WTO trade negotiations are not brisk endeavors. However even by the WTO’s own lethargic standards, the progress of the current Doha round has been disappointingly slow. As a new paper by Aaditya Mattoo, Francis Ng, and Arvind Subramani explains, the main reason for this is the “elephant in the green room” – China.

According to the authors, the Doha round originally suffered due to a lack of interest from the private sector – the key driver behind previous rounds. Other factors such as Indian reluctance to cut domestic subsidies and a lukewarm US attitude under Barrack Obama have also played a part.

Many hoped that the global financial crisis would inject some stimulus into the negotiations. However the authors believe that a new hurdle now impedes any serious progress – fears of competition from a trade-dominant China.

Matoo et al believe that today’s Doha negotiations centre around improved market access in the manufacturing sector. Agriculture, a key obstacle is the past, has become last salient due to record high food prices. Services meanwhile, are seen as too complex to be handled in this round.

In the nine years that Doha has been rumbling on China has emerged as a dominant source of supply to the key manufacturing importers around the world.  Today China accounts for 35% of Japan’s manufacturing imports. It also accounts for 30% and 25% of the respective EU and US figures.

What is even more crucial for Doha participants however is China’s huge market share of imports in their countries’ most protected sectors. This figure reaches 70% for Japan, 55% for Brazil and 50% for the US and the EU.  The implication is clear – if Doha cuts tariffs in these protected markets, they may see a flood of Chinese goods.

However as the authors point out, Chinese dominance in these sectors should not be an insurmountable obstacle, as long as Beijing is prepared  to open up their own markets in certain protected areas such as fertilizers.

The real problem therefore not the lack of potential for reciprocity but rather the widespread perception that Chinese trade success has been achieved, and sustained, by an undervalued Yuan. Few politicians, in any country, will be prepared to cut their own tariffs when they see China imposing an across-the-board import tariff and export subsidy (through their undervalued Yuan).

This fear of increasing currency-led market share for China’s exports is already making having implications. In 2009, 34% of developing countries’ anti-dumping cases were lodged against China. Brazil, one of the most vocal critics of currency undervaluation, has seen its currency rise 40% in the past few years. At the same time Brazil also has particularly high tariffs in certain sectors and would be expected to make cuts in Doha.

In the eyes of Doha participants the benefits of any trade concessions that they offer will be nullified by an instrument – Chinese currency undervaluation – that remains outside the scope of WTO negotiations.

The authors believe that a gradual re-evaluation of the Yuan by China  has already begun but that it will take significant time. Others like Patrick Chovanec argue that this currency undervaluation is one of the critical causes of the domestic inflation that China is currently battling. Trade enthusiasts must hope that China’s lukewarm embrace of currency appreciation gathers pace.

Cet essai a été contribué par Jan Weisensee. Les idées qu’il avance sont les siennes.

L’Union européenne est un « acteur fragmenté » non seulement par son système institutionnel et le grand nombre de décideurs possédant d’un droit de véto, mais aussi par les intérêts de ceux-ci, parfois extrêmement divergents. Cette fragmentation est souvent la principale source d’une politique européenne incohérente, un fait qui est particulièrement frappant dans les relations extérieures du bloc. Même s’il est admis que l’UE constitue la première économie mondiale et exerce ainsi une influence incontestable sur pratiquement tous les pays du monde, le dicton du ‘géant économique, mais nain politique et ver militaire’ reste omniprésent. Fraser Cameron, analyste politique et ancien conseiller auprès de la Commission européenne, suggère que l’UE aurait le potentiel de devenir même une superpuissance si elle parlait d’une seule voix.

Il semble donc surprenant que Simon Nuttall indique que « The […] mistaken assumption is that the concept of ‘consistency’ must by definition be awarded a positive value. » L’incohérence n’a-t-elle vraiment que des inconvénients? Est-il souhaitable que l’Union mène une politique cohérente à tout prix, ou existe-t-il des cas où il est plus raisonnable d’utiliser la fragmentation pour atteindre des buts politiques?

A l’aide de deux exemples récents, je vais contester ici l’idée habituelle selon laquelle l’incohérence politique de l’UE est par définition ‘une mauvaise chose’.

L’incohérence inter-étatique : L’Union européenne et la crise en Géorgie
Pendant la guerre en Géorgie en août 2008, l’Europe a réussi à répondre à une situation de crise d’une manière décidée et rapide. Le président français, ayant la Présidence tournante du Conseil, a pu négocier un cessez-le-feu et, un mois plus tard, un accord sur le déploiement d’une mission européenne d’observation. Pour cela, l’Union a été obligée d’influencer deux adversaires bien différents: D’un côté la Géorgie, allié proche des Etats-Unis depuis son indépendance en 1991 et méfiant de la position de certains Européens vis-à-vis ses ambitions otaniennes. De l’autre côté la Russie, déterminée d’empêcher l’adhésion géorgienne à l’OTAN à tout prix, mais en même temps partenaire dit ‘stratégique’ de l’UE. Notamment l’Allemagne et la France entretiennent des relations économiques importantes, la dernière en est particulièrement proche – entre autre en raison du projet de gazoduc ‘Nord Stream’. Vu que les Etats-Unis se sont mis du côté de la Géorgie très tôt, ils n’étaient plus dans la position de mener des négociations directes avec Moscou. Les relations assez tendues entre Condolezza Rice et Sergey Lavrov ainsi qu’un contact faible et irrégulier des officiels ne lui ont pas permis de gérer une telle crise. De plus, les liens personnels et historiques entre l’administration géorgienne et les Etats-Unis, symbolisé par l’expression du sénateur John McCain, « Today, we’re all Georgians », ont considérablement réduit la crédibilité des Américains en tant qu’acteur impartial. Comment l’Europe a-t-elle pu s’engager avec succès dans ce conflit?

D’une part, il est vrai que certains Etats membres de l’Union, notamment de l’Europe centrale, ont également pris position pour le président géorgien. Ainsi, quelques semaines avant le déclenchement de la guerre, les cinq ministres des affaires étrangères de la Slovénie, la Lettonie, la Lituanie, la Pologne et la Suède se sont rendus à Tbilissi, afin d’afficher leur soutien intact à la Géorgie. Ce soutien symbolique peut être considéré comme facilitateur de l’influence politique européenne sur l’administration géorgienne. D’autre part, les grands pays ont joué sur un autre plan: L’Allemagne avec ses très bon contacts à Moscou et la France en tant que Présidence du Conseil, bénéficiant du poids de l’ensemble des 27, ont eu un impact politique considérable sur le comportement de la Russie. Il est peu surprenant que ces deux Etats étaient moins bienvenues à Tbilissi. La France doutait ouvertement de l’innocence de la Géorgie dans l’affaire, et l’Allemagne, suspectée par les Géorgiens d’être de mèche avec Moscou, soupçonnait que Saakashvili cherchait à impliquer l’Europe dans une confrontation avec la Russie.

Dans cette situation, la fragmentation politique parmi les Etats membres semble avoir permis à l’Union de prendre les choses en main. Conscients ou non, les leaders européens ont pratiqué la division du travail et ont réussi d’avoir bonne presse, les uns à Moscou, les autres à Tbilissi. Ainsi, l’Europe a pu s’engager dans la résolution du conflit sans perdre sa crédibilité chez un des belligérants. Et même si le conflit reste jusqu’à nos jours loin d’être ‘résolu’, l’Union a réussi d’exercer une influence politique considérable.

L’incohérence inter-institutionnelle : Les relations euro-chinoises
Depuis le massacre de Tienanmen en 1989, les relations euro-chinoises sont stigmatisé par la question des droits de l’homme. En même temps, le commerce est au cœur des contacts entre l’Europe et la République populaire depuis déjà bien plus longtemps et le développement des échanges commerciaux prouve que l’intérêt économique joue toujours un rôle dominant. Après avoir levé la plupart de l’embargo commercial et politique sur la Chine en 1995, le Conseil européen défend le point de vue selon lequel le dialogue politique dit « discret » sur les droits de l’homme serait plus effectif. Il a renoncé officiellement aux condamnations publiques au sein des organisations internationales en 1998. Surtout les grands Etats membres ont poussé vers ce développement, ou encore la Grande-Bretagne et le Portugal, les deux étant à cette époque en pleines négociations sur la restitution de Hong Kong et de Macao, ce qui demandait des relations stables avec la Chine.

En revanche, le Parlement européen, disposant d’un nombre considérable d’instruments pour dénoncer des violations de droits de l’homme, n’a pas cessé de condamner la Chine pour ses abus. Une simple recherche dans l’archive des textes adoptés sur le site web du Parlement fournit une liste de plusieurs dizaines de documents portant sur les droits de l’homme en Chine, et dans un communiqué de presse récent, les euro-députés soulignent que « nous devons être intransigeants en matière de droits de l’Homme » et que « l’Europe devrait discuter de la problématique des droits de l’Homme dans un dialogue ouvert avec la Chine » plutôt qu’en discret. En utilisant tous les instruments à sa disposition pour critiquer la Chine, le Parlement européen assume donc le rôle du naming and shaming, alors que les Etats membres continuent leur dialogue euro-chinois de diplomatie discrète. Le professeur et ancien conseiller juridique auprès du Parlement européen Roland Bieber souligne que cette capacité du Parlement de formuler ses propres principes et préférences indépendamment des autres institutions « reveals a special feature of the Union’s institutional system » et « enables the European Parliament to develop and put forward its own independent foreign policy attitude […]. A particularly striking example is Parliament’s role in the promotion of Human Rights. » Vue la forte sensibilité des Chinois à ce sujet, la capacité de l’UE de mener ces deux politiques en parallèle est plutôt exceptionnelle et avantageuse. En plus, toutes ses activités endommagent rarement les relations bilatérales entre la Chine et les Etats membres. Le fait que celles-ci ne soient affectées que par les actes politiques originairement nationaux (par exemple un Chef d’Etat recevant le dalaï-lama) démontre le niveau de flexibilité que l’Europe possède dans sa politique vis-à-vis de la Chine grâce à l’incohérence politique entre le Parlement et le Conseil/les Etats membres.

Conclusions
Ces deux exemples démontrent que, dans certains cas, une politique extérieure incohérente a permit à l’Union européenne de jouer un rôle clé particulier sur la scène internationale. En effet, il semble que la cohérence politique et l’unité institutionnelle de beaucoup d’Etat-nations traditionnels présentent même le risque de restreindre leurs  choix politiques réalisables. Pour être clair, ce n’est pas pour dire qu’une politique incohérente devrait toujours être souhaitable. Evidemment, celle-ci entrave souvent la capacité de l’Union d’atteindre un objectif politique précis. Pourtant, les exemples ci-dessus montrent que l’Europe peut profiter de ses ‘plusieurs voix’ dès qu’il lui faut marcher ‘sur la corde raide’. Et cela arrive assez fréquemment : en Libye entre la protection des civils et le soutien du mouvement démocratique; au Kazakhstan entre les intérêts politiques (démocratie) et économiques (pétrole). Parfois une telle incohérence politique – je l’appellerais « incohérence stratégique » – peut être bénéfique. Même si cela ne fait pas encore de l’Union européenne une grande puissance, l’incohérence stratégique la munie d’une capacité exceptionnelle qui n’est normalement pas à la disposition d’un Etat-nation traditionnel.

(The following post was contributed by Marie Français. Marie writes at http://en.generation112.eu)

On Tuesday April 26th, in a letter addressed to the President of the European Commission José Manuel Barroso, Nicolas Sarkozy and Silvio Berlusconi called for a discussion on “the possibility of restoring temporary control at internal borders in the event of exceptional difficulties in the management of common borders”. The request takes place at a time when France and Italy are battling to emerge from a bilateral crisis that began when Italy redirected 24,000 Tunisian immigrants towards France.

A retrograde Franco-Italian request

This mooted proposal is dangerous for various reasons. Firstly it implies a clear retreat away from one of the fundamental pillars of the European Union – the free movement of people. By allowing a member state to close its borders, the proposal stands accused of dismantling the core of the European project.

It is important to note that the reintroduction of national borders is already permitted under article 23 of the Schengen agreement. With rather vague wording, the article stipulates that a member state may reintroduce border controls when faced with a great threat to its public order or national security. In practice this has meant the hosting of major events such as international football games or France’s hosting of the NATO summit in Strasbourg in 2009.

The recent Franco-Italian proposal adds a nuance to the current situation. By talking of “exceptional difficulties in the management of common borders”, the proposal is aimed squarely at situations where member states face an influx of migrants, such as those stemming from the recent Arab spring. It establishes a clear link between migrants entering a country and a corresponding threat to domestic public order.

The Franco-Italian proposal leaves many questions unanswered. How would one define an “influx of migrants”? How can we measure the threat of an “influx” if we are not even sure what the term itself means? How many immigrants would have to land in the Italian island of Lampedusa before France can decide that it is facing a threat to its public order and should close its borders?

The current situation also brings attention back to France’s much-criticized deportation of Roma to Romania and Bulgaria earlier this year. Could France, using the new language of this proposal, use the argument of a “influx of migrants” to restore control at its borders and prevent the future entry of Bulgarians and Romanians to French territory?

The proposal, in its current form, constitutes a real threat to the freedom of movement of people within Europe. It also points the future development of a two-track Europe where certain Europeans can freely move between countries, and others cannot.

Some reform is necessary

However while the acquis should not renege on its founding principle of free movement, it is clear that the Schengen border code, in its current form, does require an upgrade. Four key objectives should be pursued.

Firstly the principle of solidarity needs to become embedded among member states. During the recent crisis Italy complained loudly about how it was left to handle the situation alone, with scant help from other member states. Similar complaints from Malta, Spain and Greece have been made (and ignored) in the past. When a burden of handling a wave of migrants falls solely on one country, a humanitarian crisis becomes increasingly likely. By issuing temporary permits to the newly-arrived migrants and thus allowing them to move freely to other European countries, Italy was issuing a direct rebuke to France, and its other European neighbours, who rather than offer Italy assistance, had turned and looked the other way.

The second key element is the need for reinforced border cooperation with neighboring countries, in particular those in the Mediterranean. The Union for the Mediterranean was formed in 2008 with this goal in mind. To date however it has done nothing to suggest that it is anything other than yet another results-shy vanity project. The widespread change taking place across the Arab world has gifted the EU another opportunity, one that it should grasp with both hands. It should aim to foster the economic and social development of the emerging, young democracies in the Arab world, not merely through border cooperation, but also through its neighborhood and development policies.

Frontex, the agency in charge of managing the EU’s external borders must also be reformed. While Schengen may have removed domestic borders, the EU is still responsible for its external borders. With most member states unable, or unwilling, to manage their own external borders, the need for an effective EU external border agency has heightened. Despite recent improvements, Frontex remains hamstrung by its limited resources and friction between EU member states. By turning Frontex into an effective border security agency, the EU could begin to rebuild trust among its member states. What the Franco-Italy crisis showed more than anything else is that such trust has evaporated among EU member states when it comes to border issues.

Finally the evaluation mechanism built into the Schengen acquis must be reviewed. Currently the annual report of the Schengen evaluation Committee (the so-called SCHE-VAL Committee) evaluates a member state’s capacity to fully implement the Schengen acquis and proposes recommendations. However these recommendations carry little weight and are not taken seriously by member states. This issue has already been taken up by several members of the European Parliament with the rapporteur on the issue, Carlos Coelho (EPP, Portugal) advocating a complete reexamination of the current process.

What’s next?

In response to the Franco-Italian proposal Commission president Barroso has said that the temporary re-introduction of checks at the internal borders are “one possibility” that the Commission is looking at. Member states will likely rule on the issue at the June 24th European Council.

The Franco-Italian crisis has cast light on Schengen’s current shortcomings. However future changes should be driven by, and not contrary to, EU law and the fundamental principles that drive EU integration.

Despite soaring prices and concerns among many investors, China is not facing a housing bubble. At least not according to a new report published by the Economist Intelligence Unit. Rather, owing to future growth in China’s urban population and their income, demand for housing looks set to remain strong. This demand will have global implications, not least on markets for steel and energy.

Rome wasn’t built in a day – but it was built in two weeks

House construction in China is nothing short of a phenomenon. In China, Rome may not be built in a day, but it is built in under two weeks. That is how long it takes China to build the number of houses that you find in the Italian capital. Ever since property markets in China were liberalized in the late ’90s, dabbling in real estate has become a national sport. Today 88% of Chinese households live in self-owed housing, one of the highest rates in the world

Crazy for housing

With 41.6 bn square metres of residential floor space in 2009, China has the world’s largest stock of housing. A key reason for this is the relatively large floor space per person that China’s urban population enjoys. At 31 square metres, this is over three times that of India and is roughly the same as Japan, despite the huge disparity in incomes between the two countries.  Although this is partially explained by population density, there are other factors that explain the Chinese exuberance for housing:

• The absence of a nationwide property tax is a critical factor. Although China has begun to introduce some limited property taxes in selected cities, they are at a very low level and have not yet had any notable impact.
• Chinese households are very small, with an average of 2.8 people in urban households. This is considerably smaller than in most developing countries. However with regards to housing the one-child policy and gender imbalance have also had an impact. With fewer women around, young men, who are keen to impress, must save feverishly in order to be able to offer impressive homes.
• Finally, Chinese homes are often of suspect quality, which holds costs down and allows larger home sizes. These poor quality buildings were also the subject of much political consternation after the collapse of “Tofu buildings” following the Sichuan earthquake in 2008.

However, as always in China, the devil is in the detail. With regards to housing, there is considerable disparity in living space per head between different Chinese cities. In the north, homes tend to be smaller, given the high cost of heating them in the cold climate. Homes in the larger, more developed, cities like Shanghai, Beijing and Guangzhou also tend to have smaller space per head.

 Future demand for housing – the rise of the inland regions

The two main drivers of future housing demand in China will be urbanization and income growth.  As incomes rise, so will car ownership. We will see cities begin to sprawl and home sizes increase.

The increase in demand will be led by cities with large urban populations. However a number of lower-tier, lower-income regions such as Chengdu will also grow in prominence. China is entering a period when economic growth in inland regions is overtaking that of coastal regions as manufacturers feel the heat from rising labour and land costs. The continued exodus of manufacturing jobs away from coastal regions and towards inland regions will drive faster job and income growth.

There are some risks to the EIU’s scenario, perhaps most notably if China goes through a period of serious monetary tightening, as a response to escalating inflation. As the Chinese government continues to tighten monetary policy and raise bank reserve requirements, nobody should ignore how seriously they take the inflation issue. Observers have also commented on a gap between housing starts and sales which suggests that a short term price correction may be in the offing.

In the longer-term however Chinese demand for housing is likely to remain robust. This has considerable implications for the world. Housing construction will set off a range of indirect demands for commodities and energy. According to the EIU, over the next five years, as floor space per head rises by 25%, steel demand will rise by 22% and energy demand by 50%. The main winners in all this will be countries who export iron ore and oil. While consumers across the world will face higher prices, this will be offset to a certain degree as China continues to grow as an export market for the rest of the world.

The following post was contributed by Malthe Mikkel Munkøe

Panama did it in 1904. Ecuador and El Salvador both did it in the early 2000’s. In Europe, Andorra, Monaco, San Marino, the Holy See, Kosovo and Montenegro have all done it: adopting a foreign currency as their own – dollars and euro, respectively. This policy, referred to as dollarization and euroization, has recently been gaining new-found attention in Europe. For example, it has sometimes been discussed as a possible policy option in Iceland following the country’s economic meltdown in 2008, and there have been similar talks of a move to euroization of the Baltic countries in light of their economic hardship brought on by the financial crisis. Policy debates usually focus on the benefits and costs of floating or fixed exchange regimes relative to euro membership, but euroization may, under the right conditions, be a viable third alternative.

The rationale for using euro

Euroization can be carried out unilaterally i.e. without acceptance from the euro countries, and largely entails the same gains as full-fledged euro membership. These include more trade integration with the eurozone countries and lower transaction costs for citizens and businesses conducting trades in the eurozone. This in turn may spur economic growth and attract foreign direct investment. Additionally, through euroization, countries effectively borrow the ECB’s credibility in terms of guaranteeing price stability because euros are expected to lose value very slowly.

However, the costs of giving up the national currency would also apply to a move towards euroization. This includes the start-up costs of physically replacing the national currency and purchasing large amounts of euro to put in reserve for fluctuations. The experience from the introduction of the euro suggests that this also causes a quick spur of additional inflation as businesses round up existing prices. More importantly, it would be impossible to conduct independent monetary policy. With a national currency the central bank can increase the money supply in the country, suppressing interest rates and boosting demand and growth. Without an independent national currency this cannot be done, and economic stabilization can only be carried out through government spending.

Euroization shares these features with a fixed exchange regime, which locks the national currency to the euro at a certain parity that the central bank will guarantee with its monetary policy and facilitate trade with the euro-countries. Fixed exchange regimes are susceptible to speculative attacks, however, which can be extremely damaging to the economy if they succeed in bringing down the monetary regime. Also, fixed exchange rate regimes can only be maintained if long-run inflation is kept at the same inflation trajectory. Euroization is a great help in terms of curtailing inflation, because the government can no longer print money itself and instead borrows the monetary credibility of the euro, which is expected to lose value only slowly. And euroization does not entail the risk of speculation and enables government borrowing at lower interest rates because the risk associated with currency fluctuations is eliminated. Euroization looks like a perfectly viable alternative to fixed exchange rates, but there are other costs of euroization that must be taken into consideration.

Further costs of euroization

All euro-zone countries have a seat in the Governing Council of the ECB. In principle all decisions are made solely with recourse to the common interest of the euro-zone as a whole. Monetary decisions do not of course take into account the economic situation of any ‘euroized’ countries. Moreover, in practice, national interests may well play some role in setting monetary policies. As such, euroization may well be seen as a ‘poor man’s euro’, which can be politically undesirable.

Another additional cost of euroization, compared to full-fledged euro membership is the loss of seignorage ­- the amount of real purchasing power that a government can extract from the public by printing money. The government can use the money it prints as tender for purchases, but has only spent a fraction of the revenue to physically produce the money. The difference is the revenue that accrues to the issuer. In other words, printing money implies a financial gain that in some countries constitutes a substantial element of total government income.

Moreover, euroization restricts the ability of the central bank to play the role of lender of last resort. Modern banks do not keep enough money in their vaults to pay out all deposits all at once, but reinvests as much as it can. This ensures that domestic savings are channeled into investments – money left in the vault is money not put to productive use in new investment projects. However, this leaves banks vulnerable to banking runs, i.e. a situation where everybody demands their money back at once, usually in response to news that the bank may be close to bankruptcy. This will impact negatively on the economy and may spread as customers in other banks fear that theirs will be next. Often this works as a self-fulfilling prophecy – even a perfectly sound bank will inevitably be swept away by a large-scale banking run. The central bank can prevent this vicious cycle by borrowing the money needed as a ‘lender of last resort’ – by lending to banks that are basically sound but illiquid, the loan is guaranteed to be paid back once the dust settles. Central banks play an important role in ensuring economic stability as lender of last resorts, since banking collapses usually have important negative repercussions for the rest of the economy. However, if a country has abolished its national currency in lieu of the euro, the central bank can only do so insofar as there are enough funds available in its reserve holdings. Finally, these capital reserves constitute an opportunity cost – the central bank needs to keep capital idle in its deposits, instead of using it for productive investments.

A third way in monetary policy?

Euroization is inferior to full-fledged euro membership because of these additional costs. However, it may still be a viable alternative to a fixed exchange regime, which similarly implies additional costs, primarily the risk of a speculative attack on the regime itself.

In comparison to a fixed exchange rate regime, euroization confers the same benefits in terms of trade, arguably even greater benefits in terms of monetary stability including with regards to inflation, while avoiding the risk of speculation. However, it also implies the loss of seignorage, the ability of the central bank to act as lender of last resort is seriously diminished, and it will be more costly to shift monetary regime in the future. For countries that find the currency fluctuations of floating exchange rates undesirable and seek to obtain the trade benefits of monetary integration with the euro-zone, but also see the speculative risks of a fixed exchange rate regime as too dangerous or costly to implement and find their mounting inflation perturbing, euroization could be an attractive alternative.

This is probably why euroization has primarily been implemented in small countries with less than stellar past monetary performance and track record for price stability – it is a easy way to rapidly arrive at a relatively credible and workable monetary regime. Policy debates almost always focus on the benefits and costs of euro membership as contrasted to a fixed exchange regime or a floating currency (including intermediate variants such as currency boards). Nevertheless, euroization is in fact a viable alternative that may be particularly appropriate for countries struggling to obtain credibility and price stability in its monetary policies.

A world that is evolving from one where strength is measured predominantly in military terms to a world in which different kinds of power and threats co-exist, helps to identify opportunities for transatlantic cooperation and constitutes an imperative for action in cyber security, writes Amanda Sellers and Tobias Felix Franke.

“The past 65 years have shown that when Americans and Europeans devote their energies to common purpose, there is almost nothing that we are unable to accomplish.”
-Joe Biden1

In April 2007, Estonia, the first country to have introduced online voting, was paralysed by an onslaught of cyber attacks that brought to a halt public and private sector communications networks. For three weeks governmental offices, banks, media corporations and private households were denied access to information from the outside world. In the same year, Germany’s vice intel chief Hans Remberg publicly denounced the targeting of Chancellor Angela Merkel’s computer. Simultaneously, US Secretary of Defence Robert Gates also fell prey to cyber operatives, and the Pentagon’s computers lost several terabytes of sensitive information. Citizens across the Atlantic thus had a common challenge to face: cyber security.

Although experts agree that “it is beyond doubt that the US and EU must work together in this field,”2 there remains, several years down the line, “no organised transatlantic response”3 to this issue. This is even more alarming as a 2010 study found that for any organisation or entity a mere €86 million, 750 men and two years of preparation would suffice to compromise Europe’s infrastructure via hacker attack.4 The possibility for collateral damage is extensive, especially since some tools such as worms can spread globally in minutes once launched into cyberspace.5

Borders indeed cease to hold significance in cyberspace, and the need arises for new forms of cooperation. As the 21st century enters into its formative years, the transatlantic relationship is thus faced with both an evolving global dynamic and a set of intangible security challenges that reach beyond conventional threats. Sprouting from the multipolar model, a ‘heteropolar’ environment has entered into force: rather than developing separate hard and soft power realms independently, regional powers contend for influence simultaneously across diverse means of comparative advantage, be it in the defence, economic, energy sectors, or others. The endurance of the cross-pond bond is precisely predicated on the question of whether Europe and North America will follow a trajectory that drifts toward heightened competition over niche capabilities and resources – or not.

In a world that is evolving from multipolar to heteropolar,6 i.e. from a world where strength is measured predominantly in military terms to a world in which different kinds of power and threats – kinetic, economic, environmental or cyber – co-exist, North America and Europe can best respond through joint efforts to engender comparative advantage in cyber excellence. Europe and North America can bring new pragmatic vitality to their relationship by seizing upon the opportunities and by understanding the constraints imposed by threats in a heteropolar world. With the will to develop cross-sector cooperation, nations’ efforts to respond to cyber threats can be combined to create a resilient, transatlantic cyber security strategy.

Hence, if counterbalancing scales register a weighty new type of threat that targets international interdependencies, what explains the still limited level of teamwork between the two partners? Furthermore, what hurdles need to be overcome in order to foster cooperation, and what would effective transatlantic collaboration look like? Convinced of the advantages of enhanced cooperation between North America and Europe7 in the field of cyber security, the authors seek to provide an answer to these questions.

All beginnings are difficult
Transatlantic cooperation is not unheard of in cyber security. Firstly, the harmonisation of cyber crime legislation has been initiated by the Council of Europe Convention on Cyber Crime. This document conveys a common commitment to punish perpetrators and to deter the threat. Interestingly, the US has signed and ratified the convention, which would thus render it a promising transatlantic tool. However a number of EU member states, for example Austria, Poland, Sweden and the UK, have not ratified the convention.8 This reflects the well-known problem that “the EU” is itself a rather heterogeneous power, within which different views on security are hard to reconcile.

Secondly, the Cooperative Cyber Defence Centre of Excellence (CCDCOE), established in Tallinn in 20069 to enhance NATO’s cyber defence capability, is a further step to link partners on both sides of the Atlantic. Yet, the centre is only sponsored by certain NATO Allies (Estonia, Germany, Italy, Latvia, Lithuania, Slovakia, Hungary and Spain, while Turkey and the United States are in the process of joining).10 Moreover, the Crete-based European Network and Information Security Agency (ENISA), initiated by the EU, can be regarded as somewhat of a duplication of such efforts. In November of this year the 27 EU member states and Iceland, Norway and Switzerland held a joint cyber security exercise in which a hacker attack was simulated. Despite the fact that the EU has identified cyber security as a threat to be addressed together with the US, Washington was not involved in the exercise.11 Far from interpreting these events as disharmony between Europe and America, it mirrors the lack of political consensus on whether NATO or the EU should take a leading role in the cooperative defence effort.

Thirdly, a cyber defence capability under the Emerging Security Challenges Division at NATO became operational in August 2010, to manage and execute the functions of the NATO Cyber Defence Coordination Centre. Its goal is to further develop mechanisms for assisting those Allies who seek NATO support for the protection of their communication systems, including through the dispatch of Rapid Reinforcement Teams (RRTs). Despite recent such initiatives, the NATO nations themselves continue to individually bear the main responsibility for the safety and security of their communications systems.12 This highlights the ongoing debate on both sides of the Atlantic on whether cyber security should predominantly remain in the realm of national capitals, or whether a transfer to the supranational level would be beneficial.

In sum, differences between states and a lack of political consensus on in which forum (NATO or EU) – or whether at all – on the international stage cyber security should be addressed. If we follow the logic of the evolving heteropolar world, then states within a given region will increasingly cooperate to exploit their common comparative advantage in a given sector. Russia and its vicinity, for example, can be expected to form a regional pole in energy matters – energy being its abundant natural resource.13 In an increasingly interconnected heteropolar world, the poles which have specialised in a certain sector will be able to trade their advantage for other poles’ expertise and thus ensure their welfare. In this respect, a member of the European Parliament stated that “at the moment both the US and the EU are leading globally in IT knowledge. However, to protect this comparative advantage – particularly vis-à-vis emerging powers – they would soon need to form a pole of technological excellence.”14 Given these considerations, it would be regrettable if the opportunities for a transatlantic comparative advantage in cyber security were overlooked.

Growing with the job
The necessity for deep transatlantic cooperation is further highlighted by three developments: hurdles to cooperation, shared challenges and common positions.

The overarching hurdle holding back cooperation is the lack of a commonly recognised definition of cyber defence, and as a consequence governments in North America and Europe vary widely in the avenues they have identified to prepare for adequate response. Nonetheless, both Brussels and Washington have deplored the lack of such a definition. According to Maeve Dion, Programme Manager at the Centre for Infrastructure Protection at the George Mason School of Law, “in one country, cyber defence may be primarily a military effort to guard against and respond to cyber attacks; in another country, cyber defence may incorporate prevention and response efforts to mitigate cyber damage caused by natural disasters or accidents”15 Russian Permanent Representative to NATO, Dmitry Rogozin, cuts to the heart of this dilemma, asking, “does it mean that Article 5 of the Washington Treaty will be used to fight cyber crimes? And that NATO is now ready to bomb hackers’ offices?”16 In effect, there is no common approach to the legal framework, and each country has independently embarked on the development of cyber defence mechanisms.

Two main challenges are simultaneously faced across the Atlantic and can be best overcome if the two sides fuse their efforts. Firstly, the disconnect between public and private sector security policies makes for ill-informed leaders and an across-the-board lack of accountability for the task of preventing against cyber attack.17 In this regard it is important to recall that “more than 90 per cent of the physical infrastructure of the Web is owned by private industry.”18 The public-private disconnect fuels uncertainty about how to both assess the damage and coordinate the response to a crippling attack. Secondly, civil liberties in the mature democracies of Europe and North America prevent against public sector security screening. There is tension between the need to defend against the full spectrum of cyber incidents on one hand, and the responsibility to uphold the freedom of information and expression. Some countries, in which authoritarian structures present less of an obligation to ensure the latter, individual freedoms bear less weight in state cyber defence strategy. Whereas civil liberties will always bind North American and European nations’ defensive options, the impact of such a restriction can be diffused when pitted against the added value (read: ‘economies of scale’) of a common security commitment among sovereign democracies to respond to cyber attack. Governments in liberal market economies are thus limited in their capacity to oblige private companies, which hold most of the endangered infrastructure, to cooperate with state-led cyber security agencies and to invest considerable amounts into their cyber security.19

On a number of issues, though, experts in North America and in Europe hold common positions, many of which so far have not prominently figured in the discussions on cyber security. Firstly, experts on both sides of the Atlantic see cyber security as the future fifth realm of defence, besides land, sea, air and space.20 Secondly, both NATO and the EU have identified transatlantic cooperation in this field as imperative.21 NATO attaches considerable importance to it in its new Strategic Concept, building on the Alliance’s 2002 Cyber Defence Programme.22 The EU has also done so in its brainstorming sessions after the adoption of the 2008 report on the implementation of the European Security Strategy, which names cyber security as a threat.23 Thirdly, only a Europe-North America-tandem has the political power to launch a credible international initiative for a regulatory framework delineating responsibilities, obligations and infringements in cyber security. Fourthly, North America and Europe do not perceive of each other as adversaries in this field. Hence, far from entering into a cyber security arms race, they are natural allies. As Ronald De Bruin of Security & Defence Agenda has pointed out, “we share the same interests, to protect our economies and our security – security is not a matter of competition, but a matter of cooperation.”24 Fifthly, the example of the Stuxnet virus, which has recently infected 30,000 industrial control systems in Iran and hence prevented the commissioning of a new power plant, demonstrates that the protection of core assets is equally a question of effective cooperation on cyber security matters.25 Finally, an index of Overall Cyber War Strength, compiled by former Assistant Secretary of State for Political-Military Affairs Richard Clarke, ranks the US sixth behind North Korea, Iran, China and Russia. While Washington is first in offensive cyber capabilities, the US ranks last in cyber defence, which is predicated on the country’s dependency on information communications technology.26 In other words, North Korea has so few systems reliant on the internet that Pyongyang can pull the plug at any moment without causing major damage. Western countries on the other hand face the dilemma that their investments in cyber security do not grow at the same pace as their dependence on cyber systems.27

All the above – legal discord, a lack of private-public security policy coordination, but a number of unifying factors – amass to advance the imperative for closer cooperation in a heteropolar world.

Taking back the initiative: a common way forward
While some first steps have been taken, a number of hurdles, challenges and common positions create a pressure for further cooperation. Moreover the emergence of a heteropolar world demands specialisation to guard the comparative advantage North America and Europe hold in information technologies. Bearing in mind the above, what concrete steps can be taken in the future?

A joint NATO-EU transatlantic cyber security body could bring the two partners together. Indeed, given that both NATO and the EU have launched ambitious programmes in this area, synergies are best exploited by close cooperation through a transatlantic NATO-EU consultative body. It could coordinate efforts and meet in the formation of the member nations’ ‘cyber czars,’ or ministers in charge of cyber security (which vary from country to country), to take legally binding decisions. Implied in this recommendation is a genuine effort by the two sides to overcome residual divisions (e.g. on the issue of Cyprus), impelled by the urgent need to address the transnational spectrum of cyber threats to critical infrastructures.

This cyber security body would function equally as a forum for discussion, necessary to prepare a UN resolution on cyber security, something Russia has also lobbied for in the past. In a time where as many as 120 governments are already pursuing information warfare programs28 and US National Intelligence Director Mike McConnell rated the problem equal in significance to the potential development of nuclear weapons by Iran,29 a cross-cutting global initiative is critical.

Above all, coordinated public dialogue about cyber threats is needed, to aid individuals in understanding the risk they expose themselves and their peers to in engaging in illicit online activity, as well as to incite exchange with multinational corporations on protecting their clients against risk. As most cyber attacks leave no marks, without a strong vision, the lack of urgency erodes the potential to create more resilient transnational infrastructure. The establishment of a coordinated transatlantic cyber security body would carry the weight needed to convince diverse actors to come the table, ready to develop a commitment to cyber security. A joint lessons learned exercise, the consultations in above framework should then be bundled in a comprehensive transatlantic cyber security strategy which establishes both the legal basis and guidelines for the cyber security body, including its powers to act in the event of a cyber attack. It would provide an institutionalised, regular forum for discussion and preventative activities.

In sum, the emerging heteropolar world helps to identify opportunities for transatlantic cooperation in cyber security but also constitutes an imperative for action. It is up to us to seize this chance, to ‘excel’ multilaterally – to create a new interface for transatlantic cooperation.

The EU keeps two battle groups on standby for six months at a time, and has done since January 2007. However, having been on standby for more than four years, the battle groups have the air of a solution looking for a problem.

The EU is often criticized for lacking a “hard” side to its common foreign and security policy. Brussels is still seen more as a “soft” or “civilian” power. However, there is a hard side to the EU’s foreign and security policy – its battle groups .

The two battle groups that the EU maintains are made up of a pooling of  personnel from contributing countries, supplied on a rotational basis. The pool is made up of personnel from the countries’ existing forces and  usually numbers around 1,500 (maybe more depending on the contributing countries).

The battlegroup groups were designed so that they could be rapidly deployed to a crisis anywhere in the world, within 5-10 days,  following a unanimous decision from the Council of the European Union (i.e. the member states’ ministers).  It sounds pretty impressive. And it is impressive, 27 sovereign national states have decided to pool their resources, with the aim of putting troops on the ground within an incredibly short period of time.

This can be seen as a considerable victory for those in favour of a common EU security policy – the battle groups were to a large extent designed to signal to the outside world that the EU is indeed capable of making a difference on the international scene, in both a “hard”  and “soft” manner. One can  be proud of the developments that have taken place within the EU’s common foreign and security policy over the past decade and one should be proud of the battle group concept as well.

So where have these battlegroups been deployed to date? Nowhere. They have never been used,  not once, and have now been on stand-by for over four years. So if we imagine the battle groups as a new, big, powerful “drill” that the EU holds, where are the “screws”? There does not seem to be any challenge out there that EU is (politically) willing to take on.

So what would be a suitable virgin deployment for the EU’s battlegroups?  Could there be a role for them in the current outbreak of instability in the Middle East and North Africa? If a crisis was to show up in the EU’s neighbourhood, could and would they get involved? It’s hard to say. At the moment though, the EU’s battle groups are in real danger of becoming a solution without a problem.

The following post was contributed by Malthe Mikkel Munkøe.

The sovereign debt crises in Greece and Ireland and the mounting economic trouble facing Portugal, Spain and Italy, have long been a cause for alarm in European capitals. Many fear that one or several of the so-called PIIGS countries may be forced to leave the euro, which could exacerbate the pressure on the euro itself and possibly spell doom for the common currency. This simple argument overlooks one fact of international economics, which has been dubbed the original sin problem.

The Original Sin  term was coined by economics professors Ricardo Hausmann and Barry Eichengreen in the late nineties to describe the economic situation relatively common to emerging economies where countries find it difficult to obtain loans in their national currency and instead opt for loans denominated in foreign currencies. This renders the country very vulnerable to a drop in the real value of the national currency, since the value of the outstanding debt increases correspondingly which makes it more difficult to service the debt.

A similar situation could occur in the eurozone. If a euro-country decided to leave the euro and recreate a national currency instead, it would still have to honor national debt which is denominated in euro. Having been forced to step out of the euro cooperation due to unbearable economic and financial pressures, a new national currency would by all likelihood be extremely weak relative to the euro. In other words, the burden of a euro-denominated debt would soar following a forced exit from the euro.

Leaving the euro is therefore no simple fix for the PIIGS. While an independent currency would enable them to carry out a large-scale devaluation to regain competiveness, it would also greatly aggravate their debt problems even further.

Correspondingly, a forced exit from the euro would probably have to be coupled with other measures to deal with the sovereign debt, ranging from an organized restructuring to the complete renegotiation of the debt. Both would be extremely embarrassing and lead to a further loss of investor confidence and possible capital flight. In short, if done in the context of mounting financial and economic problems, leaving the euro would be nowhere near as easy as entering it and could precipitate a crisis of the same magnitude as other full-blown currency crises in the past have done. 

We are used to thinking of the euro in terms of the relatively simple Mundell-Fleming model and the Trilemma of international finance. That is to say, as a possible policy choice that implies certain benefits and costs, and one that policy-makers can decide relatively easily. In particular, by entering into a currency union countries cannot use monetary policy to keep their economy on a growth trajectory. Indeed, many have claimed that the woes of the PIIGS are to a large extent the result of an overly austere monetary policy that has been ill-suited for the business cycle dictated needs of Southern Europe. However, in a world of deeply integrated financial markets, things may not be that easy in practice. Due to the original sin problem, changing the modus of monetary policy-making is not just choosing another policy mix between costs and benefits, but will also have great repercussions if financial markets react adversely to the shift.

Hence, weak members will have to try to weather the storm and stay in the euro almost no matter what. Some, perhaps most prominently NYU Professor Nouriel Roubini, have suggested that this will not work and Greece will eventually have to negotiate an organized default. But leaving the euro is certainly not a good way to fix those problems either. The common currency render countries with an inability to stimulate their economies with monetary policy, but it is a well-known fact, although it was sometimes forgotten in the hectic days of the Greek sovereign debt crisis, that ultimately, long-run economic problems can only be solved by long-run measures, not temporary adjustments in the supply of money.

If the other euro members lose faith in the European project or become convinced that they could prosper from reintroducing a national currency, they might be able to leave the euro without incurring the terrible consequences of a forced exit. After all, financial markets would not react as adversely to a shift, and their public finances are sounder and can withstand a greater financial strain.

Of course, there is currently little prospect of this happening. The euro confers economic benefits to the members, and so much national prestige is staked at its survival. Also, no-one yearns for a return to the time where the Bundesbank pretty much dictated monetary policy in Europe, and the political aspirations of European decision-makers is generally speaking to have more, not less European integration. Similarly, both German chancellor Merkel and the French president Sarkozy favour stronger international financial governance as a response to the financial crisis, and at the World Economic Forum last year Mr. Sarkozy even called for the instigation of a new Bretton Woods system. If the euro proves to be unworkable, it would seriously question the durability of global economic governance – if it cannot work in Europe, why should it work globally? But of course things could change, especially if economic recovery continues to stall in Europe.

The lesson is that if you want to gauge the sustainability of the euro, you should look to the countries that are doing well and study the political will to maintain the euro in Paris, Frankfurt and Berlin, rather than being overly concerned with what the PIIGS might do. Sadly for the PIGS, there is no attractive policy alternative to holding tight and hoping they can weather the financial storm.

The following post was contributed by Mario Giuseppe Varrenti.  Mario holds an MA in International Relations and Diplomacy Studies from the College of Europe. Mario will soon take up a traineeship post in DG DEVCO, electoral assistance in the European Commission.

More than two months since the second round of elections in Cote d’Ivoire, the international community faces a big dilemma. Technically flawless elections delivered a result which was not accepted by the incumbent Laurent Gbagbo. Three options are now in sight: protracted deadlock,  military intervention and power-sharing.

Election assistance experts have convened that the Ivorian elections were run according to international standards, in a technically impeccabile way. There was no rigging and an independent electoral commission delivered a timely and clear official result, which was welcomed by the international community.

However, the country faces deadlock. The Constitutional Court, controlled by Mr Gbagbo’s men, overruled the outcome of the elections and annulled the results. The Constitutional Court acted against the electoral law and so   “legally” there is a clear answer to the dilemma,  Mr Ouattara is the winner.  However, “politically” the issue remains a splitting headache.

Three scenarios are in sight and none of them looks promising. The first  is protracted deadlock, the current status quo, with Mr Gbagbo remaining in power and Mr Ouattara being slowly abandoned to his destiny. In this case Mr Gbagbo may become a international pariah, with restrictive measures being imposed upon him and his cronies. In such a scenario, renewed internal conflict cannot be ruled out.

A second scenario is international military intervention. This is a highly unrealistic option whose costs may easily dwarf any benefits. Although we have seen the military card branded to date, we do not know whether it is backed up by serious political will or if it is simply seen as a way to put further pressure on Mr Gbagbo. This political  hot potato has been passed on to the sub-regional organisation, ECOWAS, and has casued considerable consternation in the domestic politics and public opinion of its member states.

The third scenario is a power-sharing agreement. Power-sharing is without doubt becoming a panacea, a sort of international norm, especially after the cases of Kenya and Zimbabwe. Power-sharing is indeed part of the solution, it can bring an end to violence and create convergence upon constitutional reform (whether successfully like in Kenya or unsuccessfully like in Zimbabwe). On the other hand, power-sharing is also a big part of the problem as it creates an incentive for candidates not to accept the result of elections, “If I can’t have it all, better to have half  than to have  nothing”.

If power-sharing will be the solution to the Ivorian crisis (which will be difficult if Mr Ouattara’s only support comes from abroad),   it will be a slap in the face for the international community and its efforts to assist Ivorian elections.

As for Mr Ouattara, it is likely that the only presidential aspiration he can realistically have at the moment is a presidential suite in the Golf Hotel of Abidjan.

Asian, European, or both?

Kazakhstan can be safely called a true Eurasian country. A founding member of the Shanghai Cooperation Organisation who plays football in the UEFA European Championships. Its president Nursultan Nazarbayev likes to say that Kazakhstan is regaining its former Silk Road function as a bridge between the two continents and has planned ambitious rail projects to back  up this assertion.

However the rather more unpleasant reality is that Kazakhstan has traditionally been trapped on the outliers of both continents. For Europeans, Kazakhstan is a far off, distant place, absent from EU initiatives such as the European Neighbourhood policy and the Eastern Partnership. For Asian giants, Kazakhstan has been traditionally seen as a remote place, located in the far-flung wild west.

A troubled history

For most of its history, Kazakhstan has been inhabited by nomadic tribes. This came to an abrupt end when it was subjugated by the Russian Empire at the end of the 19^th century. After the Russian revolution of 1917,  the Kazakhs had a brief dalliance with independence before it uprisings were brutally suppressed by the Soviet Union. It was subsequently established as a state under the Bolsheviks in 1920 and became a fully-fledged republic under the Soviet Union in 1936.

After the fall of the Soviet Union, Kazakhstan was the last state to declare independence, doing so on December 16th 1991. Kazakhstan’s communist-era head of state Nursultan Nazarbayev became the country’s first president and remains in that role to this day. He was most recently elected in 2005, earning over 90% of the vote in a much criticised election.  At a time when long-serving, authoritarian leaders in the Arab world are coming under pressure, he may well be casting nervous glances at Cairo and beyond.

Kazakhstan is home to a multi-ethic society whose composition has changed considerably over the last century.  Stalin’s purges in the ‘30s saw the mass deportation of German, Polish and Koreans to Kazakhstan’s territory, a period that also saw the setting up of a huge Russian diaspora. However since Kazakh independence many have returned to their native lands and as a result ethnic Kazakhs now make up almost 65% of the total population, up from less than 40% in 1989.

Kazakh politics and economics

Kazakhstan is a self-described unitary presidential republic, with a bicameral parliament consisting of the Senate (37 seats) and the lower house of Parliament, entitled the Mazhilis (107 seats). The parliment is generally seen as weak and subject to the executive impulses of the president. On the global scene, Kazakhstan follows a much-trumpeted ‘multi-vector’ foreign policy that has it reaching out to all powers, far and near.  As its chairing of the OSCE in 2010 shows, Kazakhstan has succeeded in establishing itself as an international force that few would have though possible when it achieved independence in 1991.

After the demise of the Soviet Union, Kazakhstan, like all post-soviet states, was faced with an abrupt cessation of its entrenched economic management from Moscow. Led by the conviction of Nazarbayev. it subsequently sought to develop a market economy and to seek investment from the outside world.

However it faced major challenges from the outset. After ’89 the Soviet Union may have disappeared relatively quickly but its infrastructure did not. Kazakhstan, like its newly freed neighbors, found itself with infrastructure that was that was creaking and that had been completely designed to facilitate Moscow’s needs. Faced with an economy that was reliant on agriculture and inefficient state-owned industries, GDP in 1994 was down 36% on 4 years earlier and annual inflation was nearing 1,000%.  However beginning in the mid-nineties, Kazakhstan began to experience strong economic growth, on the back of its opening up to trade and investment and rising energy and raw materials prices.

Kazakhstan is rarely mentioned in international discourse without a nod to its substantial natural resources. Attention focuses predominantly on oil reserves, where it has a proven tally of 30 billion barrels. Kazakhstan itself claims that the promise of more undiscovered reserves could put it in the world’s top 5 producers in the next decade.

Kazakh oil has also led to considerable reserves of associated natural gas with proven reserves totalling 3 trillion cubic metres, a sum which is expected to rise to almost 5 trillion cubic metres by 2010.  However Kazakhstan is far from a petro-state and the fact that it also possesses 19% of the entire world supply of uranium, as well as 35 billion tons of coal and substantial copper, zinc and gold reserves it is often overlooked in international circles 

The EU’s engagement in Kazakhstan

After the dissolution of the Soviet Union, while European energy companies quickly entered the Kazakh energy market the EU remained on the sidelines. Its engagement with Kazakhstan for the most part of the ‘90s was limited to the opening of a delegation in Almaty (the former capital) in ’94 and some generic aid programs like the Technical Assistance Programme for the Commonwealth of International States (TACIS).

Cooperation began to pick up with the signing of the EU-Kazakh Partnership and Cooperation Agreement (PCA) in 1999 but it was at the turn of the century that two events galvanised the attention of the EU. Firstly, 9-11 and the Operation Enduring Freedom mission to Afghanistan  brought Central Asia as a whole onto the EU’s radar. Secondly, the successive gas crisis between Ukraine and Russia led to a refocus by the EU on energy projects in the region. The result was the 2007 ‘EU and Central Asia Strategy for a New Partnership’ and subsequent increases in EU aid to the region.

In Kazakhstan, the EU sees the dominant power in Central Asia and the only clear  candidate in the region that is capable of becoming a “trusted partner”.  However in private EU officials maintain that Kazakhstan has currently no chance of joining the ENP or the Eastern Partnership and that EU membership is “not on the table at all”.

From the Kazakh point of view, they have constantly stressed the importance of the EU’s  role in their multi-vector policy. 2008 saw the launch of Kazakhstan’s “Road to Europe” state program, which aimed to “join the European integration experience” and to intensify cooperation in areas such as technology, transport, energy and investment.

In one interview, the Kazakh ambassador to Moscow Adilbek Dzhaksybekov claimed that Kazakhstan would like to join the EU, although this has not been repeated publicly..

China’s engagement in Kazakhstan

Unlike the geographical distance that separates the EU, China and Kazakhstan share a 1,700 km border and a substantially more complex history. After the dissolution of the Soviet Union and ensuing Kazakh independence, Chinese officials were faced with the nightmare scenario of their minorities in Xinjiang seeking to emulate their ethnic brethren in seeking independence.

China thus moved fast to establish friendly relations and recognised Kazakhstan on the 27th December 1991. Premier Li Peng subsequently visited Nazarbayev and initiated full diplomatic relations. For the majority of the subsequent decade China’s negotiations with Kazakhstan focused on two major issues: The negotiation of border demarcation treaties and Kazakh support for tackling the Uyghur separatist threat.

The border negotiations took place on a bilateral level and a regional level under the 4+1 format involving Russia. The latter provided the basis for the forming of the Shanghai Cooperation Organisation in 2001, of which China and Kazakhstan are key members.  The fist and second border Sino-Kazakh demarcation accords or “friendship treaties” were signed in 1994 and 1997 before a final agreement in 1998 brought the issue to a close. 

Since the turn of the late ‘90s, the cooperation between China and Kazakhstan has focused primarily on energy and economic cooperation where the activity has been fast and comprehensive.  

At a practical level the growing importance of China is evident from the high-level posts that Nazarbayev has dished out to mandarin speakers. Recipients include Kassym Tokayev, a sinologist, who is the current chairman of the Senate and Karim Masimov, the current Kazakh Prime Minister who is a mandarin-speaking Uyghur.

Part 1 of this 5 part blog series on ”The EU, China and Kazakhstan” can be found here