Britain Ties the Kremlin in Knots

Ukraine Can't Lose From Here. Putin can't win from here

Sometime last year, when a reader asked me to list the priorities for Ukraine, I outlined them as follows:

1. Contain Russia’s Black Sea Fleet

2. Push the Russian Air Force onto the backfoot

3. Counter the ground forces

The sequence was Black Sea Fleet, Air Force, and then ground forces. You cannot take on the third without addressing the first. Almost a year later, the list remains unchanged. No change whatsoever.

I am a little disappointed that Ukraine is not pursuing the Russian Black Sea Fleet, which remains hidden in the Russian port of Novorossiysk. Ukraine has increased the threat level in Crimean waters to the highest level, forcing the Russian navy to avoid the entire region and stay away from it. However, in my opinion, Ukraine should have been more aggressive in hunting Russian warships. Offense remains the best defense for Ukraine in the Black Sea. Russian warships still launch a significant number of missiles into Ukraine from the Russian port of Novorossiysk.

Containing and constraining the Russian Black Sea Fleet is extremely important because the Black Sea is Ukraine’s economic lifeline. Since the day Ukraine established the maritime corridor hugging the shoreline of NATO member states, this corridor has been a critical asset.

Ukraine established this maritime corridor on August 10, 2023.

In one year, this corridor has transported 70 million tons of cargo via more than 2,500 ships from Ukrainian ports. Ukrainian cargo has reached ports across Asia, Africa, Europe, and America, delivering grain to countries like Egypt, Indonesia, Tunisia, Libya, India, Algeria, and China. President Zelensky stated that through the humanitarian initiative “Grain from Ukraine,” essential food supplies have been shipped to millions in Ethiopia, Somalia, Yemen, and Sudan.

The average monthly value of exported goods through this route in 2024 has exceeded $3 billion. This corridor is the reason Ukraine’s GDP continues to expand, giving its economy the breathing space needed to sustain the war effort. The Russians used their navy to block Ukrainian exports, but Ukraine blocked the Russian navy to the eastern end of the Black Sea to free up their exports.

Both Ukraine and Russia are running deficit budgets. Putin has less than $45 billion in reserves, while Ukraine has access to $100 billion from Europe and the G7, allocated this year. This funding should be sufficient to manage Ukraine’s finances through 2025 and 2026. However, we don’t need to look that far; Putin’s economy is not in a position to sustain the war for another six months unless he relies heavily on North Korean troops from here on out.

Inflation is out of control in Russia. Corporate bankruptcies are at a record high. The central bank, in its meeting on December 20th, must raise interest rates again, triggering another wave of bankruptcies. Unemployment is at a historic low—everyone who can work is probably already working. Yet, Putin’s war in Ukraine requires at least 1,500 workers to be withdrawn daily.

Six months from now is simply too long for the Russian economy to handle.

However you look at it, Russia is the one facing a potential collapse of resources to continue fighting the war. Ukraine does not have this problem. The front line might bend; maybe it will break in some areas, but it will not collapse as Assad’s army did in stunning fashion.

Not anymore.

Can you say the same for Russia?

They can run out of money; all it takes is for the ruble to crash past 135 against the dollar. The daily troop loss rate is 500 soldiers above the average recruitment rate. Russia now needs not just North Korean weapons, but also North Korean soldiers. Most Western think tanks have concluded that Russia will run out of tanks and artillery barrels by 2025.

Putin has some time.

A small window.

UK Prime Minister Keir Starmer seems to have spotted this weakness. In the last eight weeks, one after another, he has been imposing sanctions on Russian imperial designers. He is implementing sanctions at the rate of one round every two weeks.

• On October 17, the UK sanctioned 18 Russian oil tankers and 4 LNG tankers, targeting the shadow fleet that allows Russia to flout the EU price cap on fossil fuel exports.

• On November 7, the UK announced its largest sanctions package since May 2023. The sanctions target the supply of goods to Russia’s military, while also going after Russian mercenaries in Africa.

• On November 25, 2024, the UK government sanctioned 30 ships part of the Russian shadow fleet and 2 insurance companies that were helping the shadow fleet. The UK government stated that this move would further constrain the Kremlin’s ability to fund its illegal war. Forty-six countries and the EU have now signed up to the UK-led call to action against the shadow fleet.

• On December 5, the UK sanctioned individuals involved in smuggling gold to help the Kremlin. “Russia uses the illicit gold trade to launder money and evade sanctions, thereby bolstering Putin’s war efforts,” the British Foreign Office said in a statement.

Starmer is on the right path. Sanctions are key to choking the Russian war machine and making it difficult for the Kremlin to buy more time. Before President Biden leaves office, the G7 and the EU must impose one of the largest sanctions packages on Russian exports.

The Trump administration will not come out of the gate announcing that they will lift sanctions on day one. There is a decent chance that the new administration will view sanctions as leverage to negotiate with Putin. So, Trump will wait. He will need some time. Ukraine can delay this or perhaps even manage to keep the sanctions on Russia for another six months.

Putin’s economy may not have six months. This is a huge opportunity. It’s time to follow the UK’s lead on this one.