In Other News – Putin’s Victory Day Speech – 5/12/2022

May 12, 2022

Putin’s Victory Day speech carefully avoided any indication of escalation, but also didn’t mention any end to the fighting. Putin’s much-anticipated Victory Day speech on Monday revealed nothing new to thousands of Russian servicemen in Red Square and the rest of the world watching for escalatory language. The speech, which focused heavily on Russian operations in Donbas, espoused the same propaganda and rhetoric that Putin’s been using for years, wrongfully asserting that the people of Donbas needed Russians to rescue them. What he didn’t say revealed that Putin has no clear plan on an exit strategy. Instead, this week Russian troops were still trying to claim Mariupol, diverting European gas for their own use, and retreating from the region of Kharkiv to redeploy elsewhere ‒ a tacit admission that Russia is finding it exceedingly difficult to occupy Ukrainian cities.

Moscow continues to blame the United States and NATO for Russia’s incurring losses, with the former president of Russia warning that NATO military assistance for Ukraine increases the likelihood of a “direct and open conflict between NATO and Russia.” But this threat hasn’t deterred those who stand against Russian brutality, and Moscow’s atrocities are further solidifying its opponents ‒ especially as Ukrainian prosecutors prepare to launch the first war crimes trials of the Russian conflict. Notably too, this week Finnish leaders announced they’d seek NATO membership for their nation right away, and Sweden could be next.

The United States and its European allies will continue to provide Ukraine with aid and certain intelligence regardless of Moscow’s disdain. EU nations have taken a hard stand against Russian oil, but Hungary is preventing an EU Russian oil ban. It’s also uncertain how China will continue to respond and there are reportedly rumblings among policy makers within China questioning the value of a weak Russian partner.

As the war drags on, further grinding down Ukraine and Russia, the trajectory of global energy costs, food shortages, and general economic instability will influence how countries respond to Moscow’s aggression and force them to reassess their own geostrategic positioning. This strategic ambiguity is prompting widespread and often indirect system effects, as evidenced by recent political conversations regarding a restructuring of international oil markets around a cartel of consumers, as well as the near collapse of the Egyptian, Sri Lankan, and Lebanese economies.

In Other News – Russia-Ukraine War Impact on Global Geopolitical Order – 5/5/2022

May 5, 2022

While the short-term outcome of the Russia-Ukraine war remains uncertain, the extent of atrocities committed by the Russian military, the strength of the Ukrainian resistance, and the war’s impact on the global geopolitical order have already been established. Russia continues to make some advances in Ukraine, including taking over the communication airwaves and switching the currency to the ruble in the Donbas, but Moscow is suffering heavy losses in personnel and equipment, and most likely morale. Russian military advances remain slow, and they’re regularly thwarted by Ukrainian air defenses and missile attacks where Russian missiles seem to be failing at alarming rates.

Moscow is now blaming its military failures on the United States and NATO, noting the impact of Western intelligence transmitted to the Ukrainians, and has “warned” NATO that transport carrying weapons to Ukraine are a target. But this doesn’t indicate a policy shift and only serves to demonstrate how inept Moscow’s been at hitting these targets thus far. Springtime conditions are also anticipated to be more difficult for the Russians, replete with muddier terrain and less energy dependence for heating Europe.

Indeed, the longer the war draws on, the harder it’s going to hit the Russian economy. This week, the European Commission proposed a ban on Russian oil and oil products by the year’s end, and Russian production could become seriously stifled as finding alternative markets is logistically lengthy and costly. Further, international sanctions against Russian businesses, leaders, and banks are continuing to multiply and their effects are starting to settle in.

As Russia’s Victory Day approaches on May 9, it’s uncertain if Putin will take the opportunity to try to declare a false victory in Mariupol or instead pronounce a full declaration of war that would allow him to mobilize Russian military reserves. While the reserves are estimated at about two million, the number of actively trained or prepared soldiers is likely only in the thousands, and a movement to mobilize reserves, or draft or extend conscription for those currently serving, could backfire and send the message to the Russian public that Putin’s operation isn’t going according to plan.

Either way, outside of the immediate region, the war has already reconstituted political alliances and will have a longstanding impact on geopolitics. On Thursday, South Korea’s spy agency became the first Asian group to join NATO’s Cyber Defense Group, seemingly disregarding any retribution from China on the collaboration. Israel might consider shifting from a neutral stance due to blatantly anti-Semitic rhetoric coming from the Kremlin, and Turkish arms sales in places like the Philippines are surging.

The evolving, knock-on effects of the war are also impacting international business operations and elevating the importance of risk-assessments. Notably, countries in the Asia Pacific are boosting defense expenditures at the same time investors are trying to understand how defense purchases fit into the Environmental, Social, Governance (ESG) framework. Given the unstable and unpredictable operating environment surfaced by Covid-19 and exasperated by the Russia-Ukraine war, resiliency is a key concern for both the private and public sectors.