Please find below the key takeaways from our conversation with Dr Samuel Ramani, recorded 16:00 UKT on 23 February 2022 (link to video).
DNR and LNR
- Russia probably does not want to just annex DNR and LNR. They do not want to take on the social security responsibilities, and within Russia, a huge influx of (even Russian-speaking) refugees would be unpopular.
- The aim was to have a greater foothold on Ukrainian soil, undermine the legitimacy of the Ukrainian state, and gain an easy way to take advantage of false-flag operations.
- We cannot rule out the ultimate aim of occupying Kyiv. Since the 1990s, a large portion of Russian elites and officials have viewed as the endgoal. Alexander Lebed (important Russian and Soviet General who died in 2002) was a spokesperson for Russian conservatism and stated that Russia, Belarus and Ukraine are one country.
- Occupation, however, is complicated and hard. There is more mileage in Russia changing the regime, installing a puppet and then leaving. But they might occupy strategically important locations (if not population centres) across the country that give Russia more strategic leverage (that would also give them a large chunk of Ukraine’s heavy industry).
- Estonian intelligence report suggest as much: that Russia’s end-goal is a limited military intervention that occupies that strategic terrain (Germany’s FM Annalena Baerbock has suggested similar).
The Prospects of an Invasion to Take the Mariupol Corridor (Region Between DNR and Crimea)
- Certainly there is a strategic benefit to connecting Crimea and DNR – it’s a 300km gap. It’s an important region, was where parts of the Minsk agreement were signed, and was seen as something of a bellwether.
- But the residents there were more sceptical of the whole separatism thing. That’s the region that saw quite a bit of resistance in 2014 when the separatists were unable to take it – it’s a bit analogous to Panjshir valley in Afghanistan).
- If the west really went all in on sanctions, they could cut off SWIFT, sanction Putin, and sanction Russian gas.
- The prospect of sanctioning Putin himself has been raised by Poland and Lithuania. That would be taken as a severance of ties with Russia and would be very serious. Biden mentioned it a while ago but hasn’t mentioned it more recently.
- But this could trigger a rash reaction from Putin – i.e. him going for Kyiv, or something more ‘apocalyptic’ happening (invading Baltics?).
- The Putin speech was basically for a domestic audience, it was Putin building the case for an eventual war with Ukraine on basically every front. This included that ‘Ukraine is an artificial state’. Interesting to see this was clarified later to state Russia recognise all other former Soviet states, but that Ukraine was under ‘foreign occupation’, and that the post-Maiden government was a US puppet.
- In sum, Putin set out the path for war, but left his ultimate aims and rationale quite unclear. The recognition of DNR and LNR came along side that and basically provided further support for the idea that Ukraine is an aggressor. It also leaves the path open for a stronger Russian presence there – which would allow an expedited war in the future.
Putin’s Psychology and His Legacy
- There’s long been rumours of Putin suffering Parkinson’s or other ailments. There’s not really been any evidence though. There is also no real evidence of him looking to leave his station. He’s likely going to be staying long beyond 2024, and has already laid the legal groundworks for this. Potentially he could be here for another decade.
- He is conscious of his legacy. He has been since the start of his rule; reviving the economy, bringing it back from the ‘wild west’ of the 1990s, and winning in Chechnya all fall under this umbrella.
- He has also prioritised how Russia sits in the international standing, and placing it as a key player on the world stage (interventions in Syria, Libya, Africa and their return to LatAm). This is all around Russia being respected again after the humiliation of the 90s.
Important People to Watch
- The difficulty in guessing actions is that decisions are normally very reactive based, and made by a small group of people in Putin’s inner circle.
- Within this, a couple of important people from Putin’s inner circle are gone recently, but major players still involved include:
- Nikolai Patrushev – Secretary of Security Council of Russia
- Sergey Shoygu – Defence Minister
- There does appear to be an increasing divide, at least generationally in Russian ministers – with the arrival for instance of Anton Vaino in Sergei Ivanov’s place as chief of staff.
- In terms of public support for a more involved war, the Russian public is more keen on the kinds of intervention we saw in Kazakhstan – limited, quick and effective (67% of people approved of it).
Why Did Russia Settle for Just Crimean Annexation, and Donbas Separatism in 2014
- In 2014 Russia settled for DNR and LNR as separate, on top of Crimean annexation as a balance between the reward and the risk. They were happy to do arms’ length plausible deniability (‘little green men’ and local separatists instead of Russian servicemen) through the crisis, but when things got more tricky in terms of pushing out from DNR and LNR, they did not see the cost as worth it.
- They actually had a hard time getting local militia’s on side even in the ethnic Russian areas of Donbas outside of the de-facto separatist areas. With Russian-speaking Ukrainians in these regions more likely to take up arms against them than for them.
- Putin got a big boost in polling within Russia, so to a large extent he was able to pull quite a few positives from it.
- Turkey has been trying to reassert itself in the international sphere for some time. It has been projecting power in Central Asia, Caucasus, and in the Black Sea. There appears to be a long-term interest in maintaining economic and strategic ties with Ukraine.
- China, interestingly, has not backed Russia’s claims to Crimea etc. even when Russia backs its claim to HK and Taiwan. China has a lot of belt and road infrastructure in Ukraine, and imports a lot of agriculture from there.
- China probably wants to lend its support to Russia in solidarity against the West, but it is not a party that wants to see Ukraine collapse economically. It will likely be acting as a voice of moderation behind the scenes even while it overtly supports Russia’s claims of NATO aggression.
- China/Taiwan, is a very different dynamic, and China is not seeing the same pressures domestically to unify.
The Effectiveness of the Russian Army
- The Russian military has proven itself to be very effective in using airpower with a proxy land force (as per in Syria). We’ve also seen them perform well in limited but effective interventions (such as in Kazakhstan).
- In terms of large scale, long-term intervention, their experience is more murky. They gained territory in Georgia (2008), but got eventually slowed down. That is what has necessitated such reforms as have been seen since.
- Generally, over longer period conflicts we’ve seen them fizzle out a bit (Libyan intervention via Wagner and in 2014 in Ukraine). Important to note that in recent history they have not yet brought their full force to bear. If they were to mobilise say 60% their armed forces (as they have done), they may just ‘blow Ukraine out of the water’.
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.