Global Financial and Structural Implications of the Ukraine Crisis

Yelena Tuzova¹, Jacek Kugler²  
(1. Economics Department, Claremont Graduate University, USA;
2. Department of International Studies, Claremont Graduate University, USA)

Abstract: Russia’s annexation of Crimea and the subsequent bloodshed in eastern Ukraine fundamentally have altered the relations between the East and the Wes far more than events in the Middle East. Wester levied sanctions on Russia reflect the deepest plunge in U.S.-EU-Russian relations since the Cold War. Russia neglected the West’s warning and continues to undermine the peace in eastern Ukraine. Facing high tensions from the West, Russia now bids to take its business east. The emerging China-Russia economic coalition for the first time in history creates a link between very large and militarily powerful developing economies whose market power and overall productivity may well surpass that of the G7. Realist and Rationalist agree that such shifts among economically powerful entities pursuing different policy goals may cause serious confrontation, but the implications of anticipated structural paradigms differs fundamentally. Focusing on Eurasia, we estimate the likely economic and political effects in the near and more extended future for Russia. Then we analyze how sifting political alliances may affect the short-term and long-term power shifts that alter relations among great powers. Finally we summarize the effect of conflicting policy implications derived from alternate realist and rationalist power distribution paradigms.

Key words: Russia; Ukraine crisis; economic sanctions; armed conflict; economic growth; global restructuring, power dynamics; forecast

JEL codes: F01, O10, O52