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.  

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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.

Wallonia Threatens to Veto the E.U.-Canada Trade Treaty: Complicating State Sovereignty in the E.U.

"The European Union and Canada signed a far-reaching trade agreement on [October 30, 2016] that commits them to opening their markets to greater competition, after overcoming a last-minute political obstacle that reflected the growing skepticism toward globalization in much of the developed world."[1] The obstacle may indeed have reflected increasing resistance at the time to globalization, but this veil can be pulled back to reveal the underlying political obstacle--that of states' rights in the E.U., taken to a crippling extreme.

The full essay is at "Wallonia Threatens to Veto the E.U.-Canada Trade Treaty."

1. James Kanter, "Canada and E.U. Sign Trade Deal, Bucking Resistance to Globalization," The New York Times, October 30, 2016.

Cheaper Driving on an Uninhabitable Planet

By the end of November 2014, the price of oil had declined about 40 percent since its peak back in the previous June.[1] Expanding American fracking, a steady supply of oil from OPEC, and a weak global economy are the major factors behind the trend. Saving $630 million on gas as compared with what they had been paying in June, American drivers found themselves with more disposable income.[2]  Besides uses such as Christmas presents, groceries, and clothing, more consumers were buying SUVs and Hummers in spite of their low gas mileages. William Dudley, president of the Federal Reserve Bank of New York, pointed to the benefits, saying “falling energy prices are beneficial for our economy and should be a strong spur to consumer spending.”[3] With OPEC countries and Russia hit disproportionately, the U.S. Government had a geo-strategic interest in a further drop in the price of oil. It is no wonder that a major disconnect existed between these benefits and a startling, albeit largely hidden downside.

As American drivers were finding they had more money available to buy Christmas presents, United Nations negotiators gathering in South America were expressing a new optimism that they may finally achieve a deal to stop the increasing rate of greenhouse gas emissions. Meanwhile, scientists were warning that even with an international deal that includes China and the U.S., the Earth would still become increasingly unpleasant; without a deal, and here’s the stunner, “the world could eventually become uninhabitable for humans.”[4] Even with a deal taking effect only in 2020 and relying on governments to hold themselves to their own targets and timeframes, a large body of scientific research in 2014 pointed to “into a near-term future of drought, food and water shortages, melting ice sheets, shrinking glaciers, rising sea levels and widespread flooding — events that could harm the world’s population and economy.”[5] Such a drag on the global economy would likely exceed expansion of between 0.5 percent and 1 percent from the decline in oil prices.[6]

Dwarfing calculations of the net impact on the global economy is the word itself, uninhabitable. The prospect of our species taking itself out of existence even as we cheer cheaper (and thus more) gas and buy larger cars again—as if no learning curve could have been applied—presents our species with the unhappy enigma that is so much a part of human nature. That we could have been so easily distracted by instant gratification is not news; the realistic possibility that our descendants might die off before the turn of the next century is—at least to those people willing and able to notice. In other words, 2014 brought the dark news that the planet being uninhabitable for humans may come sooner than anyone distracted by the oil would believe.

To be sure, the astounding technological advances that took place in the twentieth century, such as putting human beings on the Moon, could mean that further advances in the twenty-first century could remove enough carbon from the atmosphere to pull us back from the brink. Moreover, the future is not simply a projection of a given trend into a trajectory; unforeseen factors are almost certain to kick in between 2014 and the end of that century.

Even so, the risk taken on by humanity in the 2010s is considerable—even astonishing—given what we knew even in 2014. Drivers pleased to death with lower gas prices dismissed the risk—missing the connection between the rising carbon emissions from their increased driving (and flying) from the lower cost of fuel, and the increasing likelihood that their children or grandchildren might realistically find the Earth to be uninhabitable in their lifetimes. Young children riding in the SUVs could live to see the Titanic sink unexpectedly quickly. The loop could be that tight, and yet it got scarcely any air-time as gas prices lowered during the last half of 2014. Crucially, drivers and the media alike were glued like addicts to a constricted perspective centered on the daily downward ticks in the price of gas as if pennies dwarf uninhabitability. Is it to be said shortly before the final curtain that our species died off for pennies?

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[1] Steven Mufson, “As Oil Prices Plunge, Wide-Ranging Effects for Consumers and the Global Economy,” The Washington Post,  December 1. 2014.

[2] Ibid.

[3] Ibid.

[4] Coral Davenport, “Optimism Faces Grave Realities at Climate Talks,” The New York Times, November 30, 2014.

[5] Ibid.

[6] The statistics are from Steven Mufson, “As Oil Prices Plunge, Wide-Ranging Effects for Consumers and the Global Economy,” The Washington Post,  December 1. 2014.

China’s Increasing International Role: A Historical Departure

Historically, China was isolationist. The Opium Wars in the mid-19^th century is a good illustration of why. From this context, China’s announcements of a series of international trade and finance initiatives by which China would assume a larger leadership role internationally are stunning. Doubtless the enhanced role is in line with China’s geopolitical and economic interests. After all, political realism is hardly a dead theory in the 21^st century. Even so, the impact of the reversal on the culture is significant, and thus worthy of study. Specifically, the traditional mistrust of foreigners is likely to diminish. As it does, the Chinese will be more likely to consider and even advocate for economic and political principles, such as liberty and rights, that are valued elsewhere in the world but not so much in China. The result could be increased political instability. In short, the initiatives timed to coincide with the Asia-Pacific Economic Cooperation (APEC) meeting in November 2014 could eventually weaken the Chinese government’s grip on power.

In the Qing Dynasty (1644-1911), relations with non-Chinese peoples were conducted by “a variety of bureaus and agencies that, in different ways, implied or stated the cultural inferiority and geographical marginality of foreigners, while also defending the state against them.”[1] Even though countries such as Burma, Thailand, and Vietnam “shared many of the basic values of Chinese culture,” the emissaries “were expected to make a formal acknowledgement of China’s cultural and political prestige by [using] a language of subservience in diplomatic documents and by making the ritual prostrations (kowtow) before the Chinese emperor in royal audiences. In return, these countries were allowed to conduct a controlled volume of trade with China.”[2] Interestingly, a certain subservience and even inferiority may have been implied at the APEC meeting in Beijing in 2014 to the extent that China held huge quantities of foreign currencies in reserve (which could be used to invest in other economies) and foreign government debt (e.g., U.S. Treasuries). In this sense, China’s enhanced leadership role internationally is in line with the history. Even the taking on of a leadership role implies that the resulting increased trade and foreign economic relations more generally would be controlled in their contours, as the leadership was oriented to designing international economic infrastructure, and no system-design is perfectly neutral.

Just before the APEC meeting, the Chinese government announced a free-trade agreement with South Korea; both the timing of the announcement and the taking of initiative on the agreement imply significant—though not complete—control. Additionally, Chinese regulators “approved a plan to open Chinese stock markets wider to foreign investors by linking exchanges in Hong Kong and Shanghai.”[3] Simply in having a plan, the Chinese government was controlling how foreign investors would relate to the stock exchanges. Put another way, control is implied in having a plan, rather than alternatively watching foreign investors come in do as they will (e.g., speculate by selling-short, thereby trashing even some sound companies). Lastly, the Chinese government announced a $40 billion Chinese-financed fund to improve trade links between Asian economies. The money alone implies control. At the very least, the Chinese would have a big say in how the links are made.

The extent of the Chinese involvement in international economic relations is startling from a historical perspective, but the degree of control implied is not. Historically, the Chinese had good reason to distrust foreign governments. On August 29, 1842, the Chinese signed the British treaty of Nanjing in what is now known as the first opium war. Facing an epidemic of addiction, the Qing government had outlawed trade in the drug. In the treaty, British opium merchants could live and operate in five Chinese cities—Canton, Fuzhou, Xiamen, Ningbo, and Shanghai. Although only the latter was a boom town, illegal opium would come into China at a rate of at least 20,000 chests a year.[4] Additionally, the island of Hong Kong was to possessed in perpetuity by the British.[5] The United States, France, and a host of other countries also extracted concessions. All told, the Qing “had lost control of vital elements of China’s commercial, social, and foreign policies.”[6] As if this were not enough, the Tianjin treaty in 1858 opened all Chinese ports to British opium traders in spite of the fact that the possession and sale of the narcotic was still illegal under Chinese law. To pressure the Qing into signing the treaty that implied deep disrespect for Chinese law within China, the British burnt down the Yuan Ming Yuan, the exquisite summer palace on October 18, 1860. The Chinese were humiliated at such a disgrace.[7]

Deep scares inexorably become etched in the subterranean contours of a society’s perspective of the world. An insistence or at least a proclivity to control relations with foreign powers naturally goes along with an inner sense of insecurity masked as an insistence to relate only from a position of power—whether it be militarily or in having massive reserves of foreign currencies or debt as assets. What has changed is the extent of China’s interaction with other countries, economically and politically. Ironically, from the controlled design of international economic regimes, increased exchange can be expected—not only of economic goods and services under free trade, but also of ideological principles. In this sense, the Chinese government risks opening China up beyond what that governing party can control.

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1. Jonathon Spence, The Search for Modern China, 2^nd ed. (New York: W. W. Norton, 1999), p. 117.

2. Ibid, p. 118.

3. Joe McDonald and Youkyung Lee, “Asia-Pacific Leaders Agree to Work Toward Possible Adoption of Trade Deal,” The Associated Press, November 11, 2014.

4. Spence, Search for Modern China, p. 164.

5. Ibid., pp. 160-61.

6. Ibid., p. 163.

7. Ibid., p. 182.

Russia Invades Ukraine as World Squashes Anti-Semitism

At a joint EU-US news-conference on 26 March 2014, Presidents Barroso, Van Rompuy, and Obama discussed the problematic Russian invasion of the Crimea province of Ukraine.  The “chairman” of the European Council and the “chief executive” of the European Commission both responded to concerns that the European Union had not stood up to its business interests in order to enact economic sanctions capable of putting Putin back in his pen. Even though the two EU presidents sought to "puff up" the force latent in the sanctions already in place, Barroso insightfully made the more significant point that aggressively sending tanks across a border was no longer tolerable. Perhaps from “lessons learned” from Hitler’s exploits in the twentieth century, global challenges such as global warming (and, relatedly, the species’ over-population), and an internet-enabled closer world in the twenty-first century, a paradigm-shift in international relations may harken some sorely needed progress in international relations (i.e., political development)  in the new millennium. The key would be a stark refusal to tolerate a practice that had been tacitly accommodated, even in opposition, just decades earlier. 

Did President Obama miss a chance to put Putin's exploits into historical perspective? President Barroso may have come out of the news conference as the visionary leader. 

(Image Source: Reuters)

The turn from one century to another is admittedly artificial as far as empirical (i.e., observed) change is concerned. Indeed, the internet actually took off during the last decade of the twentieth century, rather than in the new millennium. Even so, a temporal benchmark, especially one involving a new millennium, can spark a moment of reflection “taking stock” of gradual shifts that would otherwise go unnoticed in their accumulated significance. This “product” can in turn leave its own imprint, such that a new paradigm is “born” (i.e., recognized). On the individual level, while turning 60 does not instantaneously turn a person into an old man or woman, the milestone can prompt a person to re-evaluate previous lifestyle choices and thus have a real impact on the person’s life as well as self-identity. Additionally, the “big picture” reflection that a benchmark birthday triggers can easily enable recognition of the many gradual changes in the aging process that would otherwise go unnoticed and thus without conscious effect. The same dynamic can occur at the societal level, especially when a new millennium is in the mix.

Considering the dramatic technological advances that took place in the twentieth century, the relative dearth of political development in or out of the nation-state system is telling. The American invasion of Iraq and the Russian invasion of Crimea in the first and second decades, respectively, of the twenty-first century dispelled any hope that the internet revolution might make the increasingly integrated world a “kinder and gentler” place in which nations can play together. Yet I suspect something subtle had changed between the two invasions, as evinced in Barroso’s statement at the EU-US news conference in 2014. “The real problem is this,” he said. “(I)n the twenty-first century it’s just not acceptable that one big power takes part of another sovereign country recognized by the United Nations.” Hearing this, I could not remember such a “new epoch” statement having been made by a country’s president as the U.S. military was toppling statues in Baghdad. Something had changed—but what exactly?

To be sure, the status-quo dies hard. Obama essentially reinforced it by serving up a warmed-over dish. “It’s about the kind of world in which we live,” he said, citing the familiar respect for national sovereignty and international law, both of which Russia violated in invading Ukraine. At least as far as the U.N. Security Council is concerned, Putin was well aware of the concept of national sovereignty. Obama’s response does not begin to get at Putin’s belief that his legislature had given him the right to invade Ukraine. As political rights apply only within the polity that grants them, Putin’s avowed right would have to be natural, as in the right of the strong to subdue the weak by sheer might. Barroso’s line in the sand effectively says that the world had moved on from tolerating the law of the jungle.

Generally speaking, a person used to doing something as it’s always been done will need to feel the considerable force of the “new rules” for them to have any effect. Such is the force of habit, and the presumption that goes along with it. The muted force of the European and American economic sanctions fall short from effecting a course correction in line with new standards. Resorting to the (also antiquated) knee-jerk military response would have only meant that the E.U. and U.S. government officials had decided to reaffirm “the old way.” Instead of being countered, Putin would feel the added confidence of a paradigm reaffirmed.

It thus appears that a new paradigm making invasion a heretofore relic of an early epoch in history had not sufficiently gelled. Another way of seeing this is by looking at a more firmly established post-twentieth-century paradigm: one forged by the horror of the Nazi holocaust.

As unmarked Russian military men were fomenting civil unrest in the eastern parts of Ukraine, masked men handed pamphlets to Jews leaving a Passover service in Donetsk. The Jews were presumably to register and provide a list of their respective properties and pay a registration "fee" of $50. The pamphlet read in part, "ID and passport are required to register your Jewish religion . . . as well as documents establishing the rights to all real estate property that belongs to you."[1] Noncomplying Jews would “be deprived of their citizenship and deported outside the republic and their property confiscated.”[2] Denis Pushilin, the leader of the Donetsk People’s Republic (the newly declared pro-Russian government) had signed the leaflets, giving them the connotation of authoritative legitimacy. 

Not surprisingly, it did not take long for scathing reactions to come in from around the world. US Secretary of State John Kerry (who once tried to convince me that he is a fiscal conservative because he believes in efficient government) issued a statement saying, "This is not just intolerable--it's grotesque."[3] A rabbi who had received one of the leaflets told NBC News, "[I] couldn't believe it was real." Such reactions as these indicate that the anti-semitic paradigm that had held such currency in prior centuries, including the previous one, was essentially "dead on arrival" in the twenty-first century. 

That is to say, the intellectual "blown away" aspect of the ensuing international condemnation eviscerated any semblance of credibility for the leaflets; the anti-semitic paradigm had been so resolutely discredited by the world's discovery of the Nazi holocaust some seventy years earlier that the stunt fell flat on its face in the Ukraine. Barroso’s reaction to Putin's invasion could easily apply. Registering one's Jewish religion just isn’t done anymore. Not today. Not in our world. Considering all the bloodshed in WWI and WWII, Barroso's clarion call of a paradigm change has just as much merit as Kerry's statement. Both the leaflets and Putin's presumed prerogative can leave onlookers around the world saying to ourselves, I can't believe this is happening. So why is one essentially being allowed while the other was stopped in its tracks? The explanation probably lies with the respective paradigms--one of the two still having some residual currency in our collective mentality.

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1. Oren Dorell, "Outrage as Jews Told to Register in East Ukraine," USA Today, April 18-20, 2014.
2. Andrew Kramer, “Demands That Jews Register in Eastern Ukraine Are Denounced, and Denied,” The New York Times, April 17, 2014.
3. Dorell, "Outrage."