General’s knowledge: a chat with Ukraine’s spy chief

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Of $45 for a three month plan equivalent to $15 per month required new customer offer for first three months only. Speed slow after 35 gigabytes if network's busy, taxes and fees extra. See mintmobile.com. Hello and welcome to the Intelligence from the Economist. I'm Ora Ogumbi. Every weekday we provide a fresh perspective on the events shaping your world. In the 1940s, Brazil was filled with casinos. That is, until a devout Catholic leader came to power and banned gambling. But legalizing it again could be a moneymaker. And President Lula da Silva has his eyes on the prize. And you might be on TikTok, but have you encountered Booktok? This community of readers and reviewers on the app is setting new trends in the publishing world and the oldies can't quite figure it out. First up, though, All eyes were on Ukraine this summer as its much anticipated counteroffensive got underway. Progress has looked alarmingly slow and some have questioned Kyiv's tactics against a dug in and well prepared enemy. But for Ukraine's head of military intelligence, Kirilo Budanova, those questions, those concerns have been misplaced. Russia, he says, is the one who should be worried. At 37, the spy chief has experienced a meteoric rise up the ranks and has been lauded for predicting how and when Russia would attack Ukraine.

Also blessed with the presence of a man who's captured the imagination of people inside this country and far beyond this country.

Lt. Gen. Budanov last sat down with the Economist in July. Now, as winter looms, our correspondent has met with him again to discuss the future of the war.

We met General Budanov in a sardonic and quizzical state.

Oli Carroll is the Ukraine correspondent for.

The Economist, and he's certainly frustrated the amount of criticism and discussion that's been going on, mostly from beyond Ukraine's borders, about the state of the ongoing counteroffensive. He says anybody who thought there was going to be a quick collapse of Russian lines simply weren't looking at the picture. Facts, he said, not discussion, was what motivated him every morning.

So then, what are these facts? As he sees them.

Russia has essentially been able to entrench their battle lines. And all across Ukrainian military circles, there is an anger that Russia was allowed to do this. Some people say that if the west had delivered earlier, if Ukraine had got the armor, the ammunition that it needed earlier, then it would have been able to press on without having to stop and essentially prepare for this counter offensive. Now, there are arguments the other way that Ukraine actually waited too long to start the counteroffensive. But what Pudanov was emphasizing was that slow movement is still movement. And the season isn't over. There are still weeks, at least before Rasputica, the muddy season. It may be longer. It does change from year to year. Another thing that's new this time is that Ukrainian tactics have developed. The battlefield commanders decided to move off heavy weapons, mechanized formations into small storm groups. The idea being that the smaller groups are harder to hit. And so with Ukrainian troops now on foot, that end point might not be as definite because the vehicles won't be dogged down in mud so much, People will be able to walk.

And what does this all mean for the Russians on the other side?

Well, the thing that he was emphasizing is that if we just look at the front line, we're making a mistake. The defensive lines have already been pierced in several places, which means that the Ukrainian operation, whose aim is to sever the land connections between Russia and Crimea, for example, may yet be achieved. At least there may be progress along that front. And it is about degrading Russian assets, degrading their air defenses, degrading their reserves. And what he said was essentially Russia has been forced to move some of their not fully formed strategic reserves from the east to the south to basically fill in the holes. Contrary to what the Russian Federation declares, he says it has absolutely no strategic reserve.

So we've spoken quite a bit about foot soldiers, but what about ammunition and other supplies?

Some of his claims are certainly bold, and in many cases, you might say the evidence is a bit scarce. But he essentially says human resources in Russia, they're, relatively speaking, are limited simply because Russia is four times bigger than Ukraine. Russia will always have the upper hand there. He says there's a question of quality. The economy, he says, the. That will only be able to hold out until 2025. The flow of weapons, he says that will dry up in 2026, perhaps earlier. This is one of the more bolder his claims. Other people would say differently, but he does believe that Russian resources are being exhausted and a reckoning is coming.

Isn't Ukraine vulnerable to those same pressures.

Absolutely. The same could be said for Ukraine. My information is that they're using along the front lines anything between 15 to 16,000 shells a day. Russ, More. But the fact is Ukraine is barely making that amount of shells in a month, let alone a day. So they're obviously dependent on the goodwill and the whim of their Western partners. Budanov himself says this, but he does reject the idea that certainly is gaining ground at the moment that the allies are in some way waning in their support. Warehouses in Western countries, he says, are not completely empty, no matter what anyone says. What we also know is that Ukraine is trying to ramp up production, particularly in terms of the production of drones. And here especially, General Budanov's agency is making waves.

When you spoke to Budanov, did he say anything with regards to Ukraine amping up use of drones within Russia's borders?

Well, he kept this fairly sardonic but unsustainable line that he knows nothing about Ukraine's supposed drone and long range strike capacity, but hypothetically he could discuss about why it was important and what it might achieve. So he says that Ukraine's new capabilities, and certainly we've seen this recently with a series of strikes by missiles and drones on ships, on military bases, on submarines and in Crimea, for example, but also further back into Russia. So for Budanov, he said drones will hypothetically definitely make the operations to liberate our territories easier. Drones have no fear. You don't feel sorry for them. And he talked about again three hypothetical main objectives for drone campaign against Russia. And the first is essentially to give them a question. Where do they want to place their air defenses? They want to place them on the front lines where they can stop Ukrainian advances, or do they want to place them in Russian cities where they can defend their own citizens? The second is to disable military transport and bombers and aviation. And the third is disrupt the production of military goods, for example, missiles and so on. That is the logic, at least, that Budanov was putting forward. And in St. Petersburg and Moscow almost every day in the last months, they've been closing airports, which is, you know, more psychological, the idea of seeding disquiet among the population in Russia.

Does Budanov feel concerned about the perception, especially by allies, that these drone plans, these hypothetical drone plans, could maybe be seen as an escalation, which then could in turn lead to waning support?

The argument that Ukraine's new offensive posture, where for some people Ukraine might be seen as a co belligerent and in that sort of darkened room, all cats are gray. That is obviously a danger for Ukraine, clearly, but Budanov refuses to see it that way. He says there have been zero civilian casualties in Russia as a result of Ukraine's hypothetical operations. And what he said was, you know, during the Second World War, no one said that the UK or United States were the aggressors, although they also bombed the territory of Germany. What he also brought up, interestingly, was the idea that Ukraine is working on its own limited deterrence and retaliation pose to counter what is widely seen as Russia's upcoming winter campaign of missile and drone attacks on energy infrastructure. He said, let them start. They'll soon receive an answer.

Ollie, thank you so much for coming on the show.

It's always a pleasure.

So have you heard we're bringing you a new subscription next month. Economist Podcast plus don't worry, these weekday episodes of the Intelligence will stay free, but you'll need to sign up to enjoy our special weekly shows like Money Talks or Babbage, our series and our very exciting new show the Weekend Intelligence, which will be a new home for in depth reporting and interviews. If you're already an Economist subscriber, thank you. You're already covered by your existing plan, but if you're not a subscriber yet, listen up. You can get a year long subscription for half price, about $2 a month if you sign up for economist podcast plus before October 17th. So come on, head to our show Notes now to find out more. The roulette ball whizzing around the table, the frenetic pings of slot machines. From Las Vegas to Monte Carlo, casinos around the world ring out with glitz and glamour, all while the governments that regulate them take a cut of the winnings. In Monaco, around 40% of GDP comes from gambling revenues alone, but many countries have avoided this market. Brazil shuttered all of its casinos, bookmakers and bingo Halls in 1946. Now authorities are poised to go all in on betting once more.

Gambling's been illegal in Brazil since the 1940s. Before then, there was a golden era.

Alessandro Ford writes about Brazil for the.

Economist, and in the seven decades after that, it's been total prohibition. That looks set to change because the government is broke.

So gambling's just suddenly gonna be legal?

Well, not yet they're not. Starting with a full reversal. So in July, Brazilian President Luis Ignacio Lula da Silva, better known as Lula, issued a provisional decree to regulate sports betting websites, which had been legal since 2018, but unregulated they were in this gray area. Congress now has until November to decide how they're going to put that into legislation. It's not a done deal. There is some opposition from Evangelical Caucus, for example. They call themselves the Anti Gambling Front. But a plan to legalize all gambling, which is a separate bill, has recently gained powerful supporters. That includes the presidents of both houses, several ministers, and according to the tourism minister, the majority of government. So it looks like this is going to be the first step towards regulating the entire gambling industry.

But even while it was banned, gambling didn't just stop existing in Brazil, did it?

No, no, you'd be right there. The country's first mafia actually arose in the early 20th century to operate the most popular gambling games. The most famous one is the Jogu du Bishu, the animal game, which basically involves betters guessing which animal's image is going to be chosen in a draw. And this was actually created to draw people to the Rio de Janeiro Zoo, and it exploded in popularity. And in the years since, it's become almost bigger than the drug trade. Brazil's illegal gambling sector as a whole draws in significantly more than the drug trade. About $5.5 billion a year. That said, the government only banned games of what they call chance, so games of skill were still allowed, and that included poker, horse racing, and there were also state lotteries.

And so why is Da Silva putting his chips on sports gambling now?

Well, basically, the country needs money. So as I said, In 2018, the government legalized sports betting, but it didn't regulate it. And that caused the free for all and unregulated revenues for these gambling companies, mostly based offshore, have risen by about 70% since 2020. The government really wants to charge that new tax base, and they're proposing an 18% levy on gross revenue for these websites. They also want to impose $6 million licen fee to operate one for five years. In turn, the government would create a state regulator and several other agencies. Another answer is also pork barrel politics. So the ministries of sport and tourism are now controlled by what they call the big centre parties, this shifting coalition of, shall we say, politically flexible parties that have backed the Lula government. And they want cash to spread around. Each of those ministries look set to get 5 to 6% of government taxes. And education and Social Security, by contrast, they're getting about 2% each.

So DA Silva is feeling pressure to finance his political partners if gambling laws are loosened. Where else might he want to spend this potential tax windfall?

Well, the main goal is to eliminate the federal government's primary deficit, which is forecast to be about 1.4% of GDP this year. They want to do that by 2024. Now, Lula's promised not to increase income taxes, which makes that much harder. And so the quest for cash is becoming quite urgent. The government recently published its budget for next year, and that contains expensive promises. So there's big increase in the minimum wage, and there are colossal infrastructure projects that are estimated to cost about $350 billion over the next few years. Now, that's shaken some investors confidence in Lula's macroeconomic management, which was previously perceived as being quite sturdy.

So that's the upside for Brazil. But what are the risks here?

Those gains have to be weighed against the possibility of criminals taking advantage of liberalization as well as the pull towards gambling addiction. So with the ban in place, it was already estimated that about 0.5% of Brazilian adults were addicted to gambling, which is not as high as 0.7% in Britain, let's say, or over 1% in the United States, but still high, high figures. Now the big question is whether such ills are going to get better or worse as Brazil looks set to open up betting further.

Alessandro, thank you so much for joining us.

Thank you for having me. You guys have a good book recommendation? Yes.

There's this kid looking for books in the Spanish section. If you're trying to enter your reading girly era, these are five of the books that I would suggest you start with. Are there any books that you would sell your soul for to read again for the first time? Okay, it's a bit drastic, probably a bit unnecessary, but on TikTok, hyperbole is the game. 400,000 people have saved a video hyping up authors like Simone de Beauvoir and Sally Rooney because they too want to know what it feels like to read a book that is worth selling your soul for. Welcome to booktok. I consider myself quite the reader and have turned to booktok recently to try and get me out of a reading slump. And I was so fascinated by this whole world that I thought, well, why not write about it for the Economist. Social media has completely transformed the world of publishing for both readers and authors. It's given new authors an opportunity to go viral and readers an opportunity to share their love for books, hidden gems. But TikTok, though, if you ask me, is a cut above the rest. The algorithm is just the perfect matchmaker. Publishers seem quite puzzled by it because authors aren't the ones driving what does and doesn't go viral on the app. According to Nielsen, a market research firm One in four book buyers referred to TikTok last year, and the number skews each even higher if you look at younger audiences. The world's biggest bookshops dedicate whole shelves to BookTok favorites or as seen on TikTok, and these shelves are filled with bits of steamy romance where somehow the protagonists have no choice but to share a single bed. A bit of fantasy books you can find in these sections, some dark thrillers. The sections cut across genres and that's kind of the point. Booktok is driven by younger people who were raised on series like Twilight, Harry Potter, the Hunger Games trilogy, which were equal parts fantastical, scary and a little bit romantic. Lots of young women are boosting the sales of romance books. You've got spicy books, spicytok with the really cringe worthy sex scenes and you've got lots of Colleen Hoover. Booktokers are keeping her books in the bestseller lists. Her most popular one, It Ends With Us, went viral on the app a few years ago and has now sold over a million paperback copies in Britain. It's been a New York Times bestseller for over two years and she has five other books on the same list as well. It's often not just the super new releases that are doing well on TikTok, it's also some of the older stuff. Readers on the app are also just as excited about options old books, books published before the app even existed. So for example, you've got this dark academia aesthetic which glamorizes gothic style universities, a love for classic literature. Are you seeing division? And that's drawn new attention to old books like the Secret History, for example, which was published 31 years ago. You've also got the hype around Netflix's hit show Bridgerton, which has created new fans of period romance and in turn led people to rediscover books like Pride and Prejudice by Jane Austen, which actually won Best BookTok Revival at TikTok's inaugural book awards this August. The data from the market suggests that TikTok is only actually driving a small slice of book sales, just 3% according to Nielsen. But the platform is still important because its commanding recommendations, it's growing rapidly and it's proving to have immense trend setting power now for publishers. The challenge is then to keep up with those trends and it's not as simple as just commissioning more books that make people cry. Some publishers have actually tried this, but they've ended up just saturating the market with subpar young adult romance books. Virality is really hard to confect, and it's also really difficult to time. You can't force it. That's the point. And it's not just publishers that don't get it. Most most authors don't understand how BookTok works either, because it's not really about them. Colleen Hoover, for example, doesn't have a TikTok account. Looking forward, I think it's unlikely that Booktok's growth trajectory will slow down. These online creators want to be treated as journalists and critics, and they want their commentary to be taken seriously. They want publishers to stop seeing these kinds of books as low brow or trashy. But also, as BookTok grows, it's not only the steamy romance and the thrilling fantasy books that have the potential to go viral. I think horror, for example, could also continue to fill an appetite for the big twist. Even beyond fiction, the popularity of things like filmed daily rituals and self care content is fertile ground for journals and self help books on the app, and even biographies like I'm Glad My Mom Died by former child actor Jennette McCurdy has also done very well on Booktok. These kinds of success stories should prompt publishers to be bolder in their bets and to break new ground. But the thing is, with virality, timing and a whole lot of luck is a very key ingredient to success. Literary quality, however, is not. That's all for this episode of the Intelligence. As you heard, we're launching a new subscription Economist Podcast plus next month. Don't worry, we aren't going anywhere. Everyone will be able to listen to our weekday episodes of the Intelligence. But to enjoy our full suite of podcasts, including our specialist weekly shows like Babbage or Money Talks and our new weekend show, you're gonna need a subscription. If you're already an Economist subscriber, don't worry, you'll have full access to all of our shows. But if you're not a subscriber yet, listen up. Here's the deal. If you sign up for economist podcast plus before October 17th, you can get a year long subscription for half price, about $2 a month. So come on. Follow the link in our show notes to find out more and we'll see you back here tomorrow.

Sam.