Outlaw,
If Putin wanted to annex eastern Ukraine, he would have seized it when Russia seized Crimea. He would have accepted, not rejected, the Donetsk petition for annexation. And he certainly would not have financed a protracted and destructive conflict that will cost billions in reconstruction for a Russian economy that has many of its own problems already. Moscow does not want to annex eastern Ukraine - it wants to weaken Ukraine and obstruct its participation in Western economic, security, and political institutions in order to create space between Russia and NATO.
Despite all of your hysterical (and frequently contradictory) claims about the mad-hatters in the Kremlin with their "altered state of reality", the fact is that Moscow and Kiev, as predicted, are coming around to an initial agreement facilitated by European governments to de-escalate the conflict and create political space for the potential establishment of a final settlement on some serious political (and social and economic) questions regarding Ukraine.
The Ukraine government does not have the strength to sustain a protracted conflict, especially one that Moscow can unilaterally escalate. Rebuilding the political structures in the eastern regions will be difficult for Kiev already, on top of the economic reconstruction necessary, and the continued threat of Russian interference. How will Kiev manage the demobilization of the militants and incorporate them into the political process? How will Kiev finance reconstruction, and under what conditions will the West extend more loans for it? Can Russia be expected to offer loans for reconstruction and what will be the political price for that support? In the long term, Kiev is fighting a losing battle, the U.S. has no interest in direct conflict with Russia, and there is serious risk for the conflict's escalation to seriously damage the status quo in the rest of Europe. So - yes, an agreement will happen, and it will probably favor Russia more than Ukraine.
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