How Russia Breach of the NovaKhokova Dam Reflects Its Ukraine Economic Strategy

Ukraine have been worried since last summer that Russia might blow up the Novakhokova Dam, especially after the Ukrainian forces liberated Kherson. 

That the Russians finally did what so many had predicted is a reflection of military weakness, as most of the flooding is on the left (Russian-occupied) bank of the Dnipro River, ruining substantial Russian defensive lines there, which suggests they had little hope of holding those trenches and bunkers for long anyway. But what the dam breach does is further damage the Ukrainian economy and prolong the rebuilding that will have to be done. And that plays into their longer term strategy of delaying Ukraine's emergence as an economic power whose existence threatens Russian dreams of hegemony as well as offering an alternative vision of life to Russians themselves. JL

Marnix Provoost and Pieter Balcaen report in Modern War Institute:

Russia fears an economically prosperous, democratic Ukraine that offers Russians the prospect of an alternative political and economic system other than authoritarian-ruled kleptocracy. This might be why Russian President Vladimir Putin characterizes the war in Ukraine as existential in nature. Russia’s principal political objective in Ukraine is not (achieved) solely with military action, but with coordinated attrition, using military, economic, and diplomatic activities to exhaust Ukraine and its Western backers. Targeting Ukraine’s economy contributes to the Russian military-political objective of dismantling Ukraine as a strong, sovereign state.

Churchill famously described Russia as “a riddle wrapped in a mystery inside an enigma.” More than eighty years on, perhaps this same sense of mystery obscures the Kremlin’s reasons for invading Ukraine and annexing parts of it. Much has been written and said about what Russia’s leadership is trying to achieve in Ukraine and how these objectives are pursued. But what is Moscow’s fundamental strategy?

Some argue that the current full-scale invasion is a clear example of Russian imperialism, while others maintain that the annexation is aimed at recreating the so-called Novorossiya. Although imperialistic and revisionist motivations cannot be ruled out and can, to some degree, influence both strategic thinking and individual decisions, this view might be rather simplistic. Furthermore, it ignores a Russian tradition of rational yet idiosyncratic strategic thought concerning its decision-making in foreign policy.

Yet despite the Kremlin’s misleading rhetoric, opportunistic changing of declared goals, and general ambiguity, it is imperative that Ukraine and its Western backers understand Russia’s likely driving political objective and how this is pursued. Misinterpreting Russia’s strategy in Ukraine obscures what needs to be done to attack it, which is essential to denying the Russian leadership the chance to declare a political-strategic victory and to securing Ukraine’s future as a sovereign, economically viable nation. Ukraine and its Western backers must understand Russia’s strategy to counter and defeat it and force Russia to seriously negotiate with Ukraine, taking the latter’s terms into consideration.

At a basic level, Russia likely fears that an economically prosperous, democratic Ukraine might offer the Russian population the prospect of an alternative political and economic system other than an authoritarian-ruled kleptocracy. This might be partly why Russian President Vladimir Putin tends to characterize the war in Ukraine as existential in nature, which in turn enables the Kremlin to further mobilize the population against what it claims are the military and cultural threats of the eastwardly expanding NATO and EU.

After failing to subjugate the country completely, this then appears to be Russia’s principal political objective in Ukraine: keeping it from becoming an example of what an alternative political and economic path might bring the Russian people. Crucially, this is not done solely with military action, but rather with a coordinated concert of various instruments of power. Russia’s strategy in Ukraine has thus become one of attrition, using military, economic, and diplomatic activities to exhaust Ukraine and its Western backers until they accept the current situation as a new reality. Key to this exhaustion is Ukraine’s ability to resist Russia’s presence on its territory, not its seemingly infinite will to do so. However, this ability to continue the war effort has become almost fully dependent on Western support, both military and economic. This is a vulnerability unlikely to be overlooked by Russian strategists.

More than a Military Strategy

By identifying Russia’s chief political objective, it becomes possible to begin to trace the outlines of its overall strategy to achieve that objective. Doing so requires a broader view than the predominantly military-focused lens many analysts, commentators, and pundits use. Analyzing the course of the conflict and its possible outcomes by mainly assessing which side has suffered the most significant losses and has the best chances of (re)conquering Ukrainian territories is shortsighted when considering Russian warfare. Since he published it in an article in Military Review in 1989, Colonel Arthur Lykke’s formula has become a dominant paradigm through which strategy is understood. War, as he described it, is a strategic effort guided by political aims (ends), encompassing military, economic, and diplomatic activities (ways) and the resources and instruments with which to undertake the effort (means). But this conceptualization is not unique to American strategic culture or that of the West more broadly. In Russian strategic thinking, too, war is seen as the use of violence to resolve a policy clash, and these three activities—military, economic, and diplomatic—form the core components of Russian warfare. Military activities and objectives should therefore be analyzed in conjunction with diplomatic and economic activities, objectives, and effects. Combined, these efforts are aimed at contributing to achieving a political victory, rather than a purely military one. This theoretical framework is used as a lens to identify Russia’s strategy in Ukraine in pursuit of its assumed political goal, enabling it to ultimately declare a political-strategic victory.

Tactical losses and operational setbacks in Ukraine tell a story, but an incomplete one. When assessing how Russia’s military activities contribute to achieving its political goals, it is essential to do so comprehensively and at the strategic level. After the Russian armed forces’ failed initial offensive and partial withdrawal in early 2022, their main effort shifted toward the eastern and southern parts of Ukraine. After the Ukrainian armed forces’ successful fall counteroffensive, the front line since then has remained largely unchanged. Although it has been argued that the Russian armed forces have failed in their winter offensive, it remains to be seen whether an operational-level offensive actually materialized. Another explanation might be that Russian armed forces launched local, tactical-level attacks to keep pressure on Ukraine’s armed forces. By forcing them to commit reserves, the Russian armed forces might possibly hinder the preparation of an anticipated counteroffensive, while simultaneously buying the Russian armed forces time to prepare a defense in depth. The key takeaway here is that Russian armed forces seem to consolidate their gains rather than launch coordinated operational-level offensives to gain new territory. Although there might be purely military reasons for a more defensive posture, these are presumably subordinate to, for example, the political ambition of conquering and occupying the remaining parts of the annexed oblasts. Thus, it might be that the current military situation is deemed sufficient to achieve the desired effects of the economic component of Russia’s strategy.

Although the effects of sanctions aimed at weakening the Russian economy have been the subject of widespread analysis, much less has been written on Russian efforts to weaken the Ukrainian economy. Targeting Ukraine’s economy contributes strongly to the Russian military-political objective of dismantling Ukraine as a strong, sovereign state. The Russian main effort in the southeast of Ukraine might not be driven only by goals such as the protection of ethnic Russians or the return of the historical regions of Novorossiya to Russia. Instead, underlying economic drivers might also be the aim of annexing these specific regions. The current occupied territories have a long history as Ukraine’s industrial motor, while during the Cold War, Ukraine was often referred to as “the bread basket” of the Soviet Union. Important parts of the former Soviet military-industrial complex are still situated in the southeastern provinces of Ukraine, and the Zaporizhzhia region constitutes an important producer of metals and machinery. Prior to the conflict, the Kherson region played a vital role in the production of vegetable products, vegetable fats, and oils, but with the occupation of the southern regions, Ukraine has lost about 20 percent of its farmlands. Even if Ukraine succeeds in retaking these territories, it could take up to ten years to demine and make them usable again.

The macroimpact of this occupation is not to be neglected. As illustrated in Figure 1 (visualizing regional contributions to Ukraine’s GDP prior to the conflict), the current Russian occupation of the majorities of the Luhansk (1 percent of prewar GDP), Donetsk (5.2 percent), Kherson (1.6 percent), and Zaporizhzhia (4.2 percent) regions results in a combined loss of 12 percent of Ukrainian GDP. Moreover, these losses need to be added to the economic losses Ukraine already suffered following the 2014 annexation of Crimea (3.05 percent of GDP in 2013) and the occupation of portions of Donetsk (a drop from 10.83 percent of Ukrainian GDP in 2013 to 5.78 percent in 2015) and Luhansk (a drop from 3.62 percent in 2013 to 1.2 percent in 2015) oblasts. In addition, far-reaching efforts have been made to “Russify” these regions at an accelerated pace. Ukrainian bank infrastructure and cash holdings were robbed, food stores (e.g., grain) were looted, Russian telecom providers have been installed, and the Russian ruble has been introduced as the only accepted means of payment.

Figure 1: Ukrainian GDP by region (percent of total GDP) in 2021, prior to the beginning of the large-scale offensive. (Source: authors’ visualization based on data from the Ukrainian State Statistics Service.)

Studying these regions in detail shows that Russia succeeded in occupying key infrastructure of importance to the rest of the Ukrainian economy. The Zaporizhzhia nuclear power plant, for example, accounted for almost half of Ukraine’s nuclear power production prior to the conflict, whereas 40 percent of Ukrainian steel was produced in Mariupol. Furthermore, the Russian offensive in southern Ukraine resulted in the occupation of several of Ukraine’s major maritime ports (most importantly Mariupol and Berdyansk). This further facilitated Russian efforts to impose a maritime blockade. This confronts Ukraine with severe logistical challenges, since 75 percent of its foreign trade took place through sea routes prior to the war.. The consequences of this blockade are tangible for the rest of the world, as Ukraine is the largest exporter of sunflower oil and one of the main exporters of wheat, barley, and maize. The drop in Ukrainian exports has had a clear effect on world food prices, particularly in countries that rely heavily on Ukrainian imports such as Lebanon, Syria, and Yemen. Despite the Black Sea Grain Initiative, signed in July 2022, enabling Ukraine to restart exports of grain and other products from the ports of Odessa, Yuzhne, and Chornomorsk, Russia continues to threaten to abandon deal if Russian demands are not met. Moreover, insurance costs for shipping companies have substantially increased, putting pressure on the profitability of export activities. This also partially explains why Russia identified Odessa as one of the strategic objectives, as taking the city and the area around it would effectively have allowed Russia to deny Ukraine all maritime exports.

Assessing Russian military-strategic objectives from an economic perspective also illustrates the rationale for Russia to have fought so hard, and at such cost, for control of Bakhmut—and for it to continue its war efforts in neighboring eastern regions, like Dnipropetrovsk. This region is almost absent from discussions as a strategic objective, despite its important and longstanding role as a center of metallurgy and military industry. During the Cold War, this region was the world’s biggest producer of nuclear missiles. The economic importance of this region comes to the fore when we look at the 2021 regional GDP contributions. As demonstrated in Figure 1, Dnipropetrovsk accounts for over 10 percent of Ukrainian GDP, serving as an important contributor to the Ukrainian economy. It moreover also serves as a hub for sea shipping. Hence, if Russia can shift the front line further to the west (getting the region’s key infrastructure into artillery range would suffice), it would be able to deal another serious blow to the Ukrainian economy.

Finally, the ongoing conflict forces the Ukrainian state to continue to channel budgetary means toward the war effort. More than 40 percent of the initially adopted state budget for 2023 was devoted to the security and defense sector, corresponding to 1.1 trillion hryvnias ($30 billion). In March, the budget was amended to further increase spending on defense by an additional 518.2 billion hryvnias ($14.1 billion). In total, spending on security and defense amounts to 26.6 percent of Ukraine’s GDP. Ukraine is choosing to prioritize guns over butter—but Kyiv almost certainly does not feel it has any other choice. Moreover, Ukraine is heavily dependent on support from the West to finance this spending. The attrition war, therefore, is not only being executed on the battlefield; both parties are also severely exhausting each other financially. As long as Russia will be able to exert pressure along the six-hundred-mile-long front line, Ukraine will be forced to maintain an enormous and costly security disposition.

Meanwhile, Russia’s diplomatic efforts are linked to both its military activities and the effects these have on Ukraine’s economy. Although Russia’s territorial gains in Ukraine might not seem impressive considering the military losses incurred to achieve them, Ukraine did witness a 35 percent drop in real GDP and a rise in inflation of over 20 percent. The war has confronted the country with severe economic challenges. Because Ukraine’s economy is dependent on substantial financial aid and economic support, Russia’s comprehensive attritional strategy aims to create a Western political perspective of doubt regarding the prospect of a quick and decisive Ukrainian victory that can end the war. The Western willingness to continue supporting Ukraine both militarily and financially is seen as critical for Ukraine’s ability to survive as a viable sovereign nation and continue its effective defense and counteroffensives. If the Russian military succeeds in keeping the Ukrainian armed forces from achieving a strategic victory in the foreseeable future, it remains to be seen what the effect will be on the continuation of substantial Western support. Russian diplomats might exploit the perspective of an endless war by displaying a willingness to negotiate while simultaneously voicing a narrative that it is the West that advocates its continuation. However, an armistice that consolidates the current front line would give the Russian leadership its desired political-strategic victory. If brokered with the United States and China, such an agreement would also imply recognition as a world power, while having demonstrated successful resistance to Western economic and military power, ultimately bringing Russia’s desired multipolar world closer. Most importantly, however, it will ensure Ukraine cannot become the economically viable, sovereign democracy that embodies an alternative reality for the closely related Russian people.

What Does This Mean for Ukraine—and its Supporters?

In crafting strategy, there is a fundamental need to account for that of the enemy. This imperative is not new—as evidenced by Sun Tzu’s words in the epigraph that opened this article—and yet states throughout history have made the mistake of making strategy absent a sufficient understanding of those of their adversaries. It is crucial to assess Russia’s activities in Ukraine through a multifaceted lens in order to identify the pillars of its overarching strategy in pursuit of a political victory. Doing so allows Ukraine and its Western backers to attack Russia’s strategy rather than focusing solely on inflicting losses and recapturing lost territory. In the short term, Ukraine’s military should consider the safeguarding of its remaining industrial assets in the center of the country as well as pursuing any opportunity to increase its export volumes. This will provide the necessary economic means for future independent force generation while countering the vulnerability of an overdependence on Western financial and military aid that might become uncertain in the future. As it seems unlikely that the underlying political causes of the current conflict will be satisfactorily addressed at the negotiating table, the war between Moscow and Kyiv will be one of protracted attrition. Making Ukraine economically viable and less dependent on Western support will better enable it to defend against—and attack—Russia’s strategy. This will allow Ukraine to ultimately tip the balance in the Russian strategic calculus against the benefits of continuing the war in pursuit of its political goal.