The UK government's response to the Russian invasion of Ukraine

Russia’s invasion of Ukraine in the run-up to our March 2022 Economic and fiscal outlook represented a significant adverse shock, primarily via a sharp rise in gas and oil prices. In this box, we considered where the UK gets its energy from and the channels through which higher energy prices raise inflation. We then set out how the economic shock from the invasion had been reflected in our forecast as well as several potential channels through which the invasion could affect the UK economy that our forecast did not explicitly capture. A large diversion of citizens to military duty would leave gaps in  the workforce to be filled, be it guarding food warehouses or building trenches and bomb shelters. Retired members of essential professions – doctors, nurses, morticians, police – would be urged back into service.

• The decline in manufacturing means there are far fewer factories that can be converted to make arms, as happened in the Second World War, when car makers churned out Spitfire parts.
• The Covid lockdown, which saw fights breaking out in queues at supermarkets and garages, was a glimpse of how trouble can spark during times of nationwide panic.
• Mr Szijarto will be in the western Ukrainian city of Uzhhorod with his Ukrainian counterpart Dmytro Kuleba and presidential chief of staff Andriy Yermak.
• We have not taken explicit account of the impact on inflation, or on the wider economy, of price rises of other commodities of which Russia and Ukraine are also major global producers such as wheat, nickel, and palladium.

For decades the European Union has heavily relied on Russia's oil and gas, generating money and cash for Russia. But Russia is also reliant on revenues from fossil fuel sales, which make up around two fifths of government revenue.  https://euronewstop.co.uk/why-doesnt-anyone-help-ukraine.html  announced plans to send army to defend its borders in response to "possible disturbances and provocations due to large military forces massed in Russia and Belarus".

How does the Russian invasion of Ukraine affect the UK economy?

So, as a net energy importer with a high dependence on gas and oil, higher global energy prices will still weigh heavily on the UK economy. From significant rises in petrol and gas prices to the potential for cyberattacks and a financial hit on London’s markets from western sanctions, people in the UK will feel the cost of the conflict. Mr Johnson said the UK and its allies would agree a "massive package of economic sanctions" in a bid to "hobble" the Russian economy, warning that the West would need to cease its dependence on Russian oil and gas.

Meanwhile Kaja Kallas, the Prime Minister of Estonia - which borders Russia - has told BBC News "we're gonna help Ukraine with all the means that we can" including political support and by sending weapons. The UK government is providing a range of economic, humanitarian and defensive military assistance to Ukraine, and is imposing additional sanctions on Russia and Belarus. Prior to Russia's invasion, the Foreign Office had seen a decline in its Russia expertise - despite the government having described the country as "the most acute threat to our security" in the Integrated Review. The muted response to Russia’s invasion of the Crimea in 2014 had already shown that, as a former UK ambassador to Moscow and Washington put it, “there was a problem in the Foreign Office; the old Cold War cadre of people just wasn’t there”. Justin Bronk, an air war specialist from the defence think tank Rusi, told the BBC that, if confirmed, the loss of an A-50 would be a "highly operationally significant and embarrassing loss" for Russia's air force. Analysts have warned that war could impact the production of grains and even double global wheat prices.

UK sanctions following Russia’s invasion of Ukraine

Even if cyberattacks didn’t wipe out Netflix, wartime Britons would still face a life without luxuries. While the Channel has long been the country’s greatest defence, it makes it hard to import in times of war. As well as curbs on foreign consumer goods, there’d be runs on more basic products like medical kits, fuel canisters and masking tape to stop windows shattering during bombing raids.

It said Nato allies were sending additional ships and fighter jets to eastern Europe to reinforce defences and increase deterrence, in response to the continuing build-up of Russian forces. We have not taken explicit account of the impact on inflation, or on the wider economy, of price rises of other commodities of which Russia and Ukraine are also major global producers such as wheat, nickel, and palladium. Some global wheat prices have risen by  more than 40 per cent this year and food and non-alcoholic beverages comprise 11.5 per cent of the CPI basket. So, price increases and potential shortages in these non-energy commodities represent additional upside risks to our inflation forecast and downside risks to our real GDP forecast. All the expeditionary wars involved victories that came, generally, in a matter of weeks, sometimes days.

Ukraine

Before the war, it was expected that one of the first lines of attack from Russia in any conflict would be a major cyber assault, both on Russia's opposing combatant, and potentially on its allies. So far, that has yet to happen, with relatively few reported cyber attacks linked to Russia in the last few months. But Air Vice Marshal Bell, who previously headed a strategic combat review for the RAF, says the reasons for this are not clear. Assuming both sides weren't annihilated by nuclear weapons, they assumed a Soviet invasion would lead to a war in western Europe, and trained and equipped UK forces would need to counter that threat.

• Gen Sir Richard Barrons, the former head of the British Joint Forces Command, told the committee that he doubted there were “sufficient munitions to sustain a high-intensity conflict for more than about a week”.
• Ukraine has said its goal for the talks is an immediate ceasefire and the withdrawal of Russian forces from the country.
• If we took casualties at the rate the Ukrainians are taking them, the NHS would immediately be overwhelmed, and for years we’ve missed recruitment targets for the Armed Forces.
• So, as a net energy importer with a high dependence on gas and oil, higher global energy prices will still weigh heavily on the UK economy.

If Vladimir Putin decided to cut off supplies of these metals in retaliation to sanctions, existing supply problems could worsen, with car firms having to find alternative sources. But be we warriors or wimps, now is the time to start facing up to the prospect, says Ed Arnold, a European Security Fellow at the Royal United Services Institute. If we took casualties at the rate the Ukrainians are taking them, the NHS would immediately be overwhelmed, and for years we’ve missed recruitment targets for the Armed Forces. “Covid showed our ugly side, with people getting upset when all they were being asked to do was sit on the sofa at home,” said the former TA soldier. The logistics of training a “Citizen Army” are also formidable, according to one former Territorial Army (TA) soldier.

• We do not assume these actions have a material effect on overall financial stability, lending, or investment in the UK.
• Russia has seen more success in eastern Ukraine, by pounding their opposing forces and holding them back with an onslaught.
• The individuals concerned are Gennady Timchenko, Boris Rotenberg, and Igor Rotenberg, all oligarchs who Mr Johnson described as “cronies” of the Russian president.
• The Ukraine war is providing a golden opportunity for British and NATO military planners to observe Russia fighting on the battlefield and to plan accordingly.

The prospect of further UK sanctions against Russia comes a day after the prime minister announced that five Russian banks had had their assets frozen and three Russian billionaires would have travel bans imposed. Mr Johnson was among leaders of the G7 group of wealthy nations who met to discuss the situation. Earlier, the prime minister said on Twitter that the invasion was a "catastrophe for our continent". He said the UK and allies will launch a "massive package" of sanctions to "hobble" Russia's economy. The price of British gas for next-day delivery shot up by 40 per cent, to £280 per therm. Opposition leaders including Labour’s Sir Keir Starmer criticised the initial package of sanctions for being too soft.

• Even though an attack of some kind has been expected for several months there is still a widespread sense of shock about what has happened around the world.
• From significant rises in petrol and gas prices to the potential for cyberattacks and a financial hit on London’s markets from western sanctions, people in the UK will feel the cost of the conflict.
• The PM said President Vladimir Putin had launched a "vast invasion by land, by sea and by air" without provocation.

A little earlier, we told you about a report in the Financial Times that the EU was proposing to sabotage Hungary's economy if Budapest blocks further aid for Ukraine this week. Meanwhile, Indian thinktank Observer Research Foundation's Russia expert, Nandan Unnikrishnan, said India was unlikely to sign "any major military deal" with Russia because it would cross a red line with the US. "A frank and constructive dialogue is expected to improve relations between states," the Ukrainian president's office said on its official channel on the Telegram messaging app alongside a photo of Mr Szijjarto, Mr Kuleba and Mr Yermak.

Mr Johnson promised to hit Russia with a “massive” package of sanctions designed to “hobble” the economy in Moscow. This is because Nato uses a system of collective security, whereby its independent member states agree to mutual defence in response to an attack by any external party. If Ukraine was part of Nato, the military alliance which is made up of 30 member states, including the US and UK, every Nato nation would have to launch an armed attack against Russia. "This renewed attack is a grave violation of international law, including the UN Charter," Nato said. But we now see more clearly that, in a crisis, for the foreseeable future UK interests are aligned with the US and Europe, especially if China aligns itself more with Russia. The revival of NATO’s purpose and a unified western response have been a necessary if painful reminder of where UK interests truly lie.

But beyond the Johnsonian rhetoric the 2021 document was quite clear-sighted about UK interests. It pledged to support an “open and resilient international order” but warned that “to be open we must also be secure” and of increasing competition between states and a fragmented international order. To that end the review already committed to exceeding NATO spending commitments, and the UK playing its part in multilateral governance and collective security in a more hard-nosed way.