Joint Report : Impact of Ukraine War on Various Regions/ International Concerns

The VIF Young Scholars Forum discussed ‘Impact of Ukraine War on Various Regions/ International Concerns’ in their weekly meeting on 08 April 2022. Scholars raised ramifications and responses to the Ukraine War as pertaining to their assigned field of study. The discussion raised many salient points as below:

Impact on the Global Supply Chains

The Russo-Ukrainian war has jolted the global supply chains with the energy and commodities markets in disarray. Shocks emanating from the war in Ukraine and the sanctions on Russia are disrupting the supply of commodities, increasing financial stress, creating inflationary pressures, and dampening global growth. Although the direct role of Russia and Ukraine within the global economy is fairly small, both the states do have an important influence on the global economy. This is largely via their role as major suppliers in several commodity markets. Russia and Ukraine together account for about 30% of global wheat exports, 20% of corn exports, mineral fertilisers and natural gas, and 11% of oil. Additionally, several supply chains around the world are dependent on exports of metals from Russia and Ukraine. Both states are also sources of inert gases such as argon and neon primarily used in the production of semiconductors. Consequently, a direct impact of the war is visible on the food prices which were already running steep due to the pandemic and have climbed to their highest levels in more than a decade. Various wheat importing states particularly in West Asia and Africa stand to be severely impacted by disruptions in this supply chain.

The increasing trends in commodity prices since the outbreak of the war could, in the longer term, reduce global GDP growth by over one percentage point in the first year, with increasing possibilities of a deep recession in Russia. This will inadvertently further push up the global consumer price inflation by approximately 2.5 percentage points. There have also been hiccups in global manufacturing as factories are seeing worsening supply shortages and soaring costs after the invasion. Additionally, the recent Covid-19 lockdowns in China have further aggravated these supply shortages and led to drops in manufacturing activity. It is important to note that this crisis is also contributing to an ongoing reassessment of the global economy’s structure and concerns about self-sufficiency and resilience. The pandemic has already highlighted the downsides of offshore supply chains and the current shocks are intensifying the move towards building more resilience. In the long term, this war will propel Europe’s moves towards diversifying its energy imports and economically decoupling from Russia; thus, fundamentally impacting the structure of the energy markets. It will also lead to a potential fragmentation of global payment systems and the rethinking of the currency composition of foreign exchange reserves. As the war in Ukraine rages on, the far-reaching impact on the intricately linked and relatively fragile global economy will have to be carefully monitored and assessed.

United States and Europe

The impact of this crisis has ripple effect across the world, however, its effects on the US and Europe have been unparalleled. The transatlantic alliance has received a boost as shared security concerns have led to a strengthening of both the US-EU ties and NATO. However, despite convergence in responses with unprecedented sanctions against Russia and bearing pressure on China, there have been rippling challenges in bringing about the desired strategic response. The prime challenge has been the increasing costs of energy while simultaneously sanctioning major energy supplier Russia. The civil aviation sector and the airlines company are suffering with largescale sanctions against Russian airlines sector. Interest rates have gone up along with the spiralling effect of inflation being highest in the past 40 years in the US, creating widespread economic distress especially with regard to groceries. They have also been affected due to disruption in the supply chain management of commodities leading to both food and energy insecurity. At the international level, US is witnessing a decline in its hegemonic standing as a global policeman. The Biden administration made it aptly clear that it will not send American troops on the Ukrainian land despite the largest mobilization to Europe in nearly a decade. The European nations have been caught between US and Russia. Exodus of refugees across neighbouring countries (Romania, Hungary, and Poland) has become a matter of immediate concern.

China

Regarding China’s position in the ongoing conflict, while some analysts say it is unclear where China stands in the crisis, some view Beijing’s policy as a “clear dual strategy of not opposing Russia and not abandoning Ukraine”. The western and Chinese media narratives are obviously not in sync. For instance, the western-aligned media reports that Washington claims Beijing “responded positively” to Moscow’s requests for military aid, while the Chinese media is busy promoting the “conspiracy theories about the U.S. bioweapons in Ukraine”. Regarding Beijing’s policy towards Russia, analysts observe that in spite of the numerous voices calling for the country “to overhaul its current Russia policy and recalibrate its relations with Moscow”, they do not see a major shift of policy position by Beijing because of two reasons. Firstly, they say, abandoning Russia “does not solve or alleviate China’s most important external national security challenge”, which as we all know, remains the United States. The second reason is domestic. It is simply too close to the Feb. 4 joint statement issued by Xi Jinping and Putin, in which the two leaders reaffirmed their cooperation. So, such a quick change of policy direction would “inevitably raise questions about the wisdom of Xi Jinping’s decision” to take the position in the first place – observers note. This is particularly when Xi Jinping is expected to consolidate his position for a third term in the upcoming 20th Party Congress of the Chinese Communist Party.

Moscow's invasion of Ukraine, unlike in 2014, did not divide western countries. However, the current invasion forged a united Western front against Moscow. Hence, consolidation of transatlantic relations is a big concern for China in the long run, since, after Russia, Western countries may impose unified sanctions on China. China may also face different economic threats owing to their BRI routes passing through Russia and Ukraine. Also, instability in Ukraine might impact “the chip production” prospects of Chinese companies since “Ukraine provides 70% of neon gas to the world”. This is a crucial ingredient for the production of semiconductors. Any disruption in the supply chain would influence Beijing's chip industry.

Central Asia

Central Asia is Russia’s sphere of influence, and Moscow is also the security provider in the region. In addition, Central Asian economies are highly dependent on remittances from Russian Federation. Against this background, the Russia-Ukraine Conflict has serious repercussions for Central Asian nations. Central Asia has been heavily impacted by the significant drop in the value of the Russian rouble as a result of Western sanctions. Their economies are extremely interlinked with Russia’s that when the rouble falls, their national currencies fall with it, and they are severely afflicted. Kazakhstan’s national currency tenge has plummeted by 20%, which has raised the cost of imports and a higher risk of inflation, and significantly higher interest rates. The condition of Central Asia’s migrant workers is the most serious economic challenge that the region is now facing. Around 7.8 million Central Asian labourers are currently employed in Russia. These remittances account for roughly one-third of Tajikistan’s total GDP and more than a quarter of Kyrgyzstan’s total GDP. Similarly, Remittances contribute to around 12% of Uzbekistan’s economic output. There has been a significant drop in remittances to these nations as a result of the economic sanctions imposed on Russia. Food prices have also rocketed due to a ban on grain exports from Russia. Kazakhstan is also dependent on Russian ports for its oil and gas exports. Now with the sanctions, alternative logistic routes are being discussed with Azerbaijan.

West Asian and North African Region

In the West Asian and North African Region (WANA), the US during the early stages of the conflict was struggling to gather support from its major allies in terms of economic sanctions and diplomatic overtures. For WANA states, Russia’s moves in Ukraine are reminiscent of the playbook used by the US to justify external interventions. Russia has applied a similar narrative to justify its ‘humanitarian intervention’ to protect ethnic Russians from ‘genocide’; support for separatists; recognition of the breakaway republics; lies about Ukraine’s nuclear weapons build-up and attempting regime change by overthrowing President Volodymyr Zelenskyy. Russia over the years has emerged as a normal extra-regional enjoying security and tactical understanding with all the key powers. The Ukraine crisis has forced these states to choose sides between their historic partnership with the U.S. and their growing economic and political ties with Russia. The strategic hedging between the west and China and Russia is likely to remain in the near future. Most West Asian states that voted in favour of ending the military aggression in UNGA however continue to enjoy warm ties with Russia. The foreign policy posture of West Asian states indicates that while it disfavours Russian military efforts in Ukraine that could affect regional security, it does not want to disrupt its relations with Moscow.

Africa

The African position vis-à-vis the crisis remains divided. While the African Union condemned Russian action, however at the UN General Assembly, only 27 African countries voted in favour of the resolution against Russia. Despite Ghana, Kenya and Gabon- all three current African non-permanent members of the Security Council’s voted for the draft resolution, the refusal of 24 out of 55 African countries to condemn Russian action underpins growing Russian clouts in Africa. And Eritrea became the only African nation formally supporting Russia. Historical connection with Soviet Union aside, many African countries currently depend on Russia as a key arms supplier. Countries like Ethiopia and Uganda are heavily dependent on Russia to end the ongoing civil war. In addition to the import of arms, a growing number of African countries have contracted with Russian mercenaries, particularly the Wagner Group. The accusation of racism and prejudice against the Ukrainian soldiers have drastically reduced African sympathy for Ukraine.

Despite being geographically distant from the region, the conflict’s spillover effect and consequent economic sanctions greatly worry the African continent. The impact of price rises depends on whether a country is a net exporter or importer of oil and gas. While oil-producing countries such as Nigeria, Angola, Libya, Algeria etc., are set to benefit, most African countries do not produce oil. They will suffer from the global oil price hike. Sanctions prohibiting deals with the Russian government or businesses will have ramifications for African states that rely on Russia for military and civic gear. The war will most certainly impact food security across the continent as both Russia and Ukraine are significant suppliers of wheat and fertiliser for Africa. There are several energy projects in the pipeline and the current crisis may cause these projects to be delayed or abandoned entirely, raising serious concerns about the continent’s energy security. Going forward, it is likely Russia’s isolation from the rest of the world could actually push it closer to African countries.

Indo-Pacific

The crisis in Ukraine has been an unwelcoming development in the Indo-Pacific. The region was still recovering from the shock of the COVID-19 pandemic, wherein the domestic economies were severely affected. The first set of reactions to the war in Ukraine was condemnation of Russian actions and calls for cessation of violence. Barring India and China, the rest of the countries in the Indo-Pacific voted in UN resolutions against Russia. However, this is not to be misinterpreted as a blanket support for the West/Ukraine or NATO, rather the countries have explained their position or voting on the basis of their foreign policy principle, viz respect for UN charter and non-violation of territorial sovereignty. And some even opposed Russian actions on the basis of a possible parallel with China’s invasion of Taiwan. The voting in the UNHRC has been much different, where one sees more abstentions and votes against dismissing Russia from UNHRC. Southeast Asia and South Korea are highly concerned about the impact on their economies and rising inflation. There is also renewed debate about US commitment to the Indo-Pacific, as well as about increasing self-defence capabilities. Japan and South Korea have also seen nascent debates on arming with nuclear capabilities.

South Asia

The current Ukraine crisis poses significant challenges to the South Asian neighbourhood, though not directly but indirectly. Looking at the responses to the UNGA resolution deploring Russia's aggression against Ukraine, South Asia has given mixed responses. While Afghanistan, Maldives, Nepal and Bhutan have supported the resolution; India, Pakistan, Sri Lanka and Bangladesh have abstained. It is important here to note that Myanmar’s position in support of the resolution is due to the position held by the previous National League of Democracy appointed candidate. Myanmar and Russia share close diplomatic and military ties (Tome Andrews, UN report). However, the current sanctions regime could impact - the sale of Russian arms and international banking transactions. However, while the western nations were quick to impose sanctions on Russia and garnered support for the same; similar actions were not taken for Myanmar. The answer to this could lie in the geostrategic significance of each country. For instance, Ukraine -EU trade is around Euro 43 billion (2019) but Myanmar -EU trade is merely Euro 3.1 billion (2020).

Ukraine crisis will have a damaging impact on the Pakistani economy. Pakistan economy is already in dire straits as local prices for gasoline, food, commodities, steel, and semiconductor chips are witnessing a sharp increase. The ongoing geopolitical tensions are likely to result in a general price increase, deteriorating current account and fiscal balances, and the stifling of economic growth. Sanctions imposed by the United States and Europe on Russia is likely to disrupt energy supplies from the world’s largest supplier. It is major setback for an oil-importing country like Pakistan, as the commodity accounts for a sizable share of its imports. According to analysts, a $10-20 per barrel increase in oil prices over a few quarters is projected to deplete their national reserves by $1-2 billion, thus further shrinking the country’s purchasing power. Importantly, in case Europe opts to replace natural gas from Russia, the world’s largest gas supplier, with its LNG to meet its energy requirements then LNG prices will shoot up. This might affect Pakistan, as the economy relies on LNG to generate electricity. As far as Pakistan’s response to Ukraine crisis is concerned there have been contrasting stances between the previous establishment and the army. Imran Khan government stated a neutral stance on the crisis and insisted on the diplomatic way, while the army had a contrasting stance. Pakistan’s military chief at the Islamabad security dialogue slammed Russia’s military attack on Ukraine. He stated Russia's invasion of Ukraine was very unfortunate, as thousand have been killed, millions made refugees and half of Ukraine destroyed.

The most severe geopolitical changes occurring in present-day Europe after the Second World War has made Sri Lanka's existent economic crisis worse. Sri Lanka receives an average income of $ 3.5 billion from the tourism sector, with about 30% of the tourists coming to Sri Lanka from Eastern European countries such as Ukraine, Russia and Belarus. But the rapidly changing equations in Europe are showing a direct impact on the tourism sector. Many Russian citizens are trapped in Sri Lanka due to the war in Ukraine and economic sanctions on Russia. Sri Lanka also exports almost 2% of its entire exports to Russia and Ukraine and imports 2.2% from these two countries. It is worth noting that the trade between Sri Lanka and Russia is not directly but through other European countries, but due to the currently imposed sanctions on Russia, now this bilateral trade may be drastically cut.

Nepal has overtime maintained a non-aligned foreign policy by not commenting on the internal matters of others. Unprecedentedly, Nepal has however, openly condemned the Russian invasion of Ukraine. So far, there are no major economic implications of Ukraine Crisis on Nepal as it relies on India for petroleum supply, yet the prices have increased. Nepal has had around 600 Nepalese students and workers living in Ukraine. Six people had requested the Government of Nepal for repatriation, and they were rescued with the help of India. Prime Minister Deuba later thanked PM Modi for the help. The others have taken shelter in Poland and other neighbouring European Countries. One point needs to be noted here is that Nepal has a huge diaspora living across the world, but the government has no structure to make emergency evacuations. There were crisis during Afghanistan where many Nepalese were stuck, and they were rescued by India and Arab countries.

Role of Cyber in the Conflict

Since the Russia-Ukraine conflict, conventional warfare has played a more prominent role than cyber-attack. There has been a lack of full-scale cyber operations in the conflict. Russia reportedly launched wiper malware attacks that deleted/wiped data from Ukraine’s government servers at the beginning of the conflict. While the Distributed Denial of Service (DDoS) attacks paralysed Ukrainian systems, no attacks against Ukraine's Critical National Infrastructure (CNI) were reported. Despite physical strikes on infrastructure, the Internet service remains operational in Ukraine. Why, despite its superior cyber capabilities, did Russia not launched full-scale cyber-attacks on Ukraine? This question's answer is still a mystery, but perhaps, large-scale cyber-attacks were attempted but failed, or Russian President Putin has sought to hold his cyber capabilities in reserve. Russia’s large-scale cyber-attacks on Ukraine’s CNI could have spill-over effects on NATO members. For example, a cyber-attack on Ukraine’s energy infrastructure may cause an outage in Poland— a NATO State. Publicly, NATO has announced that cyber-attacks may invoke Article 5. Article 5 of NATO— an armed attack against a NATO member state will be considered an attack against them all. In case of full-scale cyber-attacks from Russia, cyber-criminals and Anonymous group(s) may get involved and the misattribution to Russia.

Terrorism vis-à-vis Foreign Fighters

There have been reactions from leaders or Islamic scholars of transnational terrorist organisations to the Russia-Ukraine war. The reactions show the interest of these leaders in the recent developments in International Relations. Islamic State (IS) encouraged Muslims to take advantage of the situation by assaulting both Ukrainians and Russians, who are both Kufrs according to IS. Chechen Islamic scholar— Salakh Mezhiev publicly called the conflict a jihad— to save Islam and Russia against the filth of the United States and NATO. Hay’at Tahrir al-Sham (HTS) in Idlib, Syria, announced that “volunteering to participate in the Russian army or joining Russia against Ukraine is an act of blasphemy and apostasy”. Dr Yasser al-Naggar, a Muslim Brotherhood expert, stressed that Muslims might join both sides of the fight to put one group of infidels against the other and be rewarded for killing unbelievers. Chechen’s Ramzan Kadyrov ensured Russian President Putin that around 70,000 Chechen fighters were ready to fight for Russia. However, the separatist Chechen groups, such as Dzhokhar Dudayev Battalion and Sheikh Mansur Battalion, joined Ukraine's side against Russia’s military intervention. The separatist Chechen groups called Kadyrov’s group a traitor and non-Chechen who joined Russia in the conflict.

Along with Chechen and Islamic extremist groups, there is an influx of White Supremacist groups worldwide joining Ukraine’s Azov Battalion— a Neo-Nazi unit of the National Guard of Ukraine based in Mariupol. However, there is a division among the White Supremacist group with hesitation to support Ukraine’s president Zelensky, Jewish and the grandson of one of the Holocaust survivors. The mobilisation of foreign nationals joining the conflict raises foreign fighters' issues and post-conflict future. Some of these foreign fighters are veterans of the US, British, Canadian, and Japanese armed forces, but most of them lack combat experience or skills. Many of these foreign fighters may die, and many may return home with PTSD (Post Traumatic Stress Disorder) or a traumatic experience of the conflict. The future of these fighters is gloomy. The influx of foreign fighters recalled the events of anti-Soviet jihad in Afghanistan in the 1980s—the genesis of the terrorist community. Another event of the high number of foreign fighters’ participation was the call made by slain Islamic State leader— Abu Bakr al-Baghdadi in mid-2014, and nearly 40,000 foreign (terrorist) fighters from 120 nations joined IS-led jihad.

Future of Climate Change

The war in Ukraine has already prompted a major rethink in the energy policies of many countries. In Europe, the fusion of foreign-policy and climate interests has lent more political momentum to decarbonization. For example, Germany has earmarked 200 billion euros for investment in renewable energy production between now and 2026. The European Union has also vowed to slash Russian natural gas imports by two-thirds by next winter and to cut them out entirely by 2027. All these efforts could supercharge the transition towards clean and renewable energy and hence decarbonization. Conversely, the war in Ukraine could also derail climate action. As energy prices soar, the focus has shifted to increased domestic fossil fuel production. And as countries rethink their priorities, investment in climate mitigation and adaptation could find themselves on the back burner, usurped by the perceived need for greater military spending. The war in Ukraine could also make cooperation on global decarbonization harder. Russia is the world’s second largest producer of natural gas and the third largest producer of oil. As such, it is critical to global efforts to decarbonization. Its enthusiasm however could get affected as a result of the war in Ukraine.