The first week of Ukraine’s war
ATHENS, Greece - The events unfolding in and around Ukraine now include a number of historic firsts.
In response to the largest war in Europe since World War Two, the United States, the European Union and Britain unleashed the deepest and broadest sanctions on such a large economy as Russia’s ($1.5tr) for the first time, and these co-ordinated political decisions were taken on both sides of the Atlantic in a week.
The European Union is for the first time financing hostile weapons purchases in a third country, giving Ukraine half a billion euros for munitions.
The political will for a common European foreign and defence policy, elusive for decades, appears to be forming. And largely thanks to a fundamental shift in German policy, Europe’s career towards energy autonomy may now greatly accelerate.
Perhaps most important of all from the West’s point of view, its political and ideological cohesion, viewed with doubt after the post-2008 financial crisis and the 2015 refugee crisis, have been asserted as government leaders snapped to attention under the EU and NATO banners.
“What Covid did for fiscal union, Russia did for defence union,” says George Pagoulatos, director at the Hellenic Foundation for European and Foreign Policy.
“This development has been a huge accelerator to European defence. It was France that was pressing for this, and Germany that resisted because of the increased cost. Now we see Germany graduating from its postwar pacifism, approving a huge defence package – the approved increase in spedning of 100bn euros more than doubles its current defence budget.”
A shot heard across the world
On Monday February 21, Russian president Vladimir Putin ordered troops into Ukraine’s Russian-majority regions of Luhansk and Donetsk, and recognised them as independent states. The move effectively killed a high-level diplomatic process that might have led to a summit between Putin and US president Joe Biden to defuse growing tension, as Russia built up its invasion force.
Putin justified his decision in a pre-recorded speech lasting 55 minutes, in which he blamed NATO for the crisis and said the alliance was an existential threat to Russia. Ominously, he reminded the world that Russia is a nuclear power.
Sanctions quickly followed. On Tuesday the US imposed full blocking sanctions on the Kremlin-controlled VEB bank and PSB bank, which it called “crucial to Russia’s ability to raise funds” and “critical to Russia’s defence sector”, respectively. Russia was also barred from selling sovereign bonds on US money markets, and oligarchs close to Putin were to have their US-held assets seized.
The European Union on Wednesday froze the assets of 351 members of the Duma, or lower parliament, which had authorised Putin’s actions, barred them from borrowing money in EU institutions and slapped a travel ban on them.
Germany said it was immediately halting the process of certifying the Nordstream 2 pipeline, which is to carry Russian gas to Germany, and plans to accelerate its transition to renewable energy.
Full scale invasion
These first measures did nothing to deter Putin. On Thursday February 24, Russia launched a full-scale assault on Ukraine from Belarus to the north, the occupied Crimea peninsula to the south and its own soil to the east, inaugurating the biggest war in Europe since World War Two. Putin formally declared war in a pre-dawn televised address. Ukraine’s president, Volodymyr Zelenskyy ordered a general mobilisation.
“Putin is the aggressor. Putin chose this war. And now he and his country will bear the consequences,” Biden said. He extending full blocking sanctions to four more Russian banks, including the second-largest, VTB.
Russia analysts believe the most consequential sanctions came in the form of export bans of sensitive US technologies, especially in the aviation, maritime and defence sectors.
Following sanctions announcements, Moscow’s stock exchange plummeted by an unprecedented 45%, prompting an intervention by the central bank to shore up the liquidity of banks. The Moex recovered somewhat to close at -33% on the day.
Market volatility will cut both ways, warns Stelios Zavvos, owner of Zeus Capital Management.
“We don’t know how long the war will last, which means there will be massive market uncertainty and volatility,” Zavvos told Al Jazeera.
“This invasion will raise energy prices. Our analysis is oil will reach $120 a barrel and above. This creates high inflation and slow growth, disrupts international trade and lowers confidence for both business deals and households. This in turn creates a danger of stagflation – low growth and inflation through supply shocks.”
Zavvos believes energy will cause the US and EU to decouple monetary policy, with the dollar strengthening against the euro. “America will continue to raise interest rates to stop inflation, but in Europe the energy shock is much stronger, so [the ECB] will continue quantitative easing. It’s also more closely bound to trade with Russia.”
More sanctions have since been announced – such as the expulsion of selected Russian banks from Swift, the interbank messaging system, which effectively cuts them off from the global financial system. Russian airlines are banned from EU and US airpsace, and the EU has banned Russian state-owned media Russia Today and Sputnik.
Despite a heroic resistance on the ground, and $1.6bn in US and EU military aid, Ukraine’s armed forces have been losing ground to the inexorable march of a larger and better-armed Russian army.
“[Putin] appears to have gambled quite dramatically with some quite curious odds, so whether he’s miscalculated we have to wait and see, but he’s certainly bitten off in military terms an enormous challenge,” says Dr. Samir Puri, a Senior Fellow at the International Institute for Strategic Studies.
What would a Russian victory look like? “It’s not likely that the goal is annexation of Ukraine,” Dr. Puri tells Al Jazeera. “I would imagine the best possible outcome for Putin is that Ukraine ends up something like Belarus, which is an independent sovereign state but one that pledges fealty to Moscow.”
Should Ukrainians put up a long resistance, he believes the country could become partitioned.
Europe will then have to decide whether to admit as a member the rump of the Ukraine that applied to join on February 28, and lay claim to the Russian-controlled part, as has happened in Cyprus.
Ukraine Timeline
Monday: Putin enters Donbas
February 21: Russian president Vladimir Putin orders troops into the regions of Luhansk and Donetsk, and recognises them as independent states. The US forbids investments there. Ukrainian president Volodymyr Zelenskyy tells people to remain calm, saying, “We are not afraid of anyone or anything.”
Tuesday: Sanctions
February 22: The Russian parliament authorises Putin to use military force. US secretary of state cancels a meeting with Russian counterpart Sergei Lavrov.
US places full blocking sanctions on the Kremlin-controlled VEB bank and PSB bank. The US Treasury said the sanctions constrained “Russia’s ability to finance defense-related contracts and raise new funds to finance its campaign against Ukraine.” Russia is barred from selling sovereign bonds on US money markets, and oligarchs close to Putin have their US-held assets seized.
The US moves military assets from Germany to the Baltic States. “We still believe that Russia is poised to go much further in launching a massive military attack against Ukraine,” Biden says.
Germany immediately halts the process of certifying the Nordstream 2, a Russian-owned pipeline that is meant to pump Russian gas to Germany.
Wednesday: EU sanctions
February 23: The EU freezes the assets of 351 Duma members, and bars them from loans and travel.
Thursday: Russia invades Ukraine
February 24: Russia launches a full-scale assault on Ukraine Zelenskyy orders a general mobilisation. Biden calls it a “premeditated attack”, and unveiled new economic measures against Russia.
The US sanctions bars five more Russian banks from the US financial system, and freeze four of the five banks’ US-held assets. A fifth, Sberbank, Russia’s largest, is also barred from the US financial system, but its assets are not frozen. Trade in the debt and equity of 13 banks and state-owned enterprises is also banned in the US. The US may not export sensitive technologies to Russia in avionics, semiconductors, telecommunications and other areas.
Moscow’s stock exchange plummets by an unprecedented 45%.
The European Council held an emergency session to condemn Russia’s “unprovoked and unjustified military aggression”.
Friday: Security Council
February 25: Russia vetoes a Security Council Resolution demanding it unconditionally pull its troops out of Ukraine. Two days later the Council calls for an emergency special session of the General Assembly – the first in 40 years - to vote on whether to use armed force in Ukraine.
Saturday: Swift
February 26: The European Union says it will bar selected Russian banks from the Swift interbank transaction system, essentially cutting them off from the global financial system. Swift says on March 1 it is still working to understand which institutions are impacted by the ban. The EU says it will also take measures to prevent Russia’s central bank from using its estimated $630bn in reserves to finance the war and undermine the impact of sanctions.
Sunday: More EU sanctions
February 27: European Commission chief Ursula von der Leyen says Russian civilian aircraft are banned from EU airspace, and Russian state-owned media Russia Today, Sputnik and their subsidiaries are banned from EU airwaves and the internet.
Other economic consequences follow. On February 27, Norway’s $13tr sovereign wealth fund says it will pull out of all 47 of its Russian investments, valued at $2.8bn. Its biggest stake is in Sberbank, sanctioned by the US and EU.
Through all this, Russian troops press towards three cities, Kyev, Kharkiv and Kherson, but by Sunday fail to capture any of the three. Zelenskyy refuses a US offer to evacuate, saying, “The fight is here.” He also belied Russian propaganda that he had fled the capital, uploading a video of himself with senior cabinet members on the streets of Kiev, saying they were joining the fight for their country.
Ukrainians answer government calls to enlist, either to carry rifles or to throw Molotov cocktails. The stiff resistance it encounters appears to have taken the Russian army by surprise, because Russian soldiers are reported to be asking Ukrainians for food – suggesting Putin had not planned to revictual his army in a campaign lasting days. By Sunday the Ukrainian defence ministry says it estimates Russian losses at 4,500 men killed, 150 tanks and 700 APCs destroyed, seven fighter jets and 26 helicopters downed.
Monday: Investors abandon Russia
February 28: In a largely symbolic move, Ukraine applies to join EU.
Russia and Ukraine start ceasefire talks at the Belarus border. They disband after five hours without agreement.
Russians pound Kharkiv, Ukraine’s second biggest city with 1.5mn people, with shelling. Authorities say at least seven people had been killed and dozens wounded. Zeleknsyy said the Russian tactics were to terrorise the civilian population. Russia denies targeting civilians. Its permanent representative to the Security Council said, “We hear lies and deceit about the indiscriminate shelling of Ukrainian facilities, hospitals and schools… the Russian army does not threaten civilians in Ukraine; it does not shell civilian infrastructure.”
Oil giant Shell says it will withdraw from joint projects with Gazprom, the Russian gas monopoly. Shell’s equity in these projects is valued at $3bn. It says it will also end its involvement in Nordstream 2.
Earlier on the same day, oil major BP says it will extricate itself from a 20% stake in Rosneft, Russia’s state oil giant. The stake is valued at $14bn and accounts for about half of BP’s oil and gas reserves. “This military action represents a fundamental change. It has led the bp board to conclude, after a thorough process, that our involvement with Rosneft, a state-owned enterprise, simply cannot continue,” BP says in an official announcement.
The effect of barring Russian banks from Swift is felt, as the Rouble tumbles 30%, forcing Putin to issue a decree imposing capital controls. Russians are prohibited from transferring money abroad or making loan payments abroad, though the central bank on Tuesday clarified that external debt could still be paid. Russians lined up outside banks to make withdrawals.
The European Union placed a ban on transactions with the Russian Central Bank, meaning payments to Russian companies and entities cannot be sent. It also banned all Russian-owned or operated civilian aircraft from EU airspace, and approved a 500 million euro support package for the Ukrainian military. “This is the first time in history that the EU will be providing lethal equipment to a third country,” the EU’s foreign policy chief Josep Borrell said.
Tuesday:
March 1: In a new offensive, a Russian convoy 65km long heads for Kiev. Pressure also increases on Kharkiv and Mariupol in the east, and Kherson in the south of the country. A Russian missile strikes the square in front of the Kharkiv administrative building, blowing off its roof and gutting it. Zelensky calls the attack “frank, undisguised terror”. Human Rights Watch reports that Russians are using cluster bombs against civilians.