Ive here. The West’s sanctions war with Russia will not change the outcome of the Ukraine conflict. Russia will prevail, but what a solution looks like is largely an open question. One of the more obvious things, however, is that most European economies and the euro will suffer. According to Michael Hudson, they are not collateral damage, but intended targets.

Hudson noted that Europe won’t get enough LNG from the U.S. until at least 2024 due to the need to increase capacity at its ports. Reader PlutoniumKun described an even bigger limitation being oil tankers. Only South Korea has built LNG carriers and they already have a full order book. A recent OilPrice article stated, U.S. fracking will also struggle to boost outputdue to shortages of key inputs such as fracturing sand, equipment, cement and even steel pipes.

Europe appears to be banking on sanctions that will hurt Russia so much that it has to be relaxed before the winter chill sets in. But that ignores the fact that there is no evidence Russia is experiencing any real difficulties and that its ability to manage shortages of vital products supplied by Europe, such as auto and aerospace parts, has yet to be tested.

Add that to the fact that Russia in the 1990s experienced enormous poverty, much worse than anything that might have happened in the near or even mid-term, and Russians saw the conflict as an existential crisis. Oh, and most importantly, even if Russia surrenders tomorrow, the US has shown no intention of easing sanctions. What does this mean to Europeans?

Hudson explained that on the current trajectory it is very likely that the euro zone will have a persistent trade deficit with the US, which will prove unmanageable given its lack of central fiscal power and a hawkish central bank.

By Michael Hudson, research professor of economics at the University of Missouri in Kansas City and fellow at the Levy Institute for Economic Research at Bard College.His latest book is “And Forgive Their Debts”: Lending, Foreclosure and Redemption from Bronze Age Finance to Jubilee

It is now clear that the new Cold War was planned more than a year ago, with a serious strategy linked to what the United States sees as blocking the Nord Stream 2 project as part of its goal of preventing Western Europe (“NATO”) from seeking prosperity through mutual trade and investment with China and Russia.

China is seen as the main enemy, as announced by President Biden and the US National Security Report. While China has helped U.S. companies lower labor wage rates by deindustrializing the U.S. economy to benefit China, the latter’s growth is seen as constituting the ultimate terror: prosperity through socialism. It is the conflict of economic systems – socialist industrialization versus neoliberal finance capitalism – that has been the archenemy of the rentier economy that has taken over most countries in this century since the end of the First World War and especially since the 1980s .

In this new Cold War against China, the U.S. strategy is to prey on China’s most likely economic allies, especially Russia, Central Asia, South Asia, and East Asia. The question is, where to start with segmentation and isolation.

US strategists see Russia as the best opportunity to cut off from China and the NATO euro zone. A series of increasingly severe – and possibly deadly – sanctions has been imposed on Russia to prevent NATO from trading with it.All it takes to ignite a geopolitical earthquake is a spies know.

It’s easy to arrange. A new Cold War could have been waged in the Near East – against the US plundering of Iraqi oil fields, or against Iran and the countries that helped it survive economically, or in East Africa. Coups, color revolutions, and regime changes are planned in all of these regions, and the U.S. military in Africa has been building up particularly rapidly over the past year or two. But Ukraine has been under attack for eight years since the 2014 Maidan coup and offered its biggest chance for a first victory in the confrontation with China, Russia and their allies.

As a result, the Russian-speaking Donetsk and Luhansk regions have come under increasing shelling, and while Russia has still not responded, plans have reportedly been drawn up for a massive attack in February last year. Showdown – The onslaught of western Ukraine organized by US advisers and armed by NATO.

The Russian defense of two eastern provinces of Ukraine over the past two months and the subsequent military sabotage of the Ukrainian army, navy and air force have been used as a pretext to begin implementing the U.S.-designed sanctions program we see today. Western Europe all the way. Instead of buying Russian gas, oil and grain, it will buy these from the United States, while dramatically increasing arms imports.

Expected fall in EUR/USD

Therefore, it is necessary to examine how this economic war may affect the balance of payments in Western Europe, and thus the exchange rate of the euro against the dollar.

Before the battle to build sanctions, trade and investment in Europe had promised increased shared prosperity between Germany, France and other NATO nations and Russia and China. Russia provides abundant energy at competitive prices, and this energy supply will achieve a qualitative leap with Nord Stream 2. Europe will export more industrial products to Russia and capital investment to rebuild the Russian economy, E.g. Invested by German car companies, aircraft and finance. This bilateral trade and investment has now ceased for many, many years now that NATO has confiscated Russia’s foreign exchange reserves held in euros and pounds.

Instead, NATO nations will buy U.S. LNG — which they can spend billions of dollars building enough port capacity by 2024. (Good luck until then.) Energy shortages will dramatically increase the price of natural gas and oil in the world. These countries will also increase their purchases of weapons from the U.S. military-industrial complex. Near-panic buying will also push its price higher. On the one hand, food prices will also rise due to a severe shortage of food in Russia due to the cessation of imports, as well as a shortage of ammonia fertilizer made from natural gas.

All three of these trade developments would strengthen the dollar against the euro. The question is, how will Europe balance its balance of payments with the US? Now that global free trade is rapidly dying out, what must it export in order for the U.S. economy to accept its protectionist interests to gain leverage?

The answer is, not much. So what will Europe do?

I can make a modest suggestion. Now that Europe is hardly a politically independent country anymore, it’s starting to look more like Panama and Liberia – “flags of convenience” offshore banking centers that are not really “countries” because they don’t issue their own currency, but use Dollar. Since the Eurozone was created with monetary handcuffs, limiting its ability to create money to exceed the 3% limit of GDP, why not simply abandon finance and adopt the dollar and Caicos like Ecuador, Somalia and Turks? This will shield foreign investors from currency devaluation in their growing trade and export financing.

Another option for Europe is for the dollar cost of its foreign debt to be used to finance its widening oil, arms and food trade deficit with the United States.

For the US, this is dollar hegemony, at least for Europe. The continent would become a larger version of Puerto Rico.

USD vs. Global South Currencies

The “Ukrainian War”, a full-blown version of the new Cold War, is likely to last at least a decade, maybe two, as the US expands the struggle between neoliberalism and socialism to include a global conflict. In addition to America’s economic conquest of Europe, its strategists have tried to target countries in Africa, South America and Asia along a line similar to the European plan.

The sharp rise in energy and food prices will hit food- and oil-starved economies hard — at the same time their foreign-currency-denominated debt to bondholders and banks is shrinking and the dollar is rising. Many African and Latin American countries — as well as North Africa — face a choice between starving, reducing gasoline and electricity use, or borrowing dollars to compensate for their reliance on U.S.-style trade.

There has been talk of the IMF issuing new special drawing rights to finance rising trade and balance of payments deficits. But this credit always comes with strings attached. The IMF has its own policy of sanctioning countries that do not follow US policy. The first U.S. demand will be for those countries to boycott Russia, China and their emerging trade and currency self-help alliance. “Why are we giving you special drawing rights or giving you new dollar loans if you’re just going to spend money in Russia, China and other countries that we declare enemies of,” U.S. officials would ask.

At least, that’s the plan. I wouldn’t be surprised to see some African countries being the “next Ukraine”, with US proxy forces (still many Wahhabi adherents and mercenaries) against countries trying to feed themselves with food from Russian farms and oil of troops and people or gas from Russian wells.

The world economy is on fire, and the United States is ready to respond militarily and weaponize its own oil and agricultural exports, arms trade, and ask countries to choose which side of the new Iron Curtain they want to join.