Trouble moving to a newer smaller storage device.

Hi everyone, I am trying to move to a 128gb Iphone 15 pro from a 256gb I phone13pro. I purchased 2 tb Icloud+ storage as I was told I can use my new phone with lesser storage as all the photos will be stored and optimized in cloud. But now not only is the storage not optimized in either of my phones, My 15pro is not even allowing me to delete due to lack of storage. The Restore process is stopped due to lack of storage and Icloud optimization of photos and videos won't start before restoration is finished. Funniest notification is that i can't delete anything from the files folder because ".Trash" doesn't have enough storage. The DELETING PROCESS IS TO CREATE STORAGE.

[Edited by Moderator]