Russian Actions in Ukraine. Probabilities of Various Scenarios.
Barely anyone has expected we would get this far this fast in terms of Russian actions in Ukraine and it would be dangerous to have illusions about how it could all end. What we can do now is attempt to assess probabilities of various scenarios.
We could assume that in scenario number one Russia and Ukraine negotiate and agree on a settlement. And the probability of that to unfold is quite low, in our opinion.
To start with, what would satisfy Russia?
Dmitry Peskov, the press secretary of the Russian president, stated a couple of conditions for ending the war:
- Ukranian neutrality, meaning rejection of any plans to enter any military blocs,
- recognition of Crimea as Russian territory,
- recognition of Donetsk and Lugansk as independent states.
We believe that a settlement on these terms is not possible. Why would that be?
First of all, the last two conditions above imply a disgraceful peace deal which is normally only accepted when there is no other choice. Ukraine is not in a desperate situation and continues to show resistance, despite Kiev being surrounded.
More than that, the scale of the attack shows that all these conditions have been introduced as a disguise and in reality the Kremlin wants much more.
Putin wants to control at least the entire central and eastern Ukraine and not only Crimea or Lugansk and Donetsk that he had already seized before. Making enormous economic and military sacrifices to maintain status quo would be foolish. Putin might be insane, but he is not a fool.
And if Putin settles under these circumstances, that will essentially mean an admission of defeat in the “special military operation”. That at the same time is a sign of weakness that would clearly be visible to the Russian elites and Putin’s internal circle as well as to the part of the electorate who supports the war (and that according to independent surveys is around 50% of the population).
That is why this will not happen, in our opinion.
In scenario number two the conflict is frozen and Russia is isolated.
That could unfold the following way: Russia augments cruelty in terms of military actions and seizes a major part of Ukraine that later becomes an unrecognised territory with puppet government like Transnistria or Abkhazia. The West remains passive and de-facto accepts the new state of affairs.
And if the previous scenario meant that the toughest sanctions (i.e. blocking the central bank reserves) could be lifted, this scenario signifies that all sanctions stay in place and Russia remains fully isolated from the rest of the world. And more than that, the regime becomes worse than that of Iran.
Tough dictatorship is imposed in the country with:
- price controls for basic goods (and shortages as a consequence),
- restrictions on trade and capital flows,
- internet censorship,
- restrictions on people flow (for valuable specialists),
- nationalization of companies and concentration of business activity around government projects.
This would inevitably happen to keep power in a situation of economic collapse caused by cutting the umbilical cord that used to be linking Russia with the rest of the developed world.
The regime could last 10 years until the West finally renounces the Russian natural resources and Russia has to (once again) find their place in the world. Different parts of Russia would be resolving this issue in their own way which could lead to a disintegration of the country.
How likely is that scenario? The probability from our perspective is again close to 25%.
First, we do not believe that the Russians are fully ready to this after living in a free (or relatively free) country for 30 years. That could of course be possible in a country where the population has low literacy, extreme levels of religious commitment or loyalty to a specific cause (idea or person). And that is not the case in modern Russia. The idea of nationalists in Ukraine or state rhetoric that the West is part of some sinister complot against Russia are no longer easy to digest and do not in no manner look noble enough.
The population would be ready to assume these ideas under the condition of relative prosperity. Which in this scenario is completely destroyed. Furthermore, Russia has already followed this path. And it appears that attempts to reverse the course of history are rarely successful long-term.
We, therefore, do not believe that this is a likely scenario for Russia.
Second, we do not believe that the West could just “swallow” this behaviour, given the rise of public sentiment against Russia and the fact that inaction would give China the green light it needs to collect “what is rightfully theirs” - Taiwan.
The last scenario is, therefore, the most likely, in my opinion. That is we see further escalation and the Kremlin, again, augments the level of cruelty in Ukraine.
Many experts say that given the resistance and sanctions, the Kremlin will have to start negotiations and eventually settle to try to save face.
Despite that being logical, Putin’s logic is different. So far, there have been a lot of sacrifices and barely any results. And more than that, the majority of sanctions will stay in place whether “he” makes the truce or not. And more than that, there is clearly no “face” left to save.
What is important to understand here is that Ukraine which is militarising and attempting to integrate in Europe is seen as an existential threat by the Kremlin. That is why I believe that no losses would stop Russia from attempting to seize eastern and central Ukraine. By any means and at all costs.
That means that the war is going to get more brutal.
How could the West react here?
Judging from their unwillingness to impose a no-fly zone over Ukraine and send the army, the West is tempted to sit on the sidelines and isolate Russia economically instead. That would under certain circumstances help arrive at scenario number two.
However, from our perspective that is no longer possible.
The West has already raised public awareness of the conflict in an attempt to justify harsh sanctions and to some extent put the blame for high inflation and slowing economic growth on Russia. That seems to be a logical decision for western politicians.
The problem here is that tbecause of that the public (both in the EU and the US) no longer sees the war as a local conflict between slavic countries that they should not get involved in.
We see that businesses that are not even under sanctions are leaving Russia being pushed by this public opinion. And this same opinion makes it unaffordable for the EU to sit on the sidelines.
The economic measures of restricting Russia have already been depleted: the access to Russia’s Central Bank reserves has been barred, economic ties have been broken. The more cruel the war becomes, therefore, the more Europeans get frustrated at their governments’ inaction. This inaction will increasingly be treated as weakness instead of prudence. This will make the public push the elected officials for more military involvement.
That in turn implies increasing the supply of weapons, troops and personnel (under the name of “volunteer foreign fighters”) and eventually establishing a no-fly zone over Ukraine.
This would lead to further escalation where the Kremlin has no other choice, but to revert back to using their threats one of which is the use of nuclear weapons. This eventually becomes a modern version of the Caribbean Crisis.
And this to us is the most probable scenario.
We could assume that in scenario number one Russia and Ukraine negotiate and agree on a settlement. And the probability of that to unfold is quite low, in our opinion.
To start with, what would satisfy Russia?
Dmitry Peskov, the press secretary of the Russian president, stated a couple of conditions for ending the war:
- Ukranian neutrality, meaning rejection of any plans to enter any military blocs,
- recognition of Crimea as Russian territory,
- recognition of Donetsk and Lugansk as independent states.
We believe that a settlement on these terms is not possible. Why would that be?
First of all, the last two conditions above imply a disgraceful peace deal which is normally only accepted when there is no other choice. Ukraine is not in a desperate situation and continues to show resistance, despite Kiev being surrounded.
More than that, the scale of the attack shows that all these conditions have been introduced as a disguise and in reality the Kremlin wants much more.
Putin wants to control at least the entire central and eastern Ukraine and not only Crimea or Lugansk and Donetsk that he had already seized before. Making enormous economic and military sacrifices to maintain status quo would be foolish. Putin might be insane, but he is not a fool.
And if Putin settles under these circumstances, that will essentially mean an admission of defeat in the “special military operation”. That at the same time is a sign of weakness that would clearly be visible to the Russian elites and Putin’s internal circle as well as to the part of the electorate who supports the war (and that according to independent surveys is around 50% of the population).
That is why this will not happen, in our opinion.
In scenario number two the conflict is frozen and Russia is isolated.
That could unfold the following way: Russia augments cruelty in terms of military actions and seizes a major part of Ukraine that later becomes an unrecognised territory with puppet government like Transnistria or Abkhazia. The West remains passive and de-facto accepts the new state of affairs.
And if the previous scenario meant that the toughest sanctions (i.e. blocking the central bank reserves) could be lifted, this scenario signifies that all sanctions stay in place and Russia remains fully isolated from the rest of the world. And more than that, the regime becomes worse than that of Iran.
Tough dictatorship is imposed in the country with:
- price controls for basic goods (and shortages as a consequence),
- restrictions on trade and capital flows,
- internet censorship,
- restrictions on people flow (for valuable specialists),
- nationalization of companies and concentration of business activity around government projects.
This would inevitably happen to keep power in a situation of economic collapse caused by cutting the umbilical cord that used to be linking Russia with the rest of the developed world.
The regime could last 10 years until the West finally renounces the Russian natural resources and Russia has to (once again) find their place in the world. Different parts of Russia would be resolving this issue in their own way which could lead to a disintegration of the country.
How likely is that scenario? The probability from our perspective is again close to 25%.
First, we do not believe that the Russians are fully ready to this after living in a free (or relatively free) country for 30 years. That could of course be possible in a country where the population has low literacy, extreme levels of religious commitment or loyalty to a specific cause (idea or person). And that is not the case in modern Russia. The idea of nationalists in Ukraine or state rhetoric that the West is part of some sinister complot against Russia are no longer easy to digest and do not in no manner look noble enough.
The population would be ready to assume these ideas under the condition of relative prosperity. Which in this scenario is completely destroyed. Furthermore, Russia has already followed this path. And it appears that attempts to reverse the course of history are rarely successful long-term.
We, therefore, do not believe that this is a likely scenario for Russia.
Second, we do not believe that the West could just “swallow” this behaviour, given the rise of public sentiment against Russia and the fact that inaction would give China the green light it needs to collect “what is rightfully theirs” - Taiwan.
The last scenario is, therefore, the most likely, in my opinion. That is we see further escalation and the Kremlin, again, augments the level of cruelty in Ukraine.
Many experts say that given the resistance and sanctions, the Kremlin will have to start negotiations and eventually settle to try to save face.
Despite that being logical, Putin’s logic is different. So far, there have been a lot of sacrifices and barely any results. And more than that, the majority of sanctions will stay in place whether “he” makes the truce or not. And more than that, there is clearly no “face” left to save.
What is important to understand here is that Ukraine which is militarising and attempting to integrate in Europe is seen as an existential threat by the Kremlin. That is why I believe that no losses would stop Russia from attempting to seize eastern and central Ukraine. By any means and at all costs.
That means that the war is going to get more brutal.
How could the West react here?
Judging from their unwillingness to impose a no-fly zone over Ukraine and send the army, the West is tempted to sit on the sidelines and isolate Russia economically instead. That would under certain circumstances help arrive at scenario number two.
However, from our perspective that is no longer possible.
The West has already raised public awareness of the conflict in an attempt to justify harsh sanctions and to some extent put the blame for high inflation and slowing economic growth on Russia. That seems to be a logical decision for western politicians.
The problem here is that tbecause of that the public (both in the EU and the US) no longer sees the war as a local conflict between slavic countries that they should not get involved in.
We see that businesses that are not even under sanctions are leaving Russia being pushed by this public opinion. And this same opinion makes it unaffordable for the EU to sit on the sidelines.
The economic measures of restricting Russia have already been depleted: the access to Russia’s Central Bank reserves has been barred, economic ties have been broken. The more cruel the war becomes, therefore, the more Europeans get frustrated at their governments’ inaction. This inaction will increasingly be treated as weakness instead of prudence. This will make the public push the elected officials for more military involvement.
That in turn implies increasing the supply of weapons, troops and personnel (under the name of “volunteer foreign fighters”) and eventually establishing a no-fly zone over Ukraine.
This would lead to further escalation where the Kremlin has no other choice, but to revert back to using their threats one of which is the use of nuclear weapons. This eventually becomes a modern version of the Caribbean Crisis.
And this to us is the most probable scenario.