Europe cannot ignore Taiwan’s desire for “better relations” if EU countries such as Germany are keen to acquire advanced microchip-making technologies from the island, Taiwanese Foreign Minister Joseph Wu said.
Speaking to POLITICO and other media on his trip to Europe, Wu questioned the enticements Europe is offering TSMC when asked why the world-leading chipmaking giant based in Taiwan has still not come to a decision to build a new plant in Germany.
“If Europe has provided very positive incentive, and also speak with the TSMC in a way that will make the TSMC feel comfortable, that their investment in Europe is going to produce very positive results … their investment in Europe is certainly not going to be stopped by the government,” Wu said.
“Even though we are not selfish in stopping the TSMC, for making investment in other countries, we certainly hope that other countries who want to attract TSMC to make investment can also think about the situation Taiwan is in, or TSMC’s position in Taiwan, and the position Taiwan is seeing in this geo-strategical landscape,” he said.
In contrast, Wu called Japan and the U.S. — where TSMC plants will be completed next year — a “like-minded partner” and “a very good partner of Taiwan,” respectively.
“I think this is some philosophical thinking, rather than government policy of putting conditions on TSMC making investment in other [countries],” Wu said. “That philosophical issue is that when a country is in shortage of computer chips, they will ask Taiwan, ‘you should do this, and you should do that’ — but they don’t seem to be thinking about a broader picture of better relations with Taiwan, economic or otherwise.”
Wu’s comments are a pointed though veiled criticism aimed at Germany.
At the height of the coronavirus pandemic in 2021, then-German Economy Minister Peter Altmaier asked his Taiwanese counterpart, Wang Mei-hua, to intervene regarding TSMC’s reduced supply to the German auto industry, according to a letter reported by Reuters. “I would be pleased if you could take on this matter and underline the importance of additional semiconductor capacities for the German automotive industry to TSMC,” said the letter written by Altmaier, who was a key member of Angela Merkel’s government which put a priority on trade with China.
Deterring China
One of Wu’s main missions in Europe — in a trip that took him to Prague, Brussels and Milan — was to shore up diplomatic support for Taiwan among European leaders.
He welcomed the EU’s repeated calls on Beijing to maintain the status quo in the Taiwan Strait. “China might also sense that it might come down with some economic price for their possible aggression against Taiwan, so sanction or other types of economic means against China, and I think the European countries have been discussing about that as well,” he said.
Even if the EU has taken a more critical view of China as a result of the coronavirus pandemic, which began in China, as well as Beijing’s stance on Russia’s war against Ukraine, Taiwan still faces challenges while engaging with Europe.
On trade, the European Commission has been reluctant to begin negotiations for a bilateral investment agreement (BIA) with Taiwan, apparently out of concern about retaliation from Beijing.
Taiwanese Foreign Minister Joseph Wu traveled to Europe to shore up diplomatic support from European leaders | Vladimir Simicek/AFP via Getty Images
“We are very concerned that the BIA between Taiwan and EU seems to be called as a hostage to the stalling CAI negotiations,” Wu said, referring to the comprehensive agreement on investment between the EU and China. “But if you look at the linkage — close linkage — between Taiwan and the EU, in economic sense, I think EU needs to find an alternative to strengthen the bilateral economic or trade relations, rather than get bogged down by the CAI which is not going anywhere,” he said.
“We hope we can persuade the EU leadership to think about this in a positive way,” Wu added.
Due to diplomatic protocol under which all EU member countries recognize the “one China” policy, the Taiwanese officials requested that POLITICO and the other media not disclose the location where the interview was conducted. Nor could Wu say which EU officials he met with, or whether he planned to have meetings at NATO, also based in Brussels. (One of the few EU figures confirming Wu’s presence in Brussels was European Parliament Vice President Nicola Beer, who tweeted about their meeting and called Taiwan a “firm member of the democratic family.”)
Despite the EU’s lack of public acknowledgment of his visit — as well as the European public’s preference of “staying neutral” in the event of a U.S.-China conflict over Taiwan — Wu still has high hopes that the bloc’s attitude would change.
“I don’t think morally, any sensible country, any sensible leader can stay neutral and say, ‘No, we’re not going to pay any attention to [the] atrocity,’” he said, referring to potential Chinese invasion of Taiwan.
“And I think the same can apply to the situation between the U.S. and China. If China initiated any aggression against other countries, in killing innocent people, violating international laws, causing atrocities and destructions, and killing innocent people, and all that, and the United States is trying to help, I don’t think the European countries can say that it’s a matter … between the U.S. and China,” Wu said.
“When the international community discuss about the major international principles,” he said, “I think it’s going to be very hard for Europe to say that ‘I don’t care’.”
As gear reviews go, it was a glowing one: In a 60-second video clip posted on Telegram, a masked sniper sporting the death’s-head insignia of the Wagner mercenary army sings the praises of the Russian-made Orsis T-5000 rifle.
“The equipment comes very well recommended,” the soldier, pictured in the charred interior of a building, tells a war reporter from the Zvezda TV channel run by the Russian Ministry of Defense.
Pulling out the clip of the weapon at his side, he continues: “It uses Western .338 caliber ammunition. It works very well. It can penetrate light cover if the enemy is behind it. And, in the open, it can strike the enemy at a range of up to 1,500 meters.”
Filings obtained by POLITICO indicate that Promtekhnologiya and another Russian firm called Tetis have acquired hundreds of thousands of rounds made by Hornady, a U.S. company that trademarks its wares as “Accurate. Deadly. Dependable.” Hornady, founded in 1949, sums up its philosophy with the phrase: “Ten bullets through one hole.”
The findings add to a growing body of evidence that supplies of lethal and nonlethal military equipment are still reaching Russia despite the West’s imposition of unprecedented sanctions in response to President Vladimir Putin’s invasion of Ukraine last year. The exigencies of war have exposed Russia’s lack of capacity to manufacture high-end sniper rounds, say defense experts, and that is fueling a flourishing black market for Western ammunition.
Information on the procurement of such gear is hiding in plain sight: Details of deals — importers, suppliers and product descriptions — can be found online by anyone with access to the Russian internet and a grasp of international customs classification codes.
Anything but bulletproof
In a “declaration of conformity” filed with a Russian government registry and dated August 12, 2022, Promtekhnologiya stated that it planned to sourcea batch of 102,200 Hornady lead bullets for the assembly of “hunting cartridges” used in “civilian weapons with a rifled barrel.” The specifications — .338 Lapua Magnum bullets weighing 285 grains — match those of a product in the Hornady catalog.
A second declaration bearing the same date is for a batch of “uncapped cartridge cases for assembling civilian firearms cartridges” made by Hornady with the same .338 Lapua Magnum specification.
The description is misleading: The .338 Lapua Magnum isn’t a “hunting cartridge;” it’s a high-powered, long-range projectile that was developed by Western militaries in the 1980s and used by their snipers in Iraq and Afghanistan.
Reached by POLITICO, Steve Hornady, CEO of the family company based in Grand Island, Nebraska, denied selling ammunition to Russia in wartime.
“The instant Russia invaded Ukraine, we were done,” Hornady said in a brief telephone call.
Hornady declined at first to elaborate and, when asked to review the evidence, requested that it be sent by fax or courier as he did not use email. He eventually responded after POLITICO sent written requests for comment with supporting documentation by courier.
“We categorically are NOT exporting anything to Russia and have not had an export permit for Russia since 2014,” he replied. “We do not support any sale of our product to any Russian son-of-a-bitch and if we can find out how they acquire, if in fact they do, we will take all steps available to stop it.”
Hornady added that he had contacted the U.S. authorities following POLITICO’s inquiry. He pointed out that current U.S. law required that customers must obtain permission from the Department of Commerce to re-export articles made in the United States. “To the best of our knowledge, none of our customers violate that law,” he said.
Wagner chief Yevgeny Prigozhin, asked which ammunition his troops used, told POLITICO they had “a huge amount of NATO-issue ammunition left over from the Ukrainian army.” In a sarcastic voice message sent to a POLITICO journalist, the Russian warlord also asked for help procuring F-35 combat jets and U.S.-made sniper rifles, machine guns and grenade launchers.
Promtekhnologiya denied filing any customs declarations to import ammunition; said it had no relationship with Hornady; and that it had the capacity to manufacture its own ammunition. The company also said in emailed comments to POLITICO that the Orsis rifle and the ammunition the company makes are intended for “hunting and sporting” purposes and are freely available on the civilian market.
Both Promtekhnologiya and Alexander Zinovyev, listed as the company’s general director in the filings, have been sanctioned by Ukraine, which cites evidence that its Orsis rifles “have been used in Russian military operations in Eastern Ukraine.”
Promtekhnologiya is also in Washington’s sights: “We take any allegation of sanctions violation or evasion seriously and are committed to ensuring that sanctions are fully enforced,” a spokesperson for the National Security Council said in response to a request for comment from POLITICO.
“We have taken steps to hold Russia accountable for its war in Ukraine and have imposed an unprecedented sanctions regime to disrupt Russia’s ability to access funds and weapons that fuel Putin’s war machine. That includes sanctioning companies like Promtekhnologiya.”
Criminal, or wilful, violations of U.S. sanctions can trigger penalties of up to $1 million per violation, as well as up to 20 years’ imprisonment for individuals. Civil penalties can run to the higher of either twice the value of the underlying transaction or around $350,000 per violation.
Describing military-grade ammunition as for hunting or sporting use, as the filings do, amounts to a thinly veiled ruse to evade targeted “smart” sanctions aimed at starving the Russian military of the means to fight the war, said defense analyst Maria Shagina.
“Strictly speaking, smart sanctions are not supposed to target anything civilian to avoid humanitarian collateral damage,” said Shagina, a research fellow at the U.K.-based International Institute for Strategic Studies. “But the targets in authoritarian countries will really exploit this.”
Steve Hornady, CEO of the family company based in Grand Island, Nebraska, denied selling ammunition to Russia in wartime | Leon Neal/Getty Images
Russia reloaded
Another Russian buyer of Hornady ammunition is a company called Tetis, which has disclosed two shipments since Russia’s full-scale invasionof Ukraine beganon February 24, 2022. The most recent was in April for more than 300,000 “units” comprising a wide range of products that checked out with the Hornady catalog.
The main owners of Tetis, Alexander Levandovsky and Sergey Senchenko — who each own stakes of 41.1 percent — have links to the Russian military.
Both were previously listed as shareholders in another company called Kampo, which according to company filings holds licenses to make weapons and military equipment and has done business with the Ministry of Defense and the Special Flight Detachment that operates Putin’s presidential plane.
Although Tetis doesn’t offer Hornady ammo on its website, it does advertise itself as an international distributor for RCBS, a U.S. maker of reloading equipment. This is used to assemble cases, primer, propellants and projectiles into cartridges that can then be fired — as seen in this video posted by a Russian gun enthusiast.
A database check revealed that the most recent declaration of conformity filed by Tetis for RCBS, for electronic weighing scales, predated Russia’s full-scale invasion on February 24 of last year by just over a month.
Russia’s trade bureaucracy allows local firms to vouch for the goods they are importing by filing declarations of conformity, such as those that mention the Hornady products. This means that the supplier listed on the form may not be aware of specific shipments that could have been handled by an intermediary.
Tetis did not respond to an emailed request for comment.
Matt Rice, a spokesman for RCBS owner Vista Outdoor, said Tetis was no longer an international distributor for RCBS. “Following Russia’s invasion of Ukraine, our business made the decision to end all sales of goods with the country,” Rice said in an email, adding that RCBS would remove the listing for Tetis from its website.
Doing the rounds
Hornady ammunition or its components are freely available in Russia, along with other high-end foreign military gear.
Take the “Sniper Shop” on Telegram, an encrypted messaging app that is popular in Russia: It features a current offer for a full range of Hornady products, with the seller inviting buyers to visit a showroom in Sokolniki, a Moscow district, and offering delivery throughout Russia by courier or post. Contacted by POLITICO, the poster confirmed the Hornady ammo was in stock but declined to comment further on how it was sourced.
Then there is “Anton,” who advertises products from Hornady and RCBS on his profile. He also touts gear from Nightforce, maker of thermal optical sights; Lapua, which helped design the eponymous .338 ammo; MDT, a maker of chassis systems, magazines and accessories for rifles; and precision gunsmith AREA 419. All are American with the exception of Lapua, which is based in Finland and owned by a Norwegian company called Nammo.
Western high-end foreign military gear seems to be freely available in Russia | Leon Neal/Getty Images
“Anton” posted an offer for Hornady cartridges last October 24. Contacted via Telegram to ask whether he was still stocking Hornady, he replied: “We don’t do ammunition.”
POLITICO has, in the course of its research, also found declarations from several other Russian companies for ammunition made in Germany, Finland and Turkey.
The thriving black market reflects a structural deficit in Russia’s war economy. Its military-industrial complex can produce good small arms, like the Orsis rifle, but lacks the capacity to churn out the amount of ammunition needed by an army fighting a war across a front stretching hundreds of miles.
“Despite the quality of the rifles produced, a successful hit directly depends on the components used in the cartridges, and they, unfortunately, are imported,” a correspondent lamented in a post on a Russian military news site a few months into the war. Gunpowder produced in Russia lacks stability, the correspondent added, saying this is “unacceptable in the framework of high-precision shooting.”
The continuing access to specialized rifle cartridges made in the West, such as the .338 Lapua Magnum, by a sanctioned Russian small arms manufacturer like Orsis maker Promtekhnologiya is “egregious,” said Gary Somerville, a research fellow at the Royal United Services Institute (RUSI), a British defense think tank.
“At present, there is only one manufacturer of this cartridge in Russia,” he added. “Preventing the shipment of these types of ammunition from Western countries to Russia is an easy win for those seeking to constrain Russia’s ability to wage war in Ukraine.”
Balkan route
It’s not just ammunition from the U.S. that is reaching the battlefront around Bakhmut in eastern Ukraine, recently captured by Prigozhin’s mercenaries after a bloody, months-long battle.
There also appear to be cartridges from the European Union, which has imposed no fewer than 10 rounds of sanctions against Russia in a so-far inconclusive attempt to starve Putin’s war machine of the means to fight on.
Promtekhnologiya has filed four declarations since October covering shipments of 460,000 units described as “Orsis hunting cartridges” — most are of the .338 Lapua Magnum type. These identify a Slovenian company called Valerian as the supplier.
The first of the filings, dated October 13, 2022, includes an air waybill number whose first three digits — 262 — indicate that the shipper was Ural Airlines, a Russian carrier. It was not immediately possible to trace the route of the flight, however.
Valerian was founded on the eve of Russia’s invasion of Ukraine with paid-in capital of €7,500 by Gašper Heybal, who previously worked for U.S. military outfitter Voodoo Tactical. On its home page, Valerian says: “Our goal is to equip you for your mission, whatever it might be, and wherever you are going.”
In online posts over the past decade — including on a Facebook Group called EU Guns with a declared mission of “easier transfer of weapons between European gun owners” — Heybal has done little to dispel the impression that he is an active small arms dealer.
Bakhmut was recently captured by Prigozhin’s mercenaries, the Wagner mercenary group| Olga Maltseva/AFP via Getty Images
The telephone number Heybal shared publicly in those posts is the same as the one for Valerian, which is registered at an address in a village around 40 minutes’ drive southeast of the Slovenian capital Ljubljana.
Reached at that number, Heybal denied that Valerian had shipped ammunition to Russia: “We don’t sell any … firearms or ammunition, and also there is an embargo on Russia,” said Heybal.
In a follow-up email on the declarations of conformity, Heybal said: “Firstly, we must stress that we do not know, nor do we understand how the name of our company, Valerian d.o.o., appears on the document.”
“Secondly, Valerian is not listed there as a supplier but as the producer, and this is not possible, as we do not produce ammunition. That being said, it still makes absolutely no sense to us as to how our name could appear on it. We are glad you brought this to our attention so we can figure out what is going on.”
A Slovenian diplomat said that, while Valerian had never applied for authorization to export weapons or ammunition to Russia, it had shipped “individual parts” to Kyrgyzstan.
The Central Asian state is one of the countries that the EU has in mind as it discusses an 11th round of measures targeting third countries that are suspected of helping Russia evade sanctions.
“The competent services in the Republic of Slovenia have already initiated the appropriate procedures to investigate the facts concerning the company,” the diplomat told POLITICO, adding that they would verify the possible diversion of goods to the Russian Federation. “Slovenia is firmly committed to supporting Ukraine, we have been supportive of all sanctions packages and especially this anti-circumvention one.”
An official at the European Commission deflected a request for comment, saying the bloc’s member countries were responsible for implementing sanctions. “As this seems like a very specific case, these allegations need to be investigated further by the competent authorities,” the official said.
Sergey Panov reported from Spain, Sarah Anne Aarup from Brussels and Douglas Busvine from Berlin. Additional reporting by Steven Overly in Washington.
Sergey Panov, Sarah Anne Aarup and Douglas Busvine
An estimated 500,000 people marched through downtown Warsaw Sunday afternoon in a huge rally against the ruling Law and Justice (PiS) party, held on the 34th anniversary of the breakthrough election that effectively ended communist rule in Poland.
The march was called by Donald Tusk, former Polish prime minister and former president of the European Council, who is now leading his Civic Platform (PO) party in a bid to defeat PiS in an election due later this year.
“You’re all here because you have just believed we can win,” Tusk told the crowd, which filled Warsaw’s Castle Square. People in the crowd were holding up white-and-red flags and anti-government placards, including the locally famous ones with eight asterisks, denoting the Polish for “f*** PiS.”
“Here’s my pledge to you today: We are going to win this election and hold PiS accountable,” Tusk said.
The rally, which appeared to be the biggest political demonstration in Poland in decades, took place just a few days after PiS-friendly President Andrzej Duda signed off on controversial legislation setting up a special commission to probe Russian influence on Poland’s security. The commission will have vast powers including slapping whoever is found to be making political decisions under Russia’s sway with a 10-year ban from holding public office.
Poland’s opposition has said that the proposed sanctions of the special commission could be used to remove Tusk from politics under trumped-up allegations.
Following criticism in Poland, as well as from the U.S. and the EU, Duda has since moved to blunt the commission’s powers. That would, however, require another vote in the parliament.
Poland is gearing up for what is set to be a close election this fall. According to POLITICO’s Poll of Polls, Tusk’s Civic Platform is currently trailing PiS. But the ruling party does not have enough support to guarantee it a majority in the next parliament.
The standing of PiS in the polls has weakened in 2023 in the wake of double-digit inflation and an economic slowdown. Both are expected to ease later this year, possibly giving the ruling party some room to outdo the opposition and secure an unprecedented third consecutive term in office.
The EU is creating a new sanctions weapon, but is afraid to load it.
After adopting 10 sanctions packages following Russia’s attempted invasion of Ukraine, the EU is now designing a new mechanism to punish countries that enable sanctions evasion. If third countries, for example in Central Asia, fail to comply with Western sanctions against Moscow or can’t explain a sudden rise in trade in banned goods, they would face EU punishment.
The sanctions have so far been effective in curbing direct exports of sanctions from the EU to Russia, according to new research by a group of European experts, while the increase in imports from non-sanctioning countries has substituted no more than a quarter of missing volumes.
But there has been a spike in volumes of certain items previously sold to Russia being exported to neighboring or nearby countries like Turkey, Kazakhstan and Armenia. The evidence here points to the rerouting of popular consumer electronics like cell phones and computers — but microchips that might be of military use may also be slipping through the net.
One recent investigation has, meanwhile, found evidence that sensitive technologies — such as drones and microelectronics — have found their way to Russia through third countries like Kazakhstan with the help of local companies founded by Russian owners.
By putting a gun on the table, the EU hopes more countries will comply.
But that proposal is now being watered down, according to the latest version of the draft proposal, dated Wednesday and seen by POLITICO.
This comes after concerns expressed by several EU countries, including heavy-hitter Germany. They fear such a mechanism would hurt diplomatic relations, and even drive countries into the arms of Russia and China. Rather than hitting the countries that are allowing sanctioned goods to be re-exported to Russia, Berlin is proposing to focus on companies, according to an earlier discussion document dated May 5 and seen by POLITICO.
To win over the skeptics, the European Commission has included more safeguards.
The most recent version of the sanctions proposal sets out a more careful and step-by-step approach before targeting third countries. For example, it classifies such steps as “exceptional, last resort measures.” And, as a latest change to the draft, the Commission would have to demonstrate that “alternative measures taken have been ineffective” before punishing third countries.
This is the second time the Commission has been introducing extra safeguards in the proposal to accommodate countries’ concerns, even though sanctions experts have warned that the threat of the instrument has to be credible enough in order for it to work.
The anti-circumvention ban is not the only outstanding issue. Greece and Hungary are still holding out over Ukraine listing some of their companies as “war sponsors.” Athens and Budapest want some of their companies struck off this list before they will agree to the sanctions package.
EU countries now hope to get a deal on the package done next week, three EU diplomats said. There will be consultations ahead of the next discussion by EU envoys on June 7. “An agreement is within reach,” said one of them, while adding that the exact timing is “still hard to predict.”
HIROSHIMA, Japan — As the leaders of the Group of Seven gather for their annual summit in Japan this week, three world-changing conflicts — past, present and potential — will converge.
The atomic bomb that ended World War II destroyed much of the city of Hiroshima, where the leaders will meet. Today, Russia’s war in Ukraine is costing thousands of lives and billions of dollars as it drags on. And then there’s the risk of another horrifying catastrophe to come, as China threatens Taiwan.
And it’s over China where the alliance may come unstuck.
For hawks like the U.S. and Japan, the summit beginning Friday offers a timely opportunity to make the case to Europe’s leaders directly that it’s time to get off the fence when it comes to confronting China.
“This G7 Summit will be an appropriate venue to also discuss security issues and our security cooperation not only in Europe, but also in the Indo-Pacific region,” Noriyuki Shikata, cabinet secretary at the Japanese prime minister’s office, told POLITICO.
The U.S. is betting on at least the appearance of common ground with allies about the People’s Republic of China. Ahead of the summit, U.S. National Security Council spokesperson John Kirby told reporters: “You can expect to hear at the end of those discussions that all the G7 leaders are of a common mind about how to deal with the challenges that the PRC presents.”
But — beyond the inevitably bland diplomatic lines of a summit communique — getting consensus on meaningful security measures for the Indo-Pacific region will be hard, even in the symbolic setting of Hiroshima.
East Asia is again descending into a state of growing security risks and military imbalance, this time due to China’s aggressive moves against Taiwan and the South China Sea.
“There’s a feeling that there’s a little bit of a gap, perhaps, between where the Europeans are on some China issues and where the U.S. is,” said Zack Cooper, former aide to the U.S. National Security Council and a senior fellow at the American Enterprise Institute.
Chief among the points of tension is how far to go in trying to stop a potential Chinese invasion of Taiwan, which could trigger world war and wreck the global economy. The self-governing island, which Beijing claims as its own, provides most of the world’s advanced computer chips that are vital to the tech and defense industries. Not all European governments are convinced it’s something they need to prioritize. “It’s going to be a continuing challenge,” Cooper said.
Picking friends
NATO is set to extend its footprint in Asia and set up a new liaison office in Tokyo to better coordinate with regional partners, such as Australia, South Korea and New Zealand.
However, French President Emmanuel Macron has repeatedly called on NATO to focus only on the Euro-Atlantic theater, saying Asia — China — is not covered geographically. He also triggered an outcry with recent comments to POLITICO, suggesting that Taiwan’s security was not Europe’s fight, and that the EU should not automatically follow America’s lead.
Justin Trudeau comes to the G7 following months of intelligence leaks that have painted his government as weak on foreign interference | Yuchi Yamazaki/AFP via Getty Images
Macron’s stance sets France — which is the EU’s biggest military power — apart from the U.S. and Japan, and also from the U.K., where Prime Minister Rishi Sunak is expected to announce a new security deal with Japan during his visit.
“Ukraine today could be East Asia tomorrow,” Japanese Prime Minister Fumio Kishida said last year, not long after Russia’s full-scale invasion began. Last week, Japan’s Foreign Minister Yoshimasa Hayashi made an even more explicit warning in a speech made to his 27 EU counterparts in Sweden.
“China is continuing and intensifying its unilateral attempts to change the status quo by force in the East and South China Seas. China is also increasing its military activities around Taiwan,” Hayashi said. “In addition, China and Russia are strengthening their military collaboration, including joint flights of their bombers and joint naval exercises in the vicinity of Japan.”
The Chinese-Russian ties will be part of the G7 leaders’ discussions, according to two officials involved in the process, who spoke on condition of anonymity because summit preparations are not public. While the Chinese authorities stop short of openly arming Russia in its war against Ukraine, a long-term strategic partnership between Beijing and Moscow is unshakable for President Xi Jinping.
G7 countries such as the U.S. and Japan are expected to raise the need to sanction countries that work around Western trade restrictions on Russia, according to the officials. Chinese companies found to be selling dual use goods to Russia would be a top focus.
Bully tactics
China’s willingness to throw around its economic weight is one area where there’s likely to be more unity between G7 allies.
The need to fight back against economic coercion will take center stage at the summit. The EU, U.S., Canada and Japan are going to rally around calls to combat China’s use of its economic power to bully smaller economies that act against its political interests.
“The sense of urgency and unity is a force factor in and of itself. For example, never before has the G7 addressed economic coercion,” Rahm Emanuel, the U.S. ambassador to Japan, told POLITICO.
“When measured against the recent past, the G7 and EU are more strategically aligned in key economic and military matters,” added Emanuel, who served as chief of staff to former U.S. President Barack Obama.
When it comes to the European view, EU Commission President Ursula von der Leyen is clear that the bloc is “competing with China” and will need to up its game. “We will reduce strategic dependencies — we have learned the lessons of the last year,” she said in a press conference ahead of the trip.
Justin Trudeau, the Canadian prime minister, comes to the G7 following months of intelligence leaks that have painted his government as weak on foreign interference, specifically from China. He’ll be carrying Canada’s message that it can be a safe, non-authoritarian alternative to Russia and China for supplying critical minerals and energy, including nuclear power.
Despite the toughening rhetoric on China, what still unites the G7 countries is an eagerness not to shut the door on talks with Beijing.
US President Joe Biden arrives to attend the G7 Summit in Hiroshima on May 18, 2023 | Brendan Smialowski/AFP via Getty Images
The Biden administration has for months been seeking to secure a visit to China for top Cabinet members, such as Treasury Secretary Janet Yellen. Biden’s national security adviser, Jake Sullivan, held eight hours of talks with the Chinese Communist Party’s foreign policy chief, Wang Yi, this month.
Just before he left for Japan on Wednesday, U.S. President Joe Biden was asked whether his last-minute decision to truncate his trip abroad could be seen as “almost a win for China.” Instead of staying in the region for a summit of the Quad — Japan, India, the U.S. and Australia — Biden plans to return to Washington Sunday to deal with domestic issues.
The president downplayed the move as something China could use to its advantage, noting he will still meet with Quad nation leaders in Japan. “We get a chance to talk separately at the meeting,” he said
Then, Biden was asked whether he has plans to speak with the Chinese president soon.
“Whether it’s soon or not, we will be meeting,” he said, before leaving the room.
Cristina Gallardo in London and Zi-Ann Lum in Ottawa contributed reporting.
BRUSSELS — The EU’s high command is calling on European governments to keep talking to China amid deepening tensions between Washington and Beijing.
The European Union’s diplomatic arm wants member countries to “be prepared” for a potentially critical escalation in the crisis over Taiwan, warning that a military conflict would upend the vital supply of microchips to Europe.
But while there’s a need to reduce risks to Europe, it may not seal itself off from China, according to an internal document drafted by the European External Action Service and seen by POLITICO.
The document, which will be discussed by the bloc’s foreign ministers at a gathering in Stockholm on Friday, comes at a crucial time for the EU as it navigates an increasingly complex relationship with China. The U.S. is doubling down on its hawkish stance toward Beijing, while European leaders have not yet agreed on a unified approach.
The paper triggered immediate backlash from some of Europe’s more hawkish governments. “With all possible alarm lights flashing, we seem to prefer hitting a snooze button again,” one senior EU diplomat said on condition of anonymity in order to discuss sensitive issues.
In the document, prepared by the EU executive’s diplomatic officials, the bloc’s 27 member countries are urged to seize “a window of opportunity” to reduce the risk of China’s growing influence over economic and security matters.
A chance remains for Europe to speak directly to President Xi Jinping’s government, the paper says. “China and Europe cannot become more foreign to each other. Otherwise there is a risk that misunderstandings will grow and spread to other areas,” according to the draft.
“Systemic rivalry may feature in almost all areas of engagement. But this must not deter the EU from maintaining open channels of communication and seeking constructive cooperation with China […] Such cooperation can serve to break through a growing self-induced isolation of the Chinese leadership but most importantly should advance the EU’s core interests,” the paper continued.
Friday’s debate at an informal meeting of foreign ministers in Sweden will fire the starting gun on a discussion over the EU’s relationship with China that is expected to dominate policymaking in the coming months, with a more comprehensive debate expected at an EU leaders’ summit in Brussels this June.
De-risking Beijing
The paper calls on member countries to speed up plans for “de-risking” and reducing overdependence on China.
“De-risking can ensure predictability and transparency in our economic and trade relations, while promoting a secure, rules-based approach,” the paper says.
The call for de-risking comes as Beijing appears increasingly impatient with the narrative that it poses a threat to the West. Chinese Foreign Minister Qin Gang, speaking in Berlin this week, criticized European politicians for attempting to “get rid of China” in the name of de-risking.
The paper also tackles the politically sensitive issue of Taiwan, with ministers due to discuss this issue as well on Friday. French President Emmanuel Macron told POLITICO in an interview last month that Europe should avoid getting dragged into a confrontation between China and the U.S. over the self-governing island, which Beijing claims as its own.
On Taiwan, the paper says: “The EU is […] adamant that any unilateral change of the status quo and use of force could have massive economic, political and security consequences, at global level, especially considering Taiwan’s primary role as supplier of the most advanced semiconductors.”
The document continues: “The EU needs to be prepared for scenarios in which tensions increase significantly. The risk of escalation in the Taiwan Strait clearly shows the necessity to work with partners to deter the erosion of the status quo in the interest of all.”
Some 90 percent of advanced semiconductors imported into the EU come from Taiwan, according to the bloc’s own estimates.
Taiwan’s semiconductor giant TSMC has been under pressure to relocate some of its manufacturing capabilities, but so far it has only moved in the direction of Taiwan’s two presumed security providers — the U.S. and Japan.
On Ukraine, the EU is not impressed with China’s latest diplomatic show, marked by President Xi Jinping’s belated first call with his Ukrainian counterpart Volodymyr Zelenskyy.
“China’s ’12-point position paper on the Ukraine Crisis’ […] confirms its firmly pro-Russian stance,” the document said. “Direct dialogue between China and Ukraine would be the best opportunity for China to contribute to a fair political settlement,” it continued.
EU member countries should keep warning Beijing to refrain from supporting Russia, including by circumventing sanctions, the same paper added.
The paper also casts gloom on the outlook for China’s domestic development, saying the Asian superpower “is likely to face unprecedented economic and political challenges internally” due to the deceleration of economic growth and demographic change.
Washington — The Biden administration announced new sanctions Thursday targeting Russia’s security service and Iran’s elite military intelligence unit, along with four of its leaders, in an effort to hold them accountable for taking American hostages and wrongfully detaining U.S. citizens.
“These actors in Russia and Iran have tried to use Americans for political leverage, or to seek concessions from the United States. These actions threaten the stability and integrity of the international political system. They also threaten the safety of U.S. nationals and other persons abroad,” a senior administration officials told reporters.
Officials said the sanctions target Russia’s Federal Security Service (FSB) and Iran’s elite Islamic Revolutionary Guard Corps (IRGC), and are meant to “promote accountability for culprits” and “prevent and deter” future wrongful detentions. They said the FSB and IRGC have been involved in and ordered the arrests of Americans who have been wrongfully detained.
President Biden signed an executive order last year to strengthen the tools the administration can use to secure the release of Americans held abroad. The sanctions announced Thursday are the first such penalties imposed under that order, officials said.
The officials, who previewed the sanctions on condition of anonymity, stressed that the sanctions have been in the works since last year and were not prompted by any specific case, including the recent detention of Wall Street Journal reporter Evan Gershkovich.
Gershkovich was arrested in Russia last month and charged with spying, an accusation the U.S. has denounced as bogus. Within days, the State Department formally declared that he was being wrongfully detained, a step that requires the government to work to free him.
In a full-page ad in the Wall Street Journal, Washington Post and New York Times on Thursday, leaders of the three news organizations called for the U.S. government, the president and the White House to support efforts to secure his release.
“As editors and publishers of some of America’s largest news organizations, we are united in calling for his immediate release. Reporting is not a crime,” the ad said.
Family members of another detainee held in Russia, Paul Whelan, have become increasingly frustrated as they have watched the government swap Russian prisoners in the U.S. for other Americans who have been wrongfully detained in Russia. Whelan remains imprisoned on espionage charges.
In a recent email update, Whelan’s brother David urged the U.S. government to “come up with something more than thoughts and prayers” to bring him home.
“Perhaps the White House does know what it might take to the get the job done but they are reluctant to cross what they see as some red line,” Whelan’s sister Elizabeth recently said.
The family of Emad Shargi, an American-Iranian dual citizen who has been wrongfully detained in Iran since 2018, have asked Mr. Biden to “do anything” in his power to bring Shargi home.
BRUSSELS — Just when you thought Europe’s China policy could not be more disunited, the two most powerful countries of the European Union are now also at odds over whether to revive a moribund investment agreement with the authoritarian superpower.
For France, resuscitating the so-called EU-China Comprehensive Agreement on Investment (CAI) is “less urgent” and “just not practicable,” according to French President Emmanuel Macron.
Meanwhile, German Chancellor Olaf Scholz is in favor of “reactivating” the agreement, which stalled soon after it was announced in late 2020 after Beijing imposed sanctions on several members of the European Parliament for criticizing human rights violations.
Speaking to POLITICO aboard his presidential plane during a visit to China earlier this month, Macron said he and Chinese leader Xi Jinping discussed the CAI, “but just a little bit.”
“I was very blunt with President Xi, I was very honest, as far as this is a European process — all the institutions need to be involved, and there is no chance to see any progress on this agreement as long as we have members of the European Parliament sanctioned by China,” Macron told POLITICO in English.
Beijing has proved skilled at preventing the EU from developing a unified China policy, using threats ranging from potential bans on French and Spanish wine to warnings that China will buy American Boeing instead of French Airbus planes.
Disagreement over the CAI is only one further example of divergence over China policy in Europe, where Beijing has expertly courted various countries and played them against each other in games of divide-and-rule over the past decade.
Merkel sought to seal the deal and ingratiate herself with Beijing before Washington could apply pressure to block it, causing tension with the incoming administration of U.S. President Joe Biden.
Germany has long been the most vocal cheerleader for the CAI due to its scale of manufacturing investments in China, particularly in the car-making and chemicals sectors.
The CAI would have made it marginally easier for European companies to invest in China and protect their intellectual property there. But critics decried weak worker protections and questioned to what degree it could be enforced.
Xi Jinping during Macron’s visit to Beijing | Ludovic Marin/AFP via Getty Images
Soon after the agreement was announced, Beijing imposed sanctions on several European parliamentarians in retaliation for their criticism of human rights abuses in the restive region of Xinjiang.
The deal, which requires ratification by the European parliament, went into political deep freeze.
Scholz, who at times seems to mimic the more popular Merkel, would like to take CAI “out of the freezer” — but has cautioned that “this must be done with care” to avoid political pitfalls, according to a person he briefed directly but who was not authorized to comment publicly.
“It is surprising Scholz still thinks this is a good idea, despite the vastly changed context from a couple of years ago,” said one senior EU official, who spoke on condition of anonymity to freely discuss sensitive diplomatic issues.
EU branches split
Not only are EU countries divided on how to approach CAI — there’s also a rift among institutions in Brussels.
With its members sanctioned, the European Parliament is certain to reject any fresh attempt to ratify the CAI.
But like Scholz, European Council President Charles Michel also hopes to resuscitate the deal. He has discussed this with Chinese communist leaders, including during his solo visit to Beijing late last year, according to a senior EU official familiar with the matter who was not authorized to speak publicly.
European Commission President Ursula von der Leyen, however, has stymied Michel’s attempts to place the agreement back on the agenda in Brussels. Von der Leyen is far more skeptical of engaging with China, citing increasing aggression abroad and repression at home.
Von der Leyen accompanied Macron on part of his China trip earlier this month, but said of her brief meeting with Xi Jinping and other Chinese officials that the topic of CAI “did not come up.” She has publicly argued that the deal needs to be “reassessed” in light of deteriorating relations between Beijing and the West.
Meanwhile, Chinese officials have made overtures to Michel and other sympathetic European leaders, suggesting China could unilaterally lift its sanctions on members of the European Parliament — but only with a “guarantee” the CAI would eventually be ratified.
A spokesperson for Michel said an informal meeting of EU foreign ministers will discuss EU-China relations on May 12. “Following that discussion we will then assess when the topic of China is again put on the table of the European Council,” he said.
During the same interview with POLITICO, Macron caused consternation in Western capitals when he said Europe should not follow America, but instead avoid confronting China over its stated goal of seizing the democratic island of Taiwan by force.
Manfred Weber, head of the center-right European People’s Party, the largest party in the European Parliament, described the French president’s comments as “a disaster.”
In an an interview with Italian media, he said that the remarks had “weakened the EU” and “made clear the great rift within the European Union in defining a common strategic plan against Beijing.”
Oil and gas giant Shell must donate more than $1 billion in unexpected profits from the potential sale of its assets in Russia to help rebuild Ukraine, according to a top Kyiv official.
In a letter to CEO Wael Sawan, dated April 18 and seen by POLITICO, Ukrainian President Volodymyr Zelenskyy’s economic adviser Oleg Ustenko called on Shell to share with Ukraine any profits from a potential Russian buyout of the British firm’s stake in a Siberian fossil fuel venture.
“If completed, this sale would represent the transfer of more than $1 billion in Russian cash into Shell’s accounts. That would be blood money, pure and simple,” Ustenko wrote.
“We call on Shell to put any Russian sale or dividend proceeds to work for the victims of the war — the same war that those assets have fuelled and funded,” he added.
Following the full-scale invasion of Ukraine last year, Shell announced it would exit the Russian market and write off up to $5 billion of assets and investments in the country as a result.
That included a 27.5 percent stake in the Sakhalin-2 project, a major oil field and offshore gas drilling venture in the Russian far east. The company wrote down around $1.6 billion for its stake in the site, and the Kremlin’s move to nationalize the venture in July last year raised concerns the firm would lose its capital.
However, Russian business media reported earlier this week that the government signed off on a trade in which the country’s second-largest gas producer, Novatek, would buy out Shell’s stake for 95 billion rubles — currently worth around $1.16 billion. Shell has previously said it is not involved in any negotiations on the issue.
Shell declined to give a public comment, but pointed out that the company is not actively engaged in any business with ongoing operations inside Russia, is not party to any current negotiations for the sale of a stake in Sakhalin-2 and has no clarity over what would happen to the proceeds from such a sale.
“We appreciate that as of this moment, Shell may not have a choice on whether to accept this offer,” Ustenko conceded in the letter, but maintained there is an “overwhelming” moral case for donating any such profits.
Rebuilding from the rubble
According to NGO Global Witness, the funds would amount to more than a tenth of the total repair bill for attacks on Ukraine’s energy infrastructure, which a U.N. report last week warned could be as high as $10 billion.
“It would be egregious if Shell kept this money,” said Louis Wilson, who leads Ukraine policy at the NGO. “This is money they’ve told the world they’ve written off as a loss and it’s money that comes straight from the Russian oil and gas sector. Shell has already set a precedent that profits from the war should go to Ukraine.”
In March 2022, the energy firm said it would donate $60 million to humanitarian causes in Ukraine following an outcry over its decision to purchase a cargo of Russian crude to be refined into petroleum products. While the trade did not contravene sanctions at the time, Shell admitted “it was not the right decision” and apologized.
In an interview with POLITICO last month, Ukrainian Energy Minister German Galushchenko urged major energy companies to donate excess revenues to his country.
“A lot of energy companies get enormous windfall profits due to the war,” he said. “I think it would be fair to share this money with Ukraine. To help us to restore, to rebuild the energy sector.”
That idea is getting some support from EU countries — although the final decision of whether to send cash to Ukraine is up to companies and their shareholders.
BRUSSELS — China and other powerful countries need to step up to help steer the world away from a potentially “catastrophic” hunger crisis this year, the new head of the United Nations’ World Food Programme said.
Cindy McCain, an American diplomat and the widow of the late U.S. Senator John McCain, also told POLITICO that the EU and U.S. should see world hunger as a national security issue due to its impact on migration. She furthermore accused Russia of using hunger as a “weapon of war” by hindering exports of Ukrainian grain.
McCain, formerly the U.S. ambassador to the U.N. food agencies, took the helm of the WFP on April 5 and begins her five-year term at a time of increasing world hunger. The number of people facing food insecurity around the world rose to a record 345 million at the end of last year, up from 282 million in 2021, according to the WFP’s figures, as Russia’s war in Ukraine deepened a food crisis driven by climate change, COVID-19 and other conflicts.
This year could be worse still, McCain warned, with the Horn of Africa experiencing its worst drought in 40 years and Haiti facing a sharp rise in food insecurity, among other factors. “2023 is going to be catastrophic if we don’t get to work and raise the money that we need,” she said. “We need a hell of a lot more than we used to.”
Non-Western countries, which have traditionally contributed much less to the WFP, need to step up to meet the shortfall, McCain said, pointing specifically to China and oil-rich Gulf Arab countries. China contributed just $11 million to WFP funds last year, compared to $7.2 billion donated by the U.S.
“There are some countries that have just basically not participated or participated in a very low fashion. I’d like to encourage our Middle Eastern friends to step up to the plate a little more; I’d like to encourage China to step up to the plate a little more,” said McCain. “Every region, every country needs to step up funding.”
Her entreaty may fall on deaf ears, however, given rising geopolitical tensions between the U.S. and China. The WFP’s last six executive directors have been American, dating back to 1992, and Beijing may prefer to distribute aid through its own channels. Last summer, for example, China shipped food aid directly to the Horn of Africa following a drought there.
National security
Countries hesitant to throw more money into food aid should think about the alternative, McCain said, particularly those in Europe that are likely to bear the brunt of any new wave of migration from Africa and the Middle East.
“Food security is a national security issue,” she said. “No refugee wants to leave their home country, but they’re forced to because they don’t have enough food, and they can’t feed their families. So it comes down to if you want a stable world, food is a major player in this.”
The WFP is already having to make brutal decisions despite raking in a record $14.2 billion last year — more than double what it raised in 2017. In February, for instance, it said a funding shortfall was forcing it to cut food rations for Rohingya refugees living in camps in Bangladesh.
The problem is compounded by surging costs following Russia’s invasion of Ukraine last year, which sent already-high food prices soaring further, as grain and oilseed exports through Ukraine’s Black Sea ports plunged from more than 5 million metric tons a month to zero.
A U.N.-brokered deal allowing Ukrainian grain exports to pass through Russia’s blockades in the Black Sea has brought some reprieve, but Moscow’s repeated threats to withdraw from the agreement have kept prices volatile.
Moscow claims that “hidden” Western sanctions are hindering its fertilizer and foods exports and causing hunger in the Global South | Yasuyoshi Chiba/AFP via Getty Images
The deal, initially brokered in July last year, was extended for 120 days last month; Russia, however, agreed to extend its side of the Black Sea grain initiative only for 60 days. Last week, Russian Foreign Minister Sergey Lavrov threatened, once again, to halt Moscow’s participation in the initiative unless obstacles to its own fertilizer and food exports are addressed.
Moscow claims that “hidden” Western sanctions — those targeting Russia’s fertilizer oligarchs and its main agricultural bank, as well as others excluding Russian banks from the international SWIFT payments system — are hindering its fertilizer and foods exports and causing hunger in the Global South.
Ukraine and its Western allies have countered that Russia is deliberately holding up inspections for ships heading to and from its Black Sea ports, creating a backlog of Ukraine-bound vessels off the Turkish coast and inflating prices.
These delayed food cargoes are hindering the WFP’s ability to respond to humanitarian crises, said McCain, who did not hold back on the issue.
“Let’s be very clear, there are no sanctions on [Russian] fertilizer,” she said. “It is not sanctioned and never has been sanctioned.”
Russia is “using hunger as a weapon of war,” said McCain. “it’s unconscionable that a country would do that — any country, not just Russia.”
Ukraine’s farmers played an iconic role in the first weeks of Russia’s invasion, towing away abandoned enemy tanks with their tractors.
Now, though, their prodigious grain output is causing some of Ukraine’s staunchest allies to waver, as disrupted shipments are redirected onto neighboring markets.
The most striking is Poland, which has played a leading role so far in supporting Ukraine, acting as the main transit hub for Western weaponry and sending plenty of its own. But grain shipments in the other direction have irked Polish farmers who are being undercut — just months before a national election where the rural vote will be crucial.
Diplomats are floundering. After a planned Friday meeting between the Polish and Ukrainian agriculture ministers was postponed, the Polish government on Saturday announced a ban on imports of farm products from Ukraine. Hungary late Saturday said it would do the same.
Ukraine is among the world’s top exporters of wheat and other grains, which are ordinarily shipped to markets as distant as Egypt and Pakistan. Russia’s invasion last year disrupted the main Black Sea export route, and a United Nations-brokered deal to lift the blockade has been only partially effective. In consequence, Ukrainian produce has been diverted to bordering EU countries: Hungary, Poland, Romania and Slovakia.
At first, those governments supported EU plans to shift the surplus grain. But instead of transiting seamlessly onto global markets, the supply glut has depressed prices in Europe. Farmers have risen up in protest, and Polish Agriculture Minister Henryk Kowalczyk was forced out earlier this month.
Now, governments’ focus has shifted to restricting Ukrainian imports to protect their own markets. After hosting Ukrainian President Volodymyr Zelenskyy in Warsaw in early April, Polish President Andrzej Duda said resolving the import glut was “a matter of introducing additional restrictions.”
The following day, Poland suspended imports of Ukrainian grain, saying the idea had come from Kyiv. On Saturday, Polish Prime Minister Mateusz Morawiecki, after an emergency cabinet meeting, said the import ban would cover grain and certain other farm products and would include products intended for other countries. A few hours later, the Hungarian government announced similar measures. Both countries said the bans would last until the end of June.
The European Commission is seeking further information on the import restrictions from Warsaw and Budapest “to be able to assess the measures,” according to a statement on Sunday. “Trade policy is of EU exclusive competence and, therefore, unilateral actions are not acceptable,” it said.
While the EU’s free-trade agreement with Ukraine prevents governments from introducing tariffs, they still have plenty of tools available to disrupt shipments.
Neighboring countries and nearby Bulgaria have stepped up sanitary checks on Ukrainian grain, arguing they are doing so to protect the health of their own citizens. They have also requested financial support from Brussels and have already received more than €50 million from the EU’s agricultural crisis reserve, with more money on the way.
Restrictions could do further harm to Ukraine’s battered economy, and by extension its war effort. The economy has shrunk by 29.1 percent since the invasion, according to statistics released this month, and agricultural exports are an important source of revenue.
Cracks in the alliance
The trade tensions sit at odds with these countries’ political position on Ukraine, which — with the exception of Hungary — has been strongly supportive. Poland has taken in millions of Ukrainian refugees, while weapons and ammunition flow in the opposite direction; Romania has helped transport millions of tons of Ukrainian corn and wheat.
Volodymyr Zelenskyy and Poland’s Prime Minister, Mateusz Morawiecki | Omar Marques/Getty Images
Some Western European governments, which had to be goaded by Poland and others into sending heavy weaponry to Kyiv, are quick to point out the change in direction.
“Curious to see that some of these countries are [always] asking for more on sanctions, more on ammunition, etc. But when it affects them, they turn to Brussels begging for financial support,” said one diplomat from a Western country, speaking on condition of anonymity.
Some EU countries also oppose the import restrictions for economic reasons. For instance, Spain and the Netherlands are some of the biggest recipients of Ukrainian grain, which they use to supply their livestock industries.
Politically, though, the Central and Eastern European governments have limited room for maneuver. Poland and Slovakia are both heading into general elections later this year. Bulgaria has had a caretaker government since last year. Romania’s agriculture minister has faced calls to resign, including from a compatriot former EU agriculture commissioner.
And farmers are a strong constituency. Poland’s right-wing Law & Justice (PiS) party won the last general election in 2019 thanks in large part to rural voters. The Ukrainian grain issue has already cost a Polish agriculture minister his job; the government as a whole will have to tread carefully to avoid the same fate.
For Turkey’s President Recep Tayyip Erdoğan, next month’s election is of massive historical significance.
It falls 100 years after the foundation of Mustafa Kemal Atatürk’s secular republic and, if Erdoğan wins, he will be empowered to put even more of his stamp on the trajectory of a geostrategic heavyweight of 85 million people. The fear in the West is that he will see this as his moment to push toward an increasingly religiously conservative model, characterized by regional confrontationalism, with greater political powers centered around himself.
The election will weigh heavily on security in Europe and the Middle East. Who is elected stands to define: Turkey’s role in the NATO alliance; its relationship with the U.S., the EU and Russia; migration policy; Ankara’s role in the war in Ukraine; and how it handles tensions in the Eastern Mediterranean.
The May 14 vote is expected to be the most hotly contested race in Erdoğan’s 20-year rule — as the country grapples with years of economic mismanagement and the fallout from a devastating earthquake.
He will face an opposition aligned behind Kemal Kılıçdaroğlu, nicknamed the “Turkish Gandhi,” who is promising big changes. Polls suggest Kılıçdaroğlu has eked out a lead, but Erdoğan is a hardened election campaigner, with the full might of the state and its institutions at his back.
“There will be a change from an authoritarian single-man rule, towards a kind of a teamwork, which is a much more democratic process,” Ünal Çeviköz, chief foreign policy adviser to Kılıçdaroğlu told POLITICO. “Kılıçdaroğlu will be the maestro of that team.”
Here are the key foreign policy topics in play in the vote:
EU and Turkish accession talks
Turkey’s opposition is confident it can unfreeze European Union accession talks — at a standstill since 2018 over the country’s democratic backsliding — by introducing liberalizing reforms in terms of rule of law, media freedoms and depoliticization of the judiciary.
The opposition camp also promises to implement European Court of Human Rights decisions calling for the release of two of Erdoğan’s best-known jailed opponents: the co-leader of the pro-Kurdish Peoples’ Democratic Party Selahattin Demirtaş and human rights defender Osman Kavala.
“This will simply give the message to all our allies, and all the European countries, that Turkey is back on track to democracy,” Çeviköz said.
Even under a new administration, however, the task of reopening the talks on Turkey’s EU accession is tricky.
Turkey’s opposition is aligned behind Kemal Kılıçdaroğlu, nicknamed the “Turkish Gandhi” | Burak Kara/Getty Images
Anti-Western feeling in Turkey is very strong across the political spectrum, argued Wolfango Piccoli, co-founder of risk analysis company Teneo.
“Foreign policy will depend on the coherence of the coalition,” he said. “This is a coalition of parties who have nothing in common apart from the desire to get rid of Erdoğan. They’ve got a very different agenda, and this will have an impact in foreign policy.”
“The relationship is largely comatose, and has been for some time, so, they will keep it on life support,” he said, adding that any new government would have so many internal problems to deal with that its primary focus would be domestic.
Europe also seems unprepared to handle a new Turkey, with a group of countries — most prominently France and Austria — being particularly opposed to the idea of rekindling ties.
“They are used to the idea of a non-aligned Turkey, that has departed from EU norms and values and is doing its own course,” said Aslı Aydıntaşbaş a visiting fellow at Brookings. “If the opposition forms a government, it will seek a European identity and we don’t know Europe’s answer to that; whether it could be accession or a new security framework that includes Turkey.”
“Obviously the erosion of trust has been mutual,” said former Turkish diplomat Sinan Ülgen, a senior fellow at the Carnegie Europe think tank, arguing that despite reticence about Turkish accession, there are other areas where a complementary and mutually beneficiary framework could be built, like the customs union, visa liberalization, cooperation on climate, security and defense, and the migration agreement.
The opposition will indeed seek to revisit the 2016 agreement with the EU on migration, Çeviköz said.
“Our migration policy has to be coordinated with the EU,” he said. “Many countries in Europe see Turkey as a kind of a pool, where migrants coming from the east can be contained and this is something that Turkey, of course cannot accept,” he said but added. “This doesn’t mean that Turkey should open its borders and make the migrants flow into Europe. But we need to coordinate and develop a common migration policy.”
NATO and the US
After initially imposing a veto, Turkey finally gave the green light to Finland’s NATO membership on March 30.
But the opposition is also pledging to go further and end the Turkish veto on Sweden, saying that this would be possible by the alliance’s annual gathering on July 11. “If you carry your bilateral problems into a multilateral organization, such as NATO, then you are creating a kind of a polarization with all the other members of NATO with your country,” Çeviköz said.
A protester pushes a cart with a RRecep Tayyip Erdoğan doll during an anti-NATO and anti-Turkey demonstration in Sweden | Jonas Gratzer/Getty Images
A reelected Erdoğan could also feel sufficiently empowered to let Sweden in, many insiders argue. NATO allies did, after all, play a significant role in earthquake aid. Turkish presidential spokesperson İbrahim Kalın says that the door is not closed to Sweden, but insists the onus is on Stockholm to determine how things proceed.
Turkey’s military relationship with the U.S. soured sharply in 2019 when Ankara purchased the Russian-made S-400 missile system, a move the U.S. said would put NATO aircraft flying over Turkey at risk. In response, the U.S. kicked Ankara out of the F-35 jet fighter program and slapped sanctions on the Turkish defense industry.
A meeting in late March between Kılıçdaroğlu and the U.S. Ambassador to Ankara Jeff Flake infuriated Erdoğan, who saw it as an intervention in the elections and pledged to “close the door” to the U.S. envoy. “We need to teach the United States a lesson in this elections,” the irate president told voters.
In its policy platform, the opposition makes a clear reference to its desire to return to the F-35 program.
Russia and the war in Ukraine
After the Russian invasion of Ukraine, Turkey presented itself as a middleman. It continues to supply weapons — most significantly Bayraktar drones — to Ukraine, while refusing to sanction Russia. It has also brokered a U.N. deal that allows Ukrainian grain exports to pass through the blockaded Black Sea.
Highlighting his strategic high-wire act on Russia, after green-lighting Finland’s NATO accession and hinting Sweden could also follow, Erdoğan is now suggesting that Turkey could be the first NATO member to host Russian President Vladimir Putin.
“Maybe there is a possibility” that Putin may travel to Turkey on April 27 for the inauguration of the country’s first nuclear power reactor built by Russian state nuclear energy company Rosatom, he said.
Çeviköz said that under Kılıçdaroğlu’s leadership, Turkey would be willing to continue to act as a mediator and extend the grain deal, but would place more stress on Ankara’s status as a NATO member.
“We will simply emphasize the fact that Turkey is a member of NATO, and in our discussions with Russia, we will certainly look for a relationship among equals, but we will also remind Russia that Turkey is a member of NATO,” he said.
Turkey’s relationship with Russia has become very much driven by the relationship between Putin and Erdoğan and this needs to change, Ülgen argued.
Turkey brokered a U.N. deal that allows Ukrainian grain exports to pass through the blockaded Black Sea | Ozan Kose/AFP via Getty Images
“No other Turkish leader would have the same type of relationship with Putin, it would be more distant,” he said. “It does not mean that Turkey would align itself with the sanctions; it would not. But nonetheless, the relationship would be more transparent.”
Syria and migration
The role of Turkey in Syria is highly dependent on how it can address the issue of Syrians living in Turkey, the opposition says.
Turkey hosts some 4 million Syrians and many Turks, battling a major cost-of-living crisis, are becoming increasingly hostile. Kılıçdaroğlu has pledged to create opportunities and the conditions for the voluntary return of Syrians.
“Our approach would be to rehabilitate the Syrian economy and to create the conditions for voluntary returns,” Çeviköz said, adding that this would require an international burden-sharing, but also establishing dialogue with Damascus.
Erdoğan is also trying to establish a rapprochement with Syria but Syrian President Bashar al-Assad says he will only meet the Turkish president when Ankara is ready to completely withdraw its military from northern Syria.
“A new Turkish government will be more eager to essentially shake hands with Assad,” said Ülgen. “But this will remain a thorny issue because there will be conditions attached on the side of Syria to this normalization.”
However, Piccoli from Teneo said voluntary returns of Syrians was “wishful thinking.”
“These are Syrians who have been living in Turkey for more than 10 years, their children have been going to school in Turkey from day one. So, the pledges of sending them back voluntarily, it is very questionable to what extent they can be implemented.”
Greece and the East Med
Turkey has stepped up its aggressive rhetoric against Greece in recent months, with the Erdoğan even warning that a missile could strike Athens.
But the prompt reaction by the Greek government and the Greek community to the recent devastating earthquakes in Turkey and a visit by the Greek Foreign Minister Nikos Dendias created a new backdrop for bilateral relations.
A Turkish drill ship before it leaves for gas exploration | Adem Altan/AFP via Getty Images
Dendias, along with his Turkish counterpart Mevlüt Çavuşoğlu, announced that Turkey would vote for Greece in its campaign for a non-permanent seat in the United Nations Security Council for 2025-26 and that Greece would support the Turkish candidacy for the General Secretariat of the International Maritime Organization.
In another sign of a thaw, Greek Defense Minister Nikos Panagiotopoulos and Migration Minister Notis Mitarachi visited Turkey this month, with Turkish Defense Minister Hulusi Akar saying he hoped that the Mediterranean and Aegean would be a “sea of friendship” between the two countries. Akar said he expected a moratorium with Greece in military and airforce exercises in the Aegean Sea between June 15 and September 15.
“Both countries are going to have elections, and probably they will have the elections on the same day. So, this will open a new horizon in front of both countries,” Çeviköz said.
“The rapprochement between Turkey and Greece in their bilateral problems [in the Aegean], will facilitate the coordination in addressing the other problems in the eastern Mediterranean, which is a more multilateral format,” he said. Disputes over maritime borders and energy exploration, for example, are common.
As far as Cyprus is concerned, Çeviköz said that it is important for Athens and Ankara not to intervene into the domestic politics of Cyprus and the “two peoples on the island should be given an opportunity to look at their problems bilaterally.”
However, analysts argue that Greece, Cyprus and the EastMed are fundamental for Turkey’s foreign policy and not much will change with another government. The difference will be more one of style.
“The approach to manage those differences will change very much. So, we will not hear aggressive rhetoric like: ‘We will come over one night,’” said Ülgen. “We’ll go back to a more mature, more diplomatic style of managing differences and disputes.”
“The NATO framework will be important, and the U.S. would have to do more in terms of re-establishing the sense of balance in the Aegean,” said Aydıntaşbaş. But, she argued, “you just cannot normalize your relations with Europe or the U.S., unless you’re willing to take that step with Greece.”
Russian law enforcement on Monday detained a young woman suspected of bombing a St. Petersburg cafe, in which a pro-Kremlin military blogger was killed and dozens injured on Sunday, according to media reports.
In a video from the interior ministry published by state news agency TASS, a woman presented as Darya Trepova can be heard saying she “brought a statuette” inside the cafe, which “later exploded.”
She said she had been arrested for “being present at the place” where the bombing occurred.
POLITICO was not able to independently verify whether Trepova’s statement was made under duress.
Trepova was reportedly detained for several days last year for taking part in a protest against the war in Ukraine on the day Russia’s full-scale invasion started.
Russian military blogger Vladlen Tatarsky was killed by the St. Petersburg cafe blast, which also injured 25 people according to Reuters.
Tatarsky — whose real name was Maxim Fomin — was part of a group of high-profile influencers filing reports on the Ukraine war. He had more than half a million followers on Telegram.
According to AP, Tatarsky utilized “ardent pro-war rhetoric” in favor of Russia’s war in Ukraine.
Russia’s top investigative body announced Monday it had opened a probe into the bombing, which it labeled a “high-profile murder.”
The state-controlled Russian National Anti-Terrorism Committee called the bombing a “terrorist act” and accused Ukraine’s special service of planning the attack.
Mykhailo Podolyak, an adviser to Ukrainian President Volodymyr Zelenskyy’s office, tweeted that Russia had “returned to the Soviet classics: isolation … espionage … political repression.”
This is the second time a pro-Kremlin media figure has been killed on Russian soil since the invasion began.
Last August, Darya Dugina — who was under U.S. sanctions for spreading misinformation about the war — was killed in a car bombing.
ABOARD COTAM UNITÉ (FRANCE’S AIR FORCE ONE) — Europe must reduce its dependency on the United States and avoid getting dragged into a confrontation between China and the U.S. over Taiwan, French President Emmanuel Macron said in an interview on his plane back from a three-day state visit to China.
Speaking with POLITICO and two French journalists after spending around six hours with Chinese President Xi Jinping during his trip, Macron emphasized his pet theory of “strategic autonomy” for Europe, presumably led by France, to become a “third superpower.”
He said “the great risk” Europe faces is that it “gets caught up in crises that are not ours, which prevents it from building its strategic autonomy,” while flying from Beijing to Guangzhou, in southern China, aboard COTAM Unité, France’s Air Force One.
Xi Jinping and the Chinese Communist Party have enthusiastically endorsed Macron’s concept of strategic autonomy and Chinese officials constantly refer to it in their dealings with European countries. Party leaders and theorists in Beijing are convinced the West is in decline and China is on the ascendant and that weakening the transatlantic relationship will help accelerate this trend.
“The paradox would be that, overcome with panic, we believe we are just America’s followers,” Macron said in the interview. “The question Europeans need to answer … is it in our interest to accelerate [a crisis] on Taiwan? No. The worse thing would be to think that we Europeans must become followers on this topic and take our cue from the U.S. agenda and a Chinese overreaction,” he said.
Just hours after his flight left Guangzhou headed back to Paris, China launched large military exercises around the self-ruled island of Taiwan, which China claims as its territory but the U.S. has promised to arm and defend.
Those exercises were a response to Taiwanese President Tsai Ing-Wen’s 10-day diplomatic tour of Central American countries that included a meeting with Republican U.S. House Speaker Kevin McCarthy while she transited in California. People familiar with Macron’s thinking said he was happy Beijing had at least waited until he was out of Chinese airspace before launching the simulated “Taiwan encirclement” exercise.
Beijing has repeatedly threatened to invade in recent years and has a policy of isolating the democratic island by forcing other countries to recognize it as part of “one China.”
Taiwan talks
Macron and Xi discussed Taiwan “intensely,” according to French officials accompanying the president, who appears to have taken a more conciliatory approach than the U.S. or even the European Union.
“Stability in the Taiwan Strait is of paramount importance,” European Commission President Ursula von der Leyen, who accompanied Macron for part of his visit, said she told Xi during their meeting in Beijing last Thursday. “The threat [of] the use of force to change the status quo is unacceptable.”
Chinese President Xi Jinping and French President Emmanuel Macron in Guangdong on April 7, 2023 | Pool Photo by Jacques Witt / AFP via Getty Images
Xi responded by saying anyone who thought they could influence Beijing on Taiwan was deluded.
Macron appears to agree with that assessment.
“Europeans cannot resolve the crisis in Ukraine; how can we credibly say on Taiwan, ‘watch out, if you do something wrong we will be there’? If you really want to increase tensions that’s the way to do it,” he said.
“Europe is more willing to accept a world in which China becomes a regional hegemon,” said Yanmei Xie, a geopolitics analyst at Gavekal Dragonomics. “Some of its leaders even believe such a world order may be more advantageous to Europe.”
In his trilateral meeting with Macron and von der Leyen last Thursday in Beijing, Xi Jinping went off script on only two topics — Ukraine and Taiwan — according to someone who was present in the room.
“Xi was visibly annoyed for being held responsible for the Ukraine conflict and he downplayed his recent visit to Moscow,” this person said. “He was clearly enraged by the U.S. and very upset over Taiwan, by the Taiwanese president’s transit through the U.S. and [the fact that] foreign policy issues were being raised by Europeans.”
In this meeting, Macron and von der Leyen took similar lines on Taiwan, this person said. But Macron subsequently spent more than four hours with the Chinese leader, much of it with only translators present, and his tone was far more conciliatory than von der Leyen’s when speaking with journalists.
‘Vassals’ warning
Macron also argued that Europe had increased its dependency on the U.S. for weapons and energy and must now focus on boosting European defense industries.
He also suggested Europe should reduce its dependence on the “extraterritoriality of the U.S. dollar,” a key policy objective of both Moscow and Beijing.
Macron has long been a proponent of strategic autonomy for Europe | Ludovic Marin/AFP via Getty Images
“If the tensions between the two superpowers heat up … we won’t have the time nor the resources to finance our strategic autonomy and we will become vassals,” he said.
Russia, China, Iran and other countries have been hit by U.S. sanctions in recent years that are based on denying access to the dominant dollar-denominated global financial system. Some in Europe have complained about “weaponization” of the dollar by Washington, which forces European companies to give up business and cut ties with third countries or face crippling secondary sanctions.
While sitting in the stateroom of his A330 aircraft in a hoodie with the words “French Tech” emblazoned on the chest, Macron claimed to have already “won the ideological battle on strategic autonomy” for Europe.
He did not address the question of ongoing U.S. security guarantees for the Continent, which relies heavily on American defense assistance amid the first major land war in Europe since World War II.
As one of the five permanent members of the U.N. Security Council and the only nuclear power in the EU, France is in a unique position militarily. However, the country has contributed far less to the defense of Ukraine against Russia’s invasion than many other countries.
As is common in France and many other European countries, the French President’s office, known as the Elysée Palace, insisted on checking and “proofreading” all the president’s quotes to be published in this article as a condition of granting the interview. This violates POLITICO’s editorial standards and policy, but we agreed to the terms in order to speak directly with the French president. POLITICO insisted that it cannot deceive its readers and would not publish anything the president did not say. The quotes in this article were all actually said by the president, but some parts of the interview in which the president spoke even more frankly about Taiwan and Europe’s strategic autonomy were cut out by the Elysée.
Chinese leader Xi Jinping had one overriding message for his visiting French counterpart Emmanuel Macron this week: Don’t let Europe get sucked into playing America’s game.
Beijing is eager to avoid the EU falling further under U.S. influence, at a time when the White House is pursuing a more assertive policy to counter China’s geopolitical and military strength.
Russia’s yearlong war against Ukraine has strengthened the alliance between Europe and the U.S., shaken up global trade, reinvigorated NATO and forced governments to look at what else could suddenly go wrong in world affairs. That’s not welcome in Beijing, which still views Washington as its strategic nemesis.
This week, China’s counter-offensive stepped up a gear, turning on the charm. Xi welcomed Macron into the grandest of settings at the Great Hall of the People in Beijing, along with European Commission chief Ursula von der Leyen. This was in sharp contrast to China’s current efforts to keep senior American officials at arm’s length, especially since U.S. Secretary of State Antony Blinken called off a trip to Beijing during the spy balloon drama earlier this year.
Both American and Chinese officials know Europe’s policy toward Beijing is far from settled. That’s an opportunity, and a risk for both sides. In recent months, U.S. officials have warned of China’s willingness to send weapons to Russia and talked up the dangers of allowing Chinese tech companies unfettered access to European markets, with some success.
TikTok, which is ultimately Chinese owned, has been banned from government and administrative phones in a number of locations in Europe, including in the EU institutions in Brussels. American pressure also led the Dutch to put new export controls on sales of advanced semiconductor equipment to China.
Yet even the hawkish von der Leyen, a former German defense minister, has dismissed the notion of decoupling Europe from China’s economy altogether. From Beijing’s perspective, this is yet another significant difference from the hostile commercial environment being promoted by the U.S.
Just this week, 36 Chinese and French businesses signed new deals in front of Macron and Xi, in what Chinese state media said was a sign of “the not declining confidence in the Chinese market of European businesses.” While hardly a statement brimming with confidence, it could have been worse.
For the last couple of years European leaders have grown more skeptical of China’s trajectory, voicing dismay at Beijing’s way of handling the coronavirus pandemic, the treatment of protesters in Hong Kong and Xinjiang’s Uyghur Muslims, as well as China’s sanctions on European politicians and military threats against Taiwan.
Then, Xi and Vladimir Putin hailed a “no limits” partnership just days before Russia invaded Ukraine. While the West rolled out tough sanctions on Moscow, China became the last major economy still interested in maintaining — and expanding — trade ties with Russia. That shocked many Western officials and provoked a fierce debate in Europe over how to punish Beijing and how far to pull out of Chinese commerce.
Beijing saw Macron as the natural partner to help avoid a nosedive in EU-China relations, especially since Angela Merkel — its previous favorite — was no longer German chancellor.
Macron’s willingness to engage with anyone — including his much-criticized contacts with Putin ahead of his war on Ukraine — made him especially appealing as Beijing sought to drive a wedge between European and American strategies on China.
Xi Jinping sees Macron as the natural to Angela Merkel, his previous partner in the West who helped avoid a nosedive in EU-China relations | Ludovic Marin/AFP via Getty Images
Not taking sides
“I’m very glad we share many identical or similar views on Sino-French, Sino-EU, international and regional issues,” Xi told Macron over tea on Friday, in the southern metropolis of Guangzhou, according to Chinese state media Xinhua.
Strategic autonomy, a French foreign policy focus, is a favorite for China, which sees the notion as proof of Europe’s distance from the U.S. For his part, Macron told Xi a day earlier that France promotes “European strategic autonomy,” doesn’t like “bloc confrontation” and believes in doing its own thing. “France does not pick sides,” he said.
The French position is challenged by some in Europe who see it as an urgent task to take a tougher approach toward Beijing.
“Macron could have easily avoided the dismal picture of European and transatlantic disunity,” said Thorsten Benner, director of the Berlin-based Global Public Policy Institute. “Nobody forced Macron to show up with a huge business delegation, repeating disproven illusions of reciprocity and deluding himself about working his personal magic on Xi to get the Chinese leader to turn against Putin.”
Holger Hestermeyer, a professor of EU law at King’s College London, said Beijing will struggle to split the transatlantic alliance.
“If China wants to succeed with building a new world order, separating the EU from the U.S. — even a little bit — would be a prized goal — and mind you, probably an elusive one,” Hestermeyer said. “Right now the EU is strengthening its defenses specifically because China tried to play divide and conquer with the EU in the past.”
Xi’s focus on America was unmistakable when he veered into a topic that was a long way from Europe’s top priority, during his three-way meeting with Macron and von der Leyen. A week earlier the Biden administration had held its second Summit for Democracy, in which Russia and China were portrayed as the main threats.
“Spreading the so-called ‘democracy versus authoritarianism’ [narrative],” Xi told his European guests on Thursday, “would only bring division and confrontation to the world.”
Wells Fargo will pay more than $97 million in fines for allowing transactions prohibited under U.S. sanction laws, the Federal Reserve and Treasury Department announced Thursday.
Wells Fargo and its predecessor, the Charlotte-based Wachovia Bank, violated national sanctions against Iran, Syria and Sudan when it designed a program to help a European bank process $532 million in prohibited transactions from 2008 to 2015, according to the Treasury Department. That resulted in a $30 million fine.
The Federal Reserve also fined Wells Fargo $67.8 million for “unsafe or unsound practices relating to historical inadequate oversight of sanctions compliance risks.”
Wells Fargo is “pleased to resolve this legacy matter,” which ended in 2015 after the bank voluntarily self-reported and fully cooperated with Office of Foreign Assets Control and the Federal Reserve Board, spokesperson Josh Dunn shared in a statement Friday.
How did Wells Fargo violate U.S. sanctions?
Mid-level management at Wachovia, which Wells Fargo bought in 2008, provided the European bank — unnamed in government documents — with a customized version of a trade finance software, according to the Treasury Department. The technology allowed the bank to process sanctioned jurisdictions and persons in-house.
The government uses financial sanctions by blocking assets and trade restrictions to accomplish foreign policy and national security, according to the Treasury Department.
To shield Wachovia staff from being directly involved with any such transactions, its system returned 124 non-compliant transactions to be processed abroad using the customized software it provided in 2008, according to the department’s news release.
While this process ensured the transactions were not processed directly through Wachovia or Wells Fargo, an investigation determined the modified software still relied on the bank’s technology infrastructure in Hong Kong and North Carolina, according to the Treasury Department.
The arrangement continued for seven years after Wells Fargo acquired Wachovia in 2008, despite some staff members raising concerns about the potential sanction violations.
In 2015, senior Wells Fargo management halted the practice and reported the issue.
The Office of Foreign Assets Control determined the violations were egregious, demonstrating “reckless disregard for U.S. sanctions requirements,” and Wells Fargo “failed to exercise a minimal degree of caution or care” when it failed to identify or prevent the transactions for seven years.
But it also found no indication that Wachovia’s senior management knew of the practice and acknowledged that Wells Fargo otherwise had a strong sanctions compliance program during the seven years the violation continued.
The transactions’ relation to agriculture, medicine and telecommunications, also mitigated harm to U.S. sanctions’ policy objectives, OFAC concluded.
Recent turbulence with Wells Fargo
While based in San Francisco, Wells Fargo has its largest employment hub in Charlotte and is one of the region’s largest employers with about 27,000 workers.
It also is the nation’s fourth largest bank by assets, at $1.7 trillion. The Federal Reserve capped the bank’s assets and ability to grow in the aftermath of the 2016 fake accounts scandal, when news broke that employees had created millions of fake accounts for customers — without their knowledge — in order to meet aggressive sales goals.
In 2018, the Office of the Comptroller of the Currency fined Wells Fargo $250 million by for “unsafe or unsound practices” related to the bank’s home lending business.
Last year, the Consumer Financial Protection Bureau found that the bank caused customers to lose their vehicles or homes when it improperly denied mortgage modifications, incorrectly applied car loan payments and charged surprise overdraft fees. The bureau charged the bank $3.7 billion in fines and restitution. The fine — the largest penalty in the agency’s history — led to a 50% drop in fourth quarter profits.
Wells Fargo CEO Charlie Scharf has maintained that the bank’s issues, which stem from the 2016 scandal, are being resolved.
“While our risk and regulatory work hasn’t always followed a straight line and we have more to do, we have made significant progress, and are moving forward,” he said in a statement on the bank’s fourth quarter earnings release.
Most recently, a nationwide computer glitch left irate customers with incorrect — and sometimes negative — balances and missing transactions earlier this month.
This story was originally published March 31, 2023, 5:05 PM.
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Charlotte Observer breaking news reporter Julia Coin recently graduated from the University of Florida, where she extensively covered state legislature, Hurricane Ian damage and sexual assault on campus. She also led one of the largest student-run newsrooms as the Independent Florida Alligator’s editor-in-chief. Support my work with a digital subscription
Russian President Vladimir Putin taking on the rotating monthly presidency of the 15-member United Nations Security Council came just after a young boy was killed by artillery launched by Moscow’s invading forces, Ukrainian President Volodymyr Zelenskyy said late Saturday.
“Unfortunately, we … have news that is obviously absurd and destructive,” Zelenskyy said in his daily address Saturday night. “Today, the terrorist state began to chair the U.N. Security Council.”
The Ukrainian leader announced that a five-month-old child named Danylo had been killed by Russian munitions in Donbas on Friday. “One of the hundreds of artillery strikes that the terrorist state launches every day,” the Ukrainian leader said. “And at the same time, Russia chairs the U.N. Security Council.”
Even though the position at the top of the Security Council is largely ceremonial, Ukraine’s Foreign Minister Dmytro Kuleba called Russia’s presidency a “slap in the face to the international community” given the ongoing conflict.
The last time Russia held the rotating monthly presidency was in February 2022, when Putin ordered the brutal full-scale invasion of Ukraine.
At present, in addition to the five permanent members, the U.N. Security Council also includes countries supportive of Ukraine such as Japan, Ghana, Malta and Albania, along with others such as the United Arab Emirates, Mozambique and Brazil which take a more neutral approach to the conflict.
In his Saturday address, Zelenskyy also said he had spoken with French President Emmanuel Macron for an hour on Saturday. He also welcomed Switzerland’s decision — as another temporary U.N. Security Council member — to join the 10th sanctions package against the Russian state.
European Commission President Ursula von der Leyen has declared Europe’s dependence on Russian oil and gas “history.”
But others, from senior Ukrainian officials to MEPs and industry insiders, say that chapter of history is still being written.
Significant quantities of Russian hydrocarbons, particularly oil, are still flowing around sanctions and into the European market, they say, earning payments that fund Vladimir Putin’s war machine.
“I had a friend in New York in the 1990s who complained cockroaches would get into his apartment through any available hole — that’s what Russia is doing with its energy,” Oleg Ustenko, economic adviser to Ukrainian President Volodymyr Zelenskyy, told POLITICO. “We have to fix these holes to stop Russia receiving this blood money they are using to finance the military machine that is destroying our country and killing our people.”
Crude oil is notoriously difficult to track on global markets. It can easily be mixed or blended with other shipments in transit countries, effectively creating a larger batch of oil whose origins can’t be determined. The refining process, necessary for any practical application, also removes all traces of the feedstock’s origin.
A complex network of shipping companies, carrying the flags of inscrutable offshore jurisdictions, adds a further layer of mystery; some have been accused of helping Russia to hide the origin of its crude exports using a variety of different means.
“Unlike pipeline gas, the oil market is global. Swap and netting systems, and mixing varieties are common practice,” said Mikhail Khodorkovsky, a prominent exiled critic of Putin and the former CEO of oil and gas giant Yukos.
“The result of the embargo is a significant increase in Russian transportation costs, a significant redistribution of income in favor of intermediaries, and some additional discount due to the narrowing of the buyers’ market.”
Crude workarounds?
The EU has largely banned Russian fossil fuels since the invasion of Ukraine in February 2022, with exceptions for limited quantities of pipeline crude oil, pipeline gas, liquefied natural gas (LNG), and oil products.
But large volumes of Russian crude oil — a bigger source of revenue than gas — are still being shipped onto global markets, leading some experts to suspect they are finding their way to Europe’s market through the back door.
“Since the introduction of sanctions, the volumes of crude oil Russia is exporting have remained more or less steady,” said Saad Rahim, chief economist at global commodities trading firm Trafigura. “It’s possible that Russian oil is still being sold on to the EU and Western nations via middlemen.”
Crude oil is notoriously difficult to track on global markets | Image via iStock
One potential route into Europe is through Azerbaijan, which borders Russia and is the starting point of the Baku-Tbilisi-Ceyhan (BTC) pipeline, operated by BP. The port of Ceyhan, in Turkey, is a major supply hub from which crude oil is shipped to Europe; it also receives large quantities from Iraq through the Kirkuk-Ceyhan pipeline.
François Bellamy, a French MEP and member of the European Parliament’s Committee on Industry, Research and Energy, aired suspicions about this route in a recent question to the Commission. Data show that Azerbaijan exported 242,000 barrels a day more than it produced between April and July last year, he said — a large margin over domestic production, which stood at 648,000 barrels a day last month and is in long-term decline, according to ministry figures.
“How can a country diminish its production and increase its exports at the same time? There is something completely inconsistent in the figures and this inconsistency creates suspicions that sanctions are being circumvented,” Bellamy said.
A spokesperson for the Commission said it is working to crack down on loopholes in sanctions regimes and has appointed the EU’s former ambassador to the U.S., David O’Sullivan, as a special envoy tasked with tackling circumvention. The official also pointed out that data cited by Bellamy on Azerbaijani oil transactions, the most recent publicly available, “happened before the sanctions entered into force so there is no question of evasion of sanctions there.”
“Azerbaijan does not export Russian oil to the EU via the BTC pipeline,” said Aykhan Hajizada, spokesperson for the country’s foreign ministry, adding that while “Azerbaijan continues to use all non-sanctioned oil regardless of source,” it “remains committed to conducting its supply and trading operations with the utmost care and diligence, in line with relevant laws and regulations.”
BP has previously been forced to deny that the BTC pipeline carries Russian oil, and data seen by POLITICO for crude shipments from Ceyhan shows a recent dip in the volume of exports to the EU, from around 3 million tons per month (about 700,000 barrels per day) in early 2022 to around 2 million tons a month this year.
Slick operations
At the same time, though, Turkey doubled its direct imports of Russian oil last year and has refused to impose sanctions on Russian crude despite simultaneously offering military and humanitarian support to Ukraine.
Finland’s Centre for Research on Energy and Clean Air (CREA) warned late last year that “a new route for Russian oil to the EU is emerging through Turkey, a growing destination for Russian crude oil,” where it is refined into oil products that are not subject to sanctions and sold on.
“We have enough evidence that some international companies are buying refinery products made from Russian oil and selling them on to Europe,” said Ustenko, the Zelenskyy adviser. “It’s completely legal, but completely immoral. Just because it’s allowed doesn’t mean we don’t need to do anything about it.”
On Monday, British NGO Global Witness released a report that found Russian oil has consistently been sold at prices far exceeding the $60 cap imposed by G7 countries in December last year.
“The fact Russian oil continues to flow round the world is a feature, not a bug, of Western sanctions,” said Mai Rosner, a campaigner who worked on the report. “Governments offered the fossil fuel industry a wide-open back door, and commodity traders and big oil companies are exploiting these loopholes to continue business as usual.”
Chinese President Xi Jinping’s marathon three-day visit to Moscow was hailed by the Kremlin as the dawn of a new age of “deeper” ties between the two countries, as Russia races to plug gaping holes left in its finances by Western energy sanctions.
But while Vladimir Putin insisted a new deal struck during the negotiations on Wednesday will ensure Russia can weather the consequences of its invasion of Ukraine, analysts and European lawmakers say he’s overestimating just how much Beijing can help him balance the books.
Prior to the full-blown invasion, Russia’s oil and gas sector accounted for almost half of its federal budget, but embargoes and restrictions imposed by Western countries have since created a multi-billion dollar deficit.
With the country’s ever-influential oligarchs estimated to be out of pocket to the tune of 20 percent of their wealth — and industry tycoon Oleg Deripaska warning the state could run out of money as soon as next year — Putin is seeking to reassure them he’s opened up a massive new market.
“Russian business is able to meet China’s growing demand for energy,” Putin declared Tuesday, ahead of an opulent state banquet.
But analysts and Ukrainian officials have been quick to point out that actually stepping up exports of oil and gas to China will be a technical challenge for Moscow, given most of its energy infrastructure runs to the West, not the East.
Putin on Wednesday announced a major new pipeline, Power-of-Siberia 2, that will carry 50 billion cubic meters of gas to China via Mongolia to fix that problem.
But “in reality, it’s pretty unclear what has actually been agreed,” said Jade McGlynn, a Russia expert at King’s College London. “When it comes to terms and pricing, Beijing drives a hard bargain at the best of times — right now they know Russia’s not got a strong hand.”
Details of the financing and construction of the project have not yet been revealed.
And with predictions of a financial downturn swirling, Beijing may not need more energy to power sluggish industries, McGlynn added.
Yuri Shafranik, a former energy minister under Boris Yeltsin who now heads Russia’s Union of Oil and Gas Producers, suggested China’s appetite for natural gas “will certainly increase” in the coming years, and pointed out that Beijing would not have signed a pipeline agreement if it didn’t need the resources.
But, if the Kremlin was hoping to replace Europe as a reliable customer, it may end up disappointed, said Nathalie Loiseau, a French MEP who serves as chair of the Parliament’s subcommittee on security and defense.
“They chose to use energy to blackmail Europe even before the war,” she said. “Now, Russia has to find new markets and must accept terms and conditions imposed by others. China is taking advantage of the situation.”
In a bid to sweeten the terms, Putin invited all of Asia, Africa and Latin America to buy Russian oil and gas in China’s domestic currency, the renminbi, at the close of Xi’s speech on Tuesday. This came after Xi had already indicated at the China-Arab Summit in December in Riyadh that he would welcome the opportunity to trade oil and gas with Saudi Arabia on similar terms.
The outreach is a nod to the 1974 pact between then-U.S. President Richard Nixon and the Saudi kingdom to accept dollars in exchange for oil, which would in turn be spent on Western goods, assets and services. Non-Western nations have, however, been threatening to move away from dollar pricing in energy markets for years to no effect.
Still, Russia’s efforts to peel away from Western-dominated energy markets are unlikely to make much difference to its fortunes in the long run, according to Simone Tagliapietra, a research fellow at the Bruegel think tank.
“What we are seeing is it’s proving extremely difficult for Russia to diversify away from Europe, and they’ve been forced to become a junior partner of China,” Tagliapietra said. “After this, Moscow won’t be an oil and gas superpower as it was before, not just because of sanctions but also because of the green transition.”
China’s President Xi Jinping on Tuesday called for “peace talks” and “responsible dialogue” over Ukraine in a joint statement with his Russian counterpart Vladimir Putin — but also criticized sanctions, blamed NATO expansion for the conflict and made no offer to withdraw invading forces.
Released on the second day of Xi’s state visit to Moscow, which has so far underscored his close friendship with Putin, Xi’s joint statement with the Russian leader shows Beijing’s wholesale adoption of Russia’s narratives.
“Russia reiterates efforts to resume peace talks as soon as possible, which is praised by the Chinese side,” said the statement, carried by China’s Xinhua news agency. “Russia welcomes China’s willingness to play a constructive role in resolving the Ukraine crisis through political and diplomatic means.”
Reverting to the Kremlin line that NATO expansion sparked the conflict — rather than Russian aggression against a democratic neighbor, whose independence it resents — Xi and Putin proclaimed: “Both sides oppose any countries or national blocs jeopardizing the reasonable security interests of other nations in the quest for military, political or other forms of superiorities.”
The resolution of the Ukraine “crisis,” according to the two countries, which wouldn’t call it a war, “shall respect all countries’ reasonable security concerns and prevent the formation of bloc confrontation.”
Putin and Xi called on “the international community to support constructive efforts” toward “responsible dialogue.”
“Both sides call for a halt to any moves that could cause tension and continue the warfare, in order to avoid the crisis deteriorating, if not getting out of control,” the statement added.
Unsurprisingly, Beijing made no mention in the statement of providing military support to Moscow, despite recent evidence — including reporting by POLITICO — showing Chinese companies’ moves to send arms to Russia.
Xi also didn’t repeat his opposition to the use of nuclear threats in this latest statement, contrary to a call he made while meeting European leaders, such as German Chancellor Olaf Scholz.
There’s also no mention of a ceasefire, let alone a complete withdrawal of Russian troops from Ukrainian territories as demanded by Kyiv and the West.
The statement on Ukraine was signed after Xi and Putin conducted talks over a broad range of issues at the Kremlin on Tuesday.
“Xi pointed out that … China-Russia relations have maintained a momentum of robust, sound and steady growth. The two countries have enjoyed deepening political mutual trust, convergence of interests, and understanding between the peoples, and have advanced cooperation on trade, investment and energy, and on exchanges at people-to-people and sub-national levels,” the Chinese Foreign Ministry said. “China-Russia cooperation is covering more areas, building greater consensus and delivering early harvests. More cooperation is being comprehensively advanced.”
