The first priority remains to stop the war. However, when a permanent member of the UN Security Council invades a country, much more is at stake than the immediate catastrophe it causes. If the alleged protector turns out to be an attacker, what will peace be like the next day? . The UN also states that the real numbers are much higher.
The United Nations High Commissioner for Refugees (UNHCR) estimates that more than 10 million people have been displaced from their homes and 4.2 million have fled the country. About half of those who have left are children and 80% of adults are women.
With buildings and infrastructure being destroyed and a large percentage of the population leaving the country, the IMF estimates that Ukraine's economy may shrink between 25% and 35% this year.
Then there are the effects on Russia. Political scientist Ilia Matvev describes how this war will destroy 30 years of economic growth. At a recent event, economist Sergei Guriyev explained that the damage done to the country would not be repaired soon or easily, as world economic and political relations with Russia have now suffered severe damage.
In the European Union (EU), the vast majority of refugees have moved to Member States. Although it is difficult to calculate the exact cost, we know it will be high for these members.
However, the overall financial cost to the EU is limited. The latest ECB figures show that while inflation will be high in the euro area this year (5.1% and up to 7.1% in the adverse scenario), economic activity will grow slightly slower than originally projected. by 3.7% (or 2.3% in the adverse scenario). The same is true of the United States, which in any case has much weaker ties with Russia.
But the fact that the financial costs are limited and controllable, draws attention from the fact that since 24 February the world has become a more dangerous place.
Even the EU, which from the beginning was a plan with In order to consolidate peace, it is now investing in military capabilities in order to be able to ensure its integrity. Countries such as Finland and Denmark, which have historically been unable or unwilling to take a stand, are now rushing to take a stand on institutions such as NATO.
At the same time, retaliation from a number of states has rightly focused on sanctions aimed at destroying the Russian economy. And while economic warfare may not kill people, it does kill livelihoods. Raghuram Rajan worries that the impact of such sanctions may be just as devastating, and in any case “the lack of rules that govern them could lead to their overuse”.
Thus, a growing rift emerges between “friendly” and “hostile” countries and the world is trapped in the logic of escalating war. As we strive to find ways to end the war, we need to think about what form peace will take in the future.
The EU will face serious dilemmas. Despite unprecedented sanctions, it still pays three-quarters of a billion euros a day in Russia to buy energy. In an economically interdependent world, financial sanctions not only harm the “enemy” but also cause serious self-harm. As a result, the EU is reluctant to impose an immediate energy embargo, which is necessary to eliminate Russia's stockpiles of war funding. But it has submitted plans to reduce its dependence on Russia by two-thirds by the end of the year.
Here, too, there is the contradiction: while the EU's reluctance to immediately ban energy imports is slowing down the end of the war, on the other hand its plans to cut ties, by at least two-thirds in terms of LPG by the end of the year, mean that the Russian economy does not have time to adjust to the loss of the European market.
Where will the Russian economy be after the war? There is no doubt that it will have to pay for the destruction of lives and property in Ukraine and be accountable to international courts for its crimes. The huge sanctions and the loss of the European market as the main destination for energy exports in such a short time, will leave Russia deprived of significant revenues. This raises a huge question for Europe. What does an economically impoverished Russia mean for the stabilization of the region?
In the midst of these big questions, the priority must be to end the war. Here, too, the EU must contribute by imposing an immediate ban on energy imports from Russia. But at the same time, it must think about how it can help rebuild a devastated neighbor and recognize that it must bear some of the costs of securing peace.
The international community, for its part, will have to restart the long de-escalation process in order to maintain this peace. We have a long way to go.
* Bruegel Deputy Director, think tank based in Brussels. This text was published in English as an opinion column on the Bruegel Blog, and on the Blog of the Cyprus Economic Studies Society (https://cypruseconomicsociety.org/).
