The Cold War between the Western powers and their Eastern rivals points towards escalation

By Michael Pröbsting, International Secretary of the Revolutionary Communist International Tendency (RCIT), 7 September 2022, www.thecommunists.net

On 2 September the G-7 states announced that they agreed on a plan to impose a set price on Russian oil. The details are expected to be ironed out before 5^th December when EU sanctions on seaborne imports of Russian crude kick in. In addition, European Commission President Ursula von der Leyen said on 7 September that the EU should also set a price cap on Russian natural gas. ^[1]

The G-7 is comprised of the leading Western imperialist powers – the U.S., Canada, France, Germany, Italy, the U.K. and Japan. They justify imposing such a price cap by saying that Russia makes huge profit from selling oil since it started its invasion of the Ukraine. As the EU’s Energy Commissioner Kadri Simson said, “it is unfair to pay excess revenues to Russia.” ^[2]

Indeed, according to latest calculations, Russia earned €158 billion in revenue from fossil fuel exports in the first six months of the war. This exceeds Moscow’s estimated military expenditures of approximately €100 billion in the same period. [3]

True, this calculation leaves out the financial and economic losses of Russia due to Western sanctions. The seizure by the West of half of Russia’s currency reserves alone meant a loss of about $300 billion. (Of course, the Ukraine has suffered much worse, both in human as well as in economic terms.) Nevertheless, the figures demonstrate that the expectations of Western powers to substantially weaken Russia have basically failed. As it is well known, leading representatives of the U.S. and the EU declared shortly after the beginning of the war that their sanctions would ruin Russia within a short period of time. For example, France’s economy minister Bruno Le Maire boasted on 1 March: “We’re going to cause the Russian economy to collapse ... The European Union is discovering its power.” [4]

Instead, the EU is discovering not only that it has failed to push Moscow over the brink but also, and even worse, that it is still highly dependent on energy imports from Russia. More than half of Russia’s above-mentioned revenue from fossil fuel exports since 24 February (54%) is paid by EU itself!

The policy of hypocrisy

One can not fail to recognise the gigantic hypocrisy of leading representatives of Western imperialism. First, nobody forces the EU to import Russian energy! If the Western leaders are really so outraged about Putin’s imperialist aggression against the Ukraine, why do they continue to import Russian fossil fuel and pay Putin so much money?!

Second, while Washington and Brussels are outraged about Putin’s war, they don’t utter a word of protest against the barbarous war of aggression which Saudi Arabia and the United Arab Emirates are waging against Yemen since 2015 (with weapons provided by the U.S. and European powers). This war has resulted in the death of about 400,000 people and starvation of many millions! Not only this, but the EU tries to replace Russian oil with imports … from these murderous Gulf monarchies which are, furthermore, hardly more democratic than Putin’s regime!

Third, who are the Western powers to denounce Putin for his war crimes?! They themselves have waged long-term wars and occupations in Iraq and Afghanistan in the past decades resulting in death and destruction no less than Putin is causing today in the Ukraine. The conflict between NATO and Russia is a conflict between two serial killers with no moral right to accuse the other!

Finally, it is worth noting the irony of the Western attempts to regulate the energy price. As is well known, Washington, London and Berlin were champions of the “free market” for decades. Again and again, they denounced any regulation of the market and criticised other states for manipulating prices. In reality, Western imperialism praised the laws of “free” supply and demand only as long as … Western corporations dominated the world market – a dominance which secured them “excess revenues”. To their bad luck, the Western hegemony has ended as new imperialist powers have emerged, Russia and – more importantly – China. Now, as the West can no longer dictate the rules, they want to change these in their favour!

So, when a leading representative of the EU laments that “it is unfair to pay excess revenues to Russia,” one can only laugh or shrug shoulders about such hypocritical nonsense.

A desperate attempt of Western imperialism to regain hegemony

In reality, the real meaning of the conflict about Russian energy prices can not be found in the spere of moral or war crimes. The G-7 plan to impose an oil price cap on Russian exports represents a desperate attempt of Washington and Brussels to avoid the failure of its sanctions war against Russia (and its most important ally, China).

As we pointed out in other works, the course of the Western sanctions policy has already demonstrated that the period of their hegemony is over. [5] Despite many efforts, the U.S. and the EU failed to pressurise successfully non-Western states to follow its policy of sanctions against Russia. As a result, Moscow has been able to replace Western buyers of its fuel exports by others – like China, India and the United Arab Emirates. China – the most important imperialist rival of the U.S. – has become the destination No. 1 of Russian fossil fuel exports and total trade between the two countries has surged by 31.4% year-on-year from January to August to $117.2 billion in the dollar terms. [6] India has also dramatically increased its purchases of Russian crude: in the period April-June of this year it soared to 682,000 bpd from just 22,500 bpd in the same period in 2021, making Moscow India’s second largest oil supplier after Iraq. ^[7] It is, by the way, not without irony that India mixes a large amount of its oil imported from Russia with imports from other countries in order to resell it … to European buyers!

In fact, it is extremely difficult to subjugate Russia on the global energy market since it is the world’s leading exporter, accounting for 17% and 12% of global output of gas resp. oil. [8] Moscow has a particular dominating position in the EU energy market where it supplies 20% of coal, 25% of crude oil and petroleum products and 37% of natural gas. [9]

In response to the G-7’s plan of an oil price cap, Moscow responded already by saying that it will not sell oil to nations that impose such a price limit. Speaking at the 7th Eastern Economic Forum held in Vladivostok (Russia), President Putin warned: “If they try to implement this dumb decision, it will entail nothing good for those who will make it. Will they make political decisions contradicting contracts? In that case, we will just halt supplies if it contradicts our economic interests. We won’t supply any gas, oil, diesel oil or coal.” [10]

Tellingly, in the wake of the G-7 announcement, Russia’s state-owned energy giant Gazprom said it would not restart flows via the Nord Stream 1 pipeline due to technical issues, blaming Western sanctions for such problems. (As a result, European gas prices jumped more than 25%.)

Hence, the Western imperialists can only impose its price cap if they succeed in two things. First, they have to convince China and India – the most important non-Western purchaser of Russian energy – to support such a plan. And, secondly, they must push other crucial exporters of oil and gas – most importantly the Gulf states – to support such a policy by substantially increasing their exports in order to replace Russian commodities.

Neither the one nor the other is likely to succeed. China and India buy Russian energy at a substantial discount to the global price (the Brent / Urals differentials increased from $1-5 per barrel in February to $32-35 per barrel in June-July). They have established privileged relations with Russia. Furthermore, as mentioned above, India makes a huge profit from reselling its imported Russian oil to Western buyers. Why on earth should they now undermine their close and beneficial relationship with Russia in order to help Washington and Brussels? Because of love for “Western values”?! This is particularly true for China which is in a Cold War with the U.S. facing a series of hostile economic sanctions?!

It is therefore hardly surprising that the Stalinist-capitalist regime in Beijing made already clear that it will not support the G-7 oil price cap. ^[11]

And while India has not formally responded to the Western demands, it would be surprising if they give in. A few days ago, Indian Petroleum Minister Shri Hardeep Singh Puri replied diplomatically to questions of journalists, saying that “We will look at it very carefully.” However, he made clear that India’s decision will be determined by its national interests and not by Western wishes. “I said the Europeans buy more in one afternoon than I do in a quarter. I’d be surprised if that is not the condition still. But yes we will buy from Russia, we will buy from wherever.” Asked whether he had a moral conflict with buying Russian oil amid the Kremlin’s onslaught in Ukraine, Puri replied: “No, there’s no conflict. I have a moral duty to my consumer. Do I as a democratically elected government want a situation where the petrol pump runs dry? Look at what is happening in countries around India.” ^[12]

Neither are the OPEC states – with the Gulf states playing a dominating role – willing to give up their extra revenues which they have made since the beginning of the war with the oil prices exploding. During his visit to Saudi Arabia in July, U.S. President Joe Biden demanded that the Gulf states substantially increase their exports. This demand was rebuffed when the OPEC+ – this is the alliance of OPEC and non-OPEC partners with Saudi Arabia and Russia as the most important members – agreed to raise oil output by just 100,000 barrels per day. Now, after the G-7 announced their plan for an oil price cap, the OPEC+ decided … to cut production targets by about 100,000 barrels per day from October! ^[13] This is nothing but the middle finger in the language of oil diplomacy.

In short, the attempts of Western imperialism to regain its hegemony – at least in the global energy market – is not likely to succeed.

“A mockery of West’s intervention in global oil market”

Such an interpretation is shared by bourgeois analysists. Chris Weafer, a well-known observer of Russian trade and finance, commented: "The main impact of the G7 oil price cap will be to further shift economic competitiveness from Europe to India, Turkey, China and other Asian states. Russia will not sell oil to so-called unfriendly western nations but will continue to sell to Asian nations at a discount to the global price. (…) OPEC has already said it will not add enough extra oil to compensate. So the price of oil will rise this winter and Russian revenue will not be badly hit because of sales to Asian buyers. This move will not help bring down global inflation as the price of oil will inevitably rise once Russian barrels are removed from Europe and Moscow will not sell indiscriminately to the global market. It will sell only to so-called friendly nations and all others (G7, EU, etc.) will pay the full market price. Neither OPEC nor US producers will cut their price just because Russia is cutting deals with India, China, Turkey and other Asian buyers." [14]

Another analyst, Ben Aris, wrote the following analysis. “Now [Russia] has launched its Phase 2 of its economic war against Europe by stopping the gas flows through Nord Stream 1 completely in response to the G7 threat to impose an oil price cap scheme. (…) Gazprom’s announcement came after the G7 finance ministers said they were going ahead with the oil price cap scheme that is designed to cut the Kremlin off from its oil export tax revenues, but Russia has already said that it will simply stop exporting to anyone that attempts to implement the scheme. Basically it's now a game of chicken: the West is banking on the hope that Russia will need the money and so continue to export oil even at reduced prices; and Russia is banking on the hope that if it cuts off European oil exports that will cause a global shortage and send oil prices into the stratosphere, thus massive exacerbating the energy crisis that is already tearing into European economies. Plus Russia seems pretty confident that the oil price cap scheme can’t be made to work because of all the leakages. Who can take the most pain? At this point my money is on Russian President Vladimir Putin as Russians do pain like no one else.” [15]

Aris adds that the escalation of the Cold War since 24 February has become very costly for imperialist Europe and that it is very doubtful how long these governments will be able to continue the conflict on this level of escalation. “One aspect of this whole story that is underreported is just how expensive this war is proving to be. German Chancellor Olaf Scholz announced a new €65bn relief package on Saturday – double the total amount of two previous packages – and Italy’s economic minister also said Rome has already spent €54bn and that will reach €100bn by the end of this year. The total cost to Europe so far is on the order of €300bn but that will clearly hit half a trillion by Christmas and maybe €1 trillion by the end of the heating season? (…) European governments have yet to put themselves on a war footing and prepare their populations for two years of hardship. Scholz's new relief package is symptomatic of the general approach so far: throw money at the crisis to try and keep life as usual going, but the question is if Europe can afford it and how committed is the EU population to actually suffer for the sake of Ukraine? Call me cynical, but I don’t think they are committed enough to wreck their own economies for the sake of a country that is a member of neither Nato nor the EU.”

And the Global Times – the English-language mouthpiece of the Stalinist-capitalist regime in Beijing – characterises the decision of the OPEC+ to cut their oil production as making “mockery of West’s intervention in global oil market”. They add: “[T]he OPEC+ production cut, which came just days after the Group of Seven, or G7, agreed to impose a price cap on Russian oil exports, is an unmistakable sign of the oil-producing countries' opposition to the West's geopolitical gambits at the expense of these countries as well as global markets. (…) For starters, Russia has made it clear that it will not sell any oil to countries that participate in the oil cap plan. Second, China and India, the two largest buyers of Russian oil, are also unlikely to support G7's price cap plan in that such a move goes against their stance on sanctions against Russia. (…) It is therefore impossible for the US and Europe to ask other countries to sacrifice their own interests to align with their geopolitical strategic goals.” [16]

The above-quoted Western analysts are unquestionably no sympathisers of the reactionary Putin regime. But they are well-informed observers and their doubts about the chances of success of the G-7 plan reflect an increasing scepticism if the Western powers can win the Cold War. In contrast, Global Times, of course, sympathises with Putin since Russia is China’s closest imperialist ally (Xi Jinping and Vladimir Putin symbolically announced, shortly before the beginning of the war in early February, the “friendship without limits” between the two powers). [17] However, their statement reflects the increasing self-confidence of the Eastern powers that they can withstand the economic pressure of their Western rivals.

An economic Armageddon option

There are Russian analysts who propose that Putin should consider to massively escalate its economic war against the Western rivals. Ruslan Nickolov, an energy expert who worked for many years for Western as well as Russian corporations, recently published an interesting article in which he proposed a plan which we could call Putin’s “economic Armageddon option”. “[U]ntil now, most of the restrictive measures by Russia have been precisely retaliatory. But what if Russia decides to force things? For example, it could announce its own embargo against everyone who adheres to the oil price cap imposed on Russia. To make its response asymmetric, Russia could add a threat to stop exporting gas, fertilizers, grain, rare gases, etc. to world markets, as well as require payment in rubles for all buyers from hostile countries. And to demonstrate its determination and the effectiveness of countermeasures, Moscow may begin to reduce supplies without waiting for the introduction of new sanctions. At the same time, having seized the initiative, Russia may want to leave the door open for a package solution on Ukraine and on the entire set of sanctions and countermeasures. The removal of the bulk of Russian barrels, tons, cubic and nanometers from global commodity markets will result in the most dramatic price surge in all affected categories. (…) Yet the biggest jolt this shockwave will send through the system will not be in the shortage of raw materials leading to a lack of power and heating and to production stoppages in core manufacturing industries. Rather, it will be a shock from a broader inflationary impact that could sway central banks to push interest rates aggressively. If the increase in rates is sharp (…), it will cause a curtailment of most corporate investment programs, a long series of bankruptcies, and glaring fiscal cuts across the entire spectrum of state, regional, and municipal budgets. The world economy will collapse into a deep recession.

Granted, if Russia does not resume its exports soon, its economy (…) will be among the hardest hit. But we must keep in mind a much higher pain threshold for society as a whole in Russia, due to its highly centralized political and economic structure, as well as the traditionally high level of stamina and perseverance of the Russian people. At some point, if Russia feels that sanctions have gone too far, it may decide to try its luck with these economic weapons of mass destruction.” ^[18]

Of course, one needs to be aware that the author is a bourgeois analyst who advises the Putin regime how it best could wage its economic war against the Western rivals. It is not surprising that he is optimistic about Moscow’s chances to the Western enemy. However, we consider his strategy interesting as it reflects that analysts in Russia (and the same is, of course, true for the West powers) consider the options for a dramatic escalation of the Cold War. And if we call to mind the above-quoted excerpt from Putin’s speech in Vladivostok where he threatened his Western rivals to stop “supplying any gas, oil, diesel oil or coal,“ we see that Nickolov’s proposal is no utopian speculation but a strategy which seems to be taken seriously in the Kremlin. ^[19]

Another confirmation of Marxist analysis

The latest developments in the Cold War between Western and the Eastern imperialists are a powerful confirmation of the analysis which the RCIT and other Marxists has elaborated since a number of years. They demonstrate once more that the long-term hegemony of the U.S., Western Europe and Japan are in decline.

At the same time, the rise of China [20] and Russia and their ability to withstand the Western pressure confirms our analysis that they are imperialist Great Powers and that they are not – contrary to the thesis of numerous Stalinist, Bolivarian and centrist forces – “semi-colonial”, “semi-peripherical” or “sub-imperialist” states. ^[21]

In other words, the current conflict about the global energy market is a struggle between imperialist robbers. Neither side defends a progressive cause. Only the struggle of oppressed peoples, facing aggression by imperialist powers, deserves support from socialists. Examples for such liberation struggles is the current war of the Ukrainian people against Putin’s invasion, ^[22] of the Chechen people against the Russian occupation or of the Syrian people against the Assad tyranny and its master in Moscow. Other examples have been the struggles of the Afghan and the Iraqi people against Western occupation or that of the Palestinian people against the Zionist Apartheid state. [23]

Therefore, socialists have the duty to oppose all imperialist powers – the U.S., EU and Japan as well as against Russia and China. They must take a revolutionary defeatist position, advocating intransigent class struggle opposition against each and every Great Power. The principles of working-class internationalism and anti-imperialism, which have informed the revolutionary Internationals in the past, remain fully valid today: with the oppressed people – always, with the imperialists – never!