Merkel leaves the European scene after two diplomatic failures

Sylvie Kauffmann – Le Monde (France)

It seems that Merkel will leave the European scene after being part of two diplomatic failures.

It used to be easy. In the early 1990s, when Helmut Kohl and François Mitterrand were promoting their idea of ​​Europe. The leaders of the two countries had only to agree between themselves and then send a proposal to the head of the Council with a request to “convey a message to other members”. And that’s it, it’s done. This was the case, for example, on October 27, 1993. On the eve of an extraordinary European summit on the implementation of the Maastricht Treaty.

It was that simple! There were only 12 Member States since then their number has more than doubled. Nevertheless, the main blow to the habits of the Franco-German tandem was their heterogeneity. Angela Merkel had to state this following the results of several hours of discussion on Hungary and Russia in the framework of the commemorative meeting of the European Council on June 24 and 25.

The German Chancellor suffered a crushing failure with a proposal to hold a European summit with Russian President Vladimir Putin. She was “saddened” by the experience. According to her, this means that the member states “do not have enough trust in each other.” An extremely perspicacious and significant comment.

Unusual haste

This European summit is the last for the Chancellor before the parliamentary elections in Germany scheduled for September 26. That will mark her departure from politics after 16 years in power. Her disappointment is understandable. She is leaving the European scene amid two diplomatic failures. Significantly, these setbacks are related to China and Russia. And in both cases, she showed an uncharacteristic haste.

As for China, Angela Merkel has used the influence of Germany’s EU presidency until December 31, 2020 to push for a global investment agreement between Europe and China. The agreement was reached on December 30 following the results of the summit held by video link with Chinese leader Xi Jinping. Be that as it may, this document faced sharp opposition from the European Parliament. It today looks stillborn due to the aggravation of relations with Beijing.

The episode with Russia was no doubt even more painful, as it struck the heart of post-Cold War Europe and Angela Merkel’s picture of the world.

To understand the situation, one should consider the June chain of diplomatic events. US President Joe Biden came to Europe to rally the Atlantic family after “Hurricane Trump”, expressed his special favor to the Chancellor. Only she received an invitation to Washington on July 15. He then left his European friends and went to Geneva to meet with Vladimir Putin on June 16.

Biden did not expect anything from this summit, to which he did not involve the Europeans. The main goal for him was to neutralize the Russian problem with the help of a communication channel with Moscow. Just in order to direct all his efforts towards solving the much more pressing Chinese issue.

Enduring dislike

On June 18, Angela Merkel received Emmanuel Macron in Berlin. They talked about Russia for a long time. The Chancellor presented her plan to the French president: to propose to the European Council a restart of the dialogue between Europe and Russia, which was frozen after the invasion of Ukraine in 2014. 

The key event was to be a summit of the heads of state and government of the EU with the President of Russia. In Paris, they considered the option of the 27 + 1 meeting too generous a gift for Putin, who had not changed his position in the least since 2014, and thought to get by with the participation of the heads of European departments. Be that as it may, Macron could not but approve of the idea of ​​resuming dialogue with Moscow. He himself has tried unsuccessfully to achieve this since 2019, earning enduring hostility from a number of European partners. And the fact that these same partners greeted the summit of Putin and Biden with applause.

Meanwhile, Merkel called Putin and Ukrainian President Zelenskiy. On June 22. Putin published a rather mild article in Die Zeit calling for the restoration of a full-fledged partnership with Europe. But Merkel forgot to discuss this Franco-German project with other Europeans. They were beside themselves when they learned about it on the eve of the European summit. The discussion that took place in the evening of the first day turned out to be tense. The Baltic states, Poland and Sweden rejected the proposal.

“She is no longer considered trustworthy representative of European interests”

Why did Merkel begin to actively promote this initiative, without making the slightest effort for preliminary preparation? She advocated European sovereignty. Since there is now a Russian-American dialogue, Europe should also discuss with Russia issues of interest to both sides. Macron, in turn, made a good face and stressed that the discussion had moved forward.

Did the chancellor dream of forming a historical geopolitical triptych before leaving? Would it be nice to end the September summit with Putin after the December meeting with Xi Jinping and the July talks with Biden? In any case, due to the protection of the Russian gas pipeline Nord Stream 2, “she is no longer considered a trustworthy representative of European interests before Putin,” said German MP Franziska Brantner.

The incident sheds light on the profound impact of the post-communist countries on the development of the EU. Whether it’s Hungary’s rejection of Viktor Orban’s open society or the Baltic states’s refusal to resume dialogue with Putin, the historical and geographical legacy of these countries is fully manifesting itself. Kohl and Mitterrand probably believed that with the help of the unification of Europe, the accounts of the Cold War were closed. Merkel and Macron have just seen that this is still a long way off.

Europeans froze the largest trade deal with China

Brussels is looking for an alternative in the USA and India

Dmitry Migunov

The European Parliament on May 20 froze the ratification of the investment agreement between the EU and China. The reason was foreign policy friction between Brussels and Beijing. It is not yet clear whether the document will be returned to the vote. A split in relations between two of the three largest economies in the world may prompt the EU to seek other alliances, or perhaps to rely primarily on its own forces and active protectionism. Details – in the material “Izvestia”.

China-EU relations in recent years have been an almost equal combination of love and hate. For the European Union, China was the second most important export market (about € 250 billion a year). Especially for critical industries like mechanical engineering. In turn, the importance of the European market for China was no less important. Although it was inferior to the American one in terms of supply, it grew faster and more stable.

At the same time, Europe has become the most important target for the export of capital from China. Accumulated Chinese investment reached $ 350 billion by the end of 2019, again second only to the United States. Investments in European countries fit perfectly into the Belt and Road project, whose main task was to create in Eurasia a reliable alternative to the United States as a destination for Chinese exports. 

Within this framework, Chinese companies have actively invested in enterprises in Germany, Italy, France, Hungary and other countries. Manufacturers of car tires, household appliances, oil and gas companies, airports and football clubs – it will be difficult to name a field of activity in Europe, wherever a Chinese investor has penetrated, both private firms and corporations with state capital. 

Mutual rhetoric sometimes blunt

Despite this flourishing relationship, mutual rhetoric was sometimes blunt. In March 2019, the European Commission named China as its “systemic competitor.” Given that this happened in the midst of Donald Trump’s declared trade war, this was not good news for China. Later, the conflict was mitigated, among other things, due to the fact that Trump’s anger fell on Europe itself. Americans began to impose trade duties against European countries, threatening retaliation for the introduction of a “digital tax” and other actions in the economy that the previous US administration took as unfriendly.

In December last year, the EU and China signed the largest investment agreement in European history. Its essence boils down to facilitating the access of European companies to the Chinese market, which was able to withstand even the blow of the pandemic (the only large economy that avoided contraction in 2020). Companies that supply high-tech goods to the PRC have received especially favorable working conditions. China, in turn, received guarantees for its investments in the EU, as well as access to the renewable energy market, where the two sides are simultaneously the two largest players and strategic partners by a wide margin.

However, the signed treaty had to go through a difficult and lengthy ratification process. And something went wrong here. First of all, the power has changed in the United States. The new government, at least at the level of rhetoric (and in some places in fact, for example, on the issue of Nord Stream 2), made concessions to the European states. The transatlantic relationship again came to the fore, and China was no longer vital partner.

The diplomatic conflict turned into a reciprocal exchange of strikes when the sanctions imposed on China (not too significant) were followed by a similar targeted response from an Asian country. This is most often the end of the conflicts. This time everything went much further. The European parliamentarians with an overwhelming advantage – with 599 votes out of 687 possible – voted to freeze the ratification of the agreement.

This is not final decision though

Note that this vote is not a final decision and, in fact, has no legal force as such. But the ratification process may be slowed down for a long time. During this time, foreign policy and economic circumstances may well change. And the attitude of individual countries to the agreements.

I must say that the Europeans did not sit idly by all these months. In the course of the trade conflict with the United States, it seemed that the EU and China would inevitably move closer. Brussels is now considering other options for economic integration. The most obvious option is trade agreements with the United States. In early May, German Chancellor Angela Merkel called for the same deal with America that was agreed with Canada last year.… This agreement was already in the air in the middle of the last decade. The parties had already begun negotiations on a Transatlantic Trade Partnership, but in early 2017, the United States canceled a similar trade alliance with the countries of East Asia and Latin America. The last agreement was “killed” at the stage of full readiness. On both sides of the Atlantic they decided that the treaty had no chance at all.

In all fairness, Merkel’s approach is not shared everywhere on the continent. French President Emmanuel Macron has repeatedly stated that Europe should not rely on other superpowers and should show more independence. Questions can also arise overseas, where, despite all the rhetoric of multilateralism and free trade, slogans like “buy American” are gaining momentum. And the full employment promised by the new American administration is unlikely to be achieved if we give even more privileges to foreign manufacturers in their market.

Protectionism is gaining strength

It is possible that the EU will turn in a different direction. In April, it became known that Brussels is negotiating with India on a global infrastructure plan. That should become a competitor to the Belt and Road. It should include cooperation in third countries, the exchange of scientific and innovative ideas and the drafting of uniform standards, especially in the field of financial sustainability. All this should tie the third largest economy in Asia (and the second in terms of purchasing power parity) more closely to the European Union.

India is not yet a player capable of replacing China and the United States as an economic partner. Rather, an agreement with it could become a demonstration of a course that presupposes self-reliance in Europe. Such a line in the economy is becoming more and more popular, given that protectionism is gaining strength in all regions – and the European Union can in no way be an exception .

Germany and Russia to work on hydrogen

Russia and Germany will jointly implement projects in hydrogen energy. The corresponding agreement was reached by the Deputy Prime Minister of the Russian Federation Alexander Novak with the Minister of Economy and Energy of the Federal Republic of Germany Peter Altmeier

The meeting was also attended by the Minister of Industry and Trade of the Russian Federation Denis Manturov, the rector of the St. Petersburg Mining University Vladimir Litvinenko and the ex-Minister of the Federal Republic of Germany Klaus Toepfer, according to the website of the Cabinet of Ministers of the Russian Federation.

“We agreed that it is important to make joint projects in hydrogen energy. The Prime Minister of the Federal State of Saxony (FRG) Michael Kretschmer recently visited. He proposed joint projects in the field of hydrogen, ” Novak said at the meeting.

“I will give instructions to the Ministry of Energy of Russia so that we jointly propose one or two projects from which we would start,” added the Deputy Prime Minister, whose words are quoted in the release of the Cabinet. According to the Deputy Prime Minister, it is necessary to continue working on joint energy projects.

A German company is already working with Gazprom on this issue.

Meanwhile, Wintershall Dea and Gazprom are discussing the possibility of transporting hydrogen through the existing gas transmission system. The head of the German company, Mario Mehren, told about this in an interview with the corporate magazine of the Russian holding.

“As part of the Science and Technology Cooperation Program between Gazprom and Wintershall Dea, specialists from our companies and joint ventures are discussing current innovative projects in order to find ideas and jointly develop solutions,” Meren explained.

“This initiative has been around for almost 30 years. And it is one of the largest and most intensive exchange formats of this kind, ”said the head of Wintershall Dea. He stressed that during the pandemic, this work continued in an online format.

“For example, in recent months, there has been intense discussion of the possibility of adapting the existing pipeline infrastructure for the transportation of hydrogen. And the use of decarbonized solutions in our joint gas transportation business. Hopefully, soon we will be able to report on new projects in this area, ” Meren added .

In addition, Wintershall Dea and Gazprom are planning a campaign to measure methane emissions. The goal is to reduce the intensity of these emissions during gas production. The partners also plan to jointly develop measures to improve the energy efficiency of compressor stations.

“I am convinced that international partnership will continue to play an important role in the future. And thanks to joint efforts to decarbonize the energy sector, we will be able to further strengthen and expand the successful Russian-German cooperation, ”Meren concluded.

EU trade chief proposes mutual tariff freeze to Washington

Brussels suggested the EU and its major overseas partner suspend tariffs imposed on billions of dollars of imports for six months, EU trade chief Valdis Dombrovskis told Germany’s main news platform, Der Spiegel.

The measure would go beyond the latest four-month suspension of import duties that the parties agreed in March.

“We have proposed suspending all mutual tariffs for six months in order to reach a negotiated solution. This would create a necessary breathing space for industries and workers on both sides of the Atlantic,” Dombrovskis said.

Last month, the two transatlantic partners agreed to suspend mutual tariffs that had covered $7.5 billion of EU imports of American goods and some $4 billion of US products shipped to the bloc. The freeze is set to expire in four months.

The bitter EU-US trade dispute over aerospace subsidies to plane makers Airbus and Boeing dates back to 2004. Then Washington challenged European subsidies of Airbus that reportedly had “adverse effects” on the US.

The EU filed a retaliatory complaint against the direct support given to Boeing in the form of regional tax breaks and government grants.

So far, tit-for-tat duties on various goods have affected nearly $50 billion in mutual trade. The list of EU products on which the US imposed taxes came in at $25 billion. $7.5 billion was authorized by the World Trade Organization (WTO). In comparison, the EU’s list totaled a mere $20 billion. WTO approved $3.99 billion.


US axes Trump-era Scotch whisky tariffs for four months in bid to resolve aircraft trade war with UK

The US said on Thursday it will suspend 25 percent tariffs on Scotch whisky and retaliatory import taxes on other UK products in a bid to resolve the two parties’ on-going transatlantic trade row due to aircraft subsidies.

Then-US President Donald Trump slapped the UK and other EU member states with tariffs on whisky, wine, cheese and other foodstuffs in 2019 in return for European plane maker Airbus being given illegal subsidies by the bloc. 

The World Trade Organization (WTO) ruled in 2018 that EU governments had failed to comply with US requests to stop funding Airbus, which had caused its American rival Boeing to lose $7.5 billion a year.

Airbus had already filed a similar complaint with the WTO against Boeing in a dispute between the two manufacturers stretching back to 2004.

On Thursday the US and the UK said in a joint statement that “the United States will now suspend retaliatory tariffs in the Airbus dispute from March 4, 2021, for four months.”

The move is the latest of Trump’s policies to be overturned by President Joe Biden, whose administration will now turn its focus toward rising civil aviation powers “such as China,” the statement says.

Reacting to the news, UK Prime Minister Boris Johnson hailed the tariff climbdown as “fantastic news” for the transatlantic trading relationship, as well as for Scotch whisky distillers and other businesses.

In December the UK International Trade Secretary Liz Truss announced Britain would suspend retaliatory tariffs against the US, ahead of Brexit and the expected new trading relationship with the US under Biden.

As well as whisky, Trump’s original tariffs in response to the WTO ruling targeted UK cashmere, German coffee and tools, Spanish olive oil, as well as cheese, meat and other products from various EU nations.

Akademik Chersky headed for Nord Stream 2

The Akademik Chersky pipe-layer headed towards Nord Stream 2. The Danish Energy Agency has reported, citing the operator’s schedule, that the vessel plans to begin completing the second string of the gas pipeline in Danish waters at the end of March

The pipe-layer Akademik Chersky left the area of ​​the Curonian Spit near Kaliningrad and headed towards Nord Stream 2. According to the Vesselfinder navigation portal, this afternoon, March 30, the vessel left the area where it was undergoing sea and pre-operational tests. It went along the route that it had previously taken to Germany.

Illustration: vesselfinder.com.
Illustration: vesselfinder.com.

The supply vessels Vengery and Ivan Sidorenko left the Curonian Spit before the pipe-layer in the direction of Nord Stream 2. “Akademik Chersky” has indicated since March 4 that he is at work at sea. Therefore, the exact direction of movement is unknown.

Also, something else is known. The Danish Energy Agency reported that completion of the second string of Nord Stream 2 in Danish waters will begin in March.

“I can confirm that we have received an updated timetable from Nord Stream AG 2 for branch A. It says that work on the pipeline will begin this month”. It is reported EADaily head of the press service of the Danish Energy Agency (DEA) Tour Falbi-Hansen .

Branch A contains the longest unfinished section of Nord Stream 2. 68.5 kilometers in Danish waters and 16.5 kilometers in German waters. Earlier, in early March, the ship left the German port of Wismar and arrived at the Curonian Spit near Kaliningrad. Operator Nord Stream 2 AG announced that the pipe-layer will undergo sea trials and pre-operational tests and begin work in Danish waters.

Meanwhile, as reported by EADaily , the barge Fortuna has already covered half – 24.5 km – of the unfinished section of Line B in Danish waters.

In February, the Danish Maritime Office clarified in a warning to seamen that work on Nord Stream 2 (the second string) is planned to be carried out by the end of September and the pipelayer Akademik Chersky will participate in them.

USA continue pressure with illegal sanctions

The Akademik Chersky is a more technically suitable vessel for Nord Stream 2 and can lay up to two kilometers per day after retrofitting. Therefore, obviously, the deadline for completing the completion of branch A in Danish waters was taken with a gap, and the pipe-layer will be able to complete it at the same time as “Fortuna” – at the end of May – June. In this case, Nord Stream 2 may be ready to launch by autumn.

Recall that the United States has imposed sanctions against the vessels of the project and the vessels of Russian companies are used on it. In addition, Washington has banned companies involved in the retrofitting of ships, insurance, inspection, testing and certification of gas pipelines from participating in Nord Stream 2. It is not known whether Gazprom solved this problem. German media reported that Washington offered Berlin conditions under which it would not impose sanctions on project participants. 

Among them are guarantees that the gas pipeline will be cut off if Gazprom stops Ukrainian transit; an increase in Russian gas supplies through Ukraine; and investment in Ukrainian infrastructure for the production and transportation of hydrogen.

Alternative to Suez: The Northern Sea Route

Finnish designers have developed a container ship for the Northern Sea Route

Suez Canal was blocked for one week by the giant container ship Ever Given. Alternative routes from Europe to Asia are increasingly being discussed. The Northern Sea Route (NSR) is no exception.

On March 22, the day before the incident in the Suez Canal, the Finnish design bureau Aker Arctic , specializing in ice technology, presented a project of an Arctic container ship for the NSR. Detailed information is contained in the corporate publication of a Finnish company. 

Prototypes

The concept design of a container ship with a capacity of 8 thousand TEU for year-round operation on the NSR is based on previous developments by Aker Arctic for the region. A series of reinforced ice-class container ships of the Norilsk Nickel type and LNG carriers of the Arc7 class for the Yamal LNG project.

The container ship for the NSR will differ from other vessels of a similar type with an ice-reinforced hull. As well as icebreaker-type bow lines, and equipment for protecting cargo from the cold.

Two options

According to Luigi Portunato, shipbuilding engineer at Aker Arctic, the vessel can be built in two versions.

The first assumes the use of the “double acting ship” technology. It is due to the hull lines and the propulsion complex higher than the nose. In this case, the hybrid propulsion system consists of one shaft line with a central propeller and two rudder propellers along the sides.

The second , more traditional option, involves the use of two shafting with propellers and two rudders.

The container ship with rudder propellers will be able to operate on the NSR all year round. It would be moving stern ahead in difficult ice conditions. A container ship with propellers in difficult conditions will need the help of an icebreaker.

A special feature of the double-acting container ship will be an additional wheelhouse located in the aft part of the mooring deck. That will be used when moving aft forward. In addition, due to low operating temperatures, the bridge between the engine room and the wheelhouse with living quarters will be located below deck.

Container ship for work on the Northern Sea Route / Illustration: Aker Arctic

Specifications

At the moment, the following technical characteristics of the container ship from Aker Arctic are known:

  • container capacity – 8000 TEU;
  • length – about 300 m;
  • width – 46 m;
  • draft – 13 m;
  • power (option 1) – 56 MW (propeller 1×22 MW, rudder propellers 2×17 MW);
  • power (option 2) – 44 MW (propellers 2×22 MW);
  • icebreaking capacity (option 1) – 2.3 m (at 3 knots, nose forward);
  • icebreaking capacity (option 2) – 1.9 m (at 3 knots, nose forward)

Project economics

When developing the project of the container ship, two options for the use of Arctic container ships on the Northern Sea Route were calculated. From Asian ports to European ports. As well as only in the section between the supposed container hubs in Murmansk and Kamchatka.

As a result, the designers came to the conclusion that the cost of transportation of a conventional container decreases with an increase in the vessel’s capacity for all options. At the same time, it is difficult to pinpoint the point when the options for transportation along the NSR become more profitable than the route through the Suez Canal. This is influenced by many factors, including the cost and type of fuel, the degree of loading of the vessel, etc.

According to Luigi Fortunatto, in the current market conditions, using an Arctic container ship is slightly more expensive than crossing the Suez Canal. The economic efficiency of Arctic container ships could be increased by switching to liquefied natural gas (LNG). At the same time, the shorter route from Asia to Europe along the NSR gives a gain in time. If earlier the speed and adherence to the schedule could only be guaranteed in summer, then with the new container ship we can already talk about the winter-spring period.

It is worth noting that the Aker Arctic publication does not mention the customer for the new vessel. It can be assumed that it is a subsidiary of Rosatom, Rusatom Cargo, which is implementing a project to create the Northern Sea Transit Corridor (SMTK). Earlier it became known about the company plans to start pilot operation of Arctic container ships of the Arc7 class as early as 2024.

The EU wants to impose carbon tariffs on Australian exports

What Australian politicians call carbon tariffs, the European Union labels a carbon border adjustment mechanism.

While one sounds bad (the WTO has rules that restrict tariffs) the other sounds understandable. If the EU is imposing a carbon tax on its own products, surely it is reasonable to impose it on products from overseas.

The argument is that if a German steel manufacturer has to pay a tax of, say, $77 a tonne for the carbon it emits while making the steel, an Australian manufacturer should be charged the same when its product enters the country, unless it has already paid the same tax here.

To do otherwise would give the Australian product an unfair price advantage — it would create “carbon leakage” of the kind Australian businesses used to warn about in the leadup to Australia’s carbon price.

The European Union approved the idea in principle on March 10.

The details are less than clear. In part because it is possible that carbon tariffs are not permitted under the rules of the WTO.

WTO rules might help Australia…

The rules say taxes or “charges of any kind” can only be imposed on imported products the same way as they are domestically.

That appears to mean that they can be imposed on importers but not on producers. However it isn’t quite what the European Union has in mind.

Ideally the WTO would be able to provide guidance. However, (in part because of the actions of the US Trump administration) it isn’t really in a position to do.

…if only they were enforceable

The WTO has a new director general in Ngozi Okonjo-Iweala. He took office this month. However it will remain unable to make rulings for as long as its appellate body is unable to hear disputes.

Under Trump, the US kept vetoing appointments to the appellate body until the expiration of terms of its existing members meant it no longer had a quorum.

Disputes can still be initiated by countries such as Australia, forcing consultations. But without final determinations.

EU says it wants to ensure that its adjustment mechanism complies with the WTO’s rules. However, it hasn’t ruled out the possibility of relying on provisions that allow exceptions.

Both sides could make a case

Exceptions are allowed for the protection of human, animal or plant life or health or the protection of an exhaustible natural resource.

The catch is these exceptions are not allowed to discriminate between countries and must not be disguised restrictions on trade.

It is arguable that an adjustment mechanism designed to protect the competitiveness of European industries will breach these provisions.