The Daily Telegraph
Humiliated in Ukraine – but the gas supply remains Russia’s trump card
Kyiv may have made huge inroads, yet Europe faces immense danger from Kremlin’s energy gambit
‘The Russian economy will shrink this year but not by as much as initially hoped’
The war in Ukraine has reached a new inflection point. Ukraine’s armed forces have advanced north of Kharkiv, the country’s second largest city, to within 30 miles of the Russian border in the past few days, recapturing roughly 1,200 square miles and more than 20 towns and villages along the way.
Joyful residents are returning to villages on what used to be the front line. Kremlin-backed troops are abandoning their weapons. In one video on social media, a Ukrainian surveys the line up of Russian hardware and declares: “Tanks for everyone!”
This is a stunning achievement. Perhaps we can start to hope that the Russian invaders can indeed be repelled. But the latest developments are not without risk. Markets, which, in recent months have focused more on second order effects like the energy crisis caused by the war may have to start taking more of an interest on military updates again.
From a purely financial point of view a situation in which Vladimir Putin got most of what he wanted but was persuaded to refrain from further aggression might have provided the fastest path back to normality. The humiliations being visited on Russian troops clearly raises the risk of military and economic retaliations from the Kremlin. If Putin’s grip on power weakens, all bets are off.
Predicting what happens next is a mug’s game. This conflict has made fools of most forecasters.
The consensus view on war in Ukraine has been consistently off-beam. Now we might be about to enter the most uncertain phase of the conflict.
Even as Russian tanks were massing on the borders of Ukraine, the received wisdom was that Putin was merely sabre rattling and wouldn’t invade. Then he did. At that point, the smart money was on Russian troops swiftly capturing the capital Kyiv. Then they got bogged down.
The initial euphoria at this setback was supplanted by the realisation that the war would become an attritional battle of the wills in which Russia was better equipped – both militarily and psychologically – to prevail. The broad assumption was that Putin would achieve most, if not all, of his goals and hang on to most of the more strategically valuable territory.
In fairness, that was a reasonable bet as it conformed to recent history. Russia made its first incursions into the Donbas in 2014 and annexed the Crimean peninsula shortly after. It appeared that we were heading for another unsatisfactory but relatively stable impasse.
At the same time we have cycled through several viewpoints on the efficacy of western sanctions – from doubt that a novel set of prohibitions could be coordinated, to belief they might be a gamechanger to concern they might be counterproductive.
The news of the last few days has overturned these judgments yet again. Ukrainian forces appear to have Russian troops on the run. Westernbuilt heavy weapons are flowing into the country. Sanctions may not have delivered a knockout blow to Russia but they are indeed working – slowly and surely.
Nevertheless, the strategic benefits of these victories remain unclear. Much of the recaptured territory is relatively sparsely populated. The Russian economy will shrink this year but not by as much as initially hoped.
The pictures of Ukrainian civilians greeting their liberators will doubtless deliver a huge morale boost and likely stiffen the resolve of Western countries to keep sending arms and other support to Kyiv.
Wry satisfaction is understandable and deserved but celebration would definitely be premature. About a fifth of Ukraine remains occupied. Russian troops are destroying vital infrastructure as they retreat. Every day the war continues, the reconstruction bill grows larger.
Putin’s greatest ally right now is probably the weather. Rockets have been fired at Ukraine’s second-largest thermal power plant in Kharkiv. Analysts believe this may just be a dress rehearsal designed to strengthen the Kremlin’s hand in any future negotiations.
Half of Ukraine is already without power and facing the very real threat of having to survive the coming winter with no supplies of electricity or gas.
Such threats prompted the stirring speech in which the Ukrainian president Volodymyr Zelensky directly addressed Russia over the weekend: “Read my lips: without gas or without you? Without you. Without light or without you? Without you.
“Without water or without you? Without you. Without food or without you? Without you.”
Similarly, turning off the gas taps to Europe remains Putin’s trump card. But it is one that he can only play once. Indeed, the threat alone has already wrought irrevocable geopolitical changes. It has forced political leaders to confront the worst-case scenario and therefore accelerate the alteration of the continent’s energy mix.
They know they cannot allow their countries to ever again operate under the thumb of a virtual energy export monopoly.
Politicians would prefer more time to ensure the transition is less painful but Putin is forcing them to rip the plaster off. Germany, for example, has replenished its gas reserves at breakneck speed and is close to squirrelling away enough to get it through the coming winter. European natural gas prices have already halved from their recent highs and are now back to the levels last seen in July.
Price subsidies are in place in many countries – including the UK – which should help keep the lid on the kind of public discontent that Putin would have been hoping might pressure western leaders into reducing their support for Ukraine.
But, if Putin’s energy gambit fails, then what? Putin has repeatedly dropped thinly veiled hints about the use of nuclear weapons.
Washington has made clear it takes such attempted extortion – along with unspoken threats about the use of chemical and biological weapons – very seriously indeed.
If the Russian leader feels cornered, he may lash out. If he is overthrown, there is no guarantee his replacement will be any less nationalistic, jingoistic or revanchist. Ukraine’s recent victories should be celebrated; this is an important moment. But it is also a dangerous one.