Is the West Ready for Ukraine’s Second-Order Effects?

Is the West Ready for Ukraine’s Second-Order Effects?

The United States and Western partners need to rethink their approach to Russia and China.

The Russian invasion of Ukraine is a nightmare for Ukrainian civilians, but the rapidly moving crisis has produced a situation where governments and corporations have taken precipitous and uncoordinated moves with little regard for strategy or legality. The results will be cascading challenges.

Some of these moves have already had predictable effects on the costs of energy, fertilizer, grain, and key strategic materials produced in Ukraine and Russia. Ukraine produces 20 percent of the world’s grain; Russia produces 20 percent of the world’s titanium. In the past month, the price of coal is up 62 percent and nickel is up 102 percent.

The geopolitical effects of cutting off Russia from Western consumer products, as well as global banking and credit systems, have driven Russia and China closer together, economically and politically. 

The impact of sanctions on average Russians has been immensely destructive, but their ability to influence Putin and his circle is minimal. The Western cancellation of Russian culture—banning the teaching of Dostoyevsky, throwing rocks through the windows of Russian restaurants, and firing Russian workers who do not adequately condemn Putin—is reprehensible.

All of this was done, seemingly, without a shred of foresight on the part of Western leaders, especially those of corporations, anxious to appear they are doing “something.” But these actions are now part of the problem; they have exacerbated global economic crises, increased food insecurity, and decreased supplies of strategic materials on which modern societies depend. Unfortunately, viable backup plans and workarounds are nowhere in sight.

But, these social and geopolitical impacts are only the beginning. Still, more nightmarish geopolitical scenarios may be imagined, ones that have the capability of reshaping entire nations and regions. Here are three scenarios:

First, Egypt, with a population of over 102 million, is projected to import close to 24 million tons of grain in 2021-2022. Egypt’s bread subsidy system provides some 60 million recipients with five loaves daily and is forced to compete on the global market where wheat prices have increased by 50 percent since the Russian invasion. But this could cause difficulty for Egypt as it may witness massive food shortages and riots. Consider how rising food prices contributed to the 2011 Arab Spring that overthrew Hosni Mubarak in less than three weeks, and brought the Muslim Brotherhood to power.

Second, Lebanon’s economic implosion that began in 2019 and has left 75 percent of the population destitute could worsen further. Saudi and Gulf's anger at the Iranian-dominated regime in Beirut has cut off Lebanese exports and remittances and reduced Lebanese GDP by nearly 40 percent.

But the Ukraine crisis has pushed the Biden administration towards reviving the JCPOA nuclear agreement with Iran. While negotiations are momentarily on hold as Russian intermediaries are demanding assurances that their promised economic dealings with Iran would not be subject to sanctions, the deal promises $90 billion to the Iranian regime.

A portion of those funds could go to Hezbollah, along with precision-guided munitions. If these weapons are aimed at Israeli targets in order to incite retaliation, Hezbollah could liken the escalating conflict to Ukraine before an uncritical world media. Sanctions on Israel could follow.

Third, as food riots unfold across North African countries and regimes waver, massive refugee flows may enter Europe. European states may react by diverting scarce relief assets towards alleviating these needs which could encourage additional migration from Sahelian states.

But with attention and finances focused on Ukraine and the countries bordering it, such as Poland, which has already absorbed over one million refugees, weak North African states search out financial, political, and military support that is not forthcoming from the West. China steps into the void, issuing predatory loans in exchange for control over resources and facilities. It thus establishes domination over the southern Mediterranean.

Many more dystopian scenarios can be imagined, not least of all, a breakup of Russia into nuclear-armed ethnic states dominated by China. And this is the problem: there are no indications that secondary effects are being visualized much less planned for. Further, the speed at which the first-order effects of the Ukraine crisis emerged, mere days, foreshadows the rapidity of collapse scenarios such as those described here.

The United States has been reactive in its response to Russia and Ukraine and worse. The sharing of intelligence with China on the ludicrous premise that the Xi regime would help dissuade Putin from invading, rather than making strategic preparations such as stockpiling foodstuffs, shows the administration’s bizarre and inept approach. Further, the lack of trust engendered by the administration’s overt embrace of Iran has Middle Eastern countries hedging their responses to Russia to the point of Gulf leaders refusing to speak on the phone with Biden himself.

The utterly predictable embrace between Russia and China, exemplified by a Chinese credit provider’s takeover of Visa and Mastercard operations shows that little thought has been given to policy decisions with titanic implications. Even the simple expedient of recommending that American and European firms state they are only temporarily reducing operations in Russia—with the hope of restoring them once a peace agreement is created—seems to have not been considered. Once economic and social ties with Russia are severed, it is impossible to use them as leverage and extraordinarily difficult to restore them.

Grain and fertilizer, banking and credit, titanium, neon, and nickel will all exist in the newly deglobalized world. But they will come at vastly higher costs in lives and within a fragmented global geopolitical balance. None of this works to the advantage of the United States and its allies.

Food relief and credit programs for countries about to suffer the impacts should be the highest American priorities after helping Europeans manage military and refugee aid to Ukraine. This can only be done by dramatically increasing American food and energy production. Increasing domestic production of strategic materials is also a vital American interest.

Projecting second-order effects should have been a high priority for policymakers before the crisis. Getting a handle on the grim possibilities now is a desperate need. 

Alex Joffe is a Senior Non-Resident Fellow of the Begin-Sadat Center for Strategic Studies.

Image: Reuters.