1. Introduction

The Ukraine war that erupted in 2022 with the invasion of Russia has its roots in a complex historical context and a series of events that unfolded over time. Scholars and experts have extensively studied the factors leading up to the conflict, providing insights into its causes and potential consequences.

The outbreak of the Ukraine war has a deep-rooted causes traced back to the dissolution of the Soviet Union in 1991. Ukraine, a former Soviet Republic, gained independence in 1991 and then faced with challenges in establishing its identity, managing its relationship with Russia, and navigating its geopolitical position. The historical ties between Ukraine and Russia, including shared cultural, economic, and political aspects, have shaped the dynamics between the two countries. In 2014, Ukraine experienced the "Euro-Maidan protests" or the "Ukraine crisis." The then-president, Yanukovych, refused to sign a cooperation agreement with the European Union and instead leaned towards Russia. This decision sparked massive protests and political turmoil, eventually leading to Yanukovych's ousting. Subsequently, Russia annexed Crimea following a controversial referendum, sparked tensions between Ukraine and Russia. The subsequent support of Russia to separatists in regions of East Ukraine, like Donetsk and Luhansk, further escalated the conflict. As a multi-ethnic country, Ukraine is characterized with eastern regions predominantly inhabited by Russians who maintain close ties with Russia and desire good relations with their neighbor, whereas, the western regions are primarily composed of Ukrainians who lean towards closer ties with Western Europe, aspiring for Ukraine's integration into the European Union and NATO. And to Russia, the last thing it would like to see is Ukraine joins NATO, as that means NATO troops could enter directly into Russia via Ukraine which is assumed as a biggest threat ever.

Economically speaking, the strategic importance of Ukraine's resources, particularly its energy sector also composed another factor that triggered the war. Ukraine stands as an important transit path for Russian natural gas exports to Europe, and in the meantime, it has its own significant reserves of natural gas. Control over Ukraine would provide Russia with greater leverage in the European energy market and potentially allow it to manipulate gas prices and supplies. Additionally, Ukraine's fertile agricultural land and its position as a major exporter of grains and other agricultural products make it an attractive target for Russia, which seeks to secure food security and control over key agricultural markets. Furthermore, the conflict has also been fueled by economic disparities between the two countries. Ukraine has been striving to align itself with the European Union and pursue economic integration, which has been perceived as a threat by Russia. The prospect of Ukraine's economic growth and potential EU membership has challenged Russia's influence in the region and its economic dominance. These economic factors, combined with political and historical tensions, have contributed to the escalation of the conflict between Russia and Ukraine in 2022.

In responses of the war, major western countries including US and European Union and many European countries has imposed several rounds of various political, economic and financial sanctions against Russia, targeting at key sectors of Russian economy, including finance, energy, aviation, defense and technology. The EU sanctions include restrictions on access to capital markets, bans on arms exports, and asset freezes on individuals and entities involved in the conflict. The US sanctions include similar measures, such as asset freezes and visa bans on Russian officials, as well as restrictions on trade and investment in specific sectors. Other countries, including Canada, Australia, and Japan, have also implemented sanctions against Russia in response to its actions in Ukraine.

2. Economic Impact of the War: Spillover Effect of Macroeconomic

The history of mankind has more than once manifested that military conflicts and wars have always incurred remarkable impact on the local, regional and global economic stability and growth, ranging from trade, economic, investment and financial setbacks, to significant deterioration in supply and cost of production and labor resources. Normally speaking, such consequences could be suffered not only by the involved parties of such conflicts, but also by their trading partners and neighboring countries, and even beyond due to unavoidable spillovers.

After the breakout of the wars, over 40 countries, including the US, UK, EU, and allies, have imposed over 40 severe economic and financial sanctions against Russia, including freezing the assets of Russia's central bank held abroad, restricting its ability to access its overseas reserves; removing major Russian banks from the SWIFT international payment system, crippling their ability to operate globally; banning exports of key technologies like semiconductors, computers, lasers, and telecoms equipment to Russia; imposing export controls on oil refining equipment and other energy sector items; sanctioning hundreds of Russian individuals, including oligarchs, officials, and Putin himself etc.. Additionally, over 1,000 major companies from various sectors have voluntarily ceased or limited their operations in Russia in response to the war. This corporate exodus has severely disrupted Russia's economy and access to global markets and supply chains [1].

2.1. Shifts in Demand and Supply of Major Commodities

The ongoing conflict between Russia and Ukraine has put significant pressure on global economic growth. Due to the confrontation between the two sides and the implementation of sanctions, global trade has been severely impacted. Many companies' supply chains have been forced to interrupt, leading to a decline in production efficiency and increased costs. At the same time, the surge in commodity prices, particularly food and energy prices, has further exacerbated inflationary pressures, resulting in a noticeable slowdown in global economic growth.

2.1.1. Energy Sector

The embargo on Russian oil exports generated direct impact on the supply side of global oil production, and as a natural consequence, the oil prices of the global market has been immediately driven up. European countries felt the suffer right away, as their oil reliance on Russian supply was quite high. They have to engage in trade with supplementary suppliers, and more importantly, they have to invest heavily to decrease their reliance on Russian oil supplies by diversifying their sourcing, and their energy consumption structure [2].

However, while sourcing of oil can be shifted relatively swiftly, trading of gas is relevantly sticky to infrastructure readiness, thus hampered the capacity for immediate replacement and rechanneling. Europe’s dependency on Russian gas imports was quite substantial, and the interruption of such import market, may trigger 40% loss of its gas supplies. Of course, Russia was due for more loss in its export of energy, as EU only took around 8.4% of its total gas export. Countries like China and others also have to suffer from such embargo with rising cost of energy, and also shortage of energy supply. Though in the long run, it may contribute to the development of renewable energies, in the short run, such immediate alter of energy supply chain has incurred greater challenges to the economic stability of the countries in the conflicts, as well as its trading partners and relevant economies.

2.1.2. Food Supply

According to statistics from United Nations, the breakout of Russia-Ukraine war and sequential sanctions and embargos resulted in rising of global hunger, which has been dropping over the past ten years. As a consequence of the on-going war, global hunger is due to exacerbate, which put the lives of 7.6 to 13.1 million people at stake, which would definitely be a serious setback to the United Nations’ achievement in the areas of food adequacy, under its UN Sustainable Development Goal 2030 [3]. Being major producers of agricultural crops, the constribution of Russia and Ukraine together to the global wheat trade reached almost 30 per cent [4]. However, due to embargos and also restrictions imposed by war in international trade, the exports of food including wheat, barley, and corn among others, stuck all in Russia and Belarus. As a result, the prices of food essentials have increased very sharply. Direct victims are countries whose food and grains rely heavily on import, such as the Central Asia, Middle East, and North African. The war stripped them of the chance to meet the food requirements since most of their food’s supply were from the Ukraine and Russia. The ongoing military conflict also made the international aid in food supply difficult, and minimized the volume of food aid due to hiking international prices. Food shortage and food security issues would then remerge in these regions, which might also trigger social unrest and political risks [5].

2.2. Increased Fiscal Constraints with Increased Fiscal Expenditure

In wartime, countries stuck in the war, neighboring states and other countries that have a strategic relevance with the region, naturally perceive conflicts as an immeidate threat and as a result, they expand their defense expenditure. In addition, governments are always willing to borrow much more than usual or raise taxes when possible, aiming at collecting more revenue to support the war effort or more expenditure for effective defense policy, so as to mitigage the pervieved sense of risk on security. In both cases, the national debt would grow considerably, due to overspending in military defensive measures, and overborrowing in raising fund. Throughout the postwar decades, debt will continue to rise to raise fund for rehabilitation and reconstruction. Therefore, it is fair to say that geopolitical conflict especially warfare drives high the expenditure of countries in defense sector, by ways of introducing more debt, or via create or increase tax revenues to fund spending.

In response to the Russia-Ukraine war, several countries, particularly in Europe, have increased their defense expenditure. Germany announced plans to spend over €100 billion on defense in 2022, a substantial increase from previous years [6]. For countries that are geographically closer to Russia and Ukrain, military expenditure expands very quickly without any surprise. Central and Western European countries announced their decisions to substantially increase their spending on military actions, in response to the increasing concerns over national security. For instance, Poland increased its defense budget by around 8% in 2022 [6]. The United States, being the top military aid provider to Ukraine, responsible for nearly two-thirds of global military aid to Ukrain in 2022, has also seen an increase in defense expenditure. Japan increased its defense budget by 20% in 2022 amid the changing security environment. India and China also witnessed rises in their military spending in 2022, though not directly attributed to the Ukraine war [7]. Overall countries in Europe, particularly those closest to the conflict zone, as well as major powers like the US, have significantly ramped up their defense budgets and expenditure in face of increasing security threat created by the Russia-Ukraine war.

As for the Russia-Ukraine conflict, for the EU countries, in addition to increased spending in defense, Governments are spending more and more fiscal revenues on shifting their heavy relianze on energies imported from Russia [2]. Moreover, Due to interruption of trade and supply chain of major commodities by sanctions imposed after the war, many countries are forced to reassess their fiscal priorities and practices, with significant economic implications in the years ahead as they navigate the fallout. In light of energy and food supply disruptions and price hike, many countries started to introduce subsidies, tax cuts, and price caps on energy and food to cushion the impact of rising prices [8].

Such expansionary fiscal policies risk fueling inflationary pressures and increasing debt burdens in the long run. This has strained government budgets and raised fiscal deficits, potentially crowding out other spending priorities.

2.3. Financial Market Disturbance

With the breakout of the war, financial markets of neighboring nations and regions like Europe has witness sharply rising market sentiment of volatility and uncertainty, especially in lieu of spillover effects of war against trade, commodity supplies and overall economic stability. In the countries of close proximity to the war zone, including Poland, Hungary and Romania, the impact on stock markets has been quite negative. Geopolitical risks and uncertainties dampened market prospect and investors’ confidence, and restricted capital flows, further affecting global economic stability [9].

Globally speaking, the war has pumped a surge in energy and food prices in the global market, which created ripple effects on inflation rates. The demand and therefore the price of safe-haven assets like gold have been increasing as investors seek for means and ways to mitigate investment risks and market uncertainties caused by the conflict. As always, people believe that Gold offers better diversification during such volatile period.

In brief, the Russia-Ukraine war has significantly impacted regional and international financial markets through increased volatility, disruptions in energy and commodity markets, and has forced central banks to recalibrate their monetary policies to address inflationary pressures and economic uncertainties.

3. Impact of the War on Geo-politics and Global Security

The war directly intensified not only tensions between the two countries in the war, but also other major relations in the world, given the significant geopolitical importance of Russia and the region, as well as the strategic and economic weights of both sides of the war. As a result, the war initiated some major shifts in international relations especially major bilateral relations of the world, and therefore readjusted the landscape of political alliances and power rivalries, which in turn cast new challenges on the global stability and regional security.

One week after the outbreak of the war in Ukraine, United Nations General Assembly endorsed with a good majority a resolution condemning Russia's aggression. However, there were 35 no votes, including South Africa, Pakistan, and India. In Asia, Governments from Singapore, South Korea, and Japan, rendered quite steadfast support to Ukraine, while Governments from China, India, and Indonesian, as top three economies in Asia, all refused to take a side. This, to a certain degree shows that three new political blocs emerged afte this war reflecting a broader geopolitical polarization: those who supporting Russia, those supporting Ukraine, and those of non-aligned [10].

3.1. Proximity Endangers General Security in Europe

The Ukraine war has presented significant political challenges for the EU, requiring it to balance security, economic, and geopolitical considerations in its response. Preserving EU unity and defending Ukraine's sovereignty are among the EU's key interests in navigating this crisis. Additionally, the war has exacerbated divisions within the EU. While most member states have condemned Russia's actions and supported Ukraine, countries like Hungary have taken a more ambiguous stance, creating tensions within the EU. This has made it challenging for the EU to maintain a united front in its response to the conflict [11].

In addition, the Ukraine war has compelled the EU to recalibrate its foreign policy towards Russia, focusing on strengthening security, reducing energy dependence, and maintaining unity within the bloc. The crisis has also highlighted the EU's need for greater strategic flexibility and differentiation in its policymaking to navigate complex geopolitical challenges [12].

3.2. Reinforced Presence and Influence of US in Europe and Ukarian

The Russia-Ukraine war has changed the regional security landscape and ally relationships of the United States in Europe. The U.S support during the war has strengthened its relations with Ukraine and other Eastern European countries, and its important role in Europe as provider of security. With the energy embargo imposed on Russia, the energy supply in Europe has become ever more critical. As an energy-exporting country, the United States helped alleviate this pressure by increasing its energy supplies and exports to Europe and by providing more energy options for European countries. Therefore, it is fair to say that the Russia-Ukraine war has prompted increased reliance of European countries on the U.S. both economically and politically for stability and security, in face of the threat posed by Russia [13].

In addition, the Russia-Ukraine conflict has significantly reshaped the U.S. military's presence and engagement in Europe. In the months following the Russian invasion of Ukraine in February 2023, the U.S. has deployed additional troops, aircraft, and equipment to countries bordering Ukraine, such as Poland, Romania, and the Baltic states. This includes the deployment of an additional 20,000 U.S. troops to Europe, bringing the total U.S. force presence to over 100,000. The U.S. has also provided substantial military aid and equipment to Ukraine to support its defense against the Russian invasion. As of early 2024, the U.S. has committed over $50 billion in security assistance to Ukraine, including advanced weapons systems, ammunition, and intelligence support [14].

The expanded military presence of US in Europe induced by the war has made it obviously of European increasing reliance on US for support in regional security and economic stability. Such presence may continue to build up after the war due to persistent concerns over Russian aggression to the East European countries.

3.3. Reconfiguration of Bilateral Relations of China with US and Europe

The sanctions again Russia, especially the cut off of energy supply from Russia has had a serious impact on Chinese economy. The financial and economic sanction, especially the financial sanction on transaction of Russian currency has increased Russian’s reliance on China, while China took advantage of this opportunity to push ahead international settlement of its own currency. Besides all the economic implications, the war has also fueled more dangerous tensions between China and the US [15].

Moreover, the war has also strained China's relations with Europe. China's refusal to condemn the Russian invasion and its support for Russia diplomatically has led to intense distrust and disillusionment in Europe. Regarding China-Russia relations, the war has made Russia more dependent on China, strengthening their partnership. However, China is also wary of being too closely associated with Russia and facing secondary sanctions or other consequences.

Overall, the war has significantly reshaped the geopolitical landscape, intensifying great power competition and forcing countries to reconsider economic and diplomatic ties.

3.4. International Actions

After the outbreak of the the war, the international community has responded to the war in Ukraine through a range of multilateral actions aimed at condemning Russia's aggression, supporting Ukraine, and addressing the broader geopolitical and economic implications of the conflict.

The United Nations General Assembly has overwhelmingly condemned Russia's invasion of Ukraine and called for the immediate withdrawal of Russian forces. The UN Security Council has also held numerous emergency meetings to discuss the situation in Ukraine.

In response to Russia's actions, NATO has suspended all practical civilian and military cooperation with Russia since 2014.2 Russia has also suspended its diplomatic mission to NATO and required NATO to close its offices in Moscow. [16] Moreover, NATO countries have strengthened their political and military ties, resulting in a significant increase in their sense of presence and influence in the global geopolitical landscape. NATO's expansion to the east has made substantial progress. After decades of staying away from military alliances, Finland and neighboring Sweden have all joined NATOUkraine. While Ukraine has not formally joined NATO, it has effectively become the "vanguard" in the battle between NATO and Russia [16].

Prior to the Russia-Ukraine war, countries such as Finland, Sweden, Austria, Switzerland, and Ireland maintained a neutral stance. However, following the outbreak of the war, Finland and Sweden abandoned their neutrality and joined NATO. Austria, Switzerland, Ireland, and other countries reevaluated their neutral principles. While these coutnries did not directly abandon their neutral status legally, they provided assistance to Ukraine or imposed sanctions on Russia.

The International Monetary Fund and World Bank have provided financial support to Ukraine to help mitigate the economic impact of the war. They have also warned of the global economic consequences of the conflict [16].

4. Conclusion

In conclusion, the Ukraine war has significant economic and political implications for all countries being directly or indirectly involved, especially for major global.

Economically, the conflict has disrupted trade flows and foreign direct investment, leading to a decline in economic activity and business opportunities. The energy sector has been particularly affected, with disruptions in gas supplies causing increased energy prices and concerns about energy security in Europe and beyond. Currency and financial markets have experienced fluctuations, leading to fiscal revenue challenges and economic downslide. These economic impacts have not only affected the countries directly involved and surrounding, but have also had ripple effects on the global economy.

Politically, the implications of the Ukraine war go beyond the immediate region, with far-reaching consequences for global politics and the international order. The conflict has intensified geopolitical tensions between Russia and Western countries, and affected Russia’s bilateral relations with every country, and also many major bilateral relations in the world, including US and Europe, US China, and China and Russia. This has resulted in shifts in regional alliances and power dynamics, with concerns about territorial integrity and potential spillover effects to neighboring countries. The conflict has created a sense of instability and uncertainty, changing the world political landscape. The expansion of NATO and the strengthening of Western influence in the region have raised concerns for Russia, leading to further tensions and rivalries.

The conflict has challenged the established norms of state behavior and raised questions about the principles of international law, and highlighted the importance of multilateral approaches and cooperation in addressing conflicts and promoting stability. A multilateral approach, focusing on ceasefire, peace agreements, and humanitarian and reconstruction assistance, is crucial to address the conflict and promote long-term peace and development.

To mitigate the economic and political implications of the Ukraine war, it is also essential for major countries and international organizations to work together to find diplomatic solutions and promote dialogue. Prioritizing long-term peace and development over short-term gains from the war is crucial for achieving stability in the region and beyond. This requires a commitment to upholding international law, respecting territorial integrity, and fostering cooperation among nations.

In conclusion, the Ukraine war has demonstrated the interconnectedness of the global political and economic landscape. Once again, this reminds the world of the importance of diplomacy, cooperation, and multilateralism in addressing conflicts and securing stability. The paper tries to do a comprehensive reviews of both economic and political impact of the war in major countries and players, with the intension to carry out a preliminary analysis on the risks and challenges brought about by the Ukraine war to the global economic development and political stability. The study finds that economic challenges are intertangled with political risks, and no country is isolated from others in the world. A war between two single countries in the current global village will have direct or rippling effect on economies and nations far away geologically from the warfield. With exacerbating economic situations, all people suffers.

By understanding the economic and political implications of the Ukraine war, hopefully the paper could provoke some thinking of policy makers of major political players in making decisions on peace-keeping and peace-breaking efforts, as the impact could be unmeasurable or unthinkable, since the world today is so inter-connected. Peaceful solution to difference shall always be more prioritized and preferred than sanctions, or military actions.

When the paper was written, US parliament has just passed a bill of offering another more than 60 billion military assistance to Ukraine. In the meantime, the persistently high interest rates of US dollars as a mean to mitigate high inflation risks has imposed additional challenges to other economies. Due to lack of reference resources, and the dynamic nature of the subject, the paper fails to bring these profound factors into the analysis. It is hoped that it can serve as a prelimirnary start for a more deep dive study on the subject.