Trump v China: How Oil Is Defining Great Power Politics (Professor Helen Thompson)

28:35First of all, it defeated communism and then it beat fascism. And then America post-1945 kind of, you know, imposed through its rivalry with the Soviet Union and then through the victory over the Soviet Union, it imposed a kind of triumph of American ideals and democracy and liberalism. Where does Europe fit into all this? Where does Europe fit into this new world? Well, I think that Europe's actually a pretty interesting exception to this supposed rules-based international order of the 1945 age, because various of the European powers, starting Britain and France, are still imperial powers for a not insignificant amount of the post-war period, particularly the one, the bit from the 40s and 60s that in social democratic terms is usually lionised.

29:24that Britain is acting as a great game power in the Middle East from the beginning of the peace after 1945 through to the retreat from east of Syrius after 1967. It's fighting quite a number of resource wars in one way or another. They're short, but you could actually argue actually some of them like in Malaya, which has got some element of resources to it because of the rubber is not actually that short. So Europe, I think, has a problem now because it, for complicated reasons, I think swallowed a rewriting of Europe's own history. And I mean by that Western Europe's own history in the Cold War period.

30:16Again, it probably takes off in the 1990s. I'm not quite sure it's like there before. And the reckoning at this moment is seeing, well, what it actually means for Europe to be a resource poor state in a world where resource driven geopolitical competition is back on the surface again and not just like buried underground. This will get us into debt a little bit later on. But is there a kind of radical idea in Europe now breaking away from the US? It would be. I mean, whether it's possible in terms of what sacrifices would have to be made for that and whether most Europeans are willing to make those sacrifices is another matter.

30:59But in principle, the radical option would be to try to be self-sufficient. Is it a stupid option? I mean, I can't think of any Western European leader, including the sort of hard right ones that might win as populists from the Netherlands to France, if Le Pen and Jordan Bardella get in there, who would advocate that. I mean, just to be clear, for Europe to sort of decouple from America, I mean, I don't know what that decoupling looks like because their economies are so sort of interconnected. But really, we're talking about defence independence there, aren't we? And Europe does not have a defence.

31:35It also would require energy independence. And actually, over the last three, four years now, since Russia's invasion of Ukraine, Europe is actually more energy dependent upon the United States than it was previously, because it's important, much more liquefied natural gas from the United States. And I do think that this gets a core difficulty for what might be called the bid for strategic autonomy from the United States to use Macron's language. If you go back to 2019, Macron was making speeches on this subject. Macron always being quite keen on making speeches. That's a very Cambridge professor dig, I'd say.

32:19He was always keen on making speeches. It very explicitly says that the condition of doing this will be a reset with Russia, recognizing Russia as a civilizational state that is part of Europe's own civilization too, albeit not exclusively. and he's right in that because if you think about it if the europe is going to have to look after its own defense free from the americans it does not want to have to be doing that at the time of having particularly confrontational relations with russia in fact more confrontational than before but that world went i mean the possibility of a reset with russia disappeared with russia's invasion of Ukraine.

33:03So now, in terms of the bid for strategic autonomy or the aspiration for strategic autonomy for Europe on the defence side, it's a much harder ask than it was when Macron was making those speeches in 2019. And it's then complicated by the fact that, as I say, that the energy dependency is now actually greater than it was. So the corollary, in terms of energy, would be an energy reset with Russia, which I don't think most European governments are in any mind to do. You're held up as kind of, and understandably given your research and interests, as kind of the preeminent interpreter of oil as an engine, get it, of human history.

33:45Could you just introduce the basics of theory or kind of argument, and then we'll get into some specifics, of your book Oil and the Western Economic Crisis? The essential point about oil and the Western an economic crisis was me in a way educating myself about the importance of oil having come you know rather late I would say to understand its its significance. Essentially what I wanted to do was two things was to understand its relationship to the 2008 economic crash and to place the Iraq war in a oil context not in the way in which it often is done of people saying oh it was all about the profits of the oil companies.

34:27It was all about Dick Cheney and Halliburton and all of that. But to see it as a more structural response to the fact that as China's demand for oil took off at the beginning of the 21st century that the oil producing countries of the world were actually struggling collectively to produce enough oil to meet that rising demand. And that's why in middle of 2008 that oil prices reached their highest ever level in terms of the price at the time about$150 a barrel. So we talk about there being these oil price shocks in the 70s, which obviously that there were, but nothing is actually comparable to the oil price shock that there was in 2007, 2008, in terms of the acceleration of the price.

35:16It doesn't get named that. But once I came to think that that's what it was, I thought, well, actually, perhaps we should start trying to understand what happened in 2008 and the crash in an oil context as well as in a financial context. So it was essentially sort of a preliminary attempt on my part to try to explain why the, if you like, the political economy and the geopolitics of the 21st century had oil at their centre. Why did, what was the connection between oil and that crash of 2007 and 2008? Because you don't hear it talked about very much. I hear a lot about subprime mortgage loans and credit default swaps and over leveraged institutions and poor regulation and Alan Greenspan.

35:58I don't hear much about oil. Well, what you can see happening is there is a link between what you've just said. What you can see happening from about 2004 is that the central banks in Western countries, particularly the Fed, start worrying that the rise in oil prices that is beginning to happen is going to feed through into inflation. And as they worry about that and as they've got the stories that they know from the 1970s about the dangers of oil driven inflation in their minds, they start raising interest rates. So the Federal Reserve starts to raise interest rates in like 2004, continues into 2005, early 2006.

36:39And that is the context in which that those subprime borrowers start to struggle with their mortgages. If you then look, go a little bit further on into like 2007, oil prices have risen so high that they are having an extremely detrimental effect on consumer confidence. So if you look in the United States, that the recession actually starts or the recession over that period, like 2000, it starts in the US in 2007 going into 2009. It's much more got an oil price context to it than it has a financial markets problem context to it. Even though the financial crash in some sense had started in the August 2007, it was absolutely confined at that moment to bank funding.

37:28So what happens I think in 2008 is that the spectacular aspects of the financial crash that come after Lehman bankruptcy and the big fall in international trade that comes in the last part of that year, they deepen recessions that have actually been caused by the large rise in oil prices. Who today is benefiting from the fact that they've got oil in the ground beneath them? How is oil affecting power politics today? Well, Russia, I mean, has been, I think, the biggest beneficiary over a longer period of time, because it has been a steady oil producer, with the exception of the problems that came out of the collapse of the Soviet Union.

38:22And it has had, since Putin at least has been leader of Russia, a leader who is determined to use Russia's oil power as an instrument of geopolitical power. And high power. Yeah, I think the problem that Putin has is that significant blows have been delivered to him over the last few years. They're not just about oil, they're about gas and particularly like the loss of significant part of the European gas market. market but that what he has found is that the United States is actually willing it must be said in some ways particularly under Trump in the last year or so to make things quite difficult for the Russian oil companies and I think as I say the exhibit a of that at the moment is the the sanctions on Rosneft and Locoil that essentially forced their withdrawal so in Locoil's withdrawal out of Iraq.

39:26The United States has been a very big beneficiary, I would say, of shale oil over the last decade and a half because it has allowed the United States to have more foreign policy options than it did in the world in which it was the world's largest oil importer. That doesn't mean that the United States has been able to do what it likes where oil is concerned. And it certainly hasn't been able to do what it likes in the Middle East, quite the contrary. And actually, the United States is still dependent upon importing oil, which I think has ultimately constrained the attempts of every president from Obama to try to detach from the Middle East.

40:09But the United States would be in a much more, I think, geopolitically difficult position if the shale boom hadn't occurred. Is it actually possible to reduce your reliance on oil? because everything that Trump says, there's a way of looking at what Trump says, which is about hard power and extreme realism, which is he says, America needs a huge amount of oil. There's oil around the world. I'm going to go and get it. You know, we need rare earths. There's loads on the Greenland. That's quite nearby. You know, Denmark's small. We could jump on them. I'm going to go and get it. And you often hear people in this country, I think about the Labour government, Ed Miliband, who says that one of the arguments for increasing investment in renewables and pursuing net zero is that we want to stop giving money to the bad guys.

40:56Those are two irreconcilable positions, aren't they? You can't, on the one hand, say, you know, the world, the future of energy is still oil. We need to go and get it. And on the other hand, say, we need to get away from oils. Who's right there? Isn't there a kind of brutal realism about what Trump's doing? Well, I think that what we have to understand as a premise of the Trump administration is that it has entirely repudiated the energy transition in the United States, as that was conducted by the Biden administration. Biden was all over it. Biden used to say, you know, when I hear people talking about green energy, I hear jobs, jobs, jobs.

41:34I want to invest hundreds of billions of dollars in it. Jobs, jobs, jobs, renewables. That's gone. It is. And I think that part of the reason for that is that it's very difficult and that it doesn't deliver jobs. It hasn't delivered jobs at any scale anyway in any Western country that has gone down the road of thinking that the energy transition is a way of reversing de-industrialisation. And in one sense, the Biden administration made a big bet on that and it failed. it certainly failed in its political outcome because Kamala Harris was not able to become president of the United States now if you think of it as a question of oil versus the energy transition then I think what you've got to concentrate on is that it's not the decarbonising of electricity that is the alternative to oil which is I think the language that sometimes of this government in Britain get caught up in.

42:40The alternative to oil is electrification. Now, it can be electrification using decarbonised electricity, but you actually have to electrify to reduce oil consumption in most countries because very few richer countries use oil to generate electricity. So actually, you've got to substitute electricity for oil. Right. Now, China is doing significantly better at that than pretty much any large country in the world. I mean, China's figures aren't always reliable, but possibly up to a third now of China's overall energy consumption is electricity.

43:31I really hope you're enjoying this conversation with Professor Helen Thompson. If you are, please do subscribe to this podcast on BBC Sounds and that way you will not miss future episodes. Also, if you do subscribe, just make sure you've got your push notifications turned on and that way you'll get an alert whenever we publish a new episode and you'll never miss out. Thank you so much. And now back to Helen Thompson. If journalism is the first draft of history, what happens if that draft is flawed? In 1999, four Russian apartment buildings were bombed, hundreds killed. But even now, we still don't know for sure who did it.

44:11It's a mystery that sparked chilling theories. I'm Helena Merriman, and in a new BBC series, I'm talking to the reporters who first covered this story. What did they miss the first time? The History Bureau, Putin and the apartment bombs. Listen on BBC.com or wherever you get your podcasts.

44:40I want to talk to you a bit about debt, because one of the other issues that you've spoken about at great length on other podcasts, and you've written about this as well, is the, how can I put this? I don't want to misquote you, but the coming debt crisis, the coming debt emergency, which is the fact that in the rich world, public debt is around about 115 % of GDP. That is the largest it has been since the Napoleonic War. So going back a couple of centuries. And two things are happening. First, populations are ageing very, very fast, really an exponential rate now because the baby boomers born after the war are suddenly getting much older.

45:17And secondly, there doesn't seem to be the political ability anywhere for people to rein in spending. and you can look at what's happening in Britain where there was U-turns over welfare and winter fuel payments or you look at France where Emmanuel Macron, he of the speeches tried to raise the retirement age from 62 to 64 and I don't want to say all hell broke loose because it was a very French kind of hell but this is a huge coming crisis in Western politics isn't it? And not just Western maybe. Yeah, I think you can also add the United States onto that I mean I think that the Western Hemisphere issue binds quite a lot of what the Trump administration has done or did through the course of 2025 together.

46:00But so, I think, does the US fiscal position because the United States is heading for the point where the debt is unsustainable, certainly in terms of the volume of interest payments that are required to maintain it. And if you look at some of the most, to use your word, radical ideas that came out, radical perhaps in one sense of the meaning of the word, ideas that came out of the early Trump administration. The most striking was probably this paper by Stephen Miran, who's now on the Federal Reserve, what he called the Mar-a-Lago Accord, which essentially tried to deal with the US debt problem by making coercive demands of the United States allies, and essentially saying that those things that we provide to you, like security and dollar swaps in a financial crisis emergency, they will be dependent upon you restructuring all the debt of hours that you hold, turning it into very long-term 100-year bonds and getting hardly any interest.

47:05So in this world, which is a bit 1895 or 1904, of the Western Hemisphere reasserting itself, in this world where oil is central not just to our history but also to our future, in this world where um britain and much of the world faces real challenges over debt what do you think this country needs to do professor thompson in order to not just navigate this world but you know if need be be radical to try to secure itself in a future that's looking uncertain aging and a bit scary well i think the one area is which is going to have to be faced is the relationship between fiscal policy, monetary policy, i.e.

47:53the position of the Bank of England. Now, you can see this playing out in the United States. Obviously, big scale at the moment, fairly dramatically, because if you say, how has the Trump administration, or in this case, actually, Trump in particular, dealt with the debt problem. It's moved from Elon Musk is going to fix it. Doge. Doge. And there's trillions of dollars of expenditure that just disappear because it's all, you know, Democratic waste, the Democratic Party waste, I mean by that, to actually he's going to try and remove, even though Joe Powell's term is actually coming to an end at the Fed.

48:39Anyway. I should explain this for people who don't follow macroeconomics as closely as you and I do. There was this absolutely incredible scene where Jerome Powell, who's the chair of the Federal Reserve, kind of the equivalent of Andrew Bailey, the governor of the Bank of England, did a kind of video, a piece to camera, as we call it in the trade, where he basically said he will not be cowed by political pressure from the Trump administration, who, and this is, you know, this is just extraordinary, had launched criminal proceedings. against the Federal Reserve over various issues. And one of the issues was the overspending by the Federal Reserve, not on anything to do with the American economy, but sort of buildings that the Federal Reserve builds.

49:21And anyway, Jerome Powell this week did a video where he seems to say, I'm being targeted for political reasons over this, over what I'm doing on interest rates or not, under the pretext of this overspending on a building. And the relevance for the UK is people are looking at this and saying, might there come a moment when there's some more political pressure on the Bank of England. So far there isn't. Since 1997 we've had an independent Bank of England, but there is going to be a kind of, you reckon, a bit of a reckoning where the relationship between politics and the Bank of England might come into focus.

49:51Yeah, I don't think it's going to play out like the way it's playing out in the US, but it's very clear. And you can understand what Trump's point is, regardless of the means by which he's going about doing this, which is the fact that the Fed is as focused on inflation as it is, means that our interest rates are higher than they would otherwise be. Now, there was a war going back to this world like of the 1990s, and this to some extent was there actually in the 80s, of just assuming that it was a given not to be contested that price stability was the most important macroeconomic end. But pretty clearly that world has gone.

50:30Because the world has gone, the economic world that went with that mindset has gone, I think there is a pretty strong case for revisiting what the relationship between central banks and democratic politics should be. Now that is radical. What would a healthier, what would a better relationship look like? Well, I think that probably the direction of travel is going to be more political control over monetary decision making. And I think here we can see that actually these things do go in cycles. when you get these times where the economic political relationship is causing a great deal of difficulty and you're getting in some sense a democratic disruption which is what's going on and i think we're in that position now and i i think it can start in relatively minor ways which would perhaps be thinking about how the bank of england handles the assets that were purchased under the quantitative easing program and what interest is paid on those.

51:31I think if there were to be a reformed government, I'm not saying I think that there will be, but I think that would be... They've talked about looking at that. Yeah, that would be on the table. But I think if you're looking over a five to 10 year period, we're going to be talking about something more than that. Because, you know, in one sense, the easiest way of like doing something about the debt is to find ways to pay less interest on it. Now, that's actually harder for Britain than it is for the United States, because Britain's got to think about what the currency consequences of what it does, and the US can just probably absorb much of that.

52:03But it needs to be politically discussed again. Do you know that you're very kindly sticking around to answer some of the excellent questions we've got from listeners, and we should probably come to something of a close. The idea of reversing Bank of England independence, which is a sort of wonderfully wonkish idea, is kind of possibly the most radical idea I've heard on this podcast. Just to bring it finally, finally, finally to geopolitics, in big sweeping historical and geopolitical terms what do you think we're living through at the moment? Is it the start of something else or is it just the kind of fag end of something?

52:33I guess the way I think about it is that there was a period of world history that came to the end in the 1970s and actually the end of the European empires and the consequences of that geopolitically in the Middle East and for oil production were quite like central to that and that the end of that era put everything into play which is why that the 70s were such a turbulent decade and that there was from about 82 a way out of that which interestingly did involve the hemisphere which was increased oil production in the western hemisphere alaska mexico but also not the western hemisphere like north sea and that was very convenient from the point of view of western democracies because it wasn't arab producing or iranian producing oil that was making things easier and that that period the interlude if you like came to an end around 2005 So I think that we've been living in a much more fraught energy world and that central since then and that central to that is not just the return of China, but India too.

53:56The way in which actually the much larger population of Asia in relation to Europe now has real significance. And again, it goes back to this issue of then, how do we think about that first part like of the 20th century and that period in which China is absent and India is ruled by the British? it's a kind of I mean I'm still struggling to understand how I quite frame this myself but I think we just need particularly in Europe to see how odd those centuries of European dominance particularly the latter part of it actually they were the exception rather than the norm and one of the reasons then why things are now as difficult as they are in Europe is because in the interlude there were various things that carried Europe through.

54:55One of them actually was North Sea. One of them was the ability of the German economy not to de-industrialise in the ways in which others did and to hold on through the end of the Cold War to its energy relationship with what had been the Soviet Union and became like Russia. And as these things have changed, then Europe's plight has been exposed. But I do think that the world becoming not just more China-centric, but more Asian-centric is actually quite central to the period in which we now live. And I think this goes back to fossil fuels, particularly oil, but not only in an interesting way, because then we can say, well, look, the really odd thing was that first Britain with industrialisation via coal, and then the United States and Russia, Soviet Union as oil producers shaped this world of hypercapita fossil fuel energy consumption.

56:01without that much participation from the two most populist countries in the world. And once that changes, and once they're on trajectories in a fossil fuel world to being hyper-capital energy consumers, not that they're quite there yet, but in India's case, that's just radically different than the world that came before it. Well, the word becoming more Indian is fine by me. Professor Helen Thompson I know you're sticking around for some listener questions in our bonus episode but thank you so so so much for coming in It's been an absolute pleasure

56:44Okay Helen Thompson is obviously an extraordinarily clever Cambridge professor and a very very very smart thinker about human history and there is about seven or eight things there where I can say and I'm only going to pick out a few of them I can say, honestly, she made me think very, very differently, radically differently about something I thought I had a pretty firm grasp of. One, financial crisis. I've spent far too much of my life reading about subprime mortgages, about credit default swaps, about over leveraged institutions called Fannie Mae and the like. And the American situation in or America's economy going into 2007, 2008.

57:24Helen Thompson has just made me think much, much differently about that because she was very clear in articulating the role of oil prices and increased oil prices, which fed into inflation, which fed into higher interest rates, which is what exposed all those people with those dodgy subprime mortgages. I thought that was so interesting. I thought it was so interesting the way she talked about how this whole language around a rules-based order, about how this sort of, and I've used it, I'm guilty of using it all the time myself, about how the post-1945 world was a kind of rules-based order with American leadership of this order, which was upheld by global institutions.

58:02And in a way, we only really started talking about that in the 1990s. We only really started justifying it to ourselves in a post-Cold War world. Again, I hadn't thought about the fact that it's a kind of, it's almost a kind of post hoc justification of the world after 1945, that we're kind of using that phrase to almost make sense of the fact that, you know, America and the West seem to have it pretty good in the 1990s and onwards. But I thought the beginning of the conversation where we talked about this, this period, maybe it's 10 or 15 years, 1895 to say, say 1904, 1905, which has such a grip on the collective imagination of the Trump White House.

58:43It's so interesting there. So in 1895, American President Grover Cleveland enforces the Monroe Doctrine. That's something that the Trump administration has updated with the Donroe Doctrine, this idea that Donald Trump has his own interpretation of the Monroe Doctrine, and it's all about power in the Western Hemisphere. The fact that William McKinley was the president that Trump cited in his re-inauguration speech, he was in charge of America 1897 to 1901. And then the fact that the National Security Strategy of America has this Trump corollary, which is a reference to the Roosevelt corollary of 1904, it shows that that period, that decade, or maybe it's a bit more than a decade, is so, so important to America.

59:23And what Helen Thompson put me in mind of for really the first time is not what was going on in America at that time, but what was going on in China. And she pointed out that that period, the late 19th century, the early 20th century, was the beginning of what China sees as a century of near humiliation, which first Deng Xiaoping, or maybe first Mao Zedong, and then Deng Xiaoping, and then more recently, leaders like Wen Jiabao and Xi Jinping have tried to reverse. That was extraordinarily interesting. And this framework of understanding politics as these big spheres of power, and this Western hemisphere, which is basically the Americas and the bit around it, is, I think, useful, because what Trump was doing there, again, Helen made me understand it, wasn't a kind of necessary preemptive move.

1:00:10But what Trump is doing in Venezuela was in some sense a response, a reaction to what China has done over the past 15 years or so, or maybe 20 odd years in terms of building access to and resources and connections with Latin American countries and the Panama Canal. And, you know, there is a way of interpreting Trump's response to Chinese action in the Western Hemisphere as Trump just being ultra realist and saying, look, China wants a bit of the Arctic. That's why we need Greenland. China wants a bit of Latin America. That's why we need to control Venezuelan oil. And I'm not saying that as a defense of Donald Trump or his actions.

1:00:47But once you listen to Helen Thompson and you look at the context here, the historic context and the geopolitical context and the energy context, it makes you realize that maybe Trump is just acting as the kind of ultra realist in a world of global affairs or in a system of a great game, which has been around for a very, very long time. God, that was interesting.

1:01:12that's it for this episode but just enough time to tell you that nick is back with a new series of political thinking with nick robinson which i recommend in the highest possible terms not least because this week he's got a cracker he sits down with the head of the biggest teachers union the neu daniel kabedi has called himself and i quote an agitator for industrial action but has found himself in agreement with the conservative leader kemi badenok over whether to ban social media for children you can hear the full conversation on bbc sounds on friday and obviously if you haven't yet subscribed to radical bbc sounds is the place to do it just search for radical with amol rajan make sure your push notifications are turned on and if you want to give us a lovely new year present give us a five-star review elsewhere too i'll be back on monday when helen thompson is going to be answering your radical questions.

1:02:02Until then, thanks for your time and goodbye.

1:02:14If journalism is the first draft of history, what happens if that draft is flawed? In 1999, four Russian apartment buildings were bombed, hundreds killed. But even now, we still don't know for sure who did it. It's a mystery that sparked chilling theories. I'm Helena Merriman, and in a new BBC series, I'm talking to the reporters who first covered this story. What did they miss the first time? The History Bureau, Putin and the apartment bombs. Listen on bbc.com or wherever you get your podcasts.