(Bloomberg) -- Russian President Vladimir Putin remains convinced time is on his side as he presses forward with the invasion of Ukraine, with plenty of resources at his disposal to feed his war machine, according to Estonian intelligence.
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In an annual report, Estonia's Foreign Intelligence Service said that while Russia is unlikely to achieve a "quality leap" in its war-making ability, Putin won't be deterred despite setbacks in the first year of the invasion. Key to his thinking is a weakening in support from allies such as the US and NATO.
"Putin is playing for time, believing that Ukraine and the West will wear out before Russia," the report said. "Putin thinks he can 'bomb' Ukraine to the negotiating table."
Even as Russian military planners were caught off guard by Ukraine's ability to defend itself and the scope of US and European Union sanctions, Putin's government shows no signs of buckling and is able to deploy the tools of "propaganda-induced imperialism," the report said.
Russia's elite is increasingly concerned that Putin "has gone mad, but most of them lack the courage to take real steps toward change," it said. There is no significant grouping that embraces democratic values in a potential post-Putin Russia.
Read More: Putin's Elite Tremble as Hardliners Call for 'Stalinist' Steps
Instead, "radical" factions are vying for power. Those include Yevgeny Prigozhin, a Putin ally who leads the Wagner Group mercenary organization that's been declared a transnational criminal organization by the US government - and Ramzan Kadyrov, the militant head of Russia's Chechnya region who has pilloried the Russian military for its failures.
The Estonian spies referred to the authoritarian regime under Putin as a Soviet Union 2.0, with "no new Gorbachev, not to mention Yeltsin, on the horizon" - a reference to the last Soviet leader who sought to liberalize the communist state and the first democratically elected Russian leader.
Estonian intelligence is concerned that the invasion has heightened the risk of a military conflict in the Baltic states, with further mobilizations and a planned large-scale Russian military exercise later this year expected to ratchet up tension on NATO's eastern flank.
Seeing the Baltics as the most vulnerable region in the 30-member military alliance, Russia is "highly likely" to prioritize rebuilding its military near Estonia, something which could take up to four years.
--With assistance from Aaron Eglitis.
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