The Ukraine War. Who died? Who pays? And, who cares?

How is the world funding the US$ 2.8 trillion needed for the Ukraine war in 2023?

The war in Ukraine originally started in 2014. It died down after an initial burst and suddenly caught on in February 2022. It has been raging for over a year.?The Office of the United Nations High Commissioner for Human Rights (OHCHR) verified a total of?7,068 civilian deaths?during Russia's invasion of Ukraine as of January 22, 2023. Of them, 438 were children.?But, who cares?

Europe has seen many skirmishes in the last century. The two World Wars and the real origin of the Cold War standoff, countless conflicts in Africa and the Middle East were all brought about by ego issues that originated in the diplomatic circles of Europe. Conspiracy theorists even attribute the dismantling of Saddam Hussain to the BBC’s false claims about Iraq’s nuclear and chemical weapons. These reports were later turned in by lazy intelligence officers as official records of Iraq’s arsenal. A later CIA report pointed to these shortcomings (https://georgewbush-whitehouse.archives.gov/wmd/text/report.html). But, who cares?

But the series of Europe’s wars don’t seem to end. It is estimated that the Russia-Ukraine war will cost US$ 2.8 trillion in 2023. That is close to the GDP of France. In an increasingly globalised world, this money will have to be pooled by the global economy. I sit in New Delhi, India and I am still paying for this war. My brothers in Africa, South America and Asia are also paying for it when they buy anything from oil to groceries. How are we paying this price?

Higher Energy Prices:

The war has pushed up the price of crude oil to an average of US$ 85 per barrel in 2022 from US$ 41.96 in 2020. (That is also due to the Covid pandemic in 2020. For a real comparison, the average price of crude was US$ 64.3 in 2019.) The higher price of crude is breaking the backs of people in the developing world. Countries from Pakistan to Sri Lanka in Asia are reeling under the pressure of an ever-widening energy divide. Gas prices are rising across the developed world too. Too many poor people everywhere are turning back to wood and coal for heating. But, who cares?

Transportation costs are spiralling out of control. This pushes up food inflation. But America’s domestic crude production has hit a high of 12.4 million barrels per day in 2023. It was 11.3 million barrels per day in 2020. By shutting out significant supplies from Russia, Iran, Ukraine and other parts of the world, the heat has been turned on the developing world to cough up the extra cost of fuel. This money then flows back to the US and other NATO allies as investments. In short, the spiking energy prices will foot a significant cost of this war. But, who cares?

Higher Food Prices:

Between Russia and Ukraine, they produce over 56% of the world’s sunflower oil, 19% of the world’s barley and 13% of the world’s wheat amongst others. Cutting off these supplies will surely spike the world’s food prices. The global price of wheat alone doubled between 2018 and 2022. It peaked at US$ 12.5 per bushel in 2022 and hovers just below US$ 9 per bushel today. But, who cares?

The United Nations World Food Program estimates that?more than 345 million people?are suffering from or at risk of?acute food insecurity, more than double the number from 2019.?Food price variation is highly uneven. The developing and least developed countries footing the increased bills with price increases of everything from 60 per cent in the U.S. to 1900 per cent in Sudan.?But, who cares?

Higher Cost of Borrowing:

Even before the fallout from the war in Ukraine, 1 in 5 developing countries was projected not to reach 2019 per capita income levels by the end of 2023, with investment rates not expected to return to pre-pandemic levels for at least two years.?But, who cares?

Developing countries’ average interest cost on external borrowing is three times higher than that of developed countries. In the low-interest environment of the last decade, developed countries borrowed at an interest cost of an average of 1%. Least developed countries (LDCs), which have increasingly tapped international markets in recent years, borrowed at rates over 5%, with some countries paying over 8%.?This has dragged up their average borrowing cost and translated into less fiscal space: LDCs dedicate an average of 14% of their domestic revenue to interest payments, compared to only around 3.5% in developed countries, despite the latter’s much larger debt stocks.?But, who cares?

While this high cost of borrowing reflects higher perceived risks, there is evidence of an additional premium associated with sovereign borrowing. Over the last 200 years, the average annual return of foreign currency debt to investors has been around 7%, even after accounting for losses from defaults, exceeding the “risk-free” return on U.S. and U.K. bonds by an average of 4 percentage points. Since the start of the emerging market ”bond finance era” around 1995, total returns to investors (net of losses from defaults) have been even higher, averaging almost 10% or around 6 percentage points over the risk-free rate—a historical high. (https://www.brookings.edu/blog/future-development/2022/06/08/bridging-the-great-finance-divide-in-developing-countries/)

All this coupon income translates into income for the developed world (read NATO members). This surplus goes back as blood money to pay for the white man’s wars.?But, who cares?

The Longer-Term Global Impact:

Russia and Ukraine’s differences started long before Glasnost and Perestroika. The only way these differences can be settled is through an amicable dialogue and the setting up of a free trade zone of former Soviet bloc countries on the lines of the EU. This requires strong political will and leadership skills, currently in short supply in the region. But, who cares?

Since 1949, NATO’s membership has increased from 12 to 30 countries through eight rounds of enlargement. The Republic of North Macedonia became the latest country to join the Alliance on 27 March 2020. Currently, five partner countries have declared their aspirations for NATO membership: Bosnia and Herzegovina, Finland, Georgia, Sweden and Ukraine. Finland and Sweden completed accession talks, and the Allies signed the Accession Protocols for both countries in July 2022. They are now official Invitees and attend NATO meetings as such.?This is only a recipe for more disaster.?But, who cares?

But the war-infused global debt burden is only growing. As explained earlier, the developing and least developing countries are shouldering an increasing cost of this conflict. The failure of states to ensure the welfare of their people will have a longer-term impetus. Budgets for healthcare, education and infrastructure are being cut across the world. A whole generation of people in these countries will suffer the consequences of a NATO-Russia war – something over which they have absolutely no control.?

But, who cares?

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