Thread by @DAlperovitch

Let’s talk about the state of the war and one of the most underreported yet crucially important issues:

Russian blockade of Ukrainian ports and resulting strangulation of the country’s economy 🧵

First, the state of the war.

Ukraine has won the Battle of Kyiv and forced Russia to withdraw from the north

The Battle for Donbas is underway and even though Russia has somewhat improved its tactics there and has shorter logistics routes, Ukraine has a good chance to thwart major Russian territory gains due to massive heavy weapons aid arriving now from the West

Supplies of tanks, howitzers, counter-battery radars, grenade launchers, anti-tank mines, reconnaissance and loitering munition drones, small arms and ammo are all crucial to Ukraine’s victory in this part of the fight

It will now be a race:

Will the Ukrainians get these weapons in sufficient numbers (and, in certain cases, get enough training on them) and move them into the Donbas faster than the Russians can cutoff those supply routes?

As, @KofmanMichael said on our last podcast, this objective to prevent Ukrainian resupplies is what is likely motivating the Russians to rush into this fight without assembling the full invasion force they would otherwise like to have for this huge offensive

https://twitter.com/dalperovitch/status/1518715676277493762

Regardless of how the fight for Donbas plays out, it is unlikely that Russia would be able to launch another major offensive anytime soon—either to have another go at taking Mykolaiv and then Odesa in the south or going back after Kyiv in the north.

The invasion force is spent

It is possible for Putin to call a general mobilization, as some nationalists are urging him to do in the media, and yet again attempt to take over large parts of Ukraine but that could be very politically fraught for him and, either way, will take many months to execute

The Russians, of course, have considerable gains in the south: much of Kherson oblast, parts of Zaporizhzhia oblast and almost all of (now destroyed) Mariupol where the Ukrainian units are cutoff and are running out of supplies in the AzovStal steel plant complex

Dislodging the Russians from these territories would be extraordinarily difficult and costly for Ukrainian forces, even with the military aid they are now receiving. The Russians will now have the advantage of being in fortified defenses and supported by air and ground fires

Kherson is likely the place where the Ukrainians can make the most progress with counteracttacks (and where they had much success in causing serious damage to Russian forces with artillery strikes)

But if the Russians abandon the city of Kherson and move south across the Dnieper and blow the bridges, it will be very difficult for Ukrainians to continue the counterattacks. Crossing Dnieper under Russian fires from the other side would be a major undertaking

However, regardless of where things end up in the near term with the Kherson, Zaporizhzhia, Donetsk and Luhansk oblasts occupation by the Russians, the key issue in the war now is actually the Black Sea blockade

Ukraine used to export over 130 million tons of goods before the war through its numerous ports on the Black Sea and Sea of Azov: Izmail, Odesa, Kherson, Mariupol and others. Everything from grain and vegetable oils, to iron ore, coal, metals and chemicals oec.world/en/profile/cou…

Russia has put a complete stop to those maritime exports. Using its Black Sea surface ships and submarines, as well as air and coastal battery assets in Crimea, it has imposed a blockade on Ukrainian shipping

This is a huge problem. Exports accounted for nearly 40% of Ukraine’s GDP before the war. And there is really no substitute for shipping today

Today Ukraine exports just 700,000 tons per month via rail to Poland and Romania. They hope to raise that to 1m per month soon. Yet, that’s about 10% of their needs reuters.com/world/europe/t…

Cost of rail freight is also 300% higher than maritime shipping. This will make some Ukrainian exports less competitive on global markets (and continue driving higher food prices)

There are huge logistical challenges with rail as well. Ukrainian rail gauges are wider than in Europe requiring hours of downtime at gauge-swap stations at the border to lift trains and change bogies. These stations are now massively backed up with increased rail traffic

Ukrainians are now trying to use rail to move goods into Romanian Black Sea port of Constanta and from there onto ships but that port is now at capacity as well theloadstar.com/new-routes-nee…

Add on top of this export challenge a loss of economic productivity of 5.5m+ refugees (and counting) that have left the country and perhaps 1m+ in territories newly occupied by Russia and you start to get the picture of the utter economic devastation that Ukraine is experiencing

Thus, the lifting of the Black Sea blockade is simply vital to Ukraine having a vibrant self-sustaining economy

I see only 4 options for resolving this economic strangulation:

1. The West keeps supporting Ukraine economically to the tune of $60b+/year… for years until rail and port infrastructure in Eastern Europe can be upgraded

And even that is not a complete solution

2. Putin gets bored/sues for peace and lifts the blockade (not very likely)

3. NATO ships (if Turkey even lets them in through the Bosporus) try to break the blockade and risk a sea confrontation with Russia, which might escalate into all out war and use of nuclear weapons (also very unlikely)

4. Ukraine retakes Crimea and sinks/captures Black Sea fleet, breaking the blockade (to say that it’s wildly unrealistic would be an understatement)

Thus, regardless of what happens with the Battle for Donbas and Ukrainian counteroffensives, we urgently need more focus on how to revive the Ukrainian exports and, thus, economy. The country’s long term viability depends on it

END