Mahsa Dini
M.A. in International Relations, Allameh Tabataba’i University
Introduction
The Russia–Ukraine war has been the most devastating conflict in Europe since World War II. The United States and its allies in the North Atlantic Treaty Organization (NATO), through the imposition of extensive sanctions on Moscow and the provision of military support to Ukraine, sought to keep the conflict contained within Ukraine’s borders. Addressing the war’s immediate challenges has therefore been a major priority for U.S. policymakers. At the same time, however, the effects of the conflict have been far-reaching. The war has already reshaped patterns of diplomatic and economic engagement, demonstrated new technologies and operational concepts in warfare, and prompted major powers to reallocate resources and reassess their investment strategies. Moreover, as the war continues, and as countries respond to it and seek to draw lessons from its consequences, its impact on the international environment is likely to deepen further.
Although Ukraine and Russia have borne the greatest direct consequences of the war, its multidimensional effects—including the human and economic dimensions of the conflict—have reverberated throughout the international system. Against this backdrop, the present study examines the economic impact of the war and discusses the potential consequences of the Russia–Ukraine conflict for both domestic economies and the global economy. In addition to its adverse economic repercussions, the study also considers the war’s significant humanitarian and human rights consequences.
Economic Consequences of the Russia–Ukraine War
Historically, military conflicts have always had significant effects on regional and global economies, ranging from economic, commercial, and monetary destruction to the loss of productive capacity, labor, resources, and livelihoods. In general, the consequences are felt not only by the parties directly involved in a conflict, but also by their trading partners and neighboring countries. Following Russia’s invasion of Ukraine in February 2022, the United States, European countries, and several other states imposed extensive economic sanctions on Russia. The current situation has heightened concerns over exposure to cross-border financial and operational vulnerabilities, with particularly significant economic consequences for Europe.
- Reducing Energy Dependence
In 2019, the value of the European Union’s imports of oil and gas from Russia amounted to approximately €200 billion each, a figure twice the foreign-exchange reserves held by the G7 countries at the end of 2021 (Pisani-Ferry, 2022: 17). The ban on Russian oil imports drove up prices on global markets, thereby generating a supply shock whose consequences can be mitigated through trade with alternative and complementary suppliers. To reduce its dependence on Russian resources, the European Union must diversify its sources of supply. This requires redesigning Europe’s energy system, including the development of networks capable of connecting and diversifying a broader range of potentially smaller energy suppliers.
While oil and coal can be exported without substantial infrastructure requirements, gas trade is heavily dependent on infrastructure, which further constrains the scope for diversification. Europe’s dependence on Russian imports has been considerable, and a suspension of gas exports would deprive the European Union of 40 percent of its gas supplies. Nevertheless, because of mutual trade dependence, Russia would incur even greater losses if it halted its exports. The European Union obtains only 8.4 percent of its total energy demand from Russia and therefore has greater scope to diversify its sources than Russia has to diversify its export markets (Edmond, 2022). The EU has accordingly pursued the goal of reducing this figure to zero by 2027. One of the principal advantages of strategic diversification is the attainment of greater independence. However, in order to reduce its existing dependence on Russia, the European Union must either lower import demand by reducing domestic consumption or turn to alternative sources, through alternative energy sources, including nuclear power and the deployment of renewable energy.
- Demand Elasticity and Supply Shocks
Prior to the conflict, the European Union had already been affected by the shock generated by the COVID-19 pandemic, which had contributed to deteriorating trade conditions and rising inflation as a result of higher energy prices. The European Central Bank was already confronting inflationary pressures, which were subsequently intensified by the Russia–Ukraine conflict and evolved into a prolonged shock. In general, when commodity-price shocks emerge, as often occurs amid geopolitical threats, central banks should address indirect, second-round effects while refraining from attempting to offset the immediate inflationary impact. Instead, permanent changes in relative prices should be taken into account.
Measures adopted by EU member states to mitigate the consequences and cushion the impact of the supply shock include transfers, tax reductions, and broad-based price controls. Another area of intervention concerns the electricity price index. As a consequence of the conflict, measures have been introduced to reform the mechanisms governing electricity pricing on the basis of the cost of marginal energy sources. These mechanisms function as a channel through which shocks in gas prices are transmitted, ultimately generating higher rents for electricity producers. In effect, the geopolitical conflict has prompted changes in the European Union’s policy approaches and has led to greater government intervention in the market.
- Fiscal Transformation and Impact
“Geopolitical risks” are identified by the International Monetary Fund and the European Commission as geopolitical factors that pose a threat to economic well-being (Plakandaras et al., 2019: 12). The term refers to tensions or wars between states that affect international relations, while its broader meaning also encompasses the risks arising from the escalation of such conflicts. Significant fiscal transformations typically occur during wars and conflicts, as budgets must be redesigned and resources reallocated in order to mitigate the price effects of major supply shocks and excessive dependence on imported resources from high-risk countries, establish emergency energy-resilience agendas, and achieve stronger integration of energy systems.
In practice, this process compels countries to safeguard economic stability regardless of the geopolitical risks that such circumstances generally entail. Consequently, investments are made to contain the price effects of severe supply shocks, expand resource-supply capacity, and provide humanitarian assistance (Hang et al., 2021: 11). In a study involving a sample of one thousand investors, three-quarters of respondents reported that political uncertainty and diplomatic and military conflicts have a significant economic impact on financial markets (Bouras et al., 2019: 5).
On the other hand, according to the results for 2024, Ukraine’s GDP grew by only 2.9 percent year on year. In other words, the country’s economic recovery has gradually been losing momentum. Each quarter of 2024 recorded weaker growth relative to 2021 than had been observed in 2023, and in the fourth quarter GDP declined by 0.1 percent compared with the fourth quarter of 2023. By contrast, in the first half of 2025, real GDP grew by only 0.8 percent, while growth in the second quarter stood at 0.7 percent year on year. In the third quarter of 2025, real GDP growth rose significantly to 2.1 percent year on year. Over the first nine months of the year, GDP increased by 1.3 percent compared with the same period of the previous year (Samoiliuk, 2025).
Finally, defense expenditure often rises as governments seek to allocate sufficient resources for an effective defense policy. During the current conflict, the European Union has increased investment in decarbonization, digitalization, and resilience. Accordingly, the short-term cost of reducing dependence on Russian imports reached €100 billion, of which €50 billion was allocated to rebuilding investment reserves, €25 billion represented additional expenditure on alternative suppliers, and another €25 billion was spent on coordinating distribution across the European Union (EC, 2022).
- Increasing Defense Spending
Although there has been extensive discussion of the costs associated with the conflict in Ukraine, the true direct cost lies in the opportunity cost of the resources devoted to the confrontation, as well as in the welfare losses resulting from those killed or injured. During wartime, public-sector debt typically increases substantially. Governments are often willing to borrow significantly more than usual because of strong patriotic support for the war effort. In times of crisis, when geopolitical developments are perceived as threats to national security, governments are compelled to intervene—either by intervening in markets and imposing sanctions on high-risk countries, or by providing financial support in response to shortages and resource scarcity, both of which place additional pressure on public finances.
The procurement and maintenance of strategic reserves must generally be financed by the public sector, since private firms, faced with the potential losses associated with fluctuations in resource prices, are neither willing to guarantee supply nor responsible for doing so. Geopolitical risk increases defense expenditure either through debt-financed mechanisms or through higher tax-funded spending. Neighboring countries often perceive conflicts as security threats and consequently raise their own defense expenditures (Smith, 2014: 246). In the context of the Russia–Ukraine conflict, EU member states have allocated between 1 and 2 percent of their gross domestic product to defense budgets (Gourinchas, 2022).
- Rising Oil Prices
The rise in oil prices is a consequence of threats to energy supplies, a relationship supported by the relevant literature, which indicates that geopolitical risks and threats affect future crude-oil returns. Geopolitical risks and threats have a significant negative effect on the dynamics of oil-price formation (Antonakakis et al., 2017: 167). Accordingly, oil and gas prices increased following Russia’s invasion of Ukraine in 2022, contributing to higher gasoline prices worldwide. Russia is one of the world’s major producers of oil and gas, and the international restrictions imposed on the country have consequently contributed to higher gas and oil prices and have constrained their production.
- The Financial Cost of the War
The financial damage caused by war is unavoidable. Uncertainty within the financial system, heightened instability, and unexpected declines in household income have been associated with the depreciation of the national currency. Shortages of goods and services, together with rising costs for essential resources such as oil, push the economy toward cost-push inflation. Hyperinflation may occur when a country’s productive capacity is constrained by war and the government attempts to create additional money to cover wartime expenditures. Such risks are plausible for both Ukraine and Russia, given that the effects of inflation are already observable.
A prolonged conflict also leads to a significant decline in gross domestic product, which in turn weakens healthcare and educational services.
- Impact on the Global Economy
The recovery of the international economy remains uncertain due to disruptions in financial markets caused by the Russia–Ukraine conflict. Past experience has shown that military conflicts and wars can exert substantial effects on both regional and global economies (Jola-Sanchez., & Serpa, 2021: 66). In this context, the automotive and shipping sectors are particularly vulnerable to prolonged inflation driven by high commodity prices, which can expose economies to the risks of stagflation and civil unrest. The conflict has also generated considerable disruption across the emerging economies of Europe and Central Asia. Beyond Russia and Ukraine, growth expectations have declined across countries as a result of war-related effects.
On the other hand, oil and gas prices rose to as much as $110 during the first week of the war. This inflationary surge resulted in a 15 percent increase in prices compared with one week before the outbreak of the war. Russia is the world’s second-largest oil exporter and possesses one of the largest oil reserves, estimated at 80 billion barrels. As a result, the war has affected markets worldwide, particularly because of the severe sanctions imposed on Russia by various countries. Russia supplies approximately one-third of Europe’s natural gas, and the sanctions imposed on the country have disrupted these supplies, contributing to the European energy crisis. Approximately 48 countries rely on oil produced in Russia. Countries such as Belarus, Cuba, Curaçao, Kazakhstan, and Latvia import around 99 percent of their oil from Russia. According to the American Fuel & Petrochemical Manufacturers, in 2021 the United States imported an average of 209,000 barrels per day of crude oil and 500,000 barrels per day of other petroleum products from Russia. These flows have since been disrupted as a consequence of the war (Akpomedaye., & Orhero, 2025: 370).
The economic effects and the potential severity of the shock to the European economy resulting from the suspension of Russian energy supplies largely depend on the reallocation of resources, fuel switching, reductions in demand, and the substitution of energy sources. In this regard, the previous pattern of Russian natural-gas exports to Europe is unlikely to be restored, at least in the medium term, while current energy prices continue to exert a significant impact on inflation. Energy consumption associated with Russian imports is concentrated in industrial, commercial, and business uses, as well as in electricity generation and transportation (Bachmann et al., 2022: 29). Accordingly, Russian gas imports to the European Union declined significantly from June 2021 and again at the beginning of 2022, and they have not yet returned to their previous levels.
The amount of gas used for electricity generation can be reduced through greater reliance on lignite, hard coal, and even nuclear energy. Cost savings achieved through reduced imports and the substitution of energy sources can have a significant positive effect by easing the financial burden on the European economy, provided that energy production in industrial power plants is likewise redirected toward alternative input sources (Mahler & Kearney, 2007: 59). Russian oil imports can therefore be replaced by switching suppliers, as several additional sources remain available in the global market.
Human Impact of the Russia–Ukraine War
One of the principal challenges in assessing the long-term human consequences of the Russia–Ukraine war is that the conflict remains ongoing. Although four years of war have already produced far-reaching changes at the domestic, regional, and international levels, future developments on the battlefield or in the political and diplomatic spheres may still alter the nature and scope of its long-term consequences (Frederick et al., 2025: 21). One of the most visible humanitarian dimensions of the war has been the large-scale displacement of Ukraine’s population. It is estimated that since the beginning of Russia’s invasion on 24 February 2022, approximately 8.1 million people have fled Ukraine, resulting in one of Europe’s fastest-growing refugee crises since World War II. Neighboring countries have, at different stages of the conflict, experienced large inflows of people crossing Ukraine’s borders in search of safety and international protection. At the height of the crisis, more than 8 million people were also internally displaced within Ukraine. Although some have since returned to their places of residence, approximately 3.6 million internally displaced persons remain in the country. Many families were forced to leave their homes with minimal belongings, while the persistence of the conflict has continued to sustain and deepen humanitarian needs. In this context, around 12.7 million people required various forms of humanitarian assistance in 2025. Since the beginning of the crisis, more than 535,000 Ukrainian refugees have also entered Moldova and Romania. In response, rapid-response teams have been deployed in Moldova and have worked with local partners to support newly arriving refugees. These teams, including those operating near the Ukrainian border, have provided immediate assistance such as food and hygiene supplies to refugees entering Moldova (OCHA, 2025).
The consequences of the war in Ukraine have not been limited to population displacement, but have also severely affected the country’s economy and the livelihoods of its population. The crisis resulting from the annexation of Crimea in 2014, the conflict in eastern Ukraine, and, above all, the onset of full-scale war in February 2022 have disrupted trade networks, damaged productive infrastructure and transportation routes, and simultaneously increased the government’s defense expenditures. The war has also aggravated poverty, employment insecurity, and the economic vulnerability of significant segments of the population. Key industries, particularly agriculture, which plays a major role in Ukraine’s economy and export sector, have suffered substantial damage. Restrictions on, or disruptions to, access to Black Sea ports have increased both the cost and the risk of agricultural exports, with consequences extending beyond Ukraine’s domestic economy to global food supply chains. The destruction of roads, bridges, factories, energy facilities, and other critical infrastructure has likewise reduced productive capacity and made it more difficult to sustain economic activity and preserve employment opportunities. From this perspective, the economic effects of the war cannot be separated from its human consequences, as declining household incomes, disruption of labor markets, and reduced access to essential services directly affect quality of life and human security.
At the social and political levels, the war has also produced contradictory consequences for Ukraine. On the one hand, the experience of confronting an external threat has strengthened national identity and increased social cohesion among a significant proportion of Ukrainian society, while also reinforcing support for the country’s European orientation. The war has further intensified Ukraine’s aspirations for membership in both the European Union and NATO. In June 2022, the European Council granted Ukraine candidate status for EU membership, marking a major milestone in the country’s integration into European structures. On the other hand, wartime conditions have placed new pressures on governance and generated additional institutional challenges, increasing the need for political and administrative reform. Anti-corruption measures, efforts to modernize governance structures, and reforms of state institutions have increasingly been pursued within the broader objective of greater alignment with European standards. At the same time, the war has led to a substantial increase in international support for Ukraine from Western countries, including financial, humanitarian, and military assistance. Broad sanctions against Russia, together with Ukraine’s growing geopolitical importance to Western states, have also enhanced the country’s position within Europe’s political and security architecture.
The continuation of the conflict has likewise necessitated extensive reforms within Ukraine’s defense and military structures. The country has received substantial military assistance from the United States, European Union member states, and other Western allies, facilitating the training of military personnel, access to more advanced weapons systems, and greater adaptation to contemporary forms of warfare. Expanded intelligence, logistical, and training cooperation with Western partners has also significantly increased Ukraine’s level of military coordination with these states. At the same time, however, this transformation of Ukraine’s defense capabilities carries its own human and social consequences. A prolonged war entails the continued mobilization of human resources, a growing number of families affected by the death or injury of military personnel, greater psychological pressures associated with protracted conflict, and the allocation of a significant proportion of public resources to defense needs. Thus, while the strengthening of Ukraine’s military capacity has increased its ability to resist, it has also contributed to the reorganization of important parts of the country’s social and economic structures around the requirements of a prolonged war.
A comprehensive assessment of the war’s human consequences, however, also requires consideration of its effects on Russian society. Although the main theaters of ground combat, infrastructural destruction, and large-scale population displacement have been located within Ukraine, the gradual geographic expansion of the conflict into the territory of the Russian Federation, particularly into border regions, has directly exposed parts of Russia’s civilian population to the effects of war. Increasing drone and missile attacks on regions such as Belgorod and Kursk have resulted in civilian deaths and injuries, damage to homes and infrastructure, and the displacement of some residents. The entry of Ukrainian forces into the Kursk region in August 2024 marked an important point in the more direct extension of the conflict’s effects into Russian territory. In October of that year, the United Nations reported that violence in conflict-affected areas had forced more than 4,200 people to leave their homes in search of safety (United Nations, 2024). In 2025, according to figures provided by Russian authorities to the United Nations, attacks by Ukrainian forces within the territory of the Russian Federation resulted in the deaths of 253 civilians and injuries to 1,872 others. The United Nations Human Rights Monitoring Mission in Ukraine, however, noted that it had been unable to independently verify these figures because of its lack of access to Russian territory and the limited availability of independent information (OHCHR, 2026).
The human consequences of the war for Russia are not confined to casualties and insecurity in border regions. The continuation of a multi-year war has also placed growing pressure on the country’s economic, social, and demographic structures. The large-scale mobilization of human and financial resources for the war, the prolonged participation of significant numbers of people in the armed forces, and the consequences of military deaths and injuries for families represent some of the direct social costs of the conflict. In addition, military mobilization and the emigration of part of the working-age population since the beginning of the war, alongside broader demographic pressures, have contributed to tighter labor supply conditions. In its assessment of the Russian economy, the International Monetary Fund described it as displaying clear characteristics of a “war economy” and identified increased public expenditure associated with financing the war as one of the factors contributing to economic overheating and heightened inflationary pressures. The Fund also highlighted a tight labor market and rapid wage growth as important features of these conditions (IMF, 2025). Accordingly, the continuation of the war has not only increased insecurity in parts of Russian territory, but has also contributed to the reallocation of resources toward defense, inflationary pressures, labor-market constraints, and growing social costs for Russian households.
Overall, the human consequences of the Russia–Ukraine war are multidimensional and markedly asymmetrical. Because the principal theater of war has been located on its territory, Ukraine has experienced far greater levels of civilian casualties, internal and external displacement, infrastructure destruction, and disruption of essential public services. In 2025, the United Nations Human Rights Monitoring Mission in Ukraine verified 2,514 civilian deaths and 12,142 civilian injuries in Ukraine and reported that 97 percent of the casualties recorded in government-controlled areas resulted from attacks by the Russian armed forces (OHCHR, 2026). At the same time, the prolongation and geographic expansion of the war have increasingly exposed Russian society to costs in the form of human casualties, displacement in border regions, economic and social pressures, and the broader consequences of the long-term mobilization of resources for war. A comprehensive assessment of the conflict’s human impact therefore requires attention to the experiences of both societies, while avoiding any false equivalence and recognizing the substantial differences in the scale, intensity, and geographic distribution of the harm suffered by the two sides.
Conclusion
The Russia–Ukraine war is a complex and multifaceted conflict with deep historical roots and far-reaching consequences for both nations as well as the international community. Emerging from geopolitical tensions and longstanding disputes over territory and influence, the war has dramatically reshaped the regional landscape. The geopolitical confrontation, intensified by Russia’s annexation of Crimea and the military action that followed, has had profound and extensive effects on both countries.
For Ukraine, the war has resulted in significant human suffering and economic pressure, while also strengthening a sense of national identity and resistance. For Russia, the conflict has led to extensive economic sanctions and increasingly strained relations with the West. Yet the continuing impact of the war extends beyond immediate military and economic concerns, influencing global politics and international security dynamics.
Ultimately, the Russia–Ukraine war serves as a stark reminder of the fragility of national sovereignty and the complex web of international relations. As developments continue to unfold, the importance of diplomatic efforts aimed at resolving the conflict, as well as the need for a coordinated international response to uphold the principles of territorial integrity and national autonomy, becomes increasingly evident. The path toward peace remains fraught with challenges, but sustained dialogue and cooperation will be essential to mitigating the long-term effects of the war on Ukraine and Russia, as well as on the broader international community.
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