In our note on Sunday, we pointed to a narrowing range of possible outcomes in Ukraine, tail risk that collapsed to a single line when Russia invaded its neighbor today. The West’s ‘proportionate response’ strategy also remains as new sanctions ratchet up pain on Russian financial institutions, conglomerates, and basic materials.
There is no need for multi-scenario analysis; President Putin is going big which implies government overthrow and replacement with a Moscow-friendly regime. It turns out the US intelligence community was spot on about an all-out invasion versus intelligence from some in the EU and Ukraine that expected a more limited incursion. Chris Skaluba of the Atlantic Council joined us this morning for a webinar update on Ukraine.
Skaluba observed that from Russia’s perspective the operation is going well in and around Kyiv, as well as key military command and control installations being eliminated or compromised. Russia is clearly aiming to prevent the Ukraine military from coalescing into a coordinated fighting force.
The costs of Putin’s up-tempo posture are a net negative even after including the crude price spike, but he is prepared for those costs at least for a while. Skaluba reminded us that in Russia the mothers became a public problem for Putin when body bags returned from Chechnya.
Civilians are being armed with small weapons by Ukraine’s air force. Cyber and physical-cyber hybrid attacks are unfolding throughout the country. This form of asymmetrical warfare very likely won’t be contained to the war theater or eastern Europe.
Other than how far Putin will push into Ukraine, NATO is beginning to focus on handling refugee flows. The G7 is considering if/when Ukrainian President Zelensky will leave the country to form a government in exile. A NATO summit is set for Friday, February 25. NATO defense reinforcements are expected to begin which Putin could use as pretext for more activity in Ukraine. That said, Putin will fabricate provocation whenever it suits his plan.
“How we think about Europe has changed” from a security perspective, according to Skaluba. The strategy by the EU and NATO has been one of deterrence and that may no longer be the case. The nuclear exercise in Belarus is the largest one since the Cold War. He agrees with us that Finland and Sweden will have much more impetus today than last week to join NATO. However, he downplays talk of a pan-EU defense apparatus as suggested by the French largely because Balkan region members and Poland greatly prefer the US security umbrella. He thinks bureaucratic impediments to closer NATO/EU cooperation will be reduced.
Please find a replay of 22V’s webinar with Chris Skaluba HERE.
