The winds of war in Eastern Europe threaten to hit the world economy

Tensions in Eastern Europe in recent months have peaked in recent days: Russia Will soon open an extensive military exercise with Belarus On the border UkraineOne hundred thousand soldiers are still concentrated along the border that surrounds the country, Russian naval ships conduct exercises in the Mediterranean and even plan live fire exercises at the edge of Europe, off the coast of Ireland. And despite diplomatic talks with the US in Geneva, Russia’s president andTo Dimir Putin Still requires disarmament in Ukraine and a commitment not to join in the future toNATO.

On the other hand, NATO announced in the last day a reinforcement of forces in its member Eastern European countries, including sending fighter jets and ships to the Baltic states and Poland, on alert, and last night the US announced that 8,500 American troops stationed in Europe were “ready” for immediate dispatch to the east. . The U.S. and its allies are demanding the immediate withdrawal of Russian forces, and London and Washington have ordered the evacuation of diplomatic families from Kiev, in parallel with emergency arms shipments to Ukraine.

U.S. President Joe Biden this evening further sharpened the tone, saying that a Russian attack would be “the largest invasion since World War II” and that it would have “enormous consequences.” “This is something that will change the world,” the U.S. president said at a news conference tonight.

“Europe has been at the highest risk of war in the last three decades,” warned the Organization for Security and Cooperation in Europe (OSCE). Even before a possible war, the tension itself already had economic, security and geopolitical effects on the ground.

The signs of war do not contribute to the stability of the financial markets, which are in any case undermined by decisions Monetary policy Close of central banks. Energy prices in Europe are climbing to new heights, and the opposing axes of the NATO alliance and the European Union are being cut and illustrating the existing division on the continent.

EU Response Bank

At present, the EU is having a hard time formulating a clear position even before a possible confrontation over the sanctions to be imposed on Russia. The intricate interests within it – the long-standing German “Ostpolitics” that caused the country to depend on Russian gas and a soft policy towards Moscow, in the face of the aggression that the French president wants to demonstrate in an election year – make it unclear what Europe will do if Russia invades Ukraine. A meeting of EU foreign ministers held in Brussels on Monday ended without unequivocal decisions. “Not always the strongest stick is also the smartest weapon,” German Foreign Minister Annelna Barbock said before the meeting.

Behind the scenes, the EU is preparing a “range” of possible responses, depending on the nature of the Russian aggression. “Little invasion,” as the President of the United States Joe Biden Non-diplomatically estimated that “Putin will have to do” – will be punished with limited sanctions; Attacking Kiev and replacing the Ukrainian government will be met with more severe sanctions.

One of the most drastic steps in the Western arsenal is the disconnection of Russia from the global banking system SWIFT, which could theoretically be done unilaterally by the Americans, but would be much more legitimate if it gained pan-European support. The move was made about four years ago against Iran, contrary to the position of the Europeans who even promised to establish a rival system for it in order to continue trading with the Islamic Republic. Now Europeans find themselves on the other side of The sanctions The possibility, but not yet recorded great enthusiasm for the sharp step.

The European press has already heard voices from anonymous government officials on the continent warning that such a move would only encourage the formation of alternative, dollar-independent banking systems, encouraged by China. Germany in particular, which maintains branch trade relations with Russia, is expected to be significantly hurt by the move that will prevent money transfers to Russian banks.

Another sharp step being considered is the suspension of the use of the natural gas pipeline. “Nord Stream 2″The connection between gas fields in northern Russia and East Germany, which has already been built with an investment of ten billion euros and is now awaiting German approvals. Luxembourg’s foreign minister said earlier this week that if Russia attacks Ukraine,” Germany is desperately in need of Russian gas. Olaf Schultz Regarding the need “not to rule out any possibility” regarding the sanctions on Russia. Schultz has previously opposed any sanction on the pipeline and defined it as a “private commercial venture” that is outside the government’s sphere of influence. BEuropean UnionOnly Austria fully supports this position.

So which softer sanctions are being discussed? This is mainly an extension of the economic restrictions already imposed on Russia after the unilateral invasion and annexation of Crimea in 2014 and support for the pro-Russian rebels in the east of the country. For example, the restriction of exports from Europe to Russia of necessary equipment for gas and oil production, including spare parts and heavy mechanical equipment, as well as new restrictions regarding the import of Russian coal into the EU. In addition, the union is considering imposing additional movement restrictions on senior Russian officials, in government and industry, and according to leaks also in Putin’s “closest circle”.

Similar sanctions were what the EU managed to formulate in 2014, just three days after the invasion. Now, the question is whether they will be enough to deter the Russian president.
A video meeting yesterday between European leaders and US President Biden reported on “unanimous agreement” on “huge consequences” and “significant economic costs for Russia” in the event of an invasion of Ukraine, but did not say what they would include.

Ukrainian soldier in a ditch on the front line in Donetsk region near the border with Russia, last week / Photo: Reuters, OLEKSANDR KLYMENKO

Putin reinforces the need for NATO

But another axis has come into play on European soil – NATO. Most European countries are members of the military alliance, and while the EU is content with threats of vague economic sanctions and complex discussions, NATO is already taking steps on the ground. Yesterday, NATO Secretary General Norwegian Jens Stolentberg announced that several member states (Denmark and Spain, according to reports) have already sent fighter jets and ships to the Baltic states and Eastern Europe. The Baltic States member states (Estonia, Lithuania and Latvia) have in recent weeks shipped arms shipments to Ukraine.

The battle lines are clear: NATO is committed to actively defending its member states from Russian aggression, but will not send forces to Ukraine to fight on the ground. He mentally dies. “He illustrates that while the EU is content at best with a pledge of funds to Ukraine (Brussels is working on a 1.2 billion-euro” aid package “for the country) – NATO is the one that comes to the defense, and better illustrates the importance of this.

Within the United States, the United States and Britain are leading a more “hawkish” line. Britain in particular is “celebrating” the possibility of presenting positions different from those of the EU after leaving the bloc, and Prime Minister Johnson said earlier this week that “invasion of Ukraine is going to be painful, violent and chaotic “He has addressed the Russian people directly and said that ‘it is very important that they understand that this could be a new Chechnya.’

Britain and the United States are also the only two countries so far to have announced the evacuation of diplomatic families and unnecessary staff from Kiev, while the EU has made it clear that at this stage it is keeping the missions fully active and not evacuating civilians. Last night it was announced that it was “ready to send” about 8,500 soldiers immediately, but has not yet taken that step.

In Ukraine, growth forecasts are lowered

In Ukraine itself, according to reports, the authorities may be preparing for war, but companies and the private sector are continuing to do business as usual. The past year has marked a recovery for the country from the corona crisis, and GDP has grown by 2.8%. It is a massive conversion to dollars, “a German economic representative in the country told the German newspaper FAZ. Such a phenomenon has not yet been recorded.

The Ukrainian government is trying to take advantage of the crisis to get all the weapons it can get, as well as all the financial aid. Kiev welcomed the emerging union plan to inject € 1.25 billion in funds, designed to “help it cope with growing tensions”. The growth forecast for 2022 still stands at an optimistic 3.5%.

In Russia, however, the ruble fell to a low of more than a year and the central bank announced it would stop buying foreign currency to try and support a higher conversion rate. On Monday, the ruble fell 2.3% against the US dollar in just a few hours. Of about 7%, and the main index has fallen by 30% in the last three months, since the tension began.

Program for anti-Russian provocations

Russia has tried to make it clear several times in recent weeks that it does not intend to invade Ukraine, but in the past has not hesitated to withdraw from such statements on various grounds. British intelligence estimated over the weekend that the Russian government plans to use well-planned provocations as an excuse for an attack, and is also already looking for pro-Russian elements in the political system to position as Moscow’s puppet rulers.

For Russia, the very willingness of the US and Europe to discuss the future of Ukraine and the withdrawal of European forces with Moscow is an achievement, achieved solely by threats of military action. It now remains to be seen at what stage, if at all, Putin decides And escalating in recent days, threatening him.

By Editor

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