By Guy Faulconbridge and Darya Korsunskaya

MOSCOW (Reuters) -President Vladimir Putin intends to keep fighting in Ukraine until the West engages on his terms for peace, unfazed by Donald Trump's threats of tougher sanctions, and his territorial demands may widen as Russian forces advance, three sources close to the Kremlin said.

Putin, who ordered Russian troops into Ukraine in February 2022 after eight years of fighting in country's east between Russian-backed separatists and Ukrainian troops, believes Russia's economy and its military are strong enough to weather any additional Western measures, the sources said.

Trump on Monday expressed frustration with Putin's refusal to agree a ceasefire and announced a wave of weapons supplies to Ukraine, including Patriot surface-to-air missile systems. He also threatened further sanctions on Russia unless a peace deal was reached within 50 days.

The three Russian sources, familiar with top-level Kremlin thinking, said Putin will not stop the war under pressure from the West and believes Russia - which has survived the toughest sanctions imposed by the West- can endure further economic hardship, including threatened U.S. tariffs targeting buyers of Russian oil.

"Putin thinks no one has seriously engaged with him on the details of peace in Ukraine - including the Americans - so he will continue until he gets what he wants," one of the sources told Reuters on condition of anonymity due to the sensitivity of the situation.

Despite several telephone calls between Trump and Putin, and visits to Russia by U.S. special envoy Steve Witkoff, the Russian leader believes there have not been detailed discussions of the basis for a peace plan, the source said.

"Putin values the relationship with Trump and had good discussions with Witkoff, but the interests of Russia come above all else," the person added.

The White House did not respond to a request for comment for this story.

Putin's conditions for peace include a legally binding pledge that NATO will not expand eastwards, Ukrainian neutrality and limits on its armed forces, protection for Russian speakers who live there, and acceptance of Russia's territorial gains, the sources said.

He is also willing to discuss a security guarantee for Ukraine involving major powers, though it is far from clear how this would work, the sources said.

President Volodymyr Zelenskiy has said Ukraine will never recognise Russia's sovereignty over its conquered regions and that Kyiv retains the sovereign right to decide whether it wants to join NATO. His office did not respond to a request for comment for this story.

However, a second source familiar with Kremlin thinking said that Putin considered Moscow's goals far more important than any potential economic losses from Western pressure, and he was not concerned by U.S. threats to impose tariffs on China and India for buying Russian oil.

Two of the sources said that Russia has the upper hand on the battlefield and its economy, geared towards war, is exceeding the production of the U.S.-led NATO alliance in key munitions, like artillery shells.

Russia, which already controls nearly one-fifth of Ukrainian territory, has advanced some 1,415 square km (546 square miles) in the past three months, according to data from the DeepStateMap, an open-source intelligence map of the conflict.

"Appetite comes with eating", the first source said, meaning that Putin could seek more territory unless the war was stopped. The two other sources independently confirmed the same.

Russia currently controls Crimea, which it annexed in 2014, plus all of the eastern region of Luhansk, more than 70% of the Donetsk, Zaporizhzhia and Kherson regions, and fragments of Kharkiv, Sumy and Dnipropetrovsk regions. Putin's public position is that those first five regions – Crimea and the four regions of eastern Ukraine - are now part of Russia and Kyiv must withdraw before there can be peace.

Putin could fight on until Ukraine's defences collapse and widen his territorial ambitions to include more of Ukraine, the sources said.

"Russia will act based on Ukraine's weakness," the third source said, adding that Moscow might halt its offensive after conquering the four eastern regions of Ukraine if it encounters stiff resistance. "But if it falls, there will be an even greater conquest of Dnipropetrovsk, Sumy and Kharkiv."

Zelenskiy has said Russia's summer offensive is not going as successfully as Moscow had hoped. His top brass, who acknowledge that Russian forces outnumber Ukraine's, say Kyiv's troops are holding the line and forcing Russia to pay a heavy price for its gains.

TRUMP AND PUTIN

The United States says 1.2 million people have been injured or killed in the war, Europe's deadliest conflict since the Second World War. Neither Russia nor Ukraine give full figures for their losses, and Moscow dismisses Western estimates as propaganda.

Trump, since returning to the White House in January after promising a swift end to the war, has sought to repair ties with Russia, speaking at least six times by telephone with Putin. On Monday, he said the Russian leader was not "an assassin, but he's a tough guy."

In an abrupt break from his Democratic predecessor Joe Biden, Trump's administration has cast the war as a deadly proxy conflict between Russia and the United States, withdrawn support for Ukraine joining NATO and floated the idea of recognising Russia's annexation of Crimea.

Putin portrays the war as a watershed moment in Moscow's relations with the West, which he says humiliated Russia after the 1991 fall of the Soviet Union by enlarging NATO and encroaching on what he considers Moscow's sphere of influence, including Ukraine and Georgia.

Putin has yet to accept a proposal from Trump for an unconditional ceasefire, which was quickly endorsed by Kyiv. Recent days have seen Russia use hundreds of drones to attack Ukrainian cities.

However, Trump told the BBC in an interview published on Tuesday that he was not done with Putin and that a Ukraine deal remained on the cards.

The first source rejected Trump's assertion last week that Putin had thrown "bullshit" around, saying there had been a failure to transform positive talks with Witkoff into a substantive discussion on the basis for peace.

A White House official said on Monday Trump was considering 100% tariffs on Russian goods as well as secondary sanctions on other countries that buy its exports as a means to drive Moscow to the negotiating table. China and India are the biggest buyers of crude.

Despite existing sanctions and the cost of fighting Europe's biggest conflict since World War Two, Russia's $2 trillion economy has performed far better than many in Russia or the West expected. The economic ministry forecasts a slowdown to 2.5% annual growth in 2025 from 4.3% last year.

The second person said that Trump had little leverage over Putin and suggested that even if Washington imposed tariffs on the purchasers of Russian crude then Moscow would still find a way to sell it to world markets.

"Putin understands that Trump is an unpredictable person who may do unpleasant things but he is maneuvering to avoid irritating him too much," the source said.

Looking ahead, one of the sources said there was likely to be an escalation of the crisis in coming months, and unscored the dangers of tensions between the world's two largest nuclear powers. And, he predicted, the war would continue.

(Reporting by Guy Faulconbridge and Darya Korsunskaya; Editing by Daniel Flynn)

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