In Truss We God—3

Not Just Straws—Whole Haystacks in the Wind

If Ms Truss believes what she has set out in three short weeks to be her doctrinal destiny, she should consider how deep the swamp of unpopularity is to which it leads:  While most people like the energy support scheme, the reversal of 1.25% rise in NI and 1% reduction in the basic rate:

  • only 12%. of voters support raising the cap on banker bonuses
  • only 11% of voters consider deleting the 45% tax band a good idea
  • only 20% of voters want the corporate tax rat reduced to 19%
  • only 12% think spend on public services will be affordable
  • only 15% think the measures will grow the economy
  • only 9% think that they will be better-off
  • only 12% of new/Red Wall Tory voters think that they will be better-off
  • only 6% support her policies if they lead to lower taxed but worse public services

(poll statistics from Prof. Matt Goddard, Univ. of Kent)

Given this level unpopularity, continuing with those policies laid out in the mini-budget—even with the 45% tax band retained—points to political, as well as financial, suicide for both Truss and Kwarteng and a 1997-scae drubbing of the Tory party in general,.

The Art of Knowing How to Stop Digging

I’d rather light a candle than curse your darkness.”

—Coen Brothers’ Raising Arizona

It may be hubris to think someone with teeth as gritted as Liz Truss might be guided by someone dedicated to dissolving the Union she loves. But in or out, Scotland will gain no benefit from England becoming the fiscal basket case it’s likely to be on her present course. Though they may appear radical, they are no more damaging than the grossly innumerate policies she is already driving toward a brick wall. What about

  1. Shelving “Global Britain” in military terms. This involves selling the aircraft carriers and scrapping Trident without replacement. Likely saving: ~ £10 bn a year, plus >£50bn in Trident replacement
  2. While we’re on things military, go through the MoD like a dose of salts because its inept procurement has wasted billions (Nimrod replacement; Warrior replacement; etc.)
  3. Fire Dido (Calamity Jane) Harding from Public Health England. Herr £40bn Test-and-Trace botch was bd enough. Instead, streamline its administrative “jobsworths” who let front-line staff down with meaningless KPIs, poor paperwork and software not fit for purpose.
  4. While we’re on health, integrate Care into a democratically accountable NHS that shares facilities in rural areas.
  5. Re-nationalise the railways and water companies. Both drain public money into dividends and bloated salaries and give real market privatisation a bad name
  6. Switzerland and Singapore may live well from Financial Services, but Sunderland never will. To stop London being the only rich region, you need to create world-class products. Rolls Royce is almost the only such example. We should be to tidal generation what Denmark is to wind, or Netherlands is to flowers and ocean towing if 67 million people are to live fro  it.
  7. Stop giving aid to the Indias of this world, who then use their own money to build nukes and space shots and cozy up to despots like Putin.
  8. Use the Alliance Party to introduce a plebiscite in Northern Ireland before the NI Protocol blows up in your face and we’re back to the Troubles. Under UK care, NI has gone from the richest to the poorest part of the island. It’s time we asked then if they want that decline to continue.

#1049—571 words

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In Truss We God—2

No’ Sae Green As We’re Cabbage-Lookin’

I have never seen the shine come off a new government as quickly as it has here.”

—Channel 4 Political Editor at the Tory Conference, Oct. 3rd 2022

As a measure of the fiscal nous of the new government, it could hardly have been more damning. The knock-on effect of the rise in interest rates was uproar in the mortgage market, where hundreds of those on offer were withdrawn to be re-introduced with a general doubling of rates. With 2 million fixed-price mortgages due for maturity in the next 15 months, refinancing will mean mortgage payments generally doubling. The effect of this on a booming housing market—let aloe government (un)popularity is yet to be seen.

Media and opposition attention seems fixed on the U-turn over dropping the highest tax band. But this is trivial in the scheme of things; government now intends £43, instead of £45 billion in tax cuts. There will be no word how this is to be financed before a statement due on November 23rd. The fact that the watchdog Office of Budget Responsibility had been prevented from commenting on all this has only added to the unease.

Despite the minor U-turn, Truss and Kwarteng remain adamant that the Covid pandemic and Ukraine war mean everyone is in the same boat of higher interest and higher inflation, so drastic remedies are required.

But examination of other G7 countries—who are indeed suffering—shows this to be simplistic, if not facile. USA, Germany, France, etc. do indeed have higher fuel costs, inflation and interest rates than normal, But:

  • USA is self-sufficient in oil & gas, so avoids soaring inflationary energy costs
  • German interest rates are still at 2%, whereas Britain’s bod yields are no greater than fiscal lame ducks like the PIGS (Portugal/Italy/Greece./Spain)
  • France has indirectly tapped supplier windfall profits as it owns EDF
  • Norway, which didn’t sell off its North Sea bonanza as Britain did is making out like a bandit
  • Britain is the only G7 country pretending it is a global power, other than the USA. Yet its GDP is only a ninth their size ($2.3 vs $21.7 trillion), with a seventeenth of their defence budget ($46 vs $801 billion)

Other than inflation caused by Covid recovery, energy costs and wage demands, a number of negative factors seem to have been overlooked in the Truss/Kwarteng calculations, such as:

  • The Brexit effect: because of new hurdles between UK and EU, some 15% of exports to our main trading partner have been lost; the 19% of civil servants shed after 2010 have almost all been re-hired to deal with the paperwork.
  • While exports have fallen, imports have increased. Including services, monthly , imports of £68 billion exceeded £61 billion in exports by 12%.
  • £2 bn in arms for Ukraine—laudable, but hardly sustainable.

#1048—452 words

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In Truss We God—1

The late Queen’s last state act in seven decades of many state acts was to ask Liz Truss to (re)form a Conservative government. While Boris managed to have a high international profile (and not always for the right reasons), Liz is a relative unknown—despite having been a government minister for seven years, lastly as Foreign Secretary.

As Britain’s third femaie Prime Minister and with a third of her Cabinet women, the gender factor is not unusual. But being first PM not to have been educated at a private school. In contrast to Boris’ ebullience, Truss has a dead-pan delivery. Having first pursued a successful business career in both Shell and Cable & Wireless., her right-wing stance comes as no surprise. But her belief in a reincarnated Reaganomics—that the economy can be boosted by cutting taxes, so that a “trickle-down” effect would grow the economy and so aid the poor too—is extreme, even by the standards of the Tory party.

Foot-Shooting for Beginners

Despite 12 years of Tory governments, in which she played a role, she portrays her administration as if it were an entirely different party taking power for the first time. As if to seal this image, a “mini-budget” by her new Chancellor Kwasi Kwarteng was in fact bigger and more radical than most full budgets.

It was radical, announcing a programme of support against soaring energy bills larger than the huge support given during Covid and applying £45bn in tax cuts to “stimulate the economy into 2.5% annual growth”. This may have gone down with tax-cutting advocate Brexiteers like Jacob Rees-Mogg and John Redwood. But the resulting furore blew the Truss/Kwarteng package off course within a week.

Though energy bill support and general lowering of taxes found broad support, three elements seem poorly considered as they have received pelters from even Tory ex-ministers. These are:

  • Scrapping of the highest income bracket of 45% for income over £150,000. This went down like a lead balloon, even among the 600,000 taxpayers who would benefit. The furore of being “the party for the rich” grew so load, it was itself scrapped in the middle of the party conference.
  • Removal of the cap on bankers’ bonuses, with the argument that the City’s financial centre was key to driving growth in wealth
  • No indication, other than the implication of government borrowing—how the fiscal shortfall of £150 billion would be financed.

The first two points were a gift to opposition parties and media, who queued up to lambast Truss’ government as one for the rich. But more lasting and deeper damage to credibility was done by the last. Exacerbated by hints from Kwarteng over the following weekend that more was to come, Monday September 26th threw London markets into turmoil. Not only did the £ sterling dip to $1.03 from an already depressed £1.12, but bond prices sank, doubling yields past 5%, triggering margin calls on major pensions funds, which had to sell even more bonds to cover them. This depressed prices further in a fatal spiral that was only halted by intervention by the Bank of England investing over £60 billion and raising interest rates to 2.25% to steady the markets.

#1047—536 words

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Union Myth-take 1

(This bog was originally published in June, but for reasons best known to WordPress, has since disappeared.)

“UK Has the Fastest Growth in the G7.”

—Prime Minister Boris Johnson

Brexit bred much uncertainty, adding to the constraints of life under lockdown. But Boris Johnson bounced with irrepressible vision of Churchillian sunlit uplands. However, in April, IMF projections already showed Britain facing slower growth and more persistent inflation than any other major economy next year. Russia’s invasion of Ukraine amplifies inflation pressures already present, squeezing living standards and growth. Subsequent inflation and energy figures show matters worsening.

“Consumption is projected to be weaker than expected as inflation erodes real disposable income, while tighter financial conditions are expected to cool investment”F)

—International Monetary Fund
GDP Growth Among G7 Countries 2020-23 (Source: IMF)

The IMF first cut its forecast for the UK’s GDP growth for 2022 to 3.7% from January’s forecast of 4.7%, while for 2023 the growth rate was first halved to 1.2% from 2.3% and finally in July to 0.5%.

The projected growth for Britain next year is lower than for any other major advanced economy and well below the 1.8% forecast by OBR. IMF chief economist Pierre-Olivier Gourinchas said:

“The downgrade reflects elevated inflation pressures and tighter monetary policy.”

—IMF

#1047—189 words

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A Right Wunch of…

“I make no apology for attacking spivs and gamblers who did more to the British economy than Bob Crow (the RTM union leader) could achieve in his wildest Trotskyite fantasies, while paying themselves outrageous bonuses underwritten by the taxpayer”.

UK Business Secretary Vince Cable

It wasn’t Fred the Shred who started it, although he was the one to blow the gaffe on the whole Camelot of egregious greed that drove UK banking in the aftermath of Thatcher’s 1988 “Big Bang”. That event brought brash ambition to a once-douce pinstriped and bowler-hatted world.

To be fair, it was high time that finance in the City got wise to the bustling world of mergers and acquisitions driving corporate turmoil and outrageous profits swirling around Wall Street. Investment banking grew with the new hub of Canary Wharf. As well as major British banks overseas ones like Deutsche and Lehman Brothers soon had major presence there, as well as New York and ambitious insiders started to make eye-popping amounts of money.

The retail side of these banks continued in more modest, traditional fashion, They were used as an anchor of respectability, but soon were brought under the more abrasive world of efficiency, downsizing and short-term profits.  Both personal and small business banking (retail; farming; tradesmen; etc.) were “streamlined” with branches disempowered, management centralised and cosy chats between manager and client dispensed with.

Banks grew by acquisitions and grew their profits from ever-more-ambitious deals in corporate finance, IPOs and M&As. Bright young things got creative with new “products”  like bundling mortgages, managed funds and other financial instruments. It became standard to make serious profits with other people’s money—with the “other people” usually taking the risk.

At the top of there “Loadsamoney” heaps were the CEO’s who were compensated in proportion to what their batteries of young Turks could rake in. Prior to the financial crash, this Wild West atmosphere was showering wealth on those at the top.

Banker Bonuses

‘It would be unacceptable I think from the point of view of our shareholders if we’re unable to attract and retain the type of people required to manage the risks in the bank and actually deliver profit to those shareholders.”

Stuart Gulliver, CEO HSBC
  • Months before Royal Bank of Scotland was rescued in a £45bn taxpayer-funded bailout in 2008, the bank had paid its chief executive Fred “the Shred” Goodwin £5m in 2006. That was 38% more than 2005. It included a bonus of £3.8m on top of his £1.2m salary. On top of that, he was granted a £16.9m pension pot that paid out nearly £700,000 a year.
  • In 2011, former investment banker turned chief executive Bob Diamond sparked controversy after he received a bumper pay packet from Barclays worth £11m in 2011. He had been granted a £1.35m salary, but also received a £2.7m share bonus, as well as £474,000 worth of perks including personal financial advice and chauffeurs. That was on top of share pay-outs and deferred payments pre-dating the financial crisis. Diamond—who only led the bank for a year—was ousted as a result of the Libor rigging scandal. Barclays was the first bank to settle with the authorities over the controversy, paying £290m in 2012.
  • In 2011, the ex-chief executive of HSBC Stuart Gulliver  took home £7.2m, a year when he was allowed to earn three times his £1.25m salary as an annual bonus. He could have been paid a maximum £12.5m, but failed to reach key targets such as cost cuts return, strategy and reputation. Overall, HSBC’s chairman Douglas Flint said the bank’s performance had been “satisfactory in aggregate” that year.
  • António Horta-Osório, the former boss of Lloyds Banking Group – which rescued HBOS from collapse and subsequently took a £20bn state bailout in 2008 – received his highest pay-out in 2011. The package, which included a £7.5m bonus linked to a three-year pay scheme, which “was an outrage for taxpayers who footed the bill” (TUC).
  • Bill Winters, a former investment banker at JP Morgan, was paid £8.4m in his first year on the job at emerging markets-focused lender Standard Chartered. The figure was bolstered by a share-based buyout award, meant to compensate him for quitting Renshaw Bay, the hedge fund he was previously running. He had otherwise negotiated an annual salary of £1.15m. Winters joined the bank just as it was launching a turn-around plan, after a damaging Iran sanction-busting scandal and a series of profit warnings.

‘Our shareholders love what we do. They love our universal banking model,  the diversity of risk and our diversity of profits. What tell me is, ‘Bob, don’t be uncompetitive and pay below market bonuses”.

Bob Diamond, CEO, Barclays

From Personal to Impersonal Account

Having been a bank customer for half a century, this writer feels experienced enough to comment on the development (or otherwise) of retail banking. My experience is of three ‘stodgy’ banks in three countries. The experience differed in detail, but not in trend. All wound up as corporate giants who lost the plot when it came to customers.

Royal Bank of Scotland had a branch in my home town. When I stopped being a penniless student, I opened an account there in 1973, which held a healthy balance during decades I was away, When return in 1993, I also opened a business account, acquired credit cards for both and paid for overdraft facilities never used. By that time, the branch “manager” was no such thing. Serious financial discussion involved phone calls to people who, unlike local tellers, didn’t knew who you were. Researching a load to start a tour business, I found a far more favourable one with the local council.

Six years ago, the branch was closed and the accounts transferred to a branch 12 miles away and which offered no telephone contact. I switched to on-line. This was particularly hard to use when I developed sight impairment. When I complained, my statements arrived in braille, which I cannot read.

Bayerische Vereinsbank Theis account dates from 1974 when I worked for Siemens in Germany. The same personal banker for twenty years proved useful, as I movrf to the USA. Then came a series of several who knew me less well.

The last three years, service reduced to a common phone number, which became next to impossible to use as an automated voice with limited options would cut you off if your request was complex. Even if you reach a human voice, nobody knows you, nor can they handle differing issues like credit versus debit cards, etc.

Wells Fargo The breezy and friendly open-plan branch where I opened my account in 1976 was a breath of fresh air. Having a good salary, the account was usually flush with cash; credit card and mortgage payments made promptly and exact. Like most US banks, they struggled to deal with international issues as they knew little and cared less about the world outside the US.

After my return to the UK, a good balance was kept and activity came in bursts during my visits there. It meant I lost touch with the tellers. But that became irrelevant last year when the bank gave me two months to close my account as they no longer served customer with principal residences abroad. SO much for loyalty to customers of 45 years’ standing.

My Request to the Whole Wunch of Them

With internet banking and modernisation, its is understandable that retail banking could not stand still. But if personal tax advisers, accountants, investment consultants and mortgage lenders—not to mention short-term loan spivs—can make a decent living from personal, one-on-one service, major banks have lost the retail plot. By being swept up in the greed-led corporations captained by the Fred Goodwins of this world, they have not just betrayed millions of once-loyal customers, but overlooked millions in profitable, if small-scale, business in their race  to make a killing at the casino.

#1046—1318 words

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Low Budget

I can’t be broke; I still have plenty of cheques.”

—Eric Sykes in BBC’s Sykes,1972

Citing events of a half-century go is not as irrelevant to Friday’s “mini” budget as you might think. In a three-hour session in parliament when Kwasi Kwarteng presented and defended his £45 billion tax relief. He pitched it as a radical scheme for growth, as if Truss’ new government were blaming years of 1% (i.e. sluggish) growth under the Tories on someone else. This surprised many Tory members behind him, as they had all loyally voted through measures he was now scrapping.

His proposals gladdened the hearts of  arch-Tories like Ian Duncan Smith and John Redwood by scrapping:

  • 1.25% rise in NIC contributions
  • proposed rise of corporation tax to 25%
  • 100% ceiling on bankers’ bonuses
  • 45% top income tax rate

Adding in the 1% drop in the lowest tax band to 19%, doubling of stamp duty threshold (in England) to £250k, plus other measures constitute a bold move to bump-start growth or innumeracy on a grand scale. A quick analysis, done by the IFS seems to point to the latter. It predicts:

  • Half of the £45 billion will benefit the top 5% of earners
  • Those earning more than £150,000 will pay less tax
  • Those earning less than £150,000 will pay more tax
  • Those earning £1 million will pay £55,000 less tax
  • Those earning £20,000 will pay £150 less, but this will be swamped by inflation

According to Kwarteng, this will boost UK growth from 1% to at least 2.5%, whereby all—and not just the rich— will prosper from sharing a bigger cake. Contrary to normal practice, none of this had been passed through the OBR (Office fir Budget Responsibility) as a sanity check. He claims it may be radical, but no gamble.

There is serious dissent with this view. For a start, it reeks of “trickle-down” economics, whereby, as the rich get richer, they spread it around and everyone benefits thereby. The problem? It’s been tried; each time, the rich and the right wing colluded to foist it on the public, inequality got sharply worse. History shows it doesn’t work.

Those who do not learn from history are condemned to repeat it.”

—George Santayana

Lesson 1: Anthony Barber

In March 1972, Heath’s Chancellor Anthony Barber presented his “Dash for Growth” tax-cutting budget. At the time, a pint of milk cost 6p and a gallon (4.5 litres) of petrol was 35p. Within months, he was forced to float the pound, leading to a sharp decrease in its value and huge inflationary pressure on the economy, which failed to grow in the way his tax-cutting measures had been intended to stimulate.

I do not believe that a stimulus to demand of the order I propose will be inimical to the fight against inflation. I see no reason why the present boom should either bust or have to be busted.”

—Anthony Barber on his 1972 Budget.

After industrial unrest,Ted Heath called a general election early in 1974 and Barber lost his job as chancellor as Harold Wilson was returned to office with a minority Labour government. This ran into massively unruly unions. Together with oil price shocks, this led to three-day weeks, inflation reached 24%. Britain became described as “The Sick Man of Europe”.

Anthony Barber’s appointment as Chancellor was the first time I realised Ted Heath had a sense of humour.”

—Harold Wilson, 1970

Lesson 2: Ronald Reagan

“The idea behind Reaganomics is that a rising tide raises all yachts.”

—Walter Mondale

When he became President in 1980, Ronald Reagan introduced a similar package he called “free market economics”, but which has since been called “Reaganomics”, “supply side” or “trickledown” economics. Like Barber and Kwarteng,, it involved reducing income tax and capital gains tax, reducing government regulation. But, unlike them, it included balancing the federal budget, slowing the growth of government spending and tightening money supply to reduce inflation.

This did create affluence, largely driven by booms in semiconductors, oil, software, arms and global corporations like Macdonald’s. But the affluence went mainly to the rich; inequality grew as “Joe Sixpack”, who had pulled down $25 an hour in Motown found themselves doing menial work to survive as US manufacturing slumped in the face of imports. Affluence in Sun Belt cities like Los Angeles and Phoenix contrasted with social decline in Rust Belt cities like Detroit, Cleveland and Pittsburgh.

Lesson 3: Donald Trump

Nothing daunted, Donald Trump played to his Republican backers in 2016 by trying the same gambit. His 2017 Tax Cuts and Jobs Act was the largest overhaul of the tax code since then. It created a single corporate tax rate of 21% and gave individuals an average tax cut of $1,200.

“At the time, economists did not think Tax Cuts and Jobs Ac would pay for itself, it only paid about one fifth..”

—Eric Ohrn, Asst. Prof of Economics, Grinnell College

For the wealthy, banks, and other corporations, the tax reform package was considered a lopsided victory given its significant and permanent tax cuts to corporate profits, investment income, estate tax, and more. By 2019, less wealthy found their tax bills higher and refunds smaller. The overhaul was forecast to raise the federal deficit by $1.9 trillion. The highest earners would benefit most from the law, while the lowest earners would pay more in taxes. Under Trump, the U.S. national debt increased by 39%, reaching $27.75 trillion by the end of his term,

Is Kwasi Kwarteng Lesson 4?

None of these lessons from history are identical to what is now proposed for Britain.  It is too early to tell whether Kwarteng’s radical plan is as much of a backward step as they indicate. But some elements of it suggest the result might even be worse:

  • Trump’s plan was the only one to propose borrowing to cover lost tax revenues
  • None of the above plans faced the level of public spending on benefits, health, education and defence already committed to by Truss’ government
  • None of the above plans faced a rejection by financial markets that happened to Kwarteng’s plans the day they were announced.

This reeks of a desperation similar to Putin’s. It’s economics, Jim—but not as we know it.

#1045—995 words

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C’est Magnifique, mais Ce n’est pas la Gloire

With apologies to Le Maréchal Pierre Bosquet’s observation on the Charge of the Light Brigade, this seems an apt comment on today’s spectacle of the Queen’s funeral.

There is no question that it was spectacular, nor that the Queen had more than earned the best send-off her kingdom could muster. Nobody does pomp and ceremony like the British Establishment, and they did not disappoint. Even the weather played along, with sunshine breaking out as the coffin left Westminster Abbey.

The Cortege on the Mall

The whole event went off with military precision. The planning had been impeccable; uniforms were vibrantly resplendent; Whitehall and the Mall provided ceremonial backdrops; nobody in the 3,000+ in the parade put a foot wrong; the crowds cheered and threw flowers. It was a global showcase of Britain at its best.

That said, other than wall-to-wall TV coverage from countless cameras, it could have been a re-run of Victoria’s funeral 120 years ago. It was the same gun carriage; they wore the same uniforms; the busbies, the ostrich feather, the plumed cavalry helmets had not changed since. Some—like those of the Tudor-era Beefeaters or the pre-Union Honourable Company of Archers are half a millennium old.

All of this makes for a spectacular show. And, though the day did not disappoint even the sceptics with its magnificence, the absence of anything indicating Britain was living in the 20th—let alone the 21st—century poses profound questions.

Such ceremonies were born of Empire, of the era when Britannia ruled the waves and the Great White Queen held dominion over a pink-painted fifth of all mankind. When you are the world leader in power and riches, it behoves you to demonstrate this with ceremonials befitting such status and which no-one else can match. It went with the cultural domination that justified fifty million people dominating a couple of billion.

That “white man’s burden” has been laid down and it is to the credit of the British state that it went more peaceably than the Roman or Russian empires. Reworking it into a Commonwealth of independent states was no mean achievement.

Though he has very big shoes to fill, Charles has shown, in his long apprenticeship, a shrewd humanity that will make a worthy king and may continue to be Head of State in 14 former colonies, as well as the UK. However,  this latter role will decline with time, as will Britain’s pretence to still be a global power “punching above its weight”. The scale of conflict in which it could be decisive ended with the Falklands war four decades ago.

It may not happen soon, or even quickly, but it will happen in my lifetime.”

—Jacinda Ardem, New Zealand PM on Laura Kuenssberg on New Zealand becoming a republic

So, if the ceremonial brilliance of today is to be maintained, it will only be as a nostalgic memento as the past that is also a big tourist draw. Because what counts today—as it did when Victoria died—is wealth, and the power derived from it. Now in the 21st century, because Britain doesn’t dominate semiconductors like America or oil like Saudi Arabia, or manufacturing like China, or engineering like Germany.

All 67.9 million of Charles’ subjects can’t eat ceremony. Nor can they live from London’s finance business and a couple of world-class successes like Rolls-Royce. We are too big to live from dairy, Lego and wind turbines like Denmark or flowers and ocean towing like Netherlands.

Glory comes from power and power derives from wealth. A century ago, Britain had both. But repeating magnificent ceremonies from then does not regenerate either wealth or power. Britain may still stage impeccable ceremony, such as today. But if it can’t rediscover the glory of world-beating exports like those ships, locomotives, etc. of a century ago, it is in danger of becoming a Ruritanian museum piece.

Transfer Point at Wellington’s Arch

#1044—639 words

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Ivan to Go Home—V

  • I—Background and Russian Unit Organisation
  • II—Russian Equipment and Personnel
  • III—Russian Onslaught
  • IV—Russian Inertia
  • V—Russian Rout

“The Russian Army is a boxer who has a great right hook and a glass jaw.”

—Phillips O’Brien, Prof. of Strategic Studies, St Andrews University

The Ukrainian offensive that began around Kherson in the South at the end of August was a cautious affair, involving first destroying bridges across the Dnepr by which Russia was supplying its troops there. It developed as an encircling movement and caused comment because the Ukrainians seemed to be revealing intentions to the public. But it appears that this was primarily a feint—and it worked.

The Russians had assembled the 3rd CAA as a strategic reserve east of Moscow, with the intention of deploying it offensively to regain the initiative. With news of the threat to their stepping stone to secure Odessa and the entire Black Sea coast, they switched it to the South. This allowed Ukraine to launch a completely unexpected offensive east of Kharkiv in the North, which caught the Russians napping.

The Ukrainian Army liberated first 1,000 in the first week of September. They then doubled that several times, each in a couple of days, so now 8,000 square km of the Kharkiv, Donetsk and Kherson Oblasts, once occupied by the Russians for months, are freed in not much more than a week.

Ukrainian Counteroffensive in Kharkiv Oblast Sep 6th – 14th (source: Al Jazeera)

Once the front was broken, the command and morals difficulties that had plagued the Russians initially were amplified by months of failure and stasis. A blitzkrieg by well co-ordinated Ukrainian forces gave bewildered Russian units no time to regroup. The absence of air superiority to allow reconnaissance simply added to chaos, which turned into a rout.

As the rout continues, the Russian army is losing at least a battalion’s worth of vehicles and men a day as twin Ukrainian counteroffensives roll back Russian territorial gains in eastern and southern Ukraine. That’s hundreds of casualties and scores of vehicle write-offs every day.

These losses are catastrophic for Russia. The Russian army barely was sustaining a little over 100 under-strength battalions in Ukraine before Kyiv’s forces counterattacked in the south on Aug. 30 and in the east eight days later.

Around 5,500 Russian troops have died in Ukraine since Aug. 29, according to Ukrainian officials. It’s possible the Ukrainians are overstating the death toll, but it’s worth noting that recent U.S. estimates of Russian losses have been only slightly lower than Ukrainian estimates.

Total Russian Military Losses by Sep 18 (source Ukrainian Military via Kviv Independent

The aircraft losses alone explain Russia clumsiness, having failed to gain air superiority and the intelligence that goes with it. But the sheer scale of losses puts the Russians in general ((and Putin in particular) between a rock and a hard place. To retain whatever hope of victory they might have to save face when the reality a quarter of their original force that included their best units and equipment seems delusional.

But if Putin calls for full mobilisation to bolster his flagging front, the gaffe is blown, and 145 million Russians will know his “special military operation going to plan” was just so much chin music.

#1043—504 words

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Ivan to Go Home—IV

  • I—Background and Russian Unit Organisation
  • II—Russian Equipment and Personnel
  • III—Russian Onslaught
  • IV—Russian Inertia
  • V—Russian Rout

“It suggests that the generals need to be at the front lines to ensure that their troops are conducting the battle plan in the way that they want. But that also suggests a lack of confidence in their troops if they need to be that far forward with so many senior ranks.”

Col. Steve Ganyard (rtd), adviser to the Ukrainian Army

By April, it was clear that, despite bumptious pronouncements on Russian TV that “The Ukraine Special Operation” against the fascists in Kiev was going to plan”, somebody in the Kremlin worked out they were getting nowhere. Casualties were far higher than anticipated and, after the prolonged and bloody battle for Mariupol, a major port on the Sea of Azov, there was little to show beyond a land bridge to Crimea and the city of Kherson, blocking the lower Dnepr river.

What had surprised Russians from the lowliest pyadavoy to the Kremlin was the widespread unity and fierce resistance of the Ukrainians—even those who spoke Russian as a mother tongue. The troops have been sent in with a variety of lies as motivation: that they were off on exercise; that the Ukrainians would treat them as liberators; that women would welcome them with flowers. But it seems even the Kremlin largely believed therir own propaganda—that Putin’s efforts to reconstruct the Russian Empire, if not the Soviet hegemony over Eastern Europe as well would come to pass as Ukrainians flocked to the cause.

The decision was made to redeploy forces that had failed to take either Kyiv or Kharkiv in the North and use them to complete conquest of the breakaway oblasts of Donetsk and Luhansk in the East. So plans were altered and an unsubtle, grinding advance behind massive artillery did eventually occupy both.

However, the withdrawal uncovered how Russian troops had behaved I occupied areas, displaying brutality to the residents and poor discipline and morale among Russian units.

Between May and July, a grinding advance focussed on clearing the Donbas by withering artillery barragescost Ukraine 150-200 soldiers killed and several hundred wounded each day. However, Russian casualties were just as heavy and the expenditure in ammunition was prodigious. Before being ejected, the Ukrainians scored successes, using longer-range weapons, partisans and  special forces to destroy several supply and ammunition dumps, slowing the Russian effort.

Ukraine Stalemate—May to August

By August, both sides appeared to have exhausted both themselves and their options. Most observers began talking about a long stalemate, with speculation how Putin could save face and claim spme sort of victory when the military situation was hard to spin as successful completion of the “Special Military Operation”.

#1042—436 words

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Ivan to Go Home—III

A five-part article on Russian military misjudgements in Ukraine

  • I—Background and Russian Unit Organisation
  • II—Russian Equipment and Personnel
  • III—Russian Onslaught
  • IV—Russian Inertia
  • V—Russian Rout

“No plan survives contact with the enemy.” ­

Otto von Clausewitz

Although the Russians stoically denied it, there was a blatant amount of warning before the attack on Ukraine actually happened on February 24th. By then, they had deployed the 6th , 8th, 41st, 48th, 58th and 65th Combined Arms Armies (CAAs) along the border, with the  29th, 35th  and 36th CAAs deployed in Lukashenko’s puppet state of Belarus. That may sound like nine armies, but they total fewer than 200,000—the size of a single Western army. Despite this belligerent stance, the presumption seems to have been threefold:

  1. That Ukrainian forces would be as ill-prepared as in 2014.
  2. That there was considerable sympathy across Ukraine for returning to the Russian fold.
  3. That the reputation of Russia as a superpower with overwhelming force would cow and resistance by hostile Ukrainians.

All three turned out to be delusional. The Ukrainian Army had used the small-scale war against separatists in the Donbas as a training ground and had cycled many units through there for “live fire” training. The Army was also much better equipped—partly from the West—and, most importantly, were motivated by outrage at earlier Russian attempts to bring the country back under Kremlin control. The invasion was all that was needed for the few remaining skeptics to feel that motivation.

Though they overran another 10% of Ukraine almost immediately, progress slowed to a crawl within a month.  This was due to several Russian shortcomings, as well as stiff Ukrainian resistance. These were:

  • BTG  fragility, leading to decline in combat effectiveness after a few losses
  • Poor logistics and support providing POL, ammunition and supply
  • Lack of air support as the Russian Air Force failed to gain air superiority
  • Lack of initiative at low levels, allowing Ukraine to dictate tactics
  • Poor timing, as the seasonal rasputitsa mud made off-road travel difficult
  • Poor command and control among units due to little brigase-level, let alone CAA-level operational experience

Perhaps the worst example of all this was the massive column at a standstill NE of Kyiv for well over a week. Within a month, little progress was being made on any front and the Ukrainians were taking fresh heart from having stopped what had been billed as a juggernaut.

Taking nothing away from Ukrainian heroes, the bullets above imply that the Russians did not help themselves. There were reports of Russian soldiers amazed that they were not welcomed as liberators; others panicked when they met stiff resistance they had not expected. Despite there being many Russian-speaking inhabitants in the regions occupied, few seemed ready to collaborate and fewer still to welcome “libettors from the fascist regime in Kyiv”.

Russian-Occupied Areass by End March 2022 (source: Bloomberg)

Further reading: https://www.bloomberg.com/graphics/2022-ukraine-russia-us-nato-conflict/?leadSource=uverify%20wall

#1041—446 words

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