The war in Ukraine is moving into a more dangerous phase, not because Russia is suddenly winning or because nuclear war has become likely, but because diplomacy is disappearing while both sides increasingly believe escalation improves their negotiating position. Moscow has concluded that peace negotiations are effectively stalled and is preparing to intensify conventional attacks on Kyiv and critical infrastructure. At the same time, Ukraine has expanded strikes against Russian refineries, logistics centres, ports and commercial infrastructure. What was once primarily a battle for territory is becoming a systematic attempt by each side to damage the other’s economic capacity to continue the war. That changes the nature of the conflict.

Russia increasingly interprets Ukrainian strikes conducted with Western weapons and intelligence as attacks enabled by NATO itself. Ukraine, meanwhile, sees Russian energy and transport infrastructure as legitimate targets precisely because Moscow uses those revenues and networks to finance the war. Both positions have an internal logic. Together, they create an escalation trap. The failure of diplomacy matters because it removes the mechanism through which military pressure can be converted into political compromise. Moscow appears to have abandoned hopes that Washington would force Kyiv to concede the remaining Ukrainian-controlled parts of Donetsk. Ukraine has no intention of surrendering fortified cities that Russia has failed to capture militarily. Neither side currently sees compromise as preferable to continued pressure. The result is that escalation becomes the substitute for negotiation.

For Russia, this means larger missile attacks on Ukrainian cities, electricity infrastructure and potentially political centres in Kyiv. Ukraine’s chronic shortage of air-defence interceptors makes that strategy particularly dangerous ahead of another winter. For Ukraine, the answer is increasingly to attack Russia’s economic nervous system. Refineries are especially important. Russia can produce enormous quantities of crude oil, but crude is useless to consumers and armies until it is refined into diesel, petrol and aviation fuel. Damaging refining capacity therefore creates a much more immediate domestic problem than simply reducing oil production. Recent strikes have already produced fuel shortages in parts of Russia. Logistics are the next vulnerability. Attacks on warehouses, ports and commercial networks increase the economic cost of war without requiring Ukraine to defeat Russian forces directly. This is asymmetric warfare through infrastructure. But the strategy carries a risk. The more effective these attacks become, the stronger Moscow’s incentive to widen the definition of legitimate retaliation. That is why the growing discussion inside Russia about tactical nuclear weapons should not simply be dismissed as propaganda.

There is currently no evidence that Moscow is preparing to use them, and the probability remains extremely low. Their battlefield utility would also be questionable. Modern Ukrainian forces are dispersed, limiting the military value of a tactical nuclear strike, while the political consequences would be enormous. China and India, two countries Russia cannot afford to alienate, have repeatedly warned Moscow against crossing that threshold. But low probability is not zero probability. The relevant change is not that Putin has suddenly decided to use nuclear weapons.  It is that the escalation ladder is becoming shorter. If Moscow believes Western weapons are effectively being used by NATO to attack strategic Russian infrastructure, and if those attacks begin materially damaging Russia’s ability to sustain the war, the distinction between Ukrainian action and Western participation becomes increasingly blurred from the Kremlin’s perspective. That raises the importance of deterrence.

During the Biden administration, Washington reportedly communicated that Russian nuclear use would provoke an overwhelming conventional response. Whether Moscow perceives the same clarity today is less certain. Ambiguity can sometimes deter. It can also encourage testing. And Putin has repeatedly demonstrated that he probes for limits before deciding how far he can go. The economic consequences extend well beyond Ukraine. Russia and Ukraine together account for more than a quarter of global wheat exports. Their attacks on Black Sea ports and commercial shipping are therefore introducing another layer of uncertainty into agricultural markets. Russian refinery disruptions are tightening product markets even as global crude supply remains adequate. The next phase of the war could therefore generate inflation without producing a traditional oil shock. Diesel shortages, damaged logistics, higher shipping insurance, disrupted grain exports and attacks on electricity infrastructure all increase costs through channels that central banks cannot control. That matters because the world is already operating with less tolerance for another supply shock. The central risk is therefore not an imminent nuclear exchange. It is a conflict losing its political brakes. Russia believes escalation can force concessions. Ukraine believes deeper economic pressure can weaken Russia’s capacity to continue. Washington’s diplomatic effort has stalled. Europe remains committed to Ukraine but divided over how far escalation should go. Nobody currently possesses a credible path from military pressure to settlement. Wars become most dangerous when both sides still believe time can improve their position. Ukraine may now be entering precisely that phase.