1. Silk, Spices and Semiconductors: Crafting a Modern China-EU Collaboration
2. The Bosphorus Bridge to Brussels: The Modern Saga of Türkiye-EU Relations
3. Orient to Occident: Rethinking EU’s Engagement with the Middle East
4. Conclusion

In the context of reinforcement of the EU’s strategic autonomy, the first part of the triptych blog was mainly dedicated to the war in Ukraine and its respective challenges, whereas the second investigated the transatlantic relationship. However, in the years to come, among crucial things for the EU will be to position itself as regards the rise of China and the proliferation of ‘regional powers’ that occupy a middle-level position in the international power spectrum, project significant influence, and reveal some capacity to shape international developments, especially in the closest EU neighbourhood. In an ever more fragmented world characterised by an increasingly transactional approach to foreign policy and a myriad of interdependencies the EU has with different countries, the EU ought to prepare for political coexistence and competition and privilege de-risking over decoupling. In light of such a frame of reference, the third part of the blog will analyse how the concept of the EU’s strategic autonomy could manifest itself in a relationship with China, Turkey, and countries of the Middle Eastern region.

Silk, Spices, and Semiconductors: Crafting a Modern China-EU Collaboration

In the years behind us, Sino–European relations have undergone dramatic changes. China’s integration into global value chains after its 2001 WTO accession led to increasing interdependence with the EU. The Kuka takeover in the mid-2010s, as part of the hunt for German future-orientated industry champions, marked a turning point for rethinking at the political level consequences of cooperation with China. Thus, in 2019, the EU Commission launched an EU-wide FDI screening mechanism, and from there, it just unwound. In 2021, the EU, for the first time in 30 years, sanctioned China for the systematic violation of human rights in Xinjiang province, whereas China, in a tit-for-tat reaction, immediately imposed countersanctions, targeting, for example, members of the European Parliament. Subsequently, China decided to teach Lithuania a strong economic lesson by applying discriminatory and coercive measures against exports from Lithuania and against exports of EU products containing Lithuanian content after Taiwan officially opened a new representative office in Vilnius and dubbed it “Taiwanese Representative Office in Vilnius”, ultimately resulting in a WTO dispute. Finally, reimagined China’s and Russia’s “no limits” friendship and subsequent China’s lukewarm support of Russia’s war in Ukraine seem to be among the final nails in the coffin of the strategic partnership between the EU and China.

Table 1: Timetable of key events impacting EU China relations. See more at this link.  

While the EU labelled the next phase of EU-China relations as a dynamic blend of partnership, competition, and systemic rivalry, the future is poised to usher in a captivating era of divergence and a deliberate shift towards the greater distance. In most cases, EU countries’ political elites view the world as undergoing a polarisation between democracies committed to rules and revisionist autocracies, with swing states positioned in between. As much as this might also be the case, the main axis of global polarisation is arguably centred around different outlooks on desirable underlying premisses of the international order and, more importantly, the exclusive or non-exclusive right to set governing arrangements among states. This does not mean that the EU necessarily needs to be involved in each story in which, for reasons of geography and capacity, the United States is likely to have the principal role. Realistically, the EU has no substantial means to project its soft power on China, whereas the use of hard power is out of the equation. Therefore, the game of “disciplining” China might be the one where the EU could call in sick. Instead, it should strive to fully enforce its open regulatory standards towards Chinese entities, thus showing its capacity to impose the norms in its bilateral relations and clearly demonstrate to any stakeholder that “Europe is a player, not a playing field”, yet a player with no intention to prescribe rules of all other bilateral relations across the globe.

The Bosphorus Bridge to Brussels: The Modern Saga of Türkiye-EU Relations

Türkiye is in a customs union with the EU and has been a candidate for accession since 1995, however, the relationship between Türkiye and the EU has been on a path of decline in the last decade. In 2019, the European Parliament called for the suspension of full membership negotiations between the EU and Turkey, and the newest European Parliament’s report in 2023 heavily criticised Turkey as well. In turn, this sparked President’s Erdogan threats that it will seriously consider “parting ways” with the EU. Therefore, the EU’s relationship with Turkey is stuck at an impasse. EU policymakers can no longer conduct effective diplomacy or formulate a wider geopolitical strategy premised on Turkey acceding to the union.

As the prospects of Turkey’s accession to the EU diminished completely, there is a dire need for reconceptualising the relationship between these two geopolitical players. The reconceptualisation must consider two, what now seem to be, facts. First, the EU’s conditionality is hardly going to stop democratic backsliding in Turkey. Second, Turkey’s accession process is in a gridlock that will hardly be resolved any time soon. Therefore, the most reasonable thing to do would be to adopt a more transactional approach to cooperation. This would include deepening the customs union, which is a part of the association agreement with Turkey (Ankara agreement), whereas “tools like high-level political dialogue, people-to-people contacts, Turkey’s participation in select EU programs and its use of EU funds, and the issue of visa liberalisation would also be on the table”. On the other hand, with violent flare-ups between Serbs and Albanians in the northern part of Kosovo*, the recent turn of events in Nagorno-Karabakh, the de-facto state of war between Israel and Hamas, as well as the war in Ukraine, EU’s extended neighbourhood has stepped on a chaotic path of geopolitical turmoil. In such circumstances and given how Turkey exploited its strategic location to play a decisive role in some of these conflicts, Europe will need to come up with imaginative diplomacy to more deeply engage Turkey given its increasing geostrategic importance.

Orient to Occident: Rethinking EU’s Engagement with the Middle East

Should one possess no prior acquaintance with the complex tapestry of politics and geopolitics, and should they be granted an introduction to the proximity of the EU to the Middle East, the intricate web of migration politics, the daunting implications of Islamic terrorism, and the pivotal access to energy resources in the wake of decoupling with Russia, their natural inclination might lead them to envision the EU as the preeminent external figure in the Middle Eastern narrative. The revelation that the EU wields considerably less influence in the region would then evoke quite a surprise.

For a long period of time, the EU has been attempting to play geopolitics relying solely on values and technocratic EU rules and standards. After Gaddafi’s removal in 2011, the EU extended offers to new governments in the form of Euro-Mediterranean Partnership and ENP participation, along with incentives. Similar plans were proposed to Algeria and Egypt, but in all instances, the regimes either rejected EU cooperation or accepted funds while resisting its cooperative security norms. However, things have arguably started to change recently. For example, in 2023, bin Salman was in Paris, where he was greeted with more than a cordial handshake with Macron at the Élysée presidential palace less than five years after Saudi journalist Jamal Khashoggi was killed and dismembered in Saudi Arabia’s consulate in Istanbul. Such diplomatic actions of one of the most important EU members might signal the EU’s shift to geopolitics based on realpolitik principles. However, the re-emergence of the EU’s stability-oriented security policy leads to: compromises in the promotion of democracy and human rights; perceived U.S. and European double standards in the promotion of values; a crisis of the so-called liberal alliance.

What this means is that the EU is being closed in between two tough choices in the Middle East – playing the realpolitik card and being called out for hypocrisy for cooperating with illiberal/autocratic countries with no strings attached on the one side and pushing through value-preconditioned geopolitical agenda on the other. Given the current state of affairs, the EU should opt for the former scenario for several reasons. Firstly, since the Arab Spring, the Middle East has witnessed the increasing interference of many relevant geopolitical actors who are willing to offer a lot. This proliferation of actors further complicates the EU’s conditioning policies. Secondly, bandwagoning with the United States may lead to the dominant ally ignoring the EU’s vital security concerns in favour of other geopolitical priorities. Thirdly, the majority of the contemporary Middle East is now on a path towards solidification of the power of brutal, illegitimate, and authoritarian regimes. This will make it strenuous for the EU to cooperate selectively with some and not with others (e.g., Saudi Arabia and Iran) while simultaneously retaining its veil of integrity and trustworthiness. Instead, the EU needs to adapt to the region, rather than seeking to adapt the region to its own value prisms, and at the same time clearly signal to Middle Eastern partners that externally, its geopolitical and security interests come as a priority, whereas as its values are not to be challenged internally.

Conclusion

In summary, the EU should not define itself in opposition to or in league with China, but instead, provide itself with a foreign policy framework that would allow cooperation and competition with China based on a clear understanding of each other’s interests. As regards Turkey and many Middle Eastern countries, such as Saudi Arabia and the United Arab Emirates, the EU should pursue transactional relationships. As most of these countries seek to escape the United States’ grip and become entangled in great power competition, this opens the space for the EU to impose itself as a relevant geopolitical player with whom these countries can cooperate without being driven into what they consider a hypocritical global war in defence of one or the other global order. While it should privilege relationships with partners that share its values, the EU will need to coexist, and sometimes work, with other countries, too. Its geopolitical future will thus depend on the ability to protect its values internally with the powers that seek to challenge them, but on the outside, the EU will need to protect primarily its interests and not values. In other words: “Rather than making the world safe for democracy, the goal should be to make European democracies safe in the world”.  

This is the third and the final part of the blog, you can read the first part here and the second part here.

Članak EU between the geopolitical backwater and strategic autonomy (3/3) se pojavljuje prvo na European Policy Centre.

Public procurement, as a process through which government agencies acquire goods and services from external sources, represents one of the essential areas in Serbia’s EU accession process, covered by Chapter 5. The importance of this chapter was heightened in 2020 with the introduction of the Revised Enlargement Methodology.

The inclusion of public procurement as an integral component of the Fundamentals cluster was a pivotal development, aligning it with other indispensable domains such as the rule of law, democratic institutions, public administration reforms, economic criteria, and more. Upon entering the EU, Serbian companies will gain the valuable right to participate in every public procurement opportunity across the EU alongside businesses from member states. Therefore, Serbia’s entire public procurement system, post-accession, must be carefully designed as a level-playing field, ensuring equal opportunities for all potential bidders from across the EU.

This proactive preparation will not only facilitate the EU accession process but also equip Serbian companies to access the significantly larger public procurement market within the EU. Additionally, public procurement holds a central position in managing EU Structural Funds because each country independently conducts procurements through these funds. This strategic approach plays a pivotal role in fostering economic growth and enhancing competitiveness during and after the accession process. European Commission, 2020, Enhancing the accession process – A credible EU perspective for the Western Balkans September 2023.

Although the EU’s endeavour aimed to underscore the paramount importance of fulfilling the public procurement benchmarks, it failed to incite substantive changes on the ground. Numerous challenges persist and continue to exert adverse effects on the functioning of the state. The vulnerability of public procurement in Serbia to irregularities stems from several key issues. A limited number of bidders and a substantial proportion of single- bid procurements indicate restricted competition, resulting in higher prices and diminished value for money. Furthermore, prioritising price criteria over striking a balance between price and quality considerations can undermine the overall quality and effectiveness of the acquired goods and services. Another critical concern is the excessive reliance on exemptions, which can potentially lead to reduced competition and transparency. These problems underscore the urgency of addressing challenges within the public procurement system. Ensuring transparency and integrity of public procurement is vital to preclude any misuse or mismanagement of public funds and, in turn, deliver high-quality services that genuinely serve the needs of citizens.

This is particularly important as a well-functioning public procurement system can be a driving force behind an efficient public sector, building trust, and upholding the principles of accountability and fairness. By analysing the lack of competition and excessive use of exemptions within Serbia’s public procurement system, this paper seeks to shed light on critical areas for improvement and pave the way for crucial reforms that will enhance the efficiency and integrity of the public procurement processes in Serbia, benefitting both the government and its citizens alike.

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1. Intermarium reborn
2. Who keeps the Open Balkan open?
3. EU Army – The long road to nowhere?
4. Conclusion

With consequential geopolitical shifts and fractures that will hardly heal any time soon, overt pressure combined with subtler influence to conform to new norms of international relations seemingly started to structure the overall relationship on a global level. The inability to conform to these norms now might come in a package with visible consequences. In the period of the imposed reestablishment of the politics of bipolarity and the “Cold War 2.0” mindset, there is little chance that occupying a position beyond the limitations of a patron-client relationship will be possible at all.

A quick screening of the transatlantic relationship between the United States and the European Union might convince us that we are precisely where we were twenty or forty years ago – trade-related disputes and different perspectives to applying tact in diplomatic endeavours and international diplomacy as the only sources of tensions in otherwise flawless compatibility. However, after a decade or two of dancing on the wire and following the path that ends up in an impasse, where several power centres balance each other out, global powers, including the US, seem to have lost their patience. Rather than sharing responsibilities and power, now there is only room for sharing liabilities. After decades of strategic partnership between the US and the EU, it seems that “Cold War 2.0” might move the relationship closer to American dominance and European dependency. The agency of the Three Seas Initiative, Open Balkans, and overreliance on NATO might be crucial aspects of such reinvented relationship. The only foot-in-the-door is arguably the concept of common European defence hand-in-hand with more robust geopolitical autonomy and more vital positioning in neighbouring regions.

Intermarium reborn

The Intermarium, or in other words, the geographical space between the Baltic Sea, the Black Sea, and the Adriatic Sea, has always been a recreation ground for various empires to test their political, economic, and military strengths, exercise their power, and test the limits of their strategic depth. We are now observing the contemporary revival of the Intermarium geopolitical project through newly emerged formats of Three Seas Initiatives (TSI) and Bucharest Nine (B9). In the modern world, this geopolitical concept was first used as a metaphor for the containment and isolation of [1] – Germany and Russia in post-World War I Europe. However, even the Intermarium as a sort of a conceptual predecessor to TSI has its conceptual forerunner used by Sir Halford Mackinder at the Versailles Conference – cordon sanitaire, the buffer belt zone consisting of smaller democratic states that narrow down the risk of closer cooperation between Germany and Russia. Following the pessimistic maxim of Rust Cohle from the popular TV series ‘True Detective’ – “time is a flat circle”, we might be witnessing yet another revitalisation of a century-old geopolitical concept.

Officially, the TSI and B9 initiatives are to be perceived as complementary, not in competition, with the EU. However, the question remains whether this perception truly reflects the dynamics at play. The focus of both initiatives lies primarily on expanding North-South infrastructure with little thought of the European East-West axis. Moreover, TSI itself is, in fact, a follow-on from the “North-South Corridor” project in 2014 led by the Atlantic Council, an organisation with the official mission to galvanise US global leadership. Moving along on the timeline, in 2017, former US President Trump endorsed the project while taking part in the Warsaw summit, thus throwing his weight behind the TSI and helping Poland to “resurrect a pre-World War II Polish plan […] to unite Central and Eastern Europe under Polish leadership and then counterbalance German leadership to the west and Russia to the east and […] drive a wedge between “new” and “old” Europe, reprising the strategy pursued by then-Secretary of Defence, Donald Rumsfeld, in the run-up to the Iraq War of 2003.” Optimistic EU decision-makers seem to have waited for the ‘Trump threat’ to pass and expected everything to go back to as it once was after seeing Trump off. However, NATO’s centre of gravity seems to continue shifting away from the Franco-German tandem to eastern flank countries at a steady pace, thus reinvigorating another power axis within the EU. Although this might contribute to further democratisation of decision-making processes within the EU, it could as much create a rift between two potential blocs asking respectively for a more geopolitical autonomy of the EU and requesting further alignment with US policies and geopolitical intentions.

Who keeps the Open Balkan open?

Yet another interesting initiative comes from the Western Balkan – the ‘Open Balkan’, before the Economic Forum on Regional Cooperation held in Skopje in 2021, also known as ‘Mini-Schengen’. Formally pioneered by Serbia, Albania, and North Macedonia, yet, given the United States’ exceptional support of the initiative, sceptics would say that it was, in fact, conceived by the United States to take advantage of the limited ability of the EU to smooth out the differences between ‘old’ and ‘new/potential’ member states. Some experts claim that the initiative unnecessarily duplicates the Common Regional Market (CRM) prospects, which have arisen under the auspices of the Berlin process, where the EU and especially Germany, have much greater authority. Some even identify “dangerous implications” that the initiative might have for the region due to risks of making existing political problems worse despite the dubious nature of such views. Proponents of the initiative insist on positive aspects of increased trade and cooperation but sometimes focus narrowly on Open Balkan’s potential to build on the CRM legacy as if the WB countries could not have done the same through the CRM. Perhaps, that is why the EU’s envoy for Belgrade-Pristina dialogue, Miroslav Lajcak, described the initiative as “unhealthy competition” with the EU integration process. A strong transatlantic link inherent to the Open Balkans thus might tilt the balance in favour of the transatlantic integration process (at the expense of the increasingly uncertain EU integration process) with a focus on the same sectors – energy, transport, and digital sectors, as in its previously discussed counterpart initiative – TSI.

Several other occurrences also indicate the growing influence of the US in the region at the expense of the EU. Until recently, prior to the Franco-German proposal for the normalisation of relations between Belgrade and Pristina, and apart from the growing number of ethnically motivated incidents and violence against Serbs, the Belgrade-Pristina dialogue and situation on the ground remained in a stalemate. Initially, Trump’s administration kickstarted parallel US-led talks, overshadowing European efforts and monopolising the mediation role. However, with Joe Biden’s presidency and appointment of two seasoned diplomats with relevant experience – Christopher Hill in Belgrade and Jeffrey Hovenier in Pristina, seemingly, the EU-facilitated process got reinvigorated. Yet, even such a turn of events left analysts with an aftertaste that the US interference and dominance even over the EU-led dialogue process is inevitable.

Besides the US’ increased involvement in the Belgrade-Pristina dialogue, there are other regional affairs in which the US aim to play a more active and dominant role. For example, in Bosnia and Herzegovina, the US and UK strongly supported sudden changes to Bosnia’s election law made by the peace envoy Christian Schmidt minutes after most polling stations closed last year. In contrast, EU countries might not have been particularly satisfied, according to some commentaries and the fact that most EU and EU member countries’ representatives remained mute. Eventually, Schmidt was even requested to appear before the Foreign Affairs Committee of the European Parliament to “clarify the reasons for such undemocratic measures”. Similarly, in 2021, when Serbian leader Dodik was, like countless times before, threatening to create a breakaway ethnic-Serb army and withdraw Bosnian Serbs from central institutions, it was Gabriel Escobar, a high-level US diplomat, who met with Dodik and deescalated the situation. Therefore, should the EU wish to preserve its diplomatic dominance over the region, it must also be aware that sending clear and strong signals about its leading diplomatic and mediation role in the region is of the utmost importance.

EU army – The long road to nowhere?

Theoretically, the EU strategic autonomy is inseparably intertwined with the security realm, but in practice, the idea of EU military independence has never managed to grow out of NATO’s shadow. Now ancient history – in 2019, Macron announced to the world that NATO is “brain dead”. Shortly after that, in 2021, France and Greece signed a landmark military agreement that provides mutual assistance in the event of one party coming under attack by a third country, even if the latter belongs to NATO. Many saw this as the first step towards the so-called ‘European army’ that has already been incorporated into the  European People’s Party programme, set out in Madrid in 2015, and the programme of Emmanuel Macron’s La République En Marche. All the political proponents of the independent EU armed forces, such as Angela Merkel or Jean-Claude Juncker, now seem far away from the stage lights, whereas Macron, according to the new Czech president, made a “reasonable shift”. In the aftermath of the discomforting Australia’s surprise decision to scrap a huge submarine deal with France in favour of nuclear-powered subs from the US and Britain, the idea of the EU army turned out to be only “a midsummer night’s dream” of Macron.

Vis-à-vis the EU’s strategic autonomy, the brave albeit light-hearted idea of the European army does not just sound complimentary but also necessary. However, in the current context of the war in Ukraine and consequential NATO revival, pursuing the idea of the EU army is unrealistic for numerous reasons, but that does not exclude further relevant reforms. First, to enable the most basic ability to defend itself as a political unit, the EU should develop a Rapid Deployment Capacity (EU RDC) consisting of up to 5.000 troops as quickly as possible. As the case of the Afghan government collapse demonstrated, the possibility for rapid response and determined troop deployment is of utmost importance for guaranteeing the security of its citizens abroad.

Secondly, the efficiency of EU member states’ militaries is extraordinarily low, given that the EU as a whole, even in 2016, had six times as many weapon systems in service as the U.S., including 17 different types of main battle tanks and 27 different howitzers (Graph 1). Increasing efficiency is thus not only the EU countries’ priority but should be the priority of NATO as well as no one can afford to have all EU members planning, developing or procuring in isolation. Therefore, the existing Permanent Structured Cooperation (PESCO) framework, especially commitments related to bringing their defence apparatus into line with each other, should be propped up by both EU and NATO to improve the interoperability of forces and develop joint defence capabilities of EU countries.

Chart 1: Number of different weapons systems in service in 2016

Source: Statista

Thirdly, as much as Article 5  of NATO’s Washington Treaty (the principle of collective defence) might be more renowned, the Article 42(7) Treaty on European Union has a much ‘more compelling nature’, given the explicit obligation of the EU Member States to come to the defence of the victim state, and that they have to do so by ‘all the means’  in their power, not just the means they think are necessary. Article 42 TEU sets a clear objective that ‘Union defence policy […] will lead to a common defence’, which might be interpreted even as an obligation – to think about the form the common defence should take and how it should be realised. Therefore, regarding the greater military autonomy, the EU has a well-defined starting point and a path to pursue, normative grounds to call upon, and compatibility and shared interest with NATO to count on. 

Conclusion

In summary, the Three Seas Initiative and Open Balkans are two significant US-driven geopolitical initiatives in Europe with the intention of reducing regions’ dependence on unwanted external actors. To have them promote a more united and prosperous Europe in addition to boosting economic, energy, and security cooperation between the participating countries, the EU administration, including France and Germany, need to step up and do more to put these two projects under its auspices.  Europe faces several geopolitical challenges simultaneously, and the US’s precipitate withdrawal from Afghanistan demonstrated the continued intention of the US to act in its own interests first. Altogether, Europe is thus required to enhance its security and autonomous defence capacities and assert its position as a global actor. To do so, establishing an EU army might still be a far-fetched idea, yet the EU has an established path to pursue that requires minimal consensus and resources – proceed with EU Rapid Deployment Capacity development and improvement of interoperability of forces and joint defence capabilities.

You can view the first part of this blog here.

The final third part of the blog series will study the relationship with other geopolitical competitors, respectively, in the context of opportunities for achieving deeper EU-SA.

[1] Stanley F. Gilchrist, ‘The Cordon Sanitaire—Is It Useful? Is It Practical?’, Naval War College Review 35, no. 3 (1982): 60–72.

[2] See more about this in a letter signed by a broad coalition of over 25 25 representatives from the European, German, Dutch and French Parliaments at the following link.

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Table of Content

1. How to Become a Diplomatic ‘Force Multiplier’?
2. How to Remain a Global Economic Powerhouse?
3. Inside Europe’s Energy Future
4. The Fallout of the War in Ukraine – Concluding Remarks

If the 2007 Munich Vladimir Putin’s speech, the financial and economic crash of 2008, and the rise of China as a most apparent geopolitical challenger and potential superpower have not been sufficiently indicative for some, the last few years brought more perplexities. The COVID-19 pandemic and geopolitically premised reconstruction of global supply chains, the US’s abrupt withdrawal from Afghanistan, the war in Ukraine, regional forces starting to reject a world order dominated only by several international players, be they from the West or the East… It seems that no longer will anyone be able to sit tight and watch the geopolitical arrows fly overhead between Washington DC, Beijing, and Moscow as, unlike in the Cold War, the politics of non-alignment will not be tolerated.

With the geopolitical realignments underway, and some just waiting to emerge, Europe will have to dig out the old textbooks it wrote long ago and remind itself how geopolitics is being played. In other words, the EU might be on the verge of ending up in the geopolitical backwater unless it starts making sound strategic geopolitical moves autonomously. Obviously, the word choice, including “strategic” and “autonomously”, has been intentional, as this paper argues that the strategic autonomy concept is an appropriate framework at the outset. However, for it to yield results, some other complementary political and geopolitical shifts need to be made. An approach is necessary that goes beyond merely listing a standard menu of policy areas and saying the EU needs more capacity in each of them. An approach is necessary that perceives power beyond hardware-type quantitative indicators, which is a low-key approach compared to geopolitical needs and ambitions that the EU has or should have.^[1]See more at: https://carnegieeurope.eu/2021/03/08/eu-s-strategic-autonomy-trap-pub-83955. To respond to the problem raised, this part of the blog series will examine the war in Ukraine and respective challenges linked with the EU’s diplomatic power and influence, economic resilience, and energy (in)dependence.

How to Become a Diplomatic ‘Force Multiplier’?

The broader impact of the war in Ukraine, the third asymmetric shock that the Union has experienced in the last two decades after the Eurozone crisis and the COVID-19 pandemic, exposed how much work is left on increasing the influence of EU diplomacy, bolstering European economic resilience, and reducing energy dependence. The most notable diplomatic effort to avoid the current conflict was that of the “Normandy Four” format, which included the Franco-German EU engine on the mediator side and Russia and Ukraine as interested parties. The accords sought to halt the armed conflict in eastern Ukraine in 2014. Unfortunately, both Minsk and Minsk II peace agreements failed to deliver any results whatsoever. Although the conflict got reduced to limited trench warfare for an extended time and arguably saved many lives yet, at the same time, it was evident that the two sides wanted diametrically opposed outcomes and that agreements left too much space for both sides to argue for interpretations that are advantageous to them.^[2]

Europe obviously could not have chosen to be reticent in the context of its immediate backyard being on fire. Yet, failures of both the Minsk and Minsk II agreements brought diplomatic reputational damage to the EU. Macron’s statements from February 2022 about Putin’s true strategic ambitions^[3] convince us that Europe did not misconstrue and curtail the conflict that it voluntarily applied to solve. However, in that case, the question remains – if the Europeans recognised the Ukrainian crisis as much more than Ukraine itself, why did not their mediation platform immediately pursue a wider and more strategic agenda that could address the true nature that drove this particular standoff – a clash in the worldviews of Russia and the West over the entire security architecture of Europe.^[4] Instead, the EU opted for mediation efforts within the narrow Minsk agreements framework that were obviously going to prove futile, given its reductive ‘ceasefire instrument’ nature. Hence, should the EU aspire to (re)impose itself as a diplomatic power, it needs to engage in a more careful critical pre-assessment of the level of success of its future diplomatic initiatives and start thinking on how to go beyond the “we are concerned” approach by evaluating all tools at its disposal, including hard-power foreign policy influence.

How to Remain a Global Economic Powerhouse?

The EU’s control over the material, institutional, and ideational structures in third countries and power over them^[5] stems mainly from its economic powerhouse capacity inseparably linked with the reputed economic resilience that has come under fire after the war in Ukraine began. After the eighth package of sanctions against Russia, the European Central Bank^[6], which has been more optimistic than most of the private sector counterparts for a long time, forecasted a sharp decline of the Eurozone GDP in the last quarter of this year and the first quarter of next year. The S&P Global Eurozone Manufacturing PMI fell to 48.4 in September from 49.6 in August^[7], signalling a further worsening of operating conditions for euro area goods producers. Furthermore, many analysts attribute the euro’s slide to expectations for rapid interest rate increases of the U.S. Federal Reserve to combat inflation at close to 40-year highs. The Deutsche Bank predicts a cut to 0.95-0.97 dollar worth^[8], which would correspond to the extreme values of exchange rates since the end of Bretton Woods in 1971. The fall of the euro makes the inflation problem more difficult due to imported inflation. Namely, about half of imported goods in the Eurozone are invoiced in dollars (more euros are needed to pay for imported goods), and slightly less than 40% in euros.^[9] Not to mention Germany’s first trade deficit, a unique export-oriented economy in entire Europe, since before the dissolution of Czechoslovakia and Yugoslavia. The war in Ukraine thus upended the European economy with economic reverberations felt worldwide and exposed significant room for improving the EU’s economic resilience.

Battered by the pandemic and Brexit, current energy prices, and especially disrupted trade relations after the war in Ukraine, the EU might be on the brink of a “Hamiltonian moment” to pursue deeper fiscal integration to support economic resilience. Today, US Treasury is the most liquid financial market in the world, enabling the situation in which US economic competitors are willing to hold their debt, sustaining the dollar as the global reserve currency, and preserving American financial hegemony. Only by creating a federal treasury of its own, the EU could complement its common currency and enter the ring with heavyweight category economic players on an equal footing. The fiscal integration, or in other words, debt mutualisation and launch of Eurobond of sorts, would allow more safety and support EU governments’ borrowing needs. Simultaneously, it would increase pools of investable capital and, most notably, the share of the Euro in global foreign exchange reserves. Just compare the EU sovereign debt market with the U.S. Treasury market relative to GDP.

That is where Europe lags^[10], which leaves the EU with inadequate funding to invest in public goods, including defence and security, and its member states without a safety net in terms of available resources in cases of recession and crises. Remember Greece in 2009? All in all, the European policymakers should sooner rather than later get into the swing of deeper fiscal integration and continue with the baby steps they have taken with the fiscal relief brought by the Recovery and Resilience Facility (RRF) to tackle economic resilience deficiencies that worldwide disruptions to trade and investment exposed after the war in Ukraine began.

Inside Europe’s Energy Future

The current gas and electricity prices increased fourfold, or even fivefold, compared with the usual rates, threatening the viability of the EU economy at large and putting at risk the survival of companies that are the backbone of the EU’s value chains. As there is currently no fast alternative to Russian gas besides demand reduction, sustained higher input costs will make European goods less competitive than North American or Asian equivalents. Thus, there is a risk that global supply chains might begin to reorient, moving towards non-European sources. As of August, industrial production had not started to decline, but the shock can be seen propagating through the economy in the form of lower orders, collapsing business and consumer confidence, and lower retail sales.^[11] Not to mention inflationary shocks that have been unleashed upon end users. The ETUC European trade union group said wages adjusted for inflation have fallen in every EU member state this year by as much as 9%. The energy crisis is ripping deep into the fabric of European society.

Different actors suggest different approaches to alleviate the energy crisis, and arguably unpleasant trade-offs are to be made. The demand reduction plan^[12] was off to a good start. Still, a further effort in that direction may only serve as an addition to an actual solution – as even European Commission head of unit at the energy directorate Monika Zsigri warned.^[13] A part of the “actual” solution might lie in electricity coming from renewables. However, the EU must ensure that part of the excess revenue of the renewable energy sector gets redistributed to consumers and disregard expected warnings of the industry representatives about the ripple effect of the EU profit cap. As for the other part of the solution, the EU’s Energy Purchase Platform^[14] is an excellent effort and should be implemented without delay. Unlike price caps, which never seem to strike the right balance and may provoke a complete energy supply chain disruption, the Platform would allow the EU to retain the reputation of a market player and substantially increase its negotiation power through pooled demand and enhanced coordination. Finally, the potential of green hydrogen fuel needs to be further assessed. The EU seems to be going in the right direction as regards most of here proposed measures but needs to speed up the decision-making process and concretise its efforts.

The Fallout of the War in Ukraine – Concluding Remarks

The war in Ukraine exposed and dramatized European frailties in several fields, mainly those that apply to the Geopolitics and Economy clusters of Strategic Autonomy, and illuminated the need for an apt balance between diplomatic and hard-power instruments, deeper fiscal integration, and energy autarky. Going down that road is easier said than done. Still, the political will seems to exist when looking at the conclusions of the European Council’s Versailles Declaration of 11 March 2022.[15] However, to achieve that end goal and pursue the above-described roadmap, EU member states need to end its strategic cacophony and start being efficient in pursuit of the EU-SA. Otherwise, the global turmoil might push the EU into the geopolitical backwater.

The following two parts of the blog series will explore the partnership with the US and study the relationship with other geopolitical competitors, respectively, in the context of opportunities for achieving deeper EU-SA.

[1] See more at: https://carnegieeurope.eu/2021/03/08/eu-s-strategic-autonomy-trap-pub-83955.

[2] Allan Duncan, ‘The Minsk Conundrum: Western Policy and Russia’s War in Eastern Ukraine’, Chatham House, 22 May 2020, https://www.chathamhouse.org/sites/default/files/2020-05-22-minsk-conundrum-allan.pdf.

[3] ‘Macron Vows “de-Escalation,” but Hints at Concessions to Putin’, POLITICO, 6 February 2022, https://www.politico.eu/article/emmanuel-macron-vows-for-de-escalation-and-dialogue-ahead-of-russian-trip-putin-ukraine/.

[4] Eugene Chausovsky, ‘Why Mediation Around Ukraine Keeps Failing’, Foreign Policy (blog), accessed 7 November 2022, https://foreignpolicy.com/2022/02/10/mediation-ukraine-russia-2014-war-west/.

[5] For clarification, see more about analytically eclectic notion of transnational power over (TNPO).

[6] See more at: https://www.ecb.europa.eu/pub/projections/html/ecb.projections202209_ecbstaff~3eafaaee1a.en.html.

[7] See more at: https://www.pmi.spglobal.com/Public/Home/PressRelease/7f7c7616023b42029707537a14443b78.

[8] Elliot Smith, ‘Euro Continues to Slide toward Dollar Parity — and Could Fall Even Further’, CNBC, accessed 17 November 2022, https://www.cnbc.com/2022/07/07/euro-continues-to-slide-toward-dollar-parity-and-could-fall-even-further.html.

[9] See more at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=International_trade_in_goods_by_invoicing_currency.

[10] George Calhoun, ‘Europe’s Hamiltonian Moment – What Is It Really?’, Forbes, accessed 16 November 2022, https://www.forbes.com/sites/georgecalhoun/2020/05/26/europes-hamiltonian-moment–what-is-it-really/

[11] Zsolt Darvas et al., ‘How European Union Energy Policies Could Mitigate the Coming Recession’, Bruegel | The Brussels-based economic think tank, accessed 16 November 2022, https://www.bruegel.org/blog-post/how-european-union-energy-policies-could-mitigate-coming-recession-0.

[12] See more at: https://ec.europa.eu/commission/presscorner/detail/en/ip_22_4608.

[13] See more at: https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/natural-gas/092122-gas-demand-reduction-key-for-upcoming-winter-but-situation-manageable-ec

[14] See more at: https://energy.ec.europa.eu/topics/energy-security/eu-energy-platform_en

[15] See more at: https://www.consilium.europa.eu/media/54773/20220311-versailles-declaration-en.pdf.

Članak EU between the geopolitical backwater and strategic autonomy (1/3) se pojavljuje prvo na European Policy Centre.

Today, according to the World Bank data, over 160 countries in the world implement assets declaration system (see Table 1 for more details). Within 30 days from the day of election, appointment or appellation, public officials in the Republic of Serbia are obliged to submit an asset declaration to the Anti-Corruption Agency, disclosing their assets and income, assets and income of their spouse or common-law partner, as well as minor children if they live in the same family household. The asset declaration is also submitted by officials whose term has ended, whereas urgent reporting is foreseen if the property or income of the public official has changed significantly in the previous year. However, due to the intensification of regional and cross-border offshore business, anti-corruption efforts in the area of asset declaration are becoming misplaced. This is because tools for tracking and detecting income and illegally acquired assets lag behind for innovative solutions aimed at hiding them from inquisitive citizens and institutions.

The brief was prepared within the Regional Good Governance Public-Private Partnership Platform (R2G4P). Analysis on this topic will be included in the Report on Good Governance in Southern and Eastern Europe countries (SEE), which will be published on the R2G4P website.

Članak A Game of Hide and Seek se pojavljuje prvo na European Policy Centre.