Geostrategic Media Political Commentary, Analysis, Security, Defense
“Three things are required for war: money, money, and money again,” proclaimed Marshal Gian-Giacopo Trivulzio (1448 – 1518) in response to Louis XII’s inquiry about the necessary preparations for conquering the Duchy of Milan. These words have since gained universal recognition. Wars historically served as instruments of political agendas, with feudal powers waging conflicts to assert their geopolitical dominance. Undoubtedly, commencing and sustaining wars demanded substantial financial resources.
However, capitalism has transformed the power-money balance. Today, economic dynamics wield supremacy. Elected officials require funds to underpin their policies, as failure to do so jeopardizes their grip on power. And the defense sector has evolved into a pivotal component of developed economies producing jobs and providing funds for policies. Notably, in 2023 the United States’ national budget designates a staggering $1.77 trillion for defense, solidifying its top rank in global defense expenditure. In 2020, the European Union recorded a turnover of 119 million euros in defense, with subsequent growth. Bolstered by an almost half-million-strong workforce, the European defense industry has ascended to a prime position within the industrial landscape.
In the economy, the defense sector serves as a conduit for directing funds into scientific and high-tech advancements. Frequently, military technological breakthroughs transition to civilian applications, thereby enriching the broader economy. Remarkably, infusions of capital through defense channels generally avoid precipitating worrisome inflation as by injecting funds through protracted defense contracts, the gradual dispersion over time mitigates the risk of acute inflation or demand disturbances while still infusing capital into the economy.
Within the current milieu, NATO nations are furnishing Ukraine with an array of weaponry. Yet, these nations are not leaving themselves defenseless. Following such transfers, many countries find themselves compelled to engage in arms procurement, predominantly from the United States, a dominant producer. Thus, a reciprocal cycle ensues—what is bestowed is balanced by what is procured or produced. These economic dynamics underscore the impetus behind the fervent advocacy for arms transfers from the US, substantiating an industry worth billions that significantly propel the American economy. Lockheed Martin, Boeing, and other defense industry players significantly outperformed the S&P 500, NASDAQ Composite, and Dow Jones Industrial Average in 2022. The European defense industry also performed extremely well with SAAB’s shares rising 170% in twelve months after the start of the war, with many more companies showing similar growth.
And not only the defense sector; other Western private and state businesses continue to profit from the Russian economy. A notable example is the Druzhba pipeline, the sole operational oil conduit for onshore oil delivery from Russia to Europe. Its significance extends beyond its function as a conduit – it encapsulates a complex interplay of interests at the intersection of economics and geopolitics.
At the core of this intricate web lies the unwavering supply of oil to European nations. The pipeline embodies an economic lifeline that sustains nations. This mutually beneficial relationship underpins the economies of both European countries receiving oil and the Russian Federation, a substantial supplier.
A compelling facet of this intricate network is the adaptability demonstrated by participating nations. A prime illustration is Germany, which has adeptly navigated this intricate landscape by sourcing oil not directly from Russia, but from Kazakhstan through the same Druzhba pipeline. This adaptability showcases the pipeline’s inherent flexibility, enabling nations to tailor their energy strategies to their specific needs. While subjected to various speculations and even attacks, there is no concrete evidence of concerted efforts to destroy the Druzhba pipeline. And quite obviously good money gained by involved persons provides the security of the transit.
It may seem intriguing that the Druzhba pipeline is much more vulnerable than the Nord Stream, but stays intact. Money appears to elucidate this mystery quite well. From a financial perspective, the Druzhba pipeline unfurls an intriguing narrative. The total volume of oil pumped through the Druzhba pipeline in 2022 is reported to have amounted to 38.4 million tons. Ukraine’s tariff of €13.6 per ton brought it more than €522 million. And now Ukraine has raised the tariff to 17 euros to gain more. In 2022, the EU paid Russia almost €140 billion for fossil fuels. Most of Russian fossil fuels are used in the same countries as before the war: countries that joined international sanctions against Russia.
So, on the one hand, the war is strongly condemned, but on the other hand, many countries, including Ukraine, continue their profitable economic relations with Russia. Simultaneously, Ukrainian officials are demanding that their Western partners tighten sanctions and sever economic ties with Russia. Ukraine insists that it has no other choice, arguing that deals with Russia provide leverage over the Kremlin and help limit the locations of airstrikes.
And this is how money affects the war directly. Oil transit through the Druzhba pipeline is one of the reasons why the”full-scale” war so desired by Russian z-patriots cannot be launched. The Russian elite is firmly settled in the West financially, and all the most important markets remain there, despite attempts to reorient to the East.
This war unveils the fact that money drives the war, while ethics is put aside. One year of war has enriched Russian oligarchs with $152 billion. About 400 multinational companies continue their business in Russia bringing the Russian government $3.5 billion in paid profit taxes: the money used to finance the war. Despite many of these companies issuing morally upright statements condemning the war they still prefer “business as usual.”
As the war rages on, new avenues for business have emerged. In August 2022, the Royal United Services Institute (RUSI), a British think-tank, issued a report unveiling a disquieting revelation: Russian weaponry responsible for the deaths of Ukrainians is laden with over 450 foreign electronic components. Strikingly, even a year and a half into the war, the efficacy of sanctions has been called into question. Russia continues to exploit Western technologies in the production of missiles for the war. It has become evident that Russia has adeptly constructed a network of international companies, enabling it to navigate past sanctions. This endeavor, however, would have been markedly less successful if not for the participation of Western entrepreneurs embracing a “nothing personal, just business” approach.
Regrettably, the influence of money on politics and war is a historical reality. An intriguing historical facet emerges when considering the inspirations and financial involvements of individuals. Henry Ford, for instance, played a role in supporting Adolf Hitler, yet he also contributed to the construction of the first tractor in the USSR – a demonstration of the complex and multi-dimensional nature of economic interests and dynamics, or simply “nothing personal, just business” approach.
And World War II exposed money and morality relations quite well. In a disconcerting chapter of history, some of America’s largest corporations engaged in lucrative dealings with the Third Reich, seemingly without ethical restraint. This period posed a profound moral challenge for these corporations, a test of their ethical compass. The context was stark – a regime demanding the dismissal of employees based on their gender, race, and religion. Remarkably, rather than distancing themselves from the German market, these companies persisted in their involvement.
In his book “Hitler’s American Friends: The Third Reich’s Supporters in the United States,” Professor Hart astutely observes, “You had a regime that was asking you to fire employees because of their gender, their race and religion. And these companies didn’t refuse to divest from the German market.” This echoes a moment of moral reckoning, where economic interests appeared to take precedence over principled action. The confluence of commerce and conscience in this historical juncture is a stark reminder of how profit motives can potentially eclipse moral considerations, even in the face of grave injustices. This historical perspective underscores the complexity of financial decisions amidst moral dilemmas and resonates with the broader theme of your article.
The 20th century bequeathed a substantial military-industrial complex legacy to all nations. The sheer scale of output, financial investment, and human resources channeled into this industry in that era stands in stark contrast to the dynamics of the 21st century. As of now, countries are reaping the dividends of this 20th-century bequest, characterized by significant military-industrial expenditure and the mass production of weaponry.
Globally, this substantial amassed potential from the past is currently being harnessed. The evident prevalence of armed conflicts across the world stands as a vivid testament to this reality. Notably, Geneva Academy monitors more than 110 military conflicts worldwide. The importance of the defense industry’s economic importance is undeniable, to be succinct, the arms industry’s financial viability relies on more than just the storage of ammunition; it necessitates its utilization. The logical conclusion emerging from this context is clear: the world is drawing upon its accrued potential.
The defense industry arising, in the years to come, a surge in military spending and a potential resurgence of global militarization could be anticipated. This trajectory will furnish ideological ammunition to some while generating immense wealth for others. Such a trend appears to be a global inevitability – as sobering as it may sound.
At the same time, ethics has become an indispensable element of modern politics, spanning across Christian democracy, “green” movements, social democracy, and more. Jean-Paul Sartre eloquently articulated in his renowned article “Existentialism is Humanism” that “one must turn to one’s absolute freedom to make a decision; values are not realized by being pre-given at all but are created performatively, in human action.”
The war in Ukraine has yet again challenged mankind and reminded it of the importance of ethics. The world is not black and white, and neither ethics nor moral are strictly pre-defined. We should perform our actions remembering our moral standing. Some Western businesses making an extra profit from the war many others refer to ethics, e.g. Intel announced that it would not use metal of Russian origin for its production.
The war in Ukraine has once again presented humanity with a formidable challenge, reiterating the paramount importance of ethics. The world’s intricacies are far from black and white, and neither ethics nor morality adheres to strict predefinitions. In our actions, we must be guided by our moral compass. While some Western businesses profit from the war, many others uphold ethical considerations. For instance, Intel publicly announced its refusal to use metal of Russian origin in its production, reflecting a conscientious stance in the face of economic opportunities, many other multinational corporations following the moral path.
In the intricate interplay of money, war, and ethics, the undeniable truth emerges: monetary pursuits wield profound influence throughout conflicts, often relegating ethics to a secondary role. The legacy of the 20th century’s military-industrial complex looms large, bestowing technological advancements alongside moral quandaries. As contemporary armed conflicts persist and global dynamics shift, the resonance of financial gains versus ethical principles continues to reverberate as a paramount global concern. In a world where profits intersect with warfare, the past’s lessons, the challenges of the present, and the potential trajectories of the future demand unwavering scrutiny.
The war in Ukraine can be stopped either by economical or ethical reasons. The negative P&L balance can stop the war, just as high ethical considerations can. We all will be blessed is not the military but the ethical lessons of the war in Ukraine will pave the path for our future.
