In my last post, I wrote about the danger of assuming this war is on the verge of being won. With that, it is official. For now, at least, Kyiv is surrounded. The Russian army is reinforcing from the north and the siege is about to enter its most dangerous phase for the Ukrainian nation. Across the country, the battle rages on, wherein part thanks to the Turkish drone support, the cities along the Sea of Azov remain tantalizingly out of reach for the Russians. What happens next militarily will determine if there is any way Putin can claim victory. For that reason, right now he will be pushing in with everything he has at his disposal. Therefore for the next 24-48 hours, everything is to play for.
Should Kyiv survive this period, the chances are that Putin will be unable to continue due to the impact of sanctions on the economy. Why are the sanctions so powerful?
The Russian Central Bank having its assets frozen means that the Russians will be hampered in their abilities to defend the Rouble. The Rouble closed on Friday evening at 87 / 1 USD, falling from 81 / 1 at the beginning of the week. In my opinion, it is not impossible that the Rouble to falls by 50% in the next 24 hours (so 120 / 1 USD or worse even. Indeed, the Rouble could struggle to find a floor. Maybe even a 100% drop next week is possible. Unthinkable normally! For context, when the UK voted to leave the EU, GBP suffered its single largest move in one day since the departure of the ERM. That move was a bit over 10%.)
This quite literally means that every purchase the Russians make which is from something that is imported becomes at least twice as expensive. The inflationary impact of that therefore hits everyone, without exception.
For Russian Banks removed from the SWIFT network, they will be unable to send and receive payments from other Banks internationally. At that point their solvency will be at risk. For individuals, this could well induce a panic of mass withdrawals, despite the announcements from the central bank to remain calm. Therefore expect a run on the banks tomorrow, as people look to withdraw en-masse. Even for Banks not removed, expect them to be impacted also.
Oligarchs for a long time have been bought by Putin and acquiescent as a result.. However, now all bets are off. Especially for the ones targeted by the West, they will be wondering if a regime change may normalize their status.
Then there is the proposed EU aid package which really is more incredible, the more you find out about it. Put simply, one of the long standing requests from the Ukrainian people has been to have shelter from the sky. (no fly zone.) Well the EU can’t do that, but what they have done instead is said they will purchase fighter jets and deliver them to the Ukrainians. This has been confirmed at the highest level and at the point it materializes means that not only are Russia guaranteed to lose, but they will lose very quickly. Overwhelming air superiority means Russian battalions will be sitting ducks. It really will be game over, that is if the war has not ended by then already.
So now, we need to think through what happens next:
- A: Putin announced that Russia has increased its nuclear readiness in response to the hostile actions from the West. Could he really fire a nuclear weapon on the west? Is there a scenario where this could lead to a win for him?
- B: Alternatively, given the failure of the war effort and the escalating pressure at home, could we see Putin deposed?
- C: Meanwhile with the talks happening between the Ukraine and Russia, whilst Zelenskyy places no stock in them, could they deliver an end to the war in a way everyone wins?
So, with scenario A, how could this unfold?
In Putin’s mind, he gave fair warning to the West, that any interference in the invasion of Ukraine would lead to an extreme response. In response, NATO members re-armed Ukraine and the west declared economic war on Russia. Therefore in his mind, he is not only fighting Ukraine, but NATO and the west as well and the technological advantage bestowed on Ukraine by having NATO weaponry is making the war unwinnable.
He currently has Kyiv surrounded, where the only way he fails to take the city is through further western interference, so on Monday 28th Feb, in the late afternoon, he gives a warning to the west, continue to re-arm Ukraine and face a nuclear strike. At this point the west is so pot committed, they continue regardless, so Putin launches a tactical strike on an EU capital, of a country which doesn’t have its own nuclear weapons. (e.g. Warsaw)
Why Warsaw? Well this the primary hub for NATO in the region and the Polish Gov’t have been vociferous in their criticism of Russia and indispensable in the role they play in keeping Ukraine re-supplied.
Article 5 is meant to protect NATO members, but here’s the catch. No Nuclear power would fire on Moscow in that scenario, knowing it would mean being fired back on. As an example, there is no way Boris Johnson would fire a nuclear weapon on Moscow, knowing it would mean London gets hit even if another NATO member had been hit. What this means is that Article 5 is meaningless when it comes to a nuclear weapon counter strike, unless the country hit is already a nuclear power. Before we get into what that means in terms of nuclear proliferation, what that shows us is there is a major weakness at the heart of article 5. If I can identify that, well, so can Putin.
Now I am not saying there wouldn’t be a response, but let’s say this response amounts to a military invasion. Well, a military invasion would need to go through Belarus. Right now there are 30,000 troops in Brest, which is due east of Warsaw. The factor that as of today, Belarus has changed its constitution to allow for nuclear weapons, any response which would involve an invasion, would not only be met by troops but would involve invading a nuclear-armed country. In that moment, what do the West do if Putin then says, retreat or I nuke another city? At that point, while people may want to disagree with me, my logic says the NATO alliance has no choice but to stand down. Special operations may be the way to react. But a formal invasion? no.
Equally, once that first nuke has been fired, no one is in any doubt as to whether or not Putin would fire a nuke again, so assuming the seige of Kyiv is still going on in this moment, his next action is to tell Zelenskyy to surrender or Ukraine is next. If Zelenskyy refuses, Putin probably nukes Lviv. Why Lviv? Well, first of all, it is the area of Ukraine that would be the hardest to ever conquer, it has the smallest Russian ethnic speaking group and is the central command hub for the Western Military Battalions. In an event where the country would be partitioned this would be the capital of the rump entity. Therefore in doing so, he can intimidate the Ukrainians into surrender, whilst destroying the city which would be the centre point for rebellion.
At that point, while Russia would be a pariah state, Putin cares about land and resources and unifying ethnic speaking Russians under a united banner. He would have total control over Ukraine and Belarus, and the new combined Greater Russia would have such a stranglehold over resources and raw materials, that even if the West would not trade with him, India and China both would.
This is an exceptionally bleak scenario and not one I hope happens. Nonetheless, in-game theory terms it’s worth thinking through how Putin could get a win using nuclear weapons.
This leads up to Scenario B – could we see Putin deposed?
Quite possibly. Monday 28th Feb in Russia is likely to be a day that is written about in history. I have no doubt that by the end of the day, the numbers of people on the streets of Moscow and St Petersburg will be so high that no amount of police can round them up. With Putin locked away in his bunker in the Urals, his ability to dictate and control events centrally will be diluted.
Indeed, there is a very good case that the Army itself, faced with orders to send tens of thousands of soldiers to almost certain death because they are facing far superior weaponry, combined with instructions to initiate a nuclear strike, not to mention the generational damage he is doing to the country, decide enough is enough and tell him that they will no longer do his bidding. At that point Putin is done. Wishful thinking? Maybe. But for many people, the Iron Wall falling was also unimaginable. And then it did.
Finally, could we see a negotiated peace where everyone can win? If so, how would that work?
Well the first rule of negotiation is all parties have to walk away with a victory they can proclaim to their grouping. In this context there are four meaningful parties. Russia, EU, USUK, Ukraine,. So working through them:
For Russia, a negotiated peace could be as simple as them having the new Crimean borders approved internationally including having freshwater access, potentially with a land bridge covering Kherson through to Mariupol (assuming the military manages to take those cities), meaning the Sea of Azov becomes sealed. The new borders being approved by all parties combined with all sanctions dating back to 2014 being lifted, would mean Putin would be able to walk away and argue the invasion was worth it.
For the EU, Russia being brought to heal so effectively by their stepping up and applying sanctions would show that they can be an effective actor on the global stage. The decision by the EU to buy Fighter Jets for Ukraine and deliver them is extraordinary. Therefore the EU gets to show that it has real muscle.
For the UK / US they are vindicated for the past month of warnings where they had been stating that Putin had been preparing for war. Similarly, they both get to take a lot of credit for the training given by them and weaponry, so when the invasion first started, the Ukrainians managed to stand up and resist. The special relationship really becomes special again.
And for Ukraine, they get a formal peace with Russia, but more importantly in the process, Russia has to swallow the bitter pill of watching Ukraine be absorbed into the EU and NATO as their price for their land bridge between Crimea and the mainland.
I don’t know how possible this kind of negotiated settlement would be, but already there are talks about Ukraine being fast-tracked for EU membership. One thing that is clear is, that once this war is done, Ukraine will need a reconstruction package the size not seen since the second world war and that can only start once there is a full and final settlement with Russia. Whereas in the 1950s it was the Americans who paid the bill, this time, I think it will be through the EU this is done, albeit with additional UK / US contributions.
This next week is a big week and speaking for myself, given how quickly this is all moving, I would be amazed if there is still fighting come Easter. I don’t think Russia can maintain the intensity required once the Fighter jets start being delivered and can’t see the Ukrainians giving up in the meantime, with the end so near and in sight. The only real question is, which of these scenarios ends up manifesting – or if none of the above, how does this situation unfold?