Brussels Playbook: He said, she said, Xi said — Fiscal reform scoop — Making big oil pay

Brussels Playbook: He said, she said, Xi said — Fiscal reform scoop — Making big oil pay
Опубликовано: Thursday, 06 April 2023 05:33

What’s driving the day in Brussels.



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DRIVING THE DAY: EU-CHINA Share on Twitter Share on Facebook Share on Linkedin Share on Handclap

HE SAID, SHE SAID, XI SAID: Today, French President Emmanuel Macron and European Commission chief Ursula von der Leyen meet China’s leader Xi Jinping, as they seek to convince Beijing to play a more constructive role to help end Russia’s illegal and brutal war against Ukraine. POLITICO’s editor in chief Jamil Anderlini and our senior France correspondent Clea Caulcutt accompanied the Europeans on the trip, and sent in a dispatch from Cotam Unité (aka the French version of Air Force One) …

Laying it on: A charming Macron greeted everyone on the plane personally; then the A330 took off with a full moon reflected on its wings. The wine on board was particularly good. Passengers were fed a snack of “crêpes with powder-based cheddar cheese filling” upon takeoff — surprisingly delicious. Dinner was smoked salmon and edamame pea salad with French cheese, then a choice of scallops or beef. Citrus pie and French chocolates capped things off. Breakfast was salmon on croissant with chocolate, fruit and nuts, yoghurt and French toast. What does one watch on Cotam Unité? The Americans saison 3, naturally — presumably to get everyone in the mood for being the targets of some espionage.

Remember COVID? On landing in Beijing, Chinese authorities required all delegates, including ministers, to deplane to take PCR tests aboard airport shuttle buses. The ministers then got back on the plane via the back door and eventually came down the steps behind Macron as he was greeted by Chinese Foreign Minister Qin Gang and a large bouquet of flowers.

Jam today: The route from the airport to the French ambassador’s residence was completely blocked for the motorcade, causing huge snarling traffic jams in the city of more than 20 million. The same goes for each of the president’s engagements, which surely won’t fill the hearts of ordinary Beijingers with enthusiasm for Sino-French amity!

Ahead of his meeting with Xi, Macron spoke with journalists about the objectives of his visit, hitting back against criticism from the U.S. that his diplomatic efforts with China are futile. According to Macron, France should not “be one of those beautiful souls who don’t talk to anyone anymore,” but should try to conduct a dialogue “with humility.”

On the agenda: Macron briefed the reporters on the hot issues he’ll discuss with Xi: Several Western countries, including the U.S., fear China will send arms to Russia, which could radically change the situation in Ukraine. Macron was cautiously optimistic, saying he didn’t see any “affirmed will” on the Chinese side to deliver weapons.

But he also issued a warning: “Anyone who would help the aggressor would be putting themselves in a position of complicity in the violation of international law,” Macron said.

Belarus: The other hot topic on the table is Vladimir Putin’s announcement that Russia will install nuclear missiles in Belarus. China repeatedly said it rejects any form of nuclear threat — but has not yet publicly addressed this. “We must, we can re-engage on this issue,” said Macron.

Today’s timing: Macron will meet Xi at 9:45 a.m. CET … von der Leyen meets Xi at 11:45 a.m. … their trilateral is at 12:20 p.m. … von der Leyen press conference at 2:15 p.m.

OPENING SHOT IN BEIJING: On Wednesday, French Foreign Minister Catherine Colonna met her Chinese counterpart, Qin Gang in Beijing. The Chinese envoy invoked Gaullist nostalgia, saying: “Since Mao … and de Gaulle, China and France have built and developed relations based on strategic autonomy. The more complex the world becomes, the more necessary it is to adhere to this.” Translation: Don’t side with the U.S. H/t Stuart Lau.

ALSO IN BEIJING: The foreign ministers of Iran and Saudi Arabia, for their first formal meeting in more than seven years, Reuters reports.

NOW READ THIS — TICKING TIME BOMB IN EU-US RELATIONS: EU and American negotiators are scrambling to solve a five-year dispute over steel and aluminum dating back to former U.S. President Donald Trump’s decision to slap tariffs on European imports. And while they have until October to get a deal, they’re still so far apart that EU officials now fear the chances of an agreement are slim, report my colleagues Barbara Moens and Steven Overly.

FISCAL REFORM Share on Twitter Share on Facebook Share on Linkedin Share on Handclap

SCOOP — GERMANY SEEKS 1 POINT YEARLY DEBT REDUCTION IN EU SPENDING RULES REFORM: The German government wants to introduce safeguards in a reform of EU rules on government spending to ensure “a realistic, timely and sufficient step-by-step reduction of debt- and deficit ratios,” according to a paper that Berlin sent to the European Commission on Wednesday, which my colleague Paola Tamma has obtained.

Context: Berlin is fearful that the Commission’s proposed reform, focusing on country-specific debt reduction paths, would leave too much leeway to bilateral horse trading between Brussels and capitals. The Commission sought to answer Berlin’s fears by floating options last week, as we reported, but Berlin has its own ideas.

Germany’s proposal: Berlin wants to introduce a “common safeguard” whereby countries with debt-to-GDP ratios above 60 percent would need to slash it by “at least” 1 percentage point per year for those with high levels of debt, and by 0.5 percentage points for those with “medium” debt.

Benchmark: Germany also asks for a “common quantitative benchmark” to ensure spending doesn’t outpace growth, whereby the difference between a country’s potential growth and net primary expenditure could be at least 1 percent. So for instance if a country’s output is expected to be 1.5 percent in a given year, it could only spend up to 0.5 percent of GDP.

Exemptions for EU investments: Berlin is ready to accept that “additional EU programs,” such as investments under the EU’s post-pandemic recovery fund, are exempted — provided the debt reduction safeguard is respected.

What’s next: The Commission aimed to present legal proposals in late April. But now it has to decide whether it will take up Germany’s suggestions, or go ahead with its own ideas, and risk a stalemate in the Council.

ENERGY FOR UKRAINE Share on Twitter Share on Facebook Share on Linkedin Share on Handclap

PRESSURE BUILDS ON WESTERN ENERGY FIRMS TO DONATE WINDFALLS TO UKRAINE: A Ukrainian proposal for Western fossil fuel firms that made big bucks last year to voluntarily hand over some of their windfalls is picking up steam, with the initiative getting positive signals in some EU capitals.

Profiting from the war and driving inflation: As POLITICO’s Victor Jack reported last week, Kyiv’s Energy Minister German Galushchenko said “it would be fair” for Western oil and gas companies that made bumper profits during the energy price crisis last year to donate some of those profits toward Ukraine’s reconstruction. “They get this money because we are fighting,” Galushchenko said. He raised the idea with EU ministers at last week’s Energy Council.

By the numbers: BP, Chevron, ExxonMobil, Total and Shell made $200 billion in profits in 2022.

The initiative is receiving positive signals in some EU countries. Austria’s energy ministry told me it “welcome[s] voluntarily contributions by [fossil] energy companies, which have made profits in the wake of the crisis, for the reconstruction of Ukraine.” A Lithuanian government official, citing the example of the partly Lithuanian-state-owned Ignitis Group that’s already decided to donate 10 percent of its windfalls, said Vilnius “encourage[s] all member states to follow Lithuania’s example.” Another EU energy ministry said they “are open to exploring” the idea, but it “should be investigated and planned throughout Europe.” A senior diplomat from a fourth country also said they were “obviously open” to encouraging the idea, though the proposal was so far “vague.”

Role model: Darius Maikštėnas, CEO of Ignitis Group, which is planning to donate €12 million “this year,” told me it would be right for energy firms with the “largest windfall profits” in 2022 that “care about true corporate responsibility” to donate to Kyiv — also to “protect Western type of democracy and business environment.” While he was skeptical about more government-imposed windfall levies, Maikštėnas said “it would be fantastic for European Union officials to step in” and encourage voluntary donations. The Commission declined to comment.

But how would it work? Maikštėnas dismissed practical concerns, arguing that “all companies” could do something similar to Ignitis. He said the company first calculated its windfall profits by comparing its 2022 results to early projections and its market guidance for earnings before interest, taxes, depreciation and amortization. Then it proposed the move to shareholders, 99.9 percent of whom voted in favor of the measure — and they will now send the cash to Kyiv through a special legal vehicle.

WORST COULD STILL BE TO COME: Amid that backdrop comes a new report out this morning that argues that while Europe won Putin’s gas battle last winter, a lengthy energy war is ahead. Cheap Russian pipeline gas has been replaced by pricier LNG — a structural change that will make EU industry less competitive over years to come, the report by consultancy BCG argues. Europe’s chemicals, steel, building materials and automotive sectors all face a structural loss in cost competitiveness from significantly increased production costs — more than 10 percent in 2030 over 2020.

Risk of complacency: “In steel, using hydrogen and direct-reduction routes in Germany would lead to around 35 percent higher costs than in the U.S.,” Patrick Herhold from the Boston Consulting Group told Playbook. And he warned that industry is underestimating the impact: “While scenarios point to an uplift of 50 percent to 100 percent in gas prices by 2030, more than half of our survey respondents expect increases of only 11 percent to 50 percent.”

Go green or go bust: The obvious way out is to develop green industries, BCG argues. “Our very future is in green markets … growth will not come from fossil-based business models. But European companies need to move beyond crisis response and take a bold leap of faith,” Herhold said.

MORE RUSSIAN WAR FALLOUT Share on Twitter Share on Facebook Share on Linkedin Share on Handclap

NATO HOPES: Things have been busy out in NATO headquarters in Brussels, where foreign ministers gathered earlier this week for a two-day meeting. Ukraine’s Dmytro Kuleba on Wednesday said it’s high time his country got the green light to join the military alliance. “This old concept of why Ukraine should not be given membership is outdated. It doesn’t meet the reality check,” he told my colleague Suzanne Lynch in an interview. “The truth is that we are not getting any closer to that open door.”

We’re happy for you, but … Kuleba pointed to the big news out of this week’s meeting — Finland’s historic entry to the club. “I’m happy for my friends from Finland who are becoming NATO members and who share more than 1,000 kilometers of border with Russia. So NATO is not afraid of having a joint border in the north, but somehow is afraid of having a joint border in the south?” he said.

Preparing for the fight: As Ukraine prepares for its coming counter-offensive, Kuleba said security of supply of weaponry is essential. “This war — it’s not a sprint, it’s a marathon. And while, for example, you may have 100 shells in your stock, and you know that you can count on them for the counter-offensive, you need to know how many shells you will have in stock in two or three months.”

Next steps: With focus already turning to the NATO summit in Vilnius in July, Ukraine is keen to move closer to the alliance and get security guarantees. But British Foreign Secretary James Cleverly told my colleague Lili Bayer that “now is not the time” for a concrete conversation on Ukraine’s NATO bid, and instead the focus is “about their self-defense in the here and now.”

AMMO FOR UKRAINE UPDATE: The plan for the EU to jointly buy ammunition for Ukraine is still stalled, after ambassadors who met Wednesday to discuss the issue were unable to make significant progress on whether arms contracts will go exclusively to EU companies or be open to outside manufacturers. Jacopo Barigazzi has the details.

ZELENSKYY UPSTAGED: Meanwhile, Ukrainian President Volodymyr Zelenskyy’s state visit to Warsaw on Wednesday blew up into a political crisis when Poland’s agriculture minister quit over his inability to cut the amount of Ukrainian agricultural products flooding into the country. The issue is a key priority for Poland’s ruling Law and Justice party, which has to keep farmers onside ahead of this fall’s parliamentary election. Nicolas Camut, Bartosz Brzezinski and Wojciech Kość have the story.

Jets for Ukraine update: Still, the Warsaw-Kyiv alliance is strong, and Zelenskyy said Poland would help form a warplane coalition to supply fighter jets to Ukraine.

CRIMEA TABOO BROKEN: Andriy Sybiha, a Zelenskyy adviser, told the Financial Times that Kyiv is willing to discuss the future of Crimea with Russia: “If we will succeed in achieving our strategic goals on the battlefield and when we will be on the administrative border with Crimea, we are ready to open [a] diplomatic page to discuss this issue,” Sybiha said. But, he added, “it doesn’t mean that we exclude the way of liberation [of Crimea] by our army.”

EU FUNDS TO MOLDOVA: The European Commission will send Moldova €50 million in financial support. Chișinău received the first €10 million on Wednesday, and will get the rest in May, Brussels said in a statement. Moldova, which was granted EU candidate status last June, has been strongly affected by Russia’s war in Ukraine, welcoming hundreds of thousands of refugees while dealing with Kremlin-linked attempts to destabilize its government.

MEANWHILE, IN RUSSIA … Putin has turned the clock back to an era in which accredited Western journalists are arrested and children of the “enemies of the state” are thrown into state orphanages, writes Jamie Dettmer in this analysis.

#FreeEvan update: “In my own mind, there’s no doubt” that jailed Wall Street Journal reporter Evan Gershkovich is “being wrongfully detained by Russia,” U.S. Secretary of State Antony Blinken said during a briefing with journalists in Brussels on Wednesday. He added that the U.S. is “working through the determination on wrongful detention.” That designation would mean the responsibility for the case would be transferred from the State Department’s Bureau of Consular Affairs to the office of the Special Envoy for Hostage Affairs, which Reuters writes would allow the U.S. to allocate more resources to securing the journalist’s release.

Who was behind the St Petersburg bombing? Jamie takes a look at the leading theories.

ROAD TO 2024 EU ELECTION Share on Twitter Share on Facebook Share on Linkedin Share on Handclap

EPP’S CORRUPTION HEADACHE: Just months after the European People’s Party went after the Socialists and Democrats group over Qatargate, the EPP has a headache of its own: The man hired by EPP chief Manfred Weber to run his digital campaign for the 2019 EU election is now at the center of a pan-European corruption probe. More here by Eddy Wax, Gabriel Rinaldi and Wilhelmine Preussen.

FINNS CHANGE ALLEGIANCE: The far-right Finns Party will leave the nationalist Identity and Democracy (ID) group in the European Parliament to join the right-wing European Conservatives and Reformists (ECR), the party announced Wednesday. The “radical change in Finland’s security policy” caused by Russia’s war led it to “reexamine international cooperation networks,” the party said. Nicolas Camut has more.

EFA BACKS SPITZ: The European Free Alliance (EFA) will run for the European elections 2024 with a tandem of Spitzenkandidaten. The candidates will be unveiled at the party’s Congress in October in Strasbourg.

EU INSTITUTIONS SNUB MUSK’S TWITTER BLUE CHECK: The Commission and Parliament won’t pay Twitter to get their hundreds of official EU accounts verified under the paid “Twitter Blue” program, according to the institutions’ press services. Twitter has given most of the 175 official Commission accounts a gray checkmark instead, a Commission spokesperson told my colleague Clothilde Goujard. Most of the 60 Parliament press service accounts were also granted the gray tick, meant for government accounts. In the U.S., the White House has previously said it would not opt for the new blue-check program.

**On April 19 at 6:30 p.m. BST, a senior cabinet minister will headline POLITICO Tech U.K. Launch Event. Register today for online attendance.**

IN OTHER NEWS Share on Twitter Share on Facebook Share on Linkedin Share on Handclap

SCOOP — EU-US SUMMIT IN OCTOBER: A high-level meeting between U.S. President Joe Biden, European Council President Charles Michel and Commission chief Ursula von der Leyen is tentatively scheduled for October, two EU officials told POLITICO’s Barbara Moens. The last official EU-U.S. summit was in June 2021, although Biden did attend a meeting of EU leaders in March 2022.

SÁNCHEZ WANTS MELONI TO TEAM UP: Spanish Prime Minister Pedro Sánchez continued his tour of EU capitals ahead of his country’s Council presidency, stopping in Rome on Wednesday. Standing alongside his counterpart Giorgia Meloni, Sánchez said Spain and Italy should work together to get fiscal rules reform over the line this year. “We can’t wait for 2024 or 2025. We have to do it in 2023,” Sánchez warned.

On migration, both countries agreed to “talk less about the internal dimension of migration,” aka secondary migration from Southern to Northern Europe, and “talk more about the external dimension of migration,” meaning “cooperation and collaboration with countries of origin and transit countries.”

On energy, Sánchez said Spain would use its presidency to seek a comprehensive reform of the electricity market to safeguard Europe’s competitiveness. “We cannot be paying caviar prices for energy that, for example, with renewables … [is] infinitely much cheaper,” a combative Sánchez said, arguing Rome and Madrid had warned that the power pricing system was broken even before Russia’s invasion.

BERLUSCONI UPDATE: Former Italian Prime Minister Silvio Berlusconi, who was in intensive care on Wednesday, “is stable” and will “make it,” his brother Paolo Berlusconi told the media last night. Ansa has his comments.

FRANCE STRIKES AGAIN: France will be hit by fresh strike action and protests against Macron’s pensions reform today, after trade union chiefs walked out of a meeting with Prime Minister Elisabeth Borne on Wednesday. The standoff over pensions has raised fears that the country may come to vote for a President Marine Le Pen in 2027, but Mujtaba Rahman argues in this column for POLITICO that the speculation is premature.

AGENDA Share on Twitter Share on Facebook Share on Linkedin Share on Handclap

— Commission President Ursula von der Leyen and French President Emmanuel Macron in Beijing, where they’ll meet with China’s President Xi Jinping. Macron will meet Xi at 9:45 a.m. CET … von der Leyen meets Xi at 11:45 a.m. … their trilateral is at 12:20 p.m.von der Leyen press conference at 2:15 p.m. Watch.

Ursula von der Leyen also meets Chinese Premier Li Qiang; meets with President of the EU-China Chamber of Commerce in China Joerg Wuttke.

— Russian Foreign Minister Sergey Lavrov meets his Turkish counterpart Mevlüt Çavuşoğlu in Turkey.

— POLITICO’s Ryan Heath interviews IMF chief Kristalina Georgieva ahead of next week’s IMF and World Bank Spring Meetings at 3 p.m. Brussels time. Watch.

— Maundy Thursday.

BRUSSELS CORNER Share on Twitter Share on Facebook Share on Linkedin Share on Handclap

COMMISSION HIDES STAFF CONTACT INFO: The European Commission has removed the names of lower-level staff from the EU WhoisWho directory. Read more by Sarah Wheaton.

GOALS GALORE: POLITICO’s football team took down a super-team of Brussels consultants in a 21-goal thriller Wednesday night. POLITICO scored a last-gasp winning goal to beat the consultancy team, made up of players from Hanbury Strategy, BCW, GCI Health, Rud Pedersen Public Affairs and Rasmussen Global, our resident sports correspondent Ali Walker writes in to report.

Tough night at the office: After losing 11-10, Hanbury’s Tom Denney, manager of the consultancy select, said: “We put in a good performance so to be on the wrong end of a narrow defeat is obviously disappointing. On the balance of play I thought we deserved more from the game.”

Who’s next? POLITICO captain Vlad Hosu grinned: “We welcome other challengers. Bring them on.”

REELECTED: Aristotelis Chantavas, head of Enel Green Power Europe, was reelected president of SolarPower Europe on Wednesday.

BIRTHDAYS: MEP Anna Júlia Donáth and Valérie Hayer; Former MEP Jo Leinen; Oliver Gajda of the European Crowdfunding Network; Former U.K. Ambassador to Germany Sebastian Wood; former Munich Security Conference boss Wolfgang Ischinger.

THANKS to Clea Caulcutt, Paola Tamma, Suzanne Lynch, Giorgio Leali, Victor Jack, Clothilde Goujard, Nicolas Camut, Ali Walker, Jamil Anderlini, Stuart Lau, Playbook reporter Ketrin Jochecová and producer Grace Stranger.

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