The clear winner in this mutiny is Ukraine
The investment environment within Russia will deteriorate markedly and rapidly, with concerns over safety, security, and predictability thrown into question, and no clear resolution on the horizon. With an understanding by the business community and consumers that this crisis is likely far from over, economic paralysis is taking hold. Hoarding, delayed spending, trading down, and canceled projects will be the immediate results, which could extend for some time as the political crisis continues (or worsens notably) or otherwise until the situation normalizes soon (not the base-case expectation). As for Ukraine, such dissension on the Russian side notably increases Kyiv’s prospects for a victory and sooner, which would allow for a robust economic recovery.
Overview
- On June 23, head of Wagner Group Yevgeny Prigozhin claimed that the Russian army launched a missile strike on his Wagner forces from the rear, causing him and his men to retreat out of Ukraine. Earlier in the month, Prigozhin had refused to obey orders to put his Wagner troops under the command of the Ministry of Defense.
- On the morning of June 24, the Wagner Group began a “March for Justice” to Moscow to remove corrupt and incompetent Russian commanders, seizing the southern Russian city of Rostov-on-Don and the Southern Military District headquarters there.
- Soon after, a detachment of some 4,000 Wagner troops traveled north through Voronezh and Lipetsk, and eventually to Moscow Region, some 200 km from Moscow itself.
- Amid this, Wagner shot down six helicopters and a command and control aircraft, allegedly killing 13 pilots, with an unknown number of Wagner soldiers killed.
- Some 24 hours after the beginning of these events, Russian President Vladimir Putin gave an address condemning the mutiny as “betrayal” and a “stab in the back” that put the Russian nation’s existence under threat, and vowed brutal punishment for the traitors.
- By late June 24 local time, Prigozhin ended his mutiny based on an alleged deal struck by Belarusian President Alexander Lukashenko. Details remain unclear, but armed mutiny charges against Prigozhin were supposedly dropped (though had not been dropped as of this writing), and he and some 8,000 of his Wagner troops were given safe haven in Belarus (though it is unclear if Prigozhin is there currently).
- The Russian security and diplomatic elites have effectively gone silent, with Chief of Staff Valeriy Gerasimov and Minister of Defense Sergey Shoigu’s whereabouts currently unknown as of this writing.
Our View
This saga is far from over. With so many details still unknown about this supposed “deal,” the situation is clearly unresolved and simply at an effective temporary ceasefire, with each side ready and eager to take advantage of the other side at the first chance. Anticipate further major developments in the coming days and weeks, with considerable impact on the stability of the Putin regime and the war in Ukraine.
Prigozhin’s “March for Justice” marks the beginning of the end for the Putin regime. Whenever his departure does occur—likely a matter of months rather than years at this point—it will be clear Prigozhin’s mutiny was the proximate cause, the war itself the structural one. Likewise, the likelihood of Ukraine outright winning the war has not only risen notably in likelihood, becoming in fact the base-case expectation at this point, but the timeline has also been expedited drastically—now a realistic possibility this year even. As noted since the war’s outbreak last year, the war can only end with either the departure of President Volodymyr Zelenskiy in Kyiv or President Putin in Moscow. With Putin’s tenure now looking far less secure, Ukraine has gained a major advantage it will assuredly exploit amid the disunity and worsened morale of the Russian military, loss of trust in leadership in Moscow, and environment of suspicion that will pervade the defense and security elites in Moscow.
In allowing a disliked, effective underling in Lukashenko to intervene to handle his problems for him, Putin suffered the ultimate humiliation in front of the world and Russia’s elites. Purportedly the leader who never backs down and always escalates, Putin in the most public way capitulated and negotiated with a man he deemed a traitor only hours earlier for conducting a mutiny during wartime, seizing Russian territory, and marching on Moscow. The veil of invincibility is now gone, his credibility and authority under question, and for the first time in over 20 years Russian elites and the population sense instability in the Kremlin and are actively considering alternatives to Putin.
Another critical aspect of this mutiny relates to the possible method of removing Putin from power, earlier seen as one of many obstacles to achieving this result. With no legal path available, high elite loyalty to Putin pervasive, and fears of what the collapse of the regime would look like, no elite had dared challenge Putin’s authority. However, as dissatisfaction with the Russian leadership becomes more public and the motivation for removing Putin from power grows, the method for doing so will become less problematic now that this mutiny, that could have developed into a coup, showed what is possible.
As for Prigozhin, he ultimately miscalculated the level of support he would receive and misjudged precisely what his march on Moscow in fact meant for the Putin regime. Likely acting out of desperation once the Wagner Group was no longer useful to Putin, fearing for his life, Prigozhin conducted his march likely not considering the implications of the mutiny, much less with the intention of starting what some saw as a coup to overthrow Putin initially. Having overplayed his hand, and considering Putin’s track record in his treatment of perceived traitors, Prigozhin’s (and possibly many of his Wagner troops) days are likely numbered. Should Putin allow Prigozhin to survive, perceptions of Putin’s weakness will be reinforced.
The fault for the mutiny is ultimately Putin’s. Employing his “may the best man win” strategy to resolve political competition in his regime, he allowed the Shoigu-Prigozhin fight to fester far too long. Seemingly an effective tactic in peace time, it developed into a threat to his regime during wartime and has undermined him permanently.
Akin to President Mikhail Gorbachev in the aftermath of the August coup of 1991, Putin will be similarly blamed for this mutiny against him, having likewise created and elevated the very forces that then threatened the entire nation. As it was with Gorbachev’s loss of power months later, the fallout from this mutiny will likely result in the eventual end to Putin’s rule, having been revealed as weak, indecisive, and increasingly irrelevant in decision-making.
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