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MNI POLITICAL RISK ANALYSIS-Russia-Ukraine Crisis Heating Up
Geopolitical focus in Europe and the US has been squarely focused on Ukraine's eastern border with Russia over the last week. In the article below we analyse some of the actions occurring in the region and examine what the responses from various international actors could be.
A growing military build-up on the edge of the Donbass region raises concerns in Kyiv and Western capitals of a major offensive by Russian forces into the two breakaway provinces of the Luhansk People's Republic and the Donetsk People's Republic. The two regions have been the site of constant internal conflict that has killed over 14,000 since Russia's annexation of the Crimea in 2014, and this violence has intensified since the start of 2021.
- Bloggers on the Russian military, the Conflict Intelligence Team, have pointed out that the build-up of troops is the greatest in size since the invasion of Crimea. The CIT also notes that while military exercises in the Southern Military District are relatively common, the next set of manoeuvres are not due to begin until September.
- While the CIT has said there are not signs of an imminent invasion, the nature of weaponry and troop units being sent south by Moscow is offensive not defensive in nature, and many are being deployed to the Voronezh region, which borders an area of Ukraine controlled by Kyiv, not the breakaway republics.
- In recent weeks and days, Ukrainian President Volodymyr Zelenskiy has frequently called for his country's application to join NATO to be accelerated in an effort to ensure protection for Ukraine in the event of Russian aggression. However, for NATO there is an inherent risk that fast-tracking Ukrainian membership serves to aggravate Moscow to the point of invading Ukraine to avoid having a NATO member covering so much of its western border.
Chart 1. Map of Potential Russian Attack Strategies
Source RUSI
- Indeed, Kremlin spokesman Dimitry Peskov stated in early April that Ukraine was acting in an aggressive fashion, saying "So far we're not seeing an intention by the Ukrainian side to somehow calm down and move away from belligerent topics,".
- As has been the case in multiple incidents between Russia and the West, the Kremlin may be testing Western mettle. The EU is seen in Moscow as a divided and weakened body in foreign policy terms, and while the US has pledged USD125mn in military aid to Ukraine, this would not be enough to fend off immediate military action - that would require direct US military intervention, something that the Kremlin thinks Washington D.C. would shy away from.
- There is already significant concern in US military circles that the EU and its member states are an increasingly unreliable partner with regards to Russia. Berlin is at odds with the Biden administration over the continued progress of the Nord Stream II gas pipeline, which would somewhat bypass the current reliance of Russian gas on Ukraine's transportation network (see chart below). Moreover, French President Emmanuel Macron has made consistent overtures to Russia, advocating a conciliatory path to better relations between Russia and the West, opposed to a more steadfast stance from the US and the UK.
Source: National Gas Union of Ukraine, ICIS, MNI
- All these factors combined create a febrile atmosphere that could lead to a major destabilisation on the border or in the Black Sea due to miscalculation. Russia is likely banking on Kyiv and the West compromising, in allowing Nord Stream II to go ahead and reversing decisions that saw an increase in Ukrainian troops on the borders of the two Russian-ethnic minority dominated breakaway regions. For the West, the reliance is on Russia simply using the troop build-up as a pressuring tactic, without the actual desire to engage in a hot war given the prospect of major Western retaliation.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.