Prof. ST Hsieh
Director, US-China Energy Industry Forum
February 26, 2023
The world has changed profoundly after one-year of Ukraine war. As of now, there is no winner and Ukraine suffered the most. But the war is not over yet, permanent scars of the war remain to be seen.
Of course, NATO is revitalized and expanding. But it is not clear that Europe is stronger because the war is draining resources and slowed economic expansion because of expensive energy and refuges. It is clear that Russia is weakening but so does Europe. Even after the war is over, the reconstruction of Ukraine will take decades.
The US led sanctions against Russia are powerful but not necessarily effective. The trend is clear that government interventions in business will continue even after the war is over. But these hasty anti-free trade, anti-market measure will work or not for the West are not sure bets. A new global trade system will take time and the full participation of every economy.
A new focus on Taiwan? It is better for the West to focus on ending the Ukraine war. The West does not have any bandwidth left to provoke China over Taiwan. Because the risk of Ukraine war becomes unmanageable is real.
How the World Changed in the Year Since Russia’s Invasion of Ukraine
Time BY YASMEEN SERHAN
FEBRUARY 22, 2023 1:57 PM EST
“There are decades where nothing happens,” the Bolshevik revolutionary Vladimir Lenin is thought to have said, “and there are weeks where decades happen.” While the veracity of the quote is in doubt, its premise couldn’t be more true when it comes to Russia’s full-scale invasion of Ukraine.
In the year since Russian President Vladimir Putin set his so-called “special military operation” into motion, the world has been altered profoundly—in some ways, perhaps, irrevocably. The Feb. 24, 2022 invasion has sparked a new sense of purpose within Europe and the wider U.S.-led Western military alliance. It has upended the world economy and forced a new energy reality in Europe. It has spurred the largest and fastest displacement of people in decades. It has even begun to influence the geopolitical thinking around events that have not yet occurred.
One year on, here are the most significant consequences of the war so far.
A revitalized NATO
When Putin began laying the groundwork for the invasion of Ukraine, he pointed to what he characterized as an existential threat posed by NATO’s expansion into post-Soviet space. What was once a fear has since become a self-fulfilling prophecy: As a result of the invasion, the Western military alliance is poised to expand even further with the looming ascension of Finland and Sweden (though the latter is being held up by a Turkish veto).
Such expansion would have been unthinkable just a year ago. Finland and Sweden, long considered buffers between the West and Russia, were neutral countries that long eschewed military alliances—a status quo that was backed by the majority of their populations. But Moscow’s invasion of Ukraine exposed their vulnerability and, seemingly overnight, public opinion began to swing in favor of NATO membership.
“Finland would have been very unlikely to join NATO on a fast track were it not for Putin,” says former Finnish Prime Minister Alexander Stubb, though that’s not all he credits the Russian leader for inadvertently achieving. The invasion of Ukraine has not only spurred the expansion of the alliance, but it has also led to further investment among its members—most notably Germany and Poland, both of which have dramatically increased their defense spending. Indeed, all NATO members are on track to fulfill the alliance’s guidelines of spending at least 2% of their national GDP on defense; there is even talk of exceeding that target.
While Ukraine’s appeals to join the alliance have been rebuffed, Kyiv has nonetheless benefited from the military might of its members, several of which have pledged billions of dollars in financial and military aid.
Such is the irony of Putin’s war. A year ago, “Putin wanted less NATO,” says Anders Fogh Rasmussen, the alliance’s erstwhile secretary-general. Now, as a direct result of his actions, “he has got more NATO.”
A stronger, more unified Europe
Like NATO, the European Union has attracted the interest of new prospective members. Ukraine submitted its membership application within days of Moscow’s invasion, followed by Georgia and Moldova. The bloc has in turn enjoyed a renewed sense of unity and purpose; to date, it has passed nine sanctions packages targeting Russian officials, banks, industries, and more. A 10th round of sanctions is in the works.
European officials admit that maintaining agreement among the E.U.’s 27 members hasn’t been easy, particularly when it comes to achieving the buy-in of governments closer to Moscow such as Hungary. But on the whole, the war in Ukraine has galvanized European unity and has even allowed Poland, another post-Soviet state once at odds with Brussels over its rule of law violations, to emerge as the standard bearer of E.U. solidarity against Russian aggression.
While support for Ukraine’s E.U. membership remains high—including from seemingly unlikely corners, such as Britain’s former Prime Minister and Brexiteer-in-chief Boris Johnson—Kyiv’s accession to the bloc is unlikely to occur anytime soon. Still, the way some observers see it, the question of Ukraine’s E.U. membership is a matter of when, not if. “Ukraine will eventually become an E.U. member,” says Stubb, a prediction that he has also extended to Georgia and Moldova. “When someone behaves as aggressively and as illegally as Putin has done, then the rest of us gang up and integrate.”
The largest refugee crisis in decades
One of the starkest consequences of the Russian invasion has been the displacement of millions of Ukrainians, internally and externally. To date, more than 8 million Ukrainian refugees have been recorded across Europe, according to the U.N. refugee agency, the vast majority of them women and children (Ukrainian men between the ages of 18 to 60 are not permitted to leave the country). That represents nearly 20% of Ukraine’s pre-war population, the highest proportions of which can now be found in neighboring Poland as well as Germany and the Czech Republic.
“This is the fastest forced displacement of people since the 1940s,” says Beata Javorcik, the chief economist at the European Bank for Reconstruction and Development, noting that the loss of human capital will have a profound impact on Ukraine and its ability to rebuild when the war finally ends. Overall, refugees “are typically younger, more educated people, more entrepreneurial people,” she adds. “These are the people you need for reconstruction.”
The intertwining of business and geopolitics
Prior to the Russian invasion, business and geopolitics were largely able to exist separately from one another. There was a sense that “you could let trade be trade and let people build their supply chains, make their investments, make money from wherever it makes sense to make money, manufacture things wherever it makes sense to manufacture things, and then let geopolitics be geopolitics and have the two be kind of separate,” says Dmitry Grozoubinski, a former trade negotiator at the World Trade Organization and founder of the ExplainTrade website.
But within days of the Kremlin’s invasion of Ukraine, scores of businesses around the world announced their intentions to suspend their operations in Russia. “The biggest change that’s happened in people’s minds after the invasion of Ukraine is watching just how quickly geopolitics can override economic considerations,” says Grozoubinski. “You have regulators requiring that firms include in their risk analysis geopolitics, but increasingly boards [are] doing it as well,” something that he says will prove just as relevant when it comes to U.S.-China relations.
Still, of the more than 1,500 multinationals that announced voluntary exits from the Russian market, about 500 have done so completely, according to a list compiled by Yale University.
Another recent analysis produced by B4Ukraine, a coalition of Ukrainian and international civil society organizations, found that of the 3,000 multinational companies, more than half continue to do business with Russia. Many of them are headquartered in G7 countries, according to their latest report, “potentially undermining the group’s efforts to curtail the Kremlin’s revenues and support an independent Ukraine.”
Less dependence on Russian oil and gas
After Russia’s invasion, Europe imposed a ban on Russian oil imports and has decreased its dependence on Russian gas from 35.7% in February 2022 to 12.9% today—a shift that is as much a consequence of European initiative as it is of Moscow’s. In addition to the Kremlin demanding that foreign buyers purchase Russian gas in rubles, in an apparent bid to prop up the country’s struggling currency, the Russian energy firm Gazprom indefinitely halted the flow of gas to Western Europe through the Nord Stream 1 pipeline.
While the steep decline in Russian energy has spurred fears of an energy crisis this winter, the impact of which is being felt across the continent, it has also turbocharged the transition to alternative, renewable energy sources.
“Eastern European E.U. members, which viewed the green transition as something that was imposed on them by Brussels, are actually embracing the green transition because it has become a matter of energy security,” says Javorcik. “Suddenly, there is a realization that energy security cannot be achieved by geographical diversification of energy sources; you need diversification of the kind of sources.”
An incompletely-isolated Russia
“The reality that we face in Europe is a permanently isolated Russia, and this is going to be a generational thing,” says Stubb, the former Finnish leader. Even if the war were to end tomorrow, it would likely take decades, if not generations, for trust to be restored between Russia and the West. For Ukrainians, that day may never come.
“We’re not going to be able to put the egg back together again,” says Malcolm Chalmers, deputy director general at the Royal United Services Institute think tank in London. “Whatever emerges from this is going to be very different from where it was in 2021, because the distrust of Russia is so much deeper.”
But solidarity with Ukraine has its limits. As U.N. General Assembly votes have made clear, not all countries are willing to involve themselves in this war more than they already have been. India and China continue to straddle the line of ostensible neutrality, as have dozens of other countries representing nearly half of the world’s population.
“The crisis has shown that most of the non-aligned world has remained non-aligned and, in some cases, is still leaning towards Russia,” adds Chalmers. “There is not an international consensus against Russia; there’s a Western consensus against Russia.”
A new focus on Taiwan
Even as Ukraine continues to dominate global focus, world leaders have started to pay closer attention to China and the potential lessons it could glean from Moscow.
“Any attempt by China to try to change the status quo [in Taiwan] by the use of military force will have severe consequences for East Asia,” NATO Secretary-General Jens Stoltenberg told Nikkei Asia in a recent interview. “But it will also have consequences for NATO allies and for global security.”
There are, of course, fundamental differences between Ukraine and Taiwan. While the former is an internationally-recognized independent state, the latter is not. And whereas trade disruptions between Russia and the West have proven particularly damaging for the global economy, a similar such dispute with China, which boasts an economy 10 times the size of Russia’s, would be “apocalyptic,” says Grozoubinski.
While Putin and Xi are very different leaders (“Xi Jinping is patient and smart,” Stubb says, whereas “Putin is impatient and rash”), the mistakes committed by the former does illustrate what could happen should the latter choose to follow a similar path vis-à-vis Taiwan.
“Had Putin just walked into Kyiv in 48 hours, Xi Jinping might think that perhaps I can do the same thing in Taiwan,” says Stubb. “But now he kind of understands that he can’t.”