Horses, bourbon, cyberattacks: Here’s how the war in Ukraine will most affect Kentucky.

Since Russia invaded Ukraine three weeks ago I’ve answered a lot of questions about the war. This is part of my job; the Patterson School of Diplomacy and International Commerce at the University of Kentucky was created to help keep the people of the Commonwealth informed about foreign policy.

The two most common questions have been “will this lead to World War III?” and “how does this affect us here in Kentucky?” On the first I remain optimistic that we’ll avoid the worst. On the second, my first answer is that it’s bad for everyone, everywhere when a large country eats its neighbor. A more direct answer involves looking at how international events affect the commonwealth. Kentucky is connected to the international system in ways that the public (and often elected officials) do not always readily perceive. Certainly, the war has had the same effects on Kentucky’s economy that it has had worldwide, including spiking gasoline and energy prices. But the war could also affect some of Kentucky’s most important industries:

Bourbon

Neither Ukraine nor Russia are significant importers of Kentucky bourbon. Total sales to either are essentially a rounding error on total bourbon exports, much less exports plus domestic production. Still, some bourbon producers perceived Russia to be a potential growth target, an assessment which is surely now dead. On the other hand, the unified stance of the West against Russia probably reduces the chances that bourbon will again become trade war tariff target. In the long term, reduction of Russian and Ukrainian vodka exports will open at least a little space for domestic liquor producers.

Horses

A relationship had begun to develop with Russian buyers at Keeneland (four Keeneland graduates have won the prestigious Russian Derby since 2014), but the war will undoubtedly nip that in the bud. In 2019 Russians purchased 112 horses for $4.1 million, a number that’s neither huge nor trivial compared to overall Keeneland sale numbers. The International Equestrian Federation (FEI) has suspended both Russia and Belarus from participation in any events, a suspension that (along with the financial sanctions against Russia) will likely end the relationship between the Russian and Kentucky horse industries for the time being.

Cyber

Institutions across Kentucky have suffered cyberattacks from malicious actors from both Russia and Ukraine, although more the former than the latter. Medical facilities in particular have attracted the attention of criminal ransomware gangs, although the major universities have also come under attack. A cyber conflict between the United States and Russia is that dog that has yet to bark in the war so far, but we can’t discount the possibility that we may see a massive increase in attacks against the commonwealth’s cyberinfrastructure.

Soldiers

Kentucky has two major US Army bases, and troops from Fort Knox have already been deployed to Eastern Europe. If tensions continue to increase (and at this point we should expect them to do so) more troops from Kentucky bases may find themselves in Poland, the Baltics, and other parts of Eastern Europe, which will impact those communities. In addition, many Kentuckians serve in the US armed forces, and they and their families will necessarily feel the impact of deployments to Eastern Europe. Kentucky is also home to companies that play an important role in the military aerospace agency. If this war results in an increase in arms exports (and increased European military spending would seem to suggest so), then Kentucky will eventually feel the effects

Natural Gas

Kentucky does not as of yet produce a major portion of America’s natural gas. However, Kentucky’s reserves of unexploited natural gas could be substantial. On the first day of the war Germany canceled the Nord Stream 2 pipeline (a gas pipeline linking Germany to Russia) and declared its intention to reduce its dependence on Russian gas. If Russian gas is taken off the market, this may generate opportunities for further gas exploration in Kentucky, with an eye towards domestic usage and another eye towards the international energy market.

Students

Neither the University of Kentucky nor the University of Louisville have many students from Ukraine or Russia. A decade ago the Muskie Graduate Fellowship Program facilitated the study of dozens of graduate students from the former Soviet Union at universities in the Commonwealth. Now, fewer than twenty Russian or Ukrainian students have enrolled at either UK or UL, and numbers at other universities across the state don’t seem much higher. To be sure, this does not account for students of Ukrainian or Russian ancestry, both of which are evident across the state’s university system.

Kentucky is a land-locked state with only its short Virginia border preventing it from being double-land-locked. Nevertheless, Kentucky’s economy is exposed to the world and dependent on international engagement. The state’s pension system has already changed its investment policies based on Russian behavior. Thus, the impact of a Russian bomb dropped on Ukraine is felt here in the Bluegrass.

Dr. Robert Farley has taught security and diplomacy courses at the Patterson School since 2005. He is the author of “Grounded: The Case for Abolishing the United States Air Force” (University Press of Kentucky, 2014), the Battleship Book (Wildside, 2016), and Patents for Power: Intellectual Property Law and the Diffusion of Military Technology (University of Chicago, 2020). Dr. Farley is also a founder and senior editor of Lawyers, Guns and Money.

This story was originally published March 17, 2022 at 8:40 AM.