Russia/Ukraine War Update - July 13th, 2022

 *** MILITARY SITUATION ***

Military Update's report today includes information on Ukrainian volunteer foreign fighter losses broken down by country. Losses are pretty egregious, especially in the US and Canadian data. The report indicates that of the US Citizens who volunteered and stayed to fight (about 550), about 2/5ths are KIA, 2/5ths have left the Ukraine, and only about 90 remain. The Canadian volunteers haven't fared any better.

-The Russians know that the HIMARS are a problem.
   
-Ukrainian authorities have confirmed their forces targeted a Russian ammunition depot in southern Ukraine overnight, resulting in a massive explosion.

-Ukraine’s president, Volodymyr Zelenskiy, has asked military chiefs to draw up plans to gather a “million-strong” fighting force equipped with western weapons to recapture its southern territory from Russia, the country’s defence minister said. Zelenskiy has ordered his military to recover occupied areas around the Black Sea coast that are vital to the country’s economy, Oleksii Reznikov said in an interview with the Times.

-Like many of his male friends, Serhiy no longer leaves his home in western Ukraine for fear of being sent to the front line to replace soldiers killed or injured in the fight against Russia. The construction worker spends his days hiding from military officials serving call-up papers at bars, beaches, checkpoints, malls and even church services. As casualties mount on both sides, there was anger last week after Ukraine’s military revealed plans to bring in permits prohibiting men eligible for conscription from leaving the region where they are registered under martial law. This restriction of movement for men aged 18 to 60 was criticized by President Volodymyr Zelensky and revoked, but it highlights the struggle for a nation suffering more than 20,000 casualties a month – officials admit up to 200 troops are killed and 800 wounded daily.

What is shocking about the Daily Mail article is the admission by Ukrainian officials that they are suffering huge losses–200 kia and 800 wia per day. Just do the math. Two hundred per day times 120 days (i.e. , 4 months) equals at least 24,000 dead. Wounded is in excess of 96,000. The number of casualties is probably much higher. Today, for example, the Russian MOD reported that it killed 300 Ukrainians in the Donestsk and 250 in Kharkov. In addition, Russia reports that 70% of the 25th Air Assault Brigade has been destroyed. That means between 1400 and 2800 soldiers.

Material losses also are piling up. At the start of the war, Ukraine had 166 helicopters. Russia claims it has shot down 137 as of 11 July. Aircraft losses are grim as well. At the outset of the war Ukraine listed 181 aircraft in its Air Force. Russia claims it has downed 243 planes. This number includes those air frames sent by NATO allies. In short, Ukraine has no functional Air Force left to carry out combat missions in support of a ground offensive. While it is conceivable Russia is overstating the number of fixed wing and rotary wing craft destroyed, Russia knows exactly what Ukraine has and only has to wait for the remaining planes to get take-off before targeting them for destruction.

There is no million man ground force in Ukraine capable of launching an offensive against Russian positions in the Crimea. There are no tank brigades or air force units intact to support such an offensive.

--At least seven people were reportedly killed by a Ukrainian missile strike on a large ammunition store in the town of Nova Kakhovka, in Russia-occupied Kherson, in a strike attributed to recently acquired US weapons. The explosion hit a warehouse close to a key railway line and a dam on the Dnipro River. Footage on social media showed a large explosion lighting up the night, burning ammunition and towering smoke.

-Russia has reportedly heavily shelled the eastern town of Bakhmut in the Donetsk region overnight in response to the Nova Kakhovka strike. Kyiv Independent reporter Illia Ponomarenko tweeted alongside footage purportedly of the assault: “Meanwhile, Russia responds by sweeping Bakhmut off the earth with artillery in the night.”

*** ECONOMIC & POLITICAL ***

-There is a rumor coming out of Russian Intelligence sources that the Ukrainians have sold a HIMARS to Russia for $880,000 + $300,000 additional for the ammunition. This of course, is unconfirmed, as is the sale of the 2 French Ceasers to Russian forces for $120,000 each. Nor can the information from Russian MoD about 2 of the HIMARS being destroyed a few days ago. It could be true, it could be counter intelligence being floated by the Russians to discourage Western arms shipments, though I will say there are so few HIMARS in the Ukraine and western intelligence is working so closely with the Ukrainians for targeting data that I cannot imagine the DoD does not know where all of the units are and what their dispositions are. If one of the systems went missing, they would have to know. The new package last week included 4 more, bringing the number given to the Ukrainians to 12 units so far. Confirmed HIMARS strikes have so far been limited to strategic targets and seem to be amounting to around a few key strikes a week on CandC centers and logistics depots, suggesting that the Ukrainians are having difficulty planning the complex HIMARS missions to ensure they can fire the weapons without being destroyed by Russian counter battery or air defense fire. Attacks slowed last week after the Russia reported destroying 2 of the trucks, and sign that the Ukrainians may have needed to change the tactics of their use.

A recent article in Al Mayadeen said this:

Ukraine is selling weapons it acquired from the West on the black market due to the Kiev forces' limited ability to use them because of their lack of training, logistical challenges, and the diminishing size of the Ukrainian armed forces, former senior Pentagon adviser Karen Kwiatkowski told Sputnik on Thursday. Russian Defense Minister Sergei Shoigu previously said the arms supplied by the West to Ukraine were ending up on the black market and spreading across West Asia. The statements by Moscow and the Pentagon are not just claims, as Kiev itself backed them by admitting that foreign aid meant for Ukraine was already being sold. Ukraine's Bureau of Economic Security Director Vadym Melnyk told Ukraine 24 earlier this week that the agency had identified repeated cases of the sale of Western military and humanitarian aid. "Given that these items are 'free,' a great deal of profit can be made by] selling what is not needed or cannot be easily used," Kwiatkowski said. "Ukraine's ability to utilize these 'gifts' is limited by lack of training, logistical challenges, and the ever-shrinking size of the Ukrainian army," the retired US Air Force lieutenant colonel added.

While some of the incoming material is incomplete, Kiev simply cannot utilize other equipment and implement it into its tactics or strategy, she added. Kwiatkowski also highlighted how ironically, some of the weapons Ukraine is selling will likely end up in the hands of the Russian armed forces and their allies. Even weapons that Kiev could utilize on the battlefield will eventually be sold, the former defense official noted, including the high mobility and efficacy ones. "Even more effective US-supplied weapons like anti-tank Javelin missiles, M142 HIMARS high mobility artillery rocket systems, and M270 MLRS multiple-launch rocket systems would probably start appearing on the black market once the Ukrainians decide to negotiate a cease-fire and a settlement with Moscow," Kwiatkowski explained.

Karen lives right here in the Shenandoah Valley. She's very credible.

-Ukraine president Volodymyr Zelenskiy says Russia “doesn’t have the courage” to admit defeat.

-US Bureau Says "Leaked" 10.2% CPI Report Was Fake, So Here's What To Expect. The US CPI report will be the main highlight tomorrow, and will also serve as what JPMorgan calls a "market clearing event."  While the BBG median consensus expects +8.8% YoY vs. +8.6% in June, Goldman and JPM expect 8.88% and 8.7% respectively, with whisper numbers at, or above, 9.0% One bit of “good” news, according to Deutsche Bank, is that yesterday the NY Fed’s long-run consumer inflation expectations series showed a decent dip and helped encourage a big rally in bonds as the tug of war in the asset class continues. Of course, much of this early optimism was reversed by today's fake CPI report "leak" which emerged around noon and signaled a 10.2% Y/Y CPI print, but was only noticed by traders and algos in the last hour of trading, sending stocks tumbling to session lows driven by a huge sell program in a very illiquid market.

-Nationwide, roughly 60,000 home-purchase agreements fell through in June, equal to 14.9% of homes that went under contract that month. That’s the highest percentage on record with the exception of March and April 2020, when the housing market all but ground to a halt due to the onset of the coronavirus pandemic. It compares with 12.7% a month earlier and 11.2% a year earlier.

-The United States treasury announced on Tuesday it was sending an additional $1.7bn (£1.4bn) in economic aid to Ukraine to help continue funding the country’s “essential services”.

-Russian president Vladimir Putin is set to visit Tehran next week to hold talks with Turkish president, Recep Tayyip Erdoğan. The meeting comes as the US has accused Iran of preparing to supply Russia with hundreds of weapons-capable drones for use in Ukraine.

-"Ukraine is getting an additional $1.7 billion in assistance from the U.S. government and the World Bank to pay the salaries of its beleaguered health care workers and provide other essential services," Politico reports Tuesday. The healthcare funds come as Ukraine's minister of health Viktor Liashko is sounding the alarm over collapsing medical and hospital infrastructure and availability, describing that paying health workers' salaries is growing more difficult each month "due to the overwhelming burden of war." As cited in Politico: "$1.7 billion is not just yet another financial support; it is an investment that makes us a step closer to victory," Liashko said in a statement. The funds are being funneled through the US Agency for International Development (USAID), the Treasury Dept., and the World Bank. "This aid will help Ukraine’s democratic government provide essential services for the people of Ukraine," Treasury Secretary Janet Yellen said in a statement. USAID has so far given $4 billion in budgetary support to Kiev as the Ukrainian government struggles to pay civic workers and essential service personnel their salaries and keep up pensions.

-Two weeks ago, when previewing the scheduled 10-day shutdown of the Nord Stream 1 pipeline - which supplies the bulk of European nat gas usage courtesy of Russia - for maintenance, we quoted from DB FX strategist George Saravelos that if the gas shutoff is not resolved in coming weeks this would lead to a broadening out of energy disruption with material upfront effects on economic growth, and of course much higher inflation, or as he puts it, "beyond the market's worries about slower global growth in recent months, what is unfolding in Europe in recent days is a fresh big negative supply shock." As such, DB's Jim Reid said that July 22, the day gas is supposed to come back online, could be the most important day of the year: "while we all spend most of our market time thinking about the Fed and a recession, I suspect what happens to Russian gas in H2 is potentially an even bigger story. Of course by July 22nd parts may have be found and the supply might start to normalize. Anyone who tells you they know what is going to happen here is guessing but as minimum it should be a huge focal point for everyone in markets."

-Brazil is looking to buy as much diesel as it can from Russia and the deals are being closed “as recently as yesterday,” Brazilian foreign minister Carlos Franca said on Tuesday, without giving further details on the transactions.

-Lego is to end all operations in Russia “indefinitely” after pausing deliveries to its 81 stores in the country in March.

-Spanish authorities are currently exploring the possibility of digging 10 German Leopard 2A4 battle tanks and 20 American M113 armored personnel carriers out of storage and donating them to Ukraine, the Spanish military news site InfoDefensa reported on Tuesday. In a complex deal involving multiple governments, the European Union will reportedly pay for the vehicles to be refurbished. According to InfoDefensa’s sources, the Ukrainian government will pay for the mothballed tanks to be restored and modernized on Spanish soil with money from the EU’s European Peace Facility (EPF), a mechanism that, despite its name, is used to fund foreign militaries.

-The US announced on Tuesday that it will send an additional $1.7 billion in funding to Ukraine, in a bid to help President Volodymyr Zelensky pay public sector-employees. US President Joe Biden has previously told Americans that they would have to sacrifice their quality of life to prop up Kiev. The aid package, which was announced by the United States Agency for International Development (USAID), was described as “direct budgetary aid” to “ensure the Ukrainian government can continue operating.” It is the second such tranche of aid announced by USAID in less than two weeks, bringing the agency’s total spending on Ukraine to date to $4 billion.

-Ukrainian Foreign Ministry spokesman Oleg Nikolenko on Saturday accused US Congresswoman Victoria Spartz of attempting to bring “Russian propaganda” into American politics. Spartz had earlier called on the US administration to develop a mechanism for tracking military assistance provided to Kiev, and expressed doubts about the reliability of President Volodymyr Zelensy’s chief of staff in an open letter to Joe Biden. “We advise Ms. Spartz to stop trying to earn extra political capital on baseless speculation around the topic of war in our country and the grief of Ukrainians. Especially cynical are manipulations about Ukraine and its leadership from a congresswoman of Ukrainian origin,” Nikolenko wrote on Facebook. He also called on Spartz to “stop undermining the existing mechanisms of providing US military assistance to Ukraine,” claiming that Kiev’s interaction with its American partners is completely transparent. Any “further bureaucratization and delaying the process” will only help the Kremlin, the Foreign Ministry spokesman claimed.

-U.S. Secretary of State Antony Blinken called on China to comply with a 2016 arbitration ruling that invalidated Beijing's vast territorial claims in the South China Sea and warned that Washington is obligated to defend treaty ally Philippines if its forces, vessels or aircraft come under attack in the disputed waters. Blinken’s statement, issued by the U.S. Embassy in Manila on Tuesday, was released on the sixth anniversary of the 2016 decision by an arbitration tribunal set up in The Hague under the U.N. Convention on the Law of the Sea after the Philippine government complained in 2013 about China’s increasingly aggressive actions in the disputed waters.

-New York City’s Emergency Management Department on Monday released a 90-second video advising residents what to do in case of a nuclear attack. Officials said there was no specific threat of an atomic attack, only that now was as good a time as any to release the public service announcement. The video opens with a female presenter appearing against a computer-generated background showing the city. “So there’s been a nuclear attack,” she says. “Don’t ask me how or why, just know that the Big One has hit. She then tells New Yorkers there are three “important steps” they need to take, starting with getting inside a building as fast as possible. Step two involves barricading inside, preferably in a basement, and showering off any dust or radioactive residue if one was caught in the blast outside – and survived somehow. The final step involves staying tuned to the media and the government to give an all-clear.

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-Washington is contemplating lifting its ban on US sales of offensive weapons to Saudi Arabia ahead of President Joe Biden’s visit to Riyadh later this week, Reuters reported on Monday, citing four sources familiar with the discussions. Strictly internal at this time and at an early stage, the deliberations are informal and far from the decision-making stage, two of the sources indicated, with another US official stating no talks on the matter have so far been held with the Saudis. The sources expect the Biden administration’s decision will depend on whether Riyadh manages to get any closer towards ending its years-long war in Yemen in a political settlement, according to the report.

-Ukraine’s heavy artillery is outnumbered roughly eight to one by Russian guns, putting Ukraine at a significant disadvantage, a spokesperson for Ukraine’s International Legion has said. M142 Himars multiple rocket launch systems supplied by the US were having an impact on the battlefield, the spokesperson said, but more arms from Ukraine’s western partners were needed to close the gap.

-Iran is preparing to provide Russia with “hundreds” of unmanned aerial vehicles, including weapons-capable drones, for use in its ongoing invasion of Ukraine, the White House said on Monday. US national security adviser Jake Sullivan said it was unclear whether Iran had already provided any of the unmanned systems to Russia, but said the US had “information” that indicates Iran is preparing to train Russian forces to use them as soon as this month, the Associated Press reports.

-A survey finds that 58 and 59 percent of EU citizens aren’t ready to accept rising energy and food prices as a consequence of sanctions against Russia, but it needs to be noted that the results vary heavily across countries and socioeconomic groups. While respondents in high-income countries such as Denmark, Sweden and the Netherlands overwhelmingly support action against Russia regardless of rising prices, respondents from lower-income EU member states such as Greece and Bulgaria are less willing to pay a personal price. Across the EU, those respondents who often or at times encounter difficulties paying bills are less likely to say they are ready to face food and energy price increases, which is not surprising.

-Russia’s president, Vladimir Putin, plans to meet with his Turkish counterpart, Recep Tayyip Erdoğan, in the near future after the pair discussed efforts to facilitate grain exports from Ukraine, according to the Kremlin.

-Latvia may increase its defence spending and introduce compulsory military service regardless of gender to contain any possible security risks arising from Russia.

-Russia has claimed to have killed a significant number of foreign mercenaries fighting in Ukraine in the last three weeks, including 23 from Great Britain. In its daily operational briefing, without presenting any evidence, the Russian ministry of defence says that the total number of mercenaries active in Ukraine is not the 20,000 it says Kyiv claimed, but is about 2,700. It claims that in the last three weeks: 166 Polish militants were liquidated. Among the representatives of Georgia, 50 “soldiers of fortune” were destroyed, Great Britain lost another 23 mercenaries killed in Ukraine. Also, 21 Romanian and 15 Canadian militants were killed in three weeks.

-As India faces a rise in Covid-19 cases, a new subvariant of Omicron dubbed BA.2.75 has been identified all over the country, as well as in about ten other nations, the Word Health Organization (WHO) warned last week. The presence of the latest mutant strain has been reported in ten Indian states in total, ranging from Tamil Nadu in the south to Uttar Pradesh in the north, the global health body’s chief scientist Soumya Swaminathan confirmed, in an interview with the Times of India on Sunday. Outside of the country, the subvariant has been spotted in approximately ten nations, she tweeted. As reported by the Associated Press, these include Australia, Germany, the United Kingdom, Canada, and the US, where a third case was identified last week. BA.2.75 could potentially outcompete other highly transmissible coronavirus subvariants – including both BA.4 and BA.5 which by late June have become dominant in the US, the UK, Germany, and France, as confirmed by the health authorities of these countries.

COVID CASES USA 7-DAY AVG
133,678 JUL 11 2022
22,822 JUL 11 2021