Month: September 2024

Oil just had its worst week in almost a year, and the new week is starting off just as bad amid concerns about oversupply and lack of demand by China, which now appears willing to risk a middle-class revolution – as employment tumbles and consumer confidence has never been lower – rather than stimulate the economy.

Brent tumbled ~10% last week even after OPEC+ postponed its supply hike by two months (amusingly it would have tumbled even more had OPEC+ not delayed its supply hike). Still, given plans to revive 2.2m b/d over the course of a year remain in place, the delay means they are simply kicking the can down the road. And then on Tuesday, it dumped another 2%, sliding below $70 for the first time since 2021, as part of oil’s now daily 10am slam, and as hedge funds are convinced there will be a soft-landing everywhere, certainly in chatbots, except in commodities where the hard-landing will somehow surpass the global financial crisis.

And even though commercial stockpiles tumbled to 2024 lows, market watchers – at least those who have no idea of what is actually taking place in the market – see stockpiles “building” through year-end and into 2025, according to Bloomberg, which forgot to turn off sarcasm mode.

Meanwhile, production has been on the rise stateside, muting OPEC+ efforts to restrain supply, but that’s only to keep up with demand which – and one wouldn’t know this from looking at the price – is also steady and rising. Macquarie sees record US output of 13.9m b/d in 2024, with rigs in the Permian and Bakken basins producing more efficiently. Baker Hughes data show crude rigs have been edging up since their July lows.

It’s hard to fight this bearish mood — in a market that has failed to push higher in a sustained manner despite geopolitical tensions, a testament that demand woes overshadow other drivers.

As the latest sign of weak demand, Saudi Arabia cut pricing of its flagship crude grade for its main market in Asia next month.
The silver lining: hedge funds have once again restarted slashing bullish oil bets, with net longs tumbling to a record low. Usually this marks the bottom.

As energy expert John Kemp writes, hedge funds and other money managers sold the equivalent of 117 million barrels in the six most important futures and options contracts over the seven days ending on September 3.

The combined position was reduced to just 93 million barrels, the lowest for at least a decade. Fund managers were sellers across the board, including NYMEX and ICE WTI (-66 million barrels), Brent (-38 million), European gas oil (-9 million), U.S. diesel (-3 million) and U.S. gasoline (-1 million).

Negative sentiment extended to refined fuels, with extremely bearish positions across gasoline and especially in diesel and other middle distillates.

Funds had sold middle distillates in seven of the most recent nine weeks, slashing their position by 123 million barrels since the start of July. 

Bearishness across all crude and fuels contracts showed investors bracing for a further deceleration in consumption growth, amid signs of a downturn in manufacturing across the United States, Europe and China.

The most recent positions were reported two days before Saudi Arabia and its OPEC⁺ allies announced on September 5 that they would postpone scheduled output increases for two months.

Prior to the announcement, positioning had become extremely stretched on the downside, creating conditions for a sharp price rebound if and when fund managers trim bearish short positions and start to rebuild bullish long ones.

For the moment, however, sentiment has remained very negative, with investors focused on the threat of an industrial downturn pushing prices down even more. Even the OPEC⁺ announcement failed to arrest the downtrend as traders interpreted it as confirming the deteriorating consumption outlook.

Inflation-adjusted front-month WTI prices have slumped to an average of $69 per barrel so far in September, the lowest since early 2021, when the coronavirus pandemic was still raging, with real gas prices nearing record lows as the Harris/Biden oil trading desk does everything in its power to slam commodity prices as low as possible ahead of the election.

 

Authored by Leslie Eastman via LegalInsurrection.com,

Legal Insurrection readers may recall the report about Chevron’s California operations.

Chevron had been headquartered in California for over 140 years, giving it strong roots in this state. However, the toxic policies of California’s lawmakers and regulators have killed those roots.

The fossil fuel giant will relocate to Texas.

Sacramento sees gasoline firms and petroleum refineries as cash cows that will always agree to be milked despite being made into a climate villain and accused of corporate greed.

So, to resolve the state’s serious energy challenges, California Gov. Gavin Newsom called for a special session Saturday after the Assembly rebuffed his efforts to pass an energy package before a critical deadline passed.

Newsom’s plan mandates that the state’s oil companies create gasoline stockpiles.

California Governor Gavin Newsom plans to propose legislation requiring oil companies in the most-populous US state to amass stockpiles of gasoline and other fuels to prevent supply shortages and price spikes during refinery outages.

Such reserves would shield Californians who already pay some of the highest pump prices in the nation from the sort of run-ups seen in 2022 and 2023, said Tai Milder, a Newsom appointee who leads the state’s Division of Petroleum Market Oversight. If such a measure had been in place, it would have saved consumers as much as $650 million last year alone, he said.

The governor’s plan signals an intensification of Newsom’s long-running battle against the fossil-fuel industry and comes less than two weeks after Chevron Corp. announced plans to shift corporate headquarters to Texas after 145 years in the Golden State. In recent years, retail gasoline prices in the state surged to $6 a gallon, spikes the Newsom administration blamed on a shortage of backup supplies when refiners reduced operations to perform repairs.

“Price spikes at the pump are profit spikes for Big Oil,” Newsom said in an email. “Refiners should be required to plan ahead and backfill supplies to keep prices stable, instead of playing games to earn even more profits. By making refiners act responsibly and maintain a gas reserve, Californians would save money at the pump every year.”

Inflation is hurting the average Californian. However, gasoline is still a good value for money, especially compared to the inflation rate for food.

Compared to September, fuel price inflation is broadly unchanged for 2023, but lowered from 5.8% to 3.2% in 2024. Our food price inflation forecast for 2023 remains high at 10.6%. The forecast for 2024 is slightly higher at 5.5%. pic.twitter.com/35KQTDHtUK

— BILALSTECH (@BILALS_TECH) November 23, 2023

Newsom’s proposals will likely do nothing more than drive the closure of even more refineries and firms that support the fossil fuel industry. That may be his objective, but unless a lot more of those Generation IV nuclear reactors start appearing or lithium battery fires stop erupting, it is going to be increasingly difficult to sustain the California lifestyle that Democrats from this state tout.

The petroleum industry has pushed back, saying the mandate would hurt consumers.

The Western States Petroleum Association said the bill would punish refiners into withholding supplies and hurting consumers.

“Governor Newsom’s refinery supply mandate will create artificial shortages of fuel in California, Arizona, and Nevada by forcing refiners to withhold fuels from the market. Lawmakers who vote for this mandate will be voting to increase gas costs for their constituents,” said Catherine Reheis-Boyd, CEO of the Western States Petroleum Association.

If Newsom and the state legislature did anything to help consumers, it was surely purely coincidental.

SpaceX’s Polaris Dawn mission launched at 0524 ET atop a Falcon 9 rocket from Launch Complex 39A at NASA’s Kennedy Space Center in Florida. The five-day mission is historic because it will be the first spacewalk carried out by an all-civilian crew. 

The Polaris Dawn launch was initially planned for late August but postponed due to a “ground-side helium leak” and then delayed further due to weather-related issues off the coast of South Florida. 

At 0524 ET, SpaceX posted on X, “Liftoff of Polaris Dawn!” 

Liftoff of Polaris Dawn! pic.twitter.com/hAti2arueX

— SpaceX (@SpaceX) September 10, 2024

More flight status (everything going to plan):

Main engine cutoff and stage separation confirmed. Second stage engine burn underway

— SpaceX (@SpaceX) September 10, 2024

Falcon 9’s first stage booster has landed on the Just Read the Instructions droneship

— SpaceX (@SpaceX) September 10, 2024

Dragon has separated from Falcon 9’s second stage pic.twitter.com/m0FZ0HVn4k

— SpaceX (@SpaceX) September 10, 2024

The Polaris Dawn crew is now in Zero-G! https://t.co/6ckVZ3TpKR

— SpaceX (@SpaceX) September 10, 2024

The @PolarisProgram astronaut mission is headed for an altitude 3 times higher than the Space Station, the furthest that humans have been from Earth in over half a century! pic.twitter.com/lYgsA5vMGk

— Elon Musk (@elonmusk) September 10, 2024

The five-day mission isn’t headed for the International Space Station – that’s so last decade. Instead, it’s heading 870 miles above Earth, about three times higher than the space station.

While in space, billionaire entrepreneur Jared Isaacman, founder and CEO of the payment processing company Shift4; retired Air Force Lt. Col. Scott “Kidd” Poteet; and SpaceX engineers Sarah Gillis and Anna Menon will conduct a series of tests, including the first commercial spacewalk with next-generation spacesuits and the use of a new communication system via Starlink. This will be the highest orbital altitude humans have reached since the Apollo moon mission in 1972.

Here are the four major milestones the Polaris Dawn’s four-person crew will attempt:

1. Flying higher than any previous Dragon mission to date and reaching the highest Earth orbit ever flown while moving through portions of the Van Allen radiation belt at an orbital altitude of 190 x 1,400 kilometers (870 miles) from Earth’s surface – or more than three times higher than the International Space Station. This will be the highest altitude of any human spaceflight mission in more than a half-century since the Apollo program;

2. Attempting the first-ever commercial spacewalk. This will take place at an elliptical orbit of 190 x 700 kilometers (435 miles) above Earth in newly developed SpaceX EVA spacesuits. During the spacewalk, the crew will conduct a series of tests that will provide necessary data that will allow SpaceX teams to produce and scale for future long-duration missions. The crew worked with SpaceX engineers throughout suit development, testing various iterations for mobility and performance (along with mobility aids and systems procedures), and conducted operations inside vacuum chambers to validate pre-breathe protocols and the readiness of the EVA suit;

3. Testing laser-based satellite communication using optical links between the Dragon spacecraft and Starlink satellites, revolutionizing the speed and quality of space communications;

4. Conducting nearly 40 experiments for critical scientific research designed to advance our knowledge of human health both on Earth and during future long-duration space flights

If successful, Polaris Dawn will ensure that Elon Musk’s SpaceX continues to dominate the space race as he sets his sights on Mars. 

Authored by Daniel Lacalle,

«The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring temporary prosperity; both bring permanent ruin. But both are the refuge of political and economic opportunists.” 

– Ernest Hemingway

The United States federal debt has soared to $35.3 trillion. In less than a year, the federal government has increased its debt by $1.9 trillion. This occurred during years of record tax revenues and economic growth.

If the current administration remains in power, the Treasury’s own estimates predict an additional $16 trillion increase in debt by 2034, without accounting for any recession or slowdown in tax receipts. According to the CBO, the Kamala Harris economic plan would add another $1.9 to $2,2 trillion to the national debt.

The Harris campaign has not even bothered to discuss a plan to balance the budget. She just said that “efficiency” and the old fallacy of taxes to the rich would pay for the increase in spending—two things that have proven to do nothing to the ballooning debt and that do not even start to scratch the already unsustainable $2 trillion deficit.

This reckless increase in debt is happening in a growth period. However, if we adjust for government debt accumulation, 2021 to 2024 were the worst years of growth adjusted for debt since the thirties.

In a recent article, Claudia Sahm stated that you should not worry about debt.

“Debt is neither inherently good nor bad. As such, the question is not what’s the right level of borrowing, but rather what’s the economic return on the borrowing or the societal goals it advances.”

She continues to say that “the government can easily service its debt because of its unlimited taxing authority and ability to issue more U.S. Treasury securities to repay maturing securities”

(“The US debt is now $34 trillion. Don’t worry. Seriously”. January16, 2024).

Now you must worry. A lot.

Let us start with the benign idea of “economic return on borrowing and societal goals.”

The evidence from the United States indicates that the economic return is extremely low. Entitlement spending has not strengthened the economic growth path, and debt continues to rise faster than GDP. It is true that debt is not inherently bad, but unproductive borrowing is. It is a massive transfer of wealth from the productive sector to the bloated bureaucratic state. Furthermore, the societal goals cannot be unlimited. The government must administer and not just add expenditures to previous expenditures, particularly when there is no realistic analysis of the success or failure of government programs. The idea that a particular government program is beneficial is not enough to add it to the budget without reducing other expenses. Not even a benign view of government spending as Sahm’s can justify that every government expenditure item today is essential. Furthermore, we must always understand that governments do not give money for free. They tax the productive sector and borrow, which means printing a currency that is constantly losing purchasing power. Therefore, the government is not advancing societal goals by borrowing without control; it is implementing a profoundly regressive policy that creates a dependent subclass and makes it increasingly difficult for the middle class to thrive.

It is false that the government has “unlimited” taxing authority and the ability to issue more debt, i.e., print money. The government has economic, fiscal, and inflationary limits. Economic because constantly increasing taxation leads to stagnation and more debt; fiscal because expenditures are consolidated and annualized, while tax receipts are cyclical; and inflationary because the constant issuance of new currency, which is what happens when more debt is issued, leads to the loss of confidence in the currency and the erosion of its purchasing power. If what Sahm and Kelton state were true, the euro area and Japan would be examples of high growth and economic strength, but they are examples of stagnation, high debt, and rising social discontent.

The government does not set taxes to fund its incessant spending habits. Taxes should be set according to the economic reality of an economy. The fallacy of taxes to the rich and corporations does not even address the ballooning deficit and erodes economic growth and productive investment.

When someone tells you not to worry about record debt, you should be extremely concerned. When they say that the government has unlimited resources, they mean that you will pay by becoming poorer with more taxes, more inflation, lower growth, or all three at the same time.

When they tell you that $35 trillion of debt is peanuts compared with $142 trillion of American wealth, they are saying that the government will be pleased to absorb the wealth of the economy. You will pay.

When they tell you that tax cuts are the problem, it comes from the perspective that the private sector is an ATM at the disposal of governments. Tax cuts do not reduce revenues, just as tax hikes do not raise them forever. Tax cuts adjust the taxable base to the real economy in order to encourage more investment and growth. Tax cuts are not a loss for the government; they are a win for the economy. It is simply a return of funds to those who have earned them. The idea that funds are better in the hands of the government than in the pockets of those who earned them is confiscatory. It is ludicrous to think that the government knows better than the private sector where and how to spend money. Additionally, it is insane to believe that the government will not squander the funds and bloat the administrative costs. Furthermore, it is foolish to assume that corporations and the affluent will hoard unused funds. There is no such thing as idle money. Capital markets and the private banking sector invest all of their earnings in a productive economy. If Sahm is concerned about economic returns and social advancements, she should advocate for the private sector to retain a larger portion of the earned money, as they will allocate it to the most advantageous investments.

Inflation is a form of default in which the government transfers its imbalances to those who receive their salaries in currency. This is the most regressive form of taxation, primarily affecting the poorest. When governments ignore the real demand for the money they issue, confidence in the currency disappears. Developing countries do not issue debt in foreign currency because they are stupid, but because there is no international demand for their local currency.

Economists like Sahm and Kelton assume that the US dollar will have eternal and unlimited demand, and, as such, the US government can export inflation to the rest of the world through the loss of the purchasing power of the currency it issues. However, global central banks are reducing their holdings of US dollars (US treasuries). International demand is declining, and the limits I mentioned before are already evident.

The US is showing its economic limit, as evidenced by the significant slowdown despite a record deficit and government so-called stimulus. The US is also demonstrating its fiscal limits as the government persists in raising taxes, resulting in significantly lower tax receipts than anticipated and an interest expense bill that has escalated to $3 billion daily. Additionally, a 20% increase in inflation over the previous four years, a 30% increase in the price of basic groceries, and persistent inflation—exemplified by the ongoing decline in the purchasing power of the US dollar—make the inflationary limit clear.

What Harris is doing as vice president and intends to continue doing if she becomes president is to continuously test the patience of the world and national citizens when it comes to accepting a constantly depreciated purchasing power of the currency.

Saying that nothing will happen if debt continues to rise and deficits continue to drive government policy is, literally, like saying that an alcoholic should drink more vodka because cirrhosis has not killed him yet.

The US dollar is the credit of the US economy. If the US government loses its credibility, domestic agents will begin to reduce their use of the US dollar, while international agents will decline the currency due to its constant fiscal excess and its tendency to push the limits of global patience. Thinking that the US dollar will never lose its reserve currency status is simply reckless and ignores history.

Harris is threatening the US dollar, and you should be very concerned when someone says that the government has unlimited taxation and printing resources. It means it has unlimited ways of making you poorer.

The city of Springfield, Ohio – population 60,000, has been overwhelmed by roughly 20,000 Haitian illegal migrants, who flocked to the city – exacerbating a ‘significant housing crisis’ according to city officials, and eating pets and wildlife according to locals.

During an Aug. 27 City Commission meeting, one local resident said that Haitians were “in the park grabbing ducks, cutting the heads off, and eating them.”

“Haitians are in the park grabbing ducks, cutting the heads off, and eating them”

Springfield resident to City Council: pic.twitter.com/aZLsOT8v2b

— End Wokeness (@EndWokeness) September 8, 2024

Another local resident posted to a Facebook group that their neighbor had a cat go missing – only to see it “hanging from a branch, like you’d do a deer for butchering, & they [the Haitians] were carving it up to eat.” 

Springfield is a small town in Ohio.

4 years ago, they had 60k residents.

Under Harris and Biden, 20,000 Haitian immigrants were shipped to the town.

Now ducks and pets are disappearing. pic.twitter.com/OOFq3ZdTiA

— End Wokeness (@EndWokeness) September 6, 2024

While the cat claim has been refuted by as racist fear-mongering, others have provided receipts showing that cats are indeed part of Haitian cuisine.

Another local told the city that she “can’t take it anymore,” as Haitian migrants are littering on her yard and harassing she and her husband.

Absolutely HEARTBREAKING moment Springfield, Ohio, resident tells mayor that she “can’t take it anymore” as Haitian migrants squat on her lawn, litter in her yard and harass her and elderly husband daily.

The mayor of Springfield does NOT want people to see this: pic.twitter.com/OJtAy7LSXX

— captive dreamer (@captivedreamer7) September 7, 2024

Resident Glenda Bailey told the city “They have become the occupiers. What they’ve done is they’ve replaced the population in Springfield.”

Tensions came to a boil last year after a illegal immigrant from Haiti caused a school bus crash last August, killing 11-year-old Aiden Clark after the child was thrown out of the emergency exit as the bus rolled off the road. Another 20 students were injured.

In July, city manager Bryan Heck wrote to leaders of the Senate Banking Committee asking for more federal funding.

“Springfield has seen a surge in population through immigration that has significantly impacted our ability as a community to produce enough housing opportunities for all,” he wrote.

A new report from wealth-tracking website Informa Connect forecasts that Elon Musk could become the world’s first trillionaire by 2027. This news is likely disheartening for struggling WeWork co-founder Adam Neumann, who famously said in 2019 that he wanted to live forever and become the first trillionaire.  

Informa Connect said that assuming Musk’s wealth growth continues linearly at an annualized rate of 110%, the billionaire, worth $237 billion according to Bloomberg’s wealth index, will reach the $1 trillion club by 2027.

This would mean Musk’s wealth would need to quadruple in the next few years. 

Here’s more from the British data firm:

Who hasn’t heard of Elon Musk? He’s the founder of the rapidly growing automotive company Tesla, the manufacturer of advanced rockets and spacecraft, SpaceX, and the person you can thank (or blame) for Twitter’s rebranding to X. With a net worth of $195 B, growing at an average rate of 109.88% every year, Elon Musk is the clear favorite to become the first trillionaire by 2027.

Much of Musk’s wealth has been derived from Tesla’s dominance in the electric vehicle space. The next leg up in wealth for Trump’s most prominent supporter is the space race and how his company, SpaceX, dominates rocket launches and space internet. Bloomberg reported in June that SpaceX was valued at around $210 billion. We have noted numerous times that SpaceX’s Starlink could be nearing an initial public offering, this would unlock even more wealth for the billionaire. 

Back to Neumann. It’s unclear what he is up to now following WeWork’s implosion.

Latvia said Monday that an Iranian-designed Shahed kamikaze drone has crashed into its territory. Its military said the aerial incursion happened Saturday, and following an investigation the drone was found in the eastern part of the country.

Latvia is a NATO and EU member, and the incident has served to heighten already boiling tensions with Russia further, along NATO’s ‘eastern flank’. Poland too has of late said that a Russian drone violated its airspace and went down in its territory.

“The explosive warhead stuck half a meter deep into the ground and was neutralized on the spot, avoiding detonation,” Latvian armed forces commander General Leonids Kalnins told a press briefing.

This “allowed our military intelligence officers to gather all the debris and remnants from the drone for further investigation, details of which will be shared with all of our NATO partners,” he described.

Separately Latvian air force commander Colonel Viesturs Masulis offered an important caveat, saying “the drone was not aimed at a military target in our country. It sort of drifted into Latvia.”

“The drone was seen by our air defenses while still deep into Belarusian airspace, which gave us time to react,” he said at the same briefing.

It is as yet uncertain whether Latvia’s anti-air defenses engaged the inbound drone at all, or merely tracked it. Latvia’s military had already confirmed a recent build-up of mobile anti-aircraft units in the country’s borderlands, as a response to the Russian invasion of Ukraine.

While Poland has recorded two cases of Russian drones breaching its territory, Romania similarly registered a new airspace breach on Sunday into its territory.

Warsaw has recently signaled it is ready to begin shooting down Russian drones over Ukrainian airspace which might pose a threat to Poland. But NATO leadership, particularly Secretary General Jens Stoltenberg, has rejected this proposal, saying that this should be a common NATO decision given the potential of such an action triggering NATO Article 5.

If a NATO eastern flank country engaged Russian airpower over Ukraine, this presents a likely scenario of a direct shooting war between the West and Moscow forces. At this point saner minds in the West are hoping to avoid such a bigger conflict.

By Charles Kennedy of OilPrice.com,

Iraq has rejected allegations made by U.S. Congressmen that it was helping Iran evade U.S. sanctions by channeling some of its oil revenues to Iranian entities.

Last week, five Congressmen called on President Joe Biden to ban the Iraqi oil minister from attending events in the United States because of his alleged involvement in Iranian sanction evasion. The group also demanded an investigation into Minister Hayyan Abdul-Ghani and other Iraqi officials on their alleged participation in sanction evasion.

“There are multiple public reports alleging that Abdul-Ghani and other officials in the Iraqi gover

“Given these reports, we respectfully request that your administration prevent Minister Abdul-Ghani from attending events in the United States until these allegations are investigated and the findings are presented to Congress.”

In response, the Iraqi oil ministry said “The letter’s contents have no foundation. The only accurate statement in the letter is that these are allegations and do not rise to the level of verified information,” as quoted by Shafaq News.

“Iraq only engages with a select group of reputable global companies, including American firms, under contracts that follow international transparency and legal guidelines,” the ministry also said.

Reports of Iraqi oil smuggling emerged earlier this year, with Reuters reporting that at least 200,000 bpd of crude from Kurdistan were being transported on trucks to Iran and Turkey. The report cited sources as saying that the oil smuggling was likely happening with the knowledge of the regional and federal governments.

Once in Iran, the oil is loaded onto ships at the Iranian ports in the Gulf at Bandar Imam Khomeini and Bandar Abbas, or transferred by road to Afghanistan and Pakistan, those sources said, putting the monthly revenue from the scheme at some $200 million.

nment are involved in industrial-scale sanctions evasion on behalf of the regime in Iran,” the Congressmen wrote.

Which EU countries are the cheapest, and which ones are the most expensive?

In this graphic, via Visual Capitalist’s Jenna Ross, we look at price differences across EU countries using data from Eurostat. Countries that are dark blue have the lowest relative prices to the EU average, while countries that are bright blue have the highest relative prices.

Relative prices were determined by the currency needed to buy the same product volume in different countries, calculated using actual individual consumption of goods and services and the exchange rate in each country.

EU Countries: Most to Least Expensive

Luxembourg has the highest prices among EU countries, at 52% higher than the EU average. In particular, education is pricier than anywhere else in the EU at 276% above average.

The country also has the highest wages in Europe, which helps support higher costs.

Data is as of 2023. Price levels indicate the currency needed to buy the same product volume in different countries.

At the other end of the scale, Romania has the cheapest prices at 46% below the EU average. The country has health costs 70% below average and education costs 62% below average. However, it also has the second-lowest median income after tax of €6,568.

Looking at the full list of EU countries, prices naturally tend to be higher in Western nations with a higher standard of living and higher incomes.

While prices are worth considering when deciding where to live, they can also be useful for travelers. For instance, many of the countries with prices below the EU average have been ranked as some of the most affordable places to explore.

To see more content about Europe, check out this graphic about how the population has changed in each country from 1990 to 2023.

Authored by Andrew Korybko via Substack,

The Ukrainian Armed Forces are in the midst of converging crises caused by the failed counteroffensive, the forcible conscription policy, and Zelensky’s Kursk blunder, which are leading to more desertions, defeats, and ultimately more desperation.

CNN carried out a rare act of journalistic service with their detailed report about how “Outgunned and outnumbered, Ukraine’s military is struggling with low morale and desertion”. It candidly describes the numerous problems afflicting the Ukrainian Armed Forces (UAF) at this pivotal moment in the conflict as they continue to occupy part of Kursk but are still losing ground in Donbass. Their story begins by introducing a battalion commander who lost most of the around 800 men under his control.

This figure couldn’t take it anymore and thus transferred to a cushy military administrative job in Kiev. He and the five others who CNN spoke to when researching their report informed them that “desertion and insubordination are becoming a widespread problem, especially among newly recruited soldiers.”

In the words of one commander, “Not all mobilized soldiers are leaving their positions, but the majority are…They either leave their positions, refuse to go into battle, or try to find a way to leave the army.”

The reader is then informed that these troops are forcibly conscripted, thus adding context to why they desert, but they also claimed that morale problems began to infect the armed forces’ ranks during the now-resolved impasse over more American aid to Ukraine. While that likely played a role, CNN conspicuously omits to mention last summer’s failed counteroffensive, which proved that Ukraine is unable to reconquer its lost lands despite all the hype and the aid that it received up until that point.  

Moving along after having clarified the real reason behind the UAF’s plunging morale over the past year, drones have made the battlefield more unbearable than before, and the amount of time between rotations has grown since some troops simply can’t leave their positions without risking their lives. CNN then added that “In just the first four months of 2024, prosecutors launched criminal proceedings against almost 19,000 soldiers who either abandoned their posts or deserted”.

They also acknowledged that “It’s a staggering and – most likely – incomplete number. Several commanders told CNN that many officers would not report desertion and unauthorized absences, hoping instead to convince troops to return voluntarily, without facing punishment. This approach became so common that Ukraine changed the law to decriminalize desertion and absence without leave, if committed for the first time.”

The impending Battle of Pokrovsk, which could be a game-changer for Russia on the Donbass front, risks turning into a total disaster for the UAF since “some commanders estimate there are 10 Russian soldiers to each Ukrainian.” Just as alarming is the claim from one officer that “There have even been cases of troops not disclosing the full battlefield picture to other units out of fear it would make them look bad.” Communication problems are also reportedly rife between Kiev’s varied units there too.

The Kursk front isn’t as bad, but it might not have served its political purpose of boosting morale among the UAF unlike what Zelensky has claimed. CNN quoted some sappers who were unsure of the strategy involved, questioning why they were redeployed from defending Pokrovsk to invade Russia when the Donbass front is experiencing such difficulties as was already reported. The piece then ends with a psychological support expert declaring that he’s no longer going to be emotionally attached to anyone.

Reflecting on CNN’s surprisingly critical report, it’s clear that the UAF is in the midst of converging crises caused by the failed counteroffensive, the forcible conscription policy, and Zelensky’s Kursk blunder, which are leading to more desertions, defeats, and ultimately more desperation. In such circumstances, Ukraine can either stay the course by remaining in Kursk at the expense of losing more ground in Donbass, withdraw from Kursk to help hold Donbass, or asymmetrically escalate.

The first two scenarios are self-explanatory while the last could concern expanding the conflict into other Russian regions, Belarus, and/or Moldova’s breakaway Transnistria region, seriously damaging Russian nuclear power plants out of desperation to provoke a nuclear response, and/or assassinating top Russians. There are only a few months left before the winter impedes combat operations on both sides, after which the status quo will persist until spring, when one or both sides might go on the offensive.

This timeline adds urgency to the impending Battle of Pokrovsk, which Russia wants to win as soon as possible in order to push through the fields beyond, capture more territory, threaten the Kramatorsk-Slavyansk agglomeration from the south, and possibly prepare to make a move on Zaporozhye city from the northeast. If Ukraine can hold out into next year, then it could have more time to build more defenses beyond Pokrovsk, thus reducing the pace of Russia’s advance if it comes out on top there.  

Even if Ukraine holds on for at least several months or perhaps as long as half a year longer there, the problems touched upon in CNN’s piece will likely only exacerbate seeing as how more forcibly conscripted troops will be thrown into what might by then become the next infamous meat grinder. Morale will probably continue plummeting while defections could spike, both of which could combine to cripple the UAF and create an opening for Russia to exploit in Pokrovsk or elsewhere along the front.

The ideal solution for Kiev would be to reach a ceasefire for facilitating its voluntary withdrawal from part of Donbass (ex: Pokrovsk’s surroundings) in parallel with pulling out of Kursk, which are terms that Russia might entertain since they’d advance some of its political and military goals. It’s better for Ukraine from the perspective of its regime’s interests to have an orderly withdrawal than a chaotic one if Russia achieves a breakthrough, but Zelensky and his ilk aren’t known for their rational decisions.

Nevertheless, those like India and Hungary who are want to help politically resolve this conflict could propose something of the sort, perhaps also suggesting the revival of last month’s reported Qatari-mediated partial ceasefire proposal for eschewing attacks against the other’s energy infrastructure. Zelensky is unlikely to agree, especially since he’s under the influence of uber-hawk Yermak, but it would still be best to informally circulate some variant of the aforementioned proposal sooner than later.

Regardless of well-intentioned third parties’ proposals, the conflict appears poised to continue raging into the next year absent a complete military and/or political breakdown in Ukraine, neither of which can be ruled out though considering how bad everything has become per CNN’s latest report. Ukraine and its Anglo-American “deep state” allies could also stage a major provocation aimed at desperately “escalating to de-escalate” on more of their terms, so observers shouldn’t rule that scenario out either.