Time to bust the illusion that Eastern Europe doesn’t matter: Ukraine is systemically important

The Russian attack on Ukraine has come as a shock to many. The Baltics had been sounding an alarm for a while about President Putin’s ambitions and risk appetite, with little effect. Now, Western leaders have to wake up to a large-scale humanitarian disaster unfolding in front of their eyes, for which they are directly responsible due to their inaction. Similarly to the prelude to WWII, deterrence and stark warnings have not worked, and even worse, the threats of unprecedented sanctions have not been followed by action. It is well-established knowledge in Russia and amongst authoritarian regimes that all that Europeans do, is talk - but almost never walk the talk, and if they do, they do so late and in a limited way.

The Ukraine situation has shown the fractiousness, slowness, and ineffectiveness of Western allies, further undermining any future deterrence efforts.

Why Ukraine matters for European security and sustainability

• Ukraine is a critically important country for Europe’s and EU’s security due to its location, resources, and political developments.

• Critical resources and European security – Ukraine has energy resources, as well as both metal and non-metal ores. While Ukraine accounts for only 0.4% of the Earth’s land surface and 0.8% of the world’s population, it has approximately 5% of the world’s mineral resources.

• Ukraine has the largest titanium reserves in Europe, most of which are in Donetsk, Kharkiv, and Kiev. It also has Europe’s largest uranium deposits.

• The second largest reserves in the world - 20% - of world’s graphite is in Ukraine. It is a resource that holds tremendous technological promise and might be critical in the future.

• Ukraine also has mercury resources (2% of the world’s reserves), potash salt, gold, building material, ornamental stones, and hydropower resources.

So, what’s at stake?

• A dangerous precedent: emboldened Russia that can try to test NATO and its resolve on Article 5 or attempts to try destabilise the Balkans or other countries of interest.

• Greater feelings of insecurity and thus hawkishness from a range of countries bordering Russia, which can be manipulated and taken advantage of by national populists.

• Increased animosity towards Russians across parts of Europe, and an even greater disillusionment with Western governments and the EU across Central, Eastern and Southern Europe, which will feed into more Euroscepticism.

• Greater risk of instability in Europe combined with more obstacles to efficient decision making and action on important matters.

• A weaker EU and questionable NATO going forward.

Why sanctions will NOT have the intended effect

• Russia has made a record profit out of the global energy crisis, and has planned for the sanctions to ensure it can withstand them for long enough. The regime also knows that it will be subject to very little public pressure. The Western decision makers frequently misunderstand the Russian populations’ emotional support for mother Russia, and their feelings of anxiety and anger about Western dominance in the global arena.

• The Russian oligarchs have learnt how to minimise their exposure to the sanctions since the last time. Murky and obscure international financial arrangements, including tax havens, Swiss banking system, other financial and legal intermediaries from London to Riga act as enablers to shield the influential individuals and their families.

• There are multiple ways for Russia to minimise the impact of the sanctions, especially if oil and gas keeps flowing. There are always friendlier regimes happy to help out.

• Oligarchs will not suffer as much as everyone hopes – it is important to also use smart pressure, exerting it on their business and social circles.

Strategic priorities for Europe

• Show a willingness to incur short to medium-term costs to defend longer-term interests and avoid sending a signal that business and money considerations can hold European ability to act hostage.

• Prioritise key long-term strategic priorities – ensuring that these are not compromised by short-term considerations about energy prices and Russian-related business. Recognise that strong action towards Russia does not mean that Russia will partner up with other authoritarian regimes: it already does so whether more or less openly, and is likely to do so more going forward.

• Ensure policy coherence: align the sustainable finance agenda with industrial, energy, foreign, and all other policies to create a greater momentum and push for innovation, creation of sustainable projects and business models, and to support future-proofing of industries,

• Recognise the importance of food and mineral resources necessary for turbo-charging the Green deal and the transition to net zero, ensuring that external and internal EU policies are aligned to ensure their secure supply.

• Use the crisis to foster stronger European unity and to improve own defence systems and capacities under NATO umbrella.

• Invest in research, R&D, and innovation, while improving the commercialisation and up-scaling of technologies and research breakthroughs.

• Speed up digitalisation and interconnectedness between European countries.

• Double down on investment and support for the development of more renewable power resources combined with necessary transition fuels and measures to minimise dependency on Russia

• Re-invigorate climate diplomacy and build alliances based on mutual respect, an improved understanding and closer cooperation across different economic spheres.

• Decide on key measures for faster decarbonisation of energy and other sectors, minimising exposure and dependency on Russia, recognising that economic interdependence does not work. Long period of peace and prosperity has created a false sense of security and a failure to understand that different regimes calculate priorities differently is a huge risk.

Immediate steps until full Russian retreat from Ukraine

• Cut Russia off the SWIFT system as soon as possible.

• Stop issuance of all visas to Russian citizens, and freeze individual assets, as well as companies linked to the Russian regime.

• Full support in terms of cyber-capacities, weapons, aircraft, and air defence units.

• Expel Russian diplomats and move own diplomatic corps home.

• Explore all pathways and channels for supporting Ukrainian government and its defences.

• Like in many situations, seek expert advice, and listen to nations with decades’ long experience in dealing with Russian regimes.

• Start looking into Russian channels of influence on European political parties, politicians, and influential individuals – uncover the links and tackle undue influence that prevents swift strategic decision making.

This article is also published by the International Sustainable Finance Centre. Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy & Sustainability writers, their opinions do not necessarily represent those of illuminem.