EU and US Ukraine Funding Even More in Doubt as War Effort Falters

As Ukraine’s military condition looks worse and worse with each passing day, its continued support looks in an even more desperate condition. It is now becoming an open question, analogous to dealing with a severely ill with multiple organ systems functioning poorly, which will put them in a terminal decline. Most commentators focus on the kinetic war because it’s more visible and dynamic, and historically, countries at war usually are vanquished or surrender (or if you are at the US, slink off and try to pretend that you really didn’t care much about the outcome). But the Ukraine leadership is already engaged in infighting, and outsiders look to fanning the fires.1

In other words, it could be that, out of pattern for most conflicts, that Ukraine being so much a proxy fighter for the West, and in particular having its government and economy propped up by external funding to such a large degree that the sudden withdrawal of those monies could be destabilizing politically and operationally in ways outsiders can’t anticipate, since this aspect of the conduct of the conflict has been not very visible. This graphic gives a sense of “financial” aid as opposed to military support. From Visual Capitalist:

Note that the detail under the chart depicts both the EU and US assistance as “loans and grants,” signaling that loans are more important. Recall that the military aid was substantially in kind (although it would be treated as a budgetary item, if nothing else to give an excuse for “replacement” procurement with newer kit. For instance, early in the conflict, former Warsaw Pact countries emptied their larders of aged Soviet hardware, since that was what Ukraine forces knew how to operate. Remember that there were complaints of the US sending Javelins that many were so old that their batteries did not work. Then the US went scouring the world for shells (remember South Korea contributing) and Patriot missiles (we leaned on Saudi Arabia among others). In addition, when the US managed suddenly found more money for hardware after what was depicted as an accounting check, it’s not hard to imagine that the Department of Defense simply revised the value of its past contributions lower, magically creating the appearance of additional money.

Interestingly, of the major international/Anglosphere media organs, the Financial Times makes the sudden, sharp and presumably unavoidable cut to Ukraine support from Europe an above-the-fold report (the pink paper makes it the lead story).

The short version is that last month, the German Constitutional court ruled against a financing gimmick, that of allowing the government to use spending authorized under emergency allocations (which allow Germany to relax its otherwise hair-shirt deficit rules) in years after the emergency is over. German leadership wanted to engage in two no-nos in the eyes of the court: using funds earmarked for Covid in past years in budget years after the authorization.3 Even though that was not part of the ruling, the inability to time-shift emergency fund use would seem also to bar category-shifting, which was the the ruling coalition was also attempting to do.

As the Financial Times story explains, the impact on the German budget is substantial, as are the knock-on effects to the EU. An earlier Financial Times piece pointed out that Germany provides about 25% of the European common budget. The current EU budget authorization has gone pear-shaped and Ukraine funds are sure to take a big hit.

And that’s before getting to the fact that the budget has to have unanimous approval, and the Netherlands (and Hungary and Slovakia) are not on board, at least at the intended lavish level. From EU budget dispute threatens €50bn war lifeline for Ukraine in the Financial Times:

Disputes within the EU over money and Ukraine’s future are endangering crucial pledges to Kyiv made months ago….

EU member states are far from reaching a deal over topping up the bloc’s joint budget — including €50bn for Ukraine — ahead of a summit in Brussels on December 14-15…

EU efforts to reach a compromise are being hampered by the victory of a far-right party in last month’s Dutch election and a recent German court ruling curbing the government’s borrowing. A budget agreement would be “very, very difficult”, a senior official said….

A failure to approve long-term funding, a separate €20bn facility for weapons purchases and the start of accession negotiations would be a hammer blow to Kyiv after the failure of its summer counteroffensive and growing concern about faltering western support. Olha Stefanishyna, Ukraine’s deputy prime minister, last week described the EU summit as an “existential moment” for her country….

Germany and other states have vowed to give Brussels no additional funds beyond that required for Kyiv, while others are demanding extra cash for domestically sensitive issues such as migration….

“I think the doom and gloom around this issue is vastly over-exaggerated,” said one EU official involved in the discussions. “We are not going to allow Ukraine to experience a sovereign default.”

It does not appear to occur to EU officials that Ukraine does not have to default. As a sovereign currency issuer, it can always create more hyrinas to pay its debts. But Ukraine is already at an estimated 30% inflation level. More net spending to meet obligations and continue funding government operations would turbo-charge price increases. Regardless, the specter of default will focus some minds.

On the US end, the budget fight positions are getting harder. Recall the Republicans wanted an audit of Ukraine spending as a condition of additional allocations, and more recently, the Republicans were pushing for trading approval on the notorious border wall and other immigration curbs for agreeing to more Ukraine monies. That idea is getting new opponents. From The Hill:

Progress on border talks has screeched to a halt as Democratic negotiators have come under intense pressure from progressives and immigration activists, further complicating potential passage of aid for Ukraine in the coming weeks.

Negotiators returned from the Thanksgiving break on an optimistic note, indicating that they had made progress on changes to asylum and that the ball was moving in the right direction. However, talks have become increasingly stagnant, especially as the drumbeat of concern from the left about the direction of talks has gotten louder, and pressure increases to unlock a supplemental deal that can reach President Biden’s desk.

Democrats and progressives are upset that Republicans are attempting to chip away at the humanitarian parole authority of the Biden administration and view it as a total non-starter, especially if no action on behalf of Dreamers — those who were brought to the U.S. as children — is included in any deal….

Republicans have repeatedly sought to frame the talks as centering on the border rather than on immigration writ large and maintain they are trying to slow the number of migrants at the southern border in the name of national security.

But reports of potential curtailment to the asylum system have alarmed Democrats….

Adding to the troubles for negotiators is the push by conservatives to adopt as much of the House GOP’s signature border bill, H.R. 2, as possible. That was the message Speaker Mike Johnson (R-La.) delivered to a Senate GOP luncheon last week, creating a tug of war between the two sides.

Democratic negotiators have tried to assure those in their party that any final product will in no way resemble the conservative proposal that they consider a non-starter.

Now of course something may give so that a budget deal gets done. But it hasn’t two times now. It’s now become clear that the cliffhanger of the lack of an agreement can be finessed short term with a stopgap funding bill. So the lack of a bona-fide crisis to force resolution means hardliners can hold fast. So it’s entirely possible that we’ll see yet more temporary funding, which means more delay in any Ukraine cash.

Recall as we have stressed that the parade of official visitors and tony journalists have almost entirely gone to Kiev, where only a comparatively few areas need to be kept in good shape (near official buildings, the embassy area, and the top tourist hotels and restaurants) to create Potemkin normalcy. And a few of these outsiders have gone to the front lines….which has been at points revealing, but not of general conditions in society and the economy. Given the big fall in GDP, the yawning budget deficit, the departure of millions and low odds that many will return (and those who left likely skew to prime age adults and the educated), the loss of the resources and output of the productive eastern oblast, domestic conditions are sure to be pretty poor. And that’s before unpleasant facts like the money to repair the Ukraine electrical grid after the Russian attacks of last winter was largely looted. So Russia may not have to do much more in the way of strikes to have it fall over under increased winter load. That could happen in large measure all on its own.2

Experts have pointed out that Russia has succeeded in greatly depleting Western weapons supplies even as the largely de-industrialized US/NATO combine has banged on about the paramount importance of not letting the evil Putin prevail in Ukraine. Yet the rhetoric of urgency has not even been remotely met with commensurate action, namely a World War II or even Sputnik-level rearmament program.

So Ukraine has several decay processes operating at the same time: its funding crisis, where a sudden loss of spending could cripple all sorts of already halting government functions; its rapidly weakening military effectiveness; and intensifying fights at senior levels of the government about what to do and potentially who should be in charge. It may be that these timelines accelerate so that it will be impossible to pick apart which was the proximate cause of a state change, like a government collapse. But it also seems likely that the cliff effect of a sudden drying up of money spigots isn’t being factored adequately into Ukraine’s survival prospects.


1 Alexander Mercoursis and Gilbert Doctorow, among others, recently debunked Seymour Hersh’s latest story, which claimed that Russia’s General Gerasimov, the Chief of Staff, was negotiating with Ukraine General Zaluzhny (Doctorow is more willing to consider that there might be some elements of truth here; Mercouris’ good contacts supports his take that this story was quite the howler). The reasons for running this account through Hersh, who is dependent on US spooky contacts and not at all well informed about how Russia works, might be to flog the idea that Ukraine (and the US) were willing to offer reasonable terms that the Russians rejected. But anyone who has been following the war would recall that Putin clearly warned early last year that the longer the war went on, the harder it would become to negotiate with Russia. A second motive might be to heighten the simmering conflict between Zelensky and Zaluzhny, with the hope that Zelensky forcing Zaluzhny out would trigger military or other opposition and precipitate his removal or flight, an outcome the US would likely welcome (Zelensky has not been taking US direction for how to conduct the war for some time).

2 Expect new Russian attacks to be depicted as the cause if there are electricity crises, even if new strikes are limited. Note I am not saying Russia might not target the grid in a big way again, but that will be depicted as the cause of any crisis, as opposed to Ukraine stealing rescue funds rather than making repairs.

3 The pink paper was pretty sketchy on the German Constitutional Court ruling. Euractiv provided some detail:

In a far-reaching ruling on the ‘debt brake’ set in the German constitution, the court has declared it unconstitutional to use debt justified with an emergency in one year for spending in subsequent years.

The opposition parties CDU/CSU had filed the Constitutional Court case and also preened in Bundestag debates about the importance of Germany sticking to budget rules as a model to the rest of Europe.

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  1. JohnH

    It’s been a mystery to me why Republicans have become opposed to funding a war. I mean, what’s with that? Historically Republicans have war mongered at least as much as Democrats, if not more. Since when does a leopard change its spots? And why?

    I have a sneaking suspicion that the answer lies not in some sudden GOP epiphany as to the godlessness of war. Rather, I suspect that it has to do with following the money. The Bidens are deeply connected with notoriously corrupt Ukrainian power brokers, such as Burisma. It doesn’t take much of a stretch to imagine a tiny fraction of the funds lavished on Kiev being siphoned off and laundered back via dark money to Democrats. Whether that’s true or not really doesn’t matter–if that’s what Republican leaders secretly believe, then to outlook for further Ukrainian funding is bleak indeed.

    1. Yves Smith Post author

      No, you don’t want to spend an absolutely unprecedented amount of money and IMMEDIATELY lose a war. This is a demonstration of impotence. Very very bad for arms sales. Recall that the US has held back all sorts of supposed wunderwaffen with the excuse being that we don’t want Russia to capture them and figure out our tech magic. What good are weapons that we treat as so precious that they have to sit in display cases?

      Of course, the reality is we don’t want to see them burn like the Leopard 2s, or have Russia soon figure out how to render them largely ineffective, like the ATACMS and the Storm Shadows.

      Getting Biden for Ukraine corruption is not on the same track as funding.

      1. Altandmain

        Yep. A big part of the reason why the US is at war is to make the Lockheed Martin’s of the world rich. The Western world is stuck with weapons that were designed to make the military-industrial complex rich, not weapons that were designed to be used in a sustained nation state war.

        That and hegemony. The whole plan was to break Russia up and loot the nation of its natural resources by putting a puppet in place like Boris Yeltsin. From there, the US would provoke a war with China.

        Now it’s all fallen apart and backfired on the West. The Republicans, unlike Biden, seem to be aware of the sunk cost fallacy and want to tie this inevitable loss to Joe Biden.

        There simply aren’t the resources avaibke in the Western world for the kind of wartime mobilization and military build-up. The only people who have the money are the super rich, who hide their money in tax shelters, as the Panama, Paradise, and other leaks reveal. They lack the sense of civic virtue to pay.

        Even worse, the bottleneck isn’t money but natural resources and affordable energy. Europe especially is looking like they are desperately short of those and what they have remaining will have to be used in the civilian economy or there will be an even bigger issue with living standards falling. Event the US has shortages. Biden isn’t trying to cozy up to the Saudi government because he likes MBS, to put it mildly. He needs them to produce lots of oil.

        Then there’s the matter that the US doesn’t know how to do industrial policy. The economy has been financialized. That sort of expertise exists in China and Russia, but not the US. Military buildups require huge amounts of industrial policy, especially since the US manufacturing base is depleted due to the greed of the rich along with their crazy class warfare economics. The shell shortages are indicative of the problems that the US is going to face. It’s even worse for Europe due to the previously mentioned resource scarcity.

        Not to mention, the public would be resistant to the conscription needed. Even worse, over 75% of the youth in the US are unfit.

        I suspect that the percentage that are fit are disproportionately among the upper middle class and rich, who would oppose their kids getting conscripted.

        The Republicans seem to have a better sense of what is happening, as opposed to the Democratic Establishment, which has foolishly tied this war to Biden’s Presidency.

        1. tegnost

          The Western world is stuck with weapons that were designed to make the military-industrial complex rich

          And patent farms.
          How much funding for autonomous tech, robotics and etc… revolves through military funding so that public costs become private profits.

          1. Altandmain

            There’s a other consideration. Intellectual property rights are only viable when the other nations have a vested interest in keeping the system going.

            The US sanctions war is going to have other issues like fewer people willing to conform to the US led IP system.

            If the US wants other countries to conform to their so called Rules Bases Order, the US is going to have to give the rest of the world benefits to comply or resort to regime change and corruption. Otherwise the rest of the world will have to work around the system over time and as the US declines, more nations will outright defy the IP system.

      1. Joe Well

        Classic politics: tie your incumbent opponent to his unpopular actions, even if you yourself would have done it if in office (and will continue it in office if elected).

          1. Feral Finster

            To be fair, this was only because of the extreme forbearance shown by Iran, Syria and Russia.

            1. Roland

              Trump negotiated an end to the Afghan War.

              At no point did he show any sort of interest in provoking Russia.

              Trump is the only US president to meet face to face with his North Korean counterpart.

              He tried to withdraw US troops from Syria, but the Pentagon openly disobeyed, and Congress backed the mutineers.

              If Trump had been pro-war, the poltical and media establishment were ready to validate his presidency. For example, the only time the NYT ever praised Trump was when he made that one token air strike on Syria. Trump could have had an easy time in office, if he had just knuckled under like Barack Obama did, at the time of the Libyan War.

              But Trump didn’t do that. It turned out that, in the real-world test, the man showed some strength of character.

              Donald Trump is the only post-Cold War US president to not add to the number of armed conflicts in which his country is involved.

              Why do you think they hate him so much? Why else has Trump been more heavily assailed in the media than any other politician in American history? Even when out of office for three years, not a single day has gone by in which Trump has not been attacked in the headlines.

              Donald Trump is the only major US presidential candidate to openly call for peace in Ukraine.

              The question of peace and war is the most important thing in all of statecraft. Donald Trump got it right. His enemies all get it wrong. It’s a matter of record.

              For a voter, this is a meaningful difference of policy and leadership. It’s a question of one’s own priorities, and perhaps even of one’s own character.

              Why should anybody have to explain, apologize, or offer extenuation for supporting the only presidential candidate who says he wants peace, and has actually shown that he prefers peace, when he had the power to make war?

              1. BradN

                Although I am loathe to call Trump a peace candidate, I also cannot find fault with your argument nor provide evidence of his actual war making (as opposed to his rhetorical war making).

                I think there will be a lot of people taking long showers next Nov 5.

              2. Cynthia Quadro

                Trump authorized the drone strike that killed the Iranian general on Jan 3, 2020. He knew when to make peace and when to go for war.

              3. Michael Levine

                Trump was consistently bellicose towards both China and Iran. it’s a complete rewrite of very recent history to suggest otherwise.

                I guess we’re to believe Trump and Epstein were simply playing checkers when they flew on each others’ private jets multiple times.

      2. digi_owl

        That, and they want to pick a fight with China instead.

        After all, Russia is a sideshow while China is the uppity factory.

    2. NotTimothyGeithner

      There are two groups:

      -GOP elites who know the can hang this on Biden without any real repercussions. Biden will have lost Ukraine and Afghanistan (I know, but this is how is how plays in the msm). The Squad has been in lockstep with Biden, so the Republican support won’t be remembered. The real plan was the Russians would give up. Everything fell apart over a year ago.

      -a mass of Republicans who are burnt out on foreign expenditure. They certainly don’t have correct solutions, but they are not completely out to lunch. When you remove how Putin kept Mother from the throne, who cares? The numbers are mind-boggling as most voters deal with the same set of problems.

      There is no coordinating war office. Corporations would have to guess basic whims and would stay out for fear of being unpatriotic. Long term damage to brands around the world might be factoring in too.

      1. Piotr Berman

        The common theme for “two groups” is that Republicans (as a mass) are averse to spending, ESPECIALLY when the cause is “noble”, and “Europeans should pay more than US”, and slogans about the audit resonate very well among them. Secondly, “poison pills” that House Republicans are adding are popular in the “mass”.

        Most importantly, passionate imperialists got marginalized in GOP, and the remaining elite see no reason to alienate the “mass” on that issue.

      2. Benny Profane

        Let’s not forget that the Republicans are now the party of the great part of our society that actually have gone off to fight these losing wars since 9/11. The Dems send their kids off to the best school they can afford while putting yellow ribbons on their trees and blue and yellow lawn signs in the yard, but Maga country volunteered for a military career, because, well, in many cases, not much else to guarantee a solid future, and, sure, grandiose visions of patriotism. Now the older generation of those service people are pretty aware of how they’ve been discarded, and probably are hardly very enthusiastic to tell the nephews and nieces at holiday dinners to join up.

    3. David in Friday Harbor

      Remember also, the Republican leadership in the Senate remains rabidly pro-war and pro-“Ukraine” — it is in the House that there is push-back. It has been much easier for the MIC to buy fly-over senators than it has been to purchase more granular representatives, who face an election every other year.

      I also think that popular anti-war libertarianism has combined with traditional Republican isolationism here. It is not coincidental that the GOP House leadership is tying “Ukraine” funding to borders and immigration.

      Even if the Republicans re-nominate that fat-punk thug from Queens, I suspect that Biden’s going to be in trouble with the voters over his transparently corrupt proxy wars. As he should be.

    4. Feral Finster

      Because a defeat in Ukraine would hurt Biden. If Team R were in the White House and doing exactly what Biden is doing, Team R would be all on board.

  2. HH

    A simpler explanation for Republican opposition to Ukraine funding is that the big non-defense corporations have decided to take down the neocons, starting with terminating their Ukraine project. Apple, Amazon, Walmart, etc. have enough potential lobbying power to change out most of the war mongers on the key Congressional committees. The plutocrats realize that the neocons are out of control, and that the Washington blob is threatening their businesses interests. The neocon Frankenstein is going to be destroyed.

    1. Bryan

      Your argument is so appealing on multiple levels that my natural inclination is to suspect it’s wishful thinking. It would be an interesting analysis for someone to quantify which group has greater control over the financing of congress, defense contractors (guns) or the producers of retail goods (butter).

      1. Hickory

        I’ve actually wondered how much influence weapons makers really have. A few years ago, the biggest weapons makers were in the 30-45Billioj range, whereas Exxon, JpMorgan etc are worth 300+Billion, and Apple/Amazon have risen over a trillion (though might be back under now). These numbers may be old but give the idea. I’ve wondered for a few years if energy, finance; tech and others let weapons makers take the public anger for influencing congress to go to war when the bigger players deserve much more blame.

        Hard to say as an outsider, but interesting.

      1. Mikel

        And Apple…
        Apple Inc. is teaming up with the US Military in order to build wearable tech. A report from Reuters on Friday morning confirmed that the Cupertino firm is working with the military to build sensors that can be worn by soldiers or used on the outside of high grade hardware like jets. Boeing and a team from Harvard is also involved in the project.

        And Google, MSFT and by extension semiconductors…
        Communications companies a plenty with defense contracts as well.
        And all the spooks that were found at social media like Twitter/X…what does that say?

        1. HH

          20% of Apple’s revenue comes from China. It would take a hell of a lot of military contracts to offset that. If you add the disruption to Apple’s logistics chain, Tim Cook would be crazy not to try to stop a war with China. Walmart is hugely exposed to China imports and has no significant military connections. The defense corporations account for only 5% of U.S. GDP. The non-defense corporate sector probably has 5x to 10x more potential lobbying power than the big 5 defense contractors. The days of the Washington neocons are numbered.

          1. Mikel

            Companies like Apple owe a lot of their “innovations” to the defense/national security area.
            The days of the Washington neocons could be numbered, but the definitive pressure may come from possibly something happening in the banking system or there is finally a limit to idiocy.

            1. Objective Ace

              I dont see the neocons and the defense/national security sector as completely overlapping groups. Surely its possible to build up defenses without provoking conflicts all over the world?.. some might say doing the latter actually hurts the former

          2. Mikel

            “Walmart is hugely exposed to China imports”
            That’s been obvious since the talks of “pivot to China” began and the saber rattling continues.

            1. HH

              Walmart’s leadership never imagined that the necons would blunder so horribly in Ukraine. It doesn’t take much imagination to grasp what the Blob idiots could do in a confrontation over Taiwan. Destroying TSMC would make the Nordstream fiasco look like a minor error. It is dawning on the non-defense U.S. corps that the neocons are dangerously incompetent. That is why changes are going to be made.

              1. Mikel

                “Walmart’s leadership never imagined that the necons would blunder so horribly in Ukraine.”
                That doesn’t exactly engender faith in their leadership. I guess we’ll see if their imaginations have improved.

              2. SocalJimObjects

                That’s why the US is “having” TSMC build factories in the US. If war were to happen, the best engineers will be flown directly to the US and given US citizenships right away.

          3. hk

            I think a major defense industry CEO (can’t remember if it was Lockheed or Raytheon) said recently that, if they can’t do business with China, they can’t function, for they are so reliant on Chinese suppliers.

    2. Michael Levine

      As for Israel?:

      More than 250 US financial executives: ‘Attack in Israel is an attack on all of us’

      “The attack in Israel is an attack on all of us.”

      “Israel is the Start-Up Nation. Its innovations make the world a better place. We stand with Jewish communities around the world which are experiencing antisemitic harassment and violence.”

      The U.S. finance managers and executives wrote that they are “disturbed” by the lack of solidarity with Jews, who are experiencing record levels of antisemitism in the wake of Hamas’ massacre of Jewish communities in southern Israel on Oct. 7.

      “We are profoundly disturbed by people who are indifferent when confronted with Jewish suffering or who organize to blame Jews and celebrate hate. Supporters of hate will have no place in our organizations or our community,” the signatories stated.

      “We stand with Jewish communities around the world, which are experiencing antisemitic harassment and violence. We are profoundly disturbed by people who are indifferent when confronted with Jewish suffering or who organize to blame Jews and celebrate hate. Supporters of hate will have no place in our organizations or our community.”

    3. Glen

      That’s not quite the relationship between the neo-cons and the plutocrats running Amazon, Walmart, etc. The plutocrats expect the neo-cons to energize America into a proxy, cold, or hot war which beats the other countries into acceptance of American hegemony, and thus allows the plutocrats to extract what they want, be that cheap bananas, oil, minerals, cheap labor, etc.

      What will happen is that these exploitative impulses will be even more unleashed on their own countries. This will not result in what the plutocrats want, it will just as all their other efforts, further accelerate the decline of the American middle class rather than reverse it, but it will not stop them from further wrecking their own country.

  3. The Rev Kev

    Looks like that not only is it that ammo is running short but also Dollars and Euros. The Collective West is now at the point where they are no longer capable of supporting this financial black hole, no matter how lucrative it is for certain people and corporations. So they are resorting to all sort of lounge lint ways of raising money for them. A coupla days ago the IMF gave them a loan of a coupla billion which was guaranteed by the Japanese government. Well they can kiss that money sayonara. Congress is finally starting to balk as its members realize that giving billions to the Ukraine and zip to Americans is never a good look, especially in an election year. Who knew? Let’s be clear – the Ukraine will default on their loans, especially if the Russians take all the Russian-speaking Oblasts. They will not have an economy left capable of generating the money to pay back those loans. And the EU will be crippled by all these bad loans for decades to come. Those loans only ever made sense if the Ukraine beat Russia and Putin fell while the Russian economy collapsed. None of that happened so now it will be the EU economy that may collapse and probably more than a few EU leaders will fall. People talk about a Götterdämmerung but that won’t be the big problem. The real problem will be what comes afterwards – the Reckoning.

    1. ChrisFromGA

      I might be mixing correlation and causation, but I do note that right around the time the 10-year note hit 5%, it became clear that the GOP wasn’t kidding about deep-sixing Biden’s $106B aid package for Ukraine and Israel.

      “Muh Kevin” got turfed out by the Freedom Caucus, ending any illusions about backdoor deals with Biden.

      And Speaker Johnson proved to be at least not the same grade of blatant whore for the MIC.

      Then the treasury announced bond sales for the next quarter that were roughly in line with market expectations, not including the hypothetical foreign aid which is vapor in the world of budge forecasting where only spending under current law can be assumed.

      Mr. Bond rallied, giving a temporary cease fire to the war between inflation and deflation, and giving pivot-mongers a nice dose of hopium.

      Put that $106B back on the table and Mr. Bond might not be so happy.

    2. John Wright

      One advantage of the current funding scheme is the loans/grants are not from private entities such as banks and wealthy individuals.

      I have read that some pressure for the USA to enter World War I came from a USA financial industry concerned that the industry’s loans to England and France would not be paid back if Germany triumphed.

      Direct loans from the USA will not have this “default hurts private profits” problem.

  4. KD

    If Ukraine does not receive foreign financial support, given the level of societal mobilization and the shrinkage of a civilian economy, they are not in a position to acquire foreign currency, and they will not be able to engage in foreign trade without resorting to hyperinflation. If they have hyperinflation combined with military collapse, its hard to see how the folks in Kiev manage to hold onto power. If they don’t resort to hyperinflation, it means a serious decline in living standards for the average Ukrainian, which is probably worse than hyperinflation politically. The only reason Ukraine has been able to tolerate the level of mobilization it is in is because of the Western financial support.

    I presume this is part of the reason Ukraine was projected to win in the West, because it could sustain a higher mobilization rate than the Russians due to EU/USA financial back stop and Western sanctions on Russia, making up for smaller population. Unfortunately for Ukraine, the kill ratio has more than made up for any advantage here. I wonder if Ukraine had gone with a more defensive strategy from the beginning, trying to preserve manpower in exchange for territory, if that would have given them long enough staying power to wear down Russia to get to a decent settlement. However, that opportunity has been squandered, they are basically on the ropes, they have waited until the dam is about to burst before they start trying to patch the holes.

    1. Benny Profane

      A significant event that may happen any day now is the often rumoured age 17-70 full mobilization. That could be the final straw to force a chaotic rebellion.

      1. ChrisFromGA

        I keep hearing that, but based on random comments from YT and MoA (I know, not the most reputable evidence) it seems that in Kiev at least, the class of IT workers and other apparatchiks to Western corporations and NGOs are still safe and sound.

        A true total mobilization would mean that IBM and other big corporate overlords have to take one for the team, and lose their pool of cheap labor. No more coding or working the night shift in the US on call, its off to the front you go, Sergei.

        Paying those tech worker salaries in hryvnia is a nice perk … corporate greed may be in play here and keeping these folks from becoming Steppe-kill.

        1. digi_owl

          That is the impression i get, that the whole thing is ethnic cleansing via press gang.

          If you got the money, connections and/or blood line, you are safe unless you want to join the Banderite “commissars” shelling the grunts for failing to advance across the mine field.

        2. Feral Finster

          “I keep hearing that, but based on random comments from YT and MoA (I know, not the most reputable evidence) it seems that in Kiev at least, the class of IT workers and other apparatchiks to Western corporations and NGOs are still safe and sound.”

          This is what I hear from the Ukrainians that I am in touch with. Galicians also have been spared much of the worst; the Ukrainian regime at one point even categorized Ukrainians as “first sort” (Galicians) “second sort” (those in Kiev and west-central Ukraine) and “third sort” (everyone else).

          It was something pretty much straight out of Nazi Germany and categorizing Reichsdeutsch and Volksdeutsch based on their pherenological profiles.

    2. ex-PFC Chuck

      “I wonder if Ukraine had gone with a more defensive strategy from the beginning, trying to preserve manpower in exchange for territory . . “

      That would have been a hard sell domestically. The UKR government had to be seen as seeking to recapture the rebel areas rather than digging in, not to mention ceding more territory to them.

      1. Not Qualified to Comment

        “I wonder if Ukraine had gone with a more defensive strategy from the beginning, trying to preserve manpower in exchange for territory . . “

        And a hard sell to the USAians and Europeans. From the start this affair was sold – by the politicians and press – as a battle of good against evil, Hollywood style, and a defensive strategy doesn’t make for rousing victory speeches or good leads for the evening news. The West’s spending was to buy entertainment , paint the politicians responsible with Churchillian glamour and give the rest of us the glow of self-congratulation at the defeat of evil you’re supposed to get just before the credits roll.

  5. ilsm

    Sooner the Russians’ ‘live fire training’ exercise is ended the better for the blob……

    Better fish to fry:

    Israel’s live fire training is going much better….. and its sponsors are not just neocon.

    While island hopping in the South China Sea bring nostalgia like “south Pacific”…..

  6. Acacia

    I wonder what percentage of that $233 B are loans, not grants.

    For comparison, $233 B is over twice the total debt owed to the IMF as of 03/2023, with Argentina as the largest single debtor with a total outstanding of $46 B.

  7. ISL

    I also think military planners, had reached their limit on weapons and arms draw for Ukraine without sacrificing US readiness (for a China war). But then the Hamas-Israel war happened, and the US is now digging into its weapons reserve, meaning the longer both wars continue, the worse the outcome when the US idiocracy starts its war with China.

    I think Republicans are more sensitive to these concerns and are trying to salvage the most weapons and funding for Israel and the next US war – it took many many years to recover from the last Israel war, and meanwhile, China keeps making more and more while the US less and less (for more and more $$).

    The window for a US-China showdown closes in a few years. hopefully it will pass before the US can re-arm, leaving the US only (self-destructive) sanctions.

  8. Aurelien

    From the European end, this just confirms the old adage that in Brussels everything is connected to everything else, which why EU budget negotiations are so much fun. It’s interesting that the FT frames money for Ukraine as being “given to Brussels,” which, while perhaps an oversimplification, is certainly the way it’s seen in some countries, and by large sections of the public. It therefore runs counter to increasing anti-Brussels feelings among European voters, and, guess what, the European parliament elections are next year.

    I think talk of continuing to fund Ukraine is effectively denial now. That is to say, in the confused minds of the western PMC, making money available is the same as buying things with it and using it productively, and promising to give money is the same as actually doing so. So as long as the money keeps flowing then, in some undefined way, the war is not over, and western policy has not failed catastrophically. Because money is all there is. There will be no rearmament, there will be no rebuilding of forces, there will be no capacity to challenge, or even seriously resist Russia. But as long as we keep shovelling money to Kiev, we can pretend that’s not the case, because what is money, in the end, but a kind of magic? As Philip Larkin wrote prophetically sixty years ago, when we still had things like industry and armed forces:

    “Our children will not know it’s a different country.
    All we can hope to leave them now is money.”

    1. Samuel Conner

      I have a recollection that in the depths of the GFC, the ECB governors did some creative things that exceeded their lawful authority in order to provide support (keeping sovereign debt interest expenses low) to Eurozone governments.

      Is there sufficient “policy space” (or, perhaps better, “political space”) for the ECB to act on its own to support the government of Ukraine? Euro/hryvnia swaps come to mind.

    2. Ignacio

      Problem is that with Europarlance it is extremely difficult to realise how these funds are arranged with the participation of sovereign and non sovereign counterparts, commercial and non commercial counterparts and with more or less inscrutable financing instruments. One has to dedicate time to try the mind-blogging exercise of reading EU Regulations that I suspect are written precisely with this objective (avoiding people can understand what the hell is going on). To be sure, apart from other voluntary funding that has been decided by specially committed countries like Germany in parallel and in addition to EU-level decided funding I believe in most EU countries no such further commitments are taken. So it is understandable if people think it is a EU thing (I do think so).

      The new “mechanism” proposed for 2024-2027, even if it passes would mean less money for Ukraine. Not much less (about 1.5 billion anually) but with rampant inflation it will be less effective. Any other cut to it would be very problematic for Z.

    3. Feral Finster

      Keeping the money, aka the skim, flowing is also key to keeping the Ukrainian regime sweet.

      Hence the frantic talk from Europoliticians about near-term Ukrainian EU membership.

  9. Joe Well

    I wonder what will happen if more German voters see that chart, showing how much is coming from Germany/EU and how little from the US and UK.

  10. The Full Fassbinder

    The exhaustion gambit! Everybody’s super-thrilled that Russia’s path to victory runs through legislative bodies of democratic capitals. The Russian soldiers will be enthused that strategy from on high is keep soaking up Western munitions with the their faces. Not that public opinion matters in Russia, given the dearth of precedents for mutiny and other paramilitary road trips to Moscow, occurring either in the 20th or 21st century.

    Recall approval for the Afghan war effort dwindled to 20% after 10 years, and NATO was there anyway for another 10 years. One reason support for Ukraine will continue, and Ukraine will fight on is “expected outcome of inaction”. Badged short-haired men in uniforms in Brussels and Washington will frankly discuss a hypothetical Russia no longer pouring everything it’s got into Ukraine. Russian victory prompts the NATO alliance to operate maximum alert readiness across theatres, a la Cold War. Funding higher readiness across all forces is more expensive than just indefinitely funding the Ukraine war with cash, weapon development allocations, and the tail ends of 30-year stockpiles.

    The West’s mantra has been, “No sharp escalations, just constant pressure.”
    Ambiguity is part of that. So, Kyiv collapsing anywhere between now and 2040 would be an unwelcome escalation of field conditions, but it won’t happen for lack of Western defense spending nor Western political changes.

  11. Paleobotanist

    Pissed that Canada is wasting so much money here when we have such needs domestically: the health care system is reeling, education is in bad shape, growing numbers of homeless, housing in critically short supply. But Trudeau wants to buy western Canadian Ukrainian votes for a majority at any price…

    1. Kouros

      That is just a small part of the many billions Canada is preparing to spend on the F35, to defend us against….!? The forest fires… (sarc). We could get about 135 big water bombers for that money, and likely double that if we include the maintenance costs over the lifetime of the F35.

  12. Feral Finster

    “It does not appear to occur to EU officials that Ukraine does not have to default. As a sovereign currency issuer, it can always create more hyrinas to pay its debts.”

    Ukraine’s foreign debts are not denominated in Hryvnyas.

    1. Yves Smith Post author

      The immediate issue is funding government operations. That is what will greatly accelerate its collapse.

      The creditors can restructure external debt. They pushed Ukraine to take on Russia and get in a mess. They can eat their own bad cooking. I’m not sympathetic with worrying about an external default since in many ways Ukraine is not sovereign.

  13. TMartin

    My only question: Why doe all the Kagan inspired neo-cons get a free ride? Why is poor decision making rewarded? It seems as if US society is so reliant on AI, that when that fails…the response is a deer in the headlights response.

  14. vao

    So Ukraine has several decay processes operating at the same time:

    I would add one more decaying process: the crumbling of its economy per se.

    1) Exporting agricultural produce by sea has become exceedingly difficult (ships dare not run the gauntlet, harbour infrastructure, such as grain silos, is being destroyed).
    2) Exports by road are blocked in some neighbouring countries.
    3) Import of Ukrainian agricultural produce is blocked in several Eastern European countries.
    4) Large expanses of fertile fields are fallow because of the war.
    5) Whatever remains of Ukrainian industry has been largely demolished or captured (from those large plants in the East — steel plant in Mariupol, salt mines in Soledar, nuclear power plant in Energodar, various industries in Melitopol and other cities — to machinery and aviation plants in the West).
    6) Flows of gas through Ukraine have been reduced.

    All in all, the loss of income from economic activites must be staggering — and it is probably getting worse as the war drags on.

  15. Roland

    If Trump doesn’t win in ’24, then I expect escalation of the war against Russia in ’25.

    There is too much talk about the US or NATO being “exhausted,” when in fact they have not committed any of their own forces, aside from the usual advisors and covert types. Unless one knows the actual munitions inventory of NATO (which is of course kept secret), how can one talk about “shortages” ?

    Do you truly believe that the USA is running itself clean out of ammo? Well, I don’t.

    There has been a steady increase in NATO deployments in Eastern Europe. A lot of the deployments have been of rear-echelon units, which is significant, because that’s what one would expect if a bigger build-up were to follow.

    For example, Canada has been deploying logistical troops to the Baltic states, with a mechanized brigade to arrive over the coming year. For the first time in history, Canadian ground forces will be poised to directly attack Russian territory. There is no domestic political opposition to this–not even any debate. Canada will go to war today with as little reflection as it did in 1914.

    It might seem that there is no reason for a major war. That depends on how one looks at it. Certainly, Russia poses little threat to the territory or sovereignty of the NATO countries.

    But for most of today’s NATO leaders, the concern is not for the safety or well-being of their particular countries. What they do feel is under threat is their current world order, and the future world which they have imagined on that model. From this perspective, Russia’s defiance of a Western-led world order is dangerous, and must be put down.

    For people like Trudeau or Macron or Sunak, this is more than some abstract thing. These people think of the Western-dominated world as their own real, personal, home–even though the world has never been something over which they had any legitimate claim. But whether rational or not, whether legitimate or not, their feelings are sincere in their way, and quite strong. They feel their home is under threat. They will fight for their home, their world. While these people are far from warriors, nevertheless in their vanity, and through their fear, they will kill very large numbers of human beings.

    1. Roland

      One correction: some Canadians did attack Russian territory in 1918-19, during the Russian Civil Wars.

      However, it remains unprecedented that Canadian troops would deploy on Russia’s frontier, with the advance intention of warring upon Russia.

  16. Dick Burkhart

    Biden will be in trouble not just over the failure in Ukraine but in Gaza too. Biden’s recent drop in the polls against Trump was in sync with this new war, which is so horrific that many progressive Dems like myself will never vote for him (I’m supporting Cornell West, though in a solid Dem state).

    Netanyahu’s Zionist backers are hell bent on ethnic cleansing – expelling the remaining Palestinians and stealing the rest of their lands, no matter the “slaughter of innocents” – war crimes extraordinaire.

    Just read the facts unearthed by the research of renowned scholar Rashid Khalidi in his book “The Hundred Years’ War on Palestine”, where he exposes the lies behind Israeli propaganda.
    Militant Zionists like Netanyahu will stop at nothing as long as the US picks up the check (before WW II it was Britain for whom Palestine was a colonial project).

    And now we know that Netanyahu knew about the Hamas attack a year in advance and did nothing to stop it, let alone prepare for it. Afterall, this was his “Pearl Harbor” – the perfect excuse to invade and destroy Gaza. And remember that Netanyahu had actually helped create and support Hamas in its early years – as a counterweight to the PLO, and now as a convenient scapegoat for completing his project of the ethnic cleansing of the Palestinians.

    Conclusion: Biden is in real trouble with his base on these wars, unless he successfully extricates the US before the next election. Even a small percentage not voting or switching to a third party candidate would swing some states.

  17. St Jacques

    This ship is listing and the rats, that can, are jumping. They call it “principles” in politics.

  18. St Jacques

    This ship is listing badly and the rats, that can, are jumping. They call it “principles” in politics.

  19. MFB

    I wonder whether there is a difference between paying banks in Monopoly money and paying for actual physical weapons and paying actual physical soldiers in Monopoly money.

    As far as I can see the Western financial system is largely kept running by central bankers writing “One trillion dollars/euroes/pounds” on a blank sheet of paper and everyone agreeing to pretend that this constitutes economic growth and a sound financial policy, while carefully refraining from cashing the cheque.

    But you probably can’t use the same technique to buy physical goods from people who actually want to spend the money they earn on something meaningful, and you can’t pay mercenaries with IOUs — ask Wallenstein and Hamilcar.

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