Russia's Invasion of Ukraine: Economic

Challenges, Embargo Issues and a New

Global Economic Order Paul J. J.
Welfens
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Russia’s Invasion of Ukraine
Economic Challenges, Embargo Issues
and a New Global Economic Order

Paul J. J. Welfens
Russia’s Invasion of Ukraine
 Paul J. J. Welfens

Russia’s Invasion
of Ukraine
Economic Challenges, Embargo Issues, and
a New Global Economic Order
Paul J. J. Welfens
European Institute for International Economic
Relations (EIIW)/Schumpeter School of Business
and Economics
University of Wuppertal
Wuppertal, Germany

ISBN 978-3-031-19137-4    ISBN 978-3-031-19138-1 (eBook)

https://doi.org/10.1007/978-3-031-19138-1

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 Preface

Russia’s invasion of Ukraine on February 24, 2022, was a turning point

for Europe and the global economy. This latest phase of the war of aggres-
sion against Ukraine (after the 2014 invasion and annexation of Crimea)
represents a breach of international political trust by President Vladimir
Putin by way of an attack on Ukraine and its 44 million inhabitants, an
invasion that was quickly followed by the uncovering of potential war
crimes. Within six weeks of the 2022 invasion, around five million
Ukrainians had already fled abroad, fleeing destruction, suffering, and
death. Russia has not succeeded in achieving the expected quick victory
over Ukraine, as communicated to his domestic audience by President
Putin, nor has his rather strange expectation that Russia’s troops would be
welcomed as liberators by the people of Ukraine materialized. In addition
to the military aspects of the Russo-Ukrainian war, a new international
economic war has also broken out in the context of the massive Western-­
led sanctions as well as Russian counter-sanctions.
The economic debate and analysis concerning what economic sanctions
would be optimal when it comes to the energy sector—concerning oil and
gas—has been somewhat controversial in Germany and many other
European Union (EU) member countries as well as in the US, the UK,
and indeed elsewhere. Particularly in Germany and the EU, as well as in
the US, issues surrounding an energy import embargo are critically dis-
cussed with regard to Russia. In the media, it is repeatedly pointed out
that EU energy imports from Russia are largely financing its war expendi-
tures. What at first thus sounds like a plausible view to hold, it is not really
convincing on closer examination. What would be the effects of a gas

v
vi PREFACE

import boycott by the EU or a conceivable EU import tariff on Russian

gas exports to the EU? If Germany or the EU as a bloc were to be affected
by gas embargo decisions taken in Russia—concerning exports—or taken
within the EU itself concerning Russian imports—which would result in
gas shortages for households and industry, how would one cope with the
problems of a short-term gas shortage or stark gas price increases? The oil
import embargo announced in June 2022 by the EU will be largely inef-
fectual, as Russia will be able to sell oil no longer sold in Europe to cus-
tomers elsewhere, such as in Asia.
If, for example, one wanted to significantly reduce the use of gas in
electricity generation, one would have to counter the problem of a gas
shortage by using more coal in electricity generation. However, this would
lead to a strong increase in CO2 emissions in the EU energy sector, which
should actually be prevented in view of the EU’s goal of achieving climate
neutrality by 2050. The Russo-Ukrainian war thus brings many problems,
including an important one for the entire world—beyond the conceivable
threat of war: namely, that the goal of climate neutrality is now much more
difficult to achieve than before. This means that, in a broader sense, the
costs of war are very high not only for Ukraine and Russia but also for the
entire global economy. Yet if these war costs—broadly defined—are indeed
so high, if there are indeed global effects, why—from the point of view of
intelligence services and the scientific field—was the potential for a full-­
blown war between Ukraine and Russia not taken much more seriously
much earlier? Why was the war not prevented—or to put it bluntly: who
are the culprits in this war?
Among the interesting insights of this book is not only a much broader
view of the Russo-Ukrainian war than is usually the case in the publica-
tions that have appeared so far. Rather, there are also additional insights
offered herein, which are, however, sometimes of a peculiar nature: for
example, for just €18, one could have read the French book by Michel
Eltchaninoff, a professor of philosophy, in 2015, which provided funda-
mental and disturbing information on the development of Vladimir Putin’s
ideology. Incidentally, the author of these lines was astonished to find out
in the course of researching this book—as presumably will the vast major-
ity of the readership of this book be—that state visits by Russia leaders to
the UK only take place every 129 years; and that this was apparently con-
sidered quite sufficient in London and Moscow. There was evidence of
some willingness for improvement from the British side as Prime Minister
Cameron visited Moscow in 2011, but this thawing of diplomatic
 PREFACE vii

relations already had cooled noticeably by 2014 when President Putin

decided to occupy parts of Ukraine in early 2014. Putin apparently did not
fully understand just how much was at state when he ordered Russian
forces into Ukraine that year.
The international economic effects of the war include a massive increase
in oil prices—and in their slipstream, an increase in inflation—as well as a
significant slowdown in economic growth in both developed and emerg-
ing economies. Russia’s economic output is expected to collapse by more
than 10% in the medium term, with significant braking effects also on the
economies of Central Asian countries via reduced trade and reduced guest
worker remittances from Russia to these countries.
The scope of analysis of the Russo-Ukrainian war is often much too
narrow. Since May 2022, however, it has been understood that the effects
of this war will not only affect energy market developments; it is also about
Ukraine’s wheat exports and indeed Russia’s wheat exports, with Russian
President Putin being able to impose de facto export barriers on both
countries. The EU has announced that in the event of restrictions on
Ukraine’s wheat exports via its Black Sea ports, it will help Ukraine to
increase truck and rail-based exports to the West; however, the very long
lines of trucks which were visible in Ukraine at its western borders in May
2022 showed little evidence of unbureaucratic, rapid EU measures to sup-
port Ukraine.
The West, which was already marked by increased inflation in 2021—
caused in part by broken international supply chains (think, for example,
of the container ship Ever Given, which became stuck and blocked the
Suez Canal for a week)—is, in mid-2022, facing inflation rates in almost
double digits in the context of the Russo-Ukrainian war. Firstly, disrupted
international supply chains are again playing a role here, as China’s zero-­
COVID policy in the case of Shanghai and other cities facing lockdowns
cripples some of the world’s largest ports for weeks, as well as key manu-
facturing facilities in China. Added to this, this time because of the war,
are rising energy prices and rising international grain prices. Here, Russia’s
belligerence and its foreign economic policy may contribute to a serious
inflation problem in many countries across the West, and not only there.
There is some danger of a wage-price-wage spiral, but this can be tempo-
rary if monetary policy and income policy work together sensibly. The fact
that unemployment rates are temporarily falling in EU countries and in
the US is due to a new Phillips curve phenomenon: unexpectedly high
inflation rates cause the real wage rate of those in work to fall. Vladimir
viii PREFACE

Putin may hope that political unrest will emerge in the West and that this
will weaken support for Ukraine in the medium term. However, it is also
understood in the capitals of the EU that the fall of Ukraine is likely to
critically increase Russia’s propensity for military aggression against other
Eastern European countries.
Russia’s invasion of eastern and southern Ukraine brought some initial
Russian success, with invading forces ultimately occupying Mariupol,
Ukraine’s second most important port city, four months after the invasion,
which was launched on February 24, 2022. The military approach that
appeared designed to cut Ukraine off from the Sea of Azov appears to be
partially successful. Russia’s military is far from occupying Ukraine more
broadly; however; the full capture of the Donbas region appears possible.
One key issue concerns the question of whether Western policies could
have helped avoiding Putin’s shift toward a much more aggressive foreign
policy stance after 2005. The extent of Western ignorance and, arguably
dangerous, early policy developments in terms of the West’s relationship
with Russia are rather unsurprising, if one would note, for example, that
official visits of the Russian head of state to London occur only every 129
years. This is, with a hint of cynicism, an allusion to Putin’s state visit to
the UK in 2003. Moreover, Russia has a structural advantage as a large
country—its sheer size makes it almost impossible to attack with any pros-
pect of success (Napoleon and Hitler were among those leaders who had
to learn this lesson the hard way). However, geographic size is also a struc-
tural disadvantage when it comes to the choice of form of government:
developing such a large country as a democracy is conceivable, but the lack
of foreign travel—as a consequence of size—is a disadvantage in the politi-
cal debate for achieving democracy in a country with 144 million
inhabitants.
If you live in the Netherlands, for example, you could have reached
dozens of democracies at a reasonable price after a maximum of a six-hour
flight. If you fly six hours within Russia, you are still in Russia, unless you
have flown north-south. Nevertheless, after 1991, new travel opportuni-
ties emerged for only the top 20 million or so, those who could travel to
Athens, Paris, Berlin, London, or Lisbon; thanks also to the emergence of
low-cost airlines flying from Russia and from EU countries. These almost
15% of the Russian population were able to visit Western countries (but
the time spent in the West was apparently too short to win a large majority
of the Russian population over to Western ideas).
 PREFACE ix

The countries reached by Russian travelers are not exactly examples of

democracies either, apart from Turkey, a fragile Lebanon, and Israel.
Moreover, the populist promises of any autocracy—that it will provide
prosperity and stability as well as preserve conservative traditions—may
sound attractive in a country that classifies its own development as rela-
tively stable and that, for example, suffered the transition to a market
economy in a democratic system in 1998 in the form of a shocking eco-
nomic collapse. This was before broad democracy-friendly privatization
had been achieved—as had been achieved to some extent in Poland, the
Czech Republic, and the Slovak Republic, as well as Bulgaria by 1997.
While based at the University of Potsdam, I indeed led a project team on
a research project (financed by the Alfred Krupp von Bohlen And Halbach
Foundation, Essen) in which we tried to develop some key insights for a
consistent Russian transformation policy in core fields whereby colleagues
from the Leontief Center in St. Petersburg and from the Higher School of
Economics in Moscow also participated. However, our presentations and
publications, including a 2004 book in the Russian language, which I
coedited along with Evgeny Gavrilenkov—Infrastructure, Investment and
Economic Integration: Perspectives on Eastern Europe and Russia (original
title: Infrastruktura, investicji i ekonomiceskaja integracja. Perspektivy
Vostocnoj Evropy i Rosiii), University Publishing House/GU VSchE,
Gosudarstviennyj Universitet Vysschaja Schkola Ekonomiki, Moscow—
had only a limited effect on the political and economic debate in Moscow;
much in contrast to a similar transformation project in Poland (with col-
leagues from Hertford College at the University of Oxford), we found it
quite difficult to gain access to the managers of leading Russian compa-
nies. Later at two conferences in St. Petersburg, which involved represen-
tatives from ministries of the Russian government, I occasionally had the
impression that the self-proclaimed big power status of the new Russia
resulted in a certain resistance to benefiting from Western and Eastern
European experiences in terms of key policy reform elements and the
broad range of available transformation experiences.
There was also little in the way of broad privatization achieved in
Ukraine or Hungary; Ukraine, like Russia in 1998/1999, realized an oli-
garchic privatization, which means a very strong concentration of wealth
in the hands of very few. In Hungary, there was only weak domestic entre-
preneurship in many sectors as Hungary had initially organized the priva-
tization of the economy in a kind of large-scale tender for foreign
multinationals as major investors.
x PREFACE

In the Balkans, Russia retained some of its old influence in certain

countries; Serbia is one such important partner—not only since the Kosovo
War—which at the same time also strives to develop economically in the
direction of the EU. All of these changes were considered relatively unin-
teresting by the Trump administration in the US from 2016 till 2020—
the judgment had been reached that the US was uninterested in Ukraine.
The West will see in the 2021 withdrawal from Afghanistan an ignomini-
ous exit that was managed only slightly better militarily speaking than
Russia’s own withdrawal from Afghanistan in 1989. The instability of the
partial Western occupation of Afghanistan was followed by the victory of
the militarily and technologically inferior Taliban, which is not easy for
either Russia or the US to understand as military superpowers.
Russia certainly understood the US withdrawal from Afghanistan as a
sign of military weakness; moreover, President Putin’s support for Syrian
autocrat Bashar Al-Assad ensured that he was able to hold on to power in
2020/2021, leaving his opponents—supported by the West—losing out;
in the mix, there was also the Islamic State terrorist group, whose birth
was attributed by the political leadership in Russia to the seemingly cha-
otic US-led intervention in Iraq. Thus, 2022 seemed to present a good
opportunity for Putin to lead the “fraternal” people of Ukraine (or, in
imperial Russian terminology, “Little Russia”) back to the Russian
“family”.
Putin came to the view that Ukraine actually belonged to Russia over
the course of about a decade—with an ideology constructed around the
works of just a few Russian philosophers. Thus, from Putin’s point of view,
the use of the Russian military to intervene to recover Ukraine was a rela-
tively attractive prospect—the philosopher Ivan Ilyin had warned against
Ukraine’s “separation” from Russia early on—leading to his announce-
ment that this intervention would happen under the headings of the lib-
eration of Ukraine and in support of Ukrainian democracy.
In 2014, the Russian intervention in and occupation of Crimea seemed
to succeed as a master-stroke facing relatively little resistance, and Putin’s
argument that Crimea had always been part of Russia—politically and cul-
turally—did not seem to be easily dismissed; especially since a democratic
majority in a regional referendum likely yielded a majority in favor of the
annexation of Crimea by Russia. For Putin, the annexation of Crimea
increased the temptation to achieve further “successes” with his military.
The resulting Russo-Ukrainian war of 2022, which came partly as a sur-
prise from the perspective of the West, is a turning point and threatens to
 PREFACE xi

destroy the established global economic order; one can note, that several
regional specialists on Ukraine and Russia had pointed out the risk of
Russian military aggression from about 2007 on. The stakes in this con-
flict are naturally high for Ukraine and Russia, but also for Germany and
the EU, respectively, not to mention the US and China.
The following economic analysis focuses on trade and economic rela-
tions between the EU and Russia. The question of possible EU energy
import embargos—with a focus on oil and gas supplies from Russia—con-
cern important sectoral and macroeconomic aspects: with worldwide eco-
nomic effects, which were controversially discussed in the first half of
2022, especially in Germany and the EU as well as in the US. Important
questions about the effects of large refugee flows from Ukraine toward
Eastern and Western Europe are addressed; aspects of integration and
migration, as well as problems of a possible enlargement of the EU to
admit Ukraine as a member, are also in focus. Are Germany and other EU
countries, as well as the UK and the US, providing enough humanitarian,
financial, and military support to Ukraine? A controversial debate, which
also arose in this regard in the first half of 2022, is critically reflected upon
before the final chapter illuminates perspectives for a new world order
after the Russo-Ukrainian war. Questions regarding New Political
Economy perspectives of the world economy are raised herein also with a
view to developments in the next decade(s).
Even if, by nature, only a scenario analysis can be carried out on some
important points, it cannot be overlooked that there are serious dangers,
which can be identified: the existing system of a rules-based international
order in conjunction with effective international organizations could go
under. But the “political club” of the BRICS countries—Brazil, Russia,
India, China, and South Africa—is also facing new kinds of tensions. In a
historic departure from the export policy of the Soviet Union, Russia is
using its energy export policy as a political weapon, which may strengthen
Moscow’s position in the short term, but will cast doubt on the country’s
reliability internationally for many years to come. That some EU policy-
makers seem to want to see energy import sanctions imposed against
Russia as a means of weakening Russia’s war financing is, moreover, mainly
wishful thinking when one takes a closer look at global adjustment pro-
cesses. At the same time, it should be noted that Russia is no longer a
constitutional state, as the important principle of proportionality of pun-
ishments no longer applies: anyone who calls Putin’s invasion of Ukraine
a “war” risks being sentenced to several years in prison.
xii PREFACE

De-globalization and chaos in many parts of the world—with and with-

out military conflicts—are conceivable as a negative outcome. Even if such
a negative scenario can be avoided, there are critical and difficult questions
to be answered, namely how to first achieve some economic stabilization
after a peace settlement, and what reforms are essential for a globally influ-
ential and cooperative “West+”. Here, “West+” refers to the expansion of
the OECD group of countries to include certain G20 countries, such as
India and Brazil; whether the West will be able and willing to maintain the
previous high expansion dynamics in terms of economic relations with
China and Russia after an eventual peace agreement between Ukraine and
Russia is an open question. Globalization is likely to become more selec-
tive, whereby the US and the EU—within the framework of the new EU-­
US Trade and Technology Council (TTC)—have been focusing on
increased cooperation in the security-relevant area of information and
communication technologies since 2021—even before the start of the
Russo-Ukrainian war of 2022. From a Western perspective, there are argu-
ments that global supply chains should be organized more flexibly and
thus autocratic supplier countries in particular should be given less politi-
cal power; autocratic power structures are often linked to state-owned
enterprises.
The EU faces a particular challenge, as the question of an enlargement
to admit Ukraine as a member will arise. Such an enlargement would be
contentious with regard to the question of the order of candidate coun-
tries. There are numerous candidate countries, including Turkey and
countries in the Western Balkans, which are quasi ahead of Ukraine in
terms of time spent in the accession process. It is hard to see that the latter,
in turn, would readily want to claim in a special way that it indeed fulfills
the Copenhagen Criteria required for EU accession and that, moreover,
the existing EU countries could easily cope with Ukraine’s accession with-
out any significant problems. A rapid accession of Ukraine to the EU
could in turn bring serious problems for the EU, namely the next BREXIT-­
type event; or even several such cases. The accession of Ukraine, with
about 40 million people, to the EU could in turn give rise to considerable
distributional conflicts within the EU, where Western EU member states
and also some Eastern EU member states are then unlikely to receive any
EU funding (in 1993, Ukraine still had 52 million inhabitants—and its
population is still declining). Moreover, Germany will play a special role,
which will also amount to a military strengthening of Germany; whether
 PREFACE xiii

this will contribute to stability in Europe in the long run remains to

be seen.
The European Commission has a special function in the upcoming EU
enlargements; of course, also in terms of the accession negotiations with
Ukraine, which the Commission has already visibly supported in May and
June 2022. It is strange, however, that the EU’s statistics agency, Eurostat,
of all places has been listing the population figures for Ukraine excluding
the population of Crimea and the dispute regions in the Donbas since
2015, thus showing a lower population figure for Ukraine than, for exam-
ple, the World Bank. The latter shows 44.6 million for 2018, but Eurostat,
as the statistical office of the EU, shows 42.3 million as the population of
Ukraine in 2018 (Demographic Statistics for the European Neighbourhood
Policy—East Countries, 2019 edition, Brussels: there is a reference to a
structural break in 2014, which probably relates to Russia’s annexation of
Crimea and involvement in the separatist regions of Donetsk and Luhansk).
The population of countries plays an important role, among other things,
in weighted votes at the European Council and Council of Ministers; and,
of course, how the EU or the World Bank determines Ukraine’s popula-
tion is also a political question. It is hoped that the unresolved conflict in
Crimea can be resolved diplomatically.
A serious and significant challenge for the West is to build better rela-
tions in the longer term, especially with China and Russia. That the
democracies of the West will have problems building good relations with
an autocratically ruled China and an autocratic, or even totalitarian, Russia
will not be seen as surprising. Failure to develop peaceful cooperative rela-
tions—initially with a focus on economics—could result in a series of dan-
gerous new international conflicts in the twenty-first century, conflicts that
may be difficult to control.
As for the challenge between the West and Russia, one can point, by
way of example, to the UK-Russia relationship between 1991 and 2021,
which deteriorated almost continuously through various phases after
1991: Partly because Russia had developed a less than realistic foreign
policy vis-à-vis the UK; but in part also because London has made rela-
tively little effort to build better relations with Russia over time. Apart
from joint counter-piracy efforts in Asia—a problem in the wake of the
1997/1998 Asian Crisis—London and Moscow have developed a few
cooperative projects.
From the perspective of EU countries, a new period of uncertainty has
emerged since 2016. Firstly, a populist president, Donald Trump, came to
xiv PREFACE

power in the US. Secondly, the opportunities economic globalization via

trade and direct investment have presumably reached a limit after three
decades—the risk of de-globalization and also regional disintegration, see
BREXIT and questions about further EU exits, is visible on the horizon.
Thirdly, the question arises as to whether the EU will succeed in shaping
or stabilizing the EU integration process in a meaningful way—if the EU
should stumble into a series of unstable new integration projects after the
Russo-Ukrainian war, it will gradually disintegrate, meaning next to the
already destabilized US would be a destabilized EU and a disintegration
of the UK would likely follow. The decline of the West—with its three pil-
lars of sustainable democracy, the rule of law, and a stable (for the most
part) economy—would then be threatened.
A global policy toward achieving climate neutrality by the middle of the
century would then be an illusion. A successful policy aimed at reaching
climate neutrality by 2050 would certainly require all G20 countries,
including Russia. The latter, under Putin, has become a country where the
president may complain, in part rightly, about NATO (the North Atlantic
Treaty Organization) eastward expansion, but where this president, above
all, clearly exaggerates the threat to Russia posed by NATO—right down
to the outlandish claim on May 9, 2022, at the Victory Day military
parade in Moscow that NATO had planned to militarily conquer the
Crimea region annexed by Russia in 2014.
Russia’s invasion of Ukraine stemmed from a military and political cal-
culation that counted on a quick military victory for Russia and the
removal of the legitimate government in Ukraine—with its replacement
by Russia-friendly politicians. This plan had already visibly failed by early
May 2022. The political legacy of President Mikhail Gorbachev—with
positive perspectives for democracy, a market economy and the rule of
law—for Russia could not be preserved (I met Gorbachev twice myself,
once in Boston and once in Linz, Austria—both times after Gorbachev’s
term in office was already over; my first scientific encounter with Eastern
Europe—in socialist times—occurred at a 1982 workshop of young scien-
tists in Warsaw and the result of a follow-up workshop was the publication
some years later of the book Innovationsdynamik im Systemvergleich
[transl. PJJW: Innovation Dynamics in Comparative Systems] (1988),
edited together with Leszek Balcerowicz; in Russian, I contributed to a
conference volume “Russia’s Economy: Transformation Experience of the
1990s and Development Perspectives” after a workshop in Moscow and
further books on transformation issues appeared in English).
 PREFACE xv

In the 1980s, when the socialist system of the Soviet Union and other
socialist countries began to experience a crisis, Russia’s position vis-à-vis
the West had improved in one aspect in foreign trade: namely, in the share
of oil and gas in Western energy imports. Here, Russia was able to benefit
economically from the politically deteriorating relationship between the
EU and US, on one hand, and the primarily Middle Eastern countries in
OPEC (Organization of the Petroleum Exporting Countries).
Under Gorbachev, Russia’s relations with the West improved temporar-
ily. After President Yeltsin took over from President Gorbachev, it took
until 2003 for his successor, Vladimir Putin, to visit the UK. This was the
first visit of a Russian head of state to London since 1874, and it is obvious
that both London and Moscow had made little effort in the matter of state
visits even as early as the period from 1875 till 1917. The Second World
War brought some meetings between British and Russian leaders outside
the UK (i.e., Yalta, Potsdam) and after 1997, there were meetings at a G8
level for a few years—this rapprochement was already frozen again in 2014
when Russia occupied Crimea. This tenuous UK-Russia relationship was
no serious substitute for bilateral relations between a leading Western
country and Russia.
That Putin saw the majority in favor of BREXIT in the June 2016 ref-
erendum in the UK as a personal success—the result of his policy of inter-
ference and destabilization via the role of Russian oligarchs (often with
dual citizenship and a visible inclination to strengthen with donations the
Conservative Party of David Cameron, Theresa May and Boris Johnson as
party chairpersons and heads of government, respectively)—is obvious:
publicly, Putin pointed out with regard to the British political debate that
the democratic result of the BREXIT referendum demanded that a
BREXIT indeed be carried out. Economically speaking, this amounted to
a visible weakening of the UK and to new political conflicts within the UK,
as well as economically to a weakening of the EU.
Russia’s strongest integration into the international system came in
2012, when it became a member of the World Trade Organization (WTO).
However, by 2016 with the election of the populist Donald Trump, the
WTO was already on the US administration’s hit list. In 2020, the WTO
was no longer able to fulfill its mandate as the US had blocked the election
of judges to the WTO’s Appellate Body—undermining its role in the field
of dispute settlement.
With the election of President Joe Biden, a temporary phase of policy
normalization came about in the US and a quasi-recovery of the WTO was
xvi PREFACE

achieved; but the Biden administration also sought success in renewed

bilateralism: instead of clearly focusing on patient WTO reforms, a new
US-EU institution was founded in the form of the transatlantic Trade and
Technology Council (TTC),which seeks to create a kind of substitute
forum to the WTO for leading democracies and technology-relevant eco-
nomic sectors in 2021/2022, with little visible political energy. From a US
perspective, dissatisfaction with many international organizations, from
the UN to the WTO to the World Bank, results from the fact that undem-
ocratic countries also participate in such bodies and authoritarian coun-
tries not infrequently—think of Russia or China—prevent meaningful
solutions to problems through approaches that were reasonable from the
Western point of view. At the UN, a vote on the Russo-Ukrainian war
produced a clear majority of countries on the side of the US. However, the
countries that abstained—including India and China—represented almost
half of the world’s population.
The West, first and foremost the US, reacted promptly to the invasion with
harsh sanctions against the Russian economy and state—to be more exact
against Russia’s leadership and elites. The EU had launched six packages of
sanctions by mid-June 2022. Massive increases in oil and gas prices have, at
times, increased inflationary pressure in developed and developing countries,
weakening the recovery in member countries of the Organisation for
Economic Co-operation and Development (OECD) in the medium term—
and this at a time of economic stress in the wake of the Corona recession. In
the following analysis, the focus is indeed substantially on the economic
aspects or effects of the Russo-Ukrainian war. The present study has been
written against the backdrop of an often emotionalized debate in the EU and
the US due to the horrific images of war reaching every television, newspaper,
computer, and smartphone; in many cases, there were loud calls for an imme-
diate energy import boycott of European countries against Russia in the
spring of 2022, and statements supportive of the supply of heavy weapons to
Ukraine were also audible in the parliaments of several EU countries.
Above all, there were many examples in the political debates in Europe
of people imploring Germany, in particular, to become more involved as a
leading country in the sanctions. An energy import embargo was often
called for on the grounds that this would significantly weaken Russia’s
financial base, which it uses to wage the war against Ukraine; it was said
that without a boycott against Russia, the EU would effectively be indi-
rectly financing the war against Ukraine. However, this view is not really
tenable from an economic perspective.
 PREFACE xvii

The economic effects of the Russo-Ukrainian war also concern trade,

direct investment and guest worker remittances in Europe and worldwide.
There have been significant changes in oil and gas prices and, in addition,
a broad transatlantic debate began on the issue of a possible EU energy
import embargo targeting Russia and the associated economic effects such
an embargo would bring. Finally, the challenge of large movements of
refugees and aid, primarily from the OECD group of countries, to Ukraine
and the Ukrainian people, respectively, has been addressed—with some
potentially very misleading claims regarding the latter from the Kiel
Institute for the World Economy. The Bachmann et al. study on the ques-
tion of a German embargo against Russia, which underestimates the risk
of a recession in Europe due to certain methodological weaknesses, is also
not a very appropriate contribution with which to try and understand the
economic challenges. More precisely, carefully considered and sensible
strategies need to be implemented: Different approaches are called for
with regard to the EU’s import of gas and oil from Russia. Putin’s war of
aggression must be contained and rebuffed—also through a strengthened
EU capable of swift and decisive action. In this context, however, a hasty
enlargement of the EU, that is, the expedited accession of Ukraine, is
questionable. Attempts to push through such an accession, albeit well-­
meaning, could sow the seeds of the next BREXIT-type scenario. In the
end, the big question facing policymakers is how to bring about a new,
stable and humanitarian world order with good prospects for achieving
climate neutrality—not by permanently excluding Russia from the global
community, but by integrating the country better only after comprehen-
sive political reforms.
The question of what a sensible sanctions strategy against Russia should
look like is indeed complicated; the aim is obviously to persuade President
Putin to engage in peace negotiations with Kyiv as soon as possible and,
more broadly, to reduce Russia’s propensity and capability to wage war (in
Ukraine or elsewhere). It would make little sense to implement what
would in effect be simply a symbolic sanctions policy. Considerable politi-
cal pressure has been building in this direction in Germany since the inva-
sion, with the argument that if Russia’s energy exports were reduced, the
country would slacken its war effort. This is hardly realistic. Nor can a
sanctions policy be simply about inflicting maximum damage on the
Russian economy as a whole—for example, with the effect of plunging
Russia’s economy into a serious recession, which could last several years.
xviii PREFACE

Germany experienced a three-year recession in the early 1930s in which

real national income fell by a total of 16%—the result was a complete
political destabilization and the massive radicalization, which ultimately
brought the Nazis to power in 1933. Germany should have learned a few
things from its own history, impulses for further political radicalization in
Russia are not in Europe’s interests; however, it will also be difficult to
hold those Russian politicians who bear responsibility for the attack on
Ukraine and who broke international law accountable. The prospect of a
trial at the International Criminal Court in The Hague, however, should
be a real risk for both President Lukashenko of Belarus, who has arbitrarily
imprisoned thousands of opposition figures and allowed his country to be
used as a staging point for the invasion of Ukraine, and President Putin.
Instead of leading Russia successfully and peacefully into a period of
stable economic expansion, President Putin has launched a war of aggres-
sion against Ukraine in violation of international law—without any com-
prehensible justification. In doing so, Putin has effectively removed Russia
from the world economy; and, if China naively continues to uncritically
support Russia, China could also experience almost the same economic
crisis as Russia under Vladimir Putin. An obvious lack of competent advi-
sors has led the Russian leader to a dangerous impasse.
From an economic perspective, a debate on the meaningful options vis-­
à-­vis a Western sanctions strategy against Russia developed over the spring
of 2022. Particularly in Germany and the EU, but also in the US, ques-
tions about further possible sanctions against Russia were discussed on the
basis of a study by Bachmann et al. concerning a German energy import
boycott against Russia. However, there were already other studies in
March 2022, which estimated Germany’s loss of real income due to such
a boycott to be significantly higher than the estimated effects in the analy-
sis by Bachmann et al. which only arrived at a decline in gross domestic
product of 0.5–3%. In Germany and the EU, a gas import boycott against
Russia would have a particularly severe impact on the chemical, steel/
metal, construction, and food sectors. There could also be significant neg-
ative effects on jobs in other sectors via supply chains. A sharp increase in
the price of oil or gasoline will also have a dampening effect on automobile
production, which is an important economic activity in many EU countries.
The idea of an EU import tariff on Russia’s gas exports as a sanctions
measure, as proposed by Ricardo Hausmann and Daniel Gros, also does
not really work: It is assumed (by Gros) that Gazprom, as Russia’s export
company for gas, behaves as a profit-maximizing monopolist, which is
 PREFACE xix

rather implausible in the context of the Russo-Ukrainian war. Rather, the

majority state-owned Gazprom is likely to follow the Kremlin’s policy line
and adopt its goals even if it were to mean lower profits; in any case, a
duopoly model is more appropriate with regard to the EU gas market than
a Gazprom monopoly model. In a duopoly, unlike in a monopoly case,
government revenues from an EU gas import tax on Russian gas can
hardly be expected to be sufficient to compensate consumers and the
wider public for the disadvantages of a tariff—that is, in the case of
increased gas prices—through increased transfers. Nevertheless, under
certain circumstances, a gas import duty may be useful as part of sanctions
against Russia.
Incidentally, it is apparently not widely appreciated that an energy
import boycott by the EU countries against Russia would have the conse-
quence that Germany and France, for example, would have to supply oil
and gas to Eastern European EU member states in addition to coping
with their own national economic problems as part of the EU’s solidarity
obligations in the event of a crisis. In the case of doubt, it would also be
required that the EU countries, and presumably the UK, would also feel
an obligation to supply gas to Ukraine. Its own leader, President Zelenskyy,
defends his country’s interests and is apparently trying in this context to
involve NATO in the Russo-Ukrainian war in various ways—even if this
entails the risk of a third world war between NATO countries and Russia.
It is debatable how much an energy import embargo by Germany or
the EU will weaken Russia’s economic growth; and whether such an
embargo will be able to significantly reduce President Putin’s willingness
to continue the war, or whether Russia’s ability to wage war in the future
can be significantly restricted in this way. There is little doubt that Russia
will be able to sell its oil (possibly no longer able to sell it in the West) at
a discount in Asia. In the event of a Western gas import boycott against
Russia or a Russian gas export boycott, there will also be a surplus supply
of gas from Russia; surplus gas tends to be difficult to sell in the short
term, as pipelines dominate gas exports and the gas transportation capac-
ity of many pipelines is fully expended. The West’s financial sanctions
against Russia are likely to have a harsher effect, although they also appear
questionable in some respects. The problem of a cyberwar between Russia
and OECD (or NATO) countries should not be underestimated as an
additional disruptive dimension. It should not be assumed that the West
would impose sanctions against Russia without counter-sanctions coming
from Moscow. Even without an energy import boycott by EU countries,
xx PREFACE

Russia’s economy will shrink significantly in the medium term; by a good

10% in 2022 alone, and the recession will continue in subsequent years.
An economic collapse in Russia would likely have only a minor impact
on Russia’s propensity for war in Ukraine initially; in any case, it will lead
to economic destabilization effects in other Central Asian countries—two
countries recorded an inflow of guest worker remittances from Russia in
2021 that accounted for more than 15% of their respective national
incomes. Rising unemployment in Russia will certainly affect migrant
workers from Central Asian countries, and the prosperity and import
opportunities of these countries will decrease. Border disputes that already
exist between some Central Asian countries—and which have even resulted
in military clashes in recent years—could intensify in a phase of weakened
economic development, with Russia temporarily dropping out as the pre-
vious regional power and guarantor or order; the EU has no presence in
the region to speak of; at most, Turkey could expand its role as an influen-
tial power and try to maintain order in the region. Western economic
sanctions against Russia thus certainly have an impact not only on Russia,
and its government, but also on many countries around the world.
Since Russia and Ukraine are both leading exporters of wheat and
important raw materials, the Russo-Ukrainian war could also lead to sig-
nificant problems in the production of industrial goods in OECD coun-
tries as well as to massive price increases and more hunger in developing
countries. An important task of the International Monetary Fund (IMF),
the World Bank and the United Nations Food and Agriculture Organization
(FAO) is to have a dampening effect here by employing aid funds. The
IMF will also continue to monitor its policies toward Ukraine and Russia.
I myself was invited by the IMF to an expert meeting in Washington, DC,
in 1998 during the Russian financial crisis—also called the Ruble crisis.
The discussion among the experts at that time was no doubt helpful in
some regards. The 1998 Russian financial crisis was, paradoxically, partly
caused by the outlandish advice from the IMF for Russia to fix the Ruble
exchange rate against the US dollar. This was a clear contradiction to the
standard economic approach in the theory of optimal currency areas,
according to which a country like Russia—with a dominance of a few
goods in its exports (in this case, energy exports)—should have flexible
exchange rates.
At the Washington, DC, IMF expert meeting on Russia in 1998, which
was chaired by Stanley Fischer, I was able to refer to a wide range of trans-
formation and Russia-focused analysis at the research institute of which I
 PREFACE xxi

am president, namely the European Institute for International Economic

Relations (Europäisches Institut für internationale Wirtschaftsbeziehungen
or EIIW); I referred, moreover, to the issue that there was no representa-
tive from the Bank of Finland’s Institute for Emerging Economies sitting
at the table, although the analyses of the Bank of Finland’s Russia experts
were considered to be at the cutting edge of research on the Russian econ-
omy at the time.
One might hope that the competence of the IMF teams in 2022 is
appropriately high in the context of the Russo-Ukrainian conflict. In
Germany and beyond, a very public dispute emerged in the wake of the
Russian invasion concerning the competence of Western, and especially
German, policy with respect to Russia in the decades before 2022. Quite
a few moderators and presenters in televised news and current affairs dis-
cussion programs present the situation in such a way that one could and
should always have known that Russia would indeed one day take military
action against Ukraine; and that the German (and Western European)
formula of change through rapprochement—specifically: “change through
trade”—corresponded to a misjudgment. However, in the past decades,
those same media commentators and presenters have themselves hardly
ever asked critical questions about Germany’s Russia policy, with the pos-
sible exception of the Nord Stream 2 gas pipeline project.
Second, the idea that a greater trade intensity between countries is con-
ducive to peace is indeed an old view that can be traced all the way back to
the British economist David Ricardo in the nineteenth century.
Unfortunately, economic history has often shown that increased trade is
only one condition for peace; otherwise, for example, there would have
been no Balkan wars following the breakup of Yugoslavia. For Germany
and other EU countries, the Kosovo War in 1999 brought the first recent
turning point in terms of large refugee flows. Bodo Hombach, former
head of the Chancellor’s Office under Chancellor Gerhard Schröder,
pointed out in a lecture in Washington some years ago that Germany’s
participation in the Kosovo War was motivated by the fear of an uncon-
trollable wave of refugees emanating from the Balkans toward Germany,
which would have been expected in the case of a continued and extended
rule by Serbian President Slobodan Milošević, who had engaged in violent
oppression against Kosovars and Bosnians.
Massive refugee movements from Ukraine have occurred in spring
2022 and, in economic terms, this means a macroeconomic demand stim-
ulus for the countries of refuge—above all Poland and other Eastern
xxii PREFACE

European EU countries, but also Germany, Italy, and France—and, of

course, problems associated with finding accommodation, which may
result in price increases on the real estate market in the short term. In the
medium term, when some of the refugees are integrated into the respec-
tive labor markets, there will also be a positive growth effect. Some EU
countries have made large commitments for refugees from Ukraine: with
Poland and several other eastern European EU countries plus Germany
and Italy being leading countries in this context. Taking a closer, compara-
tive look at aid commitments for Ukraine—relative to the real income of
donor countries—shows interesting (and rather different) rankings; there
is an IfW-Kiel-ranking, which ignores the expenditures on refugees, and
an alternative EIIW-ranking, which includes expenditures for Ukrainian
refugees
Many EU countries have responded to Russia’s attack on Ukraine by
increasing defense spending. Higher defense spending is a positive demand
driver in OECD countries. At the same time, it should be borne in mind
that the significant number and types of Western sanctions measures and
Russian countermeasures amount to a significant weakening of global eco-
nomic integration.
There will be strongly negative economic effects of the Russo-Ukrainian
war. The weakening of the Western economic recovery and the increase in
defense spending in Germany and other Western countries will increase
the government budget deficit ratio. However, some Western countries
are unlikely to see real interest rates rise—for example, the US, the UK,
Germany, and France are considered to be “safe havens” from the perspec-
tive of international investors. In view of inflationary pressures, the central
banks of the US, the UK, and the Eurozone would actually have to raise
central bank interest rates significantly in 2022, but due to the economic
weakness in the OECD countries, some central banks will postpone such
measures. It remains to be seen whether this will give rise to serious stag-
flation risks in the medium term.
The world economic order could change fundamentally if the Russo-­
Ukrainian war cannot be ended relatively quickly and Russia’s role as an
active member of important international organizations restored. This lat-
ter process is likely to take about a decade. However, if China and Russia
were to move closer together politically and militarily, and a continued or
further weakening of international organizations could not be avoided,
then the disintegration of the current international rules-based economic
order would be imminent. For countries with a strong international
 PREFACE xxiii

position in terms of trade and capital flows, such as Germany, the UK, the
Netherlands, Belgium, and Switzerland, this would be a structural deteri-
oration and a threat to long-term prosperity. In the longer term, there is
the threat of an increased militarization of international economic
relations.
The study builds upon earlier analyses of economic system transforma-
tion in Russia, Poland, Hungary and other Eastern European countries—
including a project that was carried out during the Gorbachev era, whereby
the project team also included researchers from St. Petersburg (Leontief
Institute) and Kharkiv University. In view of the Russo-Ukrainian war, the
system transformation has only been partially successful, and the question
of how to secure prosperity, international economic cooperation, and
peace in Europe in the long term is an ongoing challenge. The German
and Eurozone economies face significant structural adjustments after
2022/2023, and the global economy faces increased inflationary pres-
sures, tendencies toward de-globalization and slower economic growth,
and deteriorating cooperation in international climate policy. The corona
crisis in Europe and the global economy has not yet really been overcome,
as the Russo-Ukrainian conflict has led to significant price shocks in many
regions of the world economy and is likely to continue to weigh on finan-
cial markets for several years; increased risk in industrialized countries will
be reflected in increased fluctuations on the stock markets, among others
effects.
The post-war reconstruction of Ukraine will be a particular challenge
for Western countries. EU integration is likely to intensify, but at the same
time, it will become more complicated as economic heterogeneity in the
EU will increase with the probable acceleration of EU enlargement round
to include some Western Balkan countries. This will make it more difficult
to find a political consensus. This would also hold in the case of an enlarge-
ment of the EU to admit Ukraine as a member; a hasty and ill-conceived
EU enlargement in the east is likely to lead to the next BREXIT case. Thus
far, the EU has not drawn the real and necessary conclusions from the
BREXIT debacle.
It will remain a difficult task for the EU to secure good relations with
Russia and China and to restore security across Europe. The economic
debates and the main aspects highlighted here are manifold, the effects of
the Russo-Ukrainian war are global and fundamentally affect the dynamics
of globalization. In the medium term, we can expect at least a temporary
de-globalization of the economy and the influence of international
xxiv PREFACE

organizations is likely to decline—a worrying perspective in a phase of an

increased tendency toward international conflict. There will be a whole
range of decisions to be made in the context of the Russo-Ukrainian war
in Europe, the US, Asia, and Africa, and the analytical findings presented
herein are of fundamental importance in many areas. Of course, the pres-
ent study can only work through a limited field of problems. Yet the inter-
connectedness of the issues highlighted as well as the research methodology
used on important topics should hopefully provide readers with a quality
of analysis that should have lasting appeal and the warnings presented and
policy options of a new kind recommended should be useful.
In the first year of war, it is fundamentally impossible to make any
detailed forecasts on the further dynamics of the war itself. However,
major economic dangers and risks, as well as serious challenges to and
changes in the world order, can nevertheless be foreseen. In fact, the rela-
tively limited Russo-Ukrainian war is leading to global problems and
weighty changes in foreign, economic, and cooperation policies, among
other areas. Critical economic questions that have been raised in the West
since this war began with regard to Russia are also being raised to some
extent with regard to China, which has positioned itself as a political ally
of Russia. The new global order is likely to be less characterized by global-
ization and international worldwide cooperation; and here lies consider-
able risk not only for prosperity and stability in the industrialized countries
and worldwide, but also for global climate protection policy. The latter
can only be successfully implemented by way of cooperation between the
West, Russia, and China as well as other important groups of countries.
Cooperation is likely to become much more difficult for a few years; and a
foreseeable reduction in global technology trade—and presumably less
direct investment relative to global income—will also make it more diffi-
cult to achieve climate neutrality by 2050 either more quickly or indeed
optimally through increased global innovation dynamics. For now, the
major international challenge is the terrible war in Ukraine - and how
to end it.
One of the peculiar findings of the analysis presented herein is that the
fields of science and politics in the West have not really picked up certain
relevant and timely studies in the matter of Russia and Putin’s own ideo-
logical framework, respectively. In 2015, the French philosopher Michel
Eltchaninoff published a very insightful book, which was also published in
German a year later; but which appeared in English only in 2018. The
English edition of the book Inside the Mind of Vladimir Putin (Hurst &
 PREFACE xxv

Co. Publishers) was cited very rarely in the following three years—
although, one should note that one such citation was by a US military
analyst in her publication. Unfortunately, the latter author, misunder-
standing Eltchaninoff’s analysis, concluded that Russian further military
aggression against Ukraine was not to be expected. One can only wonder
to what extent the study by Eltchaninoff was taken up in time—or at all—
by Western intelligence services and politicians. Incidentally, the media
coverage of Ukraine and related issues is sometimes strangely erroneous
(even the World Bank published a press release on April 10, 2022, that, for
example, reported the sum of guest worker remittances from Russia to
Kyrgyzstan and Tajikistan to be twice as high as they actually were). The
fact that on certain news broadcasts on German television in March 2022,
reporters also repeatedly confused millions and billions of Euro in terms
of EU military aid is, by the way, worrying in terms of the quality of jour-
nalism on a very important topic; it is also downright dangerous with
regard to a potential escalation in terms of an EU-Russia conflict.
In the end, the big question facing policymakers is how to bring about
a new, stable and humanitarian world order with good prospects for
achieving climate neutrality—not by permanently excluding Russia from
the global community, but by integrating the country better only after
comprehensive political reforms.
Looking at the four economic fields of an aging society, ICT expansion
(ICT stands for information and communication technology), economic
inequality and globalization (trade and direct investment), and relating
them to the Russo-Ukrainian war, important perspectives emerge for
Russia, China, the EU (plus the UK), and Ukraine as well as Japan and
China. Depending on the outcome of the Russo-Ukrainian conflict, two
alternative scenarios emerge here—an increase in nominal interest rates in
the medium term and real interest rates in the long term. The Russo-­
Ukrainian war causes an international slowdown in economic develop-
ment, which for China brings a dampening effect in real growth and a
lower inflation rate than in the US and the Eurozone plus UK.
In the UK, the Johnson government will push for the UK’s agreement
with the EU over Northern Ireland (the Northern Ireland Protocol) to be
effectively terminated in the slipstream of the Russo-Ukrainian war.
However, according to Speaker Nancy Pelosi, the US will reject such a
move—there can be no US-UK free trade agreement, she said, if the UK
would, in doing so, also effectively undermine the Good Friday Agreement,
which brought peace to Northern Ireland (and in which the US played a
xxvi PREFACE

part in negotiations). The British strategic approach after BREXIT, namely

that of a “Global Britain” with more trade after leaving the EU, would
then be neutralized. It will also hardly be feasible because the US has only
partially given full support to the World Trade Organization under the
Biden administration; difficulties with reforms of the aforementioned
organization have led the Biden administration to tackle international
trade issues more via, for example, the new US-EU institution Trade and
Technology Council in 2021/2022, which means a BREXIT-related dis-
advantage for the UK.
Ukraine will push for quick EU membership after a peace deal with
Russia, but one could advise the EU against rushing an accession, as the
risks of the next “BREXIT” would then be relatively high, unless a really
well thought-out admission strategy for Ukraine is developed on the EU
side. If the next hasty enlargement of the EU to the east should only accel-
erate further EU disintegration, Putin would probably have achieved his
goal of weakening the West in various areas after all. From the EU’s point
of view, US leadership should be seen with a question mark in the medium
term, because the US is latently unstable politically speaking due to the
enormous economic inequality in that country that could be overcome
with European-style social policies, while at the same time opinion polls in
the US show that the majority of the electorate rejects such social policies.
Rather, a relative majority of respondents want large US firms and busi-
nesses to eliminate inequality by changing corporate wage structures: an
illusory expectation in the US market economy. This, in turn, favors the
resurgence of populism in the US, that is, Trumpism, along with political
polarization that will hardly allow for Western leadership (on this, see my
book The Global Trump [2019, Palgrave Macmillan]).
It is therefore up to the—already in part overstretched—EU to contrib-
ute to the stabilization of the West through clever reforms and policy
projects and, in the process, ultimately also to induce the US to switch
more strongly to a social market economy model as the economic order of
the twenty-first century. A multi-year occupation of parts of Ukraine by
Russia will create a relatively unstable situation in the middle of Europe.
Overall, the present analysis shows how the terrible Russo-Ukrainian war
came about—identifying political mistakes on the part of the West and
certainly also on the part of Russia, as well as weaknesses in Western
research on Russia are two important explanatory pillars. Incidentally,
there is little reason to believe that the US market economy is inherently
stable—the 2007/2008 Transatlantic Banking Crisis has already exposed
 PREFACE xxvii

enormous weaknesses in the Anglo-American model. With its democra-

cies, however, the West has always remained capable of reform in impor-
tant fields, which can make the combination of a market economy,
democracy, and the rule of law an attractive prospect in the long term;
perhaps one day it could even bring about a rethink in China.
I would like to thank my colleagues at the Chair of Macroeconomic
Theory and Policy and at the EIIW, at the University of Wuppertal, for
their support in the research process, especially Julia Bahlmann, David
Hanrahan, Kaan Celebi, Alina Wilke, Tobias Zander, and Tian Xiong; as
well as Christina Wiens, Rebecca Addy, and David Hanrahan for editorial
assistance. I am very grateful to my colleague Werner Röger for his valu-
able insights and comments on the economic aspects of an EU energy
import boycott; finally, I am grateful to anonymous reviewers of the draft
manuscript who suggested that I consider additional aspects—I hope their
feedback is now reflected in the—improved—book. The responsibility for
the analysis lies solely with the author.

Wuppertal and Brussels, Germany Paul J. J. Welfens

September 2022
 Contents

Part I The Background to the Russo-­Ukrainian

War and Contextual Factors   1

1 Beginnings of the Russo-Ukrainian War  3

2 Turning Points in the Russo-Ukrainian War 45

3 The
 West and Russia: Frozen Relations Between
the UK and Russia for Decades 69

4 Energy Perspectives 77

Part II The Implications of an Energy Import or Export

Boycott  93

5 A
 Russian Energy Import Boycott by Germany
or the EU as a Policy Option? 95

6 A Russian Gas Supply Boycott Against Western Countries 99

7 Asia
 and the Global Effects of an EU Energy Import
Boycott of Russia115

xxix
xxx Contents

Part III Wider Economic Challenges Arising from the

Russo-Ukrainian War 123

8 EU-China-Russia:
 Macroeconomic Aspects and
Multinational Enterprises125

9 Ukrainian
 Refugees and Ukrainian Guest Workers in EU
Countries and Their Effects on Ukraine and the EU155

10 Key
 Ukraine-related Emigration Aspects and EU
Enlargement Risks with Ukraine167

11 International
 Aid Pledges to Ukraine: Coverage, Effects,
and Potential Challenges181

Part IV The Implications for a New Global Economic Order 205

12 Scenario Perspectives207

13 A New Global Economic Order221

14 Free
 Trade, Freedom, the Rule of Law, and Democracy
Belong Together271


Annex A: German-Russian Economic Relations in 2021
(Federal Statistical Office of Germany, 24/2/2022)291

Annex B: NATO Aircraft for Ukraine?295


Annex C: Ukraine’s Neo-Nazi Problem—Cohen (2018),
Published on REUTERS on March 19th, 2018297


Annex D: EU Sanctions Against Russia (from EU Ukraine
Support Website, March 2022)299
 Contents  xxxi


Annex E: OECD Interim Economic Outlook, March 2022
(Economic Model Analysis of the Russo-Ukrainian War/Main
Assumptions and Selected Results)301


Annex F: Joint Statement by the Leaders of International
Financial Organizations with Programs for Ukraine and
Neighboring Countries (World Bank, 2022a)305


Annex G: Intra-EU Solidarity Requirements of Member
Countries under the EU Gas Supply Emergency Directive
(Excerpts: 2017)309

Annex H: Largest Exporters of Crude Oil and Coal317


Annex I: On Important Sectors with High Electricity Intensity
of Production (Expert Opinion for the German Federal
Ministry of Economic Affairs and Energy, 2015)321


Annex J: Sanctions Against Russia (According to Spisak
[2020], Tony Blair Institute)327


Annex K: Extract from the Emergency Plan for Gas for the
Federal Republic of Germany (2019); (Transl: PJJW)331


Annex L: Indirect Job Effects of Major Sectors in Germany
(per 100 Direct Job Effects in the Respective Sector; Based on
Input Output Analysis)335


Annex M: Conceptual Framework—Key Quantities in the
Bachmann et al. (2022) Model337


Annex N: On International Citations of the Eltchaninoff Book
on Putin (English Edition: Inside the Mind of Putin)339


Annex O: IMF World Economic Outlook Projections, April
2022343
xxxii Contents


Annex P: Traditional Gas Market Perspective in the EU and
New Approach347


Annex Q: EU Trade Relations with Ukraine. Facts, Figures,
and Latest Developments (European Commission, 2020b)351


Annex R: House of Commons Foreign Affairs Committee
(2017)355


Annex S: Simplified Regression Analysis for the Russian Real
Gross Domestic Product, 2005–2021357


Annex T: Analytical Approach for the Economic Effects of a
Gas Cut-off in Germany in the Second Half of 2022,
According to Lan et al. (2022, p. 25)365

Index369
 About the Author

Paul J. J. Welfens is a long-time researcher of Russian economic devel-

opment and European integration as well as an expert on EU-US and
EU-China economic relations. He has been invited as an expert to the US
Senate, the IMF, the World Bank, the European Central Bank, the
European Parliament, the European Commission, the German Bundestag,
and the UN, as well as the InterAction Council, amongst others. He is
President of the European Institute for International Economic Relations
(EIIW) at the University of Wuppertal, where he also holds the Jean
Monnet Chair in European Economic Integration and the Chair of
Macroeconomic Theory and Policy. He is a research fellow at IZA, Bonn,
and a Non-resident Senior Research Fellow at AICGS/Johns Hopkins
University, Washington, DC. He was Alfred Grosser Visiting Professor at
Sciences Po, Paris, in 2007/2008.

xxxiii
 List of Figures

Fig. 1.1 Map of Eastern Europe showing Ukraine, Russia, the Exclave of
Kaliningrad, the Baltic States, Poland, Belarus, and other
countries. Source: Own representation; created using
Datawrapperhttps://www.datawrapper.de19
Fig. 1.2 Google trend analysis for Germany: “war Russia”, “inflation”,
“recession”, and “gasoline price”. Note: Weekly data are in
whole numbers; lowest value “<1”. Source: Own presentation;
data from Google Trends (https://www.google.com/trends) 31
Fig. 1.3 Google trend analysis for the US: “war Russia”, “inflation”,
“recession”, and “gasoline price” Note: Weekly data are in whole
numbers; lowest value “<1”. Source: Own presentation; data
from Google Trends (https://www.google.com/trends) 32
Fig. 1.4 Changes in crude oil prices on a daily basis, from January 1,
2021, to March 21, 2022. Source: Own presentation and
calculations; data from Federal Reserve Economic Data (as of
2022)34
Fig. 1.5 Business cycles from 1970 to 2020 in the US, Germany, France,
Italy, the UK, and Japan—percentage of annual rate of change
in real GDP. Source: EIIW presentation; data from the World
Bank (World Development Indicators, as of 2022) 35
Fig. 1.6 Selected share price developments, 2019–22 (daily values):
Germany, the US, Eurozone, the UK, Japan, China. Note: This
chart shows the performance of the world’s major stock indices
from January 4, 2019, to March 29, 2022 (January 4,
2019=100). Source: Own calculations; data from investing.com,
onvista.de39

xxxv
xxxvi List of Figures

Fig. 2.1 Real economic growth (annual growth rate in percent):

Emerging market economies and developing countries, world,
Ukraine, Russia, Poland. Source: International Monetary Fund
(World Economic Outlook, as of October 2021) 54
Fig. 4.1 EU gas imports from main trading partners (non-EU), 2020
and H1 2021 (share in % of trade value). Source: Own
representation of data from Eurostat Database (Comext) and
Eurostat estimates 78
Fig. 4.2 EU oil imports from main trading partners (non-EU), 2020
and H1 2021 (share in % of trade value). Source: Own
representation of data from Eurostat Database (Comext) and
Eurostat estimates 79
Fig. 5.1 The share of Russia in total energy import supply for selected
countries, relative to domestic consumption, 2019. (Note:
Figures above 100% may include (a) transit volumes, (b) stocks,
and/or (c) import of crude oil, its refining and subsequent oil
exports. * Estonia shows negative values for oil (−4574%, set to
0% here) due to statistical processing of oil shale liquefaction
processes. Due to the structure and definition of energy
balances, the TES for crude oil is negative as it picks up exports
but not production. This methodology is only applied for these
two years, but will be extended to all time series in the
forthcoming IEA statistical release. Source: Own presentation
based on OECD (2022), data from IEA (2022): Reliance on
Russian Fossil Fuels, online: https://www.iea.org/data-­and-­
statistics/data-­product/reliance-­on-­russian-­fossil-­fuels-­in-­oecd-­
and-­eu-­countries) 97
Fig. 6.1 Expected real income loss with a 20% decline in energy imports.
Note: Based on a reduction of 20% of direct and indirect imported
energy inputs from fossil fuels, refined fuel products, and electricity
and gas supply. Source: Own calculations based on OECD XE
“Organisation for Economic Co-operation and Development”
(2022), Fig. 6. Data from OECD IOTs 2021 database 103
Fig. 6.2 European Central Bank’s CISS indicator for financial market
system stress in the Eurozone, from January 5, 2007, to March
25, 2022. Note: Weekly index data for January 5, 2007, until
March 25, 2022. Source: ECB Statistical Data Warehouse,
Composite Indicator of Systemic Stress (2022), EIIW Graph 106
Fig. 6.3 Development of CISS in the US and the Eurozone (daily
values, from January 1, 2007, to March 30, 2022). Note: Daily
index data from January 1, 2007, until March 31, 2022. Source:
ECB Statistical Data Warehouse, Composite Indicator of
Systemic Stress (2022), EIIW Graph 107
 List of Figures  xxxvii

Fig. 11.1 Comparison of government aid to Ukraine as a percentage of

GDP by Antezza et al. (IfW Kiel, 2022) and Welfens (see
Welfens, 2022b)—the role of refugees. Source: Own
presentation. Data from Ukraine Support Tracker, Antezza
et al. (2022), version 2, May 2, 2022; UNHCR (2022);
Wikipedia (2022, “2022 Ukrainian refugee crisis”, compiled
secondary data from figures reported by national governments);
number of Ukrainian refugees in Germany: https://www.zdf.
de/nachrichten/panorama/fluechtlinge-­deutschland-­bamf-­
ukraine-­krieg-­russland-­100.html; other data through April 27,
2022196
Fig. 13.1 Supply Chain Issues in the Eurozone and the US, 2020–2022
(January and February). Source: ECB XE “European Central
Bank” (2022), Economic Bulletin 2022/2, p. 53 236
Fig. 13.2 CO2 Certificate Price Dynamics in the EU, 2008–2022
(quarterly values). Source: Own representation of data available
from https://icapcarbonaction.com/en/ets-­prices 238
Fig. 13.3 Remittances in Countries in Eastern Europe, the Caucasus, and
Central Asia as Percent of GDP in 2020. Source: Own
representation on the basis of data available in Ratha and Kim
(2022), Table 1 247
 List of Tables

Table 1.1 Selected data for the world economy and key countries/
country groups from the IMF July 2022 World Economic
Outlook Update, including size of revisions between July and
April WEO, for output, inflation, and trade 17
Table 1.2 Share of fossil energy imports from Russia in domestic energy
consumption of selected countries, 2019 38
Table 2.1 Top 15 leading countries in natural gas reserves as of end
of 2020 49
Table 2.2 Top 15 natural gas exporters (in volume), estimated 2017 50
Table 2.3 Country ranking of bilateral aid commitment to Ukraine in
percentage of donor country GDP, February 24, 2022—
March 27, 2022 61
Table 4.1 Russia’s share in national non-EU Imports of EU member
dtate, H1 2021; share (%) of trade by value, sorted by gas
share and alphabetically 80
Table 6.1 Expected loss of real income in the event of a German energy
import boycott against Russia (DE=Germany) 109
Table 8.1 Total net outward FDI stocks of selected OECD economies
with Russia as a partner country in 2020 145
Table 8.2 Total net inward FDI stocks of selected OECD economies
with Russia as a partner country in 2020 146
Table 9.1 Refugee movements from Ukraine, as of March 30, 2022
(total influx from Ukraine in neighboring countries) 156
Table 10.1 Technical EU pillars: clusters of negotiating chapters for EU
enlargement (European Commission, 2020) 175

xxxix
xl List of Tables

Table 10.2 Ukraine’s implementation ratings of the main provisions of

the association agreements and DCFTAs (Early 2022) 177
Table 11.1 Total pledges of assistance to Ukraine by selected European
and other countries—Antezza et al./IfW Kiel expansion
(2022): Plus pledges for refugees (in two scenarios), sorted
by minimum total pledge in penultimate column 187
Table 11.2 Total pledges for aid to Ukraine by selected European and
other countries—Antezza et al. expansion (2022): Plus
pledges for refugees (in two scenarios) as a % of the donor
country’s GDP (2020), sorted by the minimum total pledge
in the penultimate column 190
Table 11.3 Total pledges of aid to Ukraine by selected European and
other countries—Antezza et al. expansion (2022): Plus
pledges for refugees (in two scenarios) as a % of total pledges,
sorted by share of refugee pledges 193
Table 13.1 Distribution of Political Power in the EU27 and in an EU28
That Includes Ukraine (according to Banzhaf Index), on the
Basis of Kirsch (2022) 241
Table 13.2 Corruption Perception Index Rankings for Selected
Countries, 1995–2020 244
Table 13.3 Gross Domestic Product of Selected Countries and
Integration Groups, Nominal and as Share of World GDP,
2020 (Ranked by Share of World GDP) 259
 PART I

The Background to the

Russo-­Ukrainian War and Contextual
Factors
 CHAPTER 1

Beginnings of the Russo-Ukrainian War

The escalation of the Russo-Ukrainian war, which entered its current

phase with an act of Russian aggression at the end of February 2022, has
led to considerable arms deliveries by North Atlantic Treaty Organization
(NATO) countries to Ukraine plus sanctions measures being imposed by
the West, including by the European Union (EU). These include inter-
ventions in international financial flows and the ability of a considerable
number of Russian banks to participate in international payments, for
example, via the SWIFT network. In addition, there is a relatively compre-
hensive EU oil import embargo against Russia, but as of yet no EU
embargo has been imposed on gas from Russia. On the other hand, by
mid-2022, Russia had stopped gas deliveries to five EU member countries,
and gradual cuts in the gas supply by Russia to Germany and Italy in June
are probably an expression of Russian countermeasures against EU
sanctions.
It is clear that Russia’s 2014 invasion of Ukraine and occupation of
Crimea—and the subsequent annexation of Crimea—based on a question-
able referendum—has already worsened the political and, less so, the eco-
nomic relations with the West over almost a decade; a limited range of
sanctions on Russia has been among the consequences, while Russia’s
membership of the Group of Eight (G8) was also suspended. At the same
time, it seemed that Russia’s strategic position in the Black Sea area had
improved due to full control of the ports of Crimea. The new, Russian-­
built Crimean Bridge (also known as the Kerch Bridge), which links

© The Author(s), under exclusive license to Springer Nature 3

Switzerland AG 2022
P. J. J. Welfens, Russia’s Invasion of Ukraine,
https://doi.org/10.1007/978-3-031-19138-1_1
4 P. J. J. WELFENS

Crimea with Russia, could become a target of the Ukrainian armed forces
since Ukraine has obtained some new medium-range weapons from
Western countries with which it could target the bridge from a great dis-
tance. However, if Ukraine would destroy this new bridge, it could be
seen as an escalation of the war and one may presume that the US would
not easily accept such an attack by the Ukrainian military. As regards the
consequences of the Russian annexation of Crimea, and the Russian gov-
ernment’s support for political and military unrest in the Donbas region,
there has been an in part low-key radicalization of Russia’s policy stance
over time—however, Vladimir Putin’s public questioning of the legitimacy
of an independent Ukrainian state has apparently been the political start-
ing point of Russia’s preparation of the further invasion of Ukraine in
2022—and the international responses to that act of military aggression—
which are the focal point of this book.
Overall, there is a kind of economic war being waged between the West
plus Japan, the Republic of Korea as well as Australia and others on one
side, and Russia on the other. The Russo-Ukrainian war itself has signifi-
cant repercussions for Ukraine, which is under attack, but also for Russia.
Russia’s position as a major international exporter of oil, gas, wheat, and
fertilizer, and Ukraine’s similar role especially in terms of wheat, creates
global economic effects through rising price expectations for commodities
and grain, while the large number of political adversaries of Russia among
industrialized countries indirectly internationalizes the conflict’s impact.
In Russia itself, there is probably a relatively small opposition to the war,
especially among young people and intellectuals. However, President
Vladimir Putin is cracking down—as he has done before—on protesters
and critics. The sanctions imposed by the West make economic life more
difficult for people in Russia every day. Yet in the past 40 years, Russia has
also already endured a real income decline of over 10% (during the trans-
formation crisis at the end of the Soviet Union).
For Russia, at least in the short term, the decline in energy export rev-
enues is relatively manageable as market prices for oil and gas have risen in
2022: lower export volumes to Europe are accompanied by significantly
higher energy prices. Meanwhile, the fierce military clashes in Ukraine
continue. Russia’s invasion of Ukraine is a shocking experience for the
people of that country and brings with it an enormous amount of suffer-
ing and destruction; it also brings significant declines in exports and pro-
duction. The International Monetary Fund (IMF, 2022b) estimates the
decline in Ukraine’s real gross domestic product (GDP) in 2022 at −35%.
 1 BEGINNINGS OF THE RUSSO-UKRAINIAN WAR 5

This is significantly higher than the corresponding estimate for Russia,

which the IMF (2022c) puts at −8.5%, while the inflation rate in Russia is
expected to be a high 21% in 2022. If the war drags on, the loss of life and
the economic cost will continue to rise. As recently as January 2022, the
IMF growth expectation for the year was just over 2% for Russia. The
economic war with the West and reduced imports from the EU, the UK,
the US, and other Western countries will result in production losses in
Russia and at the same time increase import prices. According to IMF
estimates from June 2022, the unemployment rate is likely to be close to
reaching 9% over the course of the year. These figures serve as a kind of
statistical departure point as changes in the perception of Russia’s eco-
nomic development and output growth in the West and the world econ-
omy have arisen, including on the side of the IMF (2022d), for example.

Key Thoughts on the Analytical Framework

Looking at the developments in Ukraine, Russia, the EU, the UK, the US,
and other Organisation for Economic Co-operation and Development
(OECD) countries plus Newly Industrializing Countries (NICs; including
China) from an economic perspective—and with a politico-economic
view—means raising several key questions:

• What is the recent historical background to the Russo-Ukrainian

war, which—at first glance—started with Russia’s invasion of
February 24, 2022, but which obviously has a far longer history at
least back to 2013 when Russia’s plans to conquer Crimea gained
significant momentum followed in 2014 by Russia’s invasion—partly
in a covert format using unidentified military personnel, which
became known as the “little green men”—of Crimea; Russia also
sponsored rioting and unrest in the eastern parts of Ukraine—the
Donbas region—which have a Russian-speaking majority, whereby
Russian-­speakers make up a minority in Ukraine as a whole. Ukraine
was part of the Soviet Union until Nikita Khrushchev and the
Presidium of the Supreme Soviet of the Soviet Union, respectively,
transferred jurisdiction of Crimea to Khrushchev’s own home repub-
lic, Ukraine, in 1954. Originally, the Russian Empire had annexed—
against the will of the weakening Ottoman Empire—the Crimean
Khanate in 1783. The Russo-Ukrainian war seemed in the months to
be primarily a war about control over the eastern Donbas region,
6 P. J. J. WELFENS

which Russia apparently wanted to conquer and annex as it had

Crimea. However, with Ukraine receiving sophisticated Western
weaponry, in August 2022, Kyiv seemed to begin a serious attempt
to possibly reclaim Crimea in the south, which may be considered to
be an escalation of the war in the view of the Russian government
(such a view was voiced at the Davos Summit 2022 by the former US
Secretary of State Henry Kissinger).
• Should or could contributions from experts, analysts, and scientists
not have alarmed Western leaders much earlier than in 2021 when
the US security agencies clearly anticipated that a Russian invasion in
Ukraine would take place within a year or earlier? There is one book
to which I will refer in this context particularly, namely the book
Inside the Mind of Vladimir Putin by Michel Eltchaninoff, which was
published in 2015 in French and in 2018 in English (and also in
other languages). One might argue that no single book could have
critically sharpened the West’s analytical understanding of Putin’s
thinking on the question of Russia and Ukraine. Further research
could provide a more definitive answer here; but this book indeed
makes a very useful and critical contribution concerning Putin’s ide-
ological development over time and points out, among other ele-
ments, the fact that Ivan Ilyin became the preferred “new”
philosopher of Putin after 2000 (several of Ilyin’s books were written
during the 1920s and 1930s, but many were published in Russia
only in the late 1990s; and Ilyin’s focus on Russia and Ukraine in a
potential post-Soviet perspective is remarkable). If a US president
would gift 10,000 copies of a book of his “new” preferred philoso-
pher—a bit more than was the case in Russia under Putin to reflect
the larger US population compared to Russia—to leading employees
in his administration plus to managers from top companies and some
personal friends, scientists, and journalists, many politicians abroad
would take notice of this. The book, which Putin gave in 5000 cop-
ies to his network and friends, was hardly covered in the Western
media and apparently noted only a few analysts and experts in the
period 2018–2021. It is not known to this author the extent to
which Western secret services considered this book in a timely fash-
ion (historians will perhaps find out more about this in the future).
It is crucial to emphasize that research on Russia and Ukraine—par-
ticularly with a focus on Russian imperialist tendencies (see, e.g.,
Galeotti and Bowen (2014) or Soroka and Stepniewski (2020)) and
 1 BEGINNINGS OF THE RUSSO-UKRAINIAN WAR 7

with an understanding of the strategic foreign policy goals of Russia

under Putin in the second decade of the twenty-first century (e.g.,
Kuzio, 2020)—have pointed out that continued peaceful relations
between Russia and Ukraine seem to be rather unlikely. The books
of Anders Aslund (2007, 2009) and Dragneva-Lewers and Wolczuk
(2015) also are crucial contributions to the broader Russia-
Ukraine-­EU debate where authors have emphasized successful mar-
ket economy reforms in the new Russia on one hand, while a
sustained democratic system could not be established on the other.
One may add the loan-equity deal under President Yeltsin—he faced
a very high government budget deficit and borrowed from wealthy
Russians in order to greatly reduce the expected deficit, where major
state-owned firms were given as collateral in the relevant loan agree-
ments with the “oligarchs”; and when his government found it
impossible to repay the loans obtained, a small group of less than 40
rich families had achieved a very profitable, silent privatization of
major firms in Russia in 1995/1996: From that point on, a normal
variant of a Western democracy was impossible to realize in the new
Russia (it is also interesting to note that in the influential writings of
German economist Walter Eucken [Eucken, 1952] on Germany and
the market economy, he had emphasized the risk for democracy and
competition policy if economic power would be concentrated in the
hands of very few owners of the largest companies). There are several
interesting and insightful publications on the recent history of
Ukraine—and indeed some historical analyses too—which cover not
only the important event of Ukraine’s Maidan Revolution (or
Euromaidan) of 2013/2014 but also other critical aspects of Russia’s
Ukraine policy and Russia’s expansionist foreign policy (see, e.g.,
Wood et al., 2015; Petro, 2017; Plokhy, 2017; Shore, 2018;
Wynnyckyj, 2019; Smith, 2022).
• How uncertain are leading economists about the impact of Western
economic sanctions from spring 2022 on Russia and the direct
impact of the Russo-Ukrainian war on Russian real gross domestic
product? This question leads to a slightly modified question, namely
how strong are the forecast revisions of the IMF with respect to
Russia in the first six months after its invasion of Ukraine?
Alternatively, one could also check for similar figures with the World
Bank and other international organizations. The IMF’s July 2022—
revised—World Economic Outlook (IMF, 2022d) provides some
8 P. J. J. WELFENS

interesting insights and indeed shows that the Russo-Ukrainian war

(plus possibly smaller impulses from other regional/global shocks,
including instabilities in worldwide delivery chains emanating from
China) has had considerable national, regional, and global economic
effects: In the Western world, the IMF has noted some downgrades
in the previously (early April 2022) forecasted GDP figures (IMF,
2022a); not least because of the strong relative price increases of fos-
sil fuel energy sources, which have affected the world economy—
particularly in a negative way in the South of the world economy
where inflation acceleration 2021/2022 was also more marked than
in major OECD countries. At the same time, the July 2022 revisions
of the IMF have indicated that Russia’s exports of fossil fuels and
other commodities have been sustained at levels better than antici-
pated by the IMF in its April 2022 World Economic Outlook (IMF,
2022a). In July 2022, the IMF (2022d) also indicated that uncer-
tainty indicators for the world economy have increased in the first
half of 2022 and this economic uncertainty is partly related to newly
perceived military conflict risks in Europe and elsewhere, such as in
Asia where China’s reaction to Nancy Pelosi’s visit—she is the
Speaker of the US House of Representatives—in early August 2022
was rather unfriendly and clear: With military maneuvers and exer-
cises in the waters around Taiwan and economic sanctions on agri-
cultural exports of Taiwan. Pelosi’s visit to Taiwan was apparently
aimed at demonstrating in the midst of the Russo-Ukrainian war that
a potential future Taiwan-­China military conflict could lead to a sim-
ilar US political and military support for Taiwan as was the case with
Ukraine in its military conflict with Russia in 2022. While the econo-
mies of Russia and Ukraine account for circa 3% of world GDP and
a bit less than 0.5% of world GDP, respectively (both figures based
on purchasing power parity statistics for 2021), the international
destabilization impulses from Russia and Ukraine are considerable:
world market prices for oil and gas are raised by the conflict between
the two countries and Russia’s energy export policy pattern. With
both countries being major exporters of wheat and fertilizer—and
Ukraine also of corn—delivery problems due to Russia’s export pol-
icy and the blocking of Ukrainian grain exports via the Black Sea (a
problem that seems to have partly been solved due to successful
negotiations of Turkey, Russia, Ukraine, and the United Nations in
late July 2022) could affect key commodity markets and also raise
 1 BEGINNINGS OF THE RUSSO-UKRAINIAN WAR 9

grain prices in the South of the world economy to a critical extent:

creating new risks of deeper poverty and hunger problems as well as
new South-North migration pressure. Russia’s destabilization poten-
tial in the neighboring Central Asian former Soviet republics, which
have for over a decade sent many migrant workers to Russia is also
considerable as a serious recession in Russia will lead to higher unem-
ployment rates and reduced international remittances of migrant
workers, which, in turn, could destabilize countries such as
Turkmenistan, Azerbaijan, Uzbekistan, and Kazakhstan (which has a
border with Afghanistan) plus Kyrgyzstan and Tajikistan—the latter
three also with borders to China. Rosstat (2019) has indicated that
legal immigrants in Russia amount to 1.7 million; however, one may
presume that there also is a high number of illegal immigrants from
Central Asian countries so that data on remittances abroad are rather
interesting. To the extent that Russia’s military and Russian merce-
naries are active in parts of the Arab world and Africa, the interna-
tional destabilization potential of Russia is much bigger than the
share of its gross domestic product in world income indicates.
Military supplier links to India and other countries come on
top of this.
• Russia’s 2022 invasion of Ukraine can be understood to be an ele-
ment of Russian imperialism and Putin’s particular policy vis-à-vis
the former Soviet Republics. Soroka and Stepniewski (2020) point
to Putin’s Russia as seeking status at the international level and its
ambition to have a clear superpower status is not least linked to at
first becoming once again an influential, dominating regional
power—with a focus on the former Soviet Republics. This kind of
imperialism could indeed translate into an aggressive foreign policy
and threats with a military intervention. From this perspective, the
Russian invasion of Ukraine did come as a surprise for this strand of
the literature with its emphasis on a new imperialism of Russia under
Putin since about 2005.
• A special risk from the Russo-Ukrainian war concerns that nuclear
power plants in Ukraine could be damaged or destroyed by military
action by either side so that a new Chernobyl-type radiation propa-
gation could affect Russia, Ukraine, the EU, or other countries—
depending on wind directions relevant after a potential meltdown of
one of the reactors. Analyzing such risk is beyond the scope of
this study.
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VAPPUNA

Lupasinhan sinulle kirjoittaa, miten täällä maansydämessä

keväätärtä vastaan otan, kertoa kuinka Vappua saapuneeksi
tervehdin.

Pitkä päiväni kului kuten ainakin — vanhaan yksitoikkoiseen

tapaansa. Ennen puolista ummehtuneessa luokkahuoneessa
oppilaitteni kanssa ponnistelin, kansakoulun tietomäärästä
yksityiskohtia nuoriin kalloihin kalkuttelin. Iltapuolen ystäväni
maakauppiaan luona »Rettinkiä» tupruutellen kulutin. Rihkamalla
täytetyssä puotikamarissa ensin vehnäiskahvit, sitten teevedet juotiin
ja sävyisästi siinä »ahvääreistä», kunnan asioista, viimeisistä
sanomalehti-uutisista ja vuodentulotoiveista juteltiin. Rauhallista
tupakkapuhettamme häiritsi ainoastaan puotioven kellon ajottainen
kilinä, saaden kauppamieheni joka kerta vaistomaisesti pystyyn
syöksähtämään ja kamarimme ovessa olevan pienoisen lasireijän
kautta puotiintulijaa tarkastelemaan ja istuutuessaan säännöllisesti
— povitaskujaan taputtelemaan sekä suljetun kassakaapin lukkoja
hypistelemään — — —.

Ja nyt on ilta — on Vapunpäivän ilta!

 Istun puolipimeässä alasvedettyjen uutimien takana, kuunnellen
tulvillaan olevaa jokea, joka koskipaikoissa kohisten
vapaudenlaulujaan hyräilee.

Yksinäni nyt keväänjuhlaa väsyneenä vietän, hämärän tullessa

kahden kesken oraan uupuneen itseni kanssa iloitsen — — —.

Muistuvat mieleeni Vaput vaihtelevat, milloin mitenkin vietetyt,

milloin missäkin seurassa kuluneet —.

Näen kaihoni kaukosilmäisellä katseella miten on pääkaupungissa

Vappu-ilo korkeimmillaan, miten hämärässä valkolakkeja ja
kukkarintaisia vaaleita kevätpukuja kaikkialla parveilee.

Nyt lasiseinäinen Kappeli satojen sähkölamppujen säteillessä

ihmisiä vilisee, puhelusta surisee kuin suunnaton kimalaispesä.
Torvisoiton sävelet lämpöisessä kevätilmassa keinuvat ja soittolavan
edessä katujen kirjava kuulijakunta kihisee. Yli lehdettömien
lehmusten ja vaahterain soitto Operakellarista milloin kasvavana,
milloin heikkenevänä kohti Kappelia kiirii ja keväthämyiset kadut ovat
vaihtelevaa liikettä ja ääntä täynnä — naurunsekaista puhelua,
kavion kalsketta, rattaiden räminää, raitiotievaunujen kellonhelinää,
joka ilmassa väräjää ja soi — — —.

Viereisen luokkahuoneen seinäkello lyö — lyö yksitoista. Kumeasti

suuren tyhjän rakennuksen kuiva hirsiseinä kajahtaa ja kaupungin
äänten humusta herään todellisuuteen — tyhjän koulutalon
kolkkouteen ja yksinäisyyden epäselvään tuskaan.

Nostan uutimeni — sataa!

 Hieno vihmasade, tasaisesti tihkuen, muodostaa pieniä
mutkittelevia virtoja ruuduille. Yhä selvemmin kuuluu harmajasta
usvasta paisuneen joen ääni, tulee huoneeseen tulvan tasainen
kohina — siinä minun ylioppilaslauluni!

Yksin! Mutta — iloitkamme! Onhan Vapunpäivän ilta! Ja

yksinäisyys ja minä päätämme lystiä pitää, kahdenkesken tänä iltana
huvitella! Pois siis yksinäisyyden tuska, pois apeutuva mieli ja
maailman surkeutta sureminen — miksi nurkua!

"Nurkuminen ja tyytymättömyys ovat onnellisuuden pahimmat

viholliset" — opettaa lukukirjamme ja hilpeän pirullisella mielellä
päätän kuulun kirjan neuvoja muistaa — — —. Ja todellakin, miksi
nurkua, onhan kevät käsissä, onhan talven valta murrettu!

Luon taas silmäyksen ulos — ja katso!

Jo on itsepintaisesti pilvinen taivas paikoittain kirkastunut ja

kevätyön hieno hämärä kolkonruman huoneeni ikäänkuin
valoisammaksi saapi, niinkuin suurenemaan ja kohoamaan saattaa
ja minut haltioihini tuntemattomilla toiveillaan nostaa. Saapunut on
Pohjolan kevät, kirkastaen yöni, että näen miltei kirjaa lukea — — —
ja mieleni valkenee, katoaa katkeruus.

Terve sä varhainen kevät, runsaslahjainen, tuhatääninen!

Avaanpa akkunanikin — jo tunnen keväättären hengen

tuulahdukset! Leudoksi muuttunut kosteanlämpöinen tuuli minua
leikkisästi hyväilee, kantaen kosken kohinan milloin kuuluvampana,
milloin heikompana korvaani. Mutta niin se kohina nyt mielestäni soi
kuin heränneen luonnon kiitosvirsi ja säestäjänä toimii sateen
jälkeen yhä harvempaan tippuva räystäs — tip — — tip — — — tip
— — — —.

Vieläkö nurkuisin yksinäisyyttäni! Terve, sä varhainen kevät,

ylistetyt olkoot lahjasi!

Toithan jo minulle kirjorintaisen käen, jonka kaksiäänisen

kukunnan kuuloni kaukaisuudesta eroittaa. Laulaahan minulle
parhaillaan öinen leppälintu säveliään. Ja himmeävarjoiselta
männikkökankaalta puhelee laulurastas:

On kesä liki — on kesä liki!

On kevät jo käsiss' — on kevät jo käsiss'!

Ja hiirenkorvall' — ja hiirenkorvall'

On koivut, on koivut!

Ja totta onkin mitä laulurastas laskettelee. Huojuvathan akkunani

edessä kohta hiirenkorvaiset valkokoivut, nuorteat ja
kevättuoksuiset. Taempana laajenevat tummat toukokyntöiset pellot,
missä elämä kohta on kytevä. Toivorikkaana syksyinen oras jo
kaukaa täysivihreänä loistaa.

Tekee miltei mieli hymyillä, hiljalleen hyräillä — —. Tahdon nauttia

siitä mikä tarjolla on — kevättunteiden sekavasta riemusta, joka
minut valtaa, tuosta salaperäisestä ahdistuksesta, joka sydäntäni
kouristaa siihen aikaan kun luonto herääjä uudelleen syntyy, kun
kaikki nesteet nousua hankkivat ja tuoreena tuoksuu, höyryää maa.

Tarttuu minuunkin, yksinistujaan äänettömään tuo sama

elämänrohkeus, jota käenkukunta uhkuu. Luo mulle lohtua öisen
leppälinnun sävel, lämpöä sydämeeni sytyttää rämeellä viheltävän
viklan liverrys.

Jopa kumminkin kannattanee olla olemassa, elää ja toimia —

vaikka hiljaisuudessa, yksinäänkin!

Jo saatan miltei ylistää sinua, yksinäisyyttä! Lääkkeistä paras olet

sinä väsyneelle, nääntyneelle mielelle. Sinun seurassa opin itseni
paremmin tuntemaan, opin luontoa lähenemään, iäisyyden
käsittämään — — —.

Jo tulevat he — jo tulevat elämänhalu ja toivo luokseni

vierailemaan — — — hiljaisin askelin hämyiseen huoneeseni
hiipivät.

Muutama sadepisara singahtaa taas ruudulleni. Surullisesti

veisaten tuuli kiihtyy, uunintorvissa vaikeroiden huokailee. On
pimennyt taas ja joen heleä hopeavyö tummaksi painuu.
Sopusoinnussa se on harmaahuntuisen taivaan kanssa, joka äsken
vielä oli niin pilvettömän kirkas. Kalpeita sumupilviä lähellä
maanpintaa vaeltaa — täytyy sulkea akkuna — — —.

Hävinneet ovat harvinaiset vieraani — toivo ja elämänhalu.

Lakastunut on äsken puhjennut riemuni heleä kukkanen — ja tuttu
toverini, hämärä surumielisyys valjuna vieressäni istuu. Tyhjää ja
harmajaa kaikki — — — syksy keskellä kirkasta kevättä!

Ääneti on käki, lopettanut on leppälintu laulunsa. Surullisina,

avuttomina huojuvat pisaraoksaiset koivuni, kolkosti tuuli huokailee,
alakuloisia säveliä koski soittelee. Yksitoikkoisesti tippuen räystäs
nyyhkyttää ja pisara pisaralta katoaa rohkeuteni, aste asteelta
elämänhaluni alenee — — —.
 Ainoa toverini, vapauttaan hakeva harmaja sarvijaakko kömpii
pitkin ruutua ylös, aina uudelleen pudoten ja taas ylös yrittäen.
Tuntuu mielestäni kuin olisin itsekin tuollainen sarvijaakko, joka
kiipeilee, kiipeilee — pudotakseen. Kurja kuoriainen, jota olojen luja
lasiruutu vapauteen pääsemästä estää! — — —.
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