Europe assumes financial burden of Ukraine war, angering Russia
Germany was prepared to pay for the systems as part of a broader US deal to sell Europe arms destined for Ukraine.
Details began to emerge on July 10 when Chancellor Friedrich Merz said Germany would buy US-made air defence systems.
'We are also prepared to purchase additional Patriot systems from the US to make them available to Ukraine,' Merz was quoted as saying on the sidelines of a Ukraine Recovery Conference in Rome.
On Friday, US President Donald Trump told NBC News that the US would sell NATO US-made weapons, including the Patriots, that NATO would give to Ukraine.
Adding to the crescendo, US Senator Lindsey Graham told CBS on Sunday: 'In the coming days, you will see weapons flowing at a record level to help Ukraine defend themselves.'
Meanwhile, Russia continued to capture Ukrainian villages.
On Friday, the Russian Ministry of Defence claimed to have seized Zelyonaya Dolina in the eastern region of Donetsk and Sobolevka in Kharkiv in the northeast. Nikolayevka in Donetsk fell on Sunday, Malinovka in Zaporizhia on Monday and Novokhatskoye in Donetsk on Wednesday.
Yet even at this accelerated rate of 15sq km (6sq miles) a day, Russia would need 89 years to capture the rest of Ukraine, The Economist magazine estimated.
Russia continued to pound Ukraine's cities with combinations of drones and missiles every night over the past week.
The biggest attack came early on Saturday. The Ukrainian air force said it downed or electronically suppressed 577 of 597 drones launched overnight and 25 of 26 Kh-101 cruise missiles.
June also saw the highest monthly civilian casualties in three years with 232 people killed and 1,343 injured, the United Nations Human Rights Monitoring Mission in Ukraine said.
Trump: 'We're getting our money back in full'
Trump announced on Monday at the White House that he had approved $10bn in weapons sales to Ukraine, which were to be paid for by Ukraine's European allies.
'We've made a deal today where we're going to be sending them weapons and they're going to be paying for them,' he said.
He doubled down on that financial message, telling reporters on Tuesday that after spending billions to help Ukraine, 'we're getting our money back in full.'
Graham played on the same theme.
'Stay tuned for a plan where America will begin to sell to our European allies tremendous amounts of weapons that can benefit Ukraine,' he told CBS.
Trump said he would send 17 Patriot systems to Ukraine. It was not clear if this meant 17 batteries or 17 launchers. 'It's everything. It's Patriots. It's all of them. It's a full complement with the batteries,' Trump said.
A Patriot battery usually contains six launchers, each typically carrying four missiles.
The particulars of the deal have remained murky and perhaps deliberately so.
German Defence Minister Boris Pistorius, who was in Washington, DC, on Monday, didn't disclose details.
'But one thing is clear – and this is a message to all other European NATO members: Everyone must open their wallets. It's about urgently raising the funds needed, especially for air defence, because Ukraine is under enormous pressure,' Pistorius said.
Russia has increased its attacks on Ukraine's cities since the beginning of the year. In June alone, Moscow launched 330 missiles and 5,000 drones against Ukraine.
While Patriots are too expensive to use on drones, they are the only weapon in Ukraine that can shoot down ballistic missiles and are also effective against cruise missiles.
Ukrainian President Volodymyr Zelenskyy said in April that Ukraine needed 10 more Patriot systems to protect its cities – presumably referring to complete batteries.
Germany's head of defence planning, Major General Christian Freuding, said on Saturday that Pistorius and his US counterpart, Pete Hegseth, had discussed a German offer to buy two Patriot systems for Ukraine. It was not clear if Pistorius's visit to Washington, DC, was related to that.
On Tuesday, Trump told reporters the Patriot systems were 'already being shipped, … coming in from Germany'.
Separately, Zelenskyy told Trump's special envoy to Ukraine, General Keith Kellogg, when they met in Kyiv on Monday that Ukraine was ready 'to purchase American weapons, particularly air defence systems'.
Russia reacts with fury to US-German deal as Trump weighs sanctions
Moscow has balked at the Western deal for Ukraine.
'Mr Merz is a fierce proponent of confrontation on all fronts and of aggressively mobilising Europe,' Kremlin spokesman Dmitry Peskov said on Friday.
Russian Foreign Minister Sergey Lavrov said Germany, France and the United Kingdom were 'attempting to raise Europe for war, … a direct war against Russia'.
Trump also announced possible secondary sanctions on buyers of Russian oil.
'We are very, very unhappy with Russia – I am,' he said Monday in the White House while sitting next to NATO Secretary-General Mark Rutte. 'I am disappointed in President [Vladimir] Putin because I thought we would have a deal two months ago.'
Trump said he was putting Putin on 50 days notice.
'We're going to be doing secondary tariffs if we don't have a deal in 50 days. It's very simple. And they'll be at 100 percent.'
The tariffs would be levied on goods the US imports from countries that buy Russian oil, an idea Graham has aggressively pursued in recent weeks, naming China, India and Brazil as the worst offenders.
'We would like to understand what is behind this statement about 50 days,' Lavrov said. 'Earlier, there were also the deadlines of 24 hours and of 100 days. We've seen it all and really would like to understand the motivation of the US president.'
Lavrov was referring to Trump's campaign boast that he would end the war in Ukraine in a day and Kellogg's self-imposed 100-day goal to bring about a ceasefire.
Some observers are sceptical about whether Trump will get tough on Putin, whom he has openly admired.
Dmitry Medvedev, the deputy chairman of Russia's Security Council, shrugged off Trump's remarks.
'Trump issued a theatrical ultimatum to the Kremlin. The world shuddered, expecting the consequences. Belligerent Europe was disappointed. Russia didn't care,' he wrote on social media.
But Peskov on Tuesday called Trump's remarks 'very serious', adding: 'Something in them concerns President Putin personally.'
On Wednesday, the normally restrained Peskov sounded even more alarmed that Europe was now willing to foot the bill for the war without US assistance.
'What we are observing so far is that the Europeans are displaying a completely aggressive militarist stance, declaring their intention to spend enormous funds to purchase weapons, to further provoke the continuation of war,' Peskov said.
'Of course, it is very hard to predict anything amid such an emotional state, bordering on irrationality, which reigns on the European continent,' he added.
The only thing that assuaged Russian concerns was indecision over sending Ukraine Germany's Taurus missiles, which can strike deep inside Russia with large warheads.
That news suggested that Europeans 'still have some sense of reason left', Peskov said on Wednesday.
European defence and reconstruction without the US
Europe's willingness to spend on defence may also have brought forth the dawn of more independence from the US.
Last week, the UK and France announced a scaling-up of their Combined Joint Force to a corps level, a reorientation of that force from overseas expeditions, 'refocusing it on defending Europe' and upgrading it 'to war-fighting readiness'.
They announced new procurement of Storm Shadow/SCALP missiles and joint research on a generation of missiles that would 'harness the power of AI'.
They also issued the Northwood Declaration on closer nuclear coordination. 'Any adversary threatening the vital interests of Britain or France could be confronted by the strength of the nuclear forces of both nations,' the UK Ministry of Defence said.
France and Britain are the only European states with a nuclear deterrent.
The US Senate Armed Services Committee, meanwhile, approved $500m in security assistance for Ukraine as part of its draft language for the next fiscal year – the only military aid announced under the Trump administration.
Under former President Joe Biden, the US spent $64.6bn on military aid to Ukraine, according to a tracker run by the Kiel Institute for the World Economy.
Biden also left $4bn unspent in the form of a presidential authority to draw down weapons from US stockpiles and send them to Ukraine. Trump has not exercised that authority, insisting that the US needs to be paid back.
As Trump touted $10bn in weapons sales, the European Commission announced 10 billion euros ($11.6bn) in investments in Ukraine, leveraged through 2.3 billion euros ($2.7bn) in loans and grants from European institutions.
The announcement came at the Ukraine Recovery Conference.
The money is for rebuilding critical infrastructure and networks and helping small businesses.
'We need a Marshall Plan-style approach,' Zelenskyy declared upon arrival in Rome, referring to the post-World War II system of grants from the US that rebuilt the European economy.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Al Jazeera
33 minutes ago
- Al Jazeera
Who gets to have nukes?
Israel and the United States – both nuclear-armed nations – recently attacked Iran. They said it was to prevent Iran from getting a nuclear weapon, something Iran denies it's trying to do. What determines which countries can, and can't, have nuclear weapons? And are we seeing a new nuclear race? Start Here with Sandra Gathmann explains. This episode features: Gary Samore | Director of the Crown Center for Middle East Studies and professor at Brandeis University Hans M. Kristensen | Director of the Nuclear Information Project at the Federation of American Scientists Sharon Squassoni | Research professor, George Washington University Hassan Elbahtimy | Senior lecturer, Department of War Studies, King's College London Tariq Rauf | Former official at the International Atomic Energy Agency (IAEA)
Al Jazeera
2 hours ago
- Al Jazeera
Trump hits India with 25% tariff, extra ‘penalty' for Russian oil purchases
United States President Donald Trump has announced a 25 percent tariff on Indian goods, as well as an unspecified penalty for the country's purchase of Russian oil and military equipment, as the unending war in Ukraine frustrates the White House. Trump announced the trade moves – which he said will come into effect on Friday – on his Truth Social account on Wednesday, saying they are necessary to reverse a long-running trade imbalance. 'While India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high,' Trump wrote. The president also blamed India for buying military equipment and oil from Russia, which he said has enabled the war in Ukraine. As a result, he intends to charge an additional 'penalty' starting on Friday as part of the launch of his administration's revised tariffs on multiple countries. The aggressive trade policy further complicates ties between Trump and India's Prime Minister Narendra Modi, which were warm during the US president's first term but have since faced challenges over trade and immigration. Modi has also denied Trump's claims that he intervened to resolve a four-day conflict with Pakistan in May, saying India has not and will never 'accept mediation'. Pakistan, by contrast, has seen its stock rise with the Trump administration before and after the conflict with India. In June, Trump hosted Pakistan's army chief, Asim Munir, for lunch at the White House – the first time a US president has hosted a military chief from Pakistan who isn't also the country's head of state. The US announcement also follows a slew of negotiated trade frameworks with the European Union, Japan, the Philippines and Indonesia – all of which Trump said would open markets for US goods while enabling the US to raise tax rates on imports. Trump views tariff revenues as a way to help offset the budget deficit increases tied to his recent income tax cuts and generate more domestic factory jobs. While Trump has effectively wielded tariffs as a cudgel to reset the terms of trade, the economic impact is uncertain, as most economists expect a slowdown in US growth and greater inflationary pressures as the costs of the taxes are passed along to domestic businesses and consumers. The Census Bureau reported that the US ran a $45.8bn trade imbalance in goods with India last year, meaning it imported more than it exported. With a population exceeding 1.4 billion people, India is the world's largest country and a possible geopolitical counterbalance to China. India and Russia have close relations, and New Delhi has not supported Western sanctions on Moscow over its war in Ukraine. When Trump in February met with Modi, the US president said that India would start buying US oil and natural gas. Trump discussed his policies on trade and tariffs with reporters accompanying him on Tuesday on the flight home following a five-day visit to Scotland. He declined to comment when asked about reports that India was bracing for a US tariff rate of at least 25 percent, saying, 'We're going to see.' Trump also said the outlines of a trade agreement with India had not yet been finalised.
Al Jazeera
2 hours ago
- Al Jazeera
‘Exorbitant privilege': Can the US dollar maintain its global dominance?
Since the 1940s, the US dollar has held firm as the global reserve currency, driving international trade and reinforcing the status of the United States as an economic superpower. In recent years, however, some countries have expressed opposition to the US dollar's longstanding economic dominance. The BRICS economic bloc, named for its founding members, Brazil, Russia, India, China, and South Africa, has actively sought to reduce its reliance on the US dollar. China has even pushed for 'de-dollarisation', by promoting its currency, the yuan, and forming currency swap agreements with other countries. Christine Lagarde, president of the European Central Bank, recently noted that a 'shift' was under way that would allow for the 'euro to gain global prominence'. Lagarde said in June that the euro accounts for approximately 20 percent of global foreign exchange reserves, and that the 'dominant role of the US dollar', which accounts for 58 percent, 'is no longer certain'. 'History teaches us that regimes seem enduring – until they no longer are. Shifts in global currency dominance have happened before. This moment of change is an opportunity for Europe. It is a 'global euro' moment,' Lagarde said. The dollar has also weakened this year, experiencing its sharpest six-month decline in decades. Global investors have been reacting to policy uncertainty under the administration of US President Donald Trump, rising debt, and shifting interest rate expectations – with some questioning its 'safe-haven' appeal. Experts say that in the unlikely event that the US were to lose its reserve currency status, the impact would be profound, as the country would lose much of its leverage to influence global trade and enforce sanctions – international trade that does not directly involve the US often runs through the dollar. Or, as Trump told reporters earlier this month, 'If we lost the world standard dollar, that would be like losing a war. 'We would not be the same country.' 'Exorbitant privilege' As the global reserve currency, the US dollar underpins a monetary system where central banks rely on it to stabilise their economies, manage debt and implement trade policies. Historically seen as a safe investment, the dollar remains so deeply embedded in the global system that, despite recent shake-ups, it is unlikely to be dethroned anytime soon, emboldened by a longstanding history of resilience. The US dollar was put on this course in the 1930s, when then-President Franklin D Roosevelt centralised US gold reserves and tied the dollar to a fixed supply of gold. Then, in 1944, the US spearheaded the Bretton Woods Agreement, which pegged international currencies to the dollar, leading to the creation of the International Monetary Fund (IMF) and the World Bank. With much of the world recovering from war and the US holding the majority of global gold reserves, the dollar emerged as the anchor of the post-war financial system, and by the 1960s, gave the US what former French Minister of Finance Valéry Giscard d'Estaing called an 'exorbitant privilege'. In 1971, US President Richard Nixon severed the last remaining ties to the gold standard, an action that became known as the 'Nixon shock', allowing the dollar to float freely in the open market. Despite the wave of changes, the US economy remained strong, bolstered by its growth in manufacturing and information, which helped the dollar maintain its status. Since the Nixon era, the dollar's dominance has mostly only strengthened, even as countries like China have outpaced the US in economic growth, population and manufacturing output. The US has continued to wield disproportionate influence through trade agreements and financial sanctions. 'Many times, even between emerging markets when one converts a currency, like the Brazilian real and the South African rand, for example, there is a transaction to US dollars in between, and so, the US extraterritorial power here stems from the fact that other countries, global banks, don't want to lose their access to the US dollar-based financial system,' Rachel Ziemba, adjunct senior fellow at the Center for a New American Security, told Al Jazeera. This also adds weight when the US imposes sanctions. 'From a geopolitical standpoint, the US having a reserve currency gives it more flexibility to weaponise its currency via financial sanctions and the like,' Ziemba said. Because transactions often pass through banks that work in tandem with the US Federal Reserve, they can be subject to US sanctions – even if the US is not directly involved. That is why the financial sanctions imposed on Russia after its invasion of Ukraine led to a default on Moscow's sovereign debt. In 2022, sanctions from the administration of former US President Joe Biden effectively cut Russia off from dollar-based trade, freezing $300bn in assets held by its central bank and crippling its economy. As a result of the sanctions led by the US, Russia's gross domestic product (GDP) fell by $104bn. If the dollar did lose its status, domestically, it would mean higher borrowing costs. Without foreign demand for US debt, interest rates would rise, driving up the cost of mortgages and credit cards. This is because private banks peg their interest rates to those of the Federal Reserve. 'It would mean the US no longer has this big pool of foreign savings to rely on to keep the US borrowing costs down. It's kind of a fundamental threat to the US economic model of the past few decades, which has generally been relatively low interest rates, which has enabled consumers, firms and the government to finance a lot of debt at relatively cheap prices,' Pearce said. 'A loss of dollar dominance for the US means higher interest rates in the US, and that's really going to put pressure on demand. Mortgages are gonna get a lot more expensive,' he added. A new era of economic uncertainty Unlike in Nixon's era, when US dominance was largely uncontested, the current global economy is more interconnected. Emerging powers such as China and India have expanded their global influence, and alternative financial systems, including the rise of cryptocurrencies, have gained traction. Repeated policy whiplash from one US administration to the next risks undermining that stability in a landscape of growing threats. Trump's erratic approach to tariffs and global agreements has revived doubts about the US's reliability on the world stage and raised long-term concerns about the stability of the dollar. 'I think Trump has done more than anybody in modern history to undermine key institutions,' said Alex Jacquez, a special assistant to the president for economic development at the White House National Economic Council under Joe Biden. After Trump's first term, global partners felt the US had returned to diplomacy under Biden, Jacquez told Al Jazeera. 'When I came in with the Biden administration and worked on these issues, certainly, we had our disputes and our issues with our trading partners, but the international community welcomed us back with good-faith negotiations. But that came with scarring and pain with their interactions with the Trump administration.' However, Jacquez noted that regaining that trust may now be harder. This is not simply because of Trump, but also because of the broader pattern of reversals in US policy that his administration has driven. Jacquez argues that frequent U-turns, abrupt withdrawals from agreements and threats to longstanding alliances have created global instability, making it difficult for other nations to formulate long-term plans, which could compromise the long-term stability of the dollar. That comes alongside Trump's tax legislation, which he recently signed into law, and is expected to add $3.4 trillion to the federal deficit. This is stoking fears about long-term US economic stability, potentially raising borrowing costs that could impact global investors, central banks and everyday consumers. In 2023, then-Senator JD Vance questioned the value of the dollar as the global reserve currency in an exchange with Federal Reserve Chairman Jerome Powell. 'I think in some ways, you can argue that the reserve currency status is a massive subsidy to American consumers, but a massive tax on American producers,' Vance said. But since Trump took office with Vance as vice president, tariffs have put pressure on US producers, not the status of the dollar. There are also concerns over Trump's attempts to influence the Federal Reserve, which could impact the status of the dollar. The president has long criticised Powell for not lowering interest rates, and has threatened to fire and replace him. Earlier this month, US Secretary of the Treasury Scott Bessent told Bloomberg that the White House has begun the formal process of finding a successor for Powell, whose term ends in 2026. This comes amid reporting from CBS News that last week, the president asked a group of Republican lawmakers if he should fire Powell. However, Trump told reporters later that firing Powell was 'highly unlikely'. 'Policies of that nature, which would make investing in US treasuries risky, particularly for foreign investors, I think that would make me a bit more concerned about a loss of reserve currency status,' Michael Pearce, deputy chief economist at Oxford Economics, told Al Jazeera. 'Tariffs and other policies have taken that kind of US exceptionalism off the table at least for this year. We expect the US to be relatively hard-hit by these tariffs compared to the rest of the world. However, when you think of the long-term performance, it's still a relatively dynamic economy,' Pearce added. Contenders for the global reserve currency There are groups of nations that are increasingly positioning themselves to take on a larger role in global finance, but none has yet matched the dollar's influence. This means it is unlikely that any currency could replace the dollar as the de facto global reserve currency. But there are attempts to challenge the US's influence. BRICS nations have moved to reduce their reliance on the US dollar in recent years, which has become a growing concern for Trump. At the same time, the European Central Bank is also pushing for the euro to play a more central role in the global system, but as Lagarde noted in her essay, a 'step towards greater international prominence for our currency will not happen by default: it must be earned'. Despite attempts by other nations to expand their influence over the global reserve, and the recent decline in the dollar's value, economists argue that it is unlikely the dollar will lose its status as the world's reserve currency. And, if it did, it might take decades to even see a minor shift. 'It's definitely premature to worry about the dollar losing the global reserve currency status. Even if [it did], that would take multiple years for that to happen,' Hong Cheng, the head of fixed income and currency research at Morningstar, told Al Jazeera. Pearce also said that a change in the global reserve hierarchy was unlikely. 'A dramatic shift in which the US clearly loses its place atop the pile, I think that's far off the cards. I find it difficult to see any viable contender emerging to the dollar in that sense,' Pearce said. Instead, experts say a more realistic future could involve a multipolar currency system, where the dollar shares its role with other major currencies, including China's renminbi. 'We could be heading into some kind of multipolar reserve currency environment where there is an additional role for currencies like China's renminbi. There's no one clear alternate currency,' said Ziemba, the adjunct senior fellow at the Center for a New American Security. Even if a transition were to occur, it would take decades. 'You would need kind of a managed unwinding through either coordination or kind of some sort of alternative system to emerge, which again would take time,' Jacquez said. While the dollar's share in global reserves has declined, it is not at an unprecedented low. 'The dollar share in FX [foreign exchange] reserves was lower in the early 1990s, so the recent decline in its share is not completely out of the norm to just under 60 percent,' according to JPMorgan Chase. In emerging markets, 'the same ratio of USD reserves as in 1995' still holds. Even after recent sell-offs, including one by China in April, analysts do not expect a major impact. Countries often hold US Treasuries as liquid assets, which provides stability to their own currencies, so unravelling the US dollar's status could also undermine their own interests. 'With more than 30 percent of foreign Treasury holdings maturing in the next 2 years, international investors are more likely to let these assets mature and choose to reinvest part of the proceeds elsewhere. We think large-scale selling is unlikely,' the note added. That signals that the US dollar will likely remain dominant for the foreseeable future. 'I don't think there's one dominant currency that's gonna replace the dollar. And if there was hypothetically a change, I think that's going to take many years to shift,' Cheng added. 'We're talking about the next 20, 30, or even 50 years.'
