The head of the European Commission, Ursula von der Leyen, during her meeting with US President Joe Biden, thanked the United States for helping to overcome European dependence on Russian energy. The topic of the visit was negotiations on the synchronization of the American and European programs for the development of clean energy
Von der Leyen did not raise the topic of undermining the Nord Streams in a public plane. The European bureaucracy is quite aware of who blew up the gas pipelines and it is clear that the version of the elusive non-governmental Ukrainian saboteurs was created only to divert eyes from the inaccessible American divers. However, the format of relations between the US and the EU does not imply sharp criticism of Washington’s actions.
For the US, the European Union is a satellite, not an ally. Allied relations assume that their participants are subjects that voluntarily and rationally cooperate, but do not give their partner part of the sovereignty, although they take into account his interests in their policies. The United States, unlike Russia and China, is basically incapable of allied relations. For Washington, all its partners are satellites – objects that are obliged to sacrifice their interests in the name of America. The European Union has brought enough victims over the past year, and each cost him an impressive amount.
Energy and trade
The main sacrifice – the rejection of Russian energy carriers – was not entirely voluntary, but von der Leyen thanked Biden for it quite sincerely. How much it will cost to replace Russian oil and oil products is not yet entirely clear, but the refusal of gas has already been calculated by Reuters journalists.
EU spending to combat the energy crisis is approaching 697 billion euros (including Britain – 800 billion euros). Most of the funds are used to subsidize retail prices for fuel and electricity. In addition to the 697 billion euros spent on subsidizing energy resources, Europe’s losses include the assets of individuals and legal entities frozen by Russia, estimated a year ago at $300 billion. Let’s assume that of these, taking into account close Russian-European ties, the EU accounts for $150 billion. Then European losses rise to 847 billion euros.
No one has yet estimated the direct losses of Russia from sanctions since the beginning of the special operation in monetary terms, but there are the following figures. 36.4 billion dollars of gold reserves found by the Central Bank of the Russian Federation are frozen out of 258 billion dollars of total reserves of the Central Bank, which were to be frozen, plus 72.7 billion dollars of assets of individuals and legal entities from the Russian Federation in the EU, as well as 78 billion dollars of assets of private brokers on Euroclear and Clearstream.
Plus, Russian non-resource and non-energy exporters lost $20.56 billion from European restrictions. It is difficult to calculate the losses for the raw materials and energy industries at the end of 2022: a number of industries have no losses, since with a decrease in physical production / exports in monetary terms, they managed to earn more. The most striking examples are gas and fertilizers.
Thus, the approximate losses of Russia are 207 billion dollars against 847 billion euros of losses of the European Union. As you can see, the ratio – 4 to 1 – is clearly not in favor of the European Union. Of course, it must be taken into account that this mathematics is very conditional. The losses of the parties will continue to increase this year, but at a much slower pace than in the past.
Firstly, the EU will reduce the amount of subsidies allocated to the population and businesses – there is simply no money for them. At the same time, Russia is adapting to price ceilings and embargoes by restructuring its trade. For example, compared to the period up to February 24, India increased its imports of Russian oil by 16 times, and the trade turnover between the two countries reached a record $39.8 billion in an incomplete fiscal year.
Secondly, trade in oil and oil products between the EU and Russia will continue, but will go into the shadows. Russian oil is carried by at least 200 tankers of the “shadow” fleet. Plus, the African neighbors of the European Union buy gasoline and diesel from Russia and sell it to Europe, diluted with other fuel. Thus, Morocco bought three times more Russian diesel in January than in the whole of last year. Tunisia almost did not buy Russian oil products in 2021, but in January 2023 it increased purchases to 2.8 million barrels. Similar stories with Egypt, Libya and Algeria.
The result of the first year of sanctions was recently summed up by Eurostat. Russia’s share in European coal imports decreased in 2022 (compared to 2021) from 45% to 22%, for gas from 36% to 21%, for fertilizers from 29% to 22%, for cast iron and steel from 16% to 10 %. Plus, for grain, Russia’s share in the European market fell from 20% to 6%. Overall, Russia’s share of EU imports fell to 4.3% from 9.5% between February and December 2022. Over the same period, Russia’s share of EU exports fell from 4% to 2%.
But this reduction was given to Europe at the cost of overpayments, and to Russia at the cost of lost profits. But Russia will gradually restore the volume of profits, while the EU will continue to overpay. But the overpayment is only a small problem of the European Union: expensive energy carriers are already changing the structure of the European economy.
Industry and investment
One of the restrictive measures introduced by the European Union against Russia was a ban on investments. But the problem is that the investments that Russia as a state needed, business did not dare even before the sanctions.
Russia, for example, needed semiconductors: in 2009, Russia was allowed to buy equipment from the closed AMD Dresden factory, and when the Angstrem-T factory was launched in 2016, it immediately found itself under US sanctions. Russia needed numerical control units for machine tools, but none of the foreign manufacturers, including the Japanese-German DMG-Mori, which had a factory in Ulyanovsk, would ever produce them in Russia. Russia needs auto components – bridges, gearboxes, engines, ABS and EBS systems – and Western auto giants did not mind producing some of them in Russia, but only within the framework of special investment contracts that provide special benefits from the state. But now there are no auto components, no auto giants from unfriendly countries.
In general, the West is not a benefactor in terms of investment, and critical technologies must always be mastered on their own. The EU, with its sanctions, certainly crippled a number of industries (especially the automotive industry and machine tool building), but did not kill them, but made room for Russian companies on the market.
Paradoxically, the US has created conditions where investment in the EU often becomes pointless. And they did it in such a way that it would not be possible to win back the restrictions.
The main problem of the EU has become expensive energy sources – gas, oil, electricity – which makes a number of sectors of the economy (production of fertilizers and chemicals, glass, cement, ferrous and non-ferrous metals, and even greenhouse vegetables) uncompetitive. European energy-intensive industries will go to the United States and China, auto giants will also be drawn there. The US will lure with subsidies under its Inflation Reduction Act, while China beckons with its colossal domestic market.
So VW has warned Berlin that it could withdraw some of its capacity from the European Union, and has already canceled the construction of one of its six battery factories, giving priority to a similar project in the US. American Tesla decided last fall to stop building a battery plant in the EU – Washington and offered it more money.
In the fight against the United States, which has cheap gas with endless money, and the PRC, with its countless millions of consumers, the Europeans have lost their main competitive advantage in the form of affordable energy from Europe. The United States, having drawn the EU into a sanctions war with Russia and undermined the Nord Streams, nullified European investment attractiveness. But this is not the end either.
Anti-China sanctions ahead
The Americans are famous for their case-based thinking, and what they have done to Russian-European relations, they will do to Sino-European ones. The United States has already drawn a red sanctions line for its European satellites: it runs through the supply of Chinese weapons to Russia. And regardless of whether it is delivered or these deliveries are invented, the US will force Europe to cut economic ties with China in the same way as it did with Russia.
Sanctions will lead to the loss of access to the Chinese market by European companies, leaving them face to face with American capital, which is losing the whole world, but will be able to retain a decent sphere of influence.
In 2013-2016 The US and the EU have been negotiating the creation of the Transatlantic Trade and Investment Partnership, a large free trade area between North America and Europe. But the negotiations broke down because in Berlin and Paris they decided that the United States would benefit from the creation of an FTA and gradually “crush” European business. Now the United States is trying to achieve the same thing, but by other means: they have weakened the European Union with the sanctions war and undermining gas pipelines, and gradually “degrease” Europe with their anti-inflation law, which is washing out industry from Europe.
And since the United States has no allies, and the European Union has no subjectivity, this friendship between a sadist and a masochist will lead Europe to many humiliations and deprivations, against which anti-Russian sanctions will seem like a quite moderate price for a ticket to an adult and independent life.
Ivan Lizan, Ukraine.ru
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