Russian-Ukraine War Hurts Global Economy, CCP to Lose More In Long Run: Strategist

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The Russian-Ukrainian war has caused both Russia and Ukraine to suffer, and the global economy has also been dealt a heavy blow. However, some countries have benefited more than others from the war.

Mike Sun, a North American investment strategist and China expert, stated that resource-based economies, such as Canada and Australia, have benefited relative to other economies from the war, but the United States has benefited the most, while the Chinese Communist Party (CCP) will have more losses than gains over the long term due to increased global isolation.

The war has been going on for four weeks. Not only have many cities in Ukraine been devastated by Russian artillery fire, but millions of people have also been displaced from their homes. However, Russia itself is also facing an economic crisis due to the war and NATO-led sanctions, and has turned to the CCP for help.

On March 13, U.S. officials revealed that after the outbreak of the war, Russia had asked for military and economic assistance from the CCP. The next day, U.S. National Security Advisor Jake Sullivan and China’s top diplomat Yang Jiechi held tense discussions in Rome for seven hours. Sullivan expressed concern over Beijing’s support for Moscow, warning of its consequences.

Sun told The Epoch Times that the United States has joined forces with its pro-democracy allies to successfully contain Russia and is now warning the CCP that “if the CCP helps Russia to circumvent U.S. sanctions, they will be severely punished.” He believes that in this war, the United States has benefited the most while the CCP has suffered more losses than any benefits gained.

Ukrainian Economy Could Shrink by 35 Percent

Ukraine will suffer huge losses because of the Russian invasion.

According to a report released by the International Monetary Fund (IMF) on March 14, Russia’s invasion of Ukraine has caused devastating loss of life and significant economic damage, and Ukraine’s economic output is expected to decline by at least 10 percent this year.

The report also shows that the Ukrainian economy may actually contract by 25 to 35 percent based on previous data on wartime real gross domestic product (GDP) contractions collected from Iraq, Lebanon, Syria, and Yemen.

The IMF said that after a humanitarian crisis, a prolonged recession and rising reconstruction costs are expected. Even if the war ended today, the cost of recovery and reconstruction will already be enormous.

Statistics released by the United Nations show that more than 2.8 million Ukrainians have fled Ukraine since the Russian invasion, triggering Europe’s largest refugee crisis since World War II.

Russian Economy to Go Back At Least 30 years

CNBC quoted economists, investors, and diplomats saying that Russia’s invasion of Ukraine and the resulting global boycott will set the Russian economy back at least 30 years and reduce its standard of living for at least the next five years.

According to analysis by Castellum.AI, an international sanctions tracking platform, Russia has incurred 6,807 sanctions due to its invasion of Ukraine as of March 15—far exceeding the previous record of 3,616 sanctions faced by Iran and 2,608 faced by Syria, making Russia the most sanctioned country in modern history.

The NATO-led sanctions are aimed at driving Russia out of global markets, freezing its assets around the world, and dealing a fatal blow to its economy. Two of them had the greatest impact—the first, expelling Russia’s largest banks from the SWIFT system making it difficult for them to process overseas transactions, and the second, freezing hundreds of billions of euros in foreign exchange reserves held by the Central Bank of Russia, leaving Russia without reserves to support the ruble.

Sun told The Epoch Times that regardless of the outcome of the war, Russia will face unprecedented long-term sanctions that will greatly reduce its national strength, and the complete cutting of ties by the West will turn Russia into an isolated island.

Europe has Largest Losses Outside Russia, Ukraine

Sun said that apart from Russia and Ukraine, the biggest economic losses are in Europe. The Russian-Ukrainian war is regarded as the largest war on the European continent since World War II. Apart from the casualties and millions of refugees in the region, the war is expected to set back the European economy for many years.

European Central Bank (ECB) chief economist Christine Lagarde said on March 10 that the war will have a considerable impact on economic activity and inflation due to higher energy and commodity prices, disrupted international business activity, and diminished confidence.

Taking grain as an example, Russia and Ukraine are both big grain-producing countries, and Ukraine is known as the “granary of Europe.” The Food and Agriculture Organization of the United Nations (FAO) predicts that the war could result in 20 to 30 percent of Ukraine’s agricultural regions being unable to be cultivated or harvested in 2022 and that already inflated international food and feed prices could rise by another 22 percent in 2022-23.

Last week, the ECB lowered its economic growth forecast for this year from 4.2 percent to 3.7 percent, while Goldman Sachs made a more pessimistic forecast, lowering its growth forecast in the euro area this year from 3.9 percent to 2.5 percent—a cut of 1.4 percent.

Resource-Rich Countries to Benefit

According to Sun’s analysis, Russia’s energy and minerals resources are restricted, meaning that Canada, Australia, and resource powers in the Middle East will benefit.

Both Canada and Australia are resource-based economies, and Canada is a major grain exporter and the world’s largest exporter of potash fertilizers. Australia is the world’s leading source of metals and minerals, rich in coal, iron ore, and so on.

Sun expects oil prices to fall back soon despite a surge in already inflated prices immediately after the outbreak of the war. “There is a lot of oil in the Middle East, and OPEC agreed to increase production, and crude oil prices will immediately fall by 20 percent.”

Crude oil prices fell below $100 a barrel on March 15, offsetting most of the surge in oil prices following Russia’s invasion of Ukraine. On the same day, international benchmark Brent crude fell by more than seven percent to $98.59 a barrel. However, prices spiked again on March 16 as uncertainties about the Russia-Ukraine war remains.

US to Benefit Most

Sun believes that ultimately, the United States is the biggest beneficiary of the Russian-Ukrainian war. First, he said that the overall strategy of the United States in dealing with the Russian-Ukrainian conflict was very clear–uniting the European Union against Russia, weakening Russia’s strength, and uniting Europe with itself.

Second, the United States will benefit economically. Once Europe shifts from its dependence on Russian energy, other countries will replace Russia to enter the European market. He predicts that at a certain point, the United States will eventually increase its sale of natural gas to the euro zone.

In addition, U.S. military companies will benefit. Russia’s invasion of Ukraine has alarmed other countries, especially Germany and Japan. Germany plans to increase its defense budget to more than two percent of GDP starting this year, and Japan is also preparing to strengthen its defense forces.

German Chancellor Olaf Scholz announced on March 14 that Germany would spend 100 billion euros (about $113 billion) on purchasing 35 American F-35 fighter jets to replace its aging Tornado fighters in an armament upgrade. This is the first major defense deal for the United States since Russia invaded Ukraine.

Third, if the United States and its NATO allies succeed in containing Russia, it can return to Asia to focus on the CCP. Sun stated that the higher-ups of the U.S. government have now made it very clear that the CCP is the biggest threat to the United States, and the Biden administration has formulated a long-term strategy to deal with the CCP. He believes that the severe sanctions imposed by the United States on Russia are “killing chickens to warn the monkeys,” a Chinese idiom that means to punish one person to warn another more better resourced target.

“The confrontation between China and the United States is escalating and has now gradually spread to various fields. In the short term, the Russian-Ukrainian war has both advantages and disadvantages for the CCP. The biggest benefit lies in Russia’s increased dependence on the CCP. The CCP can solve a considerable part of energy needs, but the biggest drawback is that Sino-U.S. relations can no longer return to how they were in the past. So in the long run, the disadvantages outweigh the advantages, and the CCP will lose more,” he said.

Finally, Sun quoted U.S Secretary of State Antony Blinken, who reminded China after high-level discussions between the United States and China in Alaska last March, ” It’s never a good bet to bet against America.”

Winnie Han

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Winnie Han reports on China news for The Epoch Times.



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