Page 4 - UKRRptJul22

1.0 Executive summary
The war drags on and Ukraine is losing ground to Russia in the face of incessant shelling. Russia has already taken all of Luhansk and is now in the process of trying to take the half of Donetsk it doesn’t already control. Will Russian President Vladimir Putin stop then? It’s possible. It would be the clever thing to do as he could declare victory and stop the bleeding of men, materiel and money. But Putin has become so unpredictable since the start of this year anything remains possible.
In the first phase of the war Russia attacked on too many fronts and never managed to take control of more than roads. That left its columns of men and amour vulnerable to the hit & run of small teams armed with the deadly Javelin missiles, which were used to such devastating effect.
But in the second phase things have changed. The war has become a classic large scale set piece confrontation, with fortified positions and dug in troops that are extremely hard to dislodged. The fighting has changed from the fast-moving low-profile hit & run teams to slugfest of an artillery duel. And there the Russians have the advantage out gunning the Ukrainians ten-to-one. Even if the Ukrainian troops are dug in, the sheer volume of lead the Russians can throw at them means that it will slowly wear down the resistance and advance, inch by inch.
For its part Kyiv has been calling on the west constantly for heavy weapons, but it hasn’t received them. In the meantime, Ukraine has put up a heroic defence, but unless Nato sends heavy weapons the outlook for Kyiv hanging onto the rest of Donbas looks poor.
Unless something changes – and according to reports the US doesn’t have the manufacturing capacity to provide enough of the heavy weapons Kyiv needs to turn the fight around for at least a year – the only hopes for a Ukrainian victory are if the Russian economy collapses, there is a mutiny by the Russian soldiers, or if Putin dies of cancer. As the sanctions are not having the desired effect and actually Russia is earning more money than ever, the first is unlikely, but the other two could still happen.
A new problem has surfaced as the war drags on longer than anyone expected: Kyiv is running out of money. Ukraine has received a total of about $9bn from the West to support budget expenditure, but it is running a deficit of around $5bn a month. The government has already tapped the country’s reserves to the tune of $3bn and the National Bank of Ukraine (NBU) is printing the rest. With only $30bn pledged by the donors to the rest of the year, but government estimates of $65bn in spending this will be a problem. Although it seems likely the donors and the IMF will cover the shortfall.
The economy is in tatters. The NBU expects Ukraine's economy to contract by “only” 35-40% in 2022. According to the National Bank,
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