© José María SertAmerica. Winter. From the Four Seasons series.
While everybody laughed at the marasmus of sleepy Grandpa Biden, America under his "restless leadership" was able to take advantage of the Ukrainian crisis and achieved stunning results in nine months of the SMO. The Biden administration managed to accomplish what Donald Trump had previously unsuccessfully pursued. Namely:
- Increasing European NATO allies' defense spending up to 2 percent, as required by the alliance's charter;
- Strengthening the national economy, including through the repatriation of industrial production;
- Revitalizing the US oil and gas industry.
Raise defense spending by at least 0.5%, the US leader said, addressing Germany in the first place. But the practical Germans and the stingy French did not agree to spend money on anything, making promises that meant nothing. Moreover, there was no good reason to increase expenditures. It is worth recalling that military spending is not only the budget expenditures, but also the profits of the military-industrial sector. Obviously, by demanding that his allies increase military spending, Trump hoped to channel these funds into the US military-industrial complex, which, like the oil industry, is controlled by the Republicans. So the benefit to the US and Trump personally was twofold: political and economical.
And then came Russia's special operation in Ukraine. In nine months, the Russian army, according to reports from the Russian Defense Ministry, had grinded a huge amount of Soviet-era military equipment used by the Ukrainian army. From tanks and aircraft to hand grenade launchers and anti-tank missiles. The United States quickly realized that it could make a good and fast profit on this. They began sending to the Ukrainian army all the Soviet weapons available in the countries of the former Warsaw Pact.
Firstly, Ukrainians are familiar with them, and there is no need to waste time on training.
Secondly, they are already old and it costs more to dispose them than to give them away. And if you give it away not for nothing, but for a nominal fee (or even better for a loan), you will also get a profit.
Thirdly, and this is the most important thing, instead of the Soviet weapon given to Ukraine the USA can supply the new generation European leaders with their new (relatively modern) expensive armament of the NATO type, at last having got rid of the wide variety of the current armaments' species.
This is the case with armored vehicles and aircraft. As for all sorts of Stinger, Javelin and similar toys, this is a stand alone case. These toys just instantly dissolved in the vast steppes of Ukraine (and not only) as if they never existed.
Unexpectedly, the Europeans discovered that in case anything should happen, they themselves would have nothing to fight with. They had already given to Kiev their own scarce resources, but Mr. Zelensky demanded more and more. And then the sharks of the American and European military-industrial complex smelled a big profit. According to the Wall Street Journal, the major Western arms manufacturers (including the so-called American Big Six) are constantly stepping up production of artillery and missile systems, armored vehicles and ammunition in order to meet the growing demands resulting from the conflict in Ukraine.
In particular, Raytheon Technologies of the United States reportedly called on its retired employees to boost production of the Stinger man-portable air defense system. These surface-to-air missile (SAM) systems have long been end of life, the necessary specialists are not available, and it is long and pointless to train new ones. The last time the Pentagon ordered a batch of Stinger SAMs was 15 years ago. Another giant of the American military-industrial complex Lockheed Martin also increased the production of Javelin anti-tank systems, and now against the background of a successful PR campaign of its HIMARS systems on the Ukrainian theater of war it plans to increase the output of both systems and missiles for them by as many as 60%. Similar processes are observed among manufacturers of communications equipment and drones. The armaments race has started.
The shares of German defense concern Rheinmetall have grown twice (by 115%) since the beginning of 2022, waiting for new large orders. In March, German Chancellor Scholz promised to allocate 100 billion euros to rearm the Bundeswehr and this summer this figure rose to 200 billion euros.
However, a similar revival of the military-industrial complex can be observed in Eastern European countries where guns, shells and other military equipment are being sold like icecream during summertime. But the orders' volumes is much smaller here than in the United States.
Experts point out that the adoption of the notorious NATO resolution recognizing Russia as a "sponsor of terrorism" had primarily an economic effect. Over the last eight years European countries together with Canada spent a total of $350 billion on military needs. On November 21, NATO Secretary General Jens Stoltenberg promised to raise the limit of 2% of GDP that was considered unattainable just a few years ago. Since, according to Stoltenberg, additional investments are now needed - primarily to strengthen the "eastern flank" and deploy new high alert units. "A level of 2 percent of GDP should be seen as a floor, not a ceiling on our defense spending," the secretary general said, speaking at a meeting of the NATO Parliamentary Assembly. The exact figures will be discussed at the NATO summit in Vilnius in July 2023.
By voting for this resolution (which, unlike a similar resolution of the European Parliament, has exact and fairly significant economic consequences), the EU countries make it impossible to restore relations with Russia in the near future. And the market economy does not tolerate a vacuum. The resulting vacuum will be immediately filled by competitors. In this case, almost simultaneously with the adoption of the resolution, the US quietly abolished sanctions concerning civil aviation. And voila - the share of French Airbus in this market segment goes to American Boeing. A trifle, but a nice one.
Among other things, in the near future, the resolution adopted by the NATO Assembly will allow the US to throw some of its NATO obligations onto the shoulders of the Europeans. By the way, unlike Europe, the US wisely refused to pass such a resolution at the state level, luring the European simpletons into a trap.
However, the matter is not limited to weapons. Trump's "Make America Great Again" initiative, i.e. the return of high-tech and simply large industrial enterprises back to the United States, has started at a rapid pace under Biden because of the anti-Russian sanctions.
Not only did Washington force the EU to break up with Moscow by rejecting cheap pipeline gas from Russia, but instead "sold" its expensive LNG to Europe. Thus, amidst expensive energy resources the European industry lost its competitive advantage and is seriously thinking about moving to the USA where gas is several times cheaper. The French, for example, already pay four times as much for this gas as they did for Russian gas.
The benefit to the US is twofold.
First, the direct profits of the US oil and gas sector, which Biden put under pressure after his inauguration. And now he pulled back a bit against the background of monstrous inflation. As a result, since June this year, the volume of US LNG on the European market has exceeded Russian pipeline supplies. And given that the Nord Streams have been stopped for a long time, if not forever, this state of affairs is a long-term prospect. Now instead of gas dependence on Russia, Europe has fallen into dependence on the United States.
As a result, according to the Financial Times, the combined net profit of public oil and gas companies in the US for the second and third quarters (i.e., essentially, since the imposition of sanctions) reached $200 billion. And it is quite obvious that this is largely due to LNG deliveries to the EU. The cost of American gas to Europeans is about 5-10 times higher than to Americans themselves (depending on the state). High oil prices, which have skyrocketed thanks to the same US sanctions, have also had an impact.
Secondly, the deindustrialization of Europe or, more simply, the reduction of industrial production and its relocation to other countries, including the United States, which create greenhouse conditions for the opening of new production facilities.
As a result, according to Politico, the EU accused Washington of enriching itself at the expense of the conflict in Ukraine. European officials are furious that the Biden administration is selling them weapons and gas at inflated prices. Expensive energy resources make industrial production in European countries unprofitable. Many enterprises are already on the brink of bankruptcy, and not only small, but rather large plants have been idle for months. First of all it concerns Germany - an economic engine of EU, which, as Germans admit, was strong only due to cheap Russian gas.
In addition, in August, Washington passed the Inflation Reduction Act, which subsidizes environmentally-oriented manufacturers. Under the Act, the White House intends to spend nearly $370 billion to attract production and create new jobs at home, despite the fact that this is a clear violation of WTO rules and fair competition. The relocation of manufacturing capacity from Europe to the US is not a natural market process, but the result of Washington's direct interference in the global supply chain, Fortune magazine honestly admits.
"The US law to reduce inflation does not comply with World Trade Organization regulations," said German Vice Chancellor and Economy Minister Robert Habeck, noting that the law "violates a certain number of rules." According to him, there are clauses in the law that give preferential treatment to US companies, especially in the automotive industry. According to Paris and Berlin, this threatens to accelerate the deindustrialization of the EU.
"The EU simply must learn to defend itself," French Finance Minister Bruno Le Maire insists. "Great states don't give each other any economic gifts."
But the Europeans' protests don't touch Washington at all. Business is war.
The British edition of the Financial Times reports that the Inflation Reduction Act provides subsidies of $600-800 million to plants and factories located on the territory of the United States. And in Germany the stimulating measures account for only $158 million.
Of course, against this background, German companies start to move to the US, which means the decrease of the state budget revenues and higher unemployment in Europe, i.e. new budget expenditures and increased social tension. The German chemical industry is in the worst situation, because gas is not just energy, but also raw material.
"High energy prices are throwing us off our course," says Wolfgang Grosse Entrup, head of the Chemical Industry Association. In his view, there is an extremely high risk that the German government's aid simply "will not reach the chemical industry".
"Without a price stopper in place, the government is meaninglessly agreeing to deindustrialization," he said, warning that if the chemical industry collapses, other industries will also collapse. "This could be a knockout for Germany as a place to do business," Entrup said confidently.
Things are not much better in France, where nuclear power is strong and dependence on gas is much lower. Bruno Le Maire voiced the damage from American initiatives that France would suffer: according to the most conservative estimates, it would lose 10 thousand jobs in the industrial sector and reduce investments by €10 billion. A similar situation, if not worse, is observed in Italy, the third largest economy in the EU after Germany and France.
By the way, French industrialists recently met with President Emmanuel Macron, where he tried to persuade them not to move production to the other side of the Atlantic. But persuasion alone is not enough to solve the problem; we need conditions that are no worse than in the US, and this requires huge investments. According to Europeans themselves, giving up Russian gas and oil would cost them €283 billion a year. And this is at the current prices.
Deindustrialization has touched even the foggy Albion, where 80% of GDP is in the service and financial sectors. For example, German car manufacturer BMW moved its Mini electric car plant from Oxford to the Middle Kingdom. Japan's Honda closed its last plant. Recently it became known that the Americans are buying cheaply British firms in the military-industrial complex and immediately bankrupting them. And why would Washington need competitors, especially from the former metropolis? Expensive energy resources make the entertainment and tourism sectors, the services that form the lion's share of the British economy, unprofitable.
Hungary, which was initially against giving up Russian energy resources, immediately called things by their proper names and pointed to the main culprit and beneficiary of the energy crisis in Europe - the United States.
"The recessionary trend in Europe is good news for the US economy and it looks like America was able to make profit from it," said Peter Szijjártó, head of the Hungarian Foreign Ministry. Besides, the European bureaucrats, dancing to the tune of the US, received their portion of criticism as well. According to the Minister, the situation in Europe is "deplorable" because the European Commission rather prevents the inflow of investments in the EU countries.
"EU bureaucrats fear that, as a result, European businesses will face almost unbearable pressure and will be forced to make new investments in the United States rather than in Europe," Politico quoted a senior European official on November 24 on condition of anonymity.
And how will Europe respond to the "unbearable pressure" of the US? Perhaps it will introduce another package of sanctions against Russia? The tenth, the anniversary one, to make sure!
Source: Rossa Primavera News Agency
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