Weekly Overview Cables - Ukraine war, Washington's wrong signals, price caps on Russian oil, and Putin's "rational actor" threat display.
Ukraine war updates.
Ukraine’s counteroffensive & outlook.
Russia is intensifying shelling of Bakhmut in the Donbas region- a city that is now in effect utterly destroyed and largely uninhabitable.
Strikes against Ukraine’s critical infrastructure continue - though Kyiv declared that 60/70 of the Russian missiles launched on Monday were shot down.
Although increased capacity of Ukrainian air defenses is good news, Russia’s attacks create a strategic dilemma for Kyiv - they can choose to protect key infrastructure and cities, or frontline troops - but with the current stock of hardware and the surface to air missiles supply, not both.
(side note: these infrastructure strikes additionally cause huge economic toll, and aim to create new waves of refugees into Europe - Putin wants to convince the West that a long war of attrition will cost them dearly, and that they should therefore press Ukraine into major concessions)
In other words, Ukraine’s problem is rapidly switching from one of capability, to that of capacity - something that the West can help to fix with a simple solution - continue to saturate the country with air defense systems.
Against this background then, it was not impressive to learn that the latest tranche of the US military aid (of largely anti-drone / air defense systems) amounted to only $275m - a number considerably lower than those of the previous weeks.
Washington must stop sending unacceptable signals to the Kremlin.
The war in Ukraine is approaching a crucial stage - Putin is solidifying his defensive line in Donbas, and is hunkering down for a long war of attrition.
In the meantime, (more on that later below) he is sending signals that he is open to a potential negotiated agreement - since, either he will secure major gains/freeze the conflict at a new status quo, or will manage to delay further Ukrainian gains until Russia itself has had enough resupply (via Iran and other means).
It is essential therefore, that Washington avoids making major signaling mistakes at such a crucial moment.
And yet, such strategically self-defeating signals continue to come out.
We previously discussed the harmful comments made by the most senior US General Mark Milley - that Ukraine should negotiate while it can, and that its outright victory was improbable.
Now, apparently this sentiment was not shared by either the White House nor the State Department.
But recent signals give a reason for a pause.
First, there was an embarrassing revelation that the US had secretly altered the HIMARS rocket launchers sent to Ukraine - to prevent the possibility of long-range strikes deep into Russian territory.
This fiasco comes with two major implications:
1) It diminishes America’s threats credibility vis-à-vis Russia: if America is this concerned about triggering Moscow, then why should the Kremlin take its threats to wipe out the Russian army in the Ukraine (and Navy in the black Sea) in relation to Russia’s potential use of tactical nuclear weapons seriously?
and;
2) It implies that the trust between Kyiv and Washington is so low, that American leaders don’t expect Ukrainians to stick to the agreed-upon parameters in relation to HIMARS use.
This is a terrible signal to send: for this has a potential to mislead the Kremlin that the relations between Kyiv and Washington are significantly worse than they first appear, and that a new divide & conquer campaign may pay some dividends.
Adding to this fiasco, was Secretary Blinken’s statement of ‘‘support’’ for Ukraine to restore its territories lost after the February 24 invasion.
There was a conspicuous omission of Crimea.
In other words, and looking at the most recent signals, Putin may very well infer (in addition to the general lack of appetite for a confrontation) that Crimea is becoming a red line for Washington - not just for the Kremlin.
Looking at these signals, one of two possibilities come to mind: 1) Washington is in the process of (if it hasn’t already) altering its war aims in Ukraine, and is now willing to freeze the conflict, or 2) These are some very basic signaling mistakes.
One hopes that it is the latter that will stop immediately.
Price caps come into effect - Russian threats & unintended consequences.
The G7 coalition’s $60 cap on the price of Russian crude oil came into force last Monday.
As expected, the initial cap wasn’t radical enough to cause massive spikes in the prices of Brent Crude.
On the contrary, prices fell from $88.50/bbl on Monday, to $76.82/bbl by the end of the week (Brent basis).
Predictably, Russia retaliated with threats to cut production and refusing to sell to those insisting on sticking to the cap.
But the EU and US are already not buying at all - so a refusal to sell to the rest (agreeing to follow the cap) will eat into Russia’s revenue.
And in relation to production cuts, OPEC will likely beat Russia to it (if it senses a need to do so).
Furthermore, with the world going towards a recession in 2023, the demand for Brent crude oil is unlikely to rise significantly.
China’s reopening will take time, and in any case, Russia’s attempts to raise the price of crude will not go down well with Beijing.
And if Russia was to succeed in driving up the prices, well there are alternative suppliers ready to come in at a lower price point.
For example, India is already courted by Iraq - which is pricing its ‘‘exclusive’’ offer at an average discount of $9 per barrel to that of the Russian crude.
There were however, some unintended consequences of the G7 Buyer’s club threat around tanker insurance (refusal to insure those not abiding by the price cap).
Worried about the catastrophic costs of cleaning up oil spills absent proper insurance, the authorities in Ankara have doubled down on stricter insurance checks on tankers passing through the Turkish straits.
Consequently, the immediate effect has been a logistical bottleneck of mostly Kazakh crude unable to transit the Turkish straits.
These are however, likely to be temporary setbacks only - it is not in Turkish interests after all to cause massive bottlenecks and raise the cost of crude oil - adding to the domestic inflation is clearly not in Erdogan’s interests.
Overall then, the introduction of price caps has thus far gone according to plan - it will be some time before they produce the intended dents in Russian revenue.
The G7 coalition must however follow up periodically with further price adjustments - gradually lowering the oil prices to the point where Russia will start to feel the dent.
On a broader geopolitical level however, this was a major win for the Western buyer’s club - they are in effect creating an alternative power base to OPEC.
If, to date, only OPEC had a cartel-like grip on the supply of oil - well now, enter the West with its coordinated “buyer’s cartel”.
Once this coalition solidifies and produces early results, the precedent set will be powerful: this is an infrastructure that can be switched on/off to hit a wide range of actors and achieve other geopolitical goals.
OPEC will now have a powerful counterweight - focusing on the long-term trends, perhaps leaders in Riyadh will in many ways be more worried than those in Moscow.
Ukraine’s new wave of successful deep strikes - implications.
Ukraine has engaged in its most consequential and strategically significant deep strikes of high-value military targets in Russia.
First, Ukraine hit the two critical airfields on Monday — the Engels-2 base in the Saratov region and the Dyagilevo base in Ryazan, (which is only a few hours’ drive from Moscow)
The following day, Ukraine followed these with another strike of an airbase in the Kursk region.
Now, there are a number of consequences of these successful strikes:
1) There are direct military implications:
Ryazan and Engels air bases are two of the largest air bases in Russia, and 2/3 of air bases that store the Tu-95 Strategic Bombers.
With Ukraine’s demonstration of an incredibly long reach of its offensive capacity, the safety and military utility of Russia’s critical air bases are now under threat.
This could push Russians to relocate their strategic bombers to air fields further out in Russia - securing Ukrainians further time and notice of impending air strikes: and this extra time could help Ukraine to repel and neutralize far higher proportion of air strikes.
2) Debates around supplying Ukraine with long-range fires become obsolete.
This is now a moot point - it is pointless to even approach the discussion from the angle of ‘‘respecting the Kremlin’s red lines” or ‘‘avoiding further escalation with Russia”.
Like it or not, Ukraine is striking legitimate military targets within Russia.
This is not a new capability anymore - the Western help could add to the frequency of these attacks, but provision of ATACMS, long-range cruise missiles, or fighter jets/long-range drones, will not in themselves create a new radical reality on the ground.
This is going to become another one of belated realizations for the West - there were similar initial worries around HIMARS and Switchblade drones.
One could only speculate, but perhaps if the US did not delay the provision of HIMARS’ to late June/early July, and instead offered these right from the beginning, Ukraine could have saved Mariupol and Sievierodonetsk from suffering total annihilation, and maybe even occupation.
A similar dynamic is now in play in relation to long-range fires - there is no good reason to refuse their supply.
Ukraine will continue to hit high-value military targets within Russia - the West can only help to expedite things and prevent a lengthy stalemate.
3) Signaling pressure on Russia’s nuclear deterrent.
It is unclear what exactly caused explosions in these airfields.
However, a widely accepted explanation (also advanced by Russia’s MoD) is that Ukraine successfully remodeled a jet-powered old Soviet Tu-141 reconnaissance drones - turning them into semi-modern attack drones carrying a payload.
If this is true, then that is really bad news for Russia - since these drones have a range of 1,000km and could therefore strike deeper into Russia.
In addition, the success of this attack raises questions around the efficacy of Russia’s air defense systems.
These were not some hypersonic drones/highly maneuverable cruise missiles - once again, Tu-141s are jet-powered and slower than almost all missiles and drones currently deployed by either side.
If Russia cannot defend the airspace of its highly strategic airbases that store Tu-95s (strategic bombers that are meant to deploy nuclear weapons), then how credible is Russia’s second-strike capability? (a country’s assured ability to respond to a nuclear attack with powerful nuclear retaliation against the attacker).
If even Ukraine (with its remodeled drone) can successfully strike 2/3 air bases storing Tu-95s, then what about a more modern power?
What is the effective limit on the US? On NATO?
In a hypothetical conflict, would Russia even survive a first nuclear strike to retaliate?
(side note: and yes, there is the ‘‘dead hand’’ system to ensure a second strike. But this is also an old system - it is unclear whether it is still operationally effective or even in use)
All of these will most definitely have significant signaling implications on Russia - not only will they have to improve their air defenses substantially, but the Kremlin now has further incentives to convince adversaries of the efficacy of its second-strike capabilities.
This will no doubt be an area of close interest, observation, and scrutiny for the American game theory & nuclear deterrence scientists and strategic advisers.
Putin revives his ‘‘rational agent’’ nuclear threats.
This was yet another eventful week in the Ukraine war - but this was not limited to actual battlefield maneuvers only: both sides engaged in further battle of narratives.
In spite of all the hardship and suffering endured by Ukraine, President Zelensky (at an event with European leaders) stuck to an optimistic tone - predicting “peacetime” for Ukraine in 2023.
Contrast this with Putin’s warning that the war might turn out to be ‘‘a long process’’.
Statements flow from incentives: Zelensky is displaying a will to fight, and is reassuring relatively tired Europeans that he can finish-off the job.
Putin is doing the opposite: warning the West that they are in for a long slog at this rate, and at a current trajectory.
(side note: he did this whilst hinting that he is open to the possibility of a new agreement with Ukraine - in other words, any ‘‘breakdown in negotiations’’ should be blamed on Ukraine only)
Zelensky’s purpose is to reduce the western pressure to ‘‘negotiate’’ - exactly what Putin is seeking to amp up.
In addition, Zelensky is providing hope to a nation about to go through a cold winter with inadequate infrastructure - the death toll is likely to be very high.
Putin needs to manage expectations, and is trying to preempt future bad news to increasingly agitated Russians (increasingly in favor of negotiations).
But the frame war did not stop here.
Putin once again decided that it was a good time to revive his “cold-blooded yet rational agent” nuclear threats.
We have previously discussed how Putin’s earlier threats (in February/March) were more over the top than necessary to maintain threat credibility - he was overdoing it.
And every threat had to sound more urgent and escalatory to remain at least somewhat credible.
It did not also help that the wider Kremlin leadership added to this dynamic - for example, with former President Dmitriy Medvedev’s unnecessary and even more dramatic rhetorical contributions.
Things have now changed - all recent threats come with a caveat: indicating that Putin is fully aware of the potential consequences, and yet, decided to proceed with these threats anyways: and this then bolsters the credibility of such threats.
And indeed, this is exactly what he did in the past week.
He spoke generically about an increase in risk of a nuclear war, (adding specifically, that Russia was in possession of “more advanced and modern” nuclear capabilities than any other country).
But then a crucial caveat was added: “We have not gone mad, we are aware of what nuclear weapons are…We aren't about to run around the world brandishing this weapon like a razor."
The timing of this statement was particularly interesting given that shortly before Putin’s remarks, the German Chancellor Olaf Scholz claimed that "Russia has stopped threatening to use nuclear weapons. As a reaction to the international community marking a red line."
(side note: ironically, the very same German Chancellor has also added to the credibility of Russia’s threats by maintaining that Putin had “not gone mad’’).
Putin is clearly undermining Scholz’s claims that West’s ‘‘red line’’ was to be praised for reducing the risk of the nuclear war - he is recovering control of the narrative.
And such a clear and (most likely) deliberately-timed rebuke of Scholz’s analysis aims to further undermine the global prestige and weight of the German Chancellor’s statements.
But have the risks actually increased?
Not really.
Putin has paused his maximalist war aims in favor of solidifying his defensive line in Donbas - hence why he is expending so much fire and manpower on relatively unimportant, and both strategically & symbolically insignificant cities like Bakhmut.
Indeed, Putin most likely genuinely believes that the tide could turn in 2023: with likely recession all over the Western world, Europeans getting increasingly tired and failing to generate a united front (see how just one country like Hungary can block a common/united policy (of providing $18.93bn of aid) on Ukraine), and the House of Representatives in GOP hands, the next year may turn out to be far more favorable - at least contextually.
Add to that: he sees how the most senior US General (Mark Milley) is arguing for Ukraine to re-enter negotiations, how the US is bending over backwards to restrict long-range capabilities of their supplied missiles, and how (per the implication of Blinken’s own statements), Crimea is becoming an official no-go for Washington.
Given all that, why would he ruin the possibility of freezing the conflict with at least some territorial gains?
Only two things could potentially push Putin in the nuclear direction: sudden rapid advances / total collapse of the Russian army in Donbas, and/or possibility of losing Crimea.
Both are unlikely to happen any time soon, and even then (and as discussed in the previous cables) there are other options and weapons available to Russia that could still send the message of red line.
So instead of worrying about remote risks, the West must be concerned about dealing with more pressing realities: Iran’s supply of ballistic missiles to Russia.
It has been reported that Russia may offer unprecedented military service in return.
This will most likely be the supply of the S-400 air defense missiles/Su-35 fighter jets, and training on shooting down stealth fighter jets: helping Tehran to boost its defenses against potential joint Israel/US air strikes.
Washington must first deal with these urgent and pressing risks (arming Ukraine with long-range drones, fighter jets, Leopard/Abrams tanks, and more long-range air defense and surface-to-surface missiles) - only then would it be appropriate to discuss how to ensure an orderly Russian defeat.
We are really far from that reality right now, and if the West does not step up, the tide might once again turn against Ukraine - as it happened so many times before during this war.