Is the United States really the biggest beneficiary from the continuation of the Russian war?

The European continent is full of allegations saying that Washington is working to prolong the war in Ukraine because it is the biggest beneficiary of its negative consequences and effects on the economies of Western European countries, and is calling on European leaders to work on adopting a unified strategy in order to stop this war.

At the same time, President Joe Biden's administration rejects these allegations, and states that 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 the Center for Policy and Strategic Studies in Washington, "Washington's 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 Americans. While inflation in the United States reached 7.7% in November 2022, it reached 11.1% in the United Kingdom." , and 11.6% in Germany, and 14.3% in the Netherlands during the same month.

Europe is suffering from the consequences of the war

Weeks ago, some European Union officials attacked President Joe Biden's administration, accusing it of making a fortune from the Russian war on Ukraine. A senior European official spoke to Politico and said, "At a time when European Union countries are suffering economically on several levels, the United States is making a lot of profits because it It sells 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.

French President Emmanuel Macron said the gas price hike in the United States was not "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 American gas, but 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 equipment is running out. European armies after sending weapons 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 is not the result of any policy or action of the US government, and added that in most cases the difference between export and import prices does not 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 decline of the American economy

The short-term economic effects of the war are likely to be limited for the United States, because 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 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 impacts on specific US companies and sectors that do business with Russia. For example, there could be concerns about losses for US financial institutions, and a decrease in the competitiveness of US companies. Concerns also center on whether the decline in Russian energy supplies It could lead to higher gas prices and worsening inflation within the United States," according to the study.

As a Dallas Fed report shows, “Russia’s war on Ukraine – which was a blow to the global economy that 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 the rise in food, energy and raw material prices.

The energy sector, arms companies and the dollar

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 is 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 American 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 American weapons, to compensate for what was provided to Ukraine.

Indeed, the basket of stocks 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 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 dollar rose over the year against the euro from one dollar compared to 0.94 euros at the beginning of the year , bringing the dollar to 1.05 euros last October, before settling at 0.94 this week.