Russia/Ukraine War Update - May 13th, 2022

*** MILITARY SITUATION ***

Russian forces may be abandoning efforts at a wide encirclement of Ukrainian troops along the Izyum-Slovyansk-Debaltseve line in favor of shallower encirclements of Severodonetsk and Lysychansk.  Russian forces likely control almost all of Rubizhne as of May 12 and have likely seized the town of Voevodivka, north of Severdonetsk.[1]  They will likely launch a ground offensive on or around Severodonetsk in the coming days.  The relative success of Russian operations in this area combined with their failure to advance from Izyum and the notable decline in the energy of that attempted advance suggest that they may be giving up on the Izyum axis.  Reports that Russian forces in Popasna are advancing north, toward Severodonetsk-Lysychansk, rather than east toward the Slovyansk-Debaltseve highway, support this hypothesis.

It is unclear if Russian forces can encircle, let alone capture, Severodonetsk and Lysychansk even if they focus their efforts on that much-reduced objective.  Russian offensives have bogged down every time they hit a built-up area throughout this war, and these areas are unlikely to be different. Continued and expanding reports of demoralization and refusals to fight among Russian units suggest that the effective combat power of Russian troops in the east continues to be low and may drop further.  If the Russians abandon efforts to advance from Izyum, moreover, Ukrainian forces would be able to concentrate their efforts on defending Severodonetsk-Lysychansk or, in the worst case, breaking a Russian encirclement before those settlements fall.

The Ukrainian counteroffensive around Kharkiv is also forcing the Russian command to make hard choices, as it was likely intended to do.  The UK Ministry of Defense reports that Russian forces pulled back from Kharkiv have been sent toward Rubizhne and Severodonetsk but at the cost of ceding ground in Kharkiv from which the Russians had been shelling the city.[2]  The counteroffensive is also forcing Russian units still near the city to focus their bombardment on the attacking Ukrainian troops rather than continuing their attacks on the city itself.  The Ukrainian counteroffensive near Kharkiv is starting to look very similar to the counteroffensive that ultimately drove Russian troops away from Kyiv and out of western Ukraine entirely, although it is too soon to tell if the Russians will make a similar decision here.

-Ukrainian forces have damaged a modern Russian navy logistics ship in the Black Sea, setting it on fire, a spokesman for the Odesa regional military administration in southern Ukraine said on Thursday. Spokesman Serhiy Bratchuk said in an online post that the Vsevolod Bobrov had been struck near Snake Island, the scene of renewed fighting in recent days, but did not give details. The tiny island is located near Ukraine’s sea border with Romania.

*** ECONOMIC & POLITICAL ***

-Finland must apply to join Nato “without delay” in the wake of Russia’s attack on Ukraine, its president, Sauli Niinistö, and prime minister, Sanna Marin, said. With neighbouring Sweden expected to follow suit, the two leaders said steps would be taken “within the next few days” to make the decision to apply, adding that Nato membership would strengthen Finland’s security. Leaders of Nato member states welcomed the announcement.

-The Russian foreign ministry in Moscow said it would have to take “military-technical” steps if Helsinki applied for Nato accession, after Finland’s president, Sauli Niinistö, and prime minister, Sanna Marin, said the country must apply to join the military alliance “without delay”. Neighbouring Sweden is expected to follow suit in the coming days.

-The Kremlin spokesperson, Dmitry Peskov, said Russia would “definitely” see Finnish membership as a threat. Russia’s foreign ministry said Moscow would be “forced to take reciprocal steps … to address the resulting threats to its national security” if Helsinki applied for Nato accession.

-Russia could cut its gas supplies to Finland tomorrow, a day after Finnish leaders said they would apply to join Nato, according to reports. Key Finnish politicians have been warned that Russia could halt its gas supplies on Friday, the local newspaper Iltalehti cited unnamed sources as saying.

-Republican senator Rand Paul has blocked the passage of a $40bn aid bill to Ukraine in the US Senate. Paul demanded changes to the legislation that would include implementing a special inspector general to oversee how the aid is spent. “We cannot save Ukraine by dooming the US economy,” Paul said.

-Urgent measures to break the Russian blockade of grain exports from Ukraine’s ports, including by trying to open routes through Romanian and Baltic ports, are being discussed at a three-day meeting of G7 foreign and agriculture ministers in Germany. Before the war, most of the food produced by Ukraine – enough to feed 400 million people – was exported through the country’s seven Black Sea ports.

-The number of people who have fled Ukraine to escape Russia’s invasion has exceeded 6 million, the UN’s refugee agency said. A further 8 million people have been forced to flee their homes and are displaced inside Ukraine, according to the International Organisation for Migration.

-A few weeks after we learned that Russia's current account just hit an all time high thanks due to soaring commodity exports (just as the US trade deficit blew out to a record high on its own)...we learned that contrary to the intentions of European countries, a calculation by a German think tank found that Russia's oil and gas revenues hit a record high in April, rising to 1.8 trillion rubles in a single month, after 1.2 trillion in March, leading to the following stunning statistics "After only 4 months, Russia's federal budget has now already received 50% of the planned oil and gas revenue for 2022 (9.5 trillion)." Today, Bloomberg confirmed this stunning statistic and, citing the latest IEA report, writes that Russia’s oil revenues are up 50% this year "even as trade restrictions following the invasion of Ukraine spurred many refiners to shun its supplies." Apparently the restrictions - which pushed the price of oil to the highest level in a decade and boosted revenue for oil exporters - is precisely what Putin was hoping for. Moscow earned roughly $20 billion each month in 2022 from combined sales of crude and products amounting to about 8 million barrels a day, the Paris-based IEA said in its monthly market report.

-The Biden administration canceled one of the most high-profile oil and gas lease sales pending before the Department of the Interior Wednesday, as Americans face record-high prices at the pump, according to AAA. The DOI halted the potential to drill for oil in over 1 million acres in Alaska's Cook Inlet, along with two lease sales in the Gulf of Mexico. The move comes as Biden has taken a few actions to combat high gas prices, despite his administration's generally hostile approach to the oil industry. A DOI spokesperson cited a "lack of industry interest in leasing in the area" for the decision "not to move forward" with the Cook Inlet lease sale, CBS News reported. The spokesperson also said the department canceled the Gulf of Mexico leases – lease 259 and lease 261 – due to "conflicting court rulings that impacted work on these proposed lease sales."

-Some interesting analysis from Michael Kofman, director of Russia studies at the Center for Naval Analyses in Washington DC, on Russia’s mobilization problem in its invasion of Ukraine. Kofman argues that Russia is currently “operating at peacetime strength”. He notes that Vladimir Putin seems hesitant to declare a state of war. Currently, Putin has designated the invasion of Ukraine as a “special operation”