The Bell, 5/31/24

Russia’s landmark tax reforms to raise revenue, change economy 

Russian officials this week announced a long-expected tax reform plan, which puts an emphatic end to a status quo that has lasted two decades. On Tuesday, the Finance Ministry announced the changes it was seeking to implement, and the government approved the necessary legislation two days later. Formal approval from parliament should be received by the end of the summer, and the changes will come into force early next year.

What are the changes?

• Russia’s flat income tax rate of 13% (the only exception, introduced in 2020, was a 15% rate on salaries over 5 million rubles ($55,300) a year) will be replaced by a progressive system. For salaries up to 2.4 million rubles, income tax will remain at 13%. All earnings above that threshold will be taxed at incrementally higher rates, ranging from 15% to 22%.
• Income from dividends, deposits, or transactions involving securities and real estate will not be affected by the new rules (the maximum tax on them remains at 15%).
• Corporate income tax will increase from 20% to 25%. From a revenue point of view, this is the most important change (it is predicted to generate 1.6 trillion rubles next year).
• Small and medium-sized businesses will be able to access tax breaks, but will also have to pay VAT on revenues over 60 million rubles ($670,000). 

How will they work?

The Finance Ministry promises that the changes will only increase taxes for 3% of the population. In reality, though, this group is likely to be bigger. First, because of inflation. There is no plan to index tax thresholds, which means that the number of individuals facing higher tax bills will increase even if real incomes remain the same, never mind if they continue to rise by 8% a year as at present. Secondly, high inflation (and with it, high interest rates) will push up unearned incomes.

There will be no personal tax-free threshold (like, for example, France or Germany). And initial proposals to cut taxes on the poor were dropped. Instead, the government is pushing ahead with a system of support for large, low-income families, and is planning to offer a rebate on taxes paid by low-income families with two or more children. These individuals will pay income tax at a rate of 6% instead of 13%. According to the Finance Ministry, this will help almost half of Russian families with 2 or more children. 

Increasing corporate income tax will reduce company profits by an average of 6.3%. Although tax breaks are available when money is spent on scientific research and Russian technologies, these – by definition – apply to only a small number of companies. The trade and service sector – the bulk of medium-sized business in Russia – is unlikely to benefit.

How much money will it raise?

The Finance Ministry expects the changes to provide an additional 2.6 trillion rubles. That’s one trillion more than the projected budget deficit for 2024. If current growth estimates hold up, the additional revenue would be about 1.4% of GDP.

However, the bond market did not react to this potentially significant boost to state finances. Apparently, the market expects the government to increase its spending at a similar rate, which means the need for borrowing will remain. 

Why the world should care

As we’ve explored many times in this newsletter, state spending is the basis of Russia’s current economic growth. And the new tax system is designed to allow the Kremlin to continue spending for longer. However, this is not the only goal. It looks like the government hopes the tax changes will tilt the economy’s focus toward the development of domestic manufacturing – in particular military production – at the expense of trade, services and other bourgeois pleasures.

Europe poised to target Russian oil export insurers

The EU is again considering sanctioning Russian insurance company Ingosstrakh, Bloomberg reported Wednesday. Such a step would be significant because Ingosstrakh is one of the largest insurance providers for Russian oil transportation. 

• Since 2022, the G7’s price cap on Russian oil exports has prevented international insurers – who make up 95% of the market – from insuring transit for Russian oil traded at more than $60 a barrel. Russian oil sold above this price is ferried by a “shadow fleet” of tankers that can only be insured by Russian companies. Ingosstrakh is one of the leading insurers of this shadow fleet.
• The proposal reported by Bloomberg to target Ingosstrakh comes from an unidentified European Union country. However, the insurer was not mentioned in the EU’s discussions around the next round of sanctions on Russia (which must be approved by all member states). There was a previous attempt to sanction Ingosstrakh in Feb. 2023, but this was opposed by some member states. Further sanctions against Russian oil tankers are opposed by countries such as Hungary and Austria, which are seen as more “pro-Russian,” as well as countries with a large maritime sector (particularly Greece). 
• The Financial Times reported in March that Ingosstrakh’s insurance for Russia’s shadow fleet does not cover possible oil spills, and therefore poses a threat. A similar study in Denmark has highlighted environmental risks.

Why the world should care

Sanctions against Russian insurers would be in line with an apparent pivot in Western tactics toward targeting the profits Russia makes from oil exports (by increasing costs). However, restrictions on Ingosstrakh, one of Russia’s leading insurance companies, may affect more than just shipping: they could also impact passenger aviation within Russia and beyond.

Figures of the week

Between May 17 and 21, inflation in Russia was 0.1% compared with 0.11% the preceding week. According to the Central Bank, year-on-year inflation on May 27 was 8.15% (compared to 7.84% at the end of the previous month). These numbers increase the likelihood that the Central Bank will raise interest rates at its next board meeting on June 7.

A total of 110 billion rubles were loaned under Russia preferential mortgage schemes for new-build apartments in April, according to the Central Bank. That’s up 15% from March.

In the first four months of this year, a total of 22,000 foreigners were deported after breaking the law in Russia. That’s almost twice the number from the equivalent period in 2023, according to a report from the Interior Ministry.

By Ben Aris, Intellinews, 7/25/24

A little more momentum was built for a start to peace talks as Ukraine’s Foreign Minister Dmytro Kuleba travelled to Beijing for his first post-invasion meeting with China, and more commentators say a deal is possible.

Well known Russia watcher Timothy Ash, the senior sovereign strategist at BlueBay Asset Management in London, published a note saying that momentum for peace talks to start was building. And former UK Prime Minister Boris Johnson penned in article in the Daily Mail calling on Ukraine to concede territory to get a ceasefire deal. Johnson was a frequent visitor to Kyiv last year and has been one of Ukraine’s most ardent supporters.

“Lots of interesting developments around Ukraine over the past week or so, that might just suggest that momentum might again be building for peace talks over the next few months,” said Ash in an emailed note.

Adding to the talk of form of a possible deal, Kyiv Mayor Vitaly Klitschko, who’s emerged as one of Zelenskiy’s top rivals over the past year, speculated in an interview with Italy’s Corriere Della Serra over the weekend that the Ukrainian leader might agree to territorial compromises with Russia. In his words, “Will he…consider a territorial compromise with Putin?…Zelenskiy will probably have to resort to a referendum. I don’t think he can reach such painful and important agreements on his own without popular legitimacy.”

Klitschko also said from mid-December Zelenskiy needs to create a “government of national unity” which could help disperse responsibility for unpopular decisions like mobilization and thus ease their implementation.

As bne IntelliNews has reported, Ukraine is inching towards a ceasefire as pressure builds on Bankova due to the country’s lack of men, money and arms.

Kuleba in China

Kuleba arrived in Beijing on July 23 to meet with his counterpart in his first war-time visit. He is hoping China will put pressure on Russia to end its assault on Ukraine, and could be pushing at an open door.

“China has unshakably reaffirmed its respect for the principle of Ukraine’s sovereignty and territorial integrity,” Kuleba said in a video post on Instagram. “My Chinese colleague clearly said that he agrees that we need not the illusion of peace, but a just and sustainable peace.”

Despite China’s ongoing support of Russia as part of its “no-limits” partnership agreed during Chinese President Xi Jinping trip to Moscow in 2023, Beijing has consistently called for ceasefire talks to start in its international meetings this year.

Kuleba restated Ukraine’s consistent position, which consists of a readiness to conduct a negotiation process with the Russian side. However, this is only possible when Moscow will be ready to conduct negotiations in good faith. Still, such readiness is not observed from the Russian side, Kuleba emphasized.

The Chinese Foreign Ministry indicated that Ukraine is ready for a dialogue with Moscow, but the negotiations should be reasonable, objective, and aimed at achieving lasting peace.

“Recently, Ukraine and the Russian Federation have been sending signals of their readiness for negotiations to varying degrees. Although the conditions and time are not yet ripe,” Chinese Foreign Minister Wang Yi told Kuleba.

Kuleba is convinced that a just peace in Ukraine corresponds with China’s strategic interests. He offered to discuss bilateral relations “through the prism of Ukraine’s future membership in the EU and China’s relations with Europe.”

China is seen as the best chance for making mediated talks work as Beijing continues to have significant leverage over Putin and the Russian economy as its biggest trade partner.

The Chinese authorities will continue to promote the “peaceful settlement of the Ukrainian crisis” during Kuleba’s visit to the country, Chinese Foreign Ministry Spokeswoman Mao Ning ahead of the visit.

“The Chinese side continues to promote peace and support the strengthening of consensus in the international community with the aim of jointly seeking real ways to settle the [Ukrainian] crisis by political means,” she said at a briefing.

The joint Ukraine-China communique pre-meeting suggests that Ukraine could be brought into the Belt and Road Initiative (BRI) that is supposed to connect Asia to Europe by a land route. It also suggested that Ukraine has accepted the “One China policy” and conceded Beijing’s claims on Taiwan, reports Ash.

Kuleba is also talking about the need to take seriously a joint peace talks deal suggested earlier this year jointly by China and Brazil, both Russia’s fellow BRICS members. Previously Ukraine downplayed this suggestion as too favourable for Russia.

The concession also suggests that Zelenskiy’s 10-point peace plan that he floated at the G20 summit in November 2022 is waning. The plan was supposed to be the centrepiece of the Swiss summit, but was cut down to only three of least concession points – food security, nuclear safety and the return of POWs – and even then only 78 of the delegates to the summit would sign the final communiqué – a diplomatic failure.

“The main outcome of the Swiss summit is the death of Zelensky’s “peace formula”, which brings us closer to real peace talks. The failure to rally the Global South behind Ukraine’s cause is more on the US than Ukraine per se,” Leonid Ragozin, a bne IntelliNews columnist, said in a tweet.

Notably, the Saudi foreign minister was also in Kyiv a week earlier – his first visit post-invasion. Both the Kingdom of Saudi Arabia (KSA) and China were conspicuously absent from the Swiss peace summit held on June 16-17 and both have considerable sway over Putin and are likely to play key roles in any negotiated settlement. KSA has also consistently called for a ceasefire and even hosted an earlier peace summit last year. In general Crown Prince Mohammed bin Salman (MbS) is playing a much more active and assertive role on the international geopolitical stage.

In Ukraine public sentiment is also turning slowly towards peace. A poll release this week by the Kyiv International Institute of Sociology (KIIS) found that 32% of respondents agreed that Ukraine could give up territory to achieve peace as quickly as possible, up from 10% earlier, while 55% opposed the idea.

Zelenskiy has called for a second peace summit this autumn and has invited both China and Russia to attend in what some hope will formally kick off the process of ending the conflict.

Events moving toward settlement

Hungarian Prime Minister Viktor Orban kicked the process off with a series of trips to Kyiv, Moscow, Beijing and America to meet presidential hopeful Donald Trump, as part of his self-proclaimed peace mission.

That was followed by Boris Johnson to Maro Lago to also meet Trump, after which Johnson said he believed that Trump had the will to bring the war to an end and discussed a peace plan that involved arming Ukraine “to the hilt.”

“Notable here that Boris seems to have backed down from his prior hard-ass pro Ukrainian stance of not giving territorial concessions to Russia,” said Ash. “Not sure if all those Boris Johnson roads will now be renamed in Kyiv. But Boris seems to have picked something up here from the Trump team, surely.”

Ukraine also reached a deal to restructure its external debt with bondholders on July 22, which Ash suggests is part of the post-war funding preparations, which hints the war will end sooner than later.

Behind this momentum towards the start of a settlement is the palpable fear that Trump will retake the White House in November, even after US President Joe Biden dropped out of the race in favour of his vice President Kamila Harris.

“Seems that we are seeing momentum, as there is generally fear now that if Trump wins in November, Western support for Ukraine drops off a cliff – better for Ukraine to negotiate from a position of some relative strength before then. Notable now that the West is front-loading disbursements to Ukraine from the $61bn US package agreed by Congress in April,” says Ash.

Ash speculates that Trump’s choice of J D Vance as vice president has been the final straw for China, as they now anticipate “the mother of all trade wars in Trump 2.0.”

As for Putin, he is increasingly believed to want to freeze the war along current lines and get on with the job of rolling back sanctions and ending the fiscal haemorrhaging that is the heavy military spending, according to Reuters sources in the Kremlin. Putin had already gone as far as explicitly offering a ceasefire on the eve of the Swiss peace summit on June 14 along the lines of the April 2022 Istanbul peace deal, where a ceasefire was all but agreed.

Snails-pace aid

Zelenskiy is also clearly becoming frustrated with the slow pace of arms deliveries that has severely handicapped the Armed Forces of Ukraine’s (AFU) ability to counter Russia increased assault along the whole front line in July.

The Defence Ministry says that the recruitment drive launched in May following a new mobilisation law is going well, but several battalions are in the rear but can’t be deployed due to the lack of weapons needed to supply them. The situation with more powerful weapons is even more frustrating.

“It’s been 18 months’ and F-16s have not yet arrived,” Zelenskiy loudly complained. Ukraine is yet to receive the first of the two dozen pledged F-16 fighter jets, despite waiting for them for year and a half, Zelenskiy said in an interview with the BBC on July 18.

The Netherlands, Denmark, Norway and Belgium have pledged a total of 80 F-16s under the fighter jet coalition launched in July 2023, with up to 20 expected to arrive this year. Yet none have arrived to date and they are badly needed to shoot down Russian jets firing up to 800 massive FAB glide bombs at Ukrainian targets each week.

Likewise, Kyiv is desperately short of money. The Ministry of Finance is scrambling to cover a $12bn budget shortfall that is earmarked for arms procurement. A recently approved $50bn loan from the G7 would cover that, but wrangling over terms is still going on and the monies are not expected to arrive until the end of the year. In the meantime, the government is living hand to mouth; the first €1.4bn tranche of profits from the investments of the frozen Central Bank of Russia (CBR) reserve assets are due to be transferred to Kyiv next week and the next $2.2bn IMF Extended Fund Facility (EFF) tranche is also due very soon.

And the prospect of a very dark and cold winter is looming after Russia destroyed 90% of Ukraine’s non-nuclear power generation capacity. Despite the current Herculean efforts being made to repair partially destroyed generators and install new smaller portable generators, supplied by USAID, the World Bank recently said that it will take a minimum of two years to make a dent in the problem.

“With 90% of all non-nuclear power generation destroyed, Ukrainians are facing the harshest winter in living memory. The suggestion that their army could retake any significant chunks of territory in these conditions is ludicrous,” says Ragozin.

The country is already stricken with rolling blackouts and Ukraine’s authorities have warned that blackouts could last 20 hours a day in the winter. Berlin is preparing for another possible million-strong wave of refugees after the heating season starts, one senior German government advisor told bne IntelliNews.

US Conference of Mayors, Website, June 2024

2024 Adopted Resolutions

The Imperative of Dialogue in a Time of Acute Nuclear Dangers

Resolution Number: 50

1.  WHEREAS, the Russian war of aggression on Ukraine, with its attendant nuclear threats, brings into sharp focus the increasing risks of nuclear war by accident, miscalculation, or crisis escalation that make disarmament that much more urgent; and

2.  WHEREAS, an intensifying array of antagonisms among nuclear-armed governments is also occurring in North-East Asia, the South China Sea, South Asia, and the Middle East; and

3.  WHEREAS, even those in nuclear-armed governments at war who do not believe the time is ripe to negotiate the end of hostilities currently underway should recognize the value of talking to their adversaries at every opportunity about limiting the most dangerous of all weapons and ensuring that they will never be used, and should use diplomacy wherever possible to create momentum for the de-escalation of hostilities; and

4.  WHEREAS, as long as nuclear weapons exist, it will always be the right time to be thinking concretely and constructively about how we will eliminate them forever; and

5.  WHEREAS, all nuclear armed states are qualitatively and, in some cases, quantitatively upgrading their nuclear arsenals and a new multipolar arms race is underway; and

6.  WHEREAS, the U.S. planning to spend $2 Trillion over the next 30 years to maintain and modernize its nuclear triad, building new ballistic missile submarines, new silo-based intercontinental ballistic missiles, a new nuclear cruise missile, a modified gravity bomb, a new stealthy long-range strike bomber, and accompanying warheads for each delivery system, with modified or new plutonium pits; and

7.  WHEREAS, at an April 2024 symposium, National Nuclear Security Administrator (NNSA) Jill Hruby stated: “[T]he reestablishment of pit production capabilities is the largest and most complex infrastructure undertaking at NNSA since shortly after the Manhattan Project,” and “NNSA delivered over 200 modernized nuclear weapons to the Department of Defense this past year, the most since the end of the Cold War”; and

8.  WHEREAS, global military spending in 2023 reached a record high, with the U.S. spending more than the next 9 countries combined; nearly 8-1/2 times more than Russia and 3 times more than China, accounting for 37% of the world total; and

9.  WHEREAS, for decades across Administrations from both parties, federal funding to the military and its support systems, including homeland security and veterans affairs, has taken a majority of the federal government’s finite resources; and

10.  WHEREAS, Mayors for Peace, founded in 1982 and led by the Mayors of Hiroshima and Nagasaki is working for a world without nuclear weapons, safe and resilient cities, and a culture of peace, and as of May 1, 2024, has grown to 8,389 cities in 166 countries and territories, with 227 U.S. members; and

11.  WHEREAS, The United States Conference of Mayors has adopted resolutions submitted by U.S. members of Mayors for Peace for 18 consecutive years, in 2023 “Calling for Urgent Action to Avoid Nuclear War, Resolve the Ukraine Conflict, Lower Tensions with China, and Redirect Military Spending to Meet Human Needs.”

12.  NOW, THEREFORE BE IT RESOLVED, that The United States Conference of Mayors welcomes the September 10, 2023 Declaration of the G20 Leaders meeting in Delhi, including leaders or foreign ministers of China, France, India, Russia, UK, and U.S., that “The threat of use or use of nuclear weapons is inadmissible”; and

13.  BE IT FURTHER RESOLVED, that The United States Conference of Mayors condemns Russia’s illegal war of aggression on Ukraine and its repeated nuclear threats and calls on the Russian government to withdraw all forces from Ukraine; and

14.  BE IT FURTHER RESOLVED, that The United States Conference of Mayors calls on the President and Congress to continue to maximize diplomatic efforts to end the war in Ukraine as soon as possible; and

15.  BE IT FURTHER RESOLVED, that The United States Conference of Mayors calls on the U.S. government to work to re-establish high-level U.S.-Russian risk reduction and arms control talks to rebuild trust and work toward replacement of the Strategic Arms Reduction Treaty, the only remaining bilateral nuclear arms control treaty, set to expire in 2026; and

16.  BE IT FURTHER RESOLVED, that The United States Conference of Mayors welcomes National Security Advisor Jake Sullivan’s June 2023 invitation “to engage Russia now to manage nuclear risks and develop a post-2026 arms control framework,” and “to engage China without preconditions—helping ensure that competition is managed, and that competition does not veer into conflict”; and

17.  BE IT FURTHER RESOLVED, that The United States Conference of Mayors encourages our government to pursue any offer made in good faith to negotiate a treaty among nuclear powers barring any country from being the first to use nuclear weapons against one another;

18.  BE IT FURTHER RESOLVED, that The United States Conference of Mayors calls on the government of the United States to make good faith efforts to reduce tensions with the government of the People’s Republic of China, seeking opportunities for cooperation on such global issues as the environment, public health, and equitable development, and new approaches for the control of nuclear arms; and

19.  BE IT FURTHER RESOLVED, that The United States Conference of Mayors calls on the Administration and Congress to reconsider further investments in nuclear weapons and find ways that our finite federal resources can better meet human needs, support safe and resilient cities, and increase investment in international diplomacy, humanitarian assistance and development, and international cooperation to address the climate crisis; and

20.  BE IT FURTHER RESOLVED, that The United States Conference of Mayors calls on member cities to take action at the municipal level to raise public awareness of the growing dangers of wars among nuclear-armed states, the humanitarian and financial impacts of nuclear weapons, and the urgent need for good faith U.S. leadership in negotiating the global elimination of nuclear weapons by, for example, planting seedlings of A-bombed trees, hosting A-bomb poster exhibitions, having mayors speak at local Hiroshima-Nagasaki commemorations, and developing youth leadership by participating in the annual Mayors for Peace Children’s Art Competition, “Peaceful Towns; and

21.  BE IT FURTHER RESOLVED, that The United States Conference of Mayors encourages all its members to join Mayors for Peace to advance the objectives of the organization and to help it reach its goal of 10,000 members.

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By Andrew C. Kuchins, The National Interest, 5/2/24

Andy Kuchins is a Senior Fellow at the Center for the National Interest and Adjunct Professor at the Johns Hopkins University School of Advanced International Studies in Washington, DC.

Ramzan Kadyrov, the leader of Chechnya since 2007, was diagnosed with pancreatic necrosis in 2019. It was reported last week that his health has taken a serious turn for the worse, and he is in “critical condition” with perhaps months left to live. Novaya Gazeta Evropa broke the story based on research dating to 2019, including reports of Kadyrov missing many key public appearances, including the United Russia Party Congress in December of last year. Appearing in photos with Vladimir Putin last September, the Chechen leader’s face appeared bloated. A PR video of Kadyrov pumping iron in a gym was released this week to promote an image of health. It is not very convincing; he is lifting at most 50 percent the weight, usually far less, than I, a sixty-five-year-old getting a hip replacement next month, can lift. Ramzan is not in good health.

Chechnya has been reasonably stable since Ramzan took over as president at age thirty, three years after his father Akhmat, also president, was blown up in a Victory Day celebration in May 2004. The relationship between Putin and Kadyrov, while framed as like father and son, is actually a Faustian bargain. Kadyrov receives huge subsidies from Moscow to distribute as he sees fit and free sway in controlling the notoriously troublesome republic. Putin gets a stable Chechnya, and Kadyrov has been eager to support Putin by sending more than 20,000 Chechen soldiers to the war in Ukraine and carrying out the occasional political assassination.

It appears that Kadyrov would like to maintain a family dynasty (he has at least fourteen known children) and has recently promoted his eighteen-year-old son Akhmat to Minister of Sport and Youth and sixteen-year-old Adam as a trustee at Special Forces University in the Chechen capital, Grozny. Adam bears the strongest resemblance to his father and seems to have inherited his father’s sadistic and violent nature. In September 2023, Ramzan released a video of Adam, then fifteen, beating up a Ukrainian in detention accused of burning the Koran. However, since Chechnya’s constitution calls for the president to be at least thirty years old, it would seem unlikely that Kadyrov Sr. could engineer a family dynastic succession, at least in the short term.

Unquestionably, the Kremlin will seek a peaceful succession. Ramzan Kadyrov’s consistent support for Putin has been very valuable for the Russian president, even if it has raised the hackles of some in the Russian intelligence and security agencies who view Kadyrov as a loose cannon with his own regional ambitions in the North Caucasus. But the historical grievances of Chechens against Russia run deep. The Chechens fought decades-long struggles for independence against the Tsars in the nineteenth century, suffered from Stalin’s mass deportations from their homeland, and struggled against Moscow rule in two wars in the 1990s and 2000s. Chechnya is a volatile place with a well-armed population.

The ISIS-K-sponsored attack conducted by Tajik guest workers at Crocus City Hall in Moscow, resulting in more than 140 dead, marked the end of a six-year lull in Islamic terrorist attacks in Russia. For more than twenty years before 2018, the catalyst for nearly all terrorist attacks in Russia came from Chechen groups and others from the North Caucasus. In 2012 and 2013, most of the fighters in the North Caucasus found conditions too difficult for fighting at home and moved to join ISIS in Syria and Iraq, where, by 2018, the majority were killed.

Global Jihadist group ties to the North Caucasus, however, date back to the 1990s, and the links with ISIS remain. Chechnya was de facto independent in the late 1990s as the Islamic Republic of Ichkeria and served as a criminal hub of trafficking in all manner of illicit goods. When legendary Chechen leader and author of the largest terrorist attacks in Russia, Shamil Basaev, led Chechen troops across the border into Dagestan in August 1999, the second Chechen War began, which catapulted new Prime Minister Vladimir Putin to public acclaim.

Putin understands the immense value of a subdued Chechnya in the Russian Federation. His symbiotic relationship with Ramzan Kadyrov has served the interests of each leader very well, but it has not been without costs. Kadyrov and his fearsome legions of “Kadyrovtsy” have created many potential opponents to stability in Chechnya and Russia at large. The large number of Chechen casualties in Ukraine add to a seething dissatisfaction there. It is not hard to imagine that ISIS and other Jihadi groups could come to view Chechnya and the North Caucasus once again as an attractive target for mayhem. Putin’s concern for this possibility may well be a factor in his very public support for Palestinians in the war in Gaza. With Russian intelligence and security forces already stretched to the breaking point, the near future would be a particularly inopportune time for unrest in Chechnya.

Russia Matters, 7/26/24

1. Since last autumn, Ukraine’s armed forces have been going steadily backward and things have become “very difficult” for the ZSU. This follows from Ukrainian commander-in-chief Oleksandr Syrskyi’s interview with the Guardian. In the interview, Syrskyi acknowledged that the Ukrainian forces are outgunned and outmanned, warning that Moscow plans to boost its fighting force in Ukraine to 690,000 by the end of 2024. Syrskyi insisted, however, that Russia’s recent creeping advances were “tactical” ones—local gains. The latter included this week the capture of Pishchane in the Kharkiv region and Prohres in the Donetsk region. The Russian military claimed control of these settlements on July 21, and Ukraine’s DeepState OSINT project’s map then appeared to show Russian forces in control of them as of July 25. The Russian Defense Ministry also claimed this week that its forces had captured the villages of Andriivka in the eastern Luhansk region and Ivano-Dariivka in the Donetsk region, but the DeepState OSINT project’s map showed Russian forces not in full control of either Andriivka or Ivano-Dariivka as of July 25.
2. Volodymyr Zelenskyy’s top adviser Mykhailo Podolyak asserted this week that signing an agreement with Russia to stop the war with Ukraine would amount to signing a deal with the devil. It remains unclear how Podolyak’s July 25 comments can be reconciled with Zelenskyy’s recent announcement that a second Ukraine peace summit should include officials from Russia. In addition to Podolyak’s comments, expectations of Russian-Ukrainian peace talks have also been dimmed by Chinese Foreign Minister Wang Yi’s statement to his Ukrainian counterpart Dmytro Kuleba in Beijing on July 24 that the time was “not yet ripe” for peace talks to end the war. Meanwhile, former president Donald Trump told Fox News that he had told Zelenskyy the following: “This is a war machine you’re facing. That’s what they (the Russians) do they fight wars. They beat Hitler. They beat Napoleon.” “We got to get this war over with,” Trump told Zelenskyy, according to Reuters.
3. Russia and China have flown a joint strategic bomber patrol near Alaska for the first time, according to FT. U.S. and Canadian fighter jets detected, tracked and intercepted two Russian Tu-95 and two Chinese H-6 aircraft on July 24. The interception occurred three days after Russia said it scrambled its own fighter jets as two U.S. strategic bombers approached Russia’s border at the Barents Sea in the Arctic, according to RFE/RL. It’s “not a surprise to us,” Defense Secretary Lloyd Austin said of the Russian-Chinese patrol, according to Bloomberg. Austin’s comments came less than a week after the Pentagon had unveiled a new Arctic Strategy that commits the U.S. to expanding its military readiness and surveillance in the region because of heightened Chinese and Russian interest coupled with new risks brought on by accelerating climate change, Bloomberg reported.
4. Joe Biden’s decision to drop out of the U.S. presidential race and support his VP Kamala Harris has Russian influentials divided on whether a Democrat can defeat the GOP’s DonaldTrump in November, according to RM’s review of commentary by Russian influentials on this development. Boris Mezhuev, a Moscow-based political scientist, told pro-Kremlin portal Vzglyad in reference to Harris: “I think her prospects can be described as positive. The gap in ratings with Donald Trump is only a few percent.” According to Russian foreign policy veteran Sen. Alexey Pushkov, however, “in the battle for the presidency, Trump defeated Biden ahead of schedule.” Pushkov’s colleague, and deputy chairman of the Russian Senate, Konstantin Kosachev, also believes Trump is more likely to win. In contrast, Putin’s spokesman Dmitry Peskov said that “nothing good can be expected” when asked what the Kremlin expects from the U.S. presidential elections.
5. Real wages have grown by almost 14% in Russia, and the consumption of goods and services by around 25%, FT reported, citing the Russian state statistics agency. A further bump in real wages of up to 3.5% is expected this year, alongside an expected 3% jump in real disposable income, according to Russia’s Center for Macroeconomic Analysis and Short-Term Forecasting, again as cited by FT’s article, “Russia’s surprising consumer boom.”