The EU is taking over defence policy by stealth

The EU is taking over defence policy by stealth 

Daily Telegraph 08-Dec-13 

The European Common Security and Defence Policy is an attempt to protect Continental industrial interests from US competition 

The UK government likes to pretend that EU’s Common Security and Defence Policy (CSDP) is harmless inter-government cooperation, which has no access to money, or legal sanctions, and is therefore a federalist paper tiger. These draft European Council Conclusions give the lie to that. Any Conservative prime minister should be wholly opposed to what these Conclusions so clearly intend. To sign the UK up to this programme is not just another step towards a Euro-Army, which has always been a dream of the federalist nations like Germany, but another blow to the UK’s already beleaguered defence industries, and another nail in the coffin of Nato, in order that Continental defence industries should not be exposed to US competition. 

Much of these draft Council Conclusions appears to be just verbiage – the usual high-flown rhetoric about the EU being a “global player” in defence, and about the “strong commitment for the further development of a credible and effective Common Security and Defence Policy”. The understatement that “defence budgets in Europe are constrained” is a feeble attempt to mask the reality that member states, including the UK, are all cutting their defence budgets. The oft repeated plea to “make use of synergies” to improve capabilities has so far proved a forlorn hope, and the invocation of “increasing the effectiveness, visibility and impact of CSDP” is bound to fail. It is almost entirely down to France and the UK that “EU defence” means anything at all – and we work increasingly bilaterally, or they are a Nato operation under an EU flag. Nato remains far more significant, because it has US backing and SHAPE (Supreme Allied Headquarters Europe) where people are practised at planning and generating force for multinational operations. But Nato only gets its first mention as a “partner” in Paragraph 6, alongside the UN, OSCE and the African Union, as though they were equivalent. There is mention of “strategic partners and partner countries”, but it is telling that the EU cannot bring itself to name the USA, the military entity which dominates the world and which is the sole guarantor of European security. This underlines the squeamishness, futility, parochialism and vanity of CSDP. 

However, the potential for to damage UK defence interests is in the detail. The call for “an EU Cyber Defence Policy Framework”, and for “an EU Maritime Security Strategy”, both involve the federalist EU Commission. Remember, the Commission is the EU’s most powerful legislative body, so this is anything but intergovernmental cooperation. Agreeing to this is to agree to a threat to the independence of UK policy in these fields. The fact that the Council will also call for “increased synergies between CSDP and Freedom/Security/Justice actors” opens the door to legally binding defence commitments “to tackle horizontal issues such as organized crime, including trafficking and smuggling of human beings, and terrorism” – another compelling reason for the UK to exercise its Lisbon Treaty opt-out from EU home and justice affairs entirely. 

Finally, on “military capability development”, the EU intends utterly to eclipse Nato, backed by the two legally binding 2009 Defence Procurement Directives, which enhance the power of the European Defence Agency (EDA). This is becoming an embryo EU defence ministry. EDA’s statute enables decisions to be taken by majority voting, and where any single state can threaten a veto, a subset of member states can act unilaterally as a bloc in the name of the whole of the EU (so called “structure cooperation”). 

However, EU Defence is not so much about defence, as protectionism of Continental defence industrial interests, whose technology rather lags behind their US counterparts. The Council proposes support for programmes on “Remotely Piloted Aircraft Systems” (a squeamish name for “drones” or unmanned aerial vehicles (UAV’s) to you and me), Air-to-Air refuelling, “Satellite Communication”, and Cyber. In at least two of these areas, air-to-air refuelling and cyber (ie. GCHQ in Cheltenham), the UK is already supreme in the EU, so why should we agree to the EU directing our policy? These are all capabilities where US interoperability is essential for the UK, but there is nothing about cooperation with our closest ally, because EU defence is about excluding the US wherever possible. 

The Council “invites the Commission (again), the European Investment Bank and the European Defence Agency to develop proposals for a pooled acquisition mechanism”, which can only mean some kind of EU defence purchasing agency. It may not require much money to develop legal control over member states’ defence procurement programmes. How so? The proposals for “Strengthening Europe's defence industry” are to be “in full compliance with EU law”. This is not inter-governmental. The Commission (again) is invited “to set up a Preparatory Action on CSDP-related research”. Finally, “The European Defence Agency, in cooperation with the Commission (yet again), will prepare a roadmap for the development of defence industrial standards” and “develop a harmonized European military certification approach”. This is the key means by which the EU can obtain control over defence. One of the key purposes of Nato was to ensure transatlantic standards and certification. Here there is a lack of any reference whatsoever to EU-US cooperation. This is because the EU wants standards and certification which will exclude US defence equipment from EU markets where ever possible. That’s what EU defence policy is really all about. 

Bernard Jenkin is Conservative MP for Harwich and North Essex, Chairman of PASC, the Public Administration Select Committee and a former shadow defence secretary

Germany to Sell Israel Two Destroyers in 1 Billion Euro Deal

Germany to Sell Israel Two Destroyers in 1 Billion Euro Deal 

Arutz Sheva 07-Dec-13 

Germany is to sell two destroyers to Israel for one billion euros ($1.3 billion), the Bild daily reported Saturday. 

The torpedo-carrying war vessels will be used to protect Israeli pipelines, the paper said, without citing a source. 

The report added that Israel's national security adviser, Yossi Cohen, was in Berlin last week. 

A German government spokeswoman reached by AFP confirmed Cohen's visit but declined to elaborate. 

The deal comes amid growing tensions with Lebanon over oil and natural gas deposits in the Mediterranean. 

In the past, Lebanon has attempted to claim at least part of Israel's Tamar and Leviathan fields as its own, claiming that parts of the fields are over the international maritime border, in Lebanese waters. Lebanon has also made similar claims on gas off the shores of Cyprus. 

In September a Globes report revealed the Lebanese government has been encroaching on Israel's exclusive economic zone (EEZ), publishing tenders for offshore oil and gas exploration licenses for areas inside Israeli territorial waters.

Protests in Ukraine and Geopolitical Realities

:Protests in Ukraine and Geopolitical Realities 

Stratfor Video Transcript 06-Dec-13 

Ukraine has seen much volatility over the past week as a result of the government's decision to not move forward with key EU agreements at last week's Eastern Partnership summit. During their peak, crowds of hundreds of thousands of people took to the streets of Kiev to protest against the decision and against the government in general. Officials from the EU and the U. s.said these demonstrations were a clear sign of the Ukrainian people's desire to join the West, and much of the media took these events as a sign of another Orange Revolution on the precipice. 

However, Stratfor has been more measured in its assessment of the events that have transpired in Ukraine. In fact, the decision by Ukraine to not sign the EU agreements, which took many European officials and much of the media by surprise, is something we forecast well before it happened. As such, there are a few key aspects to keep in mind in explaining why the situation in Ukraine has played out as it has and also in looking ahead to what can be expected in the future. 

The first is what would have happened if Ukraine actually had gone through with the EU agreements. In the months and weeks leading up to the decision, Russia had enacted and been threatening to enact further painful trade restrictions on Ukrainian goods if it signed the EU deals. Such a freeze on trade would have sent the Ukrainian economy, already in a delicate state, over the edge. Given Ukraine's economic dependence on Russia and the EU's inability to make up for such a shortfall, these threats were a major factor in derailing the EU agreements. 

The second is why Russia is really against Ukraine's integration with the EU. Given Ukraine's geographic location, its industrial and agricultural integration into Russia's heartland and status as a vital transit state for Russian energy to Europe, Ukraine has historically been crucial for Russia to keep in its orbit. While the EU agreements in and of themselves would not pose an existential threat to Russia, it is what they represent -- a long-term orientation of Ukraine toward the West at the expense of Russia -- that Moscow could not tolerate. In short, it was about geopolitical interests -- not ideology. 

Third is the significance of the protests. As Stratfor has written, the demonstrations have been just that -- demonstrations, not a revolution. Even at their peak, the demonstrations were largely composed of younger, Western-oriented people and opposition figures and failed to bring out broader segments of society. This explains why the protests were so big over the weekend but then substantially shrank in size during the week. 

And finally is the split nature of Ukraine. While much of the population is oriented toward the West and supports EU membership, there is also a substantial portion of the population that looks eastward and does not want to see Ukraine join the EU. This reflects cultural and political divisions in the country, as the political swings in Ukraine's chaotic post-Soviet era have shown. Had Ukraine signed the EU agreements, it is likely there would have been demonstrations against that decision as well; only those would have come from the other side of the social and political spectrum. And while Ukraine did not move forward with the EU agreements, it will show the same hesitation in making any significant moves toward integration with Russia. 

Maintaining a balance between Russia and the West is a key imperative for Ukraine. This is something very difficult to achieve, but it is this reality that frames the decision-making of any leader ruling the country.

South Stream bilateral deals breach EU law, Commission

South Stream bilateral deals breach EU law, Commission says 

EurActiv 04-Dec-13 

The bilateral agreements for the construction of the Gazprom-favoured South Stream gas pipeline – concluded between Russia, Bulgaria, Serbia, Hungary, Greece, Slovenia, Croatia and Austria – are all in breach of EU law and need to be renegotiated from scratch, the European Commission said today (4 December). 

Speaking in the European Parliament, Klaus-Dieter Borchardt, director for energy markets at the European Commission, said the deals were in breach of EU law. 

“The Commission has looked into these intergovernmental agreements and came to the conclusion that none of the agreements is in compliance with EU law," Borchert said. 

"That is the reason why we have told these states that they are under the obligation, either coming from the EU treaties, or from the Energy Community treaty, that they have to ask for re-negotiation with Russia, to bring the intergovernmental agreements in line with EU law,” he added. 

The development comes at a moment of heightened sensitivity in EU-Russia relations. Last week European heads of state were dismayed by the decision of Ukrainian President Viktor Yanukovych to reject the signing of a partnership agreement that would bond relations between the former Soviet state and the EU. 

Instead, Yanukovych has signalled Ukraine will bind itself closer to Russia, triggering mass protests at home in favour of closer ties with Europe. 

Russian deals out of the window 

The parliament event where Borchert spoke was attended by high-level representatives, including Russian deputy minister for energy Anatoly Yankovski, Gazprom’s director-general for export Alexander Medvedev, and Serbian energy minister Zorana Mihajlović. 

Borchert explained that if these negotiations are not successfully conducted, then these countries had to denounce their agreements with Russia. 

He explained that the EU's Energy Commissioner, Günther Oettinger, had just sent a letter to Russian energy minister Alexander Novak explaining the situation and asking him “to look positively” into the possibility of re-negotiating the deals with the countries concerned. 

These include EU members Bulgaria, Hungary, Greece, Slovenia, Croatia and Austria, as well as Serbia, which is a member of the Energy Community, an EU-backed international agreement covering former communist countries of Eastern Europe. 

“What I can say is the intergovernmental agreements will not be the basis for the construction or the operation of South Stream. Because if the member states or states concerned are not renegotiating, then the Commission has the ways and means to oblige them to do so. And South Stream cannot operate under these agreements,” Borchardt insisted. 

Three conditions 

The Commission official highlighted at least three major issues about the deals: 

    First, the EU's so-called network ownership 'unbundling' rules need to be observed, he said. This means that Gazprom, which is both a producer and a supplier of gas, cannot simultaneously own production capacity and its transmission network; 

    Secondly, non-discriminatory access of third parties to the pipeline needs to be ensured. There cannot be an exclusive right for Gazprom to be the only shipper; and 

    Thirdly, the tariff structure needed to be addressed. 

“Is it possible to bring in line the construct of South Stream and the operational part of South Stream with these rules? I don’t know. I don’t know yet ,” the official repeated. 

But even if negotiations are successful, work to accommodate South Stream with EU concerns would take time, Borchardt warned. 

“Not months, maybe two years before we get there," he said. 

Exemptions may be in the distant future 

Exemptions from unbundling obligations are not ruled out, the official said. But such a window of opportunity would open up only when gas capacities would start to be allocated to the different segments of the pipeline, he explained, adding that such a moment would take place only in the remote future. 

“It will not be an easy task; it needs a lot of mutual understanding, maybe also some new ideas that are not yet discussed. But I have to say in all openness and frankness that the South Stream pipeline will not operate on the territory of the EU if it is not in compliance of our energy law,” Borchardt stressed. 

Asked by EurActiv to reveal when the Commission had made the announcement to the EU countries concerned, Borchardt said this took place in several steps. 

First, the EU executive had asked them to send to Brussels their intergovernmental agreements which were subsequently analysed by Oettinger's services. He said he had personally chaired a meeting on 18 October, at which he also invited a Gazprom representative, and that the countries were well aware of the situation since. 

“They are fully informed of what I said today,” Borchert assured. 

'First welding' ceremonies                               

The Commission's announcement may embarrass at least two South Stream transit countries. 

Bulgaria, which opened its doors to South Stream in April 2012 under a previous government, hosted a South Stream “first welding” ceremony on 4 November, in the village of Rasovo in the Montana municipality of Bulgaria, near the border with Serbia. 

And Serbia did the same on 24 November in the village of Šajkaš, in Vojvodina. Both countries reportedly knew that they were promoting a project under agreements seen by Brussels as illegal. 

Asked about the timeframe to re-negotiate the agreements, the Commission official remained vague. The first step, he said, is for the EU countries concerned to ask for a re-opening of the intergovernmental agreements with Moscow. Borchert said the EU Executive hoped that Moscow would look at this positively. 

But Russia has apparently no intention of re-opening those deals. Speaking at the event, Gazprom’s Medvedev stressed that “nothing could prevent the construction of South Stream”. 

Borchardt replied by saying: “What the Commission would hardly accept is that you put to us a pipeline that is built, that’s in the landscape, and then handing over the baby to us and say – now it’s up to you, Commission, to find a solution how can we operate it." 

Russian deputy minister for energy Anatoly Yankovski, who delivered a prepared speech shortly afterwards, said that Russia does not accept that EU rules should apply to trans-boundary projects such as pipelines, which are not stationed solely on EU territory. 

He added that EU law could not prevail in EU-Russia relations, which are governed only by international law. In other words, the intergovernmental agreements concluded by Russia over South Stream were prevailing over other legal norms, Yankovski said.

The Future of OPEC

The Future of OPEC 

Stratfor 04-Dec-13 

The prospect of revitalized oil production in Iraq and Iran may add to tensions between those two countries and Saudi Arabia over export quotas. On Dec. 4, representatives of the Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna to discuss a number of topics. OPEC is facing two challenges. First, OPEC's historically biggest consumer -- the United States -- is rapidly increasing its own domestic production. At the same time, OPEC must deal with plans to expand oil production envisioned both by Iraq and Iran, which could lead to lower prices than the cartel desires. Ultimately, however, emerging markets in Asia will set global demand, and their energy thirst will determine the scale of the problem OPEC faces. 

Analysis 

OPEC was organized in the early 1960s by Saudi Arabia, Iran, Iraq, Kuwait and Venezuela with the primary goal of unifying the five countries' oil export policies -- and hopefully dictating a high price for their oil. The five countries certainly possessed that power when the cartel was initially formed, and while the cartel still produces about 40 percent of the world's oil, OPEC's dominance has declined over the years. Today, only Saudi Arabia and to a certain extent the United Arab Emirates, Qatar and Kuwait retain the ability to voluntarily adjust production levels. OPEC's other members -- Indonesia, Libya, Algeria, Nigeria, Ecuador, Gabon and Angola -- must maintain production to finance their national budgets. Effectively, this means that OPEC wields nowhere near the power it once did. Even a producer of Saudi Arabia's size is barely able to change the price of oil through boosting or cutting production. 

A new wave of oil production outside the cartel has already hit. Production in the United States has increased to an estimated 8 million barrels per day -- the highest level since the 1980s. Elsewhere, production is set to take off in Canada and potentially Brazil. At the same time, increased production outside OPEC is dwarfed by the ambitious expansion plans put forward by OPEC members Iraq and Iran. While production outside the cartel is manageable, together with Iraq and Iran's plans it could represent a significant threat to oil prices in the latter half of the decade. 

Iraq and Iran's Ambitions 

Iraq's energy sector has been revitalized after the past five years and is now producing nearly 3.5 million barrels per day. Its oil ministry has set several ambitious goals, including production hitting 9 million to 10 million barrels per day by 2020. Iran, too, sees prospects for boosted production on the horizon. Complementing the negotiations with the United States on a possible long-term rapprochement, Iranian President Hassan Rouhani has started a significant reform campaign hoping to bring oil production back to the pre-sanction level of 4.2 million barrels per day within six months and increase it to the pre-revolution level of 6 million barrels per day within 18 months. To be clear, both goals are not attainable within their respective time frames, but significant increases are possible. 

The amount of production that comes online in Iraq will largely depend on two factors. First, the political system and violence will shape the pace of investment and regulatory procedures, such as issuing contracts and permits. Second and more important, there are logistical limitations to bringing online that level of production in such a short period of time. Some of these limitations can be overcome with proper coordination between international oil companies, oil services providers, the Shia surrounding the Basra region and the various political interest groups in Baghdad. Adroit cooperation between all of these parties is unlikely, meaning Iraq will fall short of Baghdad's lofty goals, but Iraq can reach about 5 million to 6 million barrels per day by 2020, and closer to 6 million to 6.5 million barrels per day within a decade. 

For Iran, the challenge is somewhat simpler, since its limitations are largely caused by external sanctions. As seen in other countries, typically when oil production has been interrupted following regime change, sanctions and other causes, production levels rarely reach the level achieved prior to the disruption. However, should sanctions be removed, Iran could quickly revive about half of its offline production within 12 to 18 months -- about 500,000 to 750,000 barrels per day. In the longer term, there are some reasons to believe that Iran could buck the trend and increase its production back to previously achieved levels, and perhaps even increase it, but the time frame would be measured in years, not months. All of this, of course, is subject to geopolitical events that could slow the process down or stop it entirely -- such as internal backlash in Iran and a slow timetable for negotiating with Washington. After bringing shut-in production back online, Iran (like Iraq) is more likely to slowly increase its daily oil production by about 250,000 to 300,000 barrels per year, pushing Rouhani's goals to after 2020. 

OPEC Going Forward 

OPEC is facing short-term and long-term challenges. In the near term, rising production in the United States and Canada has been unexpectedly quick -- increasing by 1 million barrels per day in each of the past two years. Although most of the U.S. increase has been offset by production taken offline due to instability in Libya, added U.S. exports have already forced Saudi Arabia to reduce production levels at times to maintain prices. U.S. production is set to grow by another 1 million barrels in 2014, potentially straining OPEC's preferential price points. 

In the longer term, Iran and Iraq's production is the key issue. Should Iran and Iraq together boost production to a reasonably achievable level of 11 million barrels per day by 2020, that would represent an increase of 5 million-6 million barrels per day above present levels. OPEC's export quotas have already been a source of tension among its members, but producers have always found ways to skirt around them. That may no longer be possible. While Iran's domestic consumption will increase significantly, the potential export increases are still too high for Saudi Arabia to offset. This will cause stress within the organization among regional rivals Iran, Iraq and Saudi Arabia. Saudi Arabia may ask Iran and Iraq to voluntarily limit export growth, but without other incentives there is no reason to believe they would do so when it is in their short-term economic interest to boost exports as much as possible. 

Increased exports by Iran and Iraq also play into the broader rivalry between Saudi Arabia and Iran over issues such as the Syrian civil war and Iranian influence in Saudi Arabia's border regions as well as its oil-producing Shiite-dominated Eastern Province. Historically, Saudi Arabia has argued for increased production from the cartel to preserve OPEC's market share, since high prices have helped encourage alternative energy development elsewhere, whereas Iran and Iraq have argued for moderate production levels and strong prices. Additionally, while Saudi Arabia can afford to sell oil at $85 per barrel, many of the governments surrounding it need prices at or above $100 per barrel, and Riyadh does not want to see its neighbors engulfed in even more turmoil than they already are due to lower oil revenue. Iran and Iraq are pursuing this boost for their long-term production and believe they can do so without reducing prices by relying on increased demand from developing Asian markets. 

Asia is now the world's biggest net importing region -- bigger than Europe and North America combined. Naturally, this has led to increased codependence between OPEC and developing Asian countries, principally India and China. Indeed, China has massive projects with Saudi Arabia, Iraq and Iran. China's footprint has expanded dramatically in Venezuela and it imports about 15 percent of its oil from OPEC member Angola. India has also deepened its connections to OPEC countries and has emerged as Nigeria's biggest customer. 

As OPEC's biggest customer, Asia will continue its strong demand in the near future, and so stress on OPEC will not necessarily mean lower oil prices. The impact on long-term prices is less certain, however; the price will be determined not only by the size of Asian growth in the future, but by global oil supplies in non-OPEC countries as well. While OPEC historically has been used as a political tool to increase oil prices or place an embargo on exports, as can be seen from the 2008 price spike, OPEC's modern challenge is more concerned with keeping oil prices reasonably low, not artificially raising them or embargoing oil. In order to preserve its long-term health, OPEC will need to preserve relatively low oil prices, both to ensure that developing markets in Asia can afford to keep buying the oil and to prevent alternatives such as shale oil, electric cars or natural gas-to-liquids technology from becoming more economically feasible. Furthermore, tempered oil prices for consumers in Asia will only reinforce the region's economic growth, contributing to increased demand for OPEC's oil.