With the dramatic collapse of communism in Southeast and Eastern Europe, the newly democratically elected governments had to face the harsh reality of being unable to properly run their countries based on a liberal democratic political system. Also, neither the governments nor their productive sector was able to cope with the rising private enterprise, which was based on supply and demand, fruitful competition, and quality of products. As a result, promoting the essence of democracy and free markets, fell into the hands of the U.S, which for years tried to find a way to make its presence in the region clear. The response of the U.S government after the fall of communism in 1989 and the dissolvement of the Soviet Union in 1991, was swift and methodical. With the signing of a series of legislative acts in the period of 1989-1995, known as the Support for East European Democracy (SEED) Act of 1989, and their implementation through the United States Agency for International Development, the U.S has managed to leave its footprint in the region and establish a network of democratic support to all the former Warsaw Pact country members, as well as the country members of the Council for Mutual Economic Assistance.
The SEED Act and America’s objectives in post-communist Eastern Europe
The Support for East European Democracy (SEED) Act of 1989, was part of a series of legislative acts that passed by Congress in the period 1989-1995. The laws were passed under the presidency of both George H.W Bush and Bill Clinton. The legislation was passed as a response to the growing demand for international help in post-communist countries. It is regarded by many as the most successful policy act towards Central and Eastern European countries. While initially the focus of this policy was targeted towards Hungary and Poland, with the growing request from other nation-states in the region, the U.S encompassed more countries such as Bulgaria, Czech Republic, Slovakia, Romania, Albania e.t.c, and later on, after the end of the Yugoslavia wars, it managed to include more countries from the former Socialist Federal Republic of Yugoslavia.
The primary goal of the SEED is to promote the establishment and enhancement of democratic institutions and help transit the economies of the respected countries that are part of this act, into a free market economy, that will allow any of those countries not only to overcome the centralized bureaucratic communist system but also to become more productive, reliable and trustworthy members of the greater Transatlantic community like their fellow Western democracies. At first, this legislation was focused on Poland and Hungary allowing the U.S to designate two private, nonprofit organizations such as the Polish-American Enterprise Fund and the Hungarian-American Enterprise Fund to promote the development of the Polish and Hungarian private sectors. With that being said, the initial thought of the American side was to not recreate a full-scale of the Marshall Plan, simply because the crushing budget deficits of those countries provoked little interest for the U.S. Instead through the SEED, the U.S government managed to establish different assistance programs, that over time, managed to assist more countries in Central and Eastern Europe and later on, in the Balkan region. These programs were focused on stabilization assistance, development assistance, technical assistance, and political conversion. Also, the aid that would come from the U.S would be directly focused on the agricultural sector, the private sector, educational and cultural programs, as well as scientific programs.
The core message that was expressed through the SEED was the fact that, although at the beginning, any sort of financial aid would be minimal, there would be a possibility of a change to this tactic, only if the fledgling democracies that were undergoing a massive transformation would agree to adopt the ways of Western Europe and the ways that the U.S was proposing for the. In other words, this meant that, if by any chance any of the countries that wished to benefit from the SEED Act, had to fulfill some pre-requirements. For the financial assistance to be implemented, the interested countries had to remove trade restrictions while fully liberalizing the investment and the capital of the country, including foreign investment, while allowing any interested U.S investors to export their profits from these countries. Also, there had to be an increased focus on the development of the capital financial markets that would allow privatization of any public assets. Throughout the years, the SEED Act, allowed the U.S to leave a footprint in the countries that got rid of communism and further help them through other independent agencies such as the United States Agency for International Development (USAID), which is responsible for administering foreign aid and development assistance. If we provide an analysis as to why the U.S is so keen on the development of the post-communist countries, we can identify the two main reasons as to why the U.S was and still is so interested in the democratic and free-market development of the region. The first reason was the fact that if the U.S would financially assist these countries, then it will manage to increase its economic transactions with more countries while also boosting its trading and the uninterrupted free flow of capital profits back to it. The second reason has to do with the geopolitical aspect of the SEED act and the role of the USAID.
If we examine this from a realistic point of view, the U.S has managed not only to increase its economic capital but also establish close diplomatic and military ties with the respected countries in an effort to counter any foreign interest coming from Russia or China. Also, this means that, once the U.S has assured the economic development and establishment of democratic institutions in the countries of Central and Eastern Europe, then their accession to the NATO and eventually their incorporation into the European Union, would allow the U.S to maintain close ties in the region and add to its already large military cooperation with third countries. Out of all the countries that the U.S has managed to assist, Romania is one of those interesting cases in Southeast Europe, and it has proven itself as a reliable strategic partner for the United States of America.
The case of Romania
The bilateral ties between Romania and the U.S were always more or less on warm status, but both countries built a strong bilateral relationship after the Romanian Revolution of 1989. The U.S was focused on the legal and fair transition of power in Romania. In 1990, right after the end of the revolution, Secretary of State James Baker expressed the concern of the U.S towards the unfair discriminatory treatment of opposition parties in the May elections in Romania and made it clear that the U.S would not support an undemocratic Romanian government. The Romanians quickly realized that if they wanted any support from the U.S they would have to incorporate more Western democratic values in their country. As a result, in 1992, Romania conducted fair parliamentary and presidential elections. Encouraged by the fair democratic results, Deputy Secretary of State Lawrence Eagleburger visited Romania in 1992. It was a symbolic visit because it allowed the Romanians to demonstrate their commitment to fully implement Western democratic values in their country. The same year, both countries signed a bilateral investment treaty (BIT), and one year later, in 1993, Romania returned to the status of Most Favored Nation (MFN). These agreements allowed Romania to completely transition its economy, allowing for American investment in energy, manufacturing, telecommunications services, consumer products sectors, and information technology.
With that being said, it was clear that Romania was managing step by step to take substantive steps toward institutionalizing political democracy and economic pluralism, the sole requirement of the SEED act. Besides that, the USAID had a critical role in Romania. In a span of 17 years, until Romania’s “graduation” from the program in 2008, the socio-economic profile of the country has changed for the better. The USAID has managed to fund and establish various NGOs that focus on the rapid decrease of children in orphanages and improving the condition in the remaining institutions for these kids. Also, the civic organizations in Romania, have managed to establish sustainable partnerships with the public and private sector and improve transparency and fairness in both sectors. Last but not least, the private businesses in Romania have managed to become an established feature of Romania’s civil society by gaining sustainable funds from the USAID that are directly invested in the tourism, agriculture, food processing, and the industrial sector that allow Romania to flourish as a stable economic power in Southeast Europe.
Apart from the socio-economic factors, the U.S has contributed to the enhancement of the military treaties between itself and Romania. On March 29, 2004, Romania joined NATO and established itself as a reliable ally of the U.S in Southeast Europe. A year after that, in 2005, Romania and the United States signed the Defense Cooperation Agreement, the framework for any future military engagements of both countries. With Romania joining NATO, the U.S managed to gain a foothold in Southeast Europe, close to Russia, and demonstrated its capabilities in creating and sustaining reliable military alliances, helping Romania avoid any influence from the East, while protecting its national interests in the region. With Romania joining NATO, the road towards a future integration in the EU was clearer. With the help of the U.S, Romania managed to meet the requirements for an EU integration. Some of those requirements were focused on reforms that would help Romania become more Western, such as the acknowledgment of respect for human rights, the commitment to personal freedom of expression, having a functioning free-market economy e.t.c. Romania joined the European Union on January 1st, 2007 and according to the European Commission, the country is set to join the Eurozone sometime in 2024. Some may argue that Romania has to be thankful to the U.S for the tremendous progress that has been made, and this will not be far from the truth, since until today both countries enjoy strong military and economic ties.
Democratization or Americanization of Romania?
However, there are always some voices from within Romania that see this whole progress with skepticism. Some argue that although Romania is a democracy, it does not have a democratic society. There are reports of high levels of corruption and nepotism in the public sector. According to Transparency International, Romania is the fourth most corrupt country in the EU, after Hungary, Greece, and Bulgaria. Besides that, the standard of living in the country has not changed significantly since the end of communism, and there is a strong demographic collapse that is connected with the so-called “brain drain” of the country, with high levels of labor export towards Western Europe. There is some criticism towards the U.S, that points to the fact that the changes in Romania have benefited the American side more than the Romanian one, and there is a feeling that Romania is still stuck in the past.
Although any sort of criticism should be reviewed thoroughly, one can argue that the U.S is not to be solely blamed. After all, the aid that was sent to Romania and the efforts of the U.S to westernize the country were always focused on the national and economic interests of the United States. It is safe to say that the U.S was applying a realistic aspect in its policy towards Romania, realizing the strategic geopolitical position of the country and the important economic outcomes that would come if Romania became a close ally of the United States. The alliance between the two countries and their ties are relatively strong even today, and although there are corruption problems in the country, Romania seems to have benefited more than any other post-communist country regarding aid from the United States. In a way, the policy of the U.S towards Romania was a success as both countries remain close allies, and Romania is enjoying a better socio-economic and political situation within its borders.
American diplomacy’s comeback and Bulgaria’s institutional trench war
Even though many mainstream media outlets have not noticed it, US diplomacy has staged a gran comeback in the Balkans. The Biden administration chose Bulgaria as the stage on which to reaffirm America’s hold on the region. Putting strong sanctions on Bulgarian oligarch, Washington is signalling not-so subtly to Russia that its reach goes far and wide. But there are sensible implication for the little South-Eastern European country’s future as well. Perhaps, the fight against systemic corruption is finally reaching its apogee. Could this be the end of misgovernance?
A corrupted country — Introduction
Many argue that corruption in Bulgaria and South-Eastern Europe is but a remnant of national Communist Parties’ half-century long rule. Thus, the EU’s threat to metaphorically swap the carrot for the stick should have favoured a thorough clean-up. Instead, it merely yielded some short-term successes for anti-corruption campaigners, activist judges and specialised procurators. Yet, State capture and malpracticesremain endemic for one reason or another amongst post-socialist countries inside and outsidethe Union. More specifically, these efforts were vain and Bulgaria was still ill-equippedwhen it joined the Union on January 1, 2007. Hence, Brussels allowed in a deeply corrupted country where hidden interest behold even those occupying the highest echelons of power.
If not membership in the European Union, at least internal politics could have helped the country fend off endemic maladministration. Yet, the status quo has preserved itself intact despite calls and promises to root out corruption having been getting louder. In a sense, corruption’s pervasiveness is a feature and not a bug embedded in Bulgaria’s imperfect liberal free-market democracy. These conservative – and, in a sense, perverting – forces have found their embodiment in Prime Minister Boyko Borisov and his associates. Therefore, governmental agencies, political parties, courts and the entire extant structure of power contribute to prevent any change.
The wind of change: Popular unrest and institutional trench war
That notwithstanding, the proverbial ‘wind of change’ may have begun to lash across Bulgaria in summer 2020. After having taken to the streets against the party of power’s abuses and failures, voters abandoned Borisov in the April 2021 elections. Conversely, new parties and loose coalitions of civil-society organisations, formed shortly before the contest, won a relative majority of preferences. And, as many analysts noticed, these newcomers do not share much besides the desire to “dismantle the Borisov system”.
Nonetheless, these new actors failed to form a governing coalition due to the heterogeneity and inherent negativity of their agendas. Thus, President Rumen Radev scheduled new elections on July 11 and appointed a caretaker government.
Indeed, there is an institutional custom prescribing such cabinets to limit their activities to managing current affairs. Nonetheless, these technocrats – many of whom supported Radev in his feud with Borisov – started an extensive review of past governments. In the process, the cabinet reshuffledbureaucracies, suspended Sofia airport’s concession and halted other public tenders for suspected irregularities. More importantly, the ministry of interior has confirmed prior suspects that Borisov-appointed officers may have illegally wiretapped opposition politicians.
In a word, President Radev’s ministers are endeavouring to tear apart the ‘Borisov system’ before the next elections. However, simply ousting most – or even all – of the previous government’s men in key positions within State apparatuses is uncomplicated. Especially when pushing such an agenda is the President,with the palpable backing of an absolute majority of the population. But the Borisov system has also an economic component. In fact, the party of power has set up a tentacular network of supportive oligarchs funding and favourable media coverage. Putting them out of the game is equally, if not more, important than firing bureaucrats — but also much more difficult.
Chasing the oligarchs
In other words, undoing the Borisov system’s appointments and putting trustworthy officers in those posts in just the first step. But real change requires leaving the wealthy individuals and organisations benefitting from the status quo clawless and teethless. Such a task entails deep economic transformations that would surely evoke immense opposition from powerful pressure groups. Evidently, there is not enough time before Bulgarians vote again and their representatives pick up a new executive. But the caretaker government is powerless in front of Bulgaria ‘s condemnation to persistent corruption no matter what.
On the contrary, the government has endeavoured to chase and derail some of these Borisov-connected oligarch. For instance, the finance minister appointed an Audit Committee with the task of reviewing the Bulgarian Development Bank’s (BBR) activities. As a result, the public discovered that oligarchs had steered the BBR away from its mandate of supporting small companies. In fact, eight large private companies have received more than half of the BRR’s total credits or ca. €473 million. On average, each of them has borrowed almost €60mln — and “this is not a small and medium business. In addition, these companies borrowed against a 2% rate instead of the average 5–7%. Following this leak, the Minister of Finance fired the entire board of the BBR. He also instructed the Bulgarian National Bank (BNB) to appoint a new directorate.
The US strike back
Quite surprisingly, the United States has just given Radev and his government a valuable assist. On June 2, the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned several “individuals for their extensive roles in corruption”. In first instance, the sanctions target Vasil Bozhkov, a Bulgarian businessman currently hiding in Dubaito escape an arrest warrant for accusation of bribery; Delyan Peevski, prominent figure of and former member of the Parliament for the predominantly Turk Dvizhenie za Prava i Svobodi as well as the owner/controller four of the companies involved in the BBR’s scandal; and Ilko Zhelyazkov, former appointee to the National Bureau for Control on Special Intelligence-Gathering Devices. Secondarily, the US have sanctioned “their networks encompassing 64 entities” with which no transaction in dollars is possible.
The US chose to hit Bulgaria, a NATO ally, with “the single largest action targeting corruption to date”. On the one hand, this falls within the boundaries of the current administration’s effort to restore America’s moral stewardship. More to the point, one may interpret the sanctions as a not-so/veiled message to Russia — which heavily influences Bulgarian politics. Still, those who had been looking at US-Bulgaria bilateral relations should have expected a similar decision. After all, the sanctions came after US ambassador Herro Mustafa’s reiterated criticisms of pervasive corruption in the country. Mustafa has also refused symbolically to meet Chief Public Prosecutor Ivan Geshev, who embodies systemic corruption in Bulgaria.
Consequently, the game has scaled up to a whole new quality now. The BNB barred all Bulgarian banks to entertain commercial relationships with people under US sanctions. Moreover, the BNB had already froze some of Peevvski’s, Bozhkov’s and Zhelyazkov’s deposits, means of payment, and assets earlier. However, after the OFAC’s decision, the block extended to their entire network of affiliates and related entities.
Conclusion: The US are reclaiming the Balkans, and it may not be bad for Bulgarians
Officially, corruption’s malign influence on democracy provides the US with a moral justification to sanction any corrupt individua. Namely, the Treasury argues that it
undermines the values that form an essential foundation of stable, secure, and functioning societies; ha[s] devastating impacts on individuals; weaken[s] democratic institutions; degrade[s] the rule of law; perpetuate[s] violent conflicts; facilitate[s] the activities of dangerous persons; and undermine economic markets.
Surely, the soon-to-come meeting with Russia’s President Vladimir Putin also played a role in this decision.
Yet, the sanctions’ timing suggests that there might be other forces at play. Rather, it seems that Washington decided to pick a side in the ongoing institutional trench war between Presidency and Government.
From Bulgaria’s perspective, even though most American media have not noticed it, the impression is quite clear. To quote President Biden: “America is back, diplomacy is back”. Specifically, this resurgence has a special meaning in the Balkans, a region of immense relevance for Europe’s energy security. Concretely, the US is taking the lead in the West’s effort to keep China, Russia, and Turkey out.
True, whether this external support will suffice for Bulgaria to finally eradicate corruption is debatable. Nevertheless, the US’s return may spur a positive competition dynamic in which Washington and Brussels compete for limited normative power. If this was the case, increase international pressures on Bulgaria to limit corruption may reach a breaking point relatively soon. At which point, either a fundamental shift will take place; or Bulgarian elites will entrench further
Indo-European rapprochement and the competing geopolitics of infrastructure
Current dynamics suggest that the main focus of geopolitics in the coming years will shift towards the Indo-Pacific region. All eyes are on China and its regional initiatives aimed at establishing global dominance. China’s muscle-flexing behavior in the region has taken the form of direct clashes with India along the Line of Actual Control, where India lost at least 20 soldiers last June; interference in Hong Kong’s affairs; an increased presence in the South China Sea; and economic malevolence towards Australia. With this evolving geopolitical complexity, if the EU seeks to keep and increase its global ‘actorness’, it needs to go beyond the initiatives of France and Germany, and to shape its own agenda. At the same time, India is also paying attention to the fact that in today’s fragmented and multipolar world, the power of any aspiring global actor depends on its diversified relationships. In this context, the EU is a useful partner that India can rely on.
Indo-European rapprochement, which attempts to challenge Chinese global expansion, seeks also to enhance multilateral international institutions and to support a rules-based order. Given the fact that India will hold a seat on the UN Security Council in 2021-22 and the G20 presidency in 2022, both parties see an opportunity to move forward on a shared vision of multilateralism. As a normative power, the EU is trying to join forces with New Delhi to promote the rules-based system. Therefore, in order to prevent an ‘all-roads-lead-to-Beijing’ situation and to challenge growing Chinese hegemony, the EU and India need each other.
With this in mind, the EU and India have finally moved towards taking their co-operation to a higher level. Overcoming difficulties in negotiations, which have been suspended since 2013 because of trade-related thorny topics like India’s agricultural protectionism, shows that there is now a different mood in the air.
The Indian prime minister, Narendra Modi, had been scheduled to travel to Portugal for a summit with EU leaders, but the visit cancelled because of the Covid-19 pandemic. As a result, the European Commission and Portugal – in its presidency of the European Council – offered India to hold the summit in a virtual format on 8 May 2021. The talks between these two economic giants were productive and resulted in the Connectivity Partnership, uniting efforts and attention on energy, digital and transportation sectors, offering new opportunities for investors from both sides. Moreover, this new initiative seeks to build joint infrastructure projects around the world mainly investing in third countries. Although both sides have clarified that the new global partnership isn’t designed to compete with China’s Belt and Road Initiative (BRI), the joint initiative to build effective projects across Europe, Asia and Africa, will undoubtedly counter Beijing’s agenda.
The EU and its allies have a common interest in presenting an alternative to the Belt and Road Initiative, which will contain Chinese investment efforts to dominate various regions. Even though the EU is looking to build up its economic ties with China and signed the EU-China Comprehensive Agreement on Investments (CAI) last December, European sanctions imposed on Beijing in response to discrimination against Uighurs and other human rights violations have complicated relations. Moreover, US President Joe Biden has been pushing the EU to take a tougher stance against China and its worldwide initiatives.
This new Indo-European co-operation project, from the point of view of its initiators, will not impose a heavy debt burden on its partners as the Chinese projects do. However, whilst the EU says that both the public and the private sectors will be involved, it’s not clear where the funds will come from for these projects. The US and the EU have consistently been against the Chinese model of providing infrastructure support for developing nations, by which Beijing offers assistance via expensive projects that the host country ends up not being able to afford. India, Australia, the EU, the US and Japan have already started their own initiatives to counterbalance China’s. This includes ‘The Three Seas Initiative’ in the Central and Eastern European region, aimed at reducing its dependence on Chinese investments and Russian gas. Other successful examples are Japan’s ‘Expanded Partnership for Quality Infrastructure’ and its ‘Free and Open Indo-Pacific Strategy’. One of the joint examples of Indo-Japanese co-operation is the development of infrastructure projects in Sri Lanka, Myanmar and Bangladesh. The partners had been scheduled to build Colombo’s East Container Terminal but the Sri Lankans suddenly pulled out just before signing last year. Another competing regional strategy is the Asia-Africa Growth Corridor (AAGC), initiated by India, Japan and a few African countries in 2017. This Indo-Japanese collaboration aims to develop infrastructure in Africa, enhanced by digital connectivity, which would make the Indo-Pacific Region free and open. The AAGC gives priority to development projects in health and pharmaceuticals, agriculture, and disaster management.
Undoubtably, this evolving infrastructure-building competition may solve the problems of many underdeveloped or developing countries if their leaderships act wisely. The newly adopted Indo-European Connectivity Partnership promises new prospects for Eastern Europe and especially for the fragile democracies of Armenia and Georgia.
The statement of the Indian ambassador to Tehran in March of this year, to connect Eastern and Northern Europe via Armenia and Georgia, paves the way for necessary dialogue on this matter. Being sandwiched between Russia and Turkey and at the same time being ideally located between Europe and India, Armenia and Georgia are well-placed to take advantage of the possible opportunities of the Indo-European Partnership. The involvement of Tbilisi and Yerevan in this project can enhance the economic attractiveness of these countries, which will increase their economic security and will make this region less vulnerable vis-à-vis Russo-Turkish interventions.
The EU and India need to decide if they want to be decision-makers or decision-takers. Strong co-operation would help both become global agenda shapers. In case these two actors fail to find a common roadmap for promoting rules-based architecture and to become competitive infrastructure providers, it would be to the benefit of the US and China, which would impose their priorities on others, including the EU and India.
The Leaders of the Western World Meet
The annual meeting of the G7 comprising the largest western economies plus Japan is being hosted this year by the United Kingdom. Boris Johnson, the UK Prime Minister has also invited Australia, South Korea, South Africa and India. There has been talk of including Russia again but Britain threatened a veto. Russia, which had been a member from 1997, was suspended in 2014 following the Crimea annexation.
Cornwall in the extreme southwest of England has a rugged beauty enjoyed by tourists, and is a contrast to the green undulating softness of its neighbor Devon. St. Ives is on Cornwall’s sheltered northern coast and it is the venue for the G7 meeting (August 11-13) this year. It offers beautiful beaches and ice-cold seas.
France, Germany. Italy, UK, US, Japan and Canada. What do the rich talk about? Items on the agenda this year including pandemics (fear thereof) and in particular zoonotic diseases where infection spreads from non-human animals to humans. Johnson has proposed a network of research labs to deal with the problem. As a worldwide network it will include the design of a global early-warning system and will also establish protocols to deal with future health emergencies.
The important topic of climate change is of particular interest to Boris Johnson because Britain is hosting COP26 in Glasgow later this year in November. Coal, one of the worst pollutants, has to be phased out and poorer countries will need help to step up and tackle not just the use of cheap coal but climate change and pollution in general. The G7 countries’ GDP taken together comprises about half of total world output, and climate change has the potential of becoming an existential problem for all on earth. And help from them to poorer countries is essential for these to be able to increase climate action efforts.
The G7 members are also concerned about large multinationals taking advantage of differing tax laws in the member countries. Thus the proposal for a uniform 15 percent minimum tax. There is some dispute as to whether the rate is too low.
America is back according to Joe Biden signalling a shift away from Donald Trump’s unilateralism. But America is also not the sole driver of the world economy: China is a real competitor and the European Union in toto is larger. In a multilateral world, Trump charging ahead on his own made the US risible. He also got nowhere as the world’s powers one by one distanced themselves.
Secretary of the Treasury Janet Yellen is also endorsing close coordination in economic policies plus continued support as the world struggles to recover after the corona epidemic. India for example, has over 27 million confirmed cases, the largest number in Asia. A dying first wave shattered hopes when a second much larger one hit — its devastation worsened by a shortage of hospital beds, oxygen cylinders and other medicines in the severely hit regions. On April 30, 2021, India became the first country to report over 400,000 new cases in a single 24 hour period.
It is an interdependent world where atavistic self-interest is no longer a solution to its problems.
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