Mission impossible: Putin can’t continue his disastrous war. By Ambrose Evans-Pritchard.
Here’s an example of the genre of the west-will-eventually-win articles, to gee-up western support for Ukraine. It’s written by a respected and credible western journalist, but no doubt relies in part on information supplied by western governments and militaries. So far this genre has mostly — but not entirely — correlated with the verifiable facts such as advances and retreats or gas prices.
The vast Uralvagonzavod tank factory in Western Siberia is running out of workers. Plans to add a second production line for T-90 battle tanks have stalled.
“It’s now impossible: there is an acute shortage of personnel at the plant. A master used to need special training, but now they take anyone with any experience in production,” said one employee, speaking to the regional Sverdlovsk newspaper.
The sprawling complex served as Stalin’s rear fortress in the Second World War. It built the Soviet Union’s T-34 tanks, safely beyond the reach of the Nazis.
Now under the state conglomerate Rostec – run by ex-KGB general Sergey Chemezov – it may struggle to save the Russian army a second time.
Rostec is scouring the country, offering bumper wages and housing vouchers, especially for design engineers. But the pool of skills and manpower has dried up.
Some 700,000 Russians have left the country since the war began a year ago, mostly young men and mostly the best-educated. The military meat grinder is chewing up 800 soldiers a day, according to British intelligence. The more that Vladimir Putin mobilises those who remain, the less he has for his war industries. …
Russia is for now drawing down its final reserve of Soviet relics, but these lack parts and are sitting ducks for Ukrainian drones.
Electronics is the key to modern weapons. (Do you use a smartphone or a dumb phone?)
The US Treasury said in October that the Western blockade of semiconductors had led to a 70 per cent drop in chip imports from all global sources, curtailing production of hypersonic missiles, surface-to-air missiles, and airborne early-warning systems.
It said Russia is cannibalising dishwashers and fridges to find chips for the military, but this is desperate bootstrap stuff. These circuit boards are not instantly interchangeable.
Russia has two major semiconductors producers, Mikron and Baikal. They are in the 90nm (nanometer) range, workhorse technology from 20 years ago, unfit for modern precision weapons. Intel, Samsung, and Taiwan’s TSMC are already working on 2nm chips.
The Kremlin has unveiled a $US40 billion ($58.2 billion) project to produce 90nm chips en masse by 2030, but that only goes to show how hopeless the task is.
Russian customs data purports to show that chip imports have surged despite the blockade, which is of course what the Kremlin wants us to believe. To the extent that volumes have risen, the imports are mostly routine low-tech chips from China…
Byrne says the weapons captured or shot down in Ukraine overwhelmingly contain US chips, mostly from Texas Instruments and Analogue Devices. This was to be expected in the early phase of the war: these were legacy weapons built earlier. …
When it comes to weapons, the Kremlin still depends on an opaque supply chain of Western chips through Hong Kong, Turkey, or the Middle East. Many get through, but many do not, and the Biden administration is tightening the global noose. …
Previous predictions of a collapses in Russian GDP and currency proved false. But Russian oil and gas income is being squeezed.
The central bank says GDP contracted by just 2.5 per cent last year. But the picture deteriorated rapidly in the fourth quarter, and shock figures in January have since raised alarm bells at the Kremlin. State energy revenues collapsed by 46 per cent and the budget swung to a $US25 billion deficit in one month.
Russia has no internal bond market to fund deficits on this scale. The Kremlin is having to raid the national wealth fund. That dropped by $US38 billion to $US148 billion in January.
Putin can still sell his oil under the G7 oil price cap, activated in December. But the West controls 90 per cent of the trade through insurance, financing, and ship ownership.
China, India, or Turkey are all driving hard bargains, knowing that Russia is a distressed seller. Urals crude has been trading at a $US40 discount to Brent.
Russia has lost its primary gas market in Europe forever. The price for liquefied natural gas that it can still sell has fallen 70 per cent since last August. Russia has now lost half its global oil export revenues as well, and that is much more painful.
Putin still has the means to torment the West. He could slash oil output by three million barrels a day, timed to coincide with recovering Chinese demand, and force the price to $US200 in hopes of provoking Europe’s frazzled democracies to turn against their leaders over Ukraine. …
Precedent:
The lesson of economic warfare, from the Continental Blockade through to the strangulation of Germany in two world wars, is that it takes a long time, but often ends with startling speed.
Russia is not going to run out of fuel or food but it lacks much else needed to sustain its war machine, and it is massively outpowered by the West.
We shall see.
Btw, Russia has about the same GDP as Australia. It cannot begin to outproduce western Europe and the US, so it will lose if the war becomes protracted and determined more by weaponry than manpower.
