US-based academic Dr Rajan Menon says recession in the US and a major economic crisis in Europe may occur as a result of the Russia-Ukraine war … Interview by Abhish K Bose
Dr Rajan Menon is the Director of the Grand Strategy Program at Defense Priorities based in Washington DC. He is also the Emeritus Anna and Bernard Spitzer Chair in Political Science at the City University of New York. He is a Senior Research Scholar at the Saltzman Institute of War and Peace Studies at Columbia University and a Global Ethics Fellow at the Carnegie Council on Ethics in International Affairs. He has authored books including ‘ Conflict in Ukraine: The unwinding of the post-cold war order, Energy and conflict in Central Asia and the Caucasus, Russia, the Caucasus and Central Asia.
In an interview with Asian Lite’s Abhish K. Bose, he discusses the repercussions of the Russian invasion of Ukraine in Europe and other parts of the world.
ABHISH K BOSE: Russian troops are suffering significant losses, and countries across the world are dealing with acute food shortages, a meteoric rise in inflation and other challenges brought in by a severe conflict that has no sign of subsiding soon. What will be the long-term economic ramifications brought about by the war on the economy of Europe?
Rajan Menon: Food prices have actually declined for the past several months, in part due to the grain export agreement between Russia and Ukraine that was mediated by the UN and Turkey in July. But so long as the war continues, food exports from Ukraine could be blocked again. Adding to this western banks’ raising of interest rates and the appreciation of the dollar will increase food import prices, making it especially hard for poor countries. All indicators point to the possibility of the economic situation in Europe and the UK getting worse, and they are already bad. There is technically (DEFINED AS TWO-QUARTERS OF DECLINING GROWTH ) no recession in the US now, but the federal reserves raising of interest rates to tame inflation, now higher than it has been in 40 years, could bring one about, though that remains to be seen.
ABHISH K BOSE: As per the statistics of the United Nations refugee agency, since February 24th, a third of Ukrainians who number over 41 million, have been forced out of their houses. The UN agency data says that more than 6.6 million Ukrainian refugees have been registered across Europe. What will be the additional burden these migrants cause on the economy of Europe?
Rajan Menon: The recent Russian attacks on Ukraine’s energy and water infrastructure have once again increased refugee flows from Ukraine, and at a time when the countries with substantial numbers of Ukrainian refugees —Poland, Germany, and the Czech Republic —are finding it hard to take in more. On top of that, Ukraine’s government, facing electricity and water disruptions have asked Ukrainian refugees not to come back for now. As Europe’s economy gets even worse the refugee burden will become harder to bear.
ABHISH K BOSE: The war and the resultant sanctions which made an adverse impact on the Russian economy thereby restricting Russia’s access to western financial markets are also causing trouble for Russia. The sanctions also restricted Russia from obtaining essential goods and materials. How long Russian economy will take to recover from the aftereffects of the war?
Rajan Menon: It’s impossible to state with any certainty how long Russia’s economy will take to recover . For now , though the sanctions have undoubtedly caused pain, the Russian economy is benefiting from high oil and gas prices and stepped-up imports of Russian and energy by China , India , and Turkey. Energy is critical to Russia’s economy : IT accounted for 45% OF Russia’s state budget in 2021 and close to the same proportion of its total export earnings.
ABHISH K BOSE: Following Russia’s invasion of Ukraine global oil prices increased to record heights. What will be the impact the war has on the oil imports of Russia vis a vis the European countries?
Rajan Menon: The European Union ban on Russian oil imports will take effect on DEC 5 but as OF SEPT the EU was still buying about One million barrels of Russian oil per day .For Europe , the much bigger problem is the effects on the slashing of Russian natural gas exports, which provided 40% of Europe’s imports before the war began on FEB 24.
ABHISH K BOSE: According to the reports Putin is facing the biggest challenge in his career since he became the President following the continuation of the war. How long can he pull it off with a debilitating economy and increasing opposition from the international community?
Rajan Menon: No one can answer this question , but the worse Russia fares in the war, the more tenuous Putin’s political position becomes because he owns this war and his fate is tied to it. That said, so far I see no sign of a split within the leaderships nor protests from below (which there have been) that are so large that the Russian government, which has formidable coercive powers , cannot contain.
ABHISH K BOSE: What will be the environmental hazards caused as a result of the war? Going by the nature of the war, the environmental imbalances created by the war could be irredeemable. Especially the catastrophic nature of the impact of the war in a highly industrialised country such as Ukraine can create havoc. Please explain your views on this.
Rajan Menon: The war itself will release carbon dioxide and other global warming gases into the air because they are produced when large urban areas suffer massive destruction, which they have in Ukraine. In the long term the energy price surge created by the war may hasten a global move to green energy (though that will take a long time before it amounts to a revolutionary shift), but in the short term countries are, in the aftermath of the Ukraine war, rushing to lok in imports of oil, natural gas and , in the case of India and China , for example, even coal, which , per unit, emits much more CO2 than do oil and natural gas.
ABHISH K BOSE: The war is estimated to cause a heavy impact on the world economy which includes weaker economic growth, stronger inflation and a long-standing assault on the supply chain. What do you think about this?
Rajan Menon: Europe’s economic crisis, the possibility of a recession in the US, and lower -than expected growth rates in China are bound to have knock-on effects on the global economy given that these three areas account for around 45% of global GDP.