Russia Analytical Report, Aug. 22-29, 2022
5 Ideas to Explore
- The knockout blow Western sanctions were expected to deliver to Russia has not materialized so far, according to the Economist. As this magazine’s writers remind us, the IMF now expects Russia’s GDP to shrink by 6% in 2022, much less than the 15% drop many expected earlier, while Russia’s current-account surplus is projected to be second only to China. The biggest flaw of the Western sanctions regime is that embargoes are not being enforced by over 100 countries with 40% of the world’s GDP. The effect of the West’s punitive measures against Russia has also been mitigated by Russia’s chokehold on gas and the time lag factor, according to the Economist. That Russia actually earned more money from oil exports this year than in 2021 has also helped the Kremlin weather sanctions.
- Is Putin really obsessed with Odesa? Roger Cohen’s story on the front-page of the New York Times declares just that. Graham Allison, however, begs to disagree. In his first fact and analysis check for RM, Allison gives six reasons why he rejects Cohen’s proposition. First, Cohen offers no specific evidence to support his central claim about Putin’s personal obsession for Odesa, according to Allison. Second, Allison’s review of Putin’s own statements on Ukraine and of experts’ analyses of the Russian leader finds no sign of any fixation or even special interest in Odesa. Third, it is Kyiv that is unquestionably the most valuable target in Putin’s eyes. Fourth, for Putin, the first and even more essential prize was Crimea in general and Sevastopol in particular. Fifth, Odesa is not the “grain port to the world,” as Cohen claims. Last, but not least, Ukrainian access to the sea does not hinge on Odesa.
- Sanctions cannot alter Putin’s determination to subjugate Ukraine, Fiona Hill and Angela Stent acknowledge in their take on “the world Putin wants.” “Putin seems uninterested in a compromise that would leave Ukraine as a sovereign, independent state—whatever its borders. ... The goal is not negotiation, but Ukrainian capitulation,” they write in FA. Moreover, Putin’s claims may stretch beyond Ukraine, into Europe and Eurasia, they write. According to Marlene Laruelle, however, the Kremlin is not interested in reintegrating either Central Asia or most of the South Caucasus. “Instead, the quest is a blend of responding to ... challenges posed by the West and recreating a mythified Russia in which historical junctures and territorial discontinuities would be erased or repaired,” she argues.
- A frustrated Putin has sidelined Shoigu, according to Russia’s Important Stories news outlet. Putin has begun to bypass Shoigu to issue direct orders to commanders of groupings of Russian forces in Ukraine after his defense minister failed to keep his promise to attain military objectives with the standing army at its peacetime levels, Istories wrote on Aug. 23. Without mobilization, which his generals urge, but which Putin continues to oppose, the shortage of personnel has become “catastrophic,” with war now projected to drag on for a year and a half or more, according to Istories’ sources.
- Have the Chinese become the decisive power for keeping Russia in the war? Phillips O’Brien has claimed just that in an interview with FT, as the PLA’s army, air force and navy prepare to participate in the same Russian wargame for the first time. “Russia couldn’t fight without China right now,” this University of St. Andrews professor claimed in an interview with FT’s Gideon Rachman.
NB: Next week’s Russia Analytical Report will appear on Tuesday, Sept. 6, instead of Monday, Sept. 5, because of the U.S. Labor Day holiday.
I. U.S. and Russian priorities for the bilateral agenda
Nuclear security and safety:
- No significant developments.
North Korea’s nuclear and missile programs:
- No significant developments.
Iran and its nuclear program:
- “Iran and Russia are forging tighter ties than ever, as their international isolation drives the two staunch American foes toward more trade and military cooperation, alarming Washington.”
- “Iran surpassed Egypt and Turkey as Russia's largest wheat buyer in July, scooping up twice as much as these two countries with deliveries of 360,000 metric tons, according to data-intelligence company Kpler. Overall, bilateral trade is up 10% between Russia and Iran this year. In 2021, trade between the two countries surged 80% higher to $4 billion, according to Russia.”
- “This month, Russia launched an Iranian satellite into space in a rare success for Tehran's space program.”
- “And last week, Iran's military hosted joint drone exercises with Russian forces, as the U.S. warns Moscow is preparing to receive Iranian drones for use in the war in Ukraine.”
- “Russians have been flocking to the Islamic Republic in recent months, often to discuss ways to circumvent sanctions, say Iranian businessmen.”
- “Esfandyar Batmanghelidj, chief executive of the Bourse & Bazaar Foundation, a think tank focused on economic diplomacy, said a revived nuclear deal—which Washington and Tehran appear on the cusp of clinching—could spark more Russian investment in Iran.”
- “A closer Russia-Iran alliance would help both countries mitigate the impact of Western sanctions by finding new markets for their products and boosting military cooperation that could help Moscow's war in Ukraine and Tehran's regional activities in the Middle East. U.S. national security adviser Jake Sullivan recently called the burgeoning Russia-Iran ties a ‘profound threat.’”
Humanitarian impact of the Ukraine conflict:
- No significant developments.
Military aspects of the Ukraine conflict and their impacts:
“Who is exercising command and control of Russian troops in Ukraine,” Istories, 08.23.22.
- “Prior to Russia's military invasion of Ukraine, Vladimir Putin showed particular attention to Defense Minister Sergei Shoigu. … People close to the General Staff of the Russian Armed Forces told Important Stories that after … the blitzkrieg failed, and the troops suffered heavy losses, the president lost confidence in Shoigu. After a forced retreat from the Kyiv area, Putin even tried to personally command troop movements, but very soon he abandoned this and now, over Shoigu’s head, he is directly conferring with the military leaders who are directly responsible for the combat.”
- “The relationship between Putin and Shoigu has changed so much that the defense minister does not dare to push for decisions that the military deems necessary. For example, … sources … claim that at the beginning of the ‘special operation’ … the president did not allow bridges to be bombed. … With his ban, Putin caused bewilderment and hidden dissatisfaction among the military leadership.”
- “Army officials say there is a catastrophic shortage of soldiers and officers at the front. As the staff officers note, the Russian army in Ukraine is fighting in the minority, therefore it is moving very slowly ... to quickly capture several regions of Ukraine with a map of hostilities stretched for hundreds of kilometers, the current number of Russian military personnel is not enough. With such slow progress, the war could drag on for another one and a half to two years. ... Nevertheless, Putin is still strongly opposed to mobilization. The military leadership considers this a big mistake, believing that it is difficult to fight with such numbers.”
- “The Ukrainians regained a little territory in Kherson but when you look at it within the context of modern war, the change in the front line for four months of pretty hard fighting is minimal.”
- “The Russians-only advances in the last few weeks or months really have been where they’ve been able to just blast the area in front of them with artillery and clear the Ukrainians out and move in to that area. If they can’t blast an area free in front of them with artillery they really don’t seem to have the ability to advance.”
- “I don’t believe there will be a nuclear exchange out of this because I don’t see what Russia gains by it. ... I can’t believe the Chinese, who are, by the way, the decisive power for keeping Russia in the war—Russia couldn’t fight without China right now—would be ecstatic about a nuclear war breaking out in Ukraine. This is not anything China wants. So might Putin do it out of desperation? I think there is a tiny but not nil chance of it, but I think it’s quite unlikely.”
- “This war also has to change our perception of what matters within Europe. I would say the thing that’s come out of this war that is quite striking, almost stunning, is the rise of eastern Europe, the Baltic states and Scandinavia.”
“New weapons for Ukraine suggest preparation for closer combat,” WP’s Alex Horton, WP, 08.22.22.
- “The Pentagon is sending new weapons and equipment to Ukraine that will better prepare its military to fight Russian troops at closer ranges. ... The nearly $800 million in assistance announced Friday will include 40 bomb-resistant vehicles with rollers attached to their front, which help detonate mines, and lighter howitzers that are easier to move than the more powerful guns the U.S. has previously sent. The aid will also include recoilless rifles with a range of few hundred meters and missile launchers limited to less than three miles—much closer than the current distance between Ukrainian and Russian units in many places.”
- “The mine-clearing is a really good example of how the Ukrainians will need this sort of capability to be able to push their forces forward and retake territory,” a senior U.S. defense official told reporters on Friday. “These are capabilities that are enhancing the Ukrainians’ mobility as they look at this very challenging environment in southern Ukraine, in particular.”
- “Ukrainian troops have struggled to punch through Russian-held territory or capitalize on earlier counteroffensives, such as one near Kherson in June that liberated villages in the region. Ukrainian forces have not made much progress since then, and have found themselves exposed in flat terrain as Russian troops surge artillery units into the area and launch reconnaissance missions to probe Ukrainian defenses.”
- “Rob Lee, a senior fellow with the Foreign Policy Research Institute and expert on the Russian military, cautioned that the most recent Pentagon package is not proof that an offensive is coming. ‘I don’t know if they have the forces to do it,’ Lee said … An attrition strategy, he said, ‘makes the most sense for Ukraine.’”
- “After beginning with the Russian seizure of part of southern Ukraine and a failed strike at the capital, Kyiv, and then pivoting to a bloody artillery battle in the country's east, the war is entering a third chapter. A battlefield stalemate prevails, with hostilities at a simmer, amid anxious uncertainty over whether—and when—Ukraine will launch a counteroffensive to try to break the deadlock.”
- “Numerous signs suggest that Mr. Putin will settle on a strategy of plodding offense designed to exhaust and kill Ukrainian forces. The latest evidence came on Thursday, when the Kremlin published Mr. Putin's order increasing the target size of the armed forces by 137,000, to 1.15 million. Analysts said the decree hinted that Mr. Putin was preparing for a long and grinding war, but not necessarily a large-scale draft that would mark a major escalation and perhaps prompt a domestic backlash.”
- ''‘Expectations that this will end by Christmas or that this will end by next spring' are misguided, said Ruslan Pukhov, a defense analyst who runs the Center for Analysis of Strategies and Technologies, a privately-owned think tank in Moscow. 'I think this will last a very long time.'”
- “With the decision on an attack in the south looming, Mr. Zelensky has taken pains to show unity with his generals. At a news conference this week, he praised the commander, Gen Valeriy Zaluzhny, and denied rumors he intended to dismiss the general.” A senior Ukrainian government adviser told FT on Aug. 29 that Kyiv had begun a major operation aimed at retaking the city of Kherson, but this claim could not be independently verified at the time this digest was being finalized.1
“How Ukraine Is Remaking War,” CFR’s Lauren Kahn, FA, 08.29.22.
- “From the sinking of the Moskva, Russia’s Black Sea flagship, in April to the attack on a Russian air base in Crimea this month, Ukrainian troops have used American and other weapons in ways few expected, the experts and Defense Department officials say.”
- “By mounting missiles onto trucks, for instance, Ukrainian forces have moved them more quickly into firing range.”
- “By putting rocket systems on speedboats, they have increased their naval warfare ability.”
- “And to the astonishment of weapons experts, Ukraine has continued to destroy Russian targets with slow-moving Turkish-made Bayraktar attack drones and inexpensive, plastic aircraft modified to drop grenades and other munitions.”
- “If the Russians could seize the seat of power in Ukraine, or at least cause the government to flee in panic, the defense of the country would quickly unravel. Moscow could install a puppet government. That was the Kremlin's plan.”
- “Instead, what transpired in and around Kyiv in the ensuing 36 days would represent the biggest foreign blunder in the 22-year rule of Russian President Vladimir Putin. His assault on the city instantly reordered the security architecture of Europe against Moscow and isolated his nation to a degree unseen since the Cold War. To the surprise of the world, the offensive against the Ukrainian capital would end in a humiliating retreat, which would expose deep systemic problems in a Russian military he had spent billions to rebuild.”
- “Wars, however, do not necessarily end with one side militarily defeating the other.”
- “For Ukraine, the biggest question mark is whether and how long the West will continue to support it. ... Putin may hope that if Russian forces can hold out in Ukraine through 2024, the return to the White House of Donald Trump—who is notoriously sympathetic toward Putin and hostile toward Zelensky—might lead to the decline or end of American support to Ukraine and so enable Moscow to prevail against Kyiv.”
- “Putin, for his part, may not be able to hold out long enough to find out. Continued Russian losses in Ukraine and economic hardship for Russians generally could lead to the growth of opposition both within Russian society and, more ominously for Putin, within Russia’s armed forces. If this occurs, Putin may have to redeploy forces away from Ukraine and back into Russia just to stay in power—assuming that those forces remain loyal to him.”
Punitive measures related to Ukraine and their impact globally:
“Are Sanctions on Russia Working?” The Economist, 08.25.22.
- “On a three- to five-year horizon isolation from Western markets will cause havoc in Russia. By 2025 a fifth of civil aircraft may be grounded for want of spares… As the state and tycoons seize Western assets, from car plants to McDonald’s outlets, more crony capitalism beckons. Russia is losing some of its most talented citizens, who recoil at the reality of dictatorship and the prospect of their country becoming a petrol station for China.”
- “The trouble is that the knockout blow has not materialized.
- “Russia’s GDP will shrink by 6% in 2022, reckons the IMF, much less than the 15% drop many expected in March.”
- “Energy sales will generate a current-account surplus of $265 billion this year, the world’s second-largest after China.”
- “After a crunch, Russia’s financial system has stabilized and the country is finding new suppliers for some imports, including China.”
- “It turns out the sanctions weapon has flaws.”
- “One is the time lag. Blocking access to tech the West monopolizes takes years to bite, and autocracies are good at absorbing the initial blow of an embargo because they can marshal resources.”
- “Although the West’s GDP dwarfs Russia’s, there is no wishing away Mr. Putin’s chokehold on gas.”
- “The biggest flaw is that full or partial embargoes are not being enforced by over 100 countries with 40% of world GDP.”
- “The lesson from Ukraine and Russia is that confronting aggressive autocracies requires action on several fronts.”
- “Hard power is essential. Democracies must cut their exposure to adversaries’ choke points.”
- “Sanctions play a vital role, but the West should not let them proliferate. The more that countries fear Western sanctions tomorrow, the less willing they will be to enforce embargoes on others today.”
- “While most economists agree that Russia is suffering real damage that will mount over time, the economy—at least on the surface—does not yet appear to be collapsing.”
- “The ruble's initial nosedive in value quickly reversed after the state limited currency transactions. … Unemployment hasn't noticeably surged … Russia continues to earn the equivalent of billions of dollars every month from oil and gas exports.”
- “In Moscow and St. Petersburg, restaurants and bars remain busy and grocery stores are stocked, even if prices have jumped.”
- “To be sure, warning signs are flashing all around.”
- “Manufacturing of autos and other goods has plummeted because companies can't import components, creating pockets of disgruntled, furloughed workers in some towns. … Airlines have slashed international flights to near zero and are laying off pilots and cannibalizing some planes for parts that they can no longer buy overseas.”
- “Thousands of highly educated people have fled the country; hundreds of foreign companies … are shutting down, and Russia's federal budget in July showed signs of distress.”
- “To inflict more damage, economists say, the European Union must cut Russia's main lifeline: oil and gas export revenue.”
- “[S]ome data shows signs of distress.”
- “Retail sales fell 10% in the second quarter compared with a year ago.”
- “Consumer confidence is at its lowest level since 2015.”
- “78% of Russians do not plan major purchases.”
- “In July, Russia reported a federal budget deficit of 900 billion rubles as some sources of tax revenue fell, a ‘huge, huge gap’ equaling 8% of gross domestic product, according to Sergei Guriev, an economist and a provost at Sciences Po in Paris.”
- “Europe's failure to quickly halt Russian oil purchases, due to its dependence, was a big missed opportunity, Shagina of IISS said.”
- “One of the many unfortunate consequences of Russia's invasion of Ukraine is the collateral damage to international scientific cooperation. The past two decades may have been the apex of this cooperation. Now it appears to be coming to at least a pause, if not an end.”
- “Collaborations on the basis of individual relationships may continue with some Russian scientists. This intellectual exchange is certainly valuable. But one can easily imagine that pullbacks and withdrawals will continue on other large scientific projects, if they haven't already, to the detriment of international relations generally. That would be an unfortunate aspect of a renewed bifurcation of the world order much like what happened during the Cold War. But I sincerely hope that the strong scientific bonds established during the past three decades will survive and help re-establish broader East-West relations.”
"Should Europe ban Russian tourists?” FT’s Tony Barber, FT, 08.27.22.
- “[Radek Sikorski, a former Polish foreign minister, is essentially proposing to] let Russians visit western countries, so that they reflect on the differences between repressive conditions at home and life in free societies. The EU could always tighten visa procedures by checking if Russians contributing to the war are trying to enter the EU, Sikorski adds.”
- “Regarding Sikorski’s broader point, I have much sympathy but also some reservations. Large numbers of Russians have visited European countries since the fall of communism in 1991, and middle-class discontent with Putinism has been evident for many years in Moscow and St Petersburg, Russia’s two biggest cities. None of this has translated either into sustained opposition capable of challenging Putin’s rule, or into broad support for western-style liberal democracy. Russia today is not central and eastern Europe on the eve of the 1989 pro-democracy revolutions.”
Ukraine-related negotiations:
- “The biggest risk to Ukraine is probably that they launch an offensive that fails badly with losses so heavy that this allows Russia to launch a successful counter-offensive. Even in this case however, the gains are likely to only be limited.”
- “The idea that Russia can successfully install a puppet regime in Kyiv backed by the Russian army is now as fantastical as the notion that it could do so in Warsaw or Prague. A second conclusion is that Russian military prestige, and therefore the idea that Russia has the capacity to invade NATO countries, have been badly damaged.”
- “The risk of unintended escalation to nuclear war does however remain very real. Since nuclear weapons are the one area in which Russia remains a superpower, there is an obvious temptation for Moscow to engage in nuclear brinkmanship—and anyone who decides to walk along a brink runs the risk of falling over it... These are the greatest threats of this war to the West, and the strongest arguments for seeking an early political solution.”
- “Like any viable settlement, this must be based on a recognition of basic realities: that even if an agreement may entail some limited territorial revisions, Ukraine’s independence and path towards the West are now fixed and unchangeable.”
- “The time to begin negotiations for peace is now, not after months or years in which tens of thousands more people have died and Ukraine has suffered still greater harm.”
“‘Stalemate’ is far too generous to Putin,” FT’s Edward Luce, FT, 08.26.22.
- “We are almost certainly underestimating Putin’s vulnerability. The fear is that he will try to destroy Western political unity this winter and may well succeed. There is little evidence for that. Indeed, Putin has almost certainly wielded his energy weapon far too early in the summer... [T]his winter will be Putin’s point of maximum leverage. By the following one his ability to threaten European energy security will have waned sharply.”
- “We should all hope that Putin will be sufficiently tutored by now to agree to a realistic settlement soon. The damage to Ukraine is colossal and mounting. Of course, we should never bet on Putin doing the rational thing. He alone can decide whether Russia’s military and economic losses from this epically foolish miscalculation will be catastrophic or merely bad.”
Great Power rivalry/new Cold War/NATO-Russia relations:
- "The New York Times’ lead story on the front-page of its Sunday Aug. 21 edition declares: Odesa is 'Putin’s Obsession.' ... Having now reviewed the evidence the article presents to support its key claims, [I conclude] that each of these claims is false or misleading."
- "First, to support his central claim that Odesa is 'a personal obsession for Mr. Putin,' the author offers no specific evidence. No statements by Putin obsessing on Odesa; no pantheons from Putin for Odesa; no reports of his inquiries about it or visits to it or impatience about capturing it."
- "Second, a review of Putin’s authorized biography, experts’ analyses of Putin and hundreds of other statements Putin has made about Ukraine, ... Kyiv, Crimea, Donbas, Kharkiv and other areas, finds no signs of any fixation or even special interest in Odesa."
- "Third, [it is] Kyiv, the national capital and base for Zelensky’s government, [that] is unquestionably the most valuable target."
- "Fourth, for Putin and his fellow Russians, the first and even more essential prize was Crimea and its naval base at Sevastopol built by Catherine the Great."
- "Fifth, the Times article’s claim that Odesa is the 'grain port to the world' and 'on Odesa’s fate hinges … the world’s access to food' … [but] the brute fact is that prior to the war, wheat exports through Odesa amounted to less than 1% of global wheat exports."
- "Finally, the article notes that 'on Odesa’s fate hinges Ukrainian access to the sea.' That is basically correct, since Odesa is Ukraine’s only major port on the Black Sea. But if the Russian advance across the southern tier of Ukraine that has now stopped 35 miles from Odesa’s city limits resumes and captures Odesa, Ukraine would still have another 100 miles of coastline on the Black Sea."
“There is no and there will be no European security system,” Kanwal Sibal’s2 interview with Fyodor Lukyanov, Russia in Global Affairs, 08.26.22. Translated from Russian.
- “To some extent, the trends we have seen before have deepened and worsened. And it can be said that certain irreversible international processes have taken shape.”
- “First, the complete collapse of relations between Russia and the United States. Not that they were normal before. But the American and European response to the Ukraine crisis, draconian sanctions aimed at Russia, put an end to diplomacy.”
- “Secondly, there is no European security system and no such system is foreseen. If there were hopes for its emergence, then they dissipated.”
- “Thirdly, the West has turned finance into a weapon, and this trend, I think, will have a long-term effect. Steps taken to confiscate state assets and private funds without any legal procedures will have far-reaching consequences. ... The non-Western world will reduce dependence on the dollar wherever possible.”
- “There is no battle between democracies and autocracies, as the West says. This is a huge simplification. Most of the non-Western world are not autocracies—they just live by their own principles. So the correct description of what is happening is not democracy against autocracies, but the West against the rest of the world. Western discourse about values and rule-based order is starting to sound more and more empty. It is becoming less and less acceptable to the rest of the world in terms of ideas about how the world order should be arranged. This means that multipolarity is gaining momentum, and globalization, which was under attack before, is now beginning to lose its meaning.”
- “Olaf Scholz has called for a new European air defense system. In the ‘Europe is our future’ speech in Prague on Monday, Scholz said Germany intended to make ‘substantial’ investments in air defense in the coming years, and its European neighbors would from the start be invited to participate in the project ... He also pledged that Germany would continue to send state of the art weapons to Ukraine ... Germany would also ensure that the planned EU rapid response force would be ready for deployment in 2025.”
- “Much of the speech, delivered at Charles University in Prague, was focused on the idea of making Europe more ‘sovereign,’ better able to defend itself against external aggression and more effective at countering competition from countries such as China ... He called for closer co-ordination between EU states on military matters, with regular meetings of EU defense ministers in Brussels and much closer co-operation between European arms companies on joint defense projects.”
China-Russia: Allied or aligned?
Missile defense:
- No significant developments.
Nuclear arms control:
- No significant developments.
Counterterrorism:
- No significant developments.
Conflict in Syria:
- No significant developments.
Cyber security/artificial intelligence
“Democracies must use AI to defend open societies,” FT’s John Thornhill, FT, 08.25.22.
- “The agonizing soul-searching of scientists over building nuclear weapons resonates strongly today as researchers develop artificial intelligence systems that are increasingly adopted by the military.”
- “War in Ukraine has increased the urgency of the debate. Earlier this month, Russia announced that it had created a special department to develop AI-enabled weapons. It added that its experience in Ukraine would help make its weapons ‘more efficient and smarter.’”
- “The Russian initiative followed the Pentagon’s announcement last year that it was intensifying efforts to achieve AI superiority.”
- “To their great credit, many AI researchers are today pressing for meaningful international conventions to constrain otherwise uncontrollable killer robots. But it would be reckless to forsake the responsible use of AI technology to defend democratic societies.”
- “The technical innovations and rebrands made by ransomware gangs will require the US government to take a proactive approach focused ‘from every angle’ to restrain Russian ransomware.”
- “As the Colonial Pipeline incident demonstrated, an effective ransomware attack can undermine the economy and upend domestic politics. The best defense for American companies and organizations, therefore, is to harden defenses with procedures and tools suggested by government security agencies.”
Energy exports from CIS:
- “The country exported 7.4 million barrels of crude and products such as diesel and gasoline each day in July, according to the International Energy Agency, down only about 600,000 barrels a day since the start of the year.”
- “Earlier this year, traders predicted daily Russian exports would fall by as many as 3 million barrels.”
- “Even with the dip in oil exports, Russia has earned $20 billion in average monthly sales this year compared with a $14.6 billion monthly average in 2021 … Shipments were rising again in August, data from ship-tracking firm Vortexa show.”
- “Russian energy sales have flourished by finding new buyers, new means of payment, new traders and new ways of financing exports, according to oil traders, former Russian industry executives and shipping officials.”
- “An unexpected market has been the Middle East. Exports of Russian fuel oil, a lightly refined version of crude, now go to Saudi Arabia and the United Arab Emirates, ... The Russian oil is either burned in Saudi power stations or exported from Fujairah, a UAE port and hot spot for blending Russian and Iranian oils to conceal their provenance. This is oil that before the war was shipped to U.S. refiners.”
- “The arrangement adds supply to the global oil market, helping put a lid on prices. ‘This is a win-win situation for the Russians and even, I would say, for the Europeans and the U.S.,’ said Carole Nakhle, chief executive at consulting firm Crystol Energy.”
- “China, Turkey and Middle East nations quickly stepped up their purchases, taking advantage of discounted prices and opening lucrative new trade routes for Russian crude. Some refine Russian oil and make profits exporting it to the West as gasoline and diesel. India is now Russia’s best customer.”
"Europe and the Economics of Blackmail," NYT's Paul Krugman, NYT, 08.26.22.
- “Unlike the markets for oil and wheat, the market for gas isn't fully global. The cheapest way to ship gas is normally via pipelines, which breaks the world into separate regional markets defined by where the pipelines run.”
- “Will Putin's economic blackmail succeed in undermining Western opposition to his aggression? Probably not. Among other things, the countries that seem least resolute in the face of Russian pressure -- hello, Germany -- have also been doing the least to support Ukraine, so it doesn't matter much if they lose their nerve.”
- “But whatever happens now, we're getting an object lesson in the dangers of becoming economically dependent on authoritarian regimes. Economists have long been skeptical about national security arguments for limiting international trade, which have often been abused in the past. But Russia's actions have given those arguments much more force."
Climate change:
- No significant developments.
U.S.-Russian economic and financial ties:
"A post-dollar world is coming," FT's Ruchir Sharma, FT, 08.28.22.
- “The dollar entered... a decline that started in 2002 and lasted six years. A similar turning point may be near. And this time, the U.S. currency’s decline could last even longer.”
- “Adjusted for inflation or not, the value of the dollar against other major currencies is now 20 per cent above its long-term trend, and above the peak reached in 2001. Since the 1970s, the typical upswing in a dollar cycle has lasted about seven years; the current upswing is in its 11th year.”
- “When a current account deficit runs persistently above 5 per cent of gross domestic product, it is a reliable signal of financial trouble to come. ... The US current account deficit is now close to that 5 per cent threshold, which it has broken only once since 1960. That was during the dollar’s downswing after 2001.”
- “The US currently owes the world a net $18tn, or 73 per cent of US GDP, far beyond the 50 per cent threshold that has often foretold past currency crises.”
- “Since the 15th century, the last five global empires have issued the world’s reserve currency — the one most often used by other countries — for 94 years on average. The dollar has held reserve status for more than 100 years, so its reign is already older than most.”
- “Meanwhile, the impact of US sanctions on Russia is demonstrating how much influence the US wields over a dollar-driven world, inspiring many countries to speed up their search for options. ... So don’t be fooled by the strong dollar. The post-dollar world is coming.”
U.S.-Russian relations in general:
II. Russia’s domestic policies
Domestic politics, economy and energy:
- “Philip Short has achieved something that in present circumstances might almost be called miraculous: a fair, balanced and insightful biography of Vladimir Putin. It should make very uncomfortable reading for Putin, in the unlikely event that he ever reads it; but it should be no less concerning for many of the Western commentators who have written about Putin and Russian policy over the past 30 years.”
- “The transformation of Putin in recent years is partly the result of something that affects us all: advancing age, leading to ossification of thought, and a narrowing of one’s circle of acquaintance. He appears to have become bored with the details of government, and has tolerated clashes and overt criminality among top officials that he would formerly have suppressed.”
- “The grotesque leadership cult created around him by the state media must also have had a certain effect, even though, according to Short, Putin’s role as ‘Tsar’ was initially something that was expected of him by his staff and society, and he himself was uncomfortable with it. With time though, to an almost cliched extent, Putin has come to display many of the stereotypical features of the aging dictator, and his planning of the war in Ukraine reflected this. … One of the very few areas that Short does not adequately examine is the nature of Putin’s nationalism.”
- “Short’s ultimate conclusion is a profoundly pessimistic one: that largely irrespective of individual leadership on either side, American determination to pursue unilateral global leadership (and European acquiescence in this) was bound to bring America and Russia into confrontation, given Russia’s determination to remain one pole of a multipolar world. ‘America, the global power, believes that its role is to lead. Russia refuses to be led.’”
Defense and aerospace:
- See section Military aspects of the Ukraine conflict and their impacts above.
Security, law-enforcement and justice:
- No significant developments.
III. Russia’s relations with other countries
Russia’s general foreign policy and relations with “far abroad” countries:
- “President Vladimir Putin’s war against Ukraine is both a strategic conflict with the West to reshape the post-Cold War European order and an identity project for Russia. While the strategic aspect has been well studied, the second roots of the war are more complex because the Kremlin has produced multiple ideological narratives on Russia’s nation building. This nebula of contradicting frames has been used opportunistically, and interpreting which node is genuine enough to inspire causing such calamity in Ukraine has not been obvious.”
- “Reading Putin’s Russia projecting itself as an empire by design is analytically mistaken: the empire has been a progressive reinvention of the country’s political and territorial identity, implemented because the other projections of Russia’s great-power status have failed. Consequently, interpreting the quest for territorial expansion in Ukraine as pure imperialism for the sake of just getting bigger is also misguided: not every territory is worth reconquering.”
- “The Kremlin is not interested in reintegrating Central Asia, for instance, and probably even not most of the South Caucasus. Instead, the quest is a blend of responding to strategic and normative challenges posed by the West and recreating a mythified Russia in which historical junctures and territorial discontinuities would be erased or repaired.”
- Ukraine finds itself the central piece of both components of the blend: it embodies the failure of Russia to be attractive enough to keep Kyiv in its orbit against Western competition and symbolizes the historical and territorial disjunctures that have broken the mythified east-Slavic unity.”
- “India has developed such extensive relations with post-Soviet Russia in political-diplomatic terms and military domains that the result is a strong bilateral strategic partnership. At the same time, however, the last two decades saw India build an increasingly strong relationship with the West in general and with the U.S. in particular (as, by the way, Russia pursued a close relationship with China). As a result, the war Russia launched earlier this year in Ukraine has confronted India with difficult strategic choices as it strives to balance relationships with Washington and with Moscow while competing with Beijing. However, such balancing should not prevent India from inferring lessons from the Russian-Ukrainian war, which will have significant long-term implications for India’s aforementioned balancing efforts.”
- “The Indian military believes in the adage that the best teacher of war is war itself, albeit brutal and costly. India’s military strategists are, therefore, watching the ongoing Russian-Ukrainian war closely and I am no exception. In my view, the war has so far produced seven major lessons.”
- “One: Pre-war optimism can backfire, but the offensive side can limit the damage if it adapts early in the game.”
- “Two: Never underestimate terrain, especially urban terrain.”
- “Three: To survive, the tank must reinvent itself.”
- “Four: If skies are contested, balance the use of warplanes with drones and missiles.”
- “Five: High-precision munitions matter more than ever.”
- “Six: When it comes to logistics, don’t push, pull.”
- “Seven: People matter.”
- “Russia is increasingly leaning on Turkey to ease its international isolation after the West imposed sweeping sanctions on Russia since its assault on Ukraine began in February. Turkish President Recep Tayyip Erdogan needs foreign currency amid an economic crisis resulting largely from his own monetary policy, economists say.”
- “From energy and industrial hardware, to Russian oligarchs parking their yachts on Turkey's glittering Mediterranean coast, the deepening relationship with Russia has sharpened concern among senior officials in Washington and Europe that Turkish policies are working against the Western sanctions imposed on Russia.”
- “Russians opened 500 companies in Turkey in the first six months of this year, more than double the number of firms started by Russian nationals in the country in all of 2021 … Turkey's exports to Russia grew by 75% in July over the previous year, as Russians pivoted to Turkey to replace off-limits European imports.”
- “Since April, Russians have become the number one foreign buyers of housing in Turkey, according to government statistics, leapfrogging Iraqis and Iranians as top investors. Russians bought more than 1,000 units of housing in Turkey in July alone, nearly double what they bought in March.”
- “Russian-Turkish energy ties are also deepening. Taking advantage of a discount triggered by the war, Turkey doubled its purchases of Russian crude oil from January to August, trade data show. Turkey's gas imports from Russia are up 51.9% so far this year compared with the same period in 2020.”
- “Turkish exports to Russia in July surged 75% compared with the same period last year, according to government data.”
Ukraine:
- No significant developments.
Russia's other post-Soviet neighbors:
- No significant developments.
Footnotes
- Here and elsewhere Italicized text represents contextual commentary by RM staff.
- Kanwal Sibal is a retired career diplomat who retired as Foreign Secretary to the Government of India. He served as India’s ambassador to Russia in 2004-2007.
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