Europe is seeing inflation continue to rise to ever higher levels. At the same time, it is seeing the potential for recession, as huge rises in energy prices, and food prices bite into disposable incomes. This week, saw gas prices rise by over 1000%, for example.
The inflation in Europe is not a consequence of these high energy prices. Inflation is a monetary phenomenon, and the rise in prices is a result of the massive amounts of money printing undertaken by the ECB over recent years, as it attempted to boost asset prices following the financial crash of 2008, and the Eurozone Debt Crisis of 2010. But, much higher energy and food prices either impact consumer spending, if workers don't get compensating wage rises, or else they seriously hit profits, if they do, which would impact the potential for capital accumulation. Either way, those higher costs are impacting the European economy, and if gas supplies are reduced further, it seems inevitable that the European economies will suffer a severe recession come the Winter, as firms have to shut down due to lack of energy supplies.
Yet, this situation is absurd. The reason that oil and gas prices rose so sharply, in Europe, is that the EU acting as a pawn of US imperialism, decided to try to restrict its imports of oil and gas from Russia. As I wrote a while ago, in terms of oil that meant that European countries seeking an alternative to Russian oil could only find an equivalent from the US. The US oil companies duly diverted oil to Europe where it could get these much higher prices, and, in the process left the US market depleted of supplies, causing oil prices in the US to spike higher, which then caused the higher gasoline prices that Biden has found such a problem in the run up to this year's mid-term elections.
Had, the EU not decided to cut its own nose off to spite its face, by denying itself access to cheaper Russian oil, it would not have had that problem. But, its problem with gas is even greater, because countries like Germany and Italy, are massively dependent on Russian gas, including for its use to generate electricity. Although there was mindless talk about switching to alternative energy, or gas from elsewhere, it was surreal, because none of those alternatives are ones that are practicable in less than a decade. Yet, Germany, under pressure from the US and Britain, decided to block its gas supplies from the new Nordstream 2 gas pipeline, and then, also proceeded to impose further US and UK inspired sanctions on Russia that were bound to provoke a response.
Of course, the US is not affected by any of that, because it is self sufficient in oil and gas, and makes money from selling both in the world market, and more money when oil and gas prices rise. Britain too, still has supplies of oil and gas from the North Sea, and takes no gas from Russia. Both of course, are now global competitors of the EU, and indeed, it is actually the EU that is still the world's largest economy and main competitor to US imperialism, with Britain trying to act as the latter's poodle and be dragged along on its coat tails. Anything that weakens the EU economy is beneficial to the US, and certainly beneficial to a UK whose economy is being wrecked by the idiocy of Brexit, and whose politicians are trying to save their own skins, as that chaos unwinds, by becoming ever more bellicose in their own relations with the EU.
Its hard to understand why the EU should agree to destroy itself as a pawn of US and UK imperialism by acting in this way. Perhaps, the EU politicians believed their own and NATO propaganda that Russia was going to lose in Ukraine, or more ridiculously that Putin himself was on his last legs, and that a change of regime was imminent in Russia. They might have thought that such sanctions and other measures would then be to coin a phrase "transitory". They should have known better, and, of course, Russia appears close to having achieved its objective of securing the Donbas, and moving to a referendum for annexing the region into Russia, alongside Crimea.
Already, the sanctions imposed on Russia have had to be lifted in several areas. Firstly, to continue supplying gas to Europe, Russia needed to have its turbines maintained. When Canada did such maintenance work, a problem arose in sending the turbines back to Russia, because to do so would have breached sanctions. In the end Germany had to press for those sanctions to be lifted, so that the turbines could be returned to Russia, so that gas could be pumped along the pipeline. But, its not just in relation to energy. Russia is the world's largest supplier of grain, not that you would know that given that all the talk is about Ukrainian grain exports which are only a fraction of those from Russia. The sanction on Russian exports caused global grain prices to soar, and sanctions on Russian exports of fertiliser also impacted global food prices. So, as NATO has sought to enable Ukraine to export its grain, so too, it has had to relax the sanctions on Russian grain exports.
As with all such sanctions regimes they are ineffective, and certainly do not impact those they are supposedly aimed at, instead impacting workers. The sanctions against Russia, in relation to oil and gas, combined with the EU's voluntary measures to curb Russian imports have been a self-inflicted wound on the EU economy, with no gain from it whatsoever. It has massively increased costs, which have fed through into prices as a result of money printing by the ECB, and at the same time it has created conditions where recession looks likely, unless policies are changed.
It has been NATO sanctions that led Russia to demand payment in Roubles, for example. If the EU wanted to avoid the problems arising from that, it has the option of either scrapping its own ineffective and counter-productive sanctions, or it can agree to pay in Roubles as requested. In that case, gas supplies would resume as before, and prices would fall sharply, as they would if Germany gave the go ahead to start pumping via Nordstream 2, and ended its self-imposed restrictions on Russian gas imports. After all, does anyone in Europe seriously think that the US would seriously damage its own economy simply to benefit Europe? Of course it wouldn't. As the old joke went, the only thing the US charged in WWI, was the interest on its loans to the allies.
The EU is damaging its own economy, causing high levels of inflation, and creating the potential for a recession that is wholly unnecessary. Of course, the speculators might be happy with that. They will be sitting on beach somewhere, as they watch a recession causing unemployment, and a fall in wages, as interest rates fall, and their share and bond prices soar again, as central banks print even more money. But, those who will lose will be the workers across Europe who see their jobs disappear, their energy supplies cut off, as they freeze in their homes.
Once again, it is evidence that the main enemy is at home.
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