On the anniversary of Putin’s aggression, however, uncertainty and irritation were undisguised in Kyiv. Ukrainians wanted to know why Western sanctions on Russia are not working, and why Moscow keeps getting components for its missiles from Western companies. Why Ukrainians have to keep asking for weapons; and why the U.S. is not pushing through the crucial new aid package for Ukraine.
“We are very grateful for the support of the United States, but unfortunately, when I turn to the Democrats for support, they tell me to go to the Republicans. And the Republicans say to go to the Democrats,” Ukrainian MP Oleksandra Ustinova said at a separate Kyiv conference on Saturday. “We are grateful for the European support, but we cannot win without the USA. We need the supply of anti-aircraft defenses and continued assistance.”
“Why don’t you give us what we ask for? Our priorities are air defense and missiles. We need long-range missiles,” Ustinova added.
U.S. Congressman Jim Costa explained to the conference that Americans, and even members of Congress, still need to be educated on how the war in Ukraine affects them and why a Ukrainian victory is in America’s best interests.
“I believe that we must, and that is why we will decide on an additional aid package for Ukraine. It is difficult and unattractive. But I believe that over the next few weeks, the US response will be a beacon to protect our security and democratic values,” Costa said.
The West is afraid of Russia, Oleksiy Danilov, Ukraine’s security and defense council secretary, told the Saturday conference.
“The West does not know what to do with Russia and therefore it does not allow us to win. Russians constantly blackmail and intimidate the West. However, if you are afraid of a dog, it will bite you,” he said.
“And now you are losing not only to autocratic Russia but also to the rest of the autocracies in the world,” Danilov added.
KYIV — As the distant howl of air raid sirens echoes around them, a dozen Ukrainian soldiers clamber out of camouflaged tents perched on a hill off a road just outside Kyiv, hidden from view by a thick clump of trees. The soldiers, pupils of a drone academy, gather around a white Starlink antenna, puffing at cigarettes and doomscrolling on their phones — taking a break between classes, much like students around the world do.
But this isn’t your average university.
The soldiers have come here to study air reconnaissance techniques and to learn how to use drones — most of them commercial ones — in a war zone. Their training, as well as the supply chains that facilitate the delivery of drones to Ukraine, are kept on the down low. The Ukrainians need to keep their methods secret not only from the Russian invaders, but also from the tech firms that manufacture the drones and provide the high-speed satellite internet they rely on, who have chafed at their machines being used for lethal purposes.
Drones are essential for the Ukrainians: The flying machines piloted from afar can spot the invaders approaching, reduce the need for soldiers to get behind enemy lines to gather intelligence, and allow for more precise strikes, keeping civilian casualties down. In places like Bakhmut, a key Donetsk battleground, the two sides engage in aerial skirmishes; flocks of drones buzz ominously overhead, spying, tracking, directing artillery.
So, to keep their flying machines in the air, the Ukrainians have adapted, adjusting their software, diversifying their supply chains, utilizing the more readily available commercial drones on the battlefield and learning to work around the limitations and bans foreign corporations have imposed or threatened to impose.
Private drone schools and nongovernmental organizations around Ukraine are training thousands of unmanned aerial vehicle (UAV) pilots for the army. Dronarium, which before Russia’s invasion last year used to shoot glossy commercial drone footage and gonzo political protests, now provides five-day training sessions to soldiers in the Kyiv Oblast. In the past year, around 4,500 pilots, most of them now in the Ukrainian armed forces, have taken Dronarium’s course.
What’s on the curriculum
On the hill outside Kyiv, behind the thicket of trees, break time’s over and school’s back in session. After the air raid siren stops,some soldiers grab their flying machines and head to a nearby field; others return to their tents to study theory.
A key lesson: How to make civilian drones go the distance on the battlefield.
“In the five days we spend teaching them how to fly drones, one and a half days are spent on training for the flight itself,” a Dronarium instructor who declined to give his name over security concerns but uses the call sign “Prometheus” told POLITICO. “Everything else is movement tactics, camouflage, preparatory process, studying maps.”
Drone reconnaissance teams work in pairs, like snipers, Prometheus said. One soldier flies a drone using a keypad; their colleague looks at the map, comparing it with the video stream from the drone and calculating coordinates. The drone teams “work directly with artillery,” Prometheus continued. “We transfer the picture from the battlefield to the servers and to the General Staff. Thanks to us, they see what they are doing and it helps them hit the target.”
Private drone schools and nongovernmental organizations around Ukraine are training thousands of unmanned aerial vehicle (UAV) pilots for the army | John Moore/Getty Images
Before Russia launched its full-scale invasion of Ukraine, many of these drone school students were civilians. One, who used to be a blogger and videogame streamer but is now an intelligence pilot in Ukraine’s eastern region of Donbas, goes by the call sign “Public.” When he’s on the front line, he must fly his commercial drones in any weather — it’s the only way to spot enemy tanks moving toward his unit’s position.
“Without them,” Public said, “it is almost impossible to notice the equipment, firing positions and personnel in advance. Without them, it becomes very difficult to coordinate during attack or defense. One drone can sometimes save dozens of lives in one flight.”
The stakes couldn’t be higher: “If you don’t fly, these tanks will kill your comrades. So, you fly. The drone freezes, falls and you pick up the next one. Because the lives of those targeted by a tank are more expensive than any drone.”
Army of drones
The war has made the Bayraktar military drone a household name, immortalized in song by the Ukrainians. Kyiv’s UAV pilots also use Shark, RQ-35 Heidrun, FLIRT Cetus and other military-grade machines.
“It is difficult to have an advantage over Russia in the number of manpower and weapons. Russia uses its soldiers as meat,” Ukraine’s Digital Transformation Minister Mykhailo Fedorov said earlier this month. But every Ukrainian life, he continued, “is important to us. Therefore, the only way is to create a technological advantage over the enemy.”
Until recently, the Ukrainian army didn’t officially recognize the position of drone operator. It was only in January that Commander-in-Chief of the Armed Forces of Ukraine Valerii Zaluzhnyi ordered the army to create 60 companies made up of UAV pilots, indicating also that Kyiv planned to scale up its own production of drones. Currently, Ukrainian firms make only 10 percent of the drones the country needs for the war, according to military volunteer and founder of the Air Intelligence Support Center Maria Berlinska.
In the meantime, many of Ukraine’s drone pilots prefer civilian drones made by Chinese manufacturer DJI — Mavics and Matrices — which are small, relatively cheap at around €2,500 a pop, with decent zoom lenses and user-friendly operations.
Choosing between a military drone and a civilian one “depends on the goal of the pilot,” said Prometheus, the Dronarium instructor. “Larger drones with wings fly farther and can do reconnaissance far behind enemy lines. But at some point, you lose the connection with it and just have to wait until it comes back. Mavics have great zoom and can hang in the air for a long time, collecting data without much risk for the drone.”
But civilian machines, made for hobbyists not soldiers, last two, maybe three weeks in a war zone. And DJI last year said it would halt sales to both Kyiv and Moscow, making it difficult to replace the machines that are lost on the battlefield.
In response, Kyiv has loosened export controls for commercial drones, and is buying up as many as it can, often using funds donated by NGOs such as United24 “Army of Drones” initiative. Ukraine’s digital transformation ministry said that in the three months since the initiative launched, it has purchased 1,400 military and commercial drones and facilitated training for pilots, often via volunteers. Meanwhile, Ukraine’s Serhiy Prytula Charitable Foundation said it has purchased more than 4,100 drones since Russia’s full-scale invasion began last year — most were DJI’s Mavic 3s, along with the company’s Martice 30s and Matrice 300s.
But should Ukraine be concerned about the fact many of its favorite drones are manufactured by a Chinese company, given Beijing’s “no limits” partnership with Moscow?
Choosing between a military drone and a civilian one “depends on the goal of the pilot,” said Prometheus, the Dronarium instructor | Sameer Al-Doumy/AFP via Getty Images
DJI, the largest drone-maker in the world, has publicly claimed it can’t obtain user data and flight information unless the user submits it to the company. But its alleged ties to the Chinese state, as well as the fact the U.S. has blacklisted its technology (over claims it was used to surveil ethnic Uyghurs in Xinjiang), have raised eyebrows. DJI has denied both allegations.
Asked if DJI’s China links worried him, Prometheus seemed unperturbed.
“We understand who we are dealing with — we use their technology in our interests,” he said. “Indeed, potentially our footage can be stored somewhere on Chinese servers. However, they store terabytes of footage from all over the world every day, so I doubt anyone could trace ours.”
Dealing with Elon
Earlier this month, Elon Musk’s SpaceX announced it had moved to restrict the Ukrainian military’s use of its Starlink satellite internet service because it was using it to control drones. The U.S. space company has been providing internet to Ukraine since last February — losing access would be a big problem.
“It is not that our army goes blind if Starlink is off,” said Prometheus, the drone instructor. “However, we do need to have high-speed internet to correct artillery fire in real-time. Without it, we will have to waste more shells in times of ongoing shell shortages.”
But while the SpaceX announcement sparked outcry from some of Kyiv’s backers, as yet, Ukraine’s operations haven’t been affected by the move, Digital Transformation Minister Fedorov told POLITICO.
Prometheus had a theory as to why: “I think Starlink will stay with us. It is impossible to switch it off only for drones. If Musk completely turns it off, he will also have to turn it off for hospitals that use the same internet to order equipment and even perform online consultations during surgeries at the war front. Will he switch them off too?”
And if Starlink does go down, the Ukrainians will manage, Prometheus said with a wry smile: “We have our tools to fix things.”
Kraken, a large crypto platform, said it won’t close Russian accounts unless the company is legally … [+] forced to do so, CEO Jesse Powell said via Twitter. Powell tweeted, “Our mission at Kraken is to bridge individual humans out of the legacy financial system and bring them into the world of crypto, where arbitrary lines on maps no longer matter, where they don’t have to worry about being caught in broad, indiscriminate wealth confiscation.” Photographer: David Paul Morris/Bloomberg
There are reports that Russian oligarchs and others are trying to move their money around to avoid the crippling economic sanctions that have been levied on the country, in response to the invasion of the Ukraine.
One of the ways to “hide” financial assets and evade the sanctions is to put their rubles, which have been crushed, into cryptocurrencies at various cryptocurrency exchanges. These trading platforms enable the buying, selling, holding and trading of digital assets, such as bitcoin and Ethereum. This would also be a way for Russian President Vladimir Putin and his inner circle to get their vast fortunes out of the traditional banking system.
Since the United Kingdom, European Union, United States, Canada and other countries kicked Russian banks from SWIFT, the primary international global payments messaging system used by banks, the country needs access to capital to supply the war and keep its economy alive.
After Russia waged war against Ukraine on February 24, transactions on bitcoin exchanges, in both the Russian ruble and the Ukrainian hryvnia, surged. On Wednesday, bitcoin increased to $44,188 after falling to $36,370 last week. Other leading digital assets, including Ethereum, Ripple and Solana, stayed about even or had modest gains. The ruble dramatically plummeted to record lows, against the dollar, to under one U.S. cent.
U.S. regulators and law enforcement officials are looking into this matter and enhancing their efforts to combat the possible use of cryptocurrencies to evade sanctions, according to the Associated Press. However, not all crypto exchanges are on board, and said they won’t shut out Russian accounts. To be fair, why should the average citizen, who is already subjugated under a tyrant, be adversely impacted? Also, the exchanges claim that one of the major reasons why people purchase crypto is to get out of the banking system and the clutches of big governments.
It will be up to compliance and regulatory personnel to ensure that the sanctions are enforced. These professionals review data and accounts of the people and companies that are on the sanctions list. They do this by conducting a Know-Your-Customer review when they onboard new clients and review existing customers.
Mykhailo Fedorov, vice prime minister of Ukraine and minister of digital transformation of Ukraine, praised the crypto community for their financial support, tweeting, “Massive support from crypto projects @solana @SolanaFndn and @everstake_pool, which set up a joint initiative @_AidForUkraine in collaboration with our @mintsyfra to raise funds for @Ukraine.”
He also called for the blocking of oligarchs to hide their money through purchasing digital assets.
Binance, the world’s largest crypto exchange, said in a statement, “We are not going to unilaterally freeze millions of innocent users’ accounts. Crypto is meant to provide greater financial freedom for people across the globe. To unilaterally decide to ban people’s access to their crypto would fly in the face of the reason why crypto exists.” The exchange did say that it will freeze the crypto accounts of Russian officials who are on sanctions lists, Reutersreported.
Kraken, a large crypto platform, said it won’t close Russian accounts unless the company is legally forced to do so, CEO Jesse Powell said via Twitter. Powell tweeted, “Our mission at Kraken is to bridge individual humans out of the legacy financial system and bring them into the world of crypto, where arbitrary lines on maps no longer matter, where they don’t have to worry about being caught in broad, indiscriminate wealth confiscation.”
Whatever the human toll of the war in Ukraine, the ugly reality is that conflicts between nation states are won or lost as much in the monetary realm as on the battlefield.
Keeping the machinery of war raging forward will leave even the wealthiest of countries in dire financial straits. Many will resort to currency debasement, capital restrictions and unsustainable foreign debt to fund their violence. Superpowers who control the global financial architecture will often deploy sanctions to strangle lesser economies, wiping out entire business sectors and goading impoverished citizens to overthrow their leaders.
One way or another: once the money runs dry, the guns soon fall silent.
Russia’s unprovoked and brutal invasion of Ukraine will be no exception. Neither side can afford a war with no end. Yet the emergence of a new form of sovereign digital money is distinguishing this conflict from all that came before it.
Never before has the ability to finance a war – and to shield oneself from monetary attack – rested in the hands of individual citizens wielding smartphones and making personal choices without scrutiny from their government, bank or law enforcement agency. The financial libertarianism that bitcoin unlocks for the world has no parallel in history. Whether it will be written about as a force for good or for evil by historians will depend not on the underlying technology – which is apolitical and incorruptible – but on the scruples with which society collectively deploys it.
Ukraine’s government fired the opening salvo on this front on February 26th, when deputy prime minister Mykhailo Fedorov appealed directly to global citizens – not their political representatives – to donate money for his country’s war effort in bitcoin and two other cryptocurrencies.
Fedorov did not ask his audience to lobby their governments for military aid. He did not solicit donations through the cumbersome, inefficient, state-supervised infrastructure that allows bank-account holders in Seattle, Sierra Leone and Shanghai to send money to Kiev. Instead, he posted a 34-character bitcoin address in a single tweet. Anyone on the planet who copied that address and pasted it into their digital wallet was then able to teleport a donation instantly, at the click of a button, for virtually no cost, and without needing the help or permission of an intermediary.
It’s easy for Westerners living in democracies to downplay the significance of this technological feat. Westerners are accustomed to opening banking apps on our phones and swiping away our globally accepted dollars or euros. Those living in poorer countries, less so. Westerners are not accustomed to being bundled into the back of a police van because our latest bank statement included a payment to a disagreeable party. Those living in autocratic countries, more so.
Bitcoin is the first genuinely peer-to-peer monetary network the world has ever known. The individual freedom it enshrines is now helping a friendly government protect its people from a hostile one: at the time of writing, 220 bitcoin worth $9.6m had been donated to Ukraine. Crucially, as a borderless and permissionless network it’s also protecting benefactors – many Russians among them, no doubt – from persecution at home.
And yet with the good, comes the bad.
Just as an army can both liberate or annihilate a population, so bitcoin can both set people free or empower their tyrants.
Western efforts to punish Russia economically – through wide-ranging sanctions and exclusion from the international payment system Swift – expose the dark side of monetary freedom. Vladimir Putin and the oligarchs in his pocket will likely try to use bitcoin to circumvent restrictions. According to Christine Lagarde, the president of the European Central Bank (ECB), this ability to defang Western policy underlines the need for regulation in cryptocurrency markets. According to Ukraine’s Fedorov, the risk is so great that all Russians should be banned from cryptocurrency exchanges.
Lagarde’s stance needs serious caveats. Regulation, in principle, is acceptable to all but the most radical libertarians. But the devil is in the detail. The fully transparent, open-ledger transaction history on which bitcoin is built already helps law enforcement track illicit funds. Credible exchanges already block “dirty” bitcoin that is known to be the proceeds of crime. They already comply with Know Your Customer (KYC) anti-money laundering legislation. These protocols can, should and will be used to target sanctioned Russians, more or less trapping their ill-gotten gains within the cryptosphere. But regulation must not become a smokescreen for attacking bitcoin and blocking law-abiding citizens from taking custody of their wealth – an ulterior motive that Lagarde clearly harbors, believing it’s the ECB’s god-given right to bind Europeans to a monetary system that dissolves the value of their savings through negative real interest rates.
Fedorov’s proposal, meanwhile, should be dismissed out of hand.
Russian citizens are not the enemy. They are not responsible for Putin’s actions; they certainly never voted him into office, and they’re now paying dearly for his madness. Binance, one of the world’s largest cryptocurrency exchanges, struck the correct tone in response to his appeal: “We are not going to unilaterally freeze millions of innocent users’ accounts,” it told CNBC. “Crypto is meant to provide greater financial freedom for people across the globe.”
It’s important to recognize that bitcoin will help ordinary Russians as much as – and very likely more so – than their Ukrainian counterparts. Russian inflation had already surpassed 8% by the end of last year. It will now, inevitably, skyrocket as supply chains collapse, energy prices surge, and panic takes hold in financial markets.
Bitcoin’s fixed supply and seizure-resistant, non-physical design are attractive traits for civilians – on both sides of the border – who need to protect their assets from inflation and government overreach. Civilians, after all, rarely escape the cost of war. Those who survive the bombs are left to pay for them. If they’re lucky, their government will secure a debt repayment plan while rolling out tax hikes that saddle an entire generation with the cost of its military adventurism. If they’re unlucky, they face total financial destruction through hyperinflation. That’s what happened in Hungary in the aftermath of WWII, when former currency the pengő was losing 90% of its value every four days. Its replacement, the forint, lopped 29 zeros off the nominal value of the old notes.
The consequences for Hungarians who had stored their life savings in pengő does not need elaborating.
On February 28th, following a weekend of deteriorating fortunes for Russia’s military, the ruble lost nearly a quarter of its value in a single day. It continues to depreciate rapidly. Moscow has responded by banning foreigners from exiting local investments and doubling the interest rate to 20%. Russian citizens will be targeted next. These are the agonized contortions of an economy that is burning from the inside out. The ruble need not go the way of the pengő for Russians to have their wealth erased with the stroke of a pen.
Her remarks were meant to convince democratic governments that bitcoin is a threat to the established financial order. Instead, they are showing undemocratic ones that global citizens can no longer be robbed and abused with impunity.
