Sanctions, oil and capitalism’s hidden war for survival

March 18, 2022
Shell and BP have made much of cutting ties with Russia but it has a hollow ring. Photo: Erik Mclean/Pexel

The media barrage that has accompanied the Russian invasion of Ukraine has alerted us to the human suffering that war brings. What the propaganda does not do is offer any reason for the devastation. The war will end and when it does it will end in tragedy.

Behind the graphic and harrowing images is another war. It is a war that capitalism has created but is being fought, not in the name of capitalism, but for “freedom” and for “sovereignty”.

Capitalism and imperialism will be the only victors. The Russian working people will suffer. The Ukrainian working people will suffer. Russian and Ukrainian capitalists will ultimately not be held to account and nor, it seems, will United States imperialism.

The economic war being waged is illustrative of the disdain that capital has for the people of any country. The US and its allies have demanded that sanctions on Russia be put in place. As a result, the Russian economy will further contract and the result will be terrible, not for the ruling class or oligarchs, who will remain comfortably placed to weather the storm, but for the Russian people.

Russian President Vladimir Putin has no regard for his people, but US President Joe Biden, as the instigator of sanctions, has even less regard for Russia’s working class.

Capital is teaching us a valuable lesson. Biden has declared that no Russian oil will or should be bought. Canada and Australia loyally made similar declarations, although none of these countries import significant volumes of Russian oil.

On the other hand, Europe relies on Russian oil and gas to keep their economies afloat.

The European Commission has stated that it “plans” to reduce its dependence on Russian fuel by two thirds by the end of the year, although that seems rather unlikely. The slightly longer plan is to have no reliance on Russian oil, gas or coal by 2030. Even while making the declaration, European Commission Vice President Frans Timmermans was hedging his bets.

Timmermans acknowledged in an address to the European Parliament that “the reality is that there’s quite a number of our member states who would get into real trouble if overnight, all the energy would no longer be provided from Russia … So, we need to make sure we don’t do more harm to ourselves than we do to Putin".

Lithuania, the most aggressive supporter of US policy, be it anti-Chinese or anti-Russian, is urging immediate cuts. Germany and other larger European economies are less committed to any action that might weaken capitalism. It is one thing to send weapons into Ukraine to prosecute the war, but quite another to risk productivity or profits at home.

So it seems that regardless of the length or savagery of the war, capitalism in Western Europe will continue to “trade with the enemy”.

Cutting ties?

Major multinational corporations, such as Shell and BP, have made much of cutting ties with Russia. The publicity value for these companies has been significant, but it has a hollow ring to it.

Shell has said it will lose $3 billion, but it has total assets of $404 billion. BP is, or rather was, a major stakeholder in a Russian oil firm. Getting out will cost it $25 billion. However, the blow is hardly critical. BP’s revenues last year were $164 billion, and its total worth is $287 billion.

Russian oil sales have suffered, although it is still producing and exporting to its most lucrative markets. Global demand is outstripping global production. Oil prices rose rapidly but have not remained high.

The reason, according to governments and media, for the rapid rise in the price of oil is tied to the war and Russia’s invasion of Ukraine. There is some logic to this argument: there is a heightened state of nervousness and this is reflected on stock markets around the world.

The invasion and the ensuing sanctions have certainly made things worse, but the price of oil has been surging for some time and largely pre-dates Putin’s military campaign.

The health of capitalism and the price of oil have long had a close relationship. It was the oil shock of 1973 and the Organization of the Petroleum Exporting Countries’s decision to cut production that led to a crisis in capitalism and its rapid globalisation.

The Iranian revolution of 1979 and the 1990 invasion of Kuwait by Iraq all led to oil crises. Production slumped and prices skyrocketed.

Chinese capitalist development between 2005–08 led to major spikes in the price of oil as demand rapidly grew. During the Arab Spring of 2010–14, there was another crisis in oil production and pricing.

Capitalism went into further deep crisis after the economic collapse of 2008. Recovery was slow and then came COVID-19 and, with it, a slashing of oil production. As economies began to regroup, the demand for oil rose but production did not.

The war in Ukraine is another factor, but by no means the only contributing one to what is ultimately a problem within capitalism.

Demand for oil is intensifying. British Prime Minister Boris Johnson has returned from a visit to Saudi Arabia that was intended to convince the Saudis to pump more oil. It is a perverse irony that after beheading a record 81 people in a single day, the regime is seen as a potential saviour of global capitalism. Holier-than-thou capitalist governments are denouncing autocracies, while supporting despotic regimes.

Profits of doom pointed to astronomical oil prices. Headlines let us know that it is a direct result of the war and then, within a couple of days, the price of oil dropped by 30%. One reason given was that the United Arab Emirates and possibly the Saudis were prepared to boost production. The other was that the sudden rise in COVID-19 cases in China would mean less oil being consumed.

What this shows, in astonishing clarity, is the brittle nature of capitalism. China locks down a city and the global price of oil falls.

Shaky ground

British Marxist economist Michael Roberts characterised the current state of play in global capitalism as including three interlinking components. They spell out just how shaky is the ground upon which capitalism walks.

The first is economic: things became critical at the time of the global financial crisis of 2008. The second is environmental: capitalism has led the world to a climate crisis that threatens our very survival, not to mention COVID-19 as a product of capitalism’s drive for profit that destroys ecosystems and unleashes pathogens and pandemics.

His final component is geopolitical: to maintain profit, or as the US bluntly states, to maintain market accessibility, competition between capitalist powers has increased.

He pointed out that imperialist demands have been resisted by some states. He concludes by saying that: “In the 21st century; from Iraq to Afghanistan and onto Yemen and Ukraine, geopolitical conflicts are increasingly being conducted through war. And the big battle between the US and China/Taiwan is coming closer.”

It is a bleak assessment, but it cuts to the core of what is happening before our very eyes.

Just to survive there is no crime too great for capitalism to first consider and then commit. The US as the greatest economic and military power on the planet, is facing a crisis that is impossible to resolve. It will crush all before it to maintain supremacy. Its allies are, to one extent or another, supportive of imperialism’s demands.

Putin has permitted imperialism to act with impunity in Europe. The war will end with Ukraine in ruins and Russia economically ravaged. The working people of both countries will be the real victims.

Capitalism in both countries may survive and European Union capital will do all in its power to make sure that its position is not imperilled. What the war will not do is make the crisis that led to this tragedy go away. On the contrary, the crisis simply intensifies.

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