It’s Time for the U.S. to Shift Strategy on Ukraine

OPINION - August 2, 2024
By Alexander Clackson
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The Path Forward: Time for Negotiations

The U.S. has achieved its goal of weakening Russia. The continued war, however, presents diminishing returns and growing risks for the United States and the world, including threats of a nuclear war. The time has come for the U.S. to consider negotiations with Russia. Such negotiations will undoubtedly be challenging and will require significant concessions from Ukraine. Yet, the alternative—an unending war with no clear victor—poses even greater dangers.

The war has already exposed Russia’s vulnerabilities and significantly weakened its military and economic standing. By facilitating a negotiated settlement, the U.S. can focus on its increasing competition with China, a much stronger adversary than Russia.

A prolonged conflict risks further draining U.S. resources and weakening public support for international interventions. Therefore, the U.S. should pivot from prolonging the conflict to facilitating a negotiated settlement. Doing so will not only save lives and resources but also help restore global stability and enhance the United States’ standing in the international community.

Almost 100 days have now passed since the Congress passed $61 billion in emergency funding for Ukraine, a measure that included a condition that required the Biden Administration to present to the legislative body a detailed strategy for continued U.S. support.

When the funding bill was passed with much fanfare on April 23, Section 504, page 32 included the following mandate:

“Not later than 45 days after the date of enactment of this Act, the Secretary of State and the Secretary of Defense, in consultation with the heads of other relevant Federal agencies, as appropriate, shall submit to the Committees on Appropriations, Armed Services, and Foreign Relations of the Senate and the Committees on Appropriations, Armed Services, and Foreign Affairs of the House of Representatives a strategy regarding United States support for Ukraine against aggression by the Russian Federation: Provided, That such strategy shall be multi-year, establish specific and achievable objectives, define and prioritize United States national security interests…”

It is now August and There is still no sign on the part of the Biden Administration of any intention to submit such a strategy to Congress. This inevitably leads to the suspicion that no such strategy in fact exists. It also suggests that without a massive change of mindset within the administration, it is not even possible to hold — let alone make public —serious and honest internal discussions on the subject, as these would reveal the flawed and empty assumptions on which much of present policy is based.

This relates first of all to the requirement “to define and prioritize United States national security interests.” No U.S. official has ever seriously addressed the issue of why a Russian military presence in eastern Ukraine that was of no importance whatsoever to the U.S. 40 years ago (when Soviet tank armies stood in the center of Germany, 1,200 miles to the West) should now be such a threat that combating it necessitates $61 billion of U.S. military aid per year, a significant risk of conflict with a nuclear-armed Russia, and a colossal distraction from vital U.S. interests elsewhere.

Ukrainian forces have reported the first sighting of a North Korean Bulsae-4 M-2018 self-propelled long-range anti-tank guided missile (ATGM) system somewhere in the Kharkiv region. It was spotted by a Ukrainian reconnaissance drone, with an image of the vehicle being posted on the @KUPua01 Telegram channel on July 30.

The Bulsae-4 launcher consists of a rotating package of eight missile containers mounted on the chassis of the North Korean M-2010 wheeled armored personnel carrier with its distinctive 2+4 all-wheel drive configuration.

The M-2010 is essentially a foreshortened version of the BTR-60/ BTR 80 armored personnel carrier. It is powered by a gutsy diesel engine which, combined with its unusual wheel layout, gives it relatively good cross country and rough terrain capability. It is said to have a maximum road speed of approximately 90 kph (55 mph) and an operational range of around 500 kilometers (310 miles).

The system is classified as Non-Line-of-Sight (NLOS) which uses a so-far unnamed fiber-optic guided missile system designed to engage both rotary and armored targets at distances said to be over 10 kilometers. It also shares some similarities with the Chinese AFT-10 ATGM.

The missile is a top-attack weapon designed to hit an armored vehicle where protection is most vulnerable. It is believed that serial production of the system began around 2018, although North Korean state television showed a similar missile being launched from an Mi-2 helicopter in 2016.

[size=33px]Exact details of the capability of the system and the number in service is unclear due to the secretive nature of Pyongyang's military programs. It is said that the missile uses an electro-optical guidance head that transmits a real-time video feed to the operator. This is understood to not only allow targeting adjustments to be made during flight but also so it can avoid obstacles and engage hidden targets.[/size]

The missile follows a non-ballistic trajectory, which helps to reduce the likelihood of radar detection, increasing crew survivability. In addition, a bank of three smoke grenade dischargers is mounted on each side at the front of the turret to assist in its self-protection.

Kyiv runs into strong opposition on tax hike to fund the war

The country wants to spend 500 billion hryvnia on the war, and needs to increase borrowing and taxes to do that.

AUGUST 1, 2024 6:57 PM CET
BY VERONIKA MELKOZEROVAKYIV — Ukraine's government is running into a fierce blowback from foreign and domestic businesses over its draft proposal to hike taxes to pay for the war effort.

The idea had been to impose a 120 billion hryvnia (€2.7 billion) tax increase on an already hard-pressed population.

“The war has been going on for the third year, and the government has been doing everything possible not to raise taxes for business. Today, all other sources for increasing the funding of the defense forces have already been exhausted,” Ukrainian Finance Minister Sergii Marchenko said in a statement on Wednesday.

However, businesses heavily criticized a draft tax law introduced to the Ukrainian parliament earlier in July.

“The search for additional revenues through the introduction of new taxes will greatly burden business,” the Ukrainian Chamber of Commerce said in a statement on Monday.

“Against the background of Russian aggression and the destruction of infrastructure and the reduction of markets and the outflow of personnel, additional fiscal pressure on Ukrainian business makes economic stability impossible,” the statement added.

The pressure to not raise taxes also came from beyond Ukraine.

“The United States is encouraging the Ukrainian government to increase revenues primarily by reforming customs and combating gray markets,” Penny Pritzker, the U.S. special representative for the economic recovery of Ukraine, at a briefing in Kyiv on Monday.

“There is also a huge source of profit in the gray markets of cigarettes, alcohol, or electronics that can be sold on a large market. And that's why we encouraged the Ukrainian government to focus on this," Pritzker added.

​​​​​​​ The draft tax bill would increase the war tax paid by Ukrainian residents as well as hike duties and excise taxes on goods like fuel and tobacco.

The extra money is desperately needed.

Ukraine allocated roughly 37 percent of GDP, or nearly $40 billion, on defense, almost entirely covered by taxation this year.

The last year has strained public finances as Kyiv was forced to use its own funds to buy weapons due to the months of delay in the U.S. Congress over passing a $61 billion military aid bill, finally approvedin April.

"The provision of weapons from international partners at the beginning of 2024 was significantly less than needed and promised," said Oleksandra Betliy, a research fellow with Kyiv's Institute for Economic Research and Policy Consulting.

Marchenko, the finance minister, said the decision on a tax hike should be made by September.

“The issue of providing these funds is an absolute necessity. The state's defense capability depends on it,” Marchenko said.

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Executive summary

About 15 percent of the population has fled Ukraine since the start of the Russian aggression in February 2022. Nearly 4 million Ukrainians have already registered in European Union countries. Based in part on evidence that few refugees return voluntarily to poor countries once they settle in rich countries, even once security is re-established at home, it can be expected that large numbers of Ukrainian refugees are likely to remain in European host countries, and will likely be joined by others, including many men that remained to fight when the conflict is over.

Ukraine already has a long history of emigration. Its shattered economy, the likelihood of a protracted conflict and significant uncertainty with regard to its final status reinforce the argument that most refugees will not return and many more will join them. EU nations must prepare for. There will be large short-term costs and long-term economic gains from Ukrainian immigration in Europe. The best way to help Ukraine, and to moderate the likely outflow of its people, will be to assist in the country’s reconstruction, and not to place artificial impediments to the immigration of individuals who have already suffered greatly.

Russia's July oil and gas revenue to jump 50% to $14 bln, Reuters calculations show

July 18, 2024 at 02:27 pm IST
ShareMOSCOW, July 18 (Reuters) - Russia's oil and gas revenue in July is set to rise by 50% year on year to almost $14 billion thanks to stronger oil prices and a weaker rouble, Reuters calculations showed on Thursday.

Oil and gas revenue has been the most important source of cash for the Kremlin, accounting for about a third to a half of total federal budget proceeds over the past decade.

Preliminary estimates project Russia's July oil and gas revenue at 1.22 trillion roubles ($13.93 billion), up from 747 billion roubles in June and 811 billion roubles in July 2023.

Proceeds for the January to July period are projected to rise by 65% year on year to 6.9 trillion roubles.

Russia's Finance Ministry is due to publish the July data on Aug. 5.

July's payments will also benefit from Russia's profit-based tax, typically paid once a quarter, reaping about 500 billion roubles, according to Reuters calculations.

The coffers have been boosted by a rise in the average price of Russia's Urals oil grade to 6,405 roubles ($73.12) a metric ton in the second quarter, up from 6,139 roubles in the previous quarter.

The budget is also set to benefit from lower subsidies to refineries under the so-called damper mechanism and excise tax. Those payments from the budget are set to decline in July by about 29 billion roubles from June.

For 2024 as a whole, the government budgeted for federal revenue of 10.7 trillion roubles from oil and gas sales, up 21% from 2023, when weaker oil prices and a fall in gas exports reduced the revenue by 24%.

That 2024 target was revised down from initial plans for 11.5 trillion roubles.

Russia has heavily increased defence and security spending since launching what it calls its special military operation in Ukraine in February 2022, leading to two consecutive annual deficits exceeding 3 trillion roubles, about 2% of GDP. (Reporting by Reuters Editing by David Goodman)

Russia’s military is adapting, to good effect. Its economy is transitioning to wartime production. China, India, and Brazil remain inclined to engage with Russia where the getting is good: imports of oil and exports of cars, machines, and other items used in manufacturing and engineering. Many others also remain unmoved by entreaties to isolate Russia, whether because they are unconvinced by assertions that Putin’s security claims are wholly illegitimate, or because they can’t reconcile objections to Russia’s inhumane prosecution of its war against Ukraine with U.S. support for Israel’s inhumane prosecution of its war against Hamas, or for other reasons entirely.

On the other side of the ledger, Ukraine is struggling to mobilize and field forces, and it is clear that it cannot long sustain a meaningful military effort without large and consistent inputs from its friends. And if the last cycle of wrangling in the U.S. Congress suggests anything, it is that the United States might—but also might not—long be that kind of friend. There is movement toward securing additional funds for Ukraine by capitalizing on the interest earned on profits from Russia’s frozen central bank assets, but the legal details of this maneuver are many and will take some sorting out. Time does not seem to be on the side of a trans-Atlantic strategy that is set on achieving full reconstitution of Ukrainian territory.

A painful tradeoff

U.S. policymakers thus are rapidly approaching the event horizon at which they will no longer be able to avoid making a painful tradeoff between what they value materially and what they value morally. Materially, staying the current course “as long as it takes” will draw down state coffers and weapons stocks, and leech the political capital needed to get the spending done. Providing support beyond that— support which might make a Ukrainian battlefield victory possible—would require not only an even larger commitment of fiscal, material, and political capital but also a high tolerance for risking a local and possibly a global catastrophe. It is one thing to believe in the abstract that Putin won’t use nuclear weapons; it’s another to put that belief to the test.

Morally, although the current narrative insists that the cost of pursuing or accepting outcomes short of a full Russian defeat is a Europe ripe for the taking, the actual cost is something both less and more: it is the price of severing attachment to the idea that war termination should be just. It is disappointing the conviction that the wronged should be made whole, and the wrongdoer made small.

Arguments connecting Russian defeat with a stable Europe, on the one hand, and negotiated settlements with dire, imagined future events, on the other, are attempts to drive policymakers toward a strategy that delivers moral satisfaction. The desire for that satisfaction is understandable—but a strategy designed to deliver it should not be confused with a strategy designed to end the war, to deliver European security, or to reduce the likelihood of World War III.

How the war ends will affect, but not determine, the depth and duration of stability in Europe thereafter. The search for an improbable perfect—a victory that returns all Ukrainian territory and ensures Russia will not attack it ever again— therefore should not be allowed to be the enemy of an achievable good. And an achievable, good outcome is one in which the war ends with a sovereign Ukrainian state led by an autonomous Ukrainian government.