The economic roots of the war in Ukraine

What are the real reasons behind this conflict? Is it the possibility of Ukraine becoming part of NATO and, more broadly, the fact that NATO has expanded to include 14 new countries since the end of the Cold War (from 16 to 30 countries in 20 years)? Is it Ukraine’s inclusion in the European Union (EU)? These issues are undoubtedly part of the explanation, but we need to take a step back to get a better overview. We’re closer to an adequate explanation if we don’t overlook the US drive for economic power.

By Samir Saul (Professor of History, Université de Montréal) and Michel Seymour (Honorary Professor, Université de Montréal)

But it’s not enough to talk about the United States hegemonic ambitions. It’s also important to point out that American leaders have been gripped by a real sense of anxiety. This is due to the fear of finding themselves in a perilous financial situation that is, to put it bluntly, fundamentally untenable. It gradually dawned on American leaders that, to prevent the country’s economic collapse, internal corrective measures alone were not enough. It was necessary to violently attack Russian and Chinese competition.

Ukraine’s neutrality is an existential issue for Russia, not for the United States. American anguish could and should have been channeled into something other than a proxy war in Ukraine, but that was without taking into account the Russophobia that has afflicted successive American administrations for over a century.

He who lives by the piaster will perish by the piaster

At the end of the Second World War, the US dollar replaced gold as the monetary reference, but it was a two-edged sword. It allowed the United States to borrow at a low-interest rate. This encouraged them to import more than they produced, gradually driving them into debt. Today, the US federal debt stands at $30 000 billion[1]. The U.S. trade deficit has widened to a staggering $1 000 billion a year[2]. Since the U.S. GDP is around $25 000 billion, public debt already represents 120% of GDP.

In the meantime, Russia has recovered economically, and China has continued its upward trend and could overtake the USA as the world’s leading economic power within ten years. Worse still, trade between the BRICS countries is increasingly conducted in other currencies. China also wants to pay for Saudi oil in yuan. So we’re heading for the end of the petrodollar. If the supply of the dollar gradually outstrips demand, and the value of the US dollar falls, this is a source of inflation that is not explained by rising wages and production costs, nor by the scarcity of goods, but first and foremost by the gradual decline in the value of the dollar, which is a major trend. Imports would become increasingly expensive because the exchange rate would not favor the US dollar. To prevent this from happening, the Federal Reserve must keep interest rates high to convince investors to buy federal bonds, but it won’t always be able to plug the gaps in this way.

Future scenarios point to a bleak future for US public finances. The Congressional Budget Office estimates that by 2052, one-third of government revenues will be devoted to servicing the debt. Federal debt could reach 185% of GDP by that date[3].

Panic at the White House

White House officials are now aware of their gigantic financial difficulties. They believe that the only way out of this downward spiral is to destroy international economic competition. If the U.S. economy succeeds in dominating the world, and its market expands at the expense of competition, the dollar will regain its strength and its place as a benchmark currency. The situation is so serious, however, that they have decided to pursue economic warfare by other means[4]: trying to destroy the Russian and Chinese economies by waging a proxy war against Russia in Ukraine, followed by a direct military confrontation with China, using Taiwan as a pretext. To stay afloat, you have to sink the others.

Conclusion

This is not a “conspiracy theory”. American leaders have implemented to the letter the suggestions of the Rand Corporation, listed in a document published in 2019 (‘Extending Russia’). This document recommended withdrawing from the Intermediate-Range Missile Treaty, strengthening NATO, imposing new sanctions on Russia, supplying lethal weapons to Ukraine, stopping Russia’s gas and oil trade with Europe, and halting the development of the Nordstream pipeline – provocations designed to provoke Russia to react and engage in wars that would be costly for it.

Democratic Representative Adam Schiff, Republican Representative Michael McCaul, Secretary of Defense Lloyd Austin, Republican Senator Lindsay Graham, former Secretary of Defense Leon Panetta, Hilary Clinton, and Oliver North have all said it: the USA is using Ukraine to weaken Russia. The Americans lit the fuse, ignited the fuse, and then added fuel to the fire.

American military and financial support for Ukraine is not motivated by generosity or a sense of duty. It is about instrumentalizing Ukraine in a proxy war to bring down Russia. To understand the source of this policy and the economic and geopolitical stakes involved, we need to look at the domestic economic situation in the United States.