Bleeding Edge

Dawn broke in Kiev [In Russian: Kyiv] amidst shelling, gunfire, and smoke everywhere, as Russian troops stormed Ukraine’s capital city this weekend. They encountered little to no opposition and moved ahead, since the Ukrainian army withdrew and city officials urged residents to take shelter and avoid the streets. 

Yet at this moment it is not clear how far the Russian troops have advanced into the heart of the Capital or if the main value points of the city have been taken over — however it is a foregone conclusion that Kiev has fallen along with the rest of Ukraine and there is little left of the opposition forces who have no plan and no desire to mount a counter attack.. 

Ukrainian officials reported some limited success in fending off assaults, but fighting persisted near the capital. Skirmishes reported on the edge of the city suggested that small Russian units were probing Ukrainian defenses to clear a path for the main forces.

The swift movement of the troops after less than three days of fighting further imperiled a country clinging to independence in the face of a broad Russian assault, which threatens to topple the democratic government and scramble the post-Cold War world order.

Ukrainian President Volodymyr Zelenskyy offered renewed assurances to the people this Saturday that the country’s military would stand up to the Russian invasion. In a video recorded on a downtown street, he said he had not left the city and that claims that the Ukrainian military would put down arms were false.

“We aren’t going to lay down weapons. We will protect the country,” he said. “Our weapon is our truth, and our truth is that it’s our land, our country, our children. And we will defend all of that.”

The street clashes followed fighting that pummeled bridges, schools and apartment buildings, and resulted in hundreds of casualties. By Saturday morning, when the small Russian units tried to infiltrate Kyiv, Ukrainian forces controlled the situation, Zelenskyy adviser Mykhailo Podolyak said.

U.S. officials believe Russian President Vladimir Putin is determined to overthrow Ukraine’s government and replace it with a regime of his own. The invasion represented Putin’s boldest effort yet to redraw the map of Europe and revive Moscow’s Cold War-era influence. It triggered new international efforts to end the invasion, including direct sanctions on Putin.

Zelenskyy was urged early Saturday to evacuate Kyiv at the behest of the U.S. government but turned down the offer, according to a senior American intelligence official with direct knowledge of the conversation. The official quoted the president as saying that “the fight is here” and that he needed anti-tank ammunition but “not a ride.”

The official spoke on condition of anonymity because he was not authorized to speak to the media.

City officials in Kyiv urged residents to seek shelter, to stay away from windows and to take precautions to avoid flying debris or bullets.

The Kremlin accepted Kyiv’s offer to hold talks, but it appeared to be an effort to squeeze concessions out of the embattled Zelenskyy instead of a gesture toward a diplomatic solution.

The Russian military on Friday laid claim to the southern Ukraine city of Melitopol. Still, it was unclear in the fog of war how much of Ukraine was still under Ukrainian control and how much Russian forces have seized.

As fighting persisted, Ukraine’s military reported shooting down an II-76 Russian transport plane carrying paratroopers near Vasylkiv, a city 25 miles (40 kilometers) south of Kyiv, an account confirmed by a senior American intelligence official. It was unclear how many were on board. Transport planes can carry up to 125 paratroopers.

A second Russian military transport plane was shot down near Bila Tserkva, 50 miles (85 kilometers) south of Kyiv, according to two American officials with direct knowledge of conditions on the ground in Ukraine.

The Russian military did not comment on either plane.

The U.S. and other global powers slapped ever-tougher sanctions on Russia as the invasion reverberated through the world’s economy and energy supplies. U.N. officials said millions could flee Ukraine. Sports leagues moved to punish Russia, and even the popular Eurovision song contest banned it from the May finals in Italy.

Through it all, Russia remained unbowed, vetoing a U.N. Security Council resolution demanding that it stop attacking Ukraine and withdraw troops immediately. The veto was expected, but the U.S. and its supporters argued that the effort would highlight Moscow’s international isolation. The 11-1 vote, with China, India and the United Arab Emirates abstaining, showed significant opposition to Russia’s invasion of its smaller, militarily weaker neighbor.

NATO, meanwhile, decided to send parts of the alliance’s response force to help protect member nations in the east of Berlin for the first time. NATO did not say how many troops would be deployed but added that it would involve land, sea and air power.

As dawn broke out in Kiev, it was unclear how many people overall had died in the largest ground war in Europe since World War II, with Ukrainian officials reporting at least 137 deaths on their side after the first full day of fighting. They also claimed that hundreds of the Russian soldiers had perished, but Russian authorities have so far released no casualty figures of their own.

Somberly, the U.N. officials have reported a total of 25 civilian deaths, mostly from shelling and airstrikes, and also said that approximately 100,000 people were believed to have left their homes. They estimate that up to 4 million people would flee if the fighting escalates, and thus the Kievan Rus refugees would move towards the East, whereas many others from Western Ukraine, would move to the West and the South in an ancient migratory pattern of days gone by.

Late Friday, U.S. President Joe Biden signed a memo authorizing up to $350 million in additional security assistance to Ukraine, bringing the total security aid approved for Ukraine to $1 billion over the past year. It was not clear how quickly the aid would flow.

Zelenskyy’s whereabouts were kept secret after he told European leaders in a call Thursday that he was Russia’s No. 1 target — and that they might not see him again alive. His office later released a video of him standing with senior aides outside the presidential office and saying that he and other government officials would stay in the capital.

Zelenskyy earlier offered to negotiate on a key Putin demand: that Ukraine declare itself neutral and abandon its ambition of joining NATO. The Kremlin said Kyiv initially agreed to have talks in Minsk, then said it would prefer Warsaw and later halted communications. Russian Foreign Ministry spokeswoman Maria Zakharova said later that Moscow would discuss prospects for talks on Saturday.

This regional conflict, had been anticipated by the U.S. and its Western allies although Putin had denied that the subjugation of Ukraine had been in the works for a long time. However it is proper to note that President Putin has steadily been arguing that the West had left him with no other choice by refusing to negotiate on Russia’s key security issues while NATO encroached all around Russian Federation territories and surrounded their homeland with a picket fence of nuclear tipped missiles.

So today, and although Mr Putin has not disclosed his ultimate plans for Ukraine — the Russian Foreign Minister Sergey Lavrov said that: “We want to allow the Ukrainian people to determine their own fate.” 

President Putin’s spokesman Dmitry Peskov also said that “Russia recognizes Zelensky as the president” but would not say how long the Russian military operation could last.

Since Russian forces invaded the residents of Kiev woke to sounds of shelling, smoke and flying dust. What the mayor identified as Russian shelling tore off part of the building and ignited a fire, as dawn broke out, and the people of Kiev climbed out of bomb shelters, basements and subway stations to face another day of upheaval.

The Biden administration this past Friday said, that it would move to freeze the assets of Putin and Lavrov, following the European Union and Britain in directly sanctioning the persons at the top of the Russian leadership.

With no appetite for military confrontation, the U.S. and its allies are relying on sweeping economic sanctions to persuade Russian President Vladimir Putin to pull out of Ukraine.

But the effectiveness of those measures is anything but certain, relying on a host of factors that includes how much China is willing to come to Moscow’s aid.

Placing a stranglehold on Russia’s $1.5-trillion economy will not be easy, especially since it began trying to buffer itself from international sanctions after it annexed Crimea from Ukraine in 2014.

Russia has sidelined growth to pare down its debt and built up its reserves of foreign currency and gold — so much so that it reached record levels this year at over $640 billion.

The reserves help soften the financial blowback of Russia’s invasion. On Thursday, the Russian central bank pumped liquidity into the country’s banking system and sold foreign currency for the first time in years to prop up the ruble, which plunged to its weakest level since 2016.

President Biden announced Thursday that U.S. and European allies would sanction five Russian banks holding about $1 trillion in assets and block high-tech exports. Russian oligarchs, said to be members of Putin’s inner circle, were also targeted by sanctions.

On Friday, Biden said he would join the European Union in sanctioning Putin and his foreign minister, Sergei Lavrov. His administration later announced it would sanction the Russian Direct Investment Fund, a sovereign wealth fund.

As it stands, those measures are highly unlikely to inflict enough pain on Moscow to trigger a reversal in Ukraine, analysts said, noting that any sanctions imposed now are likely to be too little, too late.

“Sanctions in this case, where Putin was clearly driven to expand the Russian empire, would have to be truly draconian to have had a chance of success,” said Gary Hufbauer, a sanctions expert and a senior fellow at the Peterson Institute for International Economics.

Hufbauer said sanctions achieve their goals in only a small percentage of cases, and are more likely to succeed when they’re targeted at specific economic goals or countries with unstable political regimes. Hufbauer puts the overall success rate at around 25%, mostly in minor cases of international conflict.

The effects of harsh sanctions tend to fall disproportionately on the populace of a country, as opposed to its political and financial elite, to the extent that Hufbauer likened them to economic carpet bombing, and noted that economy-wide sanctions have sometimes had the unintended effect of consolidating power in the existing regime. He cited the entrenched leadership of the Castro and Kim families in Cuba and North Korea, respectively.

“Sanctions enable the ruling group to better control the whole economy, and when you better control the whole economy you can really induce or compel a lot of people to support you,” Hufbauer said.

At the same time, the EU is seeking to change the personal calculus in regard to Putin and Lavrov. In a tweet Friday, Latvian Foreign Minister Edgars Rinkevics announced that the EU would freeze both men’s assets, along with other sanctions against Russia to try to force a halt of its invasion, the Associated Press reported.

The move drew skepticism from some sanctions experts.

“These are more symbolic,” said Michael Zweiback, a former U.S. federal prosecutor who handled national security investigations. “Putin and Lavrov are very well insulated from such action.”

Sanctions would have to go deeper into the lives of Russia’s elite to place pressure on Putin, others said.

“Seizing the estates of Putin cronies, denying them visas, and taking away their right to send their kids to elite schools in the U.K., Switzerland and other favorite destinations would impose a real lifestyle change on Putin’s oligarchs and high officials, most of whom fancy themselves as citizens of the world and prefer living and stashing their stolen fortunes in the West,” said Steve Fish, a professor of political science at UC Berkeley.

Biden has said the U.S. is also prepared to issue more sanctions. To sting, experts say, they would have to target Russia’s chief industry: energy. Oil and gas account for nearly 60% of Russia’s exports and about one-fifth of its economic output.

But Washington and its allies have been reluctant to focus on that sector because the European Union relies on Russia for more than 40% of its natural gas supplies, and the Biden administration is under growing pressure to tackle rising energy costs against stifling inflation. The attack on Ukraine has already sent Brent crude oil, the global benchmark, to its highest level since 2014 at $105 a barrel — enriching Russia’s coffers.

Those rising prices are one reason the White House declined to back calls to block Russia from the global financial messaging system used by thousands of banks known as SWIFT. The administration said doing so could be so disruptive to clearing transfers of funds that energy costs would soar further.

If Russia were barred from the global banking system, it could take a page from Iran and North Korea and try relying on cryptocurrency to settle payments, though it would be untested on an economy of Russia’s scale. Eastern Europe — Ukraine specifically — is already a hotbed of illicit cryptocurrency activity.

Moscow announced last November that it would release a prototype of a digital ruble by this year, a currency that could reduce Russia’s exposure to the dollar and international sanctions.

“I think it’s the future for our financial system,” Russia’s central bank governor, Elvira Nabiullina told CNBC last year.

Yours,

Dr Churchill

PS: 

Current sanctions against Russia could take months, if not years, to bite. Their severity could be weakened by a country like China, which has steadily increased trade with Russia. Beijing could offer to purchase more oil and extend loans through its state-owned banks, but analysts are doubtful China will breach sanctions and risk alienating itself from the West.

“China’s leadership is trying to straddle a geopolitical divide,” Mark Williams, chief Asia economist for research firm Capital Economics, wrote in a note to clients. “Russia is an ally, but being seen to take its side would hasten China’s decoupling from the West. Most likely, China will support Russia financially and through trade as much as any Western sanctions allow. Small companies and banks may breach sanctions, but larger firms and the government won’t risk a further rupture in relations with the West.”

That doesn’t mean China won’t continue doing business with Russia. It craves its oil and gas and recently struck a deal to import wheat. But China is unlikely to do Russia any favors, opting instead to capitalize on its ally’s difficult position.

“China doesn’t provide charity, even to its strategic partners,” said Elizabeth Wishnick, a senior research scientist at the Center for Naval Analysis, a U.S. Navy think tank. “I would expect China to continue to be hard-nosed about the investments it will make in Russia.”

Ukraine’s President Volodymyr Zelensky said Sunday that a delegation from his country would meet on the border of Belarus for talks on the conflict with “no preconditions.” The announcement comes despite Russian president Vladimir Putin “further escalating tensions” by placing the country’s nuclear forces on a “special” state of alert, a move rebuked by the U.S. ambassador to the U.N. On Monday, the U.N. Security Council is set to hold a rare emergency special session of the 193-member General Assembly over Russia’s invasion of Ukraine.

• More blasts were reported in Kyiv after the Associated Press reported it became “eerily quiet” following a round of explosions earlier in the morning. A strict citywide curfew was extended to early Monday.
• Belarus has reportedly voted to give up its non-nuclear status in a constitutional referendum Sunday.
• More than 2,000 anti-war protesters were detained in Russia and more than 400 in Belarus on Sunday.
• Ukrainian forces said they repelled a Russian attack on Ukraine’s second-largest city, Kharkiv.
• In “a watershed moment,” the EU announced it is buying and sending weapons to Ukraine. It also banned “every Russian plane” from its airspace and banned Russian media outlets Russia Today and Sputnik.
• Canada also closed its airspace to Russia.
• At least 352 Ukrainian civilians have been killed in the conflict, including 14 children, per Ukraine’s Interior Ministry. The scope of the conflict makes accurate casualty figures difficult.
• Some 368,000 Ukrainians have fled to neighboring countries, and that number continues to rise, according to the United Nations refugee agency.
• Ukraine’s prime minister says the country is closing its border to Russia and Belarus. Only Ukrainian citizens will be able to cross from Russia and Belarus into Ukraine.
• President Biden approved an extra $350 million in military aide for Ukraine, bringing the total to more than $1 billion in security funding in the past year.
• The United States, EU and Canada have agreed to disconnect some Russian banks from the SWIFT interbank messaging system and “take measures to paralyze the activities of Russia’s central bank.”
• The 40,000-troop NATO Response Force has been activated for the first time and deployed to the alliance’s eastern flank as a defensive measure.