In February 2022, Russia launched a full-scale invasion of neighboring Ukraine. This conflict has resulted in the deaths of thousands and the displacement of millions, but the effects of this conflict extend far beyond the borders of fighting.
The roots of the conflict can be traced back to Ukraine's desire for independence from Russian influence since the dissolution of the USSR (now Russia) in 1991. As Ukraine sought to join NATO, an anti-Russian organization, Russia responded aggressively to maintain its influence in Eastern Europe. Russian leader Vladimir Putin has even gone as far as to question the legitimacy of Ukrainian identity and statehood, advocating for a united Slavic nation under Russian rule. It was therefore not a huge surprise when Putin’s forces launched an invasion of the country.
Turning our attention to recent developments, Russian forces have launched an invasion of the Eastern Ukrainian city of Avdiivka. This comes as part of a series of battles within the hotly contested Ukrainian state of Donetsk, which Russia annexed in September 2022 (although this annexation has not been recognized by the United Nations).
In the realm of international relations, there has been an intriguing development involving North Korea's engagement with Russia. North Korean leader Kim Jong Un, who has been a consistent ally of Russia and enemy to the United States, has initiated talks with Russian officials on arms and trade deals. This could potentially bolster Russia's resource supplies and aid in their pursuit of Ukrainian control. Such negotiations could potentially diminish China's geopolitical influence over Russia, and with it, Eastern Europe altogether. This could prove geopolitically complicated, as China has been seeking to increase their influence in Eastern Europe through their Belt and Road initiative, in an effort to combat NATO’s dominance in Western Europe.
Further along the geopolitical front, we shift our focus to a significant international meeting. Ukraine has traditionally played a crucial role in the international grains and seeds market, particularly in its trade with Turkey. However, as the war has disrupted trade routes, Ukraine has been cut off from international trade. Turkey has called for Russia to resume trade routes between Ukraine and the rest of the world, but Russia has consistently refused.
The Russia-Ukraine war has also significantly disrupted global pricing. Prior to the war, at the end of 2021, the global Gross Domestic Product (GDP) growth estimate stood at nearly 7%, but it has since dropped to around 2% (and just 0.3% in Europe), a massive loss. This development has caused price spikes in Europe and a sharp increase in food and energy prices worldwide. Inflation, which was nearly nonexistent in the early 2020s, has surged since the war’s inception. Furthermore, the war has triggered economic challenges in developed nations that pursued "soft” economic policies to avoid recessions, particularly in Europe.
Europe's heavy dependence on Russian energy has led to significant increases in oil, coal, and gas prices. This has prompted increased investments in renewable energy sources, reducing import dependence and strengthening national economies. However, the years of dependence on nonrenewable energy have led European economies to suffer particularly from the Russia-Ukraine war.
Food prices in Europe have also surged, particularly for edible oils, corn, and wheat. Together, Russia and Ukraine produce a third of the world's share of these products, so the loss of their production has led to a significant reduction in supply. The war's impact also extends to the steel industry, with extreme shortages and soaring prices due to the shutdown of Ukrainian steel plants and disrupted shipping routes. Russia has stepped in to fill the gaps in steel production, often bypassing sanctions through black markets. For the most part, however, the immediate future of European economies looks bleak.
Looking ahead, the colossal task of rebuilding Ukraine looms large, with estimates exceeding the cost of the war itself. The World Bank estimated the cost at about $411 billion in June 2023, a sum larger than pre-war Ukrainian GDP, and a number that is only growing. The war's effects have also prompted increased defense spending in Europe, reshaping security dynamics and global relations.
The Russo-Ukrainian War has left a lasting imprint on the global stage, affecting how economies work, straining international relations, and testing security frameworks. While its immediate consequences are evident, the long-term impact on global relations, trade, and investments will continue to evolve over time. It’s likely that whenever the war eventually ends, the governments and economies of Europe will take years to truly recover.
Note: This article was written by Vedant Kharul, and edited by Sohan Sahay
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