Chris Johns
I write a (short) daily post for Powerscourt, a Strategic Communications company, based in London and Dublin. The idea is to summarise the news flow around the war in Ukraine - not so much the news that makes the front pages but more the stuff that we find interesting/relevant. News that may have not attracted the attention it deserves. Anyone interested in receiving the short email on a daily basis is welcome to contact Powerscourt here: insights@powerscourt-group.com
Each Friday I will post the weeks ‘diary’ here. All feedback/comments welcome.
Monday, 24th October
Ukraine is shooting down Russian drones but enough are getting through – along with larger missiles – to cause serious infrastructure damage. The Ukrainian ministry of defence claims more than 70% of Iranian-manufactured drones have been shot down by fighter jets, surface-to-air missiles, and soldiers with rifles and machine-guns. That’s a (claimed) total of 237 drones shot down since the attacks started on 13 September.
Naturally enough, Ukraine is asking countries who are good at manufacturing drone defence (and drones) for help. The US has promised ‘within the next nine months’ delivery of the Vampire, truck mounted, counter-drone system. Ukraine has just asked Israel, again, for access to its sophisticated drone and missile defence technology. Israel, again, said no.
That’s the latest refusal in a long line that includes many rebuffed attempts to buy Israeli drones as well as the means to shoot them down (including the Iron Dome shield). Because of the way the international arms trade is conducted, anyone trying to sell Israeli-made munitions to Ukraine is prevented from doing so. Italian, Polish, German and US deliveries of Israeli-made weapons have been blocked by Israel since the invasion.
This all started in 2014 when Ukraine first ordered some Israeli-made drones. Russian pressure prompted a cancellation of the deal. Indeed, Russia had earlier bought some reconnaissance drones from Israel and is now converting them to armed systems and deploying them in Ukraine. To be unable to buy Israeli drones while at the same time having them dropped on you must be somewhat galling.
Israel is reluctant to upset Russia because of Syria. Too much could go wrong if a delicate, if unwritten, ‘non-aggression’ pact is disturbed. That said, Russian deployment of Iranian drones has now prompted some Israelis to suggest that greater cooperation with Ukraine makes a lot of self-interested sense. Those Iranian drones were originally manufactured to be dropped on Tel-Aviv. Whispers of more intelligence sharing, at least, have emerged over the last few days.
Tuesday 25th October
Natural gas prices are falling on both sides of the Atlantic, with key Dutch spot prices down another 5% this morning, adding to their 70% fall since the peak reached on 26th August. US prices are below where they were a year ago. Motorists the world over complain that petrol pump prices rise instantly when wholesale prices go up, but take ages to respond to falls in the price of crude oil. Domestic energy consumers are starting to think the same about their household bills.
In the U.K., spot wholesale electricity prices are around 8p p/Kwh today, down around 85% from their August peak, a move not uncorrelated with gas price falls. None of these price drops could have been the intended consequences of shutting down and blowing up Gasprom pipelines.
Economists would say that ‘sticky prices’, particularly in a downward direction only, are evidence of lack of competition. Industry insiders tell your correspondent that energy market structures have peculiarities not unlike financial markets in that the regulators are often gamed by participant firms. Moreover, in the U.K. there are hints that the regulator is bending over backwards to help energy suppliers’ profitability, in an attempt to prevent a repeat of the bankruptcies seen last winter.
OPEC infuriated the White House last month with its production cutbacks aimed at delivering a $100/bl oil price. The Wall Street Journal reports that the de facto leader of Saudi Arabia, Crown Prince Mohammed bin Salman, really doesn’t like Joe Biden and would prefer Donald Trump to be President. Aware of the political salience of the price of petrol in the US, the Saudi leader appears to want the Republicans to do well in next month’s mid-terms. Saudi alignment with Russia on oil prices and preferred US President raises all sorts of fundamental questions about the Riyadh-Washington relationship. As the WSJ says, that’s “an unwritten pact binding the U.S. and Saudi Arabia [which] has survived 15 presidents and seven kings through an Arab oil embargo, two Persian Gulf wars and the Sept. 11 terrorist attacks.”
Wednesday 26th October
The classic bureaucratic response to most problems is to form a committee. Equipment, manpower and food shortages experienced by Russian armed forces have been evident for some time. Vladimir Putin yesterday chaired a newly established committee in an attempt to cut through shortages and production delays. Al-Jazeera quotes the Russian president stressing the need to “gain higher tempo in all areas.” The UK’s ministry of defence tells us today that Russia’s battlefield losses of helicopters have been staggering and that stocks of artillery shells are running low. Other reports have focussed on the basic clothing shortages facing the 220,000 new Russian conscripts.
Putin’s purchases of Iranian drones is consistent with a pressing need to re-equip. Early on in the war there were fears that China would become a reliable weapons supplier to Russia. Xi Jingpin has, so far, decided that it is not in China’s interest to get too involved. That’s consistent with perhaps the biggest geopolitical development in many years, bigger even than the war itself. The reappointment of Xi to a third term means China’s ‘Manchester capitalism’, the move to embrace markets, is over.
Since 1978, China has embraced manufacturing exports and domestic property construction as the twin engines of economic growth. Economic growth is no longer Xi’s priority. Neither is foreign investment in China. That explains the sudden outflow of capital from Chinese stock and bond markets - and the associated unprecedented weakness of renminbi. Is this a Chinese version of a Liz Truss-style attempt to ‘buck the market’? It certainly means a more inward looking China, an end to the opening up of the Chinese economy and the start of companies like Apple moving manufacturing capabilities to other countries such as Vietnam. Xi’s lack of interest in the economy has even led to him cancelling the production of much economic data. All of this will have profound and long lasting global consequences. Putin’s need for kit is unlikely to be satisfied by this new, inward looking, China.
Thursday 26th October
Israel’s President has defended his country’s refusal to supply Ukraine with anything resembling a weapon. Isaac Herzog told CNN on Wednesday about his fears about Israeli military secrets falling into enemy hands. He noted that other countries had also refused to send certain types of weapons to Ukraine. No mention was made of Russia’s presence in Syria. Iran’s gift of around 400 attack drones to Russia has complicated Israel’s position, with speculation that the price of those drones could be Russian assistance with Iran’s nuclear program.
At the UN Security Council, Russia again tried to thwart a suggested UN investigation into a potential violation of Resolution 2231, one that prohibits weapon transfers to or from Iran. British, French and German diplomats have written to António Guterres, the UN Secretary General, urging a probe into those Iranian drones being dropped on Kyiv. CNN quotes the U.K. Ambassador to the UN, James Kariuki, saying ‘the Russians have been caught red-handed violating resolution 2231’. Russia claims that the UN has no remit for any investigation, arguing that Article 100 of the UN charter prohibits the Secretary General from taking instructions from any member state.
Al-Jazeera reports that Russia has ordered 1700 Iranian drones, some of which have yet to be built. Iran is also considering delivery of missile systems to Russia. Candidates for sale include Fateh-110 and Zulfighar missiles which are seen as close replacements for Russian Iskander missiles, reported now to be in seriously short supply. In another sign of shortages, the New York Times reported that Russia is moving moving S-300 missile systems from Syria to Ukraine.
The International Energy Authority today published its 524 page annual report. Striking a cautiously optimistic tone, the IEA says the current global energy crisis is accelerating the move to clean energy. It’s as much about the price of fossil fuels as about concerns for the environment. China might well be burning a lot of coal but in the last year built more offshore wind energy than the entire world built in any previous year.
Friday 27th October
Propaganda can sometimes misfire. In its attempts to prove that Ukraine is manufacturing a ‘dirty bomb’, Russia’s foreign ministry posted, on Twitter, pictures of radioactive material that it claimed was evidence of Ukrainian nasty intentions. A bright spark in the Slovenian government spotted that the photos were first used in 2010 by their atomic energy authority as part of an information campaign. The Russian tweet included images of a ‘Ukrainian’ nuclear power plant that turns out to be a stock photo of Beloyarsk, a Russian facility located more than 1000 kilometres from the Ukrainian border. The Slovenians, also via Twitter, have been quick to refute the Russian claims.
Again via Twitter, the UK’s ministry of defence today notes a major strategic shift by Russian ground forces in Ukraine. They are now being reinforced by Putin’s new conscripts but are mostly just transitioning to a defensive posture, digging in for the long haul.
Twitter itself is also in the news thanks to the completion of Elon Musk’s fractious purchase of the company. Less well known is the assistance given by Musk to Ukrainian communications via his satellite networks. Russia is content to use Twitter for free but is deeply unhappy about those satellites. “Quasi-civilian infrastructure may be a legitimate target for a retaliatory strike," Konstantin Vorontsov, deputy director of the foreign ministry's department for non-proliferation and arms control, was quoted as saying by TASS, threatening to move the war into outer space.
The appearance of Russia’s ‘Paris Hilton’ in Lithuania suggests Russian suppression of dissent has returned to levels last seen forty years ago. Ksenia Sobchak left Russia on her Israeli passport following a ‘criminal investigation’ into her employees. NBC reports that Sobchak’s flight topped the evening news in Moscow and that she has been described as a ‘critic’ of the Kremlin. ‘Family connections’ and her metamorphosis from party girl into well-known journalist and politician have led to suspicions that the ‘criticisms’ were more apparent than real. Nevertheless, her anti-war comments were enough to prompt her exile.