War in Ukraine

The policy challenges

Policy challengesThe OECD and Ukraine
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Policy challengesThe OECD and Ukraine
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FEATURED: Trade, sanctions, and household income

How reducing trade would affect purchasing power

A simulated 40% reduction in bilateral trade with Russia in all goods and services would have a notable negative real income effect on households in some European G7 countries in the medium term. However, households in Russia would have to withstand a significantly larger negative impact – roughly double the effect of eliminating oil dependency on Russia.

At least 70% of Russia’s imports of, among other items, electronics, motor vehicles and parts, machinery and equipment, chemicals, and business services are from the G7, Europe and Australia. Together, restrictions on exports to Russia from these countries would have an almost 50% larger impact on Russian household income than if these countries restricted imports from Russia.

This also highlights an important point: the benefits of trade – and here the harm potentially inflicted with trade sanctions – is at least as much about Russia's imports as it is about its exports.

Read: Challenges to International Trade and the Global Economy

Statement from OECD Secretary-General, 24 February 2023

One year on from Russia's full-scale invasion of Ukraine, the OECD's solidarity remains undiminished.

> Read the full statement

The OECD's initial response in 2022

Within hours of the invasion, the OECD Council condemned Russia’s large-scale aggression against Ukraine in the strongest possible terms as a clear violation of international law and a serious threat to the rules-based international order, expressing its solidarity with the Ukrainian people.

See official statements:

> OECD Council statement, 24 February 2022

> OECD Secretary-General: initial measures, 25 February 2022

> OECD Secretary-General: further measures, 8 March 2022

OECD–Ukraine: A reinforced partnership

Since February 2022, the OECD has continued to broaden, deepen and strengthen its engagement and cooperation with Ukraine, building on several decades of work. A new OECD-Ukraine Liaison Office was established in Paris.

The OECD has worked with Members to support the reception and integration of Ukraine’s refugees and displaced persons, and to help address their needs with a particular focus on educational and employment continuity. It has worked with donors and other partners on the international coordination of support to Ukraine. It has worked closely with the government of Ukraine in support of its rebuilding, reconstruction and reform agenda.

In 2022, the OECD formally recognised Ukraine as a prospective Member, committing to an initial accession dialogue designed to increase its adherence to OECD standards and participation in OECD bodies. It welcomed President Volodymyr Zelensky, virtually from Kyiv, to the Organisation's annual Ministerial Council meeting and Prime Minister Denys Shmyhal to the final Council meeting of 2022.

> Read more about the OECD and Ukraine partnership

> Explore the latest OECD analysis on the impact of the war

Looking ahead: Supporting Ukraine's reconstruction and recovery

On 24 February 2023, OECD Secretary-General Mathias Cormann announced the official opening of the OECD-Ukraine Liaison office in Kyiv, hosted by the Embassy of the Slovak Republic to Ukraine in Kyiv, with the financial support of Poland, Lithuania, Latvia and Romania, as well as of the Slovak Republic.

The immediate focus must remain on securing a comprehensive, just and lasting peace for the people of Ukraine, consistent with international law and with the terms of the UN resolution passed with the overwhelming support of its Members.

In the meantime, the OECD will continue to support Ukraine’s determined efforts to plan and prepare for the reconstruction and recovery effort, to help rebuild better and stronger, consistent with the values of a free, open, market-based democracy and the high standards expected of a prospective Member of the OECD.

At full capacity, there will be a team of four OECD officials on the ground from Kyiv who will:

Interim Economic Outlook (March 2023)

The world economy

Recovering – but risks persist

More than 12 months following the commencement of Russia’s war of aggression against Ukraine, Brent crude oil was trading between USD 80 and USD 84 a barrel at the beginning of March 2023, having spiked to USD 133 a year earlier. Wholesale prices for natural gas and coal have seen similar volatility in the same period.

However, even as energy price rises have eased off their highs, the outlook for the world economy remains fragile. Trade tensions, financial vulnerabilities and high core inflation – driven by strong service price increases and cost pressures from tight labour markets – point to persistent downside risks.

Structural reforms aimed at boosting productivity growth will be vital, alongside fiscal support targeted at the most vulnerable and monetary policy to combat persistent inflation.

Explore: Interim Economic Outlook

Latest OECD analysis

GLOBAL VALUE CHAINS

Trade dependencies and the implications for policy

How should policymakers assess global value chain risks? A new OECD paper looks at the economic dependencies and implications for policy.

Refugees and the labour market

Ukrainian refugees and work: What we know so far

Many of the 4.7m refugees registered in the EU by mid-November have high formal qualifications, but early employment has been in low-skilled jobs – putting the challenge of skill transferability under scrutiny.

Fiscal Outlook

Inflation up, growth down – and implications for government revenues

Supply shocks have driven up energy prices and inflation – which in turn is leading to increasing borrowing costs. This is leading a weakening outlook for government revenues.

Rebuilding Ukraine

The vital role for Ukraine's regions and local governments

Ukraine's ambitious regional development reforms since 2014 were key to its resilience in 2022. Continued reform will bolster its post-war reconstruction efforts.

The future of science in Ukraine

Action today will ensure a robust recovery tomorrow

OECD countries can build on new and strengthened scientific relationships to relaunch science in Ukraine and support the country’s recovery after the war.

Disinformation

Responding to the threat posed by Russia's disinformation

Systematic information manipulation and disinformation have been part of Russia's operational toolkit in its assault on Ukraine. How should democracies respond?

Explore OECD work on Ukraine

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01/03/2023
Paper
Global value chain dependencies under the magnifying glass
Policy makers are increasingly grappling with the stability implications of global value chains (GVCs), as widespread supply shortages following the COVID-19 pandemic and the Russian Federation’s large-scale aggression against Ukraine have disrupted the economic recovery and contributed to high inflation. This paper provides a tool to assess vulnerabilities in GVCs by drawing a detailed map of dependencies based on new indicators constructed from the OECD Inter-Country Input-Output tables. The key findings are as follows. First, GVC dependencies increase with both the size of foreign exposures and the length of foreign value chains. Second, in some industries, such as the automotive and ICT industries, vulnerabilities from high GVC dependence are amplified by high geographic concentration of suppliers or buyers. Third, the People’s Republic of China is the most critical choke point in GVCs across a broad range of industries, both as a dominant supplier and as a dominant buyer.
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21/01/2023
Report
Assessing the Impact of Russia’s War against Ukraine on Eastern Partner Countries
Russia’s war against Ukraine is causing a humanitarian, social and economic crisis for the Ukrainian people. The consequences of this full-scale military invasion are disrupting the global supply of commodities, sharply increasing food and energy prices, and threating the recovery from the COVID-19 pandemic. Countries with established commercial and financial ties with the economies of Russia and Ukraine appear to be particularly vulnerable.Assessing the Impact of Russia’s War against Ukraine on Eastern Partner Countries investigates the exposure of Eastern Partner countries (Armenia, Azerbaijan, Georgia, Republic of Moldova and Ukraine) to the economic shocks caused by the war, and in particular through the impact that the conflict is having on inflation, migration, remittances, investment and trade.This report is published as part of the multi-country project “EU4Business: From Policies to Action – phase 2”, implemented in the Eastern Partnership with the financial support of the European Union within the EU4Business initiative.
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20/01/2023
Paper
Challenges to international trade and the global economy
Amidst the recovery from the impact of the COVID-19 pandemic, Russia’s war of aggression against Ukraine has resulted in new challenges to the global economy and to international trade. This report relies on detailed trade data to assess the impact of these two overlapping shocks on international trade and supply chains. In February 2022, global trade was approaching pre-Covid levels in absolute terms, but with a different product and geographical composition resulting in a continued sense of tension in the trading system. Russia’s war of aggression against Ukraine has added a new dimension of challenges as it has led to deliberate radical interruptions of trade linkages between Russia, Ukraine and many industrialised economies, with significant repercussions on prices of key commodities in the energy and agricultural sectors.
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06/01/2023
Policy response
What we know about the skills and early labour market outcomes of refugees from Ukraine
Even though much uncertainty remains regarding the length of stay of Ukrainian refugees in host countries, continued fighting has dimmed prospects of an early return and the issue of labour market integration is becoming increasingly pertinent. Finding gainful employment commensurate with refugees’ educational and professional qualifications supports new arrivals in becoming self-sufficient and boosts the local economy. It also enables them to use and possibly further enhance their skills, which is crucial for the future recovery of Ukraine. This policy response outlines the existing evidence on the socio-economic profiles and labour market integration of Ukrainian refugees in OECD countries as well as relevant policies to further support labour market integration. Findings suggest that the labour market inclusion of Ukrainian refugees has been faster compared to other refugee groups. That said, much of the early employment uptake by Ukrainian refugees has been concentrated in low-skilled jobs, thus skills mismatches are widespread.
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05/01/2023
Paper
The intergovernmental fiscal outlook and the implications of Russia’s war against Ukraine, high energy prices and inflation
Less than two years after the start of the COVID-19 pandemic, Russia’s illegal, unprovoked and unjustifiable war of aggression against Ukraine has triggered the biggest military confrontation in Europe since World War II. Many OECD countries have reacted to Russia’s aggression by providing military and humanitarian aid to Ukraine and by imposing economic sanctions on Russia, which has accentuated supply chain disruptions, especially in the energy sector. A combination of these supply shocks with a demand shock caused by expansionary fiscal and monetary policies to tackle the pandemic has created inflationary pressures on a scale not seen in decades. Central banks around the world are acting to fulfil their price stability mandates by increasing interest rates and by engaging in quantitative tightening (primarily the selling of government bonds to reduce central bank balance sheets), all of which put pressure on borrowing costs at a time when governments are engaging in expansionary fiscal policy to alleviate the impact of inflation. The objective of this policy note is to examine the main consequences of this challenging environment for the fiscal stance of different levels of governments. These include the weakening outlook for government revenues in times of high expenditure pressures from a more rapid energy transition as well as high borrowing costs.
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02/12/2022
Report
Rebuilding Ukraine by Reinforcing Regional and Municipal Governance
<img src="https://assets.oecdcode.org/ilibraryres/img/eufunded-banner3.png" class="img-responsive" style="width:80%; padding-bottom:5px;" alt="EU Funded Note"/>Prior to Russia’s invasion of Ukraine on 24 February 2022, Ukraine had made significant progress in implementing ambitious regional development and decentralisation reforms. These reforms resulted in the creation of 1 469 amalgamated municipalities, the establishment of an elaborate multi-level regional development planning framework, as well as a significant increase in local public service delivery, and public funding for regional and local development. However, the reforms faced a number of challenges, many of which have been significantly exacerbated by Russia’s war against Ukraine. These challenges include increasing regional economic, demographic and well-being disparities, a fragmented regional development funding framework, as well as marked discrepancies in municipal administrative, human resource and fiscal capacity. This report presents an in-depth analysis of Ukraine’s progress in implementing its multi-level governance reforms and explores the role of subnational governments in disaster management. From there, it recommends how Ukraine, together with international partners, can use multi-level governance, regional development and decentralisation to support subnational reconstruction and recovery to address urgent humanitarian needs, rebuild local economies and communities, and strengthen their resilience.
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02/12/2022
Policy response
Turning to regions and local governments to rebuild Ukraine
This policy response highlights how Ukraine’s regional development and decentralisation reforms, adopted after the 2014 Maidan Revolution, have contributed to the resilience of the country’s regions and municipalities following Russia’s war of aggression against Ukraine. Based on the OECD report Rebuilding Ukraine by Reinforcing Regional and Municipal Governance, it also sets forth how the achievements of Ukraine’s post-2014 multi-level governance reforms can provide the stepping stones for an effective subnational reconstruction and recovery. Finally, it presents concrete recommendations on how policymakers can leverage local expertise and further build subnational capacities to design and implement reconstruction projects and track progress, as well as contribute to longer-term sustainable regional and local development.
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02/12/2022
Paper
Service design and delivery in the European Neighbourhood Policy East region
European Neighbourhood East countries have been actively engaged in improving service delivery for citizens and businesses for some time. Some have opted for flagship initiatives (often with large-scale, one-stop shop solutions), some for digitalisation of services, while some have taken an incremental approach towards the service delivery modernisation process. This comparative paper outlines the state of play in the design and delivery of public administrative services in Armenia, Azerbaijan, Georgia, Moldova and Ukraine. Public administrative services cover the vast array of interactions with (and within) government: making enquiries, applications, registrations and payments, and receiving information, documentation, decisions and funds. These contacts allow service users (citizens, businesses and non-governmental organisations) to exercise rights, access entitlements, execute obligations and achieve ambitions. As well as the description and analysis of the general service delivery framework(s), institutional set-up and practical implementation, this paper presents a comparative analysis of a set of life events and highlights inspiring practices from the different countries.
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25/11/2022
Paper
Trends, investor types and drivers of renewable energy FDI
As foreign direct investment (FDI) can help mitigate the repercussions of climate change, understanding what factors attract energy FDI is important. A large share of energy FDI originated from outside the energy sector, and given that renewable power FDI also comes from outside the energy sector, it is worthwhile to examine if drivers behind this type of FDI differ from what encourages investment by firms operating within the energy sector. This paper demonstrates that renewable energy FDI has been increasing, while FDI in fossil fuels is potentially slowing down. Results of the empirical analysis show that both the broader investment conditions and the strength of climate policies are vital for ensuring the favourable environment for renewable energy FDI, but the extent to which these factors impact investment decisions varies depending on where the investors come from: greenfield investors from outside the energy sector seem less responsive to the climate mitigation policies of host countries, whereas their location choices are tightly linked to the broader investment conditions in the destination economies.
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25/11/2022
Policy response
Supporting the social and emotional well-being of refugee students from Ukraine in host countries
Russia’s invasion of Ukraine has resulted in the largest forced displacement crisis in recent history, with a high proportion of those fleeing being children and young people. The stressful and traumatic experiences Ukrainian refugees may have encountered can lead to a variety of mental health issues, which, if unaddressed, may have lasting impacts on their development. Schools in host countries play a vital role in addressing refugee learners’ needs, providing a space where they can feel safe, continue their learning, and access psychosocial support services. Schools can also serve as sites for social and emotional learning, which is essential for helping students navigate the challenges associated with adjusting to a new culture and for facilitating their inclusion in education and society. This brief discusses how education systems in host countries can support the social and emotional well-being of Ukrainian students, drawing on existing examples of policies and practices.
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15/11/2022
Policy response
How the war in Ukraine is affecting space activities
Russia’s war of aggression against Ukraine is demonstrating the new role of commercial space systems in crisis management. The improved availability of commercial satellite data and signals is contributing to the quality and resilience of government systems, with telecommunications and follow-ups of military actions and impacts on the ground for civilians. But the war has also revealed vulnerabilities of space infrastructure and in global supply chains. It also unleashed a series of new threats, notably unanticipated third-party uses of satellite data and disruptions of civilian telecommunications. Furthermore, the current geopolitical situation raises questions about the future of international co-operation in space activities, at a time when it is urgently needed to collectively manage the use of orbital resources. This policy note includes OECD recommendations for policy responses to improve the resilience of space infrastructure, manage access to and use of data and signals and ensure long-term sustainability of space activities.
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04/11/2022
Paper
A new landscape for space applications
For decades, governments have relied on space systems for intelligence gathering and satellite connectivity in remote areas, but today’s situation marks a distinct break with the past. Extended coverage, advances in digital technologies and, importantly, free and/or commercial availability of space products allow many new uses by both government and non-government actors. This brings important benefits for users and citizens, but also leads to new challenges in terms of data management, infrastructure and supply chain resilience, and international co-operation. This paper uses illustrations from the war in Ukraine to highlight recent developments in the sector, placing them in a broader context of digitalisation and government space investments. It discusses the growing importance of space technologies for society and provides policy options and resources from other strains of OECD work.
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04/11/2022
Policy response
The future of science in Ukraine
This policy response reflects on how policy actions can shape the future of Ukraine’s science system and contribute to post-war recovery. It draws on several OECD indicators and highlights the challenge of “brain drain” as a structural problem that is aggravated by Russia’s war of aggression against Ukraine. It then makes the case for international co-ordination on talent circulation and exchange to prevent the irreversible loss of scientific expertise for key industries and the education of future generations in Ukraine. The policy response further argues that OECD countries can put in place new and strengthened scientific relationships with Ukraine, while also implementing temporary measures to assist both displaced scientists and those remaining in their posts under very challenging conditions.
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04/11/2022
Policy response
Building back a better innovation ecosystem in Ukraine
Russia’s aggression against Ukraine is aggravating the long-term trend of R&D under-investment in Ukraine, as well as accelerating brain drain. In the reconstruction period, science, technology and innovation have the potential to contribute to the societal transformation of Ukraine, feeding into an innovation-centric industrial strategy, which also includes developing linkages with selected parts of the academic sector, which should themselves be strengthened to serve that purpose. It can also significantly contribute to Ukraine’s green transition, through stimulation of grassroots entrepreneurship in co-creation with academia, in particular on the basis of Ukraine’s small but excellent scientific production in the areas of environmental and planetary sciences. The brief provides specific policy recommendations which can help policy makers address the binding constraints towards the attainment of these goals.
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03/11/2022
Policy response
Disinformation and Russia’s war of aggression against Ukraine
This paper provides an overview of how the Russia's war of aggression against Ukraine illustrates immediate threats posed by disinformation, as well as governance responses to countering it. It focuses on disinformation in relation to the Russian armed aggression of Ukraine, including actors, tools and narratives used to justify the invasion and maintain support for the war. The paper also identifies government efforts to counter the spread of disinformation, including efforts to ensure the spread of accurate content, promote international co-operation, and support civil society and media actors to build resilience to the spread of false and misleading content.
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13/10/2022
Report
Kazakhstan 2022 Energy Sector Review
This in-depth review of the energy policies of Kazakhstan follows the same format used by the International Energy Agency (IEA) to review member countries. It was conducted under the auspices of the EU4Energy programme, which is being implemented by the IEA and the European Union, along with the Energy Community Secretariat and the Energy Charter Secretariat.Kazakhstan has made ambitious commitments to reduce greenhouse gas emissions and increase the role of renewables in its energy supply, but dependence on large reserves of inexpensive domestic coal and a lack of flexible generating capacity make these a challenge. Oil continues to provide much of the country’s export earnings and government revenue, while many oil-importing countries have pledged to reduce consumption of fossil fuels, and most oil exports currently transit the Russian Federation. Low domestic energy prices are a social priority for the government, but have made it difficult to promote energy efficiency and stimulate commercial production of gas for the domestic market.This report assesses the energy sector and related challenges facing Kazakhstan and proposes policy recommendations to improve sector governance, energy efficiency and security of supply.
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13/10/2022
Report
Moldova 2022 Energy Policy Review
Moldova is largely dependent on fossil fuel and electricity imports, with the vast majority of its natural gas imports coming from the Russian Federation. Moldova has made considerable efforts to diversify their supply sources and increase the security of both electricity and gas supply. Further integration with Europe for both gas and electricity imports is ongoing as Moldova prioritises moving away from Russian sources of energy. The March 2022 emergency synchronisation with ENTSO-E, triggered by Russia’s invasion of Ukraine, has pushed Moldova closer to full electricity trade with Europe. Since Moldova signed an Association Agreement with the European Union in 2014, it has been working to adopt core EU legislation. Moldova’s National Energy Strategy for 2030 reflects this work, with key government priorities including: ensuring the security of energy supply; further developing competitive markets and integration on a regional and European level; and ensuring the sustainability of the energy sector while mitigating the effects of climate change. Increasing the share of renewables in Moldova’s energy mix remains key to meeting the country’s priorities as it aims to enhance regional and European integration.This report assesses the energy sector and the related challenges facing Moldova, and it proposes policy recommendations to improve energy security, support the development of free and competitive energy markets, and accelerate its transition to a more sustainable, clean and efficient energy system.
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04/10/2022
Paper
Impact of the Russian invasion of Ukraine on insurance markets
This note assesses the immediate impact of Russia’s large-scale aggression against Ukraine on global insurance markets. It addresses direct impacts of the war on the industry, such as losses arising in certain specialty lines and restrictions on the provision of insurance services, and indirect impacts, such as increased macroeconomic and financial market volatility, that in turn affects insurers.
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04/10/2022
Policy response
Administrative Service Delivery during War Time
The large-scale aggression by Russia against Ukraine drastically changed how and which administrative services are delivered to its citizens. Physical facilities and communications infrastructure have been damaged or occupied in many areas of the country. This created the need to adapt or propose new ways of providing administrative services and the creation of entirely new services. The system of service delivery has had to be relaunched, adapted and even transformed. During the first days of the war there were almost no services. After three months the system had adapted to wartime conditions. The Ukrainian system of administrative service delivery has proved itself resilient in terms of safety and security, and in terms of responses to the new needs of the population. The simplification, deregulation and digitalisation efforts of the government will continue after the war.
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29/08/2022
Report
Electricity Market Report, July 2022
In the first half of 2022, many electricity markets continued to experience skyrocketing prices, particularly in Europe, reflecting deep uncertainties over both fossil fuel supplies and the economic outlook. Russia’s invasion of Ukraine shattered any hope of energy prices declining in the near term following the strong increases seen in the second half of 2021. In Europe, the situation prompted heightened ambitions and strengthened policies to advance clean energy transitions and reduce dependency on fuel imports. But in the short term, it also resulted in a partial return to coal-fired electricity generation. Sluggish economic growth is expected to dampen global electricity demand growth in 2022 and 2023 to less than half the rate seen in 2021. Despite gas-to-coal switching and low nuclear power plant availability in Europe, global electricity sector emissions may decline slightly in 2022 and 2023 – reflecting a combination of slowing power demand and displacement of fossil fuels by renewables.This July 2022 update of the IEA Electricity Market Report presents our latest forecasts for global electricity demand, supply and emissions through 2023. In light of Russia’s invasion of Ukraine, we also provide a special focus on the situation in Europe, discussing recent developments and future plans.
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