Crimea Bridge Explosion Disrupts Crucial Supply Route for Russian Forces (VIDEO)

At the video, just after 10 seconds, the car was spared a direct hit, but the blast-shrapnel ignited the gas tank and blew up the vehicle. Pretty rad actually, though bummer for the occupants. That's definitely called being in the wrong place at the wrong time.

At the Wall Street Journal, "Russian officials blame Kyiv; Ukrainian officials have repeatedly threatened to hit the 12-mile bridge":

A major explosion on Saturday severely damaged the bridge connecting Russia’s mainland to the occupied Crimean Peninsula, disrupting traffic on a crucial artery for the supply of fuel, military equipment and food to Russian troops fighting to hold ground in southern Ukraine.

The bridge, opened by President Vladimir Putin to great fanfare in 2018, was meant to symbolize the might of the Russian state and the permanence of Russia’s annexation of the peninsula four years earlier. Russia even released a feature movie about its construction.

Russia’s investigations committee said three people died after the early-morning explosion of a truck on the bridge’s roadway next to a supply train that was carrying fuel.

Mr. Putin signed a decree requiring the boosting of defenses for Crimean transportation and energy infrastructure links. The decree placed the country’s intelligence service, FSB, in charge of the measures.

Sergey Aksyonov, the Russian-appointed leader of Crimea, raised the terrorism alert level to high through Oct. 23.

Some demolition experts who analyzed footage of the blast questioned the Russian version and said that the explosion must have come from under the bridge, caused either by an explosives-laden boat, manned or unmanned, or by shaped charges placed by divers.

Tony Spamer, a former British Army expert on bridge demolitions, said a truck bomb would have created a hole in the middle of bridge but wouldn’t have been sufficient to cut the reinforcing bar and cause the structure to collapse. “You’ve got to attack the whole width of the bridge. Looking at it, it looks like it was attacked from underneath. It’s a monster job,” he said.

Russia rushed to launch ferry services as an alternative, a move made difficult by stormy weather. Crimean authorities said passenger traffic resumed Saturday afternoon on the two surviving lanes of the four-lane road bridge, and rail services should be restarted soon. Civilian flights to Crimea have been suspended since February.

David MacKenzie, a senior technical director at COWI Holding A/S, a Denmark-based company that designs and builds some of the world’s largest and longest bridges, said it would take several months for Russia to be able to fully restore the destroyed spans of the bridge, and that the ban on truck traffic is caused by concerns that the bridge’s substructure has also been damaged. Weight restrictions are likely to be imposed on the railway bridge should it reopen, he said.

“A quite significant fire has taken place, and it will have an impact on the strength of the steel that is there,” Mr. MacKenzie said. “There is a very good chance that the steel on the top of the deck may well have been heated to temperatures well above the limits that the steel takes.”

Russian officials in Crimea were quick to blame Kyiv. “The Ukrainian vandals have managed to reach the Crimean bridge with their bloodied hands,” the speaker of Crimea’s legislature, Vladimir Konstantinov, wrote on social media. Other than ordering a commission of inquiry, Mr. Putin has so far remained silent on the incident, even as Russian lawmakers and politicians called for retribution.

While Ukrainian officials have threatened to hit the strategic bridge in the past, there was no direct claim of responsibility from Kyiv. Senior Ukrainian officials, however, on Saturday expressed delight at the blow to Russian prestige.

Alluding to Mr. Putin’s 70th birthday on Friday, Ukraine’s national-security adviser Oleksiy Danilov posted a video online of the burning bridge next to footage of Marilyn Monroe singing, “Happy birthday, Mr. President.”

Russia’s annexation of Crimea in 2014 is considered illegal by virtually the entire international community, and Ukrainian President Volodymyr Zelensky has repeatedly said that he seeks to reclaim all Ukrainian territories seized by Russia.

Russia in recent days moved to annex four other regions of Ukraine where fierce fighting continues, while Mr. Putin ordered the mobilization of hundreds of thousands of reservists to shore up the crumbling Russian front lines, prompting an exodus of Russian men to neighboring countries.

Moscow on Saturday for the first time named an overall commander for the faltering campaign in Ukraine, Gen. Sergei Surovikin. Previously the head of Russia’s Aerospace Forces, he was this summer identified by the Russian Ministry of Defense as head of Group South, the military grouping that led the fighting to seize the southeastern city of Mariupol. He is a veteran of the Chechen campaign and a former commander of Russian forces in Syria.

Russian nationalists and personalities such as Chechen leader Ramzan Kadyrov and Yevgeni Prigozhin, owner of the Wagner private military company, have blamed a rival general, Col. Gen. Aleksandr Lapin, commander of Group Center, for recent defeats that saw Russia lose thousands of square miles in the Kharkiv, Donetsk and Luhansk regions. There was no word about Gen. Lapin’s fate.

Crimea, the home of Russia’s Black Sea fleet, has also become a focus for the Ukrainian war effort as its forces press farther south, especially in Kherson, where dozens of villages have been taken in recent days. Kyiv has attacked several high-profile targets in Crimea in recent months, striking a major Russian air base in Saky and a railway junction near the town of Dzhankoy. It has used American-made Himars missiles to hit the Antonivsky bridge in Kherson, a lifeline for Russian troops in the area.

The bridge over the Kerch Strait accounted for the bulk of fuel and food supplies to Crimea and represented the only way of traveling to and from the peninsula for ordinary Russians...

 

Louise Mensch on Putin's War

From September 16th, on Twitter:

1/ I don’t think this war, or Putin, are going to make it to next summer.

in case you haven’t been paying attention, Putin just went to China and was snubbed. Tiny Eastern European countries are making him wait around.

He’s finally being treated like the dog he is.

2/ It’s tempting to say I think the war will be over by the end of the year. That certainly possible, but sources say Kherson itself is going to take a little while. Most likely Ukraine is thinking about the push to Crimea. Ukraine WILL be retaking Crimea. cc @Dominic2306

3/ Putin enjoys being hated and feared. Instead, he’s now being hated and mocked. that’s a lethal combination. And the first whiff of future rationing has just hit Russia.

4/ Militarily, I would expect all Ukrainian territory to be liberated by spring 2023, however, if there is a coup in Moscow, (and there is a significant chance of that) before then, I would expect the war to end immediately afterwards with total Russian withdrawal

5/ in any event, surely no serious person can now envisage anything other than the utter defeat of the Russian Federation, and the total victory and complete liberation of Ukraine. Glory to Ukraine. 6/ following the complete victory of the Armed Forces of Ukraine @DefenceU over the Russian Army @MOD_Russia, I believe a coup against Vladimir Putin is inevitable. The only question is whether it will come before, or after, Russia’s total military defeat in Ukraine

7/ the coup, in my view, is marginally more likely to happen after Russia is driven out of Crimea. The reason for this is that Ukraine is going to insist on retaking Crimea, and it would be very difficult indeed, for any Russian president, domestically, to give Crimea back.

8/ it is another thing entirely, if your predecessor has “lost” @Crimea (Crimea is Ukraine, but the Russians lie that it is part of Russia), than if you, the new guy, “surrender” it back to the Ukrainians. Putin’s replacement may want that loss to be on Putin, not them.

9/ I cannot see Putin, surviving this situation, and I take great pleasure in knowing the fear that he must feel every morning when he wakes up. He is a dog. He is utterly despicable. I have often been told by more than one source that there is worse behind him.…

10/ … that Putin cares only about Vladimir Putin, and real Russian nationalists are waiting in the wings, but I’m not going to ‘be careful what I wish for’.

I want justice done against Vladimir Putin, and I want justice to be seen to be done. #смертьворогам

11/ Vladimir Putin is the enemy of the free world, he invaded Ukraine, he committed war crimes against civilians, he propped up Assad’s genocidal regime, he interfered in a sovereign election in the United States, and in two British referendums; all, imo, acts of war.

12/ Putin committed information warfare against every democracy in the world, spreading anti-vaccination propaganda during the Covid pandemic. It’s unacceptable to me that he end his life with nothing worse than humiliation.

*Whoever* is behind him: fiat iustitia ruat caelum.

13/ after Russia is driven from Crimea and Putin is violently deposed in Russia, there must be war crimes trials at the Hague. And large amounts of Russia’s sovereign wealth fund must be simply given to Ukraine as compensation. Glory to Ukraine. Destruction to the Kremlin. Ends.

 

'A Brutal, Needless War ... Chosen by One Man': Biden, at United Nations, Slams Putin's Invasion of Ukraine (VIDEO)

Following-up, "Putin Orders Draft of Reservists for War in Ukraine, Threatens Nuclear Response."

At the Los Angeles Times, "The president says Putin ‘attempted to erase the sovereign state from the map’ and urged the United Nations to add additional members to the Security Council to weaken Russia’s influence":

NEW YORK CITY — President Biden excoriated Russian President Vladimir Putin and announced another $1.2-billion aid package for Ukraine during his annual address to the U.N. General Assembly on Wednesday.

“Let us speak plainly: A permanent member of the United Nations Security Council invaded, attempted to erase the sovereign state from the map,” Biden said, calling Russia’s invasion of Ukraine “a brutal, needless war” that was “chosen by one man.”

Russia and China’s standing as two of the five Security Council members is undermining the U.N.'s ability to fulfill its mission, Biden went on to argue. Intent on signaling to allies and adversaries alike that the United States will not waver in its defense of Ukraine and support for other sovereign nations, the president urged the United Nations to add additional members to the Security Council to weaken Russia and China’s influence. But he did not go as fas as to call for revoking their Security Council membership, and with it, their veto power.

“The time has come for this institution to become more inclusive,” Biden said.

The annual week of meetings at U.N. headquarters, the first in-person gathering in three years, comes as Putin, his military having suffered major setbacks in recent weeks, has indicated he now plans to annex occupied regions of Ukraine. Moscow-aligned puppet governments there are preparing to hold sham referenda on joining Russia.

“The world should see these outrageous acts for what they are,” Biden said of the planned votes.

Just hours before Biden’s speech, Putin announced an immediate partial mobilization of 300,000 reservists in a pre-recorded address airing on Russian state television. Characterizing the conflict as a war with the West, he went as far as to threaten to deploy nuclear weapons.

“To defend Russia and our people, we doubtlessly will use all weapons resources at our disposal,” Putin said. “This is not a bluff.”

Putin’s remarks won’t come as a surprise to the White House, where national security officials continue to believe the war is nowhere near a resolution despite Ukraine’s success in pushing back Russian forces from formerly occupied territories in the country’s east.

Since Russia’s invasion of Ukraine in February, Biden’s guiding principle has been keeping the United States and the North Atlantic Treaty Organization unified and out of any direct confrontation with Russia. Speaking to the world some seven months later, he looked to bolster the resolve of the world’s leading democracies in continuing to stand behind Ukraine, even as the drawn-out conflict has upended energy markets and exacerbated inflation, creating domestic issues for leaders in London, Paris and Berlin.

He will hold his first meeting with new British Prime Minister Liz Truss later Wednesday.

At the same time, he is trying to ward off a potential attack on Taiwan by China. In an interview Sunday on CBS’ “60 Minutes,” Biden said he would respond militarily to any act of aggression by Beijing that violates Taiwan’s sovereignty — the kind of response he took off the table from the get-go when Russia was getting ready to invade Ukraine.

U.N. Secretary General António Guterres, in his remarks Monday, implored world leaders to rally together in support of the principles enshrined in the organization’s charter, offering a bleak summation of a world where democratic principles and institutions are increasingly under attack and multilateral organizations have been unable to muster the responses necessary to combat climate change, food insecurity, diseases, human rights violations and other challenges...

Watch the full speech is here: "Biden denounces Russia in speech to U.N. General Assembly."

Putin Orders Draft of Reservists for War in Ukraine, Threatens Nuclear Response

A big day in great power politics.

At the Wall Street Journal, "The Russian president’s move sought to bolster his faltering military, while China urged the Kremlin to de-escalate":

MOSCOW—Russian President Vladimir Putin raised the threat of a nuclear response in the conflict and ordered reservists to mobilize, an escalation of the war in Ukraine as Moscow seeks to buttress its army’s flagging manpower and regain the offensive following stinging losses on the battlefield.

“Russia will use all the instruments at its disposal to counter a threat against its territorial integrity—this is not a bluff,” Mr. Putin said in a national address that blamed the West for the conflict in Ukraine, where he said his troops were facing the best of Western troops and weapons.

The speech is the clearest sign yet that seven months into the biggest conflict in Europe since World War II, Russia is unable to counter Ukraine and the West, which has largely united in the face of the Russian invasion. It also raises the stakes for Ukraine’s backers, which have sent billions of dollars of military aid since the beginning of the conflict.

Without providing evidence, Mr. Putin said top officials at the North Atlantic Treaty Organization had said that it would be acceptable to carry out nuclear strikes on Russia. He also blamed Ukraine for strikes against the nuclear-power plant in the Zaporizhzhia region, which has been occupied by Russian troops since near the start of the war.

“To those who allow themselves such statements, I would like to remind them, Russia also has many types of weapons of destruction, the components of which in some cases are more modern than those of the countries of NATO,” said Mr. Putin.

In his speech, Mr. Putin cast the partial mobilization—Russia’s first since World War II—as a response to what he called a decadeslong Western plot to break up Russia. He repeated false accusations that the West had stirred rebellion inside the country’s borders, armed terrorist rebels in the Muslim-dominated south, arranged a coup in Ukraine in 2014 and transformed Ukraine into an “anti-Russian bridgehead, turning the Ukrainians themselves into cannon fodder.”

The bellicose address to the nation comes after officials in Russian-occupied parts of Ukraine on Tuesday announced plans for Russia to annex four regions in the country’s east and south. The move would allow Mr. Putin to describe a Ukrainian offensive on that territory as tantamount to an attack on Russia.

“He has been pushed into a corner and his only hope is to demonstrate resolve and readiness for escalation to compel the Ukrainians to sit down at the negotiating table,” said Abbas Gallyamov, a Russian political analyst and a former speech writer for Mr. Putin. “I don’t think he believes in victory any longer. He wants to show Ukrainians that victory will be too expensive and it’s better to negotiate.”

Shortly after Mr. Putin’s speech, China urged the Kremlin to de-escalate.

“We call on the parties concerned to achieve a cease-fire and an end to the war through dialogue and negotiation, and find a way to take into account the legitimate security concerns of all parties as soon as possible,” said Wang Wenbin, spokesman for the Chinese Foreign Ministry. “We also hope that the international community will create conditions and space for this.”

Western leaders expressed their resolve to continue supporting Ukraine despite Mr. Putin’s threat.

The partial mobilization and annexation of parts of Ukraine are “an admission that [Mr. Putin’s] invasion is failing,” U.K. Defense Secretary Ben Wallace said in a tweet Wednesday. “No amount of threats and propaganda can hide the fact that Ukraine is winning this war, the international community are united and Russia is becoming a global pariah.”

Mr. Putin has sought to avoid a full mobilization of troops, fearing that the broad support for the war could become fragile once average Russians are forced to serve.

While both state-run and independent polls show that most Russians support the war, the enthusiasm has been more subdued than eight years ago, when Mr. Putin ignited the conflict with Ukraine by seizing the southern peninsula of Crimea and announcing its annexation to great fanfare in a Kremlin ceremony.

In its mobilization efforts, the Kremlin has so far taken a calibrated approach, avoiding a widespread call-up that would be a shock to Russian society.

The decision, however, is likely to silence nationalist critics of Mr. Putin’s approach, which has seen him stop short of declaring war.

“Nuclear signaling is directed to the West and Ukraine, but it’s also meant to satisfy radical domestic critiques that are turning into a serious opposition,” said Dmitry Adamsky, a Russian expert at the School of Government, Diplomacy and Strategy at the Reichman University in Herzliya, Israel...

 

Russia’s Battered Army Has No Quick Fix in Ukraine (VIDEO)

 At the Wall Street Journal, "Kyiv’s counterattack tests Moscow’s forces and raises stakes for Kremlin at home":

Russian forces sent fleeing by Ukraine’s recent counterattack are attempting to establish defensive positions and regain their footing. It is a difficult pivot even under ideal conditions, and so far Moscow’s forces show signs of struggling to adapt.

Battlefield setbacks are just one challenge facing the Kremlin as it tries to secure its territorial gains in Ukraine and fend off nascent criticism at home. Kyiv’s forces this month have retaken dozens of settlements and more than 3,500 square miles of Russian-controlled ground in the northeastern Kharkiv region, according to government officials.

Ukraine continued attacking Russian-held territory on Friday, hitting the easternmost parts of the Kharkiv region and other parts of eastern Ukraine. They hope to capitalize on those gains to advance their offensive in the southern city of Kherson. Attacks on government buildings in Kherson and the eastern city of Luhansk killed two Moscow-installed officials, local Russia-backed authorities said.

On the battlefield over recent weeks, Russia has lost hundreds of heavy military vehicles, including over 100 tanks, according to open-source intelligence reports. It also lost several pieces of classified electronic-warfare equipment that are now in the hands of Western-allied forces. Many Russian soldiers—in the thousands, by some estimates—have either surrendered or will become prisoners of war.

Ukraine’s advance will also allow its rockets to hit targets deeper within Russian-controlled areas, potentially in occupied parts of Ukraine such as Crimea and in Russia itself.

Within Russia, criticisms of President Vladimir Putin and his regime remain limited but are growing. Spreading wariness about the war could limit Mr. Putin’s options for responding, such as a limited mobilization or a draft, which under Russian law likely would require an outright declaration of war.

“We gave up the strategic initiative,” said Vladimir Soloviev, a popular host on state-run television this week.

Russian TV pundits acknowledged Ukraine’s successes in its counteroffensive, which they credited to U.S. intelligence, Western weapons and even fighters from the North Atlantic Treaty Organization disguised as mercenaries. They showed clips alleging cruel punishment of Russian sympathizers by Ukrainian forces in retaken areas as supposed proof of Ukrainians’ Nazi-like nature.

Russia still retains significant forces deployed in and around Ukraine and vast stores of weaponry and ammunition, giving it the potential to react and hit back. While Kyiv has seized the initiative in routing some of Moscow’s front-line troops, it is far from uprooting all Russian forces occupying its territories.

Ukraine could also face more opposition in pushing further into Russian-controlled regions, military analysts say. Kyiv’s recent gains near Kharkiv, in the northeast, were achieved using surprise and by finding weak points in Russia’s long and thinly protected front line, according to soldiers involved in the fight. Achieving such surprise again may be difficult and Ukrainian forces are advancing into regions where Russian forces are more dug-in than near Kharkiv.

Eastern parts of Ukraine under pro-Russian occupation since 2014 have been bound more closely to Moscow, so Kyiv’s forces may receive less support from local populations there than they have so far.

“I think it does become somewhat harder for the Ukrainians going forward,” said Dmitry Gorenburg, a Russian military expert at CNA, a defense-research organization in Arlington, Va. As the area Russia is defending shrinks, its ratio of forces to territory should rise, he said.

Working against Russia is low morale, an inflexible military command structure and equipment that has proved to be poorly maintained. Energized Ukrainian forces, who have shown themselves to be nimble in battle, are using new and well-kept equipment...

 

It’s Time to Prepare for a Ukrainian Victory

From Anne Applebaum, at the Atlantic, "The liberation of Russian-occupied territory might bring down Vladimir Putin":

Over the past six days, Ukraine’s armed forces have broken through the Russian lines in the northeastern corner of the country, swept eastward, and liberated town after town in what had been occupied territory. First Balakliya, then Kupyansk, then Izium, a city that sits on major supply routes. These names won’t mean much to a foreign audience, but they are places that have been beyond reach, impossible for Ukrainians to contact for months. Now they have fallen in hours. As I write this, Ukrainian forces are said to be fighting on the outskirts of Donetsk, a city that Russia has occupied since 2014.

Over the past six days, Ukraine’s armed forces have broken through the Russian lines in the northeastern corner of the country, swept eastward, and liberated town after town in what had been occupied territory. First Balakliya, then Kupyansk, then Izium, a city that sits on major supply routes. These names won’t mean much to a foreign audience, but they are places that have been beyond reach, impossible for Ukrainians to contact for months. Now they have fallen in hours. As I write this, Ukrainian forces are said to be fighting on the outskirts of Donetsk, a city that Russia has occupied since 2014.

Many things about this advance are unexpected, especially the location: For many weeks, the Ukrainians loudly telegraphed their intention to launch a major offensive farther south. The biggest shock is not Ukraine’s tactics but Russia’s response. “What really surprises us,” Lieutenant General Yevhen Moisiuk, the deputy commander in chief of the Ukrainian armed forces, told me in Kyiv yesterday morning, “is that the Russian troops are not fighting back.”

Russian troops are not fighting back. More than that: Offered the choice of fighting or fleeing, many of them appear to be escaping as fast as they can. For several days, soldiers and others have posted photographs of hastily abandoned military vehicles and equipment, as well as videos showing lines of cars, presumably belonging to collaborators, fleeing the occupied territories. A Ukrainian General Staff report said that Russian soldiers were ditching their uniforms, donning civilian clothes, and trying to slip back into Russian territory. The Ukrainian security service has set up a hotline that Russian soldiers can call if they want to surrender, and it has also posted recordings of some of the calls. The fundamental difference between Ukrainian soldiers, who are fighting for their country’s existence, and Russian soldiers, who are fighting for their salary, has finally begun to matter.

That difference might not suffice, of course. Ukrainian soldiers may be better motivated, but the Russians still have far larger stores of weapons and ammunition. They can still inflict misery on civilians, as they did in today’s apparent attack on the electrical grid in Kharkiv and elsewhere in eastern Ukraine. Many other cruel options—horrific options—are still open even to a Russia whose soldiers will not fight. The nuclear plant in Zaporizhzhia remains inside the battle zone. Russia’s propagandists have been talking about nuclear weapons since the beginning of the war. Although Russian troops are not fighting in the north, they are still resisting the Ukrainian offensive in the south.

But even though the fighting may still take many turns, the events of the past few days should force Ukraine’s allies to stop and think. A new reality has been created: The Ukrainians could win this war. Are we in the West really prepared for a Ukrainian victory? Do we know what other changes it could bring?

Back in March, I wrote that it was time to imagine the possibility of victory, and I defined victory quite narrowly: “It means that Ukraine remains a sovereign democracy, with the right to choose its own leaders and make its own treaties.” Six months later, some adjustments to that basic definition are required. In Kyiv yesterday, I watched Ukrainian Defense Minister Oleksii Reznikov tell an audience that victory should now include not only a return to the borders of Ukraine as they were in 1991—including Crimea, as well as Donbas in eastern Ukraine—but also reparations to pay for the damage and war-crimes tribunals to give victims some sense of justice.

These demands are not in any sense outrageous or extreme. This was never just a war for territory, after all, but rather a campaign fought with genocidal intent. Russian forces in occupied territories have tortured and murdered civilians, arrested and deported hundreds of thousands of people, destroyed theaters, museums, schools, hospitals. Bombing raids on Ukrainian cities far from the front line have slaughtered civilians and cost Ukraine billions in property damage. Returning the land will not, by itself, compensate Ukrainians for this catastrophic invasion.

But even if it is justified, the Ukrainian definition of victory remains extraordinarily ambitious. To put it bluntly: It is hard to imagine how Russia can meet any of these demands—territorial, financial, legal—so long as its current president remains in power. Remember, Vladimir Putin has put the destruction of Ukraine at the very center of his foreign and domestic policies, and at the heart of what he wants his legacy to be. Two days after the launch of the failed invasion of Kyiv, the Russian state-news agency accidentally published, and then retracted, an article prematurely declaring success. “Russia,” it declared, “is restoring its unity.” The dissolution of the U.S.S.R.—the “tragedy of 1991, this terrible catastrophe in our history”—had been overcome. A “new era” had begun...

 Still more.

Russian Offensive Campaign Assessment, September 15

At the Institute for the Study of War:

Ukrainian forces are continuing counteroffensive operations in eastern Ukraine, increasingly pressuring Russian positions and logistics lines in eastern Kharkiv, northern Luhansk, and eastern Donetsk oblasts. Russian sources reported that Ukrainian forces are continuing ground operations southeast of Izyum, near Lyman, and on the east bank of the Oskil River, reportedly compelling Russian forces to withdraw from some areas in eastern Ukraine and reinforce others. Russian forces in eastern Ukraine will likely struggle to hold their defensive lines if Ukrainian forces continue to push farther east.

The Kremlin is responding to the defeat around Kharkiv Oblast by doubling down on crypto-mobilization rather than setting conditions for general mobilization. Chechen leader Ramzan Kadyrov called on all federal subjects to initiate “self-mobilization” and not wait on the Kremlin to declare martial law. Kadyrov claimed that each federal subject must prove its readiness to help Russia by recruiting at least 1,000 servicemen instead of delivering speeches and conducting fruitless public events. Russian propagandist Margarita Simonyan echoed the need for Russians to volunteer to join the war effort, and several loyalist Russian governors publicly supported Kadyrov’s speech. The Russian-appointed head of occupied Crimea, Sergey Aksyonov, announced the formation of two volunteer battalions on the peninsula in support of Kadyrov’s calls.

The defeat around Kharkiv Oblast prompted the Kremlin to announce a Russia-wide recruitment campaign. Kremlin officials and state media had not previously made country-wide recruitment calls but had instead tasked local officials and outlets to generate forces ostensibly on their own initiative. Kremlin Spokesperson Dmitry Peskov vaguely welcomed the creation of the battalions on July 12, while 47 loyalist federal subjects advertised and funded the regional volunteer battalion recruitment campaign. A prominent Russian milblogger and a supporter of general mobilization praised officials such as Kadyrov for taking the recruitment campaign from the ineffective Russian Ministry of Defense; this recruitment revamp is likely to secure more support for the Kremlin among nationalist figures who are increasingly critical of the Russian MoD, even if the drive does not generate large numbers of combat-effective troops.

The Kremlin has likely abandoned its efforts to shield select federal subjects from recruitment drives, which may increase social tensions. ISW has previously reported that the Kremlin attempted to shield Moscow City residents from reports of the formation of the Moscow-based “Sobyaninsky Polk” volunteer regiment. Russian opposition outlet The Insider noted that several groups in the republics of Buryatia, Kalmykia, Tyva, and Yakytia (Republic of Sakha) are publicly opposed to the Kremlin's emphasis on recruitment on an ethnic basis. Simonyan’s statement about “self-mobilization” prompted numerous negative comments among Russians calling on Russian oligarchs to pay for and fight in the war.

The Kremlin has almost certainly drained a large proportion of the forces originally stationed in Russian bases in former Soviet states since Russia’s full-scale invasion of Ukraine began in February, likely weakening Russian influence in those states. A Radio Free Europe / Radio Liberty (RFE/RL) investigation reported on September 14 that the Russian military has already deployed approximately 1500 Russian personnel from Russia’s 201st Military Base in Dushanbe, Tajikistan, to Ukraine since the full-scale invasion began and plans to deploy 600 more personnel from facilities in Dushanbe and Bokhatar, a southern Tajik city, in the future.[10] RFE/RL additionally reported on September 13 that Russia has likely redeployed approximately 300 Tuvan troops from the Russian Kant Air Base in Kyrgyzstan to fight in Ukraine at varying points since late 2021.

The withdrawals from the Central Asian states are noteworthy in the context of border clashes between Kyrgyzstan and Tajikistan. Tajik and Kyrgyz border guards exchanged fire in three separate incidents on September 14, killing at least two people. The uptick in violence between Tajikistan and Kyrgyzstan, both of which are members of the Russian-controlled Collective Security Treaty Organization (CSTO), comes alongside renewed aggression by Azerbaijan against CSTO member state Armenia. Russian forces also withdrew 800 personnel from Armenia early in the war to replenish losses in Ukraine, as ISW has previously reported.

Key Takeaways

*Ukrainian forces continued counteroffensive operations in eastern Ukraine.

*The Kremlin is responding to the defeat around Kharkiv Oblast by doubling down on crypto-mobilization, rather than setting conditions for general mobilization.

*The Kremlin has almost certainly drained a large proportion of the forces originally at Russian bases in former Soviet states since *Russia’s full-scale invasion of Ukraine began in February, likely weakening Russian influence in those states.

*Russian and Ukrainian sources reported Ukrainian ground attacks northwest of Kherson City, near the Ukrainian bridgehead over the Inhulets River, and south of the Kherson-Dnipropetrovsk Oblast border.

*Russian-appointed occupation officials and milbloggers claimed that Ukrainian forces conducted a landing at the Kinburn Spit (a narrow peninsula in Kherson Oblast).

*Russian forces conducted limited ground assaults and are reinforcing positions on the Eastern Axis.

*The Russian proxy Donetsk People’s Republic (DNR) is likely attempting to stop its administrators from fleeing ahead of the Ukrainian counteroffensive, demonstrating the bureaucratic fragility of the DNR.

We do not report in detail on Russian war crimes because those activities are well-covered in Western media and do not directly affect the military operations we are assessing and forecasting. We will continue to evaluate and report on the effects of these criminal activities on the Ukrainian military and population and specifically on combat in Ukrainian urban areas. We utterly condemn these Russian violations of the laws of armed conflict, Geneva Conventions, and humanity even though we do not describe them in these reports.

*Ukrainian Counteroffensives—Southern and Eastern Ukraine

*Russian Main Effort—Eastern Ukraine (comprised of one subordinate and two supporting efforts); *Russian Subordinate Main Effort—Capture the entirety of Donetsk Oblast

*Russian Supporting Effort—Southern Axis

*Russian Mobilization and Force Generation Efforts

*Activities in Russian-occupied Areas

Ukrainian Counteroffensives (Ukrainian efforts to liberate Russian-occupied territories)

Eastern Ukraine: (Vovchansk-Kupyansk-Izyum-Lyman Line)

Ukrainian forces continued counteroffensive operations in eastern Ukraine, setting conditions to drive deeper into the Russian rear in eastern Kharkiv and western Luhansk oblasts. A Russian source claimed that Ukrainian forces expelled Russian forces from Sosnove on the north bank of the Siverskyi Donets River and are fortifying positions at the settlement.[14] The source also reported that Russian forces may have pulled out from Studenok immediately west of Sosnove to avoid encirclement.[15] Official Russian and Ukrainian sources reported that Russian forces reinforced Russian positions in Lyman.[16] The Ukrainian General Staff reported that the heavily reduced remnants of the Luhansk People’s Republic (LNR) 2nd Army Corps 202nd and 204th Motorized Rifle Regiments were disbanded into reserves, possibly meaning that the remnants of these reduced elements reinforced the Russian Combat Army Reserve (BARS) elements fighting in Lyman.

Ukrainian forces are reportedly advancing across the Oskil River in northern Kharkiv Oblast. A Russian source claimed that Ukrainian forces are establishing bases and artillery positions throughout Kharkiv Oblast, including emplacing artillery in Hryanykivka on the east bank of the Oskil River near the R79 highway. A confirmed Ukrainian position in Hryanykivka would indicate that the Russian frontline east of the Oskil River is weak and/or that Russian forces’ lines in this area are farther east of the Oskil River than previously assessed. ISW will continue collecting and reconciling data to refine our control of terrain assessment. A Russian source reported that Ukrainian sabotage and reconnaissance groups occasionally cross the Oskil River in unspecified areas.

Ukrainian forces continued operations to disrupt Russian logistics in eastern Ukraine and pin Russian forces away from the frontlines...

Keep reading.

Why Ukraine Will Win

From Frances Fukuyama, at the Journal of Democracy, "The country’s military is advancing on the battlefield. If Ukraine defeats Russia’s massive army, the ripple effects will be felt across the globe":

The war in Ukraine, now in its seventh month, marks a critical juncture that will determine the course of global democracy. There are three important points to be made about its significance.

First is the question of why the war occurred in the first place. The argument was made, even before the Russian invasion, that Vladimir Putin was being driven by fear of NATO expansion and was seeking a neutral buffer to protect his country. While Putin doubtless disliked the idea that Ukraine could enter NATO, this was not his real motive. Ukrainian membership was never imminent. NATO expansion was not a plot hatched in Washington, London, or Paris to drive the alliance as far east as possible. It was driven by the former satellites of the former USSR, which had been dominated by that country since 1945 and were convinced that Russia would try to do so again once the balance of power turned to Russia’s favor. Putin, moreover, has explained very clearly what was at stake. In a long article written in 2021 and in a speech on the eve of the invasion, he castigated the breakup of the Soviet Union and asserted that Russians and Ukrainians were “one people” artificially separated. More broadly, Russian demands in the leadup to the war made it very clear that Moscow objected to the entire post-1991 European settlement that created a “Europe whole and free.” Russian war aims would not be satisfied by a neutral Ukraine; that neutrality would have to extend across Europe.

The real threat perceived by Putin was in the end not to the security of Russia, but to its political model. He has asserted that liberal democracy didn’t work generally, but was particularly inappropriate in the Slavic world. A free Ukraine belied that assertion, and for that reason had to be eliminated.

The second critical point concerns Western solidarity in support of Ukraine. Up to now, the continuing supply of weapons and economic sanctions have been absolutely critical to Ukraine’s ability to resist Russian power. Most observers have in fact been surprised by the degree of solidarity shown by NATO, and particularly by the turnaround in German foreign policy. However, the Russians have now cut off a large part of the gas they supply to Europe in retaliation for Western sanctions, and there are huge uncertainties as to whether foreign support will continue as the weather gets colder and energy prices continue to rise all over Europe.

In this respect, the most critical variable to watch is the outcome of the current military conflict. Political analysts typically believe that military outcomes reflect underlying political forces, but in Ukraine today the opposite is true: The country’s political future will depend first and foremost on its battlefield success in the short run.

Over the summer, when Russia had withdrawn from its initial effort to occupy Kyiv and the fighting was centered in the Donbas, a conventional wisdom emerged that Ukraine and Russia were locked in a “long war” (featured on the cover of the Economist). Many asserted it was inevitable that there would be a stalemate and war of attrition that might go on for years. As Ukraine’s forward military momentum slowed, there were Western voices arguing that peace negotiations and territorial concessions from Ukraine were necessary.

Had this advice been followed, it would have led to a terrible outcome: Russia keeping the parts of Ukraine it had swallowed, leaving a rump country unable to ship exports out of its southern ports. Such a negotiation would not bring peace; Russia would simply wait until it had reconstituted its military to restart the war.

By contrast, if Ukraine can regain military momentum before the end of 2022, it will be much easier for leaders of Western democracies to argue that their people should tighten their belts over the coming winter. For that reason, military progress in the short term is critical for the Western coalition to hold together.

The prospect that Ukraine can actually regain military momentum is entirely possible; indeed, it is likely in my view and unfolding as we speak. The Ukrainian general staff has been extremely smart in its overall strategy, focusing not on the Donbas but on liberating parts of the south that were occupied by Russia in the first weeks of the war. Ukrainian forces have used NATO-supplied weapons, particularly the HIMARS long-range rocket system, to attack ammunition depots, command posts, and logistics hubs all along the front. They have succeeded in attacking supposedly secure Russian rear areas deep in the Crimean peninsula. At the moment, 25,000 to 30,000 Russian troops are trapped in a pocket around the southern city of Kherson, which lies on the west bank of the Dnipro River. The Ukrainians have succeeded in taking out the bridges connecting Kherson to Russia, and have been slowly tightening the noose around these forces. It is possible that the Russian position there will collapse catastrophically and that Moscow will lose a good part of its remaining army.

More broadly, morale on the Ukrainian side has been immensely higher than on the Russian side. Ukrainians are fighting for their own land, and have seen the atrocities committed by Russian forces in areas the latter have already occupied. The Russian military, by contrast, has had to scrape the bottom of the barrel to replace the manpower it has already lost, recruiting prison convicts and people from the poorer ethnic minorities to do the fighting that ethnic Russians seem unwilling to do themselves.

Thirdly, a Russian military failure—meaning at minimum the liberation of territories conquered after 24 February 2022—will have enormous political reverberations around the world...

 

China's Economy Won’t Overtake the U.S., Some Now Predict

I've long been bearish on the China challenge. China has grown, dramatically, and the hype has grown right up along with it. All we can do is "prepare for the worst but hope for the best."

At WSJ, "Slowing growth has dampened expectations that the Chinese economy will be the world’s largest by the end of the decade":

HONG KONG—The sharp slowdown in China’s growth in the past year is prompting many experts to reconsider when China will surpass the U.S. as the world’s largest economy—or even if it ever will.

Until recently, many economists assumed China’s gross domestic product measured in U.S. dollars would surpass that of the U.S. by the end of the decade, capping what many consider to be the most extraordinary economic ascent ever.

But the outlook for China’s economy has darkened this year, as Beijing-led policies—including its zero tolerance for Covid-19 and efforts to rein in real-estate speculation—have sapped growth. As economists pare back their forecasts for 2022, they have become more worried about China’s longer term prospects, with unfavorable demographics and high debt levels potentially weighing on any rebound.

In one of the most recent revisions, the Centre for Economics and Business Research, a U.K. think tank, thinks China will overtake the U.S. as the world’s biggest economy two years later than it previously expected when it last made a forecast in 2020. It now thinks it will happen in 2030.

The Japan Center for Economic Research in Tokyo has said it thinks the passing of the baton won’t happen until 2033, four years later than its previous forecast.

Other economists question whether China will ever claim the top spot.

Former U.S. Treasury Secretary Lawrence Summers said China’s aging population and Beijing’s increasing tendency to intervene in corporate affairs, along with other challenges, have led him to substantially lower his expectations for Chinese growth.

He sees parallels between forecasts of China’s rise and earlier prognostications that Japan or Russia would overtake the U.S.—predictions that look ridiculous today, he said.

“I think there is a real possibility that something similar would happen with respect to China,” said Mr. Summers, now a Harvard University professor.

Researchers debate how meaningful GDP rankings are, and question whether much will change if China does overtake the U.S. The depth and openness of the U.S. economy mean the U.S. will still have outsize influence. The dollar is expected to remain the world’s reserve currency for years to come.

Size alone doesn’t reflect the quality of growth, said Leland Miller, chief executive officer of China Beige Book, a research firm. Living standards in the U.S., measured by per capita gross domestic product, are five times greater than in China, and the gap is unlikely to close soon.

Still, a change in the ranking would be a propaganda win for Beijing as it seeks to show the world—and its own population—that China’s state-led model is superior to Western liberal democracy, and that the U.S. is declining both politically and economically. Over time, it could lead to more-substantive changes as more countries reorient their economies to serve Chinese markets.

“If China slows down substantially in its growth, it impacts China’s capacity to project power,” said Mr. Summers.

How the two countries stack up economically matters to Chinese leaders: After the U.S. economy grew faster than China’s during the last quarter of 2021, Chinese President Xi Jinping told officials to ensure the country’s growth outpaces the U.S.’s this year, the Journal previously reported.

Economic fortunes can reverse quickly. In 2020, when China bounced back faster than the U.S. did from initial Covid-19 outbreaks, it looked like China’s economy might surpass the U.S. sooner than expected.

Some economists appear less perturbed by near-term threats to China’s growth. Justin Yifu Lin, a former chief economist at the World Bank who has long been bullish on China’s potential, argues its larger population means the country’s economy will wind up twice as big as the U.S.’s eventually. At a forum in Beijing in May, he predicted that process would continue despite the country’s latest slowdown.

Nevertheless, economic problems keep piling up in China, in part because of policy choices Beijing has made to contain Covid-19 and rein in debt.

The country’s real-estate slowdown is showing no signs of letting up. An index tracking consumer confidence plunged to its lowest level in decades in spring this year. Urban youth unemployment is at a record high.

The Lowy Institute, an Australian think tank, noted in a March report that it expects Chinese growth to average only about 2% to 3% a year between 2021 and 2050, compared with some researchers’ expectations that China could maintain 4% to 5% growth until midcentury. The institute cited unfavorable demographics, diminishing returns from infrastructure investments and other challenges.

With growth of 2% to 3% a year, China could still become the world’s largest economy, the institute noted.

“But it would never establish a meaningful lead over the United States and would remain far less prosperous and productive per person than America, even by mid-century,” it wrote. Its growth also wouldn’t be enough to give it any significant competitive advantage.

In a response to questions, the Lowy Institute said China’s further economic slowdown since the report came out has “at minimum pushed back the likely moment when China might overtake the U.S., and made it more likely that China might in fact never be able to do so.”

With China’s urban youth unemployment at a high, a job fair was held in Beijing last month.

Measured by purchasing power, which takes into account differing costs of goods and services across countries, China already overtook the U.S.’s economy in 2016, according to World Bank figures. Measured in U.S. dollar terms, however, China’s GDP was 77% of the size of the U.S’s. in 2021, up from 13% in 2001, data from the World Bank shows.

Capital Economics researchers wrote in a report early last year that their most likely scenario envisions China’s economy expanding to about 87% of the size of the U.S.’s in 2030, before dropping back to 81% in 2050. It blamed China’s shrinking working population and weak productivity growth, among other factors.

“A lot of people for a long time have overestimated the competence of China’s leadership and have been shocked by the missteps with Covid and the property sector,” wrote Mark Williams, the firm’s chief Asia economist, in an email in which he reaffirmed his firm’s forecast. “The weakness these crises have revealed have been present and growing for a long time.”

Some researchers say China’s ability to overtake the U.S. will depend on whether it pursues more economic policy changes...

 

Moscow’s Struggle to Sustain Its War in Ukraine

At Foreign Affairs, "Is Russia’s Economy on the Brink?":

In April, just weeks after he launched the invasion of Ukraine, Russian President Vladimir Putin maintained that the West could never strangle Russia’s economy. The barrage of American and European sanctions had not succeeded and would not succeed in bringing his country to its knees. “We can already confidently say that this policy toward Russia has failed,” he told his officials. “The strategy of an economic blitzkrieg has failed.”

Such defiant posturing can be expected of Putin and other Russian leaders. But now, six months after the beginning of the war and the imposition of sanctions, many observers are questioning whether Western sanctions have had the tough effects their architects promised. International observers such as the International Monetary Fund have revised their projections of Russian GDP upward from earlier this year. Compared with initial forecasts made right after the imposition of sanctions, Russia’s economy has done better than expected, partly because of deft technocratic Russian policymaking and partly because of tight global energy markets, which have kept the price of oil and gas high.

Russia’s economic overperformance must be placed in context, however. Few observers and policymakers expected sanctions to cause enough pain to force Russia out of the conflict in a matter of months, so Russia’s ongoing war shouldn’t be a surprise. Yet Russia’s economy is still hurting; it is suffering a steeper growth slowdown than was seen during the 2008 financial crisis and one that is unlikely to be followed by a postcrisis rebound. Living standards are being supported by social spending that will be difficult to sustain and that will likely force tough decisions about the government budget over the coming year. Thus far, Putin has promised Russians that he’s fighting a “special military operation,” not a war that could impose tough sacrifices on the population. As time passes, however, the cost of the war and the effects of sanctions on ordinary Russians will only grow.

BELTS TIGHTEN IN RUSSIA

For a health check on the Russian economy, start with some macroeconomic data. Russia’s GDP has shrunk by around five percent compared with last year, with the rate of decline increasing each month since the war began. Industrial production, which includes Russia’s oil and gas industries, has fallen by only about two percent compared with last year (a reflection of high energy prices), although the manufacturing segment of Russian industry has fallen by 4.5 percent. Inflation stands at just over 15 percent, down somewhat from the nearly 18 percent peak after the ruble slumped, then recovered, in March. Adjusted for inflation, monthly wages are down by about six percent compared with last year. (Some analysts have expressed skepticism about Russia’s official data, yet there is no evidence that the state statistics agency is engaged in large-scale manipulation.)

Russia’s inflation statistics may not fully capture the reality that buying certain products is now occasionally difficult (in the case of iPhones) or nearly impossible (in the case of Lexus automobiles). Similarly, inflation data struggle to quantify the impact of reduced quality. Russia’s government, for example, is changing regulations to allow the sale of vehicles without airbags or antilock brakes, which are now difficult to produce because of sanctions-induced supply chain problems. This degradation in quality won’t show up in inflation data, but it will eventually be felt by Russians, especially the urban, wealthier Russians who consume more of the imported goods that are now harder to access.

Even accounting for the inflation captured by government statistics, wages are trending sharply downward, around six percent lower compared with last year. Social welfare payments such as pensions, which are the primary income source for older Russians, have been eroded by inflation since the war began. The government increased pension payouts by over eight percent in June to compensate, but without more such expensive social spending increases in the coming months, the typical Russian’s income will decline in the second half of the year. The fact that retail sales are down by nearly ten percent suggests that consumers have already started saving in anticipation of tighter budgets to come.

THE OIL KEEPS FLOWING

Although households are only just beginning to feel the impact of lower living standards, some industries have already been hit hard. Rather than looking at aggregate industrial production data, which include both raw materials and manufacturing firms, it is more insightful to analyze each sector separately. The raw materials sector has been only slightly affected, which is no surprise given that prices are high and that Western sanctions have been designed to keep most commodities, thus far including oil, flowing freely.

The Russian economy owes much of its resilience to its trade in natural resources. With quiet diplomatic support from the United States, the United Kingdom and the EU have been watering down sanctions that were supposed to take effect against Russian oil exports later this year. To keep energy prices from spiking, the West has backed away from some efforts to stop Russia from redirecting oil exports to other customers, such as China and India. Now, under recent tweaks to sanctions, European firms will be allowed to ship Russian oil to third parties.

Because the West has implemented few significant sanctions on Russia’s oil and gas exports, and because the EU’s oil import ban doesn’t take effect until December, the volume of Russian oil exports is basically unchanged since sanctions were imposed. Sanctions are now forcing Russia to sell oil at around a $20 per barrel discount to global benchmark prices. Still, the latest monthly data that Russia’s government released on its revenue from taxing oil suggest the country is making roughly as much in export revenue as it did in January. By contrast, revenues from the export of natural gas—far less important to Russia than oil exports—have slumped after the Kremlin restricted its sale to Europe.

INDUSTRIAL WOES

Unlike Russia’s energy industry, the rest of Russia’s industrial sector has been hit hard. Among the worst affected sectors have been cars, trucks, locomotives, and fiber optic cables, each of which has seen production fall by over half. In other sectors less exposed to foreign ownership or complex supply chains, such as textiles or food processing, production is flat or in some cases has increased relative to last year.

One cause of this industrial disruption is the withdrawal of Japanese, U.S., and European firms that had factories in Russia. Some of these factories will reopen under new Russian ownership, but operating them independently may prove difficult. Manufacturers are also struggling to source necessary materials. Accessing components from abroad is now far trickier, because even products not under formal restrictions are harder to access, ship, and pay for. “I cannot say we’re facing a total blockade,” the CEO of Transmashholding, a Moscow-based railroad equipment firm, told Russian media, referring to the difficulties his firm has in shipping and paying for imported components. “But we face increased friction.”

A key question over the coming months is whether these industrial disruptions intensify or are resolved. On the one hand, Russia has now had nearly half a year to establish alternative payments and logistics networks, which should allow some crucial nonsanctioned imports to reach the country. On the other hand, Russian firms when surveyed say they are continuing to draw from existing inventories, implying that they are still struggling to source necessary components. Monthly data show that Russian imports of industrial goods and components remain far below prewar levels...

Still more.

 

President Andrés Manuel López Obrador Brings Back Mexico's Nationalization of the Economy

This never ends well for Mexico, and especially not for U.S. taxpayers, who always get stuck with the bill when the U.S. government rushes in to bail out our southern neighbor every time its economy crashes. 

At the Wall Sweet Journal, "Mexico Takes Aim at Private Companies, Threatening Decades of Economic Growth":

Populist president seeks to reclaim state control over oil-and-gas, electricity sectors; ‘It’s a closing off of Mexico’.

MONTERREY, Mexico—For the past 20 years, a 1,100-megawatt power plant owned by Spain’s Iberdrola SA outside Mexico’s industrial capital has kept the lights on for scores of companies such as brewing giant Heineken NV, despite winter freezes, a hurricane and the occasional brush fire.

But since January, half the gas-fired plant has been forcibly shut down by Mexico’s government, which argues that private energy companies have plundered Mexico like Spanish conquistadors of old. The electricity shutdown forced dozens of firms in Monterrey to return to the inefficient and more costly state-run utility for their power.

In September, a fuel-import terminal owned by global investment firm KKR & Co. was closed at gunpoint by Mexico’s energy regulator, months after it closed two other such terminals owned by U.S. companies. Last year, the government took over operating control of the biggest oil find in recent Mexican history, stripping it from a U.S. company that made the discovery. It is also trying to revoke the operating license of Latin America’s largest wind farm, majority owned by Japan’s Mitsubishi Corp., an example of how the government’s policies are hobbling Mexico’s transition to renewable energy.

Going after private companies might seem like something from the playbook of Socialist Venezuela rather than Mexico, which in recent decades has transformed itself into one of the world’s most globalized nations, signing free-trade deals with more than 40 countries and using manufacturing exports to become the U.S.’s second largest trading partner. Along the way, it lifted millions of its citizens out of poverty.

But Mexico’s populist leader Andrés Manuel López Obrador, who took office in 2018, is shifting the country to a 1970s industrial policy focused on the domestic market, natural resources such as oil and greater state intervention, from backing state-run energy giants to using the army for major public-works projects.

“It’s a closing off of Mexico,” says Gabriela Siller, an economist at Mexico’s Tecnológico de Monterrey.

The change is especially stark in Mexico’s crucial energy sector, where the government has launched a broad effort to stop new private investment and restore the dominant position of former government monopolies in both oil and gas and electricity—effectively reversing a 2013 constitutional overhaul that opened both markets to private firms.

The moves will cost Mexico billions of dollars in forgone investment; raise domestic energy prices; limit the growth of oil and electricity output; and damage the competitiveness of Mexican companies and hundreds of multinationals that operate here, according to the U.S. government, private companies and economists. It also risks prompting more migration by job-seeking Mexicans to the U.S.

The president says, without offering evidence, that past governments were paid off by multinationals to allow them to enter the market and destroy the state oil giant Petróleos Mexicanos, or Pemex, and the state-run utility, Federal Electricity Commission, or CFE, leaving Mexico’s energy security at risk and consumers at the mercy of profiteers. He also argues that Mexico’s turn to an open economy left too many poor people behind.

“They had a plan to close all the CFE plants and leave everything to the private sector, to such a degree that half our country’s electricity is now made by private companies,” the president said at a news conference.

The CFE has a monopoly on residential power, which it subsidizes heavily. But it lost hundreds of industrial clients over the past decade as firms opted for cheaper electricity provided by private firms. The CFE usually doesn’t subsidize electricity for large corporate clients, and its prices can be up to 30% to 50% higher than those of private power producers. Some privately produced renewable energy is a third of the price of the CFE’s power, according to Mexico’s renewable energy association.

In many ways, the decommissioned electricity plant outside Monterrey is a metaphor for Mexico’s stalled economy and a glimpse of the country’s potential economic future.

From 2019 through 2021, the first full three years of Mr. López Obrador’s presidency, Mexico’s economy shrank an average of 1.14% a year, according to government data. While the U.S. regained its prepandemic level of economic output by mid-2020, Mexico is among the few countries in the hemisphere, along with the leftist dictatorship of Venezuela, that hasn’t yet recovered, according to estimates from the International Monetary Fund.

The Mexican economy is now lagging that of the U.S. and Canada in a sustained way for the first time since shortly after the mid-1990s, when all three countries banded together in a free-trade deal then called the North American Free Trade Agreement, or NAFTA.

Next year, Indonesia is set to overtake Mexico as the world’s 15th-biggest economy, according to IMF estimates.

At the same time, migration from Mexico has accelerated to the U.S. for the first time since the early 2000s. In fiscal year 2021, U.S. apprehensions of Mexican migrants along the U.S.-Mexico border more than doubled over the previous year to almost 655,600. That figure is set to rise in 2022, U.S. government data show.

Mexico’s average electricity prices for companies are already about 40% higher than the U.S., according to Mexican business chamber Concamin, putting the country at a disadvantage for manufacturing. But economists say Mr. López Obrador’s policies will make matters far worse.

Since Mr. López Obrador took power, the government has halted new auctions for oil-and-gas exploration by private firms, new mining concessions and new investments for private electricity generation, including solar and wind farms that can produce electricity at roughly a third the CFE’s average cost, according to figures from Mexico’s energy regulator.

Last year, the government passed a law forcing the national electric grid to give priority to electricity produced by the CFE, even though its power is more costly and polluting than that of private firms. The laws retroactively affected an estimated $22 billion in investment by firms such as Iberdrola. Energy regulators have also tied up oil-and-gas firms from Shell to BP to prevent them from opening up new filling stations to compete with state oil giant Pemex, the companies said.

The law forcing the grid to use the CFE’s electricity first could raise Mexico’s electricity costs by up to 52%, or some $5.5 billion a year, and boost CO2 emissions by up to 73 million tons a year, a 65% jump from current emissions, according to a recent study by the U.S. government’s National Renewable Energy Laboratory. That would prevent Mexico from meeting its carbon reduction goals under the Paris Climate Agreements, say environmental groups like the Natural Resources Defense Council. Mexico’s Environment Ministry declined to comment.

Felipe Calderón, Mexico’s president from 2006 to 2012, tweeted last October, “What Mexicans need is more clean energy…and not more polluting and expensive energy from the CFE. The government’s changes seek to stop renewable energy from private firms and force us all to pay for old fossil-fuel energy.”

Thanks to more than 200 lawsuits against the new dispatch rules, a judge last year ordered the government to temporarily block their implementation. The government is appealing the order and has vowed to start implementing the changes despite it. Mexico has halted auctions for new renewable-energy investments. Three such auctions between 2015 and 2017 were so successful they doubled the country’s renewable energy capacity to 15 gigawatts, according to the wind industry association. During the 2017 auction, Mexico set a then-world record low price for wind power per megawatt hour and close to a record in solar, making both forms of energy produced here far cheaper than electricity made by fossil fuels and among the cheapest sources of energy in the world.

With no more private investment in wind or solar farms, the country’s renewable energy capacity will stall. Mexico’s state utility is currently building five natural-gas fired power plants and doesn’t plan on opening its first solar farm until 2027. It has no plans for wind farms.

“If Mexico can’t create a legal framework to promote renewable energy, then General Motors isn’t going to get rid of its zero carbon plans. Unfortunately, we just won’t consider Mexico as an investment choice,” Francisco Garza, the president of GM in Mexico, recently told a meeting of financial executives.

Foreign direct investment during Mr. López Obrador’s first three years averaged $31.4 billion a year versus $35.7 billion a year during his predecessor’s six-year term, according to central bank figures. Meanwhile, for the first time since NAFTA came into effect, Mexico saw a net outflow of investment in publicly traded stocks and bonds for two consecutive years.

The government’s policies are causing the country to miss out on a historic chance to attract more U.S. companies that are trying to diversify their supply chains away from China and face growing labor shortages at home, economists say.

“The Mexican government needs to do some soul searching about why investment has been so weak,” said Alberto Ramos, chief economist for Latin America at Goldman Sachs. “It’s not just the pandemic. I think it’s the overall business environment, and it’s a pity because there are great opportunities Mexico could be taken advantage of.”

KKR said it planned to sue the Mexican government for $667 million in damages linked to the takeover of its fuel terminal. Houston-based Talos Energy said it would pursue international arbitration over the government’s decision to seize operating control of its Zama field, which shares oil with a neighboring field under Pemex’s control.

Mexico’s government said it is in talks with Talos, KKR and other U.S. firms to resolve the issues.

The three closed fuel terminals all supply gasoline to private oil companies that are competing with state oil firm Pemex to sell gasoline, part of the 2013 overhaul in Mexico that ended Pemex’s monopoly...

The Western Citizen is Dying? (VIDEO)

At the Friedman Center in Israel, Victor Davis Hanson discusses his new book, The Dying Citizen: How Progressive Elites, Tribalism, and Globalization Are Destroying the Idea of America, with Caroline Glick:

Peter S. Goodman, Davos Man

At Amazon, Peter S. Goodman, Davos Man: How the Billionaires Devoured the World.

What is Bitcoin?

I have no personal interest in digital money, though I'm not saying it's not a thing. It's a real big thing. But I've yet to see any conclusive evidence that bitcoin isn't one big speculative bubble where hedge-fund junkies and big-money dark-web urchins spend their time buying digital art masterpieces with blockchain non-fungible tokens. Cryptos gonna crypto, I guess. *Shrug.*

The most basic problem: Can cryptocurrencies serve the real, historical, and fundamental functions of money? Can digital money serve as a medium of exchange, a unit of account, and a store of value? I don't know. It remains to be seen. 

Meanwhile, it doesn't hurt to bone up on the trend. I mean, if you want to be hip with all the cool crypto cat blockchain bros.

At the New York Times, "The Latecomer’s Guide to Crypto":

Until fairly recently, if you lived anywhere other than San Francisco, it was possible to go days or even weeks without hearing about cryptocurrency.

Now, suddenly, it’s inescapable. Look one way, and there are Matt Damon and Larry David doing ads for crypto start-ups. Swivel your head — oh, hey, it’s the mayors of Miami and New York City, arguing over who loves Bitcoin more. Two N.B.A. arenas are now named after crypto companies, and it seems as if every corporate marketing team in America has jumped on the NFT — or nonfungible token — bandwagon. (Can I interest you in one of Pepsi’s new “Mic Drop” genesis NFTs? Or maybe something from Applebee’s “Metaverse Meals” NFT collection, inspired by the restaurant chain’s “iconic” menu items?)

Crypto! For years, it seemed like the kind of fleeting tech trend most people could safely ignore, like hoverboards or Google Glass. But its power, both economic and cultural, has become too big to overlook. Twenty percent of American adults, and 36 percent of millennials, own cryptocurrency, according to a recent Morning Consult survey. Coinbase, the crypto trading app, has landed on top of the App Store’s top charts at least twice in the past year. Today, the crypto market is valued at around $1.75 trillion — roughly the size of Google. And in Silicon Valley, engineers and executives are bolting from cushy jobs in droves to join the crypto gold rush.

As it’s gone mainstream, crypto has inspired an unusually polarized discourse. Its biggest fans think it’s saving the world, while its biggest skeptics are convinced it’s all a scam — an environment-killing speculative bubble orchestrated by grifters and sold to greedy dupes, which will probably crash the economy when it bursts.

I’ve been writing about crypto for nearly a decade, a period in which my own views have whipsawed between extreme skepticism and cautious optimism. These days, I usually describe myself as a crypto moderate, although I admit that may be a cop-out.

I agree with the skeptics that much of the crypto market consists of overvalued, overhyped and possibly fraudulent assets, and I am unmoved by the most utopian sentiments shared by pro-crypto zealots (such as the claim by Jack Dorsey, the former Twitter chief, that Bitcoin will usher in world peace).

But as I’ve experimented more with crypto — including accidentally selling an NFT for more than $500,000 in a charity auction last year — I’ve come to accept that it isn’t all a cynical money-grab, and that there are things of actual substance being built. I’ve also learned, in my career as a tech journalist, that when so much money, energy and talent flows toward a new thing, it’s generally a good idea to pay attention, regardless of your views on the thing itself.

My strongest-held belief about crypto, though, is that it is terribly explained.

Recently, I spent several months reading everything I could about crypto. But I found that most beginner’s guides took the form of boring podcasts, thinly researched YouTube videos and blog posts written by hopelessly biased investors. Many anti-crypto takes, on the other hand, were undercut by inaccuracies and outdated arguments, such as the assertion that crypto is good for criminals, notwithstanding the growing evidence that crypto’s traceable ledgers make it a poor fit for illicit activity.

What I couldn’t find was a sober, dispassionate explanation of what crypto actually is — how it works, who it’s for, what’s at stake, where the battle lines are drawn — along with answers to some of the most common questions it raises.

This guide — a mega-F.A.Q., really — is an attempt to fix that. In it, I’ll explain the basic concepts as clearly as I can, doing my best to answer the questions a curious but open-minded skeptic might pose.

Crypto boosters will likely quibble with my explanations, while dug-in opponents may find them too generous. That’s OK. My goal is not to convince you that crypto is good or bad, that it should be outlawed or celebrated, or that investing in it will make you rich or bankrupt you. It is simply to demystify things a bit. And if you want to go deeper, each section has a list of reading suggestions at the end...

Still more.

 

Janet Yellen Says No Danger to U.S. Dollar's Reserve Currency Status

I've been reading about the prospects of the greenback remaining the dominant money in global trade and finance. See, Benjamin J. Cohen, Currency Statecraft: Monetary Rivalry and Geopolitical Ambition.

Yellen says no fear, the dollar's still here.

At Bloomberg, "Yellen Rejects Notion Sanctions Could Undermine Dollar Dominance":

Treasury Secretary Janet Yellen said the U.S. dollar is in no danger of losing its status as the world’s dominant reserve currency as a result of sanctions imposed against Russia over its invasion of Ukraine.

“I don’t think the dollar has any serious competition, and is not likely to for a long time,” Yellen told reporters in response to questions following a speech in Denver on Friday.

Some commentators, including Credit Suisse Group AG interest-rate strategist Zoltan Pozsar, have warned sanctions that blocked Russia’s access to its foreign currency reserves could drive other countries away from the dollar.

“When you think about what makes the dollar a reserve currency, it’s that we have the deepest and most liquid capital markets of any country on earth,” Yellen said. “Treasury securities are safe, secure and immensely liquid. We have a well-functioning economic and financial system and the rule of law. There really is no other currency that can rival it as a reserve currency.”

 

Roman Abramovich, Russian Oligarch, Hit by Sanctions

This guy's getting slammed

Chelsea's a diamond on the football world and the team plays in the Premier League, the top division in England.

This is from yesterday at WSJ, "Russian Billionaire Roman Abramovich, Owner of Chelsea Soccer Club, Is Sanctioned by U.K."

And from this evening, "Roman Abramovich U.S. Hedge Fund Investments Are Frozen":

Hedge funds told to freeze Russian oligarch’s assets after he was sanctioned by the British government.

A number of U.S. hedge-fund firms that have investments from Russian oligarch Roman Abramovich have been told to freeze his assets after he was sanctioned by the British government Thursday, according to people familiar with the instructions.

A message from fund administrator SS&C Globe Op to one firm said, “Currently accounts attributed to Roman Abramovich are blocked from transacting, as such any distributions, redemptions or payment cannot be made and no subscriptions or contributions can be accepted.”

SS&C, whose clients include hedge funds and other investment managers, said in the message it was monitoring the situation for guidance from the U.K. Treasury, the Office of Financial Sanctions Implementation and the Cayman Islands Monetary Authority. Other funds have received similar messages, according to people familiar with the matter.

The guidance likely puts a stop to recent efforts by Mr. Abramovich to sell his interests in a slew of hedge funds, said people familiar with the matter.

Mr. Abramovich, who for years has accessed hedge-fund investments through New York-based adviser Concord Management, had been trying to sell interests in funds including those managed by Empyrean Capital Partners in Los Angeles and Millstreet Capital Management in Boston, the people said.

Mr. Abramovich had been seeking to sell the funds on the secondary market since at least late February, the people said. For at least some of the funds, the investor is Concord, with Mr. Abramovich or entities connected with him being the underlying investor, said people familiar with the matter. People familiar with the matter said Concord was a small investor in Millstreet.

Mr. Abramovich also is invested through Concord in hedge funds including Millennium Management, Sarissa Capital Management and Sculptor Capital Management, SCU -2.09% formerly known as Och-Ziff Capital Management, said people familiar with the matter. It couldn’t be determined Friday if he had tried to sell his interests in those funds as well. Mr. Abramovich’s hedge-fund portfolio includes investments in many small funds betting on and against stocks, one person briefed on the matter said.

A spokeswoman for Mr. Abramovich didn’t respond to requests for comment. Concord didn’t respond to a request for comment.

The New York Times earlier reported Mr. Abramovich’s ties to Concord.

The U.K. on Thursday froze Mr. Abramovich’s assets and prevented him from doing any business in the country or selling assets including soccer club Chelsea F.C.

While managers in the past welcomed Concord’s money—the firm has a reputation for being a thoughtful, long-term investor in the hedge-fund industry–the relationship is proving delicate following Russia’s invasion of Ukraine and the cascade of sanctions it triggered.

Managers would have welcomed a sale as a way to distance themselves from a sanctioned oligarch, and some had been thinking about forcibly redeeming Mr. Abramovich from their funds, said people familiar with the matter.

One manager had been considering the possibility of replacing Mr. Abramovich with other investors, another person familiar with the matter said...

 

War in Ukraine and the Emerging Post-American Order

The war's definitely not heralding the end of the U.S.-led liberal international order that arose after WWII, bringing a so-called "Post-America Order."

If anything, Putin's awakened a sleeping giant, and by that I mean not just the U.S., but the whole trans-Atlantic community. The NATO countries and the European Union are doing more than their normal thumb-twiddling this time around. It's been stunning. 

A very interesting essay, nonetheless. 

From Peter Sovodnik, at Bari Weiss's Substack, "The Dawn of Uncivilization."

Tetiana Perebyinis Identified as Woman in Evacuation of Kyiv, of Family Blown Up in Viral Video

This is the woman, along with her two kids and a man, a church volunteer, who was with them. 

The video went viral for 24 hours. CNN showed it over and over again, as I described at my post, "CONTENT WARNING: Russian Cruise Missile Strike Kills Family in Irbin, Ukraine (VIDEO)."

The woman's been identified. She was a tech worker for a Silicon Valley software company. Her husband learned about her death, and their children, on Twitter.

At the New York Times, "They Died by a Bridge in Ukraine. This Is Their Story":

KYIV, Ukraine — They met in high school but became a couple years later, after meeting again on a dance floor at a Ukrainian nightclub. Married in 2001, they lived in a bedroom community outside Kyiv, in an apartment with their two children and their dogs, Benz and Cake. She was an accountant and he was a computer programmer.

Serhiy and Tetiana Perebyinis owned a Chevrolet minivan. They shared a country home with friends, and Ms. Perebyinis was a dedicated gardener and an avid skier. She had just returned from a ski trip to Georgia.

And then, late last month, Russia invaded Ukraine, and the fighting quickly moved toward Kyiv. It wasn’t long before artillery shells were crashing into their neighborhood. One night, a shell hit their building, prompting Ms. Perebyinis and the children to move to the basement. Finally, with her husband away in eastern Ukraine tending to his ailing mother, Ms. Perebyinis decided it was time to take her children and run.

They didn’t make it. Ms. Perebyinis, 43, and her two children, Mykyta, 18, and Alisa, 9, along with a church volunteer who was helping them, Anatoly Berezhnyi, 26, were killed on Sunday as they dashed across the concrete remnants of a damaged bridge in their town of Irpin, trying to evacuate to Kyiv.

Their luggage — a blue roller suitcase, a gray suitcase and some backpacks — was scattered near their bodies, along with a green carrying case for a small dog that was barking.

They were four people among the many who tried to cross that bridge last weekend, but their deaths resonated far beyond their Ukrainian suburb. A photograph of the family and Mr. Berezhnyi lying bloodied and motionless, taken by a New York Times photographer, Lynsey Addario, encapsulates the indiscriminate slaughter by an invading Russian army that has increasingly targeted heavily populated civilian areas.

The family’s lives and their final hours were described in an interview by Mr. Perebyinis and a godmother, Polina Nedava. Mr. Perebyinis, also 43, said he learned of the death of his family on Twitter, from posts by Ukrainians.

Breaking down in tears for the only time in the interview, Mr. Perebyinis said he told his wife the night before she died that he was sorry he wasn’t with her...

 

How War in Ukraine Drives Up Inflation at U.S. Farms, Supermarkets, Retailers

At the Wall Street Journal, "The global supply chain is slow, but the economic fallout from the invasion of Ukraine is swiftly raising prices for producers and consumers world-wide":

Russia’s invasion of Ukraine has set the stage for faster-rising consumer prices, with the mayhem of war driving up manufacturing costs for food, consumer goods and machinery in places far from the battlefield.

The conflict is stressing an already strained global supply chain, and its economic impact will likely be felt in households world-wide, at supermarkets, retailers and the gas pump. While higher costs will take time to work their way from producers to consumers, executives and analysts expect the war’s fallout to worsen inflation already stoked by shortages of goods and workers.

“It seems to be overshadowing everything now and reversing the improvement that we were seeing,” said Kathy Bostjancic, chief U.S. economist at Oxford Economics.

The short-term consequences have been serious. Grain markets recently hit a 14-year high in anticipation of a diminished harvest in Ukraine, which would raise costs to feed the world’s cattle and poultry.

Aluminum prices rose in anticipation of sanctions on Russia, a major supplier of the metal used in soda cans, aircraft and construction, as well as on fears that Moscow could halt exports.

Crude oil prices rose 25% last week, to more than $118 a barrel, the highest level since 2013. Gas prices have gone up an average of 43.7 cents a gallon in the U.S., according to data from price tracker GasBuddy. On Sunday, the national average was $4.02 a gallon, according to GasBuddy.

On Friday, Russia, one of the world’s largest suppliers of fertilizers such as potash and nitrogen, said it could suspend exports. Farmers and consumers will bear the cost of any prolonged shortage. Ingka Group, which owns and operates furniture giant IKEA’s stores, said Thursday that prices would rise more than expected this year after it warned the war in Ukraine was causing serious supply chain disruptions. IKEA said its global prices would rise about 12%, up from earlier estimates of 9%.

Some analysts and company officials caution that it is too early to know exactly what the long-term effects of the war will have on the global economy, and not all think the conflict in Ukraine will have a major impact on supply chains. Businesses have rebounded from global conflicts in the past and can mitigate the effects by finding alternative suppliers elsewhere.

But the invasion of Ukraine has already slowed the journey of goods traveling by various means. Many Western shipping companies are steering clear of Russian ports, an important Asia-to-Europe rail line is used less, much of the Black Sea remains out of bounds and many air cargo flights are either banned from or are avoiding Russian airspace, a key route for goods moving between Europe and Asia. Shipping and airfreight rates have moved higher.

Rising energy and food prices are only the most obvious pressure points for consumers. “Now that we are seeing increases across other commodities, like aluminum, palladium, copper,” Ms. Bostjancic said, “that is going to feed through to some degree to consumer prices as well.”

Ukraine industries, including car-part manufacturers, breweries and an alumina refinery, have halted production. A giant steel mill owned by ArcelorMittal SA, one of the country’s largest industrial enterprises, closed Thursday. That and other plant closures in the country, along with Russia’s difficulty in getting some of its steel out, are expected to accelerate already rising steel prices...

Still more.

 

Benjamin J. Cohen, Currency Statecraft

At Amazon, Benjamin J. Cohen, Currency Statecraft: Monetary Rivalry and Geopolitical Ambition.