The Cold Winter
Europe Braces while the Russo-Ukraine War Rages
Conflicts, by their nature, are expansive, and their impact often expands beyond the borders of the belligerents. As historian Victor Davis Hanson pointed out, World War II started as a series of border conflicts spiraling out of control. While there were imperial designs at the hand of emergent powers in the antebellum period of the Second World War and a waning of the previous colonial powers, the actual fighting occurred localized and spiraled out of control. While the Russo-Ukraine War likely remains localized, the conflict’s impact expands.
As I previously mentioned, the Russo-Ukraine War is a proxy conflict between the Western Allies, particularly the US-UK alliance, and Russia and Russia’s senior partner, China. While much of the agricultural crisis vis-à-vis Ukraine seems resolved by agreements to continue exports of grain, the next stage of the fight begins over energy.
Russia is a petrostate. More specifically, it’s a commodities-based export country. This reality is why the Russian ruble is doing well despite the sanctions – and why some of the sanctions were shortsighted. While the impulse to punish Russia for the war in Ukraine is correct, prudent public policy requires us to consider what works.
Russia is a relatively poor country (to the United States and the broader European Union) with limited capabilities. However, everything in Russia is very cheap, including human lives. Where Russia punches above its weight is not in military operations, contrary to the think tank perpetuated the myth of the Soviet Superman, but in geostrategy. Russia conducts espionage and other destabilization operations par excellence. To that ends, Russia also uses energy policy to affect geopolitical outcomes.
Gazprom released a video on Monday, September 5, 2022, depicting Europe frozen over after plant workers shut off the gas. This video comes on the heels of Gazprom announcing on Friday, September 2, 2022, that Gazprom indefinitely shut down the Nordstream pipeline.
While overall gas prices in the market seemed to normalize, there are real repercussions. There are two important places for us to analyze: Germany and the United Kingdom. Previously, former President Donald Trump warned Germany and the world that Germany was far too dependent on Russian energy. In a repeat of historical diplomatic intrigues, the Central European powers became heavily reliant on cheap Russian gas for their powerful economies in the Eurozone. Former German Chancellor Angela Merkel is particularly infamous for pushing for greater economic dependence on China and Russia.
However, the consequence of the German decision to refuse economic diversification is manifesting. Despite German dominance of the European Union, the failsafe of the North Atlantic Treaty Organization kicked in. Despite popular misconception, NATO isn’t only a treaty organization oriented as a counterbalance to Russia but also a form of containment on Germany. After the Second World War, some, like the former US Treasury Secretary Morgenthau, argued for the massive deindustrialization of Germany. Sensible people won; instead, two rival military pacts in Europe were formed that prevented German middle manning between the remaining superpowers in Europe, the United States and the Soviet Union. The NATO alliance, while not a belligerent in the Russo-Ukraine War, also is activated and in a state of partial, minimal mobilization. Thusly, Germany is both contained from brokering an agreement that benefits it at the expense of the European periphery with Russia but is also obligated to assist in NATO efforts whether it wants to or not.
German manufacturers are reporting declining monthly orders and production costs, primarily from rising energy costs. Germany as a country is dependent on exports of its manufactured goods and could face a severe recession. On top of this, German winters do get cold, and energy demands will rise with autumn and winter.
The other tale is Germany’s 20th Century rival across the North Sea, the United Kingdom. An island nation with some (somewhat ambiguous) independence from the Eurocrat decision-making, the UK still faces severe consequences from the energy crunch. The UK is still tied to global energy markets, and rising energy costs affect consumers and producers.
The new Prime Minister of the United Kingdom, Liz Truss, came out on Wednesday, September 7, 2022, with radical new policies and emergency departures from the green trendline of British energy. First, Truss is expected to announce more North Sea drilling and lift the British ban on fracking. Second, the UK will freeze energy prices at £2,500 a year. This price freeze will be subsidized with a whopping £150 billion from the treasury. This sum is roughly double the British Defence budget.
Meanwhile, the United Kingdom is training 10,000 Ukrainian soldiers in England. The United States has massive amounts of capital and is spending significantly to assist in the Ukrainian war effort. Still, proportionally, the United Kingdom is heavily invested in the conflict. From arms to money to strategic and operational assistance, the British led this proxy war in many ways.
The United Kingdom and Russia last fought as imperial rivals in the Crimean War of 1853 to 1856. In that war, the British Empire interceded against the Russian Empire as the latter seized old Ottoman territory in Eastern Europe to maintain a balance of powers and protect British interests in the Middle East from Russian expansion. While the specific reasons changed and their empires waned, Russian influence in Ukraine, but more broadly in Europe, is a problem for the United Kingdom, and they’ve taken up the Ukrainian cause.
This tale of two countries is very important from two European competitors and their previous dealings with the antebellum Russia and Ukraine issues. However, both now reap what they’ve sown. The United Kingdom is moving in a much more total fashion, preparing for a very harsh winter and economic consequences. Germany is boxed into a crisis they’ve created for themselves. Now the pieces are locked in, relying on assistance from the United States to help secure stable energy sources in the foreseeable future. Europe now has skin in the game as the stakes rise as energy prices rise.