The Impact of the Ukraine War Will Last for a Generation

The Russo-Ukrainian War has significant and underappreciated implications for deglobalization, Russia’s relations with the West, and the international system.

THE WAR in Ukraine will have several underappreciated, long-term implications for the future of international relations. For one, it will spur deglobalization, especially in the energy and food sectors. The war has the potential to lead to armed conflicts between Russia and the West; the rupture of ties will have a profound impact on global stability. Notably, the war clarifies that the current bipolar period in international relations will be less stable than its unipolar predecessor, though the impact of the war will not change the bipolar structure of the international system.

The war exacerbates many of the effects of the Covid-19 pandemic on international relations. One key impact of the twin crises is that they observably and significantly spur deglobalization by disrupting previously reliable supply chains. Both crises have prompted a sharp inward focus by elites as they perform the most basic function of the nation-state—to protect citizens. Leaders focused on domestic jobs. They erected barriers to the movement of goods and capital to protect their constituents. And they adopted more expansive definitions of national security.

Like the pandemic, the war in Ukraine will last for many years, which will amplify its impact as a long-term driver of deglobalization. Both sides want the same land, believe time is on their side, and have no trust in the other. Ceasefires are possible, but lasting peace will be elusive.

The war will propel ongoing deglobalization and decoupling in four ways. First, the commodity and supply shocks it caused will strengthen policymakers’ proclivity to encourage redundant and resilient supply chains, “friend-shoring,” onshoring, regionalization, and stockpiling. Second, the sheer magnitude and force of Western sanctions on Russia will cause other countries to fear that they or their main trading partner could be next, which will likewise catalyze movement toward safer supply chains. Third, China’s public sympathy for Russia during the conflict further darkens superpower competition and therefore decoupling between the West and China. Lastly, firms themselves have been burned by both import risks and price shocks, and they too are trending toward redundancy and stockpiling.

Deglobalization’s impacts on energy markets: War-induced deglobalization will have a particularly lasting impact on energy markets and food security.

For energy markets, one of the longer-lasting effects is the movement of fossil fuel flows toward regionalization—a deglobalization of the market. There are two primary war-related drivers here. First, countries now show an even stronger preference for hydrocarbon supplies that come from relatively nearby and “friendly” countries. The import and price shocks of the Ukraine crisis have greatly strengthened this motivation. Also, especially for the United States and the European Union (EU), there is now a preference for “good” over “bad” oil and gas, with the distinction relating to the political orientation of the supplier country.

The first energy grouping is U.S.-Canada-Latin America-EU. The major new plank here is the dramatically strengthened liquified natural gas (LNG) link between the United States and Europe. At current levels, the United States sells about two-thirds of its LNG to Europe, roughly double the prewar level, which accounts for 15 percent of Europe’s gas needs. If targets in the recent U.S.-EU joint statement are met, that figure will rise to well over 20 percent. The U.S. role in supplying Europe’s gas needs has grown dramatically, even given the fact that European gas consumption is dropping. The United States has become a strategic partner for Europe in this area. And Europe is de facto replacing “bad” Russian pipeline gas with “good” U.S. LNG. The broader U.S.-Canada-Latin America nexus is well-established. Canada sends large amounts of crude to the United States. Latin American producers also primarily supply the United States, but the integration with Latin America is more fully established by U.S. exports of gasoline and diesel to their markets. These “good” energy flows will continue.

A second increasingly strong grouping is Russia-China. While substantial flows are already moving between the two because of geographic proximity and close political relations, China has limited the extent of this energy relationship in the past, as it has sought to diversify supplies. Since the start of the war, however, China has ramped up purchases of discounted Russian oil by roughly 300,000 barrels per day (BPD), and this trade is likely to expand given that Russia is losing access to the European market. Similarly, Russia needs to replace its European markets for natural gas. China will become the only serviceable and large market for Russian pipeline gas. Investment will be needed, but flows will grow—as illustrated by recent moves to begin work on the Power of Siberia 2 pipeline from Russia to China through Mongolia. The key driver of bigger Russian energy flows to China is politics; seen from the West’s perspective, these are flows of “bad” oil and gas.

The third key grouping is Middle East-Asia. Here, already strong flows are driven primarily by proximity and market potential. Asia is still building refineries, and Middle East countries seek to send crude to higher-growth, refined product markets. There will be upward pressure on the size of these flows because of the postwar politicization of energy. Before the war, the killing of Jamal Khashoggi had left Saudi oil “good enough” but under a bad shadow. Since the onset of the war in Ukraine, the Saudis and the Emiratis have decided to maintain good relations with Russia and OPEC+, while Riyadh has resisted boosting production to accommodate Washington. The recent decision by OPEC+ to cut production by 2 million BPD proves the point. The war will leave Saudi oil still “good enough,” yet under a slightly darker shadow. Over time, especially during periods when the market is not tight and the West can choose its producers, political considerations will mean that Saudi oil will probably find more willing buyers in Asia than in the West.

Finally, several countries and regions will occupy a more ambiguous status. India will remain a floater state, drawing supplies from Russia while crude is cheap; imports of Russian crude have risen from 30,000 BPD prior to the war to over 800,000 BPD at present. New Delhi will likewise increase purchases from the Middle East. Africa will also float. West African suppliers will target European markets seeking to replace Russian supplies; East African suppliers will look more to Asia. Importing African states will draw from a variety of sources, including continental production.

Food security: Increasing and lasting fragmentation of the global market. Food policy is another area where the twin shocks of the war and Covid-19 are likely to bring about lasting changes, as more states begin to view food as falling within the perimeter of national security. Over the medium to long term, this will mean a greater degree of protectionism and a less globalized international food system.

Both the pandemic and the Ukraine war drove up food prices markedly. On the United Nations (UN) Food and Agriculture Organization’s Food Price Index, average costs fell by more than 10 percent in real terms from January to May 2020. But as global economic activity recovered and supply constraints began to bite, food prices rose steadily to more than 33 percent above pre-crisis levels in February. Prices then spiked in March, as the war broke out, disrupting Black Sea shipments of wheat, corn, sunflower oil, fertilizers, and other products.

With commodity prices dropping since mid-June and a deal in place to unblock Ukrainian ports, many economists are predicting that food inflation has peaked. Yet the extent to which that is true will in part depend on how well the deal is implemented and whether it is renewed in November. And given that the war will likely go on for many years, a cloud of uncertainty will remain around food exports from Ukraine. The war will leave many leaders more concerned than ever about their dependence on a fragile international food system.

Leaders have good reason to be worried. While the relationship is not always direct, runaway food inflation and hunger are often accelerants of social unrest. The two most salient historical examples are the Arab Spring protests in 2011–2012 and the food riots of 2007–2008, both of which occurred against the backdrop of high food inflation.

According to data from the Carnegie Endowment for International Peace, the total number of significant global protests appears set to decline in 2022, following two notable years of political activism. However, the frequency of food and agriculture-related protests has risen considerably. The number of these demonstrations between January and June of this year topped the total number of similar protests during the last five years combined. Recent examples include demonstrations in Ecuador, Iran, and Sri Lanka.

A new Arab Spring is quite unlikely, but the Middle East and North Africa still appear vulnerable. The most fragile states are those facing conflict, including Sudan, Syria, Libya, and Yemen. A second tier of countries—which face high food inflation but are less exposed than the states in conflict—includes Lebanon and Tunisia.

For leaders seeking to avoid unrest and safeguard domestic food supplies, market interventions look increasingly attractive. Trade policy measures, regulatory changes, stockpiling, price caps, and subsidies are likely to become more popular and entrenched.

The aggregate data on new subsidies to agricultural producers and/or consumers since the onset of the pandemic are telling. Across fifty-four countries, the Organisation for Economic Co-operation and Development (OECD) found that governments devoted about $55.5 billion in additional public support to agriculture amid the pandemic in 2020 and $70.4 billion in 2021.

Since the war began, governments have enacted a host of policy measures, stepping up aid to farmers and consumers through subsidies, price caps, and other measures. In March 2022, the EU suspended a prohibition on growing food and feed crops on fallow land without loss of greening payments and instituted a €500 million support package providing additional assistance to farmers. Spain, Finland, and France made funding available to farmers to cope with high input costs.

And such measures were hardly limited to Europe. On March 7, the Philippines allocated $467 million in new subsidies to farmers, most of them going to fertilizer. Weeks later, the Egyptian government capped prices on all categories of unsubsidized bread. In April, the Indian government expanded its fertilizer subsidy program, and in September it banned the export of broken rice and placed a 20 percent export tax on some other varieties. Lastly, some countries—including Egypt, Bulgaria, and Ukraine—are building resilience by accumulating reserves of food and feed commodities.

Given the twin shocks of the war and Covid-19, and the fact that both drivers will have an ongoing impact on markets, many of these measures will be politically difficult to reverse and will remain in place much longer than originally intended.

A SECOND underappreciated implication of the war is the enormity of the impact of Russia’s ruptured relations with the West. Many experts are lost in battlefield updates, U.S. policymakers seem oblivious to the risks as they aggressively pursue the war, and the business community generally doesn’t get it.

The most profound risk is war between the United States/NATO and Russia. It is unlikely because the cost would be enormous for both sides. But given Ukrainian battlefield successes based in part on Western weapons, and Vladimir Putin’s view that control of the Donbass is an existential need for Russia, conflict is conceivable. Putin’s threat to use nuclear weapons makes the risks and possible implications for international relations greater.

More broadly, the relationship will be moribund for as long as Putin is president, and that could be a decade or more. Some Russian analysts now refer to the United States as “the enemy.” While true, it’s still quite a shock to hear for long-time Russia analysts. Neither side will be interested in meaningful relations with the other for a long time.

That leads to a series of risks. On nuclear arms control and strategic stability, Moscow will probably adhere to most of the provisions of New START until it expires in 2026—despite having recently suspended on-site inspections. But as of 2026, the nuclear relationship will probably rest on crude deterrence, much like in the initial years of the Cold War. Mutual transparency and limits will fall by the wayside. Thin levels of communication will stand alongside a broken relationship between the top nuclear powers.

For NATO and Europe, assuming no direct armed conflict, there will be an unstable, hot line of control in the middle of Europe just as Russia and the rest of the continent have decoupled in the energy sector. Along that line will be a newly muscular and cohesive NATO standing opposite a Russian buildup.

Moreover, the West-Russia split will occur against the backdrop of the new “Putin Doctrine,” which asserts that former Soviet states will henceforth stay in Russia’s sphere of influence and not lean toward NATO. The doctrine pertains especially to what some analysts call historical Russia: eastern Ukraine, Belarus, western Kazakhstan, and Russia itself. But there and more broadly in the former Soviet space, expect more wars as neighbors try (with Western support) to move away from Russia.

THE FINAL set of under-recognized implications of the war pertains to the international system. First, this war foreshadows a likely increasing number of wars in the current historical era. As I explained in the Winter 2021 issue of Washington Quarterly, the current period is one of bipolarity: the United States and China are the superpowers.

Bipolarity is more stable than the multipolar world that most observers predict, but it is less stable than the unipolar, U.S.-led world that existed from the fall of the Soviet Union in 1991 to the election of Donald Trump in 2016. Overwhelming U.S. power deterred challengers and suppressed most wars. Under bipolarity, though, leaders must judge the power of not one but two nations—a task made even more difficult because the bipolar system is new.

The Ukraine conflict is the first major war of the bipolar era. Under bipolarity, more conflicts should be expected, including those between a great power and its neighbors (Ukraine), as well as proxy wars between a superpower and a great power over a third party (the United States and Russia over Ukraine). Putin tried to elevate Russia’s status in the system by weakening the U.S.-led order in Central and Eastern Europe, and by keeping NATO out of Ukraine. Russia’s leader, however, badly underestimated the strength and resilience of the U.S.-led grouping within bipolarity. This is an example of why wars are more likely under bipolarity than unipolarity—a misperception of relative power leading to war.

Second, nuclear weapons have played an underrecognized role in restraining both the United States and Russia. It is remarkable that the dimension of the Ukraine conflict pitting the United States/NATO against Russia has not already produced a military crisis. Both nuclear powers in the event seek to avoid direct conflict and the risk of escalation to the nuclear level that entails. Indeed, the shadow of nuclear weapons will continue to dampen escalation between the United States/NATO and Russia—it is the primary reason why war remains unlikely.

What are the long-term implications of the war for the international system? Many observers believe the West will get a huge boost if Russia loses. Others see a big hit to the international order if Russia wins, including a weakening of the norm against the use of force for territorial conquest.

But history will likely view this war as a regional conflict that didn’t alter the international system. The war won’t affect the distribution of capabilities that produces the system. The United States and China were the superpowers in a bipolar world before the war, and they will be after it. Each side will have regions or spheres of influence. And within the robust U.S.-led grouping at least, the norm against conquest by force will remain alive and well.

THE WAR has significant and underappreciated implications for deglobalization, Russia’s relations with the West, and the international system. But what are the concrete impacts on geopolitics and markets?

Deglobalization in the energy sphere means that the market alone will no longer dictate flows. Instead, geopolitics will play an increasing role in shaping where these hydrocarbons go—and that in turn leads to regional groupings. Political alignment will also color related investment decisions and infrastructure choices. In addition, the growing “good oil”/“bad oil” relationship will spark specific global tensions. If Saudi Arabia becomes a “bad” producer, tensions between the kingdom and the West will skyrocket because Saudi elites won’t accept this dark shadow on their reputation. Meanwhile, Russia, Venezuela, and Sudan will see their pariah status worsen.

In the food arena, the war will be a long-term driver of upward pressure on food prices—both because of the uncertainty it creates about production and the support it lends to market interventions such as subsidies. These measures have the long-term impact of decreasing market efficiency and on balance boost prices.

Regarding Russia and the West, nuclear and other strategic arenas across the board will show lesser, even crude, levels of stability. The risk of overreaction in a crisis or an accident leading to escalation will increase significantly. Also, the war in Ukraine marks a lost generation of work by officials and experts on both sides trying to build better relations between Russia and the West. The Western analytic community must figure out what it got wrong, and then prepare a new action plan if there is another opportunity to engage Russia.

On the international system, we should expect more wars now, under bipolarity, when compared to the twenty-five years of unipolarity. The continuing challenge will be to assess where war is likely, and then take all possible steps to prevent it. A U.S.-China war over Taiwan is the most prominent case. But risk around Russia will remain very high. Direct conflict with NATO could be calamitous. Moscow’s support for Serbian leaders against both Bosnia and Kosovo, neither of which belongs to NATO, creates conditions ripe for war. And the new “Putin doctrine” demanding loyalty from neighbors will likely lead to conflict in Eurasia.

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