Michael Hudson : Europe’s Energy Policy Is Economic Suicide

with Ian Proud

Professor Michael Hudson on Europe’s Self-Destructive Energy Policy, the Diesel Giveaway to the US, and Why the Continent Is Choosing Economic Decline. In this wide-ranging conversation, economist Michael Hudson joins me to examine the latest Western sanctions push (including on Russian LNG), the contradictory Trump-era diesel arrangement with Europe, and the deeper structural reasons Europe keeps acting against its own economic interests.

We discuss how Europe is locking itself into high-cost U.S. energy dependence, the contrast between Western financial capitalism and China’s industrial approach, lost EU-Russia economic ties, and the long-term consequences for industry, living standards, and geopolitics.

Key topics discussed:

The incoherence of current Western sanctions policy on Russian energy amid a global energy crisis
The U.S.-Europe diesel deal: Europe sells reserves cheaply now and faces buying back at much higher prices later
How the arrangement increases Europe’s dependency on expensive American energy and worsens its industrial cost base
Russia’s resilience and redirection of energy exports to the Global South and Asia
Europe’s broader surrender on energy, taxes (especially on U.S. tech), trade with China, and industrial policy
The shift from industrial capitalism to financial capitalism in the West versus China’s long-term investment and R&D model
Historical context: Nord Stream debates, the reliability of Russian energy supplies, and the destruction of pre-2014/2022 EU-Russia commercial ties
Why European leaders appear captured by U.S. priorities and the resulting “Stockholm syndrome” dynamic
Implications for European competitiveness, deindustrialization, military spending, and the absence of a viable path back to self-interest

Ian Proud, Conversation with Professor Michael Hudson, “Europe Chooses Economic Suicide,” Wednesday 14 October, 2026.

Professor Michael Hudson, it’s good to see you again. I really enjoy our conversations about economics, a subject close to my heart.

The 14th of October. Zelensky has been in London, and the UK Chancellor has been in Thailand, pushing for more sanctions on Russia, specifically sanctions on Russian liquefied natural gas. It almost seems comical to discuss it at a time there’s a global energy shortage caused by U.S. policy in Iran.

That has to be then set against Trump’s decision to un-sanction Russian oil to provide 9.8 days worth of diesel to the United States. The whole Western foreign policy is completely unjoined up for a start, and it’s utterly nonsensical.How do you make sense of it?

Professor Michael Hudson

Well, the deal may not affect U.S. prices a lot, but it does lock in, as you pointed out, Europe’s dependency on the United States and the fact that European foreign policy’s been captured by the EU leadership under Von der Leyen and Kallas of Estonia.And what’s really self-destructive today, the euro exchange rate with the dollar just plunged to $1.11, down from $1.15 just a month ago, sort of indicating that the United States views Europe as being in a death wish.

It’s basically the European leaders, certainly of Germany, France, and England, have said it’s worth increasing the cost of living for European labor. It’s worth cutting back the social programs simply in order to increase the military spending for a coming war with Russia that we all expect in a year or two. President Putin recently said the war would last probably a few hours. So you know what kind of a war that would be. It’s not going to be treating Europe like Russia’s treating Ukraine in a way that wants to preserve certainly the Slavic population of Ukraine into something that can be a viable state, sort of like Austria was after World War II.

It’s just amazing the deal that Trump made with Europe shows how much Europe is willing to bear the cost of supporting the United States. It’s almost more pro-U.S. than it is anti-Russian. Here’s the deal: Europe is going to be selling its national petroleum reserves to the United States at the current prices that are being artificially kept down. There must be a manipulation of the oil market by Brent and other trading vehicles by the U.S. Treasury or someone intervening, or simply the fact that investors believe the happy talk of Trump, saying that everything’s going to go back to normal as soon as we can reopen the Strait of Hormuz, but that that’s not going to happen.

Europe is going to be selling its diesel oil at today’s prices, and then at the end of the four month period that Trump has negotiated, Europe will refill its petroleum reserves by buying at prices that may be at least twice the cost of what diesel is selling now, because the fact is that the Persian Gulf exports of oil and diesel have been blown up by the Houthis, Yemenis, joining the war against Saudi Arabia, in addition to Iran’s bombing.

So the destruction of oil and refining capacity, natural gas exports, fertilizer exports from the Persian Gulf are going to take, now estimated between seven and ten years to replenish. This is going to be a long-term increase, not only in oil and gas and fertilizer prices, but a decline in simply the availability of the energy that was available in the past.

So you’re seeing how the United States has thwarted EU negotiations again and again. I guess it all began with Trump’s tariff policy that Von der Leyen surrendered to and said in exchange for the United States imposing what turns out to be illegal tariffs of 25 percent on the EU and reducing them to an equally illegal 15 percent.The United States demanded that Europe give givebacks in the sense of committing its economies to fight against Russia and to agree on a long term basis to buy American oil and gas at much higher prices than was available from Russia or Iran, basically.

So the inflation and the associated closedown of European heavy industry, glass industry, fertilizer industry, cutbacks in the planting of crops throughout Europe, all of that is a policy decision, and it’s obviously being opposed by the voters as a whole, according to the opinion polls. But it’s being supported by Merz and Macron and the British Prime Minister, as if they’re really working for the United States, which I guess whose non-governmental organizations have promoted their careers all along to rise to their current positions, and there doesn’t seem to be any way that Europe can cope with how do you actually run European policy for its own self-interest, not that of the United States? Here, I don’t know what to say.

Europe is going to have to pay double the cost of whatever oil that it sent to the United States to replenish its reserves later. This is a pure giveaway, and because of the European budget rules, this means that it’s going to have to cut back spending elsewhere in the economy. It’s obviously not going to be military spending, which is increased to, I guess, the reported 5% everyone’s talking about, and if that’s the case, that means that Europe’s entire potential growth, all the growth in GDP, is going to be to fighting Russia, to prevent any thought of European trade with Russia for energy, which was the whole foundation of its relatively low cost structure up until 2022, when it agreed to step up its policy.

I want to say one thing about what’s happening here in America for the prospects of how this deal with Europe is being taken. The opposition to the deal here is not by the Republicans. They’re afraid to make any kind of critique against Donald Trump, the criticism is by the Democratic Party, especially Charles Schumer, who is the head of the Democratic Senate, and he’s 100% behind the neocons and Wall Street. He said that the Democrats, you know, want to wage this in a few weeks. This fight against Trump is making a deal with Russia, and the Americans should do just what the Europeans are doing, and essentially go on a war footing against Russia and reject any kind of deal that that could be made.

So you’re having a united front between Europe and the United States that that is going to make Europe even more heavily dependent on U.S. energy and even more high cost, and its euro will be going down even further against the U.S. dollar.

I was in Russia two weeks ago, and you know, this is a country sitting on vast reserves of oil and gas, not the largest producer in the world, but one of the largest producers in the world. But the point is that it’s energy independent, and actually, it’s just because it’s a seller’s market right now. It has just diverted its trade to other countries.

So, all of these sanctions, not buying energy from Russia, is having no impact at all on Russia. I mean, that’s the illogical thing about it. I look at the Russian balance payments numbers on a regular basis, and they haven’t changed. In fact, they had a windfall in the first year of the war (2022), but since then they’ve been slightly above pre-war averages in terms of the current account surpluses.

So, the rhetoric around not buying Russian energy is actually self harming because it hurts our economies. It doesn’t actually hurt Russia’s economy, which is clearly the intention. So it’s self defeating.

But to come back to the European diesel deal with the US. What makes anybody think that the US is going to have diesel to re-export back to the EU in four months’ time? I mean, that’s my question. Okay, I understand the trade that we sell them cheap diesel from National Petroleum Reserves, and we eventually buy back more expensive diesel from from the US in the early part of next year. But what diesel would be my question, right?

Well, here’s what’s so ironic about all this, especially given the fact that the United States has been bombing Russia’s refineries, blocking Russian exports of diesel. Where is this Russian oil going to be coming from? And we know that Europe has been buying indirectly Russian oil. The Russian oil that’s going to be sold seems to be largely Iranian oil. So Russia is going to be buying oil from Iran at fairly low prices, marking up the price and then selling it as Russian oil to all of the various buyers that need oil and diesel and Russian energy. So you’re right. The point you’ve just made is Russia doesn’t really need the European market, so it’s not really being hurt by the sanctions.

The only party being hurt is Europe itself, because Russia can now sell this oil to India or global South countries or the Asian countries, Japan, Korea, and other countries that are in need of replacing the oil that they’re no longer able to get from the Persian Gulf countries.

So, all of this isolation of Russia simply helps provide a market for Iran to begin to rebuild enough or obtain enough foreign payments to buy what it needs from the Asian countries, not from Europe at all.

So, Europe and the United States are sort of isolating themselves from the rest of the market, and there’s also apparently a political fight within the United States between Trump and the CIA.

There is a charade going on in which Trump tells Zelensky stop bombing Russian refineries, while the United States is providing the satellite guidance for Ukraine to bomb the Russian oil refineries.

Well, the United States seems to be the CIA operating, you know, out of its German and other offices where they’re coordinating all of this overall satellite information. So the question is, is Trump himself being turned simply into a figurehead, and the CIA, the deep state of the neocons, are really taking over policy?

And if that’s the case, the neocons have no more love for the European Union than they do for Russia, and they see in Europe’s repeated surrender to almost everything that Trump is asked for as just a sign. Well, you never know how far you can push until there’s some fight back, and you would have thought that this diesel arrangement would have been an opportunity for them (the Europeans) to stand up along with other negotiations, but this surrender that they’ve done with the diesel goes hand in hand with another fight that is going on right now.

That the United States is asking them to surrender their tax policy, where the EU has talked about a corporate tax on the AI companies and the large U.S. information technology monopolies, Google, Meta, etc. so that they get some revenue from these monopolies, and they’re able to tax the income. The United States is fighting tooth and nail against it. So that’s the other red flag to watch the canary in the coal mine of saying just how much is Europe going to sacrifice its own fiscal self-interest, its balance of payments self-interest, its industrial self-interest, and living standards to the U.S. demands.

Exactly right, and as you suggest, there are several dimensions to that. The big one is on energy, of course. This attempt to sanction Russian LNG (the UK Chancellor was lobbying to sanction Russian LNG at the G20-IMF meeting in Bangkok), which is the most economically idiotic thing to do in the middle of an energy crisis. The plan is to make the European Union and the United Kingdom energy dependent on the USA and Norway a bit, you know, because Norway is a big supplier, of course. But essentially energy dependent on the USA at a much higher energy cost that would be available if it had the right to choose its energy partnerships in a diversified way, which essentially was the arrangement up until about 2014.

But of course the consequence is that that automatically narrows the the big trade surplus that Europe has with the USA, right?

I mean, that immediately diverts a whole lot of trade back to the American side of the ledger because suddenly they’re providing most of our energy. So that gives the US economy a boost. It doesn’t really shift how much European capital flows into the United States, but it improves the overall U.S. position of trade.

Now on tax, as you say, the U.S. holds a whip hand in terms of vetoing tax policies, whereby you know they can say, well, you can’t tax our AI companies, you can’t tax Amazon, you can’t tax Google, and don’t be so harsh on them; otherwise, we’ll impose punitive sanctions on you.

In addition to the balance of trade shifting more to the U.S. they still impose tariffs on existing European trade, even if it’s reduced to 15%.

And on top of that, they say, “Well, you know, you can’t have significant investments in your economy by the Chinese, the Russians, Iranians, whoever they don’t like on a given day. So there’s a whole set of levels where the U.S. is dictating our economic and industrial policy. Right? I mean, who would agree to this? And you know, it’s not just one country; it’s 28 countries agreeing to this. It’s crazy, right?

Well, I’m glad you mentioned China because what Trump threatened Europe with the diesel deal, he said, if you don’t agree to this deal, then I’m going to stop U.S. diesel exports to you altogether.

And he’s using the dependency that Europe has established on the United States as a lever to get a European policy right across the board, including joining America’s fight against China, as well.

And that’s the other news that’s coming out of Europe this week for all of this. And I’d like to talk a bit about that because, in addition to Europe seemingly having its economic interest to lie in working with the United States, the EU has been in a trade war with China, and I think some of the characteristics of this are so unique that I want to say just a few words about it.

China’s agreed to reduce its car exports to the EU from 800,000 in 2025 to only 350,000 next year. That surprised me because the advanced discussions and what people had been writing before last Friday, before the details of these deals came out was China may cut back its car exports by 1/3 or more, but it’s done a lot more.

And the EU complains that its trade deficit with China, which was 250 billion pounds in 2025, is now rising very sharply this year by at least 10 percent, and the EU is looking at this trade not as here is our chance to keep down our cost of living and our cost of doing business by buying in the cheapest market, but it’s looking at this as an unfair exploitation. And the EU car industry has been the lead fight in all of this confrontation, following the fight over batteries that was fought largely by Holland stopping the agreements that it had with a Chinese company that was more than 50% owned by the Chinese.

So what you’re having now is the EU wants to stop China’s electronic vehicle imports, especially the hybrid plug-ins. Well, the main vehicles that China’s car trade with Europe has been replacing are Musk’s the Tesla vehicles for all of this. The EU argument is just a rhetorical travesty. It’s that any export by China is a result of overproduction, and any overproduction is called dumping.

This is an Orwellian rhetoric. Any country’s export is, by definition overproduction because if you didn’t have enough over and above domestic consumption to export, there wouldn’t be any trade. So, the alternative to overproduction is total autonomy, isolation. Well, that’s nonsense.

The real problem that the EU refrains from discussing is that China is indeed subsidizing its industry, and the EU has called these new agreements anti-subsidy duties. Well, the fact is that every government has subsidized its key industries, just like the EU subsidizes its agriculture. Ever since the Common Agricultural Policy of the Common Market, the whole strategy of industrial capitalism from its takeoff in the 19th century was that governments are to provide subsidy of basic research and development of key technologies and subsidy to make its industry more competitive.

That’s why all the governments of Europe and the United States said we’re not going to permit private monopolies in communications and transportation and other natural monopolies. We’re going to have the government do it because that was recognized as being supplied at cost instead of including profits or monopoly rent.

Well, since the 1980s and especially in the last few decades, Europe has adopted the American neoliberal policy of putting the stock market first. It’s an anti-government neoliberal philosophy saying government should get out of playing any role at all, leave it all to private enterprise.

Well, suppose you’re a corporate financial manager of any European car maker or other industry. You’re going to have a decision to make. What are you going to use the profits for that you are making, such as are left after the anti-Russian deal?In the United States, 94% of corporate cash flow is spent on paying out dividends to stockholders and stock buybacks. What’s cut back is research and development or any kind of long-term investment in factories and means of production that take a long time to develop. And the reason is that the financial sector, whether it’s the United States or Europe, lives in the short run, and the short run for the corporate economy is how do we support our stock prices, and you support your stock prices by avoiding long-term investments and living from year to year, even quarter to quarter, to increase stockholder wealth, and that’s what Europe is doing.

Traditionally, look at how the United States and Europe developed by government investment in the space race, in military-related technologies, and almost every technology, governments have made huge investments in research and development, and that includes pharmaceuticals research and development, especially in the United States, which is what I’m more familiar with.

And once the government research produces results, then it makes these results available to the private sector to commercialize and make profits. Well, that’s called a giveaway, but that’s how industrial capitalism works.

The government makes the long-term investment let private enterprise live in the short run, commercialize it, and do it well. That’s exactly what China has done. It has devoted more of its GDP than any other country to research and development, and its educational system has focused on STEM, you know, science and technology primarily, and the leaders of the Communist Party’s Central Committee in China basically all have a science and technology background. They’re not financial leaders.

China doesn’t have a financial sector of banking deciding who’s going to get the credit created and what are they going to use it for? Are they going to use it to make money financially or industrially? Europe and the United States and the whole West has chosen to make money financially, not by industrial long-term investment, and that’s why the United States has been deindustrializing.

And that deindustrialization and living in the short term is what forced it to turn to Europe. Who else better to turn to than its own allies, Europe, Japan, and South Korea, for subsidy and, in fact, tribute to pay for the economic surplus that it’s no longer producing at home under its finance capitalist economy that’s replaced its industrial economy.

Well, that’s what Europe is doing. So, the European car companies and battery companies and other technologies simply have not been able to invest in the long-term innovations that have enabled China to produce the e-vehicles and the batteries. To power them and all of the related technology that has given China this trade advantage over Europe and the West. Let’s look at the upshot of what we’re seeing just in this week’s discussion of Europe. At least from the Financial Times, seems to be the only paper that I get that actually discusses what Europe is doing. The chemical industry in Europe is now saying, “Well, we want the same kind of restraints on Chinese imports that the EU is giving the car companies. But I think one reason that China made such major concessions on this auto deal with Europe is saying, “Okay, we have reserved the right that if there’s any violation of these agreements, that we get to go to the World Trade Organization and bring legal charges for countervailing duties against Europe, and you can see that China’s negotiation with the car industry has given it the lever to say, “All right, now we’re we’re not going to give you any more trade concessions, certainly of the chemical industry, your European chemical industry is high priced because chemicals are made out of sulfur and oil and gas that you used to get from Russia, and you’ve turned your back on. You’re not going to ask us to give up our ability to export to you, so that you can create a high-cost domestic market for your reliance on the United States, which, like you, has said we’re going to go to war with China in the next few years. That’s absolutely crazy to me, that’s the big context that’s shaping all of these negotiations.

Yeah, I completely agree, and I agree on the distinction which you make well between industrial capitalism and financial capitalism, and how that really separates China from Western nations, both China and Russia, for that matter, and Western nations. But on the issue of services with Europe, fundamentally, one of the reasons that, in addition to the research and development and investment, that Chinese exports are more competitive is because the equilibrium of their currency is just naturally weaker than the U.S. dollar because it isn’t it’s not financialized in the same way.

It doesn’t have the exorbitant privilege of the dollar’s role as global first choice reserve currency accounting for 60% of total reserves. China’s is less than 5% I think, at the moment that is reserved in renminbi globally. So that naturally means that the currency is naturally weaker. They therefore export more than they have in terms of investment flows into their country, which is the complete opposite to what happens in the U.S.

So, partly what’s happening in Europe is just a feature of the fact that China is just a more competitive country for exports. And of course, in addition to that, warfare and turbulence that’s happening around the energy market for European exporters just makes the input costs of production so much higher than they would have been otherwise, right?

So, China has a monetary advantage in terms of the currency, but also it has an export advantage because it’s just much more expensive to produce things in Europe than it is in China, right?

I mean, this is basic economics that even me as a diplomat can see, but many people can’t see this. But I think U.S. positioning is very much around doing what the Americans want to do, fighting back against Chinese dumping. It just is another narrative that people need to stick to, with no thought to the longer term consequences, in terms of the limitations that China could put on the export of rare earth minerals and things of that. Rhe whole thing is lacking any intellectual clarity in policy development in Europe, with a big dose of bullying from the American side along the way.

Well, the way to get clarity is to put everything in very simple terms. What determines a country’s cost structure and exchange rate? There are really two big dimensions of all this: trade, on the one hand, and trade is a function of the cost of production, the cost of living and doing business, and the cost of production is very largely the cost of energy.

Because if you look at rising productivity from any country, European or American, the rise in productivity and energy use per worker is hand in hand. So, energy is what governs the productivity and hence the cost structure. And by turning away from the low cost energy to high cost American energy, America is depriving itself of what was the whole essence of European trade policy throughout the 19th century and most of the 20th century. The idea is you minimize your cost of raw materials imports in order to concentrate on finishing the goods, working the raw materials into finished manufactures.

That’s what the Corn Law debates were all about in England in 1815. Buy, don’t depend on domestic high-cost agriculture. Depend on import of your food and raw materials, and we British will make our profits in working these raw materials into manufacturers in this workshop of the world. That’s going to enable us to earn the trade surpluses, to become creditor nations, and have an empire. Well, that was the whole logic.

But now it said, well, we don’t want to minimize the cost of raw materials. We want to support the United States as much as possible, and we’re willing to sacrifice this whole strategy that made Britain and Europe so dominant under industrial capitalism. We’re going to essentially shift our loyalties to the United States.

Well, apart from trade, that means that trade is Europe is tying one hand behind its back. Its cost of production will go up. That is not how to outcompete other markets and be the workshop of the world. And in terms of investment, Europe and Britain especially made huge investments abroad, and that was part of its balance of payments inflow, especially under the empire preference system that existed until it gave that away to the United States in 1944, negotiating the post-war order.

So now it’s the United States that’s invested in Europe, and is drawing revenues, profits, and interest out of the European economy and the British economy into itself. And the one way that Europe can stabilize all of this is to at least tax these profits, just like it taxes its own firms, but it said, “All right, just as we’re not going to benefit our producers by buying low-cost energy, we’re not going to tax American firms, especially in AI and sectors that the United States wants to monopolize to use as choke points for creating its own monopoly rents on the rest of the economy in information technology and Meta and Google and automatic technology.

That means Europe has given up its tech any chance of technological rivalry with American companies that establish first comer or establish production that actually pay fewer taxes in Europe than it would even in the United States itself? Usually if you’re forecasting what is a country going to do, or what is a continent like Europe going to do, you say, well, what’s in its self-interest? That’s the realist or material approach that economies act in their own self-interest. That’s not happening.

Who could have forecast that a whole continent is not acting in its economic self-interest, but that of the United States, as if it’s simply a political satellite as well as an economic satellite? How did this come about?

Exactly. Well, you know, you need you need an enemy, right, to focus minds, and for us, that big enemy is is Russia. Well, that’s how that’s how it’s portrayed. Even though Russia, with its supplies of cheap energy, was actually kind of one of the reasons for economic success, you know, in the latter half of the 20th century, right? The availability of cheap energy, even when it’s the Soviet Union, the Americans tried to ban the Germans from buying Soviet Union energy under Ronald Reagan.

We need Russia to be an enemy. So therefore, not having cheap inputs to production is just one sacrifice because they’re the enemy, and therefore, this is a cost that we have to bear. But you know, do you remember?Casting your mind back to the debate about Nord Stream Two and for that matter Nord Stream One, you know these gas pipelines, into Germany.

One of the big American attack lines is that the Russians are weaponizing energy. They can cut you off at any time. There’s one very brief dispute. I think in January 2009, basically because the Ukrainians were refusing to pay their bills. There’s one very brief temporary cut in in supply. That was it. I mean that the Russians are always incredibly reliable suppliers because it’s part of their economic model, right? I mean that they export energy. That that is a big part of the economic model. They’ve always been very reliable, but this narrative that Russia’s weaponizing energy.

Now it’s actually the Americans who are the weaponizers in chief, right? I mean they are weaponizing everything. The Russians never weaponized energy. The Americans are weaponizing everything now. But it’s because we need an enemy, and of course, the other thing here is that actually, we can make up for a lack of industrial capacity by actually just militarizing to drive growth through military Keynesianism. Okay, fine, but how do you fight a war if you don’t have energy?

It’s like, how do you build tanks without energy? You know, and how do you build tanks without industry? What are we going to fight a war with?

You know, is is the other question. We have no energy. We have no industry. We have a population that doesn’t want to fight. We have no liquidity. You know, how much available cash do you have to fight a war? We have none because our debt levels are so high. So I mean, fight a war with what? It’s a big question.

Well, you can see how shocked President Putin has been at all of this. His whole orientation, when he took over from Yeltsin, was that he wanted to look towards Europe as a natural union with Russia, and Russia wanted European investment to come in and develop Russian industry in the same way that it had developed European industry. Yeah, Europe could have done in Russia what it’s tried to do in China, developing a market there, developing a captive market, developing production with the full support of the Russian government, their whole orientation was they acknowledged Stalinist bureaucracy doesn’t work. We and they wanted the Western model, but the Western model wasn’t do as we did. It’s do as we’re telling you to do in something that became the whole awful 1990s kleptocracy for all that.

Europe could have provided an alternative, and indeed begun to provide an alternative to this kleptocracy by actually making productive investments there, all that market it lost, it gave up. That’s the real opportunity cost. Yeah, this hatred of Russia that goes, I guess, way back to the Crimean War, where Britain and France wanted to divide up the Ottoman Empire among themselves in contrast to Russia.

I think it goes back further to the great game in Central Asia. But I have to slightly disagree with you – not a big disagreement, a small disagreement. I would argue that the Europeans in the early part-okay, forget the 1990s, which was bandit capitalism under Yeltsin’s time, in the early part of the Noughties, Europe and Russia were succeeding in doing that together. That kind of big investments of European companies into the Russian marketplace, starting with a big investment by Volkswagen in Kaluga Oblast, which is just a couple of hours outside of Moscow. All sorts of Western companies investing in the Russian market, massive audience. I think you know we produce Nissan motor vehicles here in the United Kingdom. Russia was our biggest marketplace for the Nissan Qashkai model car from the factory in the northeast of England. When I was in Moscow after the Ukraine crisis started, AstraZeneca, the pharmaceutical company, opened up a new plant there. JCB was huge.

It was really funny. I was in a bus with Richard Sakwa. We’re going down to listen to Putin at his plenary in Moscow a couple of weeks ago, and I was telling Richard about all these UK investments that had been happening in the Noughties. I said, look, and JCB, and just as I said that, this JCB drove past on the highway. It was like a Bader Meinhof moment.

But the point is that that was happening. You know, the EU accounted for 40% of Russia’s imports, I think almost 45% it was in 2014. But we’ve succeeded in completely destroying that. You know, we have, and not the Russians. You know, this has been our choice to do it.

We’ve chosen to destroy all those amazing connections, economic connections that we built up. So it did happen, Michael. My point is that that we did that.

The Russians liked it. You know, I I remember going to presentations in Kaluga near the Volkswagen factory, and the local Governor’s there and the German business representatives would say, well, you know, when we first came, that there’d be about 20 different regulators that we had to pass their inspections, we had to pay some bribes, and that this person needed endless forms, and that person needed all these kind of things, and lots of pressure was coming. He said, but as soon as the new local governor came along, he said, well, you know, you just phone my office. If you need any help, we’ll just cut straight through all of that Soviet bureaucracy and nonsense and bribe taking and all that sort of thing. And that just made business life so much easier. And that was replicated in lots of Russian regions. Maybe not every single Russian region, but Russia was climbing up the World Bank Ease of Doing Business index rapidly while I was there. But we chose to destroy it. I mean, that’s the crazy thing.

When you say we, was that European industry?

No, it wasn’t industry.Volkswagen was the first company to really go in hard. You know, big old factory there. They even produced documentaries about it. You know, the Kaluga effect and how that how that had a ripple effect in terms of other parts of Russia. Different provinces wanted to attract European companies too, so they had to improve their business practices and everything else.No, it wasn’t the companies themselves. The companies were more than happy. BP had a 19.75% stake in Rosneft. BP would have stayed, but the government said, “Well, you have to get out, and they had to get out. And yeah, I mean the former president of BP is now president of BP in Jamaica, I think, or something like that. Having been in Russia, he’s now been demoted to the Caribbean. But, but there you go. I mean, it’s the government’s crazy, crazy choices.

So what you’re describing is that essentially the industrial investment policy has been captured from corporations by government policy in the service of the U.S. neocons.

Exactly right. And the European neocons if they exist, because you know they were supported in their careers by the United States. It’s important to to say that in in the first phase of the Ukraine crisis, it was very much the Americans and the British. Even though we were still investing in Russia, we were really pushing for this line. The Germans, in particular, the French, Italians, the Spanish, you know, they were keen to carry on doing business, having these factories doing good business, great market in Russia, very receptive marketplace for them, but it’s only really since the war started that the European neocons have taken charge, and they are basically the unelected ones that live in Brussels. I mean, as far as I can see, captured by the Merz’s, the Macrons, and you know all these folk that have come along as well.

You described the European neocons as really being shadows of the U.S. neocons because the agreements they’ve made have all been giving away to the United States, not for not to Europe in Europe’s own interest.

Yeah, exactly right. Because Germany, you know. Even Merz is doing an interview, saying, “Well, you know, Germany benefited a lot, benefited a lot from cheap Russian energy. But you know, this was an addiction.”

It’s like how low cost production is an addiction. You know how profits, industrial profits, industrial production is an addiction. That’s what he said. “But we just have to get used to the fact that you know, Russians were using this cheap energy to try and try and really affect us”, which they weren’t. They were just trying to sell it because it benefits their economy to sell it. It’s just like, I mean, Mertz is obviously a character from Blackrock. So what do you expect? I mean, all these plug-in folk. They’ve been to DC. They’ve been to San Francisco. They’ve had the right microchip plugged into their brain, like in the Running Man movie with Arnold Schwarzenegger, to do exactly as they’re told. Right?

Well, the result is that Russia’s turned its back on Europe and the West. It doesn’t want to conquer Europe. It’s not worth it. There’s no gain. There’s no motivation. Russia is doing what you would have expected Europe to do its trading with China, Asia, the global majority, the global South, and it has no interest in Europe at all. So all of this fantasy that Russia somehow has something to gain from sacrificing 50 million soldiers trying to invade Europe in a war that is going to be fought in two hours before troops can even get on an airplane. It’s all going to be fought by missiles, if there is one. So, it’ll be a short war. Russia has nothing to lose by losing Europe and America. It’s already turned its back, and it’s like Europe. What can I say? We’re living in a fictitious world.

Yeah, absolutely fictitious. It’s like something out of George Orwell book, right? You know that. But yeah, I mean, I was in Moscow, and I wasn’t just in Moscow. We stayed at this resort two hours out of Moscow, so we got to drive through lots of towns on the way, and in the process see all these brand new multi-lane highways that have been built since I was last in Russia, seven years ago when the road network outside of Moscow wasn’t that great, really. To be honest, they were only just starting to build a a proper highway, you know, big multi-lane highway all the way to St. Petersburg.But now I mean, life is carrying on as normal, you know, there are cars on the road. Some gas stations have shut. I think they’re obviously concentrating to a smaller number of gas stations. There’s still lots of cars on the road, but yeah, I mean they’re just getting on with their lives. While we’re we’re paranoid, obsessed, and almost we’re caught in Stockholm syndrome, right?

We kind of hate the Americans, but we don’t want them to leave because we love them too. We love the punishment we get from them, and you know, and I think that’s that’s what it is, right? It’s like European Stockholm syndrome. That’s the best way I can describe it, Michael.

Anyway, that was very deep and thought provoking. I’d happily talk to you more about the whole industrial interconnections between Europe and Russia because it was quite something. It really was, you know, when I was there, and it’s all been destroyed. And it’s such a great shame. But there we are for now, Professor Michael Hudson, and thank you so much as always for joining. Thank you everybody for watching, whoever you are in the world, whatever your nationality and your religion. I wish you much peace. And Michael, thanks for your time today. And let’s do this again sometime soon.

I love our discussions.

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