What the United States gain from the ongoing Russian war on Ukraine economically?
Europe is full of allegations towards Ukraine, saying that the United States is working to prolong the war there.
The United States is gaining from the war.
The biggest beneficiary of the war negative consequences and effects on the European countries economy.
European leaders are trying to work on adopting a unified strategy in order to stop this war.
At the same time, the US President Joe Biden’s administration rejects these allegations.
The US Congress approved a few days ago to provide new military and economic aid worth $44.9 billion, in addition to the $50 billion the United States has already sent this year to help Ukraine.
According to a study by published by the Center for Policy and Strategic Studies in Washington, the US European partners suffer much more as a result of the economic consequences of their support for Ukraine and higher global energy costs compared to the US.
While inflation in the United States reached 7.7% in November 2022, it reached 11.1% in the UK, 11.6% in Germany, and 14.3% in the Netherlands during the same month.
The bottom line is, Europe is suffering from the consequences of the war.
A few weeks ago, some EU officials criticized US President Joe Biden’s administration, accusing it of making a fortune out of the Russian war on Ukraine.
A senior European official spoke to Politico newspaper and said, “At a time when European Union countries are suffering economically on several levels, the United States is making a lot of profits from selling more gas at higher prices, and because it sells more weapons”.
These comments came at a time when Europe has witnessed growing anger over US government support for some sectors, which negatively affects European industries.
European foreign policy official Josep Borrell called on Washington to respond to European concerns, and said, “Our American friends are making decisions that have an economic impact on us”.
The growing dispute over the Biden Inflation Reduction Act (IRA) – a massive package of tax cuts and subsidies for alternative energy programs – has also put concerns about a transatlantic trade war high on the agenda of transatlantic issues once again.
The French President Emmanuel Macron said the rise in gas prices in the United States wasn’t friendly, and Germany’s economics minister called on Washington to show more solidarity and help lower energy costs.
And while the European Union countries are trying to reduce their dependence on Russian energy sources, they are turning to US gas, however the price that Europeans pay is nearly 4 times the same fuel costs in America, and then there is the potential increase in demands for American-made military equipment, as their own equipment is running out, after European armies almost depleted their own military equipment and supplies after sending them to Ukraine.
Washington rejects these complaints, justifying that the rise in gas prices in Europe is a result of the Russian invasion of Ukraine, and Putin’s energy war against Europe.
A US official stressed that setting gas prices for European buyers reflects private market decisions, and isn’t the result of any policy or action of the US government, and added that in most cases the difference between export and import prices doesn’t go to US LNG exporters, but to companies that return Gas is sold within the European Union, and the largest European holder of long-term US gas contracts is France’s Total, for example.
The short-term economic effects of the war are likely to be limited for the United States, as its trade relations with Ukraine and Russia are modest, although the general price hike due to the war is depressing inflation upwards.
Inflation in the United States reached high levels after the agreement of huge financial support packages in the wake of the economic shock and the closures of Covid-19, and the beginning of the war exacerbated the problem worldwide, which prompted the US Federal Reserve to start tightening by raising interest rates 5 times this year.
According to a recent study by the Congressional Research Service, the research body that supplies members of the House and Senate, there has never been a significant economic relationship between the United States and Russia.
However, the sanctions could have significant implications for specific US companies and sectors that do business with Russia.
For example, there may be concerns about losses for US financial institutions and a decrease in the competitiveness of US companies.
According to the study, there are concerns whether reduced Russian energy supplies could lead to higher gas prices and exacerbate inflation within the United States”.
Russia’s war on Ukraine is a blow to the global economy that has dampened the recovery from the Covid-19 pandemic, is what exacerbated already high inflation.
In this context, the US economy is facing significant headwinds, from rising food, energy and raw material prices.
The energy sector, arms companies, and the US dollar, as the research unit of the Economist magazine estimated that the most important effects of the Ukrainian war on the US economy are as follows:
- The war will cause global commodity prices to rise, fueling inflation and affecting US economic growth.
- The United States will boost fossil fuel production, and strengthen its position as a major source of energy, especially liquefied natural gas (LNG), to help meet demand in Europe.
However, the US economic decline during 2022 made an exception with regard to the energy and arms sectors.
European countries turned to the United States to help bridge the energy gaps, at a time when they were looking for alternative suppliers of oil and gas, in an attempt to limit their imports of Russian energy.
Washington has boosted domestic production, and has already become a major energy exporter (the fourth largest exporter of crude oil in the world and the second largest exporter of natural gas).
It’s expected that the United States will remain the largest supplier of liquefied natural gas in Europe in 2023, and this is likely to generate greater revenues for US exporters after 2022 set records, and the proceeds from the sale of American gas to Europe amounted to a total of $ 35 billion until the end of last September, compared to by $ 8.3 billion during the same period in 2021, according to data from the US Energy Information Administration (EIA).
On the other hand, the decline in arms stocks in European countries forced Western countries to submit new requests for US weapons, to compensate for what was provided to Ukraine.
Indeed, the stock basket of major US arms production companies rose during the current year.
At a time when the S&P 500 index fell by 24% in 2022, shares of arms producers such as Northrop Grumman, Lockheed Martin, General Dynamics and Boeing L3 Harris, and Liodos Holdings; An increase of 5.8% over the same period.
The US dollar also strengthened due to the war, as many investors around the world moved away from Europe, and considered that the United States is a safe financial haven because Europe and its currencies are no longer safe, and the value of the US dollar rose over the year against the Euro from $1 compared to €0.94 at the beginning of the year, bringing the US dollar to €1.05 last October, before settling at €0.94 by the end of last week.