Monday 16th of September 2024
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Ukraine’s recent military actions have caused concern and consternation, not only by crossing into Russian territory but also by challenging the boundaries set by the United States. Since the beginning of Russia’s full-scale invasion of Ukraine, the US has been clear about its intentions: to help Ukraine defend itself and remain a sovereign nation. However, the idea of taking the fight into Russia has always been considered a risky move, one that could lead to dangerous consequences.
After Ukraine’s recent incursion into the Kursk region of Russia, Ukrainian President Volodymyr Zelenskyy expressed frustration with the restrictions placed on Ukraine’s military actions by its allies, particularly the US. He criticized what he called the “naive, illusory concept of so-called red lines regarding Russia” that some of Ukraine’s partners had insisted on. According to Zelenskyy, these red lines are no longer relevant.
But is that really the case? The differing approaches of the US and Ukraine reflect not just different views on how much pressure can be applied to Russian President Vladimir Putin, but also different goals. From the outset, US President Joe Biden has had two main objectives: supporting Ukraine and avoiding a broader conflict that could escalate into a world war. If it ever came down to a choice, the US would prioritize avoiding a global conflict.
Ukraine, however, is fighting for its survival. For Ukraine, direct involvement by the US in the war would be welcome, even if it risks a larger conflict. In fact, according to a recent book by David Sanger, Biden has suggested that Zelenskyy might even be trying to pull the US into a larger war. This difference in goals naturally leads to a different appetite for risk. The US has been very cautious about the types of weapons it provides to Ukraine and how they are used. For instance, when the US supplied long-range missiles to Ukraine, it placed strict limits on how far they could be fired. Only recently did Washington allow US-supplied weapons to be used against targets just inside Russia, and even then, certain restrictions remain.
This cautious approach isn’t just limited to the US. Within Europe, there is also a range of opinions. Countries like Estonia and Poland, which feel directly threatened by Russia due to their proximity, have been advocating for giving Ukraine more advanced weapons and fewer restrictions on their use. Meanwhile, Germany has been much slower and more reluctant to take such steps.
Ukraine has long complained that the caution of its most powerful allies is forcing it to fight with one hand tied behind its back. While Russia is free to strike deep into Ukrainian territory, Ukraine has faced limitations on how it can respond. Both Ukraine and the US have stated that the Biden administration was not informed about the Kursk offensive before it happened. This seems to be true, as the US has a strong interest in distancing itself from any direct involvement in attacks on Russian soil.
Ukraine’s decision to launch the Kursk offensive without prior approval from Washington is reminiscent of Israel’s approach to military action. Israel has a history of taking military actions independently, sometimes without US approval, under the assumption that if the action is successful, it will eventually be accepted. If it fails, the US is expected to help manage the fallout. For now, there is cautious optimism in Washington about the Kursk offensive. However, there are still concerns about whether Ukrainian forces can hold onto the territory they have taken and withstand Russian counterattacks in eastern Ukraine.
For everyday investors, it’s important to be aware of these escalating risks, but there’s no need to panic. Global investment portfolios generally have limited direct exposure to these conflicts, and while the situation is serious, it is being managed carefully by the US and its allies. The goal is to continue supporting Ukraine while avoiding a broader conflict that could have more significant global repercussions. Investors should stay informed but maintain a balanced perspective on how these developments might affect their investments.
We would like to thank Dominion Capital Strategies for writing this content and sharing it with us.
Sources: Bloomberg, Yahoo Finance, Marketwatch, MSCI.
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