“It has amazed a lot of people because they didn’t think Ukraine could reach so far. We clearly see the effects of deep strike technology,” he told the Royal United Services Institute this week.
Zagorodnyuk said the old warfare is essentially dead. Much of Russia’s enormous military hardware is useless. The war has become a high-tech race, and Ukraine is a step ahead.
The Wall Street Journal says the Trump administration is now actively helping with long-range intelligence, crossing a line that Joe Biden never dared cross.
All the optimism of the Trump-Putin summit in Alaska two months ago has drained away.
“Our edifice of relations is collapsing, and the Americans are to blame,” said Sergei Ryabkov, Russia’s deputy foreign minister.
Twenty regions of Russia are facing fuel rationing. Petrol stations are limiting sales to 30 litres across large parts of the country. Many have stopped selling 95-grade fuel altogether.
Russia was producing 9.7 million barrels a day (b/d) of oil in 2023. Goldman Sachs says this has dropped to 9 million b/d and could be on its way to 7.5 million b/d.
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The refinery crisis is causing a build-up of crude that cannot be stored. Goldman Sachs said drillers are reeling from 17 per cent interest rates and a rising “tax wedge”.
The Centre for Research on Energy and Clean Air says the total export revenues of Russian oil, gas and coal have been sliding for three years, reaching a new low of €546 million ($980 million) a day in August.
This is not enough to sustain a Russian war machine consuming a tenth of national income in one way or another. The liquid component of the reserve fund has fallen below 2 per cent of GDP.
The Kremlin is casting about for desperate taxes. It is even exploring a “parasitism tax” on shirkers, sparing only pensioners, the disabled and the seriously ill.
Russia’s “hot” military-Keynesian economy has flattered growth but at the cost of deepening deformation.
Putin has disguised the true deficit by forcing banks to lend to the military-industrial complex, but that is storing up a banking crisis and has reached the end of the road.
Fiscal attrition is now colliding with a second graver threat to Russia: the prospect of a prolonged collapse in oil prices as Saudi Arabia and the Gulf states flood the global market.
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The US Energy Information Administration expects $US50 oil prices in 2026. Goldman Sachs says Brent could drop to the low $US40s if the world economy slows and the Gulf states pursue maximalist market share.
In real terms, this is comparable to the oil market slump that broke the Soviet Union in the 1980s. On the other side of the ledger, lower oil prices act like a tax cut for the oil-importing states of Europe. The pain pendulum is swinging back in the West’s favour.
The clock is ticking for Putin and that, precisely, is the imminent danger facing Europe.
“He always raises the stakes when things are going wrong. In order not to lose, he may try to go further than Ukraine,” said Zagorodnyuk, now head of the Centre for Defence Strategies in Kyiv.
“The opinion of my colleagues in Eastern Europe is that the chances of the war escalating in Europe are now extremely high, and they are very concerned,” he said.
Russia’s war economy is producing weapons at full throttle
To the Western mind, it seems suicidal for Putin even to think of such a wild move when he cannot defeat Ukraine – but he may see more tactical gain from softer targets in Moldova or even across the NATO line.
His war economy is producing weapons at full throttle while Germany and European NATO countries are only just beginning to close the gap. The window of opportunity will never be so wide again.
A well-picked conflict might expose the deep cleavages within NATO.
The vulnerable points are well known. Ethnic Russians make up 85 per cent of the Estonian city of Narva, which sits on the Russia border. It is where Peter the Great won his first great victory over the Swedish empire and it is Tsar Peter’s portrait that hangs above Putin’s desk.
These are perilous times. They become more perilous if the West shows a flicker of weakness.
It would not be hard to conjure some murky irredentist grievance – from Hitler’s Sudetenland playbook – that fools those who wish to be fooled.
Otherwise, he could stir up trouble in the Suwalki Gap running through Lithuania from Belarus to the Russian Baltic enclave of Kaliningrad. Putin could escalate anywhere contrived to throw the West into confusion.
Zagorodnyuk said there is another geopolitical twist to this story.
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The talk in security circles is that Putin has reached a working deal with Xi Jinping: Russia wears down NATO with aerial violations and cyber-strikes, seeking to sow division and scare appeasers, while China stops the Russian economy collapsing and commits to staying the course.
Wang Yi, China’s foreign minister, stunned EU officials in July by openly stating that Beijing needs to keep Russia in the war to stop the US turning its full attention to China.
Helima Croft from RBC Capital said China has been filling its strategic petroleum reserve rapidly. American intelligence analysts suspect that China may be preparing for a showdown with the US over Taiwan.
How would Trump respond to a calibrated customs blockade of Taipei by the Chinese navy?
These are perilous times. They become more perilous if the West shows a flicker of weakness.
The better reflex is to take an economic knife to Putin’s throat by closing the Danish Straits to any vessel in Russia’s shadow fleet that violates clean shipping rules.
Zagorodnyuk said the hopeful template is the Crimean War of 1853-1856. Russia did not lose to France and Britain because it was crushed in battle or because it ran out of men or artillery shells. It lost because its silver-based currency regime collapsed and set off rampant inflation.
Its archaic serf-based army could not match the technology and structure of a modern military.
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The reactionary Tsar Nicholas I, who launched the war in false certainty that Britain and France would never join forces, accepted the harsh terms of defeat in the end because the cost of continuing the war had become excruciating.
Needless to say, the Tsar had his cheerleaders in the democracies. One Karl Marx wrote in his column in the New York Daily Tribune that “a certain class of writers” was enthralled by that cruel, reckless and unpleasant autocrat.
They attributed to him “extraordinary powers of mind and especially of that far-reaching, comprehensive judgement which marks the really great statesman”.
Some things never change.
