The night of the 23rd of February was a warm one in the Russian city of Rostov-on-Don. After months of a bleak and biting winter, the river ice had melted, and muddy puddles lined the streets where heaped-up piles of snow had been. Just fifty miles away though, across the border with Ukraine’s Donbass region, the Kremlin was only hours away from turning a frozen conflict hot.
That was more than seven months ago and, while tens of thousands of soldiers and civilians have died as a result of President Vladimir Putin’s territorial ambitions, the war is seemingly a long way from over. But, with a summer of unseasonably hot weather fading away, much of Europe may now face the full consequences of the invasion for the first time.
As the West scrambles to divest from Russian fossil fuels imports after decades of reliance, choking off funding for the Kremlin’s brutal war, the worsening energy crisis is coming to a head at the same moment ordinary people go to turn on the heating. Meanwhile, the rising cost of fuel is driving economic chaos across the continent, and threatens to throw more than a dozen developed nations into a prolonged downturn.
Investors and analysts are now warning that Europe will slump into a recession by the fourth quarter of this year, with slim prospects for recovery any time soon. Meanwhile, Josep Borrell, the EU’s top diplomat, has cautioned that the bloc’s members are struggling to deal with the value of their currencies slipping against the US dollar. “Everybody is running to increase interest rates,” he said earlier this month, adding that “this will bring us to a world recession.”
Other signs are also looking glum. European firms are reportedly planning to boost workers’ pay-packets to help them match the rising cost of food and fuel over the winter, and many have announced one-off payments to ensure their staff don’t go cold or hungry, while UK retailers have introduced a series of wage rises. The resulting inflationary pressure and the slimmer profit margins, analysts tell Reuters, could throw Europe’s private sector into disarray.
Germany, the continent’s largest economy, is also predicted to be heading towards a recession and economists say the two consecutive quarters of negative growth could come by early next year.
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Having boomed for decades on the back of cheap Russian oil and gas, it has been hit the hardest by the sudden shutoff, with its heavy industry bearing the brunt. Vital manufacturing sectors are being hit hardest – for example, the colossal BASF chemical plant in Southern Germany saw its energy bill rise by £687 million in the first four months since the war started.
Now, with the underwater Nord Stream natural gas pipeline having been put out of commission by a series of blasts earlier this month, the cost of buying from alternative sources is on the rise. In an effort to bail out businesses, Berlin has unveiled €200 billion in energy support funds. However, other European nations warn that its cash injection will drive up prices and throw other states into economic turmoil.
Those objections, though, have fallen on deaf ears while the country races to avoid winter blackouts and energy shortages. “If Germany were to experience a really deep recession, it would drag the whole of Europe down with it,” Deputy Chancellor Robert Habeck said last week in response to the criticism. “We’re not being selfish — we’re trying to stabilise an economy at the heart of Europe.” Even that rescue package may not be enough, and the demand for firewood is soaring as consumers fear sky-high energy bills.
While the UK has never been anywhere near as dependent on Russian oil and gas, and has relatively secure supply chains, the resulting pressure on alternative providers is driving up costs. Embattled new British Prime Minister, Liz Truss, has seen her flagship energy policy – freezing bills at £2,500 a year for two years – scrapped, and replaced with a commitment to maintain those levels only until April, with concerns about the overall cost of the plan in the context of a market meltdown.
In Russia, meanwhile, temperatures are already dropping and locals say a grey, damp winter is on its way. While they may have plenty of energy to burn, the revenues Moscow once used to enrich its elite and fund its armed forces are no longer there. Instead, those unlucky enough to be drafted to the front lines in Ukraine face months freezing in a foxhole ahead, as their better-motivated, better-armed and better-trained foes push them back to the border.
The invasion has ultimately achieved little of what Putin might have hoped for – destroying Moscow’s reputation as a great power rather than cementing it, and putting himself in an increasingly vulnerable position at home. But, showing no signs of giving up, the increasingly dictatorial Russian President may well settle for watching Europe slip into economic chaos in whatever time he has left in power.
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