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Could international economic fallout from the war in Ukraine constitute a Third World War?

The war on Ukraine explained: Hear from our experts
Professor Greg Kennedy

Professor of Strategic Foreign Policy

21 March 2022

Discussions of the spread of the war in Ukraine into greater Europe creating a Third World War miss the point of the nature of modern warfare in the post-globalisation age: the war already encompasses the world in terms of the global economic system. Warnings of massive shortages in energy supplies, ranging from oil to natural gas; impending grain and other commodity shortages; critical raw material shortages such as neon and palladium and even aluminium; re-orientation of supply chains for security rather than economic savings – and on the back of a system battered by COVID measures – will all combine to create short and long-term realities that will demand governments take a more martial approach to the norm that has been the liberal global economic system: the world of free and open markets.

The decision to use these economic warfare weapons instead of military power is not guaranteed to produce fewer casualties nor with any certainty whatsoever a shorter war. However, no matter what the peace will look like the ripples in the global economic system will not be easily stopped or re-directed now that they have been put in motion. Shortened and secure supply chains come with a variation of nationalism or the creation of blocs of like-minded states, otherwise there is no security produced.

The forthcoming shortages, particularly in grains and other food stuffs will create significant social unrest and political upheaval as the era of cheap food is finally extinguished. Open markets for key strategic materials, such as food, will be put under pressure to be closed: why would the Canadian or American public want to pay $10 for a loaf of bread just because North American farmers can get an inflated price on the world market instead of restrictions on the export of grains being now part of the national security requirement?

Rationing and supply restrictions are peacetime realities buried in our far distant past, a thing of the dark ages of World War One and Two, perhaps the first half of the Cold War. But for those who have studied the nature of Economic Warfare the future “peace” will challenge governments to deliver stability and prosperity if preparations for that peace do not begin now.

The UK re-orienting itself to a North American energy supply chain makes cultural, social and political sense. However, the associated rise in cost of such security will mean enduring high costs for the short to medium term, as well as possible social/economic changes. COVID revealed how energy savings could be made, so do we impose a work-from-home imperative for national security reasons now in order to keep crippling energy costs from doing even more harm than that imposed on the economy by keeping universities, accounting firms, and other parts of the economy that can work without burning energy in order to free up supply for other areas?

Will fracking and nuclear energy sources now become legitimate if the choice is freezing, paying crippling energy bills, or continuing the status quo? Do we allocate ammonia/phosphate fertilizers to the highest bidder or most needful? So would that be North American markets or India or Brazil with not only their absolute need for such goods but also their inability to replace the missing fertilizers by their own means, which North American markets could do? It is just that the cost to do so would have to be underpinned by guarantees of long-term usage/investment. Do we re-think our agriculture policy and land use to become even marginally more self-sufficient in order to create jobs and food security, and what does this do for new food technologies and debates of GM and other food sources, bearing in mind there is a climate crisis that must be fought at the same time as these questions are being dealt with?

Do we re-think the way BREXIT will work to ensure food and energy security and access to Great Britain’s closest and most logical economic ally is not made less efficient because of petty domestic politics? How will the UK treat China in any “peace” that sees that nation at even greater odds with the United States due to the Chinese support and sustainment of a Putin-led Russia, a not unlikely situation? Where are the strategic red lines in Anglo-American economic relations if the US wishes to escalate its already ongoing economic Cold War with China?

The list of outcomes and effects of the impact of the economic world war we now find ourselves in demands a return to more centralised and unified thinking about the economy not only as a weapon but as a critical vulnerability. Private and public officials and representatives must be woven together into a more coherent and collaborative whole, a fused organisation that can see the economic and fiscal as well as the national security outcomes in a more comprehensive fashion nationally, and then also link inter-nationally with allies and partners, an economic NATO of sorts. Only by recognising that our strategic thinking has to acknowledge we are in an economic third world war can the appropriate actions and solutions be produced in a coherent fashion.

Most of these questions will have answers that point to a negotiated “peace” that can allow Putin to remain in power, that can partition off Crimea and the eastern territories of the Ukraine and can provide some form of words that allows Putin to save face rather than extract even further suffering in order to save his position, and indeed possibly his very life, as Russia’s leader. This is because such a “peace” does not put an end to the physical problems of the war, but it would allow some degree of normality and confidence, the two critical ingredients for any sort of liberal economic order, to once again begin to operate in a fashion more reminiscent of the pre-war world.

Such a “peace” will be in high demand by the end of the summer months as the degrees of economic instability and scarcity become more pronounced and disruptive to a wider global populous and as the forecasts for the new global harvests come in. Everyone should be hoping hard that there are no droughts, floods or other climatic disasters such as those which occurred last year, otherwise things will get much, much worse by the autumn.

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Greg Kennedy

Professor of Strategic Foreign Policy

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