The weaponization of interdependence — and other consequences of the war in Ukraine

One of the many nagging uncertainties of the horrendous, epoch-altering war in Ukraine is what the endgame will look like. That is still over the horizon. But regardless, many of the cascading, and destabilizing, unintended consequences of Putin’s folly and the global response to it are already beginning to come into view.

Few have yet to fathom just how deep in uncharted waters we are — and why it is a world-historical event, like 9/11, reshaping world affairs. Its short-term impact is already being felt, and new trends set in motion are likely to have long-term after-effects, from deglobalization to new global alignments.

Never before has the world’s 11th largest economy been so unplugged from the world system, almost overnight. The Russian economy may shrink by 15 percent or more this year, the ruble may have stabilized for now, by tight capital controls — that is to say, by government intervention, not markets, and it may be short-lived.

Moscow now demands payment in rubles, no longer dollars, for its oil and gas. As imports of equipment and computer chips are blocked by sanctions, Russian industry will falter. Russia’s future is at risk as Putin is losing a whole generation with tens of thousands of professionals fleeing, the tech sector leading the pack. 

But unlike sanctions against smaller countries such as Syria or Myanmar, this weaponization of interdependence does not spare those imposing them.  

Among the short-term fallout is the price of oil, still over $100 a barrel, price hikes and shortages of phosphate for fertilizer and nickel needed for electric vehicle batteries. As Russia and Ukraine together account for nearly 30 percent of world wheat exports, bread prices are spiking with prospective food riots in places like Egypt and East Africa.

Such commodity shortages are likely to spur more inflation and looming recession in Europe, and possibly the U.S. The International Monetary Fund (IMF) lowered its projection of global economic growth due to the Ukraine war. The Biden administration appears to be putting its climate change plans on hold, and is seeking to ramp up U.S. and global oil and gas production.

The weaponization of interdependence has led some to forecast deglobalization. To some extent, this trend has been accelerating since the pandemic began, and now, with the sanctions response to the Ukraine war, more so. This is evident in reshoring of supply chains, valuing security over efficiency, shifting global investment patterns and in protectionist policies such as Biden’s “Buy American,” which in the case of electric vehicles, Canada and Mexico say violates the USMCA trade accord. We’re seeing how fragile the international system is, as it fragments into regional blocs, as digital currencies are accelerating efforts to reduce the global role of the dollar. But all told, it appears more a scaling back and regionalization of globalization than its demise.

But the swiftly shifting geopolitical and geoeconomic dynamics may have long-term consequences. Sanctions, particularly the freezing of central bank transactions and Western phase out of Russian oil and gas, have unplugged Russia from the global economy. The problem is that the gap between the near-term pace of the war and longer time frame for the pain of sanctions to be felt have meant limited gains in Ukrainian and U.S./NATO leverage on Moscow. But regardless of the Ukraine war’s outcome, it will be many years before Russia reconnects.

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Most dramatic has been a revolution in Germany sensibilities. Overnight, Germans discarded 70 years of a pacifist culture, doubling its defense budget and sending weaponry to Ukraine. More broadly, the European Union writ large has seen its core myth – that economic interdependence means more security and less likelihood of war – shattered. This is likely to lead to a stronger European military capability, and perhaps a larger dollop of independence from the U.S.

For the foreseeable future, however, Putin has succeeded in forging a new and previously unimagined unity among Western democracies (as well as with Japan and South Korea). In fact, the EU led the charge on imposing financial sanctions on Russia and killing the Nordstream 2 gas pipeline. As evidenced in the recent EU-China summit, the war and Beijing’s ambiguous effort at projecting neutrality, the EU has moved closer to the U.S. perspective on China.

Whether the newfound harmony translates into narrowing the gaps between U.S. and EU trade and technology policies, or even long-term common posture regarding Russia, is uncertain. But Ukraine has certainly strengthened trans-Atlantic ties.

There is also the specter of a bifurcated world looming. China has adopted a sort of pro-Russian neutrality, refusing to condemn Putin’s barbarism, echoing Moscow disinformation but calling for talks and ending the war, and carefully taking actions to not cross economic and financial sanctions, curbing economic connectivity with Russia.

Depending on what strategic choice China plays going forward and how the war ends, Ukraine could be an opportunity for China to play a constructive role and perhaps not risk its economic ties with the U.S. and EU. Or China could tilt further to support Moscow and the future may be a Double Cold War.

But the world may become more complicated than just bipolar. An under-appreciated factor is the response to the Ukraine war by a significant group of neutral nations —India, Saudi Arabia, the United Arab Emirates, Vietnam, Egypt, Turkey, Brazil and other developing states that are affected by the economic fallout of the war. For example, the political pendulum in Latin America is tilting to the left, with leftist populist leaders elected in Colombia and Chile, and likely in Brazil’s upcoming elections. In the Middle East, much of which depends on Russian and Ukrainian wheat, bread prices are sparking protests, and the contrast between Europe’s welcome of Ukrainian refugees and its opposition to those from Syria fosters resentment.

There is a tendency to confuse Western consensus with global consensus. This nascent grouping may evolve into an informal non-aligned network. This would further fragment the global system. Moreover, many have economic or arms supply ties to Russia and major and investment ties to China. If past is prologue, they are likely to play off the West and a Sino-Russian pole for advantage depending on the issue.

Regardless of how and when the Ukraine war ends, we are already seeing economic and strategic fallout that is shaping a rocky future. 

Robert A. Manning is a senior fellow of the Scowcroft Center for Strategy and Security and its New American Engagement Initiative at the Atlantic Council. He was a senior counselor to the undersecretary of state for global affairs from 2001 to 2004, a member of the U.S. Department of State policy planning staff from 2004 to 2008 and on the National Intelligence Council strategic futures group from 2008 to 2012. Follow him on Twitter @Rmanning4.