Crisis in Kursk
Ukraine continues to occupy Russian territory after a surprise incursion in the Kursk region
Hello from the Bear Market Brief. We are back from our planned hiatus and are resuming weekly news updates!
This week in the news:
In early August, Ukraine launched a military offensive in Russia’s Kursk region. While Ukraine now controls approximately 1,000 square kilometers of Russian territory, Russian forces continue to advance rapidly in Ukraine’s southeast.
Several Russian regions are holding regional elections September 6-8 amid the most repressive electoral conditions in recent Russian political history.
Following the announcement of a government shake-up by Ukrainian President Volodymyr Zelenskyy, several key ministers have resigned and been replaced.
President Putin spoke about economic challenges in Russia’s forced pivot to Asian markets during the Eastern Economic Forum in Vladivostok.
— Sara Ashbaugh, Editor in Chief
Ukraine’s Kursk offensive
On August 6, the Russian Ministry of Defense reported that Ukraine launched an offensive in the Kursk region, which lies in western Russia and borders Ukraine. Ukrainian authorities confirmed their involvement on August 12, and three days later, Ukraine's commander-in-chief Oleksandr Syrskyi announced the establishment of a military commandant’s office in the occupied part of the Kursk region headed by Major General Eduard Moskalyov.
As of early September, Ukraine reportedly controls around a hundred settlements and nearly 1,300 square kilometers in the region (albeit estimates vary, the extent of the push is only 813 square kilometers according to the Ukrainian OSINT project “DeepState”), and has taken hundreds of Russian soldiers prisoner. President Volodymyr Zelenskyy stated in a recent NBC News interview that Ukrainian forces are holding exactly the area they intended to, describing it as a buffer zone on Russian territory. He also claimed that Russia has mobilized over 60,000 troops to Kursk to counter the Ukrainian incursion, though this figure has not been independently verified.
In mid-August, Zelenskyy explained that the offensive was partly in response to the nearly 2,100 artillery strikes launched from Kursk into Ukraine’s Sumy region since June 1. The operation aimed to secure Ukraine's borders against potential Russian advances into the Sumy and Chernihiv regions.
Despite these explanations, some experts believe the Kursk offensive’s primary goal was to divert Russian forces from Pokrovsk in the Donetsk region. This objective appears to have failed, as Russian forces continue their advancement, having captured an estimated 355 square kilometers in the Donetsk region. Capturing Pokrovsk would sever a crucial supply line for Ukraine and facilitate further Russian advances in the southeast. Ukrainian officials recently ordered mass evacuations from Pokrovsk, which had a prewar population of around 60,000, with Russian forces now just a few miles away.
George Beebe, Director of Grand Strategy at the Quincy Institute for Responsible Statecraft, expressed skepticism about the Kursk operation, suggesting it may have been a strategic blunder. “There seems to be a great deal of skepticism about what this incursion is going to accomplish, and growing concerns that it was a blunder,” Beebe noted. “The Russians have not diverted significant numbers of forces from the front lines in Ukraine. They’ve stepped on the accelerator pedal.”
— Lisa Noskova
As a result of its offensive in Kursk, the Ukrainian military now reportedly controls around 1,000 square kilometers and 93 villages in the Russian oblast, though estimates vary. Kursk and the neighboring Belgorod region have both declared a state of emergency, and almost 200,000 people have been evacuated from the area. Meanwhile, Russia continues to seize territory in eastern Ukraine, pushing toward the strategic city of Pokrovsk in the Donetsk region. Ukrainian authorities have begun to evacuate Pokrovsk and the surrounding villages as Russian forces rapidly advance. As of September 1, Russia occupied a total of 66,266 square kilometers in Ukraine. (map: BBC)
Russian domestic reaction to the Kursk offensive
For the Russian authorities, the offensive in Ukraine remains a strategic priority, as confirmed by Vladimir Putin in his speech at the Eastern Economic Forum in Vladivostok this week. While the Kursk offensive seems to have caught Russian forces by surprise and made the prospect of conscript soldiers being transferred to war zones—as well as a new military mobilization—more realistic, the political leadership appears to have decided that the situation is stable. The federal military and political leadership has, with some notable exceptions, so far steered clear of the topic of the Kursk offensive. This is even as questions arose about billions of rubles spent on clearly ineffective defensive fortifications under the governorship of Roman Starovoit, who was recently promoted to serve as Minister for Transport in the federal government.
In August, both the federal government and the regional government started paying financial aid to local residents displaced by the offensive. The basic sums offered to residents—adding up to 25,000 rubles ($276.70) with additional payments for loss of family members or injury—compare poorly to sign-up bonuses to contract soldiers: currently 800,000 rubles ($8,855) in Kursk. The government likely expects private business to fill the gap (e.g. the Metalloinvest company, which has announced social payments and free lunch to its workers in the Kursk and Belgorod regions). Interest in signing military contracts grew in August, as per the analysis of the Vyorstka media outlet based on search data, which is likely driven by increased payments. The governors of the Belgorod and Bryansk regions had to ask Vladimir Putin repeatedly to finance the formation of territorial defense forces from the federal budget, after the Finance Ministry reportedly turned down their request.
— Andras Toth-Czifra
“Elections” country-wide
Regional and local elections, as well as three by-elections to the State Duma, are being held in several Russian regions on September 6-8. 21 (of 83) regions are holding gubernatorial elections, while 11 regions (as well as occupied Crimea) are holding legislative elections to regional parliaments. In two regions, Kursk and Bryansk (as well as occupied Crimea), early voting began on August 28. In Kursk, currently partially occupied by the Ukrainian army, municipal elections were postponed indefinitely, but the gubernatorial election is ongoing. According to data (of questionable authenticity) shared by the Kursk Electoral Committee, more than 44% of voters had already cast their vote as of Friday, September 6 (five years ago, the total turnout was 41%).
The elections are taking place under the most repressive conditions in recent Russian political history and are even less competitive than the votes held a year ago. In its report about the electoral campaign, the independent election monitoring organization Golos—which has been labeled a “foreign agent” by the Russian government and one of whose leaders, Grigory Melkonyants, remains in prison on politically motivated charges—highlighted that barely any campaigning took place either online or offline for most of the elections. The authorities, according to Golos, turned down the intensity even of the mobilization of voters by administrative means (meaning putting pressure on public employees and people working for large enterprises to vote). In most regions, the selection of candidates was tightly controlled, with any even remotely interesting or anti-regime opposition candidates removed by administrative means before the vote. In St. Petersburg, where the highly unpopular governor Alexander Beglov is running for a new term, out of 22 potential candidates only 4 were allowed to run, none of whom represent a risk for the incumbent. In Ulan-Ude, the capital of Buryatia, a Communist candidate for the City Council was disqualified by the electoral authorities officially for using the wrong font.
While the official results will undoubtedly show comfortable victories for pro-Kremlin incumbents, it is worth looking at how the votes are playing out in several regions:
While Kremlin-adjacent pollsters are predicting large majorities for incumbent governors in every region, likely no regional head—not even the former United Russia supremo Andrey Turchak, demoted to head the Altai Republic—will want to record an official tally surpassing that of Vladimir Putin’s official support in this year’s presidential election.
The Kremlin is using these elections to “pacify” two regions that have delivered some of the most interesting “systemic” anti-Kremlin movements of the past years: the Khabarovsk Territory and Khakassia. In Khabarovsk, where the arrest and subsequent sentencing of former governor Sergey Furgal triggered unprecedented protests in 2020, Dmitry Demeshin, a former deputy prosecutor general, is the Kremlin’s candidate. Demeshin has brought in a team partially consisting of his former prosecution colleagues and will likely use the vote to crack down on local elites. Furgal’s former colleague, Mikhail Sidorov, who was standing with the support of the “Fair Russia–For Truth” party, was disqualified. Roza Chemeris, the candidate of the New People party, is a State Duma deputy, but she is better known in the neighboring Maritime Region. In Khakassia, governor Valentin Konovalov successfully saw off a challenge by the Kremlin’s preferred candidate Sergey Sokol a year ago, but then had to compromise with Sokol and United Russia when the ruling party scored a supermajority in the local parliament. The fruit of this newfound understanding is the candidacy of former federal energy minister Nikolay Shulginov, who is standing for the region’s Duma seat, and is supported by both Konovalov’s Communist Party and Sokol’s United Russia.
In Moscow, local authorities are putting the finishing touches on the near-total digital control of local elections with the introduction of universal online voting (likely to be rolled out country-wide in the coming years). A crackdown on opposition candidates has meant that even without this, Moscow would be far away from the loud protests that accompanied the disqualifications preceding the 2019 local elections. However, new voting rules mean that those wanting to vote in the traditional way have to apply to their local electoral committee, while electronic voting is available everywhere. The vast majority of votes in Moscow—according to the official tally—were cast this way even in this year’s presidential and last year’s mayoral elections. However, moving the vote completely online greatly limits both its transparency and opportunities to cast protest votes by congregating at polling stations.
An interesting electoral campaign developed in the Irkutsk Region city of Bratsk, an important industrial center. Here, United Russia is split behind the incumbent Sergey Serebrennikov, a former FSB officer, and Alexander Dubrovin, the head of the Bratsk district, with which the city was planned to be merged, who has nonetheless criticized the municipal reform. The situation is somewhat similar to last year’s Khakassian electoral resistance, where local elites rallied behind a candidate to oppose what they saw as dictates from Moscow. Elena Kutergina, a local journalist and activist who was going to run as a Communist Party candidate (along with other associates) has been disqualified. In general, it appears that electoral authorities have been trying to discourage the formerly widespread practice of local activists allying themselves with “systemic” opposition parties.
— Andras Toth-Czifra
On September 3, Russia attacked a military educational facility and a nearby hospital in Ukraine’s Poltava with two ballistic missiles. The search and rescue operation lasted until September 5. As a result, 55 people died, and 328 people were injured. This is one of the deadliest single attacks since the start of Russia’s full-scale invasion in February 2022. Speaking about the missile strike, President Zelenskyy repeated his call for western allies to supply Ukraine with more air defense systems and lift restrictions on using western weapons to strike inside Russia. “Long-range strikes that can protect against Russian terror are needed now, not later. Every day of delay is, unfortunately, the death of people,” he said. (photo: Emergency Service of Ukraine)
Ukraine’s government shake-up
On Wednesday, Ukraine’s Verkhovna Rada convened for a plenary session during which it voted on the dismissal of several ministers. This decision followed a wave of resignations on September 3, prompted by President Volodymyr Zelenskyy's indication of an impending major government shake-up. Among those who resigned are Denys Maliuska, Minister of Justice; Oleksandr Kamyshin, Minister of Strategic Industries; and Ruslan Strilets, Minister of Environmental Protection and Natural Resources.
On Thursday, the Verkhovna Rada appointed Olha Stefanishyna as the new Minister of Justice and Svitlana Grynchuk, formerly Deputy Minister of Energy, as the new Minister of Environmental Protection and Natural Resources. Additionally, Dmytro Kuleba was dismissed as Minister of Foreign Affairs, with Andrii Sybiha—formerly Deputy Head of the Office of the President and First Deputy Foreign Minister—taking over the role. Iryna Vereshchuk, Deputy Prime Minister and Minister of Reintegration of Temporarily Occupied Territories, was also dismissed and is expected to replace Rostyslav Shurma as Deputy Head of the Office of the President.
Furthermore, Oleksiy Kuleba, Deputy Head of the Office of the President, was appointed Deputy Prime Minister and Minister for Communities, Territories, and Infrastructure Development. Mykola Tochytskyi, another Deputy Head of the Office of the President, became the new Minister of Culture and Information Policy. Former Minister of Strategic Industries Oleksandr Kamyshin is anticipated to join the Office of the President to focus on armaments and infrastructure, while Herman Smetanin, CEO of the state arms company Ukroboronprom, was named Minister of Strategic Industries. Additional appointments are expected by the end of the week.
Mykhailo Podolyak, advisor to the Head of the Office of the President, remarked that Ukraine is entering a new phase in its conflict with Russia, necessitating a revamp of the executive branch. “There’s a need to rebuild the economy, enhance foreign negotiations, and highlight the benefits of investing in or supplying weapons to Ukraine,” he said. President Zelenskyy echoed this sentiment, emphasizing the need for “new energy” during a press conference in Kyiv.
The reshuffle has been met with skepticism from the opposition. Yaroslav Zhelezhyak, an MP from the Holos Party, criticized the lack of new faces, noting on Facebook, “Zelenskyy says new energy is needed, but in this ‘great re-introduced order,’ there is still no new person in sight.” Ivanna Klympush-Tsintsadze, a lawmaker from the European Solidarity opposition party, described the shake-up as another instance of “systematic centralization of power by the President and his office.”
— Lisa Noskova
On the podcast
Why has the Global South, historically on the receiving end of colonialism and imperialism, maintained what might be called a neutral stance towards Russia's war against Ukraine? Ivan Grek, Director of the Russia Program at George Washington University’s Institute for European, Russian, and Eurasian Studies, joins Aaron Schwartzbaum to discuss.
Missing foundations for Russia’s eastern pivot
The Eastern Economic Forum in Vladivostok concluded on September 6. The event was meant to showcase Russia’s pivot to Asia and highlight the fact that it is not isolated from global markets and not shunned by global leaders. The Forum was held shortly after Vladimir Putin’s trip to Mongolia, his first trip to a member country of the International Criminal Court (ICC) since his indictment by the Court for war crimes. During Putin’s trip, deals were announced to modernize Ulan-baatar’s energy provision system, supply aviation fuel to Mongolia, and upgrade logistical links between the two countries. None of these are very significant projects; the most important message of the trip was that, in spite of its obligations under international law, Mongolia failed to arrest Putin. This is due to its geopolitical dependency on amicable ties with both Russia and China and fits perfectly with Putin’s view on international law, namely that major countries should be able to take liberties.
Similarly, the Forum itself was more about show than about grand investment breakthroughs (for one, there is still no news about the Power of Siberia 2 pipeline, coveted by Russia), albeit smaller infrastructure projects were announced. In his speech, Putin highlighted Russia’s need to develop the Far East to support the country’s forced pivot to Asian markets. However, the speech sounded like a long list of pre-existing problems, primarily the wider region’s energy production deficit (which the President ordered the government to eliminate) and transit bottlenecks, which Putin expects Chinese investors to contribute to solving, along with several other issues, such as urban development. If Chinese investors remain shy—or, as in the case of the Zashulansky coal deposit project in the Transbaikal Territory, facing difficulties due to sanctions—and interest rates remain high for the foreseeable future, the solution will likely have to involve more money from the Russian state. Participants in the Forum reportedly suggested various versions of this, with the Kremlin ultimately preferring the involvement of VEB, the government’s main investment vehicle, in public-private projects to mitigate risks. Rosatom announced plans to build 2-3 new nuclear power plants in two Far Eastern regions. Putin also highlighted several long-standing problems, such as population decline in the Far East and the lack of foundations for a knowledge-based economy, but it is difficult to see how the Kremlin will solve these deep-seated structural problems in the near future.
The Forum also took place amidst an ongoing yuan liquidity deficit in Russia, which caused the ruble to weaken by almost 5% against the Chinese currency on September 4, and comes after weeks of significant delays in payments in bilateral trade. While the crisis has not significantly affected technology imports and commodities exports (the two most important fields from Russia’s point of view), it did highlight the vulnerability of the Russo-Chinese trade partnership to Western sanctions and the lack of progress on a new bilateral payment system to bypass U.S. dollars and euros. In response, Russian lenders have asked the Central Bank to increase liquidity.
— Andras Toth-Czifra
