Dirty fights for Europe’s Blue Banana. Geoeconomics in European affairs

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Economically, the European Union (EU) is a giant: it sits at the heart of a geographical space of 80 countries that depend on it for trade and investment, and even align themselves with its currency; moreover, the EU has the world’s largest single market; most multinational companies, therefore, depend on access to the region – which means complying with EU standards. With its regulatory powers, the EU should, therefore, profit widely from globalization. However, overlapping crisis such as the financial turmoil starting in 2008, the refugee crisis of 2015, and Britain’s recent decision to leave the Union, put Europe’s internal coherence into question. Apparently, the national grip on various policy areas remains a weighty obstacle for the pooling of the EU’s ample resources behind common policies.

Hence, the question remains whether the European Union is capable of reaching the internal cohesion necessary to organize Europe’s economic space effectively. To evaluate this question, the concept of geoeconomics in intra-European affairs is an interesting one, as it combines two strands of political theory: First, geoeconomics are based on the complex notion of strong reciprocal intersections between the economic and the political sphere; as a consequence, geoeconomics assumes that (some, not all) governments are guided by weighty companies, while (some) others guide large companies for their own geoeconomic purposes. Second, geoeconomics is rooted in realist IR theory, thus encompassing organized actions by governments to change their external environment in general, or the policies and actions of other states in particular so as to achieve the objectives that have been set by policy makers.

Essentially, geoeconomics, therefore, means states leveraging power via economic means to get other states to do what they would not do otherwise.

This idea of nation-states deploying economic weapons in international power struggles, e.g. productivity, trade balances and foreign investment – is not new. However, throughout the twentieth century the balance of power among nations was typically viewed through the lens of geopolitics, and only recently geoeconomics has (re-) emerged. In (Western-) Europe after 1945 on the other hand, geopolitical thought has been largely replaced by integration theories which see Europe as having developed beyond the anarchy of the international system.

Yet given that the European Union does not represent a fully unified political entity, it is unlikely that geoeconomics, this form of power politics through economic means, is completely contained by the (nevertheless dense) system of supranational institutions on the EU-level. Depending on the specific policy area or section of the Internal Market that are concerned, at least parts of the toolbox of geoeconomic statecraft can therefore be assumed of being available to national policy makers in Europe. And where such instruments are available, it appears rather likely that they are also in use. Geoeconomically motivated statecraft should hence (still) play a (more or less strong) role in the relations between European countries.

Moreover, Member States’ reluctance to transfer powers to supranational bodies is growing, and the EU is increasingly characterized by policy co-ordination between MS (as opposed to deeper Europeanization). In other words, politics on the European level have become somewhat deracinated from the supranationalist dynamics and the legislative framework that characterized supranational governance beyond the nation-state.

Of course entities such as the EU will not being replaced by nation states exerting influence through economic instruments, and neither can Europeanization of politics and business (e.g. lobbying) be ignored. But EU-level policy making can be assumed to happen increasingly under the absence of the Community method, that is based on decision-making logic/procedures characterized by voluntary and informal policy coordination between national governments and national representatives with an increasingly strong national rational.

Open power politics may still be unthinkable in this kind of European framework, but the importance of regional integration as a strategy to gain power by increasing market size and economic opportunities is losing its longstanding attractiveness, while government-company relations are intact on the national level. The decreasing inclination of national governments to govern Europe collectively through the various forms of European governance, should therefore be paralleled with a growing importance of geoeconomics for the behavior of individual EU Members vis-à-vis their neighbors.

Energy imports, Regional Coordination, Geoeconomics

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The Case of Germany and Poland in the Baltic Energy System – Close Neighbours, Close(r) Cooperation?

International Journal of Energy Economics and Policy, 2016, 6(4), 789-800.

Abstract:

When the Baltic Sea region is included in debates concerning European energy policy, the focus often lies on the transit of natural gas. However, this focus on gas transit is too narrow to fully grasp the region as a wider element within the complex fabric of the European energy system. This article therefore approaches the energy system of the Baltic Sea region in a holistic manner and discusses ows of natural gas, oil, coal, and electricity. Against this backdrop, the article presents and discusses the energy supply and demand situation of the Baltic Sea littoral states. Focussing strictly on the Baltic Sea region in a narrow geographical sense allows a detailed visualisation of energy ows between individual countries. From a geoeconomic perspective, the article then analyses and compares the positions of Germany and Poland in the regional energy system; furthermore, scenarios concerning the effect of Polish and German national energy policies on regional energy flows are presented and discussed. As most European countries are energy importers, this discussion focuses on the effect of national policies on energy imports and their impact on the regional energy system. Based on this discussion, the article evaluates the geoeconomic implications of these scenarios for Poland and Germany and the prospects for better aligning the two countries’ national energy policies.

Past event: China’s New Silk Road – Good or bad for Europe’s green economy?

Organisation: Thomas Sattich

4 June 2015 from 12:00 – 14:00.

The Chinese government has proposed the New Silk Road, or “one belt and one road”, which would link China and Europe by land and sea. The one belt and one road is a high- level initiative to which the Chinese government attaches enormous importance and would in theory improve interlinkages between China and Europe and the intervening regions. Although the details of the initiative remain unclear, the Chinese government intends that it will an important role in the development of the EU-China economic relationship. Its potential impact in the EU will have many dimensions that are not simply about infrastructure and trade, but also concern key issues such as sustainability.

In the course of the last two decades the concept of a green economy with limited carbon dioxide emissions and reduced resource intensity has evolved to a key element of many European policies. Use of renewables and resource efficient economic and industrial processes are key issues of this sustainability agenda. The integration of two or more economic areas is believed to bring the distribution of resources and markets closer to their optimum. Under certain circumstances the integration of different economies hence appears to be beneficial for EU’s sustainability agenda. Various initiatives of the European Union such as enlargement, neighbourhood policy, trade and investment agreements are based on this assumption.

Accessibility is the key issue in this regard: Without access to markets, no exchange of goods, services and ideas can take place, thus leaving existing patterns of production and consumption unchallenged and unchanged. Economic development is therefore closely tied to network conditions. In other words, existence and state of transport, energy and communication networks determine the capability of putting potential synergies between different regions to practical use. Improving the basis for economic exchange between different regions should therefore present various opportunities for sustainable economic development. The need of cost intensive green technologies for big markets represents only the most prominent example in this regard.

The Chinese government has already committed US$40 billion to a Silk Road infrastructure investment fund. The project would involve not just infrastructure, but will require a broad range of other institutional initiatives such as customs, as well as security. By extension it will also involve Chinese investment in infrastructure in the EU. As a result it is highly likely that China will have a direct impact on the sustainability and integration agendas in the EU. This Policy Forum will address what the impact of the New Silk Road in the EU:

  • What is the current state of the New Silk Road project?
  • Does the New Silk Road project merely entail transport systems, or is it a more encompassing concept?
  • What are the economic, political, security and environmental risks?
  • What sustainability issues does the construction of such a large project entail?
  • Would its construction be positive or negative for Europe’s concept of a green economy?
  • What impact does the project have in the EU and on its policy goals?

The expert panel will consist of the following panellists:

Chair: Duncan Freeman, Research Fellow, Brussels Institute of Contemporary China Studies

Speakers:

Xiang Yu, First Secretary at the Economic & Commercial Counselor’s office of the Mission of the People’s Republic of China to the European Union

Michael Grabicki, Vice President ZOA BASF Group

Thomas Puls, Senior Economist, Environment, Energy, Transport and Infrastructure, Cologne Institute for Economic Research

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