US reaps windfalls as Europe sinks into deeper economic distress, sees strategic autonomy weakened
Washington's process to fill EU energy gap hard to materialize, experts say
Published: Jun 20, 2022 07:53 PM
Trucks transport fuel tanks through the streets of the St. Pauli district of Hamburg, Germany,April 19, 2022. Photo: VCG

Trucks transport fuel tanks through the streets of the St. Pauli district of Hamburg, Germany, April 19, 2022. Photo: VCG

Editor's note
: As the US moves to stir up contradictions between Russia and Western countries by calling upon sanctions against Russia and giving hard-to-materialize promises to Europe that it would help Europe reduce reliance upon Russian energy supplies, it is pushing Europe into further economic distress such as higher inflation and energy crises. This is the third article of a multi-part series on the US’ exporting of economic crises to the world. 

US' guiding role for the Western alliances to pile on sanctions against Russia, intensifying contradictions between Russia and Ukraine, as well as its hard-to-materialize promises to help Europe reduce reliance upon Russian energy supplies, are increasingly dragging Europe into an energy crisis and economic distress.

Now that many Europe countries are already on the verge of economic chaos, with inflation skyrocketing, social instability uprising and many people losing their jobs, an even bigger risk is looming over the continent, as Europe is drifting away from its strategy of being independent, while its industrial competiveness will fall behind if it relies too much on the US for products and technologies, economists said. 

"The Europe is an important victim of the Ukraine crisis," Wang Yiwei, director of the Institute of International Affairs at the Renmin University of China, told the Global Times on Monday. 

A difficult position 

In recent months, the economic problems faced by European have repeatedly hit the headlines, as European economies face a surging inflation in commodities ranging from gas, cars to food, a phenomenon that is causing pain among European residents. 

According to a report by CNBC on May 31, German inflation came in at 8.7 percent in May, significantly outstripping analyst expectations of 8 percent. French inflation also surpassed expectations in May to a notch record 5.8 percent, up from 5.4 percent in April, while Spanish consumer prices jumped by an annual 8.5 percent in May, exceeding expectations of 8.1 percent. 

One driver behind rising prices is energy price inflation, as energy supplies from Russia dwindle amid the Russia-Ukraine conflicts. In particular, Russia has reduced gas flow to Europe over the conflict, while EU leaders were also reportedly planning to block most Russian oil imports by the end of 2022 to punish Russia. 

The tit-for-tat confrontation is now placing Europe on a very dangerous situation of an energy crisis, as normally the EU imports about 40 percent of its total gas consumption from Russia. 

According to a Reuters report, Germany's network regulator Bundesnetzagentur noted recently that the situation around gas supplies remained "tense." It cautioned that even if Germany's gas storage facilities were 100 percent filled it would only last for two and a half months if Russia were to stop supplies completely.

Experts stressed that although the tensed relations between Europe and Russia are triggered by Europe's feeling of insecurity for Russia, it was also aggravated by the US' instigation, as it only "paid lip services" to the EU that it would help EU reduce their energy reliance on Russia.

The Biden administration has promised to provide an extra 15 billion cubic meters of liquified natural gas (LNG) to the European Union this year, which represents about a tenth of the gas the EU now gets from Russia.

"The 15 billion cubic meters is a 'tiny' number considering Europe's energy imports from Russia, not to mention that the operation is very difficult in the short term, as there's almost no infrastructure to transport natural gas from the US to Europe right now," Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Monday. 

According to Lin, the US first needs to build special vessels to transport the gas, which will take about 2-3 years. Besides, the cost of US-produced natural gas will definitely be much more expensive than Russian energy, which is an extra burden on European economy. 

Yang Chengyu, a deputy research fellow at the Chinese Academy of Social Sciences, told the Global Times on Monday that US' call for Russia-bound sanctions is partly driven by its intention to seek profits for itself, including boosting LNG and oil products exports to Europe. 

Besides, many other commodities' prices are also hiking in Europe over the Ukraine crisis, fuelling social disorder. According to a report by the Guardian on June 18, thousands of people have gathered in London to protest against the government's lack of action in tackling the cost of living crisis. Car prices have also reportedly risen in Turkey recently over global supply chain disruptions and high volatility in the country's national currency. 

Yang noted that European countries have been quite reliant on grain imports from Russia and Ukraine, which is one of the major reasons behind the recent inflation in Europe. 

Lack of dependence

Experts noted that Europe set to rely more on US products, not only slashing the continent's independent strategy, but posing hurts to European countries' industrial competitiveness.

According to Wang, the US and European are two developed economies which have also been competing, and the affordable Russian energy resources integrating with the German manufacturing has helped reindustrialize the Europe and even contributed to the interconnection of Eurasia, which will threaten the US. 

"The US' fueling up the Russia-Ukraine conflict also accelerates the divisions of EU members and hurts the EU's strategic autonomy as members insisting different attitudes toward sanctions on Russia," Wang noted, adding that US' undermining the relationship between Russia and the Europe will force EU to partly rely on it for energy resources. 

The US has been developing and selling its LNG, aiming to export it around the world and dominate the global energy market, Wang said, noting that the US wants to control Europe's energy security and lead Europe's energy transition, which further expressed its financial hegemony. Consequently, the European economy may fall into stagflation or a deep recession.

Yang stressed that as Europe shows increased dependence on the US, previously in safety and defense sectors and now extending to industrial products, energy and technologies, it would make European economy lose independence in the future. 

For example, he said that manufacturing industries' global operation capabilities largely hinge on energy costs. "Europe's energy cost in the future is unlikely to have any advantages compared with US products. Thus, the competitiveness of Europe's industries in the future will face challenges," Yang said.