Wars Update

Stephen Stanley | December 13, 2024

This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors. This material does not constitute research.

As the new leaders in Syria attempt to figure out how to run the country, the IDF has systematically eliminated what was left of the assets of the Syrian Army.  By Tuesday, the IDF announced that it had destroyed 70% to 80% of the Assad regime’s military capabilities, taking out heavy equipment and missile stockpiles.  Air strikes have largely stopped, though the IDF reportedly conducted three more today.

Hezbollah reportedly helped senior Assad regime officials and some Assad family escape Syria to Lebanon.  We will see whether that has an impact on the Lebanese political landscape over time.

In Syria, HTS leaders continue to preach tolerance and moderation, ordering their militants not to dictate women’s dress standards or to take revenge against SAA soldiers.  It will be a tough task to avoid retaliation and extremist actions, as many of the militants involved in the opposition are hardline Islamists who will presumably want to impose their views on a diverse nation of people.  Many of the leaders’ edicts have come in response to reports already of incidents involving their followers.

Russia is still in a holding pattern regarding its assets in Syria.  Its air base is still housing the normal array of planes.  Its naval assets have been moved offshore, about 5 miles out to sea from the Tartus naval base, as the Russians seek to negotiate to keep the bases under the new regime.  News reports suggest that Russian officials have been in talks with HTS leaders and are optimistic that they will be allowed to keep the bases.  Over the past day, there have been reports that Russia reached an agreement to keep the bases, but it is unclear whether the deal is a permanent one or simply an interim pact (and, even if the former, there is no guarantee that it would hold, as there are many factions that Russia would have to deal with to strike a meaningful arrangement).  In the meantime, Russian naval landing and cargo ships are sailing toward Tartus in the event that Russia needs to evacuate all of its personnel and equipment in the country, though it will take weeks for the ships to arrive in the Mediterranean Sea.

Hamas is beginning to implicitly acknowledge that its negotiating position has been undermined by the events in Lebanon and Syria.  With slim hopes now of being able to rearm, leaders of the group have begun to slowly walk back some of their demands required for a ceasefire in Gaza.  For example, according to the New York Times, Hamas leaders are now willing to concede an extended IDF presence along the Netzarim and Philadelphi corridors (as a reminder, the former bisects the Gaza Strip and is being used by the IDF to prevent unmonitored movement between the northern and southern halves of the Strip, while the latter runs along the southern border of Gaza with Egypt), even as they continue to insist that Israel eventually completely withdraws from Gaza.  Egyptian officials who are brokering the talks told Israeli media on Tuesday that an interim deal is “imminent” that would involve a 60-day ceasefire and the release of all hostages that are: female, male above 50, and/or have a serious medical condition.  Hamas has reportedly submitted a list of hostages that it would release if a deal were struck.  In return, Israel would release Palestinian prisoners and allow more humanitarian aid into Gaza.

As noted in the previous update, Iran’s fortunes have taken an ugly turn over the last few months, with Hamas and Hezbollah as well as Iran’s own air defenses being dismantled by the IDF and then Iran’s key ally in the region, the Assad regime in Syria, falling.  The concern in the U.S. is that, like a wounded animal, Iran may lash out by trying to ramp up its nuclear weapons program.  The Wall Street Journal reported today that the Trump transition team is considering all of its options to prevent that from happening, including pre-emptive airstrikes.  The article notes that the Trump team is devising “a maximum pressure 2.0 strategy,” which will include a renewal of tough economic sanctions but this time may also extend to military options.  The lighter scenario involves raising the U.S. presence in the region and selling Israel bunker-busting bombs in hopes of convincing Iran to abandon its nuclear aspirations.  The other scenario involves using military force if necessary to get to the same outcome.  Sources cited in the piece make clear that Trump has no interest in drawing the U.S. into war with Iran, but at the same time, he is determined not to allow Iran to achieve nuclear status on his watch.

U.S. efforts to rein in Iran’s nuclear program will likely find support in Europe.  France, Germany and the UK have already sent a letter to the UN Security Council indicating their readiness to call for the UN to impose ”snapback” sanctions on Iran.

The Houthis once again attacked U.S. Navy destroyers in the Gulf of Aden.  This time, the vessels were escorting three U.S.-flagged commercial ships.  There was no damage or injuries.  The Trump team is sending signals that it intends to get tough with the Houthis, including reinstating their designation as a foreign terrorist organization.  It strikes me that if the incoming Administration wants to get tough on Iran, an easy way to get started is to further weaken their proxies, and it sounds like the Houthis may be near the top of the list.

President-elect Trump offered a nuanced view regarding his support for Ukraine in their fight against Russia when he sat for an interview with Time Magazine after being named Time’s Person of the Year.  He said that he opposed Ukraine launching U.S.-supplied missiles “hundreds of miles” inside Russia, which he viewed as an escalation.  When asked whether he would cut support for Ukraine, he said that he would look to leverage U.S. aid to encourage Russia to come to the negotiating table.  He said: “I want to reach an agreement, and the only way you’re going to reach an agreement is not to abandon.”

In his meeting last week with French President Macron and Ukrainian President Zelenskyy, President-elect Trump reportedly conveyed that he does not support Ukrainian membership in NATO, but he wants a robust, well-armed Ukraine after a ceasefire.  And he expects Europe to take the lead responsibility for both supplying Ukraine with weapons and with providing peacekeeping forces to enforce any peace deal with Russia.

Russia has renewed its assault on the Ukrainian town of Pokrovsk.  After diverting the main thrust of their offensive southward for a time, Russia has turned its focus back to seizing Pokrovsk.  Forces have moved to within about 5 miles of the town from the south and southeast.  The assaults that have gained this ground, however, have come at a high cost.  A local Ukrainian officer noted that Russia lost nearly 3,000 personnel in the area in two weeks.  One report indicated that Russia has lost 580 tanks over the course of the campaign to seize Pokrovsk.  To put that in perspective, 580 is more tanks than any country in Europe possesses.  Still, it is beginning to look like Russia’s capture of the town is finally about to happen.  The next few weeks will be critical.  Pokrovsk would be a huge loss for Ukraine.  Not only is it a key logistics hub (situated near several highways and railways) but it is also home to Ukraine’s largest operating steel-making factory.  Reports suggest that the factory was forced to shut down operations this week in light of the proximity of Russian forces.

Ukraine drone strikes hit a Russian military aircraft repair facility in Taganrog and an oil depot in Bryansk.  Speaking of oil, the outgoing Biden Administration was hesitant to impose tough sanctions on the Russian oil industry going all the way back to the start of the war because of the fear that oil prices would spike and anger U.S. households (voters).  Now that the Administration no longer has to worry about that, it is finally considering tougher sanctions, perhaps with the idea that it can tie the incoming Trump’s Administration’s hand a bit.

Russia launched another massive set of airstrikes today targeting Ukraine’s electricity infrastructure.  The strike consisted of almost 200 drones and over 90 missiles.  President Zelenskyy said that 81 of the missiles were intercepted, but what got through still did extensive damage, forcing Ukraine to reduce output at 5 of its 9 nuclear reactors and resulting in massive blackouts in several regions of the country.  Russia said that the attack was retaliation for the Taganrog assault.

U.S. intelligence has warned that Russia may fire a second Oreshnik ballistic missile at Ukraine soon.  This would presumably be another attempt by Russia to dissuade the West from supporting Ukraine by implicitly threatening nuclear war (the Oreshnik is a nuclear-capable missile).

Speaking of Russian bombs, Ukrainian media reports that Russian attacks on Ukraine using guided glide bombs have dropped by more than half since the West allowed Ukraine to use long-range missiles on targets in Russia.  Ukraine has systematically targeted munitions depots, depleting Russia’s stores of bombs, resulting in fewer attacks.

North Korea is reportedly seeing its first returns for supplying thousands of troops to Russia’s war with Ukraine.  Russia is said to be supplying North Korea with advanced jet fighters.  North Korean pilots are reportedly already in Russia receiving training to fly the planes.

In a recent post, I noted that India has been hedging its bets by balancing its purchases of military equipment between Russia and the West after traditionally relying heavily on Russia.  However, India continues to do extensive business with Russia.  This week, Reuters reported that an Indian oil refinery company signed a 10-year deal with Rosneft to buy 500,000 barrels per day of oil.  This pact is valued at around $13 billion per year.