Quote (dro94 @ 26 Sep 2024 22:06)
I think there are a multitude of reasons why supporting Ukraine through 2025 is the best strategy for the West:
1) Russia has transformed its economy into a wartime economy with large deficits and withdrawals from their National Wealth Fund to pay for the war. Inflation is stubbornly high, with their interest rate being increased to 20% to keep it in check and support the falling ruble. There are significant labour shortages, partially driven by the mobilisation and partially by the death and injury of hundreds of thousands of men in the war, which is further harming the demographics of the country and causing inflation. Much of the economic growth is being driven by the production of missiles and vehicles, and the incomes of Russian servicemen by the government, which are not productive to the Russian economy long term. Western countries, on the other hand, are not on a wartime footing, so supporting Ukraine with a small proportion of their military budgets is not detrimental to our long term outlook.
2) Oil demand is flat and not forecasted to increase significantly in the near future; as such, Brent Crude is trading within the $70-75 a barrel range, much lower than the $90-110 range we saw in 2022. $70 oil isn't a disaster for Russia, but it's not a tailwind either. If oil dropped to $60 a barrel or below, it would be a disaster - the NWF would be drained within a year with current government expenditure.
3) Due to sanctions and lack of high-end components being produced domestically, Russia relies on taking old military equipment out of storage and refurbishing them, and military experts forecast the stockpiles of this equipment will be dwindling as early as late 2025. Meanwhile, Ukraine doesn't have this problem as they don't need to produce a lot of military equipment domestically - we have plenty of it in the West.
In light of all this, it's unlikely Russia can continue a protracted war against Ukraine if we continue to back them, which will lead to a better negotiating position for Ukraine in the future.
Very good post. Specifically the point about Russia relying on Soviet-era stockpiles which have to run out at some point, which I've made repeatedly as well. A lot of the outlook hinges on when exactly they will run out, though. Particularly in light of NATO stockpiles also dwindling, and also being drained by support for Israel, Taiwan or the anti-Houthi mission in the Red Sea.
Also, at the current rate, it's not clear whether Ukraine can actually hold on until late 2025 or early 2026 (if Russian stockpiles last a bit longer than anticipated) at current levels of Western support. For your scenario to pan out, the West might have to increase its support and commitment for Ukraine, which is something I see no appetite for. The way I see it, this war is not only a race against time for Russia, but also for Ukraine - and we don't actually know whose clock will run out first.