The war in Ukraine and the global economy
- Christopher Prince
- Mar 26, 2023
- 3 min read
There is a proverb in Ukraine that says “When the banner is unfurled, all reason is in the trumpet”. It means that when the nation is in danger or there is a national issue, the only thing that is important is to save it. In the same token, Ukrainians are greeting each other now with “Slava Ukraini!” which means “Glory to Ukraine!” – to which it is customary to respond “Heroyam Slava!” which means “Glory to Heroes!” – instead of “Khoroshyy den” which means “Good day” – as the good days will be after the war and now the priority is to fight off the invaders.
I experienced this resolute and pride in the nation firsthand as I visited Ukraine twice. And Putin’s aggression is only making it stronger now. Ukrainians on the West are mostly catholic speaking Ukrainian while on the East they are mainly orthodox speaking Russian, but all of them feel very strongly that they belong to the same nation.
The Ukraine invasion triggered an energy crisis worldwide and accelerated inflation
The Ukraine invasion by Russia propelled gas and petrol prices to almost all-time highs in the markets in the middle of 2022, reaching $121 a barrel for petrol on 7 March 2022 and $9.75/MMBtu for natural gas on 31 August 2022
But the prices are now down, even lower than pre-war levels at $70 a barrel for petrol and $2.20/MMBtu for natural gas.
And the “apocalyptic” winter prophesised by Russia who cut out almost all gas and petrol supplies to Europe, did not eventuate thanks to a milder European winter but above all to European households who deliberately reduced their heating and petrol consumption.
Ukraine is preparing a counter-offensive, Russia is betting on a long war
Ukraine is preparing a counter-offensive in the spring with its newly acquired Leopard tanks from many European countries and MiG-29 fighter jets from Poland to regain most of its lost territory. Zelenskyy promised its people that their territory will be liberated by the end of the year.
Meanwhile, Russia is trying to gain control of the more symbolic than strategic Donetsk town of Bakhmut at the cost of considerable loss of human life. Russians think they have time on their side as it is with time that they prevailed against Napoleon in 1812 and again against the Nazis in 1943.
But this time, circumstances are different. Russia is running out of ammunitions and high-tech equipment parts because of Western sanctions and is losing soldiers at a very high rate.
Russia and China are allies but their long-term interests are different
Xi Jinping made a well-publicised visit to Moscow on 20-22 March but fell short of signing any real defence pact with Russia nor of delivering lethal weapons to Russia. Putin needs all the support he can get, especially to sell its gas and petrol at discount prices, but now he looks more like a vassal to China. The two leaders do not even trust each other as they toasted champagne from two different bottles.
Moreover, Russia’s and China’s interests diverge on the long run. China has ten times the population of Russia with half Russia’s size. On the 4,300-km long border between Russia and China, thriving cities on the Chinese side are facing gloomy and sparsely populated areas on the other side. With climate change, China is increasingly looking at the Arctic for a shorter route to Europe and America and the Arctic Ocean are becoming an even more strategic area for the world’s superpowers. It will not take long before China will put its eyes on Eastern Siberia, if not militarily, with a commercial dominance.
How the Ukraine-Russia war will end
The odds are for a Ukraine win or a long stalled war. But Russia will eventually completely run out of material and human forces so they will have to cease hostilities in one way or another.
Economically, the world has been hardly hit by this war. Energy prices have blown up, food prices have soared, as both Ukraine and Russia are leading exporters of cereals, oils, seeds and legumes, which has added on the already underlying inflation.
But the silver linings are that the energy crisis has accelerated the much needed move to electric cars, renewable energies and energy sobriety. It has also awoken European countries to the need of strengthening and modernising their defence, and it has retightened and expanded NATO.
Hence the Western world will likely exit from this war stronger militarily, expanded geographically and more prepared to face the climate change challenges. China will remain a threat with its intended invasion of Taiwan but might think about it twice now as they may learn the lessons of the Ukrainian conflict if Russia does not prevail.
Sources:
Hubacek K., Yan J., Chan Y., Guan Y (2023). Russia–Ukraine war has nearly doubled household energy costs worldwide – new study. The Conversation 17 February 2023.
Is Russia running out of ammunition? The Economist 20 December 2022.
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