Showing posts with label international business. Show all posts
Showing posts with label international business. Show all posts

Saturday, February 8, 2025

Russian Electricity Hits a Financial Curtain

On February 8, 2025, the E.U. states of Estonia, Latvia, and Lithuania turned off all electricity-grid connections to Russian and Belarussian supplies of electricity, thus reducing revenues for the belligerent country and its ally. Electricity would thenceforth merge with the Continental European and Nordic grids through links with the E.U. states of Finland, Sweden, and Poland. Europe was taking care of its own, for a price of course, while Russia was increasing trade with China and other countries to make up the difference from decreasing trade with Europe. In short, it can be concluded that unilaterally invading a country has economic consequences that diminish and reconfigure international business.

At the time, European media played up the “geopolitical and symbolic significance” of the “severing of electricity ties.”[1] To these, economic significance could be added. No longer could officials in Russia’s government count on the stable revenue to help finance the military incursion into Ukraine. The economic interdependence between Russia and the E.U. was decreasing. Moreover, the philosophy of international business, which maintains that increasing commercial ties, including trade and foreign direct-investment, reduces the probability of war because such conflict would come with a financial cost. In fact, decreasing economic interdependence can itself make war more probable as there is less to lose financially from going to war.

Moreover, taking the E.U. and Russia as empire-scale countries that in themselves can be viewed as regions in the world, a financial curtain replacing the Iron Curtain of the Cold War could be said to be the “big picture” of which cutting off supplies of Russian electricity is just a part. In the age of nuclear weapons, a financial divide between the E.U. and Russia (and Belarus) could give rise to dangers of much greater magnitude than even Russia’s threats to use tactical nuclear weapons in Ukraine. Even though the view that if enough international business is established between two or more countries, war can finally be obviated has been shown to be faulty, eliminating trade and foreign direct-investment makes it easier politically for countries to go to war over other matters.

In short, the severing of business relationships can be viewed on the macro economic-geopolitical level on which the severing of ongoing business contracts can itself be viewed as a political weapon and, together with other severings, as part of larger economic wedge between even regions of the world. At that scale, as the world wars of the twentieth century demonstrate and perhaps pre-figure, war can be of a magnitude that the weapons unleased are nothing short of horrendous. Drawing an economic line roughly between Europe and Asia can have very significant geopolitical and military implications. Perhaps it is owing to human nature that we are more prone to drawing such lines in which economic relations are severed than to reinforcing economic interdependencies in spite of the fact that they do not obviate war. It takes some time for a spider to weave its web, especially if the spider happens to be named Charlotte, but only a moment for such a web to be destroyed.


1. Daniel Bellamy, “Baltic States Cut Russian Electricity Ties, Ending Decades of Reliance,” Euronews.com, February 8, 2025.

Wednesday, January 1, 2025

On the Potential of International Business to Render War Obsolete: The Case of Russian Gas

In a graduate-level course on international business, a professor sketched out the political-economic philosophy of international business, whose mantra is that if two or more countries have enough trade and foreign direct-investment, those countries would be less likely to go to war. In short, economic interdependence, thanks to international business, can render war obsolete and thus greatly enhance the human condition. Decades after I had taken that course, a business professor at the same university wrote extensively on the role that business can play in facilitating peace. Unfortunately, that economically-sourced theory of international relations downplays or ignores that the reasons or rationales for going to war and the decisions taken by a government for military-strategic reasons during a war can trump the (especially immediate) economic benefits from international business, whether in terms of imports, exports, or foreign direct-investment by foreign firms at home or by domestic firms abroad. This can occur even though revenue from taxes or state-owned enterprises having to do with trade and foreign-direct investment can help a government in fighting a war. The case of Ukraine cutting off Russian natural gas from traveling through Ukraine in pipes to the E.U. as of January 1, 2025 is illustrative of vulnerability in the theory of international business as a way to world peace.

In not allowing the 2019 transit deal between the Kremlin-owned gas company, Gazprom, and Ukraine’s Naftogaz to be renewed for 2025 and beyond, the Ukrainian government faced “the loss of some $800 million a year in transit fees from Russia, while Gazprom [stood to] lose close to $5 billion in gas sales.”[1] At the time, Russian forces were making further incursions in eastern Ukraine, so the Ukrainian military could have used the military hardware that $800 million could have bought, especially with isolationism soon to gain a foothold in the White House. Furthermore, that Gazprom had “recorded a $6.9 billion loss, its first in more than 20 years, due to diminished sales to Europe,”[2] suggests that Putin’s decision to invade Ukraine, largely for a noneconomic, imperial reason, had come with some economic costs. Put another way, Putin’s regime could have used the $5 billion in gas sales to the E.U. to help finance the invasion. International business was clearly not foremost two either government in the war. Rather than the pipeline reducing the chances of war when it broke out in 2023, the international commerce would become a casualty of war. Although international business benefits states, to reduce state interests in political realism to economics misses a lot and thus can lead to bad predictions regarding war and peace.

As for the E.U., at first glance it would seem that Europe would be less supportive of Ukraine in its war, including financially and in terms of sending military hardware because the Ukrainian government had just cut off Russian gas from reaching the E.U. in the middle of winter. Fortunately, the E.U. had anticipated the geopolitical strategic move by seeking out other sources of natural gas, such as the U.S., so the Russian gas through Ukraine only “represented about 5% of the European Union’s total gas imports, according to Brussels-based think tank Bruegel.”[3] A spokeswoman for the European Commission said at the time, “The European gas infrastructure is flexible enough to provide gas of non-Russian origin to (central and eastern Europe) via alternative routes . . . since 2022.”[4] Taking into account the continuing pipeline through Turkey, the E.U. had reduced “Russia’s share of its pipeline gas imports down from over 40% in 2021 to about 8% in 2023, according to the European Council.”[5] I submit that even if the E.U. had not prepared for the rather obvious decision of Ukraine’s government not to renew the transit deal with Russia in the midst of the Russian invasion, non-economic, geopolitical interests would have continued to fuel the E.U.’s desire to support Ukraine militarily, for fear of Russian inroads in eastern and even central Europe can easily be understood to trump even the economic benefits from international trade and foreign direct-investment with Russia.

In short, states are foremost political entities; not that they and the people who run them are not motivated by the economic benefits arising from international trade and foreign direct-investment, and these can admittedly make a difference on close calls on whether to go to war, but geopolitical considerations are primary. War and the effects thereof go beyond economics and business. A town being occupied, whether in Ukraine or Gaza, has existential implications for the people therein that extend beyond how trade is being impacted. In fact, as Israel has demonstrated toward Gaza, economic resources can be weaponized such as by withholding food and other humanitarian relief so as to kill off a population. Such a goal is not economic in nature, and international business is not sufficient to override such ideological goals, or even hatred itself. The limits to peace through economic interdependence stem from precisely this point: hatred goes beyond economics, so the latter can only go so far in constraining the former. The problem, in other words, is not that international trade and business haven’t been extended sufficiently to insure world peace, but that hatred can override economic self-interest.  



1. Kosta Gak, Alex Stambaugh, and Anna Cooban, “Ukraine Ends Supply of Russian Gas to Europe,” CNN.com, January 1, 2025.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.

Wednesday, June 24, 2015

Pope Francis on Climate Change: The Mutually-Reinforcing Impacts of Power, Wealth, and Culture

Writing in 2015, Pope Francis addressed the problem of climate change and suggested what he, or the Vatican more broadly, considered to be necessary systemic changes on the road to recovery. In the encyclical, the patient may be human nature itself—specifically, its self-destructive propensity and trait of power-aggrandizement. In other words, we had lost control of our built-up (i.e., artificial) societal systems and structures, which could wind up strangling us in their protection of the status quo. In this essay, I discuss the Pope’s portrayal of the problem of climate change from the standpoints of culture, power, and wealth. I then address the feasibility of the Pope’s prescription.
“A very solid scientific consensus indicates that we are presently witnessing a disturbing warming of the climatic system,” the pope reported.[1] In recent decades this warming had been accompanied by a constant rise in the sea level and, it would appear, by an increase of extreme weather events, even if a scientifically determinable cause could not be assigned to each particular phenomenon. At the time, India, Pakistan, and parts of western North America were either in or soon to be in heat-waves.
In the encyclical, Pope Francis turns to what he viewed as more subtle causes of the climate change. “The problem is aggravated by a model of development based on the intensive use of fossil fuels, which is at the heart of the worldwide energy system. Another determining factor has been an increase in changed uses of the soil, principally deforestation for agricultural purposes.” These “man-made” contributors in turn set in motion natural contributors. “The melting in the polar ice caps and in high altitude plains can lead to the dangerous release of methane gas, while the decomposition of frozen organic material can further increase the emission of carbon dioxide. Things are made worse by the loss of tropical forests which would otherwise help to mitigate climate change. Carbon dioxide pollution increases the acidification of the oceans and compromises the marine food chain. If present trends continue, this century may well witness extraordinary climate change and an unprecedented destruction of ecosystems, with serious consequences for all of us.” Put another way, the CO2 already in the atmosphere—at approximately 400 ppm—had already triggered natural processes beyond the reach of human technology. The resulting climatic shift could easily outpace the ability of biological evolution to adapt. Given the historical role of the Creationism-Evolution false-dichotomy, the pope’s reference to evolution is striking.
Undergirding the role of fossil fuels, the pope highlights socio-economic and political obstacles. “Regrettably, many efforts to seek concrete solutions to the environmental crisis have proved ineffective, not only because of powerful opposition but also because of a more general lack of interest. Obstructionist attitudes, even on the part of believers, can range from denial of the problem to indifference, nonchalant resignation or blind confidence in technical solutions. We require a new and universal solidarity.”
The pope evinces very little patience for such attitudes. He was hardly alone. "We are not here today to debate whether or not climate change is real. We are not here to debate whether or not human activity is contributing to that. These questions have been settled by science," U. S. Surgeon General Vivek Murthy said a week after the Vatican’s release of the encyclical.[2] On the same day, the 2015 Lancet Commission on Health and Climate Change came out with its report.[3] More severe heat waves, longer allergy seasons, and decreased urban air-quality were already erasing gains made in public health, according to the report.[4] It's like a cigarette smoker with lung problems,” a Commission official said at the time. “Doctors can treat the disease, but the first thing that has to be done is to get the patient to stop smoking, or in this case get off coal in the next five years.”[5] In short, the world—or, more precisely, the species—no longer had the luxury of denial; in fact, radical change was urgently needed.
Formidable, well-entrenched forces nevertheless stood in the way. In fact, some were actually urging environmental deregulation. Accordingly, the pope charges ahead. “Many of those who possess more resources and economic or political power seem mostly to be concerned with masking the problems or concealing their symptoms, simply making efforts to reduce some of the negative impacts of climate change.” This is not enough. “Caring for ecosystems demands far-sightedness, since no one looking for quick and easy profit is truly interested in their preservation. But the cost of the damage caused by such selfish lack of concern is much greater than the economic benefits to be obtained.” In other words, an expedient, selfish mentality—doubtless rooted in human nature itself—has been a steady obstacle to caring for ecosystems such that the species made in God’s image might long endure.
Additionally, organizational and societal artifacts have been erected in line with the sordid mentality. Indeed, the pope claims that “many of these symptoms indicate that such effects will continue to worsen if we continue with current models of production and consumption.” Privileging “short-sighted approaches to the economy, commerce and production,” those models do not adequately absorb externalities—such as costs borne by the environment because firms can evade them. Whereas “the way natural ecosystems work is exemplary: plants synthesize nutrients which feed herbivores; these in turn become food for carnivores, which produce significant quantities of organic waste which give rise to new generations of plants. But our industrial system, at the end of its cycle of production and consumption, has not developed the capacity to absorb and reuse waste and by-products. We have not yet managed to adopt a circular model of production.” The circular system of inputs, manufacture, and use is not sufficiently closed. On the input end, natural resources are depleted. On the output end, waste piles up in the “throwaway culture,” whether in the oceans or in the air.
Unfortunately, culture and leadership can wind up reinforcing each other in favor of the status quo. “The problem is that we still lack the culture needed to confront this crisis. We lack leadership capable of striking out on new paths and meeting the needs of the present with concern for all and without prejudice towards coming generations.” We lack principled leaders with the guts to stand up to the corporate patrons whose disproportionate impact on democracies gives the vested interests in the status quo a veto on real change. The inherent conflict of interest is of course ignored. Additionally, people are too willing to enable the denial espoused in some of their respective leaders’ rhetoric. “As often occurs in periods of deep crisis which require bold decisions, we are tempted to think that what is happening is not entirely clear. Superficially, apart from a few obvious signs of pollution and deterioration, things do not look that serious, and the planet could continue as it is for some time. Such evasiveness serves as a licence to carrying on with our present lifestyles and models of production and consumption. This is the way human beings contrive to feed their self-destructive vices: trying not to see them, trying not to acknowledge them, delaying the important decisions and pretending that nothing will happen.” A cultural mentality ensconced in a throwaway society reinforces the leaders of denial.
Furthermore, the live-for-today mentality societally in an era of technological advancement proffers a blind faith in technology as savoir. “Following a period of irrational confidence in progress and human abilities,” Francis writes, “we find those who doggedly uphold the myth of progress and tell us that ecological problems will solve themselves simply with the application of new technology and without any need for ethical considerations or deep change.” The incrementalism itself may reflect the nature of the production model based on Frederick Taylor’s Principles of Scientific Management. The pope points to the tunnel-vision inherent in such an approach. “Technology, which, linked to business interests, is presented as the only way of solving these problems, in fact proves incapable of seeing the mysterious network of relations between things and so sometimes solves one problem only to create others.
Not even human pride in our sapiens brain can touch the intricate complexity in Creation as evinced in natural laws. “The climate is a common good, belonging to all and meant for all. At the global level, it is a complex system linked to many of the essential conditions for human life.” The precariousness of conditions consistent with human life is invisible next to the observed constancy through a “long life” and, moreover, the length of human history. “Many people will deny doing anything wrong,” the Pope maintains, “because distractions constantly dull our consciousness of just how limited and finite our world really is.” The subtle premise that tomorrow will be like today is so hardwired into the human psyche that we are vulnerable to environmental shocks.
Not unexpectedly, the pope assumes a distinctly religious perspective. Rather than selfishly padding our own nests in excess to what is natural (not to mention necessary) within a narrow perspective, “we are called to be instruments of God our Father, so that our planet might be what he desired when he created it and correspond with his plan for peace, beauty and fullness.” Seeing himself as such an instrument, the Pope goes beyond the problem itself to propose possible steps toward a solution.
Given the tyranny of the status quo and its formidable defenders, the pope argues that the “establishment of a legal framework which can set clear boundaries and ensure the protection of ecosystems has become indispensable.” The pope is proposing here that some governmental sovereignty be transferred to the global level because relying on nation-states to deal with the externalities (i.e., CO2 emissions) had only resulted in dismal results. In other words, the nation-state system itself (and the disproportionate influence therein of business interests) had become incompatible with the new problem, which is inherently global and thus potentially treated at that scale, politically speaking.
“It is remarkable,” the pope observes, “how weak international political responses have been. The failure of global summits on the environment makes it plain that our politics are subject to technology and finance. There are too many special interests, and economic interests easily end up trumping the common good and manipulating information so that their own plans will not be affected.” According to the pope, “economic powers continue to justify the current global system where priority tends to be given to speculation and the pursuit of financial gain, which fail to take the context into account, let alone the effects on human dignity and the natural environment.” In other words, plutocracy—wherein wealth rules—combined with the externalities-problem of the nation-state system rendered continued reliance on the extant system of geo-politics nothing short of a fool’s errand. In fact, the reliance could be classified as self-destructive from the species’ standpoint.
Jean-Jacque Rousseau, a seventeenth-century philosopher, wrote in his treatise, The Social Contract, “Man is born free, and everywhere he is in chains.” At least with respect to the tyranny of the industrial and political status quo, those chains are entirely of our own making. It is easy to point to theoretical freedom, and yet quite another to stand up to the paymasters in order to hem them in such that the maximizing species will not pierce the semi-permeable membrane of the Earth’s habitat for humanity. If a transfer of governmental sovereignty to a global entity is needed to stave off additional climate change, who’s to say that large multinational corporations won’t capture that power too? Moreover, how many government officials would willingly give up some power to a global organization that could hold them accountable? At the time, the U.S. would not even agree to be bound by the International Criminal Court. Also, neither China nor Russia—defenders of the notion of absolute sovereignty, or “internal affairs”—would likely consent to be bound by a global entity that could be dominated by the U.S. and the E.U. In short, if the Vatican’s assessment and prescription are correct, the species made in God’s image might turn out to be a flickering image on the mask of eternity.


1. Pope Francis, “Encyclical Letter Laudato Si,” All quotes from the Pope in this essay are from this source.
3. The Lancet Commission on Health and Climate Change, “Health and Climate Change: Policy Responses to Protect Public Health,” The Lancet, June 23, 2015.
4. Sheppard, “Surgeon General.”
5. Seth Borenstein, “Panel of Doctors Give a Warming Earth a Physical and Say Kick the Coal Habit Immediately,” US News and World Report, June 22, 2015.

Monday, April 28, 2014

High Finance Answering Putin’s Imperial Ambitions: A New Age?

A week and a half after government representatives from Russia, the E.U., the U.S., and Ukraine agreed to deescalate the political instability in eastern Ukraine, the U.S. Government imposed additional “targeted sanctions on a number of Russian individuals and companies” after concluding that the Russian government had not ceased from fomenting violence in eastern Ukraine.[1] With the official numbers on capital flight from Russia at $50 billion a month for the first three months of 2014, this announcement on April 28th is oriented to exploiting a Russian vulnerability. Moreover, the statement signals a step-wise, “surgical” approach premised on the value of money—a symbol of value. In relative terms, a broad military response looks almost primitive, if not (hopefully) antiquated.

In posing the question of how to stop a government of one country from invading another country ‘in this day and age,” Bill Browder of Hermitage Capital sought to convince the CNBC audience that the morning’s White House announcement could be seen as fit for a new age, even if we are not all there yet. With the Russian president and about a thousand other Russians holding the vast majority of the money in Russia, Browder argued that targeting the financial cost (“pain”) to particular Russians and Russian companies would be the most effective (and efficient) means of constraining Vladimir Putin’s attempts to reconstruct the Russian Empire.

The Russian Empire exactly a century before Putin's invasion of Crimea. 
(Image Source: Wikipedia)

With just such a strategy in mind, the White House announced that the U.S. Treasury Department would impose sanctions (including asset freezes and U.S. travel bans) on seven Russian government officials. Seventeen Russian companies “linked to Putin’s inner circle” would also be subject to economic sanctions; thirteen of those companies would also bear the brunt of a license requirement denying the export, re-export or other foreign transfer of U.S.-based items to those companies.[2]

How would old man Kant deem the UN as a world federation oriented to perpetual peace?

Plato and Kant would doubtless have been pleased to find the exactitude of reason replacing the shot-gun approach of a large-scale military response. A polis, whether a city or the international domain, is just, Plato reasons, only if reason is governing desires rather than vice versa.  Given the pathological nature of human nature itself, Kant reasoned, perpetual peace is possible but not probable. Although Kant advocated a world federation as a means to keep the human pathology from effecting ruinous consequences, he, as well as Plato, would likely approve of strategic reasoning oriented to balance sheets over the passions having the upper hand in the heat of battle. Moreover, the shift from military to financial geo-political strategy would likely fit within Hegel’s perception of progress through human history as the (collective) human spirit becomes increasingly free. 

Even if my inclusion of notable philosophers is too lofty, Browder’s point that countries just don't invade other countries in the twenty-first century may (hopefully) portend a new age following the astonishingly bloody twentieth century. The question facing Putin as he sought to drag the eastern half of Ukraine back “into the fold” of a Russian empire in the wake of the American invasion of Iraq is perhaps whether he could accomplish his imperial goal before the “new rules” go into effect, effectively closing the door on the old way of doing things. Considering the sheer staying power of (pathological) human nature as well as the millennia in which military might established and defended the interests of states and their respective rulers, I have difficulty seeing how geo-politics in international relations could ever reduce to high-finance. Even though this might be possible, I submit it is not probable.




[1] White House Statement on Ukraine, April 28, 2014.  Also available at: “U.S. Announces New Sanctions on Russia Over Ukraine Crisis,” The Wall Street Journal, April 28, 2014.
[2] White House Statement on Ukraine, April 28, 2014.