NEMETHY: How the Battle for Ukraine may change Europe

NEMETHY: How the Battle for Ukraine may change Europe
Europe is not fighting the war in Ukraine against Russia, but its consequences will have a major impact on the Continent both economically and politically. / bne IntelliNews
By Les Nemethy CEO and founder of Euro-Phoenix Financial Advisors February 6, 2023

More and more signs point to a new major Russian initiative to take Ukraine in the spring, including a possible attack on Kyiv. This article discusses how (a) a major Russian offensive; and (b) a Russian victory in Ukraine would challenge the European Union.

(a) Implications of a major Russian offensive

Should a new offensive materialise, given that the Russians have recently mobilised large numbers of conscripts, they will probably throw far more manpower and resources at Ukraine than any time during the first year of the war. Despite HIMARS, Leopard tanks and other sophisticated weaponry supplied by the West to Ukraine (albeit in limited quantities), the Russians will attempt to overwhelm with sheer numbers. Throughout Russian history, the military had a tradition of using masses of relatively poorly equipped and untrained men as cannon fodder. Russia may also have a few surprises up its sleeve, in the form of military technologies. Nuclear conflict should not be ruled out (e.g. a Russian attack on a Ukrainian nuclear reactor or use of tactical nuclear weapons).

Should any of the above scenarios materialise, the trillion dollar question will be whether the West will step up its supply of weapons and financial assistance to Ukraine. Several multiples of past levels of assistance may be required just to maintain the existing balance.

Stepping up support would strengthen the antagonism between those who supported Ukraine in the past and would wish to defend the already substantial investment made against the pacifists (e.g. some of the German opposition) and those who were more friendly towards Russia/less friendly to Ukraine (e.g. the Hungarian Government), who would argue that supporting Ukraine was a bad bet all along, no use throwing good money after bad. 

The European body politic will be immersed in a massive conflict between those wishing to centralise power (taxation, borrowing, military spending and control) and defend Ukraine versus a coalition of those who have always resisted centralisation within the EU and pacifists who will claim it is not worth paying the price to keep Ukraine from being absorbed into the Russian sphere. This conflict between what I call the centripetal versus the centrifugal forces has already been evident during the first year of the war; in the event of a major offensive, the conflict may be about to become even stronger.

(b) Implications of a Russian victory

A Russian victory would constitute a wake-up call for the European Union, as the Russians might not stop at Ukraine. The Russian Foreign Minister recently made a statement that Moldova may be “the next Ukraine”, and the Baltic countries have also been feeling the heat.

Just as the first year of the war forced Europe to rethink its energy strategy (to which, in my opinion, the response was beyond expectation), a Russian victory in Ukraine during the second year of the war would force Europe to rethink its geopolitical position in the world basic questions, such as:

  1. Is the US and Nato defence shield sufficiently reliable? 
  2.  Does the EU need to integrate its armed forces to form a more credible deterrent to Russian aggression?
  3. Does the EU need to dramatically increase its defence spending? (It currently spends about a third of what the US spends).

Conclusion

If the answers to the above questions take it in a centripetal direction, this will likely require a further transfer of sovereignty from nation states to the centre, with a much higher share of tax collection, spending (particularly military spending) and indebtedness happening at a centralised level. It may unleash the largest push towards centralisation since the formation of the EU while there remain widespread concerns about bureaucracy, poor governance, lack of accountability and political legitimacy. Pressures for broader reform may grow.

The US has the option of retreating into Fortress America. Europe, however, is a different matter, as Russia and Ukraine are right on the EU’s doorstep. Ukraine is a candidate for EU membership, which would make the EU seem weak if it “lost” Ukraine or a substantial part of it to Russia.

The Ukraine War has the potential to catalyse the integration of Europe into a much more cohesive political and economic entity. It also has the potential to tear it asunder. Will centrifugal or centripetal forces prevail?  How will the European Union rise to the challenge? 

To paraphrase historian A J P Taylor about the 1848 revolutions that swept Europe: will the Ukraine war prove to be a “turning point in history that failed to turn”?  Or will George Washington’s vision prevail? He predicted: “Some day, following the example of the United States of America, there will be a United States of Europe.”

Les Nemethy is the CEO and founder of Euro-Phoenix Financial Advisors Ltd and a former official at the World Bank.

Opinion

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