Natylie Baldwin's Blog, page 41

Richard Connolly: Russia’s Wartime Economy isn’t as Weak as it Looks

By Richard Connolly, RUSI, 1/22/25

Russia’s economic resilience is defying expectations, enabling the Kremlin to sustain its war efforts in Ukraine despite mounting challenges, and raising doubts about hopes for a swift resolution.

Russia regained the momentum on the battlefield in Ukraine last year. Although Russian progress remains slow and costly, the outlook for the year ahead is bleak. Ukraine’s energy system has been heavily damaged by Russian air strikes, and its forces continue to lose ground in southern Donetsk, where the heaviest fighting is taking place.

Perhaps most importantly, political shifts in some of Kyiv’s key allies – especially the US – could result in crucial financial and military aid being substantially reduced in the year ahead. Together, these trends raise the prospect of Ukraine being forced to accept a crushing defeat after three years of heroic resistance.

Against this lugubrious backdrop, many analysts have seized on what appears to be a rare bright spot: Russia’s faltering ‘war economy’, which – according to some – is ‘Putin’s greatest weakness’. An acute labour shortage, persistent and rising inflation caused by soaring military expenditure, and ever-tightening sanctions will – it is claimed – finally bring about an economic crisis that will force Moscow to abandon its maximalist aims in Ukraine and bring about an end to the war on terms more acceptable to Kyiv and its allies.

Sadly, these hopes are likely to prove misplaced. Russia’s economy has confounded expectations throughout the war and, despite suffering several complications, remains well-placed to support the Kremlin’s ambitions in Ukraine and beyond.

Dashed Hopes…

This is not the first time that Kyiv’s supporters have placed their hopes in Russia’s economy proving to be its Achilles’ heel. In the early months of the war, analysts forecast that Russia would suffer a severe and long recession that would cause living standards to slump and the state’s fiscal resources to dwindle. Moscow, it was hoped, would be forced to make an embarrassing retreat with potentially fatal consequences for President Vladimir Putin and the ruling elite.

But these hopes were soon dashed. The imposition of capital controls, a surge in federal expenditure, and the successful reorientation of foreign trade at breakneck speed arrested the signs of economic distress observed in the first months of the war.

Although Russia did not avoid a recession in 2022, it was much shallower than expected (GDP fell by only 1.9%) as the economy adapted to its new circumstances. Growth exceeded nearly all expectations in 2023 (3.6%), with this momentum continuing into 2024. Output is likely to have expanded by 3.6–4% last year.

…Raised Again

Nevertheless, the quantitative expansion of the last two years has been accompanied by growing signs of weakness on several important economic indicators, raising questions over the quality and sustainability of Russia’s better-than-expected performance.

Mounting labour shortages, fuelled by the demands of war, are just one factor that threatens to derail growth. The massive expansion of the military and defence-industrial production has drawn large numbers of men away from the civilian labour force.

Although Russia undoubtedly faces significant challenges, there is little to suggest that these will result in any significant political consequences that might prompt the Kremlin to rein in its ambitions in Ukraine

Along with rising demand from other sectors of the briskly growing economy, this has caused the supply of labour to tighten considerably. Unemployment reached 2.3% in October, a post-Soviet record low. Maintaining the current rate of economic growth will only be possible if Russia utilises its existing labour force more efficiently.

Labour shortages are not the Kremlin’s only problem. Western sanctions and a shrinking trade surplus contributed to a sharp depreciation of the ruble last year, causing import prices to rise and amplifying inflationary pressures.

At the end of November, the Central Bank of Russia (CBR) recorded an annual inflation rate of 8.9%, well above the bank’s target rate of 4%. Even this rate likely understates the real extent of price growth, with some staple goods registering price increases in excess of 70%.

In an attempt to quell inflationary pressures, the CBR raised the key rate throughout the year, setting it at a post-Soviet high of 21% in October. Many businesses now find the cost of borrowing prohibitive.

Many analysts have attributed these signs of overheating to elevated spending on the war in Ukraine, pointing to record-high military expenditure which is expected to have reached over 7% of GDP in 2024. With defence spending expected to rise by nearly 25% this year, accounting for around 40% of federal government expenditure, some have raised the prospect of Russia slipping into ‘stagflation’, combining high inflation with low to no growth.

Finally, with new UK and US sanctions targeting Russia’s oil industry, and G7 states seeking to tighten the enforcement of the oil ‘price cap’, some hope that Moscow’s vital hydrocarbon revenues will be crimped even further, exacerbating the losses caused by the collapse of Russian gas exports to Europe and flagging coal sales.

Desperate but not Serious

Unfortunately, hopes of an imminent economic crisis are unlikely to be realised. Although Russia undoubtedly faces significant challenges, there is little to suggest that these will result in any significant political consequences that might prompt the Kremlin to rein in its ambitions in Ukraine.

The tight labour market has benefitted many Russians used to stagnant income growth in the decade before the war. Real wages have soared since 2022, fuelling the fastest sustained growth in consumer spending in over a decade. Soaring military production and record-high wages for soldiers have helped reduce some of Russia’s chronic regional inequalities.

Crucially, the absence of a large pool of latent labour need not constrain growth so long as labour productivity continues to rise. Russia’s low-productivity economy means that there are plenty of easy wins available for firms prepared to undertake simple organisational changes or investment in new machinery.

Inflation also has its advantages. Rising prices send important signals to firms to expand supply by investing in areas where prices are growing fastest. Investment – chronically low for most of the post-Soviet period – has grown faster than GDP since the war began. Rising prices have also helped swell public coffers, with turnover taxes like VAT growing at record levels and boosting the Kremlin’s fiscal position.

The CBR’s record-high key rate is not as damaging as it might be in a Western economy, either. Large swathes of Russian business – including those in strategically important sectors – can access state-subsidised loans at considerably lower interest rates. Even those firms unable to access subsidised loans will be able to use record-high retained earnings to finance investment.

Russian consumers have also benefitted from state support. Most mortgages offered during the recent housing boom were taken on at subsidised rates.

Even the extent to which Russia has a ‘war economy’ is exaggerated. While the broad NATO measure of military expenditure is likely to account for around 40% of federal spending this year, this will amount to closer to 20% of Russia’s consolidated state spending (that is, including both regional and national expenditure).

Although this is high, it is comparable to US military spending during the Vietnam War. The militarisation of the economy has undoubtedly grown. However, it remains well below the crippling levels observed in the ‘hyper-militarised’ Soviet economy.

Importantly, many of the features of true war economies – such as price controls, the centralised allocation of resources, and widespread nationalisation of private sector assets – have yet to appear in Russia. 

Sources of Resilience

If Russia’s weaknesses are not as severe as many hope, its sources of strength and durability also remain impressive.

Take the country’s balance sheet. Despite fighting the most intense war in Europe since 1945, Moscow has managed to fund the war with staggeringly modest budget deficits of between 1.5–2.9% of GDP since 2022. As a result, the Kremlin has barely had to borrow to fund the war. At around 15% of GDP, Russia has the smallest state debt-to-GDP ratio of the G20 economies.

Despite being cut off from most external sources of capital, Russia remains more than capable of financing domestic investment and government expenditure with its own resources. Over the past two years, Russia has recorded a surplus on its current account – that is, the gap between aggregate savings and investment – of around 2.5% of GDP. For as long as Russia can continue to export large volumes of oil, this is unlikely to change.

Designed to ensure that the Kremlin can pursue a sovereign foreign policy against the interests of the collective West, Russia’s economic system is doing its job

Crucially, the Kremlin’s fiscal position remains very healthy. Tax revenues generated by domestic activity have soared since the war began. Oil and gas revenues are forecast to account for 28% of federal government tax receipts in 2024, significantly lower than the 53% recorded in 2018.

Even if export revenues slump, perhaps due to a looming trade war or China’s spluttering economy, Russia has plenty of resources it could tap to maintain elevated levels of state spending. The largely state-owned banking system is sitting on piles of cash that could be paid as dividends to their owner: the state. Banks could also be directed to buy government bonds, as they were at the end of 2024. If all else fails, the CBR could buy government bonds.

Importantly, Russia’s resilience is not purely financial in nature. The foundations of the market economy built in the turbulent 1990s remain strong. Much of Russia’s unexpected adaptability has come not only from its well-trained and professional economic managers, but also from its large and growing class of private business.

Accustomed to operating in an often hostile and challenging business environment, privately owned firms have exploited the opportunities created by sanctions to supply soaring demand from the government and consumers. The number of registered private businesses has grown briskly since the war began, reaching a record high in 2024. It is this strong base of commercially oriented firms that will enable Russia to continue adapting to sanctions and the demands of war.

Calibrating Expectations

To be clear, Russia’s economic prospects are far from rosy. Property rights remain weak, and the state’s role in the economy is high and growing. The vagaries of the international oil market always retain the potential to generate a strong external shock. Western sanctions will also continue to raise the cost of doing business and restrict the flow of know-how to Russian businesses. As a result, Russia is unlikely to join the ranks of high-income countries any time soon.

However, the country’s poor long-term prognosis should not lead us to overlook its short-term resilience. Throughout its 500-year history, Russia’s economic system has rarely delivered broad-based growth or economy-wide innovation for long. Instead, the needs of the market have usually been subordinated to the needs of the state, often to enable the Kremlin to pursue security-related objectives.

Today’s system is no different. Designed to ensure that the Kremlin can pursue a sovereign foreign policy against the interests of the collective West, it is doing its job. The market is strong enough to give the system adaptability and dynamism. And the state is strong enough to ensure that sufficient resources are mobilised towards achieving its security objectives.

For as long as this equilibrium remains intact, Russia will be able to generate the necessary economic resources to sustain enough military power to wage war in Ukraine and, over the longer term, to rearm for a prolonged confrontation with the West. Any hopes that its economic vulnerabilities will bring it to the negotiating table are therefore unlikely to be realised.

USAID Spent Millions On Regime Change and Woke Agendas, Funded Censorship & Smears of Americans

YouTube link here.

USAID Funded Censorship, Smears of Americans (Excerpt)

By Lee Fang, Substack, 2/4/25

…The sprawling agency [USAID] has financed groups that have engaged in smear campaigns and efforts to silence prominent American dissident voices…

But most troubling, the foreign assistance agency has financed a network of groups in Ukraine that have spread unsubstantiated claims that American voices in favor of peace negotiations with Russia are agents of the Kremlin.

American government entities face restrictions on spreading such propaganda against domestic targets. The foreign nexus of USAID provides a convenient loophole. American grants and contracts flow, often through third-party intermediaries, to a network of foreign recipients, which can push to silence American journalists and politicians through outside advocacy.

In Ukraine, USAID, through its contractor Internews, supports a network of social media-focused news outlets, including New Voice of Ukraine, VoxUkraine, Detector Media, and the Institute of Mass Information. These news outlets have produced a series of videos and reports targeting economist Jeffrey Sachs, commentator Tucker Carlson, journalist Glenn Greenwald, and Professor John Mearsheimer as figures within a controlled “network of Russian propaganda.”

The influence of these outlets extends far beyond the borders of Ukraine. VoxUkraine, for instance, is an official fact-checking partner to Meta and helps the social media giant censor so-called disinformation. Detector Media similarly produces English-language disinformation reports widely circulated through western media.

Despite branding as independent outlets, these organizations are heavily reliant on USAID…

Full article available here. (I have a paid subscription to Lee Fang’s Substack, so I think this full article may be behind a pay wall for non-subscribers. You can read his in-depth article from April of 2024 on this topic for free at Real Clear Investigations. – Natylie)

Russian News – New YouTube Channel of Russian News Programming Dubbed in English

The above video episode was posted on 1/23/25

“Russian News, voiced into English. Here you will see Russian political news, statements and speeches of the President of Russia, the Minister of Foreign Affairs of Russia, the Minister of Defense of Russia, the representative of Russia in the UN Security Council, as well as political news and analytical programs recorded directly from Russian television.”

https://www.youtube.com/@Russian_News_Ch/videos

Andrew Korybko: Rare earth piece in Ukraine peace deal puzzle

By Andrew Korybko, Asia Times, 2/4/25

Trump’s confirmed interest in Ukraine’s critical and rare earth minerals is being interpreted by some as beneficial for President Volodymyr Zelensky amid uncertainty about the new US president’s commitment to Ukraine. One of the points from Zelensky’s so-called “Victory Plan” calls for letting his country’s allies to extract its minerals.

New Secretary of State Marco Rubio recently warned about the strategic advantage that China derives from its control over the world’s rare earth mineral supply chain so he might have influenced Trump’s views on the issue in relation to Ukraine.

US Senator Lindsey Graham raised awareness of Ukraine’s rare earth riches during his trip there last June, after which he claimed that Ukraine was sitting on US$10-12 trillion worth of such wealth.

Trump 2.0’s foreign policy focus on more muscularly containing China in all ways predictably predisposed him to appreciate the abovementioned point from Zelensky’s “Victory Plan.”

The problem, though, is that the bulk of Ukraine’s critical mineral wealth is under Russian control while Ukrainian forces continue to retreat.

At the same time, US Special Envoy for Ukraine and Russia Keith Kellogg’s suggestion that Ukraine needs to hold long-delayed elections was seen as reflecting Trump’s interest in brokering a ceasefire, after which martial law can be lifted, the elections could be held, and a new Ukrainian government can then begin peace talks.

This expectation contrasts with what Trump said a few days later about his interest in Ukraine’s (largely Russian-controlled) rare earth mineral deposits and the attendant possibility for proxy escalation of the war.

Instead of abandoning his efforts to freeze the Ukrainian conflict by doubling down on military aid in the hope that Zelensky’s forces can then recapture these deposits from Russian control, which could perpetuate the proxy war and thus derail his foreign policy agenda, Trump might instead try to cut a deal with Russian President Vladimir Putin.

One of the conditions that Trump could make for coercing Ukraine into withdrawing from at least some of the territory that Russia claims as its own might be for Putin to sell some of these rare earth and other critical minerals to the US.

Putin might agree to this depending on how far Trump is able to coerce Ukraine into withdrawing. There’s also a pragmatic argument in favor of this arrangement in that it could form a trust-building measure for the US one day, allowing the EU to partially resume some Russian gas pipeline imports.

The purpose would be to restore a degree of Russia and the EU’s pre-conflict economic interdependence, albeit this time under US supervision, as a reward for Russia complying with a ceasefire.

Russia requires capital and technology to fully exploit the rare earth deposits that are now under its control, both of which could be provided by the US, with the first possibly involving the return of some seized Russian assets so long as they are invested in this endeavor.

If successfully implemented, then this proposal could lead to more creative diplomacy of the sort suggested at the end of this analysis here for depriving China of Russia’s enormous resource wealth, which aligns with Trump’s foreign policy goals.

Ukraine wouldn’t be left completely in the lurch, however, since other smaller rare earth mineral deposits still remain under its control. These could be given to the US in exchange for continued military aid, even if the latter is curtailed compared to its height under the Biden administration in the run-up to summer 2023’s ultimately doomed counteroffensive.

If Trump reached an agreement with Putin on the Russian-controlled deposits, then Zelensky would have little choice but to agree to this deal.

Far from the full military support that he expected to receive in pursuit of recapturing those lost deposits, Zelensky would only end up with whatever the cost-conscious Trump administration determines is the absolute minimum that the US considers that Ukraine requires for keeping the peace.

This is the best outcome for those on all sides who truly want peace, but it will require substantial political will from both the US and Russia, along with the US coercing Ukraine into agreeing – none of which at this juncture can be guaranteed.

Tucker Carlson Interviews Oliver Stone & Peter Kuznick: War Profiteering, Nuclear Tech, NATO v. Russia, & War With Iran

YouTube link here.

Ted Snider: Did We Just See Trump’s Ukraine Peace Plan?

By Ted Snider, Antiwar.com, 2/3/25

A leaked document has given us a first glimpse at Trump’s peace plan for Ukraine. According to the Ukrainian online newspaper Strana, U.S. officials handed the plan to European diplomats who then passed it on to Ukraine.

The existence of the plan has not been verified, and Andriy Yermak, head of the Office of the President of Ukraine, has said “no ‘100-day peace plan’ as reported by the media exists in reality.”

If the plan is real, if it is being put on the table by the Trump administration as a finished product that, if rejected, will lead to more sanctions on Russia and more weapons for Ukraine, as Trump has threatened, then the war will go on, and Trump’s promise to quickly end the war will vanish in a puff of delusion. But if the plan is put on the table as a starting point for negotiations, then there is hope. And there is suggestion that it is a starting point.

Here is an item by item analysis of what each side may consider acceptable in the plan and what each side may insist on negotiating further.

The process begins with an immediate phone call between Trump and Putin followed by discussions between Washington and Kiev. That the plan may be intended as a starting point for negotiations is suggested by the fork in the schedule that negotiations will continue if common ground is found or pause if it is not. Further negotiations would lead to an Easter truce along the front line, an end of April peace conference, and a May 9 declaration of an agreement.

Russia has said that the Istanbul agreement could still be “the basis for starting negotiations.” In June, 2024, Russian President Vladimir Putin set out a peace proposal based on the Istanbul agreement, but adjusted for current territorial realities. Putin’s proposal had four points. Ukraine must abandon plans to join NATO, they must withdraw from the four annexed territories, they must agree to limits on the size of their armed forces, and they must ensure the rights of ethnic Russians in Ukraine.

The alleged Trump plan can be evaluated by comparison to Putin’s proposal and to recent statements made by Ukrainian President Volodymyr Zelensky.

1.  Ukrainian troops must withdraw from Kursk at the time of the April Truce

This would be acceptable to Russia who would insist on Ukrainian troops leaving its territory.

For Ukraine, this would be a difficult concession, not because of the withdrawal but because of the timing. Aside from the strategically catastrophic hope that the Kursk invasion would divert Russian troops away from the Donbas, the point of taking Russian territory was to use it to barter for the return of Ukrainian territory. Giving up the bargaining chip before the negotiations begin would nullify Ukraine’s hope of using it to force the return of more of its land.

Ukraine must end martial law and hold presidential elections by the end of August and parliamentary elections by the end of October

This could be a bitter pill for Zelensky. Recent polling has shown that Zelensky could well lose that election.

Elections would be welcomed by Russia who see Zelensky’s government as intransigently hostile and anti-Russia. This would legally transfer hope for regime change to Ukrainians.

Ukraine must declare neutrality and promise not to join NATO. NATO must promise not to expand to Ukraine

Ukraine was willing to abandon its NATO hopes in Istanbul. Though accepted by Kiev as inevitable, it would now be a painful concession. In the absence of NATO membership, it would be a hard sell to Ukrainians that the war after the Istanbul talks was worth the devastation.

For Russia, this point is key, and there can be no negotiations without it. It would be the key accomplishment to get the two sided promise that Ukraine will not ask for membership and NATO will not offer it.

Ukraine will become a member of the EU by 2030

This item is acceptable to both. EU membership will be necessary for Zelensky to present to Ukrainians as something that was worth fighting for. Ukraine is now free to pursue its ambitions to turn west and join Europe.

Though Russia had concerns in 2014 with the EU’s Association Agreement with Ukraine because of its implied integration of Ukraine into the European security and military architecture, Putin has long left EU membership on the table for a postwar Ukraine, and that was specifically agreed to in the Istanbul agreement.

Ukraine will not reduce the size of its armed forces and the U.S. will continue modernizing the Ukrainian armed forces

While Ukraine will welcome this, it may not be enough. Russia will have a hard time with this one.

This is like “the Israeli model” that then Israeli Prime Minister Naftali Bennett says Putin and Zelensky were both open to in the early days of the war. But, in the absence of NATO, Zelensky has been adamant about U.S. supported security guarantees. And, already by Istanbul, Russia was demanding limits on Ukraine’s armed forces. At the very least, modernized Ukrainian weaponry would have to be defensive with a cap on firing into Russian territory.

Ukraine refuses military and diplomatic attempts to return the occupied territories but does not officially recognize Russian sovereignty

This item goes not far enough for Russia and too far for Ukraine. Zelensky has accepted that “De facto, these territories are now controlled by the Russians. We don’t have the strength to bring them back.” So, he will accept not attempting to return the occupied territories militarily. He has also insisted that Ukraine would never officially recognize Russian sovereignty over those lands. But the added clause, that he will not attempt to return them diplomatically, may be going further than Zelensky has been willing to go. In the case of Crimea, he has reserved the right to try to bring territory back diplomatically.

For Russia, the de facto recognition of the territory it occupies will likely be enough. In his proposal, Putin insisted on the complete withdrawal from the territories while saying nothing about Ukraine officially recognizing Russian sovereignty over them. However, though Russia may be willing to negotiate over Kherson and Zaporizhzhia, they are less likely to accept only the lands east of the current front without it including all of the Donbas.

Some sanctions on Russia will be lifted, including EU bans on Russian oil

This item will likely be acceptable to Ukraine, especially since temporary duty on sales of oil will be used to restore Ukraine. It will likely be acceptable, at least as a starting point, for Russia.

Parties that support Russian language and peaceful relations with Russia can participate in Ukraine’s elections. State actions against the Ukrainian Orthodox Church and Russian language must cease

Though difficult for Zelensky and some forces in Ukraine to accept, protection of language, religious and cultural rights is the second key Russian demand along with NATO.

The idea of a European peacekeeping force is to be discussed separately

The recognition that security guarantees is both key and difficult for both parties is realistic. Neither side will agree to a European security force: Russia because it goes too far; Ukraine because it goes not far enough.

If this plan is a final draft whose rejection means negotiations end, then the war will not end. But if Trump’s plan is intended as a starting point to negotiations – the most difficult of which may be the security guarantees – then there is hope.

Ted Snider is a regular columnist on U.S. foreign policy and history at Antiwar.com and The Libertarian Institute. He is also a frequent contributor to Responsible Statecraft and The American Conservative as well as other outlets. To support his work or for media or virtual presentation requests, contact him at tedsnider@bell.net.

Will the Nord Steam gas pipelines be turned back on soon?

By Ben Aris in Berlin, Intellinews, 1/31/25

Could Gazprom’s Nord Stream undersea gas pipelines, partially destroyed by saboteurs in September 2022, eventually be restarted? The idea of reconnecting Europe to the giant Russian Yamal gas fields has been introduced as a possible bargaining chip in the widely expected ceasefire talks between Russia and Ukraine. While political optics of such a deal are terrible, for the struggling European economies it is an economic no-brainer.

Denmark’s energy agency ordered the operator of the Nord Stream pipelines to cap the severed ends of the three destroyed pipelines this week to preserve their integrity, making it possible, in theory, to patch the holes created in a series of explosions in September 2022 and lift the pipes to the surface for repairs.

The idea of restarting Russian gas deliveries to Germany is clearly in the air and favoured by some in the German political firmament. Leader of Germany’s Alternative für Deutschland party (AfD) Alice Weidel told a party conference this week that “We will put Nord Stream back into operation, you can count on it!’ as the right have (correctly) identified the end of cheap Russian as being a major cause of the collapse of the German economy.

That has not gone down well with Ukraine’s supporters. The Baltic states have been adamant that all Russian gas imports should end. Polish President Andrzej Duda the same week that Germany “should not be tempted” to resume Russian supplies just because its economy is struggling; Germany’s economy has contracted for two years in a row and is predicted to shrink again this year. Rather than repair the €10bn pipeline that is capable of supplying 40% of Europe’s gas needs, Duda said that Nord Stream should instead be “dismantled.”

Detractors argue that resuming Russian gas deliveries threaten Europe with energy dependence, but also frame it as a military threat as the money it generates funds Russian President Vladimir Putin’s war machine. Russia’s Gazprom earned some €6.5bn from gas exports to Europe last year.

The loss of cheap Russian gas has been disastrous for Germany leading directly to its deindustrialisation as heavy industry has had to close down due to the soaring cost of gas and energy. The end of gas imports came just as the government decided to shutter its six powerful state-of-the-art nuclear power plant (NPP) in the midst of one of the worst energy crises this century in 2022 that turned Germany from a net exporter of energy into a net importer. That has put pressure on the rest of the EU, as Germany’s neighbours are forced to supply Germany with power under EU rules that have driven up costs in those countries as well. Sweden and Norway in particular are now suffering from power price inflation and have frozen plans to increase power links with Germany to cap exports capacity so they can use more of their domestic production capacity to meet their own domestic demand.

The upending of Germany’s energy security has led to the biggest collapse in German living standards since the Second World War and a downturn in economic output comparable to the 2008 financial crisis.

The downturn is having political consensus too. The funding of the war in Ukraine – Germany has been Ukraine’s most generous EU backer – has put intolerable strain on Germany’s finances that was already in a budget crisis after budget spending bumped up against borrowing limits imposed by the constitution by the so-called Schuldenbremse, or “debt brake” that limits government borrowing. At the end of last year, German Chancellor Olaf Scholz announced that Berlin has run out of money for Ukraine and will drastically reduce its contributions after this year. Tensions over money and wrangling over a €3bn aid package for Ukraine has already led to the collapse of the ruling coalition and German policy is in limbo as the country waits for a new government in a general election slated for February.

The quality of German life was already falling before the war started but has been made much worse by the various shocks the conflict has unleashed. The failure to protect German industry from the energy price spike may turn the 2020s into “a lost decade for Germany,” according to a recent paper published by the Forum for a New Economy, the Spectator reports. The economic malaise is fuelling the rise of the far-right AfD that won several key regional elections in November and is currently ranked second in popularity after the conservative Christian Democratic Union (CDU).

And Russia’s gas business is still doing well, despite the setbacks. Gas production rose 7.6% in 2024 y/y to around 685bcm, according to comments by Deputy Prime Minister Alexander Novak on January 30. This year Russia expects to increase gas production again. Pipeline gas exports also increased last year by 15.6% to over 119bcm, while LNG exports were up by a more modest 4% to 47.2bcm (21.2mn tonnes).

Despite the myriad sanctions on Russia, Europe bought 22.6bcm (17mn tonnes) of LNG from Gazprom in 2024, mostly via terminals in France, Spain and Belgium. Taking LNG and piped gas together, Russia’s export to Europe were up 20% year on year to about 50bcm – around a third of pre-war export volumes. This year imports of piped gas may fall after Ukraine walked out on a gas transit deal with Russia, but delivered via the one remaining route, TurkStream that runs through the Black Sea, continues to rise, as does shipped LNG deliveries.

Publicly, Germany has ended the import of Russian gas and the CDU leader Friedrich Merz, who is very likely to take over from Scholz in the upcoming elections, has called for all Russian gas imports to end. However, embarrassingly, Germany continues to be the biggest importer of Russian gas via the backdoor imports routed through French and Belgium ports among other alternatives. Despite the fighting-talk, Europe remains hooked on Russian gas.

Currently, Europe is still consuming half of Russia’s annual gas production. Although the volume of piped Russian gas has fallen dramatically over the last two years, the volume of Russia’s LNG exports to Europe have doubled in the last two years and are currently at an all-time high and still rising. Ukraine’s supporters wanted to include an LNG ban in the sixteenth package of sanctions under debate at the moment and due to be enacted in February, but that idea has already been dropped as unworkable, according to reports.

The Danish energy agency decision to cap the four strands of the Nord Stream 1 & 2 pipelines creates the possibility that the damaged pipes could relatively easily be patched, pumped dry and lifted to the surface for repairs at some point. The one strand that survived the 2022 bombings in September 2022 is still pressurised and could in theory be turned back on tomorrow to deliver a badly needed 25bcm of gas to the EU – half as much again as Ukraine was delivering until it turned off the spigot on January 1.

The idea of restarting Russia’s gas deliveries has been in the air for a while now. Russian President Vladimir Putin and Scholtz held their first phone conversation in two years in November to talk about the war. Not much was agreed, but amongst the points raised, Putin said that he was willing to restart gas deliveries to Germany through the working pipeline if there was an acceptable Ukrainian ceasefire deal.

Moon of Alabama on the withdrawal from the Kursk battle of non-existent North Korean troops

Moon of Alabama, 1/31/25

At the time of writing the above I did not know that the idea for this campaign came from RAND, the Pentagon’s think tank which often proposes strategic ideas. In a commentary about Russian/North Korean and Chinese cooperation published on October 11, three days before the start of Zelenski’s campaign, a RAND analyst wrote:

What Should the United States Do?

Given the differences in the objectives of Russia, China, and North Korea, the United States should be mounting major information operations against these three countries to highlight their differences and fuel distrust among them.
…
[T]he United States should recognize that North Korean military advisors are supporting Russian use of North Korean military supplies in occupied areas of Ukraine.
…
This new cooperation between Russia and North Korea is hardly a signal of a budding long-term alliance and U.S. information campaigns could help speed its demise.

Just three days later the Military Intelligence of the Ukrainian army, headed by General Budanov, started to ‘leak’ claims to the Ukrainian press about North Korean troops in Russia.

Since launching the first rumors of 1,500, then 3,000 North Korean soldiers in Russia the CIA trained head of the Ukrainian military special service General Budanov increased the number from hot air to 11,000 North Korean soldiers.

But even NATO denied to have any knowledge of such a force.

As I summarized at that time:

Shortly after RAND proposed a U.S. information operation campaign around the theme of North Korean soldiers in Russia the Ukrainian military intelligence service under CIA trainee Budanov started to spread rumors of North Korean soldiers soon to fight on the Russian side. The numbers claimed by Budanov have since steadily increased. South Korean intelligence, also associated with the CIA, and U.S. media have joined the campaign. The chair of the House Intelligence Committee is milking the campaign to make political points.

Evidence that was supposed to support the claims has been exposed as being fake. The whole story is thus based on nothing but ‘intelligence’ rumors which are following a RAND proposed script. Don’t fall for it.

The story continued to grow through repetition. Media quoted each other with each adding bits of bullshit from their usual ‘security sources’. What failed to turn up though was evidence.

After being repeatedly questioned about the lack of evidence for their claims, Ukrainian politicians presented their solution:

Today the Ukrainian Minister of Defense, Rustem Umerov, has given a hint how Ukraine will handle this issue (machine translation):

Ukrainian Defense Minister Rustem Umerov confirmed the words of the head of the National Security and Defense Council’s Center for Combating Disinformation, Andriy Kovalenko , that the first “small-scale fighting” had already taken place between the Ukrainian Armed Forces and North Korean soldiers, and the Koreans had suffered losses.
…
Umerov also said that the Russian Federation disguises Koreans as Buryats, so the dead and prisoners must be identified before Ukraine calls the number of enemy losses.

Buryats are a Mongolic people in Siberia who are part of the Russian Federation. Many of them have joined the well paid ranks of Russian forces. Umerov’s plan was thus obvious:

As soon as some Buryat soldier of Russia will turn up dead, the Ukrainian military will present him as a disguised North Korean soldier. Some black and white photos will be found of a similar looking person in North Korean uniform …

“There is your prove. Now send soldiers and weapons.” will Umerov say.

There have since been several attempts by Ukrainian special services to reinforce their media campaign. Russian passports from dead Russian soldiers were presented as ‘fake documents’ carried by ‘North Koreans’. They even captured a Buryat:

On Oct. 28 (local time), Jonas Ohman, head of the Lithuanian NGO Blue/Yellow, which provides aid to Ukraine and its military, informed local media outlet LRT, stating, “The first encounter between a Ukrainian unit we support and North Korean soldiers occurred on the 25th in Kursk. To my knowledge, all of the North Korean soldiers, except for one, were killed. The surviving soldier was found carrying identification as a Buryat.”

Other ‘evidence’ included hand written letters, allegedly by North Korean soldiers, written in South Korean type and style.

Even Wikipedia had to admit:

As of January 2025, there has been no independent confirmation of the Buryat Battalion’s existence [,allegedly consisting of soldiers from North Korea,] outside of Ukrainian sources.

The nonsense of this scheme has become too obvious.

Now the CIA, with the help of the New York Times, is shutting it down.

The ‘North Korean soldiers’ are leaving the battlefield the same way they came – ever unseen.

North Korean Troops No Longer Seen on Front Lines Fighting Ukraine (archived) – New York Times, Jan 31 2024
North Korea sent its best troops to aid Russia in its war against Ukraine. But after months of suffering severe losses, they have been taken off the front line.

North Korean soldiers who joined their Russian allies in battle against Ukrainian forces have been pulled off the front lines after suffering heavy casualties, according to Ukrainian and U.S. officials.

The North Korean troops, sent to bolster Russian forces trying to push back a Ukrainian offensive inside Russia’s borders, have not been seen at the front for about two weeks, the officials said after requesting anonymity to discuss sensitive military and intelligence matters.

Well – that sentences is formally correct. But it would be even more precise to say that ‘North Korean troops have not been seen at the front – since ever.’

The CIA/NYT can’t go there (yet). They still add to the stupid claims:

Many of the soldiers are among North Korea’s best-trained special operations troops, but the Russians appear to have used them as foot soldiers, sending them forth in waves across fields studded with land mines to be mowed down by heavy Ukrainian fire.

Well, where are the pictures and videos of North Korean troops ‘sent forth in waves’ and ‘mowed down by heavy Ukrainian fire’?

In a war where every ground move is surveilled by dozens of drones how come there is not even one video that shows evidence of such a scene?

For now the RAND/Ukraine (dis-)information campaign of ‘North Korean’ soldiers fighting Ukraine has been shut down. U.S. ‘officials’ however keep the door open to relaunch it at a convenient time:

The American officials said the decision to pull the North Korean troops off the front line may not be a permanent one. It is possible, they said, that the North Koreans could return after receiving additional training or after the Russians come up with new ways of deploying them to avoid such heavy casualties.

Maybe a month, a year, or ten from now we will be again told about these imagined ‘enemies’ from North Korea which unite with Russians to ‘fight us’.

Posted by b on January 31, 2025 at 14:48 UTC | Permalink

Russia Matters: Russia’s Close to Gaining Decisive Edge on Energy Front of War With Ukraine

Russia Matters, 2/3/25

“Russia is close to achieving a decisive edge on the energy front of the Russo–Ukrainian war,” argues Theresa Sabonis-Helf of Georgetown University. According to Sabonis-Helf’s estimates in War on the Rocks, Russian attacks have damaged Ukraine’s electrical grid so much that it has become 70% reliant on three complexes of nuclear reactors. “These reactors are increasingly threatened by the instability of the grid itself and could become unsafe to operate, forcing a shutdown and grid collapse,” she warns. Moreover, with Ukraine having submitted to heightened oversight by IAEA, “the decision to shut down its nuclear plants if the perceived risk becomes too high may not be entirely its own,” this Georgetown University professor observes in her data-rich commentary. “We now find ourselves in a moment in which a slow war of attrition could come to an abrupt end, resolved by the triumph of cold and darkness,” she warns.The seizure of  Velyka Novosilka , which has been  described  as a “most important fortified area” of the Ukrainian Armed Forces in the Donetsk region, underscores the effectiveness of a tactic that Russian forces have been employing to take towns: using its personnel advantage to attack relentlessly, gradually trapping Ukrainian forces in a pincer movement and forcing them to retreat to avoid encirclement, according to NYT’s Constant Méheut. Russia’s seizure of this eastern Ukrainian town “followed a familiar pattern: relentless infantry assaults, devastating casualties, collapsing Ukrainian defenses and their eventual retreat” with the battlefield dominated by drones, and armor playing a minimal role, according to the Economist’s article on this battle, entitled “Amid talk of a ceasefire, Ukraine’s front line is crumbling.” “It would not be accurate to claim that the Russians don’t know how to fight,” Maj. Ivan Sekach of Ukraine’s 110th Brigade, acknowledged in an interview with NYT.

Intellinews: Russian military withdraws from Syria amid tensions with Damascus regime

Note: “Frank discussion” is diplomatic speak for “they argued.” – Natylie

Intellinews, 1/30/25

Russian forces have begun withdrawing from Syria, with two cargo vessels, the Sparta II and Sparta, departing from the port of Tartus on January 30, carrying significant military equipment.

The Russian withdrawal follows what appears to be failed negotiations with Syria’s new interim President, Ahmed al-Sharaa, who formally took the position late on January 29. Al-Sharaa has reportedly demanded the extradition of former President Bashar al-Assad, who fled to Moscow in December following the collapse of the Baathist regime. Russia reportedly refused the demand to return the former Syrian leader. 

Dmitry Peskov has declined to comment on the specifics of any deal between the two sides and the departure from Tartus of the Russian military, which now needs to access Russian ports via Istanbul’s Bosphorus or around the Nordic countries.

The Russian foreign ministry later wrote: “During a frank discussion of the entire range of issues in Russian-Syrian relations, the desire to continue to build bilateral multifaceted cooperation based on the principles of traditional friendship and mutual respect between Russia and Syria was emphasised.”

The two bases were crucial to the Russian presence in the region but are also key logistical nodes for its wider operations in the region and Africa.

A Russian delegation, including two presidential special representatives – Deputy Foreign Minister Mikhail Bogdanov and Alexander Lavrentiev – met with the new Syrian administration in Damascus on January 28.

Recently released verified footage showed columns of Russian vehicles moving north towards the port following the “frank discussions between the two sides.”

This marked the first such meeting since Assad’s departure. They met with Sharaa (previously wanted by the US for a $10mn bounty) and interim government members, including Foreign Minister Asaad al-Shibani and Health Minister Maher al-Sharaa.

Russia’s Foreign Ministry stressed continuing bilateral cooperation based on “traditional friendship and mutual respect.”

“The importance of the Syrians themselves resolving their internal problems through the establishment of a sustainable political process within the framework of an inclusive dialogue with the participation of the entire spectrum of political forces was emphasised,” it said.

The ministry also indicated a potential willingness to provide “necessary assistance in post-crisis reconstruction” while maintaining that Syria’s internal issues should be resolved through “inclusive dialogue with participation from all political forces.”

The situation puts at risk Russia’s significant military presence in Syria, including the naval base in Tartus and the Khmeimim air base near Latakia.

While Russia could theoretically seek new bases in Libya, such moves could face opposition, with Turkey already reportedly moving Syrian fighters into North Africa.

The withdrawal appears to present two possibilities: either Russia has found the new regime’s conditions unacceptable, or the military withdrawal is a temporary measure during negotiations.

Based on the Foreign Ministry’s carefully worded statements, Russia appears unwilling to extradite Assad but may be open to discussing other forms of cooperation.