Europe as Collateral: The Last Phase of US Hegemony

For three decades the Atlantic bargain was simple. The United States provided the security umbrella. Europe provided exports, technology and diplomatic cover. Washington ran the currency and the sanctions machinery. Brussels ran the single market and pretended not to notice who ultimately wrote the rules.

That script is finished. The combination of the Ukraine war, the energy shock and a declared pivot toward Asia has exposed a blunt reality. The United States intends to stay dominant, but to do so it must triage. Priority goes to the Indo Pacific contest and domestic industrial renewal. Europe is expected to pay more, absorb more risk and lose more competitiveness, while remaining politically obedient.

THE END OF THE EASY BARGAIN

When Washington now speaks about its external policy, the phrase that recurs is “foreign policy for the middle class”. It sounds benign. In practice it means that alliances, trade and sanctions are judged first by what they deliver to voters at home. The interests of partners are secondary. The logic is not conspiracy. It is domestic politics.

NATO strategy papers have quietly adjusted to this. They openly anticipate that European allies will take on a larger share of the cost and burden of confronting Russia, while the United States concentrates resources on the larger contest with China and its own internal reconstruction. The official language remains “burden sharing”. The underlying assumption is that Europe is the theatre where costs can safely be dumped without threatening the core of American power.

Before 2022 that assumption was still masked by the energy bargain. Russian pipeline gas supplied roughly forty five percent of EU gas imports and around forty percent of total gas consumption in 2021 on long term contracts. The system was politically awkward but economically effective: heavy industry and heating in Europe were underpinned by relatively cheap, predictable supplies. That foundation has been deliberately broken.

ENERGY SHOCK AND THE HOLLOWING OF INDUSTRY

The REPowerEU plan and emergency measures were framed as a necessary response to war. They were. They were also a decision to accept structural damage to Europe’s industrial base in exchange for geopolitical positioning. LNG imports surged, regasification terminals ran near full capacity, and spot prices for gas exploded. Electricity followed.

Households were partly shielded by caps and subsidies. Energy intensive factories were not. Analyses of European manufacturing show that by late 2023 production in sectors such as chemicals, metals, glass, cement and paper had fallen by at least ten percent compared with early 2021, even as total industrial output looked superficially stable. In Britain the official statistics are starker: output in energy intensive industries has fallen by about one third since 2021, to the lowest level since the early nineteen nineties.

Behind those percentages sit concrete decisions. Plants in fertilisers, base chemicals and metals have been mothballed or scaled back across Germany, France, the Benelux countries and Central Europe. A major study of the chemical sector finds that volumes in Europe have dropped by around fourteen percent since 2021, with executives citing sustained high energy prices and cheaper competition abroad as reasons to shift investment elsewhere.

None of this has hit the United States in the same way. Domestic gas prices remain structurally lower. American exporters have enjoyed a windfall as emergency European demand pushed LNG cargoes across the Atlantic. Washington can present this as supporting allies. The invoice lands in European factories and households.

FROM ARSENAL OF DEMOCRACY TO CUSTOMER OF WAR

The war in Ukraine has also changed the way Europe thinks about weapons and industry. For the first time, EU institutions are co financing arms deliveries, coordinating ammunition purchases and writing a defence industrial strategy. The language is the usual blend of technocratic optimism and bureaucratic acronyms. The reality it admits is blunt. Europe discovered that its ammunition stocks and production lines were nowhere near adequate for a prolonged high intensity war.

NATO’s own documents and independent commentary acknowledge severe shortfalls in shells, air defences and basic munitions in the early stages of the war. Emergency orders went to American suppliers and to a patchwork of European plants that had been run down during the peace dividend years. The alliance has now adopted a Defence Production Action Plan designed to aggregate demand and accelerate procurement. The European Commission has launched its own defence industrial strategy and specific measures to expand ammunition and missile production, including a five hundred million euro scheme under the Act in Support of Ammunition Production and broader packages worth several billion.

On top of these instruments sits a much larger political project. The “ReArm Europe” initiative, unveiled in 2025, promises to mobilise up to eight hundred billion euro for defence over the next decade, combining national budgets, EU funds and private capital. Leaders talk about readiness and resilience. Few spell out clearly which other areas of public spending will have to shrink to make room for this.

Once again, the structure is telling. Europe is expected to build the factories, carry much of the fiscal burden and host the infrastructure. Strategic direction, escalation ladders and the higher end of defence technology remain tightly tied to the United States. It is a textbook case of cost sharing without genuine co command.

FOREIGN POLICY FOR WHOSE MIDDLE CLASS

From Washington’s side this is consistent. The stated aim of foreign policy is to support American middle income households through jobs, investment and security. That is why recent industrial and trade measures focus on reshoring key sectors, subsidising domestic clean energy and semiconductors, and using alliances as channels to lock in supply chains and export markets under American rules.

European leaders repeat the language of partnership but have not insisted on reciprocity. They accepted an energy shock that slashed their industrial competitiveness. They now contemplate cutting social programmes and investment at home to free fiscal space for defence, while American legislation pours hundreds of billions into domestic green industry and manufacturing. In effect, Europe is asked to align on sanctions, pay more into NATO and absorb the industrial fallout, while the United States secures its own position in the next technological and military cycle.

In public this is sold as a necessary sacrifice to defend an open international order. In private, business surveys, industrial associations and central bank work all warn of a more prosaic risk: a structural loss of investment, innovation and skilled employment in Europe as energy shocks and policy uncertainty drive firms to shift production to cheaper and more predictable jurisdictions.

SANCTIONS, THE GLOBAL SOUTH AND EUROPE’S LOSSES

There is a further cost that is only faintly acknowledged in Brussels and Berlin. The sanctions campaigns of the last years have not just hit Russia. They have signalled to many states in the wider global south that Europe is willing to subordinate its own commercial and energy interests to Washington’s priorities without serious debate.

Countries in Asia, Africa and Latin America have watched energy flows and trade patterns change. They see Russia pivoting volumes eastward, China and India buying discounted hydrocarbons, and new arrangements emerging that bypass European markets altogether. They also see European officials lecturing them on alignment while themselves accepting higher prices, energy insecurity and deindustrialisation as the price of loyalty.

For governments already frustrated with decades of unequal trade and finance, this is interpreted not as moral leadership but as proof that Europe is no longer capable of independent calculation. That perception matters. It shapes future decisions on where to direct investment, whom to trust on technology, which currencies to hold and where to seek security partners. A continent that once saw itself as a balancer between blocs is being recoded as an obedient, declining province of a wider system.

THREE ROADS OUT OF COLLATERAL STATUS

Europe still has choices. None of them are comfortable.

The first road is denial. Leaders continue to insist that the current shocks are temporary, that green investment and digital plans will fill the gap, and that defence spending can rise without deeper cuts elsewhere. This is the path of speeches and photo opportunities. It relies on the hope that electorates will not join the dots between higher bills, lost jobs and faraway wars until it is too late to change course.

The second road is a harder bargain within the alliance. Europe could insist on real reciprocity: coordinated industrial policies that do not strip its manufacturing base, energy arrangements that reduce rather than entrench volatility, and defence planning that shares genuine decision making rather than just invoices. That would require being willing to say no to certain American initiatives, and to accept friction in the short term.

The third road is the one European officials like to invoke but rarely define: strategic autonomy. That would mean building energy systems, defence industries, payment rails and diplomatic channels that are not simply extensions of US planning, while maintaining cooperation where interests align. It would involve real costs and political courage, and it would almost certainly mean admitting publicly that the unipolar phase is over.

THE FOURTH ROAD: THE RETURN OF THE NATION

There is also a fourth path that Brussels and the commentariat refuse to name, because to name it would be to admit that the post Maastricht project has reached its limits. It is the road that is already being walked in Warsaw, Budapest, Rome and increasingly in the back rooms of Paris and Berlin: the deliberate, unapologetic reassertion of the nation state as the only unit that can survive an age of scarcity and great power rivalry.

This is not a retreat into nineteen thirties caricature. It is colder and more modern than that. It is the recognition that when energy, munitions, microchips and demographic survival are again decisive currencies, no supranational bureaucracy can allocate them efficiently or defend them credibly. The European Union was designed for abundance and American protection. Both conditions have expired together.

The real behaviour of governments in the mid 2020s bears this out. Poland is planning one of the largest land armies in Europe and building a domestic arms sector financed by debt that Brussels tolerates in practice. France is quietly renationalising parts of its electricity system and pushing “European preference” in terms that are barely distinguishable from protectionism. Italy is securing bilateral gas deals with Algeria and Libya while voices in Rome openly question a sanctions regime that has landed hardest at home. Even Germany — broken, lectured and weighed down by guilt — has started to ask in public whether permanent deindustrialisation is truly the price of moral purity.

The mood has shifted under the feet of the cosmopolitan class. Across the continent, voters no longer believe that “more Europe” is the answer to factory closures, electricity bills that devour half a wage packet or the prospect of conscription to hold a line that Washington itself is preparing to abandon the moment the Indo Pacific heats up. They have noticed that the countries which kept their nuclear plants, their refineries or their pragmatic relations with Moscow until the war made it impossible are the ones still producing fertiliser, steel and aluminium at something like competitive prices.

What is emerging is not a coordinated front but a thousand small acts of sovereign repossession: coal plants reopened “temporarily”, defence procurement routed around EU competition rules under “essential security” clauses, the return of golden shares and national champions, the use of eurozone stability mechanisms as leverage against Commission dogma. These are not aberrations. They are the immune response of nations that have remembered they are mortal.

The Brussels elite still speaks the language of nineteen ninety two: irreversible integration, ever closer union, the moral superiority of a rules based order. But voters, factory owners, mayors of dying industrial towns and increasingly generals and intelligence chiefs speak a different language. They speak of kilowatt hours, of artillery shells per month, of birth rates, of borders that actually stop something. They are no longer asking permission.

This is the real meaning of the current moment. Not another treaty, not another “geopolitical Commission”, not another speech about European values while the lights dim in Saxony and blast furnaces cool in Liège. The meaning is the return of the oldest political unit in Europe: the nation that decides for itself what it is willing to pay, whom it is willing to fight and where it draws the line between survival and suicide.

Washington understands this clearly. That is why planners now speak openly of a “European pillar” that can hold the eastern front while America pivots to Asia — because they know the pillar will be paid for by European taxpayers, built by European workers and, if the cost benefit ratio in Wisconsin or Arizona no longer adds up, quietly abandoned.

Europe’s tragedy is not that it faces hard choices. It is that for thirty years it was told there were no choices at all, only a radiant future managed by experts in Brussels and underwritten by American power. Both the radiance and the guarantee are gone. What remains is the hard, cold light of reality, and in that light the nation state is the only form that still casts a shadow.

At the moment Europe is drifting down the first road while pretending it is on the third, and stumbling into the fourth by necessity rather than design. The real test is whether its leaders can admit that the age of cost free integration is over and that survival now depends on choices they have spent their careers denying.

References

Source	Relevance
International Energy Agency – gas market lessons and Russia’s war on Ukraine	Documents the collapse of Russian pipeline gas flows to Europe, the surge in LNG imports and the resulting price and volatility shock.
European Commission – REPowerEU and EU Council gas import infographics	Provides official figures on Russia’s pre war share of EU gas imports, the shift to alternative suppliers and the stated goal of ending Russian fossil fuel imports.
Delors Centre and other analyses of energy intensive industries	Shows double digit declines in output across sectors such as chemicals, metals, glass and paper since early 2021 and warns of relocation risk.
Office for National Statistics and financial press on UK energy intensive output	Records a fall of around one third in British energy intensive manufacturing output since 2021, the lowest level in decades.
European Defence Industrial Strategy and Act in Support of Ammunition Production	Sets out EU plans to boost arms and ammunition production, including specific funding envelopes and targets for industrial capacity.
NATO Defence Production Action Plan and related communiqués	Confirms the alliance’s recognition of ammunition and stockpile shortfalls and the push to aggregate demand and expand industrial output.
European and national reporting on “ReArm Europe” and defence spending	Explains the scale and structure of proposed rearmament investments and the expectation that European budgets will carry long term increases.
Studies and commentary on “foreign policy for the middle class”	Clarifies how US strategy now explicitly links foreign policy choices to domestic industrial and middle income interests.
Central bank and policy papers on energy shocks and investment	Shows how higher energy costs reduce investment and innovation, particularly in financially constrained European firms.
Industry and media reports on Europe’s steel and chemical sectors	Illustrate in concrete terms how energy prices, global competition and policy choices are driving closures and job losses.