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The strategic effects of Brexit

Giancarlo Elia Valori

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Brexit is the greatest strategic shock occurred in Europe after the “fall of the Berlin Wall” in 1989. Furthermore the 1989 myth had been nurtured by the EU small cultural elites, who regarded it as the beginning of the European century, different from the American Century analyzed by the Italian economist, Geminello Alvi, before and after the globalization.

Millions of euros were also spent for funding various intellectuals – often unreasonably famous – to create the myth of 1989 and Europe’s “new start”.

It was a great error of perspective: the fall of the Berlin Wall, built by East Germans in August 1961, did not mean the end of confrontation between the Communist and the liberal-democratic blocs, but its shifting to a different and higher context.

In 2006 President Putin stated that “the fall of the USSR had been the greatest geopolitical disaster of the twentieth century” and certainly he has not changed his mind in the meantime.

The Russian Federation has always dreamt – and not just recently – of a large Eurasia, not a remake of the old Bolshevik empire.

The Baltic republics are now completely Atlantic and Europeanized. Georgia and many Central Asian republics of the former Soviet Union have a more complex economy and strategy which does not look to the Kremlin only.

Moreover, under these conditions, Georgia – which has long been dismembered with the rebellions in Abkhazia and South Ossetia – will never enter the European and NATO sphere of influence.

That is enough for Russia.

Russia wants to penetrate and dominate the whole Central Asia, after the end of the failed Afghan experience.

President Putin’s real post-Soviet project, which explains much of what is currently happening with Brexit, was outlined by him in an old article published by Izvestiya on October 4, 2011.

It is a new “Eurasian union” joining together – just as the EU did – the former Soviet republics, the old Eastern Europe of the Warsaw Pact and the major expanding economies in the Asian-Pacific system.

Against this background, any strengthening of the old European Union runs counter to the line imparted to the Russian Federation by Vladimir Putin who, however, cannot positively view the coordination between the European Security and Defense Policy and NATO, which is relocating itself along the new Russian borders southwards, in connection with the Ukrainian crisis.

Indeed, in some circles there are rumors – groundless for the time being – about Russian strong support for Brexit so as to prevent the occurrence – on the same days – of something irreparable, namely a NATO-EU operation in Ukraine.

The news cannot be verified, but it shows us how a strategic balance between Russia and the West is reshaping and emerging in the South and in the Middle East.

A balance in which the EU is retreating and Russia is filling the void left by the European Union.

The Customs Union between Russia, Belarus and Kazakhstan of 2012 was a first step of President Putin’s project, followed by the treaties with the EFTA countries (Norway, Switzerland, Iceland and Liechtenstein) and later by the treaty with New Zealand, the new Russian asset in the Pacific.

Another Russian goal, shared with Norway, is to control the immense Arctic resources.

In short, President Putin is playing a zero-sum game with the European Union. He currently thinks that if there is no longer a European Union, there will not even be a significant US presence in Europe, particularly on our borders.

This Russian project also envisages military and strategic relevance: if the buffer zone traditionally represented by the European Union vis-à-vis the Russian Federation is weakened, the EU Member States will certainly be more sensitive to the Russian commercial appeal and to a future series of regional military agreements in the Mediterranean and the Balkans.

In particular, however, the European leaders will be less attentive to the link between Europe and NATO, which is certainly weakened by Brexit that marks the walking out of a large nuclear and military power present in the UN Security Council.

Furthermore the UK Treasury forecasts that the British GDP will decrease by 3.6% and that the pound sterling will lose 12% of its value compared to the period in which the UK was a member of the European Union.

Hence a 2% squeeze on military spending, already announced by Prime Minister Cameron – exactly the same percentage of the budget increase required this year by the Atlantic Alliance.

Probably the new British nuclear submarines will no longer see the light.

If this happens, Great Britain will have to redesign all its maritime engagements and its participation in the Inherent Resolve operation, thus creating a void which will certainly be filled by the alliance between Russia, the Syrian Arab Army of Bashar el Assad and the forces run by the Shiite Iran.

Furthermore all NATO and EU actions designed to control Russia and its allies in the Balkans, as well as in Mali, Somalia and the Mediterranean, will be weakened.

Even the actions in Libya, where the British special forces have been long operating, will be made less relevant.

For the time being the model for the redefinition of relations between Great Britain and the EU is following the Swiss and Norwegian example, which is the system of the EFTA area.

Currently EFTA has 25 trade agreements in place, while the EU manages exactly twice as many agreements with third parties.

If Great Britain adhered to EFTA, it would pay 17% fewer contributions than paid so far to the European Union.

There is no Schengen-style freedom of movement in the EFTA treaties and the EU has also little power of influence and commercial leverage on the European Free Trade Association.

Nevertheless, unlike the European Union, EFTA has no geopolitical, strategic and military relevance.

It is a good surprise for Russia.

China does not care much about Brexit, which is considered irrelevant, in the long term, for China’s economic development prospects in Great Britain and in the EU.

Indeed, according to some Chinese financial analysts, a fall in the value of the pound sterling could favor bilateral trade.

Moreover, no Chinese leader has hinted at a new definition of bilateral relations with the United Kingdom.

Between 2010 and 2014, Chinese companies invested 46 billion euros in the European Union for 1,047 Foreign Direct Investment (FDI).

Furthermore Great Britain was the largest beneficiary of this Chinese FDI, with 12,2 billion euros again for the 2010-2014 period.

At strategic level, China does not want any distortions of the world order.

China has been openly in favor of Bremain while, unlike Russia, it still regards the EU as a potential factor of weakening and separation – in the NATO European area – between the US interest and the interests of the other European countries – Germany, in particular.

Moreover, Great Britain’s walking out of the European Union could foster an improvement of the bilateral economic relations between Great Britain and China.

In the real estate sector, as well as on the financial and stock markets, it is unlikely for Brexit to change something in the relations between Great Britain and China.

Moreover this situation could favor the Chinese strategy for the internationalization of the renminbi, which would find – in the pound sterling – an effective channel, also widespread in the financial world.

Moreover, with a divided and weakened Europe, China would have much greater bargaining power not only with Great Britain, but also with the EU Member States.

However, as some British analysts maintain, an European Union “divided into two parts” is less competitive than usual on the market-world.

Hence, while the Russian-British trade is at minimum levels and trade with the EU is destabilized by the US sanctions and the Russian countersanctions, we can predict that China is the only real winner of Brexit.

For Israel, the temporary fall of European economies and of the British one, in particular, can become a problem – apart from the now widespread and naïve pro-European anti-Semitism – considering that trade with the EU is one of Israel’s major sources of liquidity.

The weakening of the pound sterling and the euro as against the shekel cannot but damage the Israeli export-oriented economy, even though Prime Minister Netanyahu has stated that there will be no direct impact of Brexit on Israel. Jointly with the Bank of Israel, his government has created a situation room to monitor the effects of Great Britain’s leaving the EU.

Basically, no one to blame but oneself: so far the European Union has exerted a regulatory power which has often be bordering on the ridiculous: from the regulations on basil to those on carrots, from those on heaters to those on pencils, everything has become “European” with such bureaucratic spending and slow pace as to make EU Member States lose most of their comparative advantages on the market-world, which opened up after the aforementioned “fall of the Berlin Wall” and the subsequent globalization-Americanization.

In fact, the euro was born as an overvalued currency so as to deal a crippling blow to the US dollar, but some actions backfire and recoil primarily upon those who carried them out.

As has been authoritatively maintained, with the changeover to the single European currency, in Italy the lira was devalued by six times.

The EU global strategy is virtually non-existent, if not banally rhetorical and declamatory.

Politics cannot be focused only on economic aspects and overregulation leads to lose global markets and increase the costs of production, which are magnified by a “Napoleonic” single currency.

And obviously so at strategic level: Germany is fed up with the sanctions on the Russian Federation. It has no interest in doing a favor to Poland by dismembering Ukraine and it does not intend to be heavily engaged in the Mediterranean.

Italy would have a vital need to stabilize the Mediterranean, especially in Libya, but it is faced with some EU allies that are more interested in sharing the Libyan oil and financial pie which, in the past, was an almost exclusive prerogative of ENI, an Italian oil and gas multinational company, and the Italian banking system.

Spain is focused on its traditional sphere of influence in Latin America and is scarcely interested in the continental and Mediterranean system, apart from the former Spanish Sahara region and Northern Africa’s Atlantic coast.

Hence where is the EU strategic rationale?

With hindsight, it was better to maintain Charles De Gaulle’s old idea that envisaged and conceded only a “Europe of nations” creating a Union stretching “from the Atlantic to Urals”, in view of a dissolution of the Bolshevik empire.

The cultural, spiritual and historical boundaries of our idea of Europe are those forgotten both as a result of the race to accept anyone after the fall of the USSR – which has led to the EU elephantine and bloated apparatus – and as a result of the pro-European obsession to find a strategic niche without “one’s own arms” that Machiavelli recommended to every Prince who wanted to stay in power.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs "La Centrale Finanziaria Generale Spa", he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group and member of the Ayan-Holding Board. In 1992 he was appointed Officier de la Légion d'Honneur de la République Francaise, with this motivation: "A man who can see across borders to understand the world” and in 2002 he received the title of "Honorable" of the Académie des Sciences de l'Institut de France

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Election Monitoring in 2018: What Not to Expect

Alina Toporas

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This year’s election calendar released by OSCE showcases a broad display of future presidential, parliamentary and general elections with hefty political subjecthoods which have the potential of transforming in their entirety particularly the European Union, the African Union and the Latin American sub-continent. A wide sample of these countries welcoming elections are currently facing a breadth of challenges in terms of the level of transparency in their election processes. To this end, election observation campaigns conducted by the OSCE Office for Democratic Institutions and Human Rights (ODIHR), the Council of Europe, the Organisation for American States (OAS), the United Nations Electoral Assistance Division, the National Democratic Institute, Carter Center and even youth organisations such as AEGEE and Silba are of paramount importance in safeguarding the incorruptibility of election proceedings in fraudulent and what cannot be seen with the naked eye type of fraudulent political systems, making sure elections unfold abiding national legislation and international standards.

What exactly does an election observation mission supposed to accomplish?   

An election monitoring mission consists of operational experts and analysts who are all part of a core team and are conducting their assignments for a period of time varying between 8 and 12 weeks. Aside from the core team experts and analysts, there can be short-term or long-term observers and seconded observers or funded observers. Joining them, there is usually a massive local support staff acting as interpreters and intermediaries. Generally, an election observer does not interfere with the process, but merely takes informative notes. With this in mind, it is imperative of the observer to make sure there isn’t any meddling with votes at polling stations by parties and individual candidates; that the people facilitating the election process are picked according to fair and rigorous benchmarks; that these same people can be held accountable for the final results and that, at the end of the day, the election system put in place by the national and local authorities is solid from both a physical and logical standpoint. Oftentimes, particularly in emerging democracies, the election monitoring process goes beyond the actual process of voting by extending to campaign monitoring.

In practical terms, the average election observer needs to abide by certain guidelines for a smooth and standardised monitoring process. Of course, these rules can vary slightly, depending on the sending institution. Typically, once the election observer has landed in the country awaiting elections, their first two days are normally filled with seminars on the electoral system of the country and on the electoral law. Meetings with candidates from the opposition are sometimes organised by the electoral commission. Talking to ordinary voters from builders to cleaners, from artists to businesspeople is another way through which an election observer can get a sense of what social classes pledged their allegiances to what candidates. After two days in training and the one day testing political preferences on the ground, election day begins. Since the early bird gets the worm, polling stations open at least two hours earlier than the work day starts, at around 7am. Throughout the day, observers ask voters whether they feel they need to complain about anything and whether they were asked to identify themselves when voting. Other details such as the polling stations opening on time are very much within the scope of investigation for election monitors. Observers visit both urban voting centres and rural ones. In the afternoon, counting begins with observers carefully watching the volunteers from at least 3 metres away. At the end of the day, observers go back to their hotels and begin filling in their initial questionnaires with their immediate reactions on the whole voting process. In a few weeks time, a detailed report would be issued in cooperation with all the other election observers deployed in various regions of the country and under the supervision of the mission coordinators.   

Why are these upcoming elections particularly challenging to monitor?  

Talks of potential Russian interference into the U.S. elections have led to full-on FBI investigations. Moreover, the idea of Russian interference in the Brexit vote is slowly creeping into the British political discourse. Therefore, it does not take a quantum physicist to see a pattern here. Hacking the voting mechanism is yet another not-so-classic conundrum election observers are facing. We’re in the midst of election hacking at the cognitive level in the form of influence operations, doxing and propaganda. But, even more disturbingly, we’re helpless witnesses to interference at the technical level as well. Removing opposition’s website from the Internet through DDOS attacks to downright political web-hacking in Ukraine’s Central Election Commission to show as winner a far-right candidate are only some of the ways which present an unprecedented political savviness and sophistication directed at the tampering of the election machinery. Even in a country such as the U.S. (or Sweden – their elections being held September of this year) where there is a great deal of control over the physical vote, there is not much election monitoring can do to enhance the transparency of it all when interference occurs by way of the cyber domain affecting palpable election-related infrastructure.

Sketching ideational terrains seems like a fruitful exercise in imagining worst-case scenarios which call for the design of a comprehensive pre-emptive approach for election fraud. But how do you prevent election fraud? Sometimes, the election observer needs to come to terms with the fact that they are merely a reporter, a pawn which notwithstanding the action of finding oneself in the middle of it all, can generally use only its hindsight perspective. Sometimes, that perspective is good enough when employed to draft comprehensive electoral reports, making a difference between the blurry lines of legitimate and illegitimate political and electoral systems.

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Can Europe successfully rein in Big Tobacco?

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Photo by Mateo Avila Chinchilla on Unsplash

In what looks set to become the ‘dieselgate’ of the tobacco industry, a French anti-smoking organization has filed a lawsuit against four major tobacco brands for knowingly selling cigarettes with tar and nicotine levels that were between 2 and 10 times higher than what was indicated on the packs. Because the firms had manipulated the testing process, smokers who thought they were smoking a pack a day were in fact lighting up the equivalent of up to 10, significantly raising their risk for lung cancer and other diseases.

According to the National Committee Against Smoking (CNCT), cigarettes sold by the four companies have small holes in the filter that ventilate smoke inhaled under test conditions. But when smoked by a person, the holes compress due to pressure from the lips and fingers, causing the smoker to inhale higher levels of tar and nicotine. According to the lawsuit, the irregularity “tricks smokers because they are unaware of the degree of risk they are taking.”

It was only the most recent example of what appears to be a deeply entrenched propensity for malfeasance in the tobacco industry. And unfortunately, regulatory authorities across Europe still appear unprepared to just say no to big tobacco.

Earlier this month, for instance, Public Health England published a report which shines a positive light on “tobacco heating products” and indicates that electronic cigarettes pose minimal health risks. Unsurprisingly, the UK report has been welcomed by big tobacco, with British American Tobacco praising the clear-sightedness of Public Health England.

Meanwhile, on an EU-wide level, lawmakers are cooperating too closely for comfort with tobacco industry executives in their efforts to craft new cigarette tracking rules for the bloc.

The new rules are part of a campaign to clamp down on tobacco smuggling, a problem that is particularly insidious in Europe and is often attributed to the tobacco industry’s own efforts to stiff the taxman. According to the WHO, the illicit cigarette market makes up between 6-10% of the total market, and Europe ranks first worldwide in terms of the number of seized cigarettes. According to studies, tobacco smuggling is also estimated to cost national and EU budgets more than €10 billion each year in lost public revenue and is a significant source of cash for organized crime. Not surprisingly, cheap availability of illegally traded cigarettes is also a major cause of persistently high smoking rates in the bloc.

To help curtail cigarette smuggling and set best practices in the fight against the tobacco epidemic, the WHO established the Framework Convention on Tobacco Control (FCTC) in 2005. The first protocol to the FCTC, the Protocol to Eliminate Illicit Trade in Tobacco Products, was adopted in 2012 and later ratified by the EU. Among other criteria, the Protocol requires all cigarette packs to be marked with unique identifiers to ensure they can be tracked and traced, thereby making smuggling more difficult.

Unsurprisingly, the tobacco industry has come up with its own candidates to meet track and trace requirements, notably Codentify, a system developed by PMI. From 2005 through 2016, PMI used Codentify as part of an anti-smuggling agreement with the EU. But the agreement was subject to withering criticism from the WHO and other stakeholders for going against the Protocol, which requires the EU and other parties to exclude the tobacco industry from participating in anti-smuggling efforts.

The EU-PMI agreement expired in 2016 and any hopes of reviving it collapsed after the European Parliament, at loggerheads with the Commission, overwhelmingly voted against a new deal and decided to ratify the WHO’s Protocol instead. Codentify has since been sold to the French firm Impala and was rebranded as Inexto – which critics say is nothing but a front company for PMI since its leadership is made out of former PMI executives. Nonetheless, due to lack of stringency in the EU’s draft track and trace proposal, there is still a chance that Inexto may play a role in any new track and trace system, sidelining efforts to set up a system that is completely independent of the tobacco industry.

This could end up by seriously derailing the EU’s efforts to curb tobacco smuggling, given the industry’s history of active involvement in covertly propping up the black market for cigarettes. In 2004, PMI paid $1.25 billion to the EU to settle claims that it was complicit in tobacco smuggling. As part of the settlement, PMI agreed to issue an annual report about tobacco smuggling in the EU, a report that independent researchers found “served the interests of PMI over those of the EU and its member states.”

Given the industry’s sordid history of efforts to prop up the illicit tobacco trade, it’s little surprise that critics are still dissatisfied with the current version of the EU’s track and trace proposal.

Now, the CNCT’s lawsuit against four major tobacco firms gives all the more reason to take a harder line against the industry. After all, if big tobacco can’t even be honest with authorities about the real levels of chemicals in their own products, what makes lawmakers think that they can play a viable role in any effort to quell the illegal cigarette trade – one that directly benefits the industry?

Later this month, the European Parliament will have a new chance to show they’re ready to get tough on tobacco, when they vote on the pending proposal for an EU-wide track and trace system. French MEP Younous Omarjee has already filed a motion against the system due to its incompatibility with the letter of the WHO. Perhaps a ‘dieselgate’ for the tobacco industry might be just the catalyst they need to finally say no to PMI and its co-conspirators.

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Bureaucrats’ Crusade: The European Commission’s Strategy for the Western Balkans

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The European Commission set a target date of 2025 for some of the Balkan countries to join. However, Brussels sees only Serbia and Montenegro as actual candidates. The door formally remains open to Albania, Bosnia-Herzegovina, Kosovo and Macedonia, but these countries have been put into a grey zone with no time frames and road maps. They have been put on hold with no tangible prospects for membership, left without any explanation of what makes them less valid candidates than Serbia and Montenegro, with these two being as poor, illiberal and undemocratic as the remaining four.

With a dose of instant cynicism, one might conclude that Serbia and Montenegro have been rewarded for their military aggressions on Bosnia and Kosovo, and Serbia’s permanent pressures on Macedonia, whereas the latter ones have been punished for being the former’s victims. However, a more careful look at the population structure of the four non-rewarded countries reveals that these, unlike Serbia and Montenegro, have a relative excess of Muslim population. So far, there have been dilemmas whether the European Union is to be regarded as an exclusive Christian club, bearing in mind the prolonged discriminatory treatment of Turkey as an unwanted candidate. After the European Commission’s new strategy for the Balkans, there can be no such dilemmas: the countries perceived by Brussels bureaucrats as Muslim ones – regardless of the actual percentage of their Muslim population – are not to be treated as European.

The resurrection of this logic, now embodied in the actual strategy, takes Europe back to its pre-Westphalian roots, to the faraway times of the Crusades or the times of the Siege of Vienna. It also signals the ultimate triumph of the most reactionary populist ideologies in the contemporary Europe, based on exclusion of all who are perceived as „others“. It signals the ultimate triumph of the European ineradicable xenophobia. Or – to put it in terms more familiar to the likely author of the strategy, the European Commissioner for European Neighborhood Policy and Enlargement Negotiations, Johannes Hahn – the triumph of Ausländerfeindlichkeit.

Now, what options are left to the practically excluded Balkan countries, after so many efforts to present themselves as valid candidates for EU membership? There is a point in claims that some of their oligarchies, particularly the tripartite one in Bosnia-Herzegovina, have never actually wanted to join the EU, because their arbitrary rule would be significantly undermined by the EU’s rule of law. It is logical, then, that the tripartite oligarchy welcomes the strategy that keeps the country away from the EU membership, while at the same time deceiving the population that the strategy is a certain path to the EU. Yet, what about these people, separated into three ethnic quarantines, who believe that joining the EU would simply solve all their political and economic problems, and who refuse to accept the idea that the EU might be an exclusive club, not open to them? What are the remaining options for them?

They cannot launch a comprehensive revolution and completely replace the tripartite oligarchy by their democratic representatives. Still, they can press it to adopt and conduct a multi-optional foreign policy, oriented towards several geopolitical centers: one of them may remain Brussels, but  Washington, Moscow, Beijing, Ankara, Tehran, and others, should also be taken into account. For, a no-alternative policy, as the one which only repeats its devotion to the EU integrations without any other geopolitical options, is no policy at all. In this sense, the presented EU strategy has clearly demonstrated the futility of such a no-alternative approach: regardless of how many times you repeat your devotion to the EU values, principles and integrations, the EU bureaucrats can simply tell you that you will never play in the same team with them. However, such an arbitrary but definite rejection logically pushes the country to look for geopolitical alternatives. And it is high time for Bosnia-Herzegovina’s people and intellectual and political elites to understand that Brussels is not the only option on the table, and that there are other geopolitical centers whose interests might be identified as convergent with the interests of Bosnia-Herzegovina. Still, all of them should first demonstrate the ability to identify the interests of Bosnia-Herzegovina, which means that they should first recognize it as a sovereign state with its own interests, rather than someone else’s proxy.

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