Ukraine dam collapse sparks fears for large-scale devastation and war implications

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.

JIMMY LOVAAS, HOST:

Welcome to the Factal Forecast, a look at the week’s biggest stories and what they mean from the editors at Factal. I’m Jimmy Lovaas.

Today is June 8.

In this week’s forecast we’ve got a discussion on the Ukraine dam situation, a look at a Swiss bank takeover, a meeting on Sweden’s bid to join NATO, the US and Guatemala addressing irregular migration and an important deadline in Ecuador’s presidential election.  

You can also read about these stories and more in our weekly newsletter, which you can find a link to in the show notes.

Kakhovka Dam breach

Information compiled by Alex Moore

JIMMY: Up first, we’ve got an update on the situation in Ukraine. For more on that I’ve got the lead for our Europe desk, Alex Moore.  

JIMMY: Hi, Alex. 

ALEX: Hello, Jimmy. 

JIMMY: You know, it was just a couple of weeks ago we had you on the podcast and it looked like the big thing on the horizon was a possible Ukrainian counter-offensive, but then things took an unexpected turn early Tuesday in Ukraine. Can you catch us up to speed on things there?

ALEX: Yeah, of course, and I'll try to be as concise as possible. There's a lot to go over, but early Tuesday morning, Ukraine time, the Nova Kakhovka dam, which is a very massive dam that spans the Dnipro River in the city of Nova Kakhovka in Kherson Oblast, was breached. Again, this is a very massive dam. It's more than three kilometers long and the reservoir it holds is the size of the Great Salt Lake. So, significant structure, and it was fully breached early Tuesday morning, which unfortunately prompted widespread flooding downstream. Just a true humanitarian, ecological disaster; economic disaster. So that has sort of overshadowed the commencing of Ukraine's counter-offensive over the last couple of days.

JIMMY: Well, I guess the big question is what happened to the dam. Did – I mean we all saw reports that claim Russia blew it up – but did that happen? Did it just fall down? What do we know?

ALEX: Yeah, that's the big question right now, of course. The two sides blamed one another. The Ukrainians – again, to be very clear, the dam is occupied and controlled by Russia. Russia has occupied the dam since the literal second hour of the invasion of last February. So it still remains unclear. It's a bit murky, who exactly did it, if anybody did it at all, or if it was the result of, sort of, prolonged damage and Russian neglect and incompetence that led to this dam being breached. But Ukraine accused Russia of placing explosive charges within the dam that led to it being destroyed and breached. Russia's response was extremely notably muddied. I should say Russian media, Russian authorities and Russian occupation authorities. Their response was very notably muddled at the start. Initially, Russia-linked military bloggers were claiming that Ukraine blew it up with an explosive charge just like Ukraine claimed Russia did. The occupation mayor of Nova Kakhovka initially said there was no explosion and the dam was fine. The occupation governor of Zaporizhzhia essentially said that an explosion didn't cause it, but that it was a buildup of multiple months of damage. And then eventually, the Kremlin called it Ukrainian sabotage, while Russian state media reported that it was due to a rocket strike, which Russia's UN ambassador further echoed. So, regarding sort of sustained damage to the dam, we have seen the dam damaged on a couple of occasions, most notably Russia detonated the bridge aspect above the dam when it retreated from the right bank of Kherson to the left bank last November. Ukraine also launched a HIMARS strike on one of the floodgates to sort of gauge how they could control [any] controlled flooding through the dam, which they claimed they were able to do. And it should also be worth noting that the reservoir reached record high levels in the days prior to the dam's collapse. So, the reservoir levels were so high in fact that it was cresting over the dam. So, just a lot of data points that are out there regarding what could have possibly happened to the dam. And obviously, a lot of impacts, you know, but yeah, the US intelligence community has reportedly concluded that Russia is responsible for it. And as of recording this, they have yet to declassify that intelligence, which they were reportedly going to do. But, the answer to your question is that we don't exactly know at this moment, but there are a few interesting data points.

JIMMY: Well considering all that's going on, what do you think folks should be watching for next?

ALEX: A few things; very widespread, widespread impacts, obviously. First thing worth discussing is the Zaporizhzhia nuclear plant, which is also occupied by Russia to be clear, relies upon the reservoir for its cooling water for its nuclear reactors. So the IAEA has been very proactive in updating us on the situation there. They are now saying that in as little as two days from when we record this – which is Friday, Saturday of this week – the reservoir could drain below levels to supply the cooling pumps at the nuclear plant, which would obviously be a bad thing even though the reactors aren't functioning at the moment. They still need to rely on cooling water in order to prevent meltdowns and properly dispose of spent nuclear fuel, so they are coming up with a variety of ways to make sure that they have water supply for that. That is a big concern obviously. There’s going to be widespread – and this is going to take years to truly manifest – but widespread impacts on Ukraine's agricultural sector. Kherson and Zaporizhzhia is sort of the most fertile area for agriculture in Ukraine in the south. Obviously, Ukraine – we've talked about this multiple times on here – is a massive exporter of grain that's crucial for global supplies. So the agricultural sector is going to feel impacts. Crimea is reliant upon a canal that runs through the dam for its freshwater supply. And this was a big objective, I mentioned, that within two hours of the invasion last February they occupied this dam for a reason. Crimea was facing an acute water crisis for eight years after Russia annexed it because Ukraine blocked the water supply through the dam. So Crimea is essentially going back to the status quo 2014 to 2022, from a water standpoint. So that's another thing to watch. What else? I mentioned widespread ecological impacts, that I'm not qualified to speak on, but thousands of people have obviously been directly impacted. Numerous evacuations. And it's sort of muddled by the fact that the region is half occupied by Russia and the left bank has been severely impacted by the flooding, which has led to sort of a chaotic evacuation effort on the Russian side with allegations that they are either not helping evacuate civilians or are actively hindering their evacuation. So, there's a lot going on. It's a very fast moving story.

JIMMY: How does this all affect the war itself?

ALEX: Yeah, the counter-offensive commencing has sort of been overshadowed by this, which any other week would have been a massive – the massive story out of Ukraine – but yeah, Ukraine has launched the early stages of what appear to be counter-offensive actions across multiple axes in Donetsk and Zaporizhzhia. Zaporizhzhia is the notable one with assaults launched on Russian lines across multiple points along the line of contact in Zaporizhzhia and right across the border in southern Donetsk. These appear, so far, to sort of just be reconnaissance probing attacks, though we have been able to observe significant swaths of the forces that were trained in Europe and equipped by Western countries that were set aside for the purposes of this very operation. They've sort of been active in the rear as Ukraine seeks to create sort of a salient through Russian lines to exploit that with mechanized and mobilized brigades. So we're continuing to keep an eye on that and Zaporizhzhya and Donetsk. But what this does from a war standpoint, and sort of the rationale – if it were to be Russia deliberately doing this as opposed to just their incompetence leading to it collapsing – the rationale would be that this essentially negates any possibility, and the possibilities were already very slim of Ukraine trying this, but you can just throw it all at the door now, that Ukraine is going to attempt the crossing of the Dnipro River to the left bank of Kherson. This essentially just completely negates that possibility. So Russia, which did build out defensive lines that were layered on the left bank of Kherson, some of those have now been wiped out by the flooding, they've just fallen back. But that was already going to be an extremely complex and deadly attack if Ukraine were to try it and it's essentially impossible now due to the flooding. So Russia can essentially cycle some of those forces toward the Zaporizhzhia front, which I anticipated and others anticipated would be sort of the main thrust of an attack to sever the Crimea land bridge. That does now appear to be what Ukraine is trying to do and Russia can now cycle forces from the left bank of Kherson to defend against that, with any possibility of an attempted Ukrainian amphibious landing essentially nixed.

JIMMY: Well, Alex, I think we'll stop there for today, but I'm sure we'll have you back in the weeks and months ahead as this war drags on. Always appreciate your expertise and your insight. Thanks.

ALEX: Thank you, Jimmy.

UBS to finalize takeover of Credit Suisse

Information compiled by Jack Beeching

JIMMY: Switzerland’s largest bank, UBS, expects to acquire its failing rival Credit Suisse as early as Monday.

This comes following the financial panic sparked by Silicon Valley Bank’s failure in March. 

It was during that panic that investors withdrew billions from Credit Suisse, the country’s second-largest bank. 

Swiss regulators then orchestrated an emergency takeover by UBS to prevent further financial fallout. 

This acquisition, the largest since the 2008 financial crisis, required a commitment from the Swiss government to absorb up to about $10 billion U.S. dollars of Credit Suisse’s losses. 

And now, having already been accepted by the European Union’s competition authorities, the deal awaits a seal of approval from the U.S. Securities and Exchange Commission.

Now, at $1.6 trillion, UBS’ new balance sheet will be twice as large as the Swiss economy, making the acquisition controversial domestically. 

Switzerland’s Social Democratic Party recently proposed capping the size of the new bank’s assets to reduce risk in the event of a financial crisis. 

UBS Chief Executive Sergio Ermotti has argued that the bank still “won’t be at the top of the classification for international banks in terms of size.” 

Finally, Ermotti has also warned of “painful” job cuts as the banks merge workforces.

Sweden and Turkey meet on NATO membership

Information compiled by Agnese Boffano

JIMMY: Officials from Sweden and Turkey are set to meet as early as Monday. 

According to Secretary-General Jens Stoltenberg, they’ll discuss Sweden’s NATO membership bid. 

Finland was the latest country to join the military alliance on April 4. 

And although Sweden initially applied at the same time as its Nordic neighbor, the process has been halted primarily by Turkey. 

They objected to Stockholm joining the alliance, alleging it harbored members of militant groups outlawed in Ankara. 

Of course, last week, new anti-terrorism legislation came into effect in Sweden, which makes it illegal to arrange meetings, provide logistical help and facilitate financial transactions to outlawed groups.

Now, both NATO’s secretary-general and Sweden’s prime minister hope the new piece of legislation will convince Turkish President Erdoğan to green light Stockholm’s NATO accession before July’s NATO summit in Lithuania. 

Analysts believe Erdogan is likely to make a decision now that he has been sworn in for another five-year presidential term. 

Finally, Sweden has faced criticism on the new anti-terrorism legislation.

Kurdish activists protesting in central Stockholm last Sunday argued that it infringes upon the right to exercise freedom of expression in the country.

U.S. processing centers in Guatemala will accept migrant appointments

Information compiled by Jeff Landset

JIMMY: The United States will try a new migration tactic in Guatemala starting Monday. 

The change comes following the end to a pandemic-era rule that let the U.S. rapidly expel most asylum seekers crossing over the southern border.

Since the election of Joe Biden, an influx of migrants have arrived at the border, hoping for looser restrictions. 

Many, however, were expelled using the public health law known as Title 42. 

The Biden administration ended Title 42 last month while also introducing a controversial new rule. 

Most people are now ineligible to seek asylum in the United States if they passed through a country to get to Mexico and did not apply for protection there. 

A new joint agreement between the U.S. and Guatemala will lead to a six-month trial program aimed at managing “irregular migration.”

Now, the new program will open offices in Guatemala to help people get temporary work permits, reunite with family or give access to other legal avenues to enter the United States. 

The United Nations will help staff the centers. 

The U.S. is hoping this new system will cut down on attempts of illegal immigration, which is seen as a political liability for Biden ahead of his 2024 reelection campaign.

Deadline to submit candidacies to Ecuador’s presidential elections

Information compiled by Irene Villora

JIMMY: Ecuador’s electoral council extended the deadline to Monday for candidates to submit their names for the presidential election that will be held in August.

The deadline was extended after President Guillermo Lasso dissolved parliament on May 17, triggering early elections. 

Lasso dissolved the chamber and cut his term short after parliament approved an impeachment trial against him over embezzlement charges. 

The move has been interpreted as a political action to try to benefit his party in the upcoming vote amid his loss of popularity. 

Lasso announced on June 2 that he will not be seeking reelection.

Now, the new deadline will allow parties to have more time to hold primaries and to meet the gender parity criteria.

That rule dictates that the president and vice president pairs aspiring to office must include both a male and female candidate. 

JIMMY: One final note for you. The podcast will be taking some time off next week, but we’ll be back with a new episode on June 22. As always, thank you for listening to the Factal Forecast. We publish our forward-looking podcast and newsletter each Thursday to help you get a jump-start on the week ahead. Please subscribe and review wherever you find your podcasts. We’d love it if you’d consider telling a friend about us.  

Today’s episode was produced with work from Factal editors Alex Moore, Jack Beeching, Agnese Boffano, Jeff Landset and Irene Villora. It was produced and edited by me – Jimmy Lovaas, and our music comes courtesy of Andrew Gospe.

Until next time, if you have any feedback, suggestions or events we’ve missed, drop us a note by emailing hello@factal.com

This transcript may be updated or revised in the future. Accuracy and availability not guaranteed. 

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