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The eruption of hostilities between Russia and Ukraine in early 2022 left many observers worried about the state of the world in several domains: the disruption to the global economy, the application of cross-domain warfare, and the disordering of the international political order. The breakneck speed at which events unfolded, and the constant media attention towards the conflict, led to a general sense of disorientation and ambiguity about the path-dependency of the belligerents, not least because of the nuclear umbrella under which war was being waged. However, this disorientation should not detract from the important interdisciplinary questions that scholars can begin to ask, particularly in the field of economics, as they proceed to contextualize such a significant global event.

By no means downplaying the scale of devastation that the conflict has unleashed, it is nevertheless worth delineating several ambits of economic research that can be informed by the developments in Ukraine, Russia, and the wider world contemporaneously within the prism of ongoing strife. Economics might, at first glance, not appear to be the most salient aspect of research in an otherwise multidimensional conventional war, but it has (1) played a significant role in terms of the toolkit of Western retaliation, and (2) had the largest aftershocks in terms of disrupting the global economy, with far flung nations bearing an economic brunt even if their governments express a sense of distance from the kinetic outcomes of the conflict.

First is the choice of economics as a war domain. Although Russia chose traditional kinetic warfare as the primary domain of engagement (and supported it with hybrid operations), the West has largely chosen economics as the counter-domain for retaliation. This might prevent the escalation ladder from being breached and the scope of belligerents from expanding, while also enabling “stroke of the pen” means to be undertaken without bloodshed for the West. At the same time, it also means that the Ukrainian military & civilian defense remains under-equipped relative to the Russian adversary in the domain that Russia chose. As such, there are various lessons for strategist-economists in ascertaining how quickly and readily economics is chosen as the domain of war, but then in considering how it measures against other domains in terms of intensity and effectiveness.

Second, and closely related, is the imposition of sanctions regimes. The list of punitive measures imposed on Russia now make it the most heavily-sanctioned country in the world. Yet the effectiveness of the sanctions regime imposed on Russia is shaped by a variety of factors including (1) the participation of countries (for & against), (2) the targeted entities & individuals, (3) the internal cohesion of institutions and individuals in Russia, (4) the self-dependency of the Russian economy, (5) the duration of the conflict, and (6) countermeasures and retaliatory actions taken by Russia. The current conflict therefore offers fresh insights into the effectiveness of sanctions regimes, which are often seen as excessively punitive towards publics instead of state actors, and generally ineffective at regime change or deterrence.

Third, and closely tied to Pakistan’s perspective, is the concept of economic security. The term “economic security” is interpreted differently by different audiences, but insofar as the National Security Policy (NSP) of Pakistan (as an example) is concerned, it tends to mean the buildup of diversified foreign reserves to withstand shocks, and economic security is thus a means of building resilience. Russia had undertaken considerable preparation since 2014 to boost its economic security, with a massive war chest of roughly $630 billion that was well-diversified across gold, euros, yuan, dollars, and other assets. However, the sanctions and delimitations that the West imposed meant that a portion of these reserves, enmeshed in the international financial system as they were, could not be easily accessed. Therefore, there are significant lessons from the Russo-Ukrainian conflict in terms of economic security strategies, particularly in terms of fine-tuning them to cater for complexity and interdependence in the international economy.

Fourth, and no less important, is the wider question of dollar hegemony & commodities. The weeks since the eruption of conflict have led to interesting news flow regarding countries’ desire to hold and use the US dollar as reserve currency, as for example in Saudi-China discussions on a wider petro yuan trade, or in Russo-Chinese discussions along similar lines. What was once seen as a core asset (or at least exorbitant privilege) of the United States as master of the global reserve currency is being increasingly rebuffed for alternatives. In addition, the utility of cryptocurrencies and other alternate stores of wealth has also gained attention; as have efforts to regulate them. The Russian central bank’s own strategy of protecting the ruble also gives insights into wartime economic operations. At the same time, the volatility in commodity markets and national strategies to combat inflationary pressures are presenting interesting lessons for financial research, which may in time suggest that the Russo-Ukrainian conflict was an accelerator of currency shifts that reflected new economic realities.

Fifth, and finally, lies the research question of geopolitical/geo-economics primacy. Economists often proceed with assumptions about human and institutional rationality that would put reasoned economic self-interest at the core, which leads them to assume that a country will put its geo-economics interests and economic stability above all other considerations. Yet the Russo-Ukrainian conflict demonstrates that the Kremlin’s calculus incorporated geopolitical and (non-economic) geostrategic considerations, even at the cost of short-to-medium term (and perhaps longer) economic hardship, which citizens are facing due to retaliatory economic isolation. Other countries too have overridden purely economic-market logics to attempt to attain other objectives which matter equally (if not more) to the state and its inner sanctum. The current conflict should be seen in light of competing logics where economics does not (or no longer) holds primacy.

Although the foregoing list is by no means comprehensive, it touches upon key areas of economic research in a multidisciplinary context that also extend far beyond Eastern Europe, and can be seen through the prism of other regions as time proceeds and dynamics with a greater semblance to the current conflict arise elsewhere. With this in mind, researchers should consider the prospects of learning carefully from the lessons of the unfortunate Russo-Ukrainian conflict.

Dr. Usman W. Chohan is the Director for Economic Affairs and National Development at the Centre for Aerospace & Security Studies (CASS), Islamabad, Pakistan. He can be reached at cass.thinkers@gmail.com.

Image Source: Culverhouse, S. 2020, “Ukraine Central Bank independence under threat,” Tellimer, July 13, https://tellimer.com/article/ukraine-central-bank-independence-under-threa.

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