Ionuţ PURICA, PhD
It is a lot of analysis done in the last year related to the economic effects that are associated with the hybrid war generated by the invasion of Ukraine by the Russian Federation military. This generated a learning curve for the decision makers of the EU economies. It took almost a year to get out of the conceptual box that, for the last almost 80 years, claimed that market resolves everything. In conditions of war market can be used as a weapon, an economic one as it turned out.
Looking at the evolution of the GDPs of EU and the one of the Russian Federation one may see that the war started in the 4th Quarter of 2021 with an increase of the GDP of Russia due to the price increase of the gas to EU resulted from market influence from Gazprom who controlled the supply of gas to the EU. This increase in energy prices resulted in an increase of the Russian GDP especially since the income from energy contributes almost half of this GDP.
Further on the military action of Russia in Ukraine generated economic sanctions from the EU toward Russia. The effect is seen in the sharp decrease of the Russian GDP in 2022. Obviously, Russia reacted with its own counter measures and the effect is seen in the decrease of the EU GDP in the second half of 2022. Some favorable weather conditions and the fast change of gas sources for EU have contained the economic effects on short term and are likely to diminish the exposure to greater risks in the future.
One may notice that Russia had made a great error escalating to military action in a world where they had a fundamental economic advantage in controlling the resources for the EU and not only. In this century owning land is no longer necessary; it is the economic control that dominates the world associated with the control of the people. The old Testament of Peter the Great indicating a pan Slavic territory from Vladivostok to Lisbon, may be even from Juneau instead of Vladivostok, is no longer actual. Various types of socio-economic structures are emerging that have a common feature: they look for resources to support their economies. Who controls the resources may control others. In this context Russia lost one advantage that resulted from the fact that their client economies became aware of the potential use of resources as a mean of influence. Resources were used even before to influence economies e.g. the increase of the use of gas eliminating other options, based on the environmental protection arguments raised by ad-hoc NGOs, but, the decision makers were not aware of the basic control potential of their economies.
Thus, the World became aware of the potential of resources owners to control others. Obviously, there is one more prerequisite: the resource owner must be a nuclear power that secures its own control of resources. Otherwise the highly advanced economies will control the ones with resources.
The existence of nuclear capability from a military point of view creates a high risk especially in the case of a hybrid war like unfortunately the present one in Ukraine. In a half metaphoric sense, the Ukrainians made two mistakes. One is that historically the Kozaks conquered Siberia and instead of calling it Ukraine they called it Russia. The second, is the fact that Ukraine has given its nuclear arsenal after the fall of the Soviet Union. If they had kept it, then the situation would have been different today. Nuclear warheads are a much better deterrent than signed treaties.
On a different line the potential classical bombing of the waste fuel deposits of present nuclear power plants in Ukraine may result in release of radioactive material that could spread out both over Russia and Europe. IAEA is closely monitoring the status of the nuclear power plants and based on the Chernobyl experience measures are taken to contain such an event from happening.
The big question that is asked in this war is if the Russians will use nuclear bombs be they tactical or strategic. Two lines of behavior may be envisaged here dictated by the interplay between the fear from nuclear retaliation from NATO and the need to show they win the war to avoid internal instabilities in Russia. The model is similar to the one of a dog that sees the bat in the hand of a man going toward it; nervousness makes the dog bark harder as the man approaches and may result in attack or else, fear may be greater and suddenly the dog may turn around and run away. The line of action that this example suggests is to keep the fear of retaliation at a high level and at the same time offer a reasonable way out for the Russians that will not impact on the Ukrainian territory.
Else, if territory may be obtained by military action, then a Pandora’s box will be opened where further countries may tempt Russia, including Alaska, and where China may claim Taiwan as well as portions of Siberia, and why not Turkey may claim Hungary as a former pashalik of Buda, etc. This will throw the world back with hundreds of years canceling the progress obtained so far.
Hopefully, reason will prevail. If not, it will be the End.
researcher at the Romanian Academy, Institute for Economic Forecasting and executive director of Energy and Environmental Consultancy Centre, Prof. Dr. Purica was also the advisor of the to the Minister of Economy and previously to the Minister of Environment as well as an expert at the Romanian Parliament.
He participated in the elaboration of the EU accession strategy for Romania and the energy strategy (electricity and heat) for the Ministry of Economy and Trade and has carried out risk and structure analyses transactions (e.g. RGAB privatisation) and project management for the World Bank, USEA, JBIC, MARSH, ITOCHU, MVV etc.