by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
RUSSIAN TROOPS WERE THOROUGHLY ROUTED in the first round of the Ukraine war; they’re still in retreat, preparing for a bloody second round in the East — which the Ukrainians also can win.
RUSSIAN SUPPLY LINES — MOSCOW’S MAJOR WEAKNESS: There were many reasons why the Russian assault on Kyiv failed — the difference in troop morale was huge — but a major factor was the inept supply lines, which were sitting ducks for Ukrainian air strikes. Now there’s another key factor.
WITH RELATIVELY LITTLE PUBLICITY, Ukraine launched a major offensive in late March against Russian navy ships docked at the port in Berdyansk on the Azov Sea, the Wall Street Journal reported earlier this week. It was the first major strike on the Russian fleet, Ukrainian and U.S. officials said. The attack destroyed a ship laden with supplies, drove others back into the sea, and damaged the port facilities.
EVEN IF RUSSIAN TROOPS find a way to enter eastern Ukraine, there’s no guarantee that they will prevail in ground fighting. Western countries, including the U.S., are flooding the region with sophisticated weapons.
THE SAVVY WASHINGTON POST COLUMNIST David Ignatius says this morning that the U.S.is rushing new weapons to Ukraine that include advanced drones, laser-guided rocket systems and light-armored vehicles.
THE CONVENTIONAL WISDOM is that this second round could last for months, with each side facing grave consequences: much of eastern Ukraine will be in ruins, and the Russian economy is facing a deep depression and staggering casualties — its troop fatalities may be over 10,000, with three times that number wounded or captured.
THE RUSSIANS WILL HAVE MORE TROOPS in this second round, but the Ukrainians know how to destroy Russian supply lines, and they have enormous public support that has been reinforced by proof of the indiscriminate slaughter of their people.
PUTIN’S JOB APPROVAL RATINGS ARE HIGH in rural Russia, but the truth about this war will eventually emerge as the educated elite, now scattered around Europe, call home with details of what has happened. And there will be growing anger from the families of the thousands of Russian war dead.
BOTTOM LINE: Russia cannot win this war; even if some eastern Ukrainian cities fall, a fierce guerrilla resistance will persist. A protracted stalemate is the best case scenario for Putin, who eventually will have to accept a deal. His worst case scenario is the prospect of another humiliating defeat on the battlefield — and his ouster by generals who have had enough of supply shortages and inept strategy.
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This post was first published at the AGF Perspectives Blog.
