The conflict in Ukraine is much more serious than you think

The war in Ukraine is, in reality, a proxy war waged between the West and Russia. Contrary to its portrayal in Western media, Russia’s invasion of Ukraine was neither spontaneous nor unpredictable. In 2008, when then-US President George W Bush harassed reluctant European leaders to promise future NATO membership for Ukraine, current CIA Director William Burns sent a note to then US Secretary of State Condoleezza Rice, which included this warning: “Ukraine’s entry into NATO is the brightest of all red lines for the Russian elite (not just Putin)… In more than two and a half years of conversations with key Russian players, from brass knuckles flirts in the dark recesses of the Kremlin to Putin’s most outspoken liberal critics, I have yet to find anyone who considers Ukraine into NATO as anything other than a direct challenge to Russian interests.”

Burns added that it was “hard to overstate the strategic consequences” of offering NATO membership to Ukraine, predicting it would “create fertile ground for Russian interference in Crimea and the eastern Ukraine”.

The conflict in Ukraine is much more complex than portrayed in international media. Its history goes back at least to 1991, if not until the Second World War. And its repercussions, too, are more complicated and perhaps scarier than most think they are.

The most obvious nightmare scenario, of course, is all-out nuclear war between Russia and the West. But even if things do not escalate to this level, the conflict poses major threats to global stability. Although most parts of the world are already feeling the economic cost of war, the worst is likely to be yet to come.

As a result of Western sanctions, the Russian economy will certainly suffer heavy losses. Even if China – which has explicitly blamed the West and NATO expansionism for violating the US promise to Russia not to expand NATO “east [of a reunified Germany]” in the negotiations that had ended the cold war (“New discovery of files from 1991 supports the Russian accusation”, February 18, 2022, Der Spiegel) – gives full economic support to Russia, there is no currently no force in the world that can match the collective economic power and influence of the United States and its European allies.

Some Russian banks have already been banned from the Society for Worldwide Interbank Financial Telecommunications (SWIFT) payment messaging system. And although Russia has developed its own alternative to the SWITF, the ban will certainly have a significant impact. Moreover, the decision of the United States and the EU to freeze almost half of Russia’s foreign exchange reserves, worth 300 billion dollars, will hurt it very badly. An example of this is the rapid fluctuation of the ruble over the past month.

The impact of the withdrawal of Western companies from Russia, while causing disruption in the short to medium term, could potentially be managed in the longer term through an expansion of Russia’s import substitution policies and the supply of goods other countries. Because Russia is an integral part of the global economy, especially because of its enormous energy, mineral and agricultural resources, many analysts believe that the country will eventually recover. At that time, however, the resulting shocks to the global economy would be significant.

The big loser (among the parties directly involved, with the exception of Ukraine) from these sanctions will be the European Union (EU). Russian gas accounts for around 40% of Europe’s total consumption. During a recent meeting in Vienna between EU officials and representatives of the Organization of the Petroleum Exporting Countries (OPEC), OPEC Secretary General Mohammad Barkindo said that current and future sanctions against Russia could create one of the worst oil supply shocks, and it would be impossible to replace these volumes. More interestingly, OPEC has signaled its reluctance to pump more oil at the behest of the West.

In Europe, prices in the euro zone had increased by 7.5% in March compared to the previous year. This inflation is mainly fueled by energy prices, which climbed 45% last month compared to the previous year. According to the European Central Bank, the conflict in Ukraine “weighs heavily on the confidence of [European] businesses and consumers. Trade disruptions are leading to further material shortages, and soaring energy and commodity prices are holding back production.

Worries about the future are particularly acute in Germany, Europe’s largest economy, due to its heavy reliance on Russian energy. Last month, economic advisers to the German government said the outlook had deteriorated “sharply” because of the war, with a growing risk of recession and even higher inflation rates.

The United States is also suffering, as it is experiencing the fastest pace of annual inflation in 40 years. But aside from the direct damage to the US economy, perhaps more concerning is how the sanctions war will affect the role of the US dollar as the world’s reserve currency.

The sanctions, including the unprecedented freezing of central bank assets, are undermining confidence in the Western financial system. And this has led to a de-dollarization trend as Russia-China, Russia-India and others have started increasing bilateral trade using their own currencies. This, according to Gita Gopinath, the first deputy managing director of the International Monetary Fund (IMF), could ultimately undermine the US dollar’s global dominance.

Russia has already indicated that EU countries (and others) will have to pay for Russian energy and other essentials in rubles, instead of dollars. Although there is currently a stalemate over this between Russia and Europe, the dollar’s share in world trade has already declined this year. And even Goldman Sachs, in a recently published research note, warned that the greenback could eventually lose its global dominance because of the sanctions war.

These threats to the Russian, European and American economies also endanger global economic stability, as the world has become so interconnected over the years. To give just one example, the World Trade Organization recently warned that because Ukraine and Russia (combined) have traditionally been responsible for 90% of crops imported into East Africa – and imports of Crops are suffering because of the ongoing war and sanctions – the region is at increased risk of famine. It is not just East Africa, but the Middle East, parts of Africa and the Far East that may also experience famines and food shortages in the future.

JPMorgan chief executive Jamie Dimon warned two weeks ago that the current sanctions, as well as possible future ones, could create even more “uncertainty around global commodity supply chains”, creating “a potentially explosive situation”. Already we have seen how this has caused the Sri Lankan economy to explode, while many others, including the economy of Bangladesh, are suffering from major inflationary pressures and other problems due to war and sanctions. .

On April 1, Chinese President Xi Jinping said it would take years, if not decades, for the global economy to recover from the consequences of the Russian-Ukrainian war. Many others echoed similar sentiments.

The truly industrially interconnected global economy is not like a set of Lego toys. It is very complex and finely tuned. Whether those involved in the Ukraine conflict realize it or not, their actions are pushing the world to the brink of major economic instability. Worse still, those who have studied the history of the two world wars have pointed out that these wars had a pattern: first there was the trade war, then there was the currency war, and then we had the world wars.

A trade war between the United States and China – possibly with European countries, Russia and Iran also involved to some degree – had undoubtedly started even before the war in Ukraine, but we are now very much in it. more deeply. A currency war is currently underway. Some claim that sanctions are a form of war, so we are at least in a new cold war. But what happens when one side (Russia or the West) feels like it’s been beaten and has no choice but to make a real hot war out of it ?

Those who are not part of this conflict will suffer, as they already are. This is perhaps why it is high time for a new non-aligned movement to emerge.

After the first Cold War, Francis Fukuyama announced the end of history. With the United States as the sole superpower, we have entered the era of a world order entirely dominated by the West. Whatever the future, it looks like this order is about to crumble, with the war in Ukraine only hastening the process (whoever wins, if there is one).

A new world order, like that announced by US President George HW Bush in 1991, is once again emerging. And there is no guarantee that it will be to everyone’s advantage. This is another reason why we need a new non-aligned movement, which can ensure that this new order is not dictated by one side and its ruling elite, but rather by the people of all countries and continents.

We need an order that, at the very least, has a more effective mechanism to resolve the type of crisis the world currently finds itself in.

Eresh Omar Jamal is deputy editor of the Daily Star. His Twitter handle is: @EreshOmarJamal

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