Over the past week, no significant territorial changes have occurred at the front. In the Donetsk region, Russian troops increased pressure on the city of Avdiivka, trying to encircle the city. Still, within a few days, the fighting there moved into the stage of small-scale infantry assaults and slowed down, just like on the Zaporizhzhia front. Fighting also intensified in the Kupyansky and Limansky directions, where the Russian Federation began offensive operations in the Makiivka area.
Rumors are spreading in the Russian Federation about a possible offensive of the Ukrainian army through the Dnieper River on the left bank of the Kherson region; Ukraine has not officially confirmed this. In particular, on the left bank of the Kherson region, there are no multi-level defense lines of the Russian Federation, as on the Zaporizhzhia front. From this point of view, advancement here would make sense for developing the Ukrainian offensive in the south of Ukraine. But the very crossing of the Dnieper and maintaining a bridgehead there and its supply is quite risky and complex.
Ukraine attacked Russian airfields in Lugansk and Berdyansk with American long-range ATACMS missiles. According to the Western press, American long-range missiles were recently secretly delivered to Ukraine. Still, they have a range limitation of up to 165 kilometers, possibly with the expectation of hitting the rear of the Russian Federation precisely in the occupied territories. Most likely, the main target of the Ukrainian Armed Forces will now be Russian ammunition and fuel depots, as well as airfields far behind the front line.
It’s still difficult to say how long-range missiles will appear ATACMS will affect the overall situation at the front; their number matters. One way or another, the first deliveries of ATACMS give the green light for the supply of long-range missiles to Ukraine from other countries. Previously, the allies refused to provide this type of weapon to Ukraine for fear of a new escalation (including nuclear) from the Russian Federation.
The Administration of US President D. Biden probably decided to transfer ATACMS to Ukraine after the summer counter-offensive of the Ukrainian Armed Forces did not bring the desired result; in addition, the resumption of pressure from the Russian Federation.
In general, new activity on the front of the Russian Armed Forces is probably an attempt to test Ukraine's political and psychological strength in the current situation of uncertainty regarding further assistance from allies. Let us recall that in the United States, during the presidential election campaign, party differences (between Democrats and Republicans) regarding additional support for Ukraine are growing. The US Congress recently blocked aid to Ukraine, and it is difficult to say when funding will be approved and in what volume. US assistance cannot be replaced by European support.
As a result, it cannot be ruled out that Ukrainian troops may lose the military initiative at the front and go entirely on the defensive if, indeed, the Western allies cut aid to Ukraine or switch their attention to other theaters of combat, for example, Israel.
The war between Hamas and Israel shifts the attention of the international community away from the issue of Ukraine, essentially making it secondary in the information space. If the conflict escalates into a broader regional war involving other groups, such as the Lebanese group Hezbollah, and the risk of significant ally and donor Ukraine spilling over into Iran or Syria, the United States will be less able to focus resources on the war in Ukraine.
The attention of the world media to events in Ukraine must also decrease significantly. This, in turn, is necessary for the team of President V. Zelensky to influence public opinion in the countries of politicians who doubt further support for Ukraine. A large-scale war in the Middle East could also lead to a sharp rise in world energy prices, negatively affecting the economic situation in Western countries and Ukraine. At the same time, Iran and the Russian Federation would benefit.
At the same time, the Administration of US President Joe Biden promised to continue to support Ukraine. The White House plans to combine aid to Israel and Ukraine (approximately $50 to $100 billion through 2025). But this issue still needs to be discussed in Congress.
In general, Ukraine's main Western allies are entering a period of instability and elections (USA, European countries), and the systemic support for the country may be disrupted. At the same time, Ukraine's dependence on Western funding is only increasing.
Thus, preferential financing and grants from the G7 countries have become vital to ensuring the balance of the state budget of Ukraine and financing critical expenses. Since the beginning of the war, the Ministry of Finance of Ukraine has attracted $64.9 billion in external funding to the state budget. The largest donors are the EU, USA, IMF, Canada, Japan, World Bank, UK, and Germany. Ukraine received almost $33 billion from the G7 countries over a year and a half, more than half of all external funding during this period.
In the future, they plan to increase funding for the Budget of Ukraine at the expense of its allies by $6.2 billion. Thus, according to the draft Budget for 2024, the following funds are planned to be received from foreign donors: from the United States (UAH 1.033.3 billion) - $28 billion; EU (UAH 372.3 billion) -$10 billion; IMF (UAH 223.8 billion) - $6 billion; International Bank for Reconstruction and Development (82.8 billion UAH) - 2.2 billion dollars. Total about - 1,711.9 billion UAH or ($46.2 billion)
Previously, representatives of the Ukrainian government stated that to cover the budget deficit, it is necessary from 3 to 5 billion dollars. This means that Ukraine should receive about 3.8 billion dollars per month; this amount, considering the data previously announced by the government, should cover budget expenses. International donors have already financed the country's budget in 2023 in the amount of more than $32 billion (by the end of the year, $40 billion is expected).
The 2024 budget may suffer losses due to tax breaks. In 2024, budget revenues that could go to the state and local budgets but will not be transferred due to tax breaks will amount to UAH 94.5 billion. This is 6.8 billion more than this year—and 26.4 billion more than in 2022. The size of inflation and the devaluation of the hryvnia are probably taken into account here. Almost a third of all these tax breaks are related to defense needs. In particular, the volume of VAT benefits on defense products in 2024 is expected to amount to 31.1 billion hryvnia, which is 12.8% more than in 2023 and 48.9% more than in 2022.
Allies are tightening oversight of how Ukraine spends funds provided to it and are making systemic demands for a series of reforms in exchange for further military and financial support. This is how I started working in Ukraine. Pentagon Inspector General Robert Storch, who will oversee the use of aid to Ukraine, will also cooperate with oversight agencies of the US Agency for International Development and the US State Department. Let us also recall that Penny Pritzker, who had already arrived in Ukraine, was previously appointed as the US Special Representative for the Economic Recovery of Ukraine. Additionally, these figures will have to neutralize possible scandals in Ukraine due to corruption during the American election campaign.
The same week, parliament adopted the law as a whole, No. 9296-d, on financial monitoring of politically exposed persons (PEP). Under this bill, top officials, instead of three years after leaving office, will remain politically exposed persons (PEPs) virtually for life. Also, the PEP status is expanded to a wide range of persons, primarily a relative of a public person. This status entails many restrictions, especially regarding financial transactions and bank interactions. They intend to return all public figures since 1991 to the scope of the law. Therefore, this law caused protests among deputies. Many parliamentarians believe that adopting this law could undermine the motivation of people to join the public service. But despite this, the law was still passed. In this version, the bill must be approved by the IMF as fulfilling the requirements of the lending program. In addition to the requirements from the IMF, the European Commission identified the law on e-declaration and the law on financial monitoring of politically exposed persons (PEP) as essential conditions for starting negotiations on Ukraine's membership in the EU. Let us recall that in September, the Verkhovna Rada adopted the law on the resumption of electronic declaration for persons authorized to perform the functions of the state or local self-government (bill No. 9534) with amendments by the President of Ukraine Vladimir Zelensky, which provide for the immediate opening of a register of declarations. In general, the Allies sought to establish total control over the source of income of Ukrainian officials and deputies.
NABU and SAPO have intensified the case of illegal enrichment of the Deputy Head of the Office of President Andrey Smirnov. There is probably an attempt to launch the process of significant personnel changes in the Office of the President, the ultimate goal of which may be the removal of the head of the Office of the President, Andrii Ermak, from his post. Taking into account the fact that NABU is leading the case, it is evident that foreign donors are interested in such a development of events, who have long been dissatisfied with the fact that it was A. Ermak who concentrated on himself the main levers of state power and controls virtually all of the country's financial flows.
But A. Ermak's position in the future may serve as the subject of behind-the-scenes power bargaining with Western partners, and, under certain conditions, he may even retain his post.
Due to the lack of significant successes at the front and the prospect of a possible reduction in funding by the allies, opposition activity in Ukraine is increasing. Former advisor to the Office of the President of Ukraine and popular public opinion leader Alexey Arestovich accused the authorities of strategic miscalculations that prevented the Ukrainian army from implementing plans to break through the front. According to him, the deadlock formed at the show does not favor Ukraine since the Russian government is already making "cannibalistic, but adequate decisions to the current situation," the Ukrainian leadership is "corrupt and inadequate." A. Arestovich sees a way out in holding elections to "carry out a reset, break the monopoly of incompetence, and give a chance to those who can make decisions that correspond to the real situation." Accusations from A. Arestovich were made after his trip to the USA and the EU, which may indicate support for such a position in conservative Western circles.
War fatigue is becoming more apparent in Ukrainian society, and the total number of skeptics is already roughly one-third. According to a study by the Kyiv International Institute of Sociology (KIIS), over the past year, from 14% to 32%, there has been an increase in those who believe in the existence of severe conflicts between the country's political leadership and the army command. The share of those who think that the West is getting tired of Ukraine, its support is weakening, and they want Ukraine to make concessions to Russia has also increased noticeably - from 15% in September 2022 to 30% in October 2023.
Military situation
Warfare.
The situation in the Kharkiv region: In the Kupyansk direction, the Russian Armed Forces are trying to advance in the areas of the settlements of Sinkovki, Ivanovka, and Makiivka.
In Donbas, clashes of lesser intensity are observed in the areas of Bakhmut, Maryinka, and Avdiivka.
In the Donetsk region, The Russian Armed Forces are increasing pressure in Tonenky, Severny, Pervomaisky, and Netaylovy.
The situation in the Southern direction: In the Zaporizhzhia region, Ukrainian troops continue offensive operations in Melitopol and Berdyansk. In the area of the village Rabotino of the Russian Federation, which is trying to regain lost positions, the Ukrainian Armed Forces are holding the line.
Black Sea-Azov direction: without significant changes.
Combat map.
The Verkhovna Rada adopted the bill on financial monitoring of politically exposed persons (PEP).
This week, parliament passed law No. 9296-d on financial monitoring of politically exposed persons (PEP). Under this bill, top officials, instead of three years after leaving office, will remain politically exposed persons (PEPs) virtually for life. Also, the PEP status is expanded to a wide range of persons, primarily a relative of a public person. This status entails many restrictions, especially regarding financial transactions and bank interactions. They intend to return all public figures since 1991 to the scope of the law.
Therefore, this law caused protests among deputies. Many parliamentarians believe that adopting this law could undermine the motivation of people to join the public service.
Recently, the IMF reminded Ukraine of the need to adopt a law on financial monitoring of politically exposed persons (PEP) and resume tax audits.
People's Deputy Y. Zheleznyak from the "Voice" party notes that in this bill version, the IMF must recognize it as fulfilling the requirements of the lending program. This is also the last stage before negotiations on Ukraine's membership in the European Union.
Let us recall that in September, the Verkhovna Rada adopted the law on the resumption of electronic declaration for persons authorized to perform the functions of the state or local self-government (bill No. 9534) with amendments by the President of Ukraine Vladimir Zelensky, which provide for the immediate opening of a register of declarations.
Criminal proceedings regarding the illegal enrichment of the Deputy Head of the Office of President A. Smirnov.
The National Anti-Corruption Bureau (NABU) and the Specialized Anti-Corruption Prosecutor's Office (SAP) have intensified investigative actions against the Deputy Head of the Office of President Andrei Smirnov for illegal enrichment. The case was started based on previously published facts in the media about the acquisition of vehicles and real estate at reduced prices in the name of the official's brother—information about A. Smirnov's trips to Moscow, which took place from 2014 to 2019, are also being studied. The case was initiated by a decision of the Supreme Anti-Corruption Court, which ordered NABU to begin an investigation into Andrei Smirnov's travel abroad, paid for by other persons and not declared by him, which is contrary to the law (air travel on a private plane at the expense of businessman Alexander Cherepinsky).
An investigation into Andrei Smirnov could be initiated and organized by forces interested in changes in the structure of the Office of the President, including international donors.
There is likely an attempt to launch a process of personnel rotation of the OP to remove the head of the OP, Andrei Ermak, from his position. Let us recall that foreign donors have long expressed dissatisfaction with the fact that Andrei Ermak controls the main levers of power and financial flows in the country.
However, Andrei Ermak's position may remain under discussion and negotiations with Western partners, and under certain conditions, he may retain his post.
Economic situation.
Since the start of the war, Ukraine's Ministry of Finance has attracted $64.9 billion in external funding to replenish the state budget. Major donors include the European Union, the US, the International Monetary Fund (IMF), Canada, Japan, the World Bank, the UK and Germany. The Minister of Finance, S. Marchenko, noted that Ukraine received almost $33 billion from the G7 countries during the year and a half of active hostilities, which represents more than half of all external funding received by Ukraine during this period.
Concessional financing and grants from G7 countries have played a key role in ensuring the sustainability of Ukraine's state budget and financing critical expenditures. Representatives of the Ukrainian Government stated that to cover the budget deficit, it is necessary from 3 to 5 billion dollars.
The 2024 budget will likely suffer losses due to the application of tax breaks. Specifically, budget revenues, funds that could go to the state and local budgets but will not be transferred due to tax benefits (specified in the benefit directories), will amount to 94.5 billion hryvnia in 2024. This is 6.8 billion more than in the current year and 26.4 billion more than in 2022. Most likely, these changes take into account inflation and devaluation of the national currency.
Almost a third of all these tax breaks are related to defense needs. In particular, the volume of VAT benefits on defense products in 2024 is expected to amount to 31.1 billion hryvnia, which is 12.8% more than in 2023 and 48.9% more than in 2022.
Almost a third of these benefits are for defense purposes (in particular, the volume of VAT benefits on defense products in 2024 is expected to be UAH 31.1 billion, 12.8% more than in 2023 and 48.9% more than in 2022).
According to the draft Budget for 2024. The following funds are planned to be received from foreign donors:
● From the US Government and other official creditors (UAH 1.033.3 billion) = $28 billion.
● European Union (UAH 372.3 billion) = $10 billion
● International Monetary Fund (UAH 223.8 billion) = $6 billion
● International Bank for Reconstruction and Development (UAH 82.8 billion) = $2.2 billion
(calculated at the rate of 36.6 UAH/$)
Total about – 1.711.9 billion UAH or ($46.2 billion)
Weighted average rate:
● for domestic debt instruments is about 19%
● for external debt instruments – about 5.5%
Thus, in the future, they plan to increase the financing of the country's budget at the expense of its allies by $6.2 billion. This means that, on average, Ukraine should receive about $3.8 billion per month; this amount, considering the data previously announced by the government, should cover budget expenses.
Sociology.
According to a study by the Kyiv International Institute of Sociology (KIIS), over the past year, from 14% to 32%, there has been an increase in those who believe in the existence of severe conflicts between the country's political leadership and the army command.
At the same time, the majority of the population of Ukraine - 54% (in September 2022 - 71%) - continue to adhere to the view that the political leadership and military command act harmoniously as one team.
There are slightly more people who believe that the authorities can make unacceptable compromises - from 5% to 12%.
At the same time, the absolute majority of Ukrainians – 80% – continue to believe that the authorities will not make compromises unacceptable for Ukraine (in September 2022, this figure was 87%)
The share of those who believe that the West is getting tired of Ukraine, its support is weakening, and in general, the West wants concessions from Ukraine to Russia has also increased noticeably - from 15% in September 2022 to 30% in October 2023.
The majority of the country's population - 63% (in September 2022 - 73%) believe that the West continues to help Ukraine and wants the war to end on terms acceptable to Ukraine.
According to the study results, war fatigue is beginning to appear in society, and the total number of skeptics is already roughly one-third.
The situation around Ukraine.
Prospects for combat operations, allied military assistance.
Representatives of the Ukrainian government fear that support for Ukraine has reached its peak. In general, Ukraine's main Western allies are entering a period of instability and elections (USA, European countries), and the systemic support for the country may be disrupted. At the same time, Ukraine's dependence on Western funding is only increasing.
During the presidential election campaign, party differences regarding further support for Ukraine are growing in the United States. It will likely be impossible to replace US assistance with European assistance, and the war in Israel may also divert this resource. In Europe, many countries also began to use the factor of reducing Ukrainian aid as an instrument of their internal political struggle.
Israel continues to say that a ground operation against the Gaza Strip will soon begin. The administration of US President Joe Biden has promised to continue to support Ukraine despite the situation in Israel. Still, the US Congress has not yet decided to send additional funding.
At the same time, it is evident that, one way or another, the United States will now have less opportunity to concentrate resources on the war in Ukraine.
A large-scale war in the Middle East could also lead to a sharp rise in world energy prices, negatively affecting the economic situation in Western countries and Ukraine. At the same time, Iran and the Russian Federation would benefit. Since the start of the war, the United States alone has sent Ukraine $46 billion in military aid.
In addition, the attention of the world media to events in Ukraine will also decrease significantly. This, in turn, is necessary for the team of President V. Zelensky to influence public opinion in the countries of politicians who doubt further support for Ukraine.
Elections in Poland.
Parliamentary elections were held in Poland last weekend. According to the results of the vote count, the ruling party, "Law and Justice" (PiS) (35.3%) and its potential ally, the “Confederation” (7%), have a total of 42% of the votes; the opposition to the government “Civil Platform” D. Tusk (30%) and her possible partners “Third Way” (14.4%) and “New Left” (8.6%) – only 50%. Thus, the opposition led by D. Tusk will create a coalition and will be able to lead parliament.
The ruling Law and Justice Party is a right-wing conservative party that advocates strengthening Polish sovereignty within the European Union and opposes the EU's liberal agenda on several issues - LGBT, migrants, abortion, etc. PiS also had tense relations with Germany.
The far-right Confederation, with which PiS could potentially form a coalition, has even harsher anti-European rhetoric and opposes aid to Ukraine.
Recently, Law and Justice have begun to disagree with Ukraine over grain exports and on the issue of refugees for whom they want to stop social payments.
With D. Tusk coming to power, relations between Kyiv and Warsaw may improve. Regarding assistance to Ukraine, D. Tusk and his party are expected to be closer to the position of the EU and other Western countries such as the USA, Germany, and France. However, the formation of a new political balance in Poland foreshadows further confrontation between the opposition and the ruling party, which will shift the attention of the Polish government more to the domestic agenda.
If PiS goes into opposition, it relies on the support of President A. Duda can begin active political activity within the country, especially if D. Tusk takes steps to revise their political course.
A negative trend is visible regarding assistance to Ukraine in general, resulting from one of the most "pro-Ukrainian" governments in Europe, represented by Poland, suddenly changing its rhetoric, which may signify some cooling of the allies towards supporting Ukraine in general.
Ruslan Bortnik, Oksana Krasovskaya, Andrey Timchenko
for the Ukrainian Institute of Politics
