The war in Ukraine as a business of the collective West

When I hear or read news about the supply of weapons and military equipment to Ukraine by the United States and its allies, for some reason I always think of a well-known English economist John Maynard Keynes (1883-1946). Especially his most famous work "The General Theory of Employment, Interest and Money” (1936).

In it and his other works, he stated that the market (which the English economist Adam Smith called an ideal automatic regulator of the economy) inevitably generates a lag in effective demand from the supply of goods. This inevitably leads to so-called overproduction crises.

In order to preserve capitalism (which was built on the ideas of Adam Smith and other representatives of classical English political economy), John Keynes proposed that the state should interfere in economic life. In his opinion, it can and should compensate for insufficient effective demand, becoming a buyer of any works, goods and services.

The state can even pay for the construction of useless objects such as the Egyptian pyramids. Or it can buy weapons and other military goods. Yes, such products, to put it mildly, do not satisfy any vital human needs. But the demand for them from the state saves society from crises. After World War II, Western governments adopted Keynesianism to justify the arms race and militarisation of the economy.

The end of the Cold War at the turn of the 80s and 90s deprived the West of the main argument in favour of continuing the arms race. Although the United States, which has always accounted for the lion's share of all military expenditures of the collective West, has increased its budget allocations for military purposes over the past three decades, its share in total budget expenditures and in gross domestic product (GDP) has been declining at this time.

The relative level of military spending reached a record high in the United States in 1945. At that time, $93.7 billion was spent on defence, which accounted for 41% of GDP and 79% of the state budget expenditure. At the turn of the 80s and 90s, US military spending was 6% of GDP. At the turn of the last decade and this one, this figure fell to an all-time low of 3.1% of GDP.

For corporations that are part of the military-industrial complex of the United States, the last three decades have been, to put it mildly, not the best of times. In order to maintain a decent level of income, they need an ever-growing demand for their products - airplanes, helicopters, military vessels, armoured vehicles, artillery, strategic and tactical missiles, ammunition, communications equipment, small arms, etc.

And such demand can create some rather large-scale military conflict. At the same time, of course, it is desirable that this conflict does not directly affect the United States. And that, if possible, it should be prolonged (preferably eternal). And, from this point of view, the current military operations on the territory of Ukraine have become a real gift for the US military-industrial complex.

Military companies from other NATO countries and other US allies are also rubbing their hands in anticipation of orders for their products. However, the military conflict in Ukraine can not be considered just a "gift" for the military-industrial complex, which fell from the sky. There is a lot of hard evidence that the United States and its closest allies were preparing for such a conflict and provoked it to start in February of this year.

Already during the war in Ukraine, at the end of March, the American President Joe Biden requested from the US Congress for the next fiscal year (which will begin on October 1, 2022) allocations for defence, which in absolute terms are a record in the entire history of the country.

US President Joe Biden presented Congress with a $5.79 trillion budget plan that includes $813 billion in defence spending. Back in February, there were rumours that Biden could request nearly $800 billion in defence spending. The requested amount announced in Congress turned out to be more. Biden addressed Congress with a convincing argument in favour of increasing military spending:

"I am calling for one of the largest-ever investments in our national security, with the funds necessary to ensure that our armed forces remain the best-trained, best-trained, and best-equipped armed forces in the world. In addition, I call for continued investment to respond strongly to Putin's aggression against Ukraine, with US support, to meet Ukraine's economic, humanitarian, and security needs."

The "people's deputies" were convinced by the president's arguments, and the sum of $813 billion was supported. As part of the defence budget for the next fiscal year, the Pentagon plans to provide $773 billion. Another $40 billion will go to the FBI, the Department of Energy, and other agencies. Compared to the previous fiscal year, the defence budget was increased by $35 billion, or 4.5%.

For reference, I would like to note that Russia is more than an order of magnitude behind the United States in terms of military spending. According to SIPRI (Stockholm International Peace Research Institute) estimates, in 2021, the Russian Federation ranked 5th in the world in terms of military spending (after the United States, China, India and the United Kingdom), and its military spending was 11.7 times less than the US’.

Already on February 27, after the start of Russia's special operation in Ukraine, NATO reported that the countries of the bloc were strengthening their "practical support" for Kiev. It was clarified that Belgium, Germany, Greece, Canada, Latvia, Lithuania, the Netherlands, Portugal, Romania, Slovakia, Slovenia, Great Britain, the US, France, the Czech Republic and Estonia "have already carried out or are claiming to have already carried out" large deliveries of military equipment to Ukrainian territory.

It was known that even before the outbreak of hostilities in Ukraine, it had already received "critical weapons" from the alliance countries, including anti-aircraft missiles and Javelin anti-tank missile systems (ATGMs).

On February 7, Ukrainian Foreign Minister Dmitry Kuleba said: "Ukraine is receiving increased... support today. The total volume in recent weeks and months has crossed [the mark of] 1.5 billion [dollars]. Weapons delivered - a total weight of more than 1,000 tons. Record levels of support are politically significant. They strengthen Ukraine's position at the negotiating table."

At the beginning of this year, many people already understood that the supply of weapons to Ukraine would inevitably lead to war. Thus, popular TV presenter Tucker Carlson at the end of January on the air of his show on Fox News said:

"Who benefits from Washington's constant push for war with Russia? We don't ask this question much. The US clearly has nothing to gain. Why do they do this? This is a difficult question. Arrogance, stupidity, psychological deviations of our leaders, massive bribery of Ukrainian politicians through lobbying, the military-industrial complex of America. All these factors play a role... a war with Russia is likely to be very lucrative."

So, the US military-industrial complex, through its lobbyists in Washington, was actively preparing a war in Ukraine.

In March, former member of the lower house of the US Congress Tulsi Gabbard in an interview with the host of the Fox News channel Tucker Carlson said: "To prevent a war in Ukraine, Biden had only to guarantee its non-entry into NATO, but the American military-industrial complex does not need this. American military industrialists need tough sanctions against Moscow and they need to start a cold war that will bring a lot of money."

By the beginning of April, shares of US military concerns had grown by 20-30% since the start of the special operation. According to analysts, the value of securities of Lockheed Martin Corporation from January to March increased by 30%, Northrop Grumann and General Dynamics - by about 20%, Raytheon - by about 10%. But until February 24, the indices of shares of military-industrial complex companies did not show signs of growth or even sank somewhat.

It is difficult to say how many weapons have been received so far from the United States and other countries of the collective West. Only fragmentary data is available. Here are just some sample posts on this topic.

February 26 US Secretary of State Anthony Blinken announced that he authorised $350 million in military assistance, including "anti-tank and anti-aircraft systems, small arms and ammunition of various calibers, body armour and related equipment."

On March 20, US Secretary of Defense Lloyd Austin stated that "in total, the security assistance that we provide to Ukraine amounts to more than $2 billion" and only "in the last two weeks we have provided Ukraine with military equipment worth more than $300 million”, and also “the president also signed $800 million recently as a military aid package”, adding that since 2014 in Ukraine “our instructors were present, along with some of our other allies" and the United States "not only provided equipment", but also Ukrainian military personnel "are ready to use this technique as soon as it is sent”.

In addition, he confirmed his readiness to assist Slovakia and Eastern European countries in sending S-300 surface-to-air missile systems to Ukraine, noting, "we'll continue to work with them and continue to work with other allies and partners to not only create the conditions to provide that kind of assistance, but also, you know, work to ensure that they have the ability to to protect their skies going forward as well."

On April 13, the United States announced that it would transfer $800 million in aid to Ukraine. In particular: 200 M113 armoured personnel carriers, 11 Mi-8 helicopters, 300 Switchblade drones, 500 Javelin missiles, 10 AN/TPQ-36 counter-battery radars and 18 155-mm M777 howitzers.

On May 2, the US Department of Defence announced that it had decided to transfer an additional 5,000 Javelin anti-tank missile systems to Kiev.

On May 7, the Washington Post reported that the United States will send a $136 million military aid package with new weapons to Ukraine. This assistance package will also include missiles that can be launched from helicopters, as well as Switchblade drones used to attack armoured vehicles and infantry. In addition, the Pentagon will purchase manual Puma drones for Ukraine.

I think that the total amount of weapons delivered to Ukraine by the United States and its allies since the beginning of hostilities on February 24 is measured in several billion dollars. But this is just the beginning. Below I will talk about the latest initiatives of the President and the US Congress, which should dramatically increase funding for assistance to Ukraine.

What is the fate of the weapons already delivered to Ukraine? Some of them, as experts say, immediately go to the “grey" and even "black" market. It’s not completely clear who the final buyers of the product are. Another part of military supplies is destroyed by the Russian armed forces. Here, for example, is the information of the Ministry of Defence of the Russian Federation for May 8.

In total, since the beginning of the special military operation, 157 aircraft, 116 helicopters, 768 unmanned aerial vehicles, 298 anti-aircraft missile systems, 2,933 tanks and other armoured combat vehicles, 336 multiple launch rocket systems, 1,411 field artillery and mortar guns, as well as 2,758 units of special military vehicles of Ukraine have been destroyed.

Of course, some of the destroyed equipment is property that Ukraine had before the start of the military operation (including Soviet-era weapons). But the old military property was mostly destroyed in the first month of military operations. Currently, "fresh" weapons imported in the last two and a half months are mostly destroyed. Finally, the weapons that end up in the hands of the Ukrainian Armed Forces often cannot be used effectively, because they are not familiar to the Ukrainian military.

But for those who supply weapons to Ukraine, it is not so important what the effectiveness of their use is. The main thing is that deliveries are paid for, and that new orders are received for weapons. Military-industrial companies need protracted wars, or even better, eternal ones. With that said, we can assume that the lobbyists of military companies in Washington will do everything possible to ensure that the military conflict in Ukraine continues as long as possible.

And in order for the conflict not to end, in the end, it is necessary that the money does not run out. And although in the next fiscal year, as I noted above, the military budget will exceed $800 billion, the Pentagon, as a customer of weapons and military equipment, has to count the money.

After all, the lion's share of the military budget goes to the maintenance of personnel (first of all, salaries), pensions for veterans, medical care for personnel and military pensioners, research and development, maintenance and repair of military equipment in service, and construction of military facilities.

In recent years, the purchase of weapons and military equipment accounted for approximately 15-18% of the military budget. Consequently, it can be assumed that in the next fiscal year, the volume of military orders may amount to about $130-140 billion.

Due to the sharp escalation of international tensions, the White House and the US Congress are calling for urgent modernisation of military equipment in the US armed forces. Taking into account the tasks of urgent and large-scale modernisation, military allocations for the 2023 fiscal year, according to American experts, do not seem to be such astronomical amounts anymore.

In early May, a video interview appeared with Dakota Wood, an employee of the Heritage Foundation Research Institute, dedicated to the state of the US armed forces ("Dakota Wood of the Heritage Foundation on the State of the US Military").

According to the expert, this condition causes concern, since most of the current military equipment – armoured vehicles, aircraft, sea vessels - is hopelessly outdated morally and physically. In addition, it has decreased quantitatively. Most of the equipment, the newspaper writes, was purchased in the 1980s-90s, and the number of pieces of equipment decreased two- or three-fold due to wear and tear alone.

“We can lament these circumstances, but the fact remains that in the event of a major conflict, America will have to rely heavily on its own military sources, and what it must rely on is a shadow of what it had the last time [Americans] faced problems on a global scale,” the expert notes.

The conclusion suggests itself: America urgently needs to build up its military-technical potential - both in quantitative and especially qualitative terms.

With this in mind, Ukraine becomes an excellent outlet for the Pentagon: during the modernisation of the US armed forces, it is possible to send physically and morally obsolete equipment there (however, since the beginning of the year, it is mainly such military "junk" that comes from overseas to Ukraine). In part, the supply of military "junk" can be carried out in general by way of gratuitous assistance. Or rather, on the terms that were applied by the Americans eighty years ago.

I am referring to the American lend-lease program, which started in 1941. The main recipients of supplies under the lend-lease act were the countries of the British Commonwealth of Nations and the USSR. All deliveries were paid for by the US Treasury. Some of them (food, clothing, medicine) were provided as gratuitous aid. Expenses for the supply of other goods had to be paid, and with sufficient instalments. To do this, the US could even provide long-term (sometimes interest-free) loans.

Finally, military and civilian property that remained in good and satisfactory condition was subject to return to the United States after the end of the war. The USSR paid for the American lend-lease for a very long time. The last lend-lease obligations were fulfilled by the Russian Federation as the legal successor of the Soviet Union in 2006.

And this year, the US Congress urgently held hearings on the law launching the lend-lease program for Ukraine. On May 9, President Joe Biden signed the bill into law. It should give an impetus to military supplies to Ukraine.

At the same time, the US Congress is currently discussing the issue of allocating additional funds to help Ukraine within the current budget. The request was made by US President Joe Biden in the amount of $33 billion, but "people's deputies" took the initiative and added another $7 billion. 368 congressmen voted in support of the initiative in the lower house of Congress (57 against).

Now the bill will go to the Senate of Congress for consideration. If approved, the document will be sent to Biden for signature. Approximately two-thirds of this amount is intended to pay for military supplies. This means that America will be able to supply weapons to Ukraine by about an order of magnitude more than what has already been delivered in two and a half months.

I suspect that the unexpected generosity of "people's deputies" on the issue of assistance to Ukraine is due to plans that are being discussed behind the scenes and have not yet been widely made public. The essence of these plans is extremely simple – to confiscate Russian foreign exchange reserves, which were frozen by the collective West in late February and early March. And then send the confiscated resources to help Ukraine.

By the way, they expect to confiscate not only the foreign exchange reserves of the Russian Federation, but also the assets of Russian companies and individuals. While they are also frozen. There are no exact estimates of the size of such frozen assets around the world. But there are quite a few fragmentary estimates.

Thus, the European Union prepared a certificate of seized Russian assets as of April 5, based on the data provided by EU member states, but not all of them. There is no common assessment methodology, and each country considered it differently. A total of €36.3 billion (or almost $40 billion) were obtained. The leader was France – €23.6 billion (65% of the total amount). Followed by (in billions of euros): Belgium - 10.0; Italy - 1.16; Ireland - 0.84; Netherlands - 0.52.

And here is the statement of the British Foreign Secretary Liz Truss. On March 24, she boasted that since the start of Russia's military operation in Ukraine, London has frozen $500 billion worth of Russian assets. British pounds, including £150 billion – the property of Russian oligarchs.

Experts believe that the figures mentioned by Liz Truss are overstated. Most likely, she was referring to the amount of assets that London could potentially freeze. But in general, today, according to many experts, the value of frozen assets of Russian individuals and legal entities is at least equal to the value of frozen foreign exchange reserves of the Russian Federation. And, most likely, it has already exceeded them. This means that the collective West has a potential resource of at least $600-700 billion.

By the way, Kiev almost the next day after the freezing of Russian reserves loudly demanded that they be sent to help Ukraine. Throughout March and the first half of April, the United States and its allies reacted poorly to these calls from Kiev. Of course, the collective West from the very beginning wanted not to “freeze" (block, arrest), but to confiscate (expropriate, steal) Russian reserves. But it could not do this for a simple reason – the current legislation did not allow it. It contained rules prohibiting outright theft and shameless robbery.

Both in the United States and Europe, "people's deputies" are working hard to amend the current legislation that would allow the expropriation of Russian reserves, and then send them to the cause of victory in Ukraine. Both the Old and New World expect that by the beginning of the summer, the legislative framework for expropriation will be created. Then both the United States and Europe will have very large amounts of money that can be directed to the noble goals of fighting the "Russian barbarians".

According to rough estimates, out of the $300 billion in Russian foreign exchange reserves that were “frozen", approximately $100 billion was frozen by Washington. The European Union has blocked reserves denominated in euros, which is the equivalent of more than $150 billion. Accordingly, the New World expects "production" of $100 billion, and the Old World - of $150 billion.

The rest of the frozen reserves are held in pounds sterling, yen and other reserve currencies. Accordingly, the remaining part of the "Russian bear skin" can be claimed by Britain, Japan, Canada, Australia, Switzerland.

With this in mind, the collective West seems to allocate money in advance for assistance (mainly military) to Ukraine. Bearing in mind that later, after the expropriation of Russian reserves, they will be able to compensate for the costs incurred. On April 22, Polish Prime Minister Mateusz Morawiecki openly stated that we should not wait for the expropriation of Russian assets, but immediately start collecting money to secure these assets. Specifically, he proposed to issue bonds secured by frozen funds of Russia and Russian citizens:

“These funds should be used today. And if the confiscation cannot be carried out quickly, for example, in Poland we adopt a special law for this purpose, then it’s possible to wait, and at this time issue bonds. The European Commission does not have any problems with the issue of bonds. And then these bonds can be quickly repaid with confiscated funds from the Russian Federation and Russian oligarchs."

It seems that the idea of the Polish Prime Minister was heard in Brussels. The European Commission has announced plans to issue new EU debt obligations to cover Ukraine's needs. This was reported on May 9 by the European edition of the American newspaper Politico. According to the newspaper, these needs are estimated at €15 billion in the next three months.

Due to the issue of debt securities, the EU expects to raise €10 billion (the remaining 5 billion must be provided by the United States). The draft commitment issue is scheduled to be made public on May 18. It is clear that the bonds will have to be repaid. Apparently, by the time the repayment period approaches, Brussels expects that the confiscation of Russian assets will occur and there will be an abundance of money.

It is clear that the beneficiary of all these "aid" schemes, in the end, will not be Ukraine, but the "collective West". And more specifically – Western military companies, whose accounts will receive billions of stolen Russian money. We are dealing with a symbiosis of dubious business and outright robbery.