The Contradictions of Propaganda and the Economic Causes of the ‘Special Military Operation’ in Ukraine
For such a ruling class there can supposedly be no imperialist ambitions. What’s the point in coming into conflict with the countries of the centre of the world economy? In short, the reason for the start of the special operation* was exclusively a humanitarian mission, initiated personally by the President. He is sincerely concerned about the fate of the inhabitants of Donbas and is doing his best to protect Russia from disintegration, which certainly would have happened otherwise. The oligarchs do not understand these threats or do not want to understand the power of their comprador nature, and that’s why they negatively reacted to the beginning of the SMO*. And then they lost money due to the arrest of Russian assets abroad. It’s a familiar point of view, isn’t it? I won’t even name those who actively promote it in the media field. I think most would recognize who it is disseminating these ideas. However, this is already part of the ideological mainstream, which of course has little to do with reality.
Who are the sub-imperialists?
However, there are still some points of intersection with reality. It’s possible to find simultaneously peripheral comprador features in countries at the same time as signs of aggressive imperialist behaviour. These components are mixed in different proportions and the formulation of this mixture is determined by the country’s place in the international division of labour. Here, Russia belongs to that group of countries where these contradictions manifest themselves in the most vivid way. South African Marxist Patrick Bond uses World-Systems Analysis to describe the contradictory nature of such countries. He applies the term sub-imperialists, revealed for example in the BRICS association, which includes Brazil, Russia, India, China and South Africa. In the world capitalist hierarchy, they are below the imperialists, inferior to them in economic power and political influence.
However, they adopt practices very similar to those used by the imperialists. By exporting capital to backward regions, they get the ability to extract imperialist rent. That is, to appropriate free of charge a part of the surplus value created by the labour of workers in less developed countries.
At the heart of such a relationship of non-equivalent exchange lies the theory described by Karl Marx: value is created by labour but is distributed according to the power of capital. Meanwhile, the possibilities for the exploitation of poor countries by sub-imperialists is generally limited in comparison with classical imperialist predators. Therefore, they compensate for lost earnings abroad by harsher oppression of workers in their own countries. This phenomenon is called internal devaluation. It manifests itself in the consistent state-sponsored austerity policies which include high taxes on households and low taxes on business, reductions in spending on education and science, oppression of trade unions, artificial undervaluation of the national currency. All these purely peripheral practices coexist with extensive appetites beyond the national borders, and form the phenomenon of sub-imperialism. It probably sounds complicated, not every journalist will figure it out.
The main question is about what criteria there are for classifying a country as belonging to one or another group of imperialists. The easiest way is to assess with how much intensity capital is exported. That is, direct foreign investments with which multinational corporations penetrate peripheral markets. A reminder: direct investments are those related to the creation of new industries, as well as gaining control over existing ones. We can collate a ranked list of countries by calculating their cumulative net FDI as a percentage of their GDP. It is possible, to a certain degree, to call this an index of imperialism.
UK: 93% Germany: 70%
Saudi Arabia 18%
[figures from 2020 based on the World Bank and UNCTAD]
The top lines are, as expected, the biggest capitalist predators: European countries, the United States and Japan, followed by a group of sub-imperialists: Brazil, Russia, China, Saudi Arabia, Turkey. At the end of the ranking are Ukraine, Bangladesh and dozens of other less developed economies which show almost no investment activity abroad. Thus, the larger the volumes of investment sent by a party to the outside world, the more effort in political, diplomatic and military relations will be exerted by their nation-states to protect their interests.
Foreign assets of Russian companies
The key regions for Russian capital are the post-Soviet countries. Companies from Russia sent several tens of billions of dollars in direct investments to the economies of nearest neighbours in various industries from mining to financial sectors. In the economy of Ukraine, before the Maidan period, about $17bn was invested. However, most of these assets were lost as a result of raider seizures, nationalization and forced sale. Western capital acting indirectly via Ukrainian officials, security forces and informal paramilitary associations ejected Russian business. Without having other ways to save a big chunk of its food supply, the Russian ruling class resorted to the argument of last resort: the application of armed force.
However, it would be a mistake to assert that the interests of domestic oligarchs are limited only to territories of the republics of the former USSR. Russian TNCs carry out direct investments far beyond the CIS, including in a number of developed capitalist countries. After the crisis of the 1990s, the rise in the oil price led to the saturation of the Russian market with foreign currency. Commodity companies were the main recipients and have become exporters of the oil and gas sector metallurgy and chemical industry The state abolished the requirements for them to sell foreign exchange earnings into the domestic market and did not interfere with capital’s withdrawal abroad. As a result, the net outflow of capital from the country has reached colossal scale: tens, and in some years, hundreds of billions of dollars. Approximately two-thirds of these funds went to offshores, and then turned into yachts, luxury real estate, football clubs, and deposits in Western banks. In short, it went into luxury consumption by the elite.
However, another third went to the economies of other countries in the form of direct investment, ensuring the promotion of Russian business abroad. Commercial expansion relied on the forces of private military companies, the most famous of which, PMC Wagner, has for several years expanded its presence in Africa, participating there in local conflicts and clearing the road for the investments of Russian oligarchs.
The geography of the business of the largest Russian TNC, Lukoil, does not end only within the post-Soviet space, but extends to Western and Northern Europe, Africa North America, Asia. Lukoil Group’s exploration, production, wholesale retail sales of gas, oil and petroleum products amount to about two percent of the world market. In the last years, the company owned large oil refineries in Bulgaria, Romania, Netherlands. And in Italy, the third biggest refinery in Europe was under the control of Russian oligarchs. Another international corporation based in Russia is Rosneft.
At its peak, the geography of its business included 25 countries: in Europe, America, Africa and Asia. In terms of hydrocarbon reserves, Rosneft has outstripped many large Western companies. In Germany, through subsidiary Rosneft Deutschland the Russian corporation owned significant shares, from 24 to 54 percent of three refineries. It controlled more than 12 percent of the country’s oil refining capacity and ranked third in terms of oil refining volume in Germany: 12.5 million tons of oil per year. In India, Rosneft owned half of the second largest refinery Vadinar, with a processing capacity of 20 million tons of oil per year. In Egypt, the company received ownership of 30 percent of gas development deposits in the Zohr field. In Venezuela, since 2008 Rosneft together with, BP, Lukoil, Surgutneftegaz and Gazprom oil, began to develop oil deposits, In Brazil, Vietnam, Mozambique, everywhere, Rosneft acquired large chunks of local extraction projects of natural resources. Until recently, the other energy Russian giant Gazprom controlled 40 percent of the gas market in Europe. Not only in the CIS, but also in Africa, in the Middle East, in Central and South America, Gazprom was engaged in the exploration of hydrocarbons, gas and oil production, and their transportation, refining process and sale, as well as the production of electricity and thermal energy. Gazprom oil is not far behind. The company is represented in 110 countries, including in Africa and Asia. Its extractive and productive assets are located in six countries. Russian transnational capital does not live by oil and gas alone.
RUSAL spread its networks across 13 countries across five continents. It owns aluminium smelters in Sweden and Nigeria. Bauxite is mined in Guinea and Guyana. Rusal owns aluminium production in Australia, Italy, Ireland, Jamaica. NLMK Group bought rolling assets in the United States itself, as well as in France, Italy, Denmark, and India. Finally, Norilsk Nickel opened a subsidiary division engaged in the sale of products in the United States Switzerland, China and in a number of other regions.
These examples, of course reveal only a small share of foreign assets of Russian transnational corporations. They grew at a particularly rapid pace before the crisis of 2008. Then the volume of accumulated direct investment abroad reached a maximum of $363 billion, which equated to 28 percent of the country’s GDP.
Losses of business of the Russian Federation abroad
But since then, world capitalism has transited from triumphant globalism to a state of deglobalization generated by uncertainty about the consequences of the global crisis. International economic relations stated to gradually reverse. States began to resort to protectionism more and more often in economic policy to administratively create favourable conditions for national capital. Sanctions became the most popular tools for the struggle for the redistribution of markets and property. Against Russia they were introduced for the first time after Crimea, and then tightened many times. As a result, the volume of Russian accumulated direct investment abroad in real expression, that is, adjusted for dollar inflation, fell by 2021 by a quarter. Many companies from Russia lost their foreign business.
For example, in 2020, Rosneft which had cornered the entire Russian share of the local oil production, left Venezuela. Though it sold its assets to another Russian company. But the production process was disrupted. A Rosneft geological exploration project has been frozen for several years in Solimões, Brazil. In 2018, Rosneft had to withdraw from work in Iran. Due to U.S. sanctions cooperation with local companies was also suspended by Lukoil, Gazproneft, and Tatneft. Lukoil withdrew from the development project of gas fields in Romania. The company had to leave the Black Sea. The same thing occurred in the Ghana Shelf Development Project and developments in Côte d’Ivoire, where the corporation had worked on deep-sea projects since 2006. Lukoil exited a project with Saudi Arabia. In addition, Lukoil completely lost its retail business in Eastern Europe, having sold 2,500 petrol stations in Lithuania, Latvia and Poland.
Gazprom under pressure from the authorities left the joint venture with Bulgaria’s largest company Overgas and lost its stake in the gas transmission network in Poland. And in 2018, Naftogaz of Ukraine in the course of a commercial dispute, achieved the freezing of Gazprom’s assets in England and Wales. And many such examples can be cited. The capital of the big imperialist countries in the struggle for the redivision of the world pushed out from the market weaker players: those whose economic development and political influence does not allow them to keep the prey between their teeth. The pressure from the outside has increased. Russian business lost spheres influences and as a result, profit. A successfully conducted SMO* in Ukraine was designed to show the world that no one messes with us. Russian oligarchs can take decisive action to protect their capital, not only toothless expressions of diplomatic concerns after the introduction of another portion of sanctions.
Under the pressure of military force, Ukraine was supposed to fall. As for the Western world, it was supposed to make any concessions just to calm down a raging bear. But these plans were not meant to be. The gestures of ‘goodwill’ by the Russian army in Ukraine showed that Western capital had nothing really to worry about. The degradation of all and sundry after the fall of the USSR and the destruction of socialism affected not only industry. The armed forces, intelligence agencies, public administration, diplomacy, the military-industrial complex: all degenerated together with the embedding of the Russian economy into the world economy as a raw material-supplying appendage.
Having been gifted with trillions of oil dollars in the 2000s, the oligarchiate decided that it no longer wanted to be a bunch of entitled nobles anymore. The nobles wanted to be the masters of the sea. Parasitizing on the Soviet legacy, they dared to bite the hand that had fed them, but clearly did not calculate their real strength. Imperialist ambitions turned out to be based on nothing, and now Western states have had a demonstration that in practice they may act more decisively. In this way, without hesitation, 300 billion dollars of government reserves were frozen in Western banks. Accounts and yachts of the Russian rich were seized. And their displacement from the world market significantly accelerated. Thus, in 2022, Germany nationalized the subsidiary of Gazprom, Gazprom Germany. And also three Rosneft refineries including a giant refinery in Sweden. In Italy, Lukoil was obliged to sell the ESAB refinery to an American energy company. Russian metallurgists also lost their European market and many assets abroad. The owner of Severstal Alexey Mordashov got poorer by a whole 11 billion dollars.
The conclusion is this. In conflict with the West, Russian business which lost out cannot be called in any way innocent victims of the imperialist aggression. Russian business itself was an active player in expanding the sphere of economic influence. However, ambitions do not always reflect capabilities. The raw material nature of the Russian economy, which previously allowed those close to the authorities to enrich themselves and become billionaires, led to the degradation of all state institutions. They turned out to be incapable of performing their key functions to protect and promote business interests. means Now, this task will be entrusted to you and me. So stock up on dry rations, army boots, bulletproof vest, helmet and preferably a Chinese drone. After all, the lost billions of Mordashov won’t return themselves.