Global Impacts of the Ukraine War Two Years On

Bradley Intelligence Report

Client Alert


February 24 will mark the second anniversary of Russia’s full invasion of Ukraine. In the past two years, the war has reshaped geopolitics and geoeconomics, transformed the tenets of European security, enlarged NATO, and set back development goals not only for the countries directly involved in the conflict but also for others, especially countries in the Global South more vulnerable to the economic crisis.

For Ukraine, the war has simply been devastating in terms of human life, social cohesion, and infrastructure destruction. Despite early fears that the war would lead to a direct confrontation between NATO and Russia, over $180 billion in Western military aid has kept Ukraine in the fight. The U.S. and supporters have gradually expanded the classes of military equipment available to Kyiv, but restrictions remain on certain offensive weaponry, such as long-range missiles and combat aircraft. As to ending the war, the parties are no closer to a negotiated settlement, though the mounting costs are testing Western resolve.

The stakes, however, are so significant for liberal democracies and the international order that governs them that the war is likely to grind on in 2024. U.S. businesses are not immune to these ground-shaking forces in the international order and face uncertainties not seen since the Cold War.

War Brings Liberal Democracies Together

Russian President Vladimir Putin believed that his war against Ukraine would fracture European political unity because of the divergent political and economic interests that European states held vis-a-vis Russia. Internal disagreements would render European leaders unable to forge a united response, leaving Ukraine isolated and completely vulnerable to Russian annexation plans. Putin was wrong. Putin also believed that invading Ukraine would halt Kyiv’s efforts to join the European Union and end NATO’s expansion plans. Again, Putin was wrong.

A united Europe and an expanding EU and NATO are all evident over the past two years. The EU has pushed differences aside, aligned behind a united policy towards Russia and adopted 12 sanctions packages. The EU accepted Ukraine as an EU member candidate country in 2022. With Russia now viewed as a larger threat to European security, fence sitters Finland joined NATO in April 2023 and Sweden is expected to join in 2024. Ukraine is closer to NATO membership now than ever before, as the transatlantic military alliance has shortened the membership pathway by removing the requirement for a Membership Action Plan, building interoperability through the collective NATO effort to provide Ukraine with high-end military capabilities and training, and establishing the NATO-Ukraine Council for joint consultation and decision-making.

Finally, Putin believed that reasserting Russia’s power on the world stage would lead to a favorable (for Russia) rewrite of the rules of international order in place since World War II. Here, Putin may yet prevail.

The Rise of the Authoritarian Axis

The Western alliance has failed to isolate Russia. Cooperation among Russia, China, Iran and North Korea is moving from transactional to strategic. While some political analysts hold that the characterization as a political axis overstates current ties, the relationship among these four countries has undoubtedly changed. Russia and China now exercise their power in the UN Security Council to provide political cover for each other, as well as Iran and North Korea. Russia is buying military equipment, in contravention of UN sanctions, from Iran and North Korea. China is a major supplier of dual use items to Russia’s industrial-military complex. The flurry of summits, diplomatic, security and trade delegations, and new cooperation agreements reflects the growing ties. The countries are linked by their authoritarian character and rejection of the laws and norms of the current international order.

The old rules governing international security are eroding. Russia, by invading Ukraine, has challenged the central tenant that political goals should not be achieved by military might. The Middle East is poised at the brink of a regional war, driven there by the Gaza war and the unresolved Israeli-Palestinian conflict. Iran is arming and encouraging its proxies to attack the U.S. and its allies, with the conflict spreading to Iraq, Syria, Lebanon, Yemen, and the Red Sea.

In East Asia, the North Korean leader is feeling empowered. Kim Jong-un has adopted more bellicose language towards South Korea, announcing that reconciliation and reunification between the two Koreas are no longer goals and suggesting that in the case of war, North Korea plans to “completely occupy, subjugate and reclaim” the south. These statements follow two years of escalating missile tests and an expanding military relationship with Russia. Tensions between China and Taiwan are also high, with the newly elected Taiwanese president a staunch supporter of independence as Beijing continues to flex its military muscles. There is increasing concern that in the current international environment, resistance to a military solution may be eroding. 

The Ukraine War caused a shock to global food security that disproportionally hurt the Global South, driving up prices on basic necessities in fragile economies already weakened by the global pandemic. Large pockets of the Global South do not view Russia as the aggressor in the war but see the Global South as the victim. There is also a sense that the existing international order benefits wealthy nations at the expense of developing ones, views encouraged by China and Russia. In short, the Global South does not hold on as tightly to the norms and institutions of the current international order and are dangerously enamored with the promises of Russia and China.

New Trade Blocs Emerging

Shifting trade patterns reflect a geopolitical realignment. With the shock of sanctions, direct Western trade with Russia has narrowed dramatically. As trade with Europe and the U.S. shuts down, Russia turned to the East and is now highly dependent upon China for import substitutions. Iran has gone from international isolation to becoming a supplier of cheap oil to China and weapons to Russia. Trade is increasingly conducted in Chinese yuan or other local currencies, eroding the global dominance of the U.S. greenback. Countries like Turkey and the Central Asian states are emerging as important gateways for East-West trade.

At the same time, the U.S. is on the offensive, pursing an economic security project to establish pre-dominance over China in the emerging technologies of advanced microchips, quantum computing and quantum sensing capabilities, AI and resource independence for the energy transition technologies. In creating “secure” supply chains, the U.S. is building new supply chains with allies and friends, expanding trade relations in China’s backyard, while using non-tariff barriers to restrict trade with “unfriendly” nations. The U.S. is courting India with a host of political, economic and security initiatives to bring the historically non-aligned democracy into the liberal bloc. Similarly, in 2023, the U.S. and Vietnam upgraded diplomatic ties to a comprehensive strategic partnership and launched a new semiconductor partnership, reflecting growing economic ties and Washington’s view of Hanoi as a “friendly” and reliable partner.

While Beijing accuses Washington of seeking to decouple trade, the U.S. and Europe speak about de-risking the trading relationship, by diversifying trading partners and reducing dependencies. The shift in U.S.-China trading relations is not theoretical. In 2023, Mexico displaced China as the U.S.’s top trading partner.

For U.S. businesses, shifting trade patterns present new opportunities along with increased risks. The opportunities may include increased business prospects and preferential terms in countries deciding to align their trade within the liberal bloc. U.S. government-designated strategic sectors can benefit from tax incentives for homeshoring or friend-shoring their supply chains. Sanctions compliance is complex as there are significant differences in the sanctions programs in the U.S., Canada, UK and EU. Trade barriers are increasing and go beyond tariffs. Businesses must tightly manage their supply chains for compliance with new foreign content restrictions. Global transportation routes through contested seas increase the cost of doing business. Reputational costs for trade and investment with China continue to increase as well. For example, just last week, the Congressional Select Committee on the Chinese Communist Party released a new report that names and shames American venture capital firms for “investing billions into PRC companies fueling the CCP’s military, surveillance state, and Uyghur genocide.”   

Ukraine in 2024

After the inspiring defense of the country in 2022, Ukraine’s counteroffensive was bogged down in 2023. To break the stalemate, Ukraine will need to mobilize, train and equip more fighters  and deploy new battlefield capabilities to push back deeply entrenched Russian positions in Eastern Ukraine. This will require U.S. and NATO partners to overcome remaining escalation fears limiting the provision of cruise missiles, offensive air power and battle tanks. Ukraine is also expected to deploy domestically produced drones equipped with AI that can identify and attack targets without human supervision. Drones have been a game changer on the battlefield, and military analysts forecast that the pairing with AI will likely transform warfare. Drones alone, however, cannot break the Russian defensive lines. For a battlefield victory, Ukraine’s allies will need to recommit military and financial support, unplug supply bottlenecks, and come to an understanding with Ukraine on how the war will end.

A negotiated solution in 2024 does not look promising at this point. Putin remains committed to a maximalist position of the surrender and annexation of Ukraine. Ukrainian President Volodymyr Zelenskyy’s 10-point peace plan does not include territorial surrender. There is still no consensus vision on post-war European security beyond NATO’s move to a more capable war-fighting alliance and deterrence by denial. Western military analysts remain concerned that a defeated Russia could be a long-term source of insecurity to Europe and the world.

In 2024, American businesses should expect the Ukraine War to continue to fuel global tensions and economic uncertainties. While Ukraine’s strategic successes in the Black Sea in 2023 succeeded in prying open the Black Sea to commercial trade, these gains are reversable. American adversaries, feeling emboldened, may decide the environment in 2024 is ripe to press their political agendas through military action in the Middle East and Asia. Instability breeds more instability. Companies will need to maintain strong situational awareness on the global risk environment and be prepared to adjust course to preserve supply chains and navigate through new trade restrictions and legal compliance.