Unintended regional consequences of the Ukraine war

16 June، 2022

The geopolitical shifts caused by the war in Ukraine have been unexpectedly dramatic and certainly unintended. The new cold war between East and West is intensifying along a new front. Europe is uniting,

NATO is expanding and the Western alliance in general is being reinvigorated after years of self-doubt and talk of strategic autonomy, i.e., reducing Europe’s reliance on the US. Germany, which had been reluctant to militarize before the war, has committed to a $112 billion increase in defense spending and pledged to meet NATO’s target of 2 percent of gross domestic product. Norway, Italy, Austria, Denmark and Poland are also increasing their defense spending.

Regionally, the war has demonstrated the critical strategic importance of Saudi Arabia and its GCC allies to the world order, debunking idle talk about their lapsed importance. Another fact uncovered by the war and the rapid rise in gasoline prices is that, despite a lot of progress in developing renewable sources of energy, fossil fuels still matter, both economically and geopolitically.

Another unintended consequence is that the war has accelerated US efforts to shore up its ties with the GCC and other partners in the region. President Joe Biden’s trip to Saudi Arabia on July 15-16 will be a watershed moment for the current administration’s ties with the region.

The EU is rediscovering the GCC’s uniquely placed importance. It last month issued a new Gulf strategy, upgrading the decades-long GCC-EU engagement to a new “strategic partnership” to include a deeper political and security engagement, including on energy security. The word “energy” came up about 50 times in that document and “security” 30 times — quite an addition to the previous emphasis on economic and environmental issues.

The GCC states’ balanced approach to the crisis has added strategic weight to the bloc. All GCC members voted for the UN General Assembly resolution in March that condemned Russia’s attack and reiterated the UN’s principles governing relations between its members, including respect for the sovereignty and territorial integrity of Ukraine and the need to settle disputes by political means without resorting to force or threats.

At the same time, they have been cautious about imposing sanctions and other punitive measures outside of the UN. They have offered their good offices to mediate. In particular, they have emphasized the need to address food shortages caused by the crisis and reduced exports from Ukraine. Both sides to the conflict have respected the GCC’s position and have sought to broaden their respective strategic dialogues.

The economic effects of Russia’s invasion of Ukraine and the ensuing sanctions from the US, EU and others have been equally intense and biting, despite the fact that Russia and Ukraine represent only a small fraction of the world economy. The effects have been most notable in energy, food and mineral supplies.

Before the war, Russia was the world’s largest exporter of natural gas, second-largest exporter of crude oil and third-largest exporter of coal. It also enriched more uranium for use in nuclear power plants than any other country in the world. The reduction in its export capacity of those items has driven energy prices sky-high.

Food and fertilizer exports have shrunk since the start of the war and their prices have reached highs not seen in more than a decade, affecting many countries in the Middle East and Africa, which used to rely on supplies from Russia and Ukraine. The two countries accounted for about 30 percent of wheat and 60 percent of cooking oil exports globally.

The spillover of the crisis in Central Asia has so far been very noticeable because of the region’s proximity and deep ties to Russia, but there is clear potential for even greater effects in the long term if the conflict continues. Kazakhstan and Turkmenistan have significant oil and gas reserves, which may shield them from the harshest consequences of the war. However, their neighbors — Uzbekistan, Tajikistan and Kyrgyzstan — will feel the pinch. Between them, they had 8 million citizens working in Russia in 2021, according to official figures. Those workers send home sizable remittances that help prop up their countries’ economies. In 2021, remittances accounted for 34 percent of Tajikistan’s GDP and 33 percent of the Kyrgyz Republic’s, according to the World Bank. In Uzbekistan, the share was about 12 percent.

Some of those workers may have to return from Russia if they lose their employment opportunities because of the economic slowdown due to the war and sanctions. Trade, investment and other economic activities between Russia and Central Asia may also be affected, adding to the economic woes of vulnerable economies in the region as they struggle to recover from the COVID-19-induced recession.

Some regional banks are also suffering, as their loan portfolios have shrunk since the start of the war because of reduced economic activity.

It is not clear how permanent the effects will be on Russia-Central Asian relations or on political stability in that region; much depends on how long the war will last and on Moscow’s ability to mitigate the effects of sanctions. There is evidence, however, that Central Asia’s supply chains are slowly shifting their sourcing toward China, accelerating a trend that predated the war. Earlier this month, China celebrated three decades of ties with the countries of Central Asia. A rare post-pandemic visit to the region by Chinese President Xi Jinping is reportedly being planned for the fall.

The longer the conflict lasts, the greater the potential for seismic tremors that could change geopolitical calculi.

Dr. Abdel Aziz Aluwaisheg

Turkey is also taking advantage of the changes in Central Asia. Ankara has been raising its profile in the region since the war started, signing trade and defense agreements and exchanging high-level visits with Kazakhstan and Uzbekistan, among others.

In this war, as in most conflicts, there are many unexpected and unintended consequences, as well as gainers and losers. The longer the conflict lasts, the greater the potential for seismic tremors that could change geopolitical calculi in many regions, including the Gulf, the Middle East and Central Asia.

It is therefore wise to mitigate against its ill effects, including rising food prices and shortages, while exploring the potential for improved strategic positioning. Biden’s mid-July visit to the region provides a rare opportunity for a rejuvenated partnership to enhance shared security and prosperity.