Ukraine war - Part 19. The economic war
In my last article, I opined that Russian
losses in infantry have prevented a more rapid advance.
Part 18 - the case against Russia
The use of drones, which have increased exponentially, particularly by Ukraine,
have made advances more difficult over time. I also said this:
Russia’s domestic economy is only being
kept out of recession by a windfall from oil and gas exports due to the Iran
war. Ukraine’s strikes on Russian energy
and other high value targets are beginning to hurt morale and cause economic
damage (going by people’s comments on Russian channels). It has necessitated
mobilization of reservists (and some volunteers) in anti-drone units. This
force might include some of those who would normally be in the anti-aircraft
regiment of existing divisions (which no longer have to face a threat from
Ukrainian aircraft) but it means reduced manpower for divisions at the front.
The war has also gone on longer than the Great Patriotic war (1941-45) The
number of Russians who favour a peace deal (albeit retaining the Donbass) is now
67-70% - the highest since the war began,
Russian advances (net territory taken) in
March 2026, was lower than March 2024 & 2025.
This was repeated in April, May and June. (Mar-June 2026 had less territory
captured compared to the corresponding period in 2024 and 2025. More
importantly, the momentum of Russia’s advance slowed. One month may be an
aberration, four months is a trend. Russia did capture more territory in July
and
August, but it did not resemble a full fledged offensive.
Ukraine’s drone offensive. In the six months ending March 2026, Ukraine was able to match or
exceed the number of long range drones launched by Russia. This was the result
of a coordinated European effort to boost drone production – done across 16
locations in Europe.
My previous post on the drone war shows an order of magnitude fewer drones than
what is being
used today by both sides. As I had suggested earlier in this series, the
collective West will finally get its act together in ramping up armament
production – I thought this would happen in 2024, but it took a year more. In
2026, NATO countries have taken a lead over Russia in drone production and that
gap can only widen.
In June, Ukraine launched over 1000 long range drones on a single day – all
against Moscow.
In July, Ukraine created a `Long range impact command’, to handle all drone and
UAV activity.
On 15th Aug, Ukraine launched a record 1328 drones (2100 on
14th and 15th Aug).
Between April and Aug, the lowest number of Ukrainian drones launched on a
single day of a month, was higher than the highest number of drones launched on
that day last year. The number of drones that Russia claimed to have shot down
(claimed to be approx. 90% of those fired) over Russia were:
Jan 2026 - 5294. Feb - 5989. Mar – 11211. April – 9372. May 14195. June –
17832. July 21537.
In the first 16 days of August, 17711 long range drones were shot down.
Not all these are attack drones. Some are decoys. There is double counting
(multiple interceptions of the
same drone. And some short range drones listed as long range.
Ukraine does not publish figures of drones launched.
Ukraine has also been using Flamingo
ballistic missiles. While they have resulted in a couple of high profile
strikes, most missiles (an estimate is 70-80% of those fired) have been
intercepted.
By contrast, Russian drone production has
not increased to the same extent, – though the quality of drones has improved.
In April Ukraine intercepted 4335 drones. These exclude decoys, recon
drones and those that hit their targets. In July, the number intercepted was
3000 by 19 July. (an estimate of 4500 for the month. This is in line with the Russian
number of 6297 long range drones fired into Ukraine. (200 per day).
Ukraine fired 6000 only at Moscow, in July. Ukraine estimates that Russia will
increase long range drone production to 10,000 per month, in August. In May
only 2% of Russian drones were jet powered, rising to 15-20% by July.
The problem for Russia is that it has a
much larger airspace and far more targets to defend. Ukraine’s armaments and
critical materials are almost all imported, while Russia’s are not. Ukrainian drone strikes use NATO’s satellite
surveillance to identify targets and the protection around them and then
cutting edge AI to plan the flight path.
Russia has had to increase the mandated
number of personnel in its armed forces by 25,000 (from 1.5 million to 1.525
million) with all the additional 25,000 personnel going into air defence.
An indication of the damage caused to the
Russian economy is that oil refinery output in the 2nd half of July
fell to 3.8 million barrels a day – a 20 year low. In Jan-Feb, before Ukrainian
strikes on Russian refineries, it was 5.4 MBD. There was also a drop in Russian
oil exports (crude + refined). In July, when Russia could have increased
revenues due to an increase in oil prices from the renewed conflict in Iran,
Russian oil exports by sea fell 55% over July 2025 and 33% before May-June’s
daily average.
For the May-July period, the loss from reduced crude exports and refinery
output was estimated at
US$ 9 billion. Russia’s largest e-commerce company Wildberries has had 21 of its 30
warehouses hit by drone strikes.
Judging by coverage of the fires in the Russian media, the damage was
considerable. There was also considerable damage to shipping in the sea of
Azov.
Ukraine had announced a 40 day campaign on
25th June, to put pressure on Russia through drone strikes to force
it to the negotiating table, under favorable conditions. That appears to have
failed. In July, 201 Russian civilians reportedly died from drone and artillery
strikes, which has hardened the attitude of Russians, going by media reports
and (unofficial but representative)
telegram channel comments.
An analysis of the 40 day campaign is here:
Ukraine's 40 day drone campaign
Russia’s response: With the number of Patriot interceptors falling to literally zero
in July -along with missiles from other
systems that can intercept Russian cruise and ballistic missiles, Russia
stepped up attacks on Ukrainian infrastructure. In July, against an estimated
production of 200 missiles a month, Russia fired 198 ballistic and 153 cruise
missiles (the highest monthly total), a negligible number of which were
intercepted. Russia fired 51 ballistic missiles on the first 4 days of August
2026.
The main target for Russia was Ukraine’s ports, which by August, almost stopped
all shipping and consequently hit Ukraine’s agricultural exports – direct loss
of $ 2 billion, which can increase if exports have to be subsidized to
compensate for the increased transport cost by road, or rail. Other targets
were oil and gas storage, power and armaments plants. Russia also hit Ukraine’s
largest e-commerce logistics provider Nova Poshta with damage to its
warehouses, as well as other logistics providers, estimated at US $1.8 - 2
billion. The economic loss to Ukraine from May-July’s bomb, missile and drone
strikes is estimated at US$ 10 billion (similar to Russia’s energy export
losses).
While Ukraine’s economy is much smaller, the losses are partly made up by
European aid. International aid to Ukraine is largely in the form of a 90
billion Euro loan for 2026 & 27 (repaid in theory from Russia reparations),
of which 60 billion is for arms purchases and 30 billion for the Ukraine
budget, over two years.
For strikes upto 75km, Russia is using glide bombs in larger numbers. In
Jan-Feb 2026, Russia used approx. 6000 UMPK (glide) bombs per month, an
increase from an average of 5000 per month in 2025.
It was 8266 in June and an estimated
8500 in July. More significantly, the range of bombs have increased (strikes
over 75km were recorded) , as has the average bomb size.
On
FPV (short range) drones, after Russian drone came close to catching up with
Ukraine in 2025, Ukraine has again moved ahead, with semi-finished drones made
across Europe and assembled in dispersed sites across Ukraine. From an average
of 250,000 drones used each month in 2025, Ukraine used an estimated 400,000
drones in Jan and has averaged 500,000 drones a month between May-July. Ukraine’s
capacity for drones – production, assembly and operators, is now estimated at
upto 10 million drones a year.
Russia had an estimated usage of 1.75
million drones in 2025 (150,000 per month). This was below the earlier estimate
of 2 million drones. So far in 2026, Russia averages 230,000 drones a month. Thus
Ukrainian FPV drone usage outnumbers Russia over 2:1. Drone usage favors the
defender, who is dug in – usually in urban areas, targeting the infantry and
vehicles advancing in the open.
The density of drones used at the front,
coupled with Ukraine’s far superior surveillance capability (due to NATO’s
satellite coverage) makes any advance very difficult.
How long can this last ?
Russia has a window of upto 6 months, when
it can:
- Exploit Ukraine’s lack of interceptor missiles, against Russian ballistic
missiles, to destroy power
generation, oil and gas facilities, key
armaments plants and port/railway infrastructure.
- Manage to finance the war, from export revenues. Oil prices will fall if there
is a fresh ceasefire in
the Iran war. Russian export volumes if the US sanctions bill comes into force,
or if Ukrainian strikes on
Russian oil infrastructure continue.
- Meet their battlefield objectives. By Feb 2027, the war would have
lasted 5 years, war fatigue among the Russian public and soldiers at the front
would have crossed a tipping point and drone saturation would make any advance
very costly.
Ukraine in the
next 6 months has to:
- Prevent Russia from reaching its
objectives in each sector of the front (summary below) to demonstrate that Russia
cannot advance.
- Avoid an infrastructure collapse (power, fuel) that enables Ukraine to
survive the winter, without
pressure to seek a peace deal.
- Increase economic pressure on Russia, by continuing attacks on its
infrastructure and lobbying the
US
for passing of the sanctions bill.
My view is that Russia will achieve its
immediate battlefield objectives in 6 months and go on the defensive, to reduce
its troop presence and costs.
Analysis of each sector of the front – my view.
(Clockwise)
1. North – Sumy to Kharkiv.
Russia’s Objective: Get to within
artillery range of both cities.
It forces Ukraine to deploy a large force to defend both cities, while ensuring
Ukraine gets no economic value from either city, with an additional flow of refugees.
Russian forces are within 5km of doing this. It should be achieved by the end
of the year.
2.East of Kharkiv (East of the
Vovchansk-Kupyansk line):
Objective: Close the pocket, occupying the area east of the Vovchansk-Kupyansk.
This restores two railway lines from Russia to Kupyansk, improving Russian
logistics and capturing a large area, increasing the buffer from the Russian border.
The Ukrainian salient is being attacked and squeezed from three directions.
Either Ukraine has to withdraw, or suffer an adverse casualty ratio and strained
logistics, trying to hold it.
3. Oskil river line. Kupyansk, south
along the river, to Oskil and Lyman.
Objective: occupy the river line. Complete the capture of Kupyansk, Borova and
Oskil.
Threaten Izyum (or capture it if the Ukrainian line collapses), cut off the M03
highway.
I believe these will be achieved by Feb. The river line can then be defended by
a smaller Russian force, freeing the powerful 1st Guards tank army
for operations in more tank friendly terrain. Ukraine’s dilemma is that if they
try to defend east of the river line, their forces will be degraded to a point
where
they are not in fighting condition, or even able to carry out an organized
retreat when moving to a new defensive line west of the river – which has not
yet been prepared.
4. Slavyansk-Kramatorsk
This is the last remaining major urban area in the Donbass controlled by
Ukraine and where both sides
will deploy the largest part of their forces. Before considering any urban
fighting – which will be another Stalingrad, Russian objectives will be to:
- Capture the city of Druzhkivka (the southern part of the Slavyansk-Kramatorsk
agglomeration).
- Cut off the two highways leading to Oleksandrivka and Dobropillya, isolating
the cities.
- Advance upto the Severo-Donetsk river, cutting off the
M03 highway to Kharkiv. That gets the Russians to within 5km of Slavyansk. (they are 6km from Kramatorsk).
I believe Russia can achieve these by Feb. Ukraine
will have to then decide if there is any point in holding Slavyansk-Kramatorsk (potentially losing 50,000 men) at a time when the city
has no further strategic value.
5. Central sector (Dobropillya). The line Oleksandrivka-Dobropillya-Novopavlivka.
Objectives: Reach the boundary of Donetsk province. Not more than 15km at its
widest (5 on average), in more open and less defended terrain than most of the
front.
- Cut the highways leading to Kramatorsk, from Oleksandrivka and Dobropillya. (which
isolates Slavyansk-Kramatorsk). These can already be interdicted by drones.
6. Zaparozhye
I believe the Russians must achieve three objectives:
- Retake lost ground west of Orikhiv (east of the Dnieper) and advance to
within artillery range of Zaparozhye from the south.
- Capture Orikhiv.
- Advance from the east, to within artillery range of Zaparozhye.
This will mean a 10km advance to achieve the first objective and 15km for the
third. There is already fighting in Orikhiv and its capture will hasten a
Russian advance on either flank.
Advancing from east to west (3rd objective) exposes the northern
flank of the advance to counter-attacks, as has happened over the last 2 months.
To counter that, either Russia also has to advance into the Dnipropetrovsk province,
which is not of strategic importance to them, or slow down the East-West
advance. Some advance is however necessary, to occupy the highway north of
Orikhiv, prevent the formation of a Ukrainian salient between the Central and
Zaparozhye group and increase the buffer
between the front line and the highway to Crimea – now attacked by drones. I
believe these objectives can also be achieved in 6 months, or earlier.
7. Kherson (lower Dnieper from Kherson to Nikopol).
In my earlier blogs I had suggested that the Russian objectives for this sector
would be to cross the river and occupy Kherson (provincial capital) and the strip
of high ground west of the river. I no longer see this happening, unless there
is a collapse of the Ukrainian position. A river crossing against a heavy drone
concentration will result in heavy casualties.
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