When we read about a serious crime, we tend to look for a financial motive – “follow the money”. Forcing Ukraine to fight “to the last Ukrainian” is, from an ethical point of view an execrable crime. Is it merely a crime of passion – “russophobia” – as some critics have suggested?
While the blindfolded Norwegian population undoubtedly suffers from acute Russophobia, the Norwegian and other European governments may have more rational reasons for sacrificing Ukraine. After all, they know perfectly well that this war was provoked by NATO, prolonged by NATO and exacerbated by NATO.
I put to you that there may be important financial motives. Apart from Ukraine’s natural resources which US and Western European vultures are eager to get their hands on, there is the matter of the US dollar, the “reserve currency” (the stuff that central banks theoretically have stashed away in case all the country’s bank customers simultaneously demand their savings). It used to be gold, now it’s USD, the currency that has underpinned most business transactions all over the world for decades.
The Reserve Currency is being challenged by the BRICS de-dollarization movement in which Russia plays a prominent part.
JP Morgan, Investopedia, and such are downplaying de-dollarization, which does not mean that it isn’t very real. On the contrary, they keenly realise that “the trend toward further de-dollarization seems unstoppable“.
We are already seeing that the price of gold has more than quadrupled since 2002. (Gold cannot be produced and exists only in very limited quantities. It is therefore considered a safe investment.) The price has risen because demand has risen. We have also seen, as you surely know, a spectacular rise in the price of Bitcoins. This tendency reflects a “loss in confidence in America’s management of the global order” and hence a perceived need to “diversify” reserves.
Meanwhile, US debt is now at 34 trillion USD. That is 120 % of the country’s GDP. Of all taxes, tariffs and fees collected by the US, 23 % goes to paying interest on debt. The US runs an increase in deficits every single year, not least to invest in wars, and every year, it finances the new deficit with new loans. How long can it keep the ball rolling?
What happens if people/countries stop investing in loans to the US? Well, the US would have to raise the price it is willing to pay for the loan (interest rate). US citizens are still buying treasury bonds, but the share of US treasury securities held by foreign investors has fallen from 34 % in 2015 to 24% in 2024 although Europe and other allies are still bravely buying them. (China holds $800 billion of US debt, down from $1.3 trillion in 2014.)
This is not good news for the USA. Even Investopedia admits that
the U.S. has long depended on the dollar’s role as a reserve currency to support running large deficits on government spending and international trade. If central banks around the world no longer felt the need to stuff their coffers with dollars, then the U.S. would likely lose this flexibility.
So back to Europe’s suicidal war against Russia: To be frank, I’m not into the mechanisms of Europe’s economic reliance on the dollar, but I believe they are linked to the growing financialisation (what we used to call “speculation”) of our economies. At any rate they say that “When America sneezes, Europe dies of Covid.” Or something to that effect.
Europe is joined at the hip with the USA and is very shaky now, with zero growth and huge debts. Meanwhile, the EUROzone suffers from “serious structural weaknesses”, whatever that means, and even Deutsche Bank has had liquidity problems. In short, the Euro might look defiant, but it is and has long been on life support.
There are many obstacles to de-dollarization. Nevertheless, as you can hear in this long but extremely interesting conversation between three economists, it is already well under-way, and BRICS and non-aligned countries are enthusiastically working out ways and means to overcome them.
I believe, in short, that Europe (and the US) fears that BRICS (rather than Russia) represents a financial (rather than military) threat. European leaders are prolonging and exacerbating this war not to defend Ukraine but in the hope of weakening Russia and slowing down de-dollarization.