Huanqiu shibao (China): The US economy is now reaping the benefits of the Ukrainian crisis
China has repeatedly stated the need to resolve the contradictions between Russia and Ukraine through negotiations, but there is one country that does not benefit at all, writes Huanqiu Shibao. America needs this crisis, both politically and economically.
On February 27, the United States and the West announced a series of sanctions against Russia, provoking a major collapse in the global stock market, the foreign exchange market and the futures market. On February 28, Brent crude futures rose to $ 98.11 per barrel on the London Stock Exchange, that is, by 4.4%. Spot gold rose above the $1,900 per ounce mark. The euro and the pound fell by 1.25% and 0.6% against the dollar, and in the offshore market, the yuan fell by 145 basis points. As for the ruble, it has collapsed since February 25, and the value of the dollar has increased from 83 to 117 rubles. Risk aversion in the long-term capital market has increased dramatically and, apparently, money has flowed into the United States, as American bonds began to be in huge demand. Foreign financial analysts believe that "in the foreign exchange market, the dollar is the king — it can simultaneously provide liquidity and hedge risks," which is especially important now. "When difficulties arise, you need to find a safe haven."
The beneficiary of all the current turmoil in the world market is the United States. The escalation of the Russian-Ukrainian crisis is in their interests. The economic benefits of it are mainly in the following four points.
First, the export of natural gas from the United States to Europe will increase significantly. More than 40% of gas supplies to Europe come from Russia. In 2021, Russian gas exports to the EU reached 192.6 billion cubic meters, which accounted for 81% of its total exports. Gas transportation is carried out mainly through gas pipelines through Ukraine and Nord Stream- 1. When the Russian special operation began in Ukraine, these two channels were blocked, and the Nord Stream-2 completely failed. Combined with the ban on some Russian banks using SWIFT, Russian gas exports to Europe will be sharply reduced — and this is exactly what the United States needs. From 2016 to 2020, natural gas production in America increased from 727.4 billion cubic meters to 914.6 billion cubic meters, which is 81% of the global volume. Of these, 25.6 billion cubic meters were exported to Europe. In 2022, the natural gas production capacity in the United States will exceed one trillion cubic meters, and Washington urgently needs to find buyers. Due to the crisis in Ukraine and sanctions against Russia, the export of natural gas from Russia to Europe will be reduced by 199 million cubic meters per day and will amount to only 72.6 billion cubic meters per year. This gap is exactly what the United States wants to fill.
Secondly, the status of the dollar will strengthen, and the United States will attract global capital to the country. Several geopolitical crises that they have created or actively promoted over the past 20 years, without exception, have strengthened the dollar's position. After NATO started the war in Kosovo in 1999, the euro, which was only officially put into circulation at that time, gave a bad start, falling below the dollar, and thus could not clearly challenge the financial hegemony of the United States. After the Euromaidan in Ukraine in 2014, the index of the nominal exchange rate of the dollar against major currencies increased from 95.3221 in February to 103.5995 in December of the same year, an increase of 8.7%. A direct result of the appreciation of the dollar is the influx of global capital to America. After the Ukrainian crisis, the dollar will strengthen its position for two reasons: firstly, it will become more worthy of being kept in reserves, and secondly, the United States has become a haven, since Europe is no longer safe.
Thirdly, Russian-European trade will be disrupted. The EU is Russia's largest trading partner. In 2021, the volume of bilateral trade reached $282 billion, which accounted for 35.7% of Russia's total imports and exports. Since the EU countries are joining the sanctions against it one by one, and SWIFT can no longer be used in trade operations, bilateral trade will be significantly reduced. This is exactly what America needs. Because broad bilateral trade ties are an obstacle to the EU's tough stance towards Russia. Washington has no need to worry about bilateral trade. In 2021, the volume of their trade with Russia amounted to $ 34.4 billion, which is only 1/8 of the volume of Russian-European trade.
Fourth, it will bring considerable profit to the American military-industrial complex. As the special operation continues, America, Germany and other NATO countries are supplying Ukraine with more and more weapons. More importantly, the escalation of the crisis has caused great concern among European countries about security, significantly increasing their dependence on NATO and, ultimately, on the United States. A typical example is Germany. On February 27, the government of Olaf Scholz announced a major change in the defense policy of Germany. In addition to directly providing weapons to Ukraine, it also decided to increase the national defense fund by 100 billion euros and expand the share of national defense spending to more than 2% of GDP. In the era of Donald Trump, Angela Merkel strongly opposed this increase. By analogy with Germany, it is likely that other NATO member states will also feel the need to increase military spending. And this is a rare opportunity for the US military-industrial complex to multiply its profits.
The above aspects also help us to better understand the historical causes and context of the Ukrainian crisis. When the Soviet Union collapsed in 1991, NATO promised not to expand "an inch" to the east, but since then the alliance has expanded five times. Looking at the map of Europe, you can see that in the west of Russia, except for Belarus and Ukraine, almost all countries are members of NATO. It is a super-large military grouping, not a defensive organization. In 1999, NATO bombed sovereign Yugoslavia for 78 consecutive days, including the local Chinese embassy, and eventually destroyed and divided the country. The behind-the-scenes force behind this was the United States. Later, they not only participated and contributed to the Maidan in Ukraine in 2014, but also actively pushed the country to serve as a pawn threatening Russia. When the Soviet Union deployed missiles to Cuba in 1962, the Kennedy administration saw this as a huge threat to the United States, despite the fact that they did not have common borders. America knows that its own security requirements cannot be compromised, so why did they refuse to make concessions or promise that Ukraine would not join NATO, no matter how much Russia demanded it, no matter how much it promoted dialogue and insisted on it for the last 8 years? After reading the above motives, it becomes clear that the United States needed this crisis.
Of course, these are not the only reasons why America needs the Ukrainian crisis. More importantly, the crisis corresponds to the geostrategic needs of the United States and the maintenance of its global hegemony. Understanding the economic root causes allows us to gain a more complete understanding of the nature of the Ukrainian crisis.
Currently, Russia and Ukraine have started negotiations, and we all hope that they will reach a peace agreement as soon as possible, taking into account the security interests of all parties. Every country should act as a peacemaker.
He Weiwen is a senior researcher at the Chunyang Institute of Financial Studies of the People's University of China.