Europe has been at the center of trade for decades after experiencing unprecedented peace, security and stability for many years and it was the major driving force for global economy for many years before the emergency of Asia in particular the emergency China but instabilities in eastern Europe, particularly in Ukraine are threatening more than 75 years of relative peace and stability in Europe and this will have a profound consequences for Europe economy.
For months US and its allies especially UK have been telling us that Russia was planning to invade Ukraine citing more than 100,000 Russian troops stationed at the border with Ukraine. They recently increased the threat to imminent Russian invasion of Ukraine citing military exercises taking place in Belarus even though Russia has denied such reports.
It should be noted that Russia is among the world’s largest producer of oil and gas and Europe is among the largest consumer of Russian energy accounting for more than 30% of Europe energy needs. Countries especially Germany, Hungary, Poland, Bosnia, Moldova and many more countries depend on Moscow for their energy needs.
Its should also be noted that the gas prices in Europe are up as much as 75%,the cost of a gallon of gasaline and this is hitting European households very hard during a winter season when gas is needed more than ever to provide heat to millions of homes.
High prices in Europe have caused inflation to go up by 5.1% as of January 2022 and that was before the Ukraine crisis intensified and this comes as economies in Europe were starting to slowly recover from the devastation caused by covid-19 pandemic which started in 2020.
Europe has experienced wars and cruises for hundreds of years and they just had more 75 years of relative peace and stability which is a major achievement but the renewed crisis in eastern Europe especially Ukraine could destroy this relative peace and stability which had defined Europe for decades as a peaceful continent.
If a war breaks out between Russia and Ukraine, first there’s no guarantee that it will remain between Russia and Ukraine, which means there’s a chance that it may spill over into neighboring countries drawing in Europe like what happened during world war I and II.
Secondly, US has convinced its allies in Europe to apply the toughest sanctions in human history against Russia which means even Russian energy sector will be sanctioned and hence this happens,then that’s the beginning of chaos in Europe if people don’t get gas to heat their homes. Governments in Europe will likely be overthrown as people take to the streets to protest luck of fuel for their cars and gas for their homes.
Thirdly, even if Europe manages to get alternative source of energy like the US has promised, that gas or oil will be much more expensive which will undoubtedly drive up commodity prices in Europe and the result will be inflation on a scale never seen before since world war II.
The EU is Russia’s largest trading partner, accounting for 37.3 of country’s total trade in goods with the world in 2020. 36.5% of Russian imports come from EU and 37.9% of its exports go to EU with total trade volume reaching more than 174 billion Euros. This is no small trade between EU and Russia, so the question is” what happens if this trade comes to stops” maybe after the imposition of sanctions. It will have devastating consequences on the economy of Europe which may even cause Chaos among member states.
The biggest challenge Europe is likely to face and maybe is facing it even now but on small scale is the migration of investors and investments from Europe to US. If this happens on large scale, then there will crash of markets in Europe bringing the whole economy to a standstill in one night.
For investors and investments, peace and stability is the main factor and if you can’t guarantee those two, they will just leave and take their money where they feel secure and the likely beneficiary from this will be York stock exchange in United States of America.
Ukraine is already experiencing this situation.According to president Zelensky of Ukraine, the increased rhtoric about Russian invasion of his country is causing panic among the population, countries have withdrawn their citizens, commercial flights are nolonger working, investments and investors have fled and factories have been shut down.
If the inflation continue to skyrocket and Russia is put under sanctions as US is telling us due to invasion of Ukraine, the Euro currency will weaken to near collapse as investors flee Europe with their money and when that happens, there be no one to save Europe.