No winners in the Ukraine war


The Russian-Ukrainian war, about to enter its seventh month, continues to escalate. Russia has been sending in more troops to take more Ukrainian towns, but it has yet to state a clear objective that will make it possible to gauge its progress, determine if and when it will achieve its goals, and get an idea of when the war might end. 

Meanwhile, the Western powers are pouring in more and increasingly powerful weapons so that the Ukrainian forces can keep fighting, thereby raising the costs for Russia to carry on the war. The Ukrainians are indeed inflicting greater losses on the Russian forces, but they have been unable to halt the Russian advance. Meanwhile US military aid alone has topped $9.1 billion in just six months, three times the amount of military aid Washington gives to Israel in a year.

In addition to the heavy losses sustained by the combatants on both sides, the huge investment of the belligerents in the war has wrought international economic havoc even for countries geographically remote from the guns and missiles. The economic harm has been so great that the propaganda used can no longer conceal it.  

Russia might be able to boast that the rouble has risen to its highest level against the US dollar since April 2018, but it is still suffering economically. The Russian economy shrank by over nine per cent a month between March and June. It continued to decline by 8.8 per cent in July and is expected to shrink by another five per cent this month, bringing it back to its size in the second quarter of 2018. The contraction is not expected to stop before 2024, even if the war stops by the end of this year.

The country is also not faring much better in terms of foreign trade. While its current account continues to show a surplus – $167 billion from January to July 2022 or three times its surplus for the same periods last year (just under $50 billion) – this amount exists purely on paper. The money cannot be used because of the sanctions imposed by the Western nations that hamper Russia’s ability to trade with other countries. 

Western prohibitions on exporting spare parts or providing maintenance have brought Russian civil airlines to the point of having to dismantle some of their Western-made airplanes in order to make spare parts available for the rest of their fleet. Such realities make it clear that a large portion of the positive Russian current account comes from its inability to import rather than from an increase in exports.

But the situation in Europe is no less drastic. Technically, the German economy is already in contraction. It shrank by about 0.04 per cent in the second quarter of this year. Although this is not very noticeable, it is a sign of what is to come, especially as the winter looms bringing with it a sharp rise in the demand for energy. By mid-August, energy cost the equivalent of 600 euros per barrel of oil in Germany. The price is likely to double with the onset of winter and the lack of the Russian gas that had accounted for over 40 per cent of Germany’s energy consumption. 

France is a net exporter of energy thanks to its 18 nuclear power plants, and it is thus less vulnerable to Russian gas supplies. However, at least five of these plants are located in the south of the country where they are difficult to operate in the summer due to the excessive heat (a consequence of climate change) and on the lower reaches of the Rhone and Garonne rivers that supply the water needed for cooling them. As a result, France is having trouble meeting its export obligations and is being forced to rely more on fossil fuels. 

The whole of Europe faces similar predicaments. Norway, another net exporter of energy, has had to halt exports to other European countries and stockpile fuel for the winter, for example.

Rising energy prices have driven inflation in Europe to record levels. The UK has just recorded the highest rate of inflation in 40 years. Food prices are such that the traditional breakfast has become a luxury for many British households that have been forced to replace meat and dairy products with cheaper sources of protein. 

Although the US is an ocean away from the conflict, it has not been spared the flames. The US central bank the Federal Reserve continues to raise lending rates in the hope of reining in inflation, but this has contributed to stymying growth, which declined by 0.9 per cent in the second quarter of this year. 

The spectre of stagflation looms closer than it has in the past 15 years. Rising interest rates have affected every aspect of the American people’s lives. Even guaranteeing a roof over one’s head has become difficult for many because of the cost of loans. People are thus being forced to rent, precipitating a sharp rise in rents – by 39 per cent in Miami, for example. The average rent in many major cities has climbed to an unprecedented over $2,000 a month.

Needless to say, the developing countries are being crushed by the economic fallout from the conflict in Ukraine. Their hard-currency reserves are dwindling as a result of rising interest rates and the consequent reverse flow of money to the US and Europe. At the same time, the rising prices of fuel, food, and other commodities are aggravating trade deficits and causing local currencies to lose their value. Most Third World currencies have declined by at least 100 per cent against the dollar, making it difficult for many countries to pay their hard-currency debts. Sri Lanka and Myanmar have already failed to meet their debt obligations, and Pakistan and some African countries will probably join them soon. 

To make matters worse, none of the parties to the conflict, who boast large nuclear arsenals, is prepared to accept defeat. Russian President Vladimir Putin has built his legitimacy in large part on a pledge to revive Russia’s ancient glory. His regime could not risk losing against a militarily weaker Ukraine even if conceding defeat would come with pledges of aid from adversaries in the West. The West and the US above all would never accept a Russian victory as this would accelerate the trend to a multipolar global order. Already the US fears the erosion of its global political and economic hegemony as it watches China’s rapid economic and military growth. 

The zero-sum equation surrounding Ukraine has become a lose-lose game. Neither side can come away with anything positive in the long run, and the longer the war continues, the higher the stakes and the greater the losses will be for all concerned. The only solution is for all sides to stop the fighting, to content themselves with whatever they have been able to achieve on the ground, and to head to the negotiating table. 

They should stay there for as long as it takes to reach a settlement, even if that means maintaining the status quo on the ground until appropriate solutions can be found. This may ultimately involve a strategic arrangement involving several powers. But whatever the case may be, a defeat at the negotiating table would be better for all concerned than a defeat in the war. 

* The writer is a senior researcher at the Egyptian Centre for Straregic Studies.

*A version of this article appears in print in the 18 August, 2022 edition of Al-Ahram Weekly.

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