Economic weakening of West and battle for South Caucasus Analytics by Serhey Bohdan

Russia’s Gazprom company has recently announced its unprecedented losses. Despite Washington's aggressive stimulation of economic growth, even thanks to its closest allies, its growth rate decreased a few days earlier.

Parallel economic problems in the West and in Russia are not surprising, because they follow the same neoliberal model, the success of which was initially overestimated as it was associated with the destruction of the developments of past generations and cheap resources from the defeated Eastern Bloc.

Even despite the recent global upheavals, the world economy continues decaying instead of transitioning to a new technological structure. The dwindling resources for growth as part of the current model are leading to an intensification of the struggle for them and markets, during which the South Caucasus is gaining special importance.

The US is tearing the EU to pieces

The key economic body of the West - the Organisation for Economic Co-operation and Development (OECD) published a renewed and rather optimistic forecast on May 2 for the development of the global economy this year.

The OECD has raised its GDP growth forecasts not only for the US, but also for its two main opponents - China and Russia. Moreover, Russian indicators have been revised upward. Western experts expected in February that the Russian Federation’s GDP would increase by 1.8 per cent, now they are already expecting +2.6 per cent!

For comparison, the forecast for the Eurozone was increased by only a tenth part of a per cent, to +0.6 per cent. Although the IMF has recently announced that the EU industry had overcome the energy crisis, it cost the EU about 768 billion euros ($826 billion) and it is partially observed overseas - in the US.

The increase in the OECD forecast indicators for the US from +2.1 per cent to +2.6 per cent reflects the success of the US in tearing the EU economy to pieces - through poaching European business, Europe's significant military orders for the US weapons and the continued subsidization of the US high technologies, which leaves no chance for EU competitors.

By the way, a similar situation is observed in the monetary and financial spheres. At first glance, the US holds its position. The share of international payments carried out in US dollars within SWIFT was 45.02 per cent in 2019, then in January 2024 this figure increased to 59.7 per cent. However, firstly, trade with such big countries as the Russian Federation and Iran is out of this system. Secondly, the US dollar strengthened by taking away a market share from the euro (its positions fell during this period from 35.68 per cent to 12.73 per cent), while the Chinese yuan strengthened even in this rather hostile Western system, rising from 1.24 per cent to 2.86 per cent!

Of course, the growing political crisis in the US during many months nullifies Washington’s numerous shameless efforts to maintain global economic hegemony, even through its allies. The US Department of Commerce's report for the first quarter of the year was published last week, according to which the country's GDP growth decreased to 1.6 per cent (in the previous quarter it was 3.4 per cent). Besides the decline in economic growth, inflation also increased - from 3.2 per cent to 3.5 per cent in March.

Latest African Warning

The US and the entire West in its economic difficulties must change the world economic system - in particular through the opportunity to take advantage of the previously inaccessible resources of other countries, for example, under the pretext of the struggle for democracy, etc. The Western media disseminated informal information on May 3 about the G7’s refusal to confiscate Russian financial assets abroad.

Apparently, their income will be used to finance the war with Russia, but the assets will not be seized. This has been discussed since autumn. The EU politicians say that it is difficult to find justification in the law. This sounds unconvincing because they easily find or create opportunities for the collective punishment of millions of citizens of undesirable countries, and for inciting war in the Caucasus through the “European Peace Facility”.

The point is different. There would be not only precedent for one of the world powers as a result of confiscating assets without declaring war, the US has recently quietly seized foreign assets from Afghanistan even knowing it would lead to famine. The fact is that taking away Russian assets would mean creating a new norm in their “right”, supposedly unshakable, but changeable in accordance with the interests of the global hegemon, rather than a precedent. Therefore, before taking such a risky step, the West decided to monitor the reaction.

Some countries expected this. Reacting to Washington’s use of economic sanctions, in particular, the freeze and threat of confiscation of assets, the BRICS countries, namely, Brazil, Russia, India, China, South Africa at their recent summit tasked their finance ministries and central banks with preparing recommendations on alternative payment systems for the October BRICS summit. These plans amid the de-dollarization of Chinese-Russian trade are taken seriously in the West. Economic advisers to ex (and maybe future) US President Donald Trump unveiled the plans last week to punish countries for refusing to pay in US dollars in their foreign trade.

However, it turned out that Western plans to confiscate the foreign assets of opponents are fraught with big consequences not only from Russia or China. The leaders of three pro-Western African regimes, namely, Ghana, Zambia and Kenya issued a joint warning manifesto in March through London’s Economist spreading liberal thoughts. In manifesto, they proposed the African countries to return 30 per cent of their foreign assets from New York, Paris and London. The matter rests in the repatriation of various foreign exchange assets, which are more important for practical economic activity in the modern era rather than the repatriation of gold reserves. More countries have been dealing with it since 2014.

While calling on Africans to get their money back, the presidents of three major African countries cited the need for a general transformation of the “global financial infrastructure”. However, there is another specific motive. Proceeding from their pro-Western position, even they fear that as soon as their interests collide with the interests of the powerful elites of the West, they may be left without money kept abroad. According to France’s “Africa Report”. Proceeding from the familiar style of French neo-colonialists, the report says that the Africans could not cope, they would squander the returned funds and it would be inconvenient for them to be away from world centres; it would be better if they gave the money to Western bankers.

However, the signals of those dissatisfied with the possible confiscations had an effect. Taking into account that the power of not only numerous industrial and financial groups in the West, but also the countries rests precisely on their ability to use non-Western deposits and capital. The issue has become acute. A decision about whether to take money from Russia or not was made as a result of the interests of Western capital, rather than some mythical sacred right of private property.

Exacerbation of the imperialist struggle and the South Caucasus

Moreover, an ambiguous situation around Western sanctions against the Russian Federation was observed, which are tearing the interdependent world economy to pieces, but so far have not given any other result.

“There is general agreement that the sanctions are not effective in accordance with the stated goals. The IMF predicts that the Russian economy will become one of the strongest economies this year,” head of the UK Treasury Committee Harriett Baldwin said on April 29 while assessing the sanctions against the Russian Federation.

The effect of sanctions against the Russian Federation should not be overestimated. Gazprom unexpectedly announced on May 2 its first loss since 1999 proceeding from the results of its work last year. This powerful company lost 629.1 billion roubles in 2023, although in 2022 it achieved a net profit worth 1.23 trillion roubles.

 Neither Russia nor the West are capable of destroying each other economically. Moreover, this can last for a long time. This stalemate does not force the world economic system to develop qualitatively. Is anything left as a result of the plans to refuse from a carbon economy? Even in those countries where representatives of green party came to power, such as Germany and Finland, they immediately began to reconsider their promises to rebuild the economy through new technologies in the direction of environmental protection and social justice.

“The era of fossil fuels is coming to an end. For all of us, this means changing industrial processes,” German Chancellor Olaf Scholz announced at the Hannover Fair last week.

However, this is rather an attempt to justify the process of coming to terms with the loss of Russian energy resources (along with other raw materials and markets) that is devastating for the German industry. After all, Scholz praised Norway for supplying its gas instead of Russian gas, and praised the Norwegians for developing new fields!

The world economy is declining as the superpowers and their allies fail to cope with the transition to a new technological structure. The West and the East have abandoned the plans for the development of even vital civilian technologies - for example, the transition to new technologies in the energy sector to prevent harmful climate change, not to mention more idealistic directions like the discovery of space, in which we are at the level of approximately 1969 and landing on the Moon. Now all funds are spent on weapons. It is required in the struggle for the remaining resources and markets, but there is stagnation in the military sector too. The superpowers are producing deadly systems that can raze Mariupol or at least a village in Yemen, but are incapable of gaining victory over their local opponents.

The importance of the South Caucasus and the Caspian Sea is growing amid the intensifying competition among superpowers for dwindling resources and markets. After the main, so-called “Northern” onshore route from China (via Russia) to Europe was closed, transportation along the alternative Trans-Caspian International Transport Route (TITR) has increased since 2023. It begins from China to Europe via Kazakhstan, the Caspian Sea, Azerbaijan, Georgia and Türkiye.

The cargo transportation along the TITR almost doubled in 2023 compared to the previous year, to 2.8 million tons. Moreover, amid an intensification of the struggle for control over ocean routes, after last year’s “Belt and Road” Summit, Chinese firms have also intensified activity in the direction of the TITR onshore route. COSCO, one of the world leaders in maritime cargo transportation, can be cited as an example.

Other world powers viewing these processes also joined. They are concerned about either the peace process in the region or “democracy”. Azerbaijan, along with Georgia and Kazakhstan, are those countries on the TITR route that are “impossible to bypass” in the current international situation, transporting cargo from the Far East to Europe or energy resources of Central Asia and the Caspian Sea to the EU.

These three countries are responsible for a transport route of global significance having vital importance for the EU. The world's superpowers - some of whom would like to sever the Caspian route do not like to negotiate, especially on such important issues, preferring to instruct and dictate. It is impossible to do this, for example, with Azerbaijan. That’s why, reviving Armenian expansionism poses a threat.

Azerbaijan is able to neutralise such intrigues thanks to its power and the system of international relations established by Baku, especially due to the relations with Türkiye, Kazakhstan and Georgia. Moreover, by taking on a leadership role within the global climate agenda, Azerbaijan can put the issue of the only possible future for humanity to the world agenda again. It is associated with the transition to development based on new technologies, which requires tolerance and cooperation, rather than with endless “liberal jihad”. It is not associated with the sanctions and the instructions of superpowers or squabbles among imperialists over dwindling resources.

The views and opinions expressed by hired political analysts in their articles may differ from and do not always reflect the views of Caliber.Az.