The Best Analysis Yet Of The Wagner Mutiny

Stonetoss comic comparing the Wagner rebellion to Jan 6th. 

The Mainstream Media Is Useless On This

We had the misfortune to listen to some talk radio and watch some cable news on Monday, and the ignorance on display about the events in Russia over the last few days was striking, particularly considering how deeply involved the U.S. has become in a war on Russia's front doorstep. One of the best analysts of that war so far has been our friend Sergei Witte (a pseudonym: Sergei Witte was a Russian nobleman and reformist minister in the governments of Russia's last two tsars), and he's presented the best analysis of the Wagner uprising we've seen yet. 

It's a long and detailed post, so we have excerpted what we found to be the most interesting and relevant part, from an American perspective, below. Before we get to that, a brief trading note. 

Trading Note: The Nuclear Option

Regular readers may remember David Janello, PhD, CFA. A few weeks ago, we shared his post here about Lululemon Athletica (LULU) sponsoring an LGBT dance party for kids in Chicago. 

In addition to keeping us posted on the latest in corporate-sponsored degeneracy in Chicago, David Janello is our go-to for advice in structuring options trades, since he's been trading options since the Carter Administration. He's got a new book out about options trading titled The Nuclear Option (the title is an allusion to Warren Buffett's quote about options being "financial weapons of mass destruction"); you can read our review of it here. 

And if you want a heads up next time we enter an options trade, feel free to subscribe to our trading Substack/occasional email list below. 

Now onto Sergei Witte's excellent post about the Wagner mutiny. 

Russia’s Crisis Management

This is the part of the article that I suspect will ruffle feathers and earn me accusations of “coping” - so be it. Let’s just get this out in the open:

Russia handled the Wagner uprising extremely well, and its management of the crisis points to a high degree of state stability.

Now, what I am not saying is that the uprising was good for Russia. It was clearly a net-negative in several ways. Russian aircraft were shot down by Wagner and Russian pilots were killed. Prigozhin was then allowed to walk away after causing these deaths - a stain on the government. There was widespread confusion which does nothing good for morale, and operations in the Southern Military District were disrupted by Wagner’s occupation of Rostov.

On the whole, this was not a good weekend for Russia. It was a crisis, but it was a crisis that the state handled quite well overall and mitigated the downsides - perhaps even making a glass or two of lemonade out of Prigozhin’s lemons. It’s a bit fitting, perhaps, that Shoigu used to be Minister of Emergency Situations (essentially disaster relief). Disasters are never good, but it’s always better to handle them well when they happen.

The state response was actually pretty straightforward: call Prigozhin’s bluff.

Prigozhin drove toward Moscow with his column - but what was he going to do if he got there? Russian national guard was preparing to block them from entering the city. Would Wagner attack Moscow? Would they shoot national guardsmen? Would they assault the Kremlin or shell Saint Basil’s? Doing so would lead to the inevitable death of every man involved. Wagner, with no supply or procurement of its own, cannot fight the Russian armed forces successfully and probably could not supply itself for more than a day or two.

The problem with Prigozhin’s approach is that pantomiming a coup doesn’t work if you aren’t willing to actually attempt a coup - and a coup only works if institutional authorities side with you. It’s not as if Prigozhin could drive a tank up to Lenin’s mausoleum and begin issuing orders to the federal ministries and armed forces. Coups require control over institutional levers of power - regional governorships, government ministries, and the officer corps of the armed forces.

Prigozhin not only lacked all of these things, but in fact the entire apparatus of power denounced him, scorned him, and branded him a traitor. Having mutinied his way into a dead end, his only choices were to either start a firefight outside Moscow and guarantee that he would die and be known to history as a traitorous terrorist, or to surrender. It is probable that the Wagner column shooting down Russian aircraft (which Prigozhin later claimed was a “mistake”) spooked him and confirmed that he was going too far and did not have a good way out. When your opponent calls and you have nothing in your hand, there is nothing to do except fold.

Consider then, for a moment, the actual scene in Russia. An armored column was driving towards the capital. What was the response from the Russian state and people? Authorities at all levels publicly denounced the uprising and stated support for the president. There were no defections, either from military units or civilian administration. There was no civil unrest, no looting, no loss of even basic government control in the country. Compare the scenes in Russia during an armed rebellion to the United States in the summer of 2020. Which country is more stable, again? [Emphasis here is ours--PA]

In the end, the government managed to dissipate a crisis situation, which could easily have spiraled into substantial bloodshed, without any loss of life apart from the crews of the two downed aircraft (deaths that we should not minimize, and must be remembered as victims of Prigozhin’s ambition). Furthermore, the terms of the “settlement” amount to little more than surrender by Prigozhin. He himself seems to be bound for a sort of semi-exile in Belarus (potentially awaiting a Trotsky ice-pick moment) and it seems that the majority of Wagner will sign contracts and be absorbed into the Russia institutional military. Based on the speech that Putin gave this evening (fifteen minutes ago as of this writing), Wagner fighters have only three options: sign MOD contracts, disband and go home, or join Prigozhin in Belarusian exile (presumably without their gear). As it relates to the institutional status of Wagner, Prigozhin lost and the state won. Wagner as an independent fighting body is finished.

Read the rest here.