Working Paper #66, 2022
Although the Russia-Ukraine conflict, which is now unfolding before our very eyes, can be seen as a primarily European crisis of regional dimensions, it will have—indeed does—many global repercussions. Naturally, Ukraine and Russia will bear the most massive costs of the conflict: the World Bank’s latest estimates suggest that Ukraine’s GDP will shrink by 45.1% in 2022, while Russia’s GDP will shrink by 11.2%. However, the negative impact on the economy is already here, and it extends far beyond the immediate participants of the conflict. According to the estimates of the International Monetary Fund, the recent developments in Ukraine have turned out to be among the principal factors that slow down the recovery of the world economy from the global crisis sparked by the coronavirus pandemic. The IMF was forced to cut its economic growth forecasts for the current year for 143 countries, which together account for 86% of the global GDP.
Economists are adjusting their overall forecasts of economic development globally, cutting their predictions from a growth of 3.6% to a growth of 2.6%. Adjustments extend to the coming 2023, with a 0.2% drop in the previously predicted growth indicators. A sharp increase in prices of hydrocarbons, food, and mineral fertilizers, coupled with a restructuring of international transportation and logistical chains as well as emergent glitches in global payment systems, may cost the global economy some USD 1 trillion in 2022, which is about 1% of the global GDP.
Mounting budget deficits, including those stemming from snowballing defense spending, will further increase sovereign debt in many nations. Global inflation, which has already spiraled in the last two and a half years, will likely swell by another 2–3% in 2022 (up to 5.7% for developed economies and up to 8.7% for developing nations), followed by another 1.5–2% in 2023. If the active phase of the Russia–Ukraine confrontation stretches for a few more months, these figures will have to be adjusted upwards again, and the upsurge in inflation—unprecedented for our century—will turn into a chronic stagflation. Some economists in the West posit that a new global recession is likely to happen as early as 2023. Indeed, the Russia–Ukraine conflict is not the only cause of the global economic slump; yet, its significance as a catalyst of negative macroeconomic trends is more than obvious.
Some of the constitutive segments of the global economy have been hit particularly badly by the crisis, bringing about major glitches in global trade and possibly prompting as-of-yet unpredictable socioeconomic and political consequences for entire groups of states located in different regions. For instance, Russia’s and Ukraine’s combined share in wheat exports exceeds half of total wheat imports for 36 countries. Since wheat prices are tightly bound to the prices of rice, corn, etc., it is hardly surprising that overall global food prices in March 2022 were one third higher than a year ago. Russia and Belarus account for some 20% of global exports of mineral fertilizers, with any glitches in such exports inevitably taking a toll on the agricultural yield in Africa, in the Middle East and even in Latin America.
In early March, global oil prices reached USD 130 per barrel. In the meantime, any ten-dollar hike in these prices entails, as is claimed by the IMF, a 0.5% annual drop in economic growth globally. The situation on the global energy markets has put a question mark over the previously approved plans for a global “energy transition”: growing hydrocarbon prices can prompt large-scale and long-term investment in traditional energy sources—not only oil and gas, but even coal.
Apparently, a conflict that broke out in Europe has become a catalyst that exacerbated crises in other regions. This may have influenced Turkey’s decision to launch its own special military operation in the north of Iraq, it may have complicated, if indirectly, the situation in Nagorno-Karabakh, and it may have stimulated North Korea’s leadership to resume missile tests, etc. Possible repercussions of the conflict in Europe are particularly troubling for the regions mired in instability and with Russia’s significant military and political presence—such as the Middle East and North Africa or highly fragile states of the African continent. There is every reason to believe that we will witness new escalations in the coming months—in both regional and domestic political crises. The conflict has had a clearly negative impact on multilateral talks on Iran’s nuclear program and on Russia–U.S. consultations on strategic offensive weapons. There are now concerns over compliance with the BWC, the Geneva Convention on Prisoners of War, the Geneva Convention on the Protection of Civilian Persons in Time of War and other international legal instruments on warfare.
Expert assessments of longer-term international repercussions of the crisis range from cautiously optimistic to openly apocalyptic. In our opinion, the central issue is this: Could the crisis be regarded as a vexing aberration of history, a regrettable exception to the established rules that underpin a mostly stable world order, an accidental blip on the computer monitor? Or are we witnessing a clear illustration of trends that will increasingly determine the overall course of global development in the foreseeable future? In other words: Will the world bounce back to its more or less normal state once the acute phase of the Russia–Ukraine conflict is over? Or has the international system passed the point of no return, which means our life will never be as was before?
These are the questions debated today in discussions on a likely and desirable future of all the dimensions of the international system, including security, economy and finance, international law, social and humanitarian cross-border interactions, inter-state cooperation in tackling global challenges, etc. Since we are only seeing the initial stage of the crisis provoked by the conflict in Europe, assessments of its next stages wildly diverge.
As optimists see it, while the crisis is having immediate and major destructive imprint on the global energy and food markets as well as on international finance, today’s global trade, investment, and finance structure still has a significant stability margin that should prevent the world from slipping into a new recession, chronic food shortages or a frenzied renunciation of the dollar as the principal international reserve currency. Pessimists, on the contrary, believe that the most recent glitches in economic relations are irreversible, with the crisis merely accelerating the current trend for de-globalization and global economic fragmentation.
When it comes to issues of international security, optimists admit that the crisis will have a negative impact on weapons control, nuclear non-proliferation, combating international terrorism, etc. However, they are slow to abandon hope that the international security will not merely survive in its current form, but will, to some extent, emerge more stable after the crisis as humanity should somehow learn the lessons of the current events to establish a system of guarantees that rule out the possibility of such situations re-occurring in the future, both in Europe and elsewhere. Pessimists suspect that weapons control will never be fully restored, WMD proliferation and the spread of international terrorist networks will be given a major impetus, and the conflict in Ukraine will have a protracted negative impact on other regional crises and wars.
There is no consensus on the future of international institutions and international public law. Is Russia’s withdrawal from the Council of Europe and the UN Human Rights Council an isolated, even if regrettable, event? Or will we see an accelerated decline of multilateralism in the near future? What could happen to regional and global organizations, the United Nations included? When the crisis is over, will we see more generally accepted rules and norms in the international system? Or will, on the contrary, their number start to irreversibly shrink? Will the international system survive as such? Or will it collapse, bringing about more chaos and unprecedented unpredictability in global politics?
When analyzing possible consequences that the Russia–Ukraine conflict could have for the entire international architecture, we need to make two important qualifications. First, the conflict itself is yet far from coming to an end, and experts in the West talk and write about this conflict going on, in some shape or form, for many months or even years. Accordingly, international consequences will accumulate over time. Second, the conflict between Moscow and Kiev is unfolding against the backdrop of other equally important crises and upheavals, such as the ongoing coronavirus pandemic, exacerbated tensions in the U.S.-China relations, political regime change in Afghanistan, instability in the Sahel, the ongoing civil war in Yemen, intensified nuclear program in North Korea, etc.
It appears proper to identify three potential scenarios of the future post-crisis transformation of the international system, which will provisionally be termed “restoration”, “reformation” and “revolution”. The likelihood of each scenario is debatable, but each has its own logic and its own set of arguments behind it, its own understanding of the current global trends, and its own notions of medium- and long-term prospects for the international system and the global society as such.
