The long-term success of the operation remains uncertain, given Ukraine’s ongoing struggles with resources and Russia’s continued advance in the east
Ukraine launched a significant and surprising cross-border incursion into Russia’s Kursk region on August 6, marking the first foreign incursion into the country since the WWII. Ukrainian forces quickly advanced several miles into Russian territory, capturing multiple settlements and leaving Kremlin in shock. The attack, which involved thousands of Ukrainian troops and significant military coordination, has been a major embarrassment for the Kremlin, forcing President Putin to scramble for a response. By Wednesday, August 14, Ukrainian forces claimed control over 74 settlements, including the strategically significant town of Sudzha, which hosts the only gas metering station transporting Russian gas to Europe. Despite over a week of intense battles, Russian forces have been unable to reclaim these territories. In response, Russian officials have evacuated more than 100,000 civilians from the border regions to ensure their safety.
Business Implications:
The escalation of conflict near Sudzha has significantly heightened geopolitical risks, causing panic among European buyers and driving TTF gas prices to peak levels not seen in 2024 at EUR 39.0 per MWh from EUR 32.0 per MWh in July. The Sudzha gas hub, crucial for nearly half of Russia’s remaining gas exports to Europe, supplies directly Hungary, Slovakia, the Czech Republic and Austria, but strong gas inventories, which stand at around 88.0% for the whole of the EU, should prevent a more sustained increase in prices. While Gazprom continues to maintain steady gas flows to its remaining buyers in Europe, the ongoing situation will continue to add to existing volatility in the short-term.
Multinationals operating in Ukraine should also be aware that the latest incursion by will provoke intensified Russian attacks on civilian and critical infrastructure within Ukraine. Multinationals should develop robust contingency plans that prioritize the continuity of critical operations, safeguard data, and ensure resilience against potential power disruptions.
What Ukraine aims to achieve with its latest move?
It remains uncertain how long Ukraine can maintain control of these territories as Russia will increase the intensity of its retaliation. Due to ongoing manpower and material shortages, Ukraine has been unable to launch a major counteroffensive in 2024. Instead, they have opted for a smaller, surprise operation in Kursk to compensate for these limitations. This unexpected move likely aims to boost the morale of both Ukrainian forces and the population, while also showcasing Ukraine’s military capabilities and potential successes both domestically and globally despite broader resource constraints. On the other hand, as momentum for peace talks was building, Ukraine’s position seemed increasingly unfavorable, and the move might be intended to give Ukraine a stronger hand in future negotiations. However, at the moment, the incursion is likely to serve to delay negotiations, as President Putin may be less willing to engage in talks while appearing vulnerable. Another key motive behind the incursion is to draw Russian military units away from Donetsk, where they have been making slow but steady gains. However, it remains to be seen whether Russia will significantly reallocate forces from its priority areas to counter the incursion in Kursk. Perhaps most crucially, Ukraine’s bold move tests the credibility of Russia’s so-called “red lines.” Russia has historically used the threat of nuclear escalation to intimidate other nations. Ukraine’s incursion and Russia’s slow, ineffective response could undermine this tactic, signaling to the international community that these threats may be less credible than previously thought.
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