The Abandonment of Ukraine

The economic implications and why I still have hope

By Maggie Kulyk, Chicory Wealth CEO and Founder

 

“Generations of American patriots, from our revolution onward, have fought for the principles Zelenskyy is risking his life to defend. But today, Donald Trump and JD Vance attacked Zelenskyy and pressured him to surrender the freedom of his people to the KGB war criminal who invaded Ukraine. History will remember this day — when an American President and Vice President abandoned all we stand for.”
—Liz Cheney, February 28, 2025

 

It’s been nearly three years since I wrote about Russia’s brutal invasion of Ukraine. Since then, it is conservatively estimated that 57,705 Ukrainians have died, both military and civilian. Along the way, it is well documented that many others have been tortured and raped. Another 6.9 million have fled the country, seeking refuge across the world. Another 3.7 million are displaced within their own country, having been driven from their towns and villages. It is the largest mass displacement of people since World War II.

 

The economics of the war in Ukraine

As to the “why” of Russia’s aggressions in Ukraine, many have pointed to its sense of vulnerability should Ukraine join NATO, and to Putin’s own imperial ambitions. However, from a simple economic standpoint, what we are seeing play out between the U.S. and Ukraine tells the tale. This is about control of Ukraine’s resource-rich land and the minerals that lie beneath it and which fund our modern, rapacious, capitalist economy.

• Lithium – Used in batteries, electronics, and electric vehicles.
• Titanium – Essential for aerospace, military, and industrial applications.
• Zirconium – Used in nuclear reactors and high-tech industries.
• Graphite – Important for battery production, particularly in electric vehicles.
• Beryllium – Used in aerospace and defense industries.
• Uranium – Critical for nuclear energy production.

Russia has tried to threaten, then bully, then finally kill and maim its way to getting its hands on these minerals. Now the United States – in the form of the Trump administration – is trying to finish the job on Russia’s behalf.

A mineral deal of sorts might have been a way toward peace – maybe – if it were being negotiated by someone who values human dignity and freedom, and if Russia didn’t have an oligarch and thug as its leader. The form this has taken, however – with Trump parroting Russian talking points, even to the extent of denying that Russia was the aggressor – is beyond the pale. Trump is acting as a proxy for Putin, trying to force a “peace” deal founded on expropriation and extortion. And where there is no justice, there can be no peace. The reason for this is plain. There are no security guarantees for Ukraine because the “great business” that the U.S. plans to do with Russia will be done over the bodies of dead Ukrainians. This U.S. administration is now in full collusion with what was, up until January 20, 2025, considered an enemy of global democracy and the United States. A rapacious, oligarchical capitalism has reached its zenith. The world has turned upside down.

(For a deeper dive into some of the economic outcomes of the last three years, see “Economic Repercussions of the War in Ukraine,” below.)

 

What could happen next?

As I write this, I have many fears and some optimism. My fears revolve around the enormous damage that has already been done to our standing around the world. If the U.S. can no longer be a trusted ally against despots and antiliberal regimes, then the dividends created by these allyships may soon dry up. Many have spoken of U.S. “exceptionalism” economically. We have been the envy of the world in terms of innovation and vibrancy in our economy, and the bedrock of that advantage comes from a respect for and trust in the rule of law. That is surely being eroded.

Further, if these policies persist, the status of the Dollar as a reserve currency will be at risk, including low borrowing costs and the ability to run enormous deficits. I’m not suggesting the Dollar will lose that status anytime soon, but it seems increasingly possible it could happen. In the near term, the inflationary situation is likely to persist. Wars, famines, climate disasters, governmental service disruptions, and mass deportations are all inflationary, as are the imposition of tariffs.

That said, economic growth could be stymied as well. Consumer confidence took a huge hit in February, dropping more than 5 points. It’s important to note the 70% of U.S. GDP is consumer spending. It is ALSO important to note that 50% of that spending comes from only 10% of consumers – those making more than $250,000 per year. That lack of broad engagement makes this metric even more vulnerable to declines.

This combination – still high inflation and subdued or no growth – could bring on a stagflationary environment. The Fed can and will cut interest rates if things on the growth side get bad enough, and that will help, but it is not a magic bullet. The U.S. economy grew only 1.4% per year on average from 2008 through 2022 when the federal funds rate was essentially 0 and money was basically free. So, cutting rates does not necessarily equal growth.

 

My reasons for hope, and our commitment to the work

Yet I do have some hope. My optimism comes from the knowledge that many folks, like many of you reading this post, are working to resist some of the worst tendencies that have been unleashed under the current administration and its policies. The people I work with, and the people we serve, are a source of great hope. Their care and commitment to a world that is just and sustainable is shown in the everyday actions they take and the way they care for and love others. There are many people in our workplaces, our churches, our neighborhoods, and all over the world who love freedom, respect the rule of law, and believe in the promise of Democracy. And there are many who were desperate for change so looked to a new regime for the answer, but are now finding themselves disappointed and worried.

As your trusted advisors and guides, we will continue to work on your behalf to help navigate these very difficult, confusing, and frightening times. Please know that we take our fiduciary duty very seriously and will continue to work tirelessly on your behalf. Reach out if you are worried or concerned. We want to hear from you, and we want you to know we will be with you through all that yet may come.

Peace,

Maggie

If you are looking for a way to help the people of Ukraine, our March 2022 blog post
“Chicory Wealth Response to the Invasion of Ukraine” offers some resources
that are still providing aid to the country and its people.

 

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Economic repercussions of the war in Ukraine

Three years ago, in a letter to our clients, I made some predictions about the impact of this tragedy on the world economy. Below you will see what I said in 2022 in italics, followed in bold by what has actually happened:

When geopolitics are involved, things can and do get extremely unpredictable. That is the situation we are in now, of course. There are too many variables to even begin to organize a coherent thesis of where things might go. There are a few things, however, that seem to be likely: 

• It is highly likely that, given the disruptions of oil and gas supplies as a result of the de facto embargo of Russia, prices of oil will continue to rise. As I write this, the average price across the U.S. right now is north of $4.00 per gallon. The record high for the national average was set on July 17, 2008, when it hit $4.11 per gallon. It seems all but certain we will shatter this record.

  In fact, it did surge and peaked at $5.02 on average in the U.S. on June 14, 2022 – the highest ever recorded average. As of this writing it has retreated to $3.10 per gallon.

• Ukraine is the breadbasket of the world, so a spring attack will surely keep farmers from their fields. This will no doubt precipitate a spiral of higher and higher food costs. Much of the world imports its food from the Ukraine and Russia – so places like China and the Middle East and parts of Africa could face famine conditions. This would likely further exacerbate unstable socio-political situations in some parts of the world. The last time the price of wheat went this high it kicked off the uprisings that came to be known as the Arab Spring.

  Since the invasion, global food prices have increased by around 30% on average, with staple foods like wheat, corn, sunflower oil, and fertilizers seeing the most dramatic rises. While prices are no longer at their peak highs from 2022, the war has created lasting disruptions that continue to affect global food security.

• It appears we have moved into a kind of commodity “super cycle” that was already underway as a result of manufacturers seeking to shore up and make redundant their supply lines in a post-COVID-disrupted world. The price of copper today was up an astonishing 55 percent! Indeed, some commentators are suggesting that we are already on our way to a post-globalization world. The impact of that is not discernible at this moment, but it could be that one era is giving way to another.

  It would not be fair to say we have reached total de-globalization, but I think we can say that we have entered an era of rising protectionism and nearshoring (the outsourcing of business). Up until the Trump administration’s take-over, we might have pointed to “friend-shoring” as well. That has slowed as the U.S. is rapidly running out of “friends.”
  

All of the above would suggest higher prices (greater inflation) and would augur well for the Fed to do what it has said it will do – raise rates, and raise them a lot and fast. However, as some of you may be reading, it is seriously complicated by the fact that all of the items above also lead to “demand destruction.” This would, quite likely, take the world into a global recession in the coming months. Higher interest rates are not needed if you’re in a recession, and yet can do nothing to slow down the rising price of fuel, food, and commodities. It is a lose/lose proposition.

Regarding Fed tightening – they certainly did that! From March 2022 to March 2023, the Fed raised interest rates by 4.75% in total, moving from near-zero levels to the 5% range. However, we did not experience a global recession. The Eurozone came closest to a recession in late 2022 and 2023, but narrowly avoided it, though Germany is now in recession. The U.S. avoided it, at least in part, due to the passing of the Inflation Reduction Act in August of 2022, which included climate and energy investments, prescription drug pricing caps, corporate tax reforms, and deficit reduction. How much of that will stay in force is definitely in question.

 

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Photo by Ihor OINUA on Unsplash