Weekly Overview - Ukraine War, McCarthy's pathetic comments, and punishing Iran for arming Russia.

(*note: China’s 20th Communist Party Congress, and the corresponding geopolitical implications will receive a separate focused attention on Thursday’s cables)

Ukraine war updates.

• Ukraine’s counteroffensive & outlook.

• Perhaps the best news of the past week: EU is to train 15,000 Ukrainian soldiers.

• A policy that these cables have been calling for since at least last Spring.

• (side note: though the scale of this training is still not adequate. The scale of training provided by a union of 27 states must be the multiple of that provided by the UK - not a mere % increase. And the US must of course lead both in terms of scale and the processing speed of this training).

• Desperate to warn of further escalation in Ukraine via indirect means, the Russian Defense Minister Shoigu called his NATO counterparts warning of Ukrainian escalation and false flag attacks (allegedly involving fake radioactive material laced explosives).

• Translation: we might do something extreme and lay the blame on Ukrainian false-flags - pull back your support and push Kyiv for de-escalation and force them to negotiate with us.

• This is of course not the only tactic that the Kremlin used this past week to pressure Ukraine and the West to negotiate with them.

• Russia resorted to high-leverage, ruthless, and civilian-targeting attacks by targeting Ukraine’s energy infrastructure.

• At least half of Ukraine’s thermal power capacity was incapacitated due to Russian strikes, and there is now a talk of retreating Russian forces destroying the Dam in Kherson - a potential humanitarian catastrophe that could lead to the death of hundreds of thousands of Ukrainian (and many Russian) citizens - precisely why this is so unlikely to take place: political, economic, and military (in terms of escalated NATO response/military aid to Ukraine) costs for Putin would be enormous.

• The purpose is not only to sap morale, redirect war efforts and resources away from offensive in Donbas and the southeast, but also to create another energy crisis for the already tired EU to deal with.

• At this rate, Ukraine will be faced with a major humanitarian catastrophe come winter.

• This would not only weaken the Ukrainian state, crush the output of its hardware based and massive energy-consuming industry, but also force the West to foot the extra bill: both via direct aid, and in the form of dealing with further humanitarian refugee inflows.

• Time is the only factor that Putin believes is in his favor.

• He is still convinced that he will outlast the West in this total war of attrition.

• And unfortunately, certain statements from the Western officials (more on that later below) reinforce this perception - leading to the repeat of further attacks under the very same strategy.

• (side note: of course for all the outward bravado, in the meantime, Russia is continuing to lose control over its occupied territories, and failing to contain Ukrainian saboteurs - hence the need to declare martial law in the occupied territories, as well as in the regions in Russia proper that border them)

• The West must respond promptly & decisively:

• 1) It is a small comfort that Ukraine is shooting down more than 80% of the slow and low-flying Iranian Shahed-136 drones.

• At the cost of only $20,000, their survivability is not the point.

• As long as few of them reach the target and inflict significant damage to Ukraine’s key civilian infrastructure, their mission is accomplished.

• Consequently, the West must expedite the provision of air defense weapons.

• Frankly, these should have been supplied way earlier - as always advocated by these cables.

• Having said that, the provision of German IRIS-Ts, and Gepards (especially useful in targeting the low-flying drones - freeing more expensive missiles of IRIS-Ts and NASAMS to deal with more significant threats) is great news.

• Israel should be pressured to provide actual weapons - Iron Dome and Arrow systems.

• Israel’s offer to help with building the air defense alert systems without the provision of actual hardware/missiles is not good enough.

• Lapid is probably waiting for the conclusion of Israeli elections, and given the Iran-Russia nexus, persuading Israel should not be too hard.

• 2) Ukraine must receive help in rebuilding its energy infrastructure.

• Direct assistance is needed.

• NATO military engineers and volunteer private sector engineers must be deployed to rebuild Ukraine’s power capacity.

• The damage done is most certainly (in most cases) not irreversible, and can be repaired by the end of this year.

• After all, most of these hits were caused mainly by cruise missiles and/or loitering Iranian drones - not carrying huge payloads like ballistic missiles or bunker busting bombs.

• 3) Provide more money - not just loans.

• The EU must step up its game and provide grants like the US (Washington is currently committed to providing monthly $1.5bn grants).

• Loans, no matter how affordable, will still add to Ukraine’s debt, and will thus amount to a drag on its creditworthiness in the international bond markets.

• In addition, the longer the EU drags its feet, the more likely it is that there is a political backlash from GOP here in the states - this will become an especially acute problem after the midterms (if as it is now projected, the GOP takes over at least the House if not both chambers).

• “Why are we the ones footing most of the bill for a war in Europe?” will be a common question and objection raised.

• Of course a misguided line of thinking (more on that later below), but one that is still likely to take place nonetheless.

A shortsighted congressional GOP leadership puts America’s credibility at risk.

• House minority leader Kevin McCarthy - a man who is already not known for his statesmanship - made some extremely damaging statements on the long-term viability of a continuous US support to Ukraine:

• “I think people are going to be sitting in a recession and they’re not going to write a blank cheque to Ukraine… ”.

• Naturally, this did not sit well with our Ukrainian allies..

• David Arakhamia, head of Ukrainian president Volodymyr Zelenskyy’s party in parliament, said the following: “We were shocked to hear these comments of Mr McCarthy, honestly…Just a few weeks ago, our delegation visited the US and had a meeting with Mr McCarthy. We were assured that bipartisan support of Ukraine in its war with Russia will remain a top priority even if they win in the elections. [emphasis added].”

• This is what it has come to - our allies now pray for a certain outcome in midterm elections so that America’s stance doesn’t flip.

• Unfortunately, higher level thinking and appreciation of advanced concepts such as grand strategy on the world stage, and pursuance of long-term national interests is beyond the capability and character of many congressional GOP members - who are more concerned with fringe and largely irrelevant domestic social issues like (rapidly dying) wokism.

• There remain only a few true statesmen in the GOP - individuals like Mike Pompeo, Senator Romney, Congressman Brian Fitzpatrick, and perhaps a few others.

• So the, rebutting McCarthy’s arguments by appealing to the defense of America’s strategic interests will be quite tough, but try we shall:

• 1) Staying power.

• Kevin McCarthy must open his eyes and realize that his comments play right into Putin’s hands.

• Putin’s entire invasion was premised on a number of faulty assumptions.

• Betting against America and EU’s resolve was one of main foundations for his decision to invade Ukraine (alongside with too much confidence in his military, conviction that Ukrainians will not resist for too long, and overestimating the competence of FSB’s sleeper cells in capturing/assassinating Zelensky and facilitating a pre-planned coup).

• It was his bet that America will grow tired, and will not have the staying power to follow through in its support for Ukraine.

• People like McCarthy are exactly what Putin hoped for - fortunately for us and for the entire world, at the time of his invasion, the reins of power were at the hands of responsible statesmen in DC.

• The GOP leadership must wake up to the fact that abandoning Ukraine now, after all that they have been through, would definitively crush America’s credibility on the global stage.

• With such an extreme reversal, America’s threats, warnings, and security guarantees (like on Taiwan), will not amount to very much.

• Our adversaries will be incentivized to do what they please, further wars and campaigns of aggression will become commonplace - Americans will suffer.

• Our security and prosperity - alongside the security and prosperity of the majority of mankind - will come under a major threat.

• 2) A blank check?

• But let us assume (as we should) that such long-term concerns and lofty principles like idealism, statesmanship, and preservation of the US-led rules-based global world order, go over McCarthy’s head.

• So let us then focus on more immediate and concrete gains.

• The US has spent under $20bn (let’s round it up to account for covert aid) on the military assistance to Ukraine - that is approximately (depending on precise numbers) 2-3% of America’s annual defense budget.

• Let us further assume direct budgetary aids and other humanitarian/financial assistance amounting to $50-70bn by the end of this year.

• What are the most immediate and practical gains for the US in return?

• A total humiliation of Russia’s paper tiger army on the global stage - damaging the credibility and prowess of China by association.

• A major distraction for Russia - enabling new powerful states like Sweden and Finland join NATO - further reducing the future costs of defending the alliance.

• Forcing Russia to redirect resources away from the Middle East, South Caucasus and Central Asia - allowing America and its allies to step in and fill in the power vacuum - denying the strategic space to all of our major adversaries: Russia, Iran, and China.

• The strategic gains are immense - we could go on forever - as we have done in previous cables and will continue to do so in the future: foreign policy/realpolitik opportunities are endless.

• Suffice it to say, this is far from a blank check.

• In fact, in terms of pure ROI, this might be the best foreign policy decision that America has ever made: only financial support & lend lease to the UK and Soviets during WWII, and the Marshall plan to reconstruct Europe (and create a buffer against the Warsaw pact and contain spread of Soviet influence), could compare as major successful foreign policy investments.

• (side note: and even then, the latter two involved much higher $ investment. So in terms of initial input to output ratio, it is highly likely that nothing can beat the decision to provide financial and military aid to Ukraine).

• 3) What is the alternative?

• What is it exactly that McCarthy is proposing here as a substitute policy to supporting Ukraine with all of America’s military and financial support?

• Provide a half-hearted support? Enough to prevent a total collapse of Ukraine, but not enough to end the war quickly? Encouraging Putin to double down in the face of little resistance, and leading to a prolonged war of attrition?

• Or perhaps McCarthy’s solution is to withdraw all support and enable a total Russian victory - crushing America’s credibility, prestige and staying power: demonstrating to the whole world that the US is willing to ditch its allies to be slaughtered by imperialist dictators, because… it was simply too pricey..? (which even then, it was not).

• And beyond the most immediate implications, you can bet that Putin will draw appropriate conclusions: his mental model of waiting out until the Western resolve is depleted, would now be confirmed loudly and definitively.

• Is he then going to stop in the eastern Ukraine?

• With America’s support withdrawn, and correlation of forces reversed on the battlefield, why would he stop? Why wouldn’t he return to his original plan A of regime change? At the very least, why wouldn’t he try to invade the entire Black Sea coast of Ukraine - choking the entire country and dominating the entire Black Sea basin?

• Putin’s victory means new frontlines closer to NATO - it means more threat to NATO member states directly, and more indirect costs due to Putin’s renewed adventurism in previously active theaters like the Middle East.

• All of this means that America would have to increase its presence and military expenditure to confront these renewed threats from an ever more confident Putin.

• In other words, America would have to pay the price one way or another - delaying these costs simply means a bigger check (in McCarthy’s preferred language) down the line.

• Or is McCarthy going to suggest that America should not get involved in defense of its allies even then?

• Perhaps McCarthy’s vision for America is a hesitant, smaller, uninspiring country, and an unreliable ally - unable to assert its own interests and finding itself in a world order shaped and dominated by its adversaries.

• After all, that would save a few pennies in the short-term right?

• Or perhaps McCarthy simply has no idea what he is even talking about? Let’s hope this is the case and that true statesmen of the GOP step in and reassure our allies that America’s word and commitments are worth much more than McCarthy would like it to be.

The EU punishes Iran for supplying Russia - inadequate & unlikely to move the needle.

• The EU has announced sanctions against eleven Iranians and four institutions in response to Tehran’s supply of drones to Russia.

• It is unclear what the ultimate objective is: to raise costs and deter Iran from further supplies? or to hit the production capacity of the company (Shahed Aviation Industries) that manufactures Shahed-136 drones?

• Ideally, the goal should be both - to deter & incapacitate simultaneously.

• Unfortunately however, the tools deployed are insufficient to achieve either of these objectives.

• The most devastating measures deployed so far - targeted asset freezes - are inadequate to affect any major changes in regime’s conduct.

• The sanctioned individuals are already unlikely to have a significant amount of assets vulnerable to Western freezes.

• Moreover, targeting only one company is not going to do much - this is Iran, not some Western liberal-democracy with strong property law provisions.

• This is a state willing to do anything to sidestep and evade sanctions.

• The regime can simply reallocate resources and use third-parties and other shell companies to secure critical supplies - as they have been doing for years.

• In addition, why is the US lagging behind the EU on this?

• How come a club of 27 nations - notorious for its slow bureaucracy on everything to do with foreign policy - can move so fast in comparison to the US?

• What is Washington waiting for?

• Are the senior White House strategy officials seriously still looking at events from the prism of reviving the JCPOA/nuclear deal?

• Are they seriously worried about triggering Tehran further, and definitively loose the chance to revive the nuclear deal talks?

• If this is the cause for a hesitancy and slowdown, then pathetic is the word that comes to mind.

• And if not this, then what else?

• How can a perpetually slow, consensus-seeking and hesitant EU move faster on this issue than Washington?

• Whatever the cause, this embarrassment must stop, and the US must join the EU in sanctioning Iran.

• But as discussed above, current limited sanctions will not suffice.

• To have any chance at producing the desired effect, the costs imposed must be higher and all-encompassing.

• Specifically, the following measures would be a good start:

• 1) Between themselves, the power structures of Iran - the IRGC, The Basij (a wing of IRGC responsible for violence against protestors), the standing Army Artesh, and the police force NAJA - own hundreds of companies and large corporations.

• Majority of these must be targeted and sanctioned - leaving out some companies for further escalatory sanctions/leverage to be deployed if Iran continues in the current path.

• 2) All major Iranian generals and security forces officials involved in this campaign must be identified, and have Interpol red notices/warrants produced against them.

• 3) Both the US and the EU must officially declare these aforementioned individuals as terrorists.

• The costs have to be immense and comprehensive if they are to have any effect on Iran.

• The regime must be convinced that continuous support of Russia is no longer financially, politically, and strategically tenable.

• And achieving an end to Iranian support is not as unlikely as it may appear on the surface.

• In spite of having their advisers on the ground in Crimea, and overwhelming evidence to the contrary, the Iranian regime is still denying their official involvement in this war.

• They still claim ignorance and maintain this absurd denialism.

• But this is also an opportunity for the regime to abandon this campaign with a minimal loss of face - since if the official line is that Iran is not involved, reversing course must not come with a loud announcement or an embarrassing press release..

• Tehran could simply stop the supply of drones - and do so under the radar.

• They could then follow this by negotiating (related) sanctions relief via a quiet backchannel diplomacy.

• But for such a scenario to have even a tiny bit of chance, the West must double down and demonstrate seriousness of purpose.