Transatlantic summitry to sketch out tough message to China

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EU leaders gathering for their regular spring European Council on Thursday and Friday will be joined by US President Joe Biden for the first day of the summit, alongside Nato and G7 leaders’ meetings on the other side of town.

We’ll explore what the meetings on Russia’s invasion of Ukraine are likely to bring, especially ahead of the EU-China summit on April 1. We will also examine why energy price discussions have the potential to bring a discordant note on the second day of the EU leaders’ talks.

While diplomatic talks seem to be inching in a positive direction, the horrors of the war are only intensifying, with people in the besieged city of Mariupol now so hungry they are killing stray dogs for food, the FT reports here. Moscow has given Ukrainian forces a deadline until today to surrender control of Mariupol, while denying any responsibility for the civilian casualties.

Still on Ukraine, a so-called ‘jumbo’ council of foreign and defence ministers is taking place later today in Brussels and I’ll bring you the latest in what to expect regarding extra aid for Ukraine’s forces, but also for neighbouring Moldova, which is struggling to cope with the influx of refugees.

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Joe and energy

The appearance of Joe Biden, US president, at the Brussels summit on Thursday is likely to temporarily push aside an ongoing internal EU quarrel over how to cope with the rising energy prices, writes Sam Fleming in Brussels.

EU officials and diplomats expect transatlantic co-ordination over the war in Ukraine to be front and centre on the first day of the summit. That includes a discussion of messaging towards China, after Biden held a two-hour call with Xi Jinping on Friday.

The EU is preparing for its own summit between Xi and the presidents of the European Council and the European Commission on April 1. It will be their first not only since the war began, but also after a period of cooling relations since Beijing last year blacklisted a number of members of the European Parliament following the bloc’s sanctions related to Xinjiang.

The focus is now firmly on how China approaches Russia’s war in Ukraine. The EU is not under any illusions that the Asian country will take its side, and it won’t be making threats, said one official, but it will urge Beijing to refrain from actively supporting Russia.

“They have a choice to make,” said the official. “China should think very carefully. It’s in their own best interests to take some distance from Russia.”

The united transatlantic front over Russia’s war in Ukraine stands in stark contrast to continued divergences inside the EU on tackling energy prices, which rose a vertiginous 32 per cent year on year in February, driving overall inflation rate to 5.9 per cent.

EU leaders will agree that the surge in prices only underscores the need to wean the union off Russian gas and oil as soon as possible, according to draft summit conclusions. But there is far less consensus on what joint action on prices is most helpful and feasible in the short term.

Thus far the most substantive steps have been taken on a national, rather than EU-wide level. Italy, for example, has opted for a windfall tax on utilities, and Belgium late last week decided to delay the exit from nuclear energy, which was due to be completed in 2025, by another 10 years.

The commission will present options for further action on energy prices ahead of the summit, but the ideas are neither novel nor easy to find consensus upon. In particular, any significant interventions into the way the energy markets work are likely to be opposed by a large number of northern EU member states.

Italy and Greece have been advocating caps on gas prices, for example, and Pedro Sánchez, prime minister of Spain, has been engaged in frantic diplomacy seeking to convince fellow member states to consider decoupling surging gas prices from electricity prices. France has also spoken in favour of the latter.

However in recent meetings of EU ambassadors, countries including Germany, the Netherlands, and Austria have warned there are no easy solutions to the surge in energy prices, and they damped down any expectations of a quick fix at the EU summit.

Opponents of wholesale reforms have prepared a letter to the European Commission warning that tinkering with the way the markets function could end up undermining the incentives for fresh investment in renewable energy, damaging the drive for energy independence from Russia in the medium and longer term.

Countries such as the Netherlands argue the near-term focus should remain on economising on energy use and filling up gas storage facilities as quickly as possible — even though utilities will need to be cajoled or prodded into doing the latter given the current high prices.

A route that may have greater potential at an EU level is joint purchasing of gas, because such a strategy would avoid member states seeking to outbid each other in the global energy markets. It was an approach that the EU feels proved its worth in the joint vaccine procurement during the Covid-19 crisis.

Chart du jour: Poland second

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More than 3.2mn people have left Ukraine since Russia’s invasion began — exceeding in weeks the numbers who arrived in Europe from Syria over a two-year period in 2015-16. Despite the strains those refugees are now putting on member states’ public services, many economists argue the fiscal burdens should be manageable. (More here)

More aid for Ukraine and Moldova

When foreign and defence ministers meet later today, they are expected to give a green light to more funding for arming Ukraine and a top-up for the macro-financial aid for neighbouring Moldova, one of the continent’s poorest nations, which has been overwhelmed by the hundreds of thousands of refugees fleeing the war.

Ukraine is set to receive another €500mn for defence purposes, topping up €450mn in lethal and €50mn in non-lethal aid approved last month. There were some discussions among EU ambassadors last week after EU foreign policy chief Josep Borrell announced the extra aid as a done deal at the Versailles summit on March 11.

Several capitals expressed their frustration after he jumped the gun on something that had not yet been agreed. It was not the first time Borrell has gone off-script, EU diplomats pointed out.

Another recent example was his statement in a news conference that the EU was going to supply fighter jets to Ukraine — a prospect that has gone nowhere given Nato and EU countries’ reluctance to engage in something that Russia could construe as a hostile act.

Today’s political agreement on the Ukraine top-up is likely to take a few more weeks to materialise, pending parliamentary procedures in Berlin, among others, diplomats say.

Meanwhile, with Moldova’s foreign minister Nicu Popescu in town today to make the case for extra grants for his country, there is talk of another top-up, to double EU’s aid for his country to €300mn.

A first macro-financial aid package of €150mn (€120mn in medium-term loans and €30mn in grants) has been approved by the EU governments and is set to get the final green light from the European Parliament later this week, with money set to start flowing soon after.

Moldova has asked for an extra €150mn in grants, which the commission is assessing — but which is still subject to approval by member states and the parliament. While some countries favour the idea, others insist on a balance between loans and grants.

In addition to the financial aid, Moldova is also set to receive help from the EU’s border agency Frontex and from a number of member states in resettling some of the Ukrainian refugees.

What to watch today

  1. EU foreign and defence ministers meet in Brussels with their Ukrainian and Moldovan counterparts
  2. European Commission puts forward new proposals on how to tackle energy price crisis

… and later this week

  1. US President Joe Biden joins EU leaders for the first day of the two-day summit on Thursday
  2. Nato, G7 summits on Thursday in Brussels

Notable, Quotable

  • Tough choices: Weaning themselves off Russian gas will be particularly painful for countries such as Italy and Germany, which import a high proportion of their energy mix from Russia.
  • Got milk? Milk prices are soaring on the expectation that a tight market will be hit by further disruption to fertiliser and feed supplies following Russia’s invasion of Ukraine.
  • Run on iodine: The EU commission is seeking to encourage EU members to stockpile iodine pills, protective suits and other medicine as it seeks to improve the bloc’s health response in case of a nuclear incident following Moscow’s invasion of Ukraine, according to EU officials.
  • Tech lobby: The two pieces of upcoming EU legislation on tech (Digital Services Act and Digital Markets Act) have prompted an extraordinary blizzard of lobbying since regulatory plans were unveiled in December 2020, with Google standing out in the way it has targeted senior officials.

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Source: Financial Times