DISCLAIMER: This is an ongoing geopolitical event subject to disinformation campaigns
Consider this a layman’s catch up on Russo-Ukrainian relations for the uninformed.
Well, it was a bit of a shock wasn’t it? I would be lying if I said I believed all the reports coming out of western intelligence agencies urging the world to prepare for a war in eastern Europe. The former Socialist Republic of Ukraine, currently just Ukraine, is fighting a defensive war against the Russian Federation.
Let’s just understand the historical context of this. This is the first major war in Europe since WW2. This is likely going to be the largest conflict since the Vietnam War. Except this time we have a gig economy to worry about. This war will likely reshape military theory, geopolitics and the validity of economic sanctions for years to come. In all aspects, in every way this is a new type of war and will leave the economic landscape of Europe changed.
Let’s break the conflict down. Ukraine is a nation in eastern Europe that has existed since the collapse of the Soviet Union in the late 1990’s. Ukraine and Russia have quite the chequered past. Culturally, Ukraine is unique and has almost always been its own administrative region. However, the modern Ukrainian state before its independence had never existed. That is to say, it has almost always existed as a state member of the Soviet Union and Russian Empire before that. After the Soviet rise to power in the 1920’s the Ukrainian people would suffer what some consider a genocide, the Holodomor. Soviet leadership in Russia had pushed farmers to their extreme and refused to compensate them for their contributions to the Soviet Union. The consequence was mass starvation, uprisings, and the death of 3.5 million Ukrainians. Sufficit to say, Ukrainians and Russians are not the best of friends.
Since the state’s creation, Ukraine has been courted by Russia, intent on bringing it back into the fold by any means. What makes matters worse is that Ukraine’s largest ethnic minority are Russians who populate the eastern half of the nation that borders Russia. This has led to constant military posturing as well as political puppeteering by Russia in Ukraine. One such example came in 2013 when the previous Ukrainian president, Viktor Yanucovych, rejected pursuing ties to the EU, instead wanting to grow closer to the Russian Federation. This led to mass demonstrations, the people were not too pleased.
The political manoeuvring ramped up during the 2014 Russian intervention into Ukraine, where a series of pro-Russian speeratist militias in eastern regions of the Ukraine stormed government buildings and declared themselves independent. Crimea, a very large island off the coast of Ukraine was also officially annexed by Russian 2014 after forcefully occupying the area and making the citizenry vote in a referendum.
The Why: Nazi’s? Really?
Since the annexation of Crimea and the speratist movement in eastern Ukraine, political conditions have been icey to say the least. The only thing preventing them from getting worse was the copious amounts of gas being exported to western Europe via Ukraine. In essence, the Russian economy was highly dependent on exporting this gas, and western Europe was as well.
Now, where it gets particularly concerning is US involvement in the eastern regions we spoke on before and seen below. These regions were never officially separated from Ukraine and were in a constant state of war. Ukraine and Russia never officially came to blows, but street gangs turned into militias did. A series of pop up militias, notably the Azhov battalion fought a 6 year war with the Russian separatists in the area. Only issue was these guys were full blown neo-nazi’s, and were funded and trained by the US government (oopsies).
Its important to note the presence of Nazi’s in Ukraine because Russian President Vladimir Putin invaded with the intention of “denazification” amongst other things we will get into. The Azhov battalion was eventually promoted into a special forces unit that trained what is now the Ukrainian army. As of right now, the Azhov battalion command has fled to Poland in fear they would be executed on the spot during the war for war crimes committed during their 6 year stint in eastern Ukraine (in addition to their political beliefs).
Most important of all reasons for the invasion is Putin’s fear of an encroaching NATO and western economic dominance. To be truthful, the west has been encroaching slowly into eastern Europe, which poses a threat to Russia. Without the ability to ensure a buffer zone, Russia would sacrifice much of its political power. Seen below, we have the timed entrance of European NATO (North Atlantic Treaty Organisation) members. These members act as military allies to the US.
So why now? Russia currently sits as the head of the UN security council, meaning any invocation of UN sanctions can simply be vetoed by them. Good timing hey.
THE ECONOMICS IN SIMPLE TERMS
Network theory and disinformation
At no point in recent memory has there ever been so much disinformation, especially from western media sources. We can explore disinformation from a perspective of network theory. For those unacquainted with network theory, it is exactly what it sounds like. In an economic sense, individuals act as nodes that connect other individuals to the resources they need. People can either be in a surplus or deficit. This assumes that every individual wants to have a vast surplus. The net effect is that those in a deficit approach those in a surplus and exchange resources for goods and services. It is a relatively basic idea, but it has its place in this conflict. For example, if I was a curious university student invested in exchange traded funds, and wanted to know if I should simply pull my money out in light of market volatility. I would go to the news. The only issue is I would act with very imperfect information, meaning my network of information would act against me. If I were to do this currently, this is what I would find.
Samuel Hyde is a far-right online entertainer and comedian. He is most famous for being used as a fake culprit for recent events. Everything from mass-shootings, to acts of domestic terrorism. These lies are perpetrated by trolls of the highest calibre and lowest morality. Please see below:
Yup, you are seeing that right. That is Illinois congressman Adam Kinzinger retweeting a photo of a fighter pilot named “Samuyil Hyde” (Sam Hyde). Congressman Kinzinger is referring to the famed “Ghost of Kiev”, a Ukrainian pilot who shot down 6 Russian jets over the Ukrainian capital (now 10). The unnamed pilot was the first person in the 21st century to become a fighter ace, and the first ‘ace in a day’ since 1965. (his existence is now debated as well)
Snake Island is an island off the coast of Ukraine located in the black sea. The island had a minor military presence of around 20 soldiers before the outbreak of the war. It was reported by western media that the island had been completely overrun by Russian forces and that the Ukrainian soldiers on the island had valiantly died to the last man. This however was a very partial truth. In reality, there was sporadic fighting on the island after an initial refusal to surrender to Russian forces. Soon after the initial fighting, all soldiers on the island surrendered to Russian forces
Ukrainian president Zelensky on the front lines !1!1!
You know where this one is going. A collection of western media outlets reported that President Zelensky was visiting the front lines (pictured below). Truth is, these photos were taken in 2021. Another screw up on behalf of western media outlets.
Photo in question:
If anything, this conflict has proven one thing: markets now operate in a state of disinformation. This has significant repercussions for volatility in the markets as well as any significant economic activity. For example Gazprom, the world’s largest gas company (with a majority stake from the Russian government) has claimed that gas will continue to flow from Russia, through Ukraine and into Russia. However, markets are pricing oil otherwise. Oil, being the next best substitute to gases used by the energy sector, is now at a 14 year high of $106 USD. it’s clear the markets simply no longer believe what they are told because the meta truth changes every 10 minutes.
Apologies ladies and gentlemen, but the volatility will not end. We do not know who is currently winning and its impossible to tell anymore because of the failure of our informational networks. Pundits and speculators can bet all they want, but we are acting on extremely incomplete information as seen above.
Sanctions: the Return of Protectionism
The most important economic casualty of this war will be the advent of sanctions and protectionism. I would love to tell you what that effect will be exactly but i can’t. After all, I study Economics and love a good doomsday story. Protectionism is a policy framework that hopes to protect domestic industries by limiting the domestic markets integration with international markets (i.e, you can’t buy Nike’s or Audi’s). American bars have already thrown out Russian vodka and the entire western sphere has begun unparallelled economic sanctions. The Russian stock exchange has also ceased trading, meaning no Russian company can raise capital from international markets in the near future. In essence, Russia has killed its entire international export base. Even then, with its gas monopoly, Europe is finding new and more sustainable energy sources so it’s simply a matter of time before Russia is stuck in a rock and a hard place.
“The philosophy of protectionism is a philosophy of war” – Ludwig Von Mises, Father of the Austrian school of Economics