The world, and Europe in particular, is currently obsessed about high energy prices. But, those high energy prices, and their effects on European economies, have been artificially created by the actions of EU governments, under pressure from US imperialism, and its economic war against Russia and China. There is no economic basis for high energy prices, because there is actually a global surplus of cheap energy over supply, as negative oil prices, of -$37 a barrel in April 2020, demonstrated. There is also plenty of cheap gas, and huge amounts of it were due to be pumped into the EU via the new Nordstream 2 pipeline from Russia, until US imperialism pressured Germany to cancel it. There is no shortage of cheap energy, no reason for consumers and business to be paying astronomical prices for it, or for consumers and business in Europe to be facing blackouts over Winter. Cheap and plentiful supplies could resume tomorrow if Germany would simply decide to open Nordstream 2, and the EU agreed to pay for its energy supplies from Russia in Roubles.
And, that remains true. Even the current artificial increase in oil prices, which will be temporary, has barely raised the price above $100 in 2014 Dollars, given the fall in the value of the Dollar, in the intervening 8 years. But, even that price, as described, is artificially high, and entirely due to the decision of EU governments to boycott Russian oil, as Ed Morse described a while ago, in this interview with Bloomberg.
As Morse describes, it was the decision of Europe, under pressure from US imperialism to boycott Russian Urals oil that caused them to have to look for alternative supplies, which they could only get from the US. That US oil was much more expensive, and, as US oil companies then shipped oil to Europe, at these higher prices, it reduced US supplies causing US gasoline prices to rise sharply. That immediately, began to hit the poll ratings of Biden and the Democrats, whose position was already weak, given the appalling performance of Biden and the Democrats following his election. It caused Biden to open the spigots on the US Strategic Reserve to try to increase supplies and lower prices, as well as going on his knees to the butchers of Saudi Arabia, pleading for assistance.
In fact, across the West, social-democracy has been forced into increasing contradictions, as it has pursued its imperialist ambitions in its economic war against Russia and China, as I predicted would be the case, some time ago. The US Democrats look certain to lose the Senate, and possibly the House, whilst Biden's standing, like that of Macron before, has collapsed. Boris Johnson fell, before Putin, and now looks set to be replaced by an even more right-wing, petty-bourgeois nationalist. Macron scraped though in France, but with massive active abstentions, and then lost control of the Assembly. In Germany, Scholz won a majority, but as with Biden and Macron, has now seen his popularity crushed, with the Social-Democrats being hammered in recent polls, as Germany sees its energy prices rocket, and the potential for its economy to be crushed come the Winter. German producer prices are rising at over 37% a year!! That is unsustainable.
Why did Europe inflict this damage on itself? There are several reasons, much as with the reasons as to why it inflicted the damage of lockdowns on itself, unnecessarily. One reason is hubris, and belief in its own propaganda. In the 1980's, NATO destroyed a collapsing USSR, by, on the one hand, forcing the USSR to try to spend money it did not have competing with expanding NATO arms programmes, as well as having bogged it down in Afghanistan, where NATO provided Osama Bin Laden and the Mujaheddin with lots of advanced weapons, and, on the other hand, undermining the soviet economy, which had become reliant on oil exports, in a climate of high oil prices, by pressing its Gulf allies to increase cheap oil supplies. It thought it could do something similar again.
But, this is not the 1980's, and Ukraine is not Afghanistan. Already, in 2021, as global economies opened up after the lockdowns of 2020, the masses of liquidity that central banks had pumped into circulation, to finance furlough schemes etc., flooded out into consumption, and as firms ramped up production, and people began to travel, money demand for energy rose sharply. With supply bottlenecks, due to the continued effects of lockdowns, oil prices rose sharply, long before any Russian invasion of Ukraine. When also in 2021, NATO began to implement sanctions against Russia, to try to limit its exports, and so its earnings, it again found that this was not the 1980's. Now, there is China and India, both of whom were prepared to buy Russian oil and gas, where Europe tried to boycott it. Its why NATO is now trying to limit the price that Russia can get for its oil and gas exports, which again will not work.
For 40 years, US and NATO imperialism got used to the idea that it could stride the world unchallenged, and send in its troops, be it Britain to the Falklands, the US to Grenada, and then to Serbia, Afghanistan, Iraq, Libya, and Syria, not to mention all of its covert operations using special forces, intelligence services and proxies. It faces a different world, in what some have referred to as the Thucydides Trap. Whatever criticisms there may be of that hypothesis, it certainly appears to be the case that the US is concerned about growing Chinese influence, not only in the Pacific, but also its economic relations in Africa and Latin America, though China also has extensive direct investments in Europe too, where its involved in many large scale infrastructure projects.
In fact, the history of US and British imperialism in actual military conflicts was not that outstanding even in the 20th century. In WWII, the defeat of Germany was almost entirely down to the role of the USSR after 1941. NATO was fought to a standstill in Korea, the US was defeated in Vietnam, and later in Afghanistan and Iraq. In Libya, its involvement led to a failed state, and that would likely have been the result in Syria were it not for the involvement of Russia and Iran. Britain only just won in the Falklands, being on the verge of running out of ammunition, and certainly would lose such a war today, particularly as, following Brexit, there is greater support for Argentina within Europe, in Spain and so on. Yet, we hear Chief Army Warrant Officer, Paul Carney, telling British military families to prepare for their loved ones being sent imminently to fight and die in Ukraine against Russia!
Of course, given the extent that Starmer has wrapped himself in the flag of petty-bourgeois nationalism, and is flanked by the ranks of petty-bourgeois, nationalists and liberals from the so called Left that have collapsed into social-imperialism, its no wonder they feel emboldened to consider such actions that would inevitably lead to nuclear war and the destruction of mankind.
One reason the EU put itself in this mess, then, is that it thought that sanctions against Russia, along with large amounts of weapons sent to Ukraine, whose population would be asked to fight to the last man, on NATO's behalf, supported by NATO covert operations, would quickly lead to Russia backing down. It didn't. They also seem to have believed their own propaganda.
Had Russia actually intended to try to occupy the whole of Ukraine as NATO and Zelensky claimed, it would indeed have bogged itself down, and been destroyed. But, it never had that intention. Russia knew such a venture would be suicidal, and was, in any case, unnecessary. It only ever needed to secure the Donbas, and, if possible, the Southern coastal areas. The fact that it only ever mobilised sufficient forces for that, and less than were mobilised by Ukraine, is evidence of that fact. It followed the same course it had previously done in Abkhazia and South Ossetia, itself following the same tactics, and using the same arguments as used by NATO in Kosovo.
The fact that NATO's strategy is in tatters was shown by the fact that it quickly reversed its propaganda, earlier in the year, within a matter of days of claiming that Russia was on the verge of defeat, and Putin was about to be toppled! As Russia has simply settled in to the Donbas, and Southern Ukraine, consolidating its position, as it previously did in Abkhazia, South Ossetia and Crimea, the chances of its defeat at the hands of Ukraine, even with the massive amounts of advanced weaponry provided, looks increasingly remote. Indeed, all of those further advanced weapons – which in large part Russia can take out with its bombers and missiles, even before they are deployed – is evidence of the fact that its NATO that has got itself bogged down, at least as much as Russia. The attacks on Crimea, and the recent car bombing of Darya Dugina were almost certainly undertaken with the assistance of NATO special forces, as acts of desperation.
Of course, this does not matter to US imperialism. Its economy is not going to be thrown into recession as a result of energy blackouts. It sells higher priced energy to Europe. Moreover, that is beneficial to US imperialism, because although China is a rising power, it is the EU that continues to be the world's largest economy, and main competitor to US imperialism. Having EU imperialism damage itself in this way, is highly beneficial to US imperialism, rather like SPECTRE, in From Russia With Love, having two of its opponents taking lumps out of each other. The EU adopted its policy of self-inflicted injury, under pressure from US imperialism, no doubt because it thought that it would be over long before it faced the potential of energy blackouts over Winter, but its unlikely that its going to be able to persist with its attempts to boycott Russian gas, even if it finds replacements for Russian oil, as the consequences of that play out in the coming months.
Another reason it adopted this strategy is that, as all of the liquidity pumped out during lockdowns led to inflation, and as economic activity and employment soared, so labour shortages were creating rising wages. The demand for capital, led to rising interest rates, which meant that asset prices started to fall. The ruling class owns all its wealth in the form of these paper assets – fictitious capital, and in the last 30 years has seen its wealth and power reside in their continual appreciation, and capital gains.
As with lockdowns, the way to avoid such rapid economic expansion, rising rates, and falling asset prices, is to physically limit it. The most obvious and blatant example of that is the actions of the Chinese state in using its zero-Covid policy to repeatedly slow economic activity, as it faces a collapse of its serial asset price bubbles, which it continues to try to inflate by further monetary injections, and which look set to still result in a financial collapse, combined with a period of hyper inflation.
A period of very high energy prices acted in the same way, because they drained household incomes, leaving little left over for additional consumption spending. But, that has failed too. Many households, as a result of furlough payments and so on, built up money reserves, which have been used as lockdowns have ended. So, consumption spending has continued at high levels though it has shifted from the “inside economy” to the “outside economy”. It is seen in the fact that, employment levels have continued to rise, as firms responding to this continued demand have had to employ additional labour. But, also, not only have labour shortages led to rising wages in various sectors, as well as a series of bonuses and recruitment and retention payments, but, as workers have sensed this stronger economic condition, they have also joined unions, and started industrial action to demand compensating wage rises. That again is something that has not happened for forty years, showing that this is not the 1980's.
Rather than high energy prices acting to slow consumer spending, it is just spurring higher wage demands, and industrial militancy. It means that, as consumer spending continues, firms will still need to expand, or lose market share, and that means they demand more capital, especially as they face higher prices for constant capital/energy, along with higher wages. It creates the tie-up of capital being manifest as lower GDP. That means higher interest rates, and as central banks increase liquidity to enable firms to raise prices to cover these higher costs, so that feeds through into even more inflation, which then prompts the need for higher nominal bank rates, which will cause asset prices to fall further.
So, the strategy of imperialism, and the attempts of social-democracy to implement the same strategies it has used for the last 40 years, have failed, because this is not the 1980's, nor the 1970's. Germany is desperately seeking alternative energy supplies so as to continue its boycott of Russian gas. But, its own supplication to the Gulf Monarchies for supplies seems to have fallen on stony ground, and Norway, which has seen its Wealth Fund decimated, as asset prices have crashed, is looking to retain more of its own production, to meet its own requirements, rather than sending it to the rest of Europe. Germany, with its Green component of the government coalition, is looking to burn more coal, as well as returning to nuclear power, illustrating the increasing contradictions, resulting from NATO imperialism's economic war against Russia. The chances of finding adequate alternatives to last through Winter seem impossible to achieve. The threat of blackouts, used not only in Germany, is again intended to try to frighten workers, to create a climate of fear to promote saving rather than spending, and undermine workers' attempts to raise wages.
The lockdowns showed the extent to which the ruling class and its state are prepared to destroy the real economy, in order to hold down wages and the demand for capital, so as to reduce interest rates and inflate asset prices. So destroying the economy by closing it down in response to self-inflicted blackouts is not beyond the realms of possibility either. But, in conditions of rising militancy, its likely that workers across Europe will not sit idly by as their workplaces are shut, and energy to their homes is cut off, especially when they see that it is all totally unnecessary.
The high prices of energy, and the threat of blackouts could be removed today. All that is required is for Germany to open Nordstream 2, for the EU to agree to pay for oil and gas in Roubles, or alternatively to remove the sanctions on Russia, such as its exclusion from the SWIFT payments system, which make payments in Roubles necessary. But, social-democracy and the social imperialists of the Left appear more concerned to press ahead with their support for US imperialism and NATO's war against Russia than they are with the interests of European workers. It shows again the truth of the old mantra of international socialism – The Main Enemy Is At Home.
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