BY Ingrid Brocková and Soňa Muzikářová
Many Western observers rejoiced at the prospect of weakened Kremlin’s leadership, following the quick-tempered fallout between the Wagner’s paramilitary group’s leader, Yevgeny Prigozhin, and Russian elites. But EU’s Eastern flank countries cringed at the prospect of Prighozhin’s men being “exiled” to Belarus, in a surprising deal brokered by Belorussian president, Aleksandr Lukashenko, that put an apparent end to the mutiny.
Latvia and Estonia reacted by bolstering their border security, while Riga also suspended the entry of Russian citizens into the country. Lithuania, which shares a 679-kilometer immediate border with Belarus, urged a stronger NATO presence, including air and missile defense, on the alliance’s eastern flank following the insurgence. At the European Union (EU) level, the conversations at the late June European Council were taken over by the importance of protecting the EU eastern flank and doubling down on support for Ukraine, at the expense of some of the originally intended agenda items, surrounding Western Balkans accession issues, for example. “We have to move forward and be decisive, because now is a crucial moment of history” Lithuania’s President, Gitanas Nauseda, reckoned.
Into its second year, the Russian war waged against Ukraine continues to fundamentally reshape world affairs. From defense to development and diplomatic relations, in no world’s region have the consequences felt more existentially abrasive than in Ukraine’s neighboring countries. The EU “Eastern flank,” which itself harbors a personal historical experience with Russian occupation, aggression and oppression has thrusted itself back into the limelight, the region’s asymmetric security exposure and the need to further beef up the eastern flank’s defenses.
While NATO spending has gone up over the recent years, with the combined defense expenditure reaching approximately USD 1.2 trillion last year – the highest since at least 2014 – only seven NATO members hit the Alliance’s 2% GDP minimum defense spending target agreed in 2006 to ensure Alliance’s military readiness. Even within the Alliance’s eastern flank, only Latvia, Lithuania, Estonia, and Poland meet the pledge, leaving behind Slovakia, Czechia, or Slovenia, which share many of the comparable risks. What’s more, most EU’s western capitals – including Berlin, Madrid or Rome – have also consistently fallen short of committing enough funds.
The ongoing conflict has, however, rendered some novel leadership out of the region, with Poland’s bold vow to commit double the minimum target at 4% of its GDP for defense spending in 2023, setting a precedent across the former Soviet space, and compelling neighbors to rethink their own financial commitments to the Alliance. As of today, most eastern European capitals committed to level up to the agreed 2% minimum in the coming years, and in the face of the enduring Russian threat.
The re-examination of country defense strategies, however, exceeded budget considerations, and resurrected dormant themes of NATO enlargement, fortifying Alliance’s borders, and country neutrality, among others. Seeking a common ground for Sweden’s and Ukraine’s entry into the Alliance has been high on the agenda at the July 2023 Vilnius NATO summit. Realizing that geography matters, leaders have also prioritized reinforcements of the Alliance’s eastern rim. Moreover, support for neutrality declined for the first time in two decades in Switzerland, which has been neutral since 1815, from 89% to 96%, perhaps reflecting a growing appreciation that small countries can only defend themselves by partnering with others. Finally, a parallel war is being fought in information spaces and on digital platforms, undermining these young democracies and uprooting popular support and sustained progress on Ukraine.
Eastern European capitals additionally belong to Ukraine’s top backers. The Baltic countries, Poland, Czechia, and Slovakia provided some of the most robust combined bilateral, military, humanitarian, and financial support in percent of their respective gross domestic product, while also actively partaking in reconstruction efforts. Slovakia alone provided tanks, artillery, munition, howitzers, helicopters and the S-300 air defense system as a part of its military aid, a long way from Germany, Europe’s biggest economy, offering some 5,000 helmets on the brink of the invasion in January 2022. What’s more, the help provided to Kiev has not crowded out development aid to other third countries.
Such financial support was given despite the fact that the invasion has derailed the post-covid recovery impulse and diluted its already stretched public resources. Without question, the economic fallouts amplified by the proximity of the region to the conflict have been louder than elsewhere. Weeks into the invasion, the region had seen sizable capital outflows and violent exchange rate swings. Months into the invasion, the inflation rate – already primed for an upward trajectory by the pandemic supply chain bottlenecks – soared well into the double-digits and in some cases remains there. The regional currencies plunged, with the Polish zloty, Hungarian forint and the Czech koruna down between 8-12% since the days leading up to the invasion, while the magnitude of the moves indicated capital flight from these currencies, whose poor general liquidity left room for the volatility to persist. This is despite the local (non-euro) central banks in Hungary, Poland, or Czechia pursuing some of the most pre-emptive and aggressive monetary policy tightening cycles, globally to intervene in the currency markets to mitigate excessive depreciation.
Moreover, Eastern Europe’s largely undiversified energy links to Russia when it comes to natural gas, but also crude oil, and nuclear fuel in some cases have posed an unparalleled threat to the region’s energy security, aggravated by its sizeable, energy-hungry industrial bases. While the region avoided the deeper, energy crunch-induced slump expected by many in the winter of 2022/23, its real economies have decelerated markedly, succumbing to lingering high inflation eviscerating households’ budgets, falling real incomes, and tightening financial conditions gnawing at the growth momentum.
This is despite the region’s governments coming to the rescue with the soaring costs of essentials – electricity, fuel, food – by extending various calibrations of fiscal help, from blanket household handouts, child allowances, tax exempts, and price caps to a more targeted help in some cases, given inflation’s redistributive effects. On the eastern rim, the Estonian, Lithuanian, and Hungarian economies still shrank for at least two consecutive quarters leading up to Q1-2023, while the Czech, Romanian, and Slovak growth is barely positive. And while the region averted some of the gloomier economic scenarios and revealed overall economic resilience, Russian invasion of Ukraine has left its citizens more impoverished: earning and affording less.
In Czechia, for instance, a census commissioned by the Labor and Social Ministry found that at least 270,000 people live on the streets, shelters, or overcrowded apartments, even without accounting for the impacts of the energy crunch. In Slovakia, the increase in prices has been estimated to shave off 200 to 600 euros from 60% of total households’ monthly budgets by 2024. About half a million of Slovak pensioners of the total number of 1.1 million are currently living below the poverty line of 424 euros per month.
But the invasion is more than a setback for the region’s development and prosperity trajectory. It is a mind-boggling repetition of historical events in Europe’s east, a surreal déjà vu, which caught some of region’s most avid observers, veteran diplomats, politicians, and statesmen off guard, despite convincing intelligence of Russian forces amassing at the Russo-Ukrainian border before the invasion. As such, it is an opportunity to reset the sails for the region’s diplomacy and foreign policy strategy based on the valuable lessons that emerged out of these events.
The foremost learning is that the Kremlin’s instincts of imperialism, expansionism, historical revisionism, and disregard for international law and human rights have not vanished with the dissolution of the Soviet Union. Rather, they have lived on silently.
This learning should lead us to the second lesson pertaining to EU capitals’ default position on Russia. Europe’s policy of “economic pragmatism,” exemplified by the late Nord Stream 2 project, was busted when Russia toyed with its natural gas supplies last winter. It offered us a valuable lesson about the risks associated with promoting economic dependencies with autocracies. Treating Russia as an equal diplomatic partner without holding them accountable for their imperialist crusades such as the 2014 unlawful annexation of Crimea, or the 2008 invasion of Georgia, which turned out to be a costly mistake, contributing to the present security situation in the region. It highlights the necessity to revise Europe’s long-term diplomatic position towards the Kremlin.
The third take-away is that the war has unleashed a two-track Eastern Europe, with some former Soviet countries, led by Poland and the Baltic states, harboring a strong resolve on Ukraine, and others, led by the likes of Hungary and Serbia, bowing to Moscow. The rupture manifests in slower consensus on EU sanctions or Ukraine support and underscores that the solidarity with Ukraine should be actively pursued, the longer the war lingers on. It also puts into the limelight the EU’s decision-making mechanism, and how it fares when put under pressure of urgent and consequential decisions made in the times of war and geopolitical turbulence. Despite these fault-lines, the Russian invasion of Ukraine has shifted Europe’s center of gravity eastward, and it also altered qualitatively how Eastern flank countries relate to Brussels, since for the first time they are not following a scripted process (such as, one related to accession) but rather are forced to think on their feet.
Since the post-communist phase, the Eastern flank has had a 3-decade run to take individual trajectories for national building and transition into democracies. The Ukraine war has given these countries a rare opportunity for self-assessment due to its high stakes in the region. May the countries that have gone-off-the-rails find their compass for course correction!
Ingrid Brocková is a State Secretary at Ministry of Foreign and European Affairs of the Slovak Republic. Soňa Muzikářová is a political economist specializing in the region of Central and Eastern Europe.