Russia's invasion of Ukraine two years ago was a disastrous mess. Instead of the swift surrender expected by Russian President Vladimir Putin, Ukraine stood firm and the Western alliance responded with military aid to Ukraine and unprecedented economic sanctions against Russia. During the first months of the war, it appeared as if President Putin had made a grave mistake.
Two years later, Russia surprised the world with its economic resilience and ability to absorb terrible losses that would paralyze most other countries. Ukraine and her allies are not losing, but they are not winning either. President Putin may still win the battle of wills with the West. Perhaps even more mind-boggling, Russia is proving that the capitalist power of the United States and Western Europe may not be able to defeat militaristic petrostates unfettered by troublesome democracies. .
“Russia feels very comfortable in its economic climate,” Maria Snegovaya of the Center for Strategic and International Studies said during a panel discussion on February 14. She said: “They have more than doubled, and in some cases more than tenfold, domestic production of weapons such as tanks, rocket launchers, artillery and missiles. This sanctions can hardly be called a success.”
But they remain the punishment of least resistance. The Biden administration announced brand new sanctions against Russia on February 23, following the death of Putin critic Alexei Navalny in a Russian prison, likely killed by Putin operatives. The new measures go further than previous efforts to constrict Russia's financial system, squeeze oil and gas revenues and hamper weapons production.
Overall, these punitive measures have certainly tested the Russian economy, which shrank by 2.1% in 2022, the first year of the war. But growth has picked up last year, and the International Monetary Fund expects Russia's economy to grow another 2.6% this year. A sharp increase in defense spending has offset the decline in Russia's civilian economy, which continues to grow.
Energy exports are Russia's biggest source of revenue, holding on to enough funds for the country to cover soaring defense spending. In fact, after the 2022 invasion, Russia's energy revenues soared as energy prices soared. According to Finland's Energy and Clean Air Research Center, by mid-2023 Russia's energy revenues had fallen to about 70% of pre-war levels. It has since recovered to about 75% of its prewar level.
In 2023, the United States, the European Union, and other countries imposed a price cap on each barrel of Russian crude oil. The plan requires Russian oil buyers who cooperate with the plan to pay up to $60 per barrel if Russia transports the oil using insurance and other infrastructure and services provided by one of the participating countries. It is mandatory.
Price caps have reduced Russia's oil revenues, but Russia has also found ways to work around them. The company is buying a “shadow fleet” of tankers that are independent of Western services, and some buyers in participating countries are willing to simply ignore partially enforced price caps. It also became clear that Moreover, large energy buyers such as China, India and Turkey do not abide by the cap, making them Russia's largest energy customers.
Russia also has new alliances with North Korea and Iran, supplying them with artillery shells, combat drones, and other military equipment that would quickly destroy Russia without reinforcements. China is also helping Russia by selling many types of technology products currently prohibited by Western sanctions, including “dual-use” technology such as computer chips that can be used to make weapons. Finally, Russia obtains much of its prohibited Western technology through third countries, including Iran.
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Of course, Ukraine also has allies, and as the war enters its third year, Germany and other European countries are finally starting to increase their defense spending after decades of holding back. But for those hoping that the industrial might of capitalism would marshal new “weapons of democracy” capable of defeating Iraq's axis of dictators, the results so far have been thoroughly disappointing. .
With the help of economic stagnation in North Korea and Iran, Russia has built something of a five-to-one artillery advantage over Ukraine, which may be Ukraine's biggest battlefield shortcoming at this point. This may have contributed to Ukraine's recent loss of Avdiivka, a key crossing point in eastern Ukraine. Europe is ramping up production of shells, but it will be more than a year before the shells are in the field in Ukraine.
America's role in the war became an exercise in shameful nihilism. Until this year, the United States was Ukraine's essential ally and largest military supporter. The isolationist Republican cabal in the House of Representatives, backed by former President Donald Trump, a Putin sympathizer, said that despite widespread support from majorities in both houses of Congress for the new aid package, President Biden has called for more. Blocking $60 billion in aid. That aid could still materialize, but the opposition has justified Putin's belief that Western democracies and their fickle politicians will tire of war before he does. Without U.S. aid, Ukraine may be able to hold on to much of the terrain it currently holds, but it probably will not be able to dislodge Russia from the occupied terrain.
Although there is no end in sight to the war, some sort of timetable is taking shape. Jack Watling and Nick Reynolds of the Royal United Services Institute (RUSI), a British research group, say Russia will spend 2024 rebuilding its battered military and building the artillery, tanks, missiles and weapons needed to make large-scale territorial gains. I think this will be the year to accumulate other weapons. If that happens, Putin will feel that he has reached the highest standard and he may consider some kind of ceasefire, but he is certainly not seriously considering it at the moment.
But Russia's ability to rebuild its war machine will continue to come under pressure, and Western resolve may be more important than ever. The Managing Director of the International Monetary Fund recently said that the contraction of Russia's private economy means “very difficult times” are ahead. Watling and Reynolds believe Russia's defense production will peak in 2025, but then begin to deteriorate as the effects of sanctions and accumulated battlefield losses pile up. Around the same time, Europe's own defense production should finally gain momentum. By then, Ukraine may finally be operating F-16 fighters.
During that time, Russia lost an astonishing number of troops, perhaps 350,000 killed or wounded to date. Russia is a large and populous country, but it lacks prisoners to replenish its infantry units, and young people are fleeing the country. The pool of forces is not bottomless.
Therefore, there is hope for Ukraine if its allies stop dithering and start matching Russia's industrial mobilization. “if, [US] “If the funding passes, I would be quite optimistic about Ukraine's chances in 2025,” Max Bergman of the Center for Strategic and International Studies said during a panel discussion on February 14. “Russia, in her arrogance, [is] launch a constant attack [and] Losing a lot of people. If US aid continues and European production increases, Ukraine will be in a very good position to continue this war until 2025. ” The real question is whether the capitalist allies will continue the fight or retreat.
Rick Newman is Yahoo Finance. Follow him on Twitter @rickjnewman.
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