Europe
Allies to take action against US government incentives
The European Union’s (EU) strong opposition to the US Inflation Reduction Act (IRA) persists.
Germany and France, the two largest economies in the European Union, decided to collaborate to formulate a strategy against the IRA. The two countries’ economy ministers, Robert Habeck and Bruno Le Maire, took action to bolster Europe’s renewable energy sector.
The ministers argued that the agreement would benefit the EU and the US, and they called on the US to “amend” the IRA.
According to Berlin and Paris, the IRA encourages state incentives for electric vehicles produced in North America, and its fixing will protect Europe’s industrial base. They have stated that North America is important for Europe in the transition to zero carbon.
The ministers announced that the European Union (EU) should be eligible for the same exemptions granted to Canada and Mexico by the IRA.
EU to loosen state aid regulations
Hoping to gain backing for their proposals from the other EU countries, Germany and France fear that the industry might otherwise leave the EU in favor of lower energy costs and government incentives in North America.
Besides obtaining exemptions from North America, Berlin and Paris are planning on granting incentives to EU-based businesses. It is said, for instance, that government contracts to be given to private companies can only be arranged in ways that European companies can adapt to.
Habeck and Le Maire also urge changes in state aid regulations, tax rebates, and the release of EU aid money for climate-friendly investments.
Caveats from the capital
On the other hand, the business world keeps sounding the alarm that the European Union will fall behind the United States in the transition to clean energy.
Lastly, Björn Rosengren, CEO of ABB, a Swiss monopoly in automation and robotics technologies, said that drive toward sustainability should do it in a way that does not destroy Europe.
Rosengren was quoted as saying, “Make the legislations right, don’t over-administrate things,” in Financial Times, highlighting the complex EU legislation and recalling the challenges in the green transformation.
Europe should take note of the US approach that offered “carrots” to bring about change, added the ABB CEO.
Rosengren said that the US would get a lot of investments in the next five years due to the IRA and Europe needs to do something.
Unsatisfied South Korea
Having car manufacturing behemoths, South Korea and Japan are also worried about the IRA.
Last week, Yonhap, a news outlet with ties to the Seoul government, published an article with expert commentary claiming that government incentives offered by the United States would hurt America’s ability to compete with China.
In the article, it has been reported that South Korean battery manufacturers are now thinking about “unwinding” their investments in Argentina and Indonesia to secure critical materials and minerals for electric vehicle (EV) batteries designed to be sold in the US.
However, it is also stated that Korean battery manufacturers, which have already invested billions of dollars in North America, have taken action to accelerate these investments together with the IRA. In the past three years, South Korean battery makers have invested in eleven new factories in the North American region.
The United States Department of Energy has recently announced the closing of a $2.5 billion loan to Ultium Cells to finance the construction of manufacturing facilities in three different states in the United States. Ultium Cells is a joint venture between American General Motors and Korean LG Energy Solution.
The interest rate on the loan is the same as the US Treasury rate, which is about 3.6 percent. LG will have to pay an additional two percent in interest if it tries to secure this loan through the South Korean bond market.
Ultium Cells expects an overall production capacity of 145 gigawatts with the three plants by 2025. This figure ensures to power 2 million all-electric vehicles per year.
In cooperation with SK On of South Korea and Ford of the United States, the largest battery factory in the United States is being constructed.
Hyundai in trouble
The IRA, however, is having an effect in other fields. Hyundai, a South Korean automaker giant, lost its second place in the US EV market to Ford this year.
Ford sold 53,752 EVs in the United States from January to November this year, surpassing the combined sales of 53,663 units of Hyundai and Kia.
As of the first half of this year, Hyundai stood second after Tesla.
In 2023, Hyundai is bound to face even bigger challenges because its IONIQ 5 and EV6 models have been excluded from tax credits since they are produced in Korea and exported to the United States.
For this reason, Hyundai plans to build an electric car factory with an annual capacity of 300,000 units in Georgia. Still, its operation is only to start in 2025.
Robert Hood, a senior executive at Hyundai Motor, threatened that if the damage from the IRA to their company increases, they will reassess whether the investment in Georgia is viable. Hood further emphasized that labor and production are substantially cheaper in Mexico.
“We ask the US government for a chance to compete fairly for the next few years,” the executive said, stating there needs to be time to adjust to the IRA.
Europe
EU states hold talks with Taliban in Brussels on Afghan returns
Representatives from 15 European Union member states met with the Taliban in Brussels on June 23 to discuss the return of Afghan nationals to Afghanistan.
A European Commission spokesperson said on Tuesday that the meeting was co-chaired with Sweden. Belgium and the Netherlands also took part.
The Commission stressed that the discussions primarily focused on the return of Afghan citizens with criminal records or those considered security threats.
Talks covered a wide range of issues, including the identification of returnees, the issuance of travel documents and procedures related to their repatriation.
However, Johannes Luchner, a senior European Commission official who travelled to Kabul in January, had previously indicated that the scope could extend beyond convicted individuals.
Addressing European lawmakers at the end of January, he said: “Our primary concern is the return of criminals, but the number of non-criminal Afghans who have received return orders is also increasing.”
Another EU source has now expressed a similar view. Speaking to EUobserver on Tuesday ahead of the meeting, the source said the discussions would also cover the return of asylum seekers whose applications had been rejected.
Earlier in the day, the Commission declined to provide details about the meeting.
As a result, questions remained unanswered regarding who covered the Taliban delegation’s travel expenses, where the meeting would take place, whether women would participate and what the Taliban expected in return for assisting the EU with deportations of Afghan nationals.
The EU and its member states have not recognised the Taliban government since it returned to power five years ago.
Brussels defended its decision to maintain limited contacts with Afghanistan’s “de facto authorities,” arguing that such engagement is necessary to facilitate the deportation of rejected asylum seekers who have committed crimes or are considered dangerous.
A European Commission spokesperson said officials from the Commission and 15 EU member states attended the Brussels meeting, which followed a previous gathering held in Kabul in January.
“The Commission services and Sweden today co-chaired a technical-level meeting in Brussels together with technical-level representatives of Afghanistan’s de facto authorities responsible for return and readmission matters,” the spokesperson said.
A spokesperson for Afghanistan’s Foreign Ministry said the agenda was broader and included the possibility of a future consular presence in the EU, the resumption of consular services for Afghans living there and “the need for confidence-building measures.”
Spokesperson Abdul Qahar Balkhi added that the meeting raised hopes of creating “positive momentum to safeguard the consular rights of Afghans residing abroad.”
According to a European Commission letter addressed to Balkhi and reviewed by Reuters, the discussions would focus on “the return and readmission of Afghan nationals without a right to reside in the EU.”
Europe
EU defence chief calls for integration of Ukraine’s military into European defence architecture
The European Union’s Defence Commissioner, Andrius Kubilius, said the bloc should integrate Ukraine into a future European defence union, speaking at the European Defence and Security Summit in Brussels.
According to remarks reported by Reuters, Kubilius said: “It would be difficult to make sense of things if we did not regard the integration of Ukraine’s armed forces into our defence architecture in Europe as a vital issue.”
Kubilius stressed that Ukraine currently holds a dominant position on the battlefield thanks to the transformation of its military doctrine.
Calling for the integration of Europe’s defence industry and Ukraine’s manufacturing facilities into a single military structure, Kubilius said Ukraine should be fully integrated into the EU’s military market.
He added that the European Commission could present a detailed analysis of the defence market and initial proposals for next steps as early as next week.
At a later stage, the commissioner said, the Commission would propose changes to defence procurement rules and other market regulations.
Kubilius also outlined a strategic objective for the European Union.
He argued that EU member states should spend around €7 trillion on arms production over the next decade in order to surpass Russia in military strength and weapons stockpiles. According to Kubilius, such spending would be consistent with commitments under NATO to raise defence budgets to 5% of gross domestic product.
Urging Europeans to be prepared to bear the cost, Kubilius described it as “the price of peace.”
At the same time, he suggested moving away from the production of highly sophisticated weapons that are difficult to manufacture in large quantities. Instead, citing the example of drones used in Ukraine, he called for a focus on producing “enormous quantities of satisfactory weapons.”
The EU Defence Commissioner also underscored the need to integrate Ukraine’s innovative defence industry into Europe’s broader defence and technological base.
Europe
Hungary blocks joint EU letter backing Ukraine and Moldova accession process
Hungary has refused to endorse a joint letter intended to be sent on behalf of all 27 European Union member states to the European Council and the European Commission in support of Ukraine’s and Moldova’s accession to the bloc.
According to Politico, citing sources familiar with the matter, the letter is required for Kyiv’s and Chisinau’s membership applications to advance to the next stage of the accession process.
The sources said Hungary was the only member state that declined to back the document. Because approval requires the consent of all 27 member states, the issue is expected to be revisited next week.
Hungary, which previously blocked Ukraine’s accession negotiations for an extended period, was led at the time by Prime Minister Viktor Orban. His successor, Prime Minister Peter Magyar, has not opposed the launch of the negotiation process but has insisted on removing the phrase “as soon as possible” from the draft letter’s reference to Ukraine’s accession.
Magyar said Hungary does not support opening all negotiating chapters simultaneously in an effort to accelerate Ukraine’s membership bid.
Explaining the government’s position, he said: “Partly because the ink on the documents relating to the first chapter has barely dried, and partly because this would send the wrong message to Western Balkan countries such as Serbia, Albania, Montenegro and North Macedonia, which have been working for years to become members of the European Union.”
The European Union formally opened the first chapter of accession negotiations with Ukraine and Moldova in June. The process was launched during a ceremony in Luxembourg attended by the foreign ministers of member states and is divided into six thematic clusters covering different areas of legislation and policy.
The opening of the first cluster, which covers core issues including the rule of law, the functioning of democratic institutions and public administration, marks the transition from the preparatory phase to practical work on meeting accession requirements.
The EU’s ambassador to Ukraine, Katarina Mathernova, has said Kyiv could join the bloc by 2030, although the final timeline will depend on how quickly the Ukrainian authorities complete the required legal and institutional reforms.
Mathernova also said she hoped all 33 negotiating chapters could be opened by the end of the summer.
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