Pressure from the United States to reach an agreement between Russia and Ukraine is increasing, while negotiations between the two sides—also involving the European Union to a limited extent—are still ongoing. Although fundamental differences between the parties remain, the chances of a ceasefire by the end of 2026 are rising. Could this be the first year since 2022 in which an end to the war becomes possible? And what would such a scenario mean for the European economy?
A preliminary peace plan assumes that any potential agreement would include Russia’s reintegration into the global economy. A reopening of the West to international trade with Russia and the possible inclusion of the country in supranational organizations such as the G8 could bring mutual benefits. What consequences for Europe are being discussed?
Easing sanctions and lower energy prices in Europe
The greatest cost Europe has borne as a result of Russia’s aggression against Ukraine was the abandonment of imports of Russian energy commodities. The key question, therefore, is what post-war energy relations might look like.
“Imports of gas and oil from Russia will not return to pre-2022 levels. The EU has recognized independence from Russian energy resources as a strategic imperative. This eliminates the possibility of energy blackmail and limits Russia’s access to foreign currencies needed to import technology, including military technologies,” says Dr. Mateusz Dadej, Chief Economist at Coface in Poland and Central and Eastern Europe. “The gap left by Russian gas has largely already been filled by liquefied natural gas (LNG) from the United States. However, due to the costs of liquefaction, maritime transport, and regasification, LNG remains more expensive than gas transported via pipelines from Russia. Therefore, lifting sanctions as part of a peace agreement would have only a limited impact on lowering energy prices in Europe,” the expert explains.
European supply chains and trade after reopening cooperation with Russia
Trade data show that imports of goods sanctioned by the European Union into Russia have not declined significantly. Instead, they have largely been replaced by supplies from neutral countries, mainly China, India, and Turkey. As Coface experts point out, European corporations may face serious difficulties in regaining lost market positions. On the other hand, Russia has not been able to fully replace imports of high-tech products, whose production is concentrated in sanctioning countries. As a result, manufacturers of advanced components—such as semiconductors—and capital goods that are difficult to produce quickly or at sufficient scale locally are likely to regain market share the fastest. This also applies to products that may appear simpler to manufacture but require precision and larger-scale production.
“Renewed access to Russian critical raw materials such as metals and rare earths, tungsten, lithium, and others could significantly help European manufacturers. These materials are essential, for example, in sectors such as lithium-ion battery production, the development of advanced defense systems, and other industries where they are used in highly processed forms,” says Dr. Mateusz Dadej. “A potential reopening to economic cooperation with Russia would therefore bring asymmetric benefits: Europe could more easily access key raw materials and sell advanced technologies. However, a return to mass exports of consumer and intermediate goods to the Russian market would be much more difficult due to alternative supply chains that have already become entrenched. A possible ceasefire would not automatically mean a return to pre-2022 relations. Still, a gradual reopening to economic cooperation with Russia could potentially bring tangible benefits. For Europe, the key issue will be how quickly and to what extent trade exchange could be restored,” the expert concludes.
Source: ceo.com.pl
