One Year On

Zelenskyy Delivers Address to Mark One Year Anniversary?

Today marks one year since the full-scale Russian invasion of Ukraine, a conflict which has resulted in tens of thousands of deaths and brought untold devastation to so much of the country. In a speech to mark the anniversary, Zelenskyy addressed the nation and stated “Ukraine has surprised the world. Ukraine has inspired the world. Ukraine has united the world. There are thousands of words to prove it, but a few will suffice. HIMARS, Patriot, Abrams, IRIS-T, Challenger, NASAMS, Leopard.” This of course is a nod to Ukraine’s request to be supplied with battle tanks, an issue which has been the subject of considerable diplomatic contention and has seen policy makers weigh on the implications of doing so, and not doing so.

During the televised speech, Zelenskyy remained resolute and reaffirmed Ukraine’s unconditional commitment to defend their country, maintain that “I want to address those who are still waiting. Our citizens who are now under temporary occupation. Ukraine has not abandoned you, has not forgotten about you, has not given up on you. One way or another, we will liberate all our lands.”

The past year has seen Ukrainian counter offensives retake considerable amounts of ground from Russia’s initial advance. Still, particularly fierce fighting continues in Donetsk and Luhansk as well as Kherson and Zaporizhzhia - four Oblasts in Sovereign Ukraine which the Kremlin recognises as independent states. These areas account for around 15% of Ukraine’s territory while the regions’ citizens have been subject to near endless bombardments and martial law from Russian aggressors.

Zelenskyy’s speech therefore offered hope for many Ukrainian’s while also called on allies for support as Kyiv renews their demand for materiel and diplomatic pressure to suppress Russian aggression. This came hours after many of the world’s top diplomates met in New York to discuss the latest UN resolution, explored below. ?

UN Resolution Reveals Geopolitical Fault Lines.

Yesterday saw the UN General Assembly call for an end to the war in Ukraine and demanded Russia’s immediate withdrawal from the country, in line with the UN Charter. Nevertheless, the vote was telling of the various geopolitical fault lines which have surfaced since the full-scale invasion. For example, Belarus, North Korea, Eritrea, Mali, Nicaragua, Russia and Syria all voted against the motion while 32 countries abstained including China, India and Pakistan. Moscow remains an important – though often complicated ?– partner for Beijing and New Deli which continue to import oil and wheat from Russia in vast quantities. For example, even by June 2022 Chinse imports of Russian Urals Crude soared 55% on an annualised basis, as Beijing benefited from a discounted rate of an estimated 30%. It is also believed that much of the contracts are being settled in non-dollar denominated currencies – chiefly the ruble and renminbi as Moscow remains unable to utilise dollar revenues.

Meanwhile, New Delhi are keen to maintain an amicable relationship with Moscow given the former’s reliance on the latter’s arms industry which saw them sign a new 10 year bilateral defence agreement signed in 2021. Indeed, when Putin met Modi in December 2021, the Russian President said that the Russia cooperates with India in the “military and technical sphere like with no other country”. For example, around 2/3 of India’s military resources came from Moscow between 1950 and 2020 which are seen as vital to India given its relationship with its neighbours, Pakistan and China. Away from arms, India is also reliant on crucial Russian exports including energy and fertiliser while the two’s financial industries are also linked.

Hence, while the UN GA was able to pass the vote, the makeup of the votes (and abstentions) are revealing of the geopolitical complexities in relation to the conflict and thus how challenging brining peace will be. ??

Concerns Grow Over Increasingly Protracted Conflict

As the war enters its second year, concerns are growing around the prospect of the conflict growing increasingly protracted. Analysts at the Centre for Strategic and International Studies suggests that the window of opportunity to deescalate violence and find a diplomatic solution to interstate wars decreases significantly after the first thirty days. Using information from the Uppsala Conflict Data Program, they found that when wars lasted over a month but less than a year, only 24% ended in a ceasefire while on average when interstate wars last longer than a year, over 50% will last over a decade. Hence, as the conflict enters its second year and the window of opportunity for a diplomatic solution seemingly decreases, there is growing pressure on the global community to look for ways to deescalate the conflict and apply greater pressure on Putin.

Mixed Picture From US

Yesterday saw markets digest mixed economic data from the US which saw US GDP come 0.2 percentage points below expectation while the PCE deflator came in 0.5 percentage points higher than expected. In terms of US growth, data suggests that the economy expanded 2.7% over Q4 when measured on an annualised basis. This latest estimate of US GDP Growth follows an earlier estimate in January which indicated that the US economy grew 2.9% on an annualised basis in Q4. This beat expectations of 2.6% and helped markets build confidence in the notion of the US economy having a ‘soft-landing’. Here, the re-filling of inventories helped push up business demand, though fixed investment reduced 6.7% as businesses grappled with economic uncertainty and rising costs.?Meanwhile, higher-than-expected inflation gave greater support to the notion that the Fed would need to further tighten monetary policy to combat rising prices. This comes as markets price in a terminal rate in the US of 5.3%, a figure which has been upwardly revised in the last month and brought a rally to the USD.