by Alastair Crooke, Strategic Culture:
The EU leadership is resolved to ignore protest messaging, however loud it becomes.
There is a whiff of desperation floating across the Brussels battlespace. Forget the Ukraine war – that is a lost cause, and just a matter of time, until its final unravelling; yet the Ukraine – as icon of how the Euro-élite have elected to imagine themselves – could not be less existential. It is (cynically) seen in Brussels to be key to keeping the 27 member states in ‘lockstep’ that is – and an opportunity for a power grab: ‘We Europeans are ‘victims’, like Ukraine, of Putin’s actions’; ‘All must sacrifice to the newly installed command ‘war economy’’.
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Consider the fears (as perceived by Brussels) of abandoning Ukraine to plead with Moscow for gas and oil. A speech by President Macron last week gave a ‘teaser’ to what might follow: Macron told an ambassadors’ conference in the Élysée last week, that the EU should not allow East European warmongers to determine EU foreign policy, or even allow East Europeans to act unilaterally in support of Kiev. “A commentator joked that Macron at least avoided Jacques Chirac’s infamous remark that Eastern Europeans had missed an opportunity to ‘shut up’”.
The EU Establishment therefore are acting with alacrity to ensure ‘a 27 lockstep cohesion’ against the risk of consensus dissolving before the nightmare scenario of an Euro 2 trillion increase in gas and power spending; a hike in unitary energy bills by 200% across Europe (that amounts to 20% of household disposable income) (figures from Goldman Sachs Research). The large demonstrations in Europe over the last weekend were clear in their message: ‘We want the gas back. F*** NATO’.
The EU leadership is resolved to ignore such protest messaging, however loud it becomes.
Russia says that unless sanctions are lifted, no gas will flow through Nordstream 1. It is a gun at the EU head (in response to the sanctions imposed on Russia). Were the EU leadership however, to attend to the protestors’ call for the EU to forget Ukraine and lift sanctions on Russia, East Europeans would of course put another gun to the EU head (the veto over EU foreign policy issues). Macron is right.
That is the internal prospect of dissolution. Externally, the view is no more rosy. There is a marked lessening of respect for EU values across the non-West. Its standing is eroding. Africa and the Global South stand aloof over Ukraine; OPEC+ has made its position abundantly clear by actually cutting crude production (100,000 barrels/day); and Iran just blew the EU a raspberry by saying ‘no deal’ until the ‘unresolved uranium particle issues’ are closed.
As a Global Times editorial this week explained: “Since the Russia-Ukraine conflict broke out, the U.S. and its allies have tried to make others support their sanctions, but didn’t bother to think why their baton is no longer working. Quite simply, the West’s waning influence is because of their abuse of power, selfishly disregarding and preying on the interests of other countries. How can the international community trust the West after all it has done?”.
No OPEC or Iranian oil as salve to the EU ‘sacrifice’ for Ukraine. Many in the non-West rather, are migrating to the BRICS and the SCO alliance.
Nevertheless, the EU is sticking to its ‘Saving Ukraine’ principles. So, after “labouring non-stop through the weekend”, the EU is proposing ‘historic interventions’ in the energy market – including a levy on excess profits of electricity and energy companies, and measures ranging from gas-price caps to a suspension of power derivatives trading.
In a word, every other commodity market is about to be ‘regulated’ or capped to death. And the EU is taking its ‘economic war with Russia’ to an explicitly very literal interpretation:
The so-called internal market ‘emergency instrument’, “set to be presented on September 13, lays out several stages that open up varying powers to the Commission depending on the situation”. Via this new instrument the Commission will seek emergency powers giving it the right to re-organise supply chains; sequester corporate assets; re-write commercial contracts with suppliers and customers; order companies to stockpile strategic reserves; and force them to prioritise EU orders over exports.
Hmmm. If adopted, that would transform the EU literally into a wartime Command Economy.
It would also Gulliverise member-states into lockstep conformity through the centralised control supervising of the entire matrix of economic infrastructure – from which there will be no opt-outs (because … because ‘we must all scarifice’).
So, Europe will not ration what little energy it gets by price; but rather, it will subsidise industrial production and households – even if the newly printed funding involved means pushing Europe into an inflationary depression and currency collapse. The numbers and liquidity required to do this likely will be massive. Germany’s consumer bailout alone comes in at $65 billion.
But these subsidies miss the point. They may offer European consumers some short-term relief, but costs aren’t the main problem. The problem remains whether oil and natural gas will be available at any meaningful price – price is moot when supply nears zero.
Supply is one thing. The structural contradictions to this command economy construct however, are quite another. How exactly does this explicitly inflationary ‘bailout’ pair with the ECB’s determination to raise rates in order to fight inflation? Clearly it doesn’t. Borrowing or printing money to pay for imported energy (in dollars) – while running rising twin deficits – is a great way to destroy one’s currency. And it means inflation is not transitory. Thus, by force of logic, the EU must ration by diktat (just as in war). But how?
In kinetic war, the answers are much more predictable: Prioritise the industrial manufacture of artillery shells and tanks. In economic war, aimed at achieving something rather different – the basic functioning of a diverse consumer economy – the choices are not so obvious: i.e. domestic household heating vs manufacturers’ operational needs; low energy usage industry vs intensive industrial use; industries serving consumer strategic needs vs luxury or security needs; and balancing equity vs high level political connections.
These are the kind of questions economists in fully planned systems ask daily – and get wrong because they have no pricing mechanisms or feedback mechanisms on which to steer their decisions.