I am just providing an update to my views on Russia’s invasion of Ukraine. I find a Q&A format easier herein to get my viewpoints across, so here goes:

Q? What is your outlook now for the war, and prospects for peace?

Answer – I know a narrative has built over the summer around the Ukraine counteroffensive having failed to deliver the decisive blow as had perhaps been expected, but actually I am not overall changing my view. I remain in the optimistic camp that either Ukraine eventually breaks the Russian lines, and Russian forces either collapse or are forced into a retreat or else both sides are forced to head to the negotiating table towards year end.

I accept that Russian defences have proven more durable than expected – but that is to a large extent the West’s fault because of the delays in providing Ukraine with the equipment it needed, which gave RussiA critical time to regroup and build up its defences in eastern and southern Ukraine. But, recent weeks have seen some notable Ukrainian victories, punching holes in Russia’s first line of defence around Robotnye, that still offer the prospect of further gains. There is still at least a month of clement weather, and ground, for Ukrainen to make further gains – likely longer in the South around Zaparozhiya where the soil is better drained, sand. The message here is that I would not give up yet on Ukraine’s counteroffence.

There has though been a noticeable shift in Ukraine’s military strategy in recent weeks, perhaps mindful of the slower pace of advance through the counteroffensive. The hope obviously was that holes would be punched in Russian lines, sufficient to allow Ukrainian forces to push south to break the much talked about land corridor to Crimea. Strategy has now changed, with Ukraine recognising that it might not need to get to the sea, to effectively break the land corridor, or to achieve the same purpose of cutting off Crimea to make the peninsula militarily unsustainable. Indeed, I think Ukrainian forces realise that if they can push far enough south to put the land corridor within range of missiles, they achieve the same effect, of cutting off the land route to Crimea, but with much lower cost in lives. Meanwhile, it is clear that Crimea itself is now becoming a target, with now frequent Ukrainian missile attacks on military facilities on the peninsula. These have had great effect, with at least two S400 missile batteries hit, and at least one sub, and one naval landing ship destroyed. The point here is to make Crimea insecure to Russian forces which then defeats the object of holding the peninsula. There is indeed some irony here, that Russia annexed Crimea in 2014 supposedly to head off the risk to its Black Sea Fleet from supposed NATO enlargement but that Russia’s annexation of Crimea and then full scale invasion have rendered Crimea insecure as a base for Russia ‘s Black Sea Fleet. It is now having to redeploy naval forces East, away from Crimea. The West of the Black Sea is in effect becoming a no go zone for Russian naval assets, and it is not going to get any better. Ukraine is day by day eroding the significance of Crimea as a naval base for Russia.

So it is no longer all about the counteroffensive punching a hole in Russian defences, but it’s now a broader strategy by Ukraine. And as time goes by, as new ATCMS, and F16s, and Taurus missiles are supplied by Western allies, Ukraine’s ability to hit Crimea, the land corridor and Russia itself will just increase. Ukraine is making Russia’s stay in Ukraine increasingly untenable. If not through forcing a total collapse of Russian forces in Ukraine, through attrition it will force Russia to the negotiating table, and from a position of strength.

Q? And what would be the outline of a possible deal?

Answer – again I have not changed much herein. I still think a deal could be framed around Russia withdrawing to Feb 23, 2022 positions, and then agreement to talk over the longer term future of Crimea, DPR and LPR.

I know it’s a tough ask of Ukraine, after so much blood has been spilt. But Ukraine is not being asked to cede Crimea or DPR or LPR, just to return to talks over their future – actually Russia has never engaged in talks over Crimea, as the Minsk process was largely around the Donbas. It is still possible that Crimea and DPR and LPR could return to Ukraine, albeit I doubt that Ukraine is politically or economically able to re absorb them immediately. The issue will be parked for a time to allow Ukraine to regroup and rebuild and to figure out a strategy for the political and economic reintegration of Crimea and DPR, LPR. Russia gets negotiations which could at some point in the future see Crimea and DPR/LPR absorbed or annexed into Russia, but it is also not a given.

Q? You could ask what does Putin get from this? How can he sell this as a victory?

Answer – well Putin completely controls the media narrative in Russia, and he can sell any deal however he wants. He can pitch this as Russia fought not only Ukraine but the whole of NATO and got acceptance of talks over the longer term future of Crimea, DPR and LPR. This was not on the table, at least not Crimea, in February 2022.

And he can choose to carry on the fight, but there is zero evidence that Ukraine’s willingness to fight has been eroded and time will only see Ukraine receive better and more Western military kit. Ukraine will secure greater conventional superiority over Russia, in the Ukrainian theatre, as time goes by, and no amount of poor quality North Korean weapons is really going to change that in favour of Russia.

Time is not on Putin’s side. The longer the war goes on, the greater human, military, and economic costs to Russia, and the greater risk to Putin of another Wagner style mutiny.

Q? But can’t Putin just wait it out until a Trump victory and then see Western support for Ukraine collapse?

Answer: I don’t really buy this narrative that a Trump victory would see a speedy Russian victory over Ukraine.

First, US elections are still a long way off, and a Trump second term would only then likely begin in January 2025. That is still 16 months off, and an awful lot of weapons and financing can flow to Ukraine before then – indeed, in anticipation of a Trump presidency, the Biden team might front load arms deliveries to Ukraine.

So assuming come January 2025, US kit deliveries to Ukraine stop, Ukraine will still have plenty of ammo in the bank, from the US, at least. It will be able to sustain war for many months after.

Second, even after the next US elections, Congress will likely remain signficantly pro-Ukrainian – with 60-70% of the Senate and House likely wanting the US to continue to fund and arm Ukraine. And remember here, arming Ukraine has become a huge business for the US defence industry, so would Senators and House members really want a pull back in defence procurement from their states? Europe and Ukraine will want to buy US military supplies – will Trump want to say no to that?

Third, even if the US stops arming Ukraine come January 2025, it’s far from certain that Europe would follow suit. Indeed, I think Europe would still have every reason to continue to arm and fund Ukraine as its front line of defence against what will still be an aggressive and expansionist Russia. And for Europe, it has to ask itself what a Russian victory in Ukraine, assuming US pulls resources, would look like? What it would look like is a total social and economic collapse of Ukraine, and likely a flood of tens of millions of Ukrainians into Europe, making the flow after the full scale invasion in February 2022 look like a kindergarten party. And by this time, Ukraine will be a signficantly militarised state, so it will likely be a flood of migrants and weapons. And even then, Europe will have to fully fund its own defence, as then a front line against an aggressive and expansionist Russia.

Fourth, let’s assume in an imaginary and highly unlikely scenario that the US and Europe stop arming and funding Ukraine. Can we imagine that the Ukrainians will just stop fighting, even then? Why/how can they when Putin has made it clear that he is at war with the Ukrainian nation. This is a war for Ukraine and Ukrainians’ very survival. They will fight on, long and hard, and as noted above, still will have plenty of arms supplies to make a Russian occupation very costly. And focusing on this, how can Russia enforce a victory in Ukraine? How can it invade the whole country, occupy and sustain that invasion, when we saw the inability of the Russian military to hold even one third of the country, through to Kyiv in the initial few weeks of the full scale invasion. The military, human and economic costs to Russia of forcing through a victory in these circumstances would be unsustainable.

So I don’t buy the line that a long war suits Russia, or that Russia’s position is somehow going to be greatly improved come January 2025 and a Trump second term. All scenarios in the longer term just get worse for Russia. That is why I think that Putin would still jump at the prospects of peace talks towards the end of this year, perhaps brokered by China – and perhaps after his meeting with Sullivan et al in Malta, perhaps that is what the Chinese foreign minister was angling after with his follow on trip to Moscow this week.

Q? So assuming your scenario of an early end to the war, what about Ukraine reconstruction?

Answer: Well I am still mega bullish on that given a) low base GDP rebound; b) huge reconstruction needs and aid/financing flows; c) Ukraine’s ingenuity and innovation shown throughout the war – the State of Israel moment; d) the anchor now of a real EU accession perspective.

I really do think that Ukraine reconstruction is the biggest, most exciting, and strategically important project facing Europe for the past 35 years, since the fall of the Berlin Wall and the collapse of the USSR.

Q? But…how is it going to be funded?

Answer – quite, we had the London Ukraine Recovery Conference, and all the talk of the use of frozen Russian assets, and now it’s all gone very quiet.

On the $300-400bn of frozen Russian assets, I sense the bean counters in Western treasuries, and the army of lawyers have presented a Yes, prime minister, line that it simply cannot be done due to concerns around the rule of law, sovereign immunity, and the sanctity of the dollar as a reserve currency.

Frankly these arguments are all bull – I have written and debunked them in nervous pieces herein the past.

It should be an absolute scandal in all Western democracies that our governments are protecting, and defending these assets – the assets of a bunch of fascist war criminals in Russia – and instead prefer to spend Western tax payers money, or pensioners money if debts to Ukraine are forced to be restructured. They are then putting the property rights of a criminal, genocidal, facist regime above those of Ukraine and indeed our own tax payers and pensioners. The money is absolutely there for Ukraine reconstruction, and it should be seized from Russia and used to fund Ukraine’s defence and its reconstruction. If laws are not there already, then legislate, as a political and security perspective. But our politicians seem very good at spending tax payers money, not being held to account – or not holding Russia to account.

And on the issue of sovereign immunity see the paper on countermeasures by Philip Zelikow, at al. The argument is that sovereign immunity only applies when a state abides by international law, which Russia clearly is not. That immunity can be set aside allowing assets to be frozen(most are only immobilised), seized and then allocated to Ukraine, until Russia moves back to being in accordance with international law.

I caused some offence by arguing that we are indeed idiots if we don’t use frozen Russian assets for Ukraine reconstruction and I still abide by that. The law, in the West, really is an ass, if we don’t make this work, but more importantly we risk a populist political backlash if we do not. Be warned.

I mean let’s just think about this, Russia invades Ukraine, causes $500bn plus in damage and partakes in heinous crimes, but our governments say fine, we will pick the tab up for rebuilding Ukraine, and by the war Putin, here is your $400bn back with interest. Shall we bend over for you while we present the cheque?

Q? What about the assets in Euroclear?

Answer – sure the worst case scenario is the interest earned on the $240bn plus in EU juridicstions can be/should be transferred to Ukraine. I think this is in the order of $3-5bn a year. It should be a scandal for Euroclear that this has not already happened. But I would also argue that Euroclear and other custodians of immobilised Russian assets should be encouraged to take a more ambitious investment approach to increase these returns, if that is the only way to secure funding for Ukraine reconstruction. Ukraine should issue reconstruction or requisition bonds which should be bought using the Russian funded immobilised/frozen. His could easily generate the $50bn annually needed for Ukraine reconstruction.

Think outside the box guys, or we will lose the longer term battle for survival between democracy and autocracy.