The great geoeconomic turning point
Author: Prof. Hon. Alexander Rahr, Chairman of the Eurasia Society
The CDU politician and thought leader Matthias Zimmer divided the Ukraine conflict into two ideal schools of thought and pointed out that the two schools of thought require different strategies. In the public debate, they face each other irreconcilably. The first line of argument is associated with the model of a rule-based order (order of values). She says: Russia is an imperial, revanchist country. Vladimir Putin has dragged his nation into a war with the West to restore the Russian Empire lost in 1991. Ukraine is only the first victim, more will follow — such as Moldova or the Baltic States. There are even fears that Putin could seize the whole of Europe (from Vladivostok to the Atlantic) or even Alaska (formerly Russian territory). That is why Ukraine is defending not only itself, but also Europe as a whole. Putin attacks the Western liberal value system by describing the West as degenerate and contrasting the enlightened West with Russian national-conservative values. And that’s why the West must put a stop to Putin and his ambitions by also arming Ukraine with heavy weapons. Due Ukraine must not lose – because a Ukrainian defeat would also mean the end of the West in its current form.
The second school of thought is different: Russia behaves like a traditional great power, protecting its interests and fighting for its sphere of influence. In Ukraine in particular, the collapse of the Soviet Union left unresolved territorial problems that could not be solved through diplomatic channels. Added to this was Ukraine’s desire to become a member of NATO, for Russia – breaking a taboo. This has led to Russia now tackling the problem militarily. For Russia, Western value-oriented policy is nothing more than hostile colonial policy. Peace will only come about when the legitimate security interests and territorial interests of Russia and Ukraine are sufficiently taken into account. This school of thought compares the Ukraine war to the Cuban Missile Crisis. In 1962, the United States had threatened World War III if the Soviet Union did not withdraw its intermediate-range missiles from Cuba, which posed an immediate threat to America’s security. The comparison illustrates how differently the genesis of the conflict is interpreted. According to the first line of argument, Putin has duped the West through years of deception. He pretended to be Russian willingness to cooperate, up to and including Russia’s possible NATO membership, and through the energy partnership with the West he achieved the necessary dependence of Europeans on Russian raw materials – in order to strike at the right time in order to achieve his actual goal of realizing Russia’s ambitions as a great power.
The reconquest of Ukraine into the Russian sphere of influence represented a geopolitical adjustment for Russia after the historic defeat of 1991. The desire of Russian society for Europeanization, democracy and freedom, which briefly flared up 30 years ago, was replaced by the striving for size, dominance and state regulatory power . Russia reclaimed its historic place in Europe as a member of the „Concert of Powers“. For Russia and the West, it’s about the whole. Either Russia will regain its dominant role as a great power in Europe and the world order – and the West and NATO will be weakened and the Western unipolar security order will become fragile. Or Russia loses – and falls to the rank of an insignificant regional power fighting for its existence. The West insisted on a European security system based on the pillars of NATO and the EU, which Moscow, in its self-image as a great power, cannot accept.
Shortly before invading Ukraine, Putin laid the cards on the table: he demanded the withdrawal of NATO military infrastructure from Eastern Europe, a return to the 1997 Russia-NATO file, and the permanent demilitarization of Ukraine. The West rejected all Russian demands, underscoring once again its unwillingness to change anything in the established security order in Europe, let alone legitimize Moscow’s sphere of influence. After the end of the Cold War, the Western community, which saw itself as the winner of the new world order, followed two primates: (1) the winner takes it all and „A Russian empire must be prevented for all time.“ According to the second line of argument, the West is partly to blame for the escalation of the conflict. The West did not treat Russia as an equal partner after the collapse of the Soviet Union, negated Russian strategic interests, and surrounded Russia with NATO’s eastward expansion. And this despite the fact that Mikhail Gorbachev was verbally promised during his negotiations on German unity not to expand NATO into the Warsaw Pact area.
The fact is that the blessed period of peace enjoyed by the West almost three decades after the end of the Cold War was overshadowed by new conflicts year after year. The focus was on a value and system conflict. A common peace architecture based on the principles of the Paris Charter (1990) proved to be an illusion early on. In the decades following the Cold War, the world witnessed a far greater number of wars than in the 1945-90 period. Most recently, a Russian proposal to create a new multipolar peace order on the drawing board through the mediation of the permanent members of the UN Security Council failed. Now the window that Peter the Great once opened to Europe has slammed shut. Instead of a common space from Lisbon to Vladivostok, the future European architecture after the proclaimed turning point will probably be transatlantic: from Vancouver to Donetsk.
The conflict in Ukraine became the catalyst for a radical turning point in geopolitics and geoeconomics. Rarely has global politics, triggered by a monumental event, experienced such profound changes in such a short space of time. World War I started because of Serbia, World War II started because of Poland – does World War III start in Ukraine? A quarter into the 21st century, it has become clear that the transition from a unipolar, Western-dominated world order to a multipolar one cannot be peaceful. The non-Western powers are fighting for a multipolar world order, which poses a serious threat to the West. The West’s counter-strategy is the struggle of democracies against the dictatorships of this world, in line with the postulate of the „end of history“: There could be no better system in the world than the liberal one.
There will be no winners in this global struggle. The West remains a united but weakened power bloc, united in NATO, the EU and the Transatlantic Community. In addition, a second power bloc is emerging – so-called Eurasian alliances, supported by authoritarian powers such as China, Russia, India, Turkey, Iran and North Korea – striving for dominance in Asia, Africa, Eurasia and the Near and Middle East. World politics is facing a lengthy global conflict between value ideologies and systems, before the world is disintegrating into different economic, legal and value spaces. This conflict will last for decades. Europe is aligning its future security architecture against Russia, China and, moreover, against Islamic extremism – the enemies of the free order.
The largest territorial state on earth – Russia – is sealed off from western culture and western economic markets. Realistically, however, this will not succeed, because the G7 can envisage isolating Russia from the world, but the majority of the G20 will prevent it. In Asia and the rest of the world, Russia is by no means isolated. One can even see a geopolitical constellation in which Europe and the US face the “rest of the world”. A Russo-Chinese military alliance is slowly forming against NATO in Europe and against the US-British-run Southeast Asia Pacific (AUKUS) military alliances. China will need an alliance with Moscow to assert itself militarily against AUKUS. The same applies to Russia. Putin’s initially completely flawed Ukraine strategy means that Russia will soon be surrounded by two new NATO states, Finland and Ukraine, that are armed to the teeth. Between Russians and Ukrainians, this war will breed decades of hatred; Putin’s belief that the eastern Ukrainians would welcome the invading Russian forces as liberators could not be more wrong.
The new Cold War will be costly and require many sacrifices previously unimaginable in Russia and the West. It remains unclear how Western societies, spoiled by prosperity, will react to these drastic changes in their living standards and how the political landscape in Europe will develop in the medium term. Will the West split as a result? Russian society will find it easier to come to terms with the aftermath of the war. The fact that Russian society is currently sworn to revising the collapse of the Soviet Union and is assuming an oversized nationalist identity, while in the West the enemy image of Russia is taking on firm contours, makes any prospect of an understanding between the West and Russia disappear.
China has suffered from Western colonization in recent history and is now pushing for revenge and its own influence in world politics. While Russia poses a geopolitical threat to the West, China poses a huge geoeconomic challenge to the West. Geoeconomic Impact The greatest impact of the turning point is the Russian geo-economic complete reorientation from the EU to Asia. As the European Union wants to break free from Russian energy supplies, Russia is building its new transport infrastructure to China and Mongolia. Russia is still supplying its Chinese neighbors with gas from the East Siberian production areas through the “Power of Siberia” pipeline. But in the near future, the natural gas deposits in western Siberia, which were actually intended for Europe, are to be diverted to the east via new pipelines. The West was late in understanding the geoeconomic consequences of the new world conflict. Russia’s war of aggression has plunged Europe into an energy and raw materials crisis. Not only are electricity, gas and oil prices exploding, the entire supply security of Europe as an industrial location is at stake. Inflation is high and the recession threatens future jobs. Without enough gas and with the world’s highest energy prices, Europe’s competitive advantage over other parts of the world is likely to dwindle.
Soon there will be an oath. On the one hand, world politics gets into the ideological system competition: democracy versus authoritarian states. But the question of who will become more powerful in the world – states that rule over energy and commodity trade or states with more developed potential for modernization – has not been answered. In the past 500 years, the answer has been unequivocal: nobody questioned the economic superiority of the West. Although the Soviet Union owned 16% of world GDP, its own mismanagement forced it to buy wheat from the West. But the global rules of the game are changing. Putin may have recognized this fact early on and coldly exploited it. The world is approaching the end of globalization, accompanied by groundbreaking power shifts in the rules of the WTO, OECD, World Bank, IMF, OSCE, G7. The future of the UN as world government and guardian of international law is at stake when a gigantic showdown erupts between the main players, the USA, China, Russia and the EU. The world economy is facing a dramatic regionalization. The BRICS countries – a group dominated by the energy giant Russia and the economic powerhouse China – now control a quarter of the global economy and have caught up with the USA and the EU (45%). BRICS and the countries of the Shanghai Cooperation Organization are creating competing parallel structures with the West, which will determine world trade, credit and currency relations and integration policies. The western population is only one seventh of the world’s population, it is less than a quarter (771 million) of the population of the BRICS (3.2 billion) The demographic development in the world tends to weaken the West. The desire of the USA, supported by the EU, to remain a hegemonic power and to enclose China and Russia in return, can hardly be achieved without economic sacrifices. The non-western part of the world challenges the states of the golden billion. The war in Ukraine would only be the beginning of this global struggle.
Regionalization is the buzzword of the geo-economic revolution in the world economy. The dramatic unbundling of Europe and Asia was already visible during the pandemic phase, but nobody thought it would be so confrontational. The previous peaceful regulatory framework in which raw material producers and raw material consumers treated each other in a civilized manner is a thing of the past. The possession of raw material stocks, the raw material dependencies and the control over the technological extraction of raw materials, as well as the supervision of global raw material transport routes – all this becomes the decisive weapon in the new world conflict. The biggest sufferer is climate change.
Controlling commodity transit routes is likely to become the military challenge of the 21st century. The terrorist attacks against the Nord Stream I and Nord Stream II pipelines fall into this category. The Russian infrastructure for transporting energy to Europe was destroyed – most likely by the USA, in order to prevent any future energy partnership between Germany and Russia. In fact, since the end of 2022, Germany has been less dependent on Russian gas supplies than on American ones. Moscow has been accused of using energy as a weapon against Europe in the past. In the future, Europeans will feel these weapons from Washington as needed.
China and Russia are strategically well-positioned on global commodity routes. Russia has established gas trading infrastructure around the world and will in future control the main transport route between Europe and Asia – the increasingly ice-free Northeast Passage. Europeans source rare earths mainly from China. Rare earths are used in the manufacture of microchips, electronics and ammunition for modern weapons. Supplies for the western armaments industry will continue to go through Russia. Most Chinese mineral resources are transported through Russian territory. If the West is not careful, all trade routes between Europe and Asia will soon be in Chinese or Russian hands.
In the multipolar world, the West will no longer be able to assert its interests with the means of liberal values and the rule of law, even if the USA wants to fight for this. The law of the strongest decides. Imagine the two commodity superpowers Russia and China joining forces against the West. Or, vice versa, the technology superpowers USA and EU get rid of their economic dependencies on Russia and China once and for all. The global economy is gearing up for a fragmented market. With expensive batteries from the west and cheap goods from Asia, with China benefiting the most. The fact is that Europe remains structurally dependent on raw material supplies from other parts of the world. Especially when it comes to refining metals, Europe cannot avoid China. 58% of lithium and 75% of global cobalt production comes from China. Individual parts of the world are now trying to become more resilient. But the West’s economic dependency on China cannot be replaced. Of 30 raw materials that the EU Commission classifies as critical (economically significant, high procurement risk), China is the largest producer for two-thirds.
Europe must invest in its own raw material extraction. There is no way around it. But the West cannot afford a second complete break with China, as it did with Russia. This is especially true for Germany, as the volume of German trade with China exceeds trade with the United States. As for Russia, Germany trades significantly more with this eastern neighbor than with Turkey, Japan, or India. Reason enough to remain realistic with such numbers. Controlling the raw material transit routes is likely to become the military challenge of the 21st century. The terrorist attacks against the Nord Stream I and Nord Stream II pipelines fall into this category. The Russian infrastructure for transporting energy to Europe was destroyed – most likely by the USA, in order to prevent any future energy partnership between Germany and Russia.
In fact, since the end of 2022, Germany has been less dependent on Russian gas supplies than on American ones. Moscow has been accused of using energy as a weapon against Europe in the past. In the future, Europeans will feel these weapons from Washington as needed. China and Russia are strategically well-positioned on global commodity routes. Russia has established gas trading infrastructure around the world and will in future control the main transport route between Europe and Asia – the increasingly ice-free Northeast Passage. Europeans source rare earths mainly from China. Rare earths are used in the manufacture of microchips, electronics and ammunition for modern weapons. Supplies for the western armaments industry will continue to go through Russia. Most Chinese mineral resources are transported through Russian territory. If the West is not careful, all trade routes between Europe and Asia will soon be in Chinese or Russian hands.
The USA act: The US government wants to dictate to its own industry that raw materials should only be sourced from friendly countries. Actually, the EU wants to achieve the same with its „Raw Material Act“. The US introduces an export ban for the Chinese high-tech sector. The Chinese are not only to be decoupled from the entire supply of chips of the latest generation, but also eliminated as a competitor in quantum computers, artificial intelligence, biotechnology and renewable energies. However, China could take revenge by attacking Taiwan – the world economy would lose 90 percent of its most important resource, the chip. If the People’s Republic were to stop delivering connectors, cable or electrical components to the West, there would be major production losses. Like energy and raw materials, microchips could soon become a driver of inflation in western economies. But in the US, economic and sanctions policy has now become the main department of security policy.
In an emergency, as in the fight against a pandemic, old principles are thrown overboard. Europeans are returning to fracking for gas and oil supplies. Europe wants to extract all the rare earths it needs from its own soil, no matter what the cost. Voices call for a renaissance of the mining industry in Europe. Will people soon no longer be able to hike in the Ore Mountains because shafts are being excavated everywhere? The change in the European landscape due to the rapid cultivation of wind turbines has been triggering protests among the local population for years. What if earthquakes occur as a result of fracking, as happened in the Netherlands? According to the current legal situation, courts will prevent mine cultivation. So self-funding is not an option. The sober statement includes: Russia will pay dearly for the lack of technology imports from the West with its own loss of prosperity due to the sanctions. But the loss of raw materials, the loss of export markets for their own goods and the abandonment of cheap production will hit the West right to the core. The geoeconomic upheavals will be painful for all sides.
The interdependence of “exchanging technology for raw materials”, which has been considered desirable for decades, is a thing of the past. Russia and other countries under sanctions are becoming self-sufficient because they can no longer access the necessary conveyor technology and investment capital from the West. And vice versa, the western states will have to procure the necessary raw materials in the USA or from western-friendly raw material suppliers in the future, because the previous producers use them as a means of exerting pressure against western sanctions. The supply chains, sales markets, joint ventures that have existed for decades: everything that has worked so flawlessly up to now is losing its strategic importance. The global economy is falling apart.
The world may be at the beginning of a global war for resources. In relation to oil, this has always been the case in recent history. The war in Ukraine is typical of this. Should Russia succeed in conquering all of eastern Ukraine, Kiev would lose two-thirds of its natural resources. Russia has cut off Ukraine from the Black Sea and now controls around 63% of Ukraine’s coal, 11% of oil, 20% of natural gas, 42% of metals and 33% of rare earths. In addition to the huge coal deposits, there are iron ore deposits that are among the largest reserves in the world. In addition, Ukraine has deposits of aluminum; titanium alloys; noble gases such as neon, xenon and krypton; and various small metals including magnesium, tantalum, germanium and silicon metal. Eastern Ukraine is one of the most mineral-rich areas in Europe.
If oil is traditionally referred to as “black gold” because of its importance, then lithium is becoming the “white gold” of this century. Global demand for lithium could increase five to tenfold by 2030. Lithium is the lightest metal in the world. In metallurgy it is used for deoxidation and strength of alloys. In optics, it is used to make glasses that protect against UV rays. In addition, it is used in nuclear power and nuclear engineering to produce a radioactive isotope of hydrogen – tritium. But the lion’s share of lithium goes into the production of lithium-ion batteries. The increasing demand for electric vehicles has caused lithium prices to increase by 400%. Lithium carbonate prices are now holding above $70,000 per ton (from around $13,000 recently) due to strong demand from lithium-ion battery manufacturers.
The largest lithium reserves are in distant countries such as Australia, China, Chile or Brazil. In the geo-economic debate, the EU wants to reduce dependencies on unsafe third countries. Larger lithium deposits are suspected in southern Europe, but also in Germany, for example in the Vosges lowlands and in the Black Forest. A team from the Karlsruhe Institute of Technology has found that Germany can theoretically produce up to 4700 tons of lithium per year. This would allow Germany to cover 2 to 13 percent of its annual battery production needs. The problem: possible environmental damage.
The largest lithium deposits are also suspected in Serbia. The fact is that the eastern regions of Ukraine contain about 500 thousand tons of lithium oxide. In the future, Ukrainian lithium reserves will be among the largest in the world. Unlike Europe, Moscow and Washington are aware of Ukraine’s geological wealth for their own military purposes. One of the aims of the $40 billion that Washington has made available to Ukraine for the war is to take the natural resources out of Russian control. The total value of Ukraine’s resources is estimated at $7.5 trillion. Russia’s war in Ukraine has upset the market for this wide range of critical commodities. Overall, Russia has taken away 80 percent of Ukraine’s exportable economic output. It is worth taking a look at Ukrainian agriculture here.
Before the war, investors from Russia, the USA, China and the EU took massive stakes in Ukrainian agribusinesses, cultivating arable land in the fertile Black Soil region of Ukraine. The competition between Americans and Chinese was fierce. The loans that Ukraine has received from the IMF and World Bank since its western orientation have been exchanged for shares in local agricultural holdings. A US report spoke of „Corporate Takeover of Ukrainian Agriculture“ (2014). Hundreds of thousands of hectares of farmland are now in the territories annexed by Russia. Another geoeconomic upheaval is imminent in the world financial economy. Russia and China are slowly dismantling global dependence on the dollar. The creation of an alternative financial system is only realistic if all world trade could be turned upside down. The BRICS are looking for allies among the emerging countries that would be willing to take on the US.
To be fair to the West, it should be said that countries like Germany have long been aware of their dependence on raw materials and that is why they initiated the energy transition. The embargo on Russian fuels cannot now be lifted without the revival of coal and nuclear power. The phase-out of nuclear power and coal is postponed in Europe – with devastating consequences for global environmental and climate protection policy. An even more radical switch to green technologies, such as solar energy, wind turbines, biomass, geothermal energy, hydrogen, will not work because their production requires tons of raw materials – which are very difficult to obtain in the non-liberal world. A country like Canada, on which European hopes are now pinned, is unable to balance raw material supplies from Russia and China. Western industrialized countries will continue to lack the necessary minerals, rare earths and raw materials for the production of green technologies.
Politicians are calling for a return to nuclear energy. The fact that the war in Ukraine did not spare the largest European nuclear power plants in Chernobyl and Zaporozhee has alarmed the world public. But there are other problems with nuclear energy. In France, more than half of the nuclear power plants were off the grid in late summer, mainly due to maintenance work and low water levels in the rivers from which they take cooling water. Due to the extreme drought in the entire Alpine region, the availability of hydroelectric power plants was exceptionally low. Horror stories are coming together like under a magnifying glass: The USA and the EU are dependent on larger uranium supplies from Russia. Russia’s state-owned company Rosatom dominates the world market. Rosatom is the second largest uranium producer in the world. It has 15 percent of global funding. Together with Kazakhstan, Russia controls almost 40 percent of the world market. In the production of enriched uranium, which is required for the operation of nuclear power plants, the dependency is even greater: over a third of global demand comes from Russia. Most of the German nuclear power plants that are still in operation are also operated with it. The EU gets 20% of the uranium from Russia, with another 19% coming from Russia’s ally Kazakhstan.
The operators of nuclear power plants are therefore calling on the American government not to impose an import ban on Russian uranium. In the US, around 20 percent of electricity is generated with uranium from Russia and its allies Kazakhstan and Uzbekistan. Only through the cheap import of uranium as a fuel for nuclear power plants can electricity prices in the USA be kept at a low level.
The French war in Mali is closely linked to the supply of raw materials for the nuclear state France. Large deposits of uranium are located in Mali. The fact that France is now being ousted from this African state by Russia is another characteristic of the current commodity wars.
One of the key questions will be whether the EU can completely free itself from Russian gas supplies. In recent years, the EU has voluntarily become dependent on Russian natural gas supplies because a) it wanted to become less dependent on Arab oil, b) because Russian natural gas was cheap, Russia proved to be a highly reliable supplier and European industry thereby gained competitiveness and c) the ecologically cleaner natural gas was considered as a bridging energy carrier in the transition from the fossil fuel economy to renewable energies.
For political reasons, Russian natural gas will no longer act as a golden bridge energy carrier in this transition. Russian natural gas is losing its dominant position in the green energy transition. Politicians wanted to switch off the coal and nuclear power plants and deliberately opted for gas. So now the West sees the ominous dependency on Russian natural gas as collateral damage of a thoughtlessly organized energy transition. Producers and consumers use natural gas as a weapon. America, which criticizes Russia the loudest for this, is doing it itself, as is the EU. For years, the USA has been trying to stop Europeans from trading in gas with Russia by threatening sanctions. In the process, they themselves are becoming Europe’s main supplier of liquefied natural gas (LNG). Instead of Russia, Europeans will be dependent on the USA for natural gas in the future.
After the Russian invasion of Ukraine, the West imposed an embargo on Russian oil and coal and sanctioned Russian gas trade by blocking Nord Stream II. Ukraine and Poland have closed key Gazprom routes for supplies to Europe – as a weapon against Russia. And Moscow responded by throttling gas exports through Nord Stream I. The danger of the gas bottleneck was recognized too late in Germany. Germany initially wanted to completely break away from Russian gas imports. Berlin thought this would damage the Russian economy. But after calculations were made, Germany found out that it was dependent on Russian gas. German industry would collapse without Russian gas supplies.
In the coming energy crisis in Europe, triggered by gas shortages and rising energy prices, Western politicians will blame Russia alone for the explosive social situation. Russia stopped supplying gas to Europe. In reality, Russia is reacting to Western sanctions by curbing gas supplies and wants Germany to lift sanctions against Russian energy production. The gas conflict is taking on ever greater proportions. Europe is struggling to find an alternative to Russian gas. At the same time, power outages lasting for hours occur in Bangladesh and Pakistan. By order of the authorities, the shops have to be closed after dark to save electricity. The reason for the lack of electricity in the developing countries lies in Europe. European demand for LNG at sea is skyrocketing. Europe is ready to bid any world market price for any LNG tanker. Because the Asians cannot keep up, the EU countries have bought up global LNG stocks in recent months. Europe sucks all the LNG out of the world. Dissatisfaction is growing in the affected countries, and the lights are going out in Asia.
Because of the war in Ukraine there are further problems with fertilizers. The global food supply has been hit at a sensitive point: especially in poorer parts of the world, fertilizer is becoming even scarcer and too expensive for farmers. In the industrialized countries, exorbitantly high fertilizer prices are contributing to rising food prices. Agricultural yields collapse and politicians fear social unrest as a result. Since 2020, in the wake of energy prices, the prices for nitrogen fertilizers have quadrupled, for phosphate and potash tripled. Russia plays an important role on the world market as a supplier of nitrogen, phosphate and potash. It is well known that natural gas is used to produce ammonia, which in turn is the most important ingredient in the production of nitrogen fertilizer. Trade across the Black Sea – a major route for ammonia exports blocked because of the war. Because of the exorbitant price of natural gas, many fertilizer manufacturers, such as BASF, cut production last year.
If the farmers fertilize even less, even less will be harvested. In the countries where the majority of the world’s population lives today, there is a threat of famine. While German car manufacturers are again looking for cheap production sites abroad due to rising electricity and gas prices, breweries are now suffering from rising prices and supply bottlenecks. Carbonation, important for the production of beer, has become in short supply due to the lack of ammonia, which is necessary for the production of carbonation. The Western industrialized countries are having problems with their sewage treatment plants because of the energy crisis. The fillers, such as iron and aluminum salts, are lacking due to the lack of hydrochloric acid, which is little produced due to high energy prices.
There is a massive bloom of algae in the waste water, the oxygen content in the corresponding waters falls, and the immediate consequence is a fish kill. Also, residues of medicines and other pollutants cannot be properly removed from the sewage treatment plants. Russia knows that it influences the global economy through natural gas trading. Moscow seems to be willing to use its raw material dominance with all its might. Russia is demonstrating to the West that it is capable of creating cold in Europe by withholding gas and triggering a world food crisis by impeding exports of wheat and corn, which could result in mass exodus around the world.
One of the most important aspects of future geoeconomic development is the problem of water. Periods of drought are increasing in Europe, while water is becoming a matter of survival in Africa and the Middle East. As the largest country in terms of surface area, Russia has the largest freshwater reserves in the world. Already in the time of the Soviet Union there were plans to divert Siberian rivers to Asia to compensate for the lack of water there. Researchers predict that water will become one of the most crucial raw material weapons of the future.
But the actual resource war will take place elsewhere: in the Arctic and Antarctic. Huge mineral resources are suspected there, in particular deposits of rare earth, which could satisfy world demand for decades. The US and Britain will claim Antarctica for their goals along with Australia – Russia and China will claim the Arctic. But the West is not giving up on its plans to weaken Russia and drain the Russian treasury. The G 7 states decreed a price cap for Russian oil exports, Russia should only be allowed limited oil trade in the future.
The G 7 decided to put massive pressure on India and China, if necessary – the states that had previously rejected Western sanctions against Russia in energy trading. In practice, international shipping companies that provide cargo ships and insurance companies are to be forced under threat of penalties to break away from Russian oil exports. This move by the G7 was a showdown ahead of the important G20 meeting in Asia. All major economies belong to the G20. This organization would be destined to become a kind of new world government. But the West wanted to demonstrate that it can enforce its laws, values and rights within the international framework of the global economy. But total isolation of Russia was not achieved by this western policy as long as Asia did not join the sanctions.
The interesting question is when, given the hard-balled resource wars, the West might feel compelled to lift sanctions against Russia. Politicians will be against it, but the fact remains that the sanctions against Russia did not lead to the collapse of the Russian economy, but to the end of globalization. In the past, the USA and the EU had pushed every country on earth into the WTO and made them promises of free trade. And now states like Russia and in the future China have become vulnerable. Such sanctions, which are currently being imposed on Russia, have been used up as a weapon for the future. Every state will consider whether it wants to make itself so dependent on punitive actions by entering into the global rulebook. Nevertheless, the Neue Zürcher Zeitung asked: „Have we imposed enough and the right sanctions?“
There’s no question that Western sanctions are hurting Russia. According to the Russian Statistics Office, the country’s GDP fell by 4% after the outbreak of the war; a decline of 7% is expected. Consumer spending has fallen. Inflation is 14%. Russian tax revenues from imports fell by 43.7%, which is a clear signal that parallel imports are not working. Russian stocks of Western goods are now almost gone. The import standstill is stifling the economy, also because Russia had neglected its own industrial production for thirty years, believing that it could always rely on cheaper West imports. The Western sanctions are having an effect after all, and experts predict that Russia’s economy will be thrown back into the shortage economy of the 1990s.
Russia’s calculation that the West will quickly drop sanctions will not work. Russia’s geoeconomic advantages over the West are short-term in nature. Despite their weaknesses, Europe’s industrial nations are resilient. With an enormous effort, the EU can manage to completely free itself from fossil fuels by 2050 and convert its own economies to green technologies. The Russian economic model, which is focused purely on the export of raw materials, is inferior to the western market economy.
Putin continues to believe that he can use the world upheaval to Russia’s advantage. Russia is not afraid to break with Europe and retreat geo-economically to Asia. Moscow overlooks the danger of becoming Asia’s appendage and gas station. Russia’s Asian orientation, which amounts to de-Europeanization, comes at an enormous price. Because Russia has invested billions in the European gas market, which seems lost in the future. Or is it conceivable that the widely ramified European pipeline network will degenerate into ruins?
The fact remains, however, that in the end the former partners will all ruin themselves. While Russia is losing its lucrative western energy export market, the European economy is losing competitiveness and prosperity. The raw material shortages threaten to destroy systemically important branches of industry. Goldman Sachs economists are forecasting a sharp recession in Europe due to massive restrictions on Russian gas supplies.
Contrary to many of its statements, the West is also not interested in a complete break with Russia. European companies purchase gas in rubles, as the Russian government is demanding in order to strengthen the ruble. The West will also remove Russian food exports from the sanctions list, as will uranium exports. In times of acute gas shortages in Europe, the Nord Stream II gas pipeline may have to be put into operation after all. In any case, the West is beginning to realize that sanctions should never do more harm to one’s own prosperity than to the enemy. To date, the western energy embargo has not reduced the flow of petrodollars to Russia. On the contrary, the rise in prices caused by the artificially created shortage of fossil fuels has refilled Russia’s treasury. The opposite of what the West wanted to achieve with the sanctions policy.
The future geoeconomic crises are difficult to predict. But the world is witnessing groundbreaking geopolitical power shifts like the ones we saw in 1815, 1919, 1945, and 1991. The world is threatened with permanent conflicts that will either end in a victory for the democratic West against the bloc of authoritarian states, or lead to a new distribution of power in a truly multipolar world order. The old order that more or less guaranteed European and world peace since the end of World War II is definitely over. The geo-economic consequences of the world upheaval are devastating for all sides. The cost of living is rising, western prosperity can hardly be maintained as before. Instead of trade links, there is militarization in Europe and Asia, which means another nail in the coffin for globalization.
100-year-old Henry Kissinger fears that the future world order will be fought by a US-West war with China and Russia. After the decision of Western states to equip Ukraine with the most modern military equipment, this danger has increased. As long as each competing side is convinced of its own victory and the defeat of the opponent – and regards this victory as morally imperative for itself – there will be no peace talks.
Russian President Putin clearly gambled the war in Ukraine. His plan to conquer Ukraine in a blitzkrieg didn’t work out. Putin overestimated Russia’s capabilities and underestimated Ukraine’s combat capability. He overestimated the resilience of Russia’s economy, he didn’t count on Western military aid to Ukraine, he overestimated China’s support for Russia. But Russia has not lost the conflict with the West. In an emergency, when its own existence is at stake, Russia will use its nuclear arsenal. One catastrophe Russia could still suffer as a result of the war: internally. If Russia does not even come close to achieving its war goals in Ukraine, Russia is threatened with losing its status as a great power. Putin wanted to cement the latter precisely by defeating Ukraine, NATO and the West. His entire government program for the past 20 years has been aimed at restoring Russia as a great power. A power struggle in the Kremlin, unrest in society, and disputes between the ministries of violence would be the direct result of Russia’s loss of face in Ukraine, and a fall of Putin cannot be ruled out.
For its part, the EU underestimated Russia’s economic power; the Russian economy did not collapse from the sanctions; it has successfully diversified. After Germany had assumed that Ukraine would capitulate at the beginning of the war, German policy turned 180 degrees after the Russians withdrew from Kiev, Kharkov and Cherson: Berlin now overestimates the combat effectiveness of Ukraine and underestimates Russia. For 30 years, the Western media has been constantly telling the story of the collapse of the Russian economy.
Basic knowledge of Russia has declined catastrophically in the West. This is due to the so-called triumphalism (end of history) in the Western leadership elite. They are overbearing, opinionated, and have traded strategic thinking for a value fundamentalism. Economically, neither Europe nor Russia will collapse in this global conflict. But the EU pays the price of extensive subjugation by the USA for its entry into the war and the „Ukrainization“ of European politics. Instead of independence in world politics, the EU has become hostage to American-British geopolitics, without the European elites being aware of this.
Finally, a suitable Bible verse: „For they do not know what they are doing.“ Putin has sworn his people to a new patriotic war. In eastern Ukraine, Russia considers the occupied territories part of Russia. Putin has declared a Russian defensive war against the „Satanic West“ in an offensive special military operation to punish Ukraine. Without a victory, Putin cannot end the war. A defeat would seal his personal fate. Is Putin plunging Russia, which he wanted to become a superpower via war to make up for the shame of the collapse of the Soviet Union, into a second geopolitical catastrophe?
In the West, the ruling elites are also going haywire. The fear of nuclear death, which has been justified for decades, has given way to a bellicism reminiscent of the time in Europe before the Second World War. The West has become a warring party to the „alien blood toll“. Ukraine is unconditionally supported in the war, the high number of Ukrainian casualties goes unnoticed.
The United States is only marginally interested in Ukraine. The US geopolitical goal is to weaken Russia’s power at all costs for many years to come, catapulting it back to the early 1990s, through this war of attrition, in which no Western soldiers have to die. This would eliminate Russia as a geopolitical rival to the United States.
(Prof. hon. Alexander Rahr, Chairman of the Eurasia Society, historian, author, e.g. The 8th of May. Story of a Day ; Senior Research Fellow of the WeltTrends Institute for International Politics.)