27 Feb, 2023
By Mohammad Al-Jaber
The United States, like the great ally that it is, has dragged Europe into another conflict, this time right at home, and bleeding it dry economically and politically under the pretext of fighting Russia.
It is a tale as old as time; ever since their declared allyship in the wake of World War II and the global status quo amid the Cold War, the United States and Europe – at least Western Europe – have been as close as allies can be. However, the United States is quite the abusive partner, forcing Europe to bear the brunt of any conflict it gets into as it emerges unscathed from its far-away lands across the Atlantic Ocean, and the Ukraine war serves as another prime example of how the US treats its allies.
Months before the Ukraine war, the United States and its European allies began bolstering their eastern flank through NATO member states. Little did Europe know what it was diving headfirst into: years of brewing tensions between Russia and the United States over Ukraine and its treatment of the people of the Donbass, as well as its usage as a political tool in the face of Moscow, exploded, and Europe was covered in ash while Washington was watching everything unfold from the comfort of its distant lands.
The situation hit the fan; Russia was now knee-deep in Ukraine and the United States started using everything in its power, including Europe, to curb Moscow and bolster Kiev’s standing. Washington had many tools at hand, most notably sanctions on Russia and arms shipments to Ukraine, both of which would be quite costly for Europe, especially due to how inconvenient the time was, given that the world was just now going back into full throttle after the pandemic brought the entire global economy into a grinding halt.
The West, somehow underestimating the repercussions of an economy as tremendous as Russia’s being thrown out of the global market, sanctioned the country in a bid to “punish” it for going against their expansionist aspirations, and the sanctions in question were not your run-of-the-mill sanctions because we are not talking about your run-of-the-mill economy here. The sanctions at hand affected everything from natural gas to gold – key pillars in any economy aspiring not to crash – which had massive reverberations throughout the West, all the way from Germany to the United States.
Gas prices reached all-time highs, and the global economy was bracing for disaster as inflation was affecting some of its biggest players. Economic powerhouses such as Germany, France, and the United States were being driven up walls due to the economic woes they were experiencing, all of which they were attributing to Russia itself rather than admitting to having committed numerous mistakes when it came to the measures they took against Russia.
US economy holding up better
A swift study of inflation rates and energy prices would be more than sufficient to exhibit the suffering inflicted on the West in the wake of war:
According to Eurostat, the European Union’s official statistical office, inflation in the EU in November 2022 was 11.1%, a stark year-on-year increase from November 2021’s 5.2% inflation rate. The Eurozone, meanwhile, was also suffering, just a little less. In November 2022, the inflation rate in the Eurozone was 10.1%, a less significant year-on-year increase from November 2021’s 4.9%.
Energy prices, on the other hand, are something else entirely. What had been 82.81 euros per megawatt-hour in terms of monthly electricity wholesale prices months before the war in August 2021 in Germany rose to a whopping 469.35 euros per megawatt-hour, an increase of 466.7%, a year later in August of 2022, six months after the start of the Ukraine war and about three months after the West to decided to try and take Russia entirely out of the global energy market.
Other countries were not better off. In fact, some were dealt even worse hands, as energy prices in Italy soared 382.4% to 543 euros per megawatt-hour, in Hungary, they rose 354.4% to 495.65 euros per megawatt-hour, and in Switzerland, they rose 490.5% to 488.14 euros per megawatt-hour. France was by far the worst off, with a striking increase of 536.9% to 492.99 euros per megawatt-hour.
At the same time, energy prices in the US averaged $167 per megawatt-hour in August 2022, a very mild year-on-year increase from August 2021’s $144 per megawatt-hour, showing that the energy crises barely affected the United States as it was not at all reliant on Russian gas.
Historic lows
Of course, the governments of the EU states had to heavily subsidize electricity as their citizens would not be able to pay off their bills if they were as high as they were driven up due to the sanctions on Russia, which led the governments in question to print more money in order to cover all the new, extra costs they had, plunging the Eurozone into record-high inflation, the likes of which had not been seen in decades.
The euro had not gone down below a dollar per since the early 2000s when it hit the low of $0.98 in January 2000, a year-on-year depreciation of 15% against the USD. The euro went through more woes, dropping to as low as $0.83 before bouncing back above the threshold three years later. What must be understood is that the decline of the euro in 2000 was the consequence of a free market reigning in the West, with many investors selling the euros they were holding in anticipation of an appreciation in the Eurozone’s currency after it had been tied with the greenback for some time at that point, with impatience prevailing, which led the euro to lose value. Securities had dominated in the euro, but as it had been at near-parity with the USD, investors felt forced to sell as the US government was making various moves that made the US economy more attractive for investors, such as the US Treasury’s 30-year bond posting strong gains and the US government reporting that orders for durable goods sharply increased before the new years, prompting experts to speculate incoming interest rate hikes.
Many things just happened to go right for the USD at the same time, making the greenback tremendous gains and putting it above the euro until the dollar fell in 2003 and made for one of the causes of the 2000s energy crisis. All in all, the euro was holding strong against the USD for nearly two decades before it made a sharp drop throughout 2022 that culminated in the Eurozone’s currency briefly dipping below parity against the USD in August amid fears of a worse energy crisis.
The euro was doing tremendously for decades, but European countries being forced to subsidies energy for their citizens and businesses so as not to leave their economies in shambles led the USD to rise above the euro due to the inflation the money-printing machines caused. The euro reached a low of $0.97 in September 2022 after having been at $1.17 a year earlier. It managed to slightly recover since, selling at $1.10 in early February, nearing pre-war levels, but the latest data shows that the euro is now on a downturn even against a struggling USD that is being bolstered by austerity measures from the Federal Reserve.
Struggling across the Atlantic, still doing better
In light of all the suffering in Europe, the United States was doing quite badly for itself. With energy prices reaching all-time highs and inflation soaring uncontrollably, Washington was between a rock and a hard place.
However, it wanted to ensure that Europe was just in a bad a position and wanted to ensure its own prosperity at the expense of the Europeans’, selling them energy with stark hikes that were unbearable, which largely affected the euro and gave further impetus to the USD. French Finance Minister Bruno Le Mair even went as far as taking shots at Washington, saying it should not be allowed to dominate the global energy market as the EU suffers the consequences of the conflict in Ukraine, stressing that it was unacceptable to let the US export LNG at prices four times higher than those paid by companies in the country.
According to the Consumer Price Index (CPI) measurement, inflation in the United States increased by 7.7% in a year until October of 2022, rising at its slowest rate in nine months after topping a forty-year high of 9.1% in a year until June of 2022. The inflation rates, though better than the EU’s, were mitigated by the Federal Reserve raising interest rates consecutive times, increasing the rate by 4.25% between March and December of last year.
Meanwhile, as the US economy showed growth in Q4 of 2022, increasing by 2.9%, the Eurozone was left in the dust with a mere 0.1% in growth after experts were expecting a recession for one of the most significant economic players in the international arena. At the same time, the European Union’s economy was stagnant, remaining stable in Q4 of 2022.
Despite the lack of a recession in the Eurozone as a whole, the German economy contracted by 0.2% in the last quarter of 2022, prompting experts to believe that the economic powerhouse was heading into a recession.
Italy, the EU’s third-largest economy, also experienced negative growth, as its GDP contracted by 0.1% in Q4 of 2022. Both Germany and Italy were among the hardest hit due to their heavy reliance on Russian gas, the stream of which was cut off from Europe in light of the Ukraine war.
The latest signs are showing that the Eurozone is heading for a recession in Q1 or Q2 of 2023, with experts saying that the European Central Bank’s policy of economic tightening through various austerity measures will cause the region’s economy to struggle as households themselves struggle with the cost of living crisis and sluggish demand.
Buddy-buddy with the wrong guy
One key aspect of the crisis that the EU and the Eurozone have been hit by is that they were caused by a conflict that spurred out between Russia and the United States that Washington sought to turn into a proxy war by using its allies in Europe against Moscow rather than embroiling itself in any direct conflict.
The European Union is no stranger to getting dragged into conflict by the United States, but the extent to which Washington is alienated from the ongoing war is quite stark in comparison to previous wars.
As discussed previously in “Analysis of Euro-paralysis: Uncle Sam’s last Afghan stand” while shedding light on the United States dragging Europe into the Afghanistan war, when Washington dragged NATO into a multi-generational war in Afghanistan, the organization’s first commitment outside European territories, the United States is not the best ally one could have by their side.
In the end, the European hand was forced into Afghanistan, and the burden was basically split in half, with Europe reaping fewer benefits, the US was in control of a geopolitically significant country, and it was intimidating its regional foes, namely Russia, China, and Iran.
Europe has been the chief bearer of consequences whenever there was a US-related flop anywhere in the Eastern hemisphere, such as the Syrian refugee crisis that took place in the wake of the war on Syria. Alongside many other crises, this is a fine testament to Washington’s strategy toward Europe.
All that Europe gained from Afghanistan was more refugees, more dead soldiers, and wasted taxpayer money. The UK and Germany, the second-largest troop contributors, spent an estimated $30 billion and $19 billion, respectively, throughout 20 years of war in Afghanistan.
The situation today is not too different from how it was back during and after the Afghan war, as the United States is now emerging with loads of profits made from the war after having Europe spend hundreds of millions on Ukraine, with the Kiel Institute for the World Economy reporting that: “The United States, for example, spent more than 3 times as much per year compared to their expenses in the Afghanistan war after 2001 (measured as a percent of GDP). Germany committed more than 3 times as much to Allies in the Gulf War of 1990/91 compared to what it has committed to Ukraine (again measured in percent of GDP).”
According to the institute, “The Americans have earmarked a total of just over 73.1 billion euros for Ukraine support. For the EU, the comparable figure is 54.9 billion euros.”
The head of the German Chambers of Industry and Commerce said the Ukraine war will have cost the German economy around 160 billion euros ($171 billion), or some 4% of its gross domestic output, in lost value creation by the end of the year.
‘Give’ only to take
Though the United States gave more aid to Ukraine, around $20 billion more, Europe is still doing worse than the US. The US economy is doing far better than expected, especially as key companies, especially energy companies, and firms within the military-industrial complex, are making bank off the suffering of Europeans and Ukrainians alike.
The share price of Lockheed Martin was up 37% by the end of 2022 as the production of Javelin anti-tank missiles by the company increased from 2,100 to about 4,000 a year. The arms company signed a $7.8 billion contract on the modification of the F-35 aircraft and $431 million to deliver new HIMARS and “support services for the US Army and its foreign allies.”
Meanwhile, in November last year, the US awarded Raytheon a $1.2 billion contract for the supply of six National Advanced Surface-to-Air Missile Systems (NASAMS) to Ukraine. Last year, it was reported that Washington was intending to send 6,500 Javelin anti-tank missile systems made by Raytheon and Lockheed Martin to Ukraine. Other contractors, such as Boeing and Northrop Grumman, are among other profiteers from the war.
The EU is not making similar profits in light of all the losses it is dealing with. Even when it comes to post-war reconstruction efforts. “The Ministry of Economy of Ukraine and BlackRock, the world’s largest investment company, have signed a Memorandum of Understanding agreeing on a framework for consultative assistance in developing a special platform to attract private capital for the recovery and support of Ukraine’s economy,” the Ukrainian government announced in November, meaning the US is making profits when it comes to the destruction of Ukraine and is making profits when it comes to its reconstruction.
One conclusion can be drawn from the whole debacle surrounding Ukraine: The United States is using the situation to subvert Europe and leave its economy in shambles, prompting many to talk about the de-industrialization of the European Union, with numerous economic sectors, such as glass, chemicals, metals, fertilizer, pulp and paper, ceramics, and cement suffering in light of the ongoing crisis.
Additionally, with gas prices four times that of the US and six times higher than they were before, several industries are considering the option of relocating abroad for cheaper energy prices, meaning that at the end of the day, many European powerhouses might be left with nothing, or just crumbs, if this situation is upheld.
Europe is before a grim reality once again because of the United States, with its economy heading toward the ghastly unknown and its industry dealing with the repercussions of terrible policy-making. Europe, once a US ally, might become a vassal for Washington as it grows more dependent on a country that only seeks to exploit it to bolster its standing in the international arena.
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- West in too deep in Ukraine war, ‘can’t afford’ to lose: Newsweek
Filed under: EU, Europe, France, Germany, NATO Alliance, Russia, Ukraine, USA | Tagged: Energy crisis, Eurozone, LNG, Russian gas and oil, Syrian refugees | Comments Off on The US scapegoat: Europe dragged into yet another conflict
UPROOTED PALESTINIANS: SALAM ALQUDS ALAYKUM 