Stinking euro-inertia

Not a very original idea for a post, to highlight an FT column everyone has probably read. But I am sure many people sitting here in Brussels and those expecting something from our good ole European Union in these days of trouble, sympathise with it – at least I do. Munchau’s column today says: “Like a fish, Europe is rotting from the head”. He said it. And yes, and the process really stinks.

A few thoughts on what’s behind the EU’s ineptitude in dealing with the Russian-Ukrainian gas row and with other Russian problems

The current disruption of gas supplies to Ukraine and therefore to the rest of Europe is unprecedented and its scale is much larger than the first such disruption during a similar dispute on gas prices, Ukrainian debts, and/or transit fees back in 2006. The media is full of these stories. Here is one.

Who’s to blame?

A bit of self-promotion – some work on Russia

Can something be done about Russia’s tendency to use trade sanctions during political conflicts with its neighbours? Can something be done to avoid that foreign investors in Russia get stripped of their assets? Can the rising tide of trade and protectionism in Russia somehow be halted? Can the EU do something about it, and is it a good idea for Europe to try and discuss a free trade agreement with Russia? Whoever is interested in those kind of questions might want to consider having a look at a new ECIPE paper.

I’ve been examining Russia’s policies for a while and the country’s relations to the EU. This has resulted in a paper, written in collaboration with my colleague Brian Hindley, who has had a closer look at Russia’s WTO accession. For anyone who’s been following my posts on Russian affairs it might be interesting to have a look at it. It has quite an unglamourous title: “Russian Commercial Policies and the European Union – Can Russia be Anchored in a Legal International Economic Order?”. Here is the paper. Ed Lucas, The Economist’s Eastern Europe correspondent who gave a keynote speech at a conference hosted by ECIPE today that was as sensational(ist) as his book on “The New Cold War”, said we should rather have given it the title “We want interdependence, they want a protectionist fence”…. It would have been a more selly title indeed….;-) But in fact it is not that simple: from quotas on Russian steel to cosy national relationships with  the Kremlin and a special Gas Monopoly I don’t want to name, there’s a lot of domestic clean-up to be done. My Director Fredrik Erixon recently had some reflections on EU-Russian energy relations, translated, as well, into a new paper. For anybody who’s interested in this issue, it might well be worth having a look at it.

Dealing with Russian gas

Pierre Noel, from The European Council on Foreign Relations just released a very good paper on how the European Union should deal with Russian gas. It highlights the importance of finalizing the internal market. It says:

The solution to the Russian gas challenge lies not in foreign energy policy but in reform of the European gas market itself. An integrated and competitive European gas market would:

• Create the maximum possible degree of solidarity between European gas consumers.

• Improve collective supply security by allowing the price mechanism to re-allocate physical supply across the entire market in times of supply or demand shocks.

• Make Member States’ bilateral relations with Russia largely irrelevant to the conditions of access to Russian gas for consumers. An integrated market would ‘Europeanise’ bilateral commercial relationships with Gazprom, without the need for political involvement from the EU.

And who’s main responsibility is it? Unsurprisingly:

“It is no exaggeration to say that the fate of Europe’s gas integration project depends on France and Germany. Whatever the technical merits of the third package, the vision of an integrated competitive market will not be realised as long as these two governments fail to fully embrace it.”

Berlin and Moscow – What kind of trade is going on there? (slight upd.)

A chill in relations in August -September following the Georgian war, but as Europe is starting to turn on its heaters, back to business as usual in EU-Russian gas and business relations. France, and now Germany couldn’t wait much longer and rushed to patch up their strained relations with Moscow. News today:

FT announcement: big deal between Germany’s EON and Russia’s Gazprom. Gazprom even renounced access to downstream assets in Germany. FT reports:

“Significantly, the deal saw Gazprom drop demands for participation in distribution assets in Germany – a cornerstone of Russia’s call for reciprocity in granting direct access for European companies to its vast energy reserves. “

BNE reports today:

Merkel says Georgia and Ukraine not ready for NATO MAP
bne
October 3, 2008

German Chancellor Angela Merkel has said Germany still does not believe Ukraine and Georgia are ready to join NATO’s Membership Action Plan (MAP).

“As far as a specific step – MAP – is concerned, Germany’s position has been that the time has not yet come to grant it,” Interfax cites Merkel as saying at a joint news conference with Russian President Dmitry Medvedev.

Merkel said “the position has not changed” since April’s Bucharest NATO summit.

Hadn’t Merkel said something about Georgia’s place in NATO, back in August?

Russia seems to be valuing control of its former empire over Gazprom assets in Europe’s biggest gas market, which is Germany. Watch that space.

UPDATE a few minutes after publishing this post: And it looks like Russia isn’t exactly hurrying up to withdraw its troops from Georgia, as had been agreed with Sarkozy (courtesy Robert Amsterdam)

Funny games – Russia can afford them, but for how long?

Last week, the European Union decided it would put on hold the freshly started negotiations for a new partnership agreement. This agreement would have a strong economic component, as the EU wants to build a common economic space with Russia.

Today, EU Commission president Barroso, French president Sarkozy and EU chief foreign policy man Solana are in Moscow for “discussions with a view to the full application of the six-point agreement” (see here) reached by Sarkozy with Russia and Georgia in August. The agreement calls for a retreat of Russian troops to pre-August 7 positions.

The Economist this week-end  was cautiously optimistic about the fact that Europe is uniting in the face of Russia. But will the EU trio’s trip to Moscow today yield results? It is doubtful, unless it is dawning upon Russian leaders that its policies are going to cost Russia a lot of political, and especially economic, credit.

Conflict in Georgia: of pipelines and European foreign policy in the region

This week-end, yet another drama costing many human lives and displacing tens of thousands unfolded in Georgia. This outcome to the escalating Russian-Georgian tensions in the last months seems to have been unavoidable. Europe has yet again been unable to respond coherently.

The European Union’s foreign policy is notoriously weak and fraught by deep member state divisions. This weakness reveals itself in particular when it comes to relations with Russia and the former Soviet Union. Many of these problems coalesce in Georgia. This involves: peace and war, energy and pipelines, and reforming EU foreign policies towards post-Soviet Russia and Georgia.

Peace and war

Irish no vote (slight upd.)

Well, looks like the EU Constitution, watered down to an incomprehensibly complex Lisbon Treaty is now definitively dead. The Dutch said no, the French said no, and now the Irish say no.

Let me just bring in two quotes by Oxford’s Jan Zielonka:

It has been evident from the very beginning of European integration that ambitious and straightforward cooperative projects have a fairly good chance of being shot down.

European policy-makers [are] faced with a choice: integration in disguise or no integration.

I have been thinking: can Europe be popular? And is there a Europe of “the people”? Quick Friday-afternoon brainstorm: there is a nationalist-competitive and an integrative Europe at play. What do I mean?

– The nationalist-competitive: concluding from the status updates one gets to read on Facebook, for sure, there is one single thing that focuses minds in Europe: Euro 2008 (definitely not the Irish referendum)!

– The integrative: concluding from my recent cheap and quick flight from Belgium to Southern France: low-cost airlines! And not least the mythical, and very Irish, Ryanair!

Précisions

Suite à mon précédent billet, je tenais à faire deux précisions.

– Mon introduction au sujet par l’idée de l’économie de guerre et de l’autarcie /autosuffisance agricole pour parler de la Politique Agricole Commune avait pour objectif d’illustrer ce que peut signifier, et où se trouvent les filiations historiques, de la PAC lorsque ses principes sont poussés à l’ extrême : étatisme extrêmement coûteux et nostalgie romantique pour un passé agraire qui en réalité veut dire misère. Les lois de l’économie s’appliquent aussi en agriculture. Une plus grande division du travail et une extension du marché permet à chacun de produire ce qu’il sait faire mieux et se procurer ce que les autres font mieux… et ainsi d’accroître notre diète. Rien de mieux pour notre santé et nos palais. Des transferts « technologiques » sont aussi rendus possibles par l’accroissement des échanges, par exemple l’introduction de nouvelles plantes qui répondent à de nouveaux besoins.
– J’ai été rapide dans une phrase. Non la PAC n’est pas la cause de la hausse des prix agricoles. Mais, en stimulant un système agricole rigide qui ne sait pas répondre à l’augmentation de la demande, il contribue au renforcement de la rareté qui se fait sentir actuellement. Celle-ci est due à une combinaison de plusieurs facteurs : demande croissante de produits alimentaires et notamment de viande en Chine et en Inde, ce qui augmente la demande de grains pour nourrir le bétail ; quelques mauvaises récoltes que l’on peut attribuer ou non au changement climatique ; la promotion notamment aux Etats-Unis et au Brésil de carburants biologiques, notamment par le biais de subventions et de mesures protectionnistes, ce qui augmente la pression sur l’utilisation de terres arables et contribue à une diversion de production qui accroît la rareté de biens comestibles produits.

Guerre des tranchées agricole

Historiquement, l’autarcie économique est associée aux régimes totalitaires et à la guerre totale. Le tout accompagné d’expansionnisme militaire et territorial, ou du moins de subjugation de pays satellites aux volontés de l’Etat surpuissant. Inutile de faire référence à l’Allemagne nazie ou à l’Union Soviétique du temps to COMECON.

L’autarcie, c’est l’économie de guerre avec un Etat hyper-puissant mobilisant par coercition l’ensemble de la société. Mais on peut aussi considérer l’autarcie ou l’auto-suffisance dans l’agriculture comme reflétant une arriération pré-industrielle. Les paysans d’Ancien Regime étaient certainement plus ou moins autarciques. Mais on vivait dans la misère, et le régime alimentaire était extrêmement limité. Fort heureusement, même sous l’Ancien Régime, nous ne vivions pas en complète autarcie ! Les pommes de terre, partie désormais du folklore germanique entre autres, ou les tomates, sans lesquelles la cuisine méditerranéenne est impensable, nous viennent originairement de Nouveau Monde, la découverte duquel marque plus ou moins les débuts de la « mondialisation ». Tout cela pour dire que,