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Mark Episkopos: Trump has a mandate to end the Ukraine War

By Mark Episkopos, Responsible Statecraft, 11/13/24

The enduring truism of electoral politics, unflinchingly even if uncritically repeated, that Americans don’t vote on foreign policy, was repudiated this election cycle.

While no single foreign policy issue commanded anything near voters’ concern for domestic challenges, the twin spiraling crises in Europe and the Middle East led a large swathe of the electorate to conclude that foreign policy is too important to be left to the technocrats.

President-elect Trump deftly exploited this lingering anti-establishment sentiment first by picking JD Vance as his running mate and then by defining himself against Harris — who did everything she could to advertise the Democratic party to anti-Trump neoconservatives, up to and including by christening Liz Cheney a core campaign surrogate — as the anti-war candidate.

The difficult but necessary work of resolving the Ukraine war, the most dangerous and destructive conflict on the European continent since 1945, now falls to the incoming Trump administration. But doing so requires coming to grips with, and rejecting, the shibboleths and superstitions that have characterized the established approach to Ukraine.

When diagnosing the crises facing U.S. foreign policy, it pays to consult the prior generation of American diplomats. As is well known, the Cold War exercised a disciplining effect on its American and Soviet figurants. The neck to neck nature of that rivalry, coupled with what both parties recognized as the catastrophic consequences of direct confrontation, meant that neither side was in a position to dictate to the other.

The two superpowers were bound to a shared logic of strategic caution that permitted and, indeed, necessitated competition on the margins but harshly discouraged an uncompromising “winner takes all” mentality on existential questions of war and peace.

This provided fertile ground for the development of a decision-making community eager to learn from their mistakes, obsessively grasping for even the most minute ways in which U.S. policy can be refined or reformed. It is not brute coercive force but rather a persistent open-mindedness, tempered by a nagging recognition and respect for the limits of American power, that produced such exertions of political genius as the long telegram and policy of detente that enabled the U.S. to contend on favorable footing with its Soviet competitor.

To draw the obvious connection between this culture of purpose-driven introspection being a rare commodity in past decades and the cascade of foreign policy blunders visited upon America since 1991 could very well be seen as an exercise in reaching for low-hanging fruit. It’s not a charge of which I wish to acquit myself. The prudence and foresight exercised by policymakers in the not-so-distant past does offer an instructive parallel to the contemporary challenges facing the U.S. — there is no shame in repairing to old wisdoms.

Yet the pervasive nescience gripping parts of Washington has been replaced by something even worse: a kind of shallow, performative introspection that draws all the wrong lessons in service of a failing status quo.

This strain is fast becoming the prevalent bar in the swan song of Kyiv’s maximalist battlefield program. Ukraine is losing the war, we are told, because its Western backers dithered in their provision of lethal aid; because the White House paid too much heed to Moscow’s red lines; and because NATO would not formally commit itself to “victory,” defined as Russia’s unconditional battlefield capitulation.

The lessons stemming from these conclusions are simple. The Pentagon should have emptied its stockpiles to aid Ukraine even if doing so would have exposed critical vulnerabilities in its own preparedness — as a lawmaker put it in the war’s early days, “if it shoots, send it.”

Western countries, the argument goes, should have stampeded as a matter of principle over anything Moscow may regard as a red line. Even to try to balance our aid for Ukraine with the real and serious risk of escalation, as the Biden administration attempted to do with its escalation management model, is decried by these voices as surrendering to Russian “nuclear blackmail.”

Still, and for many of the same reasons, this war has taken on a metaphysical superstructure that blots out and renders impossible any meaningful debate. We are told against all the weight of all available evidence that the wanton slaughter unfolding in eastern Ukraine and, more recently, Russia’s Kursk region, is part of a noble crusade for democracy. And it is a global crusade, for Russia’s “victory” in Ukraine will impel Putin’s Westward march and give Xi Jinping a “green light” to attack Taiwan.

But when has wartime mobilization ever made a country less corrupt, more free, or more liberal? To the extent that democracy requires stability, it is not at all clear that Ukrainian institutions have benefited from the indefinite continuation of a war that has ravaged the country’s economic outlook and thrust it into a demographic crisis.

The notion that the Chinese are waiting to see who controls which part of western Donetsk —as opposed to gauging factors much closer to home, like the balance of forces in the Asia-Pacific and Taiwan’s deterrent capabilities — is hardly deserving of sober commentary. Nor can Beijing interpret the West’s clear signal that it will not fight for Ukraine as taking a stance on Taiwan, as the latter occupies an entirely different tier of strategic significance in U.S. policy thinking.

Finally, as I previously explained along with my colleagues George Beebe and Anatol Lieven, there is not a shred of evidence that Moscow demonstrates either the capability or the intention to launch a war of aggression against any NATO state; indeed, doing so would contradict Russia’s strategic aims behind invading Ukraine in the first place.

The problem is not just that the Ukraine war is the most propagandized, ideologized conflict since Iraq, though it is that, too. It is, moreover, that the military and political realities governing this conflict have become dangerously unwound from security discourses in most Western governments.

Any effort to disentangle the West from this quagmire can only but start with acknowledgement of simple truths: Ukraine could not, cannot, and will not prevail over Russia in a full-scale conventional war, if victory is defined as the complete ejection of Russian forces from Ukraine’s 1991 borders solely by military means; Ukraine is decisively losing this war of attrition and no amount of Western military aid can reverse its trajectory of collapse; Russia’s total, unconditional defeat cannot be brought about by any means short of a full-on war between NATO and Russia, whereas Washington and European capitals have concluded and continually reaffirmed over the past three years that they will not go to war over Ukraine.

It isn’t difficult to tell where this leads, but that doesn’t make it any easier to accept after three years spent submerged in an ocean of denial and conceit. It is long past time for Washington to come up for air on Ukraine.

American, European, and Ukrainian interests are best served by a U.S.-led effort to swiftly reach a negotiated settlement, something President-elect Trump rightly identified as one of his key foreign policy priorities. The administration should be candid with the American people that this process will be complex and challenging, as peace talks always are, but the cost of inaction, of failing to rise to the occasion, is infinitely greater.

President-elect Trump has secured a powerful mandate to stop this war and, in doing so, strengthen not just America’s European posture but its global standing. The time to seize it is now.

Ben Aris: Russia faces a wave of bankruptcies as borrowing costs skyrocket

By Ben Aris, Intellinews, 11/10/24

Russian businesses are bracing themselves for a financial crunch that could put many of them out of business. The Central Bank of Russia (CBR) interest rate has reached a crushing 21%, with expectations for a further hike in December, and over the last two years companies have built up significant commercial debt with floating rate interest payments.

The CBR has progressively raised rates since the second quarter of 2023 in a bid to control persistent inflation and support the faltering ruble. However, the soaring cost of borrowing is now pushing many companies towards a dangerous debt spiral, with interest payments consuming one out of every four rubles they earn.

Late payments from customers and partners have been climbing, signalling distress in the corporate sector as firms struggle to service debt under such high rates. With real interest rates, once bank premiums are factored in, effectively reaching 25% for businesses, the likelihood of defaults and bankruptcies has risen sharply, Meduza reports.

Before the war only around 20% of corporate loans were issued at floating rates. By mid-2023, however, that share had surged to 44%, as businesses took out loans with terms pegged to the CBR’s key rate. Many firms, driven by the need for capital to support import substitution after the imposition of sanctions and to acquire assets as foreign companies left Russia, borrowed heavily – and under the assumption that interest rates would eventually stabilise or decrease.

That didn’t happen. Heavy government spending overheated the economy and sent inflation soaring. The CBR began an aggressive rate-hike tightening cycle that has ended yet.

By late 2024, floating-rate loans constituted 53% of corporate borrowing. This surge, combined with the weakened ruble and heightened government spending, drove up inflation, fuelling further rate hikes.

The demand for loans has also soared as businesses race to lock in capital ahead of anticipated new restrictions. Tightened reserve requirements and stricter lending standards are expected to come into force by year-end, leading companies to expand their loan portfolios by 22% in the past year alone.

The situation will only get worse. Building up debt is not a problem while the economy was growing, turning in a surprise 3.6% expansion in 2023, but as bne IntelliNews reported, Russia’s economy is cooling and a sharp slowdown is expected in 2025 that will only increase the pressure on corporations further. The prospects for the CBR to switch to easing monetary policy remains remote as long as the war in Ukraine continues.

Corporate bankruptcies in Russia have jumped by 20% this year, as soaring interest rates and liquidity shortages push firms closer to financial ruin, according to data from the Unified Federal Registry of Bankruptcy Declarations (Fedresurs), Meduza reports.

The uptick in insolvencies, though initially concentrated in the first quarter, is poised to accelerate as tighter monetary conditions make debt servicing increasingly unsustainable.

Signs of distress have intensified in recent months, with the Russian Union of Industrialists and Entrepreneurs (RSPP) reporting a substantial rise in complaints over late payments.

“Previously, 22% of business owners faced this issue, but that figure has now jumped to 37%,” said the union as cited by Meduza. The RSPP attributes the escalation to the difficulty of assessing working capital loans, a situation forcing many companies to delay payments to suppliers and other creditors.

The retail sector is especially vulnerable. Russia’s Union of Shopping Centres has petitioned the government for critical relief measures, including subsidised interest rates of 7-10%, debt restructuring, and payment deferrals of five to 10 years, reports Kommersant. Without such interventions, the union warns, 200 shopping centres could face bankruptcy within the coming months. Similarly, office and warehouse owners are attempting to renegotiate terms with creditors.

Officials are increasingly sounding the alarm bell. Sergey Chemezov, CEO of the state-owned defence conglomerate Rostec, warned that the current lending environment is untenable for manufacturers whose production cycles exceed a year.

“If we keep operating like this, most of our businesses will go bankrupt,” Chemezov said in October, adding that even high-revenue arms sales are insufficient to offset debt costs at rates exceeding 20%.

“If a product’s manufacturing cycle takes a year, advance payments cover only 40% of production costs. The rest must be borrowed, but high interest rates wipe out all profits,” he added.

Red lights are also flashing in the corporate bond market, where high rates are making bonds unaffordable as a source of capital. A key risk measure, the net debt-to-EBITDA ratio, has surged among lower-tier firms, with Gazprombank estimating this metric now exceeds three. While previously manageable, this debt-to-earnings ratio has become perilous under today’s interest rates, which is already forcing some companies to spend three out of four rules they earn to servicing debt.

The high rates have also made rolling maturing bonds over untenable, putting even more pressure on corporate reserves as management had not planned to retire their debt at this stage and assumed that bonds could be refinanced. To refinance maturing bonds, companies are now forced to offer yields around 27% to attract investors wary of default risks, according to credit rating agency Expert RA, as cited by Meduza.

Industries on the frontlines include paper and wood processing, wholesale trade, and agriculture. Russia’s coal industry is already in crisis after EU markets were closed by sanctions. The construction sector, particularly vulnerable to delayed payments, has been hit by a double whammy after a generous mortgage subsidy programme was ended on July 1, sending the cost of borrowing for would-be home owners upwards. Mortgage loan applications halved in July alone as Russia’s real estate market was rocked by the decision.

Real estate companies have responded by offering their own financing programmes, similar to the subprime model used in the US that caused the 2008 global financial crisis. Borrowers can take out cheap loans with rates well below the regulator’s prime rate for a fixed period of a few years, but the rates will rise to match the prime rate after the honeymoon period is over. It’s a bet that the CBR will reverse its monetary policy in a few years – in other words it’s a bet that the war in Ukraine will stop soon – and rates will fall again. But if that doesn’t happen, Russia will face a major housing-induced financial crisis.

Retail loans have also been hit by a double whammy as the CBR attempted to cool mushrooming consumer borrowing that was adding to inflation as part of its non-monetary policy methods to cool the economy and bring inflation down. The United Credit Bureau has reported a notable decline in average credit scores across Russia. By October 2024, the likelihood of default among consumers had risen by 12% compared to the previous year, and long-term overdue payments are becoming more prevalent. That is worrying the regulator, which reports a build up in the concentrations of debt that could precipitate a financial crisis.

Historically, corporate bankruptcies and bond defaults tend to surge three to six months after rate hikes, reports Meduza, a trend that could manifest before year-end as companies face imminent bond repayments. Many corporate bonds mature in the fourth quarter of this year, and with investor sentiment fragile, refinancing options remain costly and elusive.

Oligarch Alexey Mordashov, the founder of steel mill Severstal, put it this way: “At the current interest rate, it’s more profitable for companies to halt expansion or even downsize and put funds in the bank rather than continue operations and take on the associated risks,” Meduza reports.

Dave DeCamp: Russia Says US Missile Defense Base in Poland Is a Potential Target

By Dave DeCamp, Antiwar.com, 11/21/24

Russian Foreign Ministry spokeswoman Maria Zakharova said Thursday that a controversial US missile defense base in Poland is a potential target of the Russian military, comments that come amid soaring tensions as the US just authorized Ukraine to strike Russian territory with long-range NATO missiles.

“Given the level of threats posed by such Western military facilities, the missile defense base in Poland has long been included among the priority targets for potential neutralization. If necessary, this can be achieved using a wide range of advanced weaponry,” Zakharova said.

The Aegis Ashore anti-ballistic missile system in Poland has long been a security concern for Russia as its Mark-41 launchers are capable of fitting nuclear-capable Tomahawk missiles, which have a range of about 1,000 miles. A land-based version of the Tomahawks was previously banned by the Intermediate-Range Nuclear Forces (INF) Treaty, which the US withdrew from in 2019.

The US just recently opened the Aegis Ashore base in Poland, and NATO formally took control of it on Thursday. “The integration of the Aegis Ashore system into NATO’s defensive network underscores our collective commitment to ensuring the security of all Allies,” US Air Force Gen. James Hecker, the head of NATO’s Allied Air Command, said at a ceremony formalizing NATO control of the base.

The Aegis Ashore Ballistic Missile Defence System facility at Redzikowo, Poland

Zakharova said the establishment of the base follows “a series of deeply destabilizing actions by the Americans and their North Atlantic allies in the strategic sphere” and said the move “aligns with the longstanding and destructive practice of advancing NATO’s military infrastructure closer to Russia’s borders.”

Her warning that Russia could potentially target the base comes after Russia updated its nuclear doctrine in response to the US supporting long-range Ukrainian strikes on Russian territory. Under the new doctrine, Russia now considers an attack by a non-nuclear armed state that’s supported by a nuclear-armed power as a joint attack.

Russian President Vladimir Putin also said on Thursday that Russia has the right to strike the military facilities of countries that are supplying Ukraine with the missiles. “We believe that we have the right to use our weapons against the military facilities of those countries that allow their weapons to be used against our facilities,” he said.

Intellinews: Russia ready to start peace talks in January, willing to make some “limited” concessions – Reuters

Intellinews, 11/20/24

The Kremlin is ready to start ceasefire talks and is willing to make some “limited” territorial concessions, Reuters’ Moscow bureau chief Guy Faulconbridge reported on November 20, citing five senior current and former Kremlin sources.

Moscow is ready to start talks after Donald Trump is sworn in as the next US president in January, according to the sources cited by Reuters. Russia is also reportedly willing to freeze the conflict along the current front line and cede a limited amount of occupied territory but is demanding in exchange significant Ukrainian concessions.

Russia’s proposed terms for negotiations are based on the failed 2022 Istanbul peace deal. Ukraine’s presidential advisor Oleksiy Arestovych, who led the Ukrainian delegation in Istanbul, confirmed that a peace deal between Russia and Ukraine was agreed in principle in March 2022 and said all the points were initialled. He said his team opened a bottle of champagne to celebrate, but Ukrainian President Volodymyr Zelenskiy rejected the deal days later. Former German chancellor Gerhard Schroeder, who participated in the Istanbul talks, listed the conditions in an interview with Berliner Zeitung on October last year:

-Ukraine would abandon its Nato aspirations;

-The bans on the Russian language in Ukraine would be removed;

-Donbas would remain in Ukraine but as an autonomous region (Schroeder: “Like South Tyrol”);

-The United Nations Security Council plus Germany should offer and supervise the security agreements; and

-The Crimea problem would be addressed, but by future generations.

Top of the list is that Ukraine renounces its aspirations to join Nato and return to its pre-2014 stance of constitutionally enshrined neutrality. The Kremlin has made it explicitly clear since the Russian Ministry of Foreign Affairs issued an eight-point list of demands in December 2021 that any and all negotiations start with an “iron-clad legally binding” guarantee that Ukraine will never join Nato.

Moscow has also returned to its demands that Ukraine dramatically reduce the size of its army – a hotly debated point in the Istanbul deal, but one that was eventually agreed to in principle.

Moscow is also insisting that laws constricting the use of the Russian language be dropped and that Russian be made an official language. In Russian President Vladimir Putin’s recent Valdai speech outlining his multipolar world view he repeated concerns for the rights of ethnic Russians that were caught in other countries following the fall of the Soviet Union and the issue of language rights has always played an important role in those concerns.

Additionally, Moscow insists on security guarantees for Ukraine that also cover Russia and will avoid future direct conflicts between Russia and the West in the future.

In the run-up to the Istanbul talks, Ukraine already conceded it was willing to give up its Nato aspirations during the initial peace negotiations in Belarus in March 2022, if it received bilateral security guarantees from its Western allies. Those hopes were dashed during the famous meeting between Zelenskiy and former UK Prime Minister Boris Johnson in April, who told the Ukrainian leader that the West would not provide Ukraine with security deals, and to “fight on.”

Since then Ukraine has signed a series of “security assurances” with European allies, but these all stop short of Western allies coming to Ukraine’s military assistance should it be attacked by Russia again.

These assurances fall short of what Ukraine would like to see and Zelenskiy has been pushing hard for accelerated accession to Nato to provide real security guarantees as part of his victory plan.

More recently, backed into a corner by Trump’s threat to bring the war to an end “in 24 hours” and in anticipation of evaporating military and financial support from Ukraine’s Western backers, Zelenskiy has switched his rhetoric from victory to “resistance”.

Territorial concessions

Putin appears more willing to make concessions to get a deal than most commentators believe, according to the Reuters report, as the officials interviewed suggest that the Kremlin will concede some territory as part of the talks.

While Putin has publicly said that any deal will have to take account of the “territorial realities on the ground” – widely assumed to mean Russia intends to keep the territory it has occupied – Reuters interlocutors suggest that there is actually some wiggle room.

Moscow might relinquish control over small areas of the Kharkiv and Mykolaiv regions. There is also “room for discussion” on the status of four regions it annexed last year – Donetsk, Luhansk, Zaporizhzhia and Kherson – declared part of Russia in 2022. Previously, Putin has said publicly that Kyiv must recognise Russia’s sovereignty over these regions, despite the fact that the Armed Forces of Russia (AFR) do not fully control any of them.

However, the Kremlin has made it crystal clear that it is not prepared to discuss returning the Crimea and the officials interviewed by Reuters did not mention the status of the land bridge that connects the Crimea to the Russian border at Rostov-on-Don, which presumably will also remain under Russian control.

Russia ready to stop the war

The very first ceasefire talks began on February 28, 2022, at a time when Russian forces had seized swaths of territory in the south, east and north of Ukraine, where they had advanced close to Kyiv after pouring across the border from Russia and Belarus.

The draft – titled “Treaty on the Resolution of the situation in Ukraine and the Neutrality of Ukraine” – is dated March 7, 2022, a week after Russia launched the invasion.

Putin has been hoping to improve his relations with the West for a long time but has been repeatedly disappointed. There was a brief glimmer of hope after Biden took office in 2021, when he met with Putin in Geneva and rushed through a renewal of the START III missile treaty – the first Cold War arms control treaty to be renewed since the fall of the Soviet Union. The Russian side immediately called for work to be started on renewing the lapsed Intermediate-Range Nuclear Forces Treaty (INF), another Cold War arms control deal, but those talks never began as tensions escalated rapidly.

Russia has had the upper hand in the Ukraine war since the fall of Avdiivka on February 17 and time is on Putin’s side in any negotiations, but the Kremlin is slowly coming under more pressure to halt the war and start repairing the damage to its military and economy.

Heavy military spending has sent inflation skyrocketing, which the CBR has been unable to reign in. Russia’s economy is cooling and set for a sharp slowdown in 2025, according to a pessimistic medium-term macroeconomic outlook issued by the regulator at the start of August. Record-high borrowing costs could spark a wave of bankruptcies in the new year, although others have argued that Russia’s economy is more robust than it first appears.

The Kremlin has been signalling since the summer that it is ready to stop and Ukraine had also been inching towards a ceasefire agreement as it began to run out of men, money and weapons. A preliminary first round of talks on halting Russian attacks on Ukraine’s energy infrastructure had been scheduled to happen in Qatar in August, but that meeting was called off after the Kursk incursion.

Zelenskiy has also said that he wants the war to finish this year as Ukraine’s position becomes increasingly dire, but he has backed himself into a corner with his maximalist demands on a complete Russian withdrawal to the 1991 borders.

While Russia is currently producing more arms than all of the EU combined, it is still digging deeply into its Soviet-era stockpile and needs to start rebuilding its military, making it increasingly vulnerable to a Nato attack. Experts estimate that it will already take decades just to get back to where the military was at the start of 2022.

Security deals

Russia has long called for a new pan-European security deal and a new European security infrastructure that reflects the post-Cold War realities that would move beyond Nato, which was specifically designed to threaten the Soviet Union.

Putin first warned that Russia would “push back” if Nato kept expanding in his famous speech at the Munich Security Conference in 2007, but was widely ignored by the West.

In his first act as president, Dmitry Medvedev travelled to Brussels in 2008 and offered a Russian draft pan-European security deal, but it was rejected out of hand. Tensions escalated from there and Russian started to modernise its army in 2012 in preparation for WWIII; this was complete by 2021 when Russian Foreign Minister Sergei Lavrov was ready to throw down the gauntlet with his “new rules of the game” speech. The war in Ukraine started a year later when his challenge went unanswered. Lavrov then lambasted the West in his “Empire of Lies” speech a year later, detailing all of Russia’s complaints with the West.

Military size

Russia has already shown it is willing to make some concessions in Istanbul to bring about peace, although the longer the conflict goes on the less those concessions will be, most experts agree.

During the Istanbul ceasefire talks in March 2022, reports indicated that the Russian side was pushing for Ukraine to significantly reduce the size of its military.

Russian negotiators were reportedly demanding that Ukraine limit its armed forces to around 50,000 to 60,000 troops from the 200,000 active military personnel serving before the war. At the same time, the Russian delegation demanded a cap on the Ukrainian tank force to no more than 100 to 150 tanks from the estimated 800 to 900 tanks Ukraine had before the Russian invasion. Similarly, the Russian side reportedly wanted to limit Ukraine’s air force to a few dozen planes, potentially capping it at 50 aircraft or fewer, vs the approximately 125 combat-capable aircraft in the Ukrainian pre-war air force, and a ban on developing or deploying missiles with a range of over 250 km. Moscow also wanted to be able to prohibit other types of weapons in the future.

However, subsequent reports claim that the Russian side made concessions on the military size issue, but in the end the Ukrainian side agreed to a substantial reduction in its armed forces. Of the various plans being discussed since Trump’s election victory, many of them include substantially beefing up Ukraine’s military, which will be a non-starter for the Kremlin should talks happen.