The cost-of-living crisis and the war on Ukraine are inextricably linked, writes Chris Nineham
At the end of August, the right-wing press was full of Boris Johnson’s calls for economic sacrifice at home in the name of the Ukrainian people. ‘We’re paying’ Johnson said, ‘in our energy bills for the evils of Vladimir Putin, the people of Ukraine are paying in their blood’.
Given the economic car crash coming in Britain this felt like a slightly unhinged appeal, more evidence of how out of touch the Tories are with the public mood.
It did, however, illustrate two things. The first is that as crisis looms, the British ruling class will double down on arguments about war, Ukraine, Russia and China to try and deflect anger. That in itself is a reason for the movement to take up the issue.
Secondly, Johnson’s appeal pointed to something real. The cost-of-living crisis and the war on Ukraine are, in fact, inextricably linked.
It is important to be clear that the current surge in inflation began before the war in Ukraine. Energy prices soared in 2021 due to a huge post-pandemic increase in demand and massive profit taking, combined with labour shortages, supply chain breakdowns and general underinvestment. Basically, structural failures in the market system.
Writing in the Financial Times, Cambridge Professor of Political Economy Helen Thompson has warned that low investment in renewables, continuing infrastructure problems and the increasing cost of fossil fuel extraction means the underlying trend will continue.
As we have argued here before, it is, however, the war in Ukraine that has turned these troubles into catastrophe. The war has devastated food production in Ukraine, one of the world’s biggest suppliers of grain. Both sides have placed explosive mines in the Black Sea, until recently blocking Ukrainian grain exports. Meanwhile, sanctions on Russia and Putin’s countermoves have massively disrupted exports from Russia, a global level supplier of both food and fuel.
In July, a United Nations Development Programme (UNDP) report found more than two-thirds of the 166.8 per cent increase in natural gas costs over the 12-month period to June happened since the start of the war. The results have already been disastrous in many parts of the global South. The UNDP report suggests that some 71 million people in the developing world are experiencing war-related poverty due to soaring food and energy prices. The Financial Times explains the process:
‘Those who import liquid natural gas (LNG) must now compete with European latecomers to the LNG market seeking an alternative to pipelined Russian gas. In early summer, Pakistan was unable to complete a single LNG tender. In poor countries, a large proportion of the state’s resources go on subsidising energy consumption. At prevailing prices, some cannot: earlier this month, the Sri Lankan Electricity Board imposed a 264 per cent increase on the country’s poorest energy users.’
Things are of course about to get much worse in Europe too. Ten EU countries depend very heavily on Russia for oil and gas imports. For these countries, mainly in Eastern Europe, more than half of oil and gas imports from outside the European Union come from Russia. Germany and Italy are not far behind in terms of dependency.
Russia is in any case such an important supplier of oil and gas that disruption to its exports has a huge impact on prices around the world. This is resulting not just in shortages and inflation, but deep-seated damage to economies across Europe. As early as mid-June the European Investment Bank was warning of dire consequences:
‘The war in Ukraine risks upending Europe’s economic recovery. The Russian invasion caused a massive humanitarian crisis – almost seven million Ukrainians have fled the country. The conflict and resulting sanctions have disrupted exports from the region for commodities like metals, food, oil and gas, pushing up inflation to levels not seen in decades.
‘Real economic growth in the European Union is now expected to fall well below 3% in 2022, down from the 4% estimated by the European Commission before the war. Further trade disruptions or increased economic sanctions could plunge the European economy into recession.’
One or two more grounded commentators are starting to draw what would, in any sensible world, be obvious conclusions: Western governments can’t continue the war abroad and expect peace at home. As Helen Thompson puts it, ‘Western governments must either invite economic misery on a scale that would test the fabric of democratic politics in any country, or face the fact that energy supply constrains the means by which Ukraine can be defended.’
The Tories and their Nato allies, however, show no signs of such good sense. They are carrying on regardless, despite the fact that things are not going well for the West in Ukraine. Russian forces are continuing to make military gains in the east of the country, however slow. Meanwhile almost all assessments suggest that the Ukrainian economy is tanking as a result of the war. As Adam Tooze put it last week:
‘There is little doubt that Ukraine is living on borrowed time. To put it simply, Ukraine cannot afford the war it is fighting. The aid it is receiving, though substantial, is an order of magnitude smaller than Russia’s fossil fuel earnings and is entirely inadequate to cover the running costs of the war. As a result, Kyiv is resorting to financing the war by printing money’.
President Zelensky is responding to this crisis by a combination of appeals for a huge increase in the already enormous Western military and financial aid for Ukraine and wholesale privatisations and attacks on the conditions of Ukrainian workers.
The war in Ukraine is first and foremost a disaster for the people there, but its impacts are rapidly intensifying around the world. Of course, there are a whole series of measures that need to be forced through to respond to the cost-of-living crisis, but not mentioning the war is no longer an option. The economic repercussions are so grave that any serious movement has to have opposition to the war as one of its central demands. Pushing for a negotiated settlement and challenging the West’s disastrous policy of military escalation are an essential part of averting disaster both here and internationally.
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Chris Nineham is a founder member of Stop the War and Counterfire, speaking regularly around the country on behalf of both. He is author of The People Versus Tony Blair and Capitalism and Class Consciousness: the ideas of Georg Lukacs.
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