Ukraine Country Report Jan23 - January, 2023

January 2, 2023

In December European Commission President Ursula von der Leyen
accidently revealed the cost to Ukraine of the war in a speech.
“It is estimated that more than 20,000 civilians and 100,000 Ukrainian military
personnel have died to date,” she said.
The comment drew a sharp rebuke from Kyiv which has made casualty figures
a state secret. The EC quickly deleted the comments from video recordings of
the address and reissued the press release of von der Leyen’s comments with
the numbers expunged.
But Leyen’s comment tallies with other estimates and shows just how much
Ukraine is paying for Russia’s invasion. Prior to the war in the eight years of
fighting in Donbas against separatists, Ukraine had lost a total of some 14,000
It is widely reported that “Ukraine is winning the war with Russia” but a
more accurate description is that against all expectations it is not losing.
The West has supplied Ukraine with powerful, but largely defensive weapons
that have been enough to prevent Russia from rolling over the Ukrainian army.
However, the West has balked at providing powerful offensive weapons, afraid
that it would escalate the war and pull Nato forces into a direct confrontation
with Russia.
After the spectacular successes of Ukraine’s September counteroffensive by
December the frontline had stabilised as Russia’s new top General Sergey
Surovikin withdrew from Kherson and redeployed his forces in a new
multi-layered defensive positions. Some 180,000 of the 300,000 fresh troops
mobilised in September have been deployed to firm up the Russian frontline
and the remaining 120,000 are held in reserves in the rear allowing the
Russian troops to rotate and recover from the fierce fighting.
At the time of writing the main military clash was around the town of Bakhmut
where neither side is able to gain an advantage. Russia has made some
incremental advances but increasingly the war is being compared to WWI
trench warfare fought with infantry and artillery. Few smart weapons have been
deployed in this fight as both sides are running low. In parallel Russia
continues to bombard Ukraine’s energy infrastructure, including two very large
barrages over the New Year’s Eve holidays in an effort to demoralise Ukrainian
civilians. That strategy is not working.
Analysts are widely predicting a big Russian counteroffensive in the
coming months once the ground freezes and Russia has had time to train
and equip its new forces. Ukraine intelligence are also predicting that Russia
will close its borders in January, declare martial law and launch a mass
mobilisation. Clearly the war will continue much longer than anticipated.
From September the Kremlin began to signal that it was ready for peace
talks, but those are unlikely as the positions of the two sides remain so far
apart. The Kremlin is insisting that Kyiv concede the four regions annexed by
Russia in September before talks start. Bankova is insisting that Russia
withdraw to at least the 2014 borders, and would prefer Russia retreat to the
1991 borders, before it will contemplate peace negotiations.
Kyiv has called for a UN sponsored peace summit in February, but this will
likely end simply as a forum for the international community to express its
outrage over Russia’s invasion of Ukraine but won’t produce any concrete
Despite the death toll, Ukrainians remain almost universally committed to
continuing the war until they win. Ukraine has some million people in uniform --
many women have also volunteer, and for frontline duty too —
with several hundred thousand in active service in the fight. They face around
400,000 Russians serving in the Russian army, but with a new mobilisation
being prepared – probably for around April when the weather improves – this
war could last for years.
Ukraine has lost an estimated 20% of its territory. At least 22% of Ukrainian
farmland is under Russian control. These areas are a large part of the territory
identified in the Minsk II agreement that were to be governed as autonomous
districts. As of today, it appears Russia has come close to achieving some of
its minimalist goals, including capturing the greater Donbas region. If Russia
completes this objective then that would represent an obvious point for Putin to
declare victory and for the war to stop. In the near term that is the most likely
scenario that could bring the fighting to an end.
In the meantime, Ukraine’s economy is suffering massive damage. The
Ministry of Economy of Ukraine was forced to return to its original forecast of a
32-33.5% fall in real gross domestic product this year due to
Russian attacks on energy infrastructure, First Deputy Prime
Minister Yulia
Svyrydenko, Minister of Economy, said at a briefing on December
2. But following
the barrage targeting the energy infrastructure that started in
October, the
contraction is likely to be much more severe.
From the initial estimates of $100bn of physical damage done by Russia over
the summer, the estimates rose to $400bn by autumn and are likely to almost
double again by the end of the year, up to $700bn. Missile strikes have
destroyed 50% of Ukraine’s energy facilities.
World Bank Vice President for Europe and Central Asia Anna Bjerde told
Austrian newspaper Die Press that the cost of rebuilding Ukraine’s
infrastructure damaged or destroyed by Russia since February 24 will cost
from €500bn to €600bn ($527bn to $632bn).
"According to our estimates, which have been verified by the World Bank, the
amount of damage caused to the Ukrainian economy as of June 1 is $350bn.
By the end of the year, this amount will obviously double. We understand this,
as the destruction continues," Ukraine’s Prime Minister Denys Shmygal said at
the economic forum in Paris in December.
At the same time, the prime minister said that all sectors of the country's
economy are suffering because of the war.
President Vladimir Zelenskiy said in a call with US President Joe Biden on
December 9. US
President Joe Biden has said he has no intentions to talk to Putin for
now. Biden is not planning to speak to Russian Putin
about ending the war in Ukraine war as Putin has shown no
inclination for
Ukraine received a total of $27.2bn in financial aid from Western allies in
2022, the country’s Deputy Finance Minister Roman Ermolichev said.
Ermolichev added that in 2023 the amount of assistance will increase up to
about $38bn to cover the budget deficit. Ukraine’s Prime Minister Denys
Shmygal noted that his country is also expecting the US Congress to approve
allocation of financial aid worth $37.7bn next year.
US Army plans ‘dramatic’ ammo production increase amid Russia’s
invasion of Ukraine. The US Army is seeking a “dramatic” increase in
monthly production of 155mm artillery shells over the next three years as
donations to Ukraine are “straining allied munitions stockpiles,” Doug Bush, the
assistant secretary of the US Army for acquisition, told Defence News, a US
media outlet.
However, during Zelenskiy’s visit to Washington DC in December Biden
repeated that the US will not send “lethal weapons” (offensive weapons) to
Ukraine in 2023. In the same week German Chancellor Olaf Scholz made
similar comments: he reiterated Germany’s support for Ukraine, but said that
Germany will not send any tanks to Ukraine in 2023.

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