Russia's victory in an economic war

by Tomasz Konicz & Herbert Boettcher Tuesday, Sep. 26, 2023 at 8:13 PM
marc1seed@yahoo.com

If perspectives for ways out of the increasingly worsening crises of capitalist socialization are to emerge, it is indispensable to look at the whole of conditions and their complex entanglements. It is necessary to break with the myths and life lies of the 'free West' as well as with those of a mission for a Russian empire or any other autocratic fundamentalism.

Russian victory in economic war?

The invasion of Ukraine is a military disaster for the Kremlin. In the economic showdown, however, Russia seems - for now - to have the longer leverage.

by Tomasz Konicz

[This article posted on 7/17/2022 is translated from the German on the Internet, https://exit-online.org/textanz1.php?tabelle=aktuelles&index=39&posnr=830.]

In the first weeks of Russia's war of aggression in Ukraine, when the Kremlin's megalomania led to the humiliating Russian retreat off Kiev and in northern Ukraine, this military defeat seemed to be accompanied by an economic disaster in Russia. The historically unprecedented sanctions imposed by the West in response to the invasion sent Russia's economy and currency crashing in their initial shock waves. Western derision of the military impotence of Putin's imperialism was accompanied by derision of the ruble's decline in value, which briefly plummeted to 135 rubles from a dollar rate of 75 rubles at the start of the war of aggression.

Russia's inefficient, archaic and highly corrupt military machine is still stuck in eastern Ukraine, leaving the Kremlin to celebrate the painstaking conquest of Lugansk oblast as a military victory, but on the economic battlefield the tide has turned - for now. The ruble, which regained its pre-war exchange rate against the dollar back in May, is now trading at 58 rubles per greenback. After almost half a year of war, the Russian currency is worth more than it was before the invasion of Ukraine. Against the euro, this rise of the ruble, which reflects Russia's economic stabilization, is even more evident: At the beginning of February, around 86 rubles had to be spent for one euro; now it is only 58 rubles. One of the most important goals of the Western sanctions strategy, namely to politically destabilize the Russian "home front" through a currency devaluation that is accompanied by inflationary spikes and a loss of prosperity, has thus - so far - failed.

Not only that: now it is the over-indebted and energy import-dependent eurozone that is suffering from currency devaluation, while skyrocketing prices for raw materials and fossil fuels are giving the European currency area a whopping foreign trade deficit of 31.7 billion euros.1 The further the euro falls, having already reached parity with the dollar,2 the more expensive imports of raw materials and energy sources become. The wind has thus shifted. It is now the eurozone that must fear for its stability, as the depreciating euro and high inflation lead to increased political tensions in the currency area. The return of a euro crisis seems likely as economic policy interests between the German center and the southern periphery increasingly come into conflict.

Eurozone as "weakest link" in economic warfare

With an EU-wide inflation rate of more than eight percent,3 Italy, which has been in crisis for years, is in debt at around 150 percent of its economic output,5 so any interest rate hikes demanded by Berlin from the European Central Bank (ECB) to combat inflation would quickly make this debt burden south of the Alps unsustainable. That is why the implied conflicts over crisis policy between Germany and the southern periphery are emerging, with Berlin opposing the continuation of expansionary monetary policy and attaching political conditions - such as austerity programs - to aid programs for European crisis countries.6 The over-indebted eurozone, plagued by economic imbalances and in which the dominant German export industry is also increasingly suffering from supply bottlenecks and protectionism, can thus be seen as the West's "weakest link" in the economic war with Russia. Even the FRG is facing a tripling of debt servicing costs due to rising interest rates.7

The economic war has thus - by means of the sanction-induced price explosion for fossil fuels - intensified the inflationary dynamics8 that already existed in the West. The rapid interest rate hikes now being implemented by the U.S. Federal Reserve to combat inflation9 make financial market crises and a recession in the U.S. and Europe10 as well as economic collapses and debt crises in the periphery of the world system likely this year or next (more details in the upcoming Konkret 08/2022).

Russia's surplus and economic slump

The Kremlin, whose military machine is embarrassing itself in Ukraine, has simply chosen the last good strategic moment for its war. The West, especially "German" Europe, has just begun the already half-hearted, often lobby-sabotaged11 attempt to phase out fossil fuels; it is still highly dependent on these energy sources, which now gives Russia an advantage in the economic war - the financial fallout from the sanctions thus hits the Western center countries harder than Russia.

This is not an exaggeration. The sanctions, which are manifesting themselves in increasing deficits and accelerating inflationary dynamics in the West, have led to whopping surpluses for commodity exporter Russia, which has been able to tap into new markets. The Russian Federation's current account surplus (it covers trade in goods, services and remittances) reached a record high of more than $70 billion in the second quarter of this year, as rising export revenues for Russian gas, oil or coal were accompanied by a sanctions-induced slump in imports of Western high-tech or consumer goods.12 Moscow's budget surplus is projected to have totaled more than 20 billion euros in the first half of 2022,13 made possible mainly by export revenues from the sale of oil and gas-the equivalent of 100 billion euros in the first half of the year, about 66 percent of the projected annual volume.

The Western sanctions, on the other hand, appear to be having their intended effect, at least in terms of economic development. According to current forecasts, Russia's recession is expected to be much more severe at 10.4 percent14 than initially assumed (minus 7.1 percent). Despite all the fears of recession, it is considered certain that neither the USA nor the EU will experience a similarly deep economic slump this year. The situation is similar for the inflation rate. According to these figures, inflation in the Russian Federation will be in double digits this year at 14.4 percent, which is also significantly higher than in the U.S. and the EU, which are expected to keep their price increases below the ten percent mark.15

And yet, these bare numbers can also be deceiving, as they do not simply translate into proportional political and social fallout. Authoritarian-ruled Russia, a semiperipheral country that thrives on commodity exports, may ultimately win the economic war despite sharper economic contraction and higher inflation. The goal of the economic war accompanying the imperialist war in Ukraine is to shake the adversary's "home front" through socioeconomic dislocation and thereby force the adversary to surrender.

Economic war and crisis

Here, however, the Russian Federation appears to have a number of advantages that enable the Kremlin to politically weather a far more difficult economic situation than is the case in the West. One is simply the post-democratic character of the Russian state, which tends toward the openly dictatorial. The possibilities for repression in Russia, where even criticism of the Russian invasion of Ukraine can result in prison sentences of several years, are much more far-reaching than in the West, where democratic standards such as the separation of powers and the rule of law still exist, most of them rapidly eroding, but still largely valid in substance.

In view of the increasing social and ecological crisis of capital, this authoritarian constitutionality of Russia or Belarus makes these societies not discontinued models, but capitalist models of the future. The Belarusian head of state Lukashenko is not Europe's "last dictator," as he is often dubbed in the European press. On the contrary, Lukashenko is Europe's first dictator; he forms the vanguard of the authoritarian capitalist crisis administration, in which "Western-oriented" countries such as Hungary or Poland can now also join. Bare, unrestrained state power gives Moscow advantages in manifest crisis situations that the West - as yet16 - does not have, as was evident most recently in the suppression of the uprisings in Belarus and Kazakhstan.

Moreover, in the entire post-Soviet region - and to a lesser extent in the eastern periphery of the EU as well - historical and cultural factors are still at work that have a stabilizing effect and are simply not present in the West. The memory of the chaotic and, especially in Russia, catastrophic system transformation in the 1990s is still vivid, so that the current crisis is perceived in a very different contemporary historical context than in the Western centers of the world system, where there have been no comparable shocks to the social fabric for more than half a century. While the population of the West has the feeling that the sky is falling on its head due to galloping inflation and the threat of an energy crisis, people in the East are sure that things have been much worse before. What's more, Putin can instrumentalize the memory of the collapse of the Soviet Union, especially among the older generation, in maintaining power, since he presents himself as a "factor of order" who prevents the fall into crisis chaos, which, according to Russian state ideology, always emanates from the West.

Moreover, subsistence crisis strategies, such as the dacha economy, are still alive in the post-Soviet space, having been lost in the West due to the complete internal colonization of the center societies by capital under Fordism. Sometimes in the EU and the U.S., the practical conditions are simply not in place to make ends meet by growing one's own food, selling at informal markets, and gathering wood in the forest, as was often the case in Russia in the 1990s. Russian wage earners are far more likely to be able to escape their wage dependency by escaping into this informal sector than their Western class counterparts.

No winners in crisis imperialism

And yet it is unlikely that this economic war can be won by Russia - or will have any "winners" at all. For one thing, the interaction between war events and the situation on the "home front" is much more pronounced in Russia than in the West. Strategic setbacks on the front in Ukraine can quickly erode any remaining support for the war of aggression, especially given the Russian army's losses. But crucial is the fact that Putin cannot order a general mobilization to rapidly advance the invasion with a similar manpower level as the Ukrainian army. Indeed, the most important ruling condition of non-totalitarian authoritarianism is to maintain apathy and desolidarization among the population, the majority of which somehow opportunistically comes to terms with dictatorial power, seeks its niches, cares only about its own advancement, and so on.

A general mobilization would deprive the population of this option to look the other way, to simply remain inactive and continue to remain in political apathy. When one's own life is at stake in a war of imperialist conquest, those affected are automatically shaken awake. In view of the military incapacity of the Russian army, the Kremlin should actually order general mobilization - and at the same time it cannot, if it wants to prevent the emergence of a broad protest movement, which also cannot be so easily crushed.

Finally, the military as well as economic war between Russia and the West cannot be understood without the profound social and ecological crisis process in which the late capitalist world system is sinking. In this respect, it is a crisis imperialism that has entered its bloody, murderous stage in Ukraine.17 The economic crisis not only formed the decisive factor contributing to the outbreak of war,18 it is also executed through economic war. The increasing clashes and power struggles of the state monsters, which turned Ukraine into an imperialist battlefield, make the losers of this crisis-imperialist "Great Game" socially and economically relegated, they are fully caught by the crisis process. Actually, in the medium term, there are no winners in crisis imperialism. The "winners" only descend more slowly. These power struggles, which were previously mainly economic and political, turn into military confrontations as the crisis intensifies.

Thus, on a systemic level, viewed objectively, the war over Ukraine functions as a crisis accelerator,19 which further dynamizes already given crisis processes. As inevitably as late capitalism breaks down at its internal and external barriers - the course of the crisis, however, is not set in stone. The impending devaluation of value can take the form of inflation or deflation. In the case of deflation, a fall in prices triggered by interest rate hikes, recession and a collapse in demand, Russia's wartime fortunes would also turn very quickly.

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Ukraine: A war for the disintegrating world order

by Herbert Boettcher

[This article posted in 2022 is translated from the German on the Internet, https://exit-online.org/textanz1.php?tabelle=aktuelles&index=62&posnr=808.]

Russia's cynical attack on Ukraine is to be condemned without ifs and buts and cannot be justified by anything. It leaves dead and wounded, drives people into flight and destroys vital infrastructure. With this war, the 'world order wars' find a new and dangerous level of escalation. Since the battles over Iraq and former Yugoslavia in the 1990s, they have been waged primarily in and around failing states, primarily in the global South. For countless people, they have destroyed livelihoods. To this day, they continue to drive more and more people into flight and death.

The situation surrounding Russia's invasion cannot be explained by Putin's wickedness as an autocratic ruler, nor by the wickedness of the actions of Western actors. What is decisive is the structural context in which the actors' actions are embedded. It is the context of the collapse of the dominant world order1 and its empires2 in the crisis of capitalism. It can no longer be confined to 'disintegrating states' on the periphery, but as a process of disintegration is also 'closing in' on the European states. In 1989, the capitalist West considered itself the victor over the collapsed East. It was not recognized that not a system competitor, but the 'twin brother' of the capitalist West had met its end: the statist variant of commodity production, also called state capitalism. The collapse of this variant of commodity production, however, was already an expression of the fact that capitalist commodity production is heading for its final crisis, because it is forced to replace value and value-added labor by technology and thus to cut off its own water. The locational competition that accompanies modern commodity production led the Eastern bloc to ruin because of its etatistically limited capitalist options for action, to the second great "collapse of modernization" (Robert Kurz) after the debt crisis of the global South.

Wars born out of the crises of the capitalist world system

It is logically consistent that the victorious West also got more and more into crisis. It acts itself out in the generally known but misunderstood crisis phenomena: social division processes, indebtedness, destruction of ecological livelihoods, disintegration of states, increasing (civil) wars, migration and flight, ideological and violent 'processing strategies'... Also affected by these disintegration processes are the formerly bipolar Eastern and Western empires, which moreover had to deal with the competitor China. Countries in the Western centers were able to cushion the crisis processes by shifting them outward: the U.S. via deficit cycles in which - mediated by the dollar as world money - exorbitant debt could be maintained for decades within the framework of a veritable financial bubble economy. The status of the U.S. dollar as the world's reserve currency was guaranteed not least by the military power of the United States. In the context of the disintegration processes, there were again and again Western interventions and wars, often contrary to international law and legitimized with lies - among others in former Yugoslavia, in Iraq or in Afghanistan with a massacre ordered by Bundeswehr Colonel Klein in 2009. Behind the defense of Germany at the Hindu Kush and the so-called humanitarian interventions nothing else was hidden than the attempt to create order in a disintegrating global world in the Western sense - a clearly failed endeavor3. Nevertheless, it was no longer possible for the U.S. and its NATO allies to maintain their role as world police and thus as guarantor of the capitalist order - the Syrian conflict at the latest made this all too clear. Germany, with its 'success model' Hartz IV and the associated reduction in labor costs, was able to rise to become the export (vice) world champion, financing its export surpluses through the indebtedness of importing countries in the European and global periphery, while the processes of disintegration progressed, especially on the peripheries of Western and Eastern Europe.

The Crisis in Ukraine and the Crisis in Russia

While the crisis processes also intensified in the Western countries, the related internal contradictions were compensated for economically and politically by expansion to the East - contrary to assurances given in 1989/90 - above all via NATO's eastward enlargement. The 'defeated' Russia became a negligible factor in the calculation of power - degraded to a supplier of raw materials on a 'third world' level. These processes were accompanied militarily by activities that extended beyond the alliance area. Security guarantees demanded by Russia were denied and, at the same time, under President Trump, important arms control agreements were abandoned and the alliance's own armaments were further advanced.

The scare now is that Russia wants to assert itself as a great power and secure its spheres of influence similar to the U.S. and Europe. After the disastrous 'power games' over Syria, Ukraine, which - with the support of Europe and the USA - has been set on a pro-Western course, is now the place of execution. Its pro-Western orientation is not simply an expression of free self-determination, but integrated into the global crisis. As an eroding state, Ukraine had become a service store for oligarchs of various stripes. Some of the oligarchs, and with them the so-called democracy movement, saw a way out of the "oligarch and disintegration struggle" in a liaison with the West. This path promised democracy and human rights and subjected Ukraine to a structural adjustment regime in the usual manner, which further impoverished the impoverished population and at the same time tried to keep job-seeking Ukrainians out of the European labor markets - cheap labor being an exception. Due to Western economic and political penetration in the wake of EU and NATO enlargements, Eastern Europe - much like Southern Europe - has become an extended cheap production site and indebted consumer for Western goods. In the contradictory nature of the situation, it should not be misunderstood that the Western desire for enlargement was and is accompanied by the understandable and justified need of Eastern Europe to finally and forever leave Soviet and now Russian domination behind.

While the West increasingly limited Russia's sphere of influence, Russia was increasingly forced into the role of an energy and raw materials supplier within the framework of economic cooperation. Russia wants to set a limit to this with the war against Ukraine (as well as earlier with foreign deployments in Syria or Libya). On the one hand, this unjustifiable war is associated with suffering and death of the population. Moreover, it is particularly dangerous because it is accompanied by Russian dreams of great power, which are historically or ideologically linked to delusional dreams of a great Russian empire, which are legitimized in religious fundamentalist terms. Putin already justified the conquest of Crimea with the sacral and religious significance of the island for Russia, since it was in Crimea that the Kiev Grand Prince Vladimir had accepted Christianity in 988. Among the reactionary philosophers favored by Putin is Ivan Ilyin (1883-1954), whose body, buried in Switzerland, Putin had 'brought home' in 2005 with an appropriate staging. According to him, the state is, entirely in the fascist understanding, an organic community, which - analogous to the Foucaultian 'pastoral power' - is governed and held together by an understanding and caring monarch. On the cutting edge of postmodern times is also Aleksander Dugin, one of Putin's court philosophers. He claims that truth is a matter of faith and that there is a special Russian truth. Such thinking moves in the vicinity of ethnic ideas of identity, which, for example, went hand in hand with genocide in the world order wars waged in the Balkans in the 1990s.

Within the framework of these ideas, the confrontation with the West is culturally and religiously charged in a fundamentalist-identitarian way. The East defends its own religious and cultural identity against the religious and moral decline of the West. Against liberal Western democracy, the idea of autocracy, the rule of one person, is represented here. Ukraine, which in Putin's view belongs to Russia, must be brought back to the realm to which it 'originally' belonged. All countries that could be counted among the haze of a Greater Russian Empire have cause for concern. This is especially true for Poland, which has been the victim of (Great) Russian and German interests several times in its history.

War for freedom, democracy and human rights

Compared to such fantasies of Putin and Co., the Western 'narratives' of freedom, democracy and human rights are by no means rational, but also have a mythological character. On the one hand, they are refuted by the realities of the crisis - from repressions against refugees to social cuts and the dismantling of freedom rights to the well-known wars of world order including gigantic militarization thrusts. In the process, they are inextricably linked to capitalist relations of domination. The more the crisis progresses, the more capitalist liberalism will again decompose more and more into authoritarian and repressive structures and ideologies, analogous to the history of the enforcement of capitalism. They are not the opposite of liberalism, but its indispensable flip side. Much like the post-1989 hallucinations of the West's victory over communism, it is now one of the West's 'life lies' to defend an out-of-control dictator and a Russian-dominated authoritarian East against a West acting prudently on the basis of democratic values. The commodity-producing system, which has come up against its internal logical and external ecological limits and to which the supposed socialist alternatives also belonged, is getting more and more out of control. This is reflected in the actions of the actors who, in the current situation, overplay the real powerlessness in a megalomaniacal way - not unlike their out-of-control counterparts in such megalomania.

The dangerous aspect of the current situation lies not least in the fact that it is not understood as an expression of the global crisis of world capital, in which the globe is being sacrificed to the irrational end in itself of the multiplication of money or capital - if the decision-makers go completely mad, even in a nuclear strike 4. Harald Kujat, former Inspector General of the German Armed Forces and Chairman of the NATO Military Committee, for example, has warned of the risk of miscalculations and human and technical failure. In the escalating crisis of capitalist commodity production, it is by no means good and evil, rationality and irrationality that confront each other, but agents and subjects who are caught up in structures of fetishized relations and their normative and symbolic charges. Without recognizing their deadly and irrational character, they imagine themselves to be on the good and rational side, while the opposite side is assigned to the realm of evil and irrationality. Both poles of one and the same crisis capitalism have to be overcome - and not one of them has to be taken at face value and the arsenal of weapons has to be further increased. Thinking in terms of such polarities is an expression of an immanent view in which nation states and their interests are always presupposed. The immanent difficulties in resolving conflicts, if not in resolving them, then at least in preventing them from escalating into wars that can ultimately no longer be controlled, makes it clear once again that nation-states are part of the commodity-producing fetish system, within the framework of which there can be no peaceful coexistence of people - all the less so the more the crises intensify at all levels. Anyone who analyzes the situation soberly will realize that the only illusionless and realistic perspective that remains is a critique of this fetish system aimed at overcoming it.

Full-bodied, naive, under-complex - and many questions

The speeches and actions of the German government prove to be full-bodied, naive and under-complex. When the chancellor speaks of a "turning point in time," he means a clear edge in the struggle between good and evil, between Russian dictatorship and the free West. His Green foreign minister even talks about "ruining Russia. The instruments for this are arms deliveries to Ukraine, economic sanctions and a 100 billion euro armament buildup. All this lies in the blind logic of what has contributed to the current escalation: intensified competition between the blocs in the disintegrating world system accompanied by economic cooperation that is now being terminated. It is absurd: a policy that has failed is now being piously imposed, sold and hailed as a solution on a higher and more dangerous rung of the problem ladder. The bloodiest part of the battle against an overpowering opponent is to be fought out by the Ukrainians, who are praised as heroic. It is to be feared that the longer the fighting continues, the more people - soldiers and civilians - will be sacrificed and given heroic status in gratitude or to legitimize their sacrifice.

The consequences of rearmament and economic sanctions are foreseeable: among other things, the aggravation of crises through higher economic burdens. They can already be seen in the form of price increases for heating oil, fuel and gas. Natural gas is needed not only for heating, but also for numerous processes in industry. The high gas prices will therefore also affect the economy, possibly even leading to company closures due to fuel shortages. As the economic situation worsens, so do the prospects for implementing the measures that are essential in view of the worsening climate crisis. And what will become of the libertarian subject, who cannot endure even limited restrictions on 'a liberty' in fighting the Corona pandemic, and who fears climate protection more than severe weather, when even more severe restrictions on capitalist normality might occur? All the problems surrounding conspiracy mania, racism and anti-Semitism are likely to be further aggravated if the financing of armaments and economic sanctions in the crisis of capitalism increasingly reaches its limits along with corresponding austerity measures, there are economic collapses, increasing inflation and the bursting of financial bubbles. In the U.S., Trump and his band of supporters could gain even more momentum, betting on 'America first' without regard for what is happening in the rest of the world. In Germany, it is to be feared that the AfD will benefit, which - along with the Left - is pretty much the only party to point out the social consequences of economic sanctions and rearmament.

It is already clear that people with low incomes will not be able to cope with the already looming cost increases in heating costs and food. Russia and Ukraine, among others, are major wheat producers. Especially in countries of the two-thirds world, food crises will intensify, if they are not already there - as in Madagascar, among others - due to climate change. This applies both to the lack of imports from Russia and to rising energy prices, which are highly relevant for transport and agriculture. And what will then become of the fleeing and refugees? The 'welcome culture' that flared up in 2015 was not only quickly over, but turned into hatred and aggression towards non-Western people. At present, the politically 'right' refugees are still coming from Ukraine. But what happens when more and more people feel forced to flee? And what will happen to the refugees who are forced to flee as a result of economic sanctions and increasing political repression from Russia, but who are not seen in a direct connection with the war in Ukraine, or who are not granted asylum because of their origin? It is to be feared that refugees will be massively played off against each other and that the repression against those fleeing from the global crisis countries will be intensified. While white refugees from Ukraine are rightly accepted as a matter of course, non-white refugees are prevented from crossing the border from Ukraine, Poland's highly militarized border with Belarus, where an unknown number of asylum seekers camp hungrily in the cold, remains closed. A foretaste of future disputes is offered by the legitimations of such actions. Slovakia's communications office let slip in a since-deleted tweet, "Ukrainian refugees come from an environment that in a cultural religious and historical sense is something different than that from which refugees from Afghanistan come." Similarly, Bulgaria's Prime Minister Petkov speaks of refugees coming from Ukraine "to whom we are accustomed. These people are Europeans. These people are intelligent. They are educated...not people with unclear pasts who may even have been terrorists."

If perspectives for ways out of the increasingly worsening crises of capitalist socialization are to emerge, it is indispensable to look at the whole5 of conditions and their complex entanglements. It is necessary to break with the myths and life lies of the 'free West' as well as with those of a mission for a Russian empire or any other autocratic fundamentalism. They must be replaced by an unvarnished and self-critical reflection on the entanglements and entanglements of the current crisis constellations. The most dangerous approach seems to be an identitarian amalgamation into a bulwark of good against evil, of freedom against dictatorship, which ignores the victims of Western freedom as well as its authoritarian-dictatorial and racist flip side.

Original: Russia's victory in an economic war