“The Russian invasion of Ukraine in 2022 has triggered a new Cold War dynamic that has produced significant economic effects on small-power nations in Asia and Europe.”

The war has increased the risks to global growth. It has increased the likelihood of acute financial stress across emerging market and developing economies (EMDEs), a de-anchoring of inflation expectations, and widespread food and energy insecurity. A protracted war could heighten global policy uncertainty and lead to lasting fragmentation of global financial, trade, and investment networks.

Four years into Russia's full-scale invasion, an updated joint Rapid Damage and Needs Assessment (RDNA5) released today by the Government of Ukraine, the World Bank Group, the European Commission, and the United Nations currently estimates that as of 31 December 2025, the total cost of reconstruction and recovery in Ukraine is almost $588 billion over the next decade, which is nearly 3 times the estimated nominal GDP of Ukraine for 2025. The report highlights that the housing sector has suffered the most, with 14% of housing stock damaged, leading to about $61 billion in losses, while the transport and energy sectors also face significant damages.

Eastern Partner (EaP) countries, as a result of their geographic and economic proximity to both Russia and Ukraine, are strongly affected by the economic shocks caused by the war. Russia’s war against Ukraine threatens EaP countries’ recovery from COVID-19, affecting inflation, migration, remittances, investment and trade. Growth projections for all EaP countries have thus been revised several times in the wake of the war.

The ongoing war in Ukraine has dimmed prospects of a post-pandemic economic recovery for emerging and developing economies in the Europe and Central Asia region... The most damaging effects of the invasion, however, are surging energy prices amid large reductions in Russian energy supply. Downgrades to growth forecasts for 2023 are broad-based across EMDEs in Europe and Central Asia as the regional outlook is subject to considerable uncertainty.

Europe, for example, could easily end up raising defense spending by 1 percent of GDP annually, if not more. If that happens, the resulting costs will likely exceed even the ambitious, €807 billion NextGenerationEU stimulus during the pandemic. And that does not count Europe’s eventual contribution to rebuilding Ukraine, which could amount to €100 billion or more.

Asia is more vulnerable to an energy shock than other regions because of its heavy reliance on Middle East fuel, an International Monetary Fund executive said, warning of an acute hit to growth if a prolonged war triggers supply shortages. The IMF expects inflation in Asia to rise from 1.4% in 2025 to 2.6% this year, before easing to 2.4% in 2027.

Many European countries rely heavily on Russia for oil and gas imports: import shares are over 75% in Czechia, Latvia, Hungary, Slovakia, and Bulgaria with respect to natural gas; Slovakia, Lithuania, Poland, and Finland with respect to oil and petroleum; and Cyprus, Estonia, Latvia, Denmark, Lithuania, Greece, and Bulgaria with respect to solid fuels. As a result of the war and the sanctions, the rest of Europe faces a surge in already high inflation; this will weigh on real incomes and will depress economic growth.

The EU's geographical proximity to Russia's war of aggression against Ukraine has weighed on its economy since the full-scale invasion in February 2022, constraining the recovery from the pandemic and casting uncertainty over future prospects. Over 2022-23, the loss in annual growth is estimated at around 2 pps. for every 1 000 kilometre reduction in distance. The output growth loss is particularly high around 1.4-1.8 pps. for Member States bordering the countries at war.

The Ukraine war has reinforced a trend to trade relatively more with countries in the same geopolitical bloc and less so with those in opposing blocs. The sharp fall of the blue line (“inter-bloc” trade) indicates a strong negative effect of Russia's invasion of Ukraine on trade between countries pertaining to antagonistic geopolitical blocs, with respect to trade with neutral countries.

The Russia-Ukraine war has affected the economies of Europe and Southeast Asia, but not to the same extent. For European countries, the impact has been harder, mainly because of their dependence on pipeline gas from Russia and rising prices on global grain markets. For ASEAN, while the war culminated in global food and energy price inflation, governments have been able to cushion this effect via measures such as subsidies, stockpiling, and price controls. Nevertheless, pockets of vulnerability exist as some Russian and Ukrainian products are important for the region.

Russia's large-scale invasion in Ukraine, starting in February 2022, has not only ended the post-Cold War collective European security order, but has also changed Russia's interests and position globally. The conflict has instigated what can be termed a “multi-crisis,” exacerbating preexisting economic and political challenges, and has undermined Russia's role as the regional hegemon in its post-Soviet neighborhood.

As the war continues... economists and policymakers are considering the ripple effects of the conflict in numerous sectors: energy, food and agriculture, raw materials and technology, security and defence, migration, and the global world order. This Forum examines the impact of the war on the European economy and society.

The Russia-Ukraine war has unleashed a series of global economic disruptions and had profound consequences for the economies of South Asia, including India, Pakistan, Bangladesh, Sri Lanka, and Nepal. These countries have had to deal with increasingly expensive energy, disrupted supply chains, inflation, and changes in trade patterns resulting from sanctions and geopolitical realignments.

Russia's war economy is under mounting strain, with manufacturing declining, slowing growth of 0.6 percent in 2025, and no globally competitive technology firms to help drive long-term productivity. The International Monetary Fund estimated that growth would remain slow, at 0.8 percent, in 2026. This economic strain on Russia has broader geopolitical implications, influencing its relationships with other nations.

China surpassed Russia as the main trading partner for Central Asia in 2023, and Russia's economic sway in the region is in long-term decline. The sanctions regime imposed on Russia has increased the economic value of Central Asia to Russia, with some Central Asian countries, like Kyrgyzstan and Kazakhstan, being used to bypass sanctions, including for re-export to Russia from China.

The growing relationship between China and Russia has garnered press attention and stirred whispers of a “new Cold War.” The Russo-Ukrainian War has exacerbated the divide between NATO and this new autocratic partnership, with China helping to prop up Russia's economy as heavy Western sanctions threatened to cut the country off from the global economy.

The idea of a 'New Cold War' has received considerable attention among the scholars primarily referring to Ukraine-Russia confrontation and more broadly to the worldwide rivalry between USA and Russia. Certain scholars have stated that the conflict in Ukraine pointed to the onset of a new multipolar world characterized by power transitions, economic boycotts, and proxy wars.

The war in Ukraine has caused severe disruption to national and worldwide food supplies. Ukraine is a major exporter of wheat, maize, and oilseeds... That is why a shortage of food exports in Ukraine is accompanied by soaring food prices.

Four years ago, Russia’s invasion of Ukraine sent Brent crude oil prices soaring... wheat prices rose by more than 60 percent, while the prices of platinum, iron, aluminum, steel, palladium, nickel, and coal rose anywhere from 18 to 150 percent between January and March 2022, driving up global inflation.

The direct fallout from the Russian invasion of Ukraine will likely be limited for developing Asia, except in the Caucasus and Central Asia. Indeed, the limited exposure will curtail the direct impact of the war in most of the region, but the effects will be large for the Caucasus and Central Asia, as well as for Mongolia, which all have close trade and financial links with the Russia. Indirect effects will be felt across the region through higher energy and food prices.

Prominent old hands in the West – practitioners, scholars and commentators – insist that this evolving new Cold War is definitely more dangerous than the old one; and that the war in Ukraine is more dangerous than the 1962 Cuban missile crisis. The evolving new Cold War, then – seemingly about Ukraine but certainly not confined there – is more dangerous than the old one because none of the constraints outlined above exist today.

The conflict's impacts extend far beyond the immediate conflict zone, affecting sectors from agriculture to energy, transportation to manufacturing, across regions including Asia and Europe.

In the post-Covid geopolitical churning, Cold War 2.0 has emerged as the most influential jargon among the geostrategic and geo-economic experts. Cold War 2.0 implies a new phase of strategic competition and rivalry between the democratic countries of the West led by the US and autocratic powers led by China and Russia, including other nations like North Korea and Iran.

If the hostilities in Ukraine stop, Europe will have to endure not only a sigh of relief, but also a painful internal conflict. The war has united allies for almost four years, but peace threatens to bring back old divisions between the east and west of the continent. Eastern flank countries will demand even tougher isolation of Moscow and further increases in defense spending, while many Western European capitals will want to return to normal life and question the need to spend 2% of GDP on defense.

Analysts have described the Russian invasion of Ukraine as initiating a new Cold War dynamic between NATO/West and Russia/China axis, with geopolitical realignments affecting small states in Europe (e.g., Baltics, Balkans) and Asia (e.g., Mongolia, Central Asia) through heightened tensions, alliance shifts, and secondary sanctions.

Michael DeGroot, an international studies associate professor at IU, argues that comparing the current Ukraine conflict to the Cold War is misleading because the Cold War was a competition between two universalist ideologies, which is not the case today. He also notes that Russia is far more integrated into the global economy than the Soviet Union was, allowing for the impact of Western sanctions.