Bad Omens For The Ukrainians

Burning Man Pays Tribute To Ukraine; Turns Into Muddy Mess

At Burning Man last week, attendees paid tribute to Ukraine by setting fire to a giant wooden box, which, when it burned down, revealed a metal sculpture of the Ukrainian national symbol, the trident. Flash forward to the weekend, and Burning Man became a muddy mess. One account on X quipped that the Burning Man attendees should be sent to fight in Ukraine, given that they now have Rasputitsa (mud season) experience. 

That seemed like an inauspicious omen for the Ukrainians, particularly as it coincided with new assessments of the dire state of the Ukrainian war effort. Below, we'll look at a few of those assessments, and, following that, we'll close with an update on a previous post about a biotech trade. 

The Man Who Predicted The War Says The Counteroffensive Has Failed

John Mearsheimer, is the University of Chicago political science professor who famously predicted the current Ukraine war back in 2015. 

On Saturday, he published a new post about the war on his Substack (Bound To Loose: Ukraine's 2023 Counteroffensive): 

It is now clear that Ukraine’s eagerly anticipated counteroffensive has been a colossal failure.^[1] After three months, the Ukrainian army has made little progress pushing back the Russians. Indeed, it has yet to get beyond the so-called “grey zone,” the heavily contested strip of land that lies in front of the first main line of Russian defenses. The New York Times reports that “In the first two weeks of the counteroffensive, as much as 20 percent of the weaponry Ukraine sent to the battlefield was damaged or destroyed, according to U.S. and European officials. The toll included some of the formidable Western fighting machines — tanks and armored personnel carriers — that the Ukrainians were counting on to beat back the Russians.”^[2] According to virtually all accounts of the fighting, Ukrainian troops have suffered enormous casualties.^[3] All nine of the vaunted brigades that NATO armed and trained for the counteroffensive have been badly chewed up on the battlefield.

The Ukrainian counteroffensive was doomed to fail from the start. A look at the lineup of forces on both sides and what the Ukrainian army was trying to do, coupled with an understanding of the history of conventional land war, make it clear that there was virtually no chance the attacking Ukrainian forces could defeat Russia’s defending forces and achieve their political goals.

Professor Mearsheimer goes on to discuss the history of blitzkrieg warfare, and why the Ukrainians were never likely to make it work against Russia--and even if they did make it work at a local level, Russia would have still beat them in the end because they have the advantages in artillery, air support, and population. 

What Happens Next 

Professor Mearsheimer concludes his post by predicting that the war will continue and then become a frozen conflict: 

The most likely result is that that the war will go on and eventually end in a frozen conflict with Russia in possession of a significant portion of Ukrainian territory. 

But another military observer, the X account "Armchair Warlord", predicts that the Ukrainian military may be about to collapse. Before we get to his prediction, lest any of you dismiss him because he's a pseudonymous X account, note that Professor Mearsheimer himself referenced another pseudonymous X account in his post above, our friend Sergei Witte, and Sergei is the one who drew our attention to Armchair Warlord's post. 

In a long post on X, which included the map above (of the Soviet Union’s drive to the Dnieper River in 1943), Armchair Warlord laid out the basis for his prediction [emphasis mine]: 

The Sword of Damocles

The Russian Army's force buildup through 2023 and what it means for the Ukrainian War going forward

One of the biggest - and certainly the most consequential - question marks in the world right now is the current status of the Russian Army. Some particularly dim Western commentators and even senior officials have claimed recently that the Russians have lost half or more of their combat power from the date of their initial invasion in February 2022 and are now weaker than the Ukrainians overall. These claims have so many problems they're barely worth discussing and should simply be dismissed out of hand. Let's work through a real analysis instead.

Claims the Russians had a "million-man army" prewar are simply false - that was the total number of people in the entire Russian Armed Forces. The Russian "Army" (between the Army proper, the Naval Infantry, and the VDV [Russian airborne troops]) was only some 350,000 personnel, of whom approximately 100,000 were conscripts. This manning level supported some 183 combined-arms battalion task forces under the now-deprecated Battalion Tactical Group organizational scheme. In real terms this meant that for every 1900 soldiers in the overall force the Russians would get one maneuver battalion with appropriate supporting arms.

This can be immediately sanity-checked by comparison to the United States Army. In 2018 the active-duty US Army had 31 Brigade Combat Teams, each of which had four maneuver* battalions for a total of 124 appropriately-supported battalions on an end strength of 483,500. When accounting for the fact that Russian units are about 2/3 the size of their Western counterparts (31 versus 44 tanks in a battalion, for instance), this means that the two armies had close to exactly the same number of effective battalion task forces available and the Russians are about 30% more efficient at converting end strength to combat power. This is to be expected given Russia's relative lack of logistical, administrative and command overhead without global commitments.

* I am including the BCT's organic cavalry squadron as a maneuver battalion because it is frequently tasked as such operationally and has the capability to perform maneuver tasks.

Now to the war. The Russians began recruiting volunteers quite early in the war, but more significant in the early stages of the war was industrial mobilization. As early as March 2022 Russian military industry began hiring huge numbers of personnel and ramping up production of war materiel across the board. Part of this was to replace equipment lost in combat but much of it was, I now have reason to believe, the leading edge of a deliberate plan to build out the Russian Army in the coming months. Mobilization of personnel was to come later, first with small-scale recruitment of volunteers over the Spring and Summer of 2022 and then with formal mobilization in Fall 2022.

Russian mobilization came in two waves. First there was an announced increase in the Russian military's end strength of 137,000 in August 2022, exactly the number of conscripts then in service. This suggests strongly that the 2021-2022 conscript class was simply retained in service for the duration. The second wave was the "partial mobilization" of 300,000 in September 2022, which was subsequently converted into another increase in the Russian Army's authorized strength. This gives us a current strength of the Russian Army as some 750,000 soldiers, more than double its strength in February 2022 and - highly significantly - with 650,000 instead of 250,000 soldiers deployable as either "contract" or "mobilized" soldiers.

It should be noted that the Russian mobilization of last year was not a "one-time" callup - it was a permanent expansion of the size of their army to be filled with ongoing recruitment efforts, conscription, and mobilization of reservists. This is a force that is being continually filled and which can be expected to be at or near its authorized strength.

Applying our ratio from earlier (1900 troops to generate one battalion task force) we get a post-expansion Russian force of some 395 maneuver battalions with enablers. This is an enormous force that could easily secure Russia's borders (particularly its now very-hostile western borders) while simultaneously overwhelming the battered Ukrainian military. Should NATO intervene directly, this force would be able to slug it out with any Western expeditionary force that could be realistically deployed into theater.

But Armchair Warlord, you say, the Russians are running out of troops and tanks - all the Twitter blue checks are telling me this! What evidence do you have? Well, I have a few data points in support of my theory.

1. Russia recently withdrew from the Treaty on Conventional Forces in Europe. The CFE treaty, originally signed in 1990 and adapted in 1999 to post-Cold War realities, sought to place national ceilings on conventional arms stationed in Europe and at first served to place a cap on the amount of hardware the Warsaw Pact could flood across the North German Plain on short notice. Serious Russia observers have long noted that, far from his characterization in the West as an unhinged autocrat, Vladimir Putin is a boring neoliberal with a highly legalistic approach to governance. Although the Russians suspended their participation in the treaty in 2007, their recent denunciation is, I believe, highly significant.

Under the treaty the Russian Federation was allowed to station some 6,350 tanks, 11,280 APCs (including 7,030 IFVs) and 6,315 artillery pieces west of the Urals. A force of some 350 BTG-equivalents deployed west would consist of approximately 4,000 tanks and some 10,000 infantry carriers as well as 6,300 artillery pieces. This strongly suggests to me that the Russians denounced the treaty because some dimension of their force build, likely either artillery pieces or infantry carriers, violated its limitations.

This is, by the way, an enormous army and explains the "all of the above" approach the Russians have taken to procuring war materiel lately. They wouldn't be simultaneously rolling large numbers of T-90Ms and T-80BVMs off the assembly lines while also doing deep modernizations of their T-62 fleet for use as frontline tanks unless they had a real need for a genuinely enormous tank fleet in the near term. Same story with APCs and artillery.

2. Contrary to what certain pro-Western analysts and officials have asserted, the Russian side of the northeastern Ukrainian border (the "non-active" front line on the prewar border) is packed with troops. What immediately struck me during the abortive Ukrainian raids on Belgorod Oblast earlier this year was the size, speed and ferocity of the Russian counterattack, with multiple Russian battalions quickly mobilizing to throw back the attackers. Russian forces responding to the attacks were often apparently from different brigades or even divisions, with different equipment sets and distinct tactical signs, and they arrived and deployed for combat in large, intact units with fresh equipment.

This same region would be the simplest area for the Russians to concentrate forces in without disturbing logistical efforts for the "active" front line to the east and south, and a large offensive from this direction would quickly carve through the thin screen of Territorial Defense units covering the border, turn the main Ukrainian army deployed in the Donbass, and lead to a rapid collapse of the Ukrainian position east of the Dniper.

3. In June, the Russians announced the actual units they intend to create as a result of this force buildout. The new ground force units announced were one Combined Arms Army (a corps-sized formation), one new Army corps, five new divisions, and 26 new brigades. It is unclear whether these units are entirely separate or whether they are intended to nest within each other matryoshka-style, but this would either be 78 new BTG-equivalents (if the units above brigade level are just new headquarters) or a whopping 177, very much in line with my calculations above (if all of these are complete units).

We haven't seen this "doom army" yet because the Russians are still pursuing their Fabian strategy of letting the Ukrainians and their NATO sponsors beat themselves bloody against their defensive line in the Donbass. The Russians can now be expected to launch a large-scale offensive at a time, place, and in circumstances of their choosing - given the exhaustion of the AFU in its monthslong offensive the time for "big red arrows" is, I feel, ripening.

It should also be noted that the Russians do not seem to be leaving anything at all to chance. In Zaporozhe, for example, they constructed several defensive lines in a deep, complex scheme in preparation for an offensive they ended up stopping close to the line of contact. I would expect similar thoroughness out of their offensive preparations.

Incidentally, Colonel Douglas Macgregor also believes the Ukrainians are close to collapse.

It would be nice to think diplomacy will prevail before the Russian "doom army" appears and potentially precipitates that collapse, but unfortunately, Professor Mearsheimer believes there are irreconcilable differences between Russia and the Ukrainians now, so a diplomatic solution is unlikely. 

Let's wrap this up on a more positive note with that update on the biotech trade I alluded to above. 

Biotech Lottery Ticket Update 

In a post two weeks ago, I mentioned A Biotech Lottery Ticket we had purchased on the Portfolio Armor trading Substack. 

That biotech stock was BioLineRx (BLRX 0.00%↑) and the trade was buying the $2.50 strike calls expiring on September 15th for $0.10. When we posted that, BLRX was trading about about $1.38; on Friday it closed at $2.02, and those calls last traded at $0.35, after the company reported better-than-expected earnings. 

Assuming that call option trades at a similar price on Tuesday, subscribers will be able to sell some of their calls for a 350% gain, and play with the house's money with the rest, as we await the potential FDA catalyst scheduled for the end of the week. 

In Case You Missed It

Finally, in case you missed it, in our last post, we posted lessons from last week's trading, and observations about the current market environment. 

If you want a heads up when we place this week's trades, as always, feel free to subscribe to our occasional email list/trading Substack below. 

If You Want To Stay In Touch

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