Page 65 - bneMag Dec22

bne December 2022 Eastern Europe I 65
not strike back with nuclear weapons, but would use conventional weapons to hit the Russian launch site and also could devastate Russian forces in and near to Ukraine with conventional missile strikes as well as possibly committing Nato troops to the conflict in Ukraine.
In parallel, the growing cost of the war is causing some to ask questions about both the sustainability of funding
the war as well the distribution of the spending by the US and the EU.
With midterm elections in the US looming, some Republican senators have raised the possibility of cutting or reducing US funding for the war as well as suggesting that the EU should carry more of the burden.
Last month US Republican House Minority Leader Kevin McCarthy suggested that a Republican-controlled Congress would not continue to write
a "blank cheque" for Ukraine. Other Republicans have argued that it is “not in US interests to allow Europe to freeload” on the US efforts to support Ukraine. Notably only Republicans voted against the last $40bn US aid package for Ukraine.
Costs and profit
There is little chance of the West abandoning Ukraine, or even significantly downscaling its support, in the short term. Public opinion remains solidly behind Kyiv, even if that support is slipping somewhat in the polls.
A recent Reuters poll found that 73% of Americans were in favour of continued support of Ukraine, but a separate
Pew poll in October found that 20% of respondents said the US was providing “too much help”, up from 12% in May and 7% in March, the BBC reported.
Another poll commissioned by the Wall Street Journal at the start of this year month found that the war in Ukraine
is becoming a partisan issue, with a third of Republicans (30%) now saying the US is doing too much, up from just 6% in March shortly after the Russian invasion of Ukraine.
Currently the bulk of the funding
for both weapon supplies and the Ukrainian budget has been provided by the US. Ukraine’s economy has been wrecked by the conflict. Banks reported this week that they have made only 14% of the profits they made in the same period a year ago and the economy has largely come to a standstill. The official forecast for this year is for a 35% contraction of the economy, but after Russia targeted and destroyed some 40% of Ukraine’s utilities, that estimate is starting to look optimistic.
Ukraine’s government estimates that
it will run a $38bn deficit next year as
it tries to keep the economy running, and has been running a $5bn a month deficit since the war started. Ukraine had been running out of money, but in October both the US and EU committed to budget support of $18bn each that should be enough to tide Kyiv over next year. The US has provided over $40bn worth of aid in total, with the EU providing about a quarter of that and a much smaller share of military aid.
On the face of it the US has provided far more money and materiel to Kyiv than Europe, but the economic costs
While estimates of how much money the US has earned in the last eight months remain vague, just the value
of the Russian gas imports to Europe were worth some $70bn in the first six months of this year, according to some estimates. Following the destruction
of the Nord Stream gas pipelines in September that has reduced Russian deliveries of gas to the EU to a fraction of its former levels, the US has provided the majority of the missing gas and captured a large part of Russia’s gas market share in the process.
The most painful impact of the war on Europe has been the cost-of-living-crisis in Europe that has seen the price of energy and food soar. Average inflation in Europe is now over 9% and a dozen countries are suffering from double- digit inflation. Europe has responded with multi-billion euro aid and relief packages that amount to some €750bn so far, with Germany alone committing to a €200bn aid programme to reduce the pain of the crisis.
And as bne IntelliNews has been reporting, the energy crisis is very likely to continue until at least the end of next year, as although the EU gas storage tanks are currently full, without the Nord
“On the face of it the US has provided far more money and materiel to Kyiv than Europe, but the economic costs are vastly different”
are vastly different. While Putin’s war has caused a global spike in inflation via the ramping up commodity prices, the impact of that on the US and EU economies has been very different.
The US economy has seen 30-year inflation highs, but the economy is still growing and as Europe cuts itself off from imports of Russian oil, gas and raw materials, the US has stepped into the breach, providing Europe with record amounts of LNG at record high prices, and it is now the world’s biggest exporter of oil.
Stream pipelines it will be extremely difficult to refill the tanks next year.
The sky-high prices in Europe have already led to protests that broke out first in Albania in the first months of the war, but have since spread to Czechia and most recently to a large protest in Dresden in Germany.
While these protests have been largely limited to Europe’s poorest countries or to fringe political groups in the more developed countries of Europe, discontent is slowly spreading into the political main stream.
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