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Europe chooses economic suicide

The inconvenient truth is that Europe needs Russia economically to power its industry but Russia can live without Europe.

A conversation with Professor Michael Hudson

Ian Proud, Oct 16, 2026, https://thepeacemonger.substack.com/p/europe-chooses-economic-suicide?utm_source=post-email-title&publication_id=3221990&post_id=220664518&utm_campaign=email-post-title&isFreemail=true&r=1ise1&triedRedirect=true&utm_medium=email

In a new conversation with Professor Michael Hudson, we examine one of the more striking recent examples of Western policy incoherence: Europe’s willingness to lock itself into high-cost American energy while simultaneously pursuing sanctions that do little to constrain Russia and a great deal to damage its own industrial base

The immediate trigger is the diesel arrangement between the United States and Europe. Under the deal, Europe is selling petroleum from its national reserves at current prices. At the end of the negotiated period it will then have to replenish those reserves by buying diesel back—potentially at roughly double the cost. This is an ill-conceived economic and political choice.

European governments are accepting a higher long-term energy cost in exchange for continued alignment with U.S. priorities on Russia and, increasingly, on China.

Hudson argues that the arrangement is best understood as part of a broader pattern. Since 2022, European leaders have treated the severing of low-cost Russian energy as a strategic necessity rather than an economic trade-off. The result has been rising input costs for industry, pressure on living standards, and a structural deterioration in Europe’s competitive position.

Cheap energy as an ‘addiction’ is a bemusing soundbite for industrial workers across Europe who have found themselves out of a job because their factories have closed.

At the same time, the United States has used Europe’s growing energy dependence as leverage across multiple fronts—trade policy, technology taxation, and the broader contest with China.

What makes the episode particularly nonsensical is the contrast with Russia’s position. Total Russian goods exports since the war began amount to over $2 trillion to date, higher than the pre-war average. Cutting Europe off of Russian energy might have been more defensible politically had Russia borne a greater cost, but it manifestly has not. The occasional oil tanker seizure or a new set of shadow fleet sanctions look good on the TV but make absolutely no difference.

Sanctions that were intended to isolate Moscow have only accelerated the reorientation of its energy exports to other markets while leaving Europe more exposed, in circumstances where global energy supply is already constrained because of the war against Iran.

The inconvenient truth is that Europe needs Russia economically to power its industry but Russia can live without Europe.

Hudson notes that European industry and governments once maintained substantial commercial ties with Russia; those links were dismantled by political decision, not by market failure.

The deeper issue, in Hudson’s view, is the difference between industrial and financial capitalism. China continues to prioritize long-term investment in productive capacity and technology. Much of the West, by contrast, has subordinated industrial strategy to short-term financial returns and geopolitical alignment.

Europe’s current energy policy is a concrete illustration of that shift: higher costs are accepted, industrial capacity is allowed to erode, and the resulting dependence is then used to shape further policy choices. European leaders live in detail and blame everyone except themselves. If you wondered why voters across Europe are increasingly turning to nationalist political parties, it is because they are recognising that their globalist leaders do not have their interests in mind.

The conversation covers the mechanics of the diesel deal, the historical context of European energy strategy, the limits of sanctions, and the structural reasons European governments continue to prioritize U.S. preferences over domestic economic outcomes.

It is a clear-eyed account of how policy choices made in the name of security are producing negative economic consequences while at the same time making the continent much less safe.

October 19, 2026 - Posted by Christina Macpherson | business and costs, EUROPE, politics international