New US Aid for Ukraine Likely by End of Month, Attrition and Ballooning Russian Ranks Remain Concerns

The US House’s passage of desperately needed security aid for Ukraine, likely helped along by additional funds earmarked for Israel, has ended a lengthy saga of uncertainty in Kyiv. Upon passage in the Senate, which is likely this week, legislation clearing the way for tens of billions of Dollars in new orders from US defense contractors will land on the President’s desk and be just a signature away. If all goes as planned, renewed US supplies of artillery shells, air defense munitions, and armored vehicles could be on the ground in Ukraine by the end of April. Russia has pushed its advantages in artillery and air support over the past several months, shifting Ukraine’s defensive positions back significantly in some areas of the front. 

Combat footage shows Russian attack jets and fighter-bombers providing seemingly uncontested air support, hammering fortified Ukrainian positions almost constantly. Some reports suggested that Ukraine may have completely depleted their stocks of air defense munitions by the end of the month without further assistance. Over 40% of US-supplied Bradley infantry fighting vehicles (IFVs) have been lost in the fighting less than a year into their deployment in Ukraine as Russia’s ranks swell by a rate of 30,000 new recruits per month. Ukraine will soon initiate a new wave of mobilization to deal with manpower shortages, but this could come at a particularly steep cost to its demographics.

Related ETF: SPDR S&P Aerospace & Defense ETF (XAR)

Over the weekend, the US House of Representatives passed H.R.8035, the legislation backing $95 billion in supplemental appropriations that budget $61 billion to support Ukraine’s effort to repel Russia’s ongoing invasion. That sum breaks out to about $23 billion to replenish drawdowns made from US military stockpiles for transfer to Ukraine, and another $14 billion for the Ukraine Security Assistance Initiative, which allows Kyiv to place direct orders for advanced weapon systems with American defense contractors via the Pentagon. A further $11 billion will be spent on US military support operations in the region, which includes the provision of reconnaissance and intelligence on behalf of the Ukrainian armed forces.

The bill still needs to be passed by the Senate before landing on the President’s desk, but it is unlikely either of those venues turn out to be a stumbling block for the funding request. The Senate, which could initiate voting on the legislation as soon as Tuesday, passed a draft bill that was very similar to the House legislation just over two months ago with a significant majority of 70 in favor to 29 opposed. One of the key differences between the Senate and House’s versions of the legislation was a hike in the package’s security assistance to Israel, which is unlikely to have any negative impact on its potential passage in the upper chamber. In the earlier Senate bill, $14 billion was budgeted for Tel Aviv, meant to assist the country in its war in the Gaza strip, as well as any other disputes that might arise in the region,  and reimburse the US for its own military operations in support of Israel. The newer House legislation boosted that sum to more than $26 billion.

Though some believed that Israel’s declaration of war against Hamas last October (as well as a broader continuation of hostilities between itself and Iran’s proxies) might distract from Ukraine’s fight against Russia, MRP opined that the outbreak of the Israeli-Hamas conflict would more likely bolster efforts to keep aid flowing to Ukraine, as the provisioning of aid to Tel Aviv could easily be tied together with new aid for Kyiv. We noted that Israel’s cause is favored much more strongly among Congressional Republicans and their voters than Ukraine’s and, by tying material assistance for those two efforts together, Biden’s supplemental funding bill could pull renewed support for the Ukrainian war effort across the finish line. It is likely more than…