The EU, the EEU, and the War in Ukraine: Political Risks and Management Options

Hannes Meissner / Johannes Leitner
In regard to the post-Soviet region as a whole, political risks that have to be managed have
reached a new dimension. However, some rules of the game are not entirely new. While Ukraine
has become a battlefield of a proxy war of nutrition, indicators of this dramatic change have been
observable long before February 24 th . The August war of 2008, when Russia openly intervened
militarily at the side of South Ossetia and Abkhazia against Georgia, the annexation of Crimea
and the war in Eastern Ukraine since 2014/15 have been major events affecting businesses in
the region. The latter events resulted in EU sanctions on Russia and Russian countersanctions.
In recent years, these geopolitical risks have added-up to a political risk constellation traditionally
posing high risks to business operations of European enterprises. Political instability, clientelism,
informal practises, legal uncertainty, a low guarantee of property rights, and unresolved
territorial conflicts have been political risks characteristic of the region since the dissolution of
the Soviet Union in 1991.
The installation of Russia-friendly governments and local administrations in the conquered
regions of Ukraine have far reaching effects on the local business constellation. The current experience
of Western corporate partners in these local cases give a first foretaste of what may be
to come elsewhere in Ukraine and the post-Soviet region. Russia is not only tightening its grip on
Ukraine, but on other governments in the region as well. The idea of the expansion of the Union
State between the Russian Federation and Belarus beyond the two countries, as recently put
forward by Lukashenko, potential further (military) conflicts in pro-Western republics (Moldova,
Georgia, Kyrgyzstan), breaking up inner-state conflicts (Uzbekistan, Kazakhstan), and responses
by the West on the new Russian imperialism, will all have a significant impact on enterprises
operating in the region.
With Russia’s tightening grip, Western security and management patterns, as well as the leverage
of Western embassies and trade commissions, will be pushed back in the individual countries.
Political instability, corruption, deficiencies concerning the rule of law will most likely increase.
Under the new rulers in the conquered regions of Ukraine, expropriation measures seem to be
inevitable. Such measures can be directed at one’s own company and/or important business
partners. At the same time, reform pressure by the EU will decrease and trade agreements
with the West will become less important in countries under Russian control. In the Eastern
Partnership region, this particularly concerns the Deep and Comprehensive Free Trade Agreements
(DCFTA) with the EU.
These developments need to be analysed, monitored, and managed. In any case, companies
firstly have to identify specific risk factors affecting their company/their projects. They then
must evaluate the possible effects and prioritise along the dimensions “probability and impact”
before finally developing and implementing mitigation strategies for the respective risk constellation.
16 Wirtschaft und Management · Band 33 · März 2023