Who’s Winning and Losing the Economic War Over Ukraine?

Yves here. This is a solid, wide-ranging summary of what the Collective West economic sanctions have wrought. It’s readable and accessible to laypeople, so I hope you’ll circulate it widely.

This article also signifies a shift in the zeitgeist, even if an incremental one. Whether due to the limits of their information sources or a need to not get too far ahead of what their readership can stomach, Medea Benjamin and Nicholas Davies have regularly salted their generally fine pieces with conventional, factually-challenged anti-Russian tropes. That is absent from this piece.

By Medea Benjamin and Nicolas J. S. Davies are the authors of War in Ukraine: Making Sense of a Senseless Conflict, available from OR Books in November 2022. Medea Benjamin is the cofounder of CODEPINK for Peace, and the author of several books, including Inside Iran: The Real History and Politics of the Islamic Republic of Iran. Nicolas J. S. Davies is an independent journalist, a researcher with CODEPINK and the author of Blood on Our Hands: The American Invasion and Destruction of Iraq.

With the Ukraine war now reaching its one-year mark on February 24, the Russians have not achieved a military victory but neither has the West achieved its goals on the economic front. When Russia invaded Ukraine, the United States and its European allies vowed to impose crippling sanctions that would bring Russia to its knees and force it to withdraw.

Western sanctions would erect a new Iron Curtain, hundreds of miles to the east of the old one, separating an isolated, defeated, bankrupt Russia from a reunited, triumphant and prosperous West. Not only has Russia withstood the economic assault, but the sanctions have boomeranged–hitting the very countries that imposed them.

Western sanctions on Russia reduced the global supply of oil and natural gas, but also pushed up prices. So Russia profited from the higher prices, even as its export volume decreased. The International Monetary Fund (IMF) reports that Russia’s economy only contracted by 2.2% in 2022, compared with the 8.5% contraction it had forecast, and it predicts that the Russian economy will actually grow by 0.3% in 2023.

On the other hand, Ukraine’s economy has shrunk by 35% or more, despite $46 billion in economic aid from generous U.S. taxpayers, on top of $67 billion in military aid.

European economies are also taking a hit. After growing by 3.5% in 2022, the Euro area economy is expected to stagnate and grow only 0.7% in 2023, while the British economy is projected to actually contract by 0.6%. Germany was more dependent on imported Russian energy than other large European countries so, after growing a meager 1.9% in 2022, it is predicted to have negligible 0.1% growth in 2023. German industry is set to pay about 40% more for energy in 2023 than it did in 2021.

The United States is less directly impacted than Europe, but its growth shrank from 5.9% in 2021 to 2% in 2022, and is projected to keep shrinking, to 1.4% in 2023 and 1% in 2024. Meanwhile India, which has remained neutral while buying oil from Russia at a discounted price, is projected to maintain its 2022 growth rate of over 6% per year all through 2023 and 2024. China has also benefited from buying discounted Russian oil and from an overall trade increase with Russia of 30% in 2022. China’s economy is expected to grow at 5% this year.

Other oil and gas producers reaped windfall profits from the effects of the sanctions. Saudi Arabia’s GDP grew by 8.7%, the fastest of all large economies, while Western oil companies laughed all the way to the bank to deposit$200 billion in profits: ExxonMobil made $56 billion, an all-time record for an oil company, while Shell made $40 billion and Chevron and Total gained $36 billion each. BP made “only” $28 billion, as it closed down its operations in Russia, but it still doubled its 2021 profits.

As for natural gas, U.S. LNG (liquefied natural gas) suppliers like Cheniere and companies like Total that distribute the gas in Europe are replacing Europe’s supply of Russian natural gas with fracked gas from the United States, at about four times the prices U.S. customers pay, and with the dreadful climate impacts of fracking. A mild winter in Europe and a whopping $850 billion in European government subsidies to households and companies brought retail energy prices back down to 2021 levels, but only after they spiked five times higher over the summer of 2022.

While the war restored Europe’s subservience to U.S. hegemony in the short term, these real-world impacts of the war could have quite different results in the long term. French President Emmanuel Macron remarked, “In today’s geopolitical context, among countries that support Ukraine, there are two categories being created in the gas market: those who are paying dearly and those who are selling at very high prices… The United States is a producer of cheap gas that they are selling at a high price… I don’t think that’s friendly.”

An even more unfriendly act was the sabotage of the Nord Stream undersea gas pipelines that brought Russian gas to Germany. Seymour Hersh reported that the pipelines were blown up by the United States, with the help of Norway—the two countries that have displaced Russia as Europe’s two largest natural gas suppliers. Coupled with the high price of U.S. fracked gas, this has fueled anger among the European public. In the long term, European leaders may well conclude that the region’s future lies in political and economic independence from countries that launch military attacks on it, and that would include the United States as well as Russia.

The other big winners of the war in Ukraine will of course be the weapons makers, dominated globally by the U.S. “big five”: Lockheed Martin, Boeing, Northrop Grumman, Raytheon and General Dynamics. Most of the weapons so far sent to Ukraine have come from existing stockpiles in the United States and NATO countries. Authorization to build even bigger new stockpiles flew through Congress in December, but the resulting contracts have not yet shown up in the arms firms’ sales figures or profit statements.

The Reed-Inhofe substitute amendment to the FY2023 National Defense Authorization Act authorized “wartime” multi-year, no-bid contracts to “replenish” stocks of weapons sent to Ukraine, but the quantities of weapons to be procured outstrip the amounts shipped to Ukraine by up to 500 to one. Former senior OMB official Marc Cancian commented, “This isn’t replacing what we’ve given [Ukraine]. It’s building stockpiles for a major ground war [with Russia] in the future.”

Since weapons have only just started rolling off production lines to build these stockpiles, the scale of war profits anticipated by the arms industry is best reflected, for now, in the 2022 increases in their stock prices: Lockheed Martin, up 37%; Northrop Grumman, up 41%; Raytheon, up 17%; and General Dynamics, up 19%.

While a few countries and companies have profited from the war, countries far from the scene of the conflict have been reeling from the economic fallout. Russia and Ukraine have been critical suppliers of wheat, corn, cooking oil and fertilizers to much of the world. The war and sanctions have caused shortages in all these commodities, as well as fuel to transport them, pushing global food prices to all-time highs.

So the other big losers in this war are people in the Global South who depend on imports of food and fertilizers from Russia and Ukraine simply to feed their families. Egypt and Turkey are the largest importers of Russian and Ukrainian wheat, while a dozen other highly vulnerable countries depend almost entirely on Russia and Ukraine for their wheat supply, from Bangladesh, Pakistan and Laos to Benin, Rwanda and Somalia. Fifteen African countries imported more than half their supply of wheat from Russia and Ukraine in 2020.

The Black Sea Grain Initiative brokered by the UN and Turkey has eased the food crisis for some countries, but the agreement remains precarious. It must be renewed by the UN Security Council before it expires on March 18, 2023, but Western sanctions are still blocking Russian fertilizer exports, which are supposed to be exempt from sanctions under the grain initiative. UN humanitarian chief Martin Griffiths told Agence France-Presse on February 15 that freeing up Russian fertilizer exports is “of the highest priority.”

After a year of slaughter and destruction in Ukraine, we can declare that the economic winners of this war are: Saudi Arabia; ExxonMobil and its fellow oil giants; Lockheed Martin; and Northrop Grumman.

The losers are, first and foremost, the sacrificed people of Ukraine, on both sides of the front lines, all the soldiers who have lost their lives and families who have lost their loved ones. But also in the losing column are working and poor people everywhere, especially in the countries in the Global South that are most dependent on imported food and energy. Last but not least is the Earth, its atmosphere and its climate—all sacrificed to the God of War.

That is why, as the war enters its second year, there is a mounting global outcry for the parties to the conflict to find solutions. The words of Brazil’s President Lula reflect that growing sentiment. When pressured by President Biden to send weapons to Ukraine, he said, “I don’t want to join this war, I want to end it.”

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  1. GramSci

    Somewhat better.

    In the long term, European leaders may well conclude that the region’s future lies in political and economic independence from countries that launch military attacks on it, and that would include the United States as well as Russia.

    The ‘it’ is neither the EU, nor NATO, nor any country save Ukraine.

    1. Polar Socialist

      Some may consider the blowing up of Nord Stream as a military attack on at least Germany, if not EU or NATO.

    2. tevhatch

      So the former nation of Yugoslavia and it’s decedents attacked and occupied by NATO are not part of Europe? :-)

    3. Bsn

      Actually, as time goes by and the reality and truth become more clear (US is the enemy as well as NATO), I think Europe may realize Russia is not their enemy and that they did not invade – they only resolved an ongoing conflict. I see Europe moving back to agreements with Russia that are good for both sides of the continent, east and west.

      1. kam

        After adjusting for inflation Europe’s GDP has dropped 5 to 10%.
        The problem with GDP is it is measured with a rubber band.

      2. John Edw. Tipre

        Am in agreement. Inside of a decade this may become the case. Admittedly, wishful thinking, but also to place a bit of confidence in young Europeans who become older and wiser, those currently experiencing the tumult who are being educated, notwithstanding the “distorted” media in their own, current Brussels/NATO influenced political cultures.

  2. The Rev Kev

    This article has near the top this sentence ‘With the Ukraine war now reaching its one-year mark on February 24, the Russians have not achieved a military victory but neither has the West achieved its goals on the economic front.’ That is kinda like saying in May of 1944 that the Allies have not been able to achieve a military victory but neither has Germany. Unless you recognize that this is an attritional war and not a positional war, then you will always be looking the wrong way.

    But when talking about the losers of this war, Medea Benjamin and Nicolas J. S. Davies are way, way off the mark. So, let me include a few more. The Collective West can no longer go with the unipolarity myth anymore. We are well and truly in a multipolar world. The west has also lost as they have show the rest of the world that your money is not safe with them and they will steal it because of where you were born. They have shown that the western values are not things like freedom and the like but authoritarianism and censorship. Europe is a major loser as they are being de-industrialized while what resources that they have left will be committed to armaments. Germany has been betrayed by its fellow western countries and has been crippled economically. The Global South is now being lost to the west as not only have they seen the craziness emanating from the west but now they know that they can go with the emerging world order rather than the suicide pill of the World Bank or the IMF. There are more but this will be enough for now.

    1. tevhatch

      Well spotted, well said.
      May I add that this inspired by your comment? Another outcome is many nations that only allowed in regime change operatives/NGOs, capture of their domestic media, etc. by USA and EU corporations and their government proxies out of fear that refusal would lead to worse, are now emboldened to legislate against them. This makes overt control of these nations economies much more expensive for the West to maintain. Next, they have given rise to a “trade block” of sanctioned nations and their economic orbitals which is now larger than the “real” economies of the EU/USA.

    2. Eric Anderson

      “Unless you recognize that this is an attritional war and not a positional war, then you will always be looking the wrong way.”

      Spot on. But so many people are still led to believe that there are white and black hats in this world. I keep saying the best thing that can happen from this “war of attrition” is reinvestment in U.S. industrial policy, which policy, aims at renewables investment b/c all the “growth growth growth” is rapidly consuming our resources resources resources, and pushing prices into an inflationary stratosphere.

      1. Susan the other

        That’s the only way to look at it short of seeing the whole thing as desperate lunacy. If the “big five” can produce big heavy war machinery that can be turned into environmental reclamation machinery for dredging, earth moving, sifting, etc. it is less of a resource loss. We kept General Motors alive because it could be rapidly retooled for war. The Big Five should be retooled to do environmental reclamation machinery for heavy cleanup and reconstruction worldwide.

    3. fresno dan

      With the Ukraine war now reaching its one-year mark on February 24, the Russians have not achieved a military victory but neither has the West achieved its goals on the economic front
      I too was going to comment on that sentence but you beat me to it..

      In the long term, European leaders may well conclude that the region’s future lies in political and economic independence from countries that launch military attacks on it, and that would include the United States as well as Russia.
      One has to give kudos to the authors for the above sentence. It seems to me that slowly it is being acknowledged in the West that the US blew up the pipeline, and this was not a smart thing to do. Kinda like it took a while for everyone to admit that Iraq did not attack the twin towers, was not an ally of Al Qaeda, and did not have weapons of mass destruction.
      Maybe the leadership of the US is strong in ideology, but it sure is weak in intelligence (and I don’t mean military intelligence).

    4. Polar Socialist

      While not really a military victory (if such a thing actually exits), somebody somewhere did point out sometime ago (sorry for the vagueness, but I really can’t remember) that Russia has already achieved the demilitarization of Ukraine in the sense that if the west stopped supplying Ukraine, it would fold faster than Afghanistan’s army.

      As a military force, Ukraine is already on anti-palliative care: the patient is in a terminal state, but the pain and suffering can still be maximized.

      1. dandyandy

        I like the anti-palliative gaff.

        If I were an oncologist, I would throw this one in the ward at rounds tomorrow. :)

      2. Lex

        It’s a sad statement on the moral and ethical state of the US that it chooses to maximize the pain and suffering of Ukraine for the sake of pride and pillage.

    5. Rubicon

      Very good points, Rev Kev; but we would like to drill down a little on the West. It IS the US Financial Hegemon, along with their Financial buddies in the UK/EU who are in intent on “colonizing” EU/UK citizens; modeling their successes in destroying US jobs, salaries, and mounting incredible costs Americans pay for Private Health, Big Insurance, Huge Tech costs Mortgage Costs, all the while forced to put everything on credit cards or bank loans. Currently, US citizens are $9 BILLION in DEBT. Wait until the EU/UK citizens are forced to pay those kinds of costs while jobs, production, small businesses are decimated by this cruel Financial System. This is what the economist, Dr. Michael Hudson, keeps saying. He is absolutely correct. Many have identified Dr. Hudson as the best economist in the West. Part of his vast knowledge includes his earlier years working in the US Banking System, the US Govt. and other Marketing Firms.

      1. Michael

        Not sure of recent figures but Europeans have a very different relationship to debt than the UK (and US?) At one point the UK (60M people) had more personal debt than the entire EU (450M people). Regarding country debt, Italy does terribly, the UK and France are middling, and Germany does better (from memory, it’s late)! And while the UK is hurtling towards the expensive and unethical US model, it won’t be happening in any affluent European country ihe near future.

    6. Skip Intro

      On the other hand, too much reality too soon might be counterproductive in a broad message meant to reach through many layers of bubble wrap and spread. Remember your scripture: The slow blade penetrates the shield.

  3. flora

    Meanwhile, in the UK.

    Fears vegetable rationing will spread as ‘other stores prepare similar cutbacks’ after Asda and Morrisons limited purchases due to shortages caused by bad weather smashing supply chains


    Yes, I’m sure it’s due to bad weather instead of something like gas prices being too high for greenhouse veg growers to keep heating the greenhouses. Yeah,, bad weather, That’s the ticket. / ;)

    1. Maxine

      In a way, it is bad weather – it is too cold to grow stuff outside / you need additional petrol to heat the green houses because of the weather. They are just leaving out the bigger picture.

  4. Ghost in the Machine

    These ‘growth’ numbers are highly suspect. The debt subsidized increase in energy prices is part of that growth, yes? For the US, the trading of houses at bubble prices, the gouging for health care, Wall Street profits, are part of the ‘economic growth,’ right? The money for armaments actually builds something I guess, but just to be consumed to murder and destroy. I think any economic growth that actually connects to well being is already in contraction. And has been.

    1. John k

      I agree. And supposedly growth is inflation adjusted, but food/energy/rent inflation is afaik higher on low incomes than high. Plus other countries routinely score better when PPP is considered. For example, I’ve read that on that basis China gdp has already passed that of us.

  5. Michael.j

    A better article, but lacks a strategic perspective.

    Inasmuch as I take history as my guide, and make the very selfish assumption that the survival of the human species is my underlying goal, based upon the hopeful survival of my offspring. I take a very empirical position that what will minimize the sudden depopulation of the planet as a primary objective.

    Given these assumptions I assume that actors will perform by their historical assumptions. The West has acted predictably in it’s 1991 “End of History” moment of empire. Russia and China have always used a historical lens in viewing their current circumstance a consequence of their history, and will act accordingly.

    Since history is a very cold master, I find emotional thinking is unproductive. I do not condemn Russia’s invasion of Ukraine, nor do I applaud it. I see it as a consequence of history. It’s instigation by the West, however, I see as particularly short sighted.

    Just as the Japanese had hoped to win WWII in the Pacific, that hope was all in vein as the US controlled the oil supplies and destroyed Japan by cutting off its oil supply from the Indonesia. If the aim of the Russian War was to economically disconnect Europe from Russia, it succeeded spectacularly. If it was to defeat Russia it has failed miserably, since that country is a self sufficient global provider of most commodities. Further, that nation is VERY nationalistic and would rather let the planet go up into flames than see itself conquered.

    The results were evident from the beginning. Inasmuch as the war actually started in 2014, and almost destroyed Russia in 2015. The Russians adapted, revolutionized their agriculture and banking and became an autarkic nation. It also sought allies with the Chinese, Iranians, Indians, Saudis,and Turks, as well as all of Central Asia. Through all of the West’s endeavors, all it managed to do was to bifurcate the world and unite much of the Global South against it.

    Going back to my fundamental assumption I think it is important to remember that we as a species are headed off a cliff to short term extinction given our current an near term dependence upon fossil fuel, and our inability to get off it before we drop off the cliff. We are blasting by the tipping points quite quickly, and I’m afraid geo-engineering on a global level is the only short term solution.

    The jet streams, which direct the flow of water in the atmosphere around the planet, are in complete disarray making agriculture more and more tenuous with each passing year. This will result in a continuously more chaotic and starving human population, and ultimately in extinction. As a species we need to 1) stabilize the jet streams; and 2) lower the CO2 level to a survivable level. This will ultimately require the reduction of fossil fuels, but that act in itself is not sufficient for short term survival.

    Given that 90% of all CO2 is absorbed by the ocean and the latter’s capacity for future absorption is reaching its maximum, the most logical solution is to precipitate as much CO2 to the bottom of the ocean as quickly as possible. If one looks at sea surface anomalies around the planet, one will see that they occur fairly closely on the downstream side of major industrial areas.

    My proposal is that all the major powers re-adjust their military industrial complexes to focus on the deployment of CO2 precipitation efforts rather than wasting their wealth and our time on exploding high intensity weapons.

    Given the military industrial complexes are the ONLY single sectors with the disposable income to invest in such a long term and poor profit to loss endeavor, they would be the logical group to start this project.

    This will require the ceasing of hostilities around the planet, and working together on global solutions. Currently we are all fiddling, while Rome burns.

    1. AG

      “The results were evident from the beginning. Inasmuch as the war actually started in 2014, and almost destroyed Russia in 2015”

      Could you may be get more into the latter part: in how far was Russia almost destroyed in 2015?

      For others here it might be totally clear but my expertise is only catching up step by step in this war, and 2015/16/17 are somewhat dimly lit in my memory.

      1. Thomas Wallace

        I don’t know what the op meant exactly, but US sanctions imposed in 2014 improved the domestic Russian economy and insulated it from the 2022 shock and awe sanctions. In 2014, US actions weakened the Ruble, embargoed Russian imports and imposed the Neo mercantilist conditions on the Russian economy. Leading to Russia becoming the world’s largest grain exporter. The same playbook that every export oriented economy wants to utilize.

  6. Oh

    Unless we firmly rein in if not dismantle the financial machine in the US, we’re doomed to destroy ourselves with wars on other countries as well as destruction of the not so well to do people here. Looking at the gouging going on every industry (MIC, Healthcare, Retailing, IT) it won’t be too long before anybody in the US will be able to support this economy. The rich will not do so and will move their wealth elsewhere. The economy will implode.

  7. Willow

    Resiliency of Russian vs fragility of Western economies shows how utterly useless Western ‘mainstream’ economists and their theories are. May have been unexpected genius but Putin’s timing for breaking Western economies is near perfect. Even if the war in Ukraine ends, the economic fallout will be catastrophic for West over the longer term.

    1. deplorado

      Thank you for this, yes, fascinating – and also such contrast between European leaders’ behavior then vs now!

  8. Karl

    As for losers from sanctions, how about everyone in the U.S. who is paying higher interest rates for homes, autos, etc.? Who have seen a decline in home prices? Who work in home construction, etc.?

    The 3-month T-bill interest rate took off in mid January 2022 (after being near zero throughout 2020-21), just as capital markets started to get spooked by an imminent invasion of Ukraine. The 30-year mortgage rate started taking off even earlier–first week of January 2022. The Fed itself didn’t start hiking the Fed Funds rate until March 2022. Subsequently, interest rates continued upward throughout 2022.

    All this time, the CPI excluding food and fuel remained in the same range that prevailed since early 2021, and if anything slightly declining.

    Mere coincidence? I don’t think so.

  9. Don

    I concede that climate change is the existential threat, and that it is urgent, but I fear that if Russia were to somehow lose this war, we will not be able to take it on. In the near term, the crushing defeat of the US and NATO must be the priority.

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