The impact of Russia’s invasion of Ukraine dominated a delayed and slimmed-down World Economic Forum this year but it took George Soros to articulate what many of those making the trip to the Swiss Alps had been thinking.
Davos would not be Davos without a broadside from the 91-year-old philanthropist and former speculator, but the conflict in eastern Europe prompted his most apocalyptic warning yet.
“The invasion may have been the beginning of the third world war and our civilisation may not survive it,” he said.
Others were voicing similarly dark thoughts – some publicly, some privately. So much so, that at times it felt as if the meeting was taking place not in May 2022 but in July 1914 or August 1939, times past when the world has stood on the brink of the precipice.
The historian Adam Tooze said: “The war dominates everything. The nuclear escalation risk is not being priced in. This doesn’t feel like cold war. It’s hard to think of a time during the cold war when the US openly announced its policy was to eliminate the capacity of Russia to take independent military action.”
Similar sentiments were expressed by a senior policymaker who pointed out that a global pandemic had been unthinkable in early 2020, a near-coup in Washington incited by Donald Trump had been unthinkable in January 2021 and a war between Russia and Ukraine had been unthinkable at the start of 2022. “Why should we think the unthinkable ended with the start of the war?”
Jens Stoltenberg, the secretary general of Nato, said the west’s military build-up in eastern Europe was designed to deter Vladimir Putin rather than provoke him, but even if Russia resists the temptation to push the nuclear button it has other ways to escalate the conflict.
Solidarity with Ukraine was total. In previous years, one of the hottest ticket at Davos was an invite to the champagne and caviar bashes thrown at the Russia House on the Promenade. This year, no Russians were invited and the party premises became the “Russia War Crimes House”, where Ukraine displayed evidence of atrocities committed since the start of the invasion.
But solidarity with Ukraine comes at a cost, as was clear from many of the sessions. It was taken as read that the war would be bad for the global economy, with the only dispute about exactly how bad. Estimates ranged all the way from a mild dose of stagflation through to Soros’s prediction of a depression.
There was no sense in Davos of the west easing its sanctions on Russia but fears over the health of the global economy reflected the fact that Putin has economic weapons at his disposal – energy and food – and has already shown a willingness to use both of them.
The Kremlin has cut off gas supplies to Poland, Bulgaria and Finland, and the European Union expects to be hit by a blanket embargo this winter, assuming there is no early end to the war. Few in Davos believe peace will have broken out by the time the WEF’s annual meeting reverts to its normal mid-January slot in 2023. “We can handle it,” one European policymaker said, “but it is not going to be easy.”
Higher gas and petrol prices since the start of the war three months ago have added to inflationary pressures in many countries, prompting central banks to raise interest rates.
But for those attending Davos – and there were fewer of them than usual – it was food not energy that was the more immediate threat. Ursula von der Leyen, the president of the European Commission, said Putin was “weaponising food” by seizing Ukraine’s grain and blockading Black Sea ports.
Kristalina Georgieva, the managing director of the International Monetary Fund,, said: “The price of food is going up, up, up, up. We can shrink our use of petrol when growth slows down but we have to eat every day.”
Achim Steiner, administrator of the UN Development Programme (UNDP), said developing countries were faced with a triple threat: a food crisis, a fuel crisis and a financial crisis. Sri Lanka was the first country to default on its debts since the start of the war, but the IMF fears it will not be the last to require its financial help.
It wasn’t supposed to be like this. After two years dominated by the global pandemic, this was billed as the Davos where the global movers and shakers breathed a sigh of relief and planned for a sustainable recovery. The idea was to harness new technology to forge a green future in which growth would be consistent with tackling climate change.
In reality, the effects of the pandemic have lingered on, with China’s lockdowns to combat the spread of Covid-19 weakening global demand and adding to bottlenecks. Meanwhile, countries starved of Russian gas are turning to coal as a substitute.
As one climate change expert put it, countries made commitments at the Cop26 conference in Glasgow to limit the rise in global temperature to 1.8C but had yet to turn pledges into action. As things stood, temperatures would rise by 4C.
In the longer term, the hope in Davos was that the war, and the vulnerability to Russia it has exposed, would hasten the transition from fossil fuels to renewable sources of energy. The prospect of countries accelerating progress to net zero provided a rare glimpse of sunshine in what has otherwise been a sombre affair.
