Michael Hudson: Germany as Collateral Damage in America’s New Cold War

Yves here. Not only are Western commentators loath to admit how much they over-estimated the impact of shock-and-awe sanctions against Russia, but they also seem to be allergic to admitting to the remarkable job Russia did of reorienting its economy. Russia very rapidly substituted for most European exports (some gaps were harder to fill, like auto and aircraft parts) and shifted trade activity to China, India, Turkey, Africa, and other “Global Majority” members. But Russia was also significantly an autarky and rich in raw materials. By contrast, Germany has no solution to its dependence on energy imports, formerly at very favorable prices from Russia.

But then again…what would have happened if Germany accused the US of being behind the NordStream bombing? The US (and the UK and the Baltics) would have screamed that Germany was making insane accusations and aiding the evil Putin. And if Scholz had dared do so, Robert Habeck and Annelena Baerbock would have joined the US in the hanging party.

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is The Destiny of Civilization. Originally published in the Investigación Económica (Economic Research), produced by UNAM (Autonomous National University of Mexico)

The dismantling of German industry since 2022 is collateral damage in America’s geopolitical war to isolate China, Russia and allied countries whose rising prosperity and self-sufficiency is viewed as an unacceptable challenge to U.S. hegemony. To prepare for what promises to be a long and costly fight, U.S. strategists made a pre-emptive move in 2022 to turn Europe away from its trade and investment relations with Russia. In effect, they asked Germany to commit industrial suicide and become a U.S. dependency. That made Germany the first and most immediate target in America’s New Cold War.

Upon taking office in January 2021, Joe Biden and his national-security staff declared China to be America’s number one enemy, viewing its economic success as an existential threat to U.S. hegemony. To prevent its market opportunities from attracting European participation as it built up its own military defense, the Biden team sought to lock Europe into the U.S. economic orbit as part of its drive to isolate China and its supporters, hoping that this would disrupt their economies, creating popular pressure to surrender their hopes for a new multipolar economic order.

This strategy required European trade sanctions against Russia, and similar moves to block trade with China in order to prevent Europe from being swept into the emerging China-centered mutual prosperity sphere. To prepare for its U.S.-China war, U.S. strategists sought to block China’s ability to receive Russian military support. The plan was to drain Russia’s military power by arming Ukraine to draw Russia into a bloody fight that might bring about a regime change. The unrealistic hope was that voters would resent war, just as they had resented the war in Afghanistan that had helped end the Soviet Union. In this case they might replace Putin with oligarchic leaders willing to pursue neoliberal pro-U.S. policies akin to those of the Yeltsin regime. The effect has been just the opposite. Russian voters have done what any population under attack would do: They have rallied around Putin. And the Western sanctions have obliged Russia and China to become more self-sufficient.

            This U.S. plan for an extended global New Cold War had a problem. The German economy was enjoying prosperity by exporting industrial products to Russia and investing in post-Soviet markets, while importing Russian gas and other raw materials at relatively low international prices. It is axiomatic that under normal conditions international diplomacy follows national self-interest. The problem for U.S. Cold Warriors was how to persuade Germany’s leaders to make an uneconomic choice to abandon its profitable commerce with Russia. The solution was to foment the war with Russia in Ukraine and Russia and incite Russophobia to justify imposing a vast array of sanctions blocking European commerce with Russia.

The result has been to lock Germany, France and other countries into a dependency relationship on the United States. As the Americans euphemistically describe these NATO-sponsored trade and financial sanctions in Orwellian doublespeak, Europe has “freed itself” from dependency on Russian gas by importing U.S. liquified natural gas (LNG) at prices three to four times higher, and divesting itself of its business linkages with Russia, and moving some of its major industrial companies to the United States (or even China) to obtain the gas needed to produce their manufactures and chemicals.

Joining the war in Ukraine has also led Europe to deplete its military stocks. It is now being pressured to turn to U.S. suppliers to rearm – with equipment that has not performed well in Ukraine. U.S. officials are promoting the fantasy that Russia may invade Western Europe. The hope is not only to rearm Europe with U.S. weapons but that Russia will exhaust itself as it increases its own military spending in response to that of NATO. There is general refusal to see Russia’s policy as defensive against NATO’s threat to perpetuate and even escalate attacks to grab Russia’s Crimea naval base in pursuit of the dream of breaking up Russia.

The reality is that Russia has decided to turn eastward as a long-term policy. The world economy is fracturing into two opposing systems that leaves Germans caught in the middle, with their government having decided to lock the nation into the unipolar U.S. system. The price of its choice to live in the American dream of maintaining a U.S.-centered hegemony is to suffer industrial depression. What Americans call “dependency” on Russia has been replaced by a dependency on more expensive U.S. suppliers while Germany has lost its Russian and Asian markets. The cost of this choice is enormous. It has ended German industrial employment and production. That has long been a major buttress of the eurozone’s exchange rate. The future for the EU looks like a long-term downward drift.

So far, the loser in the U.S. New Cold War has been Germany and the rest of Europe. Is economic vassalage to the United States worth forfeiting the opportunity for mutual prosperity with the fastest growing world markets?

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69 comments

  1. ambrit

    The downside to being vassals of America are obvious, if not acted upon rationally. When the German Greens support the war in the Ukraine, you know something is not right with German politics.
    My question is; where are the real radical political parties in Europe? All I can see from over here in America are Le Pen’s rightist party in France and the AfD in Germany. Are there no radical leftist parties worthy of the name in Europe today?
    Eventually, the public in Europe is going to feel the pain of this devolution to the extent that they begin to act. Perhaps a cold winter this year with natural gas rationing in Europe will kickstart something.
    Finally, could some of the smaller and more ‘independent’ nations in Europe ask the Russians in? Say, economic aid packages with Russian “advisors” attached. That could be the wedge that begins the unravelling of the European Union experiment.
    Stay safe.

    Reply
    1. Jams O'Donnell

      Within Germany there is Sahra Wagenknecht and her leftist party. Not sure how far she will be able to go with her programme. Also don’t know about anything similar elsewhere in Europe. Certainly nothing in the UK which only has right and far-right parties now.

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      1. Alex Cox

        The UK has the Workers Party. George Galloway is its founder and sole MP. But Craig Murray and others are standing in upcoming byelections – Murray in Rochdale.

        Reply
    2. LY

      Wagenknecht in Germany?

      But yeah, Labor and various social democrat parties have gone neocon and neoliberal.

      Reply
    3. leaf

      I think in France there is also François Asselineau and his Popular Republican Union in France that seems to want to restore some level of sovereignty but they seem to be a very small party. I think they have had some issues getting on the ballot or something though

      Reply
      1. barefoot charley

        Jean Luc Melenchon’s la France Insoumise party is what’s left of the Left. They get a quarter or so of the national vote, with regional strengths and weaknesses. He was another unholy terror to respectable opinion, but le Pen has been the greater threat to demonize. It’ll be fun when his party polls into second place over the next Macron–the pearl clutchers will have no hope! He’s such a populist he calls himself one, even though he’s a leftist. My pearls!

        Reply
    4. Feral Finster

      It was made clear to the german Greens that support for American hegemony was the price they would have to pay to be allowed a share of power.

      Like the good europeans they are, the Greens were happy to pay that price.

      Reply
    5. clarky90

      Re; “The downside to being vassals of America”…..

      I posit that the chain of vassalage goes further back …..

      The Israeli Zionists have progressively, and now, completely colonized the USA and the UK. The Zionists “never forgive, and they never forget.”…. This is important to grok.

      Therefore. The Ukrainian War was engineered by the Zionists, using their USA and UK vassal states’ assets, (ie war equipment, money, advisors, ……Nuland, Zelensky…..), to

      (1) Depopulate Ukraine of Ukrainian Orthodox Christians by death or by forced emigration, as revenge for hundreds of years of internecine conflict.
      (2) Depopulate/destroy Orthodox Russia also, as revenge for centuries of internecine conflict.
      (3) Wreak revenge on Germany for propagating the Shoah during late 1930s and early 1940s.

      Killing three birds with one stone (one war), so to speak.

      IMO, the plan is utterly failing on point (2).
      They are on track with depopulating Ukraine (1), however, Ukraine will be conquered and re-populated by Orthodox Russia. so a total failure.

      Point (3) Germany is doomed as long as the power structures in the West remain intact, and the thirst for revenge still exists.

      The wild card…... (imo) The Al-Aqsa Flood calls into question the very existence (and more importantly imo) the prestige and power of Zionism as a belief system. If/when zionism falls, then……..what?

      Reply
      1. clarky90

        Nowadays, most secular Westerners hear or use the phrase, “Jesus Christ!!” as a curse word, everyday, in ordinary life or on TV, radio or the internet.

        Meanwhile, one thousand, nine hundred and forty six years ago…… just before the destruction of the Second Temple of Jerusalem.

        In 69 AD there were many Jewish denominations;
        (1) The Sadducees
        (2) The Pharisees
        (3) The Essenes
        (4) The Zealots
        (5) The Sicarii
        (6) The Nazarene (later to be known as The Christians)
        (7) …..and many more tiny sects.

        After the Second Temple was destroyed, by the Roman Legion (NOT by the Nazarene), in 70 AD, revolutionaries, like the Zealots and the Sicarii were crushed by the Romans. The Sadducees, whose teachings were closely connected to the Temple, disappeared with it’s destruction. The Essenes disappeared, perhaps because their teachings so diverged from the concerns of the times, perhaps because they were sacked by the Romans at Qumran?

        Of all the major Second Temple sects, only (1) the Pharisees and (2) the Nazarene (Christians) remained.

        “The Pharisees (literally, ‘the separated ones’) were a Jewish social movement and a school of thought during the time of Second Temple Judaism. After the destruction of the Second Temple in 70 CE, Pharisaic beliefs became the foundational, liturgical, and ritualistic basis for Rabbinic Judaism.……

        ….The Sadducees rejected the Pharisaic tenet of an Oral Torah…..

        …The sages of the Talmud see a direct link between themselves and the Pharisees…..”

        https://en.wikipedia.org/wiki/Pharisees

        The Pharisees (now Rabbinic Judaism) has a visceral, endless hatred of Jesus and of the Nazarenes (followers of the declared Messiah from Nazarene), who they see/saw as their only religious rivals in Judaism.

        “The Jerusalem Talmud version of the Birkat_haMinim reads:

        For the apostates let there be no hope,
        and uproot the kingdom of arrogance speedily and in our days.
        May the Nazarenes and the sectarians perish as in a moment.
        Let them be blotted out of the book of life, and not be written together with the righteous.
        You are praised, O Lord, who subdues the arrogant.”

        https://en.wikipedia.org/wiki/Birkat_haMinim

        Thus the origin of the name “Jesus Christ” as a curse.

        To my knowledge, no other religious leader/founder’s name is misused in this way?

        Reply
  2. JBird4049

    The obvious answer is that destroying the German economy especially its manufacturing base is not in the best interest of the Germans although it probably is for that country’s elites. Destroying the American manufacturing forty years ago was not in the best interest of either the American nation or the survival of the country of the United States, but it was in the best economic interest of selected American elites to destroy our autarchy.

    Since a growing percentage of newly impoverished Germans along with the already impoverished Americans cannot buy native manufacturing because it is too expensive or does not exist, I guess that Germany will start having large economic wastelands, disposal zones, or garbage dumps akin to Detroit. If by chance I am still alive in thirty years, I expect to see a German Detroit.

    Reply
    1. eg

      I’m not even so sure that it’s good for ALL of Germany’s elites — mostly just the cabal in the “Stoplight Coalition.”

      Reply
    2. Rubicon

      Very succinctly put. Anyone who has studied how the US took control of EU, UK nations during and after WWII via the financial power of the US, will understand why the German hierarchy was bought off by the US following Nord Stream.

      It’s quite simple: just as the US as gone and destroyed mineral riches, land, and food production in Latin American, Indonesia, elsewhere, what better chance to make it official in denying trade between China, Russia w/ Germany’s central length via all the rest of the EU nations.

      We call it, “The US Colonization of the EU.”

      Reply
  3. Yaiyen

    Germany is finished, they did a year ago 20 year LNG contract, something they never did with Russia from what i remember EU is against doing longterm contract but now they did with USA at a outrageous price. Where am the food price is outrageous and the economy is run better than Germany, so if that is the case germany food prices must be much higher than normally.

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    1. The Rev Kev

      If I remember correctly, before the war the EU was demanding that the Russians end their long-term gas deals with the EU countries and instead use the spot market as a basis for any deals. The Russians were saying no as a legal deal was a legal deal. Of course after the war started, those spot market prices went to the moon for those EU countries that now used them.

      Reply
    2. vao

      Actually, German firms did conclude very long-term gas delivery contracts with Russia in the past. In 2006, for instance, E.On entered a 20-years contract with Gazprom to get 400 Gm3 delivered to Germany.

      Those German firms that have such long-running supply arrangements in force are facing a problem: as is customary in the energy market, the contracts are of the type “take or pay”, i.e. customers must pay for the agreed upon gas volumes, whether they actually accept the consignments or not.

      As for the 20-years LNG contracts, they make sense if the perspective is to give up on pipeline-delivered gas. Germany has been busily building facilities in its harbours for the transfer and regaseification of LNG, and new pipeline strands to have it delivered to its existing gas network. That infrastructure requires heavy investments whose profitability can only be ensured via long-term, guaranteed LNG deliveries.

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      1. lyman alpha blob

        I may be mistaken here, but I think that LNG terminals, which bring in condensed, pressurized gas, make a much bigger kaboom should something go pear shaped than say, taking out a pipeline.

        Given the current situation, I’m not really sure why any city would want to expose themselves to that risk.

        Reply
        1. vao

          For the time being, Germany is building floating LNG storage and regasification plants, basically consisting of a long pier at the end of which a specialized ship (FSRU) is berthed.

          LNG tankers dock along that ship and transfer their load to it; the specialized, static vessel has the necessary equipment to regasify the LNG, and is itself connected to a pipeline from the shore.

          Because of the draught of those LNG tankers, and security issues (as you mention), those piers end up relatively far from the coast. It is also true that the German government wanted to set up a LNG infrastructure rapidly (Germany did not have any before 2022), and those floating units were the only solution. In the long run, they are more expensive than on-shore facilities (the rental price of a FSRU can easily amount to USD 200000/day), and they required dredging the approach to the pier. On-shore facilities would have taken years to come on line after finding the proper location (it is not like German harbours have a lot of free space left), clearing up permit issues, and construction.

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          1. lyman alpha blob

            Thanks for the info. Despite the threats to build one in my area several years ago, so far it hasn’t happened so I’ve never seen what one looks like.

            Reply
    3. Not Qualified to Comment

      Germany looked to be finished a century ago but, as I recall, staged an impressive comeback with spectacular results. Let’s hope Marx observed is right and that history repeats this time as farce rather than tragedy.

      Reply
      1. Desillusionizer

        Well…

        back then,
        Germany still had what has been beaten out of it ever since. Discipline, Skill and a sense of Community.

        Nowadays we have nurseries and prinary schools where German is a foreign language and being blond / blue eyed, doing sports or wearing a platt is considered racist. Not to mention Genderspeak, Ramadan decoration in our towns or the recommended ‘solidarity fasting’ so that the muslim community feels accepted.

        This country is rotten to the core.

        The historians of the future
        will refer to German postwar history as the first ethno-suicide in history.

        Reply
        1. Rubicon

          Thank you, Desllusionizer, for sharing that information.

          We have European friends who are seeing these same kinds of Orwellian concepts throughout many EU nations. .They sense there’s a kind of Soviet/Stanlinesque approach that is dominating all of Western Europe.

          At the same time, we see no uprising amongst the citizens. There was a big flare up in France a few weeks ago, but it seemed it was the immigrants who responded to the French dictates. The rest of the native born French people were not a part of that.

          Reply
    4. Kouros

      From what I remember, the US exporters demanded that the contracts have to be long term otherwise there won’t be any contract.

      Reply
  4. AntonioB

    “Annelina Baerbock”

    Annalena : Anna + Lena

    “the war in Afghanistan that had helped end the Soviet Union”

    Afghanistan war didn’t help end USSR. The causes of USSR dissolution are elsewhere but when Yanquis are convinced of something it’s not possible to try to explain rationally by facts.

    “the Western sanctions have obliged Russia and China to become more self-sufficient.”

    Russia is self-sufficient excepted for processors, that they get from China’s own manufacturing and from proxies who are more than happy to supply them (India, Georgia, Turkia). Articles about problem with automotive and aeronautic industry were silly because there’s domestic automotive and aeronautic industry, just that is was left undeveloped when they decided to buy foreign in the 90’s instead of investing locally.

    two huge events happened in 2022:
    – a major civilian energy infrastructure was destroyed in neutral area (international sea waters) like it was nothing.
    – the $/€ reserves of Russia central bank were robbed.

    until then robbery of a country’s central bank was targeting small powerless countries in a more or less anecdotal way (Cuba, Venezuela,, Afghanistan). The principle is wrong anyway because it’s a massive attack on sovereignty and the idea of money as non-political value.
    By doing this robbery and destruction to Russia, USA+Germany have just told ALL emerging, big countries, that it WILL be done to them. Someone doesn’t follow USA decisions? wallet frozen, major infrastructure destroyed.
    I don’t know what is that gringos don’t understand?
    It was clear for anyone outside gringo realm and their EU Commission puppets, that Russia-China-Iran-N.Korea would form a block.
    The funny fact is UAE and Saudi slowly softly pivoting. Because they know that the day they are smaller in energy supply, so that an attack on them will not cause big disruption, they will be attacked like for instance Iraq or Libya.
    What Americans don’t understand?

    Otherwise Germany is the key actor in the war against Russia. Without Germany ie. the EU-Reich, but with Poland alone, USA could never had built up the neo-banderist device. CDU have since ever dreamed of knocking Russia. CDU is the avatar of Adenauer Globke Gehlen etc ideology.
    By now it looks like Germany, with most of EU is building up a next stage of war, as per plans designed by the “genuses” in Washington.

    Reply
    1. Yves Smith Post author

      Your airy handwave about aeronautics and car parts is off base. Russia has had to procure car parts, including used ones, from third countries. Even though Russia is now getting some traction with its domestic cars, visitors to Russia report seeing a lot of Chinese cars. Russia has a very good military aviation industry but commercial is completely different. Experts say it would take a monstrous amount of time for Russia to meet the expected level of noise and vibration control for civilian passengers. Maybe they will tolerate noisy planes that shake a lot. But Russia has no realistic prospect of catching up with Airbus and even falling apart Boeing, particularly given the size of the available market.

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        1. Polar Socialist

          Also SSJ “New”, Tu-214 and Il-114 have gone or are going trough complete “russification”. It takes time to certify all the new parts and subsystems properly. I believe Rostec aims to deliver ~700 aircraft for domestic routes by 2030.

          Reply
      1. Bugs

        I’ve ridden in Antonov passenger jets and they’re not totally awful but it’s true that the vibration and noise made me feel like the things could go down at any moment. Sort of the level of passenger aviation in the 50s-60s in the US.

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        1. Polar Socialist

          Antonov is Ukrainian, and made mostly regional jets of military pedigree for the rugged airfields the ex-Soviet countries are full of. I believe they’re capable of using airfields that have no services available, including external power etc.

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      2. Frank

        I drive a 2008 Toyota Tundra, a car as obscure in Russia as it is ubiquitous in the US, and have had no problems sourcing spare parts, despite this being a vehicle produced only in the US. In fact, things were much worse during the covid and post covid supply chain issues. While it’s true that there are very many Chinese cars now, I’m not sure why that’s such a bad thing – they have replaced western imports, and are actually much more interesting than I expected. Incidentally, there are issues with spare parts for those cars, as their manufacturers are fairly young and haven’t developed their supply chains as robustly as more established OEMs.

        In terms of the aviation industry, the OP is correct that the country maintained domestic civilian manufacturing left over from the Soviet Union, even if much of it was dormant or developing slowly. That’s changed now, as there are many interesting projects in the pipeline. I’m not sure what this issue is with noise and vibration, I pay close attention to this sector and have heard nothing about it. Perhaps this is in reference to the older Soviet era planes whose life has been extended due to necessity.

        Currently under development is the MC-21, a fully modern mid haul plane with completely domestic PD-14 engines that will be a decent competitor to the Airbus 320 Neo, and cursed 737. It will still be somewhat behind the western duopoly in some areas like avionics (though ahead in others like its composite wing), but the aircraft will be good enough for foreign marketing to countries who may not want to be under the threat of sanctions blackmail. In addition, Russia will soon be producing fully domestic SSJs, and Tu-204s, along with modernized Il-96s. The latter is a 4 engine, long haul wide body, not remotely competitive with western counterparts, but good enough to breach the gap of the current western fleet with something more modern. As it is, Russia is only one of two countries in the world able to build a wide body civilian airliner domestically, independently.

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        1. Jams O'Donnell

          Just so. There is a lot of mis-information flying around in the west about Russias technological capabilities. By GDP PPP Russia is now ahead of Germany. But we still hear stuff about a ‘gas station with nukes’ The capability of most Russian armaments is currently fifteen to twenty years ahead of the US, and other industries will advance in the spin-off from this. Russia makes its own chips in sufficient quantity, maybe not at the very smallest sizes (yet), but for most purposes size is not of critical importance (unless you are making phones).

          Reply
      3. AntonioB

        Russia has had to procure car parts, including used ones, from third countries. Even though Russia is now getting some traction with its domestic cars, visitors to Russia report seeing a lot of Chinese cars.

        yes of course there is a need for car parts for a big proportion of the current car market. Current foreign cars get parts from abroad and some are locally made non OEM parts. But the industrial infrastructure base is there, no need to start from scratch. This is non critical.

        I am a frequent visitor to Russia. Some cheap cars were foreign brands manufactured in Russia (Renault with Reno Logan for instance, and Hyunday in Izhevsk, etc) on former soviet car factories. Otherwise already by autumn 2022 I saw in Murmansk the previous european and japanese car sales replaced by chineses. It happened very fast, few months.
        Some brands do keep supplying russian market by proxy. The case of Mercedes for instance via Kazakhstan. Yet former official importer in Moscow has quickly replaced Mercedes with chineses:
        https://mbr.ru/

        aviation industry but commercial is completely different. Experts say it would take a monstrous amount of time for Russia to meet the expected level of noise and vibration control for civilian passengers. Maybe they will tolerate noisy planes that shake a lot. But Russia has no realistic prospect of catching up with Airbus and even falling apart Boeing,

        If these are the same kind of experts who engineered the economic crash of Russia ….

        Russia started relaunching production for recent domestic civilian planes 100% homemade already after 2014, because initially Superjet-100 was planed as joint project with europeans and some american company but with 2014 sanctions they retracted so the plane was finally produced with 100% homemade engines and parts. That’s when Irkut and Ilyushin also started to plan future civilian aircrafts.
        the point is: there are all the raw materials, the infrastructure, the know-how and the people. It’s not like sanctions against iran.
        Newest planes are the MS-21, the IL-96-400 and Superjet-100,, and are no different for civilian passengers than current Airbus. It’s not about R&D but just about manufacturing output in order to replace all the Airbus and Boeing. Meanwhile parts are sourced from the planes stranded by Russia as counter-sanctions. Concurrently a program for production of compatible parts was launched, and russians went to Iran to learn how iranians do some hacks.

        btw, some regional airlines do still use soviet planes. For instance on the short route Moscow-Vologda I have been on Yak-40, a nice little mono-reactor quit silent. Northern airlines did mostly replace the old Antonov-24 by small Airbus or Boeing, but then in very harsh condition despite the deafening noise of the propellers I prefer an old Antonov. At the time all jet planes were stranded in Scandinavia due to particles from Eyjafjellajökul irruption in the atmosphere, a potential risk for fans of jets, I was doing Murmansk-Arkhangelsk on An-24….

        In short if the idea was to induce an aeronautic problem to Russia it was wrong, it causes a temporary annoyance at worst.
        The american embargo on aeronautic parts was opposed by IATA, because it can potentially endangers passengers. Actually this is what USA wants: to induce maintenance problems in order to cause crashes. The idea being to generate anti-government discontent among the population. How silly…

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    2. ISL

      The idea that Russia would be self-sufficient in producing jet fighters, except for the electronics, is a nonsensical Von der Leyen canard that doesn’t pass the sniff test.

      SmoothieX12 has many times said, and other sources I have seen have confirmed, that Russia makes its own military chips, which are never state of the art (25-60 nm) due to the need for reliability in harsh EW environments and extreme climate (space, siberia) unlike consumer products.

      Reply
    3. Feral Finster

      “By doing this robbery and destruction to Russia, USA+Germany have just told ALL emerging, big countries, that it WILL be done to them. Someone doesn’t follow USA decisions? wallet frozen, major infrastructure destroyed.
      I don’t know what is that gringos don’t understand?”

      So did the USD or EUR tank as a result?

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    4. Goat_farmers_of_the_CIA

      AntonioB’s pedantic insistence on the correct spelling of Baerbock’s name has given me an idea for a more fitting alias: Asinine Beerburp.

      Reply
  5. The Rev Kev

    I believe that the US core principal right now is ‘Russia is an adversary, China is an existential threat’ and that this can explain the present situation. The US is right now gearing up to get into a fight with China though I am not sure in what form or forms. The intent seems to be to box China in to its coastline and threaten it with long-distance weaponry based in other Asian nations and my estimation is that this will all go into high gear after the November elections. But as it is recognized that China has an enormous economy, the US will not only need all its resources but all of it allies as well. Actually, allies is the wrong word here. Great powers dislike having allies and prefers vassals instead. So with the EU, it had to be brought to heel under US control and its heartland deindustrialized in order not to be a competitor to the US but one dependent on the US. In a world dominated by a US hegemony, there can be no competitors so the EU was going to be taken out sooner or later. It just turned out that sooner was the better option as the present war could be used to hide this intent and it seems that the idea is to use Europe to keep the Russians occupied while the US turns it’s attention to China. I may be wrong but I think that Washington as decided that it is either going to be US world hegemony or bust. They cannot accept a multipolar world but want things to go back to the way that it was in the 90s. But that boat has long sailed and just for a start we live in a world that has the BRICS in it right now. And in any fight with China, BRICS will not be backing the US.

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    1. SocalJimObjects

      When it comes to BRICS, Russia will stand with China, and perhaps South Africa as well. India will play both sides but when push comes so shove I believe they will stand with the West as long as the US Dollar and the UK Poundsterling maintain their respective values. The UK economy is looking very shaky though so I think pretty soon the Indians will have to seriously rethink their old colonial mindset. I don’t know much about Brazil, but the country is in the US backyard, and the US has a wealth of experience when it comes to changing leaders down south. Anyway I wouldn’t set store by BRICS, since it’s a Goldman Sachs invention.

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      1. playon

        Speaking of the British pound, can someone explain to me why it still has as much value as it does? Is the US supporting it?

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        1. vao

          My hunch is that this may have something to do with the influx of money into the City. Despite Brexit, London still looms large (though perhaps not as large as before) in the finance world. Colonel Smithers might have more information about all this.

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    2. Bugs

      It’s kind of crazy that the USA is intent on the weakening and vassalistion of the EU but at the same time, it needs it to be an ally in the plan to preserve western hegemony? Cannon fodder, I guess.

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      1. Synoia

        The us needs non US cannon fodder, not high tech. If it were limited to US cannon fodder, the US populace would not agree to the foreign wars.

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        1. JBird4049

          I think that Americans already are against the permanent war. The military is having a hard time recruiting enough cannon fodder, not just because of the poor health of Americans generally, but also because the population of Americans that traditionally went in are burnt out and feeling betrayed. Nobody in the bottom half of the population thinks that they need in another war. And even if we did need to, who would believe the proponents especially if it came from the same class of people banging the drums for the past two decades?

          Maybe if the sons and daughters of Congress-critters and CEOs were volunteering for the frontlines, but I don’t see that happening.

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    3. eg

      For a country that supposedly believes China poses “an existential threat” America is going about countering said threat in an odd way by forcing Russia into closer alignment with it, providing the Chinese with access to all the fossil fuels, metals and grains it lacks domestically.

      Epic geostrategic blundering.

      Reply
    4. ISL

      Rather than vassals, I think the word colonies describes the desired end state. Does the US not have immunity treaties for its soldiers in Europe? Food dependency? Wealth extraction?

      Personally, I think the whole House of Cards will fall down, leading to a mad max Wild West future (with a climate change twist), but I see nothing to provide a warm fuzzy feeling about the West’s future (if one is not a Western oligarch).

      Reply
      1. juno mas

        Yes, that future for America is likely more inflation, less remunerative work, and more debt. USA! USA!! USA!!!

        Reply
    5. Kouros

      If an LNG tank going from the US East Board to Germany explodes in the middle of the Atlantic, could it be determined whether it was an accident, a sabotage, a torpedo? With everything at the bottom of the Atlantic in a million of pieces?

      Talk about vulnerable supply chains…. After such an accident all LNG cargoes will stop…

      Reply
  6. LawnDart

    I found an article (which appears to be a translation from Chinese) on this subject (from a Chinese perspective) but I am not sure whether the source is credible– it could be BS. But even if so, among other points made in the article, it does make me wonder if there has been any recent discussion of repairing the pipelines? I know this was being discussed a year ago, but I don’t recall any decisions having been made.

    German Chancellor Schulz: Germany is willing to offer 7 billion euros to invite China to repair the Nord Stream 2 pipeline

    German Chancellor Schulz made a suggestion at the EU meeting: “Ask China to repair the Nord Stream 2 pipeline, and we can pay 7 billion euros for this.”

    …if China chooses to take action, it will represent a major change in the world structure. China will completely transform from the previous defensive stage to the offensive stage. The United States will usher in a comprehensive counterattack from China. The Chinese people have been looking forward to this day for too long.

    https://inf.news/en/world/cbd37e8f7e74facfab4396570b0042c0.html

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    1. Cristobal

      It would be interesting to see. To me, a big problem is that a lot of money has been borrowed to build all the LNG infrastructure that Germany is undertaking. No doubt that financing depended on a lot of LNG being brought in. Someone is going to get hurt. Iam afraid that the Germans have locked themselves in.

      Reply
  7. SocalJimObjects

    “Is economic vassalage to the United States worth forfeiting the opportunity for mutual prosperity with the fastest growing world markets?”

    I’ve been told that the position of First Servant of Uncle Sam comes with very significant benefits, and if you don’t want it, there will be lots of people vying for the position. The asymmetrical payoff that comes from adhering to the will of the “strongest” player in the room will always override any loyalty you have to your own people when it comes to the upper class.

    Reply
    1. vao

      Let us face it:

      1) The current European “elites” in power basically came of age as the Russia-centered Eastern block was collapsing or had collapsed, or when the USA, under Reagan, appeared to be the bullwark against the USSR and all communist movements in former colonies of the Third World. As far as they can remember, the USA always ruled and therefore will always rule.

      2) It is much, much easier and considerably less risky to be a comprador rather than a statesman/stateswoman. Since WWII, there have been many examples of that throughout the world (especially in Latin America).

      Reply
      1. digi_owl

        Especially as one can always decamp for fortress America should the locals get uppity. How many former dictators are enjoying the sun in Florida these days?

        Reply
  8. Irrational

    I forget where I read or heard it, but someone put it as follows:
    ” Europe now depends on the US for defense, energy and demand.”
    Not sure how this is helping the much-vaunted “strategic autonomy” of Macron.

    As for ambrit’s opening question: I have looked at the platforms of all the parties standing for the EU elections in my minuscule country and the only ones against war are the communists. The rest are all about buying weapons, mostly with the EU budget. Guess I am voting communist, LOL.

    Reply
  9. Thorleif

    When Germany”s (industrial) elite in the late 90s finally started to “abandon” their traditional inflationary-scare policies (EU competition through the Euro) for a new neoliberal finance-supporting economy and more emphasis on private consumtion and debt I understood this was going to be a difficult transformation for the country somewhere down the road. Not the least since the industrial owners still were not keen on joining the bandwagon of labor-arbitrage to China (as their competing neighbours) in the beginning of the new century. Liberal political support for the goal of establishing Frankfurt as the no 1 financial center of Europe on the one hand and on the other keeping it’s industrial base intact at home while still supporting it’s traditional mercantile trade-system with high trade-surplus within the EU and externally and ……..down-pressure on workers earnings (minijobs instead of unemployment-benefits).

    The Schröder et al ambition of etablishing a joint industrial “project” with Russia (tech for energy) was “allowed” by the US from the 90s because of the parallel US collaboration (led by Wall Str.and State Dept) with russian oligarchs (Berezovsky i.e). Due to these developments the old communist-garde tried to stop the “theft” of russian assets and the political influence/powers which nearly resulted in a civil war when a compromized Yeltsin later in 1999 reached for Putin, neither a communist or an oligarch, to save the country. The US failed and are now again trying to overthrow&change the russian government using the Ukraine since at least 2008 by then inviting them to NATO. The german-russian industrial “project” had to be shutted down. And now Germany also face the implications of it’s China export-relations due to the new cold trade war between the Anglo-Americans and China while also lacking cheap energy and a failing climate-program due to the necessety of again burning coal etc (carbon) to save the economy.

    Are the germans going to stand up against being vassals? AfD being forbidden? Tensions are building by the day!

    Reply
  10. Paul Art

    I think the war in Ukraine has proved that the US is a giant with hollow legs. You cannot outsource all your manufacturing and still hope to be a major power. Scott Ritter has been clinically savage about the complete unpreparedness of our military as has Col McGregor. I have a feeling that we are going through a major shift in World super power dynamics. I think we are one Neocon fool away from proving to the rest of the world what happens to a country that uses the ‘greed is good’ mantra as its only operational guideline. Greed for the most part has informed our foreign policy with the major exceptions of Vietnam and Afghanistan – if you discount the MIC motive. I was reading in the “Underground Empire – Farrell & Newman” that Ukraine approached lobbyists in Washington to lobby against the Nordstream pipeline (because Russia) and the issue fell into the lap of Ted Cruz who immediately wrote legislation to block implementation of the pipeline in more ways than one. In particular they threatened a Dutch cable layer who was crucial to the pipeline project. Ted of course helped his own home state of Texas with the massive export of LNG. One wonders how much money he personally made through this via strategic stock purchases or investments. “Underground Empire” is a fantastic story of SWIFT and how it took form and shape from the 1960s. It appears that old greedy fat cat Walter Wriston was a prime mover in the early inter-bank networks.

    Reply
  11. AnObserver

    I refuse to believe that the current state of affairs in mainland Europe and the UK will continue.

    The English, for nothing else, are a shrewd people. They accepted the inevitable demise of the empire without much resistance because the replacement was a kin power in the U.S. However, as it becomes clear that is no longer the case they will, despite their hopes of maintaining this power, will start to diversify and shift away from the U.S. hegemonic system.

    France is a complicated place and the French have always been the first to switch sides when the tide seems to be turning. Unlike Germany, they continued to use nuclear power and even though they were not as industrially powerful as Germany, unlike Italy, they kept their industry and for the most part control of it in the face of American competition.

    Spain and others are already skeptical of the American project and non publicly hedge their positions.

    The last to wake up will be Germany. Because they are a rule following people they will stick with the path drawn for them until they reach the bottom before switching course. Think Weimar. We won’t get another H but when that moment arrives the turn will be abrupt and drastic.

    I believe that the multipolar world will have finally arrived when Europe turns that corner. So long as the Europeans allow themselves to continue to be drained of their potential and subjected to the destructive social and economic policies of the U.S., America cannot course correct and start reforming itself.

    In other words, the Europeans are enablers and when that stops because of acceptance of the geopolitical realities or hitting rock bottom themselves, real change will come to America and the fallacious concept of the “West” will be replaced by a national and regional realist path.

    This might not happen within a year or two but it is inevitable.

    That’s my view.

    Reply
  12. Altandmain

    Germany, either through its own poor choices of leaders or a covert US Operation Gladio-like operation has done grievous damage to its once world beating manufacturing industry.

    In truth German was already losing ground to China, which was rapidly making gains in manufacturing relative to Germany. Either through appallingly bad geopolitical policy or political corruption / subservience to the US, Germany has done terminal damage to its living standards of its citizens.

    Affordable energy was one of the last advantages Germany had. Now Germany will end up like Northern England or the Midwestern US after NAFTA and bringing China into the WTO.

    In regards to the earlier comments on computer chips, commercial aerospace, and automotive manufacturing, those 3 sectors are the most difficult sectors to master. Part of the reason why the Russians are behind is because of cannibalization of the Russian domestic manufacturing industry due to trade (Hint: The Russians were worse off due to free trade in this regard, contrary to economic theory about “comparative advantage”), but part of the issue is because Russia was a poorer nation than the Collective West.

    The times are changing. Boeing has declined dramatically with its internal problems. Greed and short term profits are now costing Boeing. Airbus will be burdened by the high costs of energy in Europe and the general decline of the Western world. That leaves a big opening for Russia and China.

    China is making rapid progress on the field of semiconductors and I suspect that at some point, they will have EUV lithography. I also believe based on China’s track record that it will happen much sooner than most Western commentators expect, and that they will export to Russia.

    Given the state of the West, I think that the Russians and Chinese may very well surpass the Western worldon technology. The West has built a world on Finance and rich rent seeking. The Russians and Chinese have confronted and controlled their oligarchs. An economic system like China or Russia encourages capital investment in industry and research. That’s something that the short term profit oriented West struggles with.

    In the long run, this may end up backfiring badly om the US. The truth about Nordstream has been suppressed by the servile German media. Once the collapse becomes apparent, there may be political revolution in Germany. Once that happens, it is possible that a new government more sympathetic to Russia and China, while hostile to the US comes into power with the support of the German people.

    Reply
    1. CA

      “Germany, either through its own poor choices of leaders or a covert US Operation Gladio-like operation has done grievous damage to its once world beating manufacturing industry…”

      Really incisive and valuable analysis all through.

      Reply
    2. playon

      …it is possible that a new government more sympathetic to Russia and China, while hostile to the US comes into power with the support of the German people

      I hope you are correct but unfortunately I think the US would go to great lengths to prevent this from happening, including sabotaging/manipulating German elections, assassinations and other dirty tricks. This has been done many times before by the US, mostly (but not always) in the developing global south.

      Reply
    3. Kouros

      “it is possible that a new government more sympathetic to Russia and China, while hostile to the US comes into power “..

      I think Germany just needs a government that is more interested in the well being of its own citizens and that is more pragmatic, and that also understands that security only for some means security for no one… doesn’t have to be buddies with some and inimical to others, that is the US mean girls society (probably something that Annalena comprehends).

      Reply
  13. isl

    The original mistake in comparing the Russian “wars” in Ukraine with the war in Afghanistan is that one of the two involves Slavic peoples who have been in the Russian empire’s orbit for centuries. It’s funny (not) that the neocons were unable to understand why the US would rally around the flag for the WTC, but not for the Lebanon embassy bombing, amongst many examples.

    Reply
  14. Jeremy Grimm

    Europe dependent on the u.s. for LNG leaves me wondering how much LNG comes from u.s. fracking. One source I found in a quick search:
    “Natural gas explained Where our natural gas comes from” https://www.eia.gov/energyexplained/natural-gas/where-our-natural-gas-comes-from.php
    That in turn leaves me wondering how much longer the u.s. fracking wells will continue to produce. I believe the u.s. has already burned or exported most of its domestic petroleum reserves. When the fracking wells play out what comes next for the u.s. and NATO Europe? This post observes: “The future for the EU looks like a long-term downward drift.” I am afraid the future for the u.s. does not look very different than the future for Europe.

    Reply
  15. Susan the other

    Yesterday Larry Johnson called Biden “batshit crazy” for both wars. Hard to disagree. When the most vulnerable pillar of capitalism, our cherished American economic ‘monopole’, gets toppled all we can do is buy time and the only way we know how to buy time is to bribe and extort other countries and they are all flipping us off … “batshit” is probably the correct word. Losing control and leaving Las Vegas are like a bad hangover. Our corporations will all have to change their business models. Because just leaving America won’t cut it. So they might as well stay here and make it work for everyone. I do sense this new awakening is happening. Otherwise it’s batshit for everyone.

    Reply
  16. gwb

    On Easter Sunday, the Washington Post gave Robert Kagan a full two-page spread in the op-ed section, where he held forth on how America cannot abandon its international obligations, esp. to Europe / NATO / Ukraine, otherwise an aggressive Putin will march hundreds of miles westward and re-establish hegemony in Eastern and Central Europe, and if Trump gets back in the Oval Office, the U.S. will revert to the isolationism and xenophobia of the 1930s. I’m sure that various deep-staters anonymously chimed in before this piece was published.

    Reply
  17. JW

    The US makes and exports a lot of ‘stuff’ as well as energy and ‘services’. It is still a very strong economy, even if now second to China on a PPP basis. Even taking into account Hudson’s correct down grading for the financialisation and rent.
    Its true that some of the equipment in the Ukraine war has disappointed and is ridiculously expensive, but some has performed OK or well. The US armed forces remain as strong as any other nation, if not stronger. Even accounting for the lack of industrial strength of resource replacement and strategic gaps in waging a war with a peer nation.
    As our host correctly points out the demise of the USD is vastly overstated . Yes it will decline in power but slowly.
    Overall I see the slow evolving of a multi centered global economy, the hegemony will decline. But its going to be very painful for every party as no hegemony gives up power without a fight.

    Reply
  18. Willow

    > Germany as Collateral Damage

    Yeah, nah! It was deliberate! Reason US economy is booming is because US is sucking the economic lifeblood out of Europe. Kneecapping Germany keeps US industry afloat and removes a key geopolitical player who could potentially in the future frustrate US dominance by teaming up with China.

    Reply
  19. ADB

    The German economy is like a kid who has been given a timeout. Before the war Germany exported five times as much as the United States to Russia. Not just cars and machinery, but also packaged medicaments. Surprise, surprise. None of that seems to have been of any earth shattering significance, except, perhaps the medications. As many of you have probably noticed, the Indian pharma industry is raring to fill that gap.
    As Yves points out, the Russians did an efficient job of substitution and diversion of trade,, in addition to being blessed with natural resources. But there are some additional factors at play.
    Such resilience and economic turnaround was possible because of a confluence of a whole set of factors –
    1. the fact, that most of the competitive advantage – natural resources etc., lay in the early stages of the supply chain, with few substitutes for importers abroad and very low elasticities of demand;
    2. the sanctions-enforced reversal and removal of distortionary globalization and imports set up in the 1990s, as well as throughout the Putin era;
    3. the large idle capacity and idle resources left over from the Soviet Union in the manufacturing and many other sectors (where they were quite competitive, and not just the boost to the domestic MIC due to the war); hence also the relatively moderate inflation,
    4. the involuntary, sanctions-enforced dismantling of many of the rent seeking networks related to imports;
    5. and the restructuring both of the export markets, as well as of those elements of the supply chain, which relied on the west, and most of which were not as consequential as it was made out to be.

    Russia GDP in PPP terms has already overtaken Germany. Japan is marginally ahead of Russia and is likely to be overtaken in the next 3 to 4 years, for some of the same. reasons but some additional ones as well.

    Reply
  20. AntonioB

    btw. it’s not just Germany’s economy that is damaged, but the whole of EU.
    But then it has been done because the ruling elites, a mix of USA centric finance figures and state apparatchiks, wanted it and were manoeuvring for it.
    USA started using blackmail against energy groups first, Siemens in Germany then Alstom in France. It blackmailed then other big groups like among others VW. (the “diesel gate” … by a country, USA, were diesel is almost nihil….)

    The USA did it by weaponization of the USD via extra-territorial laws.
    Some investigators would find some obscure transaction done many years ago between Siemens, Alstom, etc, with Iran for instance or some bribery somewhere, and paid in … USD.
    At which point they bring in some american law telling transactions with Iran are illegal and it’s retroactive.
    This kind of laws have of course no effet outside american jurisdiction in a foreign country, so the workaround is for USA to blackmail at Wall Street level: if the foreign business has significant investments in USA and is on US stock exchange, it is threatened to get excluded of Wall Street and its assets confiscated.

    From that point on, it was up to ruling elites, financial and political, in Germany to bend, or to take the loss but reject. Germans gave themselves away.

    Some years after Siemens, it was the turn of Alstom. This one was nasty because it used also a hostage. The then Alstom boss for Eastern-Asia, based in indonesia, Frédéric Pierucci, was on its way from Indonesia to France via USA, he was arrested in an airport by FBI and put in a high-security jail without being told why. Then indicted for bribery commited by Alstom in Indonesia years ago, when he was not even working in the position. American laws are just totally arbitrary but if you happen to be on US soil you are off luck. Trapped.
    This was in fact a warning to the executives of Alstom: they could no longer travel abroad or at least at countries with extradition treaties with USA. A big problem for top executives of the then biggest nuclear energy group.
    Alstom was considering an alliance with a chinese group, but USA wanted this deal killed and instead GE take control of Alstom.
    Which was done. Patrick Kron,, Alstom CEO was excluded from warrant lists and traveled many times France-USA, until he finally sold Alstom to GE, in secrecy. French government owned 50% of Alstom, but the government was kept out of the discussions between Kron and GE. They didn’t know about!
    French government learned about the sale after it was done, by reading a leaked announcement in a WSJ article. Arnaud Montebourg, industry minister requested an emergency meeting with president Hollande and economy and trade minister who was …. Macron.
    Montebourg wanted the sale cancelled by nationalization of Alstom. Macron opposed and Hollande sided with him.
    So did France lose its nuclear energy group, patents went to GE, and sovereignty in nuclear matters was lost.

    Other case of blackmail was against French banks. Under president Hollande. Credit Lyonnais, Société Générale were threatened of being blacklisted in Wall Street and their american fronts confiscated with the assets.
    French government could have taken the loss and at same time turned into deals with China and Russia for instance. This would may have brought USA to tell “wait a second, let’s talk!” but no, the government and banks CEOs just paid huge billions-size fines and bowed.

    On the other hand take China. USA exerted blackmail by ordering Canada to detain the nr.2 of Huawei group in Vancouver. China retorted by sending to jail three Canadians living in China, so Canada was stuck. And Chineses did hold, until Canada had enough of it and released the Huawei hostage.

    And there is more: inside EU, USA encouraged Germany to work against France. France had a very big advantage in industrial costs thanks to self-resilience in nuclear energy for cheap with an extensive high-quality grid of nuclear power stations.
    Against this Germany worked on two areas: the “green” ideology, and market liberalization inside EU. Over a period of twenty years French political class were either ideologically brainwashed or financially bought. Then coup de grâce came under Macron and the Alstom affair.

    Now EU is stuck because main countries have signed into long term deals with US shale LNG.

    But decay keeps going: facing bankruptcy some industrial and hi-tech businesses are bought for cheap by … american groups.

    Reply
  21. flora

    Many, many thanks, Prof. Hudson. Your simple explanation of the real world situations is quite good, imo. Best.

    Reply

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