On February 24, this will have been going on for two years. Both the West and Russia are still a long way from attaining the outcomes they want.
As a response to Russia’s invasion of Ukraine, the United States and its European allies made a commitment to apply severe sanctions with the intention of bringing Moscow to its knees and compelling it to leave. The plan was to erect a new Iron Curtain that would divide a desolate and impoverished Russia from a flourishing West. On the other hand, the punishments have produced the reverse of their intended result.
When Western sanctions lowered the worldwide supply of oil and natural gas, they had the opposite effect of driving up prices, which worked to Russia’s advantage. In spite of the decline in export volume, the Russian economy shrank by just 2.2% in 2022, compared to the 8.5% contraction that was forecast by the International Monetary Fund (IMF), and it is anticipated to expand by 0.3% in 2023.
On the other hand, despite receiving $67 billion in military help and $46 billion in economic aid, the size of Ukraine’s economy has decreased by more than 35 percent. The economy of Europe has also been impacted negatively.
In 2023, it is estimated that the economy of the Euro area would expand by just 0.7%, while the economy of the United Kingdom will decrease by 0.6% and the economy of Germany will show no growth at all. The United States of America is less directly influenced than Europe is, but its growth has decreased from 5.9% in 2021 to 2% in 2022, and it is anticipated to continue decreasing, reaching 1.4% in 2023 and 1% in 2024.
India and China, on the other hand, have remained mostly unscathed by it. It is anticipated that India would keep its growth rate of over 6% per year during the years 2023 and 2024, despite the fact that it has maintained its neutral stance while purchasing oil from Russia at a subsidized price. In addition, China has profited from Russia’s sale of oil at a lower price and from a general rise of 30 percentage points in trade with Russia in 2022. This year, it is anticipated that China’s GDP would expand by 5%.
Other oil and gas companies have also enjoyed windfall earnings as a direct result of the effects that the sanctions have had. The Gross Domestic Product (GDP) of Saudi Arabia increased by 8.7%, which was the fastest rate of growth among all large economies. At the same time, Western oil companies deposited a total of $200 billion in profits. ExxonMobil made $56 billion, which is an all-time record for an oil company; Shell made $40 billion; Chevron and Total each gained $36 billion; and Total gained $36 billion. Despite the fact that BP “only” made $28 billion due to the shutdown of its activities in Russia, the company nonetheless managed to treble its 2021 earnings.
The United States and Europe have attempted to replace Russia’s supply of natural gas with LNG produced in the United States; however, the high price of fracked gas produced in the United States and the terrible climatic implications of fracking make this alternative less desirable.
In summary, the outcomes of the conflict in Ukraine have been unpredictable, with neither side attaining its objectives. In spite of the fact that the sanctions imposed by the West on Russia have not produced the result that was intended, they have had a detrimental effect on the economies of the United States and Europe.
On the other side, India and China have been able to save money by purchasing oil at a discount from Russia, while Saudi Arabia’s GDP has increased at an exponential rate.
The United States major weapons manufacturers—Lockheed Martin, Boeing, Northrop Grumman, Raytheon, and General Dynamics—have been the only ones who can legitimately claim to have emerged victorious from the conflict.