Note: This Situation Report acts as an update to KSG’s 23 October, 2024 assessment of the Russo-Ukrainian Conflict.
Key Takeaways:
Trump’s election means Ukraine is likely to have little over two months left of considerable US resource support.
Ukraine fired Western-supplied long-range missiles into Russian territory; Russia responded by targeting Dnipro with an experimental intermediate-range ballistic missile (IRBM).
Russian advances in the Donbas and counter-offensive in Kursk are gaining momentum despite record-breaking casualties.
North Korean personnel will almost certainly join Russia’s Kursk counter-offensive in the coming weeks as they complete training alongside Russian paratroopers.
The intensity of the fighting will likely increase significantly in the lead-up to President-elect Trump’s inauguration as both sides seek to gain leverage going into peace negotiations.
Military Developments
Over 1,000 days into the full-scale invasion, the Russian military continues its steady advances in Eastern Ukraine at an increasingly high material and personnel cost. During the first 12 days of November, Russia lost an average of 1,498 soldiers per day – up from an average of 1,354 casualties per day in October, which had marked a new high for Russian losses in Ukraine.
In Donetsk oblast, Russian forces continue advancing towards Pokrovsk and have entered Chasiv Yar and Toretsk. These cities are strategically important for Ukrainian military logistics in the Donbas.
In Kharkiv Oblast, Russian forces have intensified efforts to capture Kupyansk since 13 November; heavy fighting is ongoing.
Ukrainian forces are under growing pressure from Russian advances in Kursk, where Western officials have expressed concern over the confirmed presence of North Korean troops.
Most significantly, the UK and the US permitted Kyiv to strike Russian territory with Storm Shadow and ATACM long-range missiles. On 19 November, Ukraine fired around eight ATACMs at an ammunition warehouse in Bryansk, followed by around twelve Storm Shadow missiles launched at a Russian command post in Kursk on 20 November.
On 21 November, Moscow responded by hitting Dnipro with Oreshnik, an experimental hypersonic intermediate-range ballistic missile (IRBM). Putin claims that Western air defences cannot intercept Oreshnik, which has sufficient range to strike any European country.
Western Support for Ukraine
In light of Donald Trump’s victory in the US Presidential election, the Biden administration is attempting to rush through as much assistance to Ukraine as possible before President-elect Trump’s 20 January inauguration. KSG assesses that the Biden administration hopes that additional aid will strengthen Ukraine’s negotiating position once President-elect Trump assumes office on 20 January 2025.
On 20 November, the US Department of Defence announced a $275 million military aid package, in addition to the $425 million package announced on 01 November.
On 21 November, it was reported that the Biden administration had informed Congress of plans to forgive $4.65 billion of Ukraine’s debt to the US.
European allies are also increasing military aid, likely in alignment with the Biden administration’s strategy to strengthen Ukraine’s negotiating position.
On 20 November, Germany announced the delivery of a significant military aid package, including additional artillery, ammunition, and air defences.
Denmark pledged to invest $137.5 million to develop the Ukrainian defence industry, which will boost long-term Ukrainian production of drones, missiles, and artillery.
Following Russia’s 21 November strike on Dnipro using Oreshnik, Kyiv convened the NATO-Ukraine Council to meet on 26 November; officials will almost certainly discuss providing Ukraine with additional air defences. KSG consultations concluded that Ukraine will likely secure these resources before 20 January.
Russian Diplomacy
KSG assesses that the Kremlin’s recent aggressive statements concerning Western support are likely rhetorical (despite increasing belligerence), seeking to delay and dissuade Ukraine’s allies from providing further support. This has been a critically successful and consistent Russian strategy throughout the war, particularly leading to the Western media taking the threats very seriously, creating an inaccurate threat perception with Western publics and politicians. As two examples:
In his address following the Oreshnik strike, Putin explicitly threatened to attack NATO countries that provide technology and support for Ukrainian missile strikes inside Russian territory.
The Russian ambassador to the UK stated that following Ukraine’s use of Storm Shadow missiles in Kursk, Britain is now “directly involved” in the Ukraine war.
North Korean involvement
Open-source investigators report that Russia has transferred over a million barrels of oil to North Korea since March 2024 – in violation of UN sanctions. Russia’s oil is highly likely a form of payment for North Korean weapons and soldiers.
Russia-Austria Gas Supplies
On 16 November, the state-owned Russian energy company Gazprom Export suspended gas supplies to Austria under its contract with OMV. This follows OMV’s decision to recuperate compensation awarded through arbitration against Gazprom Export by offsetting the €230 million sum against payment for Russian gas deliveries.
Domestic Stability and Russian Economy
As the war continues, economic pressures identified by KSG in July 2024 are gradually becoming more acute, thereby increasing the risk of an economic crisis in Russia, which has the potential to undermine domestic stability.
Inflation continues to rise (currently at 9.1%) along with the Central Bank’s key interest rate, which has increased to 21%.
Economic activity shows signs of slowing, with output slowing across all core sectors over the previous three months (bar the defence sector) and incoming payments through the Central Bank’s payment system down 2.9% against the Q3 average.
Russia’s target of a budget deficit below 1%, while spending an unprecedented 6.2% of GDP in 2025 on the military, is almost certainly unrealistic in these economic conditions. This is reflected by the Russian “National Wealth Fund” bleeding liquid assets since February 2022 – now under half its pre-2022 value.
Forward Look
Military
Russia will almost certainly continue (and intensify) its offensives in eastern Ukraine, likely continuing to employ Oreshnik missiles and potentially other experimental weapons systems in an attempt to sap Ukrainian morale and stoke hesitance among Ukraine’s Western supporters. The rate of Russian advances likely hinges on whether Ukraine can successfully defend its key logistical hub, Pokrovsk.
KSG assesses that Ukrainian forces are likely to be pushed out of Kursk by January 2025, having already lost approximately 40% of captured territory.
Negotiations
KSG assesses that following President-elect Trump’s 20 January inauguration, the new administration will quickly begin efforts to end the war in Ukraine. Trump will likely use military aid to Ukraine to leverage both sides into engaging with his administration’s peace proposals.
The Trump administration’s peace proposals are highly likely to seek territorial concessions from Ukraine along existing lines of engagement with minor adjustments – hence the intensification of fighting in Donbas and Kursk. Kyiv has already voiced its opposition to any peace proposals that require it to cede territory.
Trump aides have indicated that the US would demarcate a demilitarised zone along the ‘new’ Ukraine-Russia border, patrolled by European troops, while the US heavily arms Ukraine – in lieu of security guarantees through NATO membership. However, KSG assesses that Moscow is unlikely to tolerate the presence of NATO troops in Ukraine, although the US possesses sufficient leverage to require Russia to compromise.
Ukraine Reconstruction and Defence Sector
KSG assesses that Trump’s peace deal is likely to create lucrative opportunities for US weapons manufacturers, as an obligation for the US to arm Ukraine would create significant and consistent Ukrainian demand for US weaponry.
With the prospect of a peace deal, KSG assesses that within the next 6 months, opportunities will arise for financial services and construction firms to participate in Ukrainian reconstruction.
Political Stability in Russia
Rising inflation paired with low economic growth makes it increasingly likely that Russia will enter a period of economic stagflation. Such circumstances would increase public pressure on Putin and his elites to conclude the war in Ukraine, thus potentially making Russia more likely to negotiate once Trump initiates talks.
Most Likely Scenario in 6 months (May 2025)
Following his inauguration, President Trump will have secured a ceasefire agreement from both Ukraine and Russia by:
Threatening Russia with increased US domestic oil production (to drive down global prices) and increased aid to Ukraine.
Threatening Ukraine with cuts to military assistance if it did not do the same.
NATO members (notably Turkey), gulf states and Belarus will have also participated in peace talks. KSG assesses that ultimately neither China nor North Korea will have participated meaningfully in ceasefire talks.
By May, there will still be difficulty in reaching an agreement. For example, European NATO members will refuse to recognise Russian-occupied Ukrainian territories, Russia will demand certain sanctions be lifted to continue negotiations, and Russia will oppose the presence of NATO troops and advanced weaponry in Ukraine.
Concurrently, Russia will attempt to destabilise European NATO members through an intensification of its clandestine misinformation and sabotage campaign. The Kremlin will be aiming to divide European participants and delay the negotiation process, to frustrate President Trump (who seeks a quick resolution) and influence his administration into pursuing a deal with less European input and terms more favourable to Russia.
KSG wargaming concluded that regular breaches of the ceasefire agreement will be seen along the line of contact still in May.