The capability of the Ukraine to hit shipbuilding infrastructure in Crimea will likely cause Russia to consider relocation, delaying the delivery of new vessels.

UK’s ministry of defence said this in an intelligence update regarding the situation in Ukraine earlier today.

“Ukraine’s capability to hit Crimean shipbuilding infrastructure will likely cause Russia to consider relocating farther from the front line, delaying the delivery of new vessels,” the ministry said.

As reported by Ukrainian and Russian sources, on November 4, 2023, a newly built Russian naval corvette was almost certainly damaged after being struck while alongside at the Zaliv shipyard in Kerch, occupied Crimea, the update said.

The Karakurst-class Askold, launched in 2021, had not been commissioned into the Russian Navy. The incident is farther to the east in Crimea than most previous Ukrainian-claimed long-range strikes, intelligence analysts said.

However, Kremlin said today that Russian air defense systems destroyed and intercepted 17 Ukrainian drones over the Black Sea and the territory of Crimea, the Russian Defense Ministry noted in a statement on Tuesday, as cited by state news agency TASS.

“On the night of November 7, Kiev regime’s attempt to deliver terrorist attacks with the use of aircraft-type UAVs against facilities on the territory of the Russian Federation was thwarted. Air defense systems destroyed nine unmanned aerial vehicles and intercepted eight more over the waters of the Black Sea and the territory of the Republic of Crimea,” the ministry stated.

Meanwhile, inflation rose to 6% in Russia in September 2023, up from 5.3% in August this year. This was driven by rises in consumer prices such as food and fuel.

“Higher inflation is almost certain to increase the costs of funding Russia´s war in Ukraine,” UK’s ministry of defence highlights. The Central Bank of Russia (CBR) responded by increasing the base interest rate by 2 percentage points, to a new base rate of 15 per cent.

In accordance with the intelligence update these are the highest rates since May 2022.

It is highly likely the CBR will maintain high interest rates through 2024. This is highly likely to increase borrowing costs for Russian consumers and is likely to also impact the Russian government´s debt servicing costs.

The UK’s defence intelligence update also points out that “due to increasing demand, partially due to large increases in defence spending, along with continued pressures of a tightening labour market, the Russian economy is likely at risk of overheating. This is highly likely to ensure inflation in Russia in 2024 remains above the target rate of 4 per cent.”

“Continued high inflation is likely to erode real terms government spending, particularly in areas such as social care with below-inflation spending rises. This further illustrates the reorientation of Russia´s economy to fuel the war above all else.”