In the Thick of It

A blog on the U.S.-Russia relationship
Russian T-72B3 mod 2016 with an orthodox cross captured during the Ukrainian Kharkiv region counteroffensive
Russia’s Defense Ministry announced on Nov. 9 that it was withdrawing its forces to the eastern bank of the Dnipro River in Ukraine’s Kherson region. The withdrawal, which the Russian top brass began to hint about in mid-October, means that Russia is abandoning the city of Kherson, which has been the only Ukrainian regional capital that Russian forces have managed to capture since the beginning of the invasion in February. Mouthpieces of Russia’s party of war view the withdrawal not only as a significant military setback, but also as a major embarrassment for Russia’s political leadership, whose members declared in Kherson in May that “Russia is here forever.” Significantly, in addition to uttering some harsh words regarding the Russian military top brass’ performance in southern Ukraine, some of the most outspoken representatives of the party of war are also now concerned that the retreat from Kherson will be followed by Russia’s political leadership suing for peace (in fact, there are some signs that this might be the case). See our selection of these comments from Telegram.
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Antoniv Bridge in Kherson
A recent visit to Ukraine with several colleagues from the military analysis community, including areas near the front in Kherson, has left me with the following thoughts and impressions about the current course of the war.

The general sense one gets is that Ukraine is winning and morale is high, but, as with any military operation, you see friction up close that you can’t from a distance. A fair bit of the Ukrainian effort comes from the ground up, based on horizontal linkages, volunteers, apps, etc.

Russia’s military appears at its most vulnerable going into the winter, but Ukraine has seen some modest impact from the Russian mobilization. Troops are being deployed to try to stabilize Russian lines and increase force density relative to terrain.

The situation in Kherson is clear as mud.
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Biden at podium
If there had been any lingering post-Cold War hopes that the United States could forge a partnership with Russia, they have been swept away by the 2022 National Security Strategy, released this month. The Biden administration endorses the position that no progress can be reached on repairing the relationship as long as Vladimir Putin remains in office, saying “it is now clear he will not change”; instead, the White House awaits a future when the Russian people have empowered a different government that is committed to working within the parameters of the U.S.-guided liberal international system. Indeed, the shift in U.S. thinking is so pronounced that this strategy does not even anticipate the possibility of a cooperative approach. Whereas past U.S. documents of this sort, even when emphasizing points of divergence and rivalry, maintained that there was a robust shared agenda (strategic stability, anti-terrorism, energy and so on), the 2022 iteration does not even use the term “cooperation,” let alone “partnership.” Instead, we find a very carefully constructed turn of phrase: “pragmatic modes of interaction.”

Thankfully, the strategic guidance dispenses with the notion that differences between Russia and the United States are the result of misunderstandings or miscommunications. It acknowledges, instead, that Washington cannot entertain any of Moscow’s demands for revisions of the post-1991 settlement in Europe and Eurasia, or in any other part of the world. It no longer maintains the fiction that somehow the United States understands Putin’s interests and vision for Russia better than he does, and it is just a matter of finding the right phraseology to convince him. It also makes clear that the United States does not see any workable compromises with Russia or any value in coming up with new ways of thinking about European security. It commits the United States to the further enlargement of Euro-Atlantic institutions as the only guarantor for that security, which Russia can either accept or see its efforts to resist countered (and hopefully overcome).
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NATO-led Steadfast Defender 2021 exercise
Next week NATO plans to conduct a major exercise in Europe. The two-week-long exercise, known as Steadfast Noon and set to begin Oct. 17, will practice the handling of and attacks with non-strategic nuclear weapons and aircraft from more than half a dozen NATO countries.

The NATO exercise will more or less overlap with a Russian nuclear exercise—Grom (or Thunder)—that will practice deployment of strategic nuclear forces and possibly include test launches of nuclear missiles.

These exercises happen every year and officials insist they are not directly linked to any current world events. Except this year, they are happening at the height (so far) of the worst NATO-Russia crisis since the Cold War. Russia is continuing its seven-plus-month brutal war in Ukraine but is losing, and Russian officials are threatening use of nuclear weapons if NATO interferes directly or attacks Russian territory. The rhetoric from both sides is escalating day by day.

This is inherently dangerous because it increases the perception of threats even further and can lock the two sides deeper into escalating nuclear posturing.
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economy
Three months after the Kremlin launched its invasion of Ukraine, economist Anders Aslund wrote that, by starting the war, President Vladimir Putin had “in a single day … wiped out most of the economic gains Russia had made since 1991.” CNBC issued a similar verdict in March. While the word “most” would typically mean more than 50%, Aslund clarified to RM that his assessment wasn’t meant to be strictly quantitative—more a turn of phrase to describe the scale of Western sanctions’ impact on Russia. Nevertheless, we think it is important to determine how much of Russia’s past gains in economic output may be erased by Putin’s war in Ukraine by the end of this year. Would the forecasted losses amount to more than half, i.e., “most”?

Here's what we found: If “economic gains” are measured as growth of GDP—the only metric for which sufficient data is available—and if the latest projections of changes to Russia’s GDP in 2022 from the World Bank and IMF are more or less correct, then the decline in Russian economic gains this year will total about 16%-24% of the gains accrued from 1992 to 2021, which is far from “most.”
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Graham Allison and Mikhail Gorbachev
As the press encomia declared: a man of vision. Yes—but whose vision never envisaged nor intended the great accomplishment for which we honor him. He dreamed of a revived Soviet Union that would demonstrate the superiority of Communist socialism over Western-style democratic-capitalism. No one was more surprised than he when the forces he unleashed led to the collapse of the Soviet Union, the emergence of Russia and 14 other newly-independent states (including Ukraine), and the end of the Cold War.
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The Congress of Paris
Though Ukraine’s efforts to stage a counter-offensive in the south continued to fall short of the city of Kherson as of Sept. 1, one might nevertheless ponder: What if the Kremlin’s unthinkable scenario happens and Russian forces in Ukraine suffer a major setback? Should that happen, there would be two realistic options for Putin to choose from: (1) escalate so that the setback fades in a larger campaign for larger purposes; or (2) cut his losses. Of these two options, the first one would be more probable, while the first one would be unlikely, but not impossible. If dealt a major military setback on the Russian-Ukrainian fronts, Putin may, indeed, decide to cut his losses, which already include 5,500 to 20,000 Russian soldiers killed in action and an up to 9.6% contraction in GDP this year.

Putin wouldn’t be the first autocrat to cut his losses after a major military loss. Russian emperor Alexander II1 (whose image, by the way, has adorned Putin's antechamber in the Kremlin) had to exercise that option in 1856. On March 30 of that year, the Russian monarch signed the Treaty of Paris, which, among other things, “obliged Russia to surrender southern Bessarabia,” according to Encyclopedia Britannica. In addition, “the Black Sea was neutralized, and the Danube River was opened to the shipping of all nations,” per the treaty, which ended the Crimean War (1853 to 1856), with which scholars of the current Russian-Ukrainian war may, perhaps, draw some parallels.
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coins
One way geopolitics experts (and pundits) try to help the general audience size up a challenge posed by a less familiar country is to compare it to a better known country (or, in the case of an American audience, a U.S. state). That cognitive trick has been recently applied by Andrew A. Michta, an American political scientist at the George C. Marshall European Center for Security Studies in Germany. In an Aug. 7 commentary in the Wall Street Journal, Michta chose Germany to help readers size up the challenges posed by Russia to the West. “Russia and even China have nowhere near the West's resources, when measured in terms of gross domestic product, compared with the overall collective wealth the West commands. Russia's economy is only about two-fifths the size of Germany's,” he wrote.

Michta is more or less right—as long as he measures GDP at market exchange rates (MER), for instance, in current U.S. dollars or in constant 2015 U.S. dollars—see table below). But the inconvenient fact is that MER is not the only yardstick for comparative measurements of national economies, nor is it the most accurate, according to agencies like the World Bank, the IMF and the CIA, all of whom recommend relying on purchasing power parity (PPP) for GDP comparisons. As the CIA explained in one of its World Factbooks, “Market exchange rates are frequently established by a relatively small set of goods and services (the ones the country trades) and may not capture the value of the larger set of goods the country produces… The data derived from the PPP method probably provide the best available starting point for comparisons of economic strength and well-being between countries.” According to the IMF, PPP eliminates “differences in price levels between economies,” allowing one to compare national economies in terms of how much each nation can buy with its own currency at the prices items sell for there. Finally, as the World Bank explains, “Due to large differences in price levels across economies, market exchange rate-converted GDP does not accurately measure the relative sizes of economies and the levels of material well-being. PPPs make it possible to compare the output of economies and the welfare of their inhabitants in ‘real’ terms, thus controlling for price level differences across countries.”
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dandelion
When scanning commentaries on post-Soviet Eurasia from English- and Russian-language sources, certain words or phrases stand out as fads that later fade away. So when RFE/RL described on July 30, 2022, a “bold prediction” by Russia expert Iver Neumann that we are witnessing “the beginning of the end” of Vladimir Putin’s regime, it seemed like one of the newest fads that have emerged after Putin’s decision to (re-)invade Ukraine in February. We decided to reaffirm that hunch as Neumann’s prediction began to gain traction in other media. With no skills or means immediately available for meta-analysis, we searched in Factiva, Google, Yandex and other open sources for “beginning of the end”+ “Putin” and “начало+конца”+ Путин.

The search revealed that proclaiming the beginning of Putin’s end was a trend long before his troops marched into Ukraine on Feb. 24, 2022. In fact, the earliest such proclamation we found was made on Oct. 26, 2002: a column by Moscow-based sociologist Boris Kagarlitsky that asks in its headline whether the Russian authorities’ mishandling of the deadly hostage crisis at Moscow’s Dubrovka theater during the second full year of Putin’s presidency meant the beginning of his political end. 

In total, we have found 38 predictions of the beginning of Putin’s end made from Dec. 31, 1999, (Putin’s ascent to the presidency) to July 30, 2022, including 22 made before the invasion of Ukraine (Table 1) and 16 made after the invasion (Table 2).
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rubles
Despite the latest Western sanctions against Russia approaching their half-year point, Russia’s war effort in Ukraine rages on. How has Russia sustained its campaign in the face of what many major news outlets and at least one academic institution have called “crippling” sanctions? One possible answer: Russia’s economy is not as crippled as people think. Just last week, the IMF revised upward its annual projection for changes to Russia’s GDP, saying it would contract not by 8.5% but only by 6% this year (at the same time, the IMF downgraded its forecasts for global, U.S., EU and Chinese growth). The World Bank has likewise revised its 2022 forecast for Russian economic output, saying it would shrink by 8.9% instead of the 11.2% estimated in April. Russia’s Central Bank, meanwhile, cut interest rates to below pre-invasion levels, another sign Russia’s economy is doing better than anticipated. While the U.S. and its allies are focusing on the long-term impact of sanctions, a number of other indicators show that, despite sanctions, Russia’s economy is doing as well as—or better than—other major economies.

Of course, there is clearly a negative side to the state of the Russian economy, from shrinking imports to plummeting equity indices. But getting a full picture means looking at positives and negatives. Here are some of the positives, which have been underreported in my view, to help our readers have a more complete picture when forming their opinions on Russia’s economic performance in the wake of sanctions.
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