• by Pete O'Brien
  • 07-11-2022

There is a theme that runs through much of academia that says that if we create a world of economic interdependence we shall have peace. Rather than a nation striving to build all those things it needs and hence ensuring independence for core goods and services, nations should instead take advantage of costs and comparative advantage, and not only will they find that goods are cheaper and thus everyone can live better lives - better material lives - because their earnings will buy more, but because of the growing economic (and concomitant social) interdependence, we will build a world that is less prone to war and violence, and thus everyone will be happier and better off.

That’s the theory. 

Of course, this theory from academia was and remains unfounded on real-world history. When things started to apparently turn this way after the end of the Cold War the underlying security provided by the US military, especially the US Navy and the US Marines, in keeping people from taking advantage of those around them, was largely discounted by the folks in academia who liked this theory of comparative advantage and interdependence.

Roll the clock forward. When, a month or so ago, the US started to make some noise about working towards independence on certain rare earths, the benevolent and peace-loving Chinese Communist Party, through the Chinese government run Global Times, let it be known that if the US sought to diversify its supply chain too much that China would consider that as the US preparing for war, and that such a move was a prelude to World War III. 

So much for Interdependence and Sweetness and Light.

Consider Europe. Ukraine invaded by Russia; US and Europe striving valiantly to aid the Ukrainians. And, Europe is currently (4+ months into the war) buying $800 million per day in energy (natural gas and oil) from Russia.

And now this: two interesting items in the news: the first is that Russia, having sent a large turbine (part of the system powering one of the natural gas pipelines) to Canada for repair several months ago (pre-war), wanted it back. Ukraine asked that Canada not release it, and argued that releasing it would violate the sanctions regime. Germany argued that there must be an exception to the sanctions as Germany needs the pipeline to come back to full operational status.

Yesterday, taking note of Germany’s situation, Canada released the turbine and it will be returned to Russia this week.

And, this from France: French Economy and Finance Minister Bruno Le Maire warned that Russia is prepared to halt gas supplies to Europe and Europe must now prepare: "Let's prepare for a total cut-off of Russian gas; Today that is the most likely option. You also have to prepare load-shedding plans, we are doing it. It means looking in a very specific way at each company, each employment area; Which are the companies that should reduce their energy consumption and which are the ones that cannot.”

One wonders where the minister has been for the last 4 months? Did the minister come up with the idea for a plan after only 4 months of war? Wow…

Seriously, how is it that France finds itself in a situation where it needs to import energy from Russia? France has nuclear weapons on the end of missiles, pointed at Russia. Why would they ever be dependent on Russia for anything critical? And how is it that there is no plan? 

And Germany is actually worse off than France. In some German apartments and housing areas rationing has already begun, and prices have surged.

One housing company in Berlin has announced a 100% increase in heating charges. An association that represents 3,000 housing companies forecasts that the average house in Germany will need to spend $3,870 on heating in 2023.

Prognos, a Basel Switzerland based research firm, concluded recently that if the Russian gas supply were cut off, Germany’s economic output could drop by 12.7% by the end of the year.

While Russia engages in a war of attrition in eastern Ukraine, and continues to fire rockets into Ukrainian cities in a rather indiscriminate and cold-blooded manner, European politicians scold Putin to not use energy or food as a weapon. One has to wonder if the politicians even take themselves seriously, never mind that we should. Or that Putin should.

What is the plan if Putin decides he is no longer winning (it doesn’t matter whether he is or isn’t, what matters is what he believes) and decides he will shut down all energy into Europe unless Europe pressures Ukraine to bring the war to an end? What is the plan?

For that matter, with Nord Stream 1 about to go off line for 10 days beginning July 11th, what is the plan if it doesn’t come back on line?

Europe - and the US - need to be independent. Both should begin with energy independence. This is a crisis. Europe’s dismal experiment to use wind power is unraveling in failure. The same will follow in the US. Coal power plants are now far cleaner and can provide the baseline electric power Europe needs. The same is true here. At least until new nuclear power stations come on line. Build up our baseline power, start now, a crash course. Take a look at the other raw materials and technologies - the studies are all out there - and lets start right now to achieve true independence, the independence we have been incrementally sacrificing for the last 30 years.

If we value our freedom the time to act is now.