Ukraine’s army is winning but its economy is losing

My first visit to Kyiv since the Russian invasion in February coincided with a major Ukrainian military success in the east of the country, where Kupyansk and Izyum were liberated and Russian troops routed. However, the government of President Volodymyr Zelenskiy is too smart to celebrate one successful battle when there is a war to be won against a still-formidable adversary.
In the belief that one of the geopolitical fault lines of the modern world runs through Ukraine, I have visited the country annually for the past 11 years to attend the Yalta European Strategy conference, or YES, an event organised by the Victor Pinchuk Foundation. A businessman and philanthropist, Pinchuk is indomitable. When Russia annexed Crimea (including Yalta) in 2014, he moved the event to Kyiv, but kept Yalta in the name. When Russia invaded again in February, launching a Blitzkrieg against Kyiv, Pinchuk insisted the event must go on. I and the other foreign participants travelled from Poland by an overnight train for two absorbing days of discussions and meetings attended by Zelenskiy and key members of his government.
Zelenskiy and his team are acutely aware that the next three months will bring both economic and diplomatic dangers for Ukraine.
Economically, the nation’s parlous fiscal and monetary situation is leading the country in the direction of high inflation if not hyperinflation. Diplomatically, the approach of winter and the shifting sands of European and American politics pose a threat to Western unity that the Russian president, Vladimir Putin, is hoping will give him leverage. Without an immediate increase in Western support, Ukraine will struggle to sustain its success on the battlefield.
The good news from the eastern front was conspicuous by its absence from the speech delivered by Zelenskiy at YES.
A “winter of discontent” lay ahead not only for Ukraine but for all of Europe, he warned; the next 90 days of the war with Russia would be decisive.
In his speech and in subsequent discussions, Zelenskiy, wearing his trademark green T-shirt, made it clear that any kind of negotiated settlement with Russia is out of the question so long as Russian troops remain on Ukrainian soil. “There is no exit … but to win,” he declared. “If our generation cannot win this war of attrition in our lifetime, the fight will still go on.”
However, he also made it clear how urgently Ukraine needs not merely continued assistance from the US and the European Union, but more assistance. Europe must resist war fatigue, Zelenskiy insisted. “The choice is between prices and values” — an implicit acknowledgment that inflation is now an actor in the Ukrainian drama.
Prime Minister Denys Shmyhal struck a similar note. “This is the beginning, a very promising one,” he said of the successful counteroffensives east of Kharkiv. “But this news should not make us complacent … This demonstrates our will and our way to win this war.” Shmyhal was one of several Ukrainian spokesmen who explicitly acknowledged the risk of hyperinflation.
In a realist perspective, Russia would seem bound to prevail over Ukraine sooner or later. Its territory is 28 times larger; its GDP is nine times larger; its population is 3.3 times larger. Western sanctions do not alter the fact that Russia still has significant (if reduced) revenue from exporting its gas and oil, whereas Ukraine is heavily dependent on Western economic and military assistance. Time might seem to be more on Russia’s side than Ukraine’s.
But Russia could
still lose. Size is not everything. Thirteen American colonies vanquished the British Empire. North Vietnam defeated the US. The Soviet Union could not win in Afghanistan. Empires decline and new nations break free.
The invader is at an inherent disadvantage in
the face of a strong nationalist sentiment. Putin has
inadvertently turned the formerly divided and disgruntled inhabitants of Ukraine into the Ukrainian people. And wars of national liberation against declining empires are more often successful than not. That is why there aren’t many empires left.
One may debate whether the US and the Soviet Union were empires between the 1940s and the 1980s (both denied it). What no one denies is that they waged a Cold War. That meant that World War III did not take place, but many proxy wars were fought in which one or more the superpowers backed one or more sides in regional conflicts.
Right now, Ukraine is not only fighting for its freedom; it’s a proxy for a US-led effort to weaken Russia (and perhaps also to deter China from similar aggression). The Ukrainian war effort is sustainable only thanks to large-scale military and financial aid from the US and its Anglosphere and European allies. At the same time, US-instigated sanctions (especially technology export controls) are driving the Russian economy and military back into the late 20th century.
This is an asymmetric war in Cold War terms. The combined resources of the countries actively supporting Ukraine vastly exceed Russia’s, while China has thus offered minimal support to Russia (though watch carefully this week’s meeting in Uzbekistan between Putin and Chinese President Xi Jinping).
If the US further increased its supply of precision weaponry to Ukraine and added tanks to the mix, the Russian positions in Kherson, Luhansk and Donetsk could probably be made unsustainable. Similarly, if the EU further
increased its economic support for Ukraine, the risk of an inflationary crisis would recede.
There is a scenario — I would give it a 20% probability — that the Russian position in Ukraine now unravels. This is a largely colonial army, its best battalions severely depleted by six months of highly destructive warfare, its
ranks replenished by raw recruits from impoverished provinces east of the Urals. Its morale is low.
Such armies can be brought to a tipping point if they encounter well-armed, well-organised and well-motivated opponents. Defeat in land war is much less about killing enemy soldiers than getting them to surrender, flee or desert.

—Bloomberg

Niall Ferguson is a Bloomberg Opinion columnist. The Milbank Family Senior Fellow at the Hoover Institution at Stanford University and the founder of Greenmantle, an advisory firm, he is author, most
recently, of “Doom: The Politics of
Catastrophe”