Missile-toe for the holidays
Biden authorizes the use of ATACMS to strike Russia
Hello from the Bear Market Brief.
This week in the news:
The Biden administration authorized Ukraine to use U.S. long-range missiles to attack targets inside of Russia, prompting retaliation from Moscow.
The State Duma adopted the 2025 federal budget, which includes significant spending on national defense and domestic security.
North Korea has received anti-aircraft missiles and more than a million barrels of oil from Russia in exchange for its support in the war with Ukraine.
The U.S. Treasury announced new sanctions against Gazprombank in an attempt to further limit Russia’s income from its energy exports.
— Sara Ashbaugh, Editor in Chief
Biden administration allows Ukraine to strike Russia with U.S. missiles
On Sunday, President Biden authorized Ukraine to use U.S. long-range missiles to strike targets inside Russia, after months of requests from Kyiv for permission to use ATACMS missiles beyond its own borders. These missiles, capable of traveling approximately 190 miles, would allow Ukrainian forces to target Russia’s weapons stockpiles, logistical centers, and airfields. Striking these targets could help prevent Russian advances on the battlefield and protect Ukrainian cities from further attacks.
The specific conditions for the authorization remain unclear. However, U.S. and allied sources report that the use of these missiles has been limited to targeting areas around the Kursk region, where North Korean troops were recently deployed. Biden’s decision came after meetings with South Korean and Japanese leaders at the Asia-Pacific Economic Cooperation summit in Peru, where the deployment of North Korean troops was a central issue.
Ukrainian President Volodymyr Zelenskyy responded to the news during his Sunday address, stating that “the missiles will speak for themselves.” The announcement came after a devastating Russian attack earlier that day, during which Russia launched 120 missiles and 90 drones at Ukraine and targeted critical infrastructure, including the energy system.
Kremlin spokesperson Dmitry Peskov responded to Biden’s authorization on Monday, citing a September statement by Putin in which he warned that allowing Ukraine to target Russian territory would significantly escalate the conflict. “This will mean that NATO countries—the United States and European countries—are at war with Russia,” Putin said. Other Russian officials also criticized Biden’s decision. For example, Senator Vladimir Dzhabarov called it “a very big step toward the beginning of the third world war.”
Russian regional leaders also reacted to the authorization. Lipetsk Governor Igor Artamonov announced the purchase of small outdoor bomb shelters that will be erected near public transit stops. Rostov Governor Yury Slyusar and Vologda Governor Georgy Filimonov ordered inspections of the regions’ bomb shelters, with Slyusar calling for “extreme caution.” The authorities of the Leningrad Region will seize basement space to build bomb shelters, and even Novosibirsk city authorities are renovating existing bomb shelters. The governors’ reactions are likely partly posturing; however, they also reflect an increased awareness of the steady expansion of the range of Ukrainian weapons and drones. On Sunday, Ukrainian drones reached Izhevsk, the capital of Udmurtia and an important weapons industry center, for the first time.
On Tuesday, the Russian Ministry of Defense claimed that Ukraine used ATACMS missiles to strike the Bryansk Region in Russia. Ukrainian officials confirmed an attack on a Russian arsenal in Karachev in the Bryansk region, which reportedly housed artillery ammunition, including munitions from North Korea, guided bombs, anti-aircraft missiles, and rocket launcher rounds. Ukrainian military spokespeople did not state whether the strike was carried out with U.S.-made missiles, but an anonymous U.S. official later confirmed that Ukraine did use the ATACMS missiles. This official noted that Russia intercepted two out of the eight launched, with the strike hitting an ammunition supply point. On Wednesday, Ukraine also reportedly fired British Storm Shadow missiles at targets in the Kursk Region, after having received authorization from the British government. The Storm Shadow missiles have a range of 250 kilometers, while ATACMS missiles have a 300-kilometer range.
On Thursday morning, Russia launched an attack on the Ukrainian city of Dnipro using a new type of missile. The strike injured two people and caused significant damage to an industrial enterprise, a rehabilitation center, and several residential buildings. Initially, Ukraine claimed that the missile used was an intercontinental ballistic missile, but U.S. officials later assessed it as an intermediate-range missile.
Following the strike on Dnipro, President Putin held a speech claiming that Russia used an “Oreshnik” missile, described as an intermediate-range hypersonic missile. Military expert Michael Kofman pointed out that it could be an experimental variant of the existing RS-26 Rubezh missile, albeit the Kremlin claims that it is an entirely new weapon that is already being stockpiled. Putin urged Ukraine’s Western backers to withdraw the authorization for Ukraine to strike Russian territory with ATACMS and Storm Shadow missiles or face potential direct retaliation. He further claimed that U.S. air defense systems would be incapable of intercepting the Oreshnik missile, and that Moscow would provide advance warnings for future strikes with intermediate-range missiles, giving civilians time to seek shelter. Putin’s speech came two days after he had approved changes to Russia’s nuclear doctrine, lowering the threshold of nuclear use in response to the authorization. The new version of the doctrine allows Russia to use nuclear weapons against a non-nuclear attacker if that country is supported by a nuclear power.
An anonymous U.S. official revealed that a warning about the missile strike was communicated through nuclear risk reduction channels. The official added that the U.S. had recently informed Ukraine and its close allies that Russia might launch an experimental intermediate-range ballistic missile. U.S. officials believe that the missile is unlikely to significantly affect the course of the war and that Russia likely has only a limited number of these missiles in its arsenal.
This was not Putin’s first threat of this kind to Western nations since the beginning of the full-scale war, even if it was the most direct one. It also comes after months of sabotage actions, likely with Russian backing, against various European civilian targets. It is likely that the Russian President is trying to send a message to the incoming U.S. administration, trying to pressure it into withdrawing this week’s authorization.
— Lisa Noskova & Andras Toth-Czifra
Several Russian opposition leaders organized an anti-war protest in Berlin on Sunday. More than 2,000 people participated in the march, which was led by Yulia Navalnaya, Ilya Yashin, and Vladimir Kara-Murza. The trio is pictured here carrying a banner that reads, “No Putin. No War.” According to Yashin, the opposition has three demands: the withdrawal of troops from Ukraine, the trial of Putin as a war criminal, and the release of political prisoners in Russia. Navalnaya thanked the protestors for their support, but urged them to continue to fight. “One protest alone won't change anything. We need to keep coming out,” she said. (photo: AP Photo / Markus Schreiber)
Federal budget adopted
The State Duma adopted the 2025 federal budget and fiscal plans for 2026-2027 in the third and final reading on Thursday, November 21. Two party groups, the Communist Party and A Just Russia, abstained from the vote, ostensibly due to a decline in social expenditures.
The budget did not change substantially from its initial draft. Federal expenditures in 2025 are planned at 41.47 trillion rubles, 13.5 trillion of which will be spent under the “National Defense” heading. This sum, comprising 6.3% of Russia’s GDP, represents a new high in Russia’s post-Soviet history. An additional 3.5 trillion rubles will be spent on domestic security. Importantly, fiscal plans suggest that these sums will decline only slightly over the next two years, crowding out expenditures on social policy and investment projects.
In the second reading, apart from adopting smaller tweaks (such as providing various subsidies for agricultural producers), the Duma released 8.1 trillion rubles of previously-reserved funds to support the execution of the budget over the three-year period. The government will also use funds from the National Welfare Fund to plug the deficit, but, on the whole, the authorities expect to replenish the fund from oil-related incomes. Otherwise, the increased expenditures will be covered by higher personal and corporate income taxes. A draft law currently being discussed in the Duma would also allow the government to increase the tax rate on the profit of the Transneft oil transit company from 25% to 40%. However, the budget is based on growth and monetary policy expectations that seem unrealistic. The budget estimated growth at 2.5% in 2025 and the yearly inflation rate at 4.5%. Given current inflation expectations, the Central Bank is unlikely to be able to keep it at that level, even with a further increase of the key rate (which already risks restraining investments, as Economy Minister Maxim Reshetnikov himself acknowledged).
Budgetary transfers to regions will be higher than initially foreseen, amounting to 3.44 trillion rubles in 2025 (instead of 3.26 trillion). However, this is still below the levels of 2023 and 2024 in nominal terms, and significantly lower in real terms due to inflation. The government will also authorize poorer regions to use funds saved from written-off budgetary loans to build social infrastructure, beyond development projects that are supposed to create fiscal receipts. The federal government will keep lending to regions for infrastructure development—up to 250 billion rubles a year—but the conditions of these loans will be tightened, with rates going up when regions fail to implement their projects.
— Andras Toth-Czifra
Military technology and oil for North Korea
New evidence suggests that North Korea has received air defense equipment and oil from Russia in exchange for deploying troops to Ukraine.
On Friday, South Korean National Security Adviser Shin Won-sik said that Russia gave North Korea air defense equipment as payment for the estimated 11,000 North Korean troops sent to Russia. “It has been identified that equipment and anti-aircraft missiles aimed at reinforcing Pyongyang’s vulnerable air defense system have been delivered to North Korea,” Shin said during an interview with the Seoul Broadcasting System (SBS). He also suggested that Russia may be providing North Korea with technology for its satellite program as well as “various forms of economic support.”
Additionally, new satellite imagery analysis from the Open Source Centre suggests that Russia has supplied North Korea with more than a million barrels of oil since March. The oil is also likely payment for the weapons and troops North Korea sent to Russia, UK Foreign Secretary David Lammy told the BBC. “To keep fighting in Ukraine, Russia has become increasingly reliant on North Korea for troops and weapons in exchange for oil,” Lammy said. Joe Byrne, Senior Analyst with the Open Source Centre, agreed; “While Kim Jong Un is providing Vladimir Putin with a lifeline to continue his war, Russia is quietly providing North Korea with a lifeline of its own,” he said. UN sanctions prohibit selling large quantities of oil to North Korea, making the oil transfers from Russia particularly significant.
Although neither Moscow nor Pyongyang has publicly confirmed the deployment of North Korean troops to Russia, the two countries have been open about strengthening their military ties. Russian lawmakers recently ratified the comprehensive strategic partnership treaty negotiated between Putin and Kim Jong Un in June, which includes a mutual defense agreement. South Korean officials are particularly concerned that Russia will share nuclear and ballistic missile technology with North Korea in exchange for its support in the war.
— Sara Ashbaugh
Russia gifted North Korea more than 70 animals from the Moscow Zoo on Wednesday. In addition to the African lion pictured here, the transfer also included two brown bears, two yaks, five white cockatoos, 25 pheasants, and 40 mandarin ducks. Russian Natural Resources Minister Alexander Kozlov oversaw the transportation of the animals via plane to the Pyongyang Central Zoo. “Animals have historically played an important role in international relations, serving as symbols of support, kindness, and care,” Kozlov said during his visit. This is not the first such gift; Moscow and Pyongyang have exchanged animals three times already this year. (photo: Russian Natural Resources Ministry / AFP - Getty Images)
Gazprombank sanctioned
The U.S. Treasury announced sanctions on major Russian lender Gazprombank, its international subsidiaries, and more than 50 smaller Russian banks, claiming that Gazprombank has been used as a conduit to purchase military equipment. The sanctions effectively lock Gazprombank, an important clearing bank for energy export payments, out of the dollar-dominated global financial system. At the same time, the Treasury issued a sanctions alert for banks joining SPFS, Russia’s alternative financial transactions system, threatening them with designations. Designations have already been issued against staff members of VTB Shanghai and Sberbank New Delhi.
Combined, the moves aim to significantly restrict Russia’s ability to draw income from its energy exports. This comes after most EU member states have significantly reduced their dependence on Russian oil and gas imports—a circumstance that has contributed to Gazprombank not having been sanctioned earlier. Russia still sells most of its liquefied natural gas to the EU, but the U.S. government took steps earlier this year to curb Russia’s key Arctic LNG projects.
— Andras Toth-Czifra
On the podcast
Kyiv-based journalist Fabrice Deprez returns to the Brief for another update on the mood in Ukraine, including a report on his recent trip to the frontline city of Pokrovsk.
Quickfire: Regions
The federal government is banning cryptocurrency mining during the fall and winter in the Irkutsk Region as well as in parts of the Transbaikal Territory and Buryatia. It also proposed introducing a total ban in North Caucasian republics and the occupied territories of Ukraine until 2031. A federal law legalizing mining recently entered into force. However, over the past several weeks, Irkutsk Region authorities have complained about planned electricity tariff hikes that were introduced due to excessive load on the Siberian power grid, which they feared would trigger consumer backlash in the region. Irkutsk politicians proposed banning cryptocurrency mining instead, pointing out that the region has become a center of cryptomining due to subsidized energy. Of the North Caucasian republics, Dagestan has also repeatedly faced power cuts in recent years, likely due to bad upkeep, theft, and rising electricity demand. The government has nonetheless limited access to electricity consumption statistics.
Russian forces have retaken nearly half of the territory conquered by Ukraine in the Kursk Region, according to the Institute for the Study of War, even as the pace of the Russian counteroffensive has slowed. Russian advances in the region have also come at a great cost of manpower and equipment, but, according to the U.S. Department of Defense, it is likely that some 11,000 North Korean troops have now been deployed to the region. Meanwhile, Kursk Region authorities continue to try to deal with the border area’s increasingly frustrated residents. Last week, the authorities announced that 14 billion rubles of federal funds would be distributed among residents in the form of housing aid (previously, the distribution of such aid had been delayed). Additionally, a separate compensation mechanism will be worked out for agricultural producers, and Governor Alexei Smirnov called for the resignation of Marina Degtyaryova, another district head whom the regional governor blamed for the failures of the evacuation process—albeit Degtyaryova has so far refused to resign.
According to Reuters, industry sources claim that Lukoil’s NORSI refinery in the Nizhny Novgorod Region partially stopped production on November 13 due to a breakdown of one of its cracking units while the other underwent scheduled maintenance. The company has denied the claims. This is the second time this year that the refinery reportedly suffered an outage, just as the Russian government is planning to lift a gasoline export ban. There are also broader concerns about the long-term viability of oil refineries in Russia. Many of them, including NORSI, depend on Western equipment, and high borrowing costs are weighing down the finances of smaller refineries. Reuters quoted industry sources who claimed that several small refineries might face closures this year. The Ilsky refinery asked the government for financial help this week.
— Andras Toth-Czifra