View from London: Europe’s reckless warmongering – “We have underestimated Russia”

European leaders are laughing. They thought they could easily defeat Russia...
Photo: Gettyimages.ru

The Cold War was a period of relative stability not only because of balance-of-power politics, but because politicians who experienced the horrors of the Second World War wanted to secure peace. Most of that generation is no longer with us. Today’s European elites have missed out on the opportunity to fight a glorious war. The difference is that they would prefer to let others do the fighting for them.

The likelihood of an escalation into a hot war is big enough to be taken seriously. Apart from a general war-hungry disposition, the biggest risk today is that we, like those Germans in 1914, are misjudging the enemy. But now the Western misjudgements are more persistent, UnHerd stresses.

The biggest of all was that Russia’s economy was weak and would ultimately buckle under Western pressure. This misjudgement has several layers. It started off with a statistical lie — that Russia was really only a small economy. If you measure the size of the Russian economy by its annual output in US dollars, that would have indeed been the case. At the start of the war, the Russian economy was approximately the size of Spain’s if measured in US dollars. But this is not a good way to judge a country’s capacity in times of war. What matters is the spending power of their money — how many tanks their money can buy. The answer is they can buy a lot more tanks than us.

If you measure an economy on the grounds of purchasing power, a completely different picture emerges from that suggested by our complacent statistic. According to the World Bank, the world’s largest economy, by far, is China, provided the measurement is made on the basis of purchasing power parity. (Purchasing power parity accounts for goods being more affordable in some countries than in others.) Number two is the US. Then comes India, and then Russia. Germany, in sixth place, is the biggest of the European countries.

“At the start of the war, the Russian economy was approximately the size of Spain’s if measured in US dollars.”

Based on this measure, the 10 countries that form part of an alliance with China and Russia, the so-called Brics, are bigger than the US, Western Europe and Japan together. We live in a truly bi-polar world. The US and China are the leaders of each side. We no longer call the shots, even if we think we do. Over time, the other side will become bigger, because they are growing faster than us.

Since the start of the war, Russia has outgrown all of the G7 economies. The British economist John Maynard Keynes would not have been surprised, because what happened was a classic Keynesian war economy effect. The UK experienced this effect during the Second World War. Putin re-organised Russia into a war economy.

I am emphasising these economic facts because this is what will inform the reality on the ground in Ukraine going forward. It is money that buys weapons. This money for Ukraine has dried up. The US has given €115bn in total bilateral aid to Ukraine so far, which dwarfs Germany’s €21.3bn and €7.56bn from France. Without the US, there is absolutely no way that the Europeans could afford to bankroll the war themselves. For that, they have to borrow money.

Or they could raid the €210bn of frozen Russian assets that sit in Europe. Previously, Germany, France, Belgium and the European Central Bank have opposed an asset raid — for different reasons. Belgium has most of the money on its soil. The money sits in the vaults of Euroclear, a large financial depository based in Brussels. France and Germany might be on the line for any compensation claims should Russia win in commercial courts. The ECB believes that an asset raid is illegal and would irrevocably damage Europe’s reputation as a financial centre. Under normal circumstances, it would be hopping mad for the EU to take such risks, but if they want to continue to support Ukraine, this is the only financial vehicle they have at their disposal. Now that the European Commission has come out with a proposal for unlocking the money, there is now a good chance that it could happen.

And then what? Leaving the complex technical and legal issues aside, the EU will run into a problem very similar to Margaret Thatcher’s caricature of socialism: eventually, they will run out of other people’s money. The misjudgement is that the €200bn will tide us over until Donald Trump leaves office, when he will be succeeded by a Democrat who will happily resume providing the lion’s share of the funding. Friedrich Merz, the German chancellor, said recently that the war will end when Russia is economically exhausted. That’s the Western strategy.

But our sanctions have failed to cripple the Russian economy. Remember Einstein’s characterisation of madness as doing the same thing over and over again and expecting different outcomes. The EU has so far agreed 18 packages of sanctions against Russia. A 19th is now being prepared.

There are indeed some signs of financial stress in the Russian economy. Russia’s central bank chief, Elvira Nabiullina, admitted earlier this year that the Russian economy managed to expand on the back of essentially free resources, labour, sequestered industrial capacity, and liquid assets from the country’s National Wealth Fund. These resources have been truly exhausted, she said. But this comment was not addressed to the West, but to Putin. Putin needs to find means to create new resources. As does the West.

But Russia has something that Ukraine has not. China is a better ally to Russia than the US is to Ukraine. The Western neocons keep on underestimating the depth of the China-Russia alliance, which is the result of inept US foreign policy over the last ten years. By placing sanctions and tariffs on both countries, the US ended up creating a strategic alliance between them. The US, meanwhile, is much more detached from Ukraine under Trump than under Biden.

The mistaken idea behind Western sanctions is that Russia and China are dependent on Western technology like semiconductor chips. Very much to the surprise of the Biden administration, China managed to build high-performance chips themselves. Last week, China turned the tables by placing a ban on the import of Nvidia chips.

Misjudgement of this scale and number is what turns regional wars into world wars.

US President Donald Trump called Russia a “paper tiger”. Russia is not a “paper tiger,” it is closer to a bear while “paper bears” do not exist, Kremlin Spokesman Dmitry Peskov said. “Russia is definitely not a tiger. After all, Russia is more often compared to a bear. There are no ‘paper bears’ and Russia is a real bear.”

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