Modern Trench Warfare on the Russian Front is about Economics

Soviet dictator Joseph Stalin blamed his nation’s military collapse in World War I on Germany’s ability to use trench warfare to starve Russia into submission. On the 100-year anniversary of the Great War, Russia is again involved in economic trench warfare with the Western powers and just responded to financial sanctions by cutting off coal to Ukraine.

The most important battles on the Eastern Front during WW1 were fought in the Ukraine, which is known as the Breadbasket of Europe. Despite the Russians inflicting 1.5 million casualties and capturing 400,000 Austrian Army prisoners in the summer of 2016, two years of devastated Ukraine food harvests caused the February Revolution of 1917 that overthrew the Tsar and led to Russia’s military defeat.

One hundred years later, Russia and her adversaries are in economic trench combat along a 3,300-mile border that stretches from Georgia to Finland. The West’s combination of an array of financial sanctions to cut Russian borrowing and America’s fracking boom knocking down oil prices has cut Russia’s cash flow by 7% this year.

Finance Minister Anton Siluanov complained to Reuters, “We’re losing around $40 billion a year because of geopolitical sanctions, and about $90 billion to $100 billion from oil prices falling by 30 percent.” He added, “The main issue that affects the budget and economy and financial system, this is the price of oil and the fall in monetary flows from the sale of energy resources.”

Russia’s outward response to the West has been over 100 reconnaissance plane incursions into NATO airspace with their transponders turned off. Russia also warned that for the first time in history, they intend to send long-range bombers capable of carrying nuclear weapons to patrol the Gulf of Mexico.

But Russia’s real counterattack against the West is economic. Ukraine’s political turmoil coupled with higher costs for Russian energy supplies cut soybean exports by 22% and may cause the wheat harvest may fall by 50%. By interrupting natural gas and coal shipments, Russia is blackmailing the West into paying ransom to prevent Ukrainians from freezing or starving to death.

The West was forced to financially backstop Ukraine’s capitulation to Russia last month to keep natural gas flowing until March. Under a temporary settlement, the Ukraine government must pay $3.1 billion for past debts to Russian gas monopoly Gazprom, make additional upfront payments of $1.5 billion for deliveries of gas for November and December, and guarantee all payments for future Russian gas deliveries.  

Relying on coal to generate about 40% of its electricity, Ukraine lost 70% of its coal supplies when the Donbass mines joined the eastern rebels. Ukraine is now forced to buy rebel coal shipped to Russia; and then sold back to Ukraine at a premium.

With winter weather in the capitol city of Kiev today a balmy 20 degree high and the low of 6 degrees, the Ukraine tried to avoid Russian coal imports by signing a contract in August with South Africa to buy 1 million metric tons of coal.

But the contract was cancelled in the wake of a scandal when the Ukrainian general prosecutor's office started a criminal investigation for massive graft after discovering that South African coal at $110-120 a ton delivered would have cost about 30% more than the $86 a ton for Donbass coal delivered from Russia.

The Ukrainian energy minister said that Ukraine would face a shortage of 4 million metric tons of coal. This is after private Ukrainian energy firm DTEK imported 1.3 million metric tons of anthracite coal from Russia and state-run Centrenergo signed a contract last week to import more than 500,000 metric tons of coal from Russia by year end.

But on November 24, 2014 the Ukrainian oil minister admitted coal supplies to both DTEK and Centrenergo were suspended by Russia, according to Stratfor Global Intelligence. Centrenergo they held talks regarding a potential purchase of thermal coal with the Recursion Ventures of the U.S. But government officials acknowledged the cost of coal will still be substantially higher than imported Russian coal.

Just like on the Eastern Front in WW 1, real trench warfare today between the Great Powers is about economics. The Kremlin is using energy supplies to badger the Ukrainian government into political and military concessions and the West is using finance to wage war by non-military means.