February 8, 2024

Global Political Economy of Oil, Gas and Energy: Is there a place for an Ukrainian Chapter? (Written in early 2022, a month before the Russian invasion)

To be sure, Russian president Vladimir Putin is quite not a democratic radical, neither on the left nor of the fascist right side of politics. And definitely, there are tremendous many ‘democratic deficits’ to adress in the Russian Federation. However, the Ukrainian crisis is not about democracy, it is about energy resources and power politics. The Russian Federation definiely has some democratic challenges and problems ahead, quite true. But pinpointing to the new ‘Hitler’ – as he is even adressed by some francy and – at least for now – marginalized Greens in Germany – is quiet irritating and even pitiful silly, to put it mildly. Because such loud and lurid analogies to the German brutal past cries obviously for hard boiled military eggs to the front. But this is utterly dangerous. There is – at least in words – a rising build up of military humming in the Western media, or to use another known metaphor, the drums of war are beating aloud and more often. The question is why, to what aim and do they know, what they are doing?

The recent issue of The Economist (January 29th 2022) makes clear that from the Western view Putin is gaming regarding the Ukrainian conflict with Russian roulette. And indeed, Putin seems to be geostrategically in the driver’s seat, pulling together massive amounts of military personel at the Ukrainian border, announcing nearly world wide sea maneuver and even threatening to shipping missiles to Venezuela, resembling the geopolitical show down well known as the Cuban crisis which brought the world very close to nuclear annilation in October 1962. Scaring, and the world’s news magazines and daily papers do their best to disseminate and fule the scale of German Angst worldwide, the Western people to death, however, might come at an untimely moment, just in the middle of a global pandemic with a couple of million death since 2020. Nevertheless, the conflict might be much more lethal than the Covid-19-pandemic if not being pacified soon. Further, fear is no good companion to rational politics. And the disgusting as well as illuminating history of the West’s propaganda model or machine – as told by Noam Chomsky and others since decades – should be a warning to believe the media outbursts of an irrational Putin as the naked truth. What, then is the Western interest in all this? Or to be precise, is there a common Western interest being pursued? The idea that Putin is an irrational blockhead should be put where it belongs: into the dust bin of history and ideological warfare.

From a Global Political Economy perspective, there are political as well as economic interests involved in any conflict between states, nations and regions. And both of them are intertwined with historical narratives and past decisions. So to understand the Ukrainian conflict one has to go back some years to come to grips with these very dangerous situation near the Ukrainian-Russian border. Futher, political and economic interest show – also in evervy case of global reach – a national and an international or – now – global face, i.e. to understand the conflict not only international relations but also internal (national) relations have to be taken into account. But for geopolitically and geoeconomically relevant questions geostrategically interests have an upper hand in comparison to internal ones. Foreign relations in its deepest sense is since centuries the real prerogative of the executive arms of (national) states, even if the globalization process brought some private actors into the scene. This geostrategically prerogative might even be reinforced by the recent universal trend towards an internal dominance of executive institutions and actors around the world of states, not only in the obviously antidemocratic regimes of Putin, Erdogan or Xi Ping, and even some parts of Europe – not to speak of some recent US developments. Therefore, the quesion arisis what are the global stakes of the Big Players that are being ‘debated’ about in the Ukrainian conflict?

Even at first sight, there are many ‘actors’ – at least potentially – involved in the conflict. Statal ones beside the Ukraine are: USA, Russia, Belarus, many of the former GUS-states, many member states of the European Union, Scandinavian countries as well as the I and C of the BRICS-states. More supra- or at least international actors are: the European Union, NATO, OSCE and several treaties and regional coalition aggreements. And even private interests should not be neglected: transnational corporations of the different and competing networks of energy and military industrial complexes. A real dynamic and explosive articulation of divergent and increasingly polarizing interests and actors is on the rise here – resembling im some respect the harsh fault lines and dragging-down pacts before 1914. No doubt, these chaotic mixup is worse than the Cold War between saturized ‘world powers’ of ancient USA and Soviet Union. It is the fuse that can linger and explode into World War III. So it is urgently needed to calm down on both sides and settle the disputes in the interest of mankind and the earth itself. It is not the place here to analyze in depth the various interests and strategies of the actors. For beyond the news world there is no trickle down of serious and credible information into the ears and eyes of ordinary people or even journalists. The only thing to hope for is that behind the scenes there are credible men and women who diplomatically thrive for preventing the world to fall into a dismayal abyss. However, some words about possible interests at stake must be given here.

The core of the geostrategical conflict is obvious the twist between Russia and NATO enlargement. Even in the German press there are many signs of denying any history of not-enlarging NATO promises during the reunion process, recently. But this ignores historical counterevidence as for example Putin’s candid speech at the 2007’s Security Conference in Munich or the memories of some old politicians being involved in the process and showing the actuality of such bargains around the collapse of the Eastern Bloc. While Germany seems – from an internal view of interests (energy dependence as well as a big minority of ‘Russlanddeutschen’, former Russians with historic German roots who immigrated to Germany after reunification on an archaic blood soil citizenship law) – unwilling to ignore Russian interests in that matter altogether, very many capitals of Europe, especially in the Eastern states near to the Russian, Belarus or Ukrainian border, share the saber rattling states of Western origin. And indeed, the reluctant inclination of a majority of political and economic elites as well as military circles in Germany to support Ukrainian forces with military means of concern, shows a dwindling power grip of German politics over European Union security issues. In that case Germany is being torn mainly – as history has shown several times – between ‘atlanticists’ and ‘europeanists’, even if maybe a note so minor group of pacifists disturb the picture, additionally. From a neo-realist perspective of US strategic thinking, to avoid European Union becoming a geopolitial player could be pursued by causing internal conflict about geopolitical divergence between ‘Old Europe’ and ‘New Europe’ as former US Secretary of Defense, Donald Rumsfeld, famously coined and strategic thinker George Friedman of Stratfor (a geopolitical think tank) several times suggested. While French interests prefer a securitization of the EU, the German elites stay divided as ‘transatlanticists’ or ‘europeanists’ about that issue – not to mention that a militarization of the European Union is notwithstanding contrary US interests a bad idea, anyway.

Conceding its speculative terms, this issue might nevertheless be a clue to the geostrategical thinking that manifests around this dangerous conflict. The whole game or at least the interest of the ‘transatlanticists’ is to keep Europe, and mainly Germany, in the Atlantic order, with USA and Canada and the NATO as its military core. However, contrary to common understandings of the political questions of this conflict the geostrategical fault line is not only between ‘the West’ and Russia but also between the US and the ‘rest’ of the ‘West’. As Noam Chomsky as well as Leo Panitch (togehter with Sam Gindin) have shown several times the USA are very aware about their global interests. The slightly military withdrawal from Europe and the turning toward East Asia and especially against China has started some time before Donald Trump. Barack Obama ordered a reorientation towards the Asian region(s) and China, however with a slightly different method but resulting nevertheless in a reorientation of military camps around the world. The EU and even Germany – as long as it is governed by transatlanticists – might be partners (yet) but they are also ‘global rivals’ in a global politico-economic order. Taking this into account means to decipher geostrategically pursued politics – at least additionally – as driven by geoeconomic interests. Without answering definitely this question here it nevertheless arises whether the US is going to insert a split between a possible EU and Russia alignment, not to start a war but primarliy to avoid a coalition that might challenge US world dominance in the near future. Who describes such thinking as cracy has a point but misses it probably if turned against the messenger. For, the critic ignores the fact that in World Politics such thinking and consequential acting has indeed been pursued in history and will be pursued in the future. Its motto is called divide et impera. Who believes such a world of politics is history displays some scaring and irritating sense of naivety about the (still) common logic of geostrategic thinking. So far, so bad: what about economics, then?

In geoeconomic terms the Ukrainian conflict is about restoring (green) growth and securing energy ressources for the extension of the unsustainabale way of life of Western liberal capitalism. The most important export goods of Russia are oil and gas. Due to the recent issue of The Economist (January 29th, p. 60) Russia is the biggest gas exporter, the second in oil exporting and ‘supplies nearly a tenth of the worlds’ aluminium and copper, and produces a range of other metals, including 43% of the world’s palladium, a component of catalyctic converters. It is also the largests exporter of wheat.’ A war in the Ukraine led by Russian troops would not only endanger world security and split the German dominanted EU from Russia but also triggered an economic upheaval in geoeconomic terms if the economic sanctions against Russia took place in reaction to a widely expected invasion of the Ukraine. It is not reassuring, then, that traders on commodity markets are preparing their strategies for the worst outcome, counting in a possible war. Recently, the price indices of oil and natural show a rising pattern. That’s bad news for the Western economies because the main central banks are also preparing for rising interests rates. Oil price and gas price increases have also triggered some cost inflation and supply bottlenecks across Europe and the Atlantic world already.

Looking back to the 2010s, in the aftermath of the financial blow out of 2007 both the United States as well as Russia has been stressed by low resource prices that triggered some countermeasures. While the United States had become more or less self-sufficient due to the new fracking technology, the fall-out of the financial crises and the plummeting of oil prices made it hard to explore new resources efficiently. Russia in contrast – as e.g. Adam Tooze (How a Decade of Financial Crisis Changed the World, p. 502f.) suspected slightly – suffered after a steady rise of oil and gas prises til 2014 since then not only from the price decline of both resources but was confronted by a flooding of the oil supply during a time when it desperately needed an economic boost for its again crisis ridden economy, even if the outfall of 2008 had been overcome so far. The main trigger was the fall of the Rubel against both the US Dollar and oil/gas prises. Against an quasi-Opec strategy to reduce the oil extraction and market supply to stabilize the oil price (and further the dependening gas price) Saudi Arabia togehter with the United States undermined this aim by opening the gates and raising the supply the oil on the world market. If there was an active common strategy, is still unclear but the coincidence of sanctions against Russia in the aftermath of occupying the Crimean peninsula, higher interest rates by the FED and the oil surge add up to a devastating economic effect of Putin’s Russia in 2014.

Russian troops had invaded Ukrainian territory in February 2014 due to the fact that their only military harbour to the Mediterranean Sea through the Black Sea, on the Crimean peninsula, was on the brink to come under NATO ‘command’ if the Ukraine would join this Atlantic security organization. Additionally, joining the EU the Ukraine would be subject to European regulations and corresponding laws and orders and consequently cut the economic ties with Russia which nevertheless exist in the Eastern parts of the large country. Russia tried to build up an economic regional customs association around the former GUS states to provide its resource industries to a wide array of customers. This regional integration project would be put also in jeopardy if Ukraine turned towards EU and NATO. Finally, in the afthermath of th 2007 crisis and dating back even before that date Russia struck a deal with Germany to channel gas to households and firms in the middle of Europe through a new pipeline: Nord Stream 2. In a kind of occidental ‘crowny capitalism’ the former German government leader, Bundeskanzler Gerhard Schroeder, joined the leading circles of higher management of the core enterprise delivering the pipeline project: the Russian state enterprise Gazprom. In the current economic sanctions the threatened abandonment of the pipeline is the main ‘stick’ with that Putin should be beaten if starting a (new) war in the Ukraine. However, most parts of the German electorate do not want to swallow this ‘carrot’ and especially the regionally often governing Social Democrats hesitate to dismiss Nord Stream 2 altogether (although they are pressed heavily by the ‘transatlanticists’ in the coalition government and even through the recent issue of The Economist, January 29th, where the new Chancellor, Olaf Scholz, and a high ranging general, who recently resinged after mentioning, the Crimean peninsual was gone for the Ukrainian state, are being scolded by displaying too much ‘misplaced sympathy’ (The Economist, January 29th, p. 22) for Putin in the first place. And even in Germany decisions has been made that give the whole project a dim future (a court decided that the project interferes with some European law regulations).

Summing up, the geopolitical and geoeconomic fault lines and (hidden) strategies being pursued by the interests involved in this conflict are not so straightforward as the news organisations and press teams are spreading around the world. The core of the conflict is, definitely, not about democratic issues. It is about geopolitical as well as geoeconomic interests between rival states and powers whose precise shape and content remains out of sight and opaque, for the public at least. Geopolitically, the conflict is about NATO and EU-Enlargement which both interfere with political and economis interests within the Russian Federation and its allied states. Geoeconomically, it is about the securing of economic spaces for capital accumulation for the respected (macroreegional) economies and (transnational) enterprises. In a sense, the conflict displays many nearly classical traits of an open interimperialist conflict about political and economic spheres of influence. However, to get a full picture one has to turn also to the internal dynamics of the conflict, after that a more fully approach understanding the conflict and predicting its probably very dangerous development might be possible.

From an internal analytical perspective, one has to be reminded, firstly, that internal and external motivations and interests are dialectically interwoven. Secondly, it has to be underlined that internal does mean very different things, depending on the political realm or political system being looked at. In the conflict there are several actors with internal processes of motivation and legitimization: the Ukraine, of course, then the USA, the EU, the Russian Federation and the Member States of EU and some of the former GUS. It is impossible to desribe fully the different internal political dynamics of these different polities. From a (Global) Political Economy perspective it is analytically sound to speak of least two premises on which a systematic analysis of internal dynamics has to rest: (i) the main thrust of internal politics and elected politicians is to hold to the power and stabilize the respective political coalitions vis รก vis the wavering opinion of the public; (ii) the national interest and its underlinig state projects aim at securing an institutional and organizational arrangement of internal and external processes to guarantee the economic prosperity of the national oder regional economy by supporting the core economic networks and branches. Further, it has to be accepted that – besides misleading denials in the public – securing those conditions of power and prosperity comprise also – if necessary – means of military conduct and physical as well as psychic (brutal) force. What is necessary, then, is finally – returning to the international level – a question of transnational consensus building between the most respected and closely intertwined political and economic actors. This internal analytical perspective has to be the next step in understanding the frontiers of the New Cold War.

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