Capitalism and its imperialist proclivity have been associated with the structural causes of conflict and war over recent centuries. But given today’s imperative realities of a globalized economy, capitalism – or at least large sections of it – cannot afford such a conflict or desire it. In this regard, we may be witnessing a seminal shift, whereby Washington’s threatened sanctions towards Russia, and the war that that entails, are seen as an untenable political agenda divorced from the all-important economic realm.
In pushing this agenda, Washington may be the one that finds itself isolated, not Moscow.
When Russia hosts the 21st World Oil Congress in mid-June there will be 500 company leaders in attendance, representing a who’s who of industry corporations. Also attending the summit will be 50 government ministers and delegates from over 100 countries.
So much for Washington’s threats of economic sanctions to isolate Russia… As far as the world’s oil industry is concerned – arguably the planet’s primary lucrative economic activity – it will be business very much as usual with Russia. This reflects Russia’s position in the global economy as the top producer of oil and gas, boasting two of the globe’s leading companies, Rosneft and Gazprom. Russian total hydrocarbon trade is reckoned to be worth some $1 trillion a year. What’s more, Moscow announced recently that it is set to no longer use the US dollar for its international oil and gas trade.
The World Oil Congress to be hosted by Russia also reflects the reality of a globalized economy. This is especially true for the oil and gas industries, with multinational corporations typically working together in sensitive strategic partnerships that transcend national boundaries and governments.
When US President Barack Obama talks about ratcheting up economic sanctions against Russia over alleged violations of Ukrainian sovereignty, there is more than a sense that this is a politically driven agenda not shared by much of the world’s economic and trade sectors. Indeed several recent business press reports show that business leaders and investors are increasingly concerned by, and even vocally opposed to, Washington’s adversarial stance towards Moscow.
Within hours of Washington and Moscow signing the Geneva document on April 17, aimed at de-escalating tensions over Ukraine, President Obama was already talking down a possible diplomatic resolution and said that his administration was drawing up a raft of harder-hitting economic sanctions against Russia.
“We are coordinating now with our European allies,” said the American president. “My hope is that we actually do see follow-through over the next several days [for a diplomatic resolution] but I don’t think given past performance that we can count on that. And we have to be prepared to potentially respond to what continue to be efforts of interference by the Russians.”
However, American government-owned news service Voice of America reported, on the same day, that “many global companies are lobbying against sanctions”. VOA quoted Ben Kumar, an analyst at London investment management firm 7IM, as saying: “You have this globalization now which means that everyone is linked to everyone else. Companies like BP [British Petroleum] – all the major energy companies are so multinational that if you start to threaten to shut down trade links they will kick up a fuss.”
It is a fair deduction that within international business, European companies are a lot more ill at ease compared with American counterparts at the prospect of further US-led sanctions on Russia. European trade with Russia is tenfold that of American-Russian commerce. Europe’s biggest economy Germany is most exposed having the largest bilateral partnerships with Russia.
More than 6,200 German companies have long-term investments and trade deals in Russia. Some of these firms are world leaders, such as Opel, Daimler and Volkswagen for cars, BASF for chemicals and Siemens for energy infrastructure. It is estimated that total German investment in Russia stands at around $30 billion. Even with the diplomatic sanctions that Washington has imposed to date, they are hitting German businesses because of resulting devaluation of the Russian currency, the ruble, which makes German exports more expensive.
“Compared with a year ago our products in ruble terms have become 25 per cent more expensive,” Wolfgang Eisser, managing director of Diosna, a machinery firm, told the Financial Times. “We see some projects have been delayed. Although business volume hasn’t fallen to zero it is smaller. The fear is that the currency could devalue further if the crisis escalates.”
The vulnerability of Germany’s economy would explain why Chancellor Angela Merkel has been less vocal than Washington and other European allies in criticism of Russian President Vladimir Putin over the Ukraine crisis. Merkel has pointedly said she is opposed to the implementation of economic sanctions despite Obama’s assurance cited above about the US “coordinating with our European allies”.
Even Merkel’s more gung-ho Foreign Minister Frank-Walter Steinmeier has lately expressed apprehensions about economic sanctions being pushed ahead of diplomatic attempts to “normalize” East-West relations.
“I would like them [Washington] to apply similar efforts, like in discussing the sanctions, to avoid further aggravation,” Steinmeier told German media earlier this week.
Another calculation disturbing Western companies and investors is the fear that Russia may orient its huge economic potential more towards Asia. Russia is reportedly lining up gargantuan oil and gas deals with China and India, among other mega projects. Former World Bank economist Peter Koenig said that the unfolding Eurasian direction represents a new axis in the world economy.
“China will re-open the old Silk Road as a new trading route linking Germany, Russia and China, allowing to connect and develop new markets along the road, especially in Central Asia,” said Koenig.
He said that in addition to this paradigm shift in the global economy is the recent announcement by Russia that it is to ditch the US dollar as the means of international payments in its energy trade, moving instead to the “petroruble”, exchanging local currencies or a mixture of barter. That will reinforce a dynamic already under way in which China and the other emerging economies of the so-called BRICS nations are to drop the dollar as the international reserve currency, to be replaced by a basket of currencies.
This is the backdrop to what German industries and investors are worried about losing out on if Washington pushes ahead with sanctions on Russia. It’s not only German firms. Multinational companies, the world over, are leery at the repercussions of the Washington-led sanctions agenda against Russia.
The irony of this is that it is the international business class that may be the restraining factor for de-escalating the conflict between Washington and Moscow. These firms are hard-nosed capitalist enterprises where monetary profit is the all-important bottom line.
This structural change is testified by the forthcoming 21st World Oil Congress to be hosted by Russia, with all the industry players in full attendance from over 100 nations. Could it be that globalized capitalism has moved away from its historical incendiary role when it was previously tightly associated with nation states? This would not be out of any ethical evaluation, but simply due to economic imperatives stemming from today’s globalized nature of capital.
There are, to be sure, still plenty of capitalist forces that stand to gain from East-West conflict. American arms manufacturers and Wall Street banks riding on the opportunities of a possible devastating war in Europe will only be too glad of Washington’s bellicose attitude towards Russia. Nonetheless, the world’s energy companies and other important trade and finance sectors across many different countries constitute a powerful counter-lobby.
Obama’s threats of ramping up sanctions against Russia are therefore in danger of sounding hollow and politically isolated. At this historical juncture of sluggish growth worldwide, or even perhaps a further financial crash, the world economy literally cannot afford Washington’s reckless political agenda. We can be sure that many top corporations, including American ones, are having a stern word in Obama’s ear.