The Greek debt crisis saga continues with no resolution in sight. As expected, the European leaders rejected a last-minute proposal by Alexis Tsipras, Prime Minister of Greece, requesting an extension of the bailout program that expired on 30th June and seeking a new €29.1 billion bailout package that could have covered country’s debt obligations over the next two years.
The rejection led the country to default on its €1.6 billion loan repayment to the International Monetary Fund. Greece is the first developed country to default to the IMF. Even though the IMF does not use the term default, it will now classify Greece as being “in arrears” and the country will only receive funds in future once the arrears are cleared.
After several rounds of protracted negotiations in Brussels, Greece had rejected the anti-austerity conditions contained in the bailout package prepared by the troika (European Commission, European Central Bank and the IMF). The troika demanded substantial cuts in pension and wages besides overhauling value-added tax as a precondition for releasing the remaining funds from the bailout package which expired on 30th June. Disappointed over the rigid stand taken by troika, on 27th June, Mr. Tsipras announced a referendum to decide whether or not Greece should accept the bailout conditions. The referendum will take place on 5th July.
By announcing a referendum, the Greek government has put the ball in people’s court. It is hard to predict the outcome of forthcoming referendum. It is likely that a No vote would strengthen the bargaining power of the current government which came to power on anti-austerity platform in January 2015. While a Yes vote would make the government’s position untenable and probably lead to general elections.
On 28th June, the Greek government imposed capital controls and other regulatory measures to maintain liquidity and stability in the banking system. These include:
- All banks in the country will remain closed for a week (June 29- July 6, 2015).
- An individual can withdraw up to €60 per card a day from ATM.
- The foreign bank cards are exempted from this daily limit.
- The transfer of money to outside Greece will require approval from the official authorities.
- A specialized agency will deal with urgent payments that cannot be met through cash withdrawals or electronic transactions.
The Accumulation of Public Debt
No discussion on Greek debt crisis would be complete without analyzing how the country’s public debt got accumulated over the years. In 2004, the country’s public debt was €183.2 billion. By 2009, it reached as high as €299.5 billion, or 127 percent of country’s GDP.
Currently, Greece’s public debt stands at €323 billion, nearly 175 percent of country’s gross domestic product. Both the critics and supporters of Greek’s government admit that such a high debt-GDP ratio is unsustainable. The current government is seeking substantial write-off of country’s debt so as to put the country back on a growth trajectory. While seeking debt relief for Greece, several economists and legal experts have referred to London Agreement in 1953 which gave generous debt relief to West Germany by writing off its 50 percent of debt, accumulated after world wars. This debt relief was one of the key factors which enabled the reemergence of Germany as a world economic power in the post-war period.
In 2015, the Greek Parliament set up a Truth Committee about the Public Debt to investigate how country’s foreign debt got accumulated from 1980 to 2014. The Committee has recently released a preliminary report which states that Greek public debt is largely illegitimate and odious. I would earnestly request readers to read this report as it confronts several popular myths associated with the Greek public debt. According to the report, the increase in debt before 2010 was not due to excessive public spending but rather due to the payment of extremely high rates of interest to creditors and loss of tax revenues due to illicit capital outflows. Excessive military spending also took place before 2010.
More importantly, the report reveals how the first loan agreement of 2010 was used to rescue the Greek and other European (especially German and French) private banks. The loan agreements of 2010 (and 2012) helped private banks and creditors to offload their risky bonds issued by the Greek government. In simple words, the debt of the private banks was transformed into public sector debt via bail-outs. As pointed out by Tim Jones of Jubilee Debt Campaign, it is not the people of Greece who have benefitted from bailout loans from the troika but the European and Greek banks which recklessly lent money to the Greek government in the first place.
Out of €254 billion lent to the Greek government by troika since 2010, only 11 percent have been spent to meet government’s current expenditure. Of course, previous governments of Greece are equally responsible for spending beyond its means and falsifying its public accounts.
Who owns Greece’s public debt? Currently, close to 80 percent of Greece’s public debt is owned by public institutions — primarily from the EU (member-states, ECB and EFSF) and the IMF (see chart below) The rest is owned by private creditors.
Austerity Caused a Humanitarian Crisis
The social and economic consequences of austerity measures imposed by troika on Greece have been devastating. Since 2010, Greece’s GDP has fallen by 25 percent and unemployment rate is 26 percent. The youth unemployment rates are at an alarmingly high level. Currently, over 56 percent of young people in Greece are without a job and there are more than 450,000 families with no working members. After five years of fiscal adjustment and economic hardship under the austerity program, Greece’s major indicators (including GDP, employment and incomes levels) are still far below the pre-crisis levels.
The welfare spending cuts proved to be counter-productive. As pointed out by Ozlem Onaran of University of Greenwich: “The wage and pension cuts and fiscal consolidation led to lower GDP, tax losses, and higher public debt. Our estimates show that the fall in the wage share alone has led to a loss in GDP by 4.5%, and a 7.80% point increase in the public debt/GDP ratio. The fall in wages alone explains more than a quarter (27%) of the rise in the public debt/GDP ratio in this period. The conditionalities of the memoranda have not only been counterproductive in terms of its aims regarding debt sustainability, but also engineered a humanitarian crisis.”
Many legal experts argue that the harsh austerity program imposed by troika could potentially pose a violation of human rights. According to Ilias Bantekas, Professor of International Law at Brunel University Law School, “The measures imposed against the Greek people were wholly antithetical to fundamental human rights as these stem from customary international law, multilateral treaties and the Greek constitution. Consequently, these ‘loans’ were held to be odious, illegal or illegitimate.”
It is pertinent to note that not just in Greece, the austerity programs also failed to yield positive results in Cyprus, Spain and Ireland.
Grexit: Pain and Gain
What would happen if Greece abandons or is forced to exit the euro? In the short-term, it would certainly entail greater uncertainty and economic hardship. A massive capital flight by the elites along with collapse of banks and businesses which have borrowed in euros cannot be ruled out. The payments of salaries and pensions could also be delayed for months.
The social and economic consequences could be disastrous for Greek economy and its people if the transition from the euro to a new national currency (possibly drachma – its old currency) is badly managed. Hence, the transition should be well-planned and properly implemented with popular support.
There is a growing consensus that a massive devaluation of drachma would help in increasing domestic demand and improving the prospects of economic recovery. A weak drachma would make Greek exports more competitive and its tourism more attractive and therefore would open up new opportunities to enhance exports and encourage more tourism over the long-term. Exports account for nearly 30 percent of its GDP. Because of a weak new drachma, the demand for domestic goods would increase as imports will become more expensive thereby boosting the domestic demand which, in turn, would also encourage greater domestic production and create more jobs for Greek people.
In addition, Greece will also regain its independent monetary policy and fiscal space to set policies in tune with its own economic needs instead of those of Eurozone economies. Needless to say, a small country like Greece (representing less than 2 percent of EU’s GDP) should never have joined the flawed monetary union in the first place.
Wider Ramifications for Europe
Greece leaving the euro will have serious economic ramifications for the rest of Europe. If Greece leaves the Eurozone, the threat of financial contagion to other weak Eurozone economies (such as Portugal, Ireland, Spain and Italy) looms large and subsequently these economies may as well exit the euro. Not only such a move would weaken the Eurozone but, more importantly, it would spell the end of the single currency experiment and the larger European project towards greater economic integration.
Besides, one cannot ignore the fact that the euro may face massive devaluation if international investors liquidates their European assets and investments en masse.
Furthermore, there are human and geo-political ramifications which are not sufficiently understood by European leaders. How will the EU cope with the influx of migrants from North Africa who enter Europe (via Mediterranean route) without the active cooperation of Greek government?
Technically speaking, an exit from euro does not mean an exit from the EU. A Greek veto on extending sanctions against Russia over Ukraine would further weaken the European strategy to isolate Russia.
The observation made by many commentators that Grexit would isolate the country from the world economy is highly misplaced. Greece can explore new economic partnerships and build strategic alliances with Russia, China and other developing world. Given its favourable geo-economic location in Southern Europe, Greece can emerge as an important regional energy distribution hub. Greece has already launched discussions with Russia to build a gas pipeline to Greece via Turkey and then to Europe. This pipeline could bring immense benefits to Greece’s economy in terms of new investments and jobs. Greece is currently considering joining the New Development Bank (NDB) which was set up in 2014 by BRICS. Becoming a member of Asian Infrastructure Investment Bank is another possibility.
Needless to say, the European leaders need to act more like statesmen as the European Union is founded on the values of respect for democracy, equality, human rights and solidarity.
The Broader Meanings of ‘No’ Vote
Finally, the Greek citizens have delivered a resounding ‘No’ to bailout conditions demanded by creditors in a referendum held on 5th July. The referendum was announced by Greece’s Prime Minister, Alexis Tsipras, on 27th June after bailout talks with the creditors failed. The referendum asked voters to decide “whether to accept the outline of the agreement submitted by the European Union, the European Central Bank and the International Monetary Fund at the Eurogroup of 25/06/15.”
The government-backed ‘No’ side won with 61.31 percent of votes, while ‘Yes’ got the remaining 38.69 percent. Further, not a single electoral district of Greece voted for ‘Yes’. No one in Greece had predicted such a massive victory for ‘No’ vote. Most opinion polls had predicted a tight contest with ‘No’ side winning by a slim margin.
Does a ‘No’ victory mean Greece leaving the euro and the EU? Not exactly. As pointed out by PM Tsipras, “This is not a mandate of rupture with Europe, but a mandate that bolsters our negotiating strength to achieve a viable deal.”
Undoubtedly, the landslide victory in the referendum has greatly strengthened the bargaining power of the current government with creditors. The impacts of the austerity measures imposed by the international creditors have been catastrophic. The Syriza-led government, which came into power on an anti-austerity platform in January 2015, has resisted pressure to implement harsh austerity programs that affect the elderly and the poor.
Another positive outcome of the referendum is that the opposition parties have also given support to the Syriza-led government to negotiate a new deal with creditors. In many important ways, the decisive referendum has brought political stability in Greece which has witnessed four elections in five years.
A New Deal for Greece
In the current circumstances, a new deal is challenging but still feasible. Both sides need to realize the sense of urgency to pursue a realistic agenda. The negotiations between Athens and Brussels should resume immediately in order to avoid a major financial meltdown.
On their part, the leaders of Eurozone should accept a compromised deal to end the impasse. They should not insist that any special privileges to Greece would encourage other potential rule-breaking eurozone countries. The costs of a Grexit are high not only for Greece but also the entire Europe in terms of wider economic and geo-political implications.
It is important to note that the IMF in its preliminary draft debt sustainability analysis (dated June 26, 2015) has sought substantial debt reduction along with extended concessional financing for Greece. This IMF analysis specifically points out that Greece needs “a significant haircut of debt, for instance, full write-off of the stock outstanding in the GLF facility (€53.1 billion) or any other similar operation.” The Greek Loan Facility (GLF) consists of bilateral loans pooled by the European Commission.
A new deal is feasible if the European leaders realize the true importance of ‘No’ vote. The message of Greek referendum is loud and clear: harsh austerity measures imposed by the EU lack democratic legitimacy. And the debt relief should not be treated as a taboo.
Hence, keeping the wider interests of the European project in mind, its political leadership should adopt a more flexible approach towards Greece based on the principles of democracy, human rights, cooperation and solidarity. After all, the financial rules are meant to serve the people, not the other way around.
In return, Greece should also undertake policy measures to check massive tax evasion by oligarchs and streamline its public finances. Needless to say, the Greek government should be given a fair chance to put its house in order. This entails patience on the part of official creditors.
European Parliament Declares Russia as Sponsor of Terrorism: Implications and Future Developments
European Union’s relations with Russia has taken a different complicated turn, this time declaring Russia as a state sponsor of terrorism. What are the significance and implications the European parliament, arguing military strikes on Ukrainian civilian targets such as energy infrastructure, hospitals, schools and shelters, to classify and finally vote in favour of a resolution calling Russia a state sponsor of terrorism? Why should the European parliament take this decisive legislative step at all giving this status to Russia?
The European parliament at a plenary meeting in Strasbourg on November 23 declared Russia as “a state sponsor of terrorism” around the world. The resolution passed by 494 votes, while 58 deputies voted against and 44 abstained. The document brings a number of accusations against Russia. The bloc has already imposed a series of unprecedented sanctions on Russia over its special military operation in Ukraine which began February 24. European lawmakers, in a largely symbolic move, now voted for this measure against Russia.
The Yermak-McFaul sanctions group, in a special project for independent newspaper Ukrainska Pravda, pointed to six main consequences of the potential U.S. designation of the Russian Federation as a state sponsor of terrorism:
1. Symbolic: recognition of Russia as one of the main global perpetrators of atrocities and terror, which the country carries out against civilian populations.
2. Diplomatic: reduction of formal ties and joint programs between the U.S. and Russia, along with increased diplomatic isolation of Russia.
3. Sanctions and restrictions on transactions: it will be illegal for American individuals and legal entities to participate in financial transactions with the Russian government, Russian state-owned banks and enterprises, and persons connected with the Russian government.
4. Secondary sanctions against entities that are connected, for example, by transactions with Russia and its institutions. This means that the U.S. and its allies can impose sanctions (usually financial or trade) on any country that continues to cooperate with the Russian Federation, prompting other countries to avoid such cooperation.
5. Blacklisting of the Russian Federation by The Financial Action Task Force (FATF):unlike the partial disconnection of Russian banks from SWIFT, this step would affect the banking system of the Russian Federation in its entirety, rather than in selective parts (this would mean the blocking of correspondent accounts of Russian banks around the world, including in China).
6. Enabling judicial, executive, and other actions against Russia directly by voiding Russia’s sovereign immunity, thereby allowing the real possibility of bringing Russia to justice in the courts of other countries. Normally, a court of one country cannot issue judgements against another country. However, a state sponsor of terrorism designation creates an exception to sovereign immunity in U.S. courts.
There have been several media reports. As the BBC has noted, there have been other attempts to designate Russia as a “terrorist” state. In the spring of 2018, after an assassination attempt by the Russian special services on Sergei Skripal and his daughter in the UK, the ranking Democrat on the U.S. Senate Foreign Affairs Committee, Robert Menendez, called for this step against Moscow. In December 2019, the Committee supported a bill introduced by Republican Senator Cory Gardner to recognize Russia as a sponsor of terrorism.
Despite these calls, Russia has still never been included on this list. However, the savage and brutal full-scale war that the Kremlin is waging against Ukraine has repeatedly strengthened both Kyiv’s calls for this step and the grounds for it.
On May 12, 2022, members of the House Foreign Affairs Committee Republican Joe Wilson and Democrat Ted Lieu introduced a bipartisan resolution proposing to recognize the Russian Federation as a state sponsor of terrorism.
“By designating Russia as a state sponsor of terrorism, the United States would be able to ban dual-use exports to Russia and take economic action against other countries that do business with Russia,” argued Rep. Lieu in a joint statement with his Republican colleague.
“What’s more, the U.S. could further inflict pain on Russia by freezing the country’s assets in the U.S., like real estate. We know that Russia provides sanctuary to a U.S.-designated terrorist group and has employed mercenaries with histories of human rights violations. A state sponsor of terrorism designation is a common-sense way to further aid Ukraine.”
They also recalled that in addition to war crimes in Ukraine and “the bloodbath that has already resulted in the death of unknown thousands of Ukrainian civilians and soldiers.”
“However, Russia’s involvement in international terrorism is more expansive and has been well documented for years, whether through direct attacks or orchestrated through private military networks and hired thugs. Their reign of terror must be stopped,” they urged.
In a recent article, the news magazine Foreign Policy analyzed why the hypothetical decision to recognize Russia as a sponsor of terrorism has drawn skepticism.
“U.S. officials and experts familiar with the matter describe a debate within the National Security Council and State Department on the merits of the move, with some officials arguing that a [state sponsor of terrorism] designation would send a powerful signal of support to Kyiv and others arguing that it wouldn’t have much of a practical impact, given that Russia already faces one of the strictest sanctions regimes in the world,” the publication reports.
On the other hand, other experts argue that the recognition of Russia as a state sponsor of terrorism would have a significant reputational effect. The move would increase pressure on the Kremlin and make virtually any relationship with Russia impossible for U.S. citizens, writes Politico. According to Atlantic Council sanctions expert Edward Fishman, “Labeling Russia as a state sponsor of terrorism would be significant because it’s a blanket measure… [It] brings risk to any relation-ship with Russia.”
He also added that a congressional mandate to grant the Russian Federation such a status would make any secondary sanctions against Russia “far more effective.”
In addition above, the Swiss daily Neue Zuercher Zeitung’s columnist wrote that “Emotionally, this decision can be understood, but it entails no legal consequences. Moreover, it is politically meaningless,” columnist Daniel Steinvorth believes. In his opinion, the resolution adopted “looks powerful”, but in reality, it is such “only verbally.”
The author draws attention to the fact that the decision of the parliament “is not binding” for either the European Commission or the countries of the European Union. The European deputies’ demand for reducing official contacts with Russia to an “absolute minimum” has been “met long ago,” taking into account the expulsion of Russian diplomats from the EU countries after the start of a special military operation in Ukraine, the columnist noted.
Steinvorth recalls that the United States, unlike the EU, does not consider Russia a sponsor of terrorism, because it is well aware that “at some point the West will inevitably have to sit down again at the negotiating table with Russia,” while “terrorists are not to be negotiated with.” Strasbourg “prefers not want to wait for this moment and hurries to attach labels instead,” the observer laments.
On the other hand the widely circulated daily Russian newspapers have, during the week, attempted to offer some analysis behind the European parliament’s move to brand Russia a ‘state sponsor of terrorism’ for its actions in Ukraine and interviewed for views from so many political experts. For example Izvestia
“This decision cannot have any legal consequences, because the European Parliament does not have any appropriate prerogatives. However, there are political implications, and the resolution may propel this issue legally,” Associate Professor of the Department of Integration Processes at MGIMO Alexander Tevdoy-Burmuli told Izvestia. The expert said the EU could later make decisions to facilitate the recognition of a third country as “a sponsor of terrorism”.
Director of the Center for European Information, Associate Professor at MGIMO Nikolay Topornin doubts the EU will soon be able to tweak its legislation for that. “This resolution would rather attract the attention of Africa, Asia, the Middle East and other regions,” he told Izvestia. And Tevdoy-Burmuli did not rule out that the EP could use this resolution to try and deprive Russia of its say at the United Nations Security Council, even though the procedure of stripping a permanent member of its right to veto is not envisaged in the organization’s documents.
What’s more, the resolution came as no surprise for Moscow. According to First Deputy Chairman of the Federation Council Committee on Foreign Affairs Vladimir Dzhabarov, the European parliament is no longer playing a decisive role, and all it has been doing of late is inciting enmity between nations. The senator suggested Russia, in its turn, should approve a document recognizing all NATO countries as “sponsors of terrorism” for the massacre of civilians in Yugoslavia, Libya, Iraq and Afghanistan.
The European parliament at a plenary meeting in Strasbourg on November 23 declared Russia as “a state sponsor of terrorism” around the world. The resolution passed by 494 votes, while 58 deputies voted against and 44 abstained. The document brings a number of accusations against Russia. The European parliament further asked the Council of the European Union to broaden the list of sanctioned persons and called on “all EU candidate countries and potential candidates to align with the EU’s sanctions policy.”
The European parliament “calls on the Commission to come forward with a legislative proposal to amend the current EU Global Human Rights Sanctions Regime […] by extending its scope to include acts of corruption, to swiftly adopt targeted sanctions against individuals responsible for high-level corruption in Russia and Belarus, as well as their EU-based enablers and beneficiaries,” the resolution says.
It “asks the Commission and the Member States to consider possible measures against countries that try to help Russia circumvent the sanctions imposed; urges the Commission to ensure that national penalties for breaching EU sanctions are effective, proportionate and dissuasive.”
“European Parliament members have given the member states an idea of developing a European Union’s legal framework ‘for the designation of states as sponsors of terrorism and states which use means of terrorism’ and called on European capitals to put Russia on this blacklist so that no one has any doubt which state they mean. The absurdity of this idea is evident to all but European Parliament members who supported it,” the mission wrote on its Telegram channel.
According to the mission, “the task set by the European Parliament is simple – to whip up confrontation with Russia by all possible means.” It is being done at the expense of the wellbeing of people who are faced with the adverse impacts of the anti-Russian sanctions, it added. Brussels has is a framework definition of terrorism and a list of terrorist organizations, and the resolution will not have any judicial consequences for Russia. Although resolutions are not legally bunding and are recommendatory, they are widely used in the EU media and political environment to promote and disseminate specific political positions.
In addition, European deputies recommend “an immediate and full embargo on EU imports of Russian fossil fuels and uranium, and for the Nord Stream 1 and 2 pipelines to be completely abandoned.”
Earlier, the NATO Parliamentary Assembly published a resolution, which recommends that Russia be designated “a terrorist regime.” A similar resolution was adopted by the Parliamentary Assembly of the Council of Europe (PACE) in October. The European Parliament resolution adopted is an advisory recommendation for consideration by the European Commission and the Council of the European Union.
Italy-Gulf Bilateral Ties: More Room for Growth
Due to historical and geographic factors, Italy has rarely figured as a protagonist in the dynamics of the Gulf region and it has mainly focused its foreign policy activism on its immediate neighborhood: the Mediterranean and North Africa.
However, Rome has signaled an interest in playing a more visible, active role in the GCC space and Italy-Gulf bilateral ties have registered exponential growth during the past decades. Three main areas of cooperation – security, economy, and energy – have significantly contributed to building a friendly diplomatic environment.
Italy came to play a more significant role in the Gulf area in the early 1990s by contributing to the US-led Operation Desert Storm against the backdrop of Saddam’s invasion of Kuwait.
Although Italian troops were rarely dispatched to the Arabian Peninsula since then, they visibly contributed to promoting security and stability in the GCC’s immediate neighborhood. Italy took an active role in the US-led Global War on Terrorism after 9/11 by participating in military missions in Afghanistan and Iraq.
Italian troops rarely engaged in combat operations when deployed to the Middle East. In most cases, Italy’s armed forces were tasked with non-combat duties. As a peacekeeper, an interposition force separating warring parties in combat zones, and head of training programs for local security forces, Italy’s army has consolidated a decades-long experience in deconfliction.
Italy has always been characterized by a strong maritime vocation and a long naval history. Still today, Italy markedly depends on sea transport lanes for its trade and energy supplies. Therefore, Italy is deeply committed to freedom of navigation and safe transit across chokepoints.
Through its naval assets, Italy is devoted to improving the security and stability of shipping lanes, providing mariners with a safe maritime environment, and intervening and protecting them from the malign activities of state- and non-state actors.
Italy has emerged as an active contributor to several maritime security platforms implemented in the waters off the Arabian Peninsula. From the US-backed Combined Maritime Forces to the counter-piracy EU NAVFOR Operation Atalanta and the French-led European Maritime Awareness in the Strait of Hormuz mission, Italy has regularly dispatched its naval assets to protect shipping lanes in Middle East waters.
More recently, Italy’s armed forces will contribute to ensuring the defense and security of Qatar’s 2022 FIFA World Cup. The Italian contingent will provide full-spectrum support to the Qatari security forces to ensure the safe and regular running of the sporting event, which is expected to gather thousands of football fans.
As the second EU manufacturing powerhouse, Italy eyes the GCC market as a promising destination to export its commodities and services. Italy-GCC trade exchanges are still adjusting to the shocks brought about by the Covid-19 pandemic and the Russia-Ukraine war, but data for the 2022’s first-semester signal a promising positive trend that, in most cases, markedly outweighs the same period in 2021.
While single cases display slightly different figures, precision mechanical products, chemical products, food products, pharmaceutical and medical products represent the bulk of Italian export to the Gulf region. Among the GCC member states, the UAE stands out as the biggest recipient of Italian export, with a value of roughly 3.8 billion euros between January and August 2022.
Some GCC countries have positioned themselves at the forefront of the freight and passenger transport industry. Many Gulf-based companies have consolidated sound expertise in offering logistics services as well as storage and distribution solutions.
Due to their capacity to develop more competitive and efficient logistics solutions that suit the increasingly demanding needs of constantly adjusting global markets, Gulf-based logistics companies have positioned themselves as trendsetters in the transport industry. Thanks to its unique geography, the Arabian Peninsula is set to become a critical transmission knot in global trade supplies and a vital logistics connector between East and West.
With a close interest in gaining a solid connection to global trade lanes to export its high-value-added commodities while securing stable access to supply chains to import energy products and raw materials to process at home, Italy eyes with growing attention the home-grown logistics solutions offered by the Gulf countries.
With a solid industrial fabric and no direct access to domestic energy sources, Italy has traditionally satisfied a high-quantity demand for electric energy for industrial and residential use by heavily importing energy products. However, the shortcomings of energy supply chains that emerged during the Covid-19 pandemic, the growing concerns regarding the long-term implications of climate change, and the severe impacts of the Russia-Ukraine war on the global energy markets have driven Italy to double down its efforts in further diversifying the country’s energy mix and pivoting it towards green products.
While the GCC states still see the export of hydrocarbon products playing a prominent role in their economies, they all have set for themselves ambitious decarbonization targets and are investing massive financial resources in the development of state-of-the-art solutions to support the green transition. With the GCC countries eyeing growing attention to creative initiatives to pivot their economies away from an oil revenue-based model, Italy-Gulf ties might reach new heights through cooperation in renewable energies-driven joint initiatives.
With a new parliament taking office and a government swearing-in last October, Italy has recently entered a new phase of its political lifecycle. Still, Italy’s positioning in the international arena is unlikely to experience radical changes.
By nominating some veterans of Italian politics at the top of critical ministries, such as the then-President of the European Parliament Antonio Tajani at Foreign Affairs and Guido Crosetto at the Defense, the government headed by PM Giorgia Meloni signals to international observers that Italy’s geopolitical and strategic posture will remain solidly anchored in the Atlantist and European camps.
PM Meloni’s pragmatic understanding of international affairs calls for the new Italian government to maintain a reassuring foreign policy posture. The Mediterranean and North Africa are bound to remain the priority areas where Italy will spend most of its diplomatic energies. Still, the need to cultivate more profound and meaningful ties with the Gulf countries is gradually becoming more relevant in Italy’s foreign policy compass.
Rome’s latest moves in the Gulf tell a story of growing resolve by Italy to contribute to upholding a secure maritime environment. The dispatching of troops and warships is a concrete display of Italy’s increasing interest and closer attention to the Gulf and its geopolitical undercurrents.
Olaf Scholz was in Beijing, is it Germany’s big bet on China or the other way around?
The visit of German chancellor Olaf Scholz to China this month generated mixed reactions, generally unsupportive, across European capitals as also in Washington. Within the EU, for example, the French leader Macron, amid a growing schism with Germany, is “irritated” with Scholz’s solo visit to Beijing. Several European countries have criticized Scholz for “unilateral diplomacy” and for the visit’s “naively” wrong timing. In China, the government and official media were delighted and over-excited with the German chancellor’s less than 24-hour “whirlwind visit,” but Chinese skeptics are calling for caution and pragmatism.
German Chancellor Olaf Scholz visited Beijing this month accompanied by the leaders of several top German businesses in China, sending a clear message to all those in Germany, in the EU capitals, and in Washington who strongly criticized the visit: business with the world’s largest market must continue and “decoupling” with China is neither good for Germany nor beneficial for Europe. The less-than-day-long visit by the chancellor to the Chinese capital – with no plan to visit the Great Wall – typically fitted into the caricature of how the Germans are perceived, i.e. “all work, no pleasure.” Realizing the importance of the business-like “flash visit,” the Chinese too cleared all hurdles in the way of the Scholz entourage’s one-day business outing to Beijing and lifted the Covid-19 standard 7-day mandatory hotel quarantine requirement for all foreign travelers.
Interestingly, while chancellor Scholz was shaking hands with Chinese President Xi Jinping in the Golden Hall of the Great Hall of the People, the US secretary of state Anthony J. Blinken was telling reporters at the end of the 2-day G7 foreign ministers meeting in the western German town of Münster: “We [G7] are clear-eyed about need to align on China.” Perhaps unable to interpret what “clear eye” means in Chinese, a section of the media in China reported Blinken as saying the “United States strongly agrees” with Scholz’s stance on his trip to Beijing. The Chinese article, entitled “Scholz goes to China, Blinken Responds,” further stressed Blinken’s remark that “in the past two years, the G7 consensus, including Germany, on the China issue has become increasingly strong and clear.”
It is indeed true Blinken did make the remark as reported in the Chinese article mentioned above. However, far from endorsing chancellor Scholz’s China visit, what the secretary of state clearly said in response to a question about how he [Blinken] viewed the German chancellor’s sudden visit was this: “Chancellor Scholz laid out in very clear terms his objectives for his visit to Beijing in an op-ed that was published this week. And we strongly agree with what he shared in that op-ed. That includes, by the way, encouraging President Xi to press President Putin on never using a nuclear weapon of any kind.” (Emphasis added) Obviously, the Chinese article did not mention Scholz’s intent to ask President Xi to press his Russian counterpart to never use a nuclear weapon. Neither did the article clarify that Blinken only spoke about endorsing the op-ed written by Scholz.
Needless to say, the Chinese article generated scores of reader’s comments criticizing Blinken’s view of Scholz’s visit as hypocritical. One reader scornfully ridiculed the secretary of state and asked: “If Blinken’s view is also the position of the US government, why is the US then carrying on with a trade war against China? Why is the Biden administration targeting Huawei? Why did the US declare a chip and semiconductor embargo against China?” Another Chinese reader wrote: “Germany is a colony of America.” A Chinese digital news and current affairs platform, known for its politically “nationalist” views, in a more pragmatic yet critical tone credited the German business community for the “uneasy,” less than 24-hour, “flash visit” by the German chancellor. A signed commentary on its website observed: “From a certain viewpoint, it is more a visit pushed by the German businesses in China, and not that chancellor Scholz leading a German business delegation to visit China.”
Curiously, some Chinese experts have questioned Scholz’s sincerity and warned Beijing to be more cautious than illusory. “Until yesterday, [Scholz] was spitting venom and was campaigning for the world to ‘decouple’ from China and calling for a ‘de-sinicized’ world,” a commentary said the day after the visitor left. Such a view was more in tandem with several readers’ comments in response to the earlier article mentioned above. Admitting Scholz traveled to Beijing under a lot of stress and anxiety, the commentary nevertheless blamed none other than Scholz himself for the opposition to his visit. “The mounting pressure and rising anxiety come from the accusations against him within Germany and the EU. And, of course, the anger is emanating from the United States. Sadly, it is he and his government that aimed at destroying Merkel’s Sino-German legacy,” it said.
Disagreeing with opinions in China such as those interpreting Scholz’s visit will not only promote China-Germany relations to increase trust, clear doubts, and deepen cooperation, but also help China-Europe relations as the ballast stone (emphasis given), a counterview such as articles cited in the paragraph above says, it is naïve to expect the German leader to show an “independent and pragmatic understanding of China.” Many scholars in China have noted, that for some time now factors such as the high tide of de-globalization, with no end in sight to the Ukraine crisis, as well as “coercive diplomacy” being pushed by the US on the European allies to contain China, etc., have been gaining traction in the European political arena.
At another level, it is significant to note most official media in China have referred to Scholz’s op-ed (cited above) in order to justify the expectations of Beijing, of the CPC, and above all of President Xi that the German chancellor “special” visit will not only promote Sino-German relations to a new height but will also be worthy of reference for other European countries. However, dismissing a Global Times editorial that describes Scholz’s visit as “special” and which claims with Scholz as the leader of Germany, Europe will eventually return to being China’s comprehensive strategic partner, a Chinese skeptic wrote: “The conclusion that Scholz’s visit is seeking strategic autonomy from the United States and that Germany’s China policy will undergo a dramatic U-turn is premature, to say the least.”
Finally, several Chinese commentaries have pointed out that the current US strategy of prolonging the ongoing war in Europe is aimed at de-industrializing Europe, creating political turmoil in Europe, and that Europe’s hard times may have just begun. Some Chinese analysts also wondered if it is worth giving a benefit of the doubt to the political clout Scholz carried on his China visit. Scholz did not display any sign that he was in a position to discuss German-China friendship, or rather China-Europe friendship, a Chinese commentator observed. “Yet he promises to be the only German leader at the moment with whom China can make a deal. It would be really worth looking forward to waiting and watching what kind of change Scholz can bring about in German-China or Europe-China ties,” the commentator noted in a witty remark.
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