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  • The UK is starting to get real about Europe

    The UK is starting to get real about Europe

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    Paul Taylor is a contributing editor at POLITICO.

    After six years of chaos and recrimination since Britons voted to leave the European Union, there are signs the country is showing an unexpected outbreak of common sense in its approach to the bloc.

    In his first weeks in office, Prime Minister Rishi Sunak — a Brexiteer himself — has sent clear signals that he wants a more constructive relationship with Brussels and Paris, and to avoid a trade war with Britain’s biggest economic partner.

    Gone are the nationalist bombast of former Prime Minister Boris Johnson and the sheer havoc wrought by his successor Liz Truss crashing the economy in pursuit of a Brexit dividend. Instead, they have both given way to a sudden burst of pragmatism, as Sunak is seeking practical solutions to festering problems. 

    This change in outlook may be partly due to the realization that Europe needs to stand united in the face of a threat to its common security from Russian President Vladimir Putin — although that hadn’t stopped Johnson from bragging about how leaving the EU had supposedly freed the United Kingdom to be more supportive of Ukraine than France or Germany.

    It may also be due to the dire economic straits Britain is in after the collapse of Truss’ short-lived experiment for a deregulated, low-tax Singapore-on-the-Thames. Or, perhaps, German Chancellor Olaf Scholz’s hard line on any EU deal with the U.K. has had a sobering effect. As may have the shift in British public opinion, which now thinks leaving the bloc was a mistake by a margin of 56 percent to 32 percent.

    For whatever reason, it is a welcome start.

    In just three weeks, Sunak has signed up to an EU defense initiative to make it easier to move armed forces around the Continent, he’s acted to improve Britain’s relations with Ireland, and he’s created political space for a possible compromise on the vexed issue of trade with Northern Ireland, which has bedeviled relations with Brussels since the U.K.’s exit from the EU.

    At their first meeting, Sunak told United States President Joe Biden that he wants to have a negotiated settlement on the Northern Ireland Protocol in place by next April — the 25th anniversary of the Good Friday peace agreement. So, sustained pressure from Washington is starting to pay off as well.

    The prime minister has also sought to thaw frosty relations with France, clinching an agreement with Paris to clamp down on migrants crossing the Channel from northern France in small boats. Europe’s only two nuclear powers have now agreed to hold their first bilateral summit since 2018 early next year, focusing on strengthening defense cooperation.

    To be fair, after saying “the jury is still out” on whether Macron was a friend or foe of the U.K., Truss had already taken a symbolic first step toward reconciliation by agreeing to attend the first meeting of the European Political Community last month. The geopolitical grouping was dreamed up by Macron to bring the entire European family together — except Russia and Belarus. 

    What’s more, the torrent of Europe-bashing rhetoric from Conservative ministers has almost dried up — at least for now. Suddenly, making nice with the neighbors is back in fashion, if only to ensure they don’t turn the lights off on the U.K. by cutting energy exports when supplies get tight this winter.

    The tone of contrition adopted by Northern Ireland Minister Steve Baker, once the hardest of Brexit hardliners, was one of the most striking signals of this new humility. “I recognize in my own determination and struggle to get the U.K. out of the European Union that I caused a great deal of inconvenience and pain and difficulty,” he told Ireland’s RTÉ radio recently. “Some of our actions were not very respectful of Ireland’s legitimate interests. And I want to put that right.” 

    Meanwhile, encouragingly, Sunak is reportedly considering deprioritizing a bill by ousted Brexit ideologue Jacob Rees-Mogg to review, reform or automatically scrap some 2,400 retained EU laws, standards and regulations by the end of 2023 — a massive bureaucratic exercise that has rattled business confidence and angered almost everyone. The prime minister now seems receptive to pleas from business to give the review much more time and avoid a regulatory vacuum.

    A bonfire of EU rules would inevitably provoke new trade tensions with Brussels — and at a time when the Office of Budget Responsibility, Britain’s independent fiscal watchdog, has just confirmed the growth-shredding damage inflicted by Brexit.

    This isn’t the end of Britain’s traumatic rupture with the bloc. Just how neuralgic the issue remains was highlighted when earlier this week, Sunak had to deny reports that senior government figures were considering a Swiss-style relationship with the EU to ensure frictionless trade. He vowed there would be no alignment with EU rules on his watch.

    To paraphrase Churchill, it may not even be the beginning of the end. But it is, perhaps, the end of the beginning.

    Puncturing the illusion of a deregulated fiscal paradise fueled by borrowing without new revenue has had a sobering effect on the U.K. — offering Sunak a political window of opportunity to start fixing EU ties. After all, the Conservative Party can’t afford to defenestrate yet another prime minister after Theresa May, Johnson and Truss, can it?

    But beyond the conciliatory tone, the real test still lies ahead.

    Sunak will have to confront the hard-line Protestant Democratic Unionist Party (DUP) to push through any compromise with the EU on the Northern Ireland Protocol. 

    As the province remains part of the EU single market under the withdrawal treaty, any such deal is bound to involve some customs checks in Northern Ireland on goods arriving from Great Britain — even if they are scaled down from the original plan. It’s also bound to involve a role for the Court of Justice of the European Union as the ultimate arbiter of EU law. Both are anathema to the DUP.

    But securing such an agreement would at least open the door to a calmer, more cooperative and sustainable relationship between London and Brussels.

    That could be Sunak’s legacy.

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    Paul Taylor

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  • Europe accuses US of profiting from war

    Europe accuses US of profiting from war

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    Nine months after invading Ukraine, Vladimir Putin is beginning to fracture the West. 

    Top European officials are furious with Joe Biden’s administration and now accuse the Americans of making a fortune from the war, while EU countries suffer. 

    “The fact is, if you look at it soberly, the country that is most profiting from this war is the U.S. because they are selling more gas and at higher prices, and because they are selling more weapons,” one senior official told POLITICO. 

    The explosive comments — backed in public and private by officials, diplomats and ministers elsewhere — follow mounting anger in Europe over American subsidies that threaten to wreck European industry. The Kremlin is likely to welcome the poisoning of the atmosphere among Western allies. 

    “We are really at a historic juncture,” the senior EU official said, arguing that the double hit of trade disruption from U.S. subsidies and high energy prices risks turning public opinion against both the war effort and the transatlantic alliance. “America needs to realize that public opinion is shifting in many EU countries.”

    The EU’s chief diplomat Josep Borrell called on Washington to respond to European concerns. “Americans — our friends — take decisions which have an economic impact on us,” he said in an interview with POLITICO.

    The biggest point of tension in recent weeks has been Biden’s green subsidies and taxes that Brussels says unfairly tilt trade away from the EU and threaten to destroy European industries. Despite formal objections from Europe, Washington has so far shown no sign of backing down. 

    At the same time, the disruption caused by Putin’s invasion of Ukraine is tipping European economies into recession, with inflation rocketing and a devastating squeeze on energy supplies threatening blackouts and rationing this winter. 

    As they attempt to reduce their reliance on Russian energy, EU countries are turning to gas from the U.S. instead — but the price Europeans pay is almost four times as high as the same fuel costs in America. Then there’s the likely surge in orders for American-made military kit as European armies run short after sending weapons to Ukraine. 

    It’s all got too much for top officials in Brussels and other EU capitals. French President Emmanuel Macron said high U.S. gas prices were not “friendly” and Germany’s economy minister has called on Washington to show more “solidarity” and help reduce energy costs. 

    Ministers and diplomats based elsewhere in the bloc voiced frustration at the way Biden’s government simply ignores the impact of its domestic economic policies on European allies. 

    When EU leaders tackled Biden over high U.S. gas prices at the G20 meeting in Bali last week, the American president simply seemed unaware of the issue, according to the senior official quoted above. Other EU officials and diplomats agreed that American ignorance about the consequences for Europe was a major problem. 

    “The Europeans are discernibly frustrated about the lack of prior information and consultation,” said David Kleimann of the Bruegel think tank.

    Officials on both sides of the Atlantic recognize the risks that the increasingly toxic atmosphere will have for the Western alliance. The bickering is exactly what Putin would wish for, EU and U.S. diplomats agreed. 

    The growing dispute over Biden’s Inflation Reduction Act (IRA) — a huge tax, climate and health care package — has put fears over a transatlantic trade war high on the political agenda again. EU trade ministers are due to discuss their response on Friday as officials in Brussels draw up plans for an emergency war chest of subsidies to save European industries from collapse. 

    “The Inflation Reduction Act is very worrying,” said Dutch Trade Minister Liesje Schreinemacher. “The potential impact on the European economy is very big.”

    “The U.S. is following a domestic agenda, which is regrettably protectionist and discriminates against U.S. allies,” said Tonino Picula, the European Parliament’s lead person on the transatlantic relationship.

    An American official stressed the price setting for European buyers of gas reflects private market decisions and is not the result of any U.S. government policy or action. “U.S. companies have been transparent and reliable suppliers of natural gas to Europe,” the official said. Exporting capacity has also been limited by an accident in June that forced a key facility to shut down.

    In most cases, the official added, the difference between the export and import prices doesn’t go to U.S. LNG exporters, but to companies reselling the gas within the EU. The largest European holder of long-term U.S. gas contracts is France’s TotalEnergies for example. 

    It’s not a new argument from the American side but it doesn’t seem to be convincing the Europeans. “The United States sells us its gas with a multiplier effect of four when it crosses the Atlantic,” European Commissioner for the Internal Market Thierry Breton said on French TV on Wednesday. “Of course the Americans are our allies … but when something goes wrong it is necessary also between allies to say it.”

    Cheaper energy has quickly become a huge competitive advantage for American companies, too. Businesses are planning new investments in the U.S. or even relocating their existing businesses away from Europe to American factories. Just this week, chemical multinational Solvay announced it is choosing the U.S. over Europe for new investments, in the latest of a series of similar announcements from key EU industrial giants. 

    Allies or not?

    Despite the energy disagreements, it wasn’t until Washington announced a $369 billion industrial subsidy scheme to support green industries under the Inflation Reduction Act that Brussels went into full-blown panic mode.

    “The Inflation Reduction Act has changed everything,” one EU diplomat said. “Is Washington still our ally or not?”

    For Biden, the legislation is a historic climate achievement. “This is not a zero-sum game,” the U.S. official said. “The IRA will grow the pie for clean energy investments, not split it.” 

    But the EU sees that differently. An official from France’s foreign affairs ministry said the diagnosis is clear: These are “discriminatory subsidies that will distort competition.” French Economy Minister Bruno Le Maire this week even accused the U.S. of going down China’s path of economic isolationism, urging Brussels to replicate such an approach. “Europe must not be the last of the Mohicans,” he said.

    The EU is preparing its responses, such as a big subsidy push to prevent European industry from being wiped out by American rivals. “We are experiencing a creeping crisis of trust on trade issues in this relationship,” said German MEP Reinhard Bütikofer. 

    “At some point, you have to assert yourself,” said French MEP Marie-Pierre Vedrenne. “We are in a world of power struggles. When you arm-wrestle, if you are not muscular, if you are not prepared both physically and mentally, you lose.”

    Behind the scenes, there is also growing irritation about the money flowing into the American defense sector.

    The U.S. has by far been the largest provider of military aid to Ukraine, supplying more than $15.2 billion in weapons and equipment since the start of the war. The EU has so far provided about €8 billion of military equipment to Ukraine, according to Borrell.

    According to one senior official from a European capital, restocking of some sophisticated weapons may take “years” because of problems in the supply chain and the production of chips. This has fueled fears that the U.S. defense industry can profit even more from the war. 

    The Pentagon is already developing a roadmap to speed up arms sales, as the pressure from allies to respond to greater demands for weapons and equipment grows.  

    Another EU diplomat argued that “the money they are making on weapons” could help Americans understand that making “all this cash on gas” might be “a bit too much.” 

    The diplomat argued that a discount on gas prices could help us to “keep united our public opinions” and to negotiate with third countries on gas supplies. “It’s not good, in terms of optics, to give the impression that your best ally is actually making huge profits out of your troubles,” the diplomat said.

    Giorgio Leali, Stuart Lau, Camille Gijs, Sarah Anne Aarup and Gloria Gonzalez contributed reporting.

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    Barbara Moens, Jakob Hanke Vela and Jacopo Barigazzi

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  • Leaders of French-speaking countries hold summit in Tunisia

    Leaders of French-speaking countries hold summit in Tunisia

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    TUNIS, Tunisia — Leaders of French-speaking countries gathered Saturday on a Tunisian island to discuss debt relief, migration, food and energy shortages, with a soaring cost of living across Africa, Europe and the Middle East due to war in Ukraine as the backdrop.

    French President Emmanuel Macron, Canadian Prime Minister Justin Trudeau and the presidents of six African nations were attending the 18th annual meeting of the 88-member International Organization of Francophonie, which promotes relations among nations that use French as their primary language.

    European Council President Charles Michel also was in Tunisia for the two-day summit, the organization’s first gathering in three years following pandemic lockdowns and travel restrictions.

    Louise Mushikiwabo, the group’s secretary-general and Rwanda’s former foreign minister, said the participants plan to issue a final declaration on major political, social and economic issues after the summit ends on Sunday.

    They will also focus on “ways to boost the use of the French language around Europe and in international institutions as its use declines compared to English,” Mushikiwabo said.

    The presidents of Senegal, the Ivory Coast, Gabon, Mauritania, Niger, Burundi and Rwanda are representing more than 320 million French-speaking people across the African continent, including Tunisia, organizers said.

    The president of Congo, Felix Tshisekedi, did not attend the summit amid escalating tensions with neighboring Rwanda, President Paul Kagame was in Djerba. The Congolese government tweeted Saturday that Tshisekedi stayed away to condemn “Rwandan aggression.”

    Congolese Prime Minister Sama Lukonde traveled to Tunisia in the president’s place, the government said. Lukonde refused to appear in the family photo during the opening session because of Kagame’s presence.

    Congolese authorities accuse Rwanda of supporting the M23 rebels, which Rwanda denies. Violence by armed groups in eastern Congo has forced hundreds to flee over the past few months, sparking a diplomatic crisis between the two French-speaking African nations.

    The summit and a two-day meeting of the organization’s economic forum next week are taking place amid tight security. Tunisia has been in the grip of a political and economic crisis.

    In preparation for the international meetings, authorities also gave Djerba a makeover, building new roads and improving infrastructure around the island that is a major tourist hub and home to several historical sites, including one of Africa’s oldest synagogues.

    The meetings are expected to boost the standing of Tunisian President Kais Saied, who has been criticized by the West for granting himself sweeping powers over the past year after sacking the prime minister and dissolving parliament.

    Said said the moves were necessary to save the North African country amid protracted political and economic crises, and many Tunisians welcomed them. But critics and Western allies say the power grab jeopardized Tunisia’s young democracy.

    Last month, the Tunisian government reached a preliminary agreement with the International Monetary Fund on a $1.9 billion loan that is designed to ease the country’s protracted budget crisis and calm the simmering discontent over soaring food and energy shortages.

    ———

    Barbara Surk in Nice, France and Yesica Fish in Dakar, Senegal contributed.

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  • How Qatar won the World Cup

    How Qatar won the World Cup

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    It doesn’t matter whether Brazil or Argentina or someone else lifts the trophy next month, Qatar has already won the World Cup. 

    Despite more than a decade of critical coverage — which at first zeroed in on the bribery and corruption embedded in the bidding process, and then highlighted Qatar’s regressive labor and human rights laws — the Gulf petro-monarchy has emerged stronger than ever after an unrivaled nation-building project. 

    The World Cup, which starts Sunday, has helped accelerate Qatar’s development, supercharging the construction of high-end stadiums, gleaming shopping malls, five-star hotels and a world-class airport — and enabled it to wield both geopolitical and sporting influence. 

    And, no matter the human rights backlash, the tournament has some of the West’s most senior politicians onside. 

    Emmanuel Macron on Thursday joined the chorus of politicians asking people to go easy on Qatar, saying that “sport shouldn’t be politicized.” The French president was echoing a much-criticized FIFA letter earlier this month, in which President Gianni Infantino told World Cup teams to stick to football and avoid dishing out morality lessons. 

    Far from being a diplomatic repellent, the controversial World Cup will instead welcome numerous senior Western officials. As first reported by POLITICO, U.S. Secretary of State Antony Blinken will attend the U.S. vs. Wales match on Monday. Belgium’s Foreign Minister Hadja Lahbib will be there to support the Red Devils. Her British counterpart James Cleverly is also going to Doha. 

    Qatar has long been under fire for its brutal use of migrant laborers; its attitude toward LGBTQ+ rights; and potential state surveillance of fans. Externally, it was hammered by a yearslong blockade by its Gulf neighbors, led by Saudi Arabia and implicitly endorsed by then-U.S. President Donald Trump. 

    But Qatar has seen off both critics and enemies thanks to its diplomatic dexterity, the leverage created by its vast hydrocarbon resources — and its willingness to splash the cash. 

    “Qatar decided it was going to learn to drive in the fast lane of a motorway,” said Simon Chadwick, professor of sport and geopolitical economy at Skema Business School in Paris, of the World Cup bid. “But Qatar had the money to be able to learn to drive.” 

    ***

    Some of the criticism — which continues unabated on the eve of the tournament — did hit home. And, in at least one case, sparked change.

    The kafala system, a sponsorship-based employment mechanism first introduced by the British to Bahrain in the 1930s, was ended by law in Qatar in 2020. In theory, this allows workers in Qatar to change jobs without needing to obtain their employers’ permission. At the same time, Doha also legislated a minimum-wage increase to 1,000 rials per month — or around €264. 

    Watchdogs, however, point out that Qatar’s “toxic” labor problems — which have resulted in the abuse and death of scores of South Asian migrant workers — didn’t end with the abolition of kafala.  

    Men making traditional fences ahead of the FIFA World Cup Qatar 2022 | Francois Nel/Getty Images

    “I think there’s a big persuasive argument to say that the system facilitates slavery or forced labor,” said Nicholas McGeehan, founding director of FairSquare Research and Projects, whose work has focused extensively on human rights in the Gulf. 

    “There are other things that help control workers,” McGeehan added. “You have severe amounts of debt, systematic passport confiscation, the absence of trade unions, the absence of civil society, and the absence of any access to justice or good health [care].” 

    “When you put all these things together, they’re very toxic, and they facilitate almost complete control over the migrant workforce,” McGeehan said. 

    Estimates vary, as the Qatari government doesn’t share official data on migrant worker deaths, but hundreds of Nepalis have died in the Gulf state of cardiac arrest, workplace accidents and suicide since 2010, according to its government statistics. Meanwhile, Doha’s new labor heat laws offer “terrible protection” from the sweltering temperatures, McGeehan said.

    Still, there is some backing for Qatar’s reforms. Marc Tarabella, a Belgian socialist MEP who is vice chair of the Parliament’s Delegation for Relations with the Arab Peninsula and also co-chair of the Sports Group, told POLITICO that, thanks to the World Cup, Qatar has become “a good example to follow for the other countries in the neighborhood.”

    And Qatar in recent months has become increasingly belligerent about defending itself to the West, after years of taking shots on the chin. 

    The country’s labor minister on Monday told European Parliament lawmakers that Qatar had been subject to a “smear campaign.” The World Cup’s own top official said that criticism of Qatar was “possibly” racially motivated. 

    Paris Saint-Germain President Nasser al-Khelaifi, who isn’t connected to the World Cup organizing team but is European sports’ most high-profile Qatari, was more circumspect, telling POLITICO that he is “very proud” his country is hosting the World Cup and isn’t “trying to hide” in the shadows.  

    “Are we doing everything 100 percent right? Maybe not. Are we perfect? No. But we are correcting things,” he said. “The World Cup has done a fantastic job for Qatar: infrastructure, regulation. A lot of things changed; massive things.”  

    ***

    Perhaps the only thing that can now truly disrupt Qatar’s crowning achievement is a shambolic tournament from both human rights and logistical perspectives. 

    That’s something detractors see as a clear possibility. 

    LGBTQ+ fans who will attend the tournament still run the risk of falling foul of Qatar’s prohibition on homosexuality. The assurances that human rights groups have received from FIFA, crucially unaccompanied by Qatari legislation on LGBTQ+ protections, are insufficient, said Minky Worden, director of global initiatives at Human Rights Watch.

    Alexander Hassenstein/Getty Images

    Escalating those human rights concerns, a Qatari World Cup ambassador told German broadcaster ZDF that homosexuality was “damage in the mind,” in comments that sparked a backlash earlier this month.

    Organizational questions also remain just before the tournament starts with Ecuador vs. Qatar on Sunday, with tens of thousands of fans descending on the tiny country. 

    Ronan Evain, executive director of Football Supporters Europe, told POLITICO that he was concerned about the training of World Cup stewards, the police approach to supporters, and the logistics of shuttling fans to and from stadiums by bus. 

    While Qatar — a country where the car is king — touts the public transport developments expedited by the World Cup, only some of the stadiums are connected by the sparkling new metro system. 

    A last-minute U-turn on beer by the Qatari hosts, now banned in and around tournament stadiums, triggered more anxiety for human rights groups, given the previous assurances on alcohol consumption provided by Qatar.

    And more than a decade after Qatar actually won the rights to host the tournament, investigations rumble on into the corruption that bedeviled the process and resulted in the FBI knocking in FIFA’s doors. French prosecutors are probing the alleged role of former French President Nicolas Sarkozy in helping Qatar win the bid, French daily Le Monde reported earlier this week. Qatar has always denied that it won the bid by nefarious means.

    On the activists’ LGBTQ+ concerns, a spokesperson for FIFA said the governing body was “confident that all necessary measures will be in place for LGBTIQ+ fans and allies to enjoy the tournament in a welcoming and safe environment, just as for everyone else.” 

    In a statement, Qatar’s World Cup Supreme Committee said it “is committed to delivering an inclusive and discrimination-free FIFA World Cup experience that is welcoming, safe and accessible to all participants, attendees and communities in Qatar and around the world.”

    ***

    But what happens when the circus leaves town? 

    Qatar has shown remarkable geopolitical deftness to keep sweet the competing interests with which its fortunes are interlinked. It hosts the largest U.S. military base in the Middle East, while also sharing access with Iran to the gas field which generated its astronomical wealth.

    Due to the ongoing Russian war in Ukraine, “Qatar will remain extremely relevant in terms of energy dynamics, especially as gas begins to come on stream,” said Kristian Ulrichsen, fellow for the Middle East at Rice University’s Baker Institute. “I think they’ll continue to play a role in regional diplomacy, especially vis-a-vis Iran if there’s no nuclear negotiation breakthrough.” Doha was a key diplomatic player when the U.S. withdrew from Afghanistan in 2021, Ulrichsen added.   

    One of Qatar’s most successful exports, media conglomerate beIN Media Group, renowned for its international sports broadcasting arm but also the owner of Hollywood’s Miramax film studios, has been approached by various U.S. and Saudi investors interested in buying a stake in the company — as the state mulls how to position itself on the international stage once the World Cup has been and gone.

    At the same time, a person familiar with the talks said U.S. investors are interested in buying a stake in PSG, which is wholly owned by Qatar Sports Investments. QSI acquired a 22 percent stake in Portugal’s SC Braga last month, which was the investment fund’s first step into multi-club ownership and a further sign of the increased significance of QSI and beIN for Qatar post-World Cup.

    “I don’t think they will give up on sport being a component of the nation’s strategy,” said Mahfoud Amara, associate professor of sport management at Qatar University.

    Qatar will host football’s Asian Cup in 2023 and the multi-sport Asian Games in 2030. Officials are currently also in preliminary discussions about a bid for another crown jewel event: The 2036 Summer Olympics.

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  • Germany mulls breaking subsidy taboo to avoid trade war with Biden

    Germany mulls breaking subsidy taboo to avoid trade war with Biden

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    BERLIN — With only six weeks to avoid a transatlantic trade showdown over green industries, the Germans are frustrated that Washington isn’t offering a peace deal and are increasingly considering a taboo-breaking response: European subsidies.

    Europe’s fears hinge on America’s $369 billion package of subsidies and tax breaks to bolster U.S. green businesses, which comes into force on January 1. The bugbear for the Europeans is that Washington’s scheme will encourage companies to shift investments from Europe and incentivize customers to “Buy American” when it comes to purchasing an electric vehicle — something that infuriates the big EU carmaking nations like France and Germany.

    The timing of this protectionist measure could hardly be worse as Germany is in open panic that several of its top companies — partly spurred by energy cost spikes after Russia’s invasion of Ukraine — are shuttering domestic operations to invest elsewhere. The last thing Berlin needs is even more encouragement for businesses to quit Europe, and the EU wants the U.S. to cut a deal in which its companies can enjoy the American perks.

    A truce seems unlikely, however. If this spat now spirals out of control, it will lead to a trade war, something that terrifies the beleaguered Europeans. While the first step would be a largely symbolic protest at the World Trade Organization (WTO), the clash could easily slide precipitously back toward the tit-for-tat tariff battles of the era of former U.S. President Donald Trump.

    This means that momentum is growing in Berlin for a radical Plan B. Instead of open tariff war with America, the increasingly discussed option is to rip up the classic free-trade rulebook and to play Washington at its own game by funneling state funds into European industry to rear homegrown green champions in sectors such as solar panels, batteries and hydrogen.

    France has long been the leading advocate of strengthening European industry with state largesse but, up until now, the more economically liberal Germans have not wanted to launch a subsidy race against America. The sands are now shifting, however. Senior officials in Berlin say they are increasingly leaning toward the French thinking, should the talks with the U.S. not lead to an unexpected last-minute solution.

    Berlin is the 27-nation bloc’s economic powerhouse, so it will be a decisive moment if Berlin ultimately decides to throw its might behind the state-led subsidy approach to an industrial race with the U.S.

    Running out of time

    The clock is ticking for a truce with Biden that looks increasingly unlikely.

    Recent attempts by a special EU-U.S. task force to address EU concerns have met little enthusiasm on the American side to amend the controversial legislation, the European Commission told EU countries this week.

    “There are only a few weeks left,” warned Bernd Lange, the chair of the European Parliament’s trade committee, adding that “once the act is implemented, it will be too late for us to achieve any changes.”

    Lange said that the failure to reach a deal would likely trigger a WTO lawsuit by the EU against the U.S., and Brussels could also strike back against what it sees as the discriminatory U.S. subsidies by imposing punitive tariffs. Warnings of a trade war are already overshadowing the runup to a high-level EU-U.S. meeting in Washington on December 5.

    MEP Bernd Lange Lange said that the failure to reach a deal would likely trigger a WTO lawsuit by the EU against the U.S. | Philippe Buissin/European Union

    It’s precisely the kind of spat that the German government wants to avoid, as Chancellor Olaf Scholz hopes to forge unity among like-minded democracies amid Russia’s war and the the increasing challenges posed by China. Earlier this month, Scholz’s government made an overture to Washington by suggesting that a new EU-U.S. trade deal could be negotiated to resolve differences, but that proposal was quickly rejected.

    There are sympathizers for the subsidies approach in Brussels, with officials at the EU’s executive saying powerful Internal Market Commissioner Thierry Breton is a leading proponent. Breton is already advocating for a “European Solidarity Fund” to help “mobilizing the necessary funding” to strengthen European autonomy in key sectors like batteries, semiconductors or hydrogen. Support from Germany could help Breton win the upper hand in internal EU strategy discussions over the more cautious Trade Commissioner Valdis Dombrovskis.

    Breton will travel to Berlin on November 29 to discuss the consequences of the Inflation Reduction Act as well as industrial policy and energy measures with Scholz’s government.

    The German considerations even echo calls from top officials of the Biden administration, including U.S. Trade Representative Katherine Tai, who are urging the EU to not engage in a transatlantic trade dispute and instead roll out their own industrial subsidies; a strategy that Washington also sees as way to reduce dependence on China.

    Plan B

    Scholz first indicated late last month that the EU might have to respond to the U.S. law with its own tax cuts and state support if the negotiations with Washington fail to reach a solution, lending support to similar plans articulated by French President Emmanuel Macron, who will meet Biden on December 1 in Washington.

    Although Scholz does not endorse Macron’s framing of the initiative as a “Buy European Act” (which sounds too protectionist for the Germans), the chancellor agrees that the EU cannot stand by idly if it faces unfair competition or lost investments, people familiar with his thinking said late last month.

    Negative economic news, such as carmaker Tesla putting plans for a new battery factory in Germany on hold and instead investing in the U.S., or steelmaker ArcelorMittal partly closing operations in Germany, have increased calls in Berlin to consider more state support to counter a negative trend caused by both the U.S. scheme and high energy prices.

    Although the official government line remains that Berlin is still holding out hope for a negotiated solution with Washington, officials in Berlin say that it could be possible to increase incentives for industries to locate the production of green technologies in Europe.

    A spokesperson for the German Economy Ministry said that faced with the challenges stemming from the Inflation Reduction Act, “we will have to come up with our own European response that puts our strengths first … The aim is to competitively relocate green value creation in Europe and strengthen our own production capacities.”

    The spokesperson warned, however, that both the U.S. and EU “must be careful that there is no subsidy race that prevents the best ideas from prevailing in the market,” and added: “Green technologies in particular thrive best in fair competition; protectionism cripples innovation.”

    One important condition that could help Germany and the EU to safeguard said fair competition and to avoid the global free trade system descending into protectionist tendencies would be to ensure that any EU state subsidies remain in line with WTO rules. That means, in contrast to the U.S. law, that those subsidies would not discriminate between local and foreign producers.

    German Chancellor Olaf Scholz first indicated late last month that the EU might have to respond to the U.S. law with its own tax cuts and state support | Sean Gallup/Getty Images

    Crucially, support is also coming from German industry.

    “In the area of industrial policy and subsidies, we could look at measures that are compatible with WTO rules — as the EU is already doing in the chip sector,” said Volker Treier, the head of foreign trade at the German Chamber of Commerce.

    Treier also stressed that “there must be no discrimination” against foreign investors, but added: “This explicitly does not rule out the possibility of settlement bonuses, which in turn should be available to investors from all countries who would be interested in such investment commitments in Europe.”

    In Brussels, the Commission’s competition department has also made clear that it’s looking with an open mind at upcoming proposals.

    “There are no instruments excluded a priori” when it comes to the EU’s response to the U.S. subsidies, the department’s state aid Deputy Director General Ben Smulders said Thursday.

    Barbara Moens, Suzanne Lynch and Pietro Lombardi in Brussels and Laura Kayali and Clea Caulcutt in Paris contributed reporting.

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  • Why cheap US gas costs a fortune in Europe

    Why cheap US gas costs a fortune in Europe

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    The EU is under immense pressure to cap the price of imported natural gas to contain energy costs — but many of the companies making a fortune selling cheap U.S. gas to the Continent at eye-watering markups are European.

    The liquefied natural gas (LNG) loaded on to tankers at U.S. ports costs nearly four times more on the other side of the Atlantic, largely due to the market disruption caused by a near-total loss of Russian deliveries following the invasion of Ukraine.

    The European Commission has come under fierce pressure to sketch out a gas price cap plan, but some countries, led by Germany, worry such a measure could prompt shippers to send gas cargoes elsewhere. The Commission is also reluctant, and its proposal issued Tuesday sets such demanding requirements that they weren’t met even during this summer’s price emergency.

    But a large part of the trade is in European hands, according to America’s biggest LNG exporter.

    “Ninety percent of everything we produce is sold to third parties, and most of our customers are utilities — the Enels, the Endesas, the Naturgys, the Centricas and the Engies of the world,” said Corey Grindal, executive vice president for worldwide trading at Cheniere Energy, rattling off the names of big-name European energy providers.

    Cheniere, which this year saw 70 percent of its exported LNG sail to Europe, sells its gas on a fix-priced scheme based on the American benchmark price, dubbed Henry Hub, which is currently at about $6 per million British thermal units.

    On average, the price across all Cheniere contracts is 115 percent of Henry Hub plus $3, Grindal said. That works out to about €33 per megawatt-hour. For comparison, the current EU benchmark rate, dubbed TTF, is €119 per MWh.

    It’s a big markup for whoever is reselling those LNG cargoes into Europe’s wholesale market, profiting from fears that there may not be enough gas to last the winter.

    Despite fears that any EU cap will send gas to higher bidders in Asia and result in bloc-wide shortages, Grindal gave a resounding “no” when asked if a cap would have any impact on how Cheniere does business with European companies.

    “Our balance sheet is underpinned by those long-term contracts,” he added.

    Translation: If buyers choose to trade their precious cargoes away for higher profits beyond Europe once they receive them, that’s their decision.

    Blame game

    “The United States is a producer of cheap gas that they are selling us at a high price … I don’t think that’s friendly,” said French President Emmanuel Macron | Ludovic Marin/AFP via Getty Images

    The difference between U.S. and EU gas prices hasn’t gone unnoticed by European politicians — but most of the finger-pointing has been at American producers rather than the resellers closer to home.

    “In today’s geopolitical context, among countries that support Ukraine there are two categories being created in the gas market: those who are paying dearly and those who are selling at very high prices,” French President Emmanuel Macron told a group of industrial players last week. “The United States is a producer of cheap gas that they are selling us at a high price … I don’t think that’s friendly.”

    Macron’s dig conveniently ignored that the largest European holder of long-term U.S. gas contracts is none other than France’s own TotalEnergies.

    At the company’s latest earnings call last month, TotalEnergies CFO Jean-Pierre Sbraire trumpeted the fact that the firm’s access to more than 10 million tons of U.S. LNG annually “is a huge advantage for our traders, who can arbitrage between the U.S. and Europe.”

    “And now, given the price of LNG, each cargo represents something like $80 million, even $100 million. So, when we are able reroute or to arbitrage between the different markets, of course, it’s a very efficient way to maximize the value coming from that business,” Sbaire added. “Cash flow generation of this order of magnitude marks the start of a new era for the company.”

    Spain’s Naturgy — which has some 5 million tons of U.S. LNG a year from Cheniere under contract — has also earned nearly five times more trading gas so far this year compared with 2021 thanks to “the increased spread between [Henry Hub] and TTF,” it wrote in its half-year report.

    Long-term contracts with the U.S. weren’t always so profitable. In fact, from 2016 to at least 2018, buyers were mostly losing money on the fixed deals, leading some to sell them off.

    In 2019 Spain’s Iberdrola, for example, pawned off its 20-year Cheniere contract to Asian trader Pavilion Energy, which is now benefiting from selling into a high-priced global market.

    In the U.K, Centrica tried — and failed — to sell off its LNG portfolio in 2020 when government-ordered lockdowns drove real-time prices through the floor. That included a 20-year fixed Cheniere contract set to run through 2038.

    Now that real-time prices have shot back up, Centrica — part of Shell-owned British Gas — is reaping the rewards and eagerly snapping up more long-term contracts, most recently a 15-year deal with U.S. LNG exporter Delfin beginning in 2026.

    “This is a really important profit stream for us,” Centrica CFO Chris O’Shea told investors on a Friday trading update call.

    Unlike some producers — for example in the Middle East — which restrict the final destination of the LNG to consumers in Asia and prevent it being sold onward at a higher price, American gas changes ownership the minute it’s loaded onto a ship and comes with no strings attached.

    That leaves buyers free to redirect the precious supply wherever it’s most profitable — sometimes at the expense of their downstream clients, if it’s cheaper to break those pre-existing domestic delivery commitments.

    “We can only control what we can control,” said Cheniere’s Grindal. “U.S. LNG is destination-free.”

    But as far as getting it on the ship at previously agreed prices, “our focus is being that reliable supplier, being committed to the obligations that we’ve made to our customers, and we’re committed to doing everything that we can to help the EU in this situation.”

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  • As Xi reemerges, Europe again falls prey to China’s divide-and-rule tactics

    As Xi reemerges, Europe again falls prey to China’s divide-and-rule tactics

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    BALI, Indonesia — Every European leader at this week’s G20 summit in Bali wanted a one-on-one meeting with Chinese President Xi Jinping.

    Not everyone got one.

    The Europeans’ desire to meet Xi was driven by the fact that this week was the first opportunity to meet the Chinese leader at a major diplomatic jamboree since the lockdowns of early 2020, when the coronavirus pandemic started in China and spread to the world.

    The Europeans always had to accept that they were going to be fighting for the crumbs in terms of the timetable. U.S. President Joe Biden spent three and a half hours with Xi, while France’s President Emmanuel Macron had to be content with (a still perfectly respectable) 43 minutes.

    China conspicuously revived its long-established tactic of courting specific EU countries and their national interests, something it has often used to destabilize Brussels. (When Brussels threatened an all-out trade war in 2013 over China undercutting the EU market in solar panels and telecoms equipment, China expertly shattered EU unity by threatening retaliatory action against French and Spanish wine, playing Paris and Madrid against EU trade officials.)

    Once again in Bali, China took the canny nation-to-nation approach, meeting Macron, Spanish Prime Minister Pedro Sánchez, Italy’s Giorgia Meloni and the Netherlands’ Mark Rutte, while avoiding European Commission President Ursula von der Leyen and European Council President Charles Michel. A meeting with Michel, at least, had been widely expected in diplomatic circles.

    China bristles at the EU designation that it is a “systemic rival” to Brussels, and instead decided to leverage its influence with individual European countries.

    Take the meeting with Rutte. The Chinese leader’s main interest was that the Netherlands, home to chipmaker ASML, a company that makes key equipment for microchip manufacturing, should not join any EU-U.S. trade coalition seeking to box China out of new technologies.

    “It is hoped that the Netherlands would enhance Europe’s commitment to openness and cooperation,” Xi noted in a readout of the Dutch meeting. Translation: Don’t make trade trouble over microchips.

    With Sánchez, Xi played up the importance of China as a motor for tourism in Spain, a sector where Madrid is particularly interested in high-rolling visitors from Asia. “The two sides need to make good preparations for the China-Spain Year of Culture and Tourism to build greater popular support for China-Spain friendship,” Xi said. 

    Similarly, the Xinhua state news agency quoted Macron saying he wanted more cooperation on business, specifically in the aviation and civil nuclear energy sectors. The Chinese account of the Xi-Meloni meeting was that Beijing would import more “high-quality” goods — presumably of the luxury and gourmet variety — and would cooperate in manufacturing, energy and aerospace.

    Macron cozies up to Xi

    In a sign that Xi’s diplomatic strategy was paying dividends, Macron took a non-confrontational approach to Xi, even massaging the Chinese leader’s ego.

    The Chinese embassy to Paris promoted a video by TikTok’s domestic Chinese equivalent Douyin, in which Macron passed his best wishes to China after Xi secured a norm-breaking new mandate. (Xi was appointed for a third term as Communist Party general secretary in a highly choreographed party congress.)

    Macron also hailed Xi as a “sincere” figure who should “play the role of a mediator over the next few months” in stopping further Russian aggression against Ukraine — even though Beijing has shown no sign of being a good fit for such a role since the war broke out in February.

    Ignoring China’s deadly Himalayan tensions with India, escalating tension with Taiwan or military adventurism in the South China Sea, Macron declared: “China calls for peace … [There is] a deep and I know sincere attachment to … the U.N. charter.”

    Macron also told reporters he planned to visit China early next year. That looks like a riposte to the visit by German Chancellor Olaf Scholz, who visited China earlier this month. Scholz reportedly rejected Paris’ suggestion for a joint Macron-Scholz visit and decided to go alone with a delegation of big businesses.

    “Macron needed this air-time with Xi enormously as he couldn’t be seen to be left out by China when the Americans and the Germans have dominated the headlines,” a Western diplomat said.

    While Macron claimed that Xi agreed with him on a “call for respect for Ukraine’s territorial integrity and sovereignty,” China’s own readout made no such mention, saying only: “China stands for a ceasefire, cessation of the conflict and peace talks.”

    Brussels boxed out

    In stark contrast to the French, Spanish, Dutch and Italian leaders, the Brussels-based EU chiefs didn’t get a look-in.

    In a show of Beijing’s continually negative view of the European Union, Xi decided not to go ahead with what POLITICO understood to be a near-certain plan for Michel, the one representing all 27 countries, to meet Xi.

    That event, had it been allowed to take place, would have been significant in showcasing the possibility for the bloc’s smaller economies to also make their voice heard, since Xi would otherwise be busy dealing with the bigger players.

    Xi’s change of heart over a meeting with Michel came shortly after the EU Council president’s prerecorded speech at a Shanghai trade expo was dropped. According to Reuters, he tried to call out Russia’s war of aggression against Ukraine in the speech, a message that was deemed too sensitive to Chinese ears.

    Commission President von der Leyen, meanwhile, busied herself not with plans to line up a meeting with Xi, but on a joint show with Biden to focus on infrastructure financing for developing countries in order to rival China’s Belt and Road Initiative.

    In a thinly veiled criticism of China’s approach to the new Silk Road, von der Leyen said: “The [West’s] Partnership Global for Infrastructure and Investment is an important geostrategic initiative in era of strategic competition.

    “Together with leading democracies we offer values-driven, high-standard, and transparent infrastructure partnerships for low- and middle-income countries,” she said.

    Her tone, though, proved to be a minority among European leaders during the G20 engagement with China.

    “There’s no common message from the EU on China,” according to another EU diplomat in Bali. “But then there never was one.”

    To the relief of European diplomats, at least Xi did not handle their bosses in the same way he treated Canada’s Prime Minister Justin Trudeau.

    “Everything we discuss has been leaked to the paper; that’s not appropriate,” Xi told Trudeau through an interpreter in a clip recorded by Canadian media.

    “That’s not … the way the conversation was conducted. If there is sincerity on your part …” Xi said, before Trudeau interrupted him, defending his country’s interest in working “constructively” with Beijing.

    Xi took his turn to interrupt. “Let’s create the conditions first,” Xi said.

    Go and stand in the corner, Justin.

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    Stuart Lau

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  • Biden says it’s ‘unlikely’ the missile that hit Poland was fired from Russia

    Biden says it’s ‘unlikely’ the missile that hit Poland was fired from Russia

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    President Joe Biden of the United States arrives at the formal welcome ceremony to mark the beginning of the G20 Summit on November 15, 2022 in Nusa Dua, Indonesia.

    Leon Neal | Pool | via Reuters

    U.S. President Joe Biden said it is unlikely that the missile that hit Poland and killed two people was fired from Russia, but the United States and allies unanimously agreed to support the country’s investigation.

    “I’m going to make sure we figure out exactly what happened,” Biden said.

    Early Wednesday morning, Polish officials said a “Russian-made missile” landed on its soil, killing two people. It would mark the first time since Russia’s war in Ukraine began in February of this year that a Russian projectile hit NATO territory.

    “There is preliminary information that contests that,” Biden said when asked if the missile was fired from Russia. “I don’t want to say until we completely investigate. It is unlikely in the lines of the trajectory that it was fired from Russia, but we’ll see.”

    Biden didn’t address whether the missile could have been fired by Russia from Ukraine or elsewhere.

    Biden was speaking in Bali, Indonesia where he is attending the Group of 20 summit, a meeting of the world’s largest economies.

    Biden has repeatedly said any attack on NATO soil will be considered an attack on all of the alliance members. He spoke with Polish President Andrzej Duda after the explosion offering his full support, according to the White House. He spokes with NATO Secretary General Jens Stoltenberg in a separate call, the White House said.

    Before speaking to reporters, Biden convened a meeting of “like-minded leaders” on the situation. Participants included G-7 members and allies: European Commission President Ursula von der Leyen, Italian Prime Minister Giorgia Meloni, German Chancellor Olaf Scholz, French President Emmanuel Macron, Canadian Prime Minister Justin Trudeau, UK Prime Minister Rishi Sunak, Spainish Prime Minister Pedro Sanchez, Dutch Prime Minister Mark Rutte, Japanese Prime Minister Kishida Fumio and European Council President Charles Michel.

    “We’re going to collectively determine our next step as we investigate and proceed,” Biden said. “There was total unanimity among folks at the table.”

    Biden said the group also discussed Russia’s recent missile attacks in Ukraine, saying the country’s aggression has been “unconscionable.”

    “The moment when the world came together at the G-20 to urge de-escalation, Russia continues to escalate in Ukraine,” Biden said. “While we were meeting there were scores and scores of missile attacks in western Ukraine. We support Ukraine fully in this moment; we have since the start of the conflict.”

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  • Zelenskyy tells ‘G19’ leaders: Don’t ask Ukraine to compromise

    Zelenskyy tells ‘G19’ leaders: Don’t ask Ukraine to compromise

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    BALI, Indonesia — Ukraine’s President Volodymyr Zelenskyy on Tuesday called on G20 leaders not to offer his country any peace deal that would compromise its independence from Russia, amid recently renewed contact between Washington and Moscow over the future of the war.

    Zelenskyy appeared at the Bali summit via videolink at the invitation of the Indonesian hosts, just days after Ukraine liberated Kherson from invading Russian forces — a feat he compared to the D-Day landing of allied troops in Normandy, a key turning point of World War II.

    “For Ukraine, this liberation operation of our defense forces is reminiscent of many battles of the past, which became turning points in the wars of the past,” Zelenskyy said in his speech to world leaders, among them U.S. President Joe Biden — and, according to a Western diplomat, Russian Foreign Minister Sergey Lavrov. “It is like, for example, D-Day — the landing of the allies in Normandy.”

    Pointedly addressing his comments to the “dear G19” — the leaders of the Group of 20, with a snub to Russia — Zelenskyy warned against making Ukraine weaker than it was before Russian President Vladimir Putin launched the full-scale invasion in February.

    “I want this aggressive Russian war to end justly and on the basis of the U.N. Charter and international law,” Zelenskyy said in his speech, the content of which was leaked to POLITICO. “Ukraine should not be offered to conclude compromises with its conscience, sovereignty, territory and independence. We respect the rules and we are people of our word.”

    Russian President Vladimir Putin was invited to the summit in Bali but last week decided not to attend, sending Lavrov instead.

    In his speech on Tuesday, Zelenskyy rejected any negotiations like those Kyiv held with Moscow in previous years, after Russia invaded and annexed Crimea in 2014, before seizing, via proxies, territory in the Donbas region of eastern Ukraine.

    “Apparently, one cannot trust Russia’s words, and there will be no Minsk 3, which Russia would violate immediately after signing,” Zelenskyy said, referring to the Minsk 1 and 2 agreements, signed in 2014 and 2015 and mediated by the leaders of France and Germany in the so-called Normandy Format, which were intended to bring an end to the war at that time.

    Zelenskyy’s speech to the G20 came on the same day Chinese President Xi Jinping asked his French counterpart Emmanuel Macron to work toward negotiated peace for Ukraine.

    According to the Chinese state media Xinhua, Xi “emphasized that China’s position on the Ukrainian crisis is clear and consistent, advocating ceasefire, cessation of war and peace talks. The international community should create conditions for this, and China will continue to play a constructive role in its own way.”

    Nevertheless, Zelenskyy thanked countries including China for rejecting Russia’s threats to use nuclear weapons.

    Slamming the “crazy threats of nuclear weapons,” the Ukrainian president added: “There are and cannot be any excuses for nuclear blackmail. And I thank you, dear G19, for making this clear.”

    Bill Burns, the head of the Central Intelligence Agency, met his Russian counterpart Sergei Naryshkin in Turkey on Monday and warned Moscow against using nuclear weapons, according to the White House.

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    Stuart Lau

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  • Rishi Sunak to meet Xi Jinping as he strikes conciliatory tone on China

    Rishi Sunak to meet Xi Jinping as he strikes conciliatory tone on China

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    BALI, Indonesia — Rishi Sunak will invite Xi Jinping to collaborate more closely on global challenges in the first meeting between a British prime minister and Chinese president in nearly five years.

    Sunak and Xi will hold a bilateral meeting Wednesday on the margins of the G20 leaders’ summit in Bali.

    Ahead of the meeting — confirmed only 24 hours before it was due to take place — Downing Street insisted it was “clear-eyed in how we approach our relationship with China.”

    The prime minister’s spokesman said there was a need “for China and the U.K. to establish a frank and constructive relationship,” but stressed that “the challenges posed by China are systemic” and “long-term.”

    The two leaders are likely to discuss the war in Ukraine, energy security and climate change among other issues, No. 10 said.

    Theresa May was the last prime minister to meet Xi, during a visit to Beijing in January 2018, at a time when Downing Street was still referring to the “golden era” of relations supposedly ushered in by David Cameron and George Osborne.

    U.K.-China relations have worsened in the wake of China’s crackdown on democratic freedoms in Hong Kong, the oppression of the Uyghur Muslim minority of Xinjiang province, and concerns about the security implications of allowing Chinese companies to build critical national infrastructure in the U.K.

    News of the meeting comes after Sunak softened his language on China and suggested he was abandoning plans to declare the country a “threat” as part of a major review of British foreign policy.

    In response to questioning from POLITICO during the trip, Sunak described China as “a systemic challenge” but stressed that dialogue with Beijing was essential to tackling global challenges such as climate change.

    Speaking to Sky News Tuesday, the PM said: “I think our approach to China is one that is very similar to our allies, whether that’s America, Australia and Canada — all countries that I’m talking about exactly this issue with while we’re here at the G20 summit.”

    Sunak’s spokesman said Tuesday that the prime minister would “obviously raise the human rights record with President Xi” at the meeting.

    But he added: “Equally, none of the issues that we are discussing at the G20 — be it the global economy, Ukraine, climate change, global health — none of them can be addressed without coordinated action by the world’s major economies, and of course that includes China.”

    Xi has already held bilateral talks with various leaders during the summit | Kevin Frayer/Getty Images

    Xi has already held bilateral talks with U.S. President Joe Biden, French President Emmanuel Macron and Australian Prime Minister Anthony Albanese among other leaders during the summit.

    In addition to the talks with Xi, Sunak will also hold meetings with Biden, Albanese, Indian Prime Minister Narendra Modi, Japanese Prime Minister Fumio Kishida and Indonesian President Joko Widodo.

    Iain Duncan Smith, the former Tory leader and co-chair of the Inter-Parliamentary Alliance on China, warned that the U.K. was “drifting into appeasement” with Xi.

    “I am worried that the present prime minister, when he meets Xi Jinping, will be perceived as weak because it now looks like we’re drifting into appeasement with China, which is a disaster as it was in the 1930s and so it will be now,” he said. “They’re a threat to our values, they’re a threat to economic stability.”

    Bob Seely, another Tory MP and member of the Inter-Parliamentary Alliance on China, added: “We need to talk to nations, especially those that may challenge our values and stability, but it is dangerous to normalize relations when they are not normal.”

    But Alicia Kearns, chair of the Commons foreign affairs select committee and a member of the China Research Group, welcomed Sunak’s meeting with Xi. “It is important they meet to prevent miscalculations,” she said. “We cannot simply cut off China, we must work to create the space for dialogue, challenge and cooperation.”

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  • Russia’s retreat from Kherson hailed by the West

    Russia’s retreat from Kherson hailed by the West

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    Western officials welcomed Russia’s retreat from the Ukrainian city of Kherson, labeled a “big moment” by the White House and “another strategic failure” for Moscow by the U.K.

    Ukrainian troops on Friday entered Kherson, the only provincial capital to be taken by Russia in its invasion. The Russian Defense Ministry confirmed in a video that Moscow’s troops had been withdrawn from the Ukrainian city and other territories on the western bank of the Dnipro River, in a huge blow to President Vladimir Putin’s war effort.

    “It has broader strategic implications as well,” U.S. National Security Adviser Jake Sullivan said, “because being able to push the Russians across the river means that the longer-term threat to places like Odesa and the Black Sea coastline are reduced from where they were before.”

    “And so this is a big moment. And it’s certainly not the end of the line, but it’s a big moment,” the top White House official told reporters while flying to a Southeast Asian summit in Cambodia, according to a readout published online.

    French President Emmanuel Macron called it a “critical step towards the restoration of [Ukraine’s] sovereign rights.”

    U.K. Defense Secretary Ben Wallace said Russia’s retreat “marks another strategic failure for them. In February, Russia failed to take any of its major objectives except Kherson,” according to a statement.

    The Ukrainian military said it was overseeing “stabilization measures” around Kherson to make sure it was safe, the Associated Press reported on Saturday. Kyiv was making speedy but cautious efforts to make the city liveable after months of occupation, as one official described it as “a humanitarian catastrophe,” the news outlet said.

    “We will restore all conditions of normal life – as much as possible,” Ukrainian President Volodymyr Zelenskyy said in his nightly address. “Our defenders are immediately followed by policemen, sappers, rescuers, energy workers,” he said. “Medicine, communications, social services are returning.’

    Roman Holovnya, an adviser to Kherson’s mayor, said humanitarian aid and supplies had begun to arrive, but that many residents still lacked water, medicine, food and electricity, the AP reported.

    “The occupiers and collaborators did everything possible so that those people who remained in the city suffered as much as possible over those days, weeks, months of waiting” for Ukraine’s forces to arrive, Holovnya said. “Water supplies are practically nonexistent,” he said.

    “I am moved to tears to witness freedom returning to Kherson,” Estonian Prime Minister Kaja Kallas tweeted on Saturday. “Ukrainians hugging their soldiers, and blue and yellow flags raised.”

    Ukrainian Foreign Minister Dmytro Kuleba on Saturday said that the “war goes on” after the Ukrainian army’s success. Ahead of a meeting with U.S. Secretary of State Antony Blinken in Cambodia, Kuleba also thanked Washington for helping Kyiv against Moscow’s invasion.

    “It’s only together that we will be able to prevail and to kick Russia out of Ukraine. We are on the way. This is coming, and our victory will be our joint victory — victory of all peace-loving nations across the world,” Kuleba said.

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    Laura Kayali

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  • Egypt’s COP27 summit app is a cyber weapon, experts warn

    Egypt’s COP27 summit app is a cyber weapon, experts warn

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    Western security advisers are warning delegates at the COP27 climate summit not to download the host Egyptian government’s official smartphone app, amid fears it could be used to hack their private emails, texts and even voice conversations.

    Policymakers from Germany, France and Canada were among those who had downloaded the app by November 8, according to two separate Western security officials briefed on discussions within these delegations at the U.N. climate summit.

    Other Western governments have advised officials not to download the app, said another official from a European government. All of the officials spoke on the condition of anonymity to discuss international government deliberations.

    The potential vulnerability from the Android app, which has been downloaded thousands of times and provides a gateway for participants at COP27, was confirmed separately by four cybersecurity experts who reviewed the digital application for POLITICO.

    The app is being promoted as a tool to help attendees navigate the event. But it risks giving the Egyptian government permission to read users’ emails and messages. Even messages shared via encrypted services like WhatsApp are vulnerable, according to POLITICO’s technical review of the application, and two of the outside experts.

    The app also provides Egypt’s Ministry of Communications and Information Technology, which created it, with other so-called backdoor privileges, or the ability to scan people’s devices.

    World leaders, including Egyptian President Abdel Fattah El-Sisi and United Nations Secretary-General António Guterres pose for a group photo during the Sharm El-Sheikh Climate Implementation Summit of the COP27 climate conference in Egypt | Sean Gallup/Getty Images

    On smartphones running Google’s Android software, it has permission to potentially listen into users’ conversations via the app, even when the device is in sleep mode, according to the three experts and POLITICO’s separate analysis. It can also track people’s locations via smartphone’s built-in GPS and Wi-Fi technologies, according to two of the analysts.

    The app is nothing short of “a surveillance tool that could be weaponized by the Egyptian authorities to track activists, government delegates and anyone attending COP27,” said Marwa Fatafta, digital rights lead for the Middle East and North Africa for Access Now, a nonprofit digital rights organization.

    “The application is a cyber weapon,” said one security expert after reviewing it, who spoke on the condition of anonymity to protect colleagues attending COP.

    The Egyptian government did not respond to requests for comment. Google said it had reviewed the app and had not found any violations to its app policies.

    The potential security risk comes as thousands of high-profile officials descend on Sharm El-Sheikh, the Egyptian resort town, where so-called QR codes, or quasi-bar codes that direct people to download the smartphone application, are dotted around the city.

    Participants at COP27 include global leaders like French President Emmanuel Macron, British Prime Minister Rishi Sunak and U.S. Secretary of State Antony Blinken, though such high profile politicians are unlikely to download another government’s app.

    The experts who spoke to POLITICO said that much of the data and access that the COP27 app gets is fairly standard. But, according to three of these specialists, the combination of the Egyptian government’s track record on human rights and the types of people who would downloaded the app represent a cause for concern.

    Strange and extensive access

    Three of the researchers said the app posed surveillance risks to those who download it due to its widespread permissions to review people’s devices, though the extent of the risk remains unclear.

    Elias Koivula, a researcher at WithSecure, a cybersecurity firm, reviewed the Android app for POLITICO and said he had found no evidence people’s emails had been read. Many of the permissions granted to the climate change conference app also have benign purposes like keeping people up-to-date with the latest travel information around the summit, he added.

    But Koivula said other permissions granted to the app appeared “strange” and could potentially be used to track people’s movements and communications. So far, he said he had no evidence that such activity had taken place. 

    Not all the experts agreed on the risks.

    Paul Shunk, a security intelligence engineer at cybersecurity firm Lookout, said he had found no evidence the app had access to emails, describing the idea that it posed a surveillance risk as “strange.” He was confident the app was not built as typical spyware, pouring cold water on claims the app functioned as a listening device. Shunk said it could not record audio if it was running in the background, which makes it “almost completely unsuitable for spying on users.”

    The COP27 app uses location tracking “extensively,” Shunk said, but seemingly for legitimate purposes like route planning for summit attendees. It lacked the ability to access location in the background, based on Android permissions, which would be what the app would need for continuous location tracking, he added.

    The other two cybersecurity analysts who reviewed the app spoke on the condition of anonymity to safeguard their ongoing security work and to protect colleagues attending the climate change conference.

    “Let me put it this way: I wouldn’t download this app onto my phone,” said one of those experts. Those two the researchers also warned that once the application had been downloaded onto a device, it would be difficult, if not impossible, to remove its ability to access people’s sensitive data — even after it had been deleted.

    POLITICO checked the app’s potential security risks via two open cybersecurity tools, and both raised concerns about its ability to listen to people’s conversations, track their locations and alter how the app operates without asking for permission.

    Both Google and Apple approved the app to appear in their separate app stores. All of the analysts only reviewed the Android version of the app, and not the separate app created for Apple’s devices. Apple declined to comment on the separate app created for its App Store.

    Egypt’s track(ing) record

    Adding to rights groups’ concerns is the track record of the Egyptian government to monitor its people. In the wake of the so-called Arab Spring, Cairo has clamped down on dissidents and used local emergency rules to track its citizens online and offline activity, according to a report by Privacy International, a nonprofit organization.

    As part of the smartphone app’s privacy notice, the Egyptian government says it has the right to use information provided by those who have downloaded the app, including GPS locations, camera access, photos and Wi-Fi details.

    “Our application reserves the right to access customer accounts for technical and administrative purposes and for security reasons,” the privacy statement said.

    Yet the technical review, both by POLITICO and the outside experts of the COP27 smartphone application discovered further permissions that people had granted, unwittingly, to the Egyptian government that were not made public via its public statements.

    These included the application having the right to track what attendees did on other apps on their phone; connecting users’ smartphones via Bluetooth to other hardware in ways that could lead to data being offloaded onto government-owned devices; and independently linking individuals’ phones to Wi-Fi networks, or making calls on their behalf without them knowing.

    “The Egyptian government cannot be entrusted with managing people’s personal data given its dismal human rights record and blatant disregard for privacy,” said Fatafta, the digital rights campaigner.

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  • Macron backs climate cash trillions

    Macron backs climate cash trillions

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    SHARM EL-SHEIKH, Egypt — Climate change talks have long been stymied over demands for transfers of billions of dollars — on Monday, French President Emmanuel Macron backed a new push for the conversation to be measured in trillions.

    Speaking at the COP27 climate summit in Sharm El-Sheikh, Egypt, Macron gave his support to elements of a plan outlined by Barbados’ Prime Minister Mia Mottley that seeks to overhaul the way climate finance flows to the countries that most need it. 

    He called for a “huge shock of concessional financing,” suspension of debt for disaster-struck countries and putting the International Monetary Fund (IMF) on notice. 

    It was a speech that signaled a shift in tone that developing countries have been long been pushing for.

    During the first day of official speeches, leader after leader from wealthy countries highlighted the need to demonstrate “solidarity” with developing countries after a year in which calamitous disasters and a bubbling debt crisis helped reshape the often contentious conversation about climate finance.

    “It’s the right thing to do,” said U.K. Prime Minister Rishi Sunak.

    Money is a central focus of this year’s climate talks given the widening gap between what has been pledged and what is needed. It extends from everything from clean energy transitions to hardening countries’ defenses against climate impacts to potential payments for irreparable climate damages.

    In September, Barbados issued the world’s first pandemic and natural disaster bond. “The time has come for the introduction of natural disaster-pandemic clauses in our debt instruments,” Mottley said.

    “God forbid, if we are hit tomorrow, we unlock 18 percent of GDP over the next two years, because what we do is effectively put a pause on all of our debt,” she said. 

    Macron called for the rules of the IMF, the World Bank and other major lenders to be changed to make clauses that halt debt repayments in the event of a disaster far more common. 

    “What you’re asking of us in terms of debt reimbursement and guarantees, when we are affected by a climate shock, when we are a victim of a climate accident, to some degree, there must be a suspension of those conditions,” said the French president.

    Broken promises

    While the need for finance to spur the transition to clean energy across the world and guard against the ravages of climate change is already stretching into trillions, the U.N. climate system remains stuck on a broken decade-old promise from rich countries. They pledged to deliver $100 billion a year in climate finance by 2020, but that’s not likely to happen until next year.

    As climate impacts have grown more extreme and prolific, appeals for new and more innovative forms of finance have escalated. Ballooning debt in the wake of the pandemic has heightened those calls, with dozens of vulnerable countries threatening a debt strike in the lead-up to COP27.

    Mottley has been a champion of elevating the debt crisis facing nations like her own and highlighting how it adds to climate inequities. The plan she outlined in September hinges on debt relief, increased finance, and new mechanisms for post-disaster recovery, like bonds.

    The Barbados leader’s call to arms and Macron’s heavyweight backing brought a new reality and scale to the financial discussion.

    Mottley has pushed for the IMF’s special drawing rights to be put toward helping climate-vulnerable nations recover and respond to climate impacts. That could be used to help unlock far more money from the private sector — $500 billion from the IMF could result in $5 trillion in investments, she said Monday.

    The challenge is getting shareholders in those financial institutions to agree to reforms. 

    Officials in the U.S., Germany and other major economies have pushed for an overhaul of the way multilateral development banks lend to allow them to extend more climate finance. U.S. Treasury Secretary Janet Yellen has called on the World Bank to draft a roadmap by the end of the year that could then be used to drive reform efforts at other development banks.

    On Monday, Macron went further, saying that by next spring, global financial institutions would need to devise ways to “come up with concrete solutions to activate these innovative financing solutions and to help us to provide access to new liquidities.”

    He paid tribute to Mottley’s “force of character” and said the two leaders — one who commands an economy 600 times larger than the other — had agreed to form a group of “wise minds” to develop suggestions for the overhaul of the international financial system.

    But one Mottley suggestion that Macron swerved was her call for fossil fuel companies to pay a levy on their profits into a fund for disaster-hit countries.

    “How do companies make $200 billion in profits in the last three months and not expect to contribute at least 10 cents on every dollar of profit to a loss and damage fund?” she asked.

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  • Macron welcomes French questions on climate ahead of COP27

    Macron welcomes French questions on climate ahead of COP27

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    PARIS (AP) — French President Emmanuel Macron released a selfie video on social media platforms Saturday asking the public to send him questions about what France should do about climate change and biodiversity.

    Thousands of responses quickly poured in. Several were hostile or questioned his sincerity, but they also included rigorous questions about fossil fuel subsidies, sea pollution and nuclear energy.

    Macron, who will take part in the U.N. climate talks opening in Egypt on Sunday, promised to respond to the questions starting next week.

    In the video, he read from a letter from the public asking why he doesn’t declare an “environmental state of emergency.” He said the letter “prompted me to ask questions about what we are doing about this ecological challenge, the challenge of our generation.”

    Early in his presidency, Macron pledged to make tackling climate change issues a top priority, but he has come under widespread criticism for not instituting enough tangible change.

    At the COP27 talks in Egypt on Monday, Macron is expected to discuss climate-related financing, protecting forests, Africa’s Great Green Wall, and other climate adaptation measures, according to his office.

    He’s also expected to raise the importance — and challenge — of sticking to climate commitments as Europe faces an energy crisis stemming from Russia’s war in Ukraine.

    Those are all key issues at the climate talks at the Red Sea coastal resort of Sharm el-Sheikh, which are expected to include more than 120 world leaders and run from Nov. 6-18.

    Laurent Fabius, the French diplomat who presided over the U.N. talks in 2015 that produced the Paris climate agreement, made a plea Saturday to those gathering in Egypt: “Keep in mind that the most beautiful announcements mean nothing if they’re not backed up by precise and rapid policies and actions.”

    ___

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  • French far-right party elects new leader to replace Le Pen

    French far-right party elects new leader to replace Le Pen

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    PARIS — European lawmaker Jordan Bardella replaced his mentor Marine Le Pen on Saturday at the helm of France’s leading far-right party, pledging to protect French civilization from perceived threats posed by immigration and defending a party member who made a racist remark in parliament.

    Bardella, 27, won an internal party vote with 85% support, marking a symbolic changing of the guard at the resurgent National Rally party. He is the first person to lead the party who doesn’t have the Le Pen name since it was founded a half-century ago.

    The National Rally is seeking to capitalize on its recent breakthrough in France’s legislative election and growing support for far-right parties in Europe, notably in neighboring Italy. It’s also facing broad public anger over an offensive comment this week by a National Rally member in parliament in response to a Black lawmaker.

    Marine Le Pen is still expected to wield significant power in the party’s leadership and run again for France’s presidency in 2027. She says she stepped aside to focus on leading the party’s 89 lawmakers in France’s National Assembly.

    To broad applause, she hugged Bardella after the results were announced at a party congress on Paris’ Left Bank, and both raised their arms in victory. Le Pen said Bardella’s main challenge will be pursuing the party “roadmap” of taking power in France.

    “We are going to win!” supporters chanted.

    Anti-racism activists, union leaders and politicians protested nearby Saturday against the National Rally, denouncing what many see as a creeping acceptance of its xenophobic views.

    Yeliz Alkac, 30, told The AP that she was demonstrating to support people who face persistent racism in France. She described shock that the remark in parliament seen as denigrating African immigrants was seen as ”normal” by some in France.

    “The fact that the National Rally has 89 lawmakers at the National Assembly is a strong signal. It should be a warning about how the extreme right is going strong,” she said.

    In his speech Saturday, Bardella defended the National Rally legislator who was suspended over the remark, calling him a victim of a “manhunt.”

    Bardella described his family’s Italian immigrant roots and pride at becoming French, but made it clear that not all foreigners are welcome.

    “France shouldn’t be the world’s hotel,” he said, calling for “drastic” limits on immigration.

    He welcomed a representative of Italian Premier Giorgia Meloni’s far-right party who came to the congress, calling for a “rapprochement” of similar forces in Europe.

    Bardella had been the interim president of the National Rally since Le Pen entered the presidential race last year. He beat out party heavyweight Louis Aliot, 53, who had argued that the National Rally needs to reshape itself to be more palatable to the mainstream right.

    “Bardella’s election feels like a fresh push,” said party member Marie Audinette, 23. “He embodies the youth.”

    Audinette, who grew up in a working-class neighborhood in Bordeaux, said that her country “was perishing,” citing deteriorating public services that struggled to cope with the COVID-19 pandemic. She also described “a clear change of population” in Bordeaux.

    Some far-right supporters in France increasingly refer to the false “great replacement” conspiracy theory that the populations of Western countries are being overrun by non-white, non-Christian immigrants. The claim, propagated by white supremacists, has inspired deadly attacks.

    Le Pen lost to French President Emmanuel Macron on her third presidential bid in April but earned her highest score yet. Two months later, her party won its most seats to date in the lower house of parliament, in part thanks to Le Pen’s efforts to focus on inflation and workers’ economic troubles.

    Le Pen has worked to remove the stigma of racism and antisemitism that clung to her party and broaden its base. She has notably distanced herself from her now-ostracized father Jean-Marie Le Pen, who co-founded the party then called the National Front and has been repeatedly convicted for hate speech.

    “Bardella is part of a generation of young, very young, people who engaged themselves behind Marine Le Pen in the 2010s and who probably wouldn’t have joined the National Rally during Jean-Marie Le Pen’s era,” political scientist Jean-Yves Camus told The Associated Press.

    The Le Pen family and the party also have deep ties to Vladimir Putin’s Russia. While Le Pen condemned Russia’s invasion of Ukraine, she has also questioned resulting Western sanctions against Russia, and her party took out a $9 million loan from the First Czech-Russian bank in 2014 that many see as a Russian effort to influence French politics.

    According to Camus, Saturday’s party vote won’t question Le Pen’s leadership.

    “Le Pen won’t have to deal with the party (now) and can focus on the most important thing, leading the party’s lawmakers in the National Assembly,” he said.

    ———

    Associated Press writers Elaine Ganley and Alex Turnbull contributed to this report.

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  • Racist incident in French parliament triggers condemnation

    Racist incident in French parliament triggers condemnation

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    PARIS — A Black lawmaker in France said Friday he was “deeply hurt” by a racist remark a far-right member of the French parliament made during a legislative session, a comment that has received condemnation from across the political spectrum.

    Gregoire de Fournas of the far-right National Rally party was heard shouting the words “return to Africa” at his fellow lawmaker as Carlos Martens Bilongo was challenging the French government Thursday about migrants stranded at sea.

    Other politicians, including France’s president, said they were shocked by de Fournas’ remark, which raised new questions about xenophobia on the far right and in other parts of French society.

    His words prompted an immediate uproar in the National Assembly, leading the legislative chamber’s president to suspend the session and launch an investigation. A meeting of the National Assembly’s managing body was set for Friday afternoon to discuss potential sanctions.

    Due to the uproar and the muffling of the words, it was unclear whether de Fournas said Bilongo should return to Africa or the migrants should.

    De Fournas said he was referring to Europe-bound migrants rescued at sea and not, as some understood, to his fellow lawmaker.

    “I fully stand by my comments about the anarchic migratory policies of our country,” he tweeted Friday.

    French anti-racism groups stressed that either way, the remark echoed the familiar invective of Black people being told to go back to Africa, regardless of where they were born or held citizenship.

    French group SOS Racisme called it “the true face of the far-right: that of racism.” The group’s president, Dominique Sopo, said that no matter what de Fournas exactly said, “obviously, they are extremely violent comments.”

    Speaking Friday on French news broadcaster BFM TV, Bilongo called for de Fournas’ resignation.

    He said he received thousands of messages following the incident from people telling him that they hear similar comments in their daily lives. The words “speak to many French who felt hurt,” Bilongo said.

    Bilongo, a member of the hard-left France Unbowed, took part in a gathering Friday near the National Assembly called by his party in a show of support.

    “I’m torn between joy and sadness,” Bilongo said. “Because I received many messages of support overnight … (,) because I see all these faces here showing solidarity with me.”

    Bilongo praised the immediate reaction of anger shown by a large majority of lawmakers from across the political spectrum.

    The International League Against Racism and Anti-Semitism condemned the comment as “disgusting” and showing “blatant inhumanity.”

    The Movement against Racism and for Friendship between People, or MRAP, described the remark as “revolting.”

    “The National Rally remains, despite some efforts to normalize this far-right party, deeply racist and xenophobic,” it said.

    The Elysee presidential palace said President Emmanuel Macron was shocked by words he considered “unacceptable in or outside” the assembly.

    French Interior Minister Gerald Darmanin said he was “extremely shocked,” telling BFM TV it was the first in his 15 years of political life that he heard such “ignominious” words in parliament.

    The National Rally is the party of far-right leader Marine Le Pen, who lost her third bid for the French presidency to Macron in April. The subsequent legislative elections led to a major breakthrough for the party, which won 89 seats in the 577-member National Assembly, up from a previous total of eight.

    Le Pen tweeted that de Fournas was “obviously speaking about the migrants transported in ships by NGOs.”

    “The controversy created by our political adversaries is gross and won’t deceive the French,” she said.

    In the past decade, Le Pen has sought to make her party more palatable to the mainstream right, striving to remove the stigma of racism and antisemitism that clung to the party under her now-ostracized father, Jean-Marie Le Pen.

    The National Rally’s members are scheduled to gather Saturday in Paris to choose the new head of the party. Le Pen has said she plans to focus on leading the party’s lawmakers in the National Assembly.

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  • Germany’s Scholz: The way we deal with China must change

    Germany’s Scholz: The way we deal with China must change

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    BERLIN — Berlin must change the way it deals with China as the country lurches back toward a more openly “Marxist-Leninist” political trajectory, German Chancellor Olaf Scholz wrote in an op-ed on Thursday.

    In his article for POLITICO and the German newspaper Frankfurter Allgemeine Zeitung, Scholz defended his trip to China on Thursday but stressed that German companies would need to take steps to reduce “risky dependencies” in industrial supply chains, particularly in terms of “cutting-edge technologies.” Scholz noted that President Xi Jinping was deliberately pursuing a political strategy of making international companies reliant on China.

    “The outcome of the Communist Party Congress that has just ended is unambiguous: Avowals of Marxism-Leninism take up a much broader space than in the conclusions of previous congresses … As China changes, the way that we deal with China must change, too,” Scholz wrote.

    Germany has faced withering criticism for pressuring Europe into a strategically disastrous dependence on Russian gas over recent years, and Berlin is now having to hit back against suggestions that it is making exactly the same mistakes by depending on China as a manufacturing base and commercial partner.

    While Scholz signaled a note of caution over China, he was far from suggesting that Germany was close to a major U-turn in its largely cozy relations with China. Indeed, he clearly echoed his predecessor Angela Merkel in insisting that the (unnamed but obviously identified) United States should not drag Germany into a new Cold War against Beijing.

    “Germany of all countries, which had such a painful experience of division during the Cold War, has no interest in seeing new blocs emerge in the world,” he wrote. “What this means with regard to China is that of course this country with its 1.4 billion inhabitants and its economic power will play a key role on the world stage in the future — as it has for long periods throughout history.”

    In a thinly veiled criticism of Washington’s policies, Scholz said Beijing’s rise did not justify “the calls by some to isolate China.”

    Crucially, he insisted that the goal was not to “decouple” — or break manufacturing ties — from China. He added, however, that he was taking “seriously” an assertion by President Xi that Beijing’s goal was to “tighten international production chains’ dependence on China.”

    Scholz is planning to fly to Beijing late on Thursday for a one-day trip to the Chinese capital on Friday, where he will be the first Western leader to meet Xi since his reappointment, and the first leader from the G7 group of leading economies to visit China since the outbreak of the coronavirus pandemic.

    The chancellor also sought to counter criticism that his trip undermines a joint European approach to China. According to French officials, President Emmanuel Macron had proposed that he and Scholz should visit Xi together to demonstrate unity and show that Beijing cannot divide European countries by playing their economic interests off against each other — an initiative that the German leader rejected.

    “German policy on China can only be successful when it is embedded in European policy on China,” Scholz wrote. “In the run-up to my visit, we have therefore liaised closely with our European partners, including President Macron, and also with our transatlantic friends.”

    Chancellor Olaf Scholz echoed his predecessor Angela Merkel in insisting that the United States should not drag Germany into a new Cold War against Beijing | Clemens Bilan-Pool/Getty Images

    Scholz said he wanted Germany and the EU to cooperate with a rising China — including on the important issue of climate change — rather than trying to box it out.

    At the same time, he warned Beijing that it should not pursue policies striving for “hegemonic Chinese dominance or even a Sinocentric world order.”

    Scholz also pushed China to stop its support for Russia’s war against Ukraine and to take a more critical position toward Moscow: “As a permanent member of the [United Nations] Security Council, China bears a special responsibility,” he wrote. “Clear words addressed from Beijing to Moscow are important — to ensure that the Charter of the United Nations and its principles are upheld.”

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  • America’s Tai faces uphill battle to defuse EU trade war fears

    America’s Tai faces uphill battle to defuse EU trade war fears

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    PRAGUE — U.S. Trade Representative Katherine Tai traveled more than 4,000 miles to prevent a transatlantic trade war over electric vehicles, but her EU counterparts signaled on Monday that they would be a tough crowd to win round.

    The growing spat hinges on U.S. legislation that encourages consumers via tax credits to “Buy American” when it comes to choosing an electric car.

    At a time when the U.S. and Europe want to present a united front against Russia, this protectionist measure has triggered outrage in many EU countries, including France and Germany, two leading European carmaking nations. Beyond the EU, China, Japan and South Korea have also voiced concern.

    After speaking with Tai at a meeting of EU ministers in Prague, the bloc’s trade chief Valdis Dombrovskis predicted it would be difficult to resolve the dispute.

    “It will not be easy to fix it  — but fix it we must,” he said.

    Among the 27 EU countries, anxiety about the U.S. measure is growing. Sweden’s new trade minister, Johan Forssell, whose country takes over the presidency of the Council of the EU in January, told POLITICO on Sunday that aspects of the U.S. legislation were “worrying” and “not in accordance with [World Trade Organization] rules.” 

    Another senior official stressed: “It’s not only one or two member states, which are concerned … It’s also the small ones; they will have no access at all” to the U.S. market.

    French President Emmanuel Macron and German Chancellor Olaf Scholz agreed over lunch last week that the EU should retaliate if Washington pushed ahead with the controversial bill. Macron floated the idea of a “Buy European Act” to strike back. 

    The new tax credits for electric vehicles are part of a huge U.S. tax, climate and health care package, known as the Inflation Reduction Act, which passed the U.S. Congress in August.

    The idea is that a U.S. consumer can claim back $7,500 of the value of an electric car from their tax bill. To qualify for that credit, however, the car needs to be assembled in North America and contain a battery with a certain percentage of the metals mined or recycled in the U.S., Canada or Mexico. 

    Czech Trade Minister Jozef Síkela, whose country currently holds the presidency of the Council of the EU, said that European carmakers wanted to qualify for the scheme, just as the North Americans do.  

    In its current form, the bill is “unacceptable,” and “is extremely protective against exports from Europe,” said Síkela as he walked into Monday’s meeting. “We simply expect that we will get the same status as Canada and Mexico.” 

    U.S. Trade Representative Katherine Tai and European Commission Executive Vice President Valdis Dombrovskis | Jim Watson/AFP via Getty Images

    “But we need to be realistic,” Síkela told reporters later. “This is our starting point in the negotiations and we’ll see what we’ll manage to negotiate at the end.”

    In a bid to soothe tensions, a joint task force was set up last week by the European Commission and the U.S. The task force is supposed to meet at the end of this week, although the exact date isn’t yet fixed, according to the senior official. 

    Asked whether Brussels would retaliate should no agreement be struck with Washington, Dombrovskis took a cautious approach: “Setting up this task force is already … a response of us, raising those concerns … At this stage, we are focusing on a negotiated solution before considering what other options there may be.” 

    The midterm elections in the U.S., where President Joe Biden’s Democrats look likely to lose ground, compound the difficulties. 

    It doesn’t seem like the tensions will be eased by the next Trade and Technology Council, which takes place between U.S. and European negotiators in early December. 

    Dismay over the U.S. subsidies has overshadowed the preparatory work for the next TTC meeting, for which the EU and businesses on both sides of the Atlantic want to see rapid concrete results to avoid the perception that the format is simply a talking shop.

    Tai herself had no immediate comment in Prague, but later released a statement on her meeting with Síkela that gave no hint of a breakthrough.

    “Ambassador Tai and Minister Síkela discussed the ongoing work of the Trade and Technology Council, and the importance of achieving meaningful results for the December TTC Ministerial and beyond.  They also discussed the newly-created U.S.-EU Task Force on the Inflation Reduction Act,” the statement said.  

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  • World leaders grieve deadly Halloween crowd surge in Seoul

    World leaders grieve deadly Halloween crowd surge in Seoul

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    HONG KONG — World leaders expressed sadness and condolences after at least 151 people were killed in a crowd surge Saturday night in Seoul, South Korea.

    The tragedy occurred in Seoul’s Itaewon district during Halloween festivities when a huge crowd surged into a narrow downhill alley. At least 82 others were injured in the South Korea’s deadliest accident in years.

    U.S. President Joe Biden and first lady Jill Biden sent their “deepest condolences” to the families of the deceased.

    “We grieve with the people of the Republic of Korea and wish for a quick recovery to all those who were injured,” said President Biden in a tweet. “The United States stands with the Republic of Korea during this tragic time.”

    Similarly, British Prime Minister Rishi Sunak described the news from Seoul as “horrific” on Twitter.

    “All our thoughts are with those currently responding and all South Koreans at this very distressing time,” Sunak wrote.

    Itaewon’s international character was shaped by its proximity to a U.S. military garrison nearby. The area is still home to restaurants, bars and other businesses catering to the American community in Seoul.

    U.S. Forces Korea, which commands the sizable American military presence in the country, expressed its condolences in a Facebook post.

    “The Itaewon community has opened its arms to us for many years and is part of the reason our Alliance is so strong,” the command said, writing in English and Korean. “During this time of grief, we will be there for you just as you have been there for us.”

    Pope Francis invited the crowd in St. Peter’s Square to pray for the victims.

    “We pray the Risen Lord also for those — especially young people — who died last night in Seoul, due to the tragic consequences of a sudden crush,” Francis said after his Sunday’s Angelus prayer.

    Leaders from countries including Japan, France, China and Singapore reacted with shock and sadness over the tragedy in Seoul.

    “I’m hugely shocked and deeply saddened by the extremely tragic accident in Itaewon, Seoul, that took many precious lives, including those of young people with their future ahead of them,” Japanese Prime Minister Fumio Kishida said in a tweet.

    In France, President Emmanuel Macron — who tweeted in both French and in Korean — offered support to Seoul residents and South Korea.

    “France is with you,” he said.

    Canadian Prime Minister Justin Trudeau echoed similar sentiments on Twitter, sending his “deepest condolences” to the people of South Korea “and wishing a fast and full recovery to those who were injured.”

    Italy’s Prime Minister Giorgia Meloni tweeted: “Our thoughts are with the victims of the tragedy that occurred in Seoul and with their families. Italy is close to the Korean people at this time of great pain and deep sadness.”

    Chinese President Xi Jinping also sent his condolences to South Korean President Yoon Suk Yeol, expressing shock over the accident in Seoul, according to a statement by the Chinese foreign ministry.

    Hong Kong leader John Lee, in a statement on Facebook, hoped for swift recoveries for those injured in the crush.

    “I express profound sorrow over the passing of the victims, extend my deepest condolences to their families and wish for a speedy recovery to all those who were injured,” said Lee.

    Prince William and his wife Kate also sent a message of condolence. The heir to the British throne said on social media: “Catherine and I send all our love and prayers to the parents, families and loved ones of those tragically lost in Seoul yesterday evening.”

    German Foreign Minister Annalena Baerbock said she was “heartbroken” by the tragic news from Seoul.

    “They were looking for a night of lighthearted Halloween festivities but instead found real horror and death,” said Baerbock. “My thoughts are with the victims, their friends and families, and those who still fear for their loved ones.”

    “This is a sad day for South Korea. Germany stands by their side,” German Chancellor Olaf Scholz said in a tweet.

    Singapore’s President Halimah Yacob described the loss of lives as “tragic” and said it was “hard to imagine” the trauma and grief experienced by the families, loved ones and friends of those affected.

    “My thoughts and prayers are with the people of South Korea during this difficult time, and I wish a quick and full recovery to all those who are injured,” she said.

    ———

    Associated Press journalists from around the world contributed to this report.

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  • Scholz and Macron threaten trade retaliation against Biden

    Scholz and Macron threaten trade retaliation against Biden

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    BERLIN/PARIS — After publicly falling out, Olaf Scholz and Emmanuel Macron have found something they agree on: mounting alarm over unfair competition from the U.S. and the potential need for Europe to hit back.

    The German chancellor and the French president discussed their joint concerns during nearly three-and-a-half hours of talks over a lunch of fish, wine and Champagne in Paris on Wednesday.

    They agreed that recent American state subsidy plans represent market-distorting measures that aim to convince companies to shift their production to the U.S., according to people familiar with their discussions. And that is a problem they want the European Union to address.

    The meeting of minds on this issue followed public disagreements in recent weeks on key political issues such as energy and defense, fracturing what is often seen as the EU’s central political alliance between its two biggest economies.

    But even though their lunch came against an awkward backdrop, both leaders agreed that the EU cannot remain idle if Washington pushes ahead with its Inflation Reduction Act, which offers tax cuts and energy benefits for companies investing on U.S. soil, in its current form. Specifically, the recently signed U.S. legislation encourages consumers to “Buy American” when it comes to choosing an electric vehicle — a move particularly galling for major car industries in the likes of France and Germany.

    The message from the Paris lunch is: If the U.S. doesn’t scale back, then the EU will have to strike back. Similar incentive schemes for companies will be needed to avoid unfair competition or losing investments. That move would risk plunging transatlantic relations into a new trade war.

    Macron was the first to make the stark warning public. “We need a Buy European Act like the Americans, we need to reserve [our subsidies] for our European manufacturers,” the French president said Wednesday night in an interview with TV channel France 2, referring specifically to state subsidies for electric cars.

    Scholz and Macron agreed the EU must act if the US progresses a ‘Buy American’ act offering incentives for companies investing on US soil, which would particularly affect French and German electric vehicle industries | David Hecker / Getty Images

    Macron also mentioned similar concerns about state-subsidized competition from China: “You have China that is protecting its industry, the U.S. that is protecting its industry and Europe that is an open house,” Macron said, adding: “[Scholz and I] have a real convergence to move forward on the topic, we had a very good conversation.”

    Crucially, Berlin — which has traditionally been more reluctant when it comes to confronting the U.S. in trade disputes — is indeed backing the French push. Scholz agrees that the EU will need to roll out countermeasures similar to the U.S. scheme if Washington refuses to address key concerns voiced by Berlin and Paris, according to people familiar with the chancellor’s thinking.

    Scholz is not a big fan of Macron’s wording of a “Buy European Act” as it evokes the nearly 90-year-old “Buy American Act,” which is often criticized for being protectionist because it favors American companies. But the chancellor shares Macron’s concerns about unfair competitive advantages, the people said.

    Earlier this month, Scholz said publicly that Europe will have to discuss the Inflation Reduction Act with the U.S. “in great depth.”

    In a blow to Germany’s industrial core, chemical giant BASF announced plans Wednesday to reduce its business activities and jobs in Germany, with company chief Martin Brudermüller citing heightened gas prices — which he criticized for being six times as high as in the U.S. — as well as increasing EU regulation as the reason.

    “The decisions of a successful company like BASF show that we need to improve the overall attractiveness of Germany as a business location,” German Finance Minister Christian Lindner said in a tweet, vowing to take various measures such as “tax relief for private investments.”

    Before bringing out the big guns, though, Scholz and Macron want to try to reach a negotiated solution with Washington. This should be done via a new “EU-U.S. Taskforce on the Inflation Reduction Act” that was established during a meeting between European Commission President Ursula von der Leyen and U.S. Deputy National Security Adviser Mike Pyle on Tuesday.

    The taskforce of EU and U.S. officials will meet via videoconference toward the end of next week, underlining the seriousness of the European push.

    On top of that, EU trade ministers will gather for an informal meeting in Prague next Monday, with U.S. trade envoy Katherine Tai planning to attend to discuss the tensions.

    In Brussels, the Commission is also looking with concern at Macron’s wording of a “Buy European Act,” which evokes protectionist tendencies that the EU institution has long sought to fight.

    “Every measure we take needs to be in line with the World Trade Organization rules,” a Commission official said, adding that Europe and the U.S. should resolve differences via talks and “not descend into tit-for-tat trade war measures as we experienced them under [former U.S. President Donald] Trump.”

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    Hans von der Burchard and Clea Caulcutt

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