in 2025" works as a hedge against any thesis that assumes unconstrained Russian missile/drone output.

3. Structural tail‑risk layer
   Maintain small, diversified exposure to nuclear‑use, direct NATO–Russia incident, and extreme energy‑shock markets. These are not central scenarios, but they sharply improve portfolio resilience across European energy, defence, and risk‑asset exposure.

11.4 Real‑Time Leading Indicators to Watch

The most useful signals for 2025 trading are process‑not‑event indicators that move scenario weights before headlines catch up:

• Mobilization and manpower
  New federal mobilization decrees, travel limits on draft‑age men, or a spike in court cases for draft evasion all point toward higher Russian risk‑tolerance and possible tempo increases—bullish for larger territorial gains but also for domestic‑instability and escalation hedges.

• Chinese dual‑use exports
  Customs and trade‑tracker data on Chinese machine tools, vehicles, and electronics into Russia—combined with Western enforcement actions—are your best forward look on missile and drone capacity. A visible clampdown is a strong signal to trim exposure to high‑tempo Russian strike scenarios.

• Iranian and North Korean supply
  OSINT on DPRK ammunition shipments or Iranian UAV/missile transfers, plus any new UN/EU sanctions, should feed directly into your assumptions about artillery ratios in Donetsk and infrastructure‑strike frequency.

• Russian and Ukrainian public‑opinion inflection points
  Sharp moves in Russian polling toward either defeatism or maximalism, or in Ukrainian tolerance for territorial concessions, change the political feasibility of a 2025 deal even if the front looks static.

• Western aid decisions and elections
  U.S. supplemental bills, EU multi‑year packages, and NATO pledges of long‑term security guarantees are the fulcrum between Scenario 1 (Russian advances) and Scenario 3 (stalemate). Aid slippage or the rise of aid‑skeptical coalitions should push you to upgrade ceasefire‑under‑pressure scenarios and downgrade Ukrainian rollback odds.

11.5 Example Trade Structures

To make this concrete, three sample structures:

1. "Attritional advance without deal" basket

   • Long: Russia controls ≥80% of Donetsk by 31 Dec 2025; Russia defence spending ≥7% of GDP; sanctions on Russia still at or above 2024 scope by end‑2025.
   • Short: formal ceasefire/armistice by end‑2025.
     This expresses a conviction that Moscow grinds forward and the West grudgingly adapts, not resolves, the war.

2. "Limited gains then deal" basket

   • Long: some Russian net gains in Donetsk (e.g., 1,000–3,000 km² band) and a ceasefire/freeze by late‑2025; markets on initial Ukraine reconstruction funding or EU integration milestones.
   • Hedge: long persistence of Crimea/Donbas sanctions, recognising any deal will probably lock in at least core Russian gains.

3. Ceasefire calendar spread

   • Short: "ceasefire by 31 Dec 2025".
   • Long: "ceasefire or formal freeze in force by 31 Dec 2026."
     This monetises your view that 2025 is still a campaign year in Russian planning, but that by 2026 the costs and politics on all sides push toward some kind of freeze.

11.6 2025 as Hinge, Not End

Nothing in the data suggests 2025 is likely to be the end of the Russia–Ukraine war. Everything in the planning and occupation apparatus suggests it is the year that locks in the parameters:

• How much of Donetsk and the south Russia holds in practice.
• Whether a ceasefire comes on Russian‑favourable terms or not at all.
• How durable the sanctions architecture and the Sino‑Russian war economy really are.
• Whether Western rearmament becomes a long‑term baseline rather than a crisis response.

For prediction‑market traders and geopolitical risk desks, the task is to treat 2025 not as a binary peace‑or‑escalation bet, but as a path‑setting year for the 2030s. The final section will step back from year‑by‑year positioning to map how today’s trades connect to that longer‑run reshaping of European security, energy flows, and global markets.

This roadmap is built entirely on open sources and transparent assumptions so traders can stress‑test, not just consume, its scenario ranges.

Core analytic sources We triangated across:

• Military analysis & mapping: Institute for the Study of War (ISW) daily campaign assessments; ACLED and DeepState territorial‑control maps for area estimates; OSINT imagery on deployments and strikes.
• Think‑tanks: RUSI, CSIS, RAND, Brookings for assessments of Russian strategy, force generation, and alliance behavior.
• Defence economics: SIPRI and related budget documents for Russian military spending, war‑related budget shares, and global military‑spending context.
• Official sources: Russian and Ukrainian presidential and MoD statements, Russian budget laws, and selected Russian Security Council rhetoric to capture stated aims and red lines.
• Public opinion: Polling from Levada Center, Russian Field, and other reputable survey organizations to gauge Russian societal tolerance and ceasefire preferences.

Method and uncertainty Quantitative indicators (territorial control over time, defence‑spending shares, estimated oil exports, polling trends) were used to set constraints: what Russia can plausibly do in 2025 without breaking manpower, industry, or social stability. Qualitative judgements from ISW/RUSI/CSIS/RAND and specialist interviews then shaped scenario structures (attritional grind, ceasefire, stalemate, tail escalation).

Probability bands in Sections 4 and 11 are therefore synthesised ranges, not precise forecasts: they reflect where multiple serious analyses cluster, with adjustments for market behaviour we see on SimpleFunctions. Casualty and production figures are particularly uncertain (fog of war, classification, propaganda); Russian polling is affected by fear and censorship; economic data under sanctions is delayed, revised, and partly opaque.

You should treat these probabilities as priors to be updated. As 2025 data on front‑line movement, sanctions enforcement, oil flows, mobilization measures, and Western aid votes come in, scenario odds should move—sometimes sharply. The most robust trading edge will come from systematically watching those inputs and re‑weighting scenarios, not from treating any single 2025 view (including this one) as fixed.

For readers who want to dig deeper or cross‑check assumptions, the sources below are a good starting core library.