NATO PA weighs Ukraine war’s impact on energy and trade, says rebuilding must start now

08 October 2023

Parliamentarians from NATO countries weighed on Sunday the impact of the war in Ukraine on the energy sector, pressures on the global trading order posed notably by Russia and China, and the importance of helping Kyiv to rebuild even before the fighting stops.

In the NATO Parliamentary Assembly’s Economics and Security Committee, legislators discussed the speedy progress made as nations weaned themselves off Russian gas and oil supplies and moved away from increasingly expensive fossil fuels towards more sustainable energy sources.

A draft report by UK parliamentarian Harriett Baldwin, discussed during the Annual Session in Copenhagen, notes that as European countries move to reduce imports of Russian energy, they become more vulnerable to supply disruptions occurring well beyond Europe. This vulnerability is actually mounting as the transition to renewable energy unfolds. That sector is particularly exposed to supply and price fluctuations in the rare earth minerals sector.

China, for example, has explored the idea of limiting access to its key minerals and technologies used in sustainable electricity generation, while Russia plays an important role in global markets for copper, platinum, nickel and other commodities used in sustainable energy production.

The draft report notes that Western sanctions on Russia have been a factor in rising commodity prices and that consumer countries have, in some ways, traded overreliance on Russian energy for overreliance on Chinese mined and refined metals and minerals. The text calls for closer transatlantic cooperation on developing dependable supply chains and technologies.

Developments in the energy sector also clearly impact NATO’s strategic environment.

“Russia’s invasion of Ukraine and its proclivity to leverage its energy industry to achieve its nefarious goals suggests that energy security is not simply a civilian matter. It is rife with strategic military implications which Allies need to consider collectively,” said the draft report.

Russia and China’s role in the global economy were also a focus of debate on a draft report about rebuilding transatlantic economic relations and resilience, drawn up by Faik Oztrak from Türkiye.

It notes that the economic impact of the war in Ukraine and the COVID-19 pandemic have led to a reappraisal of the trading order as well as the energy, digital, industrial and defence sectors on both sides of the Atlantic. The biggest supply chain crisis in decades has been one of the consequences of these developments.

The draft argues that many of the assumptions that once shaped the liberal international trading and financial order no longer adequately capture the new realities of strategic economic competition, climate change, national security and energy requirements.

“The global economy is undergoing what can only be described as a series of paradigm shifts that challenge our societies and governments,” Oztrak argued. “This creates enormous anxiety in our societies and could be destabilising if not properly managed.”

China’s increasingly aggressive posture and the leveraging of its economy for geostrategic gain has also unsettled the West, the text notes, as policy makers debate ways to ensure fair trade with the Asian giant without cutting Beijing adrift altogether.

Oztrak said that fully decoupling from China would be far more costly than isolating Russia has been. “A more modest de-risking strategy seems both proper and manageable although this could change if relations with China were to worsen,” he said.

The economic impact of the war in Ukraine  – both present and future  – was high on the agenda too, notably in a draft report and a draft Resolution on the reconstruction of Ukraine, drawn up by acting NATO PA President Michal Szczerba (Poland).

“Waiting until war’s end to begin discussing Ukraine’s reconstruction would be simply too late,” Szczerba told the legislators.

“Ukraine must win the war and reclaim its occupied territories,” he said, warning that immediate “efforts to sustain the Ukrainian state, its institutions, its military, and its people are crucial to ensuring that it prevails in this terrible conflict and is positioned to launch its reconstruction.”

In a draft Resolution, to be adopted during Monday’s Plenary Session, the Assembly urged NATO governments and parliaments to recognise that the Kremlin aims to alter the European security order and end NATO’s presence in Europe, and that their support to Ukraine must live up to this reality.

The text insisted that Russia must be held accountable for war crimes and the destruction of civilian infrastructure, and that seized and frozen Russian assets should be used to help fund the rebuild.

In turn, Ukraine should lead the reconstruction effort. Parliamentarians assumed, however, that a priority for boosting economic activity would be to remove the thousands of mines that Russia has planted across the country.

NATO Allies and partners should also help by sending targeted aid and other support to take the load off Ukraine’s economy once rebuilding gets underway in earnest, while continuing to provide grants and loans that the national budget is capable of absorbing, the draft Resolution said.

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