When Vladimir Putin ordered Russian troops into Ukraine in February 2022, the Kremlin’s message was crisp and confident: this would be a swift, surgical “special military operation,” expected by many in Moscow to last mere days. Nearly two years on,that three‑day fantasy has dissolved into a grinding war of attrition reshaping not just the battlefield,but the global economy,energy flows and the balance of power in Europe.
For London and other financial hubs, the miscalculation has had far‑reaching consequences. Sanctions once considered unthinkable have become routine tools of policy. Russian assets have been frozen, energy markets upended, and long‑standing assumptions about defense spending, supply chains and geopolitical risk have been rewritten. Investors, corporates and policymakers are now grappling with a world in which a “limited” conflict has metastasised into a structural shock.
This article examines how Putin’s failed three‑day operation has evolved into a protracted confrontation with the West, what it has meant for London’s status as a financial center, and why businesses can no longer treat the war as a temporary disruption to be waited out.
How the promised three day operation became a protracted war reshaping Europe
In February 2022, the Kremlin sold the world a narrative of swift regime change and minimal disruption, a lightning strike that would be wrapped up before global markets had time to react. Instead, Europe now finds itself in the midst of a grinding conflict that has redrawn political red lines and upended economic certainties. NATO’s eastern flank, once a strategic backwater, has become the alliance’s most heavily fortified frontier. Formerly neutral states have reassessed their security doctrines, while defence budgets, long stagnant, have surged across the continent. The war has also forced European leaders to confront uncomfortable truths about energy dependence, military readiness and the fragility of global supply chains.
What began as a narrowly framed “special operation” has evolved into a structural shock that is reshaping national priorities and corporate strategies from Warsaw to Westminster. Governments are not just reacting militarily; they are recalibrating entire policy frameworks, with a renewed focus on:
- Energy sovereignty and accelerated transition away from Russian hydrocarbons
- Defence industrial capacity and long-term munitions production
- Sanctions architecture and financial de-risking from authoritarian regimes
- Support for Ukraine as a test of European credibility and cohesion
| Shift | Before 2022 | Now |
|---|---|---|
| Defence spending | Below 2% in many EU states | Rising to or above NATO targets |
| Energy policy | High reliance on Russian gas | Diversification and LNG build-out |
| Security posture | Limited eastern deployments | Permanent presence and new bases |
The economic fallout for London and global markets from a miscalculated invasion
What was billed in Moscow as a lightning strike has become a grinding war that London’s markets now treat as a semi-permanent risk premium.The City has had to absorb an energy price shock, a scramble to unwind exposure to sanctioned Russian entities, and a surge in volatility that has reshaped everything from FX desks to commodity trading floors. Sterling has seesawed alongside shifting expectations on Bank of England rate moves, while FTSE-listed energy and defence stocks have often risen on the very instability that has weighed on consumer-facing sectors. Behind the indices, compliance teams, in-house counsel and risk officers report a quiet boom, as firms pay for the expertise needed to navigate ever-evolving sanctions and fractured payment channels.
Yet the displacement of capital is as important as the destruction of confidence. Russian money once parked in London property and financial assets has drained away or frozen, accelerating a re-rating of prime real estate and spurring a broader debate over the City’s role as a magnet for opaque wealth. Simultaneously occurring, global investors are rebalancing towards “friend-shored” supply chains and more politically predictable jurisdictions, creating thinly veiled winners and losers. Among the shifts now visible to traders and CFOs alike are:
- Repriced risk for European assets, with a persistent geopolitical discount baked into valuations.
- Energy reshoring and long-term LNG contracts reshaping London-based commodity trade flows.
- Arms and cyber-security spending feeding new revenue pipelines for UK-listed contractors.
- Fragmented clearing and settlement as Western and non-Western blocs drift further apart.
| Market Move | London Impact | Global Signal |
|---|---|---|
| Energy price spike | Higher input costs, windfall gains for oil & gas majors | Inflation shock, tighter monetary policy |
| Sanctions escalation | Exit from Russian assets, legal & compliance boom | Fragmentation of capital markets |
| Defence budget rise | Outperformance of UK defence stocks | Rearmament cycle in NATO economies |
| FX volatility | More trading volumes, hedging demand in the City | Risk-off flows to dollar and safe havens |
Military missteps intelligence failures and what they reveal about Kremlin strategy
Russian forces advanced into Ukraine believing they faced a fractured state, demoralised army and a passive West. Rather, they met entrenched defences, agile local commanders and a stream of real-time intelligence shared by NATO partners. The now-infamous dash towards Kyiv exposed a series of miscalculations: overextended supply lines, poorly coordinated air-ground operations, and the deployment of elite units as if they were riot police rather than shock troops. These failures were not isolated errors but symptoms of a command system built on fear, filtering bad news and rewarding loyalty over competence. At the tactical level, units lacked modern communications and battlefield awareness; at the strategic level, the Kremlin appeared to rely on political assumptions rather than verifiable data.
The pattern that emerges is less of a precision war machine and more of a regime willing to trade soldiers for narrative control. Rather of recalibrating after early setbacks, Moscow doubled down with familiar tools:
- Escalation of bombardment on civilian areas to break morale
- Information warfare to reframe defeats as “regrouping”
- Coercive mobilisation to plug frontline gaps with minimally trained conscripts
- Opaque casualty reporting to preserve domestic support
| Assumption | Reality on the Ground | Strategic Lesson |
|---|---|---|
| Rapid regime collapse | Resilient government in Kyiv | Political intel heavily distorted |
| Weak Ukrainian military | Mobile, adaptive defence | Enemy capabilities underestimated |
| Divided Western response | Unified sanctions and arms supply | Global backlash misjudged |
| Short, contained conflict | Protracted, high-cost war | Kremlin prepared to absorb attrition |
Policy lessons for Western governments mitigating risk and preparing for the long haul
Western capitals need to accept that deterrence is no longer a static Cold War relic but a living system that must flex with each battlefield setback or breakthrough. That means investing not only in tanks and artillery, but in resilient supply chains, semiconductor security, and energy independence that can survive years of sanctions blowback and price shocks. It also means creating ring‑fenced, multi‑year defence and reconstruction funds protected from election cycles, along with fast‑track procurement rules that cut through peacetime bureaucracy. Above all, governments must treat public opinion as a strategic asset: transparent briefings, coordinated messaging with allies and honest assessments of costs can blunt disinformation and sustain support when the conflict inevitably drags on.
- Lock in long-term funding through cross‑party pacts and automatic budget triggers.
- Harden the home front with energy diversification, cyber-defence drills and stockpiles of critical materials.
- Professionalise sanctions policy via permanent units that track evasion and update measures in real time.
- Invest in Ukraine’s viability with targeted aid for governance, anti-corruption and defence industrial capacity.
| Priority Area | Short-Term Move | Long-Haul Goal |
|---|---|---|
| Defence | Rapid ammo surge | Shared EU-NATO production hubs |
| Energy | Gas storage guarantees | Full exit from Russian hydrocarbons |
| Information | Joint fact‑checking cells | Societies resilient to propaganda |
| Finance | Freeze elite assets | Use windfall gains for Ukraine’s rebuild |
Concluding Remarks
Putin’s “special military operation” has proved anything but swift or surgical. What was billed as a three-day dash to Kyiv has become a grinding war of attrition, reshaping Europe’s security architecture, testing Western unity, and straining Russia’s economy and political system in ways the Kremlin did not publicly foresee.
For London and other financial centres, the conflict has redrawn the map of risk: sanctions regimes are now a permanent feature of the landscape, energy security has become a boardroom priority, and exposure to authoritarian markets is under closer scrutiny than at any point as the Cold War. What happens on the battlefield will continue to matter-but so too will the quieter decisions being made in trading rooms, ministries and corporate headquarters.
As the “three-day operation” stretches into its third year and beyond, the central question is no longer how quickly this war can end, but how deeply its consequences will be felt in the global economy, and how prepared businesses are to navigate a world in which geopolitical miscalculation can upend assumptions overnight.
