What’s the Exit Path in Ukraine? Five Scenarios
Author: Greg Valliere
December 19, 2022
THE RUSSIAN INVASION ten months ago led to an astonishing Russian embarrassment, as young men fled Moscow and St Petersburg, as Russian troops suffered losses well in excess of 100,000 casualties. The bottom line has been clear — Russian troops are unwilling to die for Vladimir Putin, but Ukrainian troops are willing to die for their country.
WE SAID IN LATE FEBRUARY that there was no way Russia could win this war, by any conventional definition of the word “win.” We still feel that way, but what’s the exit strategy? We offer the five following scenarios:
1. Putin doubles down. Harassed by Russian hawks, Putin may intensify missile attacks on Ukraine’s infrastructure while threatening the use of weapons of mass destruction — nuclear, biological, chemical, etc. He may step up threats, but use of those weapons would unite the world — including China and India — against him. And there’s no certainty his generals would obey orders to use these weapons. A more likely Putin “double down” would bring his ally Belarus into the war.
2. Putin departs: Considering the enormous casualties inflicted on the top military brass — especially generals — there’s little wonder why Putin reportedly is paranoid about his personal safety. And there’s the issue of his health, the topic of growing speculation. If Putin left, of course, his replacement might not be any more palatable.
3. Ukraine drives to the east and south and effectively wins the war. Thanks to billions of dollars worth of Western weapons, and Kyiv’s fierce fighting force, Ukraine has re-captured hundreds of kilometers in the East. The conventional wisdom is that the war will stall during this winter but that isn’t necessarily true; the Ukrainian army could target western Russia with missile attacks.
4. The West loses its resolve. The brave Ukrainian people are prepared for a cold, dark winter, but what about the public in Western Europe and the U.S.? NATO has been remarkably unified but that will not last indefinitely. More aid is coming from Washington but the spigots may tighten by summer.
5. A truce by spring and the beginnings of negotiations. Analysts feel this
will become more likely as both countries are bled dry and agree to talk with an intermediary such as Recep Tayyip Erdoğan of Turkey (who has his own political problems). While Eastern Ukraine, in ruins, could be negotiated back to Kyiv, the biggest obstacle to a peace treaty would be the tremendously emotional issue of Crimea, which both countries consider non-negotiable.
BOTTOM LINE: An end of this horrible war does not appear to be imminent; even if Putin and Zelensky agree to talk, negotiations could drag on for months. And as long as the war persists, the inflationary pressure on natural gas, grains and metals will also persist, along with fears of a deepening Western European recession.
WE REITERATE: Russia cannot win this war; its troops are demoralized and its economy is in shambles. The Ukrainians will survive the winter — and by spring it will become clear that Putin has met his match.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
©2023 AGF Management Limited. All rights reserved.