What if Western support evaporates so that Ukraine either loses the war or the peace?  

Ukrainian defeat in the war against Russian aggression would be a catastrophic failure for the West on numerous fronts, but particularly from an economic perspective. 

First, if Russian troops were able to drive through Ukraine and reach the border with Poland, it is likely that tens of millions of Ukrainians would flee westward. As we have already seen with prior migrant flows, this would impose huge economic, social, and political risks on Europe. 

Second, it would be profoundly reckless for the West to assume that having captured Ukraine, Putin would stop there. 

The risk would be of further moves west, against the Baltic states, and elsewhere in Central and Eastern Europe. (This effective surrender of former communist satellite states is essentially what Putin demanded in December 2021, just before launching the all-out war.)  

Remember this would be an emboldened, and economically strengthened Russia fresh from a colonial land grab into Ukraine. The West likely would need to counter this threat by boosting defense spending, well beyond the 2% of GDP current target for NATO and likely back to the 3% level maintained for much of the Cold War period — if that sounds small, consider also that it’s a 50% rise on current levels for debt-burdened NATO states. 

Given that the US already spends at this level, and assuming only Europe moves up to this level, this would represent an additional $200bn of defense spending per year by Europe alone. That is equivalent to Ukraine’s entire annual GDP, and double the annual rate of spend at present by the West in supporting Ukraine.  

Note here too that this $200bn additional NATO defense spend would be annual and recurring. So stumping up the cash to help Ukraine defend itself and us, in the process, brings double the return, and further multiples if Ukraine wins and stops or denudes the longer-term Russian threat. 

Third, a Russian victory over Ukraine would signal to the West’s foes the weakness of the Transatlantic alliance and encourage them to test its resolve in other regions, particularly over Taiwan, the South China Sea, and the Middle East. We would then have to deploy yet more military assets to defend key strategic interests, again implying higher costs. 

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Fourth, defeat would prove that Russian blackmail, for example over energy supplies, succeeds. We should expect further bullying by Russia, using its energy and commodity weapons, to secure its strategic interests and impose high economic costs on the West in the process. Ultimately we will pay more for vital commodities. 

Winning the war isn’t sufficient. The risks of underfunding Ukraine’s recovery and reconstruction also present dangers and higher longer-term costs.  

Imagine for example the millions of Ukrainian soldiers returning home having won their/our war and expecting a better life — EU membership, the rule of law and higher living standards. A failure to deliver would be a huge disappointment and this could be reflected in social unrest, political instability (likely voting for populist candidates), and large-scale emigration from Ukraine.  

And what does a well-armed — probably by then the most effective military power in Europe — but politically unstable Ukraine mean for the rest of Europe? Likely it will again cost Europe dearly in terms of dealing with millions of migrant flows and requiring additional spending on defense and security.  

Certainly, the costs of funding Ukraine’s defense, its budget, and then recovery and reconstruction, appear large, especially when set against the context of a global cost of living crisis.  

But annual support costs of perhaps $100bn are less than one-fifth of 1% of Western GDP and less than 10% of NATO’s current defense spending. Much of this spending is in any event returned to Western economies, in booming contracts for Western (especially US) defense companies, construction companies, and others.  

The price of allowing Ukraine to fail in its war and recovery and reconstruction will be multiples higher for the West, and will then result in a much more challenging defense and security environment.  

Helping Ukraine win this war, and then the peace, is the best investment NATO and its allies can make in their own defense. The West might be paying a high price in terms of treasure, but Ukraine is paying a much higher price in the blood of its brave soldiers. Blood spilled in our defense.  

Timothy Ash is a Senior Emerging Markets Sovereign Strategist at RBC BlueBay Asset Management. He is an Associate Fellow at Chatham House on their Russia and Eurasian program.   

The views expressed here are his own. 

Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.

Europe's Edge
CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America.
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