How the U.S. made money from the Russia-Ukraine conflict

On March 25th, US President Joe Biden announced an agreement with the EU on ensuring the EU’s energy security. Under the agreement, the United States will increase LNG (liquified natural gas) exports to the EU to reduce the EU’s energy dependence on Russia. Although the implementation of the agreement still faces many difficulties, in the context of soaring energy prices and sanctions against Russia becoming politically correct, Biden has become the “savior” in many American media. But is America the true “savior”? It has been a month since the outbreak of armed conflict between Russia and Ukraine on February 24. The two sides have conducted three rounds of negotiations, but there is still no result recognized by both sides. In this war, Ukraine’s territory was invaded and its citizens were displaced; Russia was subject to economic sanctions by many countries in the world; the EU caused energy shortages due to sanctions against Russia. They all suffered huge losses. While in this seemingly no-winner war, the United States has made a lot of money.
The U.S. makes money in the military industry
Since last October, when tensions began to escalate in Ukraine, shares of U.S. military giants have risen staggeringly. As of the closing price on March 24, Lockheed Martin’s shares rose 35% in the past six months, Northrop Grumman’s shares rose 27%, and Raytheon’s shares rose 14.5%.
Also, in the month since Russia launched a special military operation in Ukraine, shares of Lockheed Martin rose about 10%, Northrop Grumman rose 11% and Raytheon rose 3.6%.
According to the report of Asia Times, massive expenditure in the field of defense has started due to this war. The European Union has announced that it will buy weapons worth 450 million euros and hand them over to Ukraine. On the other hand, the US has said that it will provide additional military assistance of $ 350 million. Earlier, the US had given military aid of $ 650 million to Ukraine. If we look at all this, America and NATO countries are sending 17 thousand anti-tank weapons and 2000 Stinger anti-aircraft missiles.”
In this regard, Franklin Spinney, who worked in the Office of the Secretary of Defense for 26 years, said in an article published earlier this month, “The U.S. Department of Defense, K Street (where Washington lobbying companies gather), the military industry, and Congress MPs have made so much money from the situation in Ukraine that they even quietly popped champagne to celebrate.”
In April 2021, Novakovich, chairman of General Dynamics, one of the five major arms giants in the United States, made a statement: “This year is a very good start. The world has become more and more dangerous, but we have seen good signs of stable demand.”
On March 14th, the report released by the Stockholm International Peace Research Institute in Sweden shows that in the five years from 2017 to 2021, although the global arms trade volume fell by 4.6% compared with 2012 to 2016, the United States arms exports rose by 14% and the global share of the US rose from 32% to 39%.
The U.S. makes money on energy
Since the outbreak of the Russia-Ukraine conflict, the United States and some European countries have launched a series of sanctions against Russian energy and other fields, resulting in a rapid rise in international energy prices. The wholesale price of natural gas in the UK and the Netherlands has risen by 30% to 40% in the short term. German natural gas stocks have reached “scarcity” levels. Since the international oil price broke through the $100 per barrel mark in early March, it has been at a high level, which even exceeded $130 per barrel at one point. Affected by factors such as rising energy prices, the UK consumer price index rose 6.2% in February compared with the same period last year. German inflation hit 5.1% in February. German energy prices rose by as much as 22.5% year on year. Due to the severe rise in energy prices in Spain, about 130,000 small and medium-sized enterprises and self-employed persons in the transportation industry have been suspended indefinitely since mid-March, and many small enterprises are facing bankruptcy.
On March 25th, to solve the energy crisis, the European Union and the United States reached a large gas agreement-the EU will buy at least 15 billion cubic meters of liquefied natural gas from the United States by the end of this year to replace energy imports from Russia. It means that US gas exports to Europe will increase by two-thirds. The European and American joint statement also mentioned that it will help Europe get rid of its energy dependence on Russia by 2027, and ensure that Europe can obtain 50 billion cubic meters of liquefied natural gas every year by 2030. This agreement seems like a big help for Europe. But the US is the biggest beneficiary.
In terms of prices, the global LNG market was 530 billion cubic meters last year, 31% of which was traded in the spot market, where there is enough spot to meet European demand, but prices are high. In March, benchmark natural gas prices in Europe hit a record high of 227 euros per megawatt-hour, or about $250, 14 times the local U.S. price. Obviously, this move will make the United States a lot of money.
In this big change, the Wall Street Journal article concluded that the United States will send more natural gas to Europe with such high spot prices and political conditions. This long-term shift could happen with surprising speed. And Fortune magazine stated that:” The agreement can triple the US’s natural gas exports. Europe is now very serious about getting rid of Russian gas, and the US LNG industry will be a big winner.”
By Shiyue Luo