Michael Hudson: Europe Falling Under the U. S. Sphere of Influence
With Glenn Diesen, October 23, 2026,
Glenn
Welcome back, everyone. We are joined today by Professor Michael Hudson, who has an excellent website with articles and videos. I have left a link in the description, so make sure to follow his excellent work. Thank you for coming back on the program. It's good to be part of this long discussion. So a lot of things are happening in the world. Not many good things, but at least a lot of things are happening. One shift on the diplomatic front appears to be Trump's ambition to have this trilateral meeting between himself, Vladimir Putin, and Xi Jinping.
So the three great powers are essentially meeting to try to sort out these difficult times the world is trying to navigate. Of course, all of them have different objectives, different views on the world. And the Europeans, who thought that they would rule the world collectively with the US under liberal hegemony, are horrified. They call this another Yalta—and, of course, a very demonized version of Yalta. How do you assess this great-power diplomacy that Trump apparently is trying to set up?
Michael Hudson
Well, it all started when Trump wanted to make a deal with Russia over Ukraine. And a major motive for this is that Trump is anticipating going to war with Iran in the Persian Gulf. And what he realizes is that if, on the one hand, he continues the U.S. and EU effort to isolate Russia's oil, gas, and diesel exports and, on the other hand, goes to war with Iran, which is going to respond by sort of closing down Persian Gulf oil exports, this is going to create a world depression that's going to last a couple of years.
You can't cut back 20% of the world's oil supply from the OPEC countries and isolate Russia, because the whole world would be in such economic and financial turmoil that it would turn against the United States and Europe for throwing the economies of Asia, the global majority, and the Global South into a balance-of-payments crisis and a resulting debt crisis. So Trump realizes that he can't afford a war on two oil fronts at the same time, and his main target is Iran, not Russia.
So he's tried to expand this plan to include China and make it a tripartite arrangement, which you've called Yalta 2.0, which is what it's been called in the American press. And the whole idea is not only to arrange a settlement, at least of the U.S. involvement in the war in Ukraine, of NATO against Russia, saying, "This is the EU's war from now on, not America's war." Trump is also trying to make an extra billion dollars off a deal with Russia. He's made $2.5 billion personally during his presidency through his special deals so far.
And he thinks that if he can make a deal with Russia for mineral rights, either in Ukraine, in Russia's territory in what used to be eastern Ukraine, or in Russia itself, for raw materials, rare earths, and other things, then he can personally benefit, along with his financial supporters and the gang that he's put together in the White House. And he wants China to play a role in this because the EU fight against Russia has extended to China.
Trump is insisting that the European Union, now that it has stopped its imports of oil and gas and other materials from Russia, extend this to China and not import Chinese information technology, artificial intelligence, or internet technology—that it essentially agree to rely on U.S. monopolies across the board, especially for the internet and AI. And he's trying to stop Europe from imposing taxes on Meta and Google and other U.S. firms that have arranged to avoid paying any taxes to Europe at all.
He's trying to prevent Europe from developing any independent internet, artificial intelligence, or information technology companies of its own to become self-sufficient and not dependent on U.S. monopolies. So what Trump has talked about in this three-part arrangement is, well, let's have a division of spheres of influence. And he says that that's how, in the 19th century, Britain and other European countries stabilized matters and, you know, avoided a general war all the way from 1815, when the Napoleonic Wars ended, to World War I.
Well, the dream is that when he says "sphere of influence," he really means influence: locking in America's sphere of influence over Europe and also over Japan and South Korea. And obviously, there's some trepidation on the part of Russia and China. They're saying they're not interested in spheres of influence. Russia does not care about Europe at all. Russia's quite happy to make an agreement with the United States, saying, "It's all yours.
We've come to terms with the fact that we can't export our oil and gas to Europe anymore because now that there's a crisis in Persian Gulf oil, there's going to be a shortage of oil and gas and diesel and fertilizer all throughout the world for the next few years. So we have plenty of customers. We're turning east." All that Russia wants to do is to be left alone. So this talk of saying that you want peace in Ukraine is pro-Russian—this doesn't affect Russian interests at all because Russia has lost interest in Europe. If you read the speeches by President Putin and Foreign Minister Lavrov, that's the content of all this.
Well, now let's look at what Trump is trying to do to make money for himself and his family off any deal. He's talking to Russia and saying, "Well, you know, there are all of these investments by Gazprom and Lukoil. And now, if you're really willing to disengage from Europe, sell us the rights to Nord Stream that are sort of in abeyance." "Nobody is using it now because we've pressured Europe's leaders to commit economic suicide for Europe, which they're all willing to do for the personal benefit of Macron, Merz, and the British Labour Party.
You sell us the rights to this so that we can now tell Europe, 'Okay, there is no need for you to fight Russia anymore because Russia is not interested in you, because you don't count. And because you don't count, you'd better depend on us, because we're the only other regional power in the world besides Russia and China.'" And so the deal that he's proposing to Putin is that if Putin will sell the Nord Stream oil to Europe, Europe can do what you can see building up already. All of the opposition parties in Europe are gaining voter support.
And it's obvious that the existing pro-war, anti-Russian parties are going to be voted out of office in the next two years. And the parties that come in are going to want to act in Europe's self-interest, as I think we discussed in our last episode, and buy Russian gas and oil. Well, if Donald Trump's family and political supporters can buy the Nord Stream pipeline and associated Lukoil holdings there, then he can say, "Well, you know, it's okay for you to trade with Russia." Russia is not going to give concessionary prices to Europe anymore because it doesn't have to, just as it's not going to give concessionary prices for its oil and gas to India anymore.
There's going to be a rising world price for oil, gas, diesel, and fertilizer. And so any deal that the American investors make to take over Nord Stream and the associated oil trade with Russia means that there's a huge monopoly profit opportunity there to simply add the transport costs to what Europe has to pay. And in addition to being able to impose these monopoly transport prices, which Russia's Gazprom and other investors in Nord Stream carefully avoided doing, the United States can have a political choke point to say, "If there's any European country that's getting Russian oil and gas now, we can simply turn off the supply of pipeline gas to them and do to them what Europe has done to the German economy." So the whole play of the United States to try to arrange spheres of influence with Russia and China is to lock in its control over that part of the world that it still hopes to maintain control of, and prevent Europe from following its own self-interest and saying, "Well, maybe we can't afford this dependency on the United States that our political leaders are committed to.
Maybe our prosperity, the recovery of our industry, our exports, and our investments will do much better in the more rapidly growing economies of Asia, the Global Majority, and the Global South than they would with the United States." So that's the big political setting for the upcoming meetings that may occur somewhere in Asia.
Glenn
What is it about Nord Stream ? It's interesting because the former prime minister of Italy, Romano Prodi—he was also the president of the European Commission, by the way—made that prediction. I'm not sure if he said complete control, but at least the Americans would want to be an investor before they would reopen it. So, again, the larger idea is that it wasn't a problem that Russian energy went to Europe, but it should be under American control. The Americans should essentially administer it and make the money. And I guess this makes sense as well, to put the Europeans into the U.S. sphere of influence.
And it's interesting what you said about the Russians because, you know, this is what you hear from Russia as well. They're, you know, shifting their economy to the East. In the past, of course, they were offering discounts on all of this because they thought that economic integration with Europe was a step towards political integration, forming this greater Eurasian security architecture. But now that that's all out the window and they're looking east instead, they don't really care, as you say. And for that reason, they're not that interested in giving economic discounts.
Even so, two or three weeks ago, I was in Moscow, and Putin was giving a speech at Valdai. Someone asked whether or not Russia might restore its energy relations with Europe. And he said, "Well, sure, but you have to compete now with the Chinese and Indians." So there's no privileged position anymore. So I think that's essentially what you're referring to. But what happens to Europe in this situation ? Because, you know, you would think that for Europe to prosper, they would want to diversify their economic connectivity. They would want to, you know, source energy from many places.
They would like to maybe be in control of their own future and have some autonomy. How does being in the American sphere of influence impact the development of the European economies ? Yeah.
Michael Hudson
Well, you mentioned that Europe views Americans buying Nord Stream as simply an investment.
Investment is control. And that control is economic control and political control.
The question is: how long can Europe live in this sort of fictitious parallel universe in which Russia could invade Europe and somehow even initiate a war with it that requires Europe to fight alongside Ukraine as if it were defending against a Russian army moving in ? Well, we've discussed this before on your program, and no country can afford to invade another country anymore. The Russian troops would be chopped up on their way through Poland.
And it's nonsensical to imagine that Russia has anything to gain from invading Europe. I think all Russia wants is to be left alone so that it can reduce its military budget. And you'd think Europe would want to reduce its military budget, because let's look at what the European politicians have to cope with now. The strikes and demonstrations in Paris, throughout France, and in other European countries—Italy, you know—are all against the fact that, because of the strange monetary and fiscal constraints that the EU has imposed on itself, Europe has cut back its social spending just at a time when prices are being inflated, not by monetary policy, but again by Trump's war against Russia and Iran to maintain control of the world's oil trade.
Those opposing the war are saying, "We want the governments to subsidize the households that are having to pay more money for lighting and heating their homes, and to subsidize the industries." How are we in Europe going to avoid looking like Germany looked in 2024, when we stopped getting Russia's gas and oil ? The interruption of the world oil trade in the Persian Gulf is even more serious than the interruption of Russia's oil trade.
The EU and the United States were trying to use Ukraine as a vehicle to bomb Russia's refineries to prevent any ability for Russia to trade with Europe, with the loser in all of this being Europe, not the United States. So the question is: how long can Europe resist this dream that its press, the media, keep stirring up—that anything that goes wrong is Russia's doing ? The claim is that the French opposition to cuts in spending on schools and to the freeze on raising retirement income to reflect the increased cost of living is all Russian-inspired. You don't need Russian inspiration for people to act in their self-interest.
I don't think that the marchers care about whether Russia or China or any country may somehow gain a geopolitical benefit. What they want is the subsidy that Europe has offered under the social democratic arrangements that it's had ever since World War II. And these social democratic arrangements—the obligation to preserve living standards, rising wages and productivity for labor, rising employment— all of that is being thrown out the window because of the insistence that European countries have to spend 5% of their GDP on the military to enrich the military companies and help fight this imaginary war that they have to fight against Russia.
As I think I mentioned before, Putin said, "The war is not going to be that expensive. It's going to last two days, maybe two hours. The war will be over in one day. There will be no more Europe." And the international stock markets have shown there's now a sell-off of European military-industrial companies because I think there's a recognition by international investors that, well, none of this is really going to come off. There's simply no political way in which Europe can really do this.
So I think one of the problems is, well, what is the pro-war class, the pro-war group that does want a war with Russia, going to do to maintain their ability to go to war ? And I think there are some dynamics here that are foreseeable. This is a very dangerous period right now for Europe because you have the pro-war groups that control the present European governments saying, "We're going to be voted out of office in two years. Here's our last chance for war.
Here's the last chance to have all of Europe obliterated by atomic bombs." Well, as crazy as that seems, this is the last chance they have for a war with Russia—as if somehow Europe could beat Russia any more than Ukraine has been able to beat Russia. So the parties that are now governing France and Germany and Britain will be out of office. And the great danger is that these parties are going to accelerate their attacks on Russian shipping. You're already seeing preparations from Finland, Sweden, the Baltic states, and the Nordic states to attack—to make the Baltic Sea a NATO lake and to prevent Russian shipping from using the Baltic.
And that would include Kaliningrad, Russia's port on the Baltic, which is as important to it in its way as Crimea, a Russian port in what was Ukraine before. Obviously, this is an attempt to prevent Russian transport of its oil—not to Europe. It's quite happy saying, "We're going to send our tankers. Don't worry. We're not going to be helping. We're not going to be selling to Europe and underselling what you have agreed to pay the United States. But we need the tankers to leave in order to sell to other countries outside of Europe." You can do whatever you want. We want to sell to Africa, to South America, to the whole rest of the world.
NATO still wants to block this, and it's threatening war over Kaliningrad and in the Baltic generally. And so, you know, what is Russia going to do ? It has begun to send aircraft alongside the tankers, and it's already stopped an Estonian ship from trying to board a Russian tanker and take it over. But there have already been seizures of Russian tankers by Sweden and other European countries. This is a declaration of war against Russia. And as I say, the war is going to be very brief, and it will be very bloody. And Russia has been doing everything it can, I think, to say, "Please realize we're not interested in you. We don't want you.
We want nothing to do with you." We are kicking ourselves for imagining that we could have had Russia become a European country with European culture. We've seen the result of European culture. It's an American culture. It's a financialized economy. It's an anti-labor economy. It's an economy that is shrinking. It's an economy that is no longer democratic or anything like your European self-image during the Enlightenment. We just want to be left alone. Leave us alone and nothing will happen. But if you threaten us and injure us, we're going to have to fight back just to preserve our independence from you and make it clear that we're isolated.
There's a new threat—the equivalent of the Berlin Wall—and we want to protect ourselves from you Europeans, who are simply puppet states of the American neoliberal, neocon deep state.
Glenn
Well, do you see war as being the most likely outcome ? Because it just seems that, in this plan of making Europe into a sphere of influence for the United States, surely someone would want to resist this. But also, surely the Europeans would sabotage in some way the efforts by the US to make a deal with the Russians, as we now see over Ukraine. You mentioned, of course, seizing ships and threatening Kaliningrad. They can also, of course, try to permanently steal the sovereign Russian assets.
But again, this idea that over the next two years, all of these very unpopular, warmongering political elites will be voted out of office—I just don't see them going quietly into the night either. I find it very strange to watch what's happening in Europe now. Again, this militarism, when they don't even have a proper military, doesn't really make much sense to me. But do you see them going for war?
Michael Hudson
The European leaders want to be the new Ukraine. The way it's expressed in America is that America is willing to fight to the last euro against Russia. We've installed a puppet regime, the neo-Nazi regime of Zelensky in Ukraine, to fight to the last Ukrainian, whom neither Europe nor the Americans care about. The Americans are willing to fight to the last euro of European industry, of European economic surpluses, to join this fight against Russia and also against China.
All of this is tied together in the agreements that the EU has made in the last few weeks—the trade agreements with China over the automobile trade in hybrid vehicles and electric vehicles. Imagine what's happening now: you're going to have diesel, oil, and gas prices going up again as a result of the war against Iran and potentially the continued isolation of Russia.
This is going to spur a shift towards electric cars because electric cars, at least if there's a supply of electricity, whether it's from atomic power—well, Germany's got rid of its atomic plants—or solar power or wind power, are going to be less expensive than relying on diesel or gasoline. So I think there's a recognition in the United States and Europe that this is going to be the line of the future. And Europe has convinced China to try to make an overall deal. And I'm bringing this up because it's, again, the Yalta II, the tripartite agreement. What's China's role in all this, in the division of the world?
Russia is quite happy to cut itself off from Europe because it's already been living with enough years of trade sanctions that the sanctions have made Russia independent of products that it used to import from Europe. It's no longer reliant on Baltic and European agriculture and dairy products. It's independent of anything essential that the EU has blocked from going to Russia. What's the effect of a sanction ? It forces countries to depend upon themselves. And so Europe's sanctions have played the same role that Russian protective tariffs would have played in creating an independent Russian industry.
So Europe's sanctions have helped prepare Russia for all this. But China doesn't feel the same way. China still looks to Europe as a market for its exports, especially its automotive and industrial exports and all of its raw materials exports. And it's negotiating with Europe: "Well, this fight against us Chinese is an American fight. They think there can only be one ruler of the world, and it has to be the United States. They believe they can still maintain their unipolar power. And where are you going to stand on this?
The world is splitting apart." And just as Western Europe and Russia are breaking apart, Asia, the global majority, and the Global South are developing an alternative set of financial institutions, trade relationships, and investment relationships on their own very rapidly. And the question is, since the United States is essentially behind this conflict, this "yellow peril" conflict, where is Europe going to fit into all of this ? So China was willing to make the agreement on automobile exports, cutting back from, I think, 850,000 vehicles last year to maybe 350,000 electric cars and other cars this year.
But it did this in exchange for an overall agreement that includes China's right to go to the World Trade Organization and sue Europe if Europe imposes other tariffs and restrictions against China that are illegal under international law. Well, already you've had the European chemical industry saying, "Well, look at this wonderful agreement that the EU has made with China. China has agreed to cut back its car exports. How can we make the same agreement for chemicals?" Well, China's made it very clear there isn't going to be any agreement there: "We understand the importance to Europe of the automobile trade.
That's been so much at the center of its industrial development that we don't want to cause mass unemployment in the auto industry in Europe, because we realize that would simply push voters to support a general anti-China policy." But when you talk about the chemical industry, you Europeans have already destroyed your own chemical industry because chemicals are made largely out of oil and gas. And even products that are not made from oil and gas need sulfur. And sulfuric acid is made as a byproduct of oil refining.
So you can't blame your lack of competitiveness with us Chinese on us, because you've increased your cost of production because of your fight against Russia. That's your problem. We're not going to cut back our exports so that you can afford to have this hatred of Russia that your leaders have been sponsored by the United States and picked out to uphold. That's your problem. And Europe has said, "Well, you know, we've decided that we're rejecting the entire last 200 years of free trade theory. We've rejected the theory that countries benefit from buying in the cheapest market. We've redefined the idea of imports.
Imports are a result of overproduction." So if overproduction is a result of subsidies, the Europeans pretend that they're not subsidizing their market and that America is not subsidizing its market, just as China and every other industrial exporter subsidize their industries, and the EU's Common Agricultural Policy subsidizes its agriculture. Of course, China has subsidized its industry like every other country. But the whole idea is that if there is an imbalance, if a country is importing from China, this is a result of Chinese overproduction. So what China said is, "That's fine.
Okay, following your logic, we'll stop exporting to you all our raw materials, our rare earths, our aluminum, our gallium, our chemicals, our pharmaceuticals, and everything else, because to you that's our overproduction, and overproduction is bad. What is good is autarky. If you want to be self-sufficient in this, have a nice life. Produce your own aluminum and rare earths and gallium and tungsten and pharmaceuticals and all of this." When I read the European press, it is such nonsense in terms of any kind of economic theory.
I wonder how so much of the popular press, especially in England, which I read mainly because it's in English, can fall for all of this nonsense. But these are the statements that you're getting out of the French, German, and Italian governments. And it's just plain crazy. So I think that all of this is going to be what comes out of this trilateral meeting between the United States, Russia, and China. And China's position would be, "We want an open economy. We don't want a sphere of influence." Let the free market, let other countries decide who they want to trade with and who they want to invest in.
And obviously, German and other European companies have invested heavily in China because that's where the market is. They're being told to invest in the United States, and von der Leyen's agreement with Trump on the Liberation Day tariffs imposed against them led to European promises to invest in the United States. But they haven't been able to find any way for their companies to operate profitably by investing in the United States, because the United States is not industrially competitive anymore. It's financialized its economy.
It's become a rentier economy with such high housing costs, whether for rent or home mortgages, such high medical insurance costs for the population, such high education costs for people to get an education to get a job, such high transportation costs, such high costs for everything across the board, that there's no way Europe can fulfill the promises that von der Leyen's surrender to Trump's terms committed it to, any more than Korea or Japan are able to fulfill their promises for these enormous investments that they'd promised to make in the United States.
So you're having what seems to be the last gasp of America trying to maintain its world empire, its military spending abroad, and its control through the old-fashioned way of earning money through efficient markets. It doesn't have an efficient market anymore. It doesn't have the creditor power that it had, now that the U.S. government has become the world's largest official debtor.
The U.S. only has, as we've discussed before, the ability to cause chaos, interrupt other countries' development, and cause a crisis if other countries don't somehow agree to continue to pay tribute or have a tributary investment and trade relationship with the United States. This is the new shape of world diplomacy. And it's so widely discussed in the American press and the Asian press, yet so absent from the European press. That's what I can't understand.
Glenn
No, I have no good answers for this. I don't understand why the discussions aren't going in this direction at all. But I actually just got back from China, and I was asked so many times by journalists to explain what is meant by this concept of overcapacity because, you know, we used to call it exports. You know, no one complains about Italian overcapacity in fashion or French overcapacity in wine. But I was wondering, with this desire by the U.S. to essentially bring Europe into its sphere of influence, how do you see them acting toward the Middle East, then?
Because the big trend now appears to be, well, as you said, the U.S. can't compete economically, so there seems to be a growing incentive and willingness to use the military instead to carve out, I guess, a privileged position in the international economy or even exclusive spheres of influence. Do you see the United States pulling away from the Middle East or demanding an exclusive sphere of influence ? Because it seems like it could go either way at this moment.
Michael Hudson
It looks like the United States is being driven out of the Middle East. The whole post-colonial European takeover of West Asia that occurred after World War I—and was already beginning in the late 19th century—is being ended. You're seeing Saudi Arabia and the Arab Emirates essentially becoming a thing of the past. Iran is the rising power in the Near East, and the declining power is Saudi Arabia, which is a terrorist power. You have the pro-U.S., pro-European Middle East run by two terrorist governments.
Michael Hudson
The al-Qaeda crazies who are running Syria, the Sunni terrorists against the Shia, the Christians, and everybody who's not a fanatic Sunni Saudi Muslim, along with Israel fighting there. And now, with Britain sending aircraft to Saudi Arabia and France sending ships, you can see that as the Near East breaks away from the United States, it's also breaking away from its whole post-colonial heritage with Europe. And that means Britain and France. And you're seeing not only West Asia but also Africa breaking away from the franc area that it was in.
You're seeing the end of the 19th-century European empires of Britain and France, and it's ending in such an unpleasant, terrorist, violent way. You can see that the West Asians, largely with the support of Iran—which is supported directly by Russia and China, providing internet guidance on exactly where to bomb U.S.-controlled puppet governments in Saudi Arabia and the rest of the Persian Gulf—are realigning to supply their oil and gas and other exports to Asia and Africa, the global majority and the Global South.
So this war in the Persian Gulf, Iraq, and Syria is going to be part of the whole split away from the legacy of European colonialism that was absorbed into American imperialism after World War II, and it'll be part of the world split. And Europe looks like it's going to be as left out of this split as it's been left out of the relationships with Russia. So again, who will Europe be able to trade with and invest in without West Asia, Africa, and other countries ? Anyone except the United States ? It's locking itself into Trump's wars against Russia, Iran, and ultimately China.
And this is going to be the losing side, just as there's no hope of Ukraine defeating Russia militarily, as we'll see. There's no hope of the Europeans or Americans being able to hold on to the dominance of the entire world economy that they had from the late 19th century until the end of the 20th century. That whole world is ending. And the rest of the world is discussing, well, what institutions are we going to put in place to create an alternative new international economic order ? Europe and the United States are not part of this discussion.
All they can do is try to isolate themselves, meaning to let America isolate those parts of the old world order that it's still able to control as its puppet states, its satellites.
Glenn
Well, as we've been watching the world drift towards a multipolar distribution of power for many years, I was always wondering how the West would adjust. And now we are here. We kind of see this now: the US reverting to this extreme militarism, and the Europeans seemingly having no idea at all and making themselves more and more marginal. Of course, I had hoped for something else, but here we are. Do you have any final thoughts before we finish?
Michael Hudson
Well, how will it adjust ? The question is whether it will become more like China. And there's a financial setting for all of this. The whole fight by the European countries and the political crisis are largely financial in character. It's the whole European financial system, the way in which the budget is financed, the way in which European and American industrial capitalism has turned into finance capitalism, and the economies have been financialized and deindustrialized.
How can they reindustrialize ? The only way to do it is to definancialize.
How can they definancialize without wiping out a lot of the debt overhead that's been created?
And how can they become competitive or have anything to trade with the rest of the world ? If they continue to have privatized former public utilities—all the communications and transportation companies that, since the 1980s, under Thatcherism in England and Reaganomics in the United States, have been privatized into high-cost monopolies—then the whole economy looks like what the Thames Water system has done for London. How can Europe and America realize that they've made a false detour away from the logic of industrial capitalism?
That logic was to develop a mixed economy, public and private, where public enterprise, including the financial system, runs basic monopolies, including the credit system, in the interests of long-term, tangible capital investment, economic growth, rising productivity, and rising living standards. That whole issue was at the core of classical economics in the 19th century.
That whole dimension of discussion—value theory, price theory, what is rent, how do we bring prices in line with the actual cost of production and avoid rent-seeking—all of this discussion that was at the center of European economic discussion for a century is going to have to be revived somewhere. And yet it's disappeared from the economics curriculum and from the political science curriculum. So, obviously, it comes down to a change in consciousness and, I guess, what used to be called ideology.
Glenn
So a steep learning curve awaits us. Well, Professor Hudson, thank you so much for taking the time. I very much appreciate your insights on this. Well, I'm glad we could extend these discussions to the broader picture.
Michael Hudson
Thank you, Glenn.
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