Russian invasion of Ukraine

India refuse to pay in rouble, North Korea aren't paying in currency for oil but goods and man power. Another refinery getting hit last night will hopefully have an impact too a death by a 1000 cuts.
That's is why I think its hard to understand the significance of the Rubel tanking. Any international trade is probably in usd in the black market or with North Korea they probably trade commodities (food/oil).

The rubal is I guess just a tool of the internal Russian economy and we should not be surprised its losing value in exchange markets.
 
THE GROUND WAR IS NOT GOING IN UKRAINE’S FAVOUR

Ukraine struck into Russia with ATACMS both around Kursk and into Crimea yesterday. The Russians continued to make advances westward almost all along the front. Additional small gains were made in Kursk. Russians seem to be focusing on Kurakhove and preparing for another offensive operation to take it while the weather permits. Russian forces also managed to cross at points along the Oskil river – mostly just infantry in boats, but it’s an alarming development that needs to be reversed.

Overall the assessment by the ISW is the war is far from being stalemated and is now more mobile than at any time since the middle of 2023, but almost universally in Russia’s favor.

The issue for Russia is can it keep this up and win, before the economic cost, which is now perilously worrying if you’re sat in the Kremlin economics office, catches up with it?

Ukrainian drones again struck deep into Russia, aiming at key military-industrial targets. The oil refinery came under attack in Kaluga and is still on fire this morning.

Typhoon electronics factory on fire
In addition to that, Ukrainian drones struck and did considerable damage to a key military industrial factory of the Typhoon company. This makes coastal missiles batteries to defend from sea attacks, but its other and more important contributions are command modules for anti-aircraft systems and artillery, as well as passive and active warning systems for warships.

SANCTIONS TIGHTEN

US banking sanctions have been tightened against Gazprombank, forcing as many as twenty ‘neutral’ countries – including China – to stop issuing cash or use of credit card facilities to individuals or companies using the UnionPay card system.


The card system was being used as a way of obtaining foreign currency or paying in foreign currency while drawing off a rouble account. This enabled purchasing of goods and services for Russia in China especially. It also complicates the lives of many Russians who rely on Russian investments for income abroad, especially in countries like the UAE.

THE COST OF THE WAR IS DRAGGING DOWN THE NAVY

The war is also having a seriously detrimental effect on the Russian navy. With the fleet in the Black Sea cut off because of the war, the Bosphorus being closed to warships by Turkey, Russia’s navy has been reduced to sitting in port by Ukrainian naval drones.

The rest of the Russian surface fleet based in the far north is suffering huge budget cuts. Refurbishments and routine refits have been delayed, stopped or even abandoned. The naval surface fleet is considered a low priority and many of the crews are now being transferred to front line formations in Ukraine.

One major victim of the cost is the Russian nuclear powered battle cruiser in refit – the costs have become prohibitive and the work has stopped. It’s considered unlikely she will ever return to sea.


New surface ship construction has dropped dramatically and has either been suspended or continues at a crawl.

Only the submarine force seems to be maintained at normal levels, but intelligence gathering shows that the pace of construction at Sevmash, the main submarine builder has slowed dramatically.

These are very capital-intensive as well as resource demanding programs showing that both materials, components and money are all in short supply.

Russia is so desperate for cash it’s actively selling submarine and missile tech to China and N.Korea.

Despite the bravado, Russian air forces continue to receive relatively few aircraft new. Su-27 and Su-35 production is barely a dozen a year – losses are twice that and more.

MILITARY PRODUCTION EVEN FOR THE ARMY IS WOEFUL

Russia has fallen into the trap of dictators past, and continues to focus on flagship programs such as new ballistic missiles, strategic bombers, producing few and changing nothing on the ground in the war. But they look good and appear prestigious.

Meanwhile key items like artillery gun barrels, remain woefully unavailable, disabling much of the large artillery and preventing new being manufactured at all. Repairs to Russian artillery following wear of the barrels leaves hundreds of units laid up. Much of this is caused by the lack of specialist turning machines and industrial machinery. Pre-war investment was minimal and sanctions have stopped any new equipment being delivered.

Russian howitzer barrels, worn out and irreplaceable.
The same situation exists for tank gun barrels which are made in the same factory. These continue to be one of the reasons so few tanks are produced annually.

Overall the stocks of Russian soviet era stockpiles of vehicles are now close to exhausted. Most of what’s left is beyond viable repair and parts can no longer be cannibalised. Most of this war has been fought using the massive legacy of Soviet military excess. On the good side once it’s gone it’s gone. Russian new production is barely 10% of what’s needed. The staggering quantities of vehicles that even now, still forms most of the Russian army vehicle parc, have been an inheritance not to be repeated.


Russian in 2025 is facing at last, the start of a major vehicle shortage, reduced artillery availability- despite plenty of ammunition- and lack of every type of support vehicle such as trucks and tractors.

Post war of course this is actually an advantage. It forces Russia to rebuild with the latest technologies and lessons learned. But for now Russia is facing a complex problem of low production, exhausted vehicle parc and nothing much left to refurbish. There’s still a huge number of existing in-service vehicles yet to be lost, but it’s a finite resource.

With limited materials, state budgets stretched, income declining, inflation soaring, manpower shortages in both the manufacturing sector and the frontlines, cash reserves dwindling, bond markets imploding, the currency sliding downhill at 5% a week, interest rates at eye-watering levels and still rising, Russia has serious problems its increasingly difficult to overcome.

THE ANALYST

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