‘Defenseless’ Europe Seen Bearing Economic Brunt of Ukraine Conflict

Captured Ukrainian border guard sits in a garage at the Novoazovsk border crossing point, in eastern Ukraine on Friday

Europe will absorb the bulk of global economic fallout coming from an escalating Russia-Ukraine conflict, a leading Russia expert says.

“Europe is suffering because it’s defenseless and therefore people feel defenseless,” said Anders Aslund, an economist and Russia expert at the Peterson Institute for International Economics in Washington. “Europeans are very good at worrying, and in particular Germans.”

Most of the economic malaise will come from investors in Europe keeping money on the sidelines, he said. Other risks include sanctions against Russia and Russia’s counter-sanctions, which have had a relatively limited effect on businesses so far, and a drop in trade with Russia and Ukraine.

Mr. Aslund pointed to a measure of German business confidence this week that showed declines, as well as to the souring economic performance of Europe earlier this year.

Despite sanctions’ side effects, European countries are likely to ratchet up punitive measures and also to increase defense spending in hopes of deterring further problems coming from Moscow and former Soviet countries, he said.

Of course, Russia is expected to suffer a substantial economic contraction, and Ukraine’s output is expected to take a far bigger hit.

Other parts of the world may see small trade disruptions coming from the conflict, but their investors and business leaders are less likely to pull back.