Russia Ukraine Conflict
Most talked topic around the world
This particular topic is making headlines every single day and is talked widely by world leaders. So what is it about? Is it ww3? Is it the collapse of economies? Or is it going to lead to a high rate of inflation?
A quick look into the history of Ukraine tells me that after going through multiple wars and emerging as an independent country and a neutral state they still faced threats from Russia, which is understandable because Russia has always been trying to annex small parts of Ukraine. But the point where both the countries actually started a conflict was the annexation of Crimea in 2014. Up until this point be it the Ukrainian military or the citizens they never resorted to violence unless it was for self defence. But after Russia sent their forces in and attacked Ukrainian vessels the Ukrainian military retaliated and protesters took a violent approach. This is where it all started.
Now coming to the current situation. This time Russia is looking to invade the whole of Ukraine, at least that’s how it looks even though Russia says it has no plans of invasion. So what does Russia want?
Acc to what I’ve read abt both the countries’ history, Russia doesn’t want Ukraine joining European institutions(EU) and NATO. Their demand from west is to guarantee that Ukraine will not join these institutions. Second after the annexation of Crimea, Russia has backed the separatists and captured even more areas in Ukraine. This has built up the confidence of Russia and has given them the license to look for more.
Why does Russia not want Ukraine to join nato?
One reason is because they fear Ukraine might recapture Crimea again. Another reason could be that Russia could be involved in a war with more than 30 countries if Ukraine joins nato.
The next question that world leaders and the common people are worried about is what will be the effect if Russia invades Ukraine.
Let me start with the general impact. There are definitely going to be casualties on both sides. Markets in both countries will crash, prices of essential commodities and the general goods will rise and all around the world there might be the fear of political instability. These are general in nature.
Now what does Russia face?
It faces severe sanctions imposed by the US, and Europe. Europe and USA could retaliate using their military in the event of a full invasion. The sanctions imposed by the countries could range from travel restrictions to export cut off. But these sanctions could affect the rest of the world as Russia is a key exporter of oil to European countries and other countries. Cutting off exports would push the prices of crude oil up and might lead to inflation. Inflation is already at a 40 year high in the USA and many other countries and these could make it even worse. Oil and natural markers will quake and Europe will be the most affected. But a shutdown of Russia’s energy exports is highly unlikely. Europe is too dependent on Russia for oil to boycott it or include oil and natural gas on the sanctions list. A full invasion along with sanctions and energy prices would add 2 percentage points to inflation in developed countries. As mentioned Europe will be the most affected by this but considering that USA is already facing a 7.5% inflation they would be severely affected as well.
A limited invasion would result similar consequences but the recovery would be quick and easier. A non military aggression would affect Ukraine severely through cyber attacks, information warfare etc. But this would have minimal implications on financial markets and overall inflation.
What are the impacts on the economy of India?
India have been quiet on the Russian conflict issue and have not taken any side as of yet and have not issued any measures. At the UN India abstained from voting to discuss the issue indicating that they might be taking a diplomatic position. But the Russia-India consultations held in Delhi in the month of jan shows a tilt towards Moscow. Now the effects:-
India is a partner to both Moscow and Washington and Washington is against Moscow. India has to either take a side and lose few privelages from the side they don't choose or prepare to deal with deal cut offs from both sides.
US and Europe had just started to focus on their Indo-pacific strategy following the Chinese aggression at loc. But now their focus has shifted to the Ukraine crisis and this might be an opportunity for china to move their men towards India china border.
India has 20000+ nationals in Ukraine mostly med students as well as business professionals and the govt is concerned abt their safety in the event of a crisis.
The issue that every country might face- energy prices
If India gets on board with USA and assuming the war never happens India will still face consequences. India will be looked as an ally of USA and ties with Russia would be permanently broken. Russia is India's number 1 supplier of weapons and making them our enemies would lead to a disaster because now we have 3 countries to contend with- Russia, China and Pakistan. China benefits the most from this. The Russia India relationship has always been a hindrance to china. US issuing sanctions on Russia will only make Russia get closer to china.
What should India do?
Both Russia and US are highly valuable partners of India. Picking one side might not be the right decision . India should continue a balanced and neutral approach and focus on the implications the conflict might have in their own issues with Pakistan and China.
India should encourage both Russia and US to reach a compromise with a mutually acceptable agreement. This would help its relations with both Russia and US and would also not lead to any war.
How will Russia attack?
Russia has enough manpower to beat Ukraine in a war which is a motivation for them to invade. But they would also consider the sanctions and market prices that they will have to face if they do so because once they invade they are going to lose the Nord Stream 2 deal and number of exports.
But Russia has other options too- a limited invasion or non military aggression(cyberattacks). Whichever option they choose would lead to a severe impact on economies of both the countries and other countries as well.
Is diplomacy the answer, can it prevent a war?
In my opinion yes, diplomacy is the answer. Any compromise would only come at a price. But taking that option would be better than to fight a war and see economies crumble. Here are the options:-
The west could convince Putin to back down. He should be provided with data of what would happen if they invaded Ukraine that the costs would outweigh the benefits.
Reviving Minsk agreements is another option. This agreement included a number of deals negotiated in 2014 and 2015 which obviously failed as the fighting still continues. Western politicians suggest reviving the agreement as it laid out a path for ceasefire and political stability.
The current situation could continue for a long time but there might never be an invasion. Over a period of time the intensity might reduce and Russia could pull its troops back declaring that the exercises are over after having multiple talks.
These 3 ways are the most prominent diplomatic ways to solve the current issue. But diplomatic solutions might come only at the last minute when a country is in a losing position. A diplomatic agreement solves the issue, prices will fall down and there’ll be deflation. Central banks will not have to worry about inflation and investors could heave a sigh of relief.
So…diplomacy the solution?