Come for the politics, stay for the snark.

You’re just a puppy masquerading as an old coot.

“Can i answer the question? No you can not!”

A democracy can’t function when people can’t distinguish facts from lies.

The rest of the comments were smacking Boebert like she was a piñata.

They traffic in fear. it is their only currency. if we are fearful, they are winning.

Dear Washington Post, you are the darkness now.

Washington Post Catch and Kill, not noticeably better than the Enquirer’s.

Let the trolls come, and then ignore them. that’s the worst thing you can do to a troll.

We’ve had enough carrots to last a lifetime. break out the sticks.

Oppose, oppose, oppose. do not congratulate. this is not business as usual.

You can’t attract Republican voters. You can only out organize them.

Dear media: perhaps we ought to let Donald Trump speak for himself!

Shallow, uninformed, and lacking identity

Sometimes the world just tells you your cat is here.

Speaking of republicans, is there a way for a political party to declare intellectual bankruptcy?

The Supreme Court cannot be allowed to become the ultimate, unaccountable arbiter of everything.

This country desperately needs a functioning fourth estate.

Proof that we need a blogger ethics panel.

Republicans don’t lie to be believed, they lie to be repeated.

You don’t get rid of your umbrella while it’s still raining.

Bad people in a position to do bad things will do bad things because they are bad people. End of story.

Cancel the cowardly Times and Post and set up an equivalent monthly donation to ProPublica.

Text STOP to opt out of updates on war plans.

Is it irresponsible to speculate? It is irresponsible not to.

You are here: Home / Foreign Affairs / War for Ukraine Day 557: President Zelenskyy Is Moving to Replace Minister of Defense Reznikov!

War for Ukraine Day 557: President Zelenskyy Is Moving to Replace Minister of Defense Reznikov!

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(Image by NEIVANMADE)

Brief housekeeping note: Sorry for the late update tonight. We did the belated birthday family get together for my mom’s birthday. It was postponed in July because one of the clones was ill.

The Russian’s opened up on more Ukrainian port infrastructure overnight. This time in Reni on the Danube:

Here is President Zelenskyy’s address from earlier today. Video below, English transcript after the jump.

Rustem Umerov should head the Ministry of Defense of Ukraine – address by President Volodymyr Zelenskyy

3 September 2023 – 22:02

I wish you health, dear Ukrainians!

At the end of the week, I would like to say a few things.

First, Ukraine has become stronger. We have new agreements with our partners on defense packages. And, by the way, today in a conversation with French President Macron, we discussed what new supplies can help our warriors. We discussed the protection of our Odesa region – what France can do to protect Odesa and the region. And there is a very important agreement on training our pilots in France – our coalition of modern fighters is getting more powerful. There are significant things that we are doing in Ukraine to protect us every week more and more intensively. This includes our weapons – from artillery and shells to drones and missiles… This also applies to our unity. In particular, unity in rejecting everything and everyone that weakens Ukraine.

Secondly, we are constantly proving that we can do things together that seem fantastic to the rest of the world, but work in reality when Ukrainians take them on. Four ships have already passed through our new, alternative sea corridor from our southern seaports. And we are working with our partners around the world to restore the normal operation of the Grain Corridor, which has ensured and should ensure food security on a global scale. I thank everyone who is helping with this.

Third, Ukraine has to achieve several very specific results in the coming months. In particular, it is our strategic political goal to launch membership negotiations with the European Union. Ukraine has seven specific recommendations from the European Commission. We have already implemented some of them. The other part requires effective work of the Verkhovna Rada of Ukraine. Timely work, which we have agreed with the European Commission. The law on the restoration of electronic declaration, amendments to the law on national minorities, and, I would like to draw special attention to it, the law on PEPs – politically exposed persons. Each of these laws is of fundamental importance. And voting on them will be of fundamental importance. People will see who is worth what. And I urge Ukrainian MPs not to postpone these decisions, not to let Ukraine down, and to support our European integration.

One more thing is very important.

This week, the Parliament will be offered to make a personnel decision. I want to outline it now. I have decided to replace the Minister of Defense of Ukraine. Oleksiy Reznikov has gone through more than 550 days of full-scale war. I believe that the Ministry needs new approaches and other formats of interaction with both the military and society at large. Now Rustem Umerov should lead the Ministry. The Verkhovna Rada of Ukraine knows this person well, and Mr. Umerov does not need any additional introductions. I expect the Parliament to support this candidate.

Autumn is a time for strengthening.

Glory to Ukraine!

While there was chatter several months ago that Reznikov was either going to be shuffled to a different ministry or fired outright, it didn’t happen. Until or unless reporting comes out that something more is going on here, I wouldn’t read to much into this personnel change. On one hand you definitely want continuity of leadership in a crisis. On the other you have to recognize that over 18 months as Minister of Defense during an existential war of self defense is going to tax and drain even the most resilient individual. I suspect we’ll know soon enough iff there’s something more going on here than it’s just time for fresh blood.

That said, here is now independent and former Kyiv Independent defense correspondent Illia Ponomarenko’s take on Zelenskyy’s announcement:

For those wondering who Rustem Umerov is, Reuters has the details:

A 41-year-old ex-lawmaker and Crimean Tatar, Umerov has headed Ukraine’s State Property Fund since September 2022 and played a role in sensitive wartime negotiations on, for instance, the Black Sea grain deal.

He has been praised in Ukraine for his track record at the State Property Fund, which oversees the privatisation of state assets and had been embroiled in corruption scandals before he took charge.

In the same article Reuters is reporting that Reznikov may be Ukraine’s next ambassador to London.

In the meantime, Reznikov is still the Minister of Defense:

.@oleksiireznikov: “The Security and Defense Forces of Ukraine have adopted 287 @NATO standards. This is almost a quarter of the total number. Among them, 174 are within the framework of the Ukraine-NATO Partnership Goals (top-priority Alliance standards), and 113 are initiative standards. Ukraine ranks first among NATO partner states in this regard, even surpassing the performance of some member states. By the end of 2023, we plan to have adopted and implemented approximately 200 more standards.”
📷 @Ukrinform

The cost:

‘Just starting to run, it’s a bit daunting because I’m not quite used to it yet. But I want to support kids who’ve lost their legs and can’t run.’ Yana, courageous 12-year-old lost both her legs when Russian missile hit Kramatorsk station. Her mother also lost a leg.

We can’t fail these children.

Bakhmut:

Near Bakhmut, 600,000 Ukrainian combat bees serve dutifully. An improvised apiary was set up just 2 kilometers from the front line, and the bees regularly fly on missions beyond it. Serhii, a paramedic and radio operator at the medical station, assembled hives from ammunition crates, and now, throughout the summer, there has always been fresh honey for both healthy and wounded fighters.

📷 ArmyInform

Kherson:

Robotyne axis courtesy of the Ukrainian Soldier who tweets under the handle Zaporizhzhia Salt. First tweet, followed by machine translation of it, from the thread followed by a machine translation of the rest from the Thread Reader App:

“Magura” is now clearly showing what it managed to overcome to the east of the village of Robotyne in incredibly difficult battles. Needless confirmation of how difficult this task was. And the reason why many among Russian propagandists were so sad 1/

When we studied these trenches, in which the Russians were still sitting at the time, we noticed that the system of fortifications was especially complex and tortuous in this area. Apparently, a lot of time and effort was spent to tinker so qualitatively right here, right next to the village 2/Image
Here is an atypically complex terrain for this area. The positions are built on the elevation relative to the area, which, among others, was used for assaults. So the place was very promising and may be most profitable for defense for many kilometers around 3/Image
However, the Armed Forces managed to solve this problem and break through. It was a grueling marathon. And after watching the video from 47 OMBr comes the understanding that it was even more difficult than we originally imagined when we were just beginning to accompany any action here 4/Image
And the otaki systems of fortifications had to be overcome northeast of Robotny. In fact, it is a line of fortifications between the villages of Robine on Verbove. A very important line, which also had to be broken by incredible effort. In the open with all the difficulties I described earlier 5/Image

Not sure whether Magura is referencing a Ukrainian military unit or something else. Hopefully one of our Ukrainian speakers can let us know what it is referring to. And since the last time I referenced our Ukrainian speakers there seemed to be some confusing, I’m going to make this explicit: If you speak, read, and/or write Ukrainian then you are who I am referring to. If you speak, read, and/or write Russian, which is close and this is a cognate word shared between the two languages, then you’re good to go too. If you are in NEITHER of these categories, I am NOT referring to you!

More from Robotyne:

In the Novoprokopivka area, to the south of Robotyne, recent satellite imagery showcases a landscape covered with with scorch marks and shell craters, particularly evident near tree lines and roads. Although I haven’t observed any dramatic shifts when compared to the August 31st imagery, it’s evident that the pressure on russian defenses to the south of Robotyne persists.

Given the visual evidence suggesting that the combat zone has shifted towards russian positions in the south and east, I see little merit in paying attention to russian claims of successful counter-attacks in Robotyne.

Your contributions via Buy Me A Coffee have enabled the availability of this satellite imagery and others, such as TU-95 with cope tires. If you found these valuable, please support by liking and retweeting the first message of the thread. Your engagement enables me to provide better materials

A year and a half after that day in the just liberated Bucha, I can only give a tired smile to all those spamming “Ukraine will lose” messages on and on.

Ukraine once climbed out of the depths of hell and made a leap off the brink of the abyss when half of the world was literally burying it alive.

It made history by defeating the 21st-century blitzkrieg waged by an overwhelmingly strong nuclear power and making the West wake up and give a helping hand.

Ukraine has paid a terrible price for its freedom and existence, and Russia has given us more than enough reasons to never give up to its bloodlust.

And, dear Russian brainless bot slaves, Ukraine will carry on subverting everyone’s expectations and moving on toward its well-deserved victory, like it or not.

In other words, fuck you.

Since I’m not sure where she’s from, I’m just going to go with Ukrainian Valkyrie:

For you tank afficionados:

I’m pretty sure this IS NOT going to work:

That’s enough for tonight.

Your daily Patron!

There were still no new Patron tweets or videos posted today, so here’s some adjacent material from the Ukrainian Army Cats and Dogs account.

Open thread!

Reader Interactions

63Comments

  1. 1.

    YY_Sima Qian

    Rustem Umarov haș no prior experience in defense? That could be a plus when it comes to reining in corruption in defense procurements. What does the defense minister do in the current Ukrainian context? Managing defense industries, training, supply?

  4. 4.

    J. Arthur Crank (fka Jerzy Russian)

    I sure can relate to the very last picture.

    I guess the Ukrainians can target piles of tires now, especially the piles that are shaped like airplanes.

  5. 5.

    YY_Sima Qian

    Posted this late in yesterday’s thread. Reposting here:

    Valuable article from the Kyiv Independent on the less well covered Kharkiv axis.
    New brigade bears heavy brunt of Russia’s onslaught in Kharkiv Oblast
    Goes into some detail on where NATO training has been useful, & where not. Also give some indication of the quality of Russian units on the axis & their tactics (relatively speaking), as least as viewed by Ukrainian grunts in the trenches. On the one hand, the Russian forces have not made much head way in that direction, the novice Ukrainian units are holding. OTOH, the attrition ratios may not be so favorable to the Ukrainian side there.

    Now that the Ukrainian Army is making progress in Zaporizhzhia , forcing the Russians to shift some VDV units down south to prevent a breakthrough, the Ukrainian brigades at Kharkiv may be under less pressure now.

  6. 6.

    oldster

    Ponomarenko’s tweet suggests that Reznikov was brought down by a journalistic exposé? I’d like to hear more about that.

    As far as I can tell, Reznikov has done good work on the crucial diplomatic front. And if he is being considered for an ambassadorship, then his sins cannot be disqualifying.

    I honestly don’t care about him per se, but I want the ship of state to remain on an even keel.

  7. 7.

    YY_Sima Qian

    @Carlo Graziani: Doesn’t look like Russia has a proper battlefield anti-drone system. They seem to be getting pretty good at knocking down the civilian drones that the Ukrainian Army uses on the front lines, but nothing like the sophisticated systems that the US, European countries, Israel & China are developing & producing (w/ AESA radars, EO cameras, small missiles, small caliber cannons w/ high rate of fire, lasers, EM pulse generators, etc. ). Perhaps a consequence of its uncompetitive electronics industry overall.

  9. 9.

    Adam L Silverman

    @oldster: The Kyiv Independent has done several exposes on the corruption accusations over the past year. From what I recall from reading them, including including at least one of them in an update, Reznikov is not himself being accused of corruption. However, he is the boss, so there has to be accountability.

  11. 11.

    Anoniminous

    In this satellite imagery, it seems the russians are still in the process of fitting tires onto the bomber

    Anyone who has lived or passed through the South knows you have to put corrugated tin on first then the tires.

    GET IT TOGETHER RUSSIA!!!

  12. 12.

    Anoniminous

    @YY_Sima Qian:

    Ukraine has started to use Australian ‘cardboard drones’ .  These fly low and slow making it difficult or impossible for anti-air radar to distinguish from birds but fly high enough to make it difficult for the Mark One eyeball to detect.  They have a payload of 3 kilos.  That doesn’t sound like much but 3 kilos of C-4, HMX or CL-20  packs a hell of a punch.

  15. 15.

    Alison Rose

    In other words, fuck you.

    Louder for the tankies in the back!

    I like what I have seen of Reznikov but I also trust that Zelenskyy as ever knows what he’s doing. Hopefully Umerov will be a good successor.

    Thank you as always, Adam.

    P.S. …….clones?

  16. 16.

    karen marie

    f you are in NEITHER of these categories, I am NOT referring to you!

    Party pooper.

    Hahaha.

    I very much appreciate all the hard work you put into these posts, Adam.  They answer questions that I have and more.

  18. 18.

    Jay

    (((Tendar)))
    @Tendar
    13h
    Much has been said regarding the Russian defense network, and when you check them then there is no doubt that Russians have put a vast amount of effort to create them. At this point I can wholeheartedly recommend the maps which @bradyafr has created to document them. But what many forget is that those are purely tactical elements which – detached from a overarching strategy – offer little.

    The Ukrainian counteroffensive has been going on for almost 3 months and over this period of time the Ukrainian onslaught has created some gaping wounds in the Russian defense network. It started Velyka Novosilka which was culminating in the devastating Russian defeat and costly withdrawal in Urozhaine.

    Far more dangerous, however, for the Russian war effort are the Ukrainian operations south of Orikhiv. Russians have specifically fortified this area. Especially, Robotyne was vital for the Russian defense sector. It also explains also why Russians continue to counter attack this area, knowing their weakness in the hinterlands.

    But this is not even the worst for the Russians. Far worse is that this whole battle has evolved in an open tug-of-war. Both sides know more less the strengths and weaknesses of each other. The open terrain makes sneak attacks and counterattacks virtually impossible. This is only emphasized by the usage of drones. Some might argue that this point might be favorable for Russians but even that Russians squandered long ago.

    The biggest thinking error many, especially Russians, are making is to make this about trench networks. The trenches are delaying the advance, there is no doubt about that. But the most crucial aspect of this battle is logistics, as always. And here Russians made absolutely decisive mistakes, by not targeting Ukrainians logistic lines in the same way than the other way around. Ukrainians masterfully and since day one of this operation targeted all the logistics hubs and HQs from Melitopol to Tokmak.

    It is also those Russian logistics lines which get increasingly compromised. I have added Screenshot 1 where some of the Russian trenchlines are marked, including the far more vital and primary logistic lines. Most of them are in range of Ukrainian tubed artillery.

    Another aspect which Russians have not employed as much as Ukrainians is the usage of drones. The occasional lancet strike is published, of course, but the drone warfare is a matter of quantities. The Ukrainian FPV strikes are far more numerous. To put that into perspective: Magyar birds alone have destroyed Russian equipment worth a billion USD (!), while using drones which do not exceed in price of 10,000 USD, and most of them being even below 1,000 USD. The flow of new drones is not only exceeding, but also being supported by a vast Ukrainian drone industry, which comes up with more intriguing and even cost-effective drones. This comes parallel with the long-range drones which increasingly strike vital Russian bases far away from Ukraine.

    The bulk of the drones at the front have a range of 5km and when you overlay this (Screenshot 2) on the Ukrainian advance then you see that in this orange area that life for a Russian soldier is short. This is also the area where increasingly the Russian elite force such as the 76th Guards Air Assault Division are getting hammered and softened up, while the heavy Ukrainian brigade still wait for the big push.

    All and all Russians have completely lost the initiative and only hope that Ukrainians stop their assault. The frantic call of Pro-Russian minions such as Hungary’s Orban are a very good sign how much in distress Russia has come. They desperately need and hope that the Ukrainian attack stops, and if they don’t then we are not far away from a complete Russian collapse along the southern front. This collapse is only determined by how and when the Russian logistics will not be able to repel Ukrainian attacks in an organized fashion, and that point is nothing what you can see on maps where trenchlines are marked. It is determined by logistic lines and their hubs as well as the attrition rate. When this tipping point is reached, then collapse of Russian army in Zaporizhzhia is complete.

    The dire situation for Russians will move then from critical to hopeless when Ukrainians break through the lines and storm to the Azov Sea. In the early stages of this open war, Russians focused on securing the Azov coast in order to protect their bases in Crimea. With the Ukrainian arsenal such as HIMARS, Stormshadows/Scalp-EG and likely soon TAURUS, as well, Ukrainian control of whole Zaporizhzhia will make the Russian occupation in Crimea untenable. It will be similar to Germany 1944 where a fight might still continue another year (which it did), but it wouldn’t change the outcome. The liberation of Zaporizhzhia by Ukrainians forces equals Russia’s strategic defeat. Both sides know that.

    This is why the influx of resources and ammunition for Ukrainian forces must be sustained and increased. The fight will go on for some time but in end Russia will lose this battle. Even when supplies are delayed there is no way that Russia can turn the tide, but any delay in supplies could result in an unnecessary and prolonged war. It is time that some Western leaders, especially in Germany, stop sitting on their hands and turn on the factories. The earlier it is done, the earlier we can end this miserable war.

    #Ukraine

    https://nitter.net/Tendar/status/1698310401983721794#m

  19. 19.

    YY_Sima Qian

    @Anoniminous: Those are difficult to detect & intercept, but AESA radars should be able to pick them up. Russia has fallen behind on the AESA race.

    Given the total destruction of the IL-76s, I was under the impression that whatever took them out must have had > 3 kg of explosive payload.

  21. 21.

    Gin & Tonic

    If you’re referring to the word “otaki” in the fifth Magura Tweet, that’s machine translation fail. He’s saying “these,” meaning the systems of fortifications he was describing in Tweets 3 and 4. If your question concerns something else in his thread, I’m missing what the source of confusion is.

  24. 24.

    Chetan Murthy

    @oldster: I don’t know enough to know that Reznikov needed to go.  But I’ve seen several exposes of corruption in the UA MoD,  and that seems like indications that, yeah, he needed to go.  Ukraine needs to establish a new “equilibrium” of no corruption, so that people will find that deviating from that is too costly to attempt.

    And when they’ve done it, they could come over here and do it for us.  Sigh.

  30. 30.

    Jay

    @Chetan Murthy:

    Over paying for food,

    Winter Uniforms that were summer uniforms,

    No training program for medics,

    No first aid supplies,

    No modern radios,

    Dissing small drones in favour of larger and more complex ones,

    No trucks or SUV’s for unit support,

    No night vision,

    and that’s a short list of the scandals.

  31. 31.

    Gin & Tonic

    @Adam L Silverman: Oh, sorry, wasn’t reading clearly. “Magura” is a proper name, which is why it doesn’t translate. It’s a) the name of that unit, the 47th OMBr (mechanized brigade) and b) in mythology, the name of Perun’s daughter, basically a valkyrie.

  34. 34.

    wjca

    @Parfigliano: Do the russians know tires burn?

    And do they have any clue how to extinguish burning tires?  Short of just clearing an area around them and waiting for the fire to burn itself out that is.

  36. 36.

    Geoduck

    It’s great the Ukrainians are using drones so efficiently, but it’s only a matter of time before someone uses them in a serious terror attack, not just randomly lobbing them into cities like the Russians have evidently been doing.

  37. 37.

    trollhattan

    I vote they’re testing the TU-95 wing root strength, because somebody was going through records and discovered nobody ever did it. “Komrade, how many tyres? “ALL tyres, Komrad!” “Excellent, vodka time!”

  43. 43.

    Jay

    Chechen fighters under the command of Vladimir Putin crony Ramzan Kadyrov claim Ukraine has been abducting wounded Russian troops from the battlefield using giant drones equipped with pincers. A member of the Akhmat battalion was quoted by Russian media as calling the drones “Baba Yaga”—an ogress or witch from Slavic folklore who snatches and eats children. Except according to him, this battlefield “Baba Yaga” also has massive claws capable of carrying troops off into the sky. “Such large drones, only slightly more modernized, have previously been used by the enemy… in order to steal our wounded. The drone is equipped with special devices that look like claws, with which it captures a person who is not able to run away, hide or fight [the drone] off,” the soldier was quoted as saying. He said these drones hunt for prey at night and can only be destroyed by flamethrower or grenade launcher.

    https://www.thedailybeast.com/chechen-fighters-ukrainian-drones-with-claws-abducting-russian-troops

  45. 45.

    Chetan Murthy

    @Jay: sure sure, that’s a plausible explanation for all the dead and wounded Russian soldiers who don’t return from the front.

  46. 46.

    Bill Arnold

    @Jay:

    A member of the Akhmat battalion was quoted by Russian media as calling the drones “Baba Yaga”—an ogress or witch from Slavic folklore who snatches and eats children. Except according to him, this battlefield “Baba Yaga” also has massive claws capable of carrying troops off into the sky.

    Quoted because LOL.

    ETA this story could be considered a Baba Yaga origin story: The Tale of the Three Beautiful Raptor Sisters and the Prince Who Was Made of Meat, by Brooke Bolander

    “YES,” she said in a loud, croaking voice. “FRUIT FOR THE SHINY APE KING’S FLAT TEETH.”
    “MAMMALS LOVE FRUIT,” her sister added, nodding emphatically.
    The elderly were often saying such things, so the guard took no mind.

  49. 49.

    Carlo Graziani

    Good interview in The Guardian with Brig. Gen. Oleksandr Tarnavskiy, commander of the Tavriisk operational and strategic group of forces, essentially the guy in charge of UA operations South of Zaporizhzhia.

    It’s noteworthy that he feels comfortable stating that the worst of the defensive line-breaching operation is now complete, and that his expectations for progress in the offensive is quite high. If he’s right, then something interesting is about to happen.

  50. 50.

    Sebastian

    From what I read yesterday and today, Reznikov almost lost his position a few months ago when a friend or associate was involved in a big military procurement scandal. It appears that the Ukraine press didn’t let go of that.

    I also read that he will most likely end up as ambassador or envoy to the UK where he has made great personal relationships over the past year.

    FWIW.

    Thank you for the nightly updates and Happy Birthday to your mom, Adam!

  52. 52.

    Another Scott

    Meanwhile, … Reuters.com:

    BEIJING, Sept 4 (Reuters) – Chinese President Xi Jinping’s first major reform plans a decade ago were also his boldest, envisaging a transition to a Western-style free market economy driven by services and consumption by 2020.

    The 60-point agenda was meant to fix an obsolete growth model better suited to less developed countries – however, most of those reforms have gone nowhere leaving the economy largely reliant on older policies that have only added to China’s massive debt pile and industrial overcapacity.

    The failure to restructure the world’s second-largest economy has raised critical questions about what comes next for China.

    While many analysts see a slow drift towards Japan-style stagnation as the most likely outcome, there is also the prospect of a more severe crunch.

    “Things always fail slowly until they suddenly break,” said William Hurst, Chong Hua Professor of Chinese Development at University of Cambridge.

    “There is a significant risk in the short term of financial crisis or other degree of economic crisis that would carry very substantial social and political costs for the Chinese government. Eventually there’s going to have to be a reckoning.”

    […]

    All the usual caveats about economists predicting 12n+1 of the last n recessions, but worth a click.

    Cheers,
    Scott.

  53. 53.

    Armadillo

    I believe the most recent defense procurement scandal (that I am aware of), which related to the procurement of winter coats from Turkey, was allegedly benefiting one of Resnikov’s relatives – a nephew or son.  The article below just summarizes the scandal – the tie to Resnikov was something I saw on Twitter from a Ukrainian activist or journalist, but cannot find now.

    https://www.reuters.com/world/europe/ukraines-zelenskiy-moves-replace-wartime-defence-minister-2023-09-03/

  54. 54.

    YY_Sima Qian

    @Another Scott: As I wrote in my reply to Carlos a few days ago, I find a lot Western commentary/analysis on Chinese economy (& politics) based on wrong conceptual framing, detached from on the ground realities, & prone to historical revisionism/amnesia, & this article is no different. Adam Tooze just published the 4th of his Chartbook series on the Chinese economy, & he clearly illustrates the above mentioned problems, referencing how current Western commentary/analysis is describing China’s overall pandemic experience.

    Xi & the CPC leadership started to rein in the real estate bubble from 2012, which is why Chinese RE construction completions & construction employment peaked in 2013 & slowly dropped since. The problem was that they focused on suppressing demand for housing, by adding all kinds of restriction on purchasing properties (impossible for foreigners, must have local hukous to purchase local properties, only 2 properties per household, 25% down payment for 1st property/50% for 2nd/no mortgages for 3nd & on, etc.), but was not nearly as tough on the supply side, because of the enormous vested interests among the property developers & construction companies (state owned & private), as well as local governments (as sale of land usage rights is critical to local government financing), & the RE sector is critical to credit impulse & financial flow through the Chinese economy. Yet, the capping of demand & the fewer restrictions on supply failed to contain the rapid inflation in housing prices, especially in the pricier segment in Tier 1 & some Tier 2 cities. Well off Chinese have few means to invest their savings. Until 2021 we would hear stories of upper middle class/rich couples getting fake divorces to they can purchase additional properties.

    Xi has been trying to implement his populist reform program since 2012. There were a lot of obstacles w/ vested interests during his 1st term, before he consolidated power. The continuing anti-corruption campaign (& “assaults” on specific industries) are both to consolidate his power & to smash vested interests. The program was also hit by the economic downturn of 2013-16, which touched off a painful (for some) financial deleveraging & excess capacity reduction campaign, which was then interrupted by pandemic. Since suppressing the domestic outbreak in Spring 2020, Xi & his team has been trying to make up for lost time, hence the tough “3 Red Lines” measures to finally pop the RE bubble, & the harsh regulations on the cram school & internet platform industries, accepting a degree of economic headwinds to enact needed structural reforms. Then came Omicron in 2022, & the sudden reopening.

    Many foreign visitors to China this summer, after 4 years of being away, are struck by both the pervasive sense of uncertainty & even pessimism among the government/business/academic elites they interacted with, & the abundant signs of economic activity in every sector outside RE, & by how much more digitized China has become in the meantime. Domestic tourism this past summer is perhaps the hottest on record. Every tourist attraction was full of people, even those “off the beaten path”. Hotels were full, RV vacation is becoming a thing, high speed rails & flight were all full & HSR tickets especially difficult to secure at the last minute. Consumption of steel has increased, despite sharp drop in the construction sector, because every other sector is showing decent growth. Tech companies are no longer doing lay offs, & most have posted decent earnings & profits in Q2 2023. The central & local governments have been dripping out supportive measures to the RE sector to prevent both a seizure & a reflation. Industrialization 4.0 is proceeding apace in China, every industry is increasing automation (China now accounts for 50% of global demand for robots) & Huawei is building tens of thousands of private 5G networks to enable smart manufacturing. Everything to do w/ energy transition & EVs are very hot. Huawei just launched a 5G enabled premium phone w/ internally designed HiSilicon SOC, the 1st since Trump choked off all 5G related semiconductor supply in 2020. Analysis of the SOC show the progress in indigenization of the semiconductor value chain: chip set made from mass production capable 7 nm process (by SMIC) that can achieve 4 – 5 nm performance & heat generation via optimizations in IC design, packaging, software & overall integration. The tear downs show zero US components & few foreign ones. The goal of the US’ tech sanctions & restrictions is to keep China at the 28 nm node. It has created tremendous buzz. Huawei also somehow integrated a sat phone function into the consumer mobile phone. SMEE will probably introduce a domestic immersion DUV lithography machine (where the Chinese semiconductor value chain is the weakest) by EOY, which will enable fully domestic value chain down to 28 & 14 nm. Domestic EUV lithography is probably still 2 – 3 years away.

    Consumer sentiments remain weak & uneven, people are holding off on big ticket purchases, both to preserve liquidity & waiting for better bargains.

    Bigger reforms are happening, especially the phased abolition of the hukou system that has been long discussed & long overdue. RE developers & Local Government Financing Vehicles need to be restructured, & local government finances need to be shifted away from the reliance on the sale of land usage rights. These reforms are not difficult conceptually, the challenge will be in overcoming vested interests. Social welfare has also advanced steadily over the past 15 years, since Hu’s 2nd term. The CPC regime prefers to address income & development inequality by in kind transfers, employment support, industrial development (primary/secondary/tertiary), & infrastructure development to connect geographically challenged areas, for which the spending has been enormous. Western economists tend to only conceive cash transfers to households.

    These are the signs of a structural transformation, an economic shifting of gears. The youth cohort will still be disadvantaged in this transition. the 16 – 24 y.o. in the labor market are those not attending upper middle school/trade schools, or those graduated from upper middle schools/trade schools but not attending university/vocational colleges. That is a tiny &n unskilled segment of the Chinese labor force. They have been the 1st to suffer from the drop in construction labor, from increased automation, from the pandemic hangover, & typically could only find employment as “gig workers” ruthlessly exploited by the internet platforms.

    As I said, Xi & the CPC leadership could very well fail, but not necessarily in the way & not necessarily for the reasons commonly bandied about.

  55. 55.

    Geminid

    Turkish President Erdogan arrived in Sochi an hour ago, and was greeted by a smiling Putin when he stepped out of his limousine. Then they walked inside to talk about reviving the Black Sea Grain Initiative. Security analyst Michael A. Horowitz (@michaelh992):

       The question is, what will Erdogan offer Putin, and does he have the approval of the US and Europe?

    The visit comes against the backdrop of renewed Russian attacks on Ukraine’s Danube River port of Reni last night, and the release by Ukraine of video showing two recent attacks by Turkish-made TB-2’s on Russian forces.*

    Besides the Grain Initiative, the two leaders have plenty to talk about regarding Syria, where their policies conflict in some ways and align in others. That general conflict seems to be heating up, with anti-government protests in western Syria and deadly clashes in eastern Syria. Those have involved different forces backed by the US, Turkiye, Russia and the Assad regime, and Iran.

    The US led, anti-Islamic Syrian Democratic Forces coalition has been strained by recent fighting  around Deir Ezzor in eastern Syria, between groups within the SDF. There have also been clashes to the northwest of Deir Ezzor, closer to tbe Turkish border, between the SDF and Turkish militia surrogates. The US military mission in eastern Syria is trying hard to tamp down the conflict around Deir Ezzor.

    * I wonder if the release of the TB-2 videos the day before the Sochi summit was just a coincidence. Ukraine and Turkiye have been reticent in the past about releasing material related to Turkish arms supplied to Ukraine.

  56. 56.

    Another Scott

    @YY_Sima Qian: Thanks very much.

    I think Xi and the CCP have done a lot of things right – investment in HSR, airports, and lots of other infrastructure.  And pushing solar and batteries and electrification.  It should pay dividends for decades to come (if enough money is set aside for operations and maintenance).  The US really needs to pay attention to the things China is doing right.  The problem with such investments is always – how to do enough quickly enough without going too far and creating a bubble and a crash?

    The property bubble is a huge and well-known thing.  It will be interesting to see how they come out of it.  It’s different, of course, but property issues were a big part of Japan’s lost decade(s).  And the US is still having property issues.  People really, really don’t like taking a loss on their homes and will keep them off the market rather than take a loss, if they have any choice at all.  Which cuts down on economic mobility, new household formation, cuts growth, and all the rest.  The sudden rise in mortgage rates from ~ 3% to 7+% is putting a damper on sales here (because people with 3% mortgages don’t want to give them up).

    There are other issues with the CCP command economy that are not so admirable.  And I, personally, do not think that the CCP has a secret sauce to eliminate recessions…

    Interesting times ahead.

    Thanks again.

    Cheers,
    Scott.

  57. 57.

    Carlo Graziani

    @Another Scott: The RE concern is pricipally about overleverage. It’s not so much the demand or supply of residential or commercial RE, but rather what happens with the vast piles of securitized debt now backed by dwindling value, who holds that debt, what other debt do they hold, and how they respond to the growing hole in their balance sheets—basically the factors that create risk of financial deleveraging contagion and of a debt-deflation spiral.

    If such a cycle should set in (or if it is already in progress, but difficult to discern due to opaqueness of Chinese macro data), then the next set of questions has to do with the capacity of the government to interrupt it, providing liquidity and coercing restructuring and shotgun marriages between financial actors (as the US Fed and Treasury did starting in October 2008) or by other measures “legally” available to Xi and his officials that relieve the pressure on lenders to call back loans across the economy. And, whether Xi and the CPC have the macrofinancial technocratic savvy and flexibility to act without inadvertently making matters worse.

    There are sui generis factors that distinguish the Chinese political-economic case from Western models, as YY_Sima Qian reminds us. But there are also technical commonalities and economic facts of life in a financialized economy that China is not exempt from, despite its non-Western political-legal environment.

  58. 58.

    YY_Sima Qian

    @Another Scott: China has experienced numerous recessions, slow downs, & otherwise problematic states of economy (most of which were “smoothed” out in the official GDP growth numbers), over the past 4 decades of “economic miracle”, that sometimes led to crises (even regime threatening):

    1. Hyperinflation in the mid- to late 80s as the planned economy was being being dismantled, which led to a series of urban protests that culminated in Tiananmen Square in ’89, requiring bloodshed to quell
    2. Post-Tiananmen policy paralysis & stalled reforms until ’92, necessitating Deng’s “Southern Tour” to reverse
    3. Hyperinflation in the early to mid-90s as reforms were jump started again & the economy overheated, forcing the government to launch SOE reforms
    4. Massive lay offs from SOEs as the state divested from most of its corporate/industrial holdings in the late 90s, rendering 60 – 80M workers unemployed, the Chinese government responded w/ giving people living in state provided housing the rights to the properties (free or for a nominal fee), perhaps the largest wealth transfer in history (& a reason housing prices inflate so quickly ahead of nominal wages in urban areas), plus pushing the infrastructure investment in public goods & housing to absorb the surplus labor
    5. Opening up of many sectors of the Chinese economy after WTO entry in ’01, which many Western commentators expected to spell the doom of Chinese industry across the board, the Chinese government provided a protective cushion to shield some of the domestic industries from the most intense competition, & supported the export oriented industries w/ favorable public policies & through provisions of public goods, plus massive investment in education (especially tertiary)
    6. Over dependence on net exports for GDP growth, the model rendered unviable due to the huge contraction in exports following the GFC, throwing 20M assembly line workers onto the streets, the Chinese government responded w/ a massive stimulus, redoubling domestic investment (in infrastructure/public goods, RE, & to a lesser extent industrial capacity to meet the increased demand created by QE in the West) to absorb the laid off labor, pivoting away from export led growth in the process
    7. Overheating economy in 2010 – 2012, massive accumulation of debt (mostly domestic), Wild Wild East crony capitalism run amok, industrial overcapacity & an RE bubble, Xi & the government responded w/ an unprecedented anti-corruption drive, imposition of strict limits to cap housing demand, promoting fintech innovations to divert savings away from RE
    8. Economic slow down in the mid-10s due to real estate deflation & restraining of froth associated w/ crony capitalism, continued massive accumulation of debts (mostly domestic) to fund investment, a burgeoning P-ro-P lending (Ponzi scheme) bubble, the Chinese government responded w/ a campaign to remove excess capacity & deleverage, eliminating P-to-P lending, massive industrial policy pivoting toward “New Economy” (all encompassing internet platforms, less risky fintech, renewable energy, EVs/batteries, automation, “Make in China 2025”)
    9. A reflated RE bubble in the late 10s, as well as internet platforms being unrestrained in monopolistic, predatory & rent seeking behavior, Xi & the Chinese government started to address these distortions, but then the pandemic hit
    10. Huge exogenous shock in the form of the pandemic in Winter 2020, but China quickly recovered following the nationwide lock down in the Spring; Xi & the government resumed the planned structural reforms (the 3 planned endogenous shocks) to deflate the RE sector, rein in the internet platforms & the cram schools, promoting “New Economy” & “hard tech.”, measured openings in the financial sector to foreign investors, with redoubled urgency & perceived unpredictability & capriciousness
    11. Huge exogenous shock of Omicron in 2022 added on top of the 3 planned endogenous shock, plus the continued head winds from the tech. war, rising geopolitical tensions, & weak global demand from inflation & post-pandemic hangover, all leading to economic weakness, Xi & the government is continuing its structural reform program, w/ indigenization of the semiconductor value chain given top priority due to the tech. war, shifting investment away from RE back to business/industry, while keeping infrastructure/public goods investment steady

    This is not the CPC regime’s 1st rodeo w/ economic turmoil, nor the worst it has encountered. Any analysis that suggests that it is is woefully ill-informed. Historically, the regime has responded to each crisis w/ a combination of muddling through by kicking the can down the road & stunning reforms that are only noted by Western observers in hindsight.

    There is always the chance that Xi & his team would break the trend, but I think we need to see more evidence than amateur psychology & vibes/feels. There are worrying signs of Xi’s more personalized style of governance affecting competence, such as the sudden regulatory assault on the internet platform & cram school industries, bypassing the standard rule making process. OTOH, 2023 has marked the return of the normal rule making process to tackle emerging economic activities that need regulation, & Xi pivoted away from “Dynamic Zero COVID” very quickly when it became untenable at the end of 2022. There are also some head scratching moves in foreign policy, such as Xi apparently skipping the G20 Summit in India, after seemingly displaying a willingness w/ Modi to deescalate the border tensions at the BRICS Summit in South Africa. Modi will interpret this as a major snub, & “face” is as important to Modi as any stereotypical Chinese leader. All of this bears close watching.

    There is one coming shock that people have not commented on: China’s dropping birth rates is well covered, but its already low birth rate saw a 1/3 drop in 2020 in the aftermath of the Spring lock down, & has not recovered at all since. That will cause a crunch a decade or 2 down the line. SK & TW have shown that one can grow & prosper even w/ low birth rates, China clearly looking to follow their example w/ Industrialization 4.0 efforts, & it would not be surprising if a decade or 2 from now China seeks to ruthlessly exploit cheap “guest worker” labor from S/SE Asia for its industries, as JPN/SK/TW have done for the past decades.

    Someone on Twitter had created a list of China related headlines from the Economist, declaring one sort of doom or another on the Chinese economy, every 2 or 3 years for the past 3 decades. One could have created an alternative list of headlines declaring that China will eventually dominate the world, also from the Economist, at roughly the same frequency & over roughly the same period of time. In either case, China is deemed threatening. I suppose this kind of media/think tank schizophrenia is not unique to China Watching.

  59. 59.

    YY_Sima Qian

    @Carlo Graziani: One of the minefields that the China avoided by halting finance reforms leading up to the GFC was securitization of debt, & certainly not the piling of layers of leverage on top. OTOH, the thicket of thorns that the decision led China to has been local governments financing investments w/ long time frames for return (infrastructure/public goods/ housing) by commercial borrowing w/ short maturities & high interest rates, due to the underdeveloped bond market. Businesses in China largely fund investments from profits or from issuing equity, due to the same.

    China facing a balance sheet recession was in vogue among commentators last month, but seems to be becoming out of favor now. China is clearly suffering from insufficient liquidity, precisely because the RE sector & the developer/LGFV borrowing that supported it were critical to credit impulse & financial flows to the larger Chinese economy. Households sitting on rising savings due to reduced expenditure through the pandemic are paying down their mortgages, we did. It will take time & skill to establish alternative conduits.

  61. 61.

    YY_Sima Qian

    @YY_Sima Qian: I forgot to mentioned that China had to restructure & recapitalize its massive but moribund state banking sector in the early 00s, which was insolvent w/ high % of NPLs to SOEs at the time.

  62. 62.

    Anoniminous

    @YY_Sima Qian: ​
     
    Practically speaking cardboard airframes are undetectable by radar. Might get a return off internal components, e.g., a battery pack, which would most likely, under most conditions, in most situations, be filtered-out as noise.

  63. 63.

    Another Scott

    Meanwhile, … France24.com:

    “Robotyne has been liberated,” Ukraine’s deputy defence minister Hanna Maliar announced on August 28.

    Although the tiny village, which had a pre-war population of fewer than 500 people, may be of little importance in itself, it lies along a strategic road that leads to the Russian-occupied road and railway hub of Tokmak. From there, another road leads to the key city of Melitopol, which, prior to Russia’s illegal annexation of Crimea in 2014, was known to Ukrainians as the “gateway” to the peninsula. Last week’s victory was therefore an important advance for Ukraine.

    Just a few days earlier, however, fighters from Rusich, a small Russian neo-Nazi paramilitary group stationed at Robotyne’s front line, had threatened to lay down their arms – a move that may have contributed to Russia’s stinging loss there.

    The official reason for the threat to lay down arms, Rusich explained in an August 25 statement on Telegram, was that one of the group’s top commanders and founding members, Yan Petrovsky, had been detained in Finland and faced extradition to Ukraine – and the Russian government was not doing much about it.

    Petrovsky, a dual Russian-Norwegian national, co-founded Rusich back in 2014 to take part in the Russian occupation of Donbas and is believed to have been a contractor for the Wagner Group at one point. He faces various terrorism-related charges in Ukraine and risks being sentenced to between 15 and 20 years in prison if he is extradited.

    In a series of messages screen-grabbed by the research project Antifascist Europe, Rusich members expressed frustration with their treatment by the Russian authorities.

    “If the country cannot protect its citizens, why should the citizens protect the country?” asked one.

    According to the Institute for the Study of War (ISW), the group did indeed seem to be operating near Robotyne in western Zaporizhia Oblast, describing it as “a critical area of the front line where the Russian military command likely cannot afford for any units to rebel and refuse to conduct combat missions”.

    Soon after ISW issued its analysis, Robotyne fell to Ukraine.

    There has been no official confirmation – either from Rusich or the Russian defence ministry – that the group’s fighters did stop fighting.

    According to Jeff Hawn, a non-resident fellow at the Washington, DC-based think-tank New Lines Institute and an expert in Russian military matters, it would have been a credible scenario.

    “There’s a very strong possibility” that the mercenaries laid down arms, which would likely have contributed to the fall of Robotyne, he said. Russia is so short of fighters it cannot replace units that give up, he said, adding that we likely won’t know “for years” what really happened.

    Hawn said the reason for a revolt would likely have less to do with the detention of the group’s leader than with a loss of motivation among Russian mercenary fighters in general, coupled with Moscow’s increasing inability to keep them under control.

    “These guys are likely just looking for an excuse to get out,” he said. “They’re realising that Ukraine isn’t just going to break and give up.”

    […]

    Good, good. More please.

    Slava Ukraini!!

    Cheers,
    Scott.

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