Finally: The EU Reacted Strongly. United we Stand, Divided we Fall.

Finally, the EU has reacted in a rather strong way. Today, 31st Jan., 2017, in the afternoon the EU Council President, the former Polish Prime Minister Donald Tusk, wrote an open letter to his 27 colleagues, as a Jingle for the forthcoming EU Summit Meeting in Malta next weekend. I wish this letter a world-wide distribution, and it goes exctly in the direction of two articles of John Feffer, Foreign Policy in Focus from Washington D.C., and myself in the next EUFAJ which will appear in some days. What is Donald Tusk’s letter about? Here is the full text:

„Dear colleagues,

In order to best prepare our discussion in Malta about the future of the European Union of 27 member states, and in light of the conversations I have had with some of you, let me put forward a few reflections that I believe most of us share.

The challenges currently facing the European Union are more dangerous than ever before in the time since the signature of the Treaty of Rome. Today we are dealing with three threats, which have previously not occurred, at least not on such a scale.

The first threat, an external one, is related to the new geopolitical situation in the world and around Europe. An increasingly, let us call it, assertive China, especially on the seas, Russia’s aggressive policy towards Ukraine and its neighbours, wars, terror and anarchy in the Middle East and in Africa, with radical Islam playing a major role, as well as worrying declarations by the new American administration all make our future highly unpredictable. For the first time in our history, in an increasingly multipolar external world, so many are becoming openly anti-European, or Eurosceptic at best. Particularly the change in Washington puts the European Union in a difficult situation; with the new administration seeming to put into question the last 70 years of American foreign policy.

The second threat, an internal one, is connected with the rise in anti-EU, nationalist, increasingly xenophobic sentiment in the EU itself. National egoism is also becoming an attractive alternative to integration. In addition, centrifugal tendencies feed on mistakes made by those, for whom ideology and institutions have become more important than the interests and emotions of the people.

The third threat is the state of mind of the pro-European elites. A decline of faith in political integration, submission to populist arguments as well as doubt in the fundamental values of liberal democracy are all increasingly visible.

In a world full of tension and confrontation, what is needed is courage, determination and political solidarity of Europeans. Without them we will not survive. If we do not believe in ourselves, in the deeper purpose of integration, why should anyone else? In Rome we should renew this declaration of faith. In today’s world of states-continents with hundreds of millions of inhabitants, European countries taken separately have little weight. But the EU has demographic and economic potential, which makes it a partner equal to the largest powers. For this reason, the most important signal that should come out of Rome is that of readiness of the 27 to be united. A signal that we not only must, but we want to be united.

Let us show our European pride. If we pretend we cannot hear the words and we do not notice the decisions aimed against the EU and our future, people will stop treating Europe as their wider homeland. Equally dangerously, global partners will cease to respect us. Objectively speaking, there is no reason why Europe and its leaders should pander to external powers and their rulers. I know that in politics, the argument of dignity must not be overused, as it often leads to conflict and negative emotions. But today we must stand up very clearly for our dignity, the dignity of a united Europe – regardless of whether we are talking to Russia, China, the US or Turkey. Therefore, let us have the courage to be proud of our own achievements, which have made our continent the best place on Earth. Let us have the courage to oppose the rhetoric of demagogues, who claim that European integration is beneficial only to the elites, that ordinary people have only suffered as its result, and that countries will cope better on their own, rather than together.

We must look to the future – this was your most frequent request in our consultations over the past months. And there is no doubt about it. But we should never, under any circumstances, forget about the most important reasons why 60 years ago we decided to unite Europe. We often hear the argument that the memory of the past tragedies of a divided Europe is no longer an argument, that new generations do not remember the sources of our inspiration. But amnesia does not invalidate these inspirations, nor does it relieve us of our duty to continuously recall the tragic lessons of a divided Europe. In Rome, we should strongly reiterate these two basic, yet forgotten, truths: firstly, we have united in order to avoid another historic catastrophe, and secondly, that the times of European unity have been the best times in all of Europe’s centuries-long history. It must be made crystal clear that the disintegration of the European Union will not lead to the restoration of some mythical, full sovereignty of its member states, but to their real and factual dependence on the great superpowers: the United States, Russia and China. Only together can we be fully independent.

We must therefore take assertive and spectacular steps that would change the collective emotions and revive the aspiration to raise European integration to the next level. In order to do this, we must restore the sense of external and internal security as well as socio-economic welfare for European citizens. This requires a definitive reinforcement of the EU external borders; improved cooperation of services responsible for combating terrorism and protecting order and peace within the border-free area; an increase in defence spending; strengthening the foreign policy of the EU as a whole as well as better coordinating individual member states‘ foreign policies; and last but not least fostering investment, social inclusion, growth, employment, reaping the benefits of technological change and convergence in both the euro area and the whole of Europe.

We should use the change in the trade strategy of the US to the EU’s advantage by intensifying our talks with interested partners, while defending our interests at the same time. The European Union should not abandon its role as a trade superpower which is open to others, while protecting its own citizens and businesses, and remembering that free trade means fair trade. We should also firmly defend the international order based on the rule of law. We cannot surrender to those who want to weaken or invalidate the Transatlantic bond, without which global order and peace cannot survive. We should remind our American friends of their own motto: United we stand, divided we fall“.

I really like this Open Letter – finally the EU gets a spine of steel. Donald Tusk Shows that he is a leader, and I hope he remains still a while in his present Job in the future, too.

It is not by chance that Donald Trump is mentioned in one line with questionable presidents like the ones in Turkey or Russia. This is really a shame for an American president. We all in Europe should not be passive in the attempts of the conscient Americans to stand and finally overcome this Person. He has so Little political and civic education, that his advisors seem to have free way, much to the pleasure of the president who thinks he can run a complicated state like a billionaire’s shop.

What is worst: The US have always been at the side of European integration, and of course we had some small difficulties, but this is normal in families. In families who share the same values, also internationally. In the last years of the Soviet Union, in the 1980s, there was a big discussion in Europe about so-called „equidistance“ of Europe, towards the USSR and the USA. In Europe, it was clear that we may be geographically closer to the first ine, but value-wise closer connected to the US. Now we know: We stand alone – and we will not give up, now more than ever, to tell the world that it is worth while to have an open society, of immigration and emigration (many famous US companies would not exist if today’s travel bans would have existed!), a social market economy, and a clear concept of the togetherness in the world. What the Republicans do at present, is adventurous, and it shows that the political coordinates cannot be considered parallel at all, between Europe and the USA. This not yet a cultural fight, but serious cultural differences – and it is indeed a matter of education, of being open to other cultures and countries. Let us work in the suitable way in keeping contact with „enlightened“ Americans, who think apriund the Corner, and let us prepare the day, when Trump is „shot down the tube“ by the voters, or by an impeachment before, what I do not exclude, if you see the exhaust of his companies.
Hans-Jürgen Zahorka
Chief Editor, European Union Foreign Affairs Journal
http://www.eufaj.eu

 

 

 

 

 

 

 

Ertragssteuern und Europäische wirtschaftliche Interessenvereinigung (EWIV)

Unser Blog verzeichnete in den letzten Wochen immer wieder Aufgriffe auf einige ältere Hinweise auf Workshops des Europäischen EWIV-Informationszentrums, einen  losen Zusammenschluss von EWIV-Experten aus Recht, Wirtschaftswissenschaften, Steuerlehre und dies aus mehreren EU-Ländern. Die Europäische wirtschaftliche Interessenvereinigung (EWIV – auf Deutsch, in den anderen 24 EU-Amtssprachen entsprechend) ist eine EU-weite Kooperations-Rechtsform aufgrund EU-Recht und wird in der EU-Verordnung 2137/85 geregelt (dieser Text und viele andere Informationen können auf http://www.ewiv.eu abgerufen werden). Um unseren Blog-Lesern Anrufe zu ersparen, hier einige grundlegende Informationen:

  1. Wie erwähnt, ist eine EWIV eine Kooperations-Rechtsform zur transnationalen Zusammenarbeit, also mindestens zwischen zwei Mitgliedern aus zwei verschiedenen EU-Staaten (+ die drei EFTA-Staaten des EWR: Liechtenstein, Island und Norwegen). Das heisst: Wer keinerlei leicht, etwa mit Dokumenten nachweisbare europäische Kooperation nachweisen kann, sollte auch keine EWIV gründen bzw  betreiben. Die Gefahr ist sonst groß, dass die Finanzämter (die in der EU ständig besser grenzüberschreitend zusammenarbeiten) feststellen, dass einer der Mitglieder eine „leere Hülse“ darstellt (Zitat aus einer baden-württembergischen Außenprüfung, wo eine deutsche GmbH mit ihrem spanischen Partner, einer Comunidad de bienes auf Mallorca, keinerlei Zusammenarbeit pflegte). Die Folge kann sein, dass bis zur Verjährungsgrenze (also mindestens 10 Jahre retrospektiv) die EWIV rückabgewickelt werden kann. Dies also zum sog. Transnationalitätserfordernis, das allerdings bei den wenigsten Finanzämtern bekannt und bewusst ist – allerdings von den Finanzgerichten aufgegriffen werden könnte. Es kann damit gerechnet werden, dass dies in den nächsten Jahren allgemein bewusst werden könnte und dann entsprechend zurück geprüft wird.
  2. Eine EWIV hat immer Unternehmereigenschaft (vgl. auch das Schreiben des Bundesministeriums der Finanzen von 1988 zur EWIV, ebenfalls auf http://www.ewiv.eu). Das bedeutet, dass eine EIWV, die ja auch in  den Handelsregistern Abt. A in Deutschland eingetragen wird (und somit als Personengesellschaft gilt, die im Übrigen keine Publizitätspflicht kennt), z.B. den Grundsätzen ordnungsgemäßer Buchführung (GoB) des HGB unterliegt. In der Praxis – durchaus sanktioniert von Finanzämtern in Deutschland – genügt eine einfache Einnahme-Überschuss-Rechnung, bei Umsätzen bis 500.000 EUR jährlich, oder bei einfachen Buchungsvorgängen. Erst ab diesem Limit muss man eine (Handels-)Bilanz anfertigen.
  3. Eine EWIV darf keinen Gewinn aufweisen – dies steht in den meisten Gründungsverträgen und ergibt sich auch aus Art. 40 der EU-VO (die eigentlich EWG-Verordnung heisst, da sie im ersten Entwuf 1970 angefangen wurde, aber der Einfachheit halber hier EU-VO genannt wird). Dieser Art. 40 besagt, dass eventuelle Überschüsse der EWIV nicht bei dieser zu versteuern sind, wenn sie an die Mitglieder aufbezahlt werden. Diese Mitglieder müssen dann diese Einnahmen (aus Beteiligung z. B.) versteuern, wo auch immer sie sitzen. Dabei können diese Auszahlungen über das Jahr verteilt oder auf einmal erfolgen, und sie können nach Köpfen oder „asymmetrisch“ erfolgen (also entsprechend Projektanteilen, nach Messgrössen wie z. B. Umsatz, Mitarbeiter o. ä.).
  4. Eine Möglichkeit aber ist auch die Bildung von Rücklagen, die bei der EWIV als „Reservefonds“ bezeichnet werden. Diese sollten in einem Rücklagenbeschluss genauer bezeichnet werden, z. B. …. EUR für ein Seminarzentrum am Lago di Garda etc. Aber auch zukünftige Kosten wie z. B. die Anschaffung von Pkw, die Webseite, allgemeine Bürokosten usw. können Gegenstand von derartigen Rücklagen sein. Derartige Rücklagen sind selbstverständlich von den Finanzämtern zu akzeptieren – dies geschieht auch. Wenn allerdings eine EWIV stets Jahresumsätze von 150.000 EUR generiert und dann plötzlich eine Million auf dem Rücklagenkonto aufweist, ist dies erklärungsbedürftig bzw. muss schlüssig erklärt werden können. ACHTUNG: Die deutschen Steuerbehörden akzeptieren derzeit mehr und mehr Investitionsrücklagen. So ist seit 2016 beim Investitionsabzugsbetrag (IAB) nicht mehr obligatorisch (und dieser endet bei 200.000 EUR), einzelne Wirtschaftsgüter einzeln zu benennen. Voraussetzung ist eine Steuererklärung per Datenübertragung.
  5. So gesehen, bezahlt eine EWIV also – bei korrekter Buchhaltung – weder Körperschafts- noch Gewerbesteuer. Voraussetzung hierfür ist aber, wie erwähnt, dass der Jahresabschluss der EWIV „null auf null“ ausgeht. Wo im Übrigen EWIV Gewinne ausweisen (manchmal geschieht dies, weil unwissende Steuerberater oder Buchhaltungsbüros dies so ausweisen, zum Teil auch aufgrund veralteter IT-Programme), müssen sie diese versteuern. Gleichzeitig machen sie sich auch automatisch zum IHK-Mitglied (mit allen Beiträgen) und bei der Kommune gewerberegisterpflichtg, wovon sie ansonsten befreit bleiben.
  6. Ansonsten bleibt eine EWIV natürlich steuerpflichtig bei allen anderen Steuern, z. B. Lohnsteuer, Kfz-Steuer, Grundsteuer, Grunderwerbssteuer, aber auch Umsatzsteuer. Sie ist in diesem Zusammenhang als ganz normales Unternehmen anzusehen.
  7. Wir machen sicherlich auch in 2017 einen oder mehrere Workshops zu diesem Thema und werden hierauf hinweisen. Wir werden auch in den nächsten Tagen ein Blog nur für EWIV-Fragen eröffnen, wo in qualifizierter Weise auf Fragen eingegangen wird – und nicht, wie seltsame Unternehmensberater implizieren, auf „Null-Steuern mit EWIV“ oder ähnlichen Unsinn.

Zwischenzeitlich stehen wir gerne zur Verfügung, falls es für präzise Fragen nötig sein sollte. Unsere E-Mail: ewiv@libertas-institut.com. Und wir können auf 25 Jahre Erfahrung und mehr als 330 gegründete EWIV zurückschauen.

Hans-Jürgen Zahorka, Assessor jur.

Leiter des Europäischen EWIV-Informationszentrum, http://www.ewiv.eu

 

 

 

EU trade agreements: Away with the unanimous vote in the EU Council

For mainly internal policy reasons (state savings, the possible heritage of the present Belgian Prime Minister by a Walloon politician…, etc.) the internal Belgian conditions have not been met – at least for Friday, 21.10.2016, 12.21 h) – that Belgium can sign the Canadian-EU trade agreement CETA. So, a small part of the EU population, namely less than one percent, has until now blocked successfully a breaking EU trade agreement. This goes in one hand with the rising number of protectionist measures, as counted by the World Trade Organisation (WTO), in all parts of the world, and Plays in favour of those populists in the whole EU who are against Integration and the EU and in favour of an exaggerated subsidiarity principle, by means of regional votes for upper competences, by referendum etc. How to avoid the possible consequence – and one of those  m u s t  be seized – on future trade and other agreements in the external field of the European Union?

The EU makes itself ridiculous, and from now on (and this is a very nice view) the EU has to calculate with the fact that one region or a country can indeed block, or blackmail?, the rest of the EU. This in a time when the Canadian-EU trade agreement CETA will be needed urgently, also as an example for other bilateral agreements. And this with Canada, which is the most similar partner to the EU overseas, sharing fully European values, always understanding the EU, and not with e.g. Pakistan, China or other countries who are also likely one day for a trade agreement, but do not share European values, like democracy, human rights, our parliamentary system etc.

Belgium should and must remain a federal state; this has to be underlined. Federalism is an excellent means to defuse many tensions immanent in a state. But federalism can also be exaggerated (and the Germans have a certain experience with that).  An exaggeration is that Belgium which has normally the sole competence in external relations negotiations needs an approval by each of the four regional parliaments. This even in the case when the EU, to which the external trade competence had been delegated has negotiated for seven years a complicated trade agreement.

It can clearly be doubted that every Walloon who now thunders against CETA has even read the text. It can be estimated that the Walloons profit now of a system which has foreseen all situations but this one – a clear „beautiful-weather system“. But sometimes it rains also, and then the EU and the Member States need umbrellas.

So the changes for a likewise situation have to be inserted at a place where a certain balance is necessary. This means clearly: The EU Council should change as fast as possible its unanimous vote in this kind of trade agreements into a qualified majority vote, at least.

A qualified majority would mean that in most of the cases the criteria for any vote would remain. But it would ease the possible pressure on any Member State „from below“ (and the EU has also a lot of experience herewith). As the EU has mended its potholes often after similar „incidents“, the time is now good for this.

The EU is in a very crucial phase for its common foreign and security policy: The refugee quotas, the Brexit, the Dutch referendum on the Ukraine-EU Association Agreement, the EU-USA trade agreement TTIP, the discussion about the Russia sanctions (which however is not yet dividing the EU decisively), etc., but now also CETA – these are all open issues, among many others, where the EU reached in very short time a clear division and not the necessary unity. It is easy: If the EU wants to have a common foreign, in particularly foreign trade policy (and experience shows that this was up to now an excellent way which never had to be discussed), a transition into a qualified majority vote will be indispensable. Otherwise, the tradition phrase about the EU „Economically a giant, politically a dwarf“ must be changed into „Politically a dwarf, economically a dwarf“. Nobody in the EU can accept this, not even the staunchest Walloon. For the Single Market, the European Single Act from 1986 has brought a qualified majority which was good, now it is the external dimension of this Single Market which is overdue.

Hans-Jürgen Zahorka

Chief Editor, European Union Foreign Affairs Journal – . http://www.eufaj.eu

 

CoE Venice Commission criticizes intended changes to Azeri constitution in referendum on 26.9.2016

A preliminary opinion by the Council of Europe’s constitutional law experts, (the Venice Commission) criticizes draft modifications to the constitution of Azerbaijan, which will be put to a national referendum on Monday 26 September. Many proposed amendments would severely upset the balance of power by giving “unprecedented” powers to the President (in this case Ilham Aliev), according to the Venice Commission opinion.

For example, the extension of the presidential mandate from five to seven years “cannot be justified” given the already very strong position of the President, who since 2009 can be re-elected without term limits.

Another reform gives the President power to dissolve parliament, which does not only make political dissent in parliament “largely ineffective”, according to the opinion, but also affects the independence of the judiciary, since parliament’s role in the approval of judges will be reduced.

The Venice Commission experts were “particularly worried” by the introduction of the figure of unelected Vice-Presidents, who may at some moment govern the country, and the President’s prerogative to declare early presidential elections at his convenience. There are many rumours in Baku that Ilham Aliev will install his wife as Vice President.

The opinion also criticizes the procedure of the referendum as having lacked proper debate in parliament and having been carried out too quickly and without real public discussion beforehand.

Indeed, due to time constraints, the Council of Europe opinion rapporteurs themselves were unable to visit Azerbaijan and did not benefit from direct consultations with the authorities, experts and other stakeholders. In this context, the Venice Commission regrets that the authorities of Azerbaijan did not consult it prior to submitting the draft to the referendum.

The experts praised proposed amendments in the human rights chapter of the Azeri constitution, such as the introduction of the concept of „human dignity“ and of the right to “conscientious treatment excluding arbitrariness” by state bodies and of certain procedural rights. They also praised the proposal to elevate the “principle of proportionality” to the constitutional level, which means that every restriction to human rights should be proportionate to the aim the state seeks to achieve.

However, the experts expressed reservations with other proposed changes in the human rights chapter, in particular one which provides for limitations to public gatherings for the sake of „public order“ and “morality”, since this provision risks to be too broadly interpreted. The opinion also is concerned about a proposed provision on withdrawing citizenship that “reduces the scope of the current guarantee” that prevents withdrawal of citizenship in absolute terms.

 

New Book in November 2016 by EUFAJ Author Sourajit Aiyer: Capital Market Integration in South Asia – Realizing the SAARC Opportunity

Lee Kuan Yew, credited for converting Singapore into an economic success, once described ASEAN as “Unpromising Start, Promising Future”. This phrase can also describe SAARC, the South Asian Association for Regional Cooperation of countries around India, Pakistan and Bangladesh, which has seen few successes as geopolitics slowed progress. Institutional investors use acronyms for groups of developing countries, but all is not rosy with these groups either. At such times, SAARC doesn’t look too bad. SAARC is a combination of sizable Emerging and Frontier markets with low correlation. While India is the largest in size, the other SAARC markets have seen decisive improvement in their metrics relative to India. Return on Equity and Profit Margins of top companies in Pakistan and Bangladesh has improved relative to India; while Sri Lankan companies have seen buoyant topline growth. The combined package should help counter volatility of single-market exposure. Investors may argue why they should look at SAARC asset class, and it is better to look at India or Frontier markets (FM) separately. But India benefits from the returns and low-correlation of SAARC’s FMs, while the FMs benefit from India’s size. A SAARC portfolio can increase the upside from multiple growth enablers, while minimizing the downside due to low-correlation constituents. A SAARC asset class may hasten country-specific funds for South Asian FMs, as current FM funds have only a small allocation to them.

Economic projections show the opportunity of SAARC vs other prominent regional groups like ASEAN, BRICS, Next-11, etc. The incremental economic size SAARC will add from 2014-2020 is next only to BRICS and Next-11. SAARC ranks high in savings growth, savings rate, and aggregate savings as of 2020. Capital market penetration is low, so depth has headroom to expand. Income is more evenly distributed, so investor breadth has headroom to expand. SAARC has the youngest demographics with a near absence of social benefits. Incremental capital formation is amongst the highest in SAARC. Not only is SAARC a large consumer base, it is building production capabilities across sectors.

As this economic story unfolds, it should translate into a financial story. This book discusses possible capital market Products/activities which regional stakeholders could explore to help realize the economic opportunity in this region. Some ideas may be implementable now; while some may be implementable as markets mature further. This book includes extensive data analysis of SAARC’s economic projections, and corporate performance and market indicators.

The purpose is to mobilize investment flows into regional markets, by providing scope for diversification, yield and risk mitigation; building product depth of smaller markets; and reducing information opacity for pricing efficiencies. Ideas are both conventional and unconventional. Unconventional ones convert SAARC’s unique challenges into ideas for capital markets. Specific rationale for institutions and retail investors is written with each idea. Products have to be viable. Hence, a focus is on how to deepen awareness of new products and markets so that asset flows increase.

Any integrated product has to take into consideration ground-realities. Bringing in an anchor partner might help counter implementation challenges in a geopolitically-sensitive SAARC, i.e. from a country that has bilateral interests with SAARC members individually and is looking for returns from overseas investments. Such an anchor may hold sway with SAARC members, which may enable faster agreements. Even if one or member remains disagreeable, the structure of these product ideas has been kept flexible to allow implementation with only few agreeable members.

In a region which is unexplored as an asset class, performance will be the kingmaker. This book includes the author’s CDCF Portfolio basket for the SAARC asset class, which selects the best fundamental-performers on a rolling basis. While this may not give equal representation to all countries, it selects the best performers. Relative comparison of this basket highlights its outperformance on risk-return parameters vs prominent indices of other regions.

It is an opportune time to look at SAARC. Recent years have seen new governments in member countries stressing their commitment towards economic development and regional relations. It makes it a hot iron to strike now. Above all, it is reasonable that SAARC as one of the world’s regional integrations – by the way always supported by the European Union – discusses about itself as a financial market, and this in view also of China. A comparison with Europe shows that it is good to have competing markets.

Sourajit Aiyeis a senior manager in investor relations and corporate planning with Motilal Oswal Financial Services, Mumbai, a leading Indian capital markets company. Previously he worked in equity trading operations with UBS Investment Bank, London; in financial analysis with Reliance Broadcast, Mumbai; and in financial research with Evalueserve, Gurgaon. He has done internships with Tata Motor Finance, Delhi and Grameen Bank, Bangladesh. He has written on over 60 unique topics in over 30 publications across 13 countries, including besides this Blog also European Union Foreign Affairs Journal (EUFAJ). He is also the author of a LIBERTAS Paper „Flying with the Winged Elephant – Niche Opportunities for Global Businesses that May Emerge in India“, see more: http://www.libertas-institut.com/de/PDF/Flyer_Sourajit.pdf

See the new book: http://store.elsevier.com/Capital-Market-Integration-in-South-Asia/Sourajit-Aiyer/isbn-9780081019061/ 

 

India’s multi-aligned approach in an increasingly tri-polar world

By Sourajit Aiyer

The author is a seasoned writer for many Major Asian and European papers and news portals. Sourajit Aiyer from India is expert on economy, also being a professional in a Mumbai financial company. Originally published in Society for Policy Studies‘ South Asia Monitor, India.

India wants constructive engagement with multiple nations. But will it succeed in an increasingly Tri-Polar world? In fact, the challenge is not how much India wants to be part of any one group. Rather, it seems to be how much they want India to be part of them, and the extent of co-operation, reconciliation (and arm-twisting) they might just do.

Tri-Polar Troika: USA was the sole superpower after the bipolar Cold-War ended with Soviet Union’s demise. Then, China started flexing its geopolitical muscle using its manufacturing boom-led foreign exchange corpus to woo developing nations. It is fast expanding its military presence in its neighborhood. Russia has also become assertive now in expanding its influence in Eurasian and Middle East regions, backed by the might of its defense establishment. It is quite a coincidence that the superpowers are often the biggest producers and exporters of defense arms. This troika may represent how the world’s polarity will shape in coming years. USA continues to be backed by key allies in Europe and Asia-Pacific, though its ties with a Sunni Muslim ally is in doldrums. Russia is aligning with Shia Muslim nations, and reining together CIS nations as a Eurasian block. Its military adventures in Ukraine made the West skeptical; who placed economic sanctions to sort-of control its ambitions. China is a game-changer and making the US establishment most insecure. It has substantial economic partnerships with Asian and African nations, where it is building ambitious transport and energy infrastructure through engineering-cum-funding deals. This is also creating long-term consumer markets in those nations for China’s vast production output. Its military excursions in regions like South China Sea and South Asia are causing concern amongst the incumbent powers, even as they maintain friendliness on the surface.

India’s Approach: India’s Modi has rightly maintained a multi-aligned stance, and has spent effort to win partners in each group. In fact, the challenge is not how much India wants to be part of any one group. Rather, it seems to be how much they want India to be part of them, and the extent of reconciliation, co-operation (and arm-twisting) they do!

USA has been working to recognize India as a partner of equal status, despite being pro-Pakistan during the Cold War. This about-turn in US approach to India is in contrast to how Nixon-Kissinger viewed India, and shows the extent of reconciliation the USA is willing to do to adapt to changing times when its ties with Pakistan hit a low due to issues relating to Pakistan’s handling of terrorists. USA is trying to step up its defense partnership with India including arms exports and technology transfers, possibly as it is the only country in this region that can balance China. Given its size, India remains lucrative for US businesses, although offshoring remains contentious. Partnering with a secular India is a good bet to combat a rise of radical Islamization. However, the US condemnation of India for testing a submarine missile shows a higher-hand attitude. India has to be watchful that this reconciliatory approach from USA does not cost India its own interests. Bringing India to its side can help US break the unison of a sizable economic bloc like BRICS, which India cannot allow. Keeping a multi-nation approach can help India eke the best terms for partnerships.

Russia was dominant in India’s defense supplies, and its co-operation is extending to transfer of critical technologies. Even the US has hesitated on this with Korea, its close ally. USA is insisting on end-user agreements with India, but Russia is becoming agreeable to partner without such agreements. With India keen on defense manufacturing, such technology-transfers may augur well in the long term, but India needs to watch it does not compromise on the terms. Also, Russia’s exports are of latest technologies. Given the leeway it is willing to give, it can help India negotiate with other countries. Keeping a multi-nation approach can help India eke the best terms for procurements!

Modi has made efforts to create inroads with China. While it has opened doors to Chinese companies, China wants deeper access into India. It has been vying for the BCIM Corridor and extending Nepal railway link into India. Given China’s links with Pakistan, India has been cautious not to compromise on national security in any manner. But given the slowness from India’s side, there seems to be some arm-twisting, possibly with the objective to make India agree. Both nations know China’s influence over Pakistan is the best bet to control militancy from Pakistani soil to India, given Pakistan is disproportionately dependent on China today. This seems a pawn China is indirectly playing. While several countries and UN branded Pakistan-based elements as terrorists, China seems to be selective. China blocked India’s appeals against Maulana Azhar and Zaki-ur-Rehman Lakhvi, citing UN provisions. These tactics seem to suggest that if India comes on China’s side, it may use its influence over Pakistan to rein in such elements. It is also opposing India’s entry to the UNSC and NSG, despite the world agreeing. One cannot say if these are true or just a fancy, but China’s expanding assertiveness across Asia raises questions, since India forms a critical component of the continent. India fears if it agrees to China, it may compromise its internal set-up to security threats from Pakistan, or a lifetime of paying Chinese debt, or a free-flow of cheap Chinese imports which can cannibalize India’s own production. Keeping a multi-nation approach can ensure India does not pay a price by disproportionately engaging with only one group.

In conclusion, this multi-aligned approach may show India as a “swing-state”. But in a world seeing such polarity, India needs to create adequate supplies at best-prices for the investments, technologies and critical imports it needs.

Tbilisi/Georgia, EaP Civil Society Forum: Is Donald Trump enemy no. 1 for Europe’s freedom?

Donald Trump is Europe’s enemy no. 1 – because he wants to violate art. 5 NATO Treaty on the mutual defense clause and wants the US‘ intervention to be dependent „if the bill has been paid“. A real problem for European NATO states, and no miracle that Putin praised Trump to be a „wise man“. This was no. 1 out of 10 policy theses set up by Hans-Jürgen Zahorka, Chief Editor of European Union Foreign Affairs Journal (www.eufaj.eu), during an Eastern Partnership Civil Society Forum in Tblisi/Georgia end of July 2016, when speaking on „Security Challenges of the EU’s Eastern Neighbourhood“. This event was organised jointly by the EaP Civil Society Forum, Brussels (www.eap-csf.eu), represented by its Co-Chair Krzysztof Bobinski, and the Liberal Academy Tbilisi, whose director Lasha Tughashi is also National Coordinator of the EaP CSF National Platform in Georgia. It was opened furthermore by Kakha Gogolashvili, Director of EU Studies at Rondeli Foundation (GFSIS), and Ambassador Janos Herman, head of the EU Delegation in Georgia. Here is what Hans-Jürgen Zahorka expressed:

Challenge no. 2: Erdogan. While it was legitimate to do everything necessary against a military putsch against a democratically elected government, the behaviour of the Turkish president after the putsch attempt shakes the whole region: not only in most of the EaP Caucasus countries there is now uncertainty, incalculability what Turkey wants really. He breaks democracy and human rights in a big NATO state, and his attempts to flirt with Putin are neither credible nor acceptable for NATO. There is a lack of consistency in Turkish NATO membership attitude, and the alliance has somehow to react, as there is a rule that NATO means also democracy, human rights and openness. This is also the fundament of the EU-NATO joint declaration from 8.7.2016.

Challenge no. 3 is nationalism, populism, lack of solidarity between European states- as there are populist and nationalist parties now in every country, and solidarity e.g. in the refugee question is often just not existing. Had the EU Member States found a solution for a proportional (including economic strength) distribution of asylum seekers, there would have been no need for a shaky Turkish refugee agreement. This new egoism is also expressed by the rising number of protectionist acts in the WTO member states, at present 22 per month, and of course by the Brexit of the UK from the EU, which brings a high economic damage – and this mainly to the UK. So the danger comes from within – also in the form of xenophobe, racist, glorifying the own country populist parties (partly financed by Russian institutions!), which are anti-Western, anti-liberal, anti-European integration oriented. In short: who want to turn back the wheel, which requires a vivid, attentive civil society in all the EU and EaP member states.

Challenge no. 4: CSDP (EU’s Common Security and Defense Policy) will gain momentum within the EU – in particular if Trump ever would win and the Brexit approaches. Then the Europeans really have to do something. The German Federal Armed Forces White Book from July 2016 is a signal for the right way, in stressing a European integrated defense, but of course also the EU Strategy Paper from a week before.

Challenge no 5: We will get an EU army – but (unfortunately) not today or tomorrow, but after tomorrow. The development will go step by step, taking also in account possible external threats which may accelerate it. Maybe this army will be much more „electronic“ than a traditional army, but there will be EU structures. It can be taken for sure that unlike in former conflicts a „levée en masse“ won’t be neither necessary nor possible, but due to the modern ways of tomorrow’s warfare, electronic warfare, unmanned air vehicles (UAVs) etc. will play a more pivotal role then anytime before – also in preventing such conflicts. We have already pooled monetary policy, when national competences don’t do it anymore. We can also pool our armed forces.

Challenge no. 6: hybrid threats. This is now a clear part of the reaction potential under the CSDP, and the EU reaction (and the EU is more able than NATO to respond to hybrid threats!) was started with a Joint Declaration from 6.4.2016. It should be directed against all ‚divide et impera‘ and attempts to destabilize a country. In the EaP, this can be done with a better know-how about the potential of small enterprises. So social unrest can be prevented – and the economy can be brought to thriving mode. In this context, I see an urgent need for informing SMEs about the chapters of the free trade agreements, where signed, to be de facto implemented – and they should be much better known to the economy. Hybrid threats shall also – see proposal no. 18 of the Joint Declaration – be treated together between EaP countries and the EU. There will be common risk assessments, and analyses and action plans of common activities. The EU, however, is asymmetrically concerned by hybrid threats, which imposes the chance for EaP countries to tell their own experiences in some countries of the EU. To meet civil society there should be a new task for the EaP civil society.

Callenge no. 7: Terrorism.. EaP countries are affected differently, but this can change very fast. In this context, a full role of the INTCEN EU Intelligence Centre must be advocated, with compulsory exchange of information. EaP countries can and should take part in this exchange – to the benefit of all.

Challenge no. 8: The EU was not able to prevent frozen conflicts and conflicts in its Neighbourhood. No miracle, as no instruments were available. But for the future, the EU must have a close look on its geographic environment. It is advocated, n this context, to explore the possible deplacement of EU peacekeepers to Nagorno-Karabakh, together with simultaneous EU-monitored negotiations which might last for many years. Azerbaijan and Armenia as well as the directly concerned Karabakhis should and could agree to this – and they would, in view of the alternatives which are not possible for various reasons (Russia, USA, OSCE, NATO).

Challenge no. 9: The EU and the EaP countries should endorse the strengthening of the OSCE – with a binding mediation mechanism, with armed peacekeepers etc. Countries or regional insurgents etc. who do not recognise the legitimacy of the OSCE must be isolated as far as possible, and modern communication can also contribute to keep a distance between these de-facto governments and the populations.

Challenge no. 10: The whole EU and the EaP countries, if possible, should endorse a value-oriented legislation and state-building. Security is more than the absence of war. In this context, the principle of being firm on principles and values of the EU while dialoguing with Russia is right. Borders cannot be changed by force. And the rules as in art. 2 Treaty of the EU can be accepted also by every EaP state, as they represent the common denominator of European civilisation: human dignity, freedom, democracy, equality, rule of law, human rights, minority protection, and this in a society of pluralism, non-discrimination, tolerance, ustice, solidarity and gender equality.

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See also the three illustrated posts on EUFAJ’s Facebook page: http://www.facebook.com/eufaj