Ukraine

To be fair, we’ve been asking this for months on here.

And to be fair I was 100% one of the people who believed the rational that the Russian economy would hit the buffers in late 2023, I reckoned without the massive boost the global spike in energy prices in 2022 gave them, the creation of the ‘shadow fleet’ of oil tankers to get their hydrocarbons onto the market  and the way the emergency measures they put in place prevented capital flight and staved off collapse.

It does however, look like those emergency measures are finally starting to run out of steam, for the Rouble to be in freefall despite eyewatering interest rates of 21% and with the ‘unofficial’ non-government doctored inflation rate reckoned to be around 27% on food, the pressure suddenly seems to be mounting. The massive reserves of gold and foreign exchange they started the war with are now also dwindling.

This has all happened fairly rapidly, the old adage of this kind of thing happening  “gradually. then suddenly” seems to apply here.

recruitment is currently still at about 85% of target – the money on offer is too good to ignore for many.

This is both a major factor in why Russia has been able to continue the war and a huge part of why the economy may be about to crash.

If you’re a man of military age in Russia you’re currently being offered one-of enlisting bonuses of $30,000 (or 3,000,000 Roubles) to sign up, that’s a crazy amount of money and it’s working but it’s costing the Russian state dearly.

The real kicker is that most of the industry  needed to make the war materials is competing for those same precious workers so they’ve had to massively increase wages as well in order to retain staff.

As a result many Russians have felt for the last few years they were doing very well out of the war and this has been key to maintaining Russian public support for it.

However, this has now lead to skyrocketing inflation which is screwing pensioners, state employees and anyone not befitting from the war economy. Civilian businesses now cannot borrow at anything approaching sensible interest rates so investment in that sector has almost stopped as well.

The Ruble is definitely worth keeping an eye on over the next few days.  Something seems to be up/about to happen.

To be fair, we’ve been asking this for months on here

its the only question that matters

Civilian businesses now cannot borrow at anything approaching sensible interest rates so investment in that sector has almost stopped as well.

Government borrowing will be more expensive as well, assuming that they can borrow under sanctions

There are benefits to high inflation, but GDP appears to be falling as well, which can cause lower tax revenues

However, this has now lead to skyrocketing inflation which is screwing pensioners, state employees and anyone not befitting from the war economy.

Absolutely, however, at some point the state has to pay the rising costs of its investment in the war economy.

how long can Russia keep this up?

This article argues that it might be in Russia’s interests to prolong the war, if it can. The question is whether a suffering population shares that view

A protracted stalemate might be the only solution for Russia to avoid total economic collapse. Having transformed the little industry it had to focus on the war effort, and with a labour shortage problem worsened by hundreds of thousands of war casualties and a massive brain drain, the country would struggle to find a new direction.

Thirty-five years after the fall of the Berlin wall, it has become clear that resource-rich Russia has become much poorer than its former Soviet neighbours such as Estonia, Latvia, Poland and Hungary, who pursued the route of European integration.

The Russian regime has no incentive to end the war and deal with that kind of economic reality. So it cannot afford to win the war, nor can it afford to lose it. Its economy is now entirely geared towards continuing a long and ever deadlier conflict. https://theconversation.com/russias-economy-is-now-completely-driven-by-the-war-in-ukraine-it-cannot-afford-to-lose-but-nor-can-it-afford-to-win-221333

Thing is, we don’t get to hear about how much ukraine is hurting – I see very little reporting on the ukrainain economy or its ability to replace lost soldiers.  I’m sure the information is out there, but it would be silly to assume there are signs Russia is in troube and not look to ukraine to compare.

Its turned into a battle of attrition – whilst the west can prop up ukraines economy and provide weaponry to some extent, ukraines fighting population is a finite resource and it must be getting close to being exhausted, surely, they have also lost many many soldiers.  Russia is sourcing troops from NK and Yemen, buying them with oil to prop up its forces.  And weaponry from NK and Iran – though I imagine Iran is sending less than expected since things kicked off on their door step.

Russia is currently advancing faster than at any time since the start of the war, at huge cost yes, but it is slowly capturing more territory

I don’t want to be negative but it doesn’t look good for ukraine, feels like they are only just holding on

Now that N Korea are supplying rounds

Their troops are turning up fully equipped with artillery and MLRS as well.

20,000 containers are estimated to have been exported to Russia by NK since August 2023, including 170mm self-propelled artillery and 240mm howitzer https://www.kyivpost.com/post/41325

Russia is currently advancing faster than at any time since the start of the war, at huge cost yes, but it is slowly capturing more territory

Fields and farming communities in the main, relatively (compared to 2023) quick advances in rural areas…

Russian forces notably have been bypassing Ukrainian strongpoints, and Ukraine still has several well-defended cities in Donetsk Oblast, such as Slovyansk and Kramatorsk, that Russian forces likely cannot seize as rapidly as they have with the rural fields near Pokrovsk. ISW continues to assess that Russian forces have not been able to restore operational maneuver to the battlefield to make deep penetrations into Ukrainian positions, as seen in the initial months of the full-scale invasion. Russian forces have instead been exploiting identified vulnerabilities in Ukrainian defenses to make gradual advances. https://www.understandingwar.org/backgrounder/russian-offensive-campaign-assessment-november-26-2024

It’s a land grab exploiting the long front-lines that Ukraine cannot hope to secure

I don’t want to be negative but it doesn’t look good for ukraine, feels like they are only just holding on

They need more support, some in the west should read this article. Here’s the last line…

Nobody in their right mind wants a third world war. So let’s not bring it about by abandoning the people who are holding it back. https://substack.com/home/post/p-152140067

Thirty-five years after the fall of the Berlin wall, it has become clear that resource-rich Russia has become much poorer than its former Soviet neighbours such as Estonia, Latvia, Poland and Hungary, who pursued the route of European integration.

If Putin had pursued a policy of integration and economic development with all their natural resources and huge population I suspect they’d be knocking on the door of world super-power by now. But he chose to be a massive **** instead and **** the whole country. Beggars belief really.

interesting article about Russia’s new weapon

https://www.reuters.com/world/europe/new-russian-missile-fired-ukraine-carried-warheads-without-explosives-sources-2024-11-26/

Still can’t believe that Pokrovsk is still holding out after the sheer volume of men and material the Russians have chucked at it.

it’s been about to ‘fall any day now’ for months.

I’m sure it’s been hellish for the defenders, but unless the Wes massively steps up selling very inch of soil for as many dead Russians as possible remains Ukraine’s best hope of breaking the Russian home front.  Grim stuff.

If Putin had pursued a policy of integration and economic development with all their natural resources and huge population I suspect they’d be knocking on the door of world super-power by now

Im no apologist for Putin, but I suspect the die was already cast by the time he became president. The free market economic shock therapy under Gorbachev and Yeltsin resulted in the creation of the billionaire oligarchs, who were always going to act as a barrier to anything except more oligarchy.

It would have been an impressive and highly principled politician who could have turned that situation around.

Russian forces notably have been bypassing Ukrainian strongpoints, and Ukraine still has several well-defended cities in Donetsk Oblast, such as Slovyansk and Kramatorsk, that Russian forces likely cannot seize as rapidly as they have with the rural fields near Pokrovsk.

Russians trying to surround the Ukrainians?

Or Russians overstretching their supply lines and risking being cut off deeper inside Ukraine?

Advancing quickly can be a double edged sword. I don’t know which way it’s going to go in this case

Bit of column a bit of column B I suspect.

The Rubble cratering in real time! It’s now 113/$

Indeed, the fall of the Ruble is good to see.
Surely now there’s huge diplomatic ‘yeah, that’s useless currency’ to any country and company still trading with Russia…

Would be great if this is the beginning of massive devaluation and hyper inflation.

Morning catch ups as always….

A different track following some comments on twitter last night about BRICS. Iran and Russia have completed their “de-dollarization” project for bilateral trade. It is suggested that this will follow to an extent across all the BRICS countries and possibly the PetroYuan is the currency of choice… Sticking point being the lack of a SWIFT like payment system which is another work in progresss.. I think chewy made the point that the dollar value is irrelevant if it’s not needed…. and crucially it is a way of circumventing sanctions.

Russia chipping away at the west from another angle.

https://www.iranintl.com/en/202407131723

https://think.ing.com/articles/de-dollarisation-more-brics-in-the-wall/#:~:text=summit%20in%20Kazan-,BRICS%2B%20is%20de%2Ddollarising%20its%20financial%20flows,share%20in%20BRICS%20external%20debt.

 I think chewy made the point that the dollar value is irrelevant if it’s not needed…. and crucially it is a way of circumventing sanctions.

That may be so but the ruble has dropped a lot recently. If the reference currency is not the ruble then they will still be selling Russian stuff cheaply and importing more expensive stuff

China has been developing Cross-border Interbank Payment System (CIPS) since 2015 ^^ as an answer to US sanctions

It can interact with SWIFT and uses their formats and messaging system

the Rubble is performing just as badly against the Yuan and Rupee

Advancing quickly can be a double edged sword. I don’t know which way it’s going to go in this case

If Ukraine keeps chipping away at logistics behind the lines, not well.

Russia doesn’t have overwhelming numbers of trained, experienced troops and the necessary vehicles. They’ve lost 50% of their pre-war troop numbers, which they’re hastily back-filling

Rupee

India wanted to pay for Russian oil in rupees because exchange costs them money. This led to tankers sitting off the coast for a month last year because Russia wanted yuan or $US.

They settled on UAE dirhams for a while, but their banks started to restrict dealings with Russia because of international sanctions

I think chewy made the point that the dollar value is irrelevant if it’s not needed

That makes no sense.

There is still a market rate for the USD vs CNY vs RUB etc.  Although Russia’s oil can be priced in CNY instead of USD that still gives it an implied price in USD – and their customers still won’t be generously paying above the real market rate: quite the reverse.

Correct. If the ruble is falling relative to the USD then in must also be falling relative to the yuan, unless either the yuan is falling relative to the dollar too or there is a massive opportunity for arbitrage traders to make a fortune. The latter may have been possible years ago but nowadays it’s tiny fractions of the price in fractions of a second before everything balances out again.

Therefore if the ruble is falling relative to the dollar it must be falling relative to all other currencies, or at least those without similar problems which are also falling rapidly.

If 100R=1D and 8Y=1D then 1Y must equal 12R. If it doesn’t then people will buy and sell whatever combinations net a profit in the currency they want, but the very act of doing that evens out the price across the market.

I think chewy made the point that the dollar value is irrelevant if it’s not needed…. and crucially it is a way of circumventing sanctions.

I am not an economist. But, my understanding was it’s all well and good getting Yuan and Rupees for your oil, but you can’t pay your population and industry in that foreign currency, so it still needs exchanging.
With Russia massively funded by selling it’s natural resources and to a narrowing group of customers, this is going to increasingly be an issue. This surely is why an ‘oil for guns’ programme is being rolled out – saves any currency exchange?

This surely is why an ‘oil for guns’ programme is being rolled out – saves any currency exchange?

Currency exchange costs and exchanging into yuan was expensive for India. They had to convert to HK$ and then yuan, which totalled 3%-ish

Sanctions have also made the banks everywhere wary, they don’t want to be cut out of the $US

With Russia massively funded by selling it’s natural resources and to a narrowing group of customers

Is that actually true though? I thought that Russia had been able to find new buyers for its oil including unlikely buyers such as Saudi Arabia and the UAE, isn’t that why the ‘shadow tanker fleet’ was established?

And despite Russia restricting natural gas exports to certain member states EU imports increased by 27% in the first half of this year.

Useful analysis here about Russian fossil fuel exports

And despite Russia restricting natural gas exports to certain member states EU imports increased by 27% in the first half of this year.

If you have a play around on the ENTSOG site you can vary calendar dates on a slider and also click on individual pipelines to see flow v capacity https://gasdashboard.entsog.eu/

Russia has two pipelines into Europe now: Russia>Estonia/Latvia which has flowed 500GWh out of a possible 35k GWh and Russia>Ukraine, which I’m assuming is the one that won’t be licensed by Ukraine from January 2025.

Russia>Germany (Nordstream) and Russia>Finland aren’t shown now (NS for obvious reasons) and Belarus has gone from two pipelines to one

I thought that Russia had been able to find new buyers for its oil including unlikely buyers such as Saudi Arabia and the UAE, isn’t that why the ‘shadow tanker fleet’ was established?

Russia has been keeping oil sales going, but they were selling to India (for example) at $10US under market price per barrel.

25 of the shadow fleet tankers are subject to sanctions and Greek shippers have been threatened as well https://www.gov.uk/government/news/uk-cracks-down-on-illicit-shadow-fleet-transporting-russian-oil-globally and https://www.reuters.com/markets/commodities/greek-shippers-exit-russian-oil-trade-us-tightens-price-cap-scrutiny-2023-11-23/

Sanctions on banks have made payments more difficult ^^

So…

Putin’s just said the massive attack on Ukraine’s power grid is in response to the new Western weapons being used. 

Now, that’s shit and a war crime obviously but…

No nukes Putin? All that pallet of baked beans and bog roll I bought gone to waste. Again.

He’s a busted flush.

Putin’s just said the massive attack on Ukraine’s power grid is in response to the new Western weapons being used.

He’d have found some excuse to do it just before winter really sets in, or no excuse and just bombed it anyway. Just like he has the past 2 winters.

Thing is, we don’t get to hear about how much ukraine is hurting

Fair comment, I think it’s fair to say that the average Ukrainan civilian in Kherson and Kyiv is feeling the war far more than the average Russian in Moscow or St Petersburg.

The key metric is the very hard to pin down ‘will to fight.’ recent polling of Ukrainians shows a slow decline of people willing to fight ‘as long as it takes’ to defeat Russia (albeit from very very high levels) and a slow increase in the proportion Ukrainians who want a negotiated settlement ASAP.

The devil is in the detail though, amongst even those Ukrainians who wanted a negotiated settlement the majority saw any kind of territorial concessions to Russia as an unacceptable red line, The Ukrainian public, in short, is oceans away from being willing to accept any treaty that allow Russia to keep what it’s gained since 2022 and Putin will not discuss anything that doesn’t.

Putin has also demanded  that lifting all sanctions are a precondition for any talks, essentially demanding that the West to throw away all their leverage before they even start, this is not the position of anyone serious about negotiating.

It suits Putin to present himself internationally as a reasonable interlocutor who’s open to talks as it gives his useful idiots in the West and elsewhere plenty of talking points and helps undermine support for Ukraine by portraying them as unrealistic and unreasonable.  The truth is he has zero interest in anything other than capitulation and the detail of his negotiating stance shows this very clearly.

Edit: Double post

Edit, Triple post, FFS Firefox!

Attacking ukraines energy infrastructure isn’t an escalation, its exactly what they did this time last year.

When I mentioned how long ukraine can hang for, it wasn’t so much I’m questioning if the will to resist and fight is still present, its more even if they have the will they only have finite manpower and we don’t hear ukraines number of casualties I don’t expect  it to be the same scale as Russia it must still be horrific.

And they don’t have the ability to rustle up 10k+ extra troops by trading their oil & nuclear secrets

WHAT NO NUKES – ¯\_(ツ)_/¯

Almost nobody predicted that ¯\_(ツ)_/¯