Shaky election for Macron + No weapon su • Table.Briefings

Dear reader,

Yesterday’s election night was not a particularly good one for Emmanuel Macron: France’s president is likely to win the most seats in the National Assembly with his Ensemble alliance, but he is not assured of a majority of his own. The left-wing alliance around the EU and Germany critic Jean-Luc Mélenchon made strong gains in the first round of voting yesterday, as Tanja Kuchenbecker reports from Paris. The second round of voting in a week’s time will determine the outcome. Without a majority, Macron’s room for maneuver in his second term in office would be severely limited.

Will Macron soon be traveling to Kyiv with Olaf Scholz and Mario Draghi to meet Volodymyr Zelenskiy? There are plenty of rumors but confirmation is still pending. Zelenskiy eagerly awaits a clear signal of support from Macron and Scholz for Ukraine’s EU membership application. Commission President Ursula von der Leyen visited Kyiv for the second time over the weekend – and praised the government’s “enormous efforts”. On Friday, she is expected to present the Commission’s recommendation on candidate status.

Vladimir Putin and Xi Jinping are as thick as thieves – at least that was the image that the two presidents conveyed publicly. However, the fraternization apparently does not go as far as China helping Russia with weapons in its campaign against Ukraine. China’s Defense Minister Wei Fenghe stressed at the Shangri-La Dialogue in Singapore that his country had not provided any material support. The link between the two countries, he said, is a partnership, but not an alliance. Michael Radunski and Felix Lee have the details from the conference, which was heavily influenced by the rivalry between the US and China.

The Digital Services Act (DSA) was good to go. However, before the Council and Parliament could give their final blessing, trouble appeared: Some of the wording proposed by the French Council Presidency, as a result, is unacceptable to large sections of the parliamentary representatives. Falk Steiner has more on this in the News.

I wish you an interesting read and a good start to the week!

Your
Till Hoppe

Macron left to worry about his majority

Emmanuel Macron was re-elected in April, but the president still has to fear for his own majority in the National Assembly. In Sunday’s parliamentary elections, the left-wing alliance NUPES led by Jean-Luc Mélenchon achieved more votes than Macron’s camp. According to projections, it came in at more than 25 percent and was just ahead of Macron’s alliance. Marine Le Pen‘s far-right Rassemblement National (RN) party achieved around 19 percent of the vote.

The reason: Under the majority voting system, only the votes for the winner in the respective district count for the distribution of seats; all others fall by the wayside. If no candidate achieves an absolute majority in the first round of voting, all those who have achieved at least 12.5 percent of the registered voters advance to the second round. The relative majority is then sufficient for victory.

Macron can count on votes in many parts of the country. Mélenchon, on the other hand, is strong with the left-wing alliance in fewer constituencies in large cities and suburbs. According to forecasts, NUPES is likely to win between 180 and 230 seats in the National Assembly. For Macron’s Ensemble alliance, pollsters predict 270 to 305 seats. Le Pen’s RN is expected to win 34 seats.

Macron needs votes from the opposition

For the president, it could be close to an absolute majority of 289 seats. In that case, the president would have to hope that he would receive support from opposition parties on a case-by-case basis for bills. In that case, it could be difficult to push through projects such as his unpopular pension reform.

Macron’s alliance still has just under 350 deputies in the National Assembly. Traditionally, it is usually the case that the elected president also wins the majority in parliament. However, many French people are critical of Macron and feel that his policies are not sufficiently social.

For Mélenchon, the election is a success, even if it is not enough for the desired post of prime minister. His left-wing party has, so far, only 60 deputies in the National Assembly. The anti-capitalist has succeeded in forming an alliance with Socialists, Greens, and Communists. Since the presidential election on April 24, Macron has lost ground in the polls, while NUPES has made gains.

Mélenchon referred to his “social program” as justification. The 70-year-old had narrowly missed the runoff in the presidential election, finishing in third place behind Macron and Le Pen. That spurred him on. He is currently the driving force on the left of the political spectrum. The alliance Nouvelle Union Populaire écologique et sociale (New Ecologic and Social People’s Union), which Mélenchon launched, is counting on the dissatisfied among the citizens.

If the alliance were to win, Macron would have to appoint a prime minister from the opposition – he would hardly get past Mélenchon. Macron, therefore, repeatedly referred to him as a threat and equated him with the far-right Le Pen. Both, he said, had a “project of disorder and subjugation”. Mélenchon is critical of the EU and has frequently stated that treaties in the EU can be violated. This is mainly about deficit rules against excessive national debt. Mélenchon has also frequently criticized a “German dictate” in financial matters in the EU.

China: no material support for Russia

Moscow and Beijing have repeatedly celebrated their close ties in public. However, the alliance apparently does not carry as far as officials in Europe and the United States feared: China’s Defense Minister Wei Fenghe stressed over the weekend that his country had not provided any material support to Russia during the Ukraine war. The connection between the two states is a partnership, but not an alliance, he said at the Shangri-La Dialogue in Singapore.

In doing so, Wei apparently wanted to counter speculations that China would side with Russia to make common cause against the West. According to official sources, Beijing has so far not openly criticized the Russian invasion of Ukraine, but it has also not declared its support for Russia’s military offensive. China hopes the US and NATO will talk with Russia to create conditions for a cease-fire, Wei said. He strongly criticized the EU and NATO countries for supporting Ukraine with war equipment. Those who supply Ukraine with weapons are pouring gasoline on the fire, the defense minister said.

The remarks on Ukraine were directed mainly toward Washington. Overall, the Asian security conference in Singapore was dominated by tensions between China and the United States. Both sides tried to promote their competing visions of regional order and stability. Wei Fenghe and his US counterpart Llyod Austin exchanged blows.

The defense ministers of the two powers had met in person for the first time over the weekend. Relations between China and the United States are extremely tense. The conflicts range from the Uyghurs in Xinjiang to the South China Sea and Taiwan to China’s stance in the Ukraine war.

Speaking directly to Austin on Friday, China’s top military official had issued a strong warning against the possibility of war. “If anyone dares to split Taiwan from China, the Chinese army will definitely not hesitate to start a war no matter the cost.” Any conspiracy to bring independence to Taiwan would be crushed, and the unification of the motherland would be resolutely upheld. Wei makes it unequivocally clear: “Taiwan is China’s Taiwan”.

China’s Minister of Defense then followed up in the same tone when he gave his official speech at the Shangri-La Forum on Sunday – just as determined and just as unequivocal: “If anyone dares to secede Taiwan from China, we will not hesitate to fight,” Wei said. “We will fight at all costs, and we will fight to the very end“. No one should underestimate the determination and ability of Chinese forces to maintain their territorial integrity.

USA: China becomes increasingly aggressive

That is because the day before, US Secretary of Defense Lloyd Austin had outlined the American view of Taiwan and the region. In his nearly one-hour speech, Austin repeatedly drew parallels between Russia’s actions in Ukraine and China’s “more coercive and aggressive approach” in the Indo-Pacific. “Russia’s invasion of Ukraine is what happens when oppressors trample the rules that protect us all,” Austin said. “It’s what happens when big powers decide that their imperial appetites matter more than the rights of their peaceful neighbors. And it’s a preview of a possible world of chaos and turmoil that none of us would want to live in,” Austin said in Singapore.

And so Austin promised that the US would help countries in Asia to resist Chinese “bullying”. That, he said, was necessary to prevent a Ukraine crisis from repeating itself in the Pacific. Referring to Russia and China, he said, “We feel the headwinds – from threats, and intimidation, and the obsolete belief in a world carved up into spheres of influence”.

Austin cited, among other things, China’s military activities around Taiwan, such as its regular military flights, and warned of destabilization in the region. Only a few days ago, 30 Chinese aircraft had entered Taiwan’s so-called Air Defense Zone; according to Taiwan’s Ministry of Defense, more than 20 fighter jets were among them (China.Table reported).

Observers recently have noted a sharpening of US policy on Taiwan. When US President Joe Biden was asked in Japan in late May whether the United States would also defend Taiwan by deploying the US Army, Biden said, “Yes, that’s the commitment we made”. (China.Table reported). Shortly before, the US State Department changed the description of Taiwan on its website: It removed the reference to “one China” – a supposedly small but exceedingly symbolic change (China.Table reported). Until now, the US strategy was to remain intentionally vague. In this way, China was to remain in the dark about the US’s determination; and concurrently, Taiwan was not to be given any incentive to declare independence with supposed American backing.

China: USA causes conflicts worldwide

However, US Secretary of Defense Austin reassured on Saturday, “Our policy hasn’t changed, but unfortunately, that doesn’t seem to be true for the PRC”. Maintaining peace and stability in the Taiwan Strait was not just a US interest, he said, but one of international importance. “We do not seek confrontation or conflict. And we do not seek a new Cold War, an Asian NATO, or a region split into hostile blocs,” Austin said. The US Secretary of Defense’s words were meant to show everyone at the conference, as well as the people in the region, who the good guys are and who the bad guys are.

China simply could not let that stand. Only moments after the Secretary of Defense finished his speech, China’s first angry reaction followed. Lieutenant General Zhang Zhenzhong called Austin’s remarks a series of falsehoods and malicious insinuations, all aimed at confrontation. “The US has been strengthening its military presence in the Asia-Pacific region, consolidating bilateral military alliances and beefing up the AUKUS trilateral security partnership, the QUAD, the Five-Eyes alliance. What should we call this other than a confrontation?” He said it was the US that had wreaked havoc in the Middle East and brought instability to Europe. And now they are trying to destabilize the Asia-Pacific region, said the Deputy Chief of the Joint Staff Department of China’s Central Military Commission.

China’s Minister of Defense Wei also presented this line of reasoning again to delegates on Sunday, saying America’s behavior is the main cause of tensions – all over the world, from Ukraine to the South China Sea. Michael Radunski, Felix Lee

Data transfer: agreement into the unknown

By

Falk Steiner

In March, Joe Biden and Ursula von der Leyen signaled top priority and transatlantic unity by pledging political agreement. However, the Trans-Atlantic Data Privacy Framework (TADPF) is not yet in place – many questions still need to be clarified at the working level. Time is running out for the companies concerned.

Recently, however, positive signals have come from the US that are in line with the EU position. When it annulled the Safe Harbor and Privacy Shield agreements, the European Court of Justice also rejected the Commission’s certificates of adequacy because there is no reliable legal framework at the federal level in the USA. Just over a week ago, US Congress members across camps and chambers now introduced a draft Data Privacy and Protection Act. If passed in this or a similar form, it would be the first federal data protection law in the United States.

That it will happen is not guaranteed. Although the plan is supported by both US senators and members of the House of Representatives, by both Republicans and Democrats, not all key US politicians are on board yet. The Democratic chairwoman of the Congressional Commerce Committee, for example, has not yet signaled support. And the midterms on November 8, when the House of Representatives will be re-elected, and a third of the Senate will also be up for election, make the project seem ambitious in terms of time.

Tim Cook emerged as a particularly prominent advocate on Friday: via letter, the Apple CEO addressed US Congress members and urged them to quickly resolve the remaining points of contention. “Only Congress can ensure strong privacy protections for all Americans,” the letter reads, among other things. Otherwise, Cook said, the patchwork approach of state laws threatens to grow even larger: “We urge you to pass a comprehensive privacy bill as soon as possible, and we stand ready to support that process.”

For some years now, the Apple Group has been pursuing the economic, technological, and political goal of ensuring better data protection than the competition and has evidently been successful on the market in doing so. However, the ability to process personal data from Europe in the USA is also an important factor for Apple.

US proposal offers points of contact

Legally, the US project is not intended to directly address the main criticisms of the ECJ judges. In particular, it does not address the state powers criticized by the judges and the lack of legal protection for EU citizens.

On the one hand, however, the principles contained in the draft, such as data economy and user rights, are fundamentally similar to European data protection law. For example, there is to be a far-reaching requirement for consent and an obligation for data economy and privacy by design. On the other hand, the bill also does not provide for a restriction to US citizens. Instead, the law is linked to residence status in the US as a prerequisite for exercising rights, including class actions, which the data protection experts at the Electronic Privacy Information Center (EPIC) regard as fundamentally positive.

With this proposal, the amount of data that US companies process at all could be more limited from the outset. The data dump would be smaller from which US intelligence agencies and law enforcement could draw. This could also be beneficial for the TADPF.

Many details of the planned TADPF framework are still not publicly known. Behind the scenes, however, there is a lot of activity. Most recently, EU Justice Commissioner Didier Reynders wanted to discuss the design of the agreement with representatives in Washington at the beginning of June. The results of this trip are not known.

Criticism grows louder

Critics like Austrian privacy activist Maximilian Schrems with his organization None of Your Business (NOYB) are already warning of insufficient assurances. In an open letter to Reynders, US Secretary of Commerce Gina Raimondo and other stakeholders published at the end of May, Schrems warned against a de facto re-run of the Privacy Shield agreement, which he most recently brought down.

In a status report of the US Congressional Research Service, the US perspectives on the TADPF were summarized once again on June 2. It confirms Schrem’s fear that the seven Privacy Shield principles will be adopted without any adjustments.

Schrems also warns quite fundamentally that the TADPF should be based unchanged on the principles of the Privacy Shield. However, this was drafted when Schrems – then still a law student – first brought an EU-US agreement before the ECJ in 2015. Today’s legal basis, the General Data Protection Regulation GDPR, was not yet in force at that time. Without adjustments, old problems could once again become a stumbling block here.

Moreover, according to the details that have become known so far, major points of criticism by the ECJ would not be addressed at the statutory level but via presidential decrees, so-called executive orders. These can be changed by the US president at any time. On the one hand, this concerns the question of how US authorities handle data on EU citizens. On the other, what options Europeans should have to take action against suspected unlawful surveillance and data collection. Critics like Schrems see no viable solution without parallel changes to substantive US law, especially the Foreign Intelligence Surveillance Act (FISA).

Concrete legal texts still in progress

But they won’t come – at least not as part of the TADPF. The EU Commission confirmed on request that the framework will be based exclusively on presidential decrees. These would form the basis for a new adequacy decision, which the EU Commission would then draft. If this passes the necessary bodies, the way would be paved for a new dispute before the European Court of Justice – and data transfers would still be far from legal certainty.

In an answer published last Friday to questions posed by Socialist MEPs Paul Tang and Birgit Sippel, Justice Commissioner Reynders once again explained the further procedure, which also provides for Parliament’s right to appeal the adequacy decision. However, six weeks after the receipt of the “Priority Question”, the Directorate-General for Justice again failed to provide substantive answers to the specific questions of the MEPs.

However, the companies concerned are threatened with concrete trouble: A decisive procedure of the Irish data protection authority DPC against the Facebook parent Meta could put an end to the currently remaining way of transferring personal data via standard contractual clauses (SCC). When asked, DPC Ireland said it expected the case to be concluded in the coming weeks. It is at an advanced stage.

If the Irish data protection supervisory authority were to declare the legal basis invalid, US corporations such as Meta, Google, Microsoft, or Amazon would have to examine whether they still want to process personal data from the EU at all. Or whether they should refrain from doing so in view of the threat of penalties.

DSA: Dispute over changes comes to a head

The Digital Services Act (DSA) had actually been fully negotiated. However, before the Council and Parliament can give it their final blessing, the political agreement reached shortly before the presidential elections in France still has to be given the final legal form. Here, however, trouble has been brewing for weeks: Some of the wording proposed by the French Council Presidency, as a result, is unacceptable to large sections of the parliamentary representatives.

On Friday, a rare alliance of the responsible parliamentarians from the far left to the far right went on a confrontational course and demanded improvements from the Council. The rapporteur Christel Schaldemose (S&D) did not join in. The Dane is held partly responsible by her colleagues for the current debacle surrounding the DSA finale.

The criticism relates primarily to two recitals, the interpretation aids for the actual legal text. In recital 28, the Council Presidency’s last proposal, for the time being, is to require service providers to use stay-down filters under certain circumstances. The Parliament had actually declared this to be out of the question.

And in recital 29, there is suddenly a far-reaching exemption of the gambling and betting industry from the enforcement logic of the DSA. While the first part is interpreted mainly as unfortunate in parliamentary circles that are otherwise largely silent on the process, the second amendment is seen as a clear affront: This should have already been addressed in the negotiations, and an addition through the back door is inadmissible.

The French Council Presidency’s action, which is classified as improper, could lead to delays in the worst case. The DSA is to enter into force 15 months after promulgation in the Official Journal at the earliest. But only once it has been promulgated can the EU Commission, which is to be directly responsible for the particularly large providers, and the member states, which for their part will have to entrust authorities with enforcement and do quite a bit for it, get to work on implementation. If France does not get the problems under control by the end of June, the Czech Council presidency, which will then follow, will have to put the dossier, which has actually been negotiated, back on the agenda.

BNetzA and state media authorities ready to take on tasks

Meanwhile, exactly what the German implementation mechanism for the DSA will look like remains completely open. On the one hand, the role of digital services coordinator could go to the state media authorities, which are responsible for media regulation on behalf of the states and have already met the DSA criterion of independence for years. At the same time, however, there is also something to be said for the Federal Network Agency, which has a great deal of experience as a supervisory authority for very large and difficult companies. Following an ECJ ruling in 2021, more independence is to be created for it by law this year.

Representatives of both regulatory worlds explained at a panel at the Republica conference that there are different tasks to be done. There is a constitutional division of tasks, said Eva Flecken (MABB), director of the State Media Authority Berlin-Brandenburg, and the dividing line can be well drawn along the opinion-forming tasks. He did not want to make a bid speech, said Klaus Müller, President of the Federal Network Agency. However, there would hardly be a country in which all tasks were in one hand. For the business community, Bitkom board member Susanne Dehmel explained that companies could not choose who supervised them: “But it would be important to have competencies in the respective authority and a level playing field in the member states, as well as legal certainty for companies.”

Meanwhile, Austria’s Administrative Court on Friday referred the local relative of Germany’s Network Enforcement Act to the ECJ: The Austrian judges want the ECJ to tell them whether Viennese lawmakers violated European law with their communications platforms law. Among other things, they are asking the Luxembourg judges whether national legislators are allowed to enact such specific regulations at all under the e-commerce directive, which is now being revised with the DSA. The European subsidiaries of Google, Twitter, and Facebook parent Meta had filed suit against the Austrian law. fst

EU accession: Von der Leyen praises Kyiv’s efforts

The EU Commission is expected to publish its recommendations on the issue of Ukraine’s EU accession next Friday. There are many indications that the Brussels-based authority will recommend that member states grant Kyiv the status of an accession candidate. During her visit to Kyiv on Saturday, Commission President Ursula von der Leyen praised Ukraine’s “enormous efforts and determination” on the road to the EU. The government has already done much to strengthen the rule of law, she said at a press conference with Ukrainian President Volodymyr Zelenskiy. “But more reforms need to be implemented, for example, to fight corruption.”

Von der Leyen had traveled to Kyiv for the second time over the weekend to discuss issues related to Ukraine’s application for EU membership. The commission’s assessment will be finalized by the end of this week, she announced. Zelenskiy stressed that Ukrainians are aware that candidate status would be only the beginning of the European road.

After the Commission, the ball will then be in the EU’s court: They would have to decide unanimously at the summit on June 23 and 24 to grant Kyiv candidate status. The formal prerequisite for this is that Ukraine fulfills the Copenhagen criteria. These include stable institutions that guarantee democracy, the rule of law, and the protection of minorities, as well as a functioning market economy. Another factor is the EU’s ability to integrate new members. The vote on candidate status does not prejudge the decision on admission.

Scholz, Macron, and Draghi traveling to Kyiv?

The challenge will be to emerge from the EU summit with a unified position “that reflects the scope of these historic decisions,” von der Leyen said. “I hope that in 20 years, when we look back, we will be able to say that we did the right thing.”

So far, however, the views of the EU states have diverged. States such as Estonia, Lithuania, and Latvia, but also Italy, and Ireland, are pushing for Ukraine to become an EU candidate quickly. EPP parliamentary group leader Manfred Weber also pleaded for it: “A message without back doors is needed that Ukraine will become an EU candidate,” said the CSU politician to the Funke Mediengruppe.

Other countries are more skeptical, such as the Netherlands and Denmark. It is still open how France and Germany will position themselves. While German Foreign Minister Annalena Baerbock (Greens) is in favor of candidate status, Chancellor Olaf Scholz (SPD) has not yet made a clear statement. He merely emphasized that he would not accept any special rules for accelerated EU accession. In doing so, he also pointed out that this would not be fair to the six countries of the Western Balkans that also hope to join the EU.

It is possible that Scholz will travel to Kyiv around the time of the EU summit. According to the German newspaper “Bild am Sonntag”, Scholz is discussing a joint visit to Zelenskiy with French President Emmanuel Macron and Italian head of government Mario Draghi before the G7 summit in Elmau, which begins on June 26. However, there was no confirmation of this over the weekend. tho/dpa

Scholz urges accession negotiations with North Macedonia

German Chancellor Olaf Scholz is pressing for an immediate start to EU accession negotiations with North Macedonia. During a double visit to the capitals of Skopje and Sofia on Saturday, he tried to soften the blockade by EU member Bulgaria. “The accession negotiations that were firmly promised two years ago must start now. In any case, I will work hard for this,” said the SPD politician.

North Macedonia and Bulgaria were the last two stops on a two-day trip to the Balkans by the chancellor to discuss EU prospects for a total of six countries in the region: In addition to North Macedonia, Montenegro, Albania, Serbia, Kosovo, and Bosnia-Herzegovina also want to become members.

Scholz now wants to create a new dynamic and restart the so-called Berlin Process with the EU accession candidates. “Everyone has called on me to do this. We will respond to this demand,” he said. Following the Russian attack on Ukraine, the chancellor also sees a new willingness among many other EU states “to support this path of the Western Balkans into the European Union more actively than was the case for many years”.

After his meeting with Scholz, the Prime Minister of North Macedonia, Dimitar Kovačevski, made it clear that his country wanted to receive confirmation from the EU summit in June that accession negotiations would begin. North Macedonia had made great efforts and reformed its administration and judiciary, he said. Scholz also acknowledged that the country’s citizens and government had “worked very hard” to clear the way for accession negotiations. Now the harvest should be in store for these efforts.

North Macedonia has been a candidate country for 17 years. In July 2020, the EU Commission gave the green light in principle for concrete negotiations. However, these are blocked by Bulgaria because of a dispute over historiography and the rights of the Bulgarian minority in North Macedonia. The Bulgarian head of government, Kiril Petkov, insisted on his country’s preconditions for EU accession talks with North Macedonia. In return, the EU would have to guarantee, among other things, that Bulgarians living in North Macedonia would be included in the constitution so that their rights would be respected. dpa

Switzerland joins oil embargo

As one of the most important hubs for international oil trade, Switzerland is adopting the EU’s new sanctions against Russia and Belarus – including the oil embargo – as the government announced in Bern on Friday. The EU sanctions will enter into force gradually with transition periods until the beginning of 2023.

Around 50 to 80 percent of the products of raw materials supplier Russia are traded via Switzerland, according to a report in the Swiss business magazine “Bilanz”. The Dutch trading group Vitol, based in Geneva, is the world’s largest independent oil trader. The company, like competitor Trafigura, has already significantly reduced or completely stopped trading in Russian crude oil and petroleum products, according to its own information. dpa

Will Europe’s embargo on Russian oil succeed?

By Daniel Gros

Daniel Gros, Vorstandsmitglied und Distinguished Fellow des Centre for European Policy Studies, im Standpunkt über Russland und Putins Potemkinsches Militär. — Daniel Gros is a member of the board and a distinguished fellow at the Centre for European Policy Studies.

As the war in Ukraine passes the 100-day mark, it is worth asking how much damage Western sanctions have done to Russia’s economy, and whether forthcoming measures – especially the European Union’s newly announced embargo on most Russian oil – can change Russian President Vladimir Putin’s strategic calculations.

Oil used to provide the bulk of Russia’s export earnings. In December 2021, exports stood at 7.8 million barrels per day – an annual rate exceeding 2.8 billion barrels. While this is a pre-invasion figure, Russia is expected to maintain robust export capacity until lack of access to cutting-edge Western equipment limits production.

In the short run, Western sanctions will not affect Russia’s oil output. Moreover, domestic use is falling as the Russian economy contracts. Russia can thus sustain its oil exports for the time being, and, at $110-120 per barrel, exports of crude alone could earn Russia over $300 billion per year – enough to finance its government and sustain its war.

The EU embargo is supposed to prevent this. The math making the rounds in diplomatic circles is simple: if the EU – which accounts for about half of Russia’s oil exports – stops importing Russian crude, Putin will lose $150 billion. But the reality is more complicated.

Even small reduction in oil volume drives up prices

Because demand for oil is very inelastic in the short run, even a small reduction in the flow of oil reaching global markets can cause prices to rise significantly. Indeed, studies show that, in the short run, revenues from oil sales increase when less oil is available. In other words, skyrocketing prices will boost Russia’s export earnings, giving the impression that sanctions have failed.

To be sure, prices will gradually decline again, as other countries, eager to take advantage of high prices, step up their oil production. Profit – not political pressure from the United States – was probably the primary motivation behind OPEC’s recent decision to increase production targets. Nonetheless, by the time prices fall, Russia will have reaped considerable revenues.

There is another key reason why the EU’s embargo on Russian oil will have only a limited impact: oil is a fungible commodity. Countries like India and China – which together consume twice as much oil as the EU – can purchase the oil that Europe otherwise would have imported. It is thus not possible to stop Russia’s oil exports.

It is also worth noting that the EU embargo applies only to seaborne imports of Russian crude oil, not to imports via pipeline. This partial ban – the result of a laborious compromise – is likely to be largely ineffective, because the seaborne oil, which has to be loaded onto tankers anyway, can easily be redirected to other destinations.

Lower prices are key

The success of sanctions should be measured not by the quantity of Russian oil Western countries import, but by how much revenue Russia collects from its exports. The key is lower prices, not lower volumes.

Any assessment of Russia’s potential export earnings should be based on the price at which the country can sell crude, rather than the world market price. Here, the news is encouraging: a large gap has opened up between the European oil price and the price of Russian oil, which is now being sold at a steep discount of some $30 per barrel. This divergence emerged right after Russia invaded Ukraine, indicating that it was a result not of official sanctions, but of self-sanctioning by traders, shippers, and importers who did not want to be associated with Russia.

High global prices mean that, even with this discount, Russia is earning around $80-90 per barrel. That is at least double the cost of production (around $40 per barrel), and far exceeds the price level a year ago. But, even though Russia is profiting from its oil exports, it is making almost $100 billion less per year than it would if it was selling its oil at full price

Ban on insurance for tankers

And these losses could grow larger, as a result of a less noticed – but potentially more important – decision taken at the same time as the EU embargo was announced. The EU and the United Kingdom agreed to a coordinated ban on insuring tankers transporting Russian oil. This will significantly impede Russia’s ability to ship its oil to buyers around the world, and should compel it to sell its output at an even larger discount.

The importance of oil prices to Russia’s geopolitical calculations cannot be overstated. Toward the end of 2014, Russia had begun to participate more openly in the fighting in Ukraine’s eastern Donbas region. If it continued to push further into Ukraine, the then-nascent Ukrainian military would not have been able to mount much resistance. But oil prices plunged from more than $100 to less than $50 per barrel – and Putin agreed to the Minsk agreements, which stopped the Russian advance.

Although international prices are now far above this level, the good news is that, given the discounts Russia is being forced to offer, global prices must fall to only $80 per barrel to cause significant economic pain. A substantial increase in oil production by other countries would help achieve this; an embargo on Russian oil will not. Western political leaders should acknowledge this reality, and admit that crippling the Russian economy is not within their power.

In cooperation with Project Syndicate.

EUROPE.TABLE EDITORS

Till
Hoppe

Charlotte
Wirth

Falk
Steiner

Timo
Landenberger

Corinna
Visser

Lukas
Knigge

Eric
Bonse

Sarah
Schaefer

Manuel
Berkel

Lisa-Martina
Klein

Markus
Grabitz

Stephan
Israel

Claire
Stam

Dear reader,

Yesterday’s election night was not a particularly good one for Emmanuel Macron: France’s president is likely to win the most seats in the National Assembly with his Ensemble alliance, but he is not assured of a majority of his own. The left-wing alliance around the EU and Germany critic Jean-Luc Mélenchon made strong gains in the first round of voting yesterday, as Tanja Kuchenbecker reports from Paris. The second round of voting in a week’s time will determine the outcome. Without a majority, Macron’s room for maneuver in his second term in office would be severely limited.

Will Macron soon be traveling to Kyiv with Olaf Scholz and Mario Draghi to meet Volodymyr Zelenskiy? There are plenty of rumors but confirmation is still pending. Zelenskiy eagerly awaits a clear signal of support from Macron and Scholz for Ukraine’s EU membership application. Commission President Ursula von der Leyen visited Kyiv for the second time over the weekend – and praised the government’s “enormous efforts”. On Friday, she is expected to present the Commission’s recommendation on candidate status.

Vladimir Putin and Xi Jinping are as thick as thieves – at least that was the image that the two presidents conveyed publicly. However, the fraternization apparently does not go as far as China helping Russia with weapons in its campaign against Ukraine. China’s Defense Minister Wei Fenghe stressed at the Shangri-La Dialogue in Singapore that his country had not provided any material support. The link between the two countries, he said, is a partnership, but not an alliance. Michael Radunski and Felix Lee have the details from the conference, which was heavily influenced by the rivalry between the US and China.

The Digital Services Act (DSA) was good to go. However, before the Council and Parliament could give their final blessing, trouble appeared: Some of the wording proposed by the French Council Presidency, as a result, is unacceptable to large sections of the parliamentary representatives. Falk Steiner has more on this in the News.

I wish you an interesting read and a good start to the week!

Your
Till Hoppe

Macron left to worry about his majority

Emmanuel Macron was re-elected in April, but the president still has to fear for his own majority in the National Assembly. In Sunday’s parliamentary elections, the left-wing alliance NUPES led by Jean-Luc Mélenchon achieved more votes than Macron’s camp. According to projections, it came in at more than 25 percent and was just ahead of Macron’s alliance. Marine Le Pen‘s far-right Rassemblement National (RN) party achieved around 19 percent of the vote.

The reason: Under the majority voting system, only the votes for the winner in the respective district count for the distribution of seats; all others fall by the wayside. If no candidate achieves an absolute majority in the first round of voting, all those who have achieved at least 12.5 percent of the registered voters advance to the second round. The relative majority is then sufficient for victory.

Macron can count on votes in many parts of the country. Mélenchon, on the other hand, is strong with the left-wing alliance in fewer constituencies in large cities and suburbs. According to forecasts, NUPES is likely to win between 180 and 230 seats in the National Assembly. For Macron’s Ensemble alliance, pollsters predict 270 to 305 seats. Le Pen’s RN is expected to win 34 seats.

Macron needs votes from the opposition

For the president, it could be close to an absolute majority of 289 seats. In that case, the president would have to hope that he would receive support from opposition parties on a case-by-case basis for bills. In that case, it could be difficult to push through projects such as his unpopular pension reform.

Macron’s alliance still has just under 350 deputies in the National Assembly. Traditionally, it is usually the case that the elected president also wins the majority in parliament. However, many French people are critical of Macron and feel that his policies are not sufficiently social.

For Mélenchon, the election is a success, even if it is not enough for the desired post of prime minister. His left-wing party has, so far, only 60 deputies in the National Assembly. The anti-capitalist has succeeded in forming an alliance with Socialists, Greens, and Communists. Since the presidential election on April 24, Macron has lost ground in the polls, while NUPES has made gains.

Mélenchon referred to his “social program” as justification. The 70-year-old had narrowly missed the runoff in the presidential election, finishing in third place behind Macron and Le Pen. That spurred him on. He is currently the driving force on the left of the political spectrum. The alliance Nouvelle Union Populaire écologique et sociale (New Ecologic and Social People’s Union), which Mélenchon launched, is counting on the dissatisfied among the citizens.

If the alliance were to win, Macron would have to appoint a prime minister from the opposition – he would hardly get past Mélenchon. Macron, therefore, repeatedly referred to him as a threat and equated him with the far-right Le Pen. Both, he said, had a “project of disorder and subjugation”. Mélenchon is critical of the EU and has frequently stated that treaties in the EU can be violated. This is mainly about deficit rules against excessive national debt. Mélenchon has also frequently criticized a “German dictate” in financial matters in the EU.

China: no material support for Russia

Moscow and Beijing have repeatedly celebrated their close ties in public. However, the alliance apparently does not carry as far as officials in Europe and the United States feared: China’s Defense Minister Wei Fenghe stressed over the weekend that his country had not provided any material support to Russia during the Ukraine war. The connection between the two states is a partnership, but not an alliance, he said at the Shangri-La Dialogue in Singapore.

In doing so, Wei apparently wanted to counter speculations that China would side with Russia to make common cause against the West. According to official sources, Beijing has so far not openly criticized the Russian invasion of Ukraine, but it has also not declared its support for Russia’s military offensive. China hopes the US and NATO will talk with Russia to create conditions for a cease-fire, Wei said. He strongly criticized the EU and NATO countries for supporting Ukraine with war equipment. Those who supply Ukraine with weapons are pouring gasoline on the fire, the defense minister said.

The remarks on Ukraine were directed mainly toward Washington. Overall, the Asian security conference in Singapore was dominated by tensions between China and the United States. Both sides tried to promote their competing visions of regional order and stability. Wei Fenghe and his US counterpart Llyod Austin exchanged blows.

The defense ministers of the two powers had met in person for the first time over the weekend. Relations between China and the United States are extremely tense. The conflicts range from the Uyghurs in Xinjiang to the South China Sea and Taiwan to China’s stance in the Ukraine war.

Speaking directly to Austin on Friday, China’s top military official had issued a strong warning against the possibility of war. “If anyone dares to split Taiwan from China, the Chinese army will definitely not hesitate to start a war no matter the cost.” Any conspiracy to bring independence to Taiwan would be crushed, and the unification of the motherland would be resolutely upheld. Wei makes it unequivocally clear: “Taiwan is China’s Taiwan”.

China’s Minister of Defense then followed up in the same tone when he gave his official speech at the Shangri-La Forum on Sunday – just as determined and just as unequivocal: “If anyone dares to secede Taiwan from China, we will not hesitate to fight,” Wei said. “We will fight at all costs, and we will fight to the very end“. No one should underestimate the determination and ability of Chinese forces to maintain their territorial integrity.

USA: China becomes increasingly aggressive

That is because the day before, US Secretary of Defense Lloyd Austin had outlined the American view of Taiwan and the region. In his nearly one-hour speech, Austin repeatedly drew parallels between Russia’s actions in Ukraine and China’s “more coercive and aggressive approach” in the Indo-Pacific. “Russia’s invasion of Ukraine is what happens when oppressors trample the rules that protect us all,” Austin said. “It’s what happens when big powers decide that their imperial appetites matter more than the rights of their peaceful neighbors. And it’s a preview of a possible world of chaos and turmoil that none of us would want to live in,” Austin said in Singapore.

And so Austin promised that the US would help countries in Asia to resist Chinese “bullying”. That, he said, was necessary to prevent a Ukraine crisis from repeating itself in the Pacific. Referring to Russia and China, he said, “We feel the headwinds – from threats, and intimidation, and the obsolete belief in a world carved up into spheres of influence”.

Austin cited, among other things, China’s military activities around Taiwan, such as its regular military flights, and warned of destabilization in the region. Only a few days ago, 30 Chinese aircraft had entered Taiwan’s so-called Air Defense Zone; according to Taiwan’s Ministry of Defense, more than 20 fighter jets were among them (China.Table reported).

Observers recently have noted a sharpening of US policy on Taiwan. When US President Joe Biden was asked in Japan in late May whether the United States would also defend Taiwan by deploying the US Army, Biden said, “Yes, that’s the commitment we made”. (China.Table reported). Shortly before, the US State Department changed the description of Taiwan on its website: It removed the reference to “one China” – a supposedly small but exceedingly symbolic change (China.Table reported). Until now, the US strategy was to remain intentionally vague. In this way, China was to remain in the dark about the US’s determination; and concurrently, Taiwan was not to be given any incentive to declare independence with supposed American backing.

China: USA causes conflicts worldwide

However, US Secretary of Defense Austin reassured on Saturday, “Our policy hasn’t changed, but unfortunately, that doesn’t seem to be true for the PRC”. Maintaining peace and stability in the Taiwan Strait was not just a US interest, he said, but one of international importance. “We do not seek confrontation or conflict. And we do not seek a new Cold War, an Asian NATO, or a region split into hostile blocs,” Austin said. The US Secretary of Defense’s words were meant to show everyone at the conference, as well as the people in the region, who the good guys are and who the bad guys are.

China simply could not let that stand. Only moments after the Secretary of Defense finished his speech, China’s first angry reaction followed. Lieutenant General Zhang Zhenzhong called Austin’s remarks a series of falsehoods and malicious insinuations, all aimed at confrontation. “The US has been strengthening its military presence in the Asia-Pacific region, consolidating bilateral military alliances and beefing up the AUKUS trilateral security partnership, the QUAD, the Five-Eyes alliance. What should we call this other than a confrontation?” He said it was the US that had wreaked havoc in the Middle East and brought instability to Europe. And now they are trying to destabilize the Asia-Pacific region, said the Deputy Chief of the Joint Staff Department of China’s Central Military Commission.

China’s Minister of Defense Wei also presented this line of reasoning again to delegates on Sunday, saying America’s behavior is the main cause of tensions – all over the world, from Ukraine to the South China Sea. Michael Radunski, Felix Lee

Data transfer: agreement into the unknown

By

Falk Steiner

In March, Joe Biden and Ursula von der Leyen signaled top priority and transatlantic unity by pledging political agreement. However, the Trans-Atlantic Data Privacy Framework (TADPF) is not yet in place – many questions still need to be clarified at the working level. Time is running out for the companies concerned.

Recently, however, positive signals have come from the US that are in line with the EU position. When it annulled the Safe Harbor and Privacy Shield agreements, the European Court of Justice also rejected the Commission’s certificates of adequacy because there is no reliable legal framework at the federal level in the USA. Just over a week ago, US Congress members across camps and chambers now introduced a draft Data Privacy and Protection Act. If passed in this or a similar form, it would be the first federal data protection law in the United States.

That it will happen is not guaranteed. Although the plan is supported by both US senators and members of the House of Representatives, by both Republicans and Democrats, not all key US politicians are on board yet. The Democratic chairwoman of the Congressional Commerce Committee, for example, has not yet signaled support. And the midterms on November 8, when the House of Representatives will be re-elected, and a third of the Senate will also be up for election, make the project seem ambitious in terms of time.

Tim Cook emerged as a particularly prominent advocate on Friday: via letter, the Apple CEO addressed US Congress members and urged them to quickly resolve the remaining points of contention. “Only Congress can ensure strong privacy protections for all Americans,” the letter reads, among other things. Otherwise, Cook said, the patchwork approach of state laws threatens to grow even larger: “We urge you to pass a comprehensive privacy bill as soon as possible, and we stand ready to support that process.”

For some years now, the Apple Group has been pursuing the economic, technological, and political goal of ensuring better data protection than the competition and has evidently been successful on the market in doing so. However, the ability to process personal data from Europe in the USA is also an important factor for Apple.

US proposal offers points of contact

Legally, the US project is not intended to directly address the main criticisms of the ECJ judges. In particular, it does not address the state powers criticized by the judges and the lack of legal protection for EU citizens.

On the one hand, however, the principles contained in the draft, such as data economy and user rights, are fundamentally similar to European data protection law. For example, there is to be a far-reaching requirement for consent and an obligation for data economy and privacy by design. On the other hand, the bill also does not provide for a restriction to US citizens. Instead, the law is linked to residence status in the US as a prerequisite for exercising rights, including class actions, which the data protection experts at the Electronic Privacy Information Center (EPIC) regard as fundamentally positive.

With this proposal, the amount of data that US companies process at all could be more limited from the outset. The data dump would be smaller from which US intelligence agencies and law enforcement could draw. This could also be beneficial for the TADPF.

Many details of the planned TADPF framework are still not publicly known. Behind the scenes, however, there is a lot of activity. Most recently, EU Justice Commissioner Didier Reynders wanted to discuss the design of the agreement with representatives in Washington at the beginning of June. The results of this trip are not known.

Criticism grows louder

Critics like Austrian privacy activist Maximilian Schrems with his organization None of Your Business (NOYB) are already warning of insufficient assurances. In an open letter to Reynders, US Secretary of Commerce Gina Raimondo and other stakeholders published at the end of May, Schrems warned against a de facto re-run of the Privacy Shield agreement, which he most recently brought down.

In a status report of the US Congressional Research Service, the US perspectives on the TADPF were summarized once again on June 2. It confirms Schrem’s fear that the seven Privacy Shield principles will be adopted without any adjustments.

Schrems also warns quite fundamentally that the TADPF should be based unchanged on the principles of the Privacy Shield. However, this was drafted when Schrems – then still a law student – first brought an EU-US agreement before the ECJ in 2015. Today’s legal basis, the General Data Protection Regulation GDPR, was not yet in force at that time. Without adjustments, old problems could once again become a stumbling block here.

Moreover, according to the details that have become known so far, major points of criticism by the ECJ would not be addressed at the statutory level but via presidential decrees, so-called executive orders. These can be changed by the US president at any time. On the one hand, this concerns the question of how US authorities handle data on EU citizens. On the other, what options Europeans should have to take action against suspected unlawful surveillance and data collection. Critics like Schrems see no viable solution without parallel changes to substantive US law, especially the Foreign Intelligence Surveillance Act (FISA).

Concrete legal texts still in progress

But they won’t come – at least not as part of the TADPF. The EU Commission confirmed on request that the framework will be based exclusively on presidential decrees. These would form the basis for a new adequacy decision, which the EU Commission would then draft. If this passes the necessary bodies, the way would be paved for a new dispute before the European Court of Justice – and data transfers would still be far from legal certainty.

In an answer published last Friday to questions posed by Socialist MEPs Paul Tang and Birgit Sippel, Justice Commissioner Reynders once again explained the further procedure, which also provides for Parliament’s right to appeal the adequacy decision. However, six weeks after the receipt of the “Priority Question”, the Directorate-General for Justice again failed to provide substantive answers to the specific questions of the MEPs.

However, the companies concerned are threatened with concrete trouble: A decisive procedure of the Irish data protection authority DPC against the Facebook parent Meta could put an end to the currently remaining way of transferring personal data via standard contractual clauses (SCC). When asked, DPC Ireland said it expected the case to be concluded in the coming weeks. It is at an advanced stage.

If the Irish data protection supervisory authority were to declare the legal basis invalid, US corporations such as Meta, Google, Microsoft, or Amazon would have to examine whether they still want to process personal data from the EU at all. Or whether they should refrain from doing so in view of the threat of penalties.

DSA: Dispute over changes comes to a head

The Digital Services Act (DSA) had actually been fully negotiated. However, before the Council and Parliament can give it their final blessing, the political agreement reached shortly before the presidential elections in France still has to be given the final legal form. Here, however, trouble has been brewing for weeks: Some of the wording proposed by the French Council Presidency, as a result, is unacceptable to large sections of the parliamentary representatives.

On Friday, a rare alliance of the responsible parliamentarians from the far left to the far right went on a confrontational course and demanded improvements from the Council. The rapporteur Christel Schaldemose (S&D) did not join in. The Dane is held partly responsible by her colleagues for the current debacle surrounding the DSA finale.

The criticism relates primarily to two recitals, the interpretation aids for the actual legal text. In recital 28, the Council Presidency’s last proposal, for the time being, is to require service providers to use stay-down filters under certain circumstances. The Parliament had actually declared this to be out of the question.

And in recital 29, there is suddenly a far-reaching exemption of the gambling and betting industry from the enforcement logic of the DSA. While the first part is interpreted mainly as unfortunate in parliamentary circles that are otherwise largely silent on the process, the second amendment is seen as a clear affront: This should have already been addressed in the negotiations, and an addition through the back door is inadmissible.

The French Council Presidency’s action, which is classified as improper, could lead to delays in the worst case. The DSA is to enter into force 15 months after promulgation in the Official Journal at the earliest. But only once it has been promulgated can the EU Commission, which is to be directly responsible for the particularly large providers, and the member states, which for their part will have to entrust authorities with enforcement and do quite a bit for it, get to work on implementation. If France does not get the problems under control by the end of June, the Czech Council presidency, which will then follow, will have to put the dossier, which has actually been negotiated, back on the agenda.

BNetzA and state media authorities ready to take on tasks

Meanwhile, exactly what the German implementation mechanism for the DSA will look like remains completely open. On the one hand, the role of digital services coordinator could go to the state media authorities, which are responsible for media regulation on behalf of the states and have already met the DSA criterion of independence for years. At the same time, however, there is also something to be said for the Federal Network Agency, which has a great deal of experience as a supervisory authority for very large and difficult companies. Following an ECJ ruling in 2021, more independence is to be created for it by law this year.

Representatives of both regulatory worlds explained at a panel at the Republica conference that there are different tasks to be done. There is a constitutional division of tasks, said Eva Flecken (MABB), director of the State Media Authority Berlin-Brandenburg, and the dividing line can be well drawn along the opinion-forming tasks. He did not want to make a bid speech, said Klaus Müller, President of the Federal Network Agency. However, there would hardly be a country in which all tasks were in one hand. For the business community, Bitkom board member Susanne Dehmel explained that companies could not choose who supervised them: “But it would be important to have competencies in the respective authority and a level playing field in the member states, as well as legal certainty for companies.”

Meanwhile, Austria’s Administrative Court on Friday referred the local relative of Germany’s Network Enforcement Act to the ECJ: The Austrian judges want the ECJ to tell them whether Viennese lawmakers violated European law with their communications platforms law. Among other things, they are asking the Luxembourg judges whether national legislators are allowed to enact such specific regulations at all under the e-commerce directive, which is now being revised with the DSA. The European subsidiaries of Google, Twitter, and Facebook parent Meta had filed suit against the Austrian law. fst

EU accession: Von der Leyen praises Kyiv’s efforts

The EU Commission is expected to publish its recommendations on the issue of Ukraine’s EU accession next Friday. There are many indications that the Brussels-based authority will recommend that member states grant Kyiv the status of an accession candidate. During her visit to Kyiv on Saturday, Commission President Ursula von der Leyen praised Ukraine’s “enormous efforts and determination” on the road to the EU. The government has already done much to strengthen the rule of law, she said at a press conference with Ukrainian President Volodymyr Zelenskiy. “But more reforms need to be implemented, for example, to fight corruption.”

Von der Leyen had traveled to Kyiv for the second time over the weekend to discuss issues related to Ukraine’s application for EU membership. The commission’s assessment will be finalized by the end of this week, she announced. Zelenskiy stressed that Ukrainians are aware that candidate status would be only the beginning of the European road.

After the Commission, the ball will then be in the EU’s court: They would have to decide unanimously at the summit on June 23 and 24 to grant Kyiv candidate status. The formal prerequisite for this is that Ukraine fulfills the Copenhagen criteria. These include stable institutions that guarantee democracy, the rule of law, and the protection of minorities, as well as a functioning market economy. Another factor is the EU’s ability to integrate new members. The vote on candidate status does not prejudge the decision on admission.

Scholz, Macron, and Draghi traveling to Kyiv?

The challenge will be to emerge from the EU summit with a unified position “that reflects the scope of these historic decisions,” von der Leyen said. “I hope that in 20 years, when we look back, we will be able to say that we did the right thing.”

So far, however, the views of the EU states have diverged. States such as Estonia, Lithuania, and Latvia, but also Italy, and Ireland, are pushing for Ukraine to become an EU candidate quickly. EPP parliamentary group leader Manfred Weber also pleaded for it: “A message without back doors is needed that Ukraine will become an EU candidate,” said the CSU politician to the Funke Mediengruppe.

Other countries are more skeptical, such as the Netherlands and Denmark. It is still open how France and Germany will position themselves. While German Foreign Minister Annalena Baerbock (Greens) is in favor of candidate status, Chancellor Olaf Scholz (SPD) has not yet made a clear statement. He merely emphasized that he would not accept any special rules for accelerated EU accession. In doing so, he also pointed out that this would not be fair to the six countries of the Western Balkans that also hope to join the EU.

It is possible that Scholz will travel to Kyiv around the time of the EU summit. According to the German newspaper “Bild am Sonntag”, Scholz is discussing a joint visit to Zelenskiy with French President Emmanuel Macron and Italian head of government Mario Draghi before the G7 summit in Elmau, which begins on June 26. However, there was no confirmation of this over the weekend. tho/dpa

Scholz urges accession negotiations with North Macedonia

German Chancellor Olaf Scholz is pressing for an immediate start to EU accession negotiations with North Macedonia. During a double visit to the capitals of Skopje and Sofia on Saturday, he tried to soften the blockade by EU member Bulgaria. “The accession negotiations that were firmly promised two years ago must start now. In any case, I will work hard for this,” said the SPD politician.

North Macedonia and Bulgaria were the last two stops on a two-day trip to the Balkans by the chancellor to discuss EU prospects for a total of six countries in the region: In addition to North Macedonia, Montenegro, Albania, Serbia, Kosovo, and Bosnia-Herzegovina also want to become members.

Scholz now wants to create a new dynamic and restart the so-called Berlin Process with the EU accession candidates. “Everyone has called on me to do this. We will respond to this demand,” he said. Following the Russian attack on Ukraine, the chancellor also sees a new willingness among many other EU states “to support this path of the Western Balkans into the European Union more actively than was the case for many years”.

After his meeting with Scholz, the Prime Minister of North Macedonia, Dimitar Kovačevski, made it clear that his country wanted to receive confirmation from the EU summit in June that accession negotiations would begin. North Macedonia had made great efforts and reformed its administration and judiciary, he said. Scholz also acknowledged that the country’s citizens and government had “worked very hard” to clear the way for accession negotiations. Now the harvest should be in store for these efforts.

North Macedonia has been a candidate country for 17 years. In July 2020, the EU Commission gave the green light in principle for concrete negotiations. However, these are blocked by Bulgaria because of a dispute over historiography and the rights of the Bulgarian minority in North Macedonia. The Bulgarian head of government, Kiril Petkov, insisted on his country’s preconditions for EU accession talks with North Macedonia. In return, the EU would have to guarantee, among other things, that Bulgarians living in North Macedonia would be included in the constitution so that their rights would be respected. dpa

Switzerland joins oil embargo

As one of the most important hubs for international oil trade, Switzerland is adopting the EU’s new sanctions against Russia and Belarus – including the oil embargo – as the government announced in Bern on Friday. The EU sanctions will enter into force gradually with transition periods until the beginning of 2023.

Around 50 to 80 percent of the products of raw materials supplier Russia are traded via Switzerland, according to a report in the Swiss business magazine “Bilanz”. The Dutch trading group Vitol, based in Geneva, is the world’s largest independent oil trader. The company, like competitor Trafigura, has already significantly reduced or completely stopped trading in Russian crude oil and petroleum products, according to its own information. dpa

Will Europe’s embargo on Russian oil succeed?

By Daniel Gros

As the war in Ukraine passes the 100-day mark, it is worth asking how much damage Western sanctions have done to Russia’s economy, and whether forthcoming measures – especially the European Union’s newly announced embargo on most Russian oil – can change Russian President Vladimir Putin’s strategic calculations.

Oil used to provide the bulk of Russia’s export earnings. In December 2021, exports stood at 7.8 million barrels per day – an annual rate exceeding 2.8 billion barrels. While this is a pre-invasion figure, Russia is expected to maintain robust export capacity until lack of access to cutting-edge Western equipment limits production.

In the short run, Western sanctions will not affect Russia’s oil output. Moreover, domestic use is falling as the Russian economy contracts. Russia can thus sustain its oil exports for the time being, and, at $110-120 per barrel, exports of crude alone could earn Russia over $300 billion per year – enough to finance its government and sustain its war.

The EU embargo is supposed to prevent this. The math making the rounds in diplomatic circles is simple: if the EU – which accounts for about half of Russia’s oil exports – stops importing Russian crude, Putin will lose $150 billion. But the reality is more complicated.

Even small reduction in oil volume drives up prices

Because demand for oil is very inelastic in the short run, even a small reduction in the flow of oil reaching global markets can cause prices to rise significantly. Indeed, studies show that, in the short run, revenues from oil sales increase when less oil is available. In other words, skyrocketing prices will boost Russia’s export earnings, giving the impression that sanctions have failed.

To be sure, prices will gradually decline again, as other countries, eager to take advantage of high prices, step up their oil production. Profit – not political pressure from the United States – was probably the primary motivation behind OPEC’s recent decision to increase production targets. Nonetheless, by the time prices fall, Russia will have reaped considerable revenues.

There is another key reason why the EU’s embargo on Russian oil will have only a limited impact: oil is a fungible commodity. Countries like India and China – which together consume twice as much oil as the EU – can purchase the oil that Europe otherwise would have imported. It is thus not possible to stop Russia’s oil exports.

It is also worth noting that the EU embargo applies only to seaborne imports of Russian crude oil, not to imports via pipeline. This partial ban – the result of a laborious compromise – is likely to be largely ineffective, because the seaborne oil, which has to be loaded onto tankers anyway, can easily be redirected to other destinations.

Lower prices are key

The success of sanctions should be measured not by the quantity of Russian oil Western countries import, but by how much revenue Russia collects from its exports. The key is lower prices, not lower volumes.

Any assessment of Russia’s potential export earnings should be based on the price at which the country can sell crude, rather than the world market price. Here, the news is encouraging: a large gap has opened up between the European oil price and the price of Russian oil, which is now being sold at a steep discount of some $30 per barrel. This divergence emerged right after Russia invaded Ukraine, indicating that it was a result not of official sanctions, but of self-sanctioning by traders, shippers, and importers who did not want to be associated with Russia.

High global prices mean that, even with this discount, Russia is earning around $80-90 per barrel. That is at least double the cost of production (around $40 per barrel), and far exceeds the price level a year ago. But, even though Russia is profiting from its oil exports, it is making almost $100 billion less per year than it would if it was selling its oil at full price

Ban on insurance for tankers

And these losses could grow larger, as a result of a less noticed – but potentially more important – decision taken at the same time as the EU embargo was announced. The EU and the United Kingdom agreed to a coordinated ban on insuring tankers transporting Russian oil. This will significantly impede Russia’s ability to ship its oil to buyers around the world, and should compel it to sell its output at an even larger discount.

The importance of oil prices to Russia’s geopolitical calculations cannot be overstated. Toward the end of 2014, Russia had begun to participate more openly in the fighting in Ukraine’s eastern Donbas region. If it continued to push further into Ukraine, the then-nascent Ukrainian military would not have been able to mount much resistance. But oil prices plunged from more than $100 to less than $50 per barrel – and Putin agreed to the Minsk agreements, which stopped the Russian advance.

Although international prices are now far above this level, the good news is that, given the discounts Russia is being forced to offer, global prices must fall to only $80 per barrel to cause significant economic pain. A substantial increase in oil production by other countries would help achieve this; an embargo on Russian oil will not. Western political leaders should acknowledge this reality, and admit that crippling the Russian economy is not within their power.

In cooperation with Project Syndicate.