Date: 11/28/2022
Author: Mr. X
So much for the Roaring Twenties redux.
The Institute of International Finance (IIF) recently warned that global economic growth in 2023 may be as weak as it was in 2009, right after the financial crisis. The IIF predicted a tepid 1.2%.
The main reason is because the organization said that the war in Ukraine risks becoming a “forever war.”
That’s probably right.
There have been numerous media articles in recent days mocking Russian president Vladimir Putin. He’s supposedly dying of a million different medical problems and is also at risk because Russian elites are poised to turn on him. Yet my analysis is the opposite of what many journalists are suggesting, even if we’re operating off the same evidence. It’s this desperation and existential nature of the conflict that will ensure Russia will fight on.
More to the point, if Putin is replaced, it will be because he was too weak, not too militarist.
Russian propaganda during the current conflict has been mediocre at best, mostly featuring flat denials that anything is going wrong. The argument that the initial thrust towards Kyiv was actually part of a lager plan to distract Ukraine while Russia attacked in the east insults the intelligence of the world. Let’s be blunt – Russia thought the Ukrainian government would collapse as quickly as Afghanistan’s. Ukrainian resistance has shocked the Kremlin. Vladimir Putin, who is far more cautious than his Western adversaries imply, would not have done this had he known.
In fact, President Putin is already doing something unprecedented – admitting mistakes. Russia managed to grab Crimea in 2014 following the chaos of the Maidan regime change. However, it could have probably grabbed far more. Pro-Russian separatists have accused Putin of betrayal for not sending Russian forces earlier. Westerners should realize that to many revanchist Russians, Putin is a pushover. Recently, Putin essentially agreed with their case, saying Russia should have done more in 2014.
Consider the way President Putin is responding to the current crisis. He sounds defensive – but he’s guarding against attacks from militarists. When speaking to a group of soldiers’ mothers, President Putin alleged nothing less than a global plot by unspecified elites to destroy Russia. “What happened in the previous years was largely because we played, lived by someone else’s rules,” he said. “The events of today are a path to some internal purging and reinvention.” Who is this “someone else?” He didn’t say, but given the Russian leader’s previous allegations against “Anglo-Saxons,” he almost certainly means America, the United Kingdom, and their European allies. “They pushed the situation to this,” Putin argued.
One of the most striking characteristics of the pullback from Kherson is that many of Russia’s militarist leaders remained silent. On paper, it was an open abandonment of Russian citizens whom the Kremlin had promised to protect “forever.” It was a national humiliation.
Yet criticism was largely muted. The pullback to more defensible lines was considered justified for military reasons.
Russia is now attacking on two different fronts and in two entirely different ways.
The first attack is dominating the headlines around the world – the brutal, deliberate destruction of Ukraine’s power grid. Ukranian president Volodymyr Zelenskyy recently said that six million people were still without power, though earlier last week it had been 12 million. There has even been discussion of abandoning the capital for the winter, which would not only cause a massive refugee crisis for the West but would surely complicate Ukraine’s own military operations.
Those who expect international public opinion to restrain Russia are fooling themselves. Following the great Soviet tradition of Whataboutism, Russians can say (accurately) that Kyiv is now just getting a taste of what Ukraine inflicted on Donetsk and Luhansk for eight years. Accounts of Ukrainian strikes on eastern cities are countering reports about the civilians killed by Russian attacks.
More to the point, militarist leaders who used to conceal their intentions are stepping up in Russia. Chechnya’s mini-dictator, Ramzan Kadyrov, has been a massive supporter of the invasion and his troops have been some of the most visible participants in the attack, especially the seizure of Mariupol. Former president Dmitry Medvedev, onetime liberal hope for the West, has reinvented himself as someone more hawkish than Vladimir Putin.
However, the most important figure is Yevgeny Prigozhin, reported head of the Wagner private military corporation. Prigozhin used to conceal his role; now he relishes it. He’s also following Kadyrov’s precedent of brandishing Western hatred as a badge of honor. Recently, a video emerged that purported to show a Wagner fighter who attempted to defect being executed by a sledgehammer. The European Commission prepared to condemn the Wagner Group for its actions in Ukraine. In response, Prigozhin sent them a sledgehammer covered in (fake) blood.
Prigozhin is also being more open about what the Russian military is actually doing. General Sergei Surovikin, overall commander for the Special Military Operation, is fundamentally an airman and his missile strikes against Kyiv and other targets fit with his approach. But Prigozhin is a gutter fighter, someone who personally will walk into Russian prisons and pitch convicts to join his fighters rather than rot. He’s not afraid to get his hands dirty. And this is where the second Russian offensive is taking place.
Trade of the Decade: The Most Critical Stock to Own NOW
Mr. X identifies “the most important company that you’ve never heard of…” and how you can take advantage of it to reap potentially life-changing profits.
For months now, the Russians have been waging a vicious and largely unsuccessful campaign against Bakhmut, a strategic center of Ukrainian power within Donbass. While the Russians have thus far failed to take the city, they are making painfully slow progress taking surrounding villages. The battle may finally be nearing a tipping point in Moscow’s favor.
It’s hard to get accurate reports of Ukrainian casualties; Western media doesn’t report them as readily, the Ukrainian government is tight-lipped, and Russian sources have their own biases. However, from what I’ve seen, it seems clear that Ukrainian casualties have skyrocketed in recent days while the Russians consolidate their gains in the east. It’s bloody for the Russians too – but Wagner is literally using convicts, expendable people who are unlikely to serve as a focus for dissent against Putin.
I’ll say this about Prigozhin – he’s completely open about his intentions and even his strategy. According to a post on Telegram, here’s his take on Bakhmut. I apologize for the rough translation, but you get the general idea:
The Ukranian army is well prepared and offers worthy resistance. Our task is not Bakhmut himself, but the destruction of the Ukranian army and the reduction of its combat potential, which has an extremely positive effect on other areas, which is why this operation was dubbed the “Bakhmut meat grinder.” In this regard, do not run ahead of the locomotive, it will happen – let’s say, happiness loves silence.
The city was trending on social media over the weekend because it looks like something out of World War I. The difference of course is that this war features drones as well as massive artillery duels. The New York Times recently reported that Ukraine may be exhausting its supplies of ammunition, simply assuming that the West will provide more. However, Western militaries are also running low on shells. Russia is turning to Iran and North Korea for more supplies.
Destroying the enemy army, as opposed to occupying territory, is often the key to victory in war. Yet the Russian approach to Ukraine is reminiscent of nothing so much as Vietnam. The Russian defense ministry is obsessed with reporting destroyed Ukrainian tanks, artillery pieces, trucks, and other equipment. Yet the West keeps supplying new (and better) weapons, while Russia is increasingly cut off.
Prigozhin’s own characterization of Bakhmut as a “meat grinder” shows that Russian leaders themselves are bracing for a long war of attrition. Both offensives – the strategic attacks on Ukraine’s power and the ”meat grinder” of Bakhmut – only make sense if the Kremlin is seeing a war that will take place over years. Putin seems to have convinced himself that the war is necessary because it will purge the Russian people of decadent Western influences. On the domestic front, Russia has banned so-called “LGBT propaganda,” even to adults, and Patriarch Kirill of the Russian Orthodox Church has openly blessed the war.
Investors should not assume this war will end soon, nor that Russia is in collapse. More to the point, if the Russian war effort does collapse (or if President Putin falls to health issues), the Kremlin will likely respond with greater force. It can’t withdraw any further and the Russian elite has convinced itself that it’s in an existential struggle. The West has left them no way out, and outraged Western public opinion will never give them a way out.
The war will go on. The supply shortages will continue. The drag on global growth will remain, but the United States will continue to benefit by weakening its geopolitical rival and replacing Russian products and energy in European markets. That’s my prediction for 2023… and if I had to bet, I’d say the war will still be underway in 2024, whether Putin is in charge of Russia or not.
