{"id":19546,"date":"2022-10-03T01:00:00","date_gmt":"2022-10-03T00:00:00","guid":{"rendered":"https:\/\/www.economicsobservatory.com\/?post_type=question&#038;p=19546"},"modified":"2022-10-18T10:29:12","modified_gmt":"2022-10-18T09:29:12","slug":"what-would-be-the-economic-consequences-of-a-military-stalemate-in-ukraine","status":"publish","type":"question","link":"https:\/\/www.economicsobservatory.com\/test\/what-would-be-the-economic-consequences-of-a-military-stalemate-in-ukraine","title":{"rendered":"What would be the economic consequences of a military stalemate in Ukraine?"},"content":{"rendered":"\n<p>In February 2022, Russia launched a full-scale military invasion of Ukraine. By September, Russia controlled large tracts of Ukrainian territory and strategic urban centres in eastern Ukraine. But it had ultimately failed to achieve its main military objective of toppling the Ukrainian government in Kyiv.<\/p>\n\n\n\n<p>Despite significant Ukrainian gains in September, neither side currently appears powerful enough to win the conflict outright. As a line of contact stabilises and parts of eastern Ukraine remain under Russian occupation, is a military stalemate likely? And what might be the economic consequences of the absence of a negotiated agreement?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>How has the conflict progressed and is a military stalemate likely?<\/strong><\/h3>\n\n\n\n<p>Russia launched its so-called \u2018special military operation\u2019 in Ukraine in February 2022. But Russia\u2019s military involvement in Ukraine dates back to 2014 when it supported separatists in the eastern regions of Donbas and Luhansk, and the southern peninsula of Crimea. Russia annexed the latter after an illegal referendum in the same year.<\/p>\n\n\n\n<p>The conflict in eastern Ukraine was fought between separatists backed by Russia and Ukrainian forces that were, at first, an amalgam of informal militias and the Ukrainian army. Over time, this became an increasingly centralised and effective military force.<\/p>\n\n\n\n<p>The conflict simmered at low intensity, with a relatively stable line of contact stretching from north of the city of Luhansk to east of the city of Mariupol. Despite sporadic episodes of heavy fighting, movement of people and goods across the contact line resumed, although this was <a href=\"https:\/\/www.ssoar.info\/ssoar\/handle\/document\/75555\">heavily controlled<\/a> through a small number of border crossings.<\/p>\n\n\n\n<p>Russia\u2019s role in the conflict was initially debatable, but the origin of the \u2018little green men\u2019 became well known, and in 2015, Russian president Vladimir Putin <a href=\"https:\/\/www.theguardian.com\/world\/2015\/dec\/17\/vladimir-putin-admits-russian-military-presence-ukraine\">admitted to their presence<\/a>. Military support often <a href=\"https:\/\/www.ft.com\/content\/ac9dacc8-223d-11e4-a828-00144feabdc0\">guised as humanitarian aid<\/a> and the direct involvement of military personnel ensured <a href=\"https:\/\/www.justsecurity.org\/69821\/russias-humanitarian-law-obligations-to-civilians-in-occupied-ukrainian-territories-in-the-time-of-covid-19\/\">high levels of control<\/a> over the separatist armed groups and region by Russia.<\/p>\n\n\n\n<p>Russia began amassing troops near the Ukrainian borders with Russia and Belarus around March 2021. Claiming to want to protect ethnic Russians from genocide, Vladimir Putin launched a full-scale invasion of Ukraine on 24 February 2022. This included bombing across the entire Ukrainian territory and an attempt to take the capital city, Kyiv.<\/p>\n\n\n\n<p>Despite predictions of imminent defeat for the Ukrainian army, the Russian army ultimately failed to achieve their primary military objectives. This was due to a combination of staunch <a href=\"https:\/\/www.washingtonpost.com\/world\/interactive\/2022\/kyiv-urban-warfare-russia-siege-donbas\/\">Ukrainian resistance and poor logistics<\/a>.<\/p>\n\n\n\n<p>In late March, the Russian defence ministry refocused its military power on eastern Ukraine, aiming to create a land bridge between Crimea and the separatist regions. Russia employed brutal and often indiscriminate military tactics to take the strategic cities of Kherson in March, Mariupol in mid-May and Severodonetsk in late May.<\/p>\n\n\n\n<p>Russia didn\u2019t succeed in achieving its initial goals, and while significant tracts of land in eastern and southern Ukraine came under occupation by Russian forces, Ukrainian forces are increasingly <a href=\"https:\/\/theconversation.com\/ukraine-hopes-to-retake-territory-as-new-weapons-give-firepower-to-push-back-russians-187884\">pushing the Russian army back<\/a>.<\/p>\n\n\n\n<p>Indeed, in recent weeks, Ukrainian forces have forced Russian troops to retreat, especially in the north-eastern region of Kharkiv, where the Ukrainian government claims to have <a href=\"https:\/\/www.bbc.co.uk\/news\/world-europe-62874557\">liberated over 3,000 square kilometres<\/a>. In response to this military setback, Putin ordered the mobilisation of army reservists to support the <a href=\"https:\/\/www.ft.com\/content\/fc1413ee-0900-479d-84c3-403bc7e42979\">ailing campaign<\/a>.<\/p>\n\n\n\n<p>But despite a successful Ukrainian counter-offensive, there are early signs of a military stalemate. Neither side appears strong enough to win the conflict outright.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>What are the prospects for a negotiated settlement?<\/strong><\/h3>\n\n\n\n<p>The international community will play an important role in how Russia\u2019s war in Ukraine ends. The invasion was largely condemned, although there were some notable absences, such as <a href=\"https:\/\/news.un.org\/en\/story\/2022\/04\/1115782\">China, North Korea, Iran and Syria<\/a>.<\/p>\n\n\n\n<p>Western states have responded in two ways. First, the West imposed debilitating sanctions that targeted the Russian economy. Sanctions are inflicting large costs on people in Russia, but their effectiveness in making the Russian elite abandon their foreign policy goals in Ukraine is not clear.<\/p>\n\n\n\n<p>Generally, economic sanctions can inflict costs on target states, but many question whether they are the most effective foreign policy tool for forcing states to change their course of action. Writing over two decades ago, <a href=\"https:\/\/www.jstor.org\/stable\/2539368?sid=primo&origin=crossref#metadata_info_tab_contents\">Robert Pape<\/a> argued that: \u2018Pervasive nationalism often makes states and societies willing to endure considerable punishment rather than abandon what are seen as the interests of the nation.\u2019 Iran has since become testament to this claim.<\/p>\n\n\n\n<p>While it is difficult to assess public opinion in Russia, early polls suggested that its <a href=\"https:\/\/blogs.lse.ac.uk\/europpblog\/2022\/03\/17\/what-do-ordinary-russians-really-think-about-the-war-in-ukraine\/\">citizens supported the invasion<\/a>, and polls show <a href=\"https:\/\/www.levada.ru\/en\/ratings\/\">high approval rates<\/a> for Russian leadership. As winter approaches, Russia is flexing its own economic muscles by halting important energy supplies to Europe. While unprecedented in scale and scope, it is not obvious whether economic sanctions will stop Russia\u2019s aggression in Ukraine or force the country to the negotiating table.<\/p>\n\n\n\n<p>Second, the West has supplied military equipment to support Ukraine in its fight against Russia. In an unprecedented move, the European Union sent military assistance to support the Ukrainian armed forces. At the same time, the UK and the United States have provided <a href=\"https:\/\/www.washingtonpost.com\/world\/2022\/08\/05\/ukraine-war-javelins-russia-tanks\/\">effective weaponry<\/a> aimed at providing Ukraine with the tools to overcome Russia\u2019s important military advantages.<\/p>\n\n\n\n<p>While surveys indicate that the Western public <a href=\"https:\/\/europa.eu\/eurobarometer\/surveys\/detail\/2772\">overwhelmingly supports<\/a> their states\u2019 response to the Russian invasion, a small but growing group are raising <a href=\"https:\/\/www.foreignaffairs.com\/articles\/ukraine\/2022-07-08\/ukraines-implausible-theories-victory\">concerns<\/a> over warmongering. For example, in the UK, the former leader of the opposition Labour Party, Jeremy Corbyn, urged Western countries to stop arming Ukraine because it will \u2018<a href=\"https:\/\/www.theguardian.com\/politics\/2022\/aug\/02\/jeremy-corbyn-urges-west-to-stop-arming-ukraine\">prolong and exaggerate<\/a>\u2019 the war.<\/p>\n\n\n\n<p>There is a large body of <a href=\"https:\/\/www.lawfareblog.com\/what-does-arming-insurgency-ukraine-mean\">relevant research<\/a> on the role of external states in civil wars and, specifically, the mixed track record of interventions in ending hostilities. Interventions affect the capabilities of opposing sides in a conflict and, ultimately, conflict duration.<\/p>\n\n\n\n<p>Existing theories tend to focus on a balance of power between government and rebel forces, which is often measured in troop numbers, military capabilities and resources. External support may shorten wars if it is provided to <a href=\"https:\/\/www.jstor.org\/stable\/27640678\">one side, but not both<\/a>. <a href=\"https:\/\/journals.sagepub.com\/doi\/abs\/10.1177\/0022002715600761\">Certain forms of support<\/a> \u2013 mainly money and weapons \u2013 cause greater uncertainty over fighting capability, which causes sides to continue fighting rather than settle the dispute.<\/p>\n\n\n\n<p>Although there is variation in the role of external states and conflict duration, a consensus has emerged that conflicts tend to be <a href=\"https:\/\/onlinelibrary.wiley.com\/doi\/abs\/10.1111\/j.1540-5907.2006.00221.x\">harder to resolve<\/a> when external states intervene, especially if the two sides achieve some form of military parity. With increasingly effective military support reaching Ukrainian troops on the frontline, it is unlikely that the conflict will end soon.<\/p>\n\n\n\n<p>There is a larger trend for conflicts not to end in victory or an agreement. <a href=\"https:\/\/direct.mit.edu\/isec\/article-abstract\/42\/3\/127\/12187\/How-Civil-Wars-End-The-International-System-Norms?redirectedFrom=fulltext\">Researchers<\/a> have argued that a norm emerged in the 1990s that led the United States to accept high costs to achieve negotiated settlements despite having the ability to help proxies achieve outright military victories. Due to a logic of appropriateness, Western policy-makers came to think that wars should end a certain way, namely through compromise based on democratic principles.<\/p>\n\n\n\n<p><a href=\"https:\/\/direct.mit.edu\/isec\/article-abstract\/42\/3\/127\/12187\/How-Civil-Wars-End-The-International-System-Norms?redirectedFrom=fulltext\">These experts<\/a> also note that an emerging goal of stabilisation marked conflicts in Iraq and Afghanistan. Indeed, <a href=\"https:\/\/ucdp.uu.se\/downloads\/index.html#termination\">conflict termination data<\/a> from the Uppsala Conflict Data Program (UCDP) show that conflicts are increasingly likely to end in low-intensity activity \u2013 that is, conflict continues but does not amount to more than 25 battle-related deaths per year. Combined, most research points to a military stalemate and, ultimately, a low-intensity or frozen conflict.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>What might a frozen conflict look like?<\/strong><\/h3>\n\n\n\n<p>It is difficult to predict how Russia\u2019s war in Ukraine will develop. A settlement that sees Russia retreating to the pre-conflict line of contact is hard to imagine. Neither Russia nor Ukraine is prepared to agree to a negotiated settlement that ultimately amounts to failure to achieve their aims.<\/p>\n\n\n\n<p>And yet a <a href=\"https:\/\/www.theguardian.com\/world\/2022\/jul\/22\/ukraine-russia-sign-un-backed-deal-restart-grain-exports\">United Nations-backed deal<\/a> negotiated by Turkey to allow the export of grain from Ukraine provides \u2018<a href=\"https:\/\/news.un.org\/en\/story\/2022\/07\/1123062\">a beacon of hope<\/a>\u2019 that Russia and Ukraine may cooperate, at least in economic matters that benefit both sides.<\/p>\n\n\n\n<p>Taking both the unlikelihood of a negotiated settlement to the war and emerging cooperation in trade, a possible future scenario is a protracted conflict with a volatile line of contact. In time, occupied lands in eastern Ukraine may be annexed by Russia through <a href=\"https:\/\/www.reuters.com\/world\/europe\/moscow-administered-kherson-prepares-referendum-joining-russia-tass-2022-06-29\/\">unrecognised referenda<\/a> or a <a href=\"https:\/\/www.taylorfrancis.com\/books\/mono\/10.4324\/9780429354847\/international-society-de-facto-state-scott-pegg\"><em>de facto<\/em> state<\/a> may emerge from an increasingly cold conflict.<\/p>\n\n\n\n<p><em>De facto<\/em> states are not recognised by most states and thus do not have access to the legal rights afforded to states. As there is no international legal protection for their existence, they are often at risk of being forcibly re-integrated into their \u2018parent\u2019 state \u2013 in this case, Ukraine \u2013 and rely heavily on their external patron for protection \u2013 in this case, Russia.<\/p>\n\n\n\n<p>There is a rich body of research on <em>de facto<\/em> states with a regional focus on the post-Soviet space. Places like Transnistria, Nagorno-Karabakh, Abkhazia and South Ossetia were part of the Soviet Union. But <a href=\"https:\/\/academic.oup.com\/isq\/article\/61\/2\/337\/3078982?login=false\"><em>de facto<\/em> states also exist elsewhere in the world<\/a>, for example Taiwan, Somaliland and Rojava.<\/p>\n\n\n\n<p>Researchers focus on how these state-like entities emerge and how long they last until they are either re-incorporated into their parent state \u2013 as was the case when Russia invaded Chechnya in 1999 \u2013 or they are recognised by the international community \u2013 as was the case with South Sudan in 2011. Scholars therefore often focus on the <a href=\"https:\/\/www.cambridge.org\/us\/academic\/subjects\/politics-international-relations\/international-relations-and-international-organisations\/power-politics-and-state-formation-twentieth-century-dynamics-recognition\">dynamics of recognition and non-recognition<\/a>, or on processes aimed at <a href=\"https:\/\/link.springer.com\/book\/10.1057\/978-1-137-60006-6\">settling the conflict<\/a> between the <em>de facto<\/em> state and its parent.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>What will be the economic consequences of a frozen conflict?<\/strong><\/h3>\n\n\n\n<p>The economic consequences of the war are dwarfed by the current human suffering and loss of life. Yet the economic impacts of war on Ukraine and beyond are immense. In the short term, Ukrainian economic output is currently a fraction of its pre-war levels.<\/p>\n\n\n\n<p>Ukraine and Russia are the biggest producers in agriculture and food globally. Described collectively as the breadbasket of the world, restricted economic activity within Ukraine and its limited ability to export raw goods, particularly food, have led to soaring food costs.<\/p>\n\n\n\n<p>This is directly linked to inflation in Europe, but crucially, record goods prices have triggered a <a href=\"https:\/\/www.worldbank.org\/en\/topic\/agriculture\/brief\/food-security-update\">global crisis<\/a> that is driving millions into poverty and hunger, especially in low- and lower-middle income countries. Despite recent shipments of grain, the Russian blockade of Ukrainian ports and sanctions against Russia mean that food prices are likely to increase further.<\/p>\n\n\n\n<p>The long-term economic costs of the war are equally alarming. People directly affected by violence are maimed, killed and displaced. Children miss out on crucial years of education and training. Combined with the loss of property and infrastructure \u2013 such as roads, bridges and equipment \u2013 all of this will significantly <a href=\"https:\/\/econpapers.repec.org\/paper\/mcnrwpapr\/1.htm\">reduce future economic activity<\/a> of people and areas most affected by the war.<\/p>\n\n\n\n<p>The destruction of human and physical capital has reduced Ukraine\u2019s macroeconomic performance, and a frozen conflict will prolong the economic costs of this war. While post-conflict states often experience a rapid economic rebound, a frozen conflict is unlikely to follow such a path.<\/p>\n\n\n\n<p>As the conflict cools and a <em>de facto<\/em> state emerges in contested parts of Ukraine, a semblance of order will return for civilians in their everyday lives. But economic activity in <em>de facto<\/em> states is often restricted because they are not internationally recognised.<\/p>\n\n\n\n<p>There may be informal trade into the <em>de facto<\/em> state over the line of contact. This dynamic was clear in Northern Ireland during the conflict known as the \u2018Troubles\u2019 and the civil war in Colombia \u2013 two wars heavily marked by <a href=\"http:\/\/www.irishborderlands.com\/living\/smuggling\/index.html\">cross-border smuggling<\/a> and narco-trade.<\/p>\n\n\n\n<p>But exports from government and Russia controlled areas are unlikely to resume to pre-war levels. In the absence of concessions by Russia to allow Ukrainian exports, sanctions that limit Russian agricultural exports will remain while Ukraine\u2019s most industrial lands are ravaged by war.<\/p>\n\n\n\n<p>Exports from occupied lands in the east and south will be limited to Russia and its allies, both of which will not be able to trade on international markets due to economic sanctions. Ultimately, a frozen conflict will ensure that the global economic crisis persists.<\/p>\n\n\n\n<p>It is thus no surprise that Ukraine launched a counter-offensive in late August and September. It aims to <a href=\"https:\/\/www.newstatesman.com\/world\/europe\/ukraine\/2022\/08\/kherson-counterattack-ukraine-war-critical-moment\">signal the ability to regain Russian occupied lands<\/a> to external supporters whose resolve will weaken if Ukraine cannot show that they can prevent a frozen war with such high economic costs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Where can I find out more?<\/strong><\/h3>\n\n\n\n<ul><li><a href=\"https:\/\/unu.edu\/events\/archive\/conference\/unu-wider-development-conference-the-puzzle-of-peace-towards-inclusive-development-in-fragile-contexts.html\">The puzzle of peace \u2013 towards inclusive development in fragile contexts<\/a>: United Nations University-WIDER Development Conference.<\/li><li><a href=\"https:\/\/www.wider.unu.edu\/project\/institutional-legacies-violent-conflict\">The institutional legacies of violent conflict<\/a>: United Nations University-WIDER project.<\/li><li><a href=\"https:\/\/cepr.org\/debates\/economic-consequences-war\">The economic consequences of the war<\/a>: articles and video from CEPR.<\/li><li><a href=\"https:\/\/cepr.org\/voxeu\/columns\/economic-consequences-ukraine-war-new-ebook\">The economic consequences of the Ukraine war<\/a>: ebook by Luis Garicano, Dominic Rohner and Beatrice Weder di Mauro.<\/li><li><a href=\"https:\/\/cepr.org\/voxeu\/columns\/war-ukraine-civilian-vulnerability-resilience-and-resistance\">The war in Ukraine: civilian vulnerability, resilience, and resistance<\/a>: article by Patricia Justino.<\/li><li><a href=\"https:\/\/www.youtube.com\/watch?v=im-h3gWNbiU\">Ukraine has become a bloody stalemate \u2013 we need a settlement to end the fighting<\/a>: <em>Democracy Now<\/em> interview with Anatol Lieven.<\/li><\/ul>\n\n\n\n<p><strong>Who are experts on this question?<\/strong><\/p>\n\n\n\n<ul><li>Kristin Bakke (University College London)<\/li><li>Anastasia Shesterinina (University of Sheffield\u00a0)<\/li><li>Dominic Rohner (University of Lausanne)<\/li><li>Patricia Justino (UNU-WIDER)<\/li><\/ul>\n\n\n\n<h5 class=\"wp-block-heading\"> Authors: Patricia Justino, UNU-WIDER and Kit Rickard, UNU-WIDER <\/h5>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p>\u00a0<\/p>\n","protected":false},"featured_media":19574,"template":"","categories":[236,231,238,235],"tags":[1145,1144],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What would be the economic consequences of a military stalemate in Ukraine? - Economics Observatory<\/title>\n<meta name=\"description\" content=\"Russia\u2019s war in Ukraine may reach a stalemate as neither side appears in reach of a military victory. 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