Russian equities weren’t amused with a second day of war escalations from the Kremlin.
Local shares extended losses Wednesday, after suffering a dramatic rout during the prior session on fears that sham referendums to justify annexing 15% of Ukraine presage an intensification of the conflict.
Luhansk, Donetsk, Kherson and Zaporizhzhia are all scheduled to “vote” over the next week on annexation. The results are a foregone conclusion. As has so often been the case over the past half-dozen or so years, Moscow is totally unconcerned with optics. The referendums are sheer, blatant farce, and outside of Vladimir Putin’s domestic propagandizing, the Kremlin probably won’t put a lot of effort into claiming otherwise.
The MOEX fell as much as 9% on Wednesday, before trimming losses. On Tuesday, the benchmark fell as much as 11% before closing around 9% lower. The figure (below) underscores the scope of investor consternation. Note that Tuesday was the worst day since the onset of the invasion.
The four-day rout came to almost 15%. If it continues, Moscow will probably take steps to stabilize the market. Sentiment was also impaired by jitters around a possible tax hike tied to commodity exports.
Dmitry Medvedev (who was, of course, president during a brief interregnum that overlapped with Barack Obama’s first term), declared the annexations “irreversible,” and emphasized that Russia would be fully within its rights to defend the territories with maximum force.
That, in turn, opens the door to the deployment of tactical nuclear weapons, a threat Putin underlined during an irritable address to the nation on Wednesday, when the Kremlin announced a partial mobilization.
I should emphasize that this is a crossing the Rubicon moment. Ukraine will never accept these annexations. Neither will the international community. Indeed, it isn’t especially likely that the Kremlin will be able to secure formal recognition from all (or any) of its allies. At the least, many will prefer to remain silent on the issue to avoid running afoul of the US Treasury, which will doubtlessly sanction everyone involved — or everyone involved who isn’t already sanctioned.
Earlier this week, Recep Tayyip Erdogan suggested Putin should return all seized territory, including Crimea. The invasion, he told PBS, “cannot be justified.” Although Turkey is a NATO member, Erdogan insists he’s neutral. “Since 2014, we have been talking to my dear friend Putin about this, and this is what we have requested from him: Return Crimea to its rightful owners,” Erdogan responded, when queried by Judy Woodruff. “But since then, unfortunately, no step has been taken.”
Erdogan’s description of Putin as “a dear friend” is simultaneously sincere and tongue-in-cheek. Erdogan is friendly with the Kremlin — until he isn’t. He (famously) clashed with Washington over the purchase of advanced Russian missile systems, and is always eager to make a show of meeting with Putin to discuss areas of mutual concern. Often, those meetings amount to little more than chest-puffing contests. At various intervals during Syria’s never-ending civil war, though, Erdogan made clear to Putin that to the extent Turkey’s objectives in the country were consistent with Russia’s, that was convenient, but when not, Russia would need to stand aside and let Erdogan pursue his cross-border activities unimpeded. Generally speaking, Putin acquiesced.
It wouldn’t be accurate to suggest Russia “needs” Erdogan as a friend. Certainly not in the same way Putin needs Xi Jinping. But it’d be entirely fair to suggest that Putin doesn’t want an antagonistic Erdogan either. And I doubt seriously that Erdogan is enamored with the prospect of Russia annexing more territory. There’s a very real sense in which these sorts of escalations make a fool of Erdogan, who’s been keen to tout Ankara’s role as mediator, particularly as it relates to freeing trapped grain shipments.
In any case, other world leaders were quick to describe Russia’s first mobilization since World War II as a sign of weakness. Romanian Prime Minister Nicolae Ciuca noted that Putin’s timing left something to be desired. “Today is international peace day,” he said.
I do not think that Russia will use nukes, tactical or otherwise, and the reason is China.
Putin knows that the Russian economy can continue a form of functioning so long as it has China and the rest of the BRICS on its side (or if not explicitly on its side, at least willing to do business). There can’t be any doubt that the number one agenda item for Putin’s meeting with Xi right before the Olympics was ensuring China wouldn’t side with the West when it came to sanctions & support for Ukraine. Putin never invades Ukraine if China says, “We will isolate you in the event you invade.”
It must rankle Putin that he can’t do anything without first getting permission from Uncle Xi.
Xi would never give permission for Russia to use nuclear weapons. Moreover, Xi is too smart to leave that to chance: he will have explicitly communicated to Putin that if he drops the bomb, All Bets Are Off.
If Putin nuked Ukraine, then Europe and NATO would immediately sanction everything. Russia would be turned into a hermit kingdom. NATO can’t respond with nukes of their own, because that’s the end of the world, so instead they’ll go for total isolation. China would be roped into this. Sanctions would explicitly say, “Anyone doing business with Russia, regardless of where they are headquartered, will be cut off from the rest of the world economy.” Only smugglers will be able to do business in Russia. I’m sure there will be lots of that–sanctions will be porous and Russia is a large country–but any corporation that transacts internationally will refuse to touch Russia with a ten-foot pole.
China does not want to be in a situation where they’re caught between the hammer of Putin’s decision making and the anvil of the worlds’ unified outrage. So China will tell Russia they’re not allowed to use nuclear weapons, and Russia will listen.
Now that I’ve said that, I’ll say that all other escalations are on the table. Russia has already committed atrocities. They’ve reduced entire cities to rubble, tortured civilians, and executed prisoners. Since the consequences for their war crimes haven’t been particularly impactful, Russia will just escalate in conventional ways.
In a throw-away comment a week or two ago, I mentioned carpet bombing, but that wasn’t just a thoughtless guess.
Allow me to tie together two seemingly disparate things.
The nationalist Kuomintang lost the Chinese Civil War to Mao’s communists not because the KMT was out manned or outgunned. Their military was larger, and it was equipped with vast amounts of American WWII military surplus plus captured Japanese equipment. The KMT lost battle after battle though, in part because its generals treated their troops as their own personal fiefdoms, and were loath to sacrificing them in combat. The lead to piecemeal losses that gradually turned the tide. When the nationalists eventually retreated to Taiwan, it was with approx 2 million soldiers. Imagine having 2 million soldiers and refusing to fight!
Before any of that happened though, the United States fought the Empire of Japan in WWII. Having won the brutal battles of Iwo Jima and Okinawa, the United States turned to the Japanese home islands. The first step was aerial bombardment. The Japanese home islands were extremely well defended though. Japan was basically out of gasoline, but they had plenty of anti-aircraft artillery. American bomber losses over Japan were horrendous. Enter General Curtis LeMay. LeMay was a real piece of work. He would later distinguish himself during the Cuban Missile Crisis, having risen to become Chief of Staff of the Air Force, by advocating for a preemptive nuclear strike on the Soviet Union. Then he would run as Vice President on George Wallace’s third party pro-segregationist American Independent Party ticket. But I digress.
LeMay completely changed the strategic bombing campaign over Japan. Tired of losing bomber crews to Japanese AAA fire, he switched to high altitude night-time bombing. Of course that’s wildly inaccurate, but Curtis didn’t care about civilian casualties or collateral damage. It was LeMay who orchestrated the infamous fire bombing of Tokyo, where more people died than in both A-bomb blasts combined.
Now lets bring things back to Russia and Ukraine. Why hasn’t the Russian air force been more decisive? It’s the area where Russia has the single greatest advantage on paper. The answer is that Ukraine has successfully been shooting down Russian air force assets. Russian air force generals are acting like the nationalist Chinese generals. They don’t want to risk their assets, their personal military fiefdom.
Eventually though, Putin will lean on them hard enough to force action, and that’s why Russia will begin high-altitude carpet bombing of Ukrainian positions (= cities). Ukrainian anti-aircraft equipment is primarily of the man-portable stinger missile variety. The kind of SAM battery that can take down a high-altitude bomber isn’t a meaningful part of Ukraine’s defense capabilities, especially close to the front line.
Furthermore, Russia has leaned heavily on old Soviet military doctrine, which calls for massive preliminary artillery bombardment followed by mopping-up operations by infantry. During the second phase of the Ukraine war, Russia used this effectively to make incremental gains throughout Eastern and Southern Ukraine. The eventual stalemate that unfolded afterwards was actually quite a testament to Ukrainian tenacity and effectiveness at taking out Russian back-line artillery and supplies. The 300,000 reservists being called up won’t be able to patch-over lost artillery capacity, and the Russian war machine is hard-pressed to replace lost equipment and trained crews. High-altitude carpet bombing can fill in for that lost capacity. As that proves effective, Russia will continue to expand it, eventually resulting in headlines reminiscent of the fire-bombing of Dresden.
We could give Ukraine its nukes back… 🙂
I’m kidding but, tbh, it’d be fair. They gave them up in the Budapest agreement in 1994 in exchange for promises their borders would be respected/defended by the US, the UK AND Russia. Since Russia reneged on the deal…
” The kind of SAM battery that can take down a high-altitude bomber isn’t a meaningful part of Ukraine’s defense capabilities, especially close to the front line.” It seems that this is a solvable problem, if NATO has the will.
“Why hasn’t the Russian air force been more decisive? It’s the area where Russia has the single greatest advantage on paper.”
You’re assuming that Russia has the capacity. Maybe their air force only exists on paper. What percent of their aircraft are crewed and combat ready?
Ukraine is smaller than Texas and the mighty Russian army is struggling to maintain 20%
NATO needs to do less talking and more acting imho…Putin must be defeated ASAP, ideally from the inside…his move reeks of desperation plain and simple which should embolden NATO et al…
The worst thing I know of that any nation-state ever did to another independent state was what Rome did to Carthage, its most hated enemy. The Romans invaded Carthage, after years of war on land and sea, razed the entire city state to the ground so absolutely no building was left standing, and finally it brought in enormous quantities of salt and pounded it into every acre of land in the city and the surrounding poisoning all the land area so as to render any future existence impossible. Putin has said at least once that he would be fine with destroying the entire country of the Ukraine and rendering it impossible for habitation into eternity if need be. He must have read about the Romans, too.
We tend to focus on the annexation as a pretext for Russia to use nukes to defend “Russian territory” but there is also this in the mix: “Putin’s illegal annexation of occupied Ukrainian territory will broaden the domestic legal definition of “Russian” territory under Russian law, enabling the Russian military to legally and openly deploy conscripts already in the Russian military to fight in eastern and southern Ukraine. Russian leadership has already deployed undertrained conscripts to Ukraine in direct violation of Russian law and faced domestic backlash.[5] Russia’s semi-annual conscription cycle usually generates around 130,000 conscripts twice per year.[6] The next cycle runs from October 1 to December 31. Russian law generally requires that conscripts receive at least four months of training prior to deployment overseas, and Russian President Vladimir Putin has repeatedly denied that conscripts will be deployed to Ukraine.[7] Annexation could provide him a legal loophole allowing for the overt deployment of conscripts to fight.
https://www.understandingwar.org/backgrounder/russian-offensive-campaign-assessment-september-20