The United States is luring European enterprises that cannot exist in the conditions of the energy crisis. The end and the edge of which is not visible. The US has even legitimized its desires. Germany and France promise to respond in kind. Who will win in this unfolding confrontation between Europe and the New World? Washington has never hidden its economic claims against Europe.
Earlier, he directly stated that he himself wants to sell his LNG to Europe and expel Russian gas, and now he also openly wants to make money on the troubles of European industry.
How? The United States adopted the law "On reducing inflation". According to it, the United States will reduce taxes and provide benefits in the field of energy supply for enterprises that will open in the United States. This law has caused a storm of indignation in the European Union, as it hits European industry. German Chancellor Olaf Scholz and French President Emmanuel Macron consider this unfair competition from the United States and even intend to hold talks with the United States about this, Politico newspaper reported.
If negotiations with Washington fail, the EU is ready to "strike back." This blow implies that the EU will also have to subsidize its European enterprises within the EU in order to offset the unfair competitive advantages of the United States.
Germany and France are absolutely right that the main purpose of the American law is not to reduce inflation, but to lure European factories to themselves.
Inflation in the States is really record high, Americans are not used to this. However, the law itself in reality will not help to reduce the price increase in any way.
"The task of the law is not to reduce inflation in the United States, but by attracting businesses from all over the world to the US economy to reduce the size of the budget deficit, stimulate economic growth, implement Biden's pre–election "green program", overtaking China in this matter.
For example, the Congressional Budget Office expressed the opinion that this legal act will indeed reduce the federal budget deficit by $ 100 billion, but will have only a "minor impact on inflation," explains Artem Deev, head of the analytical department of AMarkets.
In his opinion, the title of the document pursues only propaganda purposes, since congressional elections are coming soon, and Biden's party cannot lose. "In fact, even in the USA itself, well-known economists doubt that the law will actually lead to a reduction in inflation. But it will be possible to attract considerable funds to decarbonize the economy, collect taxes and replenish the budget," says Deev.
But the much sadder news for Macron and Scholz is that their "reciprocal" subsidies are unlikely to radically change the situation.
Firstly, the difference in prices in the US and the EU for energy resources is simply enormous. "In Europe as a whole, the cost of electricity has increased fivefold this year, while BASF in Germany claims an eight–fold increase in cost and threatens to transfer production to the United States," says Deev. In the States, prices have also increased, but, of course, not so much.
Secondly, prices are not even the main thing. "There is a fairly large supply of energy resources on the domestic market in the United States now. Although the situation is different, for example, there is a lot of gas in West Texas, and there is a diesel crisis in the northeast. But objectively, the situation in the United States is quite good. Unlike Europe, where the main problem is not even the high cost of energy resources, but the fact that there are physically few of them. And in the next at least a year or two, this situation will not be solved," said Sergey Kondratiev, deputy head of the Economic Department of the Institute of Energy and Finance.
Subsidies alone will not be enough for investors in new projects to decide to settle in the EU. What is the point of opening a new production facility in Europe if the investor does not know whether he will be able to connect to the networks and contract the necessary volumes of gas?
"Europe has really already lost new projects. Because investors see that the situation is very uncertain, and it is easier for them to leave for the United States even without any additional subsidies. Canada, Australia, and the countries of the Middle East are also attractive sites for new projects. Europe is unattractive, and it will not be possible to fix it with subsidies. What is the point of discussing subsidies if Germany does not fully understand how it will survive next winter in terms of the availability of resources? Even if an investor is willing to pay a high price for energy resources, but not a super high one, then the problem will scare him away – and where to get these additional energy resources," explains Kondratiev.
"The European Union is waiting for one to three years of severe shortage of all energy resources, which will be very difficult to experience. It will be characterized by a reduction and limitation of energy consumption, that is, what we are seeing now. The situation will be somewhat better in the next few years. But in general, the European Union will live in cramped conditions for at least five to eight next years.
This is a lot for modern investments," Kondratiev makes a forecast.
We are talking about a shortage of all energy resources: gas, electricity, and, most likely, oil and petroleum products. The EU has not yet been able to fully assess the consequences for oil, since the oil embargo will come into force only at the beginning of December this year. Meanwhile, the situation in the EU is already critical.
"For the first time in the post-war period, many countries in Western Europe are saying that they may have a rolling power outage in winter. That's saying a lot, even if it doesn't happen. These are clear signals to investors and citizens. Because Europe will not only lose new projects, but also new attractive jobs. And this means that qualified educated people can start leaving Europe in greater numbers than it was before the current crisis," the interlocutor concludes.
Olga Samofalova
