142,498 views May 24, 2024
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2024 has been the year of Ukrainian attacks on Russian refineries. However, the White House is firmly against the policy, believing that Ukrainian drones would be better aimed at Russian weapons manufacturing facilities and concerned about European political stability. Critics argue that the Biden administration is worried about higher gas prices on the eve of a presidential election. This video examines the controversy around the subject and whether Ukraine and the White House may have aligned incentives on this front.
0:00 Ukraine's Evolving Refinery Attacks
0:35 Overview of the Refinery Campaign and U.S. Objections
6:11 Why the White House Opposes the Refinery Strikes
9:52 Biden's Electoral Incentives
16:07 Ukraine's Deeper Dilemma
The appearance of U.S. Department of Defense (DoD) visual information does not imply or constitute DoD endorsement
We have discussed at length Ukraine’s foray into bombing Russian oil refineries.
But what we have not yet fully discussed are the ramifications to the domestic politics of the United States— and, in turn, Ukraine’s ability to win the war. As a result, we have missed out on a fun sequence of reporter claims, internet objections, recognition that the original report was right, fun Senate banter (words that should never be said), and a deeper dilemma in Kyiv that is not really discussed publicly by anyone involved. The saga all begins back in January 2024, when Ukraine started its refinery campaign. The first of these occurred on January 9. Then there was another on January 18. And then there so many that we would all be better off if we just fast forwarded to the end of them. There. I think. Okay. Wait. Nope. There were more. That’s what I get for trying to write these things in advance. Anyway, Ukraine’s strategy here was simple: destroy the infrastructure, destroy Russia’s ability to finance the war, win the war (?) You see, the devil here was in the details. The intrigue began on March 22, when the Financial Times published this article, citing three sources and claiming that “the White House had grown increasingly frustrated by brazen Ukraine drone attacks that have struck refineries, terminals, depots, and storage facilities across western Russia.” And, as a result of that frustration, Washington had told Kyiv to stop the strategy. This is when things started to get weird. An advisor to Zelensky claimed that no such request had been made. Online commentary turned to whether the original article was some kind of Russian plant. More generally, there was a collective denial that it is possible for coalition partners to have diverging priorities, that Washington may be sensitive about Russian energy exports, that the White House generally does not support strikes on internationally-recognized Russian soil, and that the Biden administration has domestic political incentives to end the refinery attacks. However, all of those things have been true since the start of the war. As a result, the article was plausible. Meanwhile, the only evidence to the contrary was the denial of a Ukrainian advisor. Who knows what happened there. But regarding the first part, every coalition has competing priorities. It is why Belarus is steadfast in its support for Russia… just do not ask that Belarusian soldiers step foot in Ukraine. It is why China “no limits” friendship with the Kremlin very much shows where the limit is. Buying oil at a steep discount? Sure. Selling dual-use items that could be turned into weapons? Yeah, why not. But selling weapons directly? No thank you. And it is why the United States is now investing $61 billion in the war, but, like Belarus, is not putting boots on the ground. Regarding Russian energy exports … well, there is a reason why it is a price cap Western countries want Russian oil to flow, they just do not want Russia to make any money in the process. Regarding Washington’s aversion to attacks on Russian soil … … well, there is a reason why it took forever for Ukraine to receive long-range ATACMS. The article even addressed this directly, with a National Security Council spokesperson publicly verifying the policy. having domestic political concerns … well, it is the year of our lord 2024, so of course he does. Look, I get that the man loves the Commonwealth of Pennsylvania, but he ain’t visiting Wilkes-Barre here for fun. Or Wilkes-“Bar”. Or Wilkes-“Bear” for that matter. I guarantee there is someone watching this video with very strong opinions about the pronunciation of the city, who will make it known in the comments. Look for it. Anyway, those political concerns go double because we are talking about something that affects gas prices. But we’ll save the deep dive on that part for later in the video. Then Zelensky himself ended the conversation. In an interview published in the Washington Post on March 29, he explicitly said that the reaction of the U.S. was not positive on this. But that Ukraine used its own drones, and nobody can say to Ukraine that they can’t.” So, in fact, the original article was not a conspiracy. The United States has indeed lodged a complaint— because that is the political reality of oil politics. Then the Washington Post released more specific details on April 15. It turned out that the first request came a full two months earlier. The source was Vice President Kamala Harris, who met privately with Zelensky at the Munich Security Conference. Then the United States reiterated this position on March 20, when National Security Advisor Jake Sullivan traveled to Kyiv. However, Ukraine brushed off the warnings. All of these attacks occurred after the conversation with Harris. And all of these occurred after Ukraine’s conversation with Sullivan— including these bonus ones from May. The warnings came at a time when United States’ aid bill was not going anywhere, so Washington had little leverage— though Ukraine continued the attacks even in the immediate aftermath of the bill’s passing. This helps answer a question that we had when the oil strikes first began: whether Kyiv was using them as leverage against Washington. The preliminary answer is apparently a “no”. Of course, the Biden administration did not view the policy in the same way that it was being discussed publicly. The argument there was twofold. The military dimension was publicly articulated by Secretary of Defense Lloyd Austin. On April 9, Austin appeared in front of the Senate Armed Services Committee to discuss next year’s defense budget. Asked by Arkansas Senator Tom Cotton “Why is the Biden administration discouraging Ukraine from undertaking some of the most effective attacks on Russia’s war making capabilities?” Austin responded “I think Ukraine is better served going after tactical and operational targets that can directly influence the current fight.” Basically, Ukraine has a limited number of attack drones. Broadly speaking, Kyiv could use them to target oil refineries or Russian arms production. The former category of energy infrastructure is a roundabout solution to ending the war. It involves financially constraining the Kremlin, and thereby forcing tough choices between squeezing the Russian economy further or leaving Ukraine. The latter category is militarily direct. The fewer tanks that Russia has, the less effective Russia will be at controlling the front lines. Thus, the Kremlin cannot push as far. Obviously, there is some bleed between the two. Tanks need oil products to run, and hitting tank factories inside of Russia still creates trepidation among the Russian population. Regardless, Austin’s position was that U.S. intelligence indicates that hitting military production would be better than hitting energy infrastructure. This, of course, is not the first time there has been disagreement between the United States and Ukraine about the best strategy, with the debate between a broad push against the front line versus single point offensive in the summer of 2023 being the most prominent. Of course, we are not privy to exactly what that intelligence looks like, so I will refrain from adjudicating which is correct. the political dimension is about keeping the European coalition together. We will talk more about the U.S. economy in a moment, but for all the consternation about inflation stateside, America has been the economic envy of the world recently. the U.S. inflation rate was 4.1%. The United Kingdom: 7.3% Italy: 5.9% Germany: 6.0% France: 5.7% The EU overall: 6.4% Now, it makes sense that Europe took the bigger hit with the war— those countries were much more economically integrated with Russia, so they had to bear the bigger brunt of the disruptions that the war caused. At the same rate, though, Russia’s closer proximity to those countries means that the average European is more willing to make sacrifices than the average American. You can see this within Europe itself, with notable differences in the commitment of Estonia, Latvia, Lithuania, and Poland versus, say, any country that does not border Russia. But that has not stopped pro-Russia candidates from picking up some steam. The Biden administration sees tempering inflation as a component of the broader effort to curtain Russian influence. And, right or wrong, that’s the White House’s perspective. However, any way that you cut it, Biden still has domestic political incentives to keep the oil flowing. Back to Cotton, who concluded his questions to Austin about Ukraine “It sounds to [him] like the Biden administration doesn’t want gas prices to go up in an election year.” Even though the United States is a net oil exporter, any restriction of supplies along the refinement chain causes prices everywhere to increase. That is because fuels are a global commodity, meaning that extensive quantities are freely bought and sold on the market. So if Russian gasoline is taken off of the board, a Russian gasoline importer will simply look other suppliers are incentivized to move in there, and that in turn forces consumers elsewhere to raise their offer prices to keep some of it with them. I should note that there alternative opinions out there about this, but if the White House is worried about the markets, then I am going to default on the private intel suggesting that prices will indeed go up. Thinking about this from Biden’s electoral perspective, and at the risk of scaring the bejesus out of my European viewers, there are nine cars for every ten people in the United States, meaning that Americans are especially sensitive to increases in the price of gasoline. And if we turn away from vibe-nomics for a moment, March’s inflation numbers did not look great, with a large part of that due to rising gas prices. April did not look much better either. Zooming out, Biden is in an interesting political position. By many of the standard metrics, the American economy is in a terrific position. Other than a COVID blip, unemployment has been consistently under 4% for the first time that any of us can remember. Okay, maybe some of you remember the Nixon administration, but it’s been a long time since the heyday of Tricky Dick. is looking more like the stonks market and was hovering around all-time highs, before finally crossing that threshold in the middle of May. According to the IMF, real GDP growth— that means controlling for inflation— was 5.8% in 2021, (note: this was oversized because we coming out of COVID), 1.9% in 2022, and 2.5% in 2023. And inflation has cooled without causing a recession so far— in other words, the mythical “soft landing” may be happening. Now, how much of that is attributable to Biden, I will let you be the judge of. Those unemployment and stock market trends began early in Obama’s term. They continued under Trump, again other than some blips from COVID. And monetary policy falls mostly under the Federal Reserve. That is especially true for inflation, especially when the federal budget is not intentionally trying to pour money into the economy. Indeed, this is part of the reason for Biden’s obsession with ending junk fees—it is a publicly visible step that he can take to curb prices even as the Fed is responsible for the bulk of the work. And that is generally a good idea, because you do not want politicians manipulating the economy for short-term political benefits. Still, historically speaking, voters tend to care little about that nuance. If a president is running for re-election, you would do a solid job at guessing the outcome solely by looking at whether the economy is booming. And yet Biden’s re-election chances look like a coin flip at the moment. However, it is no secret as to why. The problem is inflation, and it is a big blemish on what would otherwise be the centerpiece of a presidential campaign. Indeed, inflation came in at 4.7% for 2021, a very high 8% for 2022, and 4.1% for 2023. All of those number are much higher than the Federal Reserve’s target goal of 2% and more broadly higher than any time since early in Reagan’s presidency— which, I guess a few more of us can remember. Now, there will not be a period of deflation—that would wreak even greater havoc on the economy. The prices that you see on store shelves are the new normal. When Biden’s approval rating bottomed out in the middle of 2022, it was precisely because inflation was spiking. And with that, I think that we can try to tie everything together. The reason that all of this matters is because inflation will play a disproportionate role in November’s election. If I told you that 2024 inflation was trending toward 2% when Americans go to the polls, I suspect you would likewise be trending toward one outcome. But if I told you that inflation was back up to 8%, I suspect you would be leaning toward a very different outcome. It’s the economy, stupid. Come to think of it, if I had to predict the outcome of the election, and a time traveler were to grant me one piece of economic data, the inflation rate is what I would ask for. Now, inflation and the economy are not the only things that matter for this election. Trump is also in a very … stormy … political situation. And Ukraine bombing oil refineries in Russia is not going to single-handedly cause inflation to swing six percentage points. But it is causing energy prices to increase, which is affecting inflation rates, which does hurt Biden’s chances at the margins. That again helps explain why the White House is concerned about the refinery strikes. And that takes us to the deeper strategic conundrum that Ukraine faces—whom does Ukraine want to win the White House in 2024? Because, like it or not, Ukraine has an outsized role in determining that. Suppose for a moment that aid will be harder to come by if Trump wins the presidency. We have examined before why that is not obviously true, so if you are skeptical of that assumption, you can consult this video instead. And it is always worth mentioning that the first president to provide lethal aid to Ukraine was Trump, Regardless, Ukraine is also playing coy on the subject—a sensible decision given that Kyiv does not want to burn bridges with Trump. But let’s just go with it for a second. Then attacking refineries is not just a cost-benefit calculation on what it does for the stability of the Kremlin. It is also how much it affects the outcome of U.S. presidential politics. If it is minimal, then fire away. If the difference between Ukraine’s outcomes under Trump versus Biden is small, But if those inflation rates are looking pivotal and Trump versus Biden matters a great deal, well, then Ukraine and Biden’s fates are perversely tied together— at least until November 6. At that point, Ukraine can go crazy without concern about American consumers. Speaking of consumerism, whether you are American or not, perhaps consider picking up a copy of one of my books on the war. Check the video description for more information about them. And if you enjoyed this video, please like, share, and subscribe, and I will see you next time. Take care. 
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