Russia’s invasion of Ukraine: assessment of the humanitarian, economic, and financial impact in the short and medium term

Abstract

What are the economic effects of the Ukraine war for Ukraine, Russia, and the rest of Europe? In this study, the Vienna Institute for International Economic Studies (wiiw) sheds light on the immediate consequences on the one hand, but also on the medium-term structural changes caused by the largest armed conflict in Europe since the Second World War. The Russian invasion of Ukraine has triggered a humanitarian crisis. Pre-war, almost 19 m people lived in those regions that are currently directly affected. Refugee inflows to the rest of Europe are likely to be at least three times greater than in 2015/2016. As Black Sea ports come under Russian assault, Ukraine has lost its ability to sell more than half of its exports, primarily agricultural commodities and metals. Western financial support will become ever more important as the war continues. Turning to Russia, sanctions will have a very serious impact on that country’s economy and financial sector. Despite being partly hamstrung by the fact that a large proportion of Russian reserve assets are frozen in the EU and G7, the central bank managed to stabilise financial markets by a combination of confidence-building and hard-steering measures: capital controls, FX controls, regulatory easing for financial institutions, and a doubling of the key policy rate. The medium-term and long-term outlook is negative. As a result of the war and the sanctions, the rest of Europe faces a surge in already high inflation; this will weigh on real incomes and will depress economic growth. Many European countries rely heavily on Russia for oil and gas imports: import shares are over 75% in Czechia, Latvia, Hungary, Slovakia, and Bulgaria with respect to natural gas; Slovakia, Lithuania, Poland, and Finland with respect to oil and petroleum; and Cyprus, Estonia, Latvia, Denmark, Lithuania, Greece, and Bulgaria with respect to solid fuels. Aside from energy, the fallout via trade for the rest of Europe is likely to be small. Non-energy trade and investment links between Russia and many European countries have declined in importance since 2013. There are four main areas of structural change and lasting impact for the EU (and Europe more broadly) as a result of Russia’s invasion of Ukraine. First, the EU will get more serious about defence. Second, the green transition will gather pace. Third, broader Eurasian economic integration will be unwound. And fourth, the EU accession prospects for countries in Southeast Europe could (and should) improve. Supplementary Information The online version contains supplementary material available at 10.1007/s10368-022-00546-5.

The Economic Impact of Russia’s Ukraine Conflict on the EU Fuel Markets

“…When news spread that Russia was invading Ukraine, investors quickly sought refuge elsewhere (Astrov et al, 2022;Benton et al, 2022). During the period of the invasion, the price at which equities were traded on major stock exchanges reached its lowest point in time.…”

“…Russia's influence is considered obvious particularly in Europe, taking into account that it provides more than 20% of the continent's oil and 30% of its natural gas. Specifically, several European countries, including Germany, Austria, Finland, Poland, Slovakia, and Hungary, import 50-100% of their oil and gas from Russia (Astrov et al 2022;OECD, 2022;Ashraf et al, 2022). Therefore, in the scenery of Russia's invasion of Ukraine, Europe's dependency on Russian oil and gas supply has turned into a threat to its existence.…”

“…If Russian crude oil supplies are shut off, the margin impact might be even larger since some refiners cannot afford to replace them (Astrov et al 2022;Ibarra, 2022). Finally, predictions of 83 million barrels per day (mmb/d) in oil product demand before the invasion might be reduced to 79 mmb/d or lower this year.…”

“…And if Russia's oil (crude and product) supplies are disrupted, refiners would undoubtedly struggle to obtain replacement feedstocks. Already, diesel prices are approaching all-time highs (Astrov et al 2022).…”

A posztszovjet térségbe irányuló tőkekivitel – országkockázat az elméletben és a hazai gyakorlatban

“…A Kijevi Közgazdasági Iskola (KSE) becslése szerint a háború első három hetében 15000 km út, 5000 km vasút, 15 repülőtér és 350 híd/átkelő semmisült meg(Astrov et al, 2022) …”