As the war in Ukraine seems poised to go on further, the war cost goes beyond soldiers and fighter jets. The cost of the Russo-Ukraine war extends far beyond the battlefront, and into the world at an economic scale not seen for decades. This war is changing the landscape of energy economics, the labor and trade market, which make the importance of defending Ukraine ever more important.
In Feb. 2022, when Russia began its offensive push against Ukraine, the majority of Western democracies aligned to punish Russia with sanctions. This included banning imports of most Russian oil, which caused energy prices in Europe to rise in various places around the continent. Since Russia was able to sell significant amounts of oil to India, in the short run, Russia did not see extensive damage caused by the sanctions on its oil. However, in the long run, Russia is now being forced to cut oil production due to the sanctions while Saudi Arabia is increasing production. Ukraine having a decisive victory in this war puts Europe in control of energy by being able to negotiate with a weaker Russia.
This has realigned the goals of European economies. One of the prime examples is Germany, as the German government had previously agreed to the Nord Stream II pipeline, which would expand oil trade with Russia. However, after the war started, the Nord Stream II pipeline construction has now been halted. In order to make up for oil imports and the shutdown of Nord Stream II, Germany has to move to coal production to keep its economy running, with them generating $1.4 trillion from using coal as energy. Ukraine’s victory in this war provides Germany with the ability to revisit Nord Stream II, which is likely, given the fact Germany kept the deal afloat despite Russia’s invasion of Crimea — showing Germany’s reliance on oil.
The labor and trade market further represent the economic importance of this war. As migrants increase throughout Europe, job opportunities and competition follows. Many Ukrainian migrants have already begun working, at a higher pace than many refugees usually do. At the end of the day, Ukrainians have been beneficial to the European economy due to the skills and work ethic they have brought. Furthermore, the input of these refugees is expected to heal labor shortages that have existed in the past.
Nonetheless, despite the benefits, it is important to understand that because of the war the Ukrainian economy is in shambles, which in return hurts Europeans one way or another. Many workers have fled, but farmers have continued to farm. Ukraine is still one of the world’s biggest agricultural producers. As the Ukraine economy is hurting, many European nations have lifted tariffs on farmers. These farmers are now competing with European farmers, which often struggle to keep up. While Ukrainian workers may have helped reduce certain labor shortages, there are certain areas where they will compete with Eurpoeans as long as the war goes on. The war has reshaped economics and made Ukraine an economic matter.