Czech court’s OK to Lisbon treaty won’t solve EU’s real problems

November 3rd, 2009 10:06am

It’s striking that the Czech constitutional court announced its approval of the European Union’s Lisbon treaty on Tuesday morning just as the prospect of another Russian gas import crisis began to loom on the EU’s horizon.  For even though the news from Prague is welcome, a moment’s reflection is all you need to remind yourself that the Lisbon treaty will, in and of itself, do very little to help the EU address its most serious foreign and economic policy problems.

The sheer sense of relief at adopting a new EU treaty - it’s taken eight years, required two different texts, gone through three failed referendums and caused endless trouble in countries such as the Czech Republic, Ireland and the UK - risks fostering the delusion that everything will be better once Lisbon is in force.  But this is to fall into the trap of assuming that process can substitute for substance (see Monday’s blog on how the same fallacy affects the EU’s approach to relations with other big powers).

Last January witnessed the eruption of a Russian-Ukrainian gas dispute that deprived a number of eastern European countries of gas supplies for two weeks in the middle of winter.  It was, in many ways, a re-run of a similar episode in January 2006.  Like that crisis, it exposed the EU’s abysmal lack of progress in fashioning a common external energy policy.  The Lisbon treaty will not improve the situation - or, for that matter, make things worse.  What counts is political will, which treaties do not produce out of thin air.

A similar consideration applies to the co-ordination of EU economic and fiscal policy.  It would hardly be an exaggeration to say that, with the huge increase in budget deficits and public debts since the start of the financial crisis, the EU’s Stability and Growth Pact - its fiscal rulebook - has become close to irrelevant.  Yet the EU, and the 16-nation eurozone in particular, badly needs a credible system of fiscal controls.  The Lisbon treaty will not provide it.  It can only come from governments acting with a strong sense of responsibility towards each other because they share the same currency.

The truth is, I think, that supporters of the Lisbon treaty have overstated its benefits since it was signed in December 2007, and critics have overstated its defects.  The EU has not ground to a halt because of the lack of a new treaty since it acquired 12 new member-states in 2004 and 2007.  Nor will it be transformed into the world’s most dynamic power once the treaty takes effect.  The best thing you can say about the treaty is that, now it is certain to come into force, there will be no need to say much about it ever again.

Europe too suspicious of China’s climate change policies

September 3rd, 2009 12:23pm

According to an opinion poll, more than half of Denmark’s population has little or no confidence that world leaders will strike an agreement on fighting climate change at December’s landmark United Nations summit in Copenhagen.  It is just a hunch, but I reckon one impulse behind this pessimism is the widespread European suspicion that China, which recently overtook the US as the world’s biggest greenhouse gas emitter, will play an unconstructive role at the talks.

What if this suspicion is unfounded?

China’s official position is that the US, Europe and other developed regions bear the primary responsibility for cutting emissions.  In spite of its rapid economic growth, China regards itself as a relatively poor country that, on a per capita basis, consumes much less energy than the developed world.  China had no binding emission targets under the 1997 Kyoto Protocol and may well refuse to accept such targets at Copenhagen.

But too few Europeans recognise that China’s leaders know they have a climate change problem and fully intend to deal with it.  According to the authoritative International Energy Agency, Chinese carbon emissions from fossil fuels soared by 129 per cent between 1990 and 2005.  Coal accounts for 70 per cent of China’s energy consumption and oil for another 20 per cent.  As China’s economic growth continues, so will the country’s urbanisation, a process that will greatly increase demand for energy.  Curbing emissions is now a national necessity.

China’s leaders certainly do not take kindly to lectures on climate change from politicians in the developed world.  However, as Duncan Freeman and Jonathan Holslag argue in a recent paper for the Brussels Institute of Contemporary Chinese Studies, this doesn’t mean the Chinese authorities haven’t given serious thought to the question.  For example, the 11th Five Year Plan for 2006-2010 set a target of a 20 per cent cut in energy intensity per unit of gross domestic product by next year.

Under a 2007 initiative, China aims to increase the share of renewable energy in total primary energy consumption to 10 per cent by next year and 15 per cent by 2020.  China is often portrayed in Europe as a country so hell-bent on economic growth that it is opening one new power plant every week.  Less well-known is that China operates a shutdown programme that in recent years has closed more than 7,000 small and inefficient power stations.

As in Europe, Chinese leaders are trying to use their fiscal stimulus, adopted to tackle the global financial crisis and recession, as an opportunity to put a “green” accent on industrial policies.  According to analysts at HSBC bank, about 38 per cent of China’s package is “green”, covering investments in railways, power grids, the environment and energy efficiency.

The European Union, which adopted a widely publicised climate change plan in December 2008, likes to portray itself as the world leader in the field.  Increasingly, however, what distinguishes the EU from China is method, not content.  The Europeans, multilateralists by instinct, like to set things down in binding international agreements.  China, notoriously prickly about its sovereignty, is less keen on this approach.

But this doesn’t mean China isn’t determined to fight climate change.  It just means China’s policies will be driven by domestic considerations rather than international pressure.

The top five priorities of the next European Commission

July 14th, 2009 2:28pm

What should be the top five priorities of the next European Commission?

1) Top of my list is the defence, and if possible the strengthening, of the single European market.  This is the European Union’s bedrock achievement.  It secures prosperity for its citizens, and it underpins the EU’s collective weight in the world.  Without the single market, the EU would lose not merely its cohesion but its very reason for existence.  The single market is under strain at present because of the emergency measures taken over the past year to prop up Europe’s banking system.  These have, in effect, suspended the EU’s state aid rules in this sector.  The Commission will need to be tough in making sure that EU governments do not manipulate the rules as the emergency measures are gradually withdrawn.  Meanwhile, it should continue to press the case for integrating and liberalising the EU’s service sector, which accounts for two-thirds of all EU economic activity.

2) In second place is the need to propose useful reforms to the EU’s system of financial market regulation.  I stress “useful”, because the legislative initiatives put forward so far range from very good to mediocre.  The first category includes the creation of a EU-wide systemic risk-monitoring agency and new EU supervisory authorities.  The second category includes the proposals for clamping down on hedge funds and private equity.  These had little or nothing to do with the causes of the financial crisis.  The Commission is understandably under populist political pressures to take aim at easy targets, but it needs to be more courageous and redraft its proposals.

3) Third is a sharper definition of the Commission’s climate change and energy security policies.  Under José Manuel Barroso’s leadership, the Commission has done a good job of raising the profile of these areas.  But in my view its effectiveness has been diminished by having three separate commissioners for energy, the environment and transport.  Transport policy, in particular, is considerably less “green” and less ambitious than the EU’s rhetoric implies.  The idea of appointing a “super-commissioner” for energy and climate change has been around for quite a while in Brussels.  Now is the time to put it into practice.

4) Fourth is the task of ensuring that the Commission president and the EU’s foreign policy high representative - not to mention the EU’s first full-time president - do not tread on each other’s toes and make a mess of the EU’s relations with the outside world.  I am assuming here that the Lisbon treaty will come into effect next year.  Under the treaty’s terms, the next foreign policy chief, replacing Javier Solana of Spain, will double up as Commission vice-president.  The scope for collisions with the Commission president is obvious.  Another thing that needs sorting out is whether the foreign policy job will be purely diplomatic and political in nature, or whether it will have influence over areas such as humanitarian aid, enlargement and trade.  Up to now, these have been the preserve of different commissioners, but they are clearly intimately linked with the conduct of EU foreign policy.

5) Fifth and finally - but this is just a baffled observer’s thought - it might be a good idea for the Commission to get itself a president for the next five years.  Is anyone in the European Parliament listening?

Will US ride to the rescue of Europe and Nabucco?

April 21st, 2009 10:09am

For anyone interested in European energy security, and especially the long-suffering Nabucco gas pipeline project, there was a fascinating piece of news on Monday. The Obama administration appointed Richard Morningstar, a former US ambassador to the European Union, as its special envoy for Eurasian energy issues.

Morningstar has a career background not only in EU affairs but in the energy diplomacy of the Caspian Sea area. As such, there is no one better placed to give the Europeans the benefit of US advice on Nabucco, a project some energy analysts think may be doomed to failure unless resolute action is taken soon to finance it, secure the necessary gas supplies and get it up and running.

The basic idea behind Nabucco is to reduce the EU’s growing dependence on Russian energy by importing gas along a proposed 3,300km-long pipeline from the Caspian, and later from central Asia, through Turkey to Europe.

But it is a project that is of more interest to the EU’s eastern European member-states, many of which were severely affected by last January’s abrupt cut-off of Russian gas deliveries, than to western European countries such as Germany and Italy, which were not affected and which invest a lot of time and effort in securing bilateral energy deals with Moscow.

Moreover, it has never been entirely clear where all the gas for Nabucco is going to come from. Azerbaijan, which the EU has identified as the key supplier in the first instance, has never made a whole-hearted commitment to the project. Russia’s military triumph over Georgia last August raised security questions about Nabucco.

Another problem concerns Turkey, which is withholding its support from Nabucco because the Greek Cypriot-controlled government of Cyprus is blocking the start of talks on the energy section of Turkey’s EU membership negotiations. The Turks are not wholly innocent, though. They see Nabucco as an opportunity to leverage their favourable geographical location to buy gas from the Caspian and elsewhere and sell it on to the EU at a profit. This vision of Turkey as a middleman enriching itself at Europe’s expense infuriates some western Europeans who have never wanted Turkey in the EU anyway.

At a EU summit last month, the tensions were temporarily defused when German chancellor Angela Merkel lifted her objections and agreed that the EU could earmark €200m of seed money for Nabucco. At a time when it is by no means easy to secure funding for any big-ticket investments, let alone one with as many question marks hanging over it as Nabucco, this was undeniably a step forward for the EU. But the total cost of Nabucco is officially estimated at €7.9bn (the final cost will surely be higher), so an awful lot remains to be done.

Meanwhile, the head of Azerbaijan’s state-owned energy company was in Moscow last month to sign a memorandum of understanding that pledges the gas from Azerbaijan’s two big new fields to Russia. The deal, though not yet irreversible, could sound the death knell for Nabucco.

Clearly, Morningstar and the Europeans have much hard work ahead of them.

Putin to Europe: Stop dithering, quibbling and sipping horilka

January 12th, 2009 10:41am

Negotiating with Vladimir Putin, Russia’s prime minister and former president, is hard enough even when Europe’s relations with the Kremlin are going well - which they haven’t been for some while. For an insight into Putin’s brutal, hard as nails character, have a look at the official Russian government transcript of a conversation he had with some Moscow-based western reporters last week.

The discussion, which centres on the shut-off of Russian gas deliveries to the European Union via Ukraine, turns at one point to the possible deployment of EU monitors along the pipeline route through Ukrainian territory. “We hope that the issue will be resolved expeditiously. We don’t want a group of men and women to come to Kiev and just sit in a hotel and sip horilka [Ukrainian vodka],” Putin says.

Expressing impatience with what he sees as the European Commission’s slow, bureaucratic procedures, he warns: “You should get cracking. In such conditions, two hours would be enough. Instead, they are quibbling over details. They have no mandate? Let them get it.”

He directs even heavier fire at Ukraine’s leaders: “We are witnessing a political collapse inside Ukraine. I regret to say that it indicates a high level of corruption in Ukrainian government structures, which today are fighting not over the gas price but for the possibility to keep certain mediators in the game, in order to use the dividends for personal enrichment and to raise the necessary funds for future political campaigns.”

Answering a question on how anyone can know who is telling the truth about the gas crisis, Putin once again uses Ukrainian food imagery. “If you are not sure, send your own observers to the border between Russia and Ukraine, and to the border between Ukraine and western Europe. Go ahead. Sit there and watch from morning to night, eat salo [pig fat] and chase it down with horilka. They have excellent pig fat in Ukraine. My friends send it to me from Ukraine.”

Only at one point is there a hint of Putin’s KGB background, and of the personal world view that such a background helps to shape. He admonishes the reporters: “I don’t know what you’re going to write and what directions you will get from your bosses. Everything points to the fact that there are some directions, because the picture being presented is absolutely biased…”

Whew. Time for some horilka, I think.

Medvedev gives frosty response to Sarkozy on Lithuania’s energy needs

November 28th, 2008 1:50pm

Buried in last Wednesday’s €200bn European Commission economic recovery plan for Europe was a proposal that sent waves of relief through Lithuanian policymaking circles. This was the idea of allocating €5bn for trans-European energy connections.

A large chunk of this money is destined for Lithuania, the aim being to reduce the dangers that face the country after the planned closure of its Ignalina nuclear power plant on December 31, 2009. Ignalina supplies 70 per cent of Lithuania’s electricity, and when the plant is shut down Lithuania will be almost entirely dependent on Russia for its energy.

For sure, Russia has no obvious interest in starving Lithuania of electricity. The lines that send Russian electricity to Lithuania also send it through Lithuania to Kaliningrad, the Russian territory to the west. Still, given it’s only 17 years since Lithuania gained independence from the Soviet Union, and given the icy relations between Russia and its tiny neighbour, any form of dependence is understandably an unnerving prospect from a Lithuanian point of view.

As officials in Vilnius point out, Lithuania relies for gas on a single Russian pipeline that passes through Belarus. As for oil, the Russians closed down the ironically named Druzhba (”Friendship”) pipeline in 2006 for repair work that mysteriously never seems to get finished.

Once Ignalina is closed, “the probability of disaster is not very high, but it is probable that there will be serious problems”, says Aleksandras Abisala, the government’s special representative on energy security.

The Lithuanians have been hammering away at their European Union colleagues on this subject for so long that, according to those in the know, French President Nicolas Sarkozy finally decided to raise the matter with Russian President Dmitry Medvedev at the recent EU-Russia summit in Nice. The response was very revealing of the present peppery mood in the Kremlin.

On the question of reopening the Druzhba pipeline, Medvedev committed himself to absolutely nothing. On the question of promising to maintain electricity deliveries to Lithuania from January 2010 onwards, Medvedev in effect said: “Nicolas, why are you talking to me about this? If the Lithuanians think they have a problem and want to talk about it, tell them to come and see me.”

In other words, Sarkozy’s efforts to speak up for Lithuania and give Medvedev a demonstration of what EU solidarity means in practice hit a big brick wall.

Lithuania had better receive some of that €5bn in EU funds quickly, or it will be a bitingly cold winter in 2010.

Europe’s Arctic challenge

October 9th, 2008 1:11pm

It was seven months ago that Javier Solana, the European Union’s foreign policy chief, warned about the risks to international stability from the intensifying competition among countries in the Arctic region. Today the European Parliament drew attention to the issue again by passing a resolution that called on EU policymakers to push for an international treaty for the protection of the Arctic.

Legislators adopted the resolution by 597 votes to 23 with 41 abstentions, demonstrating that it had overwhelming cross-party support. Soon the European Commission will publish a long-awaited report that for the first time will put flesh on the bones of the EU’s Arctic policy.

The problem in the Arctic is that there are no comprehensive rules governing how states should behave there. There is no system for managing fish stocks, nothing to regulate the extraction of oil and gas, and not much guidance on how to settle territorial disputes that may flare up as the polar ice recedes.

According to a US Geological Survey report published in July, the Arctic accounts for about 22 per cent of the world’s undiscovered, technically recoverable resources. That includes 13 per cent of the undiscovered oil, 30 per cent of the natural gas and 20 per cent of the natural gas liquids. It is an extraordinary, unrepeatable opportunity.

However, as was shown in August 2007 when Russian explorers planted their flag on the seabed under the North Pole, the Arctic could easily turn into a zone of clashing national interests. Moreover, the boom in shipping activities and energy exploitation may create all sorts of environmental hazards for the Arctic’s vulnerable ice-covered areas.

Joe Borg, the EU fisheries and maritime affairs commissioner, says the Commission’s report will stress three points: safeguarding the Arctic’s ecosystem, promoting the sustainable use of its resources, and putting in place a stronger system of international governance. The idea is to build on the UN Convention on the Law of the Sea, the international environmental treaties that apply to the Arctic, and the work of various bodies such as the Arctic Council, which includes Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the US.

The EU lacks even observer status in the Arctic Council and needs to catch up quickly if it is to defend its interests in the region. Solana’s message is worth repeating: “There is an increasing need to address the growing debate over territorial claims and access to new trade routes by different countries which challenge Europe’s ability to effectively secure its trade and resource interests in the region and may put pressure on its relations with key partners.”

Paying the climate change bill

September 4th, 2008 10:04am

How much will it cost the European Union to fight global climate change? Clearly, the answer depends on what your target is, how you propose to get there, and the size of the EU’s contribution compared with those of the US, China and so on. But a new report from the Centre for European Policy Studies thinktank offers some useful estimates.

The report assesses six recent studies, ranging from the Stern Review and a World Bank analysis to research prepared by Vattenfall, the Swedish energy company. In these reports, the average annual global costs for mitigating and adapting to climate change are put at anything from €230bn to €614bn, based on 2006 data.

The EU is not, these days, one of the world’s great polluters. In 2004, the global economy emitted about 49bn tons of greenhouse gases (measured in CO2 equivalent). The share of the 27-nation bloc was only 5.2bn tons, or 10.6 per cent.

However, as western Europe is one of the world’s richest areas, and as Europe has historical responsibility for the CO2 emissions of its industrial heyday, the EU will surely have to pay more than 10.6 per cent of the global costs of fighting climate change.

According to the CEPS study, the smallest bill the EU could expect to pick up is €24.4bn a year, while the biggest is €194.3bn. The thinktank’s own estimate, based on what it calls “the limited likelihood of a global burden-sharing according to current emissions”, is that the EU will face annual costs of at least €60bn.

This figure is close to the forecast provided by the European Commission last January, when it published its all-encompassing proposals on energy and climate change policy. At the time, the Commission said €60bn - or about 0.5 per cent of the EU’s annual GDP - might seem a lot of money, but the cost of doing nothing would be even higher.

Has the message got through, I wonder, to Germany’s car manufacturers and their friends in the European Parliament? This week the legislature’s industry committee tried to weaken a Commission proposal for capping CO2 emissions from new cars.

Rather than imposing a target of 130 grams per kilometre on all new cars by 2012, the committee voted to apply it to only 60 per cent of new cars and to delay full introduction of the target until 2015. The vote was unmistakeably aimed at helping German carmakers, whose models are bigger and less “green” than those of France and Italy.

This is, of course, hardly the last word on the subject. The parliamentary committee’s vote isn’t binding. But when it comes to converting the EU’s high-sounding principles on climate change into concrete legislation, the devil is always in the detail.

Commission ploughs a lone furrow on biofuels

April 10th, 2008 5:49pm

Thursday’s thundering Financial Times editorial on the food crisis unfortunately arrived too late to change opinions on the 13th floor of the Berlaymont, the European Commission nerve centre. The day before the call for a pause in the push for biofuels was made Jose Manuel Barroso, Commission president, defended the policy.

He said the use of crops for fuel had so far had little effect on higher food prices. It can’t be often that the Commission disagrees with its multilateral brethren, the IMF, World Bank and United Nations.

Barroso said the push to increase biofuels to 10 per cent of the EU transport fuel mix by 2020 will continue. In fact, by creating a market for sustainable biofuels the EU could improve their production round the world, he said.

Perhaps he will listen to the EU’s own scientific advisers. On Thursday advisers to the European Environment Agency called for the target to be scrapped.

“The overambitious 10 per cent target is an experiment, whose unintended effects are difficult to predict and difficult to control,” they said.

However, Barroso did warn of a human tragedy caused by high food prices and called on EU countries to lift their giving to affected countries.

The link between the EU policies and food shortagesis beginning to worry some in the Berlaymont. It is seeking to end export subsidies that see cheap food dumped on poor countries. However, there are still many high tariff barriers that prevent poor farmers exporting to the EU. Doubtless this debate will become a centrepiece of the haggling over the mid-term review of the common agricultural policy this year.

France is already talking about the need for “food security” while Franz Fischler, former agriculture commissioner who keeps on top of the issues, told me recently that Europe has a duty to feed itself and the world.

Meanwhile, Andris Piebalgs, the energy commissioner, has been making the case for stimulating investment in farm productivity through the biofuels target.

He wrote in a recent blog post: “Substantial tracts of arable land lie fallow since the collapse of the collective farming system used during Communist times in many of the new Member States. The EU’s ambitious but realistic 10% target will provide the market pull stimulation that these farmers need to face a future market based agricultural economy and less dependence on EU subsidies.”

But with Gordon Brown among others calling for a change of stance, I wouldn’t advise any farmer to start sowing the seeds of biofuel crops until they are sure of exactly what they will reap.

A chill wind blows across the Baltics from Warsaw

December 5th, 2007 1:31pm

The thaw between Poland and Brussels has sent a chill down spines in Lithuania.

Donald Tusk, the new Polish premier, arrived at the European Commission and parliament on Tuesday to show that his country was back in the centre of Europe. The era of the Kaczynskis, “the terrible twins”, picking fights with Brussels, was over.

The fear in Vilnius is that he may stop picking fights with Russia, too, leaving the Baltic republics, which only recently threw off the Soviet yoke, alone in the ring with the bear. Talks on resolving the Russian blockade of Polish meat, which in turn have held up a new EU-Russia partnership agreement to Brussels’ ill-concealed annoyance, start next week.

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