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How 150,000 Russian Soldiers Just Created Billions of Problems for the Pentagon

By Rich Smith – Mar 1, 2014 at 9:30PM

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U.S. generals thought ground wars were going out of style. President Putin just proved them wrong.

Three days after Russian diplomats assured the West that Russia will not invade Ukraine, Russia ... invaded Ukraine.

"Trust me. Would I lie to you?" Photo: Wikimedia Commons.

Disclaiming any connection between the move and events in Kiev last week, Russian President Vladimir Putin put 150,000 troops on alert along the Ukrainian border Tuesday. Defense Minister Sergei Shoigu clarified that the troops would conduct "combat drills" over the ensuing 72 hours.

According to Shoigu, as many as three separate Russian "Armies" -- the 2nd, 6th, and 20th -- would take part in the war games, along with attached paratroop units. "Ninety aircraft, over 110 helicopters, up to 880 tanks, over 1,200 pieces of military hardware, and as many as 80 ships and vessels will be involved."

Don't look now, but it appears that President Putin has begun a land war in Eurasia.

Russian tanks on parade. Photo: Wikimedia Commons.

Actually, it's not only conceivable. It was predictable. Events in the Ukrainian "autonomous republic" of Crimea are closely following the script laid down for Russia's invasion and conquering of the Georgian provinces of Abkhazia and South Ossetia in 2008.

Allegations of "abuses" of ethnic Russians in the province have been followed by the formation of local militias, setting up of roadblocks at key intersections, seizures of government buildings, and the unofficial involvement of Russian military forces. On Friday, reports began filtering out of Crimea of Russian troops, stripped of identifying insignia, moving around the province to secure vital communications links, capture airports, and blockade Ukrainian military bases.

Demonstration in Tbilisi during Russia's 2008 invasion of Georgia. Photo: Wikimedia Commons.

On Saturday, Russia set the stage for an actual, formal intervention, when the Federation Council (Russia's Senate) unanimously approved President Putin's proposal to send troops into Ukraine. Even before that happened, news agencies were reporting that thousands of Russian troops were being flown into the captured airports of Belbek and Simferopol. Ukrainian Defense Minister Ihor Tenyukh reported Saturday that some 6,000 Russian troops had entered Crimea, backed by armored vehicles and aircraft. These are in addition to thousands of Russian troops already on the ground at Russian military bases, leased from Ukraine in the region.

Is this war?
Ukraine's interim president, Oleksandr Turchynov, is calling Russia's actions "naked aggression" and says Russia has begun the "annexation" of Crimea. In response, he put the country's military on "full combat alert" Saturday. Vitaly Klitschko, former boxing star and now a prominent Ukrainian politician, called Saturday for a "general mobilization" of Ukraine's military to repel the invasion.

Ukrainian boxer-turned-politician Vitali Klitschko. Photo: Wikimedia Commons

As for what happens next, it's anybody's guess. Importantly, so far there have been no reports of actual fighting between Russian and Ukrainian forces. But the situation is extremely fluid.

What does it mean to investors?
We'll let the mainstream media handle reporting on what happens next on the ground. At The Motley Fool, our mission is to look past the headlines, and explain what they mean for you as an investor. In the case of Ukraine's news, this primarily concerns investors in defense companies.

Over in Washington, as you've probably heard, the Pentagon, White House, and Congress are busy hashing out their defense budget for fiscal 2015. The main themes this year appear to be:

  • Significant cuts to military personnel -- as many as 120,000 soldiers being mustered out.
  • Cancellation of the Ground Combat Vehicle being developed by General Dynamics (GD 1.54%)
  • The wholesale elimination of the Air Force's fleets of A-10 Thunderbolt II tank-busters.

Put another way, the Pentagon appears to have decided that ground warfare is passe. So instead of investing in troops, tanks, and ground-attack planes that support troops and tanks, they'll be shifting funding to high-tech wunder-aircraft such as Lockheed Martin's (LMT 1.42%) F-35 stealth fighter and Northrop Grumman's (NOC 2.43%) Global Hawk drone.

"Putin's Putsch" in Ukraine may force the Pentagon to rethink these assumptions. The prospect of seeing Russian tank columns roll west across Ukraine is a great argument for keeping in service the A-10 -- designed from the ground up as a Soviet tank-buster. And while the U.S. Army may be satisfied with the 5,000 tanks it has in the motorpool right now, it's entirely possible that Russia's aggression in Ukraine, and Georgia before that, and Moldova before that, may have the accidental consequence of opening up new export markets for General Dynamics.

In fact, I can think of one potential customer that would be very happy to have a few M1 Abrams and A-10 "Warthogs" in its inventory right about now.

Ugly, but effective: the A-10 Warthog. Source: Wikimedia Commons.

Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of General Dynamics, Lockheed Martin, and Northrop Grumman. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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