With news breaking that the Ukrainians are moving towards a final, total mobilization against Russia – and me regretting I didn’t post about it yesterday when I had a hunch on the matter – something occurred to me. I’ve underestimated the Russians before. What if I still am?
The Russians, after all, could quite easily attack and seize huge swathes of Ukraine via high-speed maneuver. The Ukrainians have a thousand kilometers of lightly-defended and barely-fortified left flank running from Kharkov to Lvov. The Russians could crash through it quite easily if they actually wanted to and they’ve always had forces in reserve that could do it – these days a huge mass of them. As things currently stand Russian special forces roam at will in Sumy and Chernigov, preying on the thinly-stretched garrisons.
But, no, the Russians have consolidated their position in Ukraine into a convenient stretch of highly defensible terrain in the country’s east and then just sat there, for over a year now, killing Ukrainian soldiers at horrifyingly lopsided ratios. When they can defend, they defend. When they must attack to keep the pressure on, they find some Ukrainian salient and turn it into a shooting gallery. Where they don’t want to push the front up, they just mow the lawn and pull back – they have to have taken the same line of strongholds east of Kupyansk a dozen times by now, each time pulling back and letting the AFU flood the same old trenches with new recruits again.
Ukrainian casualties have been so astronomical they’re now deep into desperate measures trying to keep soldiers in the ranks, drafting women and looking at emptying out the small pool of privileged young students to feed the front. When the war is over, Ukraine will be a broken society in which most of the people willing to fight for an independent Ukrainian state – and a Western-oriented Ukrainian national identity separate from Russia – will be dead.
What if that’s the point? Objectively speaking, if the Russian plan was simply to kill as many Ukrainian combatants as possible, as efficiently as possible, with as little risk to themselves as possible, then they’re doing it. The Russians know full well that the current iteration of Ukrainian national identity is implacably hostile to Russia and they cannot coexist with it – and they’re very coldly killing anyone and everyone willing and able (or coercible) to bear arms in its defense on the battlefield. In their manic drive to expel the Russians and fight for every inch of their land, the Ukrainian leadership is facilitating this.
Is this genocide? No. The Russians are fighting armed combatants. It’s no violation of the law of war to inflict horrific casualties on the enemy, and any comparison with the ongoing war in Gaza will show that the Russians have been meticulous to avoid civilian casualties. Will it have the effect of breaking the Ukrainian nation at the end of the war? Yes.
Is it an ugly thought that the Russians may very well have planned it this way? Very.
From Ivan Katchanovski, of the University of Ottawa, on the peace deal that was all but signed and delivered back in April, 2022. The interview, which I am posting in an English-dubbed version, shows David Arakhamia, head of Zelensky’s parliamentary faction, admitting pretty much what Putin, Gerhard Schröder, Naftali Bennet, and others have claimed: that there was a deal, already initialed, but scuttled after Boris Johnson made a sudden visit to Kyiv. The main Russian demand was Ukrainian neutrality, plus language protections for the Russian-speakers in east Ukraine. A month after the war started, Putin would have settled for that! Well, there it is.
Ivan Katchanovski:
Wow! In his interview, the head of the Zelensky party faction in the Ukrainian parliament & the head of the Ukrainian delegation in the Ukraine-Russia talks confirms that a peace deal could have been reached in spring 2022 if Ukraine agreed to neutrality. He said that Russia was ready to end the war in such case & that Ukrainian neutrality/no NATO membership was the key Russian condition, which also included “denazification,” “Russian language rights,” etc. He also confirmed that Western countries knew everything concerning peace talks and told Zelensky not to sign peace deal and that British PM Johnson during his visit told them to continue fighting. P.S. Subtitles can be automatically translated. [https://www.youtube.com/watch?v=g5hrJNGZxYE&t=1s]
Translation of interview by Davyd Arakhamiia, head of Zelensky faction in Ukraine parliament & head of Ukrainian delegation at peace talks with Russia: “They really hoped almost to the last moment that they would force us to sign such an agreement so that we would take neutrality. It was the most important thing for them. They were prepared to end the war if we agreed to, – as Finland once did, – neutrality, and committed that we would not join NATO.
In fact, this was the key point. Everything else was simply rhetoric and political ‘seasoning’ about denazification, the Russian-speaking population and blah-blah-blah…
Moreover, when we returned from Istanbul, Boris Johnson came to Kyiv and said that we would not sign anything with them at all, and let’s just fight.”
Arakhamiia added that Western partners knew about the negotiations and saw drafts of documents, but did not attempt to make a decision for Ukraine, but rather gave advice.
“They actually advised us not to go into ephemeral security guarantees [with the Russians – ed.], which could not have been given at that time at all,” said Arakhamiia, who headed the negotiating delegation.”
Yves Smith is creator of the influential blog, Naked Capitalism, a top ranked economics and finance blog with over 250,000 unique visitors each month. She is the author of ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism. Smith has been working in and around the financial services industry since 1980 as an investment banker, management consultant, and corporate finance advisor. Smith has appeared, on CNBC, CNN, and FOX Business News, and has written over 40 articles in venues such as The New York Times, Slate, and the Christian Science Monitor. She lives in Manhattan.
Putin and Medvedev recently made statements that took an expansive view of what “Russian lands” in Ukraine amounted to. At least as far as Putin is concerned, what he said at the November 3 meeting with members of the Civic Chamber is, philosophically, not all that different than the sort of historical observations Putin had made before. Nevertheless, both Ukrainian Pravada and Alexander Mercouris regarded the Putin remarks as potentially significant, and Medevedev reiterating them would seem to confirm that take. And both suggested that Kiev might wind up as part of Russia. From Medvedev, who loves trolling Western officials:
Now admittedly, Ukraine has plenty of reason to be jumpy, Putin was arguably just ringing the changes on favored themes before a relevant audience, and Medvedev was putting on his usual tough cop hat. Or perhaps both Russian leaders are trying to get Ukraine and the West to understand that Russia will control the end-game and reset their views as to what that could amount to.
Regardless of whether these remarks represent a meaningful shift, they serve as a reminder that Russia is on track to take a maximalist stance in terms of territorial acquisition. For instance, even Russia-friendly commentators wondered if Russia would take Odessa. Most now seem to see that as a given and are adding more sections of Ukraine as potential acquisitions. But as we flagged from the very outset, Russia could lose the peace by not coming up with a good solution as to what to do about Western Ukraine.
So does the renewed talk about Ukraine being an artificial construct carved out of Russia, and of Ancient Rus? Or is this just posturing, to make those paying attention less unhappy about the endgame, to act as if Russia has serious designs on parts of Western Ukraine so that when Russia integrates less into Russia, that the West can claim a face saving success?
Ukraine’s Appallingly Poor Prospects
Things are so bad it is hard to know where to begin.
Big Serge recently posted a fine, detailed account of why it was vanishingly unlikely that Ukraine would achieve its aims of pushing Russia back to Ukraine’s 1991 borders. Admittedly, hindsight is 20/20. At the start of the war, many thought, including many in Russia, that the shock and awe sanctions would cripple Russia, ideally lead to Putin’s ouster or at least severely destabilize Russian leadership, and undermine industrial, particularly military, output. The West also believed what is now clear was its own nonsense, that Russia had a poorly armed and led military, when it was was the US and NATO that had optimized their forces to fight insurgents, and had gotten very good at building super expensive, fussy weapons systems that didn’t necessarily perform all that well when tested. Even worse, it still has not been adequately acknowledged that Russia is ahead in many critical categories, such as air defense, hypersonic missiles, and signal jamming.
What is striking about the current state of play is not simply that Ukraine is losing the war with Russia, and it’s just a matter of time before Russia dictates terms, but that the Ukraine government is acting in ways that benefits the Russian military, to the destruction of what is left of its society and economy.
Militarily, Ukraine is approaching a catastrophic condition. That does not mean a collapse is imminent; key variables include whether the Ukraine military leadership revolts against Zelensky and how hard Russia pushes into growing Ukraine weakness. Russia may prefer to go slowly (mind you, it is making a concerted effort to crack the well fortified Avdiivka1), not just to reduce losses of its troops, but also to more throughly bleed out Ukraine and give the West time to adjust psychologically to Ukraine’s prostration.
Another factor that bears repeating is that Russia knows well this is a war against NATO. That will make the eventual defeat more consequential, even if the US and its minions come up with a face-saving pretense, like Putin was going march all the way to Paris (or Poland) and they succeeded in stopping that. That is one aspect that Big Serge gives short shrift: that this was a messy coalition war, which meant that for Ukraine to message success often trumped realistic assessments (how often was Russia just about to run out of missiles? Or having to raid washing machines for chips?). So not only were Ukraine’s backers not making enough weaponry to keep up with Russia’s output (which Russia then kept increasing), it was not the right equipment. Ukraine first stripped NATO cupboards bare of old Soviet style gear, which their troops were trained to handle. They then got a hodge podge of Western materiel, which they were often not well trained enough to handle proficiently, plus the mix of weaponry created a logistical nightmare. Scott Ritter argued that so many different types of equipment put Ukraine in a worse position.
And that’s before getting to poorly (barely) trained forces. Depending on how you are counting, Ukraine is on its third or fourth army. A recent story in Time Magazine serves as one-stop shopping for the deteriorating state of its forces and its difficulty in replenishing losses. The average age at the start of the war (30 to 35, due in part to a demographic dearth of men in their 20s) is now up to 43. And:
Now recruitment is way down. As conscription efforts have intensified around the country, stories are spreading on social media of draft officers pulling men off trains and buses and sending them to the front. Those with means sometimes bribe their way out of service, often by paying for a medical exemption. Such episodes of corruption within the recruitment system became so widespread by the end of the summer that on Aug. 11 Zelensky fired the heads of the draft offices in every region of the country.
The decision was intended to signal his commitment to fighting graft. But the move backfired, according to the senior military officer, as recruitment nearly ground to a halt without leadership. The fired officials also proved difficult to replace, in part because the reputation of the draft offices had been tainted. “Who wants that job?” the officer asks. “It’s like putting a sign on your back that says: corrupt.”
A new CNN article also discusses Ukraine’s manpower problems, but weirdly tries to spin Ukraine as having headroom by not having yet gone to full conscription. But it does point out that Ukraine has imposed martial law and restricts travel
Ukraine’s military was about 15% female as of 2020, and recent rule changes allowed for conscription of women with medical and pharmacy training, so recent claims that Ukraine is conscripting women look largely to be misrepresentations of existing policy. However, it may still be that Ukraine is using more women in combat roles of late: Dima of Military Summary reported this week of seeing a video of a trench with dead women soldiers in it.
Experts have argued that even with diminishing levels of equipment and shells, that absent a revolt or surrender by the military, Ukraine could keep up a fight for a while. The West, after all, is probably capable of sending in materiel at some level. But the manpower, particularly trained manpower, problem is only going to get worse. And it’s now acknowledged in the Western press as pretty bad.
There’s been much less discussion of the Ukraine economy, which is set to go off a more dramatic cliff than its combat capability. Western journalists go almost entirely to Kiev, and then likely only near government buildings and foreign-official venues (tony restaurants) and so have little feel for day to day life. The reporters who do venture further afield are going mainly to combat areas. We need to do a bit more digging and give a fuller report, but it doesn’t take a lot of effort to work out that the near and long-term prospects for Ukraine are terrible, and it was staring out as the poorest and most corrupt country in Europe.
Ukraine is facing a demographic disaster, as Moon of Alabama and others have chronicled. It already had a dearth of young adults due to a birth collapse (similar to what Russia suffered) in the 1990s. It’s no secret that many Ukrainians have fled for Europe and the majority are not expected to come back. Moreover, that population is also likely to skew young. Douglas Macgregor had said that his sources estimate that Ukraine is down from a pre-war population of 43 million to 19 million in the territories the government in Kiev controls. And the scuttlebutt is Zelensky, to keep the fight up, is looking to or has actually started throwing more young people into the meat grinder, by tightening up on essential employment and college exemptions.
And keep in mind that Ukraine is also suffering a high level of debilitation among war survivors. The Wall Street Journal reported months ago that orders for prosthetics might be as high as 50,000. That was before the famed counteroffensive got going.
As we pointed out and the Western press has also been acknowledging, Ukraine has not done a very good job of repairing its grid after the Russian attacks last fall and winter, to the degree it may fall over in certain areas under higher winter loads. Some sources have suggested the repair funds were partly looted. That may be true. But we’ve also pointed out that Ukraine is using Soviet gear and has been exhausting stocks of spared among former Warsaw Pact members. No one is going to set up new factories to do a very large but limited run of various components for Ukraine’s rebuilding. That means that any of the areas that have suffered critical damage that can no longer get replacements from the West will find Russia controls their reconstruction.
Ukraine tax receipts have collapsed as defense spending has spiked. Ukraine projected a budget deficit of $38 billion in March. Given optimistic assumptions about its super duper counteroffensive, one has to think that forecast was similarly optimistic. Set that against two stopgap spending bills with no Ukraine funding and Europe saying loudly that it can’t fill the US money gap. I have no idea what the lag is between allocation approvals and cash actually arriving in Ukraine official coffers, but one would have to think the US till is about to be emptied. And Ukraine will crash from its already fallen level of functioning. In Russia even during its mass privatizations, loss of services and economic/demographic decline, some critical public servants kept working for no or little compensation. Putin made a point of giving teachers their back pay in his early years as President. How much social cohesion is there in Ukraine, particularly after so many have already abandoned it?
Also keep in mind Ukraine had a nominal GDP in 2022 of $160 billion on a nominal basis, nearly $380 billion on a PPP basis. Those figures are likely exaggerated by including the parts of Ukraine that voted to join Russia. So even looking at these results in the most generous way possible, Ukraine is running a deficit of 10% of GDP, when it already has inflation of 30%. Big deficits after a sudden reduction of productive capacity is a textbook prescription for hyperinflation.
We’ve also pointed out the Western reconstruction talk was a bunch of hooey, since private sector types do infrastructure deals only as exercises in looting (we’ve posted on how new-build deals go bankrupt). So at best, this initiative was set to be an exercise in strip mining what was left of Ukraine. That’s now been indirectly confirmed by the reconstruction czar Penny Pritzker herself. From Ukrainska Pravda via Yahoo in Imagine there may be no help: conclusions of US Special Representative’s visit to Ukraine:
Penny Pritzker, US Special Representative for Ukraine’s Recovery, has suggested that officials imagine how the country could survive economically without US aid during her first visit to Ukraine….
Ukrainska Pravda stated that her first visit to Ukraine had left “a rather disturbing aftertaste in many government offices” here.
One of the sources, familiar with the course of Pritzker’s meetings, said that she tried to “lead [them] to the idea” of how Ukraine could survive economically without American aid.
Quote from the source: “At the meetings, Penny tried to get people to think, like, let’s imagine that there is no American aid: what do you need to do over the next year to make sure that your economy can survive even in this situation? And it really stressed everyone out.”
More details: Andrii Hunder, the president of the American Chamber of Commerce in Ukraine, told Ukrainska Pravda that Pritzker’s main question during her visit and meetings with businesses was “What hinders success and who hinders it?”
The UP article reads that perhaps the strongest concern among most people who interacted with Biden’s representative was her call not to wait for Western assistance, but to seek areas of growth as if it wouldn’t be coming.
Does the Russian Map Talk Represent New Thinking About the End Game?
John Mearsheimer has argued that Russia wants a dysfunctional rump Ukraine. The same way the US, NATO and Ukraine obliged Russia’s war of attrition game plan by continuing to throw ever weaker forces against Russian lines, so to have they managed to do even more damage to Ukraine’s economy that the war already would have done by pumping up the military and government with support it could not maintain for the long haul, and then withdrawing it abruptly.
However, even though Russia looks like it will eventually impose its will on Ukraine, Russia still faces constraints. The more of Ukraine Russia decides to incorporate, the more it will have to rebuild. Those efforts would compete with another Putin initiative, announced early in the SMO, of greatly improving public amenities in remote areas (I envision manufacturing and mining towns in the hinterlands). Russia is also already facing labor shortages. To some degree, it might be able to redeploy men now working in manufacturing, particularly arms related, to reconstruction. But Russia may face labor constraints on how quickly it can restore infrastructure and buildings.
Putin and his inner circle likely also recognize the risk and cost of tying to hold areas where Russia is not welcome. Putin even said words to that effect early on. Putin also seems to value referendums as validating integrating territory into Russia. These would argue, all things being equal, for limiting the parts of Ukraine that are candidates for integration to ones with a solidly ethnic Russian majority.
To look at an overlapping set of consideration, ever since the Munich Security Conference, Putin has been trying to get a hostile Europe and US to acknowledge and respect Russia’s security needs. So what territorial end state is optimal, or alternatively, the least bad compromise, particularly given that ex Hungary and Belarus, Russia would continue to have hostile neighbors to its west?
This is why both Putin and Medvedev suggesting Kiev might be part of the equation would seem to be a significant shift. There are lots of maps of electoral results that Western pundits have used as proxies for ethnic Russian versus ethnic Ukrainian representation. This one from the Washington Pos is indicative. You can see Kiev is most assuredly in a European-leaning part of the country, as if that were in doubt:
But in Putin’s November 3 speech, he described long form as to how Russia has claims on “Ancient Rus” and that would seem to include Kiev2:
Contrast this with Medvedev’s not-exactly-a-joke earlier proposal:
Admittedly, Putin has said repeatedly, such as in his 2021 article, On the Historical Unity of Russians and Ukrainians, that Russians and Ukrainians are one people and the recent divisions were engineered to facilitate control. But it’s going to be hard to put the discord genie back in the bottle.
One guess is that Russia has decided it eventually has to take, or ideally, find some other way to subdue Kiev as the administrative center of Ukraine. But what does it do then? Even if Russia is able to create a puppet state, how does it exercise enough control without it becoming a governance and financial albatross? Remember, Kiev is a physically sprawling city of 3 million, straddling the Dnieper. It would be hard to secure it against the will of its inhabitants….unless, say, even more could be encouraged to decamp.
But it seems any other way, with rump Ukraine entering into some sort of victor’s peace with Russia, is ripe for the West trying to undo that. Perhaps (as we and John Helmer have suggested) Russia creates a particularly impoverished and very low population buffer zone (one way is by de-electrifying it) as a DMZ of sorts.
Again, at a minimum Russia’s leadership recognizes it has ever more degrees of freedom in terms of what Ukraine’s end state might be. And I may not be imaginative enough. But I don’t see how things have gotten much better regarding the potentially festering problem of western Ukraine. Perhaps there have been better remedies bandied about by Russian pundits and pols that have not gotten coverage here. Any reader intel or informed speculation very much welcomed.
Russian President Vladimir Putin held a late-night oligarch meeting on November 16 where dozens of Russia’s top oligarchs expressed anxiety over a wave of nationalisations since the start of the war in Ukraine just under two years ago, Vedomosti reports.
As reported by bne IntelliNews, there has been a tsunami of M&A deals in the last year, as leading Russian companies and people close to the government have snapped up the businesses of departing multinationals. Amongst the victims of forced takeovers have been some leading Russian companies like Tinkoff bank and Yandex that have been acquired, or are being acquired, by state-owned businesses of people close to the Kremlin.
This is the third time that Putin has called in Russia’s business elite for a meeting. The first was held on July 28 just after he took office for the first time in 2000, where the president famously made the pact: keep what you got but stay out of politics.
Oil tycoon Mikhail Khodorkovsky famously reneged on that deal and was arrested in 2003, convicted of fraud in May 2005 and spent the next nine years in a Russian labour camp. Putin held a second oligarch meeting shortly after Khodorkovsky’s arrest where he added to the terms of the unwritten agreement, “… and use your wealth for the betterment of the country,” ushering in the “ZAO Kremlin” economic model. For several years Putin held one-on-one meetings with leading businessmen, who had to present their investment plans. Putin, acting more like a CEO than a president, would then “explain” how those plans could be adjusted to dovetail with the Kremlin’s own development plans.
ZAO Kremlin was a failure as the oligarchs continued to buy influence and pursue their own goals. In one famous incident at the end of this era Putin flew to the mono-city of Pikalyovo in 2009 and publicly humiliated a top oligarch Oleg Deripaska who had a factory there where the workers had not been paid for months. Putin, playing on the anger of protesting workers in the town, forced Oleg Deripaska, a top metals tycoon and once Russia’s richest man and a close Kremlin insider, to sign a contract for supplies to help idle factories restart operations on live TV. The coup de grace was Putin’s venomous comment: “Give me back my pen” after Deripaska had signed the deal, but walked off the pen he had been given by Putin.
Putin abandoned trying to co-op the oligarchs into his programme to develop the economy and focused more on containing their avarice, turning instead to the stoligarchs, the small group of state-sponsored oligarchs that were personal friends of Putin’s and came to control a fifth of the Russian economy. The rest of the oligarchs were left largely alone to run their business in the privately owned part of the economy, managed by the liberal economics team, headed by former Finance Minister Alexei Kudrin and his protegees.
The details of the third meeting, held between 10am and midnight on November 16 remain vague, as few of those that attended where willing to talk, but leading Russian business daily Vedomosti reports that one of the topics of conversation was the rising anxiety amongst Russia’s captains of industry over the Kremlin’s aggressive policy of taking control of some of Russia’s biggest businesses.
At the meeting with dozens of Russian business leaders they complained of the increasing number of nationalisations that have occurred since the invasion of Ukraine, according to anonymous sources cited by Vedomosti.
The sources highlighted the trend of state seizures of private businesses over the past year and a half as “frightening” and expressed alarm. While officials attempted to address the 80 business mens’ concerns during the two-hour meeting, participants left with the impression that the Kremlin would also raise taxes for increased war spending, rather than tightening fiscal policies, and that would also cause them problems.
The stated purpose of the meeting was to discuss ways to “improve Russia’s investment climate” in the face of extreme Western sanctions and create conditions for companies transferring assets to Russian jurisdiction from “unfriendly” countries. However, the meeting can be characterised as yet another addition to Putin’s pact with the oligarchs: “… and pay more taxes to support the war effort or I will take your companies away after all.”
Prominent attendees at the meeting included Sberbank CEO German Gref and Russian Railways head Oleg Belozerov, who are both stoligarchs identified in bne IntelliNews’ 2016 cover article. Also in attendance were Kamaz head Sergei Kogogin, as well as government officials like presidential economic advisor Maxim Oreshkin, First Deputy Prime Minister Andrey Belousov, and Economics Minister Maxim Reshetnikov.
Russian Finance Minister Anton Siluanov has been working hard to avoid raising taxes to fund the war, where state spending has been ballooning as Putin clearly is preparing for a long war.
The sanctions were designed to starve the Kremlin of funds to fuel its war machine and that goal has clearly failed. After reporting deep twin deficits in December 2022 and January 2023, the economy has made a strong recovery and the economy is on course to turn in 2.2% growth this year, while most of the rest of Europe is teetering on the edge of recession. “The worst is over”, declared Prime Minister Mikhail Mishustin at an economic conference in October. The realisation that sanctions have failed to do enough damage to Russia to end the war quickly is starting to sink in as epitomised by a Wall Street Journal editorial on November 16 entitled “It’s Time to End Magical Thinking About Russia’s Defeat”, which admits sanctions have failed.
“At the front line, there are no indications that Russia is losing what has become a war of attrition. The Russian economy has been buffeted, but it is not in tatters. Putin’s hold on power was, paradoxically, strengthened following Yevgeny Prigozhin’s failed rebellion in June. Popular support for the war remains solid, and elite backing for Putin has not fractured,” the Wall Street Journal wrote.
Russia has survived the first two years of a proxy war against the West, but analysts are unanimous that the sanctions will tell over the longer term. Putin’s third oligarch meeting was all about getting ready for the problems to come, not the problems he already has to cope with.
Russia has already transformed from an open, largely private sector economy with an open current account, to a closed system where the state’s share and interference in the economy has rapidly escalated.
The threat of nationalisation is seen as a component of Russia’s approach to punishing countries that have seized Russian [assets] in the rest of Europe, but well connected opportunistic entrepreneurs are also making use of the war chaos and the complete shake up nearly ever sector to enrich themselves and establish new empires, as bne IntelliNews reported in Russia’s new business elite.
