Geopolitical Monitoring Report | September 30, 2022

Russia | Ukraine

Putin Annexes Ukrainian Territory and Threatens Nuclear Escalation

Background:

Russian President Vladimir Putin formally annexed four Ukrainian territories into Russia following sham referendums that were organized by occupying Russian troops. Russia now claims the entirety of the Donetsk, Kherson, Luhansk, and Zaporiziha oblasts are Russian territory, despite the fact that they only occupy portions of most of them. Putin declared that he would defend these new territories with “all available means” and former President and Vice Chairman of Russia’s Security Council Dimitry Medvedev has stated that the Kremlin could use nuclear weapons to defend these territories. The annexation of these territories comes as the Ukrainian army continues to push forward with its counteroffensive in the Kharkiv region.

Ukrainian troops are currently close to encircling a large Russian army unit in Lyman, Donetsk. Putin also blamed the United States and the United Kingdom for the sabotage of the Nord Stream and Nord Stream 2 pipelines that occurred earlier in the week. There has been no official conclusion about what happened to the pipelines, and Russia has been named as one of the possible suspects.

Putin concluded his speech demanding a ceasefire and negotiations with Ukraine to begin.  In response to Putin’s announcement of annexation and demands for a ceasefire, Ukrainian President Volodymyr Zelensky submitted a “fast-tracked” membership application to join the NATO alliance and announced that he would not negotiate with Putin, but with the “next Russian president.” Belarus – Russia’s closest European ally – has reportedly begun preparing to receive newly mobilized Russian troops following Putin’s decision to partially mobilize. This could set the stage for a renewed push on Kyiv, either to relieve pressure on Russian troops in the east or to capture the city.

Impact:

The referendums in the Ukrainian territory under Russian control will not be legally recognized by the international community and have already resulted in increased sanctions on Russia. However, these votes are more likely designed to secure continued public support for the war and justify the mobilization of additional troops at home as opposed to convincing the international community to accept the annexations.

The annexation has also led to additional sanctions being placed on Russia by the US and the EU is also reportedly considering a new sanctions package on Moscow. While Putin’s threats to use nuclear weapons are real, it is important to note that Russia has other methods of escalation that would not trip the nuclear threshold, but could be devastating for Ukraine. Targeting civilian infrastructure in Ukraine – such as dams, bridges, and power plants – is possibly the next step of escalation before the newly mobilized troops arrive at the front.

However, major military defeats could convince Putin that tactical nuclear weapons are a viable option. Both the West and Russia appear to be casting blame on each other for the destruction of the Nord Stream and Nord Stream pipelines, and the sabotage may serve as a foreshadowing for future attacks by Russia on underwater energy infrastructure and communications infrastructure – like underwater internet cables – in the West.

This could take the form of kinetic sabotage – like what occurred to the Nord Stream – or in the form of cyber attacks. Regardless of whether or not additional acts of sabotage on energy resources occur, the destruction of the pipelines ends any prospect of reproach between Germany and Russia.

While Zelensky’s attempts to join NATO are almost certain to fail due to the fact that all 30 members must approve their application, his statement that he refuses to negotiate with Putin and that he will only negotiate with Russia’s “next president” may further encourage Putin to consider the use of tactical nuclear weapons, as it may make him fear for the stability of his regime.

Finally, the annexation of these territories will now make it legal for Russian conscripts to be deployed in their defense. It is unclear what shape new Russian offensives will take, but it is clear that their arrival means this conflict will continue for an extended duration. 

Mitigation:

The increased threat to undersea energy and communications infrastructure following the destruction of Nord Stream means that companies in this sector must be prepared to mitigate these threats and those that rely on this sector must be prepared to mitigate disruptions. This includes ensuring that your organization has quality third-party intelligence capabilities and well-thought-out emergency plans to monitor for and mitigate disruptions to energy supplies or communications.

While many companies have already cut ties to Russia, the new round of sweeping US sanctions also includes 14 non-Russian international companies that provide equipment for the Russian military. Given that Russia is the most sanctioned country in the world, these types of sanctions on foreign companies that assist its military are likely to continue, as there are very few entities or high-profile individuals in Russia that are not already under some form of sanctions.

This trend highlights the importance for companies and organizations to ensure that their suppliers and supply chains do not involve sanctioned entities or companies. In-depth due diligence is essential to prevent this from occurring and should be done before entering into any agreement with a company that operates abroad.

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