Wars Update

Stephen Stanley | December 18, 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.

Turkey’s allies in Syria, most notably the Syrian National Army (SNA), are slowly but surely taking control of northern Syria.  There are two main losers from this development.  First, Russia appears to be withdrawing from all of its bases in northern Syria.  For the moment, Russian forces are being allowed to remain in their two largest bases, the air and naval bases on the Mediterranean Sea coast, but they are being forced to evacuate personnel and assets from other bases, pulling back to the two seaside facilities.  The other loser will be the U.S.-backed Syrian Democratic Forces (SDF).  This is the Kurdish militia that the U.S. tasked with fighting ISIS over the past decade.  In fact, the SDF controls a network of prisons holding ISIS leaders and militants.  However, the Turkish government considers the Kurds to be terrorists who oppose the Turkish regime and are intent on using the SNA and others to dismantle the SDF.  The greatest fear of the U.S. remains that the chaos in Syria will allow ISIS or other violent groups to re-emerge and threaten the world with terrorist operations.

The U.S. and Israel continue to eye the Syria situation nervously.  The U.S. sent a carrier strike group to the Middle East last week.  The U.S. also conducted airstrikes Monday on ISIS positions in Syria, killing 12 ISIS fighters.  Meanwhile, Israel has advanced up to 5 or 6 miles into southern Syria, worried that prior Assad regime positions will be assumed by entities hostile to Israel.  A plan has been put in place by the Israeli government to move further into Syria if the need arises, but no such order has been given yet.   The IDF also continues to conduct airstrikes to destroy former SAA positions and weapons depots.  Israel is also in talks with Jordan to prevent Iran from smuggling weapons to the West Bank through Jordan.  With Syria potentially no longer open to Iranian weapons shipments overland to Hezbollah in Lebanon, Israel and Arab states in the region that oppose Iran are game planning for how Iran may try to pivot.

The signals coming from the HTS-controlled interim government continue to be positive.  The leader of the HTS held a news conference this week in which he traded his traditional military fatigues for a suit and used his real name, Ahmed al Shara, rather than his nom de guerre, signaling that he intends to pursue a non-sectarian, non-militant government.  The government has extended amnesty to SAA rank-and-file soldiers and is offering to integrate some units into the new government’s current forces.  He also indicated that a reform of the old regime’s security apparatus, which he called “a source of terror” for the Syrian people, is in the works.  He said that a new constitution is being developed but will take a long time, and he added that the country will not be ready for elections any time soon.  Interestingly, the U.S. and others in the West have still not pulled their terrorist designation for HTS or lifted the bounty on the head of the HTS leader.  Israel’s Deputy Foreign Minister Sharren Haskel on Wednesday described Syria’s new leaders as “wolves in clothes of sheep.”  The Israeli government is treating the new Syrian governing coalition skeptically, especially after being deceived by Hamas in advance of the October 7 attacks.

Russia is continuing to withdraw personnel and equipment from Syria while it attempts to negotiate to stay at some of its bases.  The talks are reportedly not going especially well, with a Qatari-owned news source claiming that an HTS source said that Russia will withdraw all of its forces from Syria within one month, though the Economist reported that HTS “will probably allow Russia to keep some or all of its bases.”  As a backup plan, Russia is pressing the Libyan warlord Khalifa Haftar to secure the use of a port in Benghazi if need be, and Russian cargo ships are feverishly steaming toward the Mediterranean Sea to execute an evacuation.

Prime Minister Netanyahu and President-elect Trump spoke by phone over the weekend.  Netanyahu asked Trump to pressure Egypt and Qatar to push Hamas to release more hostages as part of any ceasefire deal.  This is reportedly the main holdup for a deal, as Hamas is offering to trade significantly fewer hostages than Israel is willing to accede to.  In a familiar formulation, a ceasefire would take place in three stages.  The first phase would entail a hostage exchange, a ceasefire in Gaza, and a gradual withdrawal of the IDF from Gaza.  The second phase would include a normalization of relations between Israel and Saudi Arabia.  The Saudis along with other countries in the region have also pledged to help fund and manage reconstruction in Gaza.  On the other side, Hamas is complaining that Israel keeps “setting new conditions” for a deal.

In the meantime, the IDF is proceeding with clearing operations in Gaza and announced another civilian evacuation on Wednesday for an area in central Gaza for several blocks in a refugee camp area after they claimed that militants fired rockets toward Israel from there.

An unnamed military source from Israel told the Washington Post that the October 25 Israeli strike on Iranian missile production facilities has reduced Iran’s production capacity from two ballistic missiles per day to one per week.  And the timeline for ramping back up is long, as it would take a year or more for Iran to acquire replacement solid fuel mixers from China to replace the ones destroyed in October.  This has implications for Iran’s ability to strike Israel again (after two large-scale air assaults this year) as well as cutting supplies to the Houthis and to Russia.

President-elect Trump is already promising to return to a “maximum pressure” campaign to squeeze Iran’s economy once he takes office.  Already, Iran is struggling.  U.S. sanctions have disrupted Iranian crude exports to China over the past two months.  More broadly, the value of the Iranian currency hit an all-time low this week and has plunged by close to 25% recently.

The U.S. and UK conducted an airstrike against a key Houthi command and control facility in Sanaa on Monday.  With Iran on its back foot, the West may step up its pressure on the Houthis.

President-elect Trump’s special envoy for Ukraine and Russia, retired General Keith Kellogg, announced that he will visit Kyiv in January and would travel to Moscow as well if invited.  Kellogg also plans to visit London, Paris, and Rome in his initial efforts to gather information and craft a path forward toward a ceasefire.

Russian forces continue to conduct high-intensity assaults across the front, trading a high number of casualties for marginal territorial gains.  The recent record is mixed.  Ukraine managed to conduct a significant counterattack south of Kupyansk, taking back a large forested area.  Just to the south, a new local Russian commander has ramped up activity in the Siversk area, though the Russians have only advanced a small amount.  Local Ukrainian commanders claim to have repelled a battalion-sized mechanized assault, destroying 15 tanks and armored vehicles and killing 400 personnel in the process.  Russian attacks have continued near Toretsk and Chasiv Yar, but the frontline in those areas is pretty static.  Russian forces attempted flank attacks both north and south of Toretsk recently and both failed.

Further south, the Russians have achieved more.  In Pokrovsk, Russia has moved to within a few miles of the town, but Ukraine has in recent days sent high-quality reinforcements, which might allow Ukraine to stabilize the situation.  If not, the town could fall within a few weeks.  To the south, Russia has squeezed the narrow Ukrainian salient south of Kurakhove, as Ukrainian forces have abandoned a strip of several towns along the highway and river running east-west.  Russia also reportedly occupies about three-quarters of the town of Kurakhove itself.  Similarly, Russian forces have taken ground south of Velyka Novosilka and have reportedly trapped a unit of Ukrainian troops in a pocket.

Reports of North Korean casualties, mainly in the Kursk region, are beginning to proliferate despite the best efforts of Russian and North Korean leaders to keep their participation in the war quiet.  Aside from procuring high-end Russian military equipment (like fighter jets), the rationale given for Supreme Leader Kim Jong Un sending thousands of his best troops to fight for Russia is that they would learn advanced Russian tactics and gain experience working against U.S. equipment (the New York Times reported that North Korea also received $2 to $6 billion from Russia in return for shipments of equipment and personnel).  Unfortunately for North Korea, Russian military leaders are using the North Korean troops in much the same way that they use their own conscripts (many of whom were prison inmates).  They are being used in Charge of the Light Brigade style suicidal attacks on Ukrainian positions (ironically, the Tennyson poem Charge of the Light Brigade references an 1854 battle between Britain and Russia in the Crimean War), which means that a) North Korean soldiers are not learning much that would be helpful in future battles and 2) more importantly, even if they were learning anything, they are dying in large numbers and thus unlikely to have a chance to relay their knowledge back home.

Another round of Ukrainian airstrikes into Russian territory hit a few key targets over the weekend, including an oil depot, a weapons storage facility, and a train carrying fuel to the front.

Two Russian oil tankers were wrecked in the Kerch Strait over the weekend by extremely rough waters, with at least one reportedly sinking.  This will be a setback for Russia’s war effort, as the fuel oil on board was undoubtedly targeted for the military.  However, the bigger story is the environmental damage that this may cause.  Each ship was said to be carrying a combined 9,000 tons of oil, a significant portion of which may now be in Sea of Azov and/or the Black Sea.

On Tuesday, Ukraine claimed responsibility for the assassination of Russian Lt. General Igor Kirillov in Moscow.  Kirillov is said to have been the head of Russia’s radiological, chemical, and biological forces.  He was killed when an explosive device planted on a scooter detonated near the entrance to an apartment building that he was exiting to head to work.  Ukraine has accused Russia of using chemical weapons on the battlefield in Ukraine thousands of times.  This news has to be an embarrassment for Russia, to see one of its high-ranking military officials killed on the street in Moscow.  Russian authorities claimed to have detained an Uzbek national who they say carried out the attack on behalf of Ukraine’s security services.