Russia/Ukraine War Update - July 21st, 2022

*** MILITARY SITUATION ***

Calls among Russian nationalist and pro-war voices for Russian President Vladimir Putin to expand Russia’s war aims, mobilize the state fully for war, and drop the pretext that Russia is not engaged in a war reached a crescendo on July 19. Former Russian militant commander and nationalist milblogger Igor Girkin presented an extensive list of military, economic, and political actions that he argues the Kremlin must take to win the war in Ukraine; first among this list is abandoning the rhetoric of the “special military operation” and defining the official goals of the war in Ukraine. Girkin advocated for expansive territorial aims beyond the Kremlin’s stated ambitions in Donbas, including the reunification of the entire territory of “Novorossiya” (which Girkin maintains includes Kharkiv, Dnipropetrovsk, Mykolaiv, Odesa, Zaporizhzhia, Kherson, Donetsk, and Luhansk oblasts as well as Kryvyi Rih) with the Russian Federation and the creation of a Malorossiya state (all of Ukraine up to the Polish border), which Girkin claims should be reunified with Russia through the Russia-Belarus Union State. Girkin also called for the Kremlin to shift the Russian economy fully to a war footing and to carry out extensive mobilization measures including forced conscription and the (further) suspension of Russians’ rights. Girkin has often criticized what he views as a lack of ambition and decisive action in the Kremlin’s handling of the war in Ukraine through his calls for maximalist objectives and measures to support territorial gains. His newest list of demands adds to the growing discontent within the Russian pro-war nationalist zeitgeist.

While Girkin’s July 19 post is an acerbic critique of the Kremlin’s intentions in Ukraine, other Russian milbloggers sought to shape a narrative favoring Putin while advancing the same maximalist aims by suggesting that the Kremlin has been purposefully setting conditions for a protracted war in Ukraine since the war began. Russian milblogger Yuri Kotyenok claimed that Russia has been pursuing the “Syrianization” of the war in Ukraine by never articulating specific deadlines or goals for operations in Ukraine.

US officials reported that Russia plans to annex occupied Ukrainian territory as soon as autumn 2022, confirming ISW’s May 2022 assessment. US National Security Council Spokesperson John Kirby announced that the Kremlin is beginning to roll out a version of its 2014 “annexation playbook” in Ukraine and is “examining detailed plans” to annex Kherson, Zaporizhia, and all of Donetsk and Luhansk oblasts, citing newly declassified intelligence.

Russian Foreign Minister Sergey Lavrov articulated expanded geographical aims for Russian operations in Ukraine on July 20, confirming ISW’s long-held assessment that Russia has territorial goals beyond Donetsk and Luhansk Oblasts. Lavrov held an interview with state-owned media outlet RT’s editor-in-chief Margarita Simonyan wherein he stated that the geography of the “special operation” has changed since March and now includes not just the Luhansk and Donetsk People’s Republics, but also Kherson and Zaporizhzhia Oblasts and a number of other unspecified territories. Lavrov also warned that these goals will expand if the West continues to provide Ukraine with long-range weapons. Lavrov’s calls for maximalist territorial objectives are notably divorced from the slow and grinding reality of recent Russian operations in Ukraine as discussed above. Ukrainian counteroffensive pressure is complicating Russian efforts to consolidate military control of occupied Kherson and Zaporizhzhia Oblasts, and it is unclear how the Kremlin will generate the offensive combat power needed to take significant new amounts of Ukrainian territory.

The Russian Defense Ministry publicly identified Lieutenant General Andrey Sychevoy as the commander of the Western force grouping in Ukraine on July 20. The Russian force groupings in Ukraine appear to follow the structure of established Russian military districts. Ukraine’s Conflict Intelligence Team (CIT) had previously reported that Sychevoy replaced Commander Alexander Zhuravlev as the Western Military District Commander. Russian Defense Minister Sergey Shoigu instructed Sychevoy to focus on destroying Ukrainian UAVs operating near the Ukraine-Russia border, indicating that the Western force grouping is likely operating on the Kharkiv City Axis. Russian forces have thus apparently split Kharkiv Oblast into two axes: the Western force grouping operating towards Kharkiv City and the Eastern force grouping operating in the Izyum-Slovyansk direction.

Ukrainian forces struck the Antonivskyi Bridge over the Dnipro River east of Kherson City for the second day in a row on July 20. Head of the Russian-backed Kherson Occupation Administration Vladimir Saldo announced that the bridge is closed to freight traffic for repairs but that it remains open to passenger vehicles. Ukrainian Kherson Oblast Military Administration Adviser Serhiy Khlan stated that the Ukrainian strikes on the Antonivskyi Bridge have made it impossible for Russian forces to transport heavy equipment across the bridge.

Russian forces continued strikes along the line of contact but made no confirmed ground assaults on the Southern Axis on July 20. Ukraine’s Southern Operational Command reported that Russian forces fired 20 missiles from S-300 anti-air systems in Kherson Oblast at unspecified ground targets overnight on July 19-20. Russian forces conducted air and missile strikes on Murakhivka and Novohryhorivka, Mykolaiv Oblast, and on the Pidyommyy Bridge in Zatoka, Odesa Oblast.

Ukrainian partisans attacked Russian occupation personnel at the Zaporizhzhia Nuclear Power Plant (NPP) in occupied Enerhodar, Zaporizhia Oblast on July 19. The Ukrainian Resistance Center reported that the partisan attack injured nine Russian occupation personnel and killed an unspecified number

-Ukrainian troops rescued a cat during clearing operations on Snake Island and evacuated it back to the Ukrainian mainland on July 20. The cat reportedly survived the duration of the Russian occupation of the island.

-Here are the highlights from General Konashenkov’s (Russian) latest briefing:

High-precision weapons of the Russian Aerospace Forces have neutralized temporary deployement point of the Right Sector Nazi militia in Kamyshevakha, Zaporozhye Region. Up to 200 militants have been killed.

High-precision weapons have hit positions of battalion of 81st Airmobile Brigade of AFU near Dolina, Donetsk People’s Republic. More than 60 personnel have been destroyed, as well as 7 armoured vehicles and 1 ammunition depot.

In addition, high-precision weapons strike have destroyed ammunition depots for weapons supplied by the US and European countries near Belen’koye, Odessa Region.

To replenish the significant losses in personnel and equipment incurred by 66th and 72nd mechanized, 58th motorized infantry and 10th Mountain Assault Brigades of AFU operating in the Soledar direction, the forced mobilization of residents of Artemovsk, Chasov Yar, Soledar, Dzerzhinsk and other nearby settlements is under way. Vehicles are seized from local residents to equip the formations.

4 platoons of Grad multiple-launch rocket systems, 13 artillery platoons of D-20 howitzers and 10 artillery platoons of D-30 guns have been neutralized in Seversk, Serebryanka, Dronovka, Opytnoye, Krasnoye, Zvanovka, Ivano-Dar’evka, Paraskovievka and Ivangrad, Donetsk People’s Republic.

Operational-tactical and army aviation, missile troops and artillery have neutralized 7 command posts, including 81st Aero-mobile Brigade near Kramatorsk, Donetsk People’s Republic, 60th Infantry Brigade near Kirovo, 128th Mountain Assault Brigade near Vozdvizhevka, Zaporozhye Region, 5 ammunition depots in Vasyukovka, Velyka Novoselka, Donetsk People’s Republic, Novoaleksandrovka, Zaporozhye region, Pokrovskoye, Dnepropetrovsk Region, 2 fuel depots near Soledar and Novgorodskoye, Donetsk People’s Republic, as well as 197 areas of AFU manpower and military equipment concentration.

-A report from Polish intelligence on the situation in Ukraine has purportedly been leaked. According to the document, a catastrophic situation has developed in the formations of the Armed Forces of Ukraine. The number of irretrievable losses is more than 300 people per day, and this figure is underestimated by the president’s office to reduce the likelihood of a public explosion and create panic among civilians and the military. The Poles emphasize that the systematic strikes of the Russia Armed Forces on command posts and training centers of the Armed Forces of Ukraine have led to the death of about 4,600 of the most trained military personnel, including senior officers, instructors and mercenaries over the past three months.

The report noted that untrained formations are sent to Donbass, the professional level of officers from the battalion commander and below is weak, the functions of commanders in the troops are often performed by national Battalion fighters. Since May of this year, almost all management functions in the planning and conduct of hostilities have been assumed by foreign advisers from the United States, Great Britain and Canada. At the same time, the fact of their presence at command posts is kept secret in order to prevent the personnel of NATO military countries from being captured by the Russian Armed Forces.

At the same time, the report notes that the American 155-mm M-777 howitzers delivered to Kiev are not always used for their intended purpose. Instead of conducting counter-battery warfare, guns are often used to bombard cities. The personel of the Armed Forces of Ukraine after accelerated training are unable to independently maintain complex air defense systems, therefore, foreign instructors from among mercenaries are often in artillery positions.

-A Reuters snap suggests that a US-made harpoon missile launcher was destroyed in Ukraine’s southern Odesa region. The snap quotes an Interfax report citing the Russian defence ministry. Ukraine began receiving the Harpoon missiles from Denmark in May as part of wider western arms shipments to Kyiv.

-Russia’s offensive in Ukraine’s Donbas region continues to make minimal gains as Ukrainian forces hold the line. The Antonovskiy bridge over the Dnieper River that was struck by Ukrainian forces is probably still usable, Britain’s defence ministry said, but is a key vulnerability for Russian forces.

** ECONOMIC & POLITICAL ***

-ECB policy announcement due Thursday 21st July; rate decision at 13:15BST/08:15EDT, press conference from 13:45BST/08:45EDT. The ECB is set to finally pull the trigger on rates; discussion will be over 25bps or 50bps. Policymakers are expected to unveil details of the anti-fragmentation tool

-The USS Benfold has traversed China-claimed waters for the third time in a week, passing through the Taiwan Strait on Tuesday after China complained about US Navy "illegal" maneuvers near islands under its control in the South China Sea. Beijing again blasted it as a serious "provocation" demonstrating that the US is a "destroyer of peace and stability" - in repetition of prior condemnations. It follows a more rare July 13 incident wherein the US destroyer entered waters off the Chinese military occupied Paracel Islands, and then last Saturday a sail-by of the Spratly Islands.

-The United States and its allies are constantly looking for ways to bolster the Ukrainian air force, including possible pilot training before potentially supplying Kiev with Western-made fighter jets, two top US military officials announced at the annual Aspen Security Forum in Colorado on Wednesday. “You want to build a long-term plan on how do you build their air force and the air force that they're going to need for the future,” the US Air Force Chief of Staff General Charles Brown said. “There’s a number of different platforms that could go to Ukraine… It’ll be something non-Russian, I can probably tell you that,” Brown said. “But I can’t tell you exactly what it’s going to be.” The general did not reveal any concrete plans to send jets to Ukraine, only speculating that all options were on the table including US-made planes, as well as Swedish Gripens, Eurofighter Typhoons and French Rafales. Meanwhile, Secretary of the US Air Force Frank Kendall, who was speaking at the same security conference about the US military seeking to retire the iconic A-10 Warthog ground attack jets, was asked point-blank – “Why don't we give those A-10s to Ukraine?”

-Russian President Vladimir Putin asserted earlier today that the “globalist” world order is “totalitarian” and is “holding back creative pursuit.” Putin made the comments during a forum in Moscow. The notorious leader claimed that the west had only achieved its global preeminence due to the historic plunder of other nations and had no moral right to enforce a unipolar model on the planet. “The model of the total dominance of the so-called ‘golden billion’ is unjust. Why should this ‘golden billion’ among the planet’s population dominate others, impose its own rules of conduct?” Putin asked. “Based on the illusion of ‘exclusivity,’ this model divides people into first and second class status, and is therefore racist and neo-colonial in its essence,” he added. “And the globalist, supposedly liberal ideology which underlies it is increasingly acquiring the features of totalitarianism, holding back creative pursuit, free historical creation,” Putin claimed.

-The US will provide four more precision rocket systems to Ukraine to assist it in its fight against Russian forces, US defense secretary Lloyd Austin said Wednesday. On Tuesday, his Ukrainian counterpart requested Washington to send more M142 High Mobility Artillery Rocket System (HIMARS), saying Kyiv’s forces have used them to destroy some 30 Russian command stations and ammunition depots so far. The US will send “four more Himars advanced rocket systems for a total of 16. The Ukrainians have made excellent use of Himars, and you can see the impact on the battlefield,” Austin said. In addition, the US will provide additional Guided Multiple Launch Rocket System (GMLRS) ammunition, which can precisely strike targets up to 80 kilometers (50 miles) away. Ukrainian defense minister Oleksiy Reznikov on Tuesday requested a major increase in the number of HIMARS, saying at least 100 were needed for an effective counter-offensive against Moscow’s troops. He also renewed a call for longer-range ammunition - 100 to 150 kilometers - to cut off Russian units from their support. President Joe Biden’s administration has so far refused to send longer-range ammunition out of worry that Ukraine would strike targets within Russian territory and potentially expand the war into a direct clash with the West.

-The European Union will mobilise a fifth tranche of military assistance of €500m to further support Ukraine. EU foreign affairs chief Josep Borrell said the region “remains focused and steadfast in its support for Ukraine, together with partners”.

-Lithuania will offer Ukraine additional military support, the Lithuanian ministry of defence announced on Wednesday. Included in the package will be M13 and M577 armoured personnel carriers, as well as ammunition for reserve training.

-South America’s Mercosur trade bloc has declined Zelenskiy’s request to address its upcoming summit. Bloc members Argentina, Brazil, Uruguay and Paraguay failed to reach an agreement on the request which he made to Paraguay last week, according to deputy foreign relations minister Raul Cano, who declined to say which states were against it.

-Russia will not supply oil to the world market if a price cap is imposed, Interfax news agency quoted deputy prime minister Alexander Novak as telling Russian television on Wednesday. US treasury secretary Janet Yellen is pushing for the cap to drive down oil prices and make it harder for Moscow to fund its war in Ukraine. Russian President Vladimir Putin told reporters earlier in the day that oil prices would skyrocket if a cap were imposed.

This is the scenerio where JP Morgan predicted oil could go as high as $380 / Barrel.

-Mortgage demand fell more than 6% last week compared with the previous week, hitting the lowest level since 2000, according to the Mortgage Bankers Association’s seasonally adjusted index. Applications for a mortgage to purchase a home dropped 7% for the week and were 19% lower than the same week in 2021. Buyers have been contending with high prices all year, but with rates almost double what they were in January, they’ve lost considerable purchasing power. While buyers are less affected by weekly moves in interest rates, the broader picture of rising rates has already taken its toll. Mortgage rates moved higher again last week after falling slightly over the past three weeks. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.82% from 5.74%, with points increasing to 0.65 from 0.59 (including the origination fee) for loans with a 20% down payment. That rate was 3.11% the same week one year ago.

-Ukrainian Defense Minister Oleksii Reznikov on Tuesday openly offered Ukraine as a venue to test NATO weapons against Russia in an online conversation with the director of the Atlantic Council’s Eurasia Center. Reznikov said that Ukraine "is essentially a testing ground" for the advanced weaponry the US and its allies are pouring into the country. "Many weapons are now getting tested in the field in the real conditions of the battle against the Russian Army, which has plenty of modern systems of its own," he said. The Ukrainian military chief made the offer in a fresh pitch for more Western arms. "We are interested in testing modern systems in the fight against the enemy and we are inviting arms manufacturers to test the new products here," he said. One weapons system that is getting its first use on the battlefield in Ukraine is the Polish Krab artillery system that was provided by Warsaw. "So, I think for our partners in Poland, in the United States, France, or Germany, it’s a good chance to test the equipment. So, give us the tools. We will finish the job and you will have all the new information," Reznikov said.

-The US Army has so far recruited just around half of the 60,000 new soldiers it hoped to enlist by October 1, officials said on Tuesday, saying that if the downward trend is not reversed, it could have a significant impact on combat readiness in the coming years. “We’ve got unprecedented challenges with both a post-Covid-19 environment and labor market, but also competition with private companies that have changed their incentives over time,” the vice chief of staff for the Army, General Joseph Martin, told a House Armed Services subcommittee, according to AP. The US military has had a difficult time attracting new soldiers, posting its lowest recruitment numbers in decades this year. Last month, the Pentagon admitted it was 23% behind recruiting goals. The problem has been widely blamed on bad advertising – specifically the recent trend toward ‘woke’ advertising, which has been widely mocked on social media – and a sloppy, antiquated recruitment system that places too much responsibility in the hands of outside contractors.

-Bloomberg's energy reporter Javier Blas opined this in a Bloomberg Opinion piece: Saudi Arabia, the holder of the world's largest oil reserves, is telling the world that in the not-so-distant future it "will not have any additional capacity to increase production."Let that sink in.  

-With Europe still on edge over the risk of an extended Nord Stream shutdown in 24 hours, moments ago Russian President Vladimir Putin eased tensions when he said that Russia would fulfill its commitments to supply natural gas to Europe, but he warned that flows via the Nord Stream pipeline could be curbed soon if sanctions prevent additional maintenance on its components. Translation: as we predicted, Putin will resume NS1 flows, but at levels at or below the pre-repair "new normal" of 40%. As we reported previously, Nord Stream 1, the main artery for Russian gas to Europe, is currently down due to regular maintenance and European governments are worried the Kremlin won’t restore its flow when the work ends Thursday, roughly around the time the ECB announces a historic rate hike (as much as 50bps according to the latest press reports). A prolonged outage could lead to an even greater energy crisis, prompting governments to ration energy, hurting industry and sending the country into recession even faster.

-The European Commission on Wednesday asserted "there is no reason to believe this pattern will change" regarding diminishing Russian natural gas flows ahead of winter, issuing a new sweeping plan in a press communique that calls on member states to immediately and 'voluntarily' slash gas consumption. It proposes a significant cut in gas consumption by 15% over the next eight months, and will require drastic action across industries, power producers and even citizens in their households, according to Bloomberg.

-Biden Transportation Secretary Pete Buttigieg has again suggested that high gas prices are a good thing because it forces people to accept a transition to the green energy agenda. During a congressional hearing, Buttigieg said that “the more pain” Americans experience from high gas prices, the more “benefit” there is “for those who can access electric vehicles.”

-Russia has widened its military aims beyond the east of Ukraine, setting its sights on other regions, according to Reuters. The delivery of weapons from the west to Ukraine prompted the shift in focus from Donetsk and Luhansk to southern regions, some of which are already under the control of Russian forces. “The geography is different now. It is not only about the DNR and LNR, but also the Kherson region, the Zaporizhzhia region, and a number of other territories,” the foreign minister, Sergei Lavrov, said. “The process is continuing, consistently and persistently.”

Lavrov warned the Kremlin’s objectives could expand further still if the west continued to supply Ukraine with weapons. “We cannot allow the part of Ukraine that Zelenskiy will control, or whoever replaces him, to have weapons that will pose a direct threat to our territory and the territory of those republics that have declared their independence,” he said.

-Russia has shut down the idea of resuming peace talks with Ukraine accusing it of being undeserving of “serious attention from serious people”. Foreign Minister Sergei Lavrov said the previous sit-down proved Ukraine had no “desire to discuss anything in earnest”, according to AFP. The countries attempted to hold talks some months ago but they ground to a halt in April, he added. Mr Lavrov continued: “They simply will never be able to articulate anything that would deserve the serious attention of serious people.”

-Reuters reported that, on Sunday, Ukraine National Bank (UNB) Deputy Governor Kateryna Rozhkova said on national television that the UNB had sold $12.4 billion of gold reserves since the beginning of Russia's invasion on Feb. 24. "We are selling (this gold) so that our importers are able to buy necessary goods for the country," Rozhkova said. She said the gold was not being sold to shore up Ukraine's hryvnia currency. There's just one problem: Ukraine doesn't have $12 billion in gold reserves (according to official IMF data at the end of June). It remains unclear how Ukraine sold so much gold.

When the Russians invaded, UNB held about 27 tons of gold in its reserves valued at about $1.6 billion, according to the WGC. In other words, according to Rozhkova, the central bank has sold more than 7 times its total gold holdings. That’s not to say Rozhkova’s statement was misleading. The country could be tapping into domestic gold supplies held by commercial banks or other institutions. PrivatBank ranks as the largest commercial bank in Ukraine. It was nationalized in 2016. It’s also possible that other countries or private entities gave Ukraine gold to sell. Countries around the world have sent billions in aid to the Ukrainian government. For example. earlier this month, Sweeden sent 577.7 million SEK to Ukraine. That’s over $55.5 million USD and 1.5 billion UAH.

Finally, some reports suggested that Ukraine's gold has been 'relocated' to Poland. Deputy Head of the National Bank of Ukraine Sergey Nikolaychuk said in an interview with Rabbit Hole magazine that Kyiv sends Ukraine’s gold and foreign exchange reserves to Poland, where they will be stored until the situation normalizes. At the same time, he did not disclose either the volumes of these same reserves, or what they are. Apparently, this is not about physical gold, but about security. This action suggests that the leadership of Ukraine is far less optimistic about its own and the country's prospects in the war with Russia than Zelensky proclaims to the world. So there we have it - UNB officials said they sold 7 times the amount of gold they have in reserves... then denied it.

-Russia is preparing to annex Ukrainian lands by arranging “sham” referendums on the territories it currently controls, like it did with Crimea eight years ago, the White House has said. “We have information today, including from downgraded intelligence that we’re able to share with you, about how Russia is laying the groundwork to annex Ukrainian territory that it controls in direct violation of Ukraine’s sovereignty,” John Kirby, US intelligence, National Security Council spokesman, told journalists on Tuesday. Russia launched a military campaign against Ukraine in late February. The US and their NATO bloc allies responded by imposing sweeping sanctions on Moscow and provided Kiev with heavy weapons.