Ukraine Is Losing the War

All you hear about in the media is how many Russian soldiers are being killed and how much Russian equipment is being destroyed. Videos are everywhere depicting Russian tanks being destroyed.

You never hear anything about Ukrainian military casualties or see any videos of Ukrainian tanks and other military equipment being destroyed. But rest assured, Ukraine has suffered heavy losses in its war with Russia.

Meanwhile, Russia is making steady progress in eastern Ukraine. Russia has taken Lyman (a key logistics hub) and is encircling the Ukrainian army in the city of Severodonetsk.

The Mainstream Media Can’t Ignore the Facts Anymore

Even The Washington Post is admitting to Russian successes:

The city of Severodonetsk, near Lysychansk, is surrounded on three sides by Russian forces. Over the weekend, they destroyed one of three bridges into the city, and they are constantly shelling the other two. Ukrainian troops inside Severodonetsk are fighting to prevent the Russians from completely encircling the city…

The Russians can advance north toward Lysychansk and completely surround Severodonetsk. That would also allow them to go after larger cities in the region.

Meanwhile, Bloomberg is now admitting that “Russian troops control almost all of Ukraine’s eastern Luhansk region.”

One Ukrainian unit commander in this area concedes that the truth is being covered up for propaganda purposes:

The casualties here are largely kept secret to protect morale among troops and the general public. “On Ukrainian TV we see that there are no losses. There’s no truth.”

I don’t report any of this because I’m pro-Russian. I’m not. I’m just interested in the truth, and the media haven’t been reporting the truth (what else is new?).


Apart from the kinetic war, there’s also the financial war against Russia.

Sanctions included seizing the assets of Russian oligarchs, excluding Russian banks from the international payment message system called SWIFT and freezing the assets of the Central Bank of Russia.

Sanctions also prohibited new investment in Russia, banned exports of semiconductors and high-tech equipment to Russia, banned Russian commercial aircraft from landing in the United States (except for emergency landings) and blocked exports of Russian oil to the U.S.

The EU, U.K., Canada, Japan and other allies introduced similar sanctions. Russia retaliated by prohibiting exports of strategic metals and other essential inputs to its adversaries and selectively cutting off its exports of natural gas to Poland and Finland.

What has been the effect?

U.S. Is Losing the Financial War

That’s not going so well for the U.S. and its allies.

Oligarch assets such as yachts and townhouses have been seized, but that’s exactly what Putin wants. Putin’s support comes from the military, intelligence services, the Orthodox Church and everyday Russians. Putin regards the oligarchs as potential threats, so he’s happy to see the U.S. destroy them financially.

The Russian ruble is actually stronger than it was before the war began. It was 80 to US$1 in late February and today is about 70 to US$1, a 13% gain. The Central Bank of Russia (CBR) is even cutting interest rates at the same time the Federal Reserve is raising U.S. interest rates. The CBR is even signaling they may cut rates further in the near future as a response to the strengthening ruble.

Most importantly, Russia’s trade surplus rose to $96 billion in the January-April 2022 period, which is more than triple the surplus for the same period in 2021. China, India and others are lining up to buy Russian energy exports in case the Europeans decide not to buy anymore.

It’s not clear how Europe can make up the energy deficit that would result (they probably cannot in less than three years), but they’ll be paying higher prices in any case.

And despite all of the sanctions talk in the media, oil and natural gas are still flowing from Russia to Europe and Russia is still being paid in dollars or euros. These payments are directed to a special account at Russia’s Gazprombank and are not subject to seizure by the U.S. (although Russia is limited in terms of what they can ultimately do with the funds).

Putin Is the Biggest Winner

The officials in the U.S. and EU who are imposing these sanctions don’t seem to understand that basic commodities, such as oil and natural gas, trade on world markets.

If Europe can replace the energy, they will have to pay the world price even as Putin receives the same world price from India or others. That’s how commodity markets work. The only difference is the price will be higher for everyone, including drivers and homeowners in the U.S., because of the boycotts and sanctions.

The biggest winner is Putin because he’s a net seller, not a buyer.

The same dynamic will play out with strategic metals like aluminum, titanium, palladium, platinum; in precious metals like gold and silver; and in commodities markets for wheat, barley, and corn.

The U.S./EU sanctions are causing disruption to global markets and imposing some costs on Russian citizens. Still the big winner in Russia itself.

It’s true that Russia has suffered a slight decline in GDP and mild inflation, but the U.S. has suffered far more. Prices for energy, food and housing in the U.S. are soaring in part because of the supply chain disruptions caused by the financial warfare started by the U.S.

Beware the Warmongers

It’s another case of the U.S. not being able to think even two moves ahead when it rushes into feel-good sanctions. The U.S. has said that the sanctions will not be lifted until the last Russian troops leave Ukraine.

Well, the Russians are not leaving Ukraine. So, get ready for a lot more financial pain as the war drags on and the costs pile up.

In the meantime, we can only hope that the warmongers in the media and in both political parties don’t drag us into the ground war in Ukraine. Unfortunately, their rhetoric is increasingly leaning towards regime change in Russia, which will only back Putin into a corner.

And a cornered autocrat, like a cornered animal, is extremely dangerous. You never know when or how he might lash out.


Jim Rickards
for The Daily Reckoning

The Daily Reckoning