The military operation in Ukraine raises the question of the balance of losses and gains of major participants, as well as global players. Such a balance has not yet been found for Russia and Ukraine. Hostilities continue and no political settlement has been reached, meaning it is still unclear to what extent each side will be able to achieve the political goals for which a huge price has already been paid. both in human lives and in terms of enormous damage to the economy. The contours of the balance for global and regional players – the EU, US, China, Japan, Iran and others are more clearly visible.
The European Union bears the greatest losses and costs. They are associated with the severance of many trade and economic ties with Russia. The main challenge is the replacement of oil, gas, metals and a number of other Russian raw materials on the European market. This process will require a serious concentration of resources and political will. Over the next few years, this will affect EU economic growth and the competitiveness of European industry. At the same time, moving Russian raw materials, painful in itself, is an achievable task. For oil, this process can go faster, for gas, slower. Within the EU, there will be differences between member states, as dependence on Russian raw materials is heterogeneous. However, the replacement of Russian products in most regions can apparently be carried out over several years. Irrespective of the evolution of the Ukraine crisis and Russia’s foreign policy, the latter’s ousting from EU trade will be a long process.
Today, the EU also bears the heaviest burden of managing Ukrainian refugees. The calculation is still difficult given the rapidly changing situation, but it is already clear that the number is in the millions. EU countries are faced with the task of welcoming, supporting, adapting and eventually integrating migrants. Social spending in many EU countries will increase. However, here, the European Union turns out to be a beneficiary in the medium term. EU countries, especially Germany, have accumulated a wealth of experience in working with migrant labour. Ukrainian migrants are culturally close to most, if not all, EU countries, unlike previous waves of migration from Islamic countries. They are better educated. They are less inclined to form closed diasporas, and they adapt and integrate faster. The EU economy receives a rich demographic injection.
Most EU countries will actively increase defense spending. This growth will not necessarily be proportional to the political subjectivity of the European Union. The EU remains a secondary partner of NATO. However, the military-political role of each member country will increase significantly. Here again, Germany should be noted, because it has great potential for increasing defense spending, modernizing the army and developing its defense industry. The highly developed military-industrial complex of EU countries enjoys a long-term gain.
You can also talk about how the European project itself is winning, so to speak. Facing Russia, it now receives a powerful consolidating factor that strengthens internal discipline, nourishes identity and maintains the East European flank.
The United States, on the face of it, bears significantly lower costs than the EU, although the rejection of Russian oil could lead to local difficulties and increased fuel prices. Washington’s main problems lie in other areas. The sharp escalation of the confrontation with Russia is once again diverting resources from the Asia-Pacific theater. The United States will have to increase its military presence in Europe, which means that the concentration of resources to contain China is now on the decline. The United States is also concerned about the prospect of the Ukraine crisis escalating into a war between NATO and Russia. This, at the very least, carries the danger of nuclear escalation. Washington will have to simultaneously contain Moscow, but at the same time act within certain limits, now fearing an escalation. Controlling the intensity of the conflict and preventing it from escalating out of control seems to be a key priority.
In other areas, the United States has a better chance of winning.
The new quality of the confrontation with Moscow makes it possible to significantly increase NATO’s internal discipline and to obtain a more significant contribution from European countries to common security. Neither Trump, nor Obama, nor GW Bush could have accomplished such a task before. Now it has been resolved without much debate. In addition, further NATO enlargement is possible.
Although the membership of neutral Sweden and Finland in the organization was not predetermined, the number of supporters of such a decision in both countries had increased considerably. Finland’s eventual membership in NATO will mean the projection of power along the entire northwestern Russian border.
The need to divert resources to Europe, in theory, can also be used by the United States to its advantage. Washington and its allies have been given carte blanche to deliver an unprecedented blow to Russia’s economic and technological potential. There is no doubt that Russia will remain the most significant military challenge for the United States and the West. However, the economic basis of military potential risks being undermined by the prospect of increased concentration on Asia.
The US energy sector is winning. In the near future, it will receive a significant share of the European market. Moreover, it will now be more convenient for the Americans to oust Russia from world arms markets. China and India will remain the main buyers, but competition for other markets will be more difficult for Moscow due to stronger American opposition.
The United States has accumulated a set of internal problems. The Russian factor makes it possible once again to at least partially consolidate Congress and society. However, the impact of the crisis on the 2024 elections is still very uncertain.
China has a lot of leeway. Unlike the EU and the US, current costs for China will be minimal. Military and political pressure from Washington is waning. Given the large-scale anti-Russian sanctions, China can claim a significant share of the vacant Russian market. Russian energy resources will now be more accessible to China and their price will probably be much lower than before. However, there may be difficulties in the infrastructure plan for their delivery to the Chinese market. China is also becoming Russia’s most important financial partner, and such a partnership will asymmetrically favor China. Beijing is further strengthening stability on its northern and northeastern borders.
Russia’s partnership with China becomes unchallenged. China has new opportunities for influence in Central Asia.
Based on the experience of sanctions against Russia, China will do important work to improve its own economic security in the event of similar complications with the West. At the same time, the ongoing processes are still unlikely to lead to the emergence of a full Russian-Chinese military-political union. By all appearances, China will keep its distance and its hands free.
For Japan, the balance of short-term gains and losses is rather negative. The prospect of a peace treaty with Russia is becoming extremely hazy. Even before the new phase of confrontation, it was clear that the negotiations were at an impasse. There was not even the slightest trace of an advancement, but the very theoretical possibility of such an advancement remained. Since 2014, Tokyo has pursued a balanced and pragmatic policy, imposing symbolic sanctions, but maintaining the Russian market and constructive relations with Russian leaders. After February 24, 2022, this concept gave way to solidarity with the actions of the United States and the EU. Japan will suffer losses due to the loss of the Russian market and the replacement of Russian raw materials. However, they are not critical for Tokyo. The most important thing is that the worsening of relations with Russia, as in the case with Germany, will become a significant incentive for the final revision of the post-war paradigm of the use of armed forces. Japan will more confidently follow the path of regaining the status of a full military-political power. The solution to the problem of the “northern territories” will also increasingly be envisaged in a military way.
India is the least affected by the current crisis. Delhi maintains a dialogue with Moscow and will resist attempts by third countries to influence military-technical cooperation. However, the position of Western arms manufacturers’ lobbyists in the country could be strengthened. The rise of China against the background of the crisis is a problem for India. However, the changes can hardly be called fundamental.
Beneficiaries of the new phase of the Ukraine crisis will also include a number of countries currently under heavy US sanctions. These are above all Venezuela and Iran. Washington may very well pursue an at least partial reduction in sanctions pressure to offset market losses resulting from the ban on Russian oil imports. As for Venezuela, the easing of sanctions is politically easier, compared to Iran. Ultimately, only the internal structure of the country poses a problem, and the United States can temporarily turn a blind eye. Venezuelan heavy oil could well replace Russian oil on the American market. In this case, the Maduro government will get some breathing room and a breath of fresh air in the form of foreign exchange earnings.
With Iran, the situation is more complicated, since it is a military nuclear program and a new version of the Joint Comprehensive Plan of Action (JCPOA), that is to say a multilateral process, in which Russia also participates. At the same time, technically, the United States may well allow Iranian oil to enter the global market without a new JCPOA. As an option, the Biden administration has the option of allowing a number of countries in Europe and Asia to buy Iranian oil by reinstating exemptions rolled back by Trump. The problem for the United States will be that Iran will also get a break and strengthen its negotiating position. Going forward, this will lead to pressure from Republicans, who oppose deals with Tehran. However, amid Russian opposition, these differences may fade. In any case, Iran has a chance to take advantage of the situation. Such a development of events excludes the formation of a coalition between the countries under sanctions, which could theoretically include China, Russia, Iran and Venezuela. China will cooperate with all three, but not at the expense of relations with the West.
All in all, the new stage of the Ukrainian crisis will have global consequences. For some, this will entail short and medium-term costs, and very significant ones. For many, however, it will create opportunities to increase their long-term influence.
From our partner RIAC