Ukraine war

Dictated peace would also have consequences for Austria

A Ukrainian soldier in a trench in Donetsk

(Bild: AFP)

Due to the latest contacts and negotiations between the USA and Russia, there are fears in Europe of a dictated peace for Ukraine. According to economic experts, this would also "indirectly affect" Austria.

Such a "peace agreement" would mean significantly less investment in Eastern Europe - a region that accounts for 20 percent of Austria's foreign trade. "This would have a negative impact on Austria's economy, as it is one of the main investors in Eastern Europe," say experts from the Vienna Institute for Economic Studies (wiiw). It could also herald the end of the peace dividend: saving budget funds by cutting military spending. Europe would be forced to rearm much more than before. The only winners in the EU would be the big arms companies. 

Solidarity rally for Ukraine including a sea of lights in Vienna

(Bild: APA/GEORG HOCHMUTH)

The end of war could harm Eastern Europe more than war itself
Paradoxically, the end of the war could harm Eastern Europe more than the war itself. This is because the effects on investments in the first years of the war in 2022 and 2023 were "surprisingly not that great". "That will change now," says wiiw Deputy Director Richard Grieveson in an interview with APA. The forecast is pointing downwards in the region, a trend that is likely to continue into Central Europe and therefore Austria. Because "the connection with Eastern Europe has always been a stability factor for Austria's economy". 

There is great fear that Donald Trump and Vladimir Putin will negotiate a "peace" without taking Ukrainian and European security concerns into account.

(Bild: AFP/Brendan SMIALOWSKI)

Ukraine expert Olga Pindyuk even sees the danger of a complete halt to investment in Eastern Europe and Ukraine in particular. "We are talking about a high-risk zone here, where there are natural resources but everything is mined," she told APA. If Ukraine is forced to accept de facto capitulation on Kremlin leader Vladimir Putin's terms, it will become a vassal state of Russia. The occupied part could become a "second Belarus", Pindyuk predicts. The raw materials in the regions conquered by Russia in the east would be exploited in a similar way to a "colonial economy". Hardly any of the proceeds from the extraction of rare earths, oil or gas will be invested in the reconstruction of the region, which has been devastated by three years of war. 

"Russia is hooked on war like a drug"
Russia is one of the few winners of a possible dictatorial peace "in the medium term", emphasizes Russia expert Vasily Astrov. Especially if such a peace is accompanied by the deepening of economic relations with the US and the return of US companies to Russia, as expected by the Russian sovereign wealth fund. However, the switch to a wartime economy from 2022 will lead to complications in the short term, says the expert. After the end of the war, Russia would face "a veritable demand shock due to lower government spending on armaments and the military". So far, Russia has been hooked on the war like a drug, says Astrov.