The US involvement in the war in Ukraine is intended to cause a strategic defeat of Russia and weaken it so that in the future it cannot create any problems for them, allowing them to focus entirely on China.
Let’s expect a continuation of hostilities during the winter
We must expect a winter escalation of hostilities. We will definitely see her either in December or early next year. There is no reason to take a break, while at the same time, Russia will increase the number of forces at the front. As far as we know, only a small part of the conscripts have now been transferred to the battlefield. Most of them are still in Russia, sometimes far from the NVO zone where they are trained.
At the same time, issues related to their equipment are being resolved. All this takes time. But when all these issues are resolved, the transfer of troops and volunteers to the front will mean an increase in the number of Russian forces in the theater of military operations. Such an increase in numbers cannot go unnoticed and will be a radical change in the situation and balance of power.
Russia’s budget plan
Russia’s budget plan assumes a sharp increase in military spending for 2022 and 2023 and a decrease in defense spending in 2024. Consequently, the main projection from which the Russian leadership proceeds is the continuation of hostilities through all or most of 2023.
But it is possible that the conflict will end a little sooner or much later. Much later is, unfortunately, also a very real prospect. The conflict can go on for a long time. But I believe time is on our side.
If we do not have serious failures and disasters, the disaster is not that we left Kherson, but if some large Russian group is surrounded and defeated, then gradually the cost of the US to finance the conflict in Ukraine will increase sharply without any positive result for it.
Will Ukraine be the final and irrevocable loser?
Ukraine is already in the phase of final and irreversible loss. Russian authorities have said many times that this is not a conflict between Russia and Ukraine, but a hybrid war between Russia and the United States, in which Ukraine acts as an American weapon.
If you look at the American position and discard the purely demagogic statements, then it all boils down to the stated goal of inflicting a strategic defeat on Russia, which would weaken it so that in the future it would not cause any problems for the United States and allow America to focus entirely in China.
The two sides are waging a hybrid war against each other on Ukrainian soil. Yes, Russia is in a less favorable position than the United States, since it is at war with its own people. And the Americans in the course of this conflict have mainly economic and some political losses.
Ukraine is already in the phase of final and irreversible loss. Russian authorities have said many times that this is not a conflict between Russia and Ukraine, but a hybrid war between Russia and the United States, in which Ukraine acts as an American weapon.
If you look at the American position, then it all boils down to the stated goal of inflicting a strategic defeat on Russia, which would weaken it so that in the future it would not pose any problems for the United States and allow America to focus entirely on China.
The two sides are waging a hybrid war against each other on Ukrainian soil. Yes, Russia is in a less favorable position than the United States, since it is at war with its own people. And the Americans in the course of this conflict have mainly economic and some political losses.
But the main thing is that the fate of Ukraine is not of primary interest to any of the players. Most likely, it is not of primary interest even to the leadership of Ukraine itself, which is concerned with the issues of its own future, well-being and political survival.
The damage done to Ukraine cannot be repaired in any reasonable time. Ukraine already at the time of the start of the war was functioning as an economically bankrupt state. Keeping it running depended on a constant influx of external financial assistance from international financial institutions.
Now we have reached a situation where Ukraine needs external injections of 3 to 5 billion dollars a month just to function. The Ukrainian budget for next year assumes that 58% of revenues will consist of foreign loans and grants. But the state budget was drawn up before the start of Russia’s strategic bombing campaign of Ukrainian infrastructure. In fact, the situation will get even worse. Ukraine is likely to reach a point where its budget will depend on foreign aid for up to 80%.
Why does Ukraine’s financial disaster matter?
Here, the question arises of comparing the resources of Russia and the resources of the United States. America has more. But for Russia now the Ukrainian conflict is the main and only thing on which forces are thrown. And the US has interests around the world.
For example, for the US there is a very costly arms race with China in the Pacific, which is not going very well for them. Other areas of US interest are the Middle East, Africa, Latin America.
In the eight months of 2022, the amount of declared Western aid to Ukraine exceeded $105 billion. This is an amount that far exceeds Russia’s annual defense budget. And more than half of that amount is accounted for by Americans. But the year is not over yet. And next year, for various reasons, will be even more costly for the West.
In the early period of the conflict, Ukraine fought using huge stockpiles of Soviet weapons. Take, for example, anti-aircraft missiles. The Soviet Union left so many missiles for the S-300 that discussions about their depletion only started after 9 months.
But soon the Armed Forces of Ukraine will have to use tens or hundreds of anti-aircraft missiles of modern Western systems per day. If we are talking, for example, about the NASAMS complex, then an anti-aircraft missile there costs more than a million dollars.
The ASK IRIS-T complex has an anti-aircraft missile worth more than 400 thousand euros. As a result, in the first 12 months of the war, the Western world will have to spend 120-130 billion on Ukraine. Next year this amount will be even higher. Of course they will. But how much longer can this go on?
After the destruction of the cities a new wave of immigration will begin
After the destruction of the cities a new wave of immigration will begin. The total loss of population may reach ten million people. The bulk of those who have left are able-bodied women of reproductive age and children. This is a strong and irreversible blow to the economy and demography, the loss of the last competitive industries, the destruction of infrastructure.
Even before the start of the war, Ukraine was not able to independently maintain all the infrastructure inherited from the USSR, fulfill its social obligations and maintain the health care system.
Although these systems were brutally reduced and “reformed”, the volume of liabilities for pensions and social benefits remained significantly higher than that of developing countries with similar socio-economic indicators. Now, because of the massive destruction, dead and injured, these liabilities will increase dramatically, while the economic base has been destroyed.
Of course, there will be reconstruction after the conflict. But we know how such a recovery usually goes. The money allocated will fall into the hands of Western contractors. Something, of course, will be built but it will not compare to the damage that has been done. After the end of the war in Ukraine, such a financial hole will be created that even none of the revenues confiscated from Russia will be enough to close it.
What can we expect then?
What is happening to Ukraine’s infrastructure and economy is certainly not leading to the collapse of Ukraine. It’s not going to happen. Or maybe not until a certain point in the future when the tipping point comes. But we can’t count on that.
We expect the gradual undermining of the combat capability of the Armed Forces of Ukraine due to high casualties, the appearance of holes in their logistics due to the destruction of the economy, and the sharp increase in the costs of Russia’s main enemy, the USA, in order to continue this conflict.
Judging by the recent statement of the president of the European Commission, Ursula von der Leyen, the losses of the Armed Forces of Ukraine in dead people alone exceed 100,000 people. In fact, for a variety of reasons, they can be larger. They are several times higher than the losses of the forces of Russia, LPR, DPR and volunteer formations. These losses will increase.
The United States will also feel the effect of this, because it will have to spend additional tens of billions of dollars to keep Ukraine in combat mode. And Europe will have to deal with a few million additional Ukrainian refugees.
What are the chances that the conflict will be transferred to the “old” territory of Russia?
On a small scale, this conflict has already been transferred there. We have continuous bombing of the border area of Russia. However, possible attempts by the Ukrainians to enter this territory deeper to occupy some border settlement for propaganda purposes, will lead to undesirable results for Ukraine.
On its “old” territory, Russia is ready to use units manned by conscripts. A full-scale entry of Ukraine into this territory would increase the manpower available to the Russian leadership, which it has so far refused to use for political reasons. We cannot rule this out. We see that the Russian administration is preparing for such a scenario by building a system of fortifications along the border. But it is not certain that this will happen.
Another theoretically possible option is to move long-range weapons into Ukraine and start firing deep into Russia. If this happens, it will lead to a nuclear escalation of the conflict and a possible withdrawal of Russia from certain agreements on the non-proliferation of weapons of mass destruction, for example from the missile technology control regime.
What is the point of Russia refusing to supply overseas ICBMs that can hit the US to those willing to pay for them, if the US is supplying Ukraine with missiles that reach major Russian cities?
The loss of the European energy market & How high is the cost to the Russian economy?
The loss of the European energy market is a severe blow to the Russian economy. But the loss of ties with Europe is a trigger for changing the basic foundations for the functioning of the Russian economy as a whole.
For most of its post-Soviet history, Russia ran a huge foreign trade surplus and a huge current account surplus. The funds thus obtained were either accumulated as Central Bank reserves, or were exported in some form abroad and invested there.
Within the economic model we had, this money simply could not be used in Russia. Any such efforts would lead either to an excessive strengthening of the ruble exchange rate and the destruction of domestic industry, or to an acceleration of inflation.
As far as we know, this year the budget deficit in Russia will be about 1% of GDP. And at some point a budget surplus was generally expected. For such a full-scale conflict as we now have, this is an unprecedentedly positive fiscal indicator. This means that Russia conducts the special operation in Ukraine very carefully and tries to minimize its costs.
Of course, we still have a decline in the economy. But the whole question is the magnitude of this decline. At the initial stage of the conflict, several economists predicted a drop in the country’s GDP of up to 23%. Such errors in calculations were due to the fact that the necessary scientific apparatus for accurate prediction was not available. To make a prediction, statistics about similar situations in the past are required. But there were no such situations. Previously, no one had ever imposed such sanctions on a country as large and integrated into the modern global economy as Russia.
Now you believe the decline to be less than 3%. At the same time, it happens mainly at the expense of the service sector. In industry, the decline is minimal. Employment remains high. From an economic point of view, we definitely have a crisis. But it is milder than some of the traditional macroeconomic crises we have experienced. The main effect of this crisis is not in macroeconomic terms. It is that the rich and the upper part of the Russian middle class have lost access to some of the types of consumption to which they are accustomed. But these are things which at the present juncture can probably be neglected.
Findings-Conclusions
We should expect an escalation of military operations in December-January in Ukraine, that the war will continue in 2023 but not in 2024, that the participation of the USA on the side of the Ukrainians is intended to weaken Russia, so that they can focus on the fight against China, that the war has shattered the Ukrainian economy whose continued US-NATO arming will be unsustainable financially, that Ukraine will face a serious migration problem even after the end of the war, that he does not expect the fall of the Ukrainian government , but also not sending missile systems from the USA to the Ukrainians in order to hit Russian cities, since this would even mean the start of World War III.
We should also expect that a new wave of mobilization from Russia is not immediately likely, that the economic sanctions did not hit the Russian economy as much as initially expected, although the energy independence of Europe from it is a hard economic blow for Moscow, that the standard of living of Russian citizens will not change radically due to the economic sanctions of the West and the war in Ukraine, that because of these Russia is called to act autonomously by putting forward as an example Iran and North Korea, while finally it appears in Russia that there is a possibility of ending the war if USA and Russia agree on it.
The future will show!!!!
