Russian International Affairs Expert Kashin: Russia Will Grind Ukraine Down; The U.S. Cannot Print Money To Sustain Kyiv Indefinitely

Moskovskiy Komsomolets’ senior commentator Mikhail Rostovsky, who since the invasion started, has talked up Putin’s strategy, conducted an extensive interview with Professor Vasily Kashin, Director of the Center for Integrated European and International Studies at the Higher School of Economics. Kashin represented the ideal interviewee for Rostovsky, because Kashin lays out the reasons why time is working on Russia’s behalf in the war with Ukraine in a rational and not propagandistic fashion. For example, he predicts that Ukraine will not crumble even though it has effectively lost. He is honest about US superiority over Russia, but argues that Russia can concentrate on Ukraine, while the US is overstretched in its commitments.

Russia, argues Kashin, has remedied the numerical disparity that worked in Ukraine’s favor hitherto via its recent mobilization. Moreover, this mobilization is designed to hold on to the areas conquered and to deny Ukraine any remarkable success. This will allow Russia to grind Ukraine down in 2023 and make the West’s task of sustaining Ukraine militarily and economically increasingly prohibitive. Russia, for its part, has weathered the sanctions much better than expected, and the only segment that has felt real pain are the elites used to Western travel and goods.

The interview with Vasilly Kashin follows below:[1]

The decade’s main event in Russia is undoubtedly the special military operation [hereafter – the SVO]. And one of the most important experts on the SVO in our country is, also undoubtedly, Vassily Kashin, Director at the Center for Integrated European and International Studies at the Higher School of Economics.

“Do you want to understand what is really going on, on the battlefield in Ukraine? Talk to our Vassily then!” these were the words I heard from a respected Russian international relations specialist less than a month after the conflict began. At first, I didn’t pay much attention to them, but I soon discovered that I was looking forward to each new article by Vassiliy Kashin on the course of the SVO with unconcealed anticipation.

“When the cannons are talking, the muses are silent,” is a paraphrase of a dictum by the great Roman orator Marcus Tullius Cicero, during whose lifetime there were, naturally, no cannons yet. But at a time of complex and intricate power conflicts, not only the sound of muses is in short supply, but also a sober and perceptive analysis of unfolding events. A sure way to make up for this deficit is to read the opinion and commentary of Vassily Kashin.

Vassily, what’s your forecast for the future course of the SVO? Should we expect, for example, a winter “hiatus” in military operations?

I believe one should expect a winter escalation of hostilities. We will, no doubt, see it either in December, or early next year. There is no reason for a “hiatus”. As Russia continues to strike the Ukrainian infrastructure, there will be ever increasing reasons for the Ukrainian side to try to accelerate the course of events up. While, in the meantime, Russia’s forces at the front will be growing.

As far as we know, only a small part of the conscripted have been transferred to the SVO zone. Most of them are still deployed on Russian territory (sometimes very far from the SVO zone) and are engaged in combat training. At the same time, issues of equipping these troops are being solved. All of this takes time.

However, when all these issues will be resolved, redeployment of conscripted and volunteers to the SVO zone will mean a significant increase in the number of Russian forces in the theater of operations. Such an increase in numbers will definitely leave its mark. It would be a radical change in the situation and the balance of power.

And how soon might this radical shift result in ending the conflict?

The Russian draft budget prescribes for a sharp increase in military expenditures in 2022 and 2023 and a decrease in defense spending in 2024. Thus, basic forecast, from which the Russian leadership proceeds, is an assumption that hostilities will continue for all or most of 2023. This is quite a realistic forecast.

However, it’s possible that the conflict will end a little earlier, or a lot later. The latter is, unfortunately, also a very real prospect. The conflict could go on for a long time. But I believe that time works in our favor (unless we’ll experience serious failures and disasters (a disaster [in my opinion] is not us leaving Kherson, but if some large Russian grouping would be surrounded and defeated), the US costs of financing the conflict in Ukraine will gradually skyrocket without any positive result for America. And Ukraine itself will slowly be “ground down.”

Will be “ground down” … will it, actually, happen? How confident can we be that the outcome of this conflict will be a complete and irrevocable defeat for Ukraine.

Ukraine has already finally and irrevocably lost. The Russian authorities have repeatedly stated that this is not a conflict between Russia and Ukraine, but a hybrid war between Russia and the US, in which Ukraine acts as an American weapon.

If one to look at the American stance discarding purely demagogic statements, it all boils down to a stated goal: to inflict a strategic defeat on Russia, which would weaken it so much that in the future it won’t be a problem for the US and allow America to concentrate entirely on China. The two sides are engaged in a hybrid war against each other on Ukrainian land. True, Russia is in a less favorable position compared to the US: it wages war using its own people. While the Americans, in the course of this conflict, sustain mainly economic and some political losses.

But the main point is that Ukraine’s fate per se is not of paramount interest to any of the players. Most likely, it’s not of paramount interest even to the leadership of Ukraine itself, which is focused its own future, its own welfare, and its political survival.

The damage done to Ukraine can’t be remedied in any reasonable period of time. Ukraine was already an economically insolvent state when the SVO began. Its functioning was maintained by a constant inflow of foreign economic aid from international financial institutions.

Now we’ve reached a situation where Ukraine requires external aid in a sum of 3 to 5 billion USD per month just to function. The Ukrainian budget for next year assumes that 58% of revenues will be covered by foreign loans and grants. But the state budget was drawn up before the Russian campaign of strategic bombing of Ukrainian infrastructure began. In reality, the situation will be even worse.

Ukraine is likely to reach a state, in which its budget will depend by up to 80% on foreign aid. This is roughly the same ratio, by which Afghanistan’s budget depended on foreign aid under President Ashraf Ghani, who was driven out by the Taliban.

I’m sorry, but until the conflict is over, does the statement of Ukraine’s economic insolvency have any meaning at all? After all, foreigners are happy to plug all the holes in the Ukrainian budget.

Naturally, in this regard a question arises of the comparability of our resources with that of the US. America possesses much more resources. But for us now, the Ukrainian conflict is the main only one into which we pour our resources, while the US has interests all over the world.

I’m talking, for instance, about a very costly arms race with China in the Pacific, which is not going very well for them, about the Middle East, Africa, Latin America. Over the 8 months of 2022, announced Western aid for Ukraine exceeded 105 billion USD. This amount by far exceeds Russia’s annual defense budget. And American aid accounts for more than half of this amount.

But the year is not over yet. And next year, due to several reasons, will be even more costly for the West.

In the early period of the conflict, Ukraine fought using enormous stocks of Soviet arms. Take, for example, anti-aircraft missiles. The Soviet Union left so many missiles for the S-300 that talks about their depletion started only after nine months of the SVO. But soon the ZSU [the Armed Forces of Ukraine] will have to use dozens, or hundreds of missiles in modern Western anti-aircraft systems per day.

If we are talking, for instance, about the “NASAMS” complex, then each of its anti-aircraft missiles costs over a million USD, each missile of the “ASK IRIS-T” complex costs more than 400 thousand euros. As a result, the Western world had to spend 120-130 billion USD on Ukraine during the first 12 months of the SVO. Next year this sum will be even higher. Naturally, they will be able to cope with it. But how much longer can this go on?

Is it correct to perceive all of this spending as the US’s costs rather than, for example, additional orders for the US military-industrial complex?

The US military-industrial complex is, no doubt, very influential. But at the end of the day someone has to pay for its products. When the US sells 40 billion worth of arms to Saudi Arabia because of its policy, it, in fact, a success (both for the US and for the US military industrial complex).

And when Americans, at the background of not the best economic situation, severe budget deficits, and mass discontent, spend several tens of billions of USD (potentially we are talking about several hundred billion USD on the conflict in Ukraine) it gradually becomes a problem.

[Is this true,] considering their habit of constantly and uncontrollably raising the ceiling of the permissible budget deficit?

They have indeed been engaged in it and are still doing it (but not entirely uncontrollably). Limits associated with a need to fight inflation come into play [when it could happen]. It’s impossible to indefinitely increase the supply of money in the economy. They too have their own limitations. They are approaching those limits.

For a long time, they have poured a stream of money on all the problems in the economy them. Their resources are truly enormous and far superior to ours, but they are not limitless. There are a million places where they need to be spent. And some of those places are far more important to the US than the conflict with Russia.

The West claims that despite all the problems, it is ready to spend as much as necessary on the conflict with Russia. And after it, as much as necessary will be spent on rebuilding Ukraine. How can you comment on this statement?

Whenever the conflict ends, it’s obvious that the part of the Ukrainian population that now resides in Europe won’t return to economy’s ruins. The power outages in cities will trigger a new wave of emigration. The total loss of population could reach as much as ten million people.

The majority of refugees are able-bodied women of childbearing age and children. This would come as a severe and irreversible blow to the economy and demography, [I’m talking about] a loss of the last competitive industries, and the destruction of infrastructure.

Even before the launch of the SVO, Ukraine was incapable of independently maintaining all the infrastructure it inherited from the USSR, fulfill its social obligations, and maintain its health care system. Although they brutally “cut” and “reformed” these systems, the volume of [state’s] obligations, regarding pensions and social benefits, was still noticeably higher than that of developing countries with similar socio-economic indicators.

Now due to enormous amount of damage, due to many people has been killed and wounded, these obligations will grow drastically. The country’s economic base is destroyed. True, naturally, there will be post-conflict rebuilding. But you know how such reconstruction usually goes. The money that will be allocated will be spent by Western contractors.

Part of these assets will be stolen by these contractors, and some of it will [be spent] on a site. Something, naturally, will be built. But this won’t be comparable to the damage caused. After the end of the SVO, Ukraine will experience such an economic deficit that not even the revenues confiscated from Russia will be enough to offset it (even if it will be enough, then for a very short time).

Let’s get back to the present times. Why, despite all the problems you’ve mentioned, didn’t the Kyiv regime collapse, as it was the case with the Ghani regime in Afghanistan?

And why should it collapse? The [Ashraf] Ghani regime was dealing with an internal enemy, and Ukrainian regime is dealing with an external one. There should be no illusions: even the destruction of the Ukrainian power grid will have no effect on the stability of the Ukrainian government and its position on the issue of talks with Russia.

Things that are happening to Ukraine’s infrastructure and economy won’t facilitate Ukraine’s collapse. It will not happen, until, maybe, in a certain point in the future, when the breaking point will be reached. But one can’t count on that.

What can count on then? – On the gradual erosion of ZSU combat capabilities due to high casualties, the emergence of holes in their logistics (due to the destruction of the economy) and a sharp increase in the costs of our main adversary, the US, allocated for continuation of this conflict.

According to a recent statement by Ursula von der Leyen, President of the European Commission, the losses of the ZSU only in terms of killed exceed 100,000 people. However, according to a number of indications, they could be higher. They exceed many times over the losses of the Russian, LPR, DPR forces and volunteer detachments.

These losses will grow. The US will also suffer the effects of this because it will have to invest tens of billions of USD to keep Ukraine combat ready. And Europe will have to deal with several million more Ukrainian refugees.

What are the chances for a shift in the conflict to Russia’s “old” [sovereign] territory?

On a small scale, this conflict has already been shifted there. We have the constant shelling of our border territory. But conceivable attempts to enter this territory in greater depth, i.e., to seize some border settlement for propaganda purposes, will prompt undesirable results for Ukraine.

Russia is ready to utilize units manned by conscripts on its “old” territory, a full-scale advance of Ukraine’s troops into this territory would increase a pool of manpower available to the Russian leadership, which it has so far refused to use for political reasons. We cannot exclude this scenario. We can see that the Russian command is preparing for such a scenario by creating a system of fortifications along the border. But it is far from clear that this will happen.

Another theoretically possible scenario, involves the transfer of long-range weapons to Ukraine and [the use of] these weapons to start firing deep into Russia. Should this occur, it would lead to a nuclear escalation of the conflict and a possible Russian withdrawal from some agreements regarding nonproliferation regime of arms of mass destruction (for instance, the missile technology control regime).

What is the logic of our renouncing the supply overseas of intercontinental ballistic missiles that can reach the US territory to those, who are willing to pay for them, provided the US supplies Ukraine with missiles that reach major Russian cities? For now, the other side refrains from doing so.

We have examples of strikes of Western artillery ammunition and, in some cases, HARM missiles at “old” Russian territory. But this situation hasn’t proceeded further yet. One should always prepare for the worst. However, there are chances that we will get through the conflict without this.

And how do you assess a chance of a new wave of mobilization happening in Russia?

A lot will very much depend on a combat strategy chosen by Russia. If it will [focus] on retaining positions and a local offensive in some small areas, then there will simply be no need for new waves of mobilization. Provided there is a major offensive (which is also possible), then it will depend on how far this offensive goes.

But on the whole, I believe that for now, new waves of mobilization are unlikely because they make no sense. We might even experience problems with infrastructure to train and equip a new wave (provided it would be comparable to the previous one). From a numerical perspective, once those already mobilized end up at the front, our forces will become equal to the Ukrainian [forces]. The key problem of their exponential manpower superiority will be over.

You have talked a lot about increasing economic costs of the Ukrainian conflict for the US. But how will our economy manage with an elevated SVO?

As far as we know, this year Russia will have a budget deficit of about 1% of GDP. And at one point a budget surplus was expected. For such a full-scale conflict as we are experiencing now, this is an unprecedentedly positive budget figure. This means that Russia is conducting the SVO very prudently and is trying to minimize its expenditures.

Naturally, our economy is still declining. But the entire question is the rate of this fall.

At the early stage of the conflict, well respected Russian economists were predicting that the country’s GDP would fall by a rate of as much as 23%. Such mistakes in the calculations were due to the fact that the necessary scientific tools for accurate forecasting were lacking.

To make a forecast, we need statistics on previous analogous situations. And there were no such situations. No one had ever surrounded with such sanctions a country as large a country as Russia that was incorporated in the modern global economy). Now there is hope that the decline will be less than 3%. Moreover, it basically comes at the expense of the service sector.

The decline in industry is minimal. The high employment lever is preserved. In terms of the economy, we certainly experience a crisis. However, it is less severe than some of the traditional macroeconomic crises we’ve experienced before. The main effect of this crisis is not in the macroeconomic indicators. It’s in the fact that the rich people and the upper segment of the Russian middle class have lost access to certain forms of consumption, which they had grown accustomed to. But these are things, which in today’s situation can, probably, be disregarded.

Are you sure? Do we have any reason to argue that Western sanctions have been ineffective, or they just haven’t begun to “bite yet?

They’ve proved ineffective in the short- and medium-term perspective. They don’t affect Russia’s ability to conduct SVO. But they present a gigantic problem from the standpoint of long-term prospects of our development.

The main component of this issue is a loss of access to modern electronic components and modern industrial equipment. Some of these products can be and is being replaced by imports from China (but far from all of them). The Chinese themselves are in a vulnerable position in terms of certain types of imports. Contrary to the developed mythology on secondary sanctions, China is doing a lot to support us. But there is something they simply cannot do.

For instance, they are in an even more vulnerable stance than we are, as far as the civil aviation industry is concerned. We are able to produce at least the Tu-204, which [is manufactured] wholly with our parts. Maybe in a couple of years, we will be able to produce a fully localized Sukhoi Superjet 100. But, the Chinese don’t have a single civilian aircraft of their own that is not fully dependent on foreign components. Furthermore, there are no prerequisites for its appearance in the foreseeable future. In short, China won’t be able to assist us in some areas. We’ll have to make do on our own.

And how exactly are we going to make do? Is there even a theoretical understanding of how Russia can solve this enormous problem?

There are cases of countries that are clearly in a worse situation than the one we find ourselves now, which have demonstrated and still demonstrate a strong will to survive and develop. I’m talking about Iran and North Korea in particular.

Don’t be alarmed. I’m not talking about the economies of these countries as a whole, because these countries are radically different from Russia in many respects, such a conversation would be completely useless. But to talk of Iran’s and North Korea’s ability to conduct quite a sound innovation policy, is to the contrary, both possible and necessary.

Iran is the only country in the Middle East that [is capable of] producing its own supercomputers, gas turbines and industrial equipment. It’s the only country in the Islamic world that has its own space program. Iran [is able to] launch its own satellites on Iran-produced rocket from the country’s own space center.

An important nuance: all of the above is not a preservation of some old developments. This was achieved at a time when country was constantly under severe sanctions. At the moment that the Islamic Revolution of 1979 occurred, Iran was incapable of doing anything like this. For a country that started practically from scratch, this is tremendous growth. By the way, Iran is one of the leading countries in terms of a growth of a number of scientific publications in international journals. Iran is a major scientific power.

Is North Korea also a major scientific power?

North Korea is trying its best to assert its presence (and it is present) in the global offshore programming market. Pyongyang regularly sends entire teams of its IT staff abroad. North Korea tries to export some of the types of machines it produces. I must admit that these are not the worst machines.

Once again, Iran and North Korea are not like Russia at all. North Korea has no fossil fuel deposits. North Korea enjoys a poor resource base. Iran has oil but the country is poorly endowed with other resources. Iran, for instance, has to import millions of tons of grain per year.

What’s more, there are many enormous programs in Iran, for subsidizing anything and everything for the population. For many years there was a problem in subsidizing gasoline prices, attempts to maintain low prices on goods (and a bunch of social issues related to Islamic ideology) were the problems for the country. They have a younger population, which creates pressure on the labor market.

In a nutshell, our countries cannot be compared. Provided, we are only talking exclusively about technology and innovation, the conclusion is the following: you can develop technology and innovation, even whilst in isolation. It’s a challenge, but it’s a solvable issue.

What exactly is needed to solve it, you ask? [My answer is:] political will, concentration of resources, a correct choice of priorities, a sound mix of public and private initiative, and right balance between security and maintaining external connections. For example, you cannot entirely focus on import substitution. We must try to maintain our presence everywhere in foreign markets wherever possible.

Regarding the issue of maintaining our presence on foreign markets. How true is the opinion that Russia has fallen into a critical dependence on a limited number of foreign partners, namely Turkey, China, and the Arab countries?

It’s not really a limited number of partners, doesn’t it? There were times in the 2000s when more than 50% of all Russian foreign trade came from the European Union. That was, in fact, a critical dependence! What we have now is not that bad.

In some cases, this dependence is mutual. Some of our partners need us as much as we need them. True, Russia, for instance, occupies a markedly more modest place in China’s foreign trade, than China does in Russia’s.

In turn, we are able to provide them with energy security at a times, when the world becomes increasingly turbulent, and economy is being weaponized. This fact alone makes us very important. Naturally, Russia must work tirelessly to broaden its ties with countries, to which Moscow has not devoted sufficient attention in the past.

How painful is the loss of the European energy market for our economy?

This is a severe blow. However, the loss of European ties facilitates change in the basic functional foundations of the Russian economy per se.

For much of its post-Soviet history, Russia enjoyed an enormous foreign trade surplus and a huge current account surplus. The funds, which were generated in such a way, or accumulated as reserves in the Central Bank, were then either exported in some form abroad and invested there.

Within the bounds of the economic model that we had, this money simply couldn’t be used in Russia. Any such attempts would’ve led either to an excessive strengthening of the ruble and elimination of domestic industry, or to accelerated inflation. To a large extent, our remarkable exports to Europe were “heating the atmosphere.”

But we were getting paid for this very “heating of the atmosphere” in hard currency, weren’t we?

True, we were getting paid. But here is how it worked: a huge part of the Russian elite was living well and getting richer at the expense of the economic model, which de facto boiled down to the exploitation of Russia by the EU member-states.

We were exporting cheap raw materials to them, and later investing into the EU a significant part of the money earned. When we were trying to demand in exchange for this money an access to technology, or the right to vote in addressing certain issues, the EU refused us.

The most vivid examples are an attempt by one of our major corporations to buy “Opel” and the Russian government’s attempt to become a shareholder of the European “EADS” aerospace concern in the 2000s.

All this was done to the end of entering European production chains and access to technology. None of this worked out for political reasons. It didn’t work back then, and it, definitely, won’t work now.

Our accumulated reserves in Western currency have now, as you know, been frozen, and in the future the West plans to confiscate them. Under the current model we simply don’t have the opportunity to build up such large reserves. It makes no sense to accumulate them.

There are simply no instruments in the world to invest them. Take even the Chinese yuan: China doesn’t have a sufficiently developed financial market to pursue such a policy. The old model is gone irrevocably. And, probably, thank God, it’s gone. Its departure will necessarily lead to profound political, economic and social changes within Russia.

Do these profound changes imply a significant decline in living standards for a majority of the country’s population?

They, naturally, imply a decrease of consumption standards for the upper 20-30% of Russia’s most affluent residents. They will lose the access they enjoyed previously to travels, [foreign] services, goods that one could buy abroad.

But I am not sure that the living standards of the rest of the population will change dramatically. In some cases, the departure of foreign competitors from our domestic market may even lead to growth in sectors of the Russian economy that were previously underdeveloped.

The problem, which existed not only in Russia, but in many other countries around the world, including even the US, is that the model of globalization that existed was very good for one portion of the population, but provided nothing for another part. For instance, those in the US, who voted for Trump are representatives of a segment of the population, to whom globalization granted nothing. Globalization facilitated the fact that factories, where they were employed previously, were shut down, and they were left in the so-called “rust belt.”

But since America is at the center of globalization, and is primarily its beneficiary, then the balance between those in the US, who support globalization and those who lose out from it is the same. In countries like Russia, the winners from globalization are substantially fewer.

How likely is Russia to return to what was routine in the 1990s’ when, for example, we experienced a catastrophic budget deficit?

There is no such likelihood. The economy is different, there is a different budgetary policy. The parameters of the budget deficit are under a tight control.

Provided we’ll face such a downturn in the economy and a decline in oil and gas revenues (which would facilitate the aforementioned threat), we are likely to see a drop in the ruble exchange rate, freezing of some investment programs, but situation will still be kept under control. But there is no reason yet for such a scenario.

Is there any reason to believe in the possibility of a compromise scenario to end the hostilities [in Ukraine], without loss of face to both sides?

There is. But now it’s too early to claim that the parties are ready to enter such an agreement. And it will definitely not be a Russo-Ukrainian agreement, even if it would be framed as such. In actuality, it will be an agreement between Russia and the US in one form or another, even if Moscow and Washington would deny conducting such talks on Ukraine.

Without their mutual understanding, nothing makes sense. This is due to the fact that the Russian side doesn’t believe in Europe’s independence [in terms of international politics] and, it believes even less, in Ukraine’s independence. Moscow won’t be ready [to conclude] any meaningful agreements with the Ukrainian side.

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