Hello, this is Eve. This is a great, compact article outlining the interconnectedness of the Ukraine-Israel conflict and its costs to both the two countries themselves and their supporters.
There is a further point made by Alex Vashinin in a recent RUSI article. The Art of Attrition: Lessons from Russia’s Ukraine WarThe United States (and Israel) are geared to wage a high-intensity, air-heavy conflict. Russia has long favored a war of attrition, and that is the battle plan adopted by the Middle East resistance. In a war of attrition, both sides are likely to find their experienced, well-trained forces severely depleted and have to rely increasingly on poorly trained recruits, so they need weapons that are easy to operate. And, of course, being able to mass-produce them is important. Western disdain for this strategy, which they see as primitive, will lead to its decline.
The article is by Satyajit Das, a former banker and author of numerous books on derivatives and general books. Traders, Guns, and Money: The Known and the Unknown in the Fascinating World of Derivatives (2006 and 2010) Extreme Money: The Masters of the Universe and the Cult of Risk (2011), Another feast of results (2021) and Fool of Fortune: Australia’s Choice (2022). His latest book is about ecotourism and the relationship between wildlife and humans. Wild Quest (Released on May 1, 2024). An earlier version of this piece was first published on May 18, 2024. New Indian Express
The complex web of industry, economics and geopolitics makes it dangerous to entrust modern warfare to generals. The replacement of Sergei Shoigu as Russia’s defense minister with economist and technocrat Andrei Belousov highlights the importance of aligning a country’s resources, industrial complex, supply chains and economic warfare with military strategy.
War requires large amounts of equipment, ammunition, and manpower. The success of the Allied powers in the two world wars of the 20th century was based on superior industrial capabilities. Western powers are now struggling to produce weapons for their client nations, against Russia and China. The United States and its allies have downgraded heavy industry essential to weapons production and focused on consumer goods and services. In contrast, their adversaries have prioritized military manufacturing and maintaining inventories for armed conflict. Western industrial ecosystems are now often privatized and lack the necessary capabilities and surge capacity.
The economy determines the ability to sustain a conflict.
Ukraine and Israel, equipped with Western weapons, possess superior conventional arsenals, but asymmetric warfare and low-tech improvisation using cheap drones and missiles could shift the balance, especially with a carefully calibrated escalation of hostilities.
Israel spent an estimated $1.4 billion in ammunition and fuel (about 6% of the country’s annual defense budget) to repel Iran’s planned attack. This attack probably cost $30 million. The Houthis in Yemen used cheap drones to disrupt shipping routes. Costs can balloon over time. Al Qaeda’s 9/11 operation cost less than $500,000, but has resulted in trillions of dollars in losses when continued defense and security spending is taken into account.
The “boy with a toy” syndrome drives an emotional trust in expensive high-tech weapons. An F35 jet, which is difficult to maintain and operate, costs about $150 million. A Patriot air defense system costs more than $1 billion, plus another $6-10 million per interceptor missile. Heavy tanks cost $6-10 million each. A single artillery shell costs $3,000-5,000. Western weapons are often twice as expensive as their Russian or Chinese counterparts. Many prove ineffective in real combat situations as enemies adjust their tactics.
Using large quantities of low-cost, low-performance weapons forces better-equipped forces to expend large amounts of resources for limited military gain. The goal is to economically weaken the enemy and prolong fighting against an enemy that does not want to fight long-term. As Stalin understood, quantity gives quality.
It is essential to reduce the enemy’s ability to finance its military operations. Russian attacks on industrial and agricultural infrastructure and personnel displacement have reduced Ukraine’s production by 30-35 percent. Reconstruction costs are about $500 billion. Ukraine needs to restructure $20 billion of its international debt to avoid defaulting.
Destruction of the impoverished, aid-dependent Gaza Strip makes no economic sense except to drive out its residents and make way for Jewish settlements. In contrast, Israel’s economy has shrunk by perhaps 20 percent. The loss of cheap Palestinian labor has crippled construction and agriculture. Reservist call-ups and an exodus of talent have disrupted Israeli industry. Skirmishes on the northern border have forced the displacement of some 60,000 Israelis, causing economic disruption and relocation costs. The conflict’s cost so far of more than $50 billion (10 percent of GDP) has significantly increased Israel’s debt and downgraded its credit rating.
Ukraine and Israel are dependent on Western aid. The US, NATO and allies have provided Ukraine with over $175 billion in military, financial and humanitarian aid, funded mainly by government borrowing. Many European countries are in violation of EU-mandated deficit and debt limits. Since its founding, Israel has been the largest cumulative recipient of US foreign aid, despite its high income, receiving $300 billion (adjusted for inflation) in economic and military aid and loan guarantees. Donors cannot tolerate this flow of aid, despite its lip service to freedom and guilt for the Holocaust. Aid is also endangered by domestic laws that prohibit military aid to countries that violate human rights.
Weaponization of economies is commonplace. However, sanctions against Russia have been ineffective, as many countries have evaded them due to strong financial and ideological motivations. Decades of isolation and wariness of the West have left Russia and China virtually self-sufficient and self-sufficient, with low reliance on external supply chains, especially for essential raw materials. Globally integrated economies like Israel are more vulnerable to reduced foreign investment and trade sanctions, as apartheid-era South Africa experienced.
Attempts to economically weaken an enemy could backfire: U.S. weapons production is currently constrained by supplies of titanium and rare earth elements from enemy nations, and Western countries have tried to limit Russian energy production and are now trying to keep prices down.
As the Gaza war shows, economics and geopolitics intersect and can have unpredictable, long-term effects on non-combatants near and far.
Regional instability has reduced tourism and traffic through the Suez Canal, Saudi Arabia is struggling to attract foreign investment to the crown prince’s pet NEOM megaproject, and a Palestinian exodus to Egypt and Jordan would destabilize those countries’ economies.
Affected countries are seeking a quick solution. The US is pressuring Saudi Arabia to normalize relations with Israel to reduce the threat posed to Israel by the United Arab Front. Saudi Arabia could sign a defense agreement with the US to help it with its nuclear ambitions. This would give Saudi Arabia better access to foreign investment and Israeli technology, and counterbalance Iran’s regional influence.
The real, unspoken obligation is to protect the unelected Arab monarchies and their wealth stored in the West. Given that over 90% of the Arab population supports the Palestinian cause, any perceived betrayal would risk a new “Arab Spring”. With rising internal tensions in the Gulf, Egypt and Jordan and increasingly repressive state counter measures, civil war and the collapse of these unpopular dynastic regimes are not inconceivable.
Such instability poses serious risks to the global economy. The Gulf states hold 30% and 21% of the world’s oil and natural gas reserves, respectively. If it is weaponized as in the 1970s, energy prices in particular will be affected. It will affect the Suez Canal trade route. Since the Gaza war began, the cost of shipping a container from China to Europe has quadrupled, from $1,000 to $4,000, and transit times have increased by two weeks.
However, an escalation of the conflict with similar consequences could occur if Arab countries unite against Israel. Terrorist acts by non-state actors targeting Western countries are an ever-present risk.
As Sun Tzu said tacticsThose who wish to fight must first understand the cost.
