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Increased importance of the Central Corridor after the Ukraine war improved Türkiye-EU relations

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Samuel Doveri Vesterbye, Director of the European Neighbourhood Council, spoke to Harici. Vesterbye said that Türkiye’s EU accession process is frozen and will not move forward, but noted that despite this, since the war in Ukraine some new geopolitical changes have happened and this has aligned a new interest, the new interest of the EU and Türkiye. “This has made the relationship much better,” he said.

A specialist in Türkiye, Central Asia and the Middle East, Vesterbye’s research focuses on EU-MENA and EU-Türkiye relations in the areas of trade, accession, energy, migration and regional neighbourhood policy. Vesterbye answered our questions on the European Union (EU) enlargement process, Türkiye’s accession negotiations, Ukraine and the Gaza conflict.

How is EU’s enlargement process going in neighborhood countries, and what could you say about recent reevaluation of readmission agreement with Türkiye?

The relationship between the EU and Türkiye has for a long time been focused on accession. But accession is now frozen and it’s not going to move. That’s because of problems that there were both in the EU and problems also in Türkiye such as Copenhagen criteria, non-compliance, Cyprus, trade irritants… There are many many factors that that lead led to this unfortunately. This is, of course, negatively affected the relationship between Türkiye and EU but in the last few years since the war in Ukraine, some new geopolitical changes have happened. Notably, the Middle Corridor has become much much more important because of trucks infrastructure, containers, insurance premiums having to be deviated away from the Northern Corridor which is Russia. And this has immediately changed the geopolitical landscape making this Middle Corridor from China into Central Asia, trans-Caspian into Caucasus, Azerbaijan, Georgia and Armenia into Türkiye across Black Sea as well into Balkans, Romania, Bulgaria and the EU much much more relevant. So, all of a sudden what we’ve seen is an increase in trade in this region. This has aligned a new interest, the new interest of the EU and Türkiye. This has made the relationship much better and because of these geopolitical changes, everything from readmission to Customs Union to security, to common foreign policy, to areas on critical raw materials and supply chains will be much more aligned in the upcoming years; maybe even upcoming months.

But don’t you think that this is some temporary developments? You know, in the long term, the cooperation of the EU with Türkiye or it’s dependency on Türkiye because of good relations with Russia is very temporary. Do you think it’s really going to affect Türkiye’s position in the EU or it’s accession to EU?

Well, first of all, everything is temporary. This is the most important thing to remember. There is no geopolitical moment of opportunity which has not been temporary in history. All of them have a timeline. The question is whether the stakeholders involved the countries grab the opportunity and exploit it to their own benefit in that moment. There is a moment of opportunity. Whether or not Türkiye and the EU will fully take advantage of it, only God will know. I have no idea. But I know for a fact that since the war in Ukraine until now, Türkiye and the EU have gotten much much closer. I was in Ankara only last week at a closed-door event together with Center for Euroasian Studies (AVİM) and Konrad Adenauer Stiftung (KAS). I felt like half of the Ankara’s diplomacy was there. And we’re talking about supply chains, critical raw materials, energy independence, common relationship with Caucasus and Central Asia, the transport and logistics that we can co-fund with European Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB). In the investors forum in January where there was also Türkiye’s transport delegation as well as representation from DEİK, they were there, too. I saw the positive momentum and I also saw the unblocking of large funds up to 10.5 billion just in the Investors Forum there for renewable energy in Central Asia. And now the EU and Türkiye are working together to do co-production, co-ventures, various types of very important geo-economic perspectives toward both countries.

Is the future of the EU as a political union at risk? After Brexit, there are discussions about the possibility of other countries leaving the Union. We started to talk about this after Brexit but still some other countries, for example Hungary is under sanctions and some negative things are going on. EU is forcing it’s all member countries to apply sanctions to Russia. Do you think there will be any cracks in future?

Yes, inevitably. What the European Union is doing today, is historically the most unique attempt at unifying 27 member-states, 420 or 425 million people. If you did this in any other time throughout history, you would have been a war. And what they’re trying to do is that they’re trying to do it peacefully. This is a very difficult task. So, along the way you’re going to have right-wing movements, certain countries disagreeing and all these discrepancies, this is inevitable. But when you actually look at what the EU is doing especially in my lifetime, they’ve increased double the budget since Covid. So, now it’s not 1% of GDP as a common budget, it is 2%. That’s gigantic to share that kind of budget together. Secondly, they’re harmonizing all legislation. 85% of laws in the EU are now EU laws, not national laws. Now, they’re funding defense and security interoperability. Whole range of different subjects that you would never have been able to imagine ten, fifteen years ago. I think it’s quite clear that the EU is moving at a very fast pace and it’s signing trade agreements around the world including with Türkiye. Customs Union reform hopefully this year or next will be released. Customs Union reform means there’s no tariffs on any products and there will be services in the future as well. Türkiye is the only country in the whole world with the exception. The rest of the world doesn’t have that kind of trade agreement. It’s only Türkiye and the EU have no customs. This is the reason why every single product in Germany is manufactured here. 

It’s also affordable work-force in Türkiye, comparing to the EU.

The EU is not taking advantage. It’s a win-win. When you look at the economic figure, it’s simple. In 1995, 3,000 Euro GDP per capita was Türkiye. It joins the accession process. It gets the EPA funds, EBRD funds. The government of AKP does a good job especially in the early 2000s. This country booms because 7,500 companies from Germany come in here. 4,000 companies from Holland come in here. 1,500 companies from France come in here. All of a sudden your whole manufacturing business and it’s not low technology. I mean, look at your defense industry today. It’s high technology everything from automotive, white good, textile -that’s a lower technology level- but this didn’t exist in Türkiye before. This is because of the Customs Union, because of EPA funds, it’s because of a very important interdependent relationship which is inseparable. It’s impossible. If Türkiye tomorrow goes bankrupt, Germany doesn’t exist. if Germany tomorrow goes bankrupt, Türkiye doesn’t exist. This is simple economics. It’s inseparable interdependency. All the politics aside -Cyprus, trade irritants, disagreement on the East-Med… They’re all problems. There are blames to be held in the EU and there are blames to be held in Türkiye as well. But from the economic point of view and the geographic point of view which doesn’t lie, we’re not 10,000 km away from one another. 

Do you think European united front for Ukraine is cracking for a while? On the one hand, Germany does not want to involve the Ukrainian war militarily, and on the other hand, France and some Eastern European countries do not rule out boots-on-the-ground. Macron said NATO should send troops to Ukraine to fight against Russia. Some cracks are true regarding the financial aid. Do you think that Ukraine can secure the EU aid for good?

Inside the EU, there are some differences in opinion with regards to how much military capacity needs to be given to Ukraine and at which volume and in which time frame. But pretty much all the EU countries have an opinion that Ukraine is a future member state. It’s a candidate country now right, so, if it’s become a candidate country, it means that all the EU countries can agree that Ukraine must have sovereign territory and no longer face the aggression of Russia, which by the way the Turkish Foreign Ministry Hakan Fidan, who was here with us at Antalya Diplomacy Forum, says exactly the same thing: “Respect the natural territory and sovereignty of Ukraine”. This is a Turkish message and EU message. Now, the question then becomes how fast and how much do you arm? This is the details that are more difficult. Germany is more apprehensive. They promised to significantly increase their budget but for a long time they’ve been worried about how much to spend on military versus social. They have electorates as well. That are worried about their social  spending and all these kind of things. So, this is a fine line to be found. What France is doing is very interesting. What France is doing is a lot of people think “oh, why is France so pro-Ukraine all of a sudden?” Well, there’s a simple reason for it. The United States is slowly removing itself, maybe it won’t, but with Donald Trump as a potential next President, there’s a real risk. So, what is France is doing is filling a vacuum. It’s saying, “Okay, my Eastern European  brothers in the European Union and also maybe in the future Türkiye that also faces a lot of problems from his northern neighbor are at risk. Bulgaria, Romania, Balkans, Kosovo, Moldova, the Baltics, Poland.” These are all countries on the front line. They’ve seen what Russia is capable of doing. Maybe provoked, maybe not provoked, that’s an open discussion among different people. But the reality is that Russia is in war and it’s threatening the whole of Eastern Europe. And so, what does France want to do? Step in and provide a security umbrella for their common Europeans in order to have a United Europe. 

What are your views on the farmer protests that started in Eastern Europe and spread to Western Europe? Do you think the European Green Deal is feasible?

No, of course. What you’re seeing is in the European Union, there is always protest about everything. It’s a very democratic structure. So, whenever you make a policy that’s going to somewhat negatively impact the agricultural sector, immediately they have so much infrastructure. They come out with their tractors and they spray milk on the Commission and they always do this. And they’ve been doing this for years. And the green deal what’s important to remember that by fulfilling the green deal the agricultural sector have to stop using as many pesticides as they’re using. Pesticides are the thing that give everyone cancer but it’s cost effective. It’s cheap. Now, the citizens -might or might not be aware of it- but they’re the ones who are going to get the cancer. The farmers who are big industry, they want to use the pesticides because it’s in their advantage to sell cheaper products. The European Commission is looking at it both from the consumer perspective of “I don’t want to get all my citizens to get sick because then the hospital bill is going to be very high in the next 10 years and is also not ethically the right thing to do” and at the same time they’re also very visionary in the sense that they’re thinking climate change, of course, ethically wrong. “We don’t want to breathe bad air. We don’t want to have factories polluting our cities.” Also because this creates social unrest. People get angry when you have factories blowing in their face. But on top of that, they have a very other visionary perspective which is the idea of that if we fulfill transition into solar, hydro, biomass, hydrogen and  wind power, we get to be energy independent. That’s energy autonomy. This is something that Türkiye wants as well. And it’s not coincidental that Türkiye is putting so much money and so much emphasis onto renewable energy as well. And now the Central Asians as well are doing the same with EU funding, with Türkiye’s support and with member states’ support because you want to be energy autonomous in this world. You don’t want to depend on everyone else who will make the decisions for you.

Of course, the EU’s official position is a ‘two-state solution’, but in practice, it does not seem a well pursued policy… What is the EU’s position regarding Israel’s war on Gaza?

It’s complicated because the EU and Norway are traditionally the two biggest funders of the Palestinian Authority in the world. They have put in the most money over the last many years and they’ve proposed a two-state solution which is also for a long period of time been supported by many other countries as well including the Arab countries. This has failed. The Netanyahu’s right-wing government has essentially started colonizing parts of what should be independent Palestinian jurisdiction on 1967 borders which is an absolute shame and is against international law. So, this has now started dividing the EU. Some countries in the beginning were a little bit more neutral. There are only very few countries in the EU like Hungary that vote for Israel. The majority of them were neutral in the ceasefire resolution at the UN. But they’re also significant amount like France, Norway, Belgium, Spain, Portugal, Ireland who are in favor of the ceasefire, in favor of Palestine, and who vote for in the UN as well. And those countries are becoming more and more important. I think France is a very interesting country in this respect. France was the only country, when the US moved one of it’s military ships into the economic maritime zone of Israel to protect, France moved its other ship which were military hospital into the Gaza-Palestine Maritime area to protect them. And this is something which was not reported so much. What it shows is that France is changing its position in the world and maybe taking much more of a Muslim and also international law, pro-Palestine perspective vis-à-vis this conflict. 

EUROPE

European stocks suffer worst day in nine months

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European stock markets had their worst day in nine months as a wave of selling that began with fading hopes of a rapid cut in US interest rates spread across the globe.

Indices in Europe and Asia fell sharply, following steep falls on Wall Street on Monday after strong US retail sales figures showed the Federal Reserve may cut interest rates less this year than previously thought.

Across the region, the Stoxx Europe 600 fell 1.5 per cent, its biggest one-day drop since July last year. Energy groups, banks and miners represented in the commodity-heavy index led the declines in Europe, while London’s FTSE 100 fell 1.8 per cent, its worst day in nine months.

Wall Street’s benchmark S&P 500 index closed down 0.2 per cent, while the technology-heavy Nasdaq Composite fell 0.1 per cent after steeper falls in the previous session. On Friday and Monday, the S&P 500 recorded its worst two-day losing streak since the regional banking crisis in March 2002.

Hong Kong’s Hang Seng, South Korea’s Kospi and Japan’s Topix all lost more than 2%, while China’s CSI 300 fell 1.1%.

Emerging market currencies also weakened against the dollar on expectations of fewer US rate cuts, prompting intervention by Asian central banks such as Indonesia and South Korea.

As changing interest rate expectations hit currency markets, the Indonesian rupiah fell 2 per cent against the dollar to 16,176 rupiah, its lowest level in four years.

Bank Indonesia Governor Perry Warjiyo said on Tuesday that the central bank had stepped in to support the rupiah, which has fallen about 5 per cent this year and is one of Asia’s worst-performing currencies.

The Indian rupee also fell 0.2 per cent against the dollar to a record low of 83.64 rupees, while the Malaysian ringgit traded near a 26-year low, down 0.3 per cent, a day after the country’s central bank said it would “manage risks from increased financial market volatility”.

The Korean won also fell 0.9 per cent to a 17-month low, and the finance ministry and the Bank of Korea said in a joint statement on Tuesday that they were ‘closely monitoring foreign exchange movements and supply and demand with special attention’.

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Swiss parliament refuses to join ‘Russia Sanctions Task Force’

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The Swiss parliament has rejected a government proposal to join the US-led sanctions task force against Russia, saying it was sufficient to cooperate with the body as an independent party.

The committee of G7 countries is tasked with freezing and seizing Russian assets that fall under sanctions imposed by the European Union and the United States over the war in Ukraine.

Switzerland has so far resisted pressure to formally join the task force, saying it was already in regular contact with the group and that cooperation was working well.

On Wednesday, MPs voted 101-80 against the Greens’ proposal, parliament said in a statement. The bill said Switzerland, “as a custodian of Russian assets and the main centre of Russian commodity trade”, bore a special responsibility for the effectiveness of sanctions.

A spokesman for the economy ministry told Bloomberg it welcomed the parliament’s decision as it confirmed the government’s position.

Sanctions are a hot topic in traditionally neutral Switzerland, where the government is caught between international and domestic pressure. Groups opposed to weakening neutrality, including the People’s Party, recently collected enough signatures to force a vote on adding a permanent non-alignment stance to the constitution.

This would also prohibit the government from participating in any sanctions regime.

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EU signals cuts in aid to poor countries in the bloc

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The European Commission has sided with ‘fiscally conservative’ governments, led by Germany, in resisting calls to finance spending through more borrowing and to attach new conditions to the hundreds of billions of euros it gives to the European Union’s poorest countries.

In effect, this marks the end of an era of “free money”, when the bloc’s huge post-pandemic rescue fund was made up of shared debt rather than national contributions, and EU funds for things like new roads, hospitals and renewable energy projects were mostly channelled to eastern and southern European countries without them having to do anything in return.

The Commission, which is responsible for managing the EU’s seven-year, €1.2 trillion budget, funded mainly by member states, has started thinking about the model from 2028.

Questions will multiply as countries negotiate how much money to allocate to different programmes. The Commission will make a formal proposal in the summer of 2025, which must be unanimously approved by governments before the end of 2027.

Common pool mechanism set up during pandemic

Since the start of the last seven-year cycle, the EU has built up a €723 billion post-pandemic emergency fund, which for the first time in the bloc’s history is based on pooling borrowing on behalf of 27 countries rather than government contributions, adding to the complexity this time around.

According to two senior Commission officials who spoke to POLITICO on condition of anonymity, many EU countries, especially the most indebted, want the Recovery and Resilience Facility (RRF) to be replicated after it expires in 2026 to create an “investment fund,” while the Commission opposes that.

To make matters worse for some poorer countries, the Commission wants to extend the ‘cash for reforms’ model of the bailout fund to the current ‘cohesion policy’, which aims to reduce the gap between rich and poor regions and accounts for around a quarter of the total budget.

Germany and the Netherlands strongly opposed to joint borrowing

The EU executive has shied away from the idea of setting up such an investment fund to finance defence and green spending in the coming years because of opposition from fiscally conservative countries such as Germany and the Netherlands. But debt-ridden capitals fear that shelving the RRF would lead to a huge shortfall in spending on long-term projects.

Although the Commission does not have the final say on the shape of the next EU budget, its proposal will serve as a basis for negotiations between capitals. The most sensitive policy decisions, such as whether to set up a new investment fund, will depend on the outcome of the European Parliament elections in June and the composition of the new executive.

All funds to be given in return for ‘reform’

The Commission believes that the Cohesion Fund could be used as a tool to push governments to reform a range of issues that have been lagging behind for years, including pensions and democratic standards.

This would mean a change from the current model, where funds are disbursed on the basis of agreed criteria, rather than as a ‘carrot’ for meeting specific targets.

This would allow the Commission to continue implementing reforms across the EU without incurring new debt or significantly increasing its budget.

The difference between the two funds is crucial

There is an important overlap between the projects financed by the RRF and the Cohesion Fund. Both funds allocate a significant share to poor countries such as Portugal in the west or Bulgaria in the east.

But officials point out that there are differences between the two. “Cohesion funding should be a long-term development approach, involving local and regional partners,” EU Cohesion Commissioner Elisa Ferreira told POLITICO. All these elements may not be present in emergency instruments like the RRF,” she said.

Commission officials acknowledge they will have a hard time selling the new cohesion model to poorer member states.

One official said countries that currently struggle to use cohesion funds would not welcome stricter rules and a tighter link to reforms.

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