We had been warned about it for months, but it was still a shock when it happened: On February 24, Russian President Vladimir Putin launched an unprovoked invasion of Ukraine in what he called a "special military operation." Putin's purported goal? The "demilitarization and denazification" of his western neighbor.
The ensuing conflict—the largest ground war in Europe since World War II—is undoubtedly the defining event of 2022. The human toll has been devastating, with not only tens of thousands of soldiers killed on both sides but also 40,000 civilians dead as a result of the war, the chairman of the US Joint Chiefs of Staff estimated last month.
And following more than 10 months of Russian attacks on its towns, cities, and infrastructure, Ukraine has suffered tremendous economic losses. The country's prime minister said the damages from the war so far totaled more than $750 billion.
But the impacts of the war have not been contained to these two countries, or even within Eastern Europe. Russia's war in Ukraine sent shockwaves across the world in 2022, jolting the global economy and upending the decades-old geopolitical order. Let's review some of the biggest changes that were sparked by Putin's invasion.
1. Russia became an economic pariah. Soon after the invasion, Western countries banded together to slap unprecedented sanctions on Russia's economy and the oligarchs within Putin's orbit. Meanwhile, hundreds of US and European corporations left the country and cut economic ties. Perhaps the most symbolic move came from McDonald's: In 1990, it opened a restaurant in Moscow that reflected the thawing of relations between the US and Russia following the Cold War. This year, McDonald's pulled out of the country.
2. Europe braced for an energy crisis. 2022 was the year we all realized how much Europe depended on Russian energy; Germany, for instance, received 60% of its gas from Russia up to a few months before the war. However, not wanting to help finance Putin's war in Ukraine, European countries decided to stop buying Russian energy. It hasn't been easy to find alternatives, and the subsequent supply shortages sent energy costs skyrocketing. Higher energy prices due to the war in Ukraine have already cost Europeans about $1 trillion, per Bloomberg, and experts warn that the crisis could last for years.
3. Military spending surges. Russia's invasion of Ukraine has sparked a military spending spree in countries that had previously thought "No one does this kind of stuff anymore, right?" Facing rising geopolitical threats from Putin (and also China), the US just approved a military budget that was $45 billion more than President Biden asked for. Japan, which has largely taken a pacifist POV since World War II, announced it will double defense spending over the next five years, and Sweden and Finland are trying to get into the NATO military alliance. The winner in all this, of course, is your local defense contractor.
Meanwhile, the war grinds on. Ukrainian forces have recaptured strategic cities from Russia, but Russian bombardments on energy infrastructure will make this a hellish winter for Ukrainians. With neither side showing willingness to negotiate, any resolution to the conflict seems far out.
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Runner-up: SCOTUS scraps Roe v. Wade
In May, Politico published a leaked draft opinion from the Supreme Court that revealed it had voted to overturn Roe v. Wade, the 49-year-old legal precedent that established the constitutional right to an abortion in the US. The next month, the court confirmed it had scrapped Roe, leaving abortion regulations up to the states. For anti-abortion advocates, it was a ruling they had long hoped for. For abortion rights supporters, overturning Roe represented a generational setback for women's health and reproductive rights more broadly.
Since the ruling, 13 states have banned most abortions, and legal challenges are ongoing in about 10 others. Some Democrat-led states have gone in the opposite direction, using the SCOTUS decision as a catalyst for increasing abortion protections.
With a split Congress coming to DC, don't expect significant federal action on abortion next year: In the upcoming abortion clashes, states will be on the front lines.
Runner-up: The Fed hikes interest rates, sending economy teetering toward a recession
If everyone was an opinionated virologist in 2020, then 2022 turned us all into macroeconomists. In an effort to fight historic inflation, the Fed raised its benchmark interest rate seven times this year, pushing it to a 15-year high. Chair Jerome Powell's hawkish turn slowed the economy and was a major catalyst for the brutal sell-off in stocks, particularly in the tech sector. This year, Amazon became the first public company to lose $1 trillion in market value.
So what's ahead for 2023? Economists think that a recession is likely, but a few are holding out hope that the Fed can achieve a so-called "soft landing," where it brings inflation down to normal levels without causing the economy to shrink. Recent months have brought cautiously hopeful news: Annual inflation has cooled from a peak of 9.1% to 7.1%, so rate hikes are expected to be much less aggressive next year.—NF, SK
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