by Federico Rampini
High inflation, fueled by energy costs, affects household purchasing power and business accounts. The fall of Wall Street is not reassuring
Does America really benefit in this conflict? a theory dear to Italy’s Putinians. They present it as a certainty: the United States would benefit from the war, so it has an interest in it lasting as long as possible. The fact that US stock market indices have plummeted since Russian aggression against Ukraine began should raise doubts. If this war really was a deal for the American economy, the news would not have escaped investors’ notice. Those who have their finger on the pulse of the American market are gripped by pessimism.
The only concrete basis for the above theory is gas and arms sales. A comparison with reality makes sense for these two areas. America is an energy superpower, has been self-sufficient for years and exports various types of hydrocarbons. The US gas industry did not need the war in Ukraine. Exports were already highest last year, especially to China and Japan. Now it diverts some of those sales to Europe, not on a large scale because the old continent has few regasifiers to process the liquefied gas transported by tankers.
In addition, the gas industry is not increasing production as much as Joe Biden has to continue issuing new production permits under pressure from environmentalists. The profits for the oil and gas industry are undoubtedly plentiful. But America is not a petrostate like Russia, it does not have an economy based primarily on the sale of energy. The weight of this limited sector has dwindled and continues to dwindle compared to when George W. Bush began the war in Iraq. Symbolically: The largest of the American oil companies, Exxon Mobil, was removed from the Dow Jones stock market index in 2020 due to insufficient capitalization. a dwarf compared to the powerful forces of US capitalism, almost all in big tech, all energy consumers, no producers. Decarbonisation is also being financed, banks and investment funds are divesting themselves of fossil energies and investing in renewable energies. The rise in gas prices is benefiting the balance sheets of a tiny part of the US economy while hurting everyone else, businesses and consumers alike. Inflation is also punishing Biden’s popularity.
As for the weapons, which, unfortunately, are sold in every war, they are not only made in the USA, because the top producers in the world market include Russia, China, France, Germany, Italy and others. On the American side, the Washington Congress yesterday approved an aid package for Ukraine. The value of $40 billion, and with it the amount that the United States has paid to Ukraine since the beginning of the conflict, rises to $54 billion. Almost half are economic aid, the rest weapons. To get a sense of proportionality, it may be helpful to compare the pro-Ukrainian law to other recent spending moves. For example, the $5 trillion in aid to American families and businesses for the pandemic. Or the $2 trillion investment in infrastructure that Biden has enacted. In comparison, Ukraine’s military spending is a trifle that leaves no trace in the world’s richest economy.
Thanks to the war, the latter is not brimming with health, on the contrary. High inflation, which is also fueled by rising energy costs on the domestic market, is affecting household purchasing power and corporate balance sheets. The strong dollar (safe haven currency in crises) weighs on exports. Fears of recession are increasing. The fall of Wall Street confirms that America was better off before this war and would gladly forego its consequences.
Another thing is the long-term geopolitical scenario that the United States – perhaps if Hungary, Turkey and Italy allow it – gathers greater Western cohesion. Here we enter a different sphere, and where the American gain is only the result of a strategic mistake by Putin anyway.
Less than a year ago, the American withdrawal from Kabul – which took place under circumstances so dramatic that they led to talk of a DBC – pointed the whole world to the Biden doctrine: This America does not have the means to be the US gendarme his world, she needs to focus on that “the only challenge that matters (with China) is to detach from other responsibilities. Russia’s aggression against Ukraine has created an opportunity consistent with this goal: to strengthen NATO while finally allowing Europeans to shoulder the cost of their own security with more resources. If Putin even managed to terrorize the Finns and Swedes by forcing them out of neutrality, he generated the geopolitical advantage for America in the form of alliance expansion.
It’s a win that involves risk and the unknown. Biden must be careful not to be dragged into an old role – from the First Cold War – by his globalist establishment, which overexposes him in Europe. The doctrine that China is the only long-term strategic rival remains valid, and indeed Biden is visiting Japan and South Korea to reinforce attention to the Indo-Pacific.
Another long-term unknown concerns the solidity of America’s commitment to NATO and the White House’s attention to Europe’s problems. The large bipartisan majority in Washington’s Congress that approved aid to Ukraine is a comforting sign at a time when Democrats and Republicans are at loggerheads. For a future Republican president, he might be less Atlantean; it would force NATO’s European pillar to shoulder greater defense burdens. For those calling for the birth of an autonomous European defense, a very popular saying applies here: Beware your wishes, your wish may come true.
May 20, 2022 (Modification May 20, 2022 | 21:39)
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