Destroyed lives, destroyed homes and destroyed infrastructure are the immediate consequences of Russia's aggression in Ukraine. The war also imperils the world's economic recovery from the COVID-19 pandemic: inflation, food security, energy security and further supply-chain pressures are among the many challenges policy makers worldwide must tackle. As the global ramifications of the invasion take hold, the OECD is bringing together its latest insights, analysis and data on the policy challenges ahead.
NEW: Rebuilding Ukraine
Rebuilding Ukraine by Reinforcing Regional and Municipal Governance
Ukraine's ambitious regional development reforms since 2014 have overhauled the country's governance structures, which have been key to its regional and municipal resilience in 2022.
While Russia’s war of aggression against Ukraine has severely undermined progress and exacerbated existing territorial disparities and governance challenges, continued reform will be vital to Ukraine's post-war reconstruction efforts.
Russia’s war of aggression against Ukraine has triggered the biggest energy price shock since the 1970s, which is weighing heavily on the world economy.
The estimated share of GDP spent on energy end-use has spiked, up from under 9% in 2020 to over 16% in 2022. The impact of price hikes and disruptions on GDP growth is estimated at -1.4% in OECD Europe and -0.5% in the world economy (Chart 3).
Prospects for world growth could deteriorate further if European gas storage runs short (Chart 2), forcing potential rationing of energy while pushing global gas prices even higher.
The global economy is expected to slow further in the coming year, with the energy shock resulting from Russia's large-scale war against Ukraine fuelling inflation, sapping confidence and increasing risks worldwide.
For multinational enterprises (MNEs) doing business in Russia, the prospect of difficulties making international payments, reduced access to foreign capital, and logistical challenges – as well as reputational risks – has led many MNEs to curtail their activity in Russia.
By sector, nearly one-third of energy and utilities companies and one-fifth of technology and industrial companies announced their complete withdrawal from the Russian market, compared to less than 10% of finance and healthcare companies. Most consumer goods MNEs continue to maintain some presence in Russia, with many citing their provision of essentials such as food and hygiene products.
Since Russia began its war of aggression in February 2022, almost five million Ukrainian refugees have fled to EU and other OECD countries.
Poland, Germany and the Czech Republic have received the largest numbers of migrants, taking in 1.4m, 1m and 400,000 refugees, respectively. Relative to total population, Estonia and the Czech Republic have received more than 40 refugees per thousand inhabitants, with Poland (36 per thousand), Lithuania (23 per thousand) and Latvia (20 per thousand) close behind.
Continued bold action in receiving and supporting these historic refugee flows is critical.
A new OECD report describes how reforms to regional and local governance arrangements since 2014 helped build resilience, and how those foundations can be reinforced to accelerate the country’s post-war recovery.
Ukraine and the OECD have been working closely together since 1991 to improve governance and economic development. A Memorandum of Understanding for Strengthening Co-operation (MoU) was signed in 2014 to drive forward efforts to address the country's public policy challenges.
The OECD draws on its multidisciplinary expertise, policy best practices and cross-country data analysis as part of on-going efforts to support Ukraine's reform efforts and strengthen its institutions.
The OECD Council, comprising the Organisation's 38 member countries, condemns Russia's large-scale aggression against Ukraine as a clear violation of international law and a serious threat to the rules-based international order.
The participation of Russia and Belarus in OECD bodies has been suspended, while the Organisation is working on new measures to strengthen support for the democratically-elected government of Ukraine, including for recovery and reconstruction.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Russia’s invasion of Ukraine has exacerbated the tightening supply of natural gas underway since mid-2021, further pushing up prices for consumers and leading to fuel switching and demand destruction. It also casts longer-term uncertainty on market prospects for natural gas, especially in developing markets where it was to play a central role in energy transitions.Natural gas demand is expected to decline in 2022 and remain subdued up to 2025. Europe’s surging pursuit of LNG to phase out Russian pipeline supply and limited global LNG export capacity additions raise the risk of prolonged tight markets. Faster development and implementation of clean energy transition policies, especially in mature gas markets, would ease price competition and help emerging markets access supplies that can contribute to short-term improvements in carbon intensity and air quality.This new issue of the Gas Market Report offers a medium-term forecast and analysis of global gas markets to 2025, as well as a review of recent developments in major regional gas markets during the first half of 2022.
Nuclear Power and Secure Energy Transitions: From Today’s Challenges to Tomorrow’s Clean Energy Systems is a new report by the International Energy Agency that looks at how nuclear energy could help address two major crises – energy and climate – facing the world today. Russia’s invasion of Ukraine and the disruptions in global energy supplies that it has fuelled have made governments rethink their energy security strategies, putting a stronger focus on developing more diverse and domestically based supplies. For multiple governments, nuclear energy is among the options for achieving this. At the same time, many governments have in recent years stepped up their ambitions and commitments to reach net zero emissions. Nuclear Power and Secure Energy Transitions expands upon the IEA’s landmark 2021 report, Net Zero by 2050: A Roadmap for the Global Energy Sector. It does so by exploring in depth nuclear power’s potential role as a source of low emissions electricity that is available on demand to complement the leading role of renewables such as wind and solar in the transition to electricity systems with net zero emissions.In this context, the report examines the difficulties facing nuclear investment, particularly in advanced economies, in the areas of cost, performance, safety and waste management. It considers the additional challenge of meeting net zero targets with less nuclear power than envisioned in the IEA Net Zero Roadmap, as well as what kind of cost targets could enable nuclear power to play a larger role in energy transitions. For countries where nuclear power is considered an acceptable part of the future energy mix, the new report identifies the potential policy, regulatory and market changes that could be implemented in order to create new investment opportunities. It also looks at the role of new technologies, particularly small modular reactors, and their potential development and deployment.
Russia’s unprovoked invasion of Ukraine has had a dramatic impact on the global energy system. Russia was the world’s largest oil and natural gas exporter in 2021, and energy markets have been thrown into turmoil, with major energy security and supply risks worldwide.Substantial gas resources currently are being produced that do not make it to market because they are lost to flaring and leaks across the oil and gas supply chain. This report estimates that nearly 210 billion cubic metres (bcm) of natural gas could be made available to gas markets by a global effort to eliminate non-emergency flaring and reduce methane emissions from oil and gas operations.If countries that currently export natural gas to the European Union were to implement these two measures, they could increase gas exports by more than 45 bcm using existing infrastructure, equivalent to almost one third of Russian gas exports to the EU in 2021.
Russia’s aggression against Ukraine has been since February 2022 undermining the latter’s capacity to harvest and export crops. A reduction in export capacity from Ukraine and Russia, and rising energy and fertiliser prices are pushing up international food prices, thereby threatening global food security. Findings presented in this brief suggest that the full loss of Ukraine’s capacity to export together with a 50% reduction in Russian wheat export could lead to a 34% increase in international wheat prices in the marketing year 2022/23.
Severe disruptions to global markets caused by Russia’s war on Ukraine have exposed vulnerabilities to the security of the supply of raw materials critical for industrial production and for the green transition. These supply chain vulnerabilities are the result of export restrictions, bilateral dependencies, a lack of transparency and persistent market asymmetries, including the concentration of production in just a few countries. A collective and co-ordinated approach among OECD countries can contribute to economic security, while preserving the benefits of open markets and a rules-based international trading system.
Given the unprecedented number and unique profile of Ukrainians fleeing their country in a short time following its invasion by Russia, as 50% of refugees are children, host country schools are facing challenges to increase their capacity and address the needs of the new refugee students. For children, returning to school can provide a sense of security and stability, while ensuring that they can have appropriate opportunities of developing their skills and do not suffer even larger losses later in life. Beyond the short-term integration of refugee students in schools and classrooms, host countries will have to deal with the promotion of the inclusion of students that will remain in the countries on a longer term. Early assessments, individualised curricula, language learning support and more will be key elements in the education of Ukrainian refugee students. Due to considerable uncertainty regarding the length of stay of refugee students from Ukraine in host countries, education systems will need to be flexible in meeting the needs of refugee students and providing opportunities to develop skills needed to prepare them for career paths after their return to Ukraine. Moreover, coordinated exchanges with Ukrainian policy makers and the provision of opportunities for students to stay connected with Ukrainian curriculum, language and culture are also important as many refugees may wish to return to Ukraine in the future. In sum, a holistic approach will be needed to address all the needs of Ukrainian refugee students, from a learning, social and emotional perspective.
Russia’s invasion of Ukraine has placed a heavy burden on host country schools and teachers. Indeed, refugee students need support beyond the development of academic skills, including assistance to integrate into the host society and support for the well-being. The challenge of providing this support falls largely on teachers in host countries, who may not have training to teach children who do not speak the language of instruction and who may require trauma counselling. Teachers need support in order to best respond to rapidly changing conditions and refugee students’ needs, including working closely with school leadership and non-instructional support staff and receiving relevant training. Moreover, countries will need to rely on Ukrainian teaching staff if faced by a personnel shortage. This will help them provide a sense of familiarity to the refugee students in both language and curriculum as students transition to the host language and host country curriculum. Additionally, this strategy can be rewarding for the refugee teachers, providing them with a sense of purpose as well as financial stability. Overall, implementing policies and allocating resources based on evidence from successful strategies can build capacity and provide teachers with needed support, with OECD countries providing examples of good practices.