Last week Vladimir Putin, the autocratic leader of Russia, ordered military troops to invade Ukraine. After years of intimidation and the annexation of Crimea in 2014, now, the people of Ukraine are confronted with large scale violence and destruction. The Russian army has invaded with great show of force, now occupying some parts of Ukraine and launching attacks on cities like Kyiv and Kharkiv. Once again, the horrific consequences of war become clear. As always, the most vulnerable citizens are the ones that suffer the most. 77 Years after World War II, again, one country is attacked by another in Europe. The international legal order has been violated shamefully.
Nobody knows how this war will develop. The consequences will be significant. For the people of the Ukraine, for Europe and for future international relations. Stopping the war as soon as possible has the greatest urgency. Economic and financial sanctions are put in place. Diplomatic and massive public protest are required to exert strong pressure on the Putin regime to avert continuation of its war. Ukrainian citizens deserve to be supported by all means possible. And let’s not forget the Russian citizens that oppose Putin’s war machine, despite government propaganda and state dominated media voicing lies and accusations. President Zelenskyy released an impressive video message, sending a strong message to the Russian population. That should be our message as well.
For Europe, the inconvenient truth is that national economies still depend - to varying degrees - on fossil supplies from Russia. The persistent delay of the sustainable and inclusive transition of the European economy and energy system in the past decades now comes with a price. Vladimir Putin knows that. Countries like Italy, Germany and the Netherlands face the challenge combining support of effective sanctions with retaining access to fossil supplies.
The best response of European countries should contain a bold, significant, if not dramatic, increase of national and European efforts to decarbonise our present economy, as was put forward by Bill McKibben in the Guardian. Although since the start of the corona crisis support was mounting for a ‘Green and Just Recovery’ (EU) and ‘Build back better’ (UK), most large-scale government support for economic sectors in lock down was not steered in this way. That should change now. See also: Q&A: What does Russia’s invasion of Ukraine mean for energy and climate change? - Carbon Brief
Financial sanctions are now deployed to hit the Putin regime and the supporting, extremely wealthy oligarchs. They include freezing Russian assets and denying Russians and Russian banks access to do business. Many countries, the EU and financial supervisors have decided to switch off Russia from SWIFT, the international communication system that supports banks settling payments. Foreign assets are frozen, including currency reserves of Central Bank of Russia. This will have profound negative impact on its economy and trade. See for more analysis: Sanctions on Russia are strong but not 'nuclear' - Raam op Rusland
Again, here, inconvenient truths are all over the place. For years, EU countries – like the Netherlands - and the UK have paved the way for transfer of Russian (stolen) wealth to safe, professionally supported, tax evading destinations and real estate objects in our capitals and elsewhere. This ugly face of the efficient global financial infrastructure should not withhold countries from doing what is right. Justifiably, Katharina Pistor reminds us of the direction relationship between the shock therapy after the collapse of the Soviet Union in 1991 and the birth of the oligarch dominated economy on which the Putin regime is based.
Help vulnerable citizens
Putin’s war will directly impact the global and European economy, delaying the recovery from the corona crisis and causing higher (fossil) energy prices, thereby fueling overall inflation with a few percentage points. We assume that the ECB and BoE, like other central banks, will support our economies with proper monetary policies. Governments would do well to especially focus on the position of vulnerable citizens, already coping with energy poverty, providing targeted support to meet the monthly bills. And, as said, the overall best approach is to increase existing efforts to make today’s energy systems our economies depend upon sustainable.
Finally, let’s not forget, that Putin’s position is under pressure as well. Commentators have pointed to that. The more we protest this war and show unconditional support with the Ukrainian people, the more we help create circumstances to stop this war. Everything helps, despite how small and insignificant we might feel ourselves.