One year after Russia’s invasion of Ukraine, we fear the prospects of peace remain remote and that the conflict is likely to drag on for quarters, if not years. An analysis of relative strategic and economic positioning drives our assessment.
The strategic initiative remains with Russia. Despite some recent successes, Ukraine has failed to fully eject Russian forces. While the provision of tanks is a significant escalation of Western support, the tanks are not expected to materialize on the battlefield for at least two months. Many are now watching for Russian President Vladimir Putin’s reaction, which may include weapons of mass destruction. In this sense, the overall strategic dynamic of the world watching for Putin’s next move persists, and ironically the Western tank decision may have only reinforced it.
Russia retains significant gains consistent with our original assessment of Kremlin aims. We expected a Russian campaign aimed at partitioning Ukraine in a manner driving dependency and killing prospects of an economically viable independent Ukraine outside Moscow’s sphere of influence. Despite setbacks, Moscow maintains de facto control over Ukraine’s industrial heartland and has effectively landlocked the country. The result has been a rump Ukraine ruled from Kyiv on life support underwritten by Western aid.
We believe talk of Ukrainian victory is premature. The initial invasion and subsequent Russian campaign decimated Ukraine’s economy. Beyond the hit to growth on the order of around one third of GDP in 2022, the destruction of the country’s capital stock and Moscow’s stranglehold on the seaborne export routes has been suffocating. In our view, late 2022 International Monetary Fund (IMF) estimates of Ukrainian gross external financing needs of $3 to $5 billion almost certainly understate reality.
Ukraine’s reaction function tilts strongly in favor of escalation. Ukrainian President Volodymyr Zelensky’s political efforts translated into Western support critical to Ukrainian defenses, which nevertheless fell short of guaranteeing Ukrainian victory. Meanwhile, Kyiv’s declared war aims have escalated to returning to the lines of 2014 rather than 2022. The former would require the reconquest of the Crimean peninsula—a mountainous region saturated with Russian forces—as well as territories in the Donbas that Russia has controlled for nearly a decade. While we may understand Kyiv’s efforts, the extent of Western support, disposition of forces on the ground, and significant advantages Russia currently holds make us doubt the prospects of a swift end to hostilities.