The Russia–Ukraine Conflict: Economic Implications for the European Union

Abstract

The Russia-Ukraine conflict, which escalated into a full-scale war in February 2022, has significantly altered the geopolitical and economic landscape of Europe. Although tensions between the two countries could be traced back as far as an annexation of Crimea by Russia in 2014, the invasion in 2022 was a sudden and drastic jump, resulting in a large-scale tragedy of humanitarian disaster and a global reaction to it (Bera, 2022). To the European Union (EU), the war has not only been a significant security blow but also a substantial economic shock. Given that it has been one of the most ardent supporters of Ukraine and a former leading trading partner of Russia, the EU has been at the center stage of the indirect economic effects of the conflict.

Because Ukraine and Russia are economically tied to the European Union, especially in energy, trade, and goods, the European Union's reliance on Russia was significant before the war. Russia provided about 40 percent of the EU's natural gas and a substantial part of its oil imports. Ukraine served as a crucial transit hub for energy and agricultural exports (Haouel, 2023). The abrupt halt in these supplies and evident mutual sanctions have increased energy prices, inflationary pressures, supply chain disruptions, and changes in labor markets due to the influx of refugees. Such dynamics have revealed structural weaknesses in the EU economy and strengthened the case for strategic autonomy.