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HomeGeopolitical CompassEurope, Russia, OceaniaUkraine, Europe, and the Re-routing of Globalization

Ukraine, Europe, and the Re-routing of Globalization

Authors: Alan Cafruny, Vassilis K. Fouskas

Affiliation: Hamilton College, University of East London

Organization/Publisher: Journal of Balkan and Near Eastern Studies

Date/Place: April 11, 2023/ UK

Type of Literature: Journal Article

Number of Pages: 22

Link: https://www.tandfonline.com/doi/full/10.1080/19448953.2023.2197635

Keywords: Ukraine War,Proxy War, Geo-economics, NATO

Brief: 

The conflict in Ukraine is complex and cannot be reduced to a simple narrative of unprovoked aggression by Russia. To gain a deeper understanding of the situation, we must consider various factors and historical context. While Putin’s actions are often portrayed as driven by imperial ambitions or domestic politics, there are broader geopolitical dynamics at play. The United States has consistently opposed closer integration between Russia and Western Europe, seeking to exclude Russia from European affairs and prevent a potential geo-economic alliance between Berlin, Moscow, and Beijing. This long-standing opposition has influenced the dynamics of the conflict. Additionally, the roots of the conflict can be traced back to the economic policies imposed on Russia in the 1990s, such as shock therapy and privatization measures, which led to authoritarianism and a decline in GDP. The gradual expansion of NATO and U.S. military interventions without UN authorization have heightened Russia’s security concerns. The U.S. supported the illegal seizure of power in Kyiv in 2014, resulting in a government aligned with the U.S. and the suppression of ethnic Russians. The failure of France and Germany to fully support the Minsk 2 agreement in 2015 further added to tensions. While Russia’s invasion of Ukraine was unquestionably illegal, labeling it as unprovoked oversimplifies the situation.

 

By framing the conflict as a battle between Western democracies and authoritarian China-Russia, the Biden administration aims to disrupt global energy relations and advance its own interests, potentially benefiting China and the U.S. Some members of U.S. foreign policy circles recognize that the conflict in Ukraine is, in essence, a proxy war with Russia. This acknowledgment highlights the complexity of the situation and underscores the need for a nuanced approach to resolving the conflict. Meanwhile, Zelensky’s war aims make peace talks with Russia impossible, insisting on restoring Ukrainian control over Crimea and the removal of Putin. Biden supports these demands, but some officials recognize difficulties in achieving maximalist goals and see Crimea as a red line for Russia. Diplomatic solutions have been proposed, but the Biden administration is committed to weakening Russia through a protracted war. Deviating from maximalist war aims could trigger political crises in Washington and Kyiv. An assault on Crimea could lead to ethnic cleansing and the potential for nuclear war. Giving in to strategic losses and proxy war fever may push the Biden administration to cross Russia’s red lines. Europe’s economic and geopolitical security has been severely affected by the war in Ukraine and the resulting re-routing of energy supplies. This has led to an increase in European dependence on the United States and intra-EU divisions. U.S. oil and gas companies have benefited from the sanctions on Russian energy, exacerbating the problem. The protectionist measures taken by the U.S., combined with the sanctions on Russia, have created chaos in key European industries and global supply chains, leading to a re-routing of globalization towards a U.S.-China economic-technological bipolarity.

 

Europe faces two major challenges: the real energy crisis and inflation. The U.S.’s dominance in oil and gas exports has created a crisis for Europe as it tries to establish new supply networks via tankers for U.S. LNG and other products. This transition period has led to a decrease in Russian oil purchases to $60 per barrel, which is not enough to curb European inflation. Germany, which depends heavily on Russian gas, has accepted the closure of Nord Stream pipelines, further cutting off any geo-strategic link with Russia. Additionally, Europe’s inflation is rooted in the regime of financialized globalization and low rates of investment, labor productivity, and real wage growth. The U.S.’s strategy of technological containment of China poses another significant challenge to European industry, particularly Germany. European industries are facing extraterritorial sanctions by the U.S., blocking attempts to develop alternative sources of oil and natural gas in Iran and cooperation with Huawei in the development of 5G networks. The U.S. is incentivizing European and Asian firms to shift operations to the U.S. through a combination of subsidies, rerouting energy supplies, and inflation, threatening mass de-industrialization in Europe. As a result, many European companies and logistics agencies are contemplating an exit. If these trends continue, it may lead to permanent austerity regimes, the breakdown of welfare institutions, and the migration of European businesses and logistics operators to China or the U.S. This could result in conflict between a globalizing Asia under Chinese primacy and a securitized, protectionist transatlantic bloc.

 

The collapse of Germany’s ordoliberalism (the German variant of economic liberalism) and surrender is now apparent due to the impact of the IRA and CSA, the loss of Russia’s cheap energy supplies, and business restrictions with China. The German developmental model was centered on austro-German ordoliberalism, which emphasized the regulation of markets and social relations without political interference. To maintain its international competitiveness, German industry relied on selective outsourcing and export mercantilism, supported by a devalued euro, resulting in permanent surpluses at the expense of an indebted European periphery. However, the energy crisis, U.S. protectionism, and attempts to sever ties with China have challenged this model. Germany’s position as the hub connecting Russian natural gas to Europe and control of the ECB has reinforced its dominance in the EU. However, the pandemic has made the Stability and Growth Pact ineffective, and under intense pressure, German leadership has ultimately given in to U.S. demands. This transformation indicates a significant shift in transatlantic power and geopolitics. The energy crisis is causing hard times for Germany’s economy, leading to the flight of capital and production facilities out of Europe and into the dollar. There is also growing conflict between the EU and the United States over subsidies and other protectionist policies, prompting European industrialists to relocate production abroad. Ultimately, Germany and France are adopting the United States’ security strategy for Eurasia, fueling transatlantic tensions. The war has caused disruptions in global supply chains and harmed European industry due to sanctions on Russia and protectionist measures in the U.S. As a result, European companies, particularly those from Germany, have been forced to relocate their operations to cope with diminishing returns in inflationary conditions. In contrast, the Asia-Pacific region is experiencing higher wage growth and better control over inflation compared to NATO countries, except for the U.S. The war has proven detrimental to Germany, the Ukrainian population, and Russian soldiers. Finding alternative sources of natural gas could take several years, while tensions over newly discovered hydrocarbons in the Eastern Mediterranean have intensified the conflict between Greece and Turkey. European business leaders, particularly in Germany, may push to restore energy relationships with Russia, but the U.S., viewing the conflict as an “economic proxy war” against Germany, would be hesitant to relinquish its geopolitical and commercial gains. The text suggests a potential shift in the global order, with Asia seen as the driving force behind globalization and the U.S. leading deglobalization. The war may lead to a divided “United West,” contributing to instability in the transatlantic space and potentially fueling U.S.-China confrontation as China’s influence grows.



By: Omar Fili, CIGA Research Assistant

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