Michał Wojda: The economic impact of the war in Ukraine is enormous

An interview with the Polish foreign policy analyst about the interests of Western Europe and Poland with regards to the EU membership of Ukraine, about the economic dimensions of the war there, about the perspectives before Georgia and Moldova for EU membership and the need for refoundation of the EU energy policy

Cross-border Talks, 12 March 2022

Michał Wojda, a foreign policy analyst at Portal Spraw Zagranicznych (International Problems’ Portal), one of the biggest Polish sites dedicated to international relations, gave an interview to Cross-border Talks about the perspectives of fast-track membership of Ukraine. He analyzed the reactions of the core countries in Western Europe, the attitude of Poland and other issues of European affairs, related to the war in Ukraine. In his view what happens now would lead to the energy refoundation of the EU, with a move to replacement of Russian energy sources with others. He also views the refugee crisis in Poland and other countries as significant, while the economic devastation caused by war in Ukraine is already enormous. Wojda also had a take on the EU membership course of Georgia and the Republic of Moldova and outlined various scenarios for the end of the Russian military intervention in Ukraine.

Małgorzata Kulbaczewska-FIgat: Hello, this is another issue of Cross-border Talks, and we are again continuing the subject of Ukraine. All of us are watching how Ukrainians are defending their land against Russian invaders, and we are also following what happens on a European level in the diplomatic world. We see how Ukraine is trying to gain a place in the European assembly of nations not only in a symbolic way, but also in a more formal way – through opening the door to accession to the European Union.

Last week, the European Parliament issued a resolution in which it backed Ukrainian ambitions, saying that Ukraine should get the status of candidate to join the European Union immediately. Is it a realistic perspective? We are going to discuss today with Michal Wojda. Our guest from Poland, Mihal is an expert on Eastern Europe, journalist and editor in chief of Portal Spraw Zagranicznych (International Problems’ Portal) – psz.pl. So good morning, good evening, everybody. 

When we were planning this episode, we were still fresh after the European Parliament’s resolution, saying that in these exceptional conditions, Ukraine could also get an exceptional fast track to join the European Union structures. This position was backed also by Poland, by President Andrzej Duda, issuing a statement that Ukraine deserves a status of candidate. And then the statement was followed by similar statements by other countries in Central and Eastern Europe, including Lithuania, Latvia and Slovakia. However, just a few days ago we read the resolution from the meeting of the heads of states of European Union investing, which is definitely more skeptical. Basically, we read in this last statement that Ukraine is a member of the European family – but nothing precise is promised to this brave country. 

So Michal, what is your take on this position? Has Ukraine actually got a chance to join the EU by a special procedure?  Or was it just a statement towards European public opinion?

Michal Wojda: Good evening everybody, and thank you for having me here. First, I would like to start off from what you have already said, so we have seen that there was support from the European Parliament. However, I can say that this looked to me more like a moral obligation of parliament than a realistic action. As you also mentioned, just a day ago, we have seen that not all the leaders of the European Union were sharing the thought of inviting Ukraine to the structures of the European Union. What we have actually seen were some words from the prime minister of the Netherlands, Mark Rutte, stating that nobody gets to the European Union overnight and that this is a long term process. If somebody gets there at all. 

So it was rather a very skeptical statement on how Ukraine can get into the European Union. But even worse, I can say, for me was the speech of President Macron, who actually stated that we should be very careful about “the sphere of influence”, as he mentioned.

So unfortunately, I believe that some European leaders, especially leaders from France, may still think of Europe – and Eastern Europe – as some spheres of influence where Russia should be a leader, in which Russia should take care of the nations and people and societies of these countries. 

So what we can hear from their European leaders nowadays, some European leaders from the countries of the so-called Old Union, is not giving us very much optimism about how Ukraine can get into the European Union.

Ukraine’s European ambitions are strongly supported by her neighbor, Poland, Slovakia, and a range of other countries in Central-Eastern Europe, including the Baltic states, including Slovenia. What can these countries actually do for Ukraine? Is Poland’s position in the European Union strong enough to see any serious and successful diplomatic effort? Something that could actually influence the thinking of those Western states that seem reluctant about making bold moves in our part of the world?

I would like to be much more optimistic here, but unfortunately, we should remember how Poland is outside of the core of the EU nowadays, due to the problems with the rule of law. So it’s very hard for me to say that Poland would be creating space and advocating for Ukraine. 

However I think this is something that we as Eastern Bloc countries, or Central and Eastern Europe countries, should do, actually. I think that we have seen the Bucharest 9, the native format of bordering countries that were supporting the fast track. And I think that every effort and every pressure on the so-called old Union would be very welcome here and it is simply something that is needed. I don’t think we have much chance to persuade this now, but I think a long term process of stating that we need Ukraine in the European family in the European Union is needed. 

I think what Poland was doing was actually initiating this Eastern partnership that is nowadays not a very active forum. However, I believe that we should think how we can make some forum that is really alive. And the platform for these might be, in my opinion, for example, the Three Seas initiative that ties the countries of Central and Eastern Europe, also the Balkans. So we need a platform that is a living platform. 

And I think that we need to ask the West the certain points that Ukraine needs to do to access the European Union. So we simply need this plan of accepting Ukraine into the European Union. However, at the same time, as I said, I’m a little bit skeptical and I’m afraid that there will be simply huge resistance in the old union. So Germany, France, Netherlands, that’s what I’m afraid of now.

The Netherlands was also resistant to the big recovery plan after the pandemic.Is there any connection, I am wondering, between Netherlands being the leader of the so-called frugal countries of the European Union and its today’s reluctance of accepting Ukraine into the EU?

I think that, yeah, there is a connection, of course, because we need to understand how Ukraine will be and is nowadays ruined after this war. This is a huge tragedy, this is going to have a huge impact on Ukraine’s economy and accepting such a country as a member means a huge need of investments to this country. 

I know that for some leaders from Western Europe, it might be very hard to state that we need to pay for countries such as Ukraine. But again, this is, I think, even a moral obligation of the Western bloc to say that we are united as a Europe. 

But even more than convincing the Netherlands to such moves, even more difficult might be to convince countries like Germany that have big, big dependence on the energetic supplies from Russia. There is a huge business in the sector of energy that will be an issue actually for countries like Germany. If we have a look, if we accept Ukraine in the European Union, we will need to guarantee Ukraine the energy supplies. And this might be problematic for Germany and for the green future of the European Union.

I say this might be problematic for Germany, not because we don’t have assets to help Ukraine in this matter, but I think we have a very strong lobbying in countries like Germany that is actually not allowing us to to change this situation. If we had Olaf Scholz stating that we can’t change our energy supplier on a date, such phrases would be used just, I think, to justify the moves that have been made already. So Nord Stream one and Nord Stream two. So of course, there is not a chance to change the energy structure in one day, but actually, this is not the point. This is the point of changing the whole structure of European Union energy supplies and this is going to be also something that is really crucial for the change of the mindset of the West us as a whole, I guess.

Vladimir MItev: Given that Michal has a lot of experience with financial affairs, having worked for auditing companies, certain financial institutions, can he further expand the analysis on the economic consequences of what is going on in Ukraine right now? Michal, you already mentioned the energy sources. And in this regard, I think it’s not only Germany, which is too dependent on Russian gas. Bulgaria or other countries of Southeastern Europe also have this dependence on Russian energy resources. So that might be an issue which really requires some time to be tackled. And also, there is a refugee dimension of the crisis, with Poland hosting more than one million Ukrainian refugees. And of course, there is the sanctions’ issue, and maybe that is even more important given that basically Russia is cancelled right now, and maybe soon there will be two very different worlds. So can you further elaborate on all of those various economic dimensions of this war?

Yes, so maybe starting from Ukraine, we heard something already that the war already cost the Ukrainian about one hundred million billions of dollars in terms of economy. I’m not really sticking into the numbers here because I think it’s very hard, hard to calculate this that way. And the problems in the economy will not be calculated by GDP only, but also by the people leaving Ukraine, maybe forever. As you mentioned, there are a lot of refugees in the European Union already, so Poland, Hungary, Moldova, these countries that are neighboring with Ukraine, mostly. Nowadays they are hosting the biggest part of Ukrainian refugees. 

There is something that we cannot even imagine nowadays. The scale of destroyed towns that will need to be rebuilt. So the issue will be calculated actually by the real problems of Ukrainian people, even after war. So even if the war stopped today by some miracle, the Ukrainians would face completely devastated towns. When I’m seeing these pictures I think that Ukraine will face a huge action of rebuilding the towns, like Poland was after World War Two. This is something that’s going to take most probably, unfortunately, most probably years, not months, not days, but years. So it’s hard to predict the exact losses to the Ukrainian economy, but we have a certain perspective of years of rebuilding the state in terms of public services as well. 

There is also a huge cost, as you mentioned, for the countries that are accepting the refugees like Poland nowadays mostly. We are now having the private sector involved right now, so non-governmental organizations and private businesses helping people and just individuals helping the people from Ukraine. But it is, of course, impossible that only these organizations and private people help refugees in the long term. So a country as a public administration will have to just step in. And this will of course, be a cost. And most probably the European Union will have to help countries that accepted refugees with the funds to support these people because these people have no place to leave. They, the children, need education. So it’s very hard to say, actually. 

Nowadays, I think we are unable to predict the scale of the help that it’s going to be needed, but it’s going to be huge, of course, in terms of public services as well in terms of employment of these people. I don’t think we are now able to absorb these people into the Polish work system. Some, of course, will be absorbed, but not all. We have already accepted around one million people from Ukraine that are working here paying taxes, and they are not refugees. These are the people that came to Poland before the war – they just came for work. So the market is also limited, and we don’t know how it will react nowadays, or how long the war will take. 

And how about Russia? I think that new sanctions will be imposed in time and they are imposed almost every day we hear something. I believe that. It is already visible that we can see the empty stores in Russia, we can see Russian people disconnected from the internet services that companies are actually fleeing from Russia, Western companies. So a lot of investment losses for Russia. But should the  sanctions be complete, Russia must be cut out of the Swift system – and that is not yet happening. So the banking system that will allow Russia to transact, we followed all other countries, countries in the world without this system. Russia will probably be supported by China, but we don’t know this yet, and this could be an option that for the Putin regime would be something. This is if I believe the Western countries, I think, still believe that this crisis, this war, actually, we should state this. This war might end without the biggest, biggest sanction nowadays – that is cutting Russia totally from the Swift system. However, I think this is becoming a little bit naive and yet so. This option is still on the table and we see already that Russia is in a deep crisis and this is going to be even deeper, I think.

Let’s go back to Ukraine. Ukraine is not getting a fast track to the European Union, that is the message from European leaders at the last summit. So as you said – actually not you but Mark Rutte said – that nobody is getting to the European Union overnight. Nevertheless, the final statement of this meeting considers the European aspirations of Ukraine and confers some hope that one day Ukraine will, after all, become a member state. This means meeting a certain set of criteria. So a question appears: what kind of reforms will be needed in Ukraine apart from the rebuilding, apart from the great reconstruction of the destroyed state after the war, so that Ukraine finally gets a place in the European Union?

I think that we are coming to the point that is actually crucial. Nowadays nobody in Ukraine thinks about such kind of reforms because it is crucial to end this war simply. I don’t think that any country could be accepted into the European Union when there is a war going on, actually. But Ukraine was on a very good track, I can say, in terms of implementing some laws, some bills that were helping Ukraine to change the system from less oligarchic to more democratic. 

This is the crucial part: to ensure that Ukraine will be following the rule of law. So the anti-corruption bills, etc. So this is something that I believe it’s crucial in terms of law. As we observe, for example, Balkan countries, the process for them to enter the European Union is something that is going very slowly, also because of the matter of the ethnic minorities. We should remember that in Ukraine, there are also some ethnic minorities whose rights must be respected so that Ukraine is accepted to the European Union and I believe there is not a big issue on that in Ukraine. However, there are countries like Hungary that may be having certain obstacles regarding the rights of minorities, especially in a region of Zakarpattya. So Ukraine will still face this issue regarding to, to law, to deals, to getting more open for the European economy. 

Also, Ukraine was on a very good track and it was stopped somehow by the war because when there is a war, nobody thinks about economy, everyone thinks about survival. And I believe that after this war and hopefully let it be soon, Ukraine will face the issues of accepting European laws into the system if the war ends. I think that the Ukrainian society, society and administration will be very much motivated to implement these laws as fast as possible. So I believe that Ukraine itself may do a fast-track for herself. 

However, we need to remember that there is no such term as ‘fast track’ from the legal perspective in the European Union, so there will be no exceptions, I believe, for Ukraine. So the European Union will not accept Ukraine without Ukraine making certain moves, accepting certain rights.

Just two days after Ukraine applied for Fast-Track membership in the EU, Georgia and the Republic of Moldova also followed and applied on their own. Could you possibly comment on their own status of candidates and what is realistic with regard to them? They have been applying some reforms in judicial or security institutions. They have been taking some steps forward, but also both of them have frozen conflicts. So what is your take on that?

Yes, thank you for bringing this up. I think that this is also important to see that there are candidates in Ukraine, and they are also making certain reforms to get into this European Union family and Moldova and Georgia. We need to remember that these countries made another platform for getting into the European Union just in the previous year. 

So far, Ukraine and Moldova are the most advanced countries in terms of implementing European laws and changing their systems to be accepted. I think that nowadays Moldova is, of course, on the top of the countries that might be actually accepted, except of Western Balkan countries that are also on the similar level. However, as you just said, there are also frozen conflicts, and it’s it’s actually very hard to say what the way it will take because we can easily accept we can easily imagine Russia also inspiring some conflicts in, let’s say, Transnistria region or Ossetia just to destabilize these countries. 

I would say Georgia is in a much worse position nowadays. This is due to several things. First is that actually the geographical location for Georgia- the Caucasus. And for many, many countries in the European Union, it is very hard to recognize that a country from the Caucasus might be aspiring to become an EU member. Georgia has the border with Russia, which is also problematic from the point of geography. And finally, there are some minorities living that may cause the problem. And of course, there is the Russian minority. There is a Turkish minority in Adjaria. So the European Union would like to have the proof that these minorities will also be respected in terms of European law. So Georgia is on the, I think, at the end of this queue to the European Union nowadays. Also, if we take into consideration that the course of the government is not very clearly straight, going straight forward into the arms of the European Union, but still trying to balance somehow between Russia and the European Union. In Moldova, instead, we have now a much more pro-European government that is trying its best to do it. But just let me state that we are still unsure how this war can go over. And let’s remember that Moldova has the Transnistria region where there are Russian troops. 

So I’m really hesitant to say what the real perspective will look like. But of course, these countries have still some perspective, but this is not something very clear to me

Let’s end the talk with a short prognosis of yours about the end of this crisis. Would it be a negotiated end? Would it be some kind of wild east or a second Syria in Ukraine, just in general what are your expectations?

I hope that this is not going to be the Syrian scenario. It would be something really unbelievable for the unbelievable tragedy for Europe as a whole. But it’s hard for me to imagine that this conflict will end by some negotiations. I think that Putin is really determined to gain as much as he can. I think that there are few scenarios. 

One scenario is that there will be some negotiations that will allow Putin to take a huge part of Ukraine, including the Crimean Peninsula and Donbas, when there is a military defeat of Ukraine. If Ukraine is resisting, there is not a big chance for Ukraine to accept such a solution. 

Another solution that, believe me, is still something that is on the table is that there will be some takeover of the power in Moscow. So this is something that is still possible that the Moscow elites will make Putin step aside because if the sanctions are implemented, I can easily imagine that the Putinism era might be ended by, let’s say, Putin being considered sick and unable to be a president of Russia. Then the Russian troops might actually retreat from Ukraine. But the problem is that it went so far that even if we have some reset with Russia, it will be very hard for Russia, for Russian people, for Russian society to accept the military defeat in Ukraine. 

I think that it is also very possible that this war will continue on some level of military engagement. So this war will be much, much less intensive than it is nowadays. But there will be a conflict that will be more and more becoming a frozen conflict. Maybe Russia will limit the military actions. Also, I think that we will see this very soon. I think maybe even next week, if Russia is unable to achieve its goals, which means to take Kyiv. It’s going to be very hard for Russia to say they are successful and we can have a frozen conflict, but on a bigger scale that we can see in Georgia or Transnistria because it will involve a bigger geographical area in Ukraine. So I think that these are potential options that are still depending on the military actions. 

And it’s very hard to predict what it will look like because we can see that Ukraine is very bravely defending its country. But on the other hand, we know that Russia has much more military power and has some advantage in air. So it really depends also on the sanctions on many factors that we are unable to say no. But these possible scenarios, I think they’re on the table and depending on what will happen in the next week or weeks, will determine how these conflicts, how this war will look like, and let’s hope it will end very soon.

Your hope is shared. Thank you for the talk on cross-border talks.

Thank you for your comments. Thank you for your explanations. And I think that our viewers too are hoping that the war will be soon over, the refugees will come back home and their country of Ukraine will not be destroyed entirely. So thank you very much for being with us. We invite everybody to subscribe to the Cross-Border talks channel and see you again.

Photo: Bild TV (Germany) reports on rising prices of fuel, following the outbreak of the Russian invasion in Ukraine (source: YouTube)

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