Bleeding Russia White. Bad News? We’re at War With Russia. Good News? They Can’t Keep it Up Much Longer.

The US (and Ukrainian) strategy now seems to be “bleed the Russians white.”  Not in terms of manpower (impossible) but equipment (already well on the way to being done).

There hasn’t been much change on the ground lately in Ukraine.  That is news itself.  For the attacker, not much change = you are losing.  As evidenced by the retreat from Kyiv, not much change eventually leads to collapse and retreat.

Russia’s lack of progress is almost a problem.  If Russia had managed a big thrust, Ukraine could have cut them off and precipitated a retreat with massive equipment losses – Kyiv all over again.  If Russian forces stay bogged down within a one-day supply truck drive of Russia, the risk is we see a static grinding war develop.  Like the Donbas conflict from 2014 to today.  That seems to be what a lot of people (particularly Putin) are expecting.

But this assumes Russia can keep up a long grinding war across a much longer front line.  They have enough people to do it.  But they are rapidly running out of equipment.   

Putin is destroying the fighting capability of the Russian military for at least a decade. He’s used up ~70% of his precision missiles (per Bellingcat).  800-1,000 tanks destroyed** out of a functional force of maybe 2,000 t0 3,000 (ignoring storage parks of rusting armored hulks stripped bare of anything of value over decades of corruption).  Note that Russia’s only tank factory can only produce 200 tanks a year (WSJ).  Except it has shut down production for lack of foreign semi-conductor supply. Missile production is hampered by the same supply constraints.  Aircraft production too. The above also ignores the structural and logistics investments now made obvious by the war.  Putin can’t just re-build the military, he must re-make it.  Under severe sanctions and with a struggling economy.

A mob without tanks, missiles, and air cover is not going to hold much for long.  Especially as we pour weaponry into Ukraine.  A few more months of losses at these rates and Russia will (literally) run out of tanks.  To that end, it is worth looking what happened after the US Defense Secretary recently went to Kyiv.  The result was a strategy to accelerate that Russian loss rate.  I’d guess the conversation went like this.

US SecDef:  So what you are saying, Volodymyr, is you will gladly keep fighting the Russians until they bleed white as long as we keep shipping in more NATO-grade weaponry?  Even if that means major losses on your side?

Ukr Pres Zelensky:  Lets face it Lloyd, we are going to fight this battle now or later.  Putin has made that clear.  So we might as well fight it out now.  We are half-way there, my people are united, and we have your attention and support.  If Putin is mis-informed enough to keep on destroying his army until it is past the point of no return, lets hurry him over that cliff.   So yes, lets just get it over with and work hard to ensure the Russian military rebuild takes longer than Putin’s life expectancy (either as President or on this earth)

US SecDef: OK.  I’ll go bang some heads together and shame the Germans to start sending heavy weapons.  You won’t get any push-back from Congress if US defense contractors get big fat orders.  And we are pretty sure the Chinese have let Mr. Putin know that using nukes would be a super big no-no, so I think we are OK on that front.  Especially since they wouldn’t really do him much good given how degraded his military already is.

Ukr Pres Zelensky:  And you do realize, Austin, we are going to end up in the EU (which has a mutual defense clause too) and probably NATO at the end of all this.  So might as well get on with arming us up to NATO standards.

US SecDef: (Sigh).  Yeah, we’ve kind’ve figured that out.  With Sweden and Finland joining NATO Putin is going to be pretty steamed.  But… him and what army are going to be able to do anything about it? (roars of laughter around the table).  Although lets hope whoever replaces Putin realizes Russia’s best interests lie in extending NATO all the way to the Chinese border…. (sober silence).

I do worry what happens when someone finally has to tell Putin the game is up.  He will be humiliated, angry, and looking to lash out.  So he says “lets use a tactical nuke to blow a huge hole in Ukrainian defenses and take Kyiv!!!”  And that poor someone will have to reply “We don’t have enough tanks and trucks to even get to Kyiv much less hold it.  Even with a nuke.  Also the Chinese have told us they’ll have to join the sanctions if we do.  We’d have a revolution in the streets – especially if we announce conscription. The economy is already in free-fall.  Besides, a lot of Russians have relatives in Ukraine and a nuke is a big step up from atrocities in Bucha.  And if the wind blows fallout towards Moscow…

I am genuinely worried about what happens after that conversation.  We know Putin will have already lost any potential practical gains from nuclear or chemical escalation.  I am fairly confident his military knows that.  Putin will hopefully come around.

He will lash out.  The Russian humiliation will be as (or more) devastating as the fall of the Soviet Union.  That will be a rough patch to handle.

Then again, this is the path Putin chose.  Geo-strategic nay-sayers seem to assume our actions could have chosen Putin a different path.  This over-states our influence and under-estimates Putin’s mis-informed stupidity.

Against his own best interests, Putin has chosen to drive Russia into the ditch.  All we can do is dig that ditch as deep as possible so he can’t climb out again. 

** The 2,000 to 3,000 estimate is someone else’s guess, but we KNOW Russia is running out of tanks because they have started sending more, truly ancient Soviet-era gear into the fight.  All the gear with little “Red Star” flags on this site is Soviet-Era while mreo modern stuff has the Russian flag.  It isn’t that Russia didn’t produce a lot of fancy gear, but turns out Russia imposed a 2%-4% profit limit on sales to the Russian Army, so their weapons makers sent as much of their production as possible to higher-profit overseas markets.    https://www.oryxspioenkop.com/2022/02/attack-on-europe-documenting-equipment.html

Taking my cue from smarter observers, I have also started taking the Ukrainian numbers of Russian losses seriously.  Turns out the Ukrainians have a track record since 2014 of being too cautious in their claims.  Their numbers also track pretty well to 3rd party data based on actual photos etc… For example, Ukraine claims they have destroyed 900 Russian tanks.  This 3rd party site (which ONLY counts documented photos) sees 580 (and he’s backlooged badly right now – see https://www.oryxspioenkop.com/2022/02/attack-on-europe-documenting-equipment.html).  The other 320 tanks he can’t count could be behind enemy lines, damaged, or simply un-photographed.  Point being the difference isn’t that great and, as others have noted, the two number sets have remained in synch with each other since the start of the conflict.  Ukrainian numbers are likely too high in some places (esp aircraft losses), but that is probably over-hopeful reporting on missile strikes and simple “fog of war” stuff vs deliberate propaganda.

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We are All Japan?  Especially China? World Population DOWN by 2100? China’s Population Cut in Half?

A study in the Lancet forecasts total world population will decline A LOT over the next 70 years.  China’s population, for example. could drop by half.  700 million fewer people than their peak population year in 2024.  As the study somewhat blandly puts it…

Our forecasts for a shrinking global population have positive implications for the environment, climate change, and food production, but possible negative implications for labour forces, economic growth, and social support systems in parts of the world with the greatest fertility declines.”

“Possible Negative Implications?”   Wouldn’t “multi-decade deflationary mega- shock?” be a more appropriate descriptor?

If China’s population really does fall in half over the next 70 years, that would require something like half the housing stock, no?  That doesn’t suggest a great outlook for Chinese Real Estate.  Or global demand for steel, concrete, dishwashers, etc….  China’s working age population has already peaked and their total population peaks in 2024.  That is a tough look for the country “everyone” expect to challenge the US for Global supremacy.  The GDP forecasts in here have China taking the #1 spot in 2025 and giving it back to the US by 2100. 

Worth a look at the charts and tables in the Lancet study below.  What is creating those abandoned rural towns in Spain, Italy, Japan, etc…  Even if their forecast is off by 25% it is pretty scary stuff.

The study might be wrong.  Other studies aren’t so negative.  As they note, their lower numbers stem “a third due to faster declines in sub-Saharan African fertility and two thirds due to the lower level of TFR (Total Fertility Rate) expected in populations with fertility lower than the replacement level, especially China and India.

Then again,

  1. Chinese women are not showing new enthusiasm for more kids (COVID has set back Chinese fertility per a recent FT series).
  2. More education + access to contraception usually means lower fertility regardless of income trends.  That is driving their lower African estimate.  Note that India saw fertility crash as girls got even a few years of education.

And, even if they are wrong, some form of demographic slowdown is going to happen.  Unless large numbers of women/families suddenly change their minds about babies for some miracle reason.  COVID actually reduced birth rates in China and there is no sign of a rebound yet per a recent FT story.

Also note this is where the economic debate was in…. 2018-2019.  Deflation was the main worry.  Now everyone is running around worrying about inflation.  But the long-term demographic trend hasn’t changed at all.

Our findings suggest that, because of progress in
female educational attainment and access to contraception
contributing to declining fertility rates, continued global
population growth through the century is no longer the most
likely trajectory for the world’s population. By contrast, world
population might peak just after mid-century and substantially
decline by 2100. The difference in population forecasts between
our reference scenario and the UNPD forecasts is a third due to faster declines in sub-Saharan African fertility and two thirds due to the lower level of TFR expected in populations with fertility lower than the replacement level, especially China and India. Our findings show that some countries with fertility lower than replacement level, such as the USA, Australia, and Canada,
will probably maintain their working-age populations through
net immigration. Our forecasts for a shrinking global population have positive implications for the environment, climate change, and food production, but possible negative implications for labour forces, economic growth, and social support systems in parts of the world with the greatest fertility declines.”

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Putin Likely Has One Big Push Before Military Collapse. Consensus For a Long, Grinding War Doesn’t Reflect Reality on the Ground.

Putin’s Army has one big push left.  Maybe. If that fails, his forces are useless as an effective attacking force.  They are already too small and degraded to effectively occupy much territory.  Leaving Putin where?  In a bad place.  Which is still worrying.  But not a long grinding war.

The Russians likely will make gains nevertheless and may either trap or wear down Ukrainian forces enough to secure much of Donetsk and Luhansk Oblasts, but it is at least equally likely that these Russian offensives will culminate before reaching their objectives, as similar Russian operations have done. – ISW

General consensus seems to expect a long, grinding war in Ukraine.  The consensus of the “sub-group of analysts that have actually called it right so far,” however, suggests Putin has only one more throw of the dice before his military collapses.  We have already seen one collapse around Kyiv last weekend.  A similar collapse in the East probably finishes off the Russian Army’s offensive capacity.  Putin can try to keep the pot simmering, but he’s done until/if he manages to rebuild a shattered army under heavy sanctions.

The general consensus is making three common analytical errors;

  1. Excessive reliance on tidy, quantifiable top-down analysis (ignoring messier, more anecdotal bottom-up analysis).
  2. Shrinking away from forecasting non-linear inflection points in preference for (safe-seeming) linear projections.  Even though most things human happen along curves and rarely along straight lines.
  3. Clinging to a comfortable-but-wrong mental model even after facts disprove it.

Mistake 1 is relying on top-down analysis => What does Putin want to achieve?   Flying at 50,000 feet pouring Russia’s “1 million man army” into a Ukraine-wide map covered in ominous Red blobs. Accompanied by beard-stroking commentary on the 5-10 year impact on China/Russia relations, China’s Belt and Road projects, wheat trade via a Russian controlled Odessa, and that shambling humbug idea of  the “land bridge to Crimea.”  That top-down, geo-strategic view has been reliably, totally wrong since the war began.

Before the war started, the geo-strategic, top-down perspective seemed valid.  But it got mugged by reality about 1-2 days into the shooting war.  Those red blobs on the map were just thin threads of roadway the Russians only “controlled” when driving them in force.  Their “million man army” has visibly and obviously run out of actual fighting troops and equipment beyond the 190,000 committed.  6 weeks later, that geo-strategic, top-down model is largely disconnected from obvious facts on the ground.  Yet it still dominates the media and investor/market consensus.

What has worked well after those first 1-2 days of war was bottom up analysis, asking => what is the Russian army actually capable of?  This group of analysts, working bottom up, were early (and correct) in calling the outcomes we have actually seen.  The daily updates from the Institute for the Study of War have been reliable, balanced, and accurate.  As have military-specialist academics and think-tankers.  The UK Ministry of Defence has also been a reliable source – their daily analysis post has spoken volumes between the lines even if they have avoided specific forecasts.  Supported by a gaggle of people with weirdly specialized expertise looking “up” from logistics, equipment types, tire wear?!?, troop counts, maintenance, reinforcements (or lack thereof) etc…  Russia’s shortage of trained, fighting-capable manpower is obvious from their own actions – bringing in Syrian mercenaries,  raiding the training divisions for officers…  Morale problems are clear in the anecdotal, daily tally of functional Russian vehicles left abandoned, often with gas in the tank.  Out of 2731 independently documented Russian vehicle losses, 1021 were captured in usable working order;  187 tanks abandoned/captured out of 464 documented losses.  With a terrifying (for their crews) number of obsolete, 30+ year old Soviet era tanks/APC’s in that count.

The sum of that bottom-up analysis showed an under-motivated, poorly supplied, under-strength military with ineffective air support and weak communications/command asked to do too much in too many places.  That picture emerged early in the war.  It culminated in last weekend’s headlong retreat from Kyiv.

It isn’t just Russian weakness.  Ukraine’s surprising success also tells us that defense had a greater-than-expected advantage over offense in the modern era.  Small, cheap missiles operated by small, units are chewing up big-ticket weapons systems at an unsustainable rate.  This isn’t just the Russian’s problem.  One day the US Army is going to waltz into a reasonably well armed country and get chewed to pieces just as badly.  Especially because our military industrial complex will work overtime to obscure that lesson.  They want to keep making those high-profit, big-ticket systems even if our boys/girls get incinerated in them down the line.

So the top-down approach has failed and the bottoms up approach has worked pretty well so far.  SCORE: Armchair generals/colonels = 1. Armchair geo-strategists – 0.  

The second error – shying away from forecasting inflection points – is harder to criticize.  I went away on a camping trip this weekend with a pretty solid sense the Russians were in trouble around Kyiv; Hoping an inflection point might be reached.  But I did not expect much less forecast they would fall apart in a pell-mell retreat over one weekend.  That is a classic inflection point.   They are always hard to forecast.  At best you hazard a guess at how things might go non-linear.  The “when” is impossible to predict with accuracy.  Which is why consensus forecasters shy away from inflection points in favor of comfortable linear trends.  If you are too obviously wrong with a non-linear forecast, they won’t invite you back on CNN for the next war.  Better to be conventionally wrong (with the crowd) than unconventionally right (alone).

Pentagon background briefing “On the refit, Bob, we don’t know for sure how long this is going to take because some units are much more devastated than others. We’ve seen indications of some units that are literally, for all intents and purposes, eradicated…”

The final error – sticking to an obviously wrong mental model – is less defensible.  After 6 weeks of evidence to the contrary, the general consensus now expects those same shattered Russian forces – with no obvious reinforcements or time to rest – to wheel across Eastern Ukraine and secure that blessed land bridge to Crimea.  The “million man Russian army” still crops up in supposedly informed commentary.  People talk about the Russian Air Force flying 250-300 sorties a day, but fail to note those flights are mostly in Russian airspace firing a diminishing stock of stand-off missiles.  A number of people still don’t seem to understand how little ground Russia has ever “controlled,” or that shops and even restaurants were open in Kyiv during an assumed Russian siege.

Putin could still get lucky. If he doesn’t, Putin can still cause trouble.  Either way, he’ll end up with a shattered military.  He can keep the pot boiling on a small scale.  But that is only what he was doing in the Donbas before the invasion.

Even that might be too much for him.  He has destroyed pro-Russian sympathies in Ukraine.  He has frittered away most of the (forcibly conscripted) Donbas-region soldiers in the meat-grinder of Mariupol and frontal assaults on the Ukranian lines in Donbas.  He might not even be able to hang on to those breakaway DNR/LNR regions once that butcher’s bill arrives in full.  He’ll also be struggling under sanctions and a for-real-now European shift away from buying his gas and oil.  Rebuilding the military he’s just destroyed will take time and money he may not have.  It is hard to re-build precision missile stocks without (western) semi-conductors in a sputtering economy.

I’m including below two excellent, expert pieces that sum up the bottoms-up analytical consensus as of this weekend.  Both are must-reads in full.

If I was a gambling man, which I’m not, I would wager it’s more likely we see a major Russian military collapse somewhere in the south and east (Kherson?) by May 9 through being overstretched and attritted than a Russian Army having seized Dnipro and surrounded the entire Donbas.  – Phillips O’Brien “Professor of Strategic Studies, University St Andrews, Author: How the War was Won, and Second Most Powerful Man in the World. Editor in Chief, War in History”

https://threadreaderapp.com/thread/1512053218448183300.html

The Russian military is attempting to generate sufficient combat power to seize and hold the portions of Donetsk and Luhansk oblasts that it does not currently control after it completes the seizure of Mariupol. There are good reasons to question the Russian armed forces’ ability to do so and their ability to use regenerated combat power effectively despite a reported simplification of the Russian command structure. This update, which we offer on a day without significant military operations on which to report, attempts to explain and unpack some of the complexities involved in making these assessments.

We discuss below some instances in which American and other officials have presented information in ways that may inadvertently exaggerate Russian combat capability…. 

We assess that the Russian military will struggle to amass a large and combat-capable force of mechanized units to operate in Donbas within the next few months. Russia will likely continue to throw badly damaged and partially reconstituted units piecemeal into offensive operations that make limited gains at great cost.[1] The Russians likely will make gains nevertheless and may either trap or wear down Ukrainian forces enough to secure much of Donetsk and Luhansk Oblasts, but it is at least equally likely that these Russian offensives will culminate before reaching their objectives, as similar Russian operations have done.

https://understandingwar.org/backgrounder/russian-offensive-campaign-assessment-april-9

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Why are Markets Up? Because the Outlook is Getting Better. Actually Its Pretty Good.

The below is not a prediction.  Nor is it a recommendation. 

My only real tool for stocks and markets is to ask Is it Getting Better or Getting Worse?  IF it is Getting Better, you buy.  If it is Getting Worse, you either hang on tight or just outright  sell.  The terms are intentionally subjective because life is subjective.

As hairy as things might feel today, things are clearly Getting Better.  If you look out 6-12 months, things could actually be pretty darn good.

3-6 months ago. we now know the market was looking ahead to 2 really ugly, nasty unknowns.  Ukraine and the Inflation/Fed/Rates dynamic.  Today, we know a lot more about both.  The outlook ranges from not too bad to downright positive.  Most important, it is a whole lot brighter than it was 5 weeks ago.  So the scale tilts solidly towards Getting Better.  Which might be why the market has been behaving better lately.

Ukraine:  The world will likely be a safer, more secure place next year.
The war is horrible, but “we” (the West and the USA) are winning. The Ukrainians are not just building themselves a better future. They are building the whole Free World a better future.That is already obvious today.

  • We will still be dealing with a loose-cannon in Russia, but a fatally weakened one.  Every day this war drags on the Russian military falls deeper into a hole that will take years and billions (that Russia may not have) to exit.  Their energy-supply “weapon” is permanently  blunted – Europe is dead serious about replacing 2/3 of Russian gas buys by 2023.  Even if they only replace half, it is enough.
  • Conflicts with China still looms sometime in the future, but this war pushed it out by probably a decade.  The Chinese are going to learn a lot of lessons from the sanctions and the Russian military failures.  Most of those point to “lets not start any Cold War 2.0’s anytime soon.  We’ve got some serious housekeeping to do before we get to that.”  
  • Most important, “the West” is now in much better shape to handle both a (weaker) Russian and China.  Well get complacent and greedy again eventually, but we’ve bought at least a decade of vigilance.

That is a win, ugly as it may seem right now. It is also a good argument for pressing the win as long as we can. Russia is digging itself into a hole (and dragging China into it). Let them keep digging. It is awful for Ukraine, but even they will be better off in the end. Trading long-term insecurity for short-term stability is usually a bad bet.

Fed/Inflation/Rates:  The worst case scenarios likely aren’t happening.  The more likely scenarios aren’t that bad.

  • The cure for high prices is… high prices.  Everyone is hyper focused on the Fed, but gas at $4-$5 a gallon is going to slow the economy a lot faster than anything the Fed does.
  • The Fed is raising rates fast enough to be able to cut them (which it will probably need to do soon).
  • The markets are resolutely refusing to price in sustained inflation.  They are pricing in sustained negative real rates.

Now idea if the above resolves to a relatively hard or soft landing, but it does look like a landing vs a crash.  Everyone walks away relatively unhurt.  That is not necessarily great, but it is definitely Getting Better vs (overblown) fears 3 months ago.

Just musing here, not predicting.  So I’ll leave this here for the moment.

OK.  One prediction.  We are winning big in Ukraine. 

Eventually people will figure that out.  Even Tucker Carlson will have to acknowledge that eventually.  OK, maybe not Tucker Carlson.  But most everyone else.

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China Wants to Win Its Cold War 2.0. It Knows Why Russia Lost. Why It Should Rein in Russia.

I’m seeing a lot of grand predictions about a new Cold War between the US and China.  There is definitely one coming eventually.  But now?  Maybe China is that dumb.  But probably not.   If they aren’t dumb, the want the Ukraine war over quickly with no more damage done to the world order.  Although it has already done a lot to damage Chinese interests.

Everyone will agree that China wants to “win” the coming Cold War with the USA.

  • A win = effectively replacing the USA at the center of the world’s power nexus.
  • A draw = an (uneasy) equal status bipolar world.
  • A loss = the dustbin of history. Where the Soviet Union ended up.

Most would also agree that wealth ultimately “won” Cold War 1.0.  The US got richer faster than the Soviet Union.  The US also attracted richer, more successful allies than the Soviets.  Note that, in 1960, this was not yet obvious.  Russia had just gone through a truly amazing 40 year transformation from backward agricultural peasant economy to an industrial powerhouse (does that narrative sound familiar vis China today?).  By 1980, it was obvious the USSR and its moribund client states had fallen hopelessly behind.  All Gorbachev did was acknowledge that reality.

China knows that history.  China does not want to lose Cold War 2.0.  Meaning China does not want to repeat Russia’s mistakes.

Right here, right now, China does not want to escalate to Cold War 2.0.  They know they would lose.  To have a chance of winning, China needs to develop its economy further.  It needs the West’s technology to do that.  The most obvious example is semiconductor manufacturing, where China is totally dependent on Western equipment.  You really cant win a Cold War (much less a hot one) without semiconductors.  To have any chance of winning eventually, China can’t any Cold War 2.0 battle lines harden right now.  They need to keep the global situation fluid and friendly.

When China does escalate (eventually), they will want successful (rich) allies. In a lot of stuff I read, China is lined up with Russia, Iran, Myanmar, and other dubious allies.  With friends like that, China has zero chance of winning Cold War 2.0.  The Soviets ended up leading the League of Losers, Parade of Pariahs, Army of Also-Rans.  China knows the leader of the League Of Losers ends up losing.  China’s best hope would be to peel Europe away from the US.  Not necessarily into the Chinese sphere of influence, but into a more neutral “mercantile” stance.  Germany, especially, was already heading in that direction.  Until Ukraine happened.

Seen in this light, the Russia/Ukraine war is already a massive setback for China’s long-term ambitions.  It has…

  1. …pushed Europe back into the US embrace (and vice versa).
  2. …pushed odious Russia (and its war crimes) a little too obviously into China’s too-obvious embrace.
  3. …set back China’s own developmental ambitions.  It is going to be that much harder to convince “the West” to keep handing over critical technologies (like semiconductor manufacturing know-how).  Putin destroyed at least a decade worth of complacency on that front.
  4. …reminded “everyone” of the dangers of authoritarian states with long-term designs on strategically important place like Ukraine or Taiwan.
  5. … cranked up defense spending in Europe and innovations in sanction regimes.
  6. …demonstrated that Taiwan might be a harder nut to crack than China first assumed.  Military advantage hasn’t shifted to favor the defender this drastically since maybe WW1.

The longer the war goes on, the worse it gets for China.  Especially if the rest of the world decides to perceive China as the new Pasha of the Pariah States.  China doesn’t want to choose teams for a new Cold War right now.  It especially doesn’t want to end up leading a “team” of lagging pariah states.  Russia led a team of lagging pariahs in the first Cold War.  Russia lost.  China understands that.

So it is in China’s best interests to get this war past us sooner vs later.  Without further damaging Russia (now a vassal state) or damaging the “open market” world order on which China’s development depends.  If it retreats behind a Bamboo Curtain today, it will retrace the Soviet’s steps.  Actually I suspect they will retrace them regardless (another blog post for later), but the Chinese are probably smart enough to try and avoid that.

China wants to replace the US as global hegemon.  Their long term goal is not to replace the Soviet Union on the shabby, lagging side of a new Iron/Bamboo Curtain.  Right here and right now, they don’t want Putin to break things any more catastrophically than he already has.  Or at least that is where China’s best interests lie.

Again, read this for a Chinese articulation of China’s own interests.  Cold War later, not Cold War now.  https://uscnpm.org/2022/03/12/hu-wei-russia-ukraine-war-china-choice/

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China Now Owns Russia. But It Doesn’t Want Another North Korea on Its Hands…

If China is rational, they will start pushing Russia to end the war in Ukraine sooner vs later.  This is our single best hope for ending the war quickly.  OK, hope is not a strategy.  But “hope” is not why I see China reining in Russia.  I see China acting in its best interests, which are best served by a quick end to this war.

First, an aside: On Feb 22, I argued that invading Ukraine wasn’t in Putin’s self-interest – “If Putin is rational, he’d played this mess out to the most face-saving “win” he’s going to get.”  Taken as a prediction, I was wrong.  Taken as analysis, I was “right” in that invasion was a huge mistake.  I never write these pieces to be “right” in a predictive sense.  It is too hard to factor in purblind stupidity and/or incompetence.  I try to tease out what “should” happen (if people act rationally) not what will happen (if some people make stupidchoices).  Take the below in that spirit.

China wants Russia as a weakened-but-productive vassal state.  A dependent supplier of oil, wheat and other commodities.  A semi-captive buyer of Chinese manufactures to balance that trade.  China already has that win.

Putin has driven Russia straight into the (soon-to-be-uncomfortable) embrace of Chinese hegemony.  His Ukraine blunder has destroyed Russia’s military credibility and surrendered its Great Power status.  He is well on his way to destroying Russia’s economic importance.  He has already permanently lost his best oil/gas markets.  He has severed most economic and social ties to “the West.”  The West can and will write Russia off as a player and a market.  China will become Russia’s second-best (but only) customer, with all the dependency that implies.

So China has acquired a new vassal state.  But China wants a useful, productive, power-additive vassal state. China has years of painful experience with the nuclear-blackmailing, economic basket case client state North Korea.  Putin and The Cronies may see advantages (for them personally) in a North Korea or Iran scenario.  But China does not want to drag another, Russian pariah client along in its quest for global hegemony.  China now owns Russia.  They will want to maximize the value of that asset.

Putin probably hasn’t figured the above out yet.  Any more than he’d figured out his own best interests in Ukraine  But his new Chinese masters will eventually yank the collar Putin has put around his own neck.  A nice sharp tug towards ending the Ukraine war would communicate Putin’s new reality to him quite nicely.

Why would China want to stop the war now?  There are a lot of reasons, but here is the over-arching one.  It would keep Putin from tearing down more of the property he has just deeded over.  Like a wastrel inheritor, Putin has run the place down far enough to lose his ancestral land.  The new owners won’t want to run it down any further.

I’ll flesh out this argument further in subsequent pieces.  The Chinese article below helped a lot in thinking this all through.  Give it a read in full. 

Hu’s long-term goal, like all Chinese Officials, is China’s long-term goal of replacing the US as global hegemon.  He is arguing China’s selfish best interests, no more no less.  Subsequent reporting clarified Hu was not stating “official Chinese” policy.  Just one side of the debate among Chinese officials (of whom Hu is one). But in doing so he shines a very clear light on China’s self-perceived interests.  Others in China may see the path to serving those interests differently.  But they all likely agree on those end goals.  I also think he makes a convincing case for taking his path forward.

Will Xi find Hu’s argument compelling?  I have no idea.  That wanders too far into the realm of prediction.  As with Putin, I’ll stick to what Xi should do, not what Xi will do.

Possible Outcomes of the Russo-Ukrainian War and China’s Choice

On a final note, most (Euro-centric) China/Russia commentary I’ve seen puts too much weight on Russia’s interests.  China’s interests are what matters now.  Russia is a vassal state, not a partner.  Yet another reason to read the above.

 

 

 

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Why a Russian “Collapse” Most Likely Ends the Ukraine War.

It occurred to me (after a conversation with a friend today) that looking for signs of Russian military collapse might come across as wishful thinking.  Perhaps I’m letting sentimental attachment to the Ukrainian cause bias me?   Except that isn’t how I got myself there.  It was just a depressing elimination of other, less-grim outcomes.  So let me detour away from China for a sec and lets go though the various ways this war might end.

  1. Russia has gotten as far as it can get.  So there is no likely master-stroke blow that wins this for them.  If you don’t agree, just leave that for now and see below.
  2. Ukraine will not back down.  That seems pretty obvious.  It is a fight for survival.  They know they must fight the battles now (with strong global support) or risk fighting them later without being certain of that support.  Besides, so far they are holding out OK.
  3. Ukraine would sign a reasonable peace settlement.  But that probably requires
    1. All its pre-invasion territory back and retaining its territorial claims on the Donbas and Crimea (although maybe leaving Russia occupying them until some sort of referendums or etc…).
    2. Explicit security guarantees from major powers.  Not official NATO membership, but pretty darn close.
  4. Russia won’t voluntarily sign a “reasonable” peace agreement.  They can’t/won’t meet Ukraine’s terms.  Even Putin’s PR machine couldn’t sell that as a win for Russia.  Putin is still looking for a win.
  5. Putin has already lost, but he won’t accept that loss.  Probably partly because no-one will tell Putin he has already “lost.”  So his cronies will keep pressing the war and hoping for a miracle until something operational finally breaks.

Something must break.  The Russians probably break before the Ukrainians do.

Ukraine understands this is a war for survival. They are fighting like it.  So they will just fight on with abundant supply (and open supply lines) from the West.  If the Ukrainians were going to break, they would have broken already.  With the Russians already on their back feet, the critical moment for Ukrainian morale has already passed.  They will just keep grinding away.

How many Russian soldiers believe this is a war for survival?  They certainly aren’t fighting like it.  Putin and The Cronies barely made the case before sending them in.  Most went in because it is their job and are now fighting mostly because the Ukrainians are shooting at them.

Russian motivation/morale will only last so long.  How long?  I have no idea.  It depends on events.  If Ukraine pulls off a few high-profile victories, the Russians will break quickly.  If it settles down into a grind, they will break slowly.  But they likely collapse before the Ukrainians do.  It takes a lot more energy to attack/invade than it does to defend.

I mean “collapse” like a souffle.  A step-function change just like most human group dynamics; the tiny shift in energy that tells you and everyone else a party has crested and the night is winding down.  Time to start collecting your coat and making your goodbyes.  Or go for that bathroom break and just never make it back to the unit.

Non-linear, impossible to predict in advance, and unstoppable once it starts. 

Enough individual Russian Army soldiers and (eventually) whole units desert, surrender or just plain malinger to a tipping point where the whole effort falls apart.  That is what I mean by collapse.

How many soldiers losing how much heart is “enough” to precipitate collapse?  I have no idea.  You never do in advance.  But in an instant, everyone knows the party is winding down.  Then they all, collectively, wind it down.  The souffle collapses.  We’ll know it when we see it.  The average Russian soldiers will know it before we see it.  Putin will likely see it last.  I feel sorry for whoever has to tell him.

———————–

Why Russia has gotten as far as it can get.  They…

  1. …haven’t encircled Kyiv and won’t.
  2. …can’t supply the army they have, much less a necessarily larger occupation force.  Supply problems are widely documented already.  An occupation force would have to assert broader control over a broader area.  Requiring more supply.  Requiring more troops to guard/protect/deliver that supply.  Which requires more supply…. The math doesn’t add up.
  3. …don’t control the air.  Yes, they are flying 200 sorties a day but most of those flights never leave Russian airspace (per the Pentagon).  They have already fired over 50% of their air-to-ground missile inventory (per the Pentagon) and have very little industrial capacity to build more even if they had the time (sanctions on semiconductors, raw materials, etc…).
  4. …are running out of troops.  They have lost 40,000 killed, wounded, or captured out of a force of 190,000.  They are depleting remaining units to replace losses and scrambling to find more soldiers in Russia, Syria, Belarus – anywhere.  Hard as it may be for some people to accept, Russia’s 1 million man army on paper only had about 200,000 – 300,000 effective soldiers in reality.  40,000 are now lost and many are needed elsewhere.
  5. …running low on equipment.
    1. They have lost more tanks than the entire British Army has in total.  Nor do they have modern tanks in reserve (a lot of tanks already deployed were 30-40+ year old Soviet-era gear).
    2. Tank/vehicle tracks wear out fast.  So do the engines. Off-road capable trucks also wear out (even if the tires aren’t sun-rotted as widely noted already).  All that stuff is built to go hard for a short burst, then get a complete rebuild in a well equipped mechanics shop.  Or it breaks down in the middle of a field and gets abandoned (as we’ve seen in how many photos already?).
    3. High performance aircraft engines wear out even faster. Those will also need a total rebuild.
  6. …running lowest on morale.  No army anywhere can keep people in combat indefinitely (except maybe a hyper-motivated guerilla army like the Viet Cong).   Humans wear down from cold, crap food, poor hygiene, and stress (if they avoid being wounded or killed).  You have to rotate troops out of the front lines to keep them effective.  Russia doesn’t have the manpower reserves to do much of that.
  7. …don’t “control” anything beyond the narrow stretches of road and local structures their troops hold.  The newspaper “blob” maps are highly misleading this way.  They don’t really “control” occupied towns (why protests still happen).  They don’t control any territory off the main roads at all.  If they do “dig in” their pitifully few troops, Ukrainian soldiers will just make a short walking detour and go around them (to attack their supply lines).  If they fall back and concentrate in territory they can actually hold, they will have effectively retreated most of the way to the border.  That retreat would be pretty much the same as losing and they’d know it.

 

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Putin Will Fight Until His Army or Economy Collapse. Oil Sanctions Will Hasten That. But China Does Not Want a Russian Collapse.

Widespread hope for a negotiated peace in Ukraine looks misplaced.  Most evidence suggests Putin will fight on until the army or economy (or both) collapse.  We can hope collapse comes soon.  The risk is it doesn’t.

The US has likely come to the same conclusion.  That argues for sharper escalation to hasten that collapse.  My guess is Biden’s trip to Brussels is to arm-twist the EU (really the Germans) into cutting off or tax-penalizing oil/gas/both purchases from Russia – or at least setting some uncomfortable red lines for doing so.

The US argument? You are already at war with Russia whether you want to face it or not, so take a 2%-5% “sanctions” GDP hit now instead of a 10%-15% “hot war” GDP hit later.  Note that Saudi Arabia on Monday set out its terms to crank up its pumps (help in Yemen, no deal for Iran, and stop talking about that dang journalist we dismembered…).  The US probably brings that Saudi commitment to the negotiating table to help cushion the supply shock.

Energy sanctions would have a drastic impact on Russia.  It might help force the issue and/or hasten the military/economic collapse.  More to the point, they are worth a try.  Even if it doesn’t end the war, Russia still ends up less dangerous (deeper in a hole).  It would remain disruptive, but the “free world” must figure out how to get along without them.  Because we can’t rely on Russia anymore anyway.  Even Germany knows that even if it doesn’t want to face up to it (yet).

But (clutching handbag) surely Russia doesn’t want to end up a pariah state like Iran or North Korea…!?  Yes, the “Russian people” don’t want to live in a pariah state, but they have no voice here.  Putin and his cronies are probably looking forward to running a pariah state. 

For Putin and the Cronies – that should be a band’s name! – pariah state status looks like a pretty good outcome.  Building a wall around Russia builds a wall around their own perks and privileges.  No more pesky pretending around elections and silly legalities.  They can get the Chinese to build a Great Firewall to lock down the Internet.  The economy will stagnate, but the oil money will flow well enough to grease the corruption machine.  Best of all, those annoying, smarmy, educated, Western-leaning, economically dynamic elites will all emigrate!!!  Leaving behind a more tractable, resigned, less dangerous, but less productive population to control.

OK, they will lose some trips to the Riviera, but Putin and his crowd prefer Sochi anyway.  Eventually, they will find some clever Western quisling law firms who will poke enough holes in the sanctions regimes.   Life will go on quite comfortably for the people at the top and their kids.  At least for those who evade Stalin-esque show trials, disappearances, and etc…  Their imagined model is likely more China than Iran or North Korea, but these are the same delusional idiots who though Ukraine would be a walk-over.

The one wrinkle is Russia will end up uncomfortably dependent on China.  Because the Russian military will emerge broken from Ukraine and Russia is unlikely to have the economy (or semiconductor supply) to rebuild it quickly or at all.  The Chinese yoke will likely chafe more than Putin and the Cronies appreciate.  But they won’t fully understand that until they are fully wearing it.

This is incredibly depressing.  Unless the sanctions ramp up to seriously “break” Russia’s ability to fight, Putin and the Cronies will keep pressing because the outcome – pariah status – has its appeal.

But…  the above ignores China’s interests. I see a decent chance China twists Putin’s arm to bring the Ukraine war to a close.  Not because China wants to “do the right thing,” but because it is in China’s self-interest to yank Putin back from the abyss.

Put another way, a China intervention would be great for Ukraine.  But a China non-intervention would be great for the West’s chances of “winning” Cold War 2.0.  If China understands its own interests, it will yank back Putin to give China a better shot at replacing the US down the road.  So maybe we should be rooting for China to make a strategic blunder here?  Let the war drag on?   I’ll save that for my next piece.

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No Chinese Military Support for Russia. A Huge Win For US Diplomacy.

At this point, we can tentatively conclude that China is not going to offer that military support Russia asked for last week.  This is a huge win.  Russia is evidently running low on supplies both fancy (missiles) and mundane (rations).  If we keep China on the sidelines, Russia’s ability to sustain the war matters more than Putin’s desire to do so.   

I’ve held off on this post because I am guaranteed to jinx myself and hit “Publish” just before we see the headline US Intelligence Says China Sold Missiles to Russia.   But it is has been a week since we saw the dire warnings to that effect and a few days since Biden spoke to Xi.  So far, not a peep about increased China support.

So lets chalk that up as a huge win for US diplomacy. Last week, the US fixed a very bright spotlight on China and its tentative moves towards supporting Russia (and making a quick buck in the process).   Caught in that glare, the Chinese blinked and stepped back.  Russia gets nothing.  China is left to reconsider its own global priorities

Here are the chessboard moves.  Start with the “official” leaks to the press.  Remember these are done with a purpose.

  1. Sunday March 13  – US Discloses Russian Request for Chinese Arms.
  2. Monday March 14 – US Notes Intelligence Says Chinese Responded Positively to Russian Arms Request.
  3. Every day since then – silence.

The Diplomatic messaging was clear in those leaks.

  1. Sunday – We intercepted that Russian request for help and we are publicizing it to let China know we’re going to publicize the Chinese response.
  2. Monday – By the way China, we also intercepted your reply to Russia.  So don’t think being extra-sneaky is/was going to help here.  The world will know China intervened in Ukraine. 

I’m assuming a decent chunk of the lead-up to and content of the Biden call with Xi  detailed all the ways we could make life miserable for Chinese companies deemed to have provided that support.  Cut off semi-conductor supplies, dollar payments, raw materials, etc….  The Huawei sanction model applied more broadly. We don’t have to formally sanction all of China, but we could interpret “support” pretty broadly to encompass 2nd and 3rd tier suppliers etc…

Public exposure would also undercut China’s standing in the world – especially Europe where China has been trying to gain influence.

Faced with the prospect of public exposure and economic risks, China has done nothing.  Which is a great result for the US.  Stopping something from happening is what Diplomacy is best at;  Avoiding a problem or a crisis.  This is why a lot of people under-value diplomatic action and over-value military action.  Armed force “does” big noisy things that make the news.  Diplomacy mostly stops bad, noisy things from happening.  So give your local diplomat a pat on the back next time you see him.

FWIW, China’s own self interest pretty obviously does NOT lie with supporting Russia.  They know who lost the last Cold War and why.  I’ll get into that in a later post.

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Putin’s Headline Grabbing Missile Strikes. Distractions Borne of Desperation?

Why is Putin firing missiles at Western Ukraine?

  1. He is so confident in victory he can afford to use up his (diminishing) stocks of super expensive, hard to replace long-range missiles on splashy, high profile, but militarily ineffective pinprick attacks.
  2. He is trying to divert attention/headlines away from the fact his ground forces haven’t done squat for 3-4 days now.

The ground stall probably won’t last.  You’d guess Putin is building up supplies for a “big push;” Hoping to get a lucky breakthrough somewhere somehow.

If he does get lucky, he buys time and gets some momentum back.  If he fails, he just burns down his troops stamina, morale, and supplies further.

He probably would need a longer a 5-6 day “pause” stall to rebuild the supplies.  Surrender/desertion rates of irreplaceable soldiers will start to climb as they sit.

He can only replace stamina and morale with fresh troops.  Which he doesn’t have.  Yes Russia nominally has 900,000 active duty soldiers.  But I saw a good line on Twitter –

The Russian Army is huge and modern, but the huge part isn’t modern and the modern part isn’t huge.

Besides, Putin can’t supply the 190,000 troops he has.  How can he supply moving in more or even the temporary supply surge needed to swap them out with fresh tanks and men?

To that end, the links below are a fascinating look at the boring supply stuff of which non-armchair wars are made (said the man sitting in his armchair – grin).  At least I’m relying on armchair logistics experts who hopefully live a little closer to reality.  Note the first piece was written in November 2021 BEFORE the war started. 

Feeding the Bear: A Closer Look at Russian Army Logistics and the Fait Accompli

 

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