Christian Oliver

This is Monday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

Margrethe Vestager, the Commission's competition chief, and her mobile phone

It often seems that the European Commission’s only real game plan regarding Brexit is to hope that there won’t be any unfortunate spats involving the UK right in the middle of campaign season. That won’t be possible, and there is every sign an imminent decision over whether to allow consolidation among British mobile phone network operators could turn into a political football.

Margrethe Vestager, the EU antitrust chief, has been known to argue that cutting the number of players from four to three in any one market saps competition and, in the case of telecommunications, allows companies to increase phone bills. Her hard-line stance on a 4-to-3 Danish telecoms merger last year suggests she’s also looking to block the £10.5bn purchase by CK Hutchison’s Three of Telefónica’s O2. Or at the very least, she will impose stinging concessions.

In less combustible times, the politics would be more navigable. Ofcom, the UK regulator, has already announced it is hostile to the deal. Just this morning, Britain’s competition and markets authority weighed in, writing to Ms Vestager that the merger a “significant impediment to effective competition” in the UK’s mobile phone market. Ms Vestager could quite easily argue that she represents the sort of “more competitive Europe” that David Cameron, the British prime minister, says he wants. She could argue she is simply protecting the little guy from big corporates who will put his phone bills up. Read more

Christian Oliver

Welcome to the Monday edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

Migrants on a rubber raft arrive on the Greek island of Lesbos early Sunday morning

Last week’s highly-touted agreement to deport migrants from Greece to Turkey went into force yesterday, which means we will soon know the answer to the most critical question now facing the EU: Have leaders burned massive political, legal and moral capital striking a deal with Turkey that will never work?

The most immediate fear is that the Greek authorities are far from ready for the Herculean task of shipping thousands of people from the Aegean islands. Then, there is the concern that desperate migrants (and the people smugglers) will probably quickly switch to even more perilous entry points into the EU, like via war-torn Libya and across the Mediterranean into Italy.

EU officials are under no illusions. Most leaders at Friday’s Brussels summit that agreed the deal were sombre rather than triumphant. Above all, there was a tacit acknowledgment that, even by its own standards, the EU had brazenly pushed the law to the very limits. Human rights groups are bound to challenge the EU’s actions over the coming weeks and months. Read more

Christian Oliver

  © AFP

Greece has become wearily accustomed to micromanagers in Brussels and Berlin telling it what to do. Last summer’s Greek bailout sought reforms in some remarkably specific areas, including the weight of loaves and the shelf-life of milk. (Bakeries and dairies were cast as symptomatic of the economy’s protectionism and uncompetitiveness). Read more

Christian Oliver

Miguel Arias Cañete, the EU’s energy commissioner, will have to choose his words carefully next week.

On February 10, he will release the European Commission’s long-awaited “gas package”, and he must manage expectations among an unusually varied bunch of interests. There are eastern Europeans who want assurances that they will be safer in the face of any supply cut by Russia. The Norwegians need comforting too, looking for signs that there will still be EU demand for their gas in the years ahead. Environmentalists want Brussels to stress that the longer term trajectory is a greener, more efficient continent burning less gas.

According to an early draft of the plan seen by Brussels Blog, there appears to be a little bit for everybody – but not yet enough to keep everybody happy. Take Norway. It wants to want to maintain its status as the EU’s favourite gas provider. But their companies need assurances that Europe has a long-term appetite for gas at a time they’re looking to invest in infrastructure in the Barents Sea, above the Arctic circle. Just in case the message wasn’t getting through, Oslo wrote to Mr Arias Cañete about the issue again last week. Read more

Christian Oliver

This is Monday’s edition of our new morning Brussels Briefing. To get it every day in your email inbox, sign up here.

Iran's foreign minister Javad Zarif, right, with EU diplomatic chief Federica Mogherini

With “implementation day” for the Iranian nuclear deal passing this weekend, the EU is wasting no time in staking its claim in what could become a high-stakes, cut-throat transatlantic commercial competition over modernising Iran’s oil industry. Miguel Arias Cañete, the EU’s energy commissioner, yesterday attempted to seize the initiative by announcing Brussels would send a “technical assessment mission” to Tehran next month, adding he looked forward to establishing a “high-level energy dialogue” sometime thereafter.

Although much of the diplomatic attention has focused on Tehran and Washington for more than a year, Europe’s diplomats fought a long and often thankless battle to help secure the deal. There has always been an intense debate about whether Tehran would be grateful towards the EU as a result. Would the Iranians finally take a softer line on European investment in the energy sector? Or would they wait? Would they keep Iran’s prime assets for US investors, holding out for the real prize: the reopening of the American embassy in Tehran?

One of the EU’s priorities is to push to improve the terms of upstream contracts, which were a major disincentive to investment for the European oil majors in the early 2000s. Companies such as BP, Royal Dutch Shell, Total, Repsol and Statoil all sought to gain a foothold in Iran in the early part of the millennium, but found the obstacles were commercial as well as political. Read more

Christian Oliver

Why don’t they want Belgian chocolates? Or Italian spaghetti?

Europe’s frustration is mounting over its slow, difficult trade negotiations with Japan. The 15th round of talks is coming in February next year, and Europe is hungry for signs that it is worth carrying on.

In October, Japan joined the US and 10 other nations in sealing the Trans-Pacific Partnership, which covers 40 per cent of the global economy. But there is little sign of that momentum carrying over into a quick deal with Europe.

Mauro Petriccione, Brussels’ chief negotiator with Japan, warned on Thursday that enthusiasm for an accord with the world’s third biggest economy could wane if the deal is not finalised next year.

“If we don’t make it in 2016, we’ll have to explain why, and we cannot exclude a resurgence of the scepticism towards the possibility of a new Japan-EU [free trade agreement] that we had before we started,” he told reporters. “It took us a long time to persuade sceptics that it was worth trying this. If they see that we don’t succeed in 2016, they will start asking themselves questions again.” Read more

Christian Oliver

Johan Van Overtveldt, Belgium's finance minister, has vowed to fight Vestager

Margrethe Vestager, the EU’s competition chief, is regularly in the headlines for her corporate tax battles with big US companies: Google, Amazon, Apple and now McDonald’s. But don’t overlook her investigation into Belgium’s tax perks scheme for multinationals. A verdict appears to be imminent, and the repercussions will be felt well beyond the country of 11m.

Earlier this week, Johan Van Overtveldt, finance minister, told the De Standaard daily that Belgium was “highly likely” to have to claw back €700m from companies that have benefited from Belgium’s special tax incentives package.

Van Overtveldt is promising to resist Vestager’s tax justice campaign, but she isn’t a commissioner to change her mind too quickly. Read more

Christian Oliver

Does postponing her first trip to China for "important matters" mean tax cases imminent?

Danes are known for being fastidious about appointments. So it’s a really big deal that Margrethe Vestager, the EU competition commissioner, has cancelled her first trip to China. She was supposed to be there on Thursday and Friday.

The commission admits that something is up: “Due to important matters requiring her presence and full attention in Brussels, the commissioner will have to postpone the visit to China,” said a spokesperson.

We may be reading too much into these runes at the Brussels Blog, but there is a clamorous army of lawyers in Brussels simultaneously saying that we are reaching endgame in the landmark tax avoidance cases involving Fiat, Starbucks, Apple and Amazon. Read more

Christian Oliver

Oh dear. It’s like Fifa all over again.

How was it that the Americans managed to unearth all the rottenness in Volkswagen, Europe’s top carmaker? How come the Europeans were asleep at the wheel again?

That pretty much summed up the shame-faced mood at today’s session of the European Parliament’s environmental committee, where MEPs wanted lots of answers from the European Commission. And didn’t really get any.

Christofer Fjellner, a Swedish centre-right MEP, captured the spirit: “Of course it’s embarrassing that it’s the Americans that show us we have a problem. It could be telling that it is the Americans because in Europe, in member states, we are not up to the task of scrutinising our own heroes the way we should.” Read more

Christian Oliver

Malmstrom, right, signs an intellectual property deal with Beijing at June's EU-China summit

The gloves are coming off in the intensifying dispute over whether the EU should recognise China as a market economy.

A group of European industry organisations has commissioned a report from the left-leaning Economic Policy Institute in Washington, which concludes that the granting of market economy status to Beijing would endanger between 1.7m and 3.5m jobs in the EU.

That report – published here today – certainly lobs a grenade into the debate, and takes it out of the realm of legal hair-splitting by trade wonks. It comes with all the normal caveats about macroeconomic modelling, but it definitely takes things to a more visceral level.

For Cecilia Malmström, EU trade commissioner, China’s status poses a serious headache.

Here’s why: China itself argues that it automatically achieves market economy status within the World Trade Organisation at the end of 2016, according to the terms of its WTO accession agreement in 2001.

If Beijing is right about that, the EU could face significant strategic problems as it would be prevented from using its standard defence – retaliatory tariffs – to block what it sees as Chinese dumping in vulnerable sectors. Under international trade rules, is much harder for the EU to punish a country with high retaliatory tariffs when the offender is officially considered a market economy. Read more

Christian Oliver

Margrethe Vestager, the EU's antitrust chief

Margrethe Vestager seems to be preparing for a marathon court battle.

At a parliamentary committee on Thursday, she gave a clear sign that she had the political will to issue tough landmark decisions on the sweetheart tax deals that EU countries have been issuing to multinationals.

But she also gave away a tell-tale clue that her officials are steeling themselves for a firestorm of litigation in what will become some of the defining cases of the Juncker commission. She won’t be rushed into a verdict before she has a “quality” case, she told the committee.

The Danish commissioner was appearing before the Brussels parliamentarians to give an update on four landmark tax investigations – Apple in Ireland, Starbucks in the Netherlands and Fiat and Amazon in Luxembourg.

Most critically, she robustly defended the commission’s revolutionary approach of treating “comfort letters” as state aid – effectively defining the letters (which are pre-emptive tax rulings, intended to reassure multinationals about whether their corporate structures aimed at to avoiding high tax bills are legal) as illegal subsidies. Read more

Christian Oliver

Cecilia Malmstrom, the EU trade commissioner, during a press conference last week

Meet the Miculas: two twin brothers, Ioan and Viorel, whose battle with EU law will be of interest to anyone following Europe’s fitful trade negotiations.

The duo’s battle to save their beer-to-biscuits food empire in northern Romania may not seem an obvious proxy for an increasingly bitter fight over the EU’s trade deals with the US and Canada. But it cuts to the heart of one of the most politically contentious issues surrounding both trade accords: the status of international investment tribunals.

The brothers, who also hold Swedish citizenship, have had a terrible start to the week.

On Monday, the EU said they would have to repay all the subsidies they received to build up their business in the poor northern Romanian county of Bihor, on the Hungarian border. Their factories, which produce brands such as Servus beer and Rony biscuits, depended on what Brussels ruled was illegal state aid. According to their lawyers, the pair had decided to invest in a region as impoverished as Bihor on the understanding that Romania would subsidise them. On that pledge hang some 9,000 jobs.

Their business model, which predated Romania’s accession to the EU, came unstuck when Bucharest decided to join the European club. Competition authorities no longer allowed this kind of state largesse. In 2005, Bucharest cut the funds to the brothers in Bihor. (Romania finally joined in 2007).

This is where things get interesting legally, and the trade aficionados will start to realise something is afoot.

As Swedish citizens, the Miculas took their case to an international tribunal and won. At the end of 2013, the International Centre for Settlement of Investment Disputes awarded a settlement of $250m from the Romanian government because of its suspension of the subsidies. It was one of the largest sums ever awarded by an international investment tribunal. To Brussels, the award of damages meant state aid was now effectively being paid “through the back door”. Read more

Christian Oliver

A pipeline at a recently-modernised gas compressor station in eastern Ukraine

In only three weeks, the Juncker commission will unveil one of its most totemic policy packages: the so-called “energy union”.

But behind the hype, key parts of the plan still seem to lack any real bite, according to documents seen by the Brussels Blog.

Overall, a single energy market makes a lot of sense as the EU is currently often a messy patchwork of 28 counter-productive energy islands. If the member states integrated their gas and electricity networks more deeply, the continent could cut costs, slash emissions and reduce dependency on Russia. Who could object to that? Well, as ever, the mood among member states is hardly harmonious.

Speaking to reporters on Wednesday, Maros Sefcovic, the EU’s vice-president charged with launching the energy union on February 25, said that the single market would comprise “hardware” and “software”.

Relatively speaking, hardware is the easy bit. Build gas pipelines and electrical cables across borders and that will improve security of supply and help prices converge.

The big hurdle is the software. Fundamentally, energy has massively different costs in various countries because of divergent tax and regulatory systems. You cannot have a free-flowing single market until you harmonise these. Poles, Czechs and Hungarians pay less than half of German and Danish rates for power. In Denmark, 57 per cent of the final electricity price is based on levies, whereas in Britain the figure is closer to 5 per cent.

So will the member states converge fully? They don’t seem to want to. Sefcovic admitted on Wednesday that taxation was a significant problem and that he had hit a wall with member states: “Most of us in this room would agree that it would be the best way forward but we have to be very realistic that unanimity on an issue like energy taxation would be very difficult to achieve.” Oh dear. That’s a pretty big hole in the energy union plan. Read more

Christian Oliver

Cecilia Malmström answers press questions about the EU-US trade deal earlier this month

One year ago, Karel de Gucht, the EU’s trade commissioner, asked people to write in and voice their concerns about the most contentious part of a landmark trade deal with the US.

It is his successor, Cecilia Malmström, who will have to take the results of this public consultation squarely on the chin on Tuesday. It’s going to be a big (and possibly bruising) day for EU trade policy.

All the furore hinges on clauses of the US-EU accord that would allow foreign investors to sue governments in international tribunals, bypassing national courts.

This is technically known as Investor State Dispute Settlement, or ISDS, and has caused a huge international stink. It is probably the single biggest political obstacle to the EU-US deal, known as the Transatlantic Trade and Investment Partnership, which is potentially the world’s biggest trade deal. Reservations about ISDS are particularly strong in Germany and Austria.

So what will this consultation show on Tuesday? As far as we know, more than 150,000 people have written in. The vast majority are unhappy. To give a scale of the feverish interest in this topic, the trade commission has never held a public consultation that garnered more than 1,000 responses before. Read more

Christian Oliver

Hyon Hak Bong presenting his credentials to Queen Elizabeth two years ago

Hyon Hak Bong, North Korea’s envoy to the EU, has his work cut out.

The instructions from Pyongyang are clear: re-open a dialogue on human rights with the EU that was suspended in 2003. That’s a tall order in itself, but it is made even more difficult by the fact that he must simultaneously reassure sceptical Europeans that camps for political prisoners simply do not exist in North Korea.

Speaking to the Financial Times on a mission to Brussels, it was clear that the London-based ambassador was part of a broader Pyongyang charm offensive towards the EU. Last month, Kang Sok Ju, one of the supremos in the ruling Workers’ party, visited Germany, Belgium, Switzerland and Italy.

Currently seen as a destination for only the hardiest foreign investors, the impoverished nation of 25m would benefit from some more business with Europe (and the access to hard currency that brings). Real progress on that prickly human rights dossier would certainly help “develop relations further”, as Mr Hyon puts it.

North Korea wants the EU to stop co-sponsoring UN resolutions against Pyongyang’s human rights record, but Mr Hyon may find Brussels bureaucrats ever-so-fussy about those infuriating details – like the penal system. Europeans will be focusing on the testimonies of North Korean defectors, who describe the horrific conditions in the country’s gulags, telling of rape, summary executions, starvation and back-breaking labour in penal mines.

According to Mr Hyon, this is all a fiction. He said that the EU needed to understand who the defectors were: “These are the riff-raff who have escaped through fear of the legal treatment they will receive for their crimes. So they attack North Korea and take money to do so…. We do not have political prisons. We have prisons like those in Belgium and the UK, where prisoners are being educated.” Read more

Christian Oliver

The Belchatow power station in central Poland, one of the largest coal-burning plants in the world

While Brussels winds down for the summer and preoccupies itself with finding new commissioners, there will be some very busy people left working on a climate policy conundrum that needs to be solved by autumn. We’ll be hearing quite a bit about it, so here at the Brussels Blog we’ve decided to give it a name: The Polish Puzzle.

By October, the EU needs to agree a target for reducing greenhouse gases by 2030. This is one of the most critical numbers for the determining the course of European industry over the next 15 years, so it is not a decision to be taken lightly. The commission has proposed a cut of 40 per cent from 1990 levels.

Poland, which derives about 85 per cent of its energy from coal, does not like this target one bit. The alternative – switching to cleaner gas – could make it more vulnerable to imports from Russia, which would be anathema in the current geopolitical environment. Unless one side gives, a climate deal by October could prove elusive. Read more

Christian Oliver

When looking for scapegoats for the EU’s energy crisis and our dependence on Russian gas, it is all too easy to attack “district heating”.

District heating is the main way that cities are heated in eastern Europe and the Soviet-era infrastructure can often be wastefully inefficient, as we write about in a story today.

But don’t write it off too quickly. The truth is that western Europe is probably going to see a lot more of this technology in the next decade as it rethinks its urban energy consumption. Read more

Christian Oliver

A bullet hole in an armoured police car used during this week's cannabis raid in Lazarat.

Eight hundred police and SWAT officers besieging a village? Armed drug dealers fighting back with grenades and mortars? This is hardly familiar territory for the wonkish world of the Brussels Blog but a dramatic battle in the Balkans is of critical importance to the course of the EU’s enlargement.

It is all happening in Lazarat in Albania, from where the Associated Press has a hair-raising dispatch. The police moved in to take out what has become the cannabis capital of Europe. Incredibly, AP cites an estimate that the area was earning about $6bn a year through cannabis cultivation, which would be just under half of Albania’s GDP.

It is the timing of this operation that is so vital. On Tuesday, Albania will learn whether it has been accepted for “candidate status” for becoming a member of the EU.

The showdown in Lazarat is a sign of Albania’s intent in the area where it needs to show most progress: judicial accountability and the fight against corruption. It is hardly as if Albania’s security services have only just woken up to what goes on in Lazarat – the key issue is that a plantation of this epic scale must have been protected from on high. Albania wants to show that it is willing to take on vested interests. Read more

Christian Oliver

Russia's Vladimir Putin at the launch of South Stream's Black Sea pipeline in 2012

Is it possible that, once again, one of Europe’s biggest strategic concerns ends up hinging on a Balkan intrigue?

This time, it is the Ukraine crisis, Europe’s fears about its energy security – and the influence of the king-making junior coalition party in the Bulgarian government, the Movement for Rights and Freedoms.

The concerns of Bulgaria’s small ethnic Turkish party may seem worlds away from the geopolitical confrontation between the Kremlin and the west. But on the group’s narrow shoulders could lie the fate of the landmark South Stream pipeline, a project that many believe will further cement Russia’s hold on Europe’s gas supplies. Read more