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.
