Source: Pew Research Center

A Forsa survey conducted for our German-language sister publication Internationale Politik in February produced a result that basically confirmed earlier polls: a fairly wide plurality of Germans (46 percent) consider the rise of “Asian countries” an opportunity, while only a third (33 percent) consider it a threat. This mirrors findings from other surveys over the past few years: Growing numbers of Europeans, especially Germans, have been describing China more positively, seeing it more as a potential partner than a potential competitor.

In a Pew Research Center global attitudes survey conducted in spring 2017, the United States and China were neck and neck in terms of favorability, with China more popular in the Netherlands and Spain and just about tied with Germany, France, Sweden, and the United Kingdom. A fifth of Germans (21 percent) described “China’s power and influence” as a threat – but then, a third said the same of the US (35 percent).

And as far back as 2013, the German Marshall Fund’s Transatlantic Trends survey showed a transatlantic divide on the issue: While almost two thirds of Americans viewed China as a threat, Europeans were nearly evenly divided, with Germany, the Netherlands, Sweden, and the UK more likely to see China as an opportunity and France, Italy, Poland, Portugal, and Spain more likely to see it as a threat.

Are Germans simply more optimistic? That seems unlikely.

Two things are important to establish when looking at survey data on Asia in general or China in particular (and it’s worth noting that the two often serve as proxies for each other in survey questions—ask about Asia and your respondent will likely think of China).

First, even the people who view the rise of China as an opportunity haven’t necessarily liked it that much. In the same Transatlantic Trends survey, 60 percent of Europeans—including 71 percent of Germans and 65 percent of Swedes—said their opinion of China was “unfavorable,” and 65 percent of Europeans described a strong international leadership role for China as “undesirable.” The more recent Pew poll shows that people have warmed up to China since then, but it should be clear that seeing China as an economic opportunity does not necessarily correlate with seeing it as a friend.

Second, demographics matter. A closer examination of the Forsa poll reveals two details worth examining. First, there is a significant education divide between Germans who view China as an opportunity and Germans who view China as a threat: 51 percent of Germans who studied beyond high school see China as an opportunity, compared to only 40 percent of those who did not study beyond high school and 31 percent who attended the less prestigious Hauptschule. In other words, the more educated a German is, the more likely he or she is to see China as an opportunity.

Second, there is no clear difference between the responses given by Germans from different political backgrounds. A supporter of Merkel’s CDU was just as likely (allowing for a 3 percent margin of error) to see China as an opportunity as a supporter of the center-left SPD, and even the outliers—the Greens at 57 percent and the FDP at 47 percent—were not that far apart. The only exception is the right-wing populist Alternative für Deutschland: AfD voters were considerably more likely to see China as a threat, and considerably less likely to see it as an opportunity.

What does this mean? Voters from very different parties with very different ideas regarding international trade held basically similar views regarding the economic rise of Asia.

Here’s one possible explanation for these attitudes: China has become such a political symbol in both the US and Europe—a stand-in for foreign competition, and globalization in general—that questions about China elicit answers about economic security. If a European is asked how they feel about the rise of China (or Asian nations in general), they will answer by estimating their own likelihood of being displaced—an educated German whose job is reasonably secure will see China as an opportunity, while a less educated German (or a French or Spanish respondent) with an uncertain economic future will see China as yet another competitor in the workplace.

These respondents would be hard-pressed to name any of China’s policies, or indeed to point to the sectors where it offered either a threat or an opportunity. But they know how relatively precarious their own economic positions are, and how likely any new factor is to be one or the other. In other words, when we ask about China, we are really asking: How prepared do you feel for competition?

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© REUTERS/Tyrone Siu

Even for the rapid pace of our age, the shift of power and wealth to Asia has happened with remarkable speed. As Indian prime minister Narendra Modi recently reminded the World Economic Forum, his country’s economy is now six times as large as it was in 1997—the last time an Indian prime minister had spoken in Davos. The growth of the Chinese economy has been even more momentous. In 2014, according to the IMF, China became the world’s largest economy, ranked by purchasing power. The United States now is number two, relinquishing the top spot that it had held since the late 19th century. The IMF figures also showed that three of the world’s four largest economies are now in Asia, with Japan at number three and India at number four. In 2009, China also became the world’s largest merchandise exporter—a position that the US had held since the World War II. China is also now a vast market. Daimler Benz sells more cars in China than in any other foreign country. Indeed in 2016, China became Germany’s largest trading partner.

The economic transformation of Asia first became evident in Japan in the 1960s and then in South Korea, Taiwan, and parts of Southeast Asia in the 1970s. The expansion and evident wealth of the Japanese economy, in particular, was so dramatic that by the late 1980s, many Americans began to fear that the US might be eclipsed by its old second world war adversary. Yet the population of Japan, at just over 120 million in 1990, was too small to shift the global balance of economic power on its own. The rise of China and India, two countries with populations of over 1 billion people, is a different matter. From 1980 onward, the Chinese economy began to grow at the double-digit rates pioneered by Japan in the 1960s. India also grew strongly, albeit not quite as fast after economic reforms in the early 1990s.

The fundamental reason for the shift in economic power to Asia is simple—weight of numbers. By 2025 two-thirds of the world’s population will live in Asia. By contrast the United States will account for about 5 percent of the world’s population and the European Union around 7 percent. Hans Rosling of Sweden’s Karolinska Institute put it nicely when he described the world’s pin-code as 1114: of the planet’s 7 billion people, roughly 1 billion live in Europe, 1 billion live in the Americas, 1 billion in Africa and 4 billion in Asia. By 2050, the world’s population is likely to be 9 billion, and the pin-code will have changed to 1125, with both Africa and Asia having added a billion people.
For centuries, the wealth and technology gap between West and East was so enormous that western nations dominated international affairs and business, no matter the difference in population. But rapid economic development in Asia over the past two generations means that this wealth gap has narrowed sufficiently, and Asia is beginning to tilt the balance-of-power in the world.

Easternization Full Speed Ahead

Western skeptics tend to highlight any signs of political or economic turmoil in China in particular—and there is no shortage of those. In 2015 alone, China experienced a sharp slowdown in growth, a spectacular plunge in the stock-market, an increasingly harsh political crackdown on domestic dissent, and the arrest or interrogation of high-profile political, media, and business figures as part of an effort to stamp out graft. It may well be that China’s economy will slow sharply in the coming years and will fall well short of the 7 percent growth a year that President Xi has targeted.

But a slowdown in Chinese or Asian growth would no longer be transformative. The economic development that allows China and India to push for great power status has already happened. The most senior analysts in western governments are already operating on the assumption that the shift in economic power from West to East will continue and that economic change will translate into political power. America’s National Intelligence Council recently predicted: “By 2030 Asia will have surpassed North America and Europe combined in terms of global power, based upon GDP and population.”

China’s communist system is clearly vulnerable to political and economic shocks, and India is notoriously hard to govern. But the idea that the fragility of the Chinese or Indian systems means that the trend of “Easternization” will soon end ignores the extent to which the West’s own rise was punctuated by episodes of extreme instability. The US, after all, fought a civil war in the middle of the 19th century, but that did not halt its rise to global pre-eminence. The rise of Asia has already been punctuated by occasional crises. China was on the brink of revolution in 1989, just a decade after the economic reforms promoted by Deng Xiaoping had begun. South Korea, Thailand, and Indonesia all suffered huge economic damage during the Asian financial crisis of 1997. Yet the rise of Asia has marched ahead.

Predicting how this shift in economic power will change international politics, however, is an uncertain business because the relationship between economic and political power is not straightforward. When China became the world’s largest economy it did not also automatically become the world’s most powerful country; similarly, while the IMF may have ranked India as the world’s third largest economy, even India’s leaders acknowledge that their country is still no more than a mid-ranking power in international politics.

Over the long run, however, there clearly is a strong relationship between economic might and international political power. The British Empire became unsustainable when Britain’s economy was no longer strong enough to support its global commitments. The Soviet Union lost the cold war largely because its economy was too weak to keep up with the United States. By contrast, America’s rise in the 20th century would have been impossible without the might of the American economy. In time, the growing wealth of Asian nations will also translate into political power that will be felt all over the world.

Asia’s New Order

The erosion of America’s strategic and economic dominance formed the backdrop to the election of Donald Trump. In pledging to “Make America Great Again,” Trump implicitly promised to reverse the shift of power to Asia, restoring America to its unrivalled position.

Some of Trump’s most important advisers made a direct link between globalization, the rise of Asia, and the decline in American wealth and influence. Steve Bannon, who was appointed as chief strategist in the Trump White House, argued: “The globalists gutted the American working class and created a middle class in Asia.” Bannon and Trump have fallen out, but the protectionist instincts of the Trump administration endure. Trump’s first months in office began with a more conciliatory stance over trade. When Chinese President Xi Jinping visited Trump at his Florida estate in April 2017, Xi did a masterful job of charming his American counterpart. Months later, Trump was still waxing lyrical about their relationship, telling an interviewer: “We got along great. I like him a lot. I think he likes me a lot.” Early threats of tariffs against China were played down, only to be revived a few months later—a useful reminder of the volatility of policymaking in the Trump White House.

Trump’s unpredictability is a profound worry for Japan and South Korea, America’s closest allies in East Asia. Both countries know that they would be in the front line if a war were ever to break out on the Korean peninsula or in the South China Sea. Efforts by South Korean President Moon Jae-in to launch a rapprochement with the North Korea underlines the extent to which US and South Korean interests are beginning to diverge. For the Moon administration, the biggest short term security threat is that the US, in pursuit of its own security interests, will attack North Korea and provoke a devastating war on the Korean peninsula.

The Japanese government, meanwhile, like the Obama administration, understands that the likeliest route to a China-dominated Asia is through commerce rather than conflict. Twenty years ago America was the most significant market for all the major Asian economies, and Japanese multinationals were the largest foreign investors across Southeast Asia. But those days are gone. Now China is the most important trading partner for South Korea, Japan, Australia, and most of the nations of South East Asia, and this carries geopolitical significance: Asian countries will be much less willing to confront China—or side with the US or Japan in a territorial dispute—if their economic futures depend on goodwill from Beijing.

For the Abe administration, the Trans-Pacific Partnership (TPP) —a giant new trade deal linking 12 countries including the US and Japan that had been painstakingly negotiated by Obama and Abe—represented a last effort to push back against a China-dominated co-prosperity sphere in East Asia. Trump’s repudiation of the deal was thus a grievous blow to Japan’s survival strategy for the 21st century. Eventually, Japan decided to press ahead with the TPP without American participation, but the alliance is clearly weaker.

Europe’s Waning Power

Outside the US, Trump’s treat from the TPP was widely interpreted as a symbol of an American retreat from global leadership. A couple of days after the decision was announced, a senior EU official in Brussels remarked to me: “It’s interesting, when the Brits were the world’s dominant economy, they were also the main promoters of free trade. And then when America became the world’s dominant economy, they became the main promoters of free trade. And now America is losing its faith in globalization and China is becoming the main advocate of free trade. You can feel the wheels of history turning.”

Go to most of the capital cities of the European Union and you will be visiting the capital of a former empire, from the ruins of the Acropolis in Athens to the Coliseum and the Pantheon in Rome and the Arc de Triomphe in Paris. By 2009, when an economic crisis erupted in Europe, the age of European imperialism in Asia and elsewhere had already been over for roughly half a century. But most Europeans are still not prepared for the idea that their slide in global power might have further down to go. It is not simply that Europe’s voice counts less in the world. The real risk is that Europe’s desire to exist as an island of prosperity and political decency in a turbulent world is being put at risk because of a loss of political power.

The process of Easternization means Europe is increasingly vulnerable to political, social, and economic trends in the rest of the world that it cannot control – but which pose direct and indirect threats to European stability, prosperity, and even peace.

The traditional “West” as a political concept has always had two pillars—North America and Europe. But if the US and the EU end up at loggerheads during the Trump years, the “Western alliance” will be in profound trouble. Trump, as an advocate of “America First,” may not worry about antagonizing Europe. But the weakening of the Western alliance would actually gravely undermine Trump’s plans to restore American greatness because it would decrease the power of the US to shape world affairs; it would also hasten the shift of wealth and power to Asia that so troubles Trump and his supporters.

The rise of new Asian powers and the fracturing of the West strengthens the case for European unification, so that EU countries can defend their collective interests. But there is little reason to believe that the EU will move quickly enough to respond to a process of Easternization that is unfolding at remarkable speed.

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© China Daily via REUTERS

You are predicting that Europe will look to Asia in the future. Why? For the last 500 years, Europe has seen itself as the center of the world. Even when the transatlantic community was constructed, it was still seen as a part of European political tradition, of European values, which had been embraced across the Atlantic. My thesis is that we are reaching a point where the idea of European exceptionalism—that we have mastered modernity, modern society, and modern technology, and the rest of the world has not—has come to an end. I think China is the proof. We are now entering a world that is essentially bipolar. There is the West, or the European political tradition, and then we have an Asia that is at least equally powerful. That means that we have two poles: one European-American, and one Asian. The balance, the combination between the two, is what defines our age—no longer the relationship between Europe and America. My thesis is not that the transatlantic community will disappear, but that our world today is not Western anymore, the world is Eurasian.

Isn’t this observation based too much on geographical determinism? It’s based on different facts. The most obvious are infrastructure and global capitalism, which have been creating connections between Europe, the West, and Asia that never existed before. During the imperial age these did not exist because the two sides were in an entirely unbalanced relationship of colonialism and imperialism: Some places in Asia became European, some others became back corners ignored by everyone, and Asia disappeared from history for a few hundred years.
In the 20th century these connections did not exist either. We had the iron curtain and the bamboo curtain, and it was literally impossible to think of Eurasia as a unified space. Now we are in a time that is perhaps bringing the world back to Ghengis Khan—though it’s more likely a completely new world, with new variables.

Beijing refers a lot to the medieval Silk Road, especially with its new Belt and Road Initiative… …which in the way it is thought about today never existed. It is a romantic invention of the 19th century. No one travelled the entire distance from Europe to the Pacific with the notable exception of Marco Polo and a few others. There was very little trade, and what there was had to pass through lots and lots of links in a long chain. So we should have no illusions. When people started to dream about an integrated Eurasia, they invented the Silk Road. When we are building a new world, we always project that new world’s beginning into the past to find some foundations there. Yet often they are imagined rather than real.

What defines that new world? The intensity of trade, the importance of the Chinese economy, and the infrastructure that has been built. Against that backdrop, the competition from China has become more and more important—that’s point number one. Number two—the Russia question. Russia is abandoning Europe. Perhaps for the first time in its history, it seems to me, it is completely abandoning Europe …

… some in Europe may doubt this, especially in Ukraine. The Ukraine intervention was perhaps the last breath of a Russia that wanted to stay in Europe. However, compare the Ukraine intervention, which was a disaster, with what one has to recognize as the success of the Syrian intervention. My impression from different conversations is that this will reinforce Russian authorities’ idea that Russia should turn east: to the Middle East to consolidate its control of energy, to China, and to Southeast Asia and Japan.
Also, and perhaps even more importantly: We now have to deal with a world of deep integration but no convergence. It is a very dangerous world. And it has taken us all by surprise because we always thought that as the world became more integrated, as countries in the rest of the world caught up with the West, they would converge with us. And surprise—what has happened is that they have caught up with the West in terms of technology and economic development, but they have not converged. So now, in the 21st century, we have deep integration with different models—China continues to look successful to lots of countries in the world. .

Isn’t China still infused with Western thinking, though, given that the Communist Party is in power? Or is it in fact a different kind of mindset, a different kind of culture, a different kind of conception of the world? It’s a very different kind of conception of the world, but it’s a modern conception based on technology, on social change, on trying to constantly transform the future. But it is a different kind of modernity from ours. The most obvious difference is a certain definition of the collective, which is present everywhere. It is present even in the new technology they are developing. If you compare Facebook with WeChat, one obvious difference is that WeChat is more collective; at some point, you don’t even distinguish who is saying what, whereas Facebook has profiles with pictures and Western individuals. With WeChat there is a stream of thought, no one knows where it is coming from. So, I think that we going to see different kinds of technology inspired by a different culture, by a different tradition. It is going to be different.
And politically, China is still a mystery to lots of us. I don’t think it is a place where people enjoy a lot of individual freedom, let’s not be naive about that. But on the other hand, I think we make a mistake if we simply project our Western images of authoritarianism or dictatorship on China. It is a different reality, and it takes a lot of time for us to understand it. We are just beginning.

In the West, we used to think that a society like China’s isn’t really inventive. Do you think that the Chinese have cracked that nut by being an unfree society but also a creative one? It’s a society where there are areas you cannot enter, things you cannot talk about. But in the areas you can talk about, there is a very intense exchange of ideas. The inventive attitude is channeled in a particular direction by society and the state. But in those channels, competition and debate are encouraged. So it’s very different from the West, but it’s also not our model of an authoritarian society.
They have a certain taste for breaking the rules, especially when it comes to the economic sphere. We in the West have become addicted to rules and a certain idea of perfection. So if you build something, it has to be in accordance with 200 rules, and we take everything to an extreme. The Chinese move faster and they take those chances. We just have to be aware of that and try to learn what they want.

Where does this mean for Europe? It leaves Europe in a very delicate position. I think we’re going to feel more and more pressure coming from China and from Russia, and our alliance with the United States is not what it used to be. Of course, Europe still has enormous resources of wealth, of creativity, of knowledge. But Europe has to become more involved with the rest of the world, and with Asia in particular. Europe has to exercise its power more. It will have to define what it wants from China and from Russia, and what it doesn’t want. It has to pick its battles. And in the end, Europe has to spend a lot more time thinking about what is happening into the East than it does now. I’m very skeptical about spending the next ten years focusing on building the United States of Europe, because I think the next ten years we should focus at least in part on what is happening to the East.

Wouldn’t Europe be in a better position if it were more united and deeper integrated? I think we already have the resources we need, they are just not being used. We need to have more European foreign policy, but we already have the institutional structures for that. It’s more a problem of awareness and being able to exercise our power. And I think if we are too focused on ourselves, it will be distracting.

German Foreign Minister Sigmar Gabriel recently said that the only great power at the moment that has a grand geopolitical strategy is China, whereas the US seems to have lost theirs, and we Europeans never really developed one of our own. That was a fascinating observation. I think China had a very bad year in terms of its foreign policy; it made lots and lots of mistakes. I wonder if it wasn’t even worse than the year the United States had.
As far as China is concerned, we have created this image of everything that is mysterious. That means that we give too much credence to things we don’t understand. But I was also struck by the fact that Gabriel did not say anything about what the strategy should be. It was incredibly empty in this respect. So again, we have the beginning of an intuition that something important is happening and our relationship with China will be a very troubled one and a very intense one. But still there are no clear ideas about what to do.

Your answer is to engage, to exert a lot of effort toward the East, and to reorient our thinking and our attention? Yes. Turn toward those questions more and more, in a spirit that’s half cooperation and half competition. I think that’s also part of the new Eurasian world. It is always a hybrid between cooperation and connectivity on the one hand and conflict and competition on the other. Even the things that bring us together—the internet, information flows, migration—even those things can be weaponized. I think that’s the world we live in now. Half competition, half cooperation.

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© REUTERS/Laszlo Balogh

Nowhere else in Europe has China’s Belt and Road Initiative (BRI) been met with such a warm embrace as in Central and Eastern European Countries (CEEC). The cash-strapped economies of Europe’s Eastern periphery are hoping that Chinese infrastructure financing and investment will drive economic growth. Even if the economic outcomes on the ground have been varied so far, China’s intense political engagement with the CEEC poses a growing challenge to the EU, and requires not only a cohesive strategy from Brussels, but also the biggest EU member states to revisit their China policies. Otherwise, they risk further tilting the EU-China balance of power in Beijing’s favor.

Beijing’s economic and political advances in the region are hardly news. As early as April 2012, China created a distinct, sub-regional economic and political cooperation format with 16 CEEC, the “16+1 platform.” Made up of 11 EU member states—Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia—five EU neighborhood countries—Albania, Bosnia and Herzegovina, Macedonia, Montenegro, and Serbia—and China, the 16+1 celebrated their fifth anniversary in late November 2017 at a high-level summit in Budapest.

As with previous 16+1 summits, CEEC heads of government from North to South used the Budapest gathering to unequivocally praise the benefits of closer economic cooperation with China. Estonia’s Prime Minister Jüri Ratas even hinted: “There are a lot of untapped opportunities in the economic cooperation of Estonia and China.” Hungary’s Viktor Orbán praised China for recognizing “this region as one in whose progress and development it wants to be present.” Speaking for the whole of Southeastern Europe, Bulgarian’s leader Boiko Borissov reiterated that “investments from China are precisely what I have always said will be beneficial for the Balkans.”

Targeting the Weak Spot

China’s large-scale financing of highways, railways, ports, and other infrastructure to better connect China to Southeast Asia, Africa, the Middle East, and Europe on the back of the BRI has clearly struck a chord with CEEC leaders. This is hardly surprising; the CEEC still display a remarkable infrastructure gap, especially when compared to Western Europe. Rather conveniently, China has pledged an estimated €12.7 billion in investments in CEEC infrastructure since the launch of the 16+1 platform. The five non-EU 16+1 countries expect to benefit in particular, with China offering an alternative to notoriously unreliable Russian financing and EU or multilateral development banks that, in the Balkans, are seen as administratively cumbersome and heavy on reform requests.

In cooperating more closely with China, the 16+1 CEEC countries also hope for an inflow of foreign direct investment in a wide range of sectors. In November 2016, the Industrial and Commercial Bank of China established a €10 billion fund to finance investments in sectors such as high-tech manufacturing and consumer goods. At the Budapest Summit, Chinese Premier Li Keqiang pledged additional money. China has also promised substantial investments in CEEC countries at a bilateral level, underlining that 16+1 is also an important tool for the CEEC to strengthen their bilateral economic and political ties with Beijing.

Aside from the lures of potentially growing Chinese investments, 16+1 has been highly attractive for Central and Eastern European leaders, as it promises to upgrade their countries’ political standings with Beijing—and by extension the rest of the EU and even the United States.

Yet the political dimension cannot disguise the fact that Chinese economic promises have so far not been matched by action. The few China-financed infrastructure projects currently underway in the region—notably, all of them are in the five non-EU 16+1 countries—suffer from the same problems that have plagued BRI projects in other parts of the world: Chinese loans are linked to Chinese companies performing all, or at least substantial parts, of the projects to be delivered. As a result, capital associated with individual projects fail to provide a lasting stimulus to local economies.

In the 16+1 EU member countries, the economic picture is similarly bleak. In February 2017, the European Commission opened a formal investigation into the flagship BRI construction project in Europe, a €2.45 billion high-speed rail link between Belgrade and Budapest. Brussels has expressed doubts about the financial viability of the project and its compliance with EU public procurement rules. Overall, Chinese loans for large-scale infrastructure remain rather unattractive in light of existing EU financing, such as the EU’s structural cohesion funds, the European Fund for Strategic Investment (EFSI), and the Trans European Transport Networks (TEN-T), which tend to come as partial grants.

However, even if China’s infrastructure financing and investments in Central and Eastern Europe were to significantly expand in the years ahead, this would only create another set of fundamental challenges for CEEC economies, since a key rationale underpinning China’s economic engagement is opening up local and Western European markets to Chinese products and services. Already, the CEEC trade relationship with China is characterized by massive trade imbalances. The countries having attracted the most Chinese investment to date also have some of the biggest trade deficits.

Driving Breaks

Despite the sobering economic realities, political elites in some CEEC states cling to cooperation with Beijing. They actively position closer ties with China as a counter-narrative to European cooperation and the liberal values underpinning the European project. In a clear reference to the EU, Hungary’s Viktor Orbán remarked at the Budapest 16+1 Summit: “We see the Chinese president’s ‘One Belt, One Road’ initiative as a new form of globalization that does not divide the world into teachers and students but is based on common respect and common advantages.” And in May 2017, Serbian President Aleksandar Vučić declared: “There are no problems in our economic and political relations, we are always on the same side, and when China has something to say, we are always on the side of China.”

As China seeks to expand its political footprint, the political damage to the European Union is already visible. For some time now, the EU has been unable to act cohesively towards China on what have been trademarks of EU foreign policy, namely upholding the international rule of law and protecting human rights. In March 2017, Hungary derailed the EU’s consensus, refusing to sign a joint letter denouncing the reported torture of detained lawyers. In June 2017, Greece—a 16+1 observer and major beneficiary of Chinese investment in recent years—blocked an EU statement at the UN Human Rights Council criticizing China’s human rights record. This marked the first time the EU had failed to make a joint statement at the UN’s top human rights body. Similar instances of CEEC blocking EU statements on China have occurred since.

Current discussions in Brussels about creating a European investment screening mechanism, which is geared initially at Chinese strategic investments in European high-tech industries, will become a litmus test for the EU’s ability to act decisively on China. Chinese investments have already prompted individual 16+1 EU members to challenge the current proposal. Opposition is also building up among EU accession countries with sizable Chinese investments. Even if the EU manages to adopt the mechanism by summer 2018—as is currently envisaged by the biggest member states—this will not help overcome what is already a central theme in European China policy-making: a growing lack of trust between the Eastern and the Western member states.

High Time for a Response

In light of these developments, Brussels has set up a working group to develop a European narrative and strategy for engaging with China’s BRI and its economic offensive in the EU and its neighborhood. An internal EU strategy paper is due to be released this year. Key recommendations are already clear: the European Commission should actively close infrastructure financing gaps that China would otherwise seek to fill, earmarking European resources from the structural cohesion funds. EU member states also need to make sure that the post-Brexit 2020 EU budget will not result in a significant reduction of funding for the CEEC and thus a greater opening for China.

At the same time, the EU will need to implement more modest measures to align BRI investments in its neighborhood with European interests. These include enabling third countries to properly evaluate, monitor, and prepare large-scale infrastructure projects, including those financed by China. To protect and promote EU norms and standards in the neighborhood, the development policy apparatus of European institutions and EU member states need to support related capacity-building.

The EU also needs to leverage institutional frameworks that can help to promote greater convergence of EU investment priorities and principles and Chinese investment activities. This includes channeling as much Chinese infrastructure investment as possible through multilateral frameworks like the EU-China Connectivity Platform and the largely Western-styled Asia Infrastructure Investment Bank (AIIB), as well as through co-financing models involving Chinese institutions and the EIB and EBRD.

As China plays to deep political divisions within Europe, it will not be sufficient for bigger EU member states to appeal to Central and Eastern Europeans’ “European sentiment” when dealing with China. Besides strengthening EU solidarity across the board and fighting the rise of populist governments across Europe, France, Germany, and Italy should expand their policy coordination on economic engagement with China to also include Poland. Among the 16+1, Warsaw has chosen to pursue a soberer approach towards Beijing, and therefore might seem susceptible to greater EU engagement on China.

Calling on China to pursue a “One Europe” policy, as German Foreign Minister Sigmar Gabriel did in August 2017, and encouraging CEEC to close the ranks also implies that bigger EU member states need to consider their own hypocrisy. As long as Berlin and Paris pursue their own interests in their relationships with China, they will struggle to convince the CEEC not to use the 16+1 for similar ends. Germany and France should deploy their privileged relationships with China to serve wider European interests. Both Angela Merkel and Emmanuel Macron have recently pointed out how important it was for European companies to get better access to the Chinese market. They also warned about the risks of state-driven Chinese takeovers of European hi-tech companies.

CEEC governments, however, do not consider these issues priorities. They hope that Chinese investment will give their economies a push, and that closer relations with Beijing will increase their political influence. It is up to Germany and France to initiate a debate within the EU to find a compromise for Europe’s policy vis-à-vis China that takes everybody’s interests into account.

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© REUTERS/Thomas Peter

Nearly two decades since the end of the Yugoslav Wars, the Western Balkan’s states and peoples remain trapped in “Europe’s waiting room,” meandering endlessly through the morass of EU accession requirements on the path toward Brussels. Acceptance into the most prosperous economic union in history is at the end of this rainbow but in the meantime, by all available measures, the quality of governance and democratic administration in the region is in free fall—and that includes the region’s EU member states Slovenia and Croatia, those who have supposedly already found their pot of gold.

Worse still, the specter of violence is returning to the Balkans. Since the beginning of this year, the region has been shaken by the assassination of a leading Serb opposition figure in Kosovo, evidence of Russian-funded paramilitaries in Bosnia and Herzegovina and the re-arming of a recalcitrant nationalist regime in the country’s ethnically Serb dominated east, and an apparent anti-NATO suicide bombing in Montenegro, the alliance’s newest member.

Countries like Russia and Turkey, which trace long (and long imagined) ties to the region, are clearly at the tip of the spear. At a time when the liberal international order has heavily come under pressure, these regimes are aiming to reshape the Balkans, and they are finding receptive audiences among local governments. But the relationships they nurture in the region are of a decidedly sectarian nature, with Moscow as the chief international patron of the Balkans’ Serb nationalist establishment, and Ankara as the supposed protector of the region’s predominantly Muslim communities, namely, the Bosniaks and the Albanians.

Thus, the grand, transformative aspirations of the liberal-democratic international community have been supplanted by the provincial posturing of the world’s new “authoritarian international.” And one authoritarian regime, with growing interest in the region, has shown a capacity to truly bring all actors to the table in the Balkans: China.

Educating the Locals

Beijing’s activities have the appearance of pure economic self-interest. Beijing’s flagship venture in the region is the so-called “16+1” framework, the political forum of the country’s attempt to expand its “One Belt, One Road” infrastructure network into Eastern and Southeastern Europe. Pragmatism certainly seems like the defining characteristic of the country’s approach to the region: If you’re willing to do business with Beijing, Beijing is willing to work with you, regardless of your political conditions or persuasions.

To educate local communities about China and its interests, Beijing has begun opening chapters of its famed Confucius Institutes throughout the region. Bosnia and Herzegovina, with a population of less than four million, already hosts two of these centers. Belgrade, meanwhile, is to host a sprawling, 32,000 square meter Chinese cultural center commemorating Sino-Serbian ties. And in tiny Montenegro, China is constructing a nearly 200 kilometer-long highway from the Serbian border to the country’s main port at Bar.

Clearly, the €6 billion or so China has invested in the Western Balkans in the past decade is a much needed cash injection into a region that is still struggling to recover from the 2008 financial crisis. Best of all, China’s money appears to come with few strings attached, at least as compared to the complex loan protocols of the IMF, the European Bank for Reconstruction and Development, and other similar Western financial institutions which have traditionally bankrolled the former Yugoslavia’s post-war recovery.

And given the titanic scale of the project Beijing is undertaking—attempting to link transportation networks from China, through Central Asia, the Middle East, Eastern Europe, and out to North Sea—the Chinese approach would appear to be very much results-oriented. To hear advocates sell the idea, China is not in the business of “conditionality,” it is simply interested in business itself.

Reality Check

But China’s approach to its growing economic and foreign policy clout is hardly so benign, especially for a region like the Western Balkans whose domestic democratic institutions are already wobbly. China’s apparent pragmatism is, in practice, a means for both locking client countries into punishing dependency structures while simultaneously buttressing illiberal and authoritarian elites and their already vast patronage networks, now newly awash with Chinese money.

Take only the example of Montenegro’s Bar-Boljare highway currently being constructed by Chinese contractors. Its cost is set to push the [Podgorica] government’s debt burden to close to 80 percent of GDP by 2018, according to IMF figures. In the event of catastrophic cost overruns—a distinct possibility in what is essentially a one-man mafia state—the Montenegrin economy would be at the whims of the Chinese regime, a sordid fate as Sri Lanka has recently discovered.

Nor is it the case that Beijing asks for nothing in return at the political level either. In the wake of the 2016 South China Sea arbitration, Montenegro explicitly rejected the ruling, and Serbia feigned neutrality on the issue. One might say that such small states cannot be expected to insist on Chinese compliance on any matter, but that is precisely the issue. Through its growing economic influence in Eastern Europe as a whole, China is seeking to indirectly institutionalize a pro-China lobby, thus securing much-needed international legitimation and support for its increasingly aggressive posture in East Asia in particular.

Challenging Brussels

It is difficult to untangle Beijing’s activities in the Balkans from its ascendancy in the political dynamics of Europe as a whole. And it is that fact that will make it difficult for Brussels, or any of the EU capitals, to form any coherent policy to check China’s growing pull in the continent’s Southeast. After all, this is the same EU that has watched the region’s political situation deteriorate to authoritarian retrenchment—and that was before the Russians, Turks, and Chinese began earnestly challenging Brussels’ commitments to being the “only game in town” in the Western Balkans.

The post Balkan Business appeared first on Berlin Policy Journal - Blog.

© REUTERS/Hoang Dinh Nam/Pool

It was some 100 years ago that a Japanese doctor, Hakaru Hashimoto, first described a troubling malady afflicting patients. The symptoms included listlessness, fatigue, and bouts of depression. Hashimoto had discovered a widespread autoimmune disorder affecting the thyroid gland. The eponymous condition cannot be cured, only aided by medication. Those suffering from Hashimoto have to adjust to living with diminished energy.

It can be argued that the doctor’s native country is suffering from the very same malaise. For a generation now, the Japanese have been yearning to return to the boom years of the 1970s and 80s, when the world and many Japanese believed their country could achieve the same grandeur China is ascribed today—the ability to conquer the world. The Japanese economy has witnessed a series of ups and downs but has not regained its swagger. Meanwhile the Japanese themselves and indeed the world still seem to see the Japan of today through the lens of the country’s boom days.

It would serve Europe well to look kindly upon Japan in its struggles. Europe and Germany in particular are suffering from many of the same symptoms, and Japan’s efforts to turn things around may provide an important blueprint. In Europe, most eyes are fixed upon China and India today, but among Asian economies, Japan is still the closest to ours.

The components of Japan’s woes are well known by now: stagnant economic growth, an over-dependency on exports, and soaring (public) debt on the one hand; a shrinking society and a growing chasm between rich and poor on the other; politically, a democracy facing real challenges to its governance and caught in a tricky position among neighbors in the region.

No Sick Man of Asia

And yet Japan is no sick man of Asia. Its challenges are not merely the result of failures, but also of important successes. Japan may not be a part of the current boom in Asia, but that is precisely because it was Japan that originally mastered it. And despite its woes, the country fares well in leading international benchmarks.

Japan ranked sixth in the Bloomberg Innovation Index in 2018, for example, while Germany came in fourth and the US in eleventh place. On the Human Development Index, Japan ranked 17th worldwide in 2016 (here, too, Germany landed fourth and France far further down at 21). While social inequality is a growing problem in Japan, it remains rather moderate by global standards. The country is ranked 22nd on the Gini coefficient of inequality register of OECD countries, between Italy and Australia. Germany, meanwhile, is ranked 13th. The United States is near the bottom (34), just ahead of Turkey and behind Russia.

Japan, it would appear, is suffering from first-world problems. Still, the extent to which these problems weigh on the country, and its economy, is unusual. Japan’s GDP in real terms has mostly stagnated over the last 20 years while the country’s public debt soared to 240 percent of GDP in 2017 (it is around 65 percent in Germany).
Meanwhile, Japan’s population is shrinking at record speed. If the current demographic trend continues, the country will plummet from 127 million people today to 87 million by the year 2060. In comparison, Germany will see a steady decline from 82 million to 68 in the same time period.

The fact that these trends affect Japan more than other wealthy countries is also reflected in the well-being of its citizens. In the UN’s annual World Happiness Report, Japan recently placed a lowly 51, alongside Russia, Belize, and Algeria; Germany ranks 16th. The studies show that many Japanese feel their country is not heading in the right direction. There is a lack of clear perspectives and opportunities.

Conflicting Interests

Part of the problem is that Japan finds itself in an uncomfortable position. Trade with China is currently the biggest opportunity for economic growth; at the same time, the rise of China is Tokyo’s biggest foreign policy challenge.

For years, the foreign policy debate in Japan has centered around both the commitment to the United States and integration in the region. At one end of the scale are the moderate pragmatists who advocate regional integration. They demand a more independent foreign policy, especially with an eye to China: They fear that cozying up too close to America will hurt Japanese interests. China is Japan’s biggest trading partner—in fact, the value of bilateral trade exceeds that between Japan and the US by more than half. And that gap is widening.

At the opposite end of the scale are the traditionalists, led by Prime Minister Shinzo Abe; they see a strong alliance with America as the highest priority. They believe Japan must work toward curbing China’s rise to prevent its powerful neighbor from becoming overly dominant—and that will only be possible with the help of Washington.

It would be as if Germany’s biggest trading partner were a booming, surging Russia—a Russia that is on the verge of dominating Europe economically and dethroning America as the most powerful in the world; a Russia where defense spending grows by double digits every year and which, at the same time, starts to make territorial claims on Germany and other European states. It is an imagined parallel, of course, but it helps to understand why Japan is lukewarm toward its budding partnership with China.

When Barack Obama was still US president, Abe knew he was on the safe side. Obama’s “pivot to Asia” was very much founded upon a strong alliance with Japan. Donald Trump has complicated the relationship, however; Abe was the first leader invited to golf with the new US president, but that show of friendship has brought Japan very little benefit so far.

Tools of Trade

The turmoil in the US has left Tokyo with no other choice than to take its fate into its own hands. The Trans-Pacific Partnership (TPP) provided the first example. Negotiated under the Obama administration, the TPP was to become the largest free trade area in the world, bringing together ten other Pacific Rim nations with the US and Japan. China was not invited to the club, which Beijing rightly saw as an attempt to rein in its influence in East and Southeast Asia.

After Trump’s withdrawal from the TPP, Abe’s government pursued a fresh deal with the remaining ten interested parties. The agreement, now known as TPP-11, is due to be signed in March. It is a striking success for Japan, not only because Tokyo led the negotiations. Its goal of creating a serious counterweight to China may not be achievable without the US, but the TPP-11 is an important signal that Japan supports global free trade and is capable of forging its own alliances.

Tokyo’s free trade agreement with the EU, called JEFTA, which enters into force next year, also shows that Japan is an important global player. Together, the participating countries in JEFTA account for around 30 percent of global GDP. Shinzo Abe described the agreement as “the birth of the largest economic zone in the world.” And JEFTA should bring significant benefit to Japan: According to a study by Germany’s Bertelsmann Foundation, it will generate growth of up to 1.6 percent of Japan’s GDP. Germany stands to benefit most of all the EU countries, with growth expected to reach 0.7 percent of GDP. It is not a game changer for any of the participating countries, but it certainly brings significant improvement and sends a signal of strength.

Abe’s Populism

Nevertheless, Japan’s possibilities are more limited than its economic power would suggest at first glance. This holds especially true in its own region. East Asia lacks the solid institutional basis that is taken for granted here in Europe. There is nothing in East Asia that comes close to the EU or NATO.

In all fairness, East Asia does present a unique set of circumstances. The size and proportions of East Asian nations are vastly different. China will never engage in European-style alliances in the region but rather pursue its own agenda; Japan is still so dominant that its neighbors fear integration would lead to domination.

Not to mention that today, more than 70 years after the Second World War, Tokyo still has not clearly distanced itself from its war-time atrocities—and that, too, worries neighbors. Nearly every post-war government in Japan has taken a revisionist stance on the country’s history, especially Shinzo Abe. Donald Trump’s former chief advisor Steve Bannon gave him the dubious praise of being a “Trump before Trump.” In reality, Abe is a far cry from the US president. But his aim to revise Japan’s pacifist constitution, restore pride in the country’s military traditions, and discredit “mainstream media” resemble the right-wing’s platform in the US.

In fact, Abe’s populist overtones have possibly prevented any party from gaining ground to the right of his Liberal Democrats. The populist sentiment he has stoked has served Abe well in cementing power at home. But abroad, he has harmed Japan’s image and deepened his country’s malaise.

Economic Strengths

Still, Japan’s technology and economy could emerge as possible bright spots for the future. Though economic growth has been weak, the country is well-positioned in key industries and has good opportunity to extend its advantage going forward.

For example, Japan regularly spends around 3.5 percent of GDP on research and development (R&D) . This is an extraordinarily high proportion, surpassed only by Israel and South Korea (in Germany, R&D expenditure has reached around 2.8 percent in recent years). Even in absolute terms, R&D spending in Japan—at around $180 billion—is among the best in the world, surpassed only by the US and China. German R&D spending, meanwhile, is around $110 billion a year.

Japan excels in robotics—it is currently the world’s number one manufacturer of industrial robots, meeting around 52 percent of global demand. This is nothing short of spectacular. While there is one major industrial robotics player in Germany (Kuka, which is now a Chinese-owned company), Japan’s Fanuc, Yaskawa, and Kawasaki Heavy are all competing.

Germany may have Siemens, but Japan has Hitachi, NEC, and Toshiba. A similar picture can be found in the chip industry and Japan’s electronics companies, which are growing and investing again after years of crisis.

Japan also has extremely ambitious goals in terms of energy and transport, including the evolution of hydrogen as an energy source. It is promoting this technology far more than any other country, and Shinzo Abe regularly speaks of a “hydrogen society” when talking about the future of Japan energy technology.
The focus on promoting new technology in the public and private sector has placed Japan on a unique path, turning the country into one of the leading drivers of innovation worldwide.

Robots for Guests

That spirit of innovation is too often overshadowed in debates and analysis of Japan. Outsiders struggle to shed the image of a directionless, listless Japan—a bit like Germany in the late years of former Chancellor Helmut Kohl’s leadership. Many are hoping the Olympic Games in 2020, due to be held in Tokyo, will jolt Japan back to life.

Even the best sports extravaganza in the world cannot change Japan’s situation dramatically, but it can certainly have a positive influence on its image. The games could provide a platform for the country to display its prowess in technology. That is why Tokyo has said it will prepare a small army of robots for the Olympics, to impress and woo foreign guests as soon as they arrive at the airport.

There is, for example, Cinnamon the humanoid who can talk to people and give directions; robotic stuffed animals translate into four languages at the airport while other robots help carry travelers’ luggage. Japan’s hydrogen technology, too, will be on display.

It may be entertaining and even useful. It could also serve as reminder to the rest of the world, that Japan is not on a detour. It is busy registering the results of its own success, and Europe would be well advised to pay closer attention.

The post An Uncomfortable Position appeared first on Berlin Policy Journal - Blog.

Artwork © Dominik Herrmann

There is no doubt that Hamburg’s Elbphilharmonie is a grand success for the city. Ever since the concert hall opened last year, the stunning structure of brick and undulating glass on the waterfront has put Hamburg back on the map for tourists interested in culture and architecture—a well-heeled and well-behaved crowd that cities love to court.

The hero of this success story is Olaf Scholz, Hamburg’s mayor since 2011. When further delays and cost-overruns threatened completion of the Elbphilharmonie, he paid the construction company an additional 195 million euros from taxpayers’ money to finish the work in a reasonably timely fashion.

This same Olaf Scholz is likely to be appointed finance minister in Chancellor Angela Merkel’s next cabinet, if the members of his party approve the coalition agreement. As the first Social Democrat in nearly a decade to run this crucial ministry, Scholz’s every deed and word are now being closely scrutinized in every capital in Europe for an indication of what to expect: Will the new minister prove as tight-fisted as his controversial predecessor Wolfgang Schäuble, or will he prove willing to throw money at European problems, too?

Don’t Blab

Scholz himself hasn’t yet committed to a policy line as finance minister. One reason is that he doesn’t want to make it look like he is taking his appointment for granted. Also, he doesn’t want to give his hand away in upcoming negotiations to reform the eurozone. As an attorney specialized in labor law, he knows not to blab.

Still, as mayor of Hamburg, Scholz spent quite a bit of money even apart from the Elbphilharmonie. Hamburg, as his supporters are eager to point out, was the first of the German states to offer free childcare to all parents. Scholz is also expanding the public subway system. Most importantly, he has concentrated on making affordable housing available. Since he took office, more than 10,000 new housing units have been built every year. A third of these new apartments are rent-controlled.

Scholz, 59, is a typical Hamburg man: He is capable, rational, understated, and somewhat lacking in charisma. Years ago, when he was secretary general of the SPD, he got the nickname “Scholzomat” for speaking in such a technocratic and repetitive way (remarkably, he actually admitted later that the name was justified). While his rhetoric has improved immensely, Scholz still doesn’t come across all that well to people outside of Hamburg.

Yet Scholz is highly ambitious and certain of his own abilities to fill any post that might come his way—possibly even including the chancellery one day. He also has convictions: He firmly believes that if Western countries are to survive as liberal democracies, ordinary people must be able to feel that there is ground for optimism. “We need a party that combines liberalism and social welfare,” he said in October 2017 when discussing the rise to right-wing populism in Germany.

As finance minister, Scholz would be likely to favor increased investment at a European level, too. The coalition agreement between Angela Merkel’s conservative block and the Social Democrats calls for more investment as well as a higher German contribution to the EU budget. It also says the euro zone’s ESM bailout fund should be turned into a European Monetary Fund. More funding should be provided to shield the eurozone from crises. Scholz, of course, was a leading member of the SPD’s negotiating team.

In one of the rare hints that he has given about his views on European finance, Scholz has raised expectations of a softer stance towards the countries hit hardest by the euro crisis. He clearly distanced himself from Schäuble’s harsh conditionality in return for EU loans and guarantees. “We don’t want to dictate to other European countries how they should develop,” Scholz told the magazine Spiegel in February. “Mistakes were surely made in the past.”

In practical terms, however, this may not mean very much. Ireland, Spain and Portugal have already exited the EU’s bailout program, and Greece is scheduled to follow in August. This means that the EU will stop its highly detailed and intrusive policy recommendations in any case.

Not a Leftie

There are other reasons to suspect that the change from Schäuble to Scholz (via Peter Altmaier, a close advisor of Merkel’s, who is serving as interim finance minister) will be less radical than some politicians in Rome, Athens, or Brussels hope. First of all, Angela Merkel is still there, and as chancellor, she outranks her finance minister. Merkel may not be as tough on budget issues as Schäuble, but she will be under pressure from her party to hold her own.

Also, Scholz’s perspective is German, not European. While he has been in national politics for more than 40 years, with lots of experience in party, parliament, and ministry posts, Scholz has never been active at the European level. His instincts as a finance minister will be to put Germany’s interests first – just as other SPD finance ministers like Peer Steinbrück or Hans Eichel have done.

Scholz has also been deeply shaped by his experiences in Hamburg. As mayor, he was unhappy about being saddled with guarantees for the HSH Nordbank, a failed German state bank. In the upcoming eurozone reform talks, the most controversial issue has to do with the financial risks linked to public debt or non-performing banks. While southern Europeans have been pushing for more sharing of risk, Germany has always insisted that countries need to reduce risks first. After the HSH bank case, Scholz is likely to follow that line.

Finally and perhaps most importantly, Scholz is simply not a leftie. As a young man, he was a member of the far-left “Stamokap” faction within the SPD’s youth wing. But for many years now, he has moved to more conservative positions, laughing at the rigid ideologist that he once was.

When serving as labor minister in Merkel’s first government, Scholz oversaw raising the retirement age to 67. In Hamburg, despite his large investments, he achieved substantial budget surpluses in 2016 and 2017. Recently, he promised to do the same for the federal budget. Once again, this is in line with the coalition agreement that promises a balanced budget for the next four years, but Scholz backs the “black zero,” as the balanced budget is referred to in German, out of conviction. “The SPD stands for solid finances,” he said in a recent interview.

For sure, Scholz will be no walk-over, neither for Merkel’s conservatives nor for the more left-wing politicians on the European scene or in his own party. If things go as planned, he will be vice-chancellor in addition to the ministry post; he is deputy leader of the SPD and took over as interim chairman after Martin Schulz’s resignation as party leader in February. Scholz is a close ally of Andrea Nahles, the SPD’s powerful group leader who will also be running for party leader in April. He also gets along well with Angela Merkel.

“If you order leadership from me, leadership you will get,” Scholz liked saying long before he was named for this top job. Europe’s capitals are right to watch out for the new guy.

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© REUTERS/Eduard Korniyenko

In today’s Russia, elections are above all a stress test for the political system Putin has built. Even if the results of the presidential election scheduled for March 18 are already established, the “campaign” exposes both the strengths and the weaknesses of the reigning regime.

First off, it is important to clarify that these are not free and fair elections in which real candidates compete against each other and enjoy equal access to the media and the public. Instead, this is a collection of candidates selected by the Kremlin (including newcomer Ksenia Sobchak) who will run a pointless race that only Vladimir Putin can possibly win. Putin has all the resources of the state at his disposal and unlimited access to Russian media. The Kremlin will manage the entire process in minute detail. This presidential election is thus a referendum on Putin’s popularity more than anything else.

Second, the actual votes cast on election day are less important than what happens before and after. Who will actually go to the polls? Who will get access to the public, and how much? And which numbers will the Central Election Commission recognize when it’s all over? Even if there are once again irregularities on the day of the election, with groups bussed from one voting location to the next to cast their ballots for the correct candidate several times, the process has become more and more professional.

Despite exercising almost perfect control over the opposition, the media, and the NGOs, the regime is always nervous ahead of an election. It has no real contact with the public, and does not trust the people. With Russian political leaders, communication is a one-way street: The public is meant to be directed by what the regime communicates via the media, but the regime receives no communication back. It has to rely on opinion surveys to understand the mood of the population.

While Putin, as a non-ideological populist, has sought direct contact with Russians in his annual TV appearances, only carefully selected individuals are given the chance to bring their problems to the president, and only as an opportunity for him to display the full power of his office in solving them. Putin issues direct edicts to governors, CEOs, and managers to solve the problems he has chosen to address, and for a brief moment he seems to be in touch with the concerns of his citizens. To the viewer at home, the message is clear: The corrupt bureaucrats are responsible for their problems, not the president himself.

A Magnifying Glass

Against this background, the presidential campaign serves as a magnifying glass that exposes all the weaknesses of Putin’s system. Putin has been in power for 18 years now, and it is becoming harder and harder for his government to pretend to stand for any kind of innovation or change; the system is geared entirely towards retaining power and enriching its elites.

Despite Putin’s considerable foreign policy successes in 2017, both the president and the media have been focusing their attention for several months now on domestic politics. The “Crimea effect” has been exhausted, Ukraine is mentioned less and less in Russian media, and there is a growing desire among Russians to withdraw the country’s military forces from Syria. Putin has been listening and announced a massive troop withdrawal at the end of 2017. Even if he does not entirely follow through on this promise, the shift in the public’s attention to domestic concerns is unmistakable.

Thanks to the rising price of oil, the economy has begun to slowly recover. Despite the sanctions, the Russian state is doing better than many economists predicted. Yet the average Russian’s standard of living has been deteriorating for years. According to the state statistics office Rosstat, real income decreased 1.7 percent in 2017. Poverty, social justice, education, and the health care system are the topics that actually concern Russians. It is increasingly difficult for the government to distract from this socio-economic reality, and Putin’s campaign offers no solutions to these issues; the long-serving president represents only continuity and stability. The state-directed media work to make this look like an attractive platform, pointing to Islamist terror in Europe or the EU’s eternal existential crisis as the potential alternatives. Be happy, they say, that you’re living in Putin’s Russia: At least we guarantee you security and stability.

Many Russians buy into that, especially in the regions where memories of the catastrophic 1990s are still fresh. And it is important to remember that over 90 percent of Russians get their information from the national, Kremlin-directed TV channels. Many of the active, educated young elites left the country long ago to try their luck in the US or Europe.

Putin does not have a particular theme for this campaign and offers no specific prospects for his country’s future other than himself – which will not be enough. The journalist Oleg Kashin described the feelings of many Russians, especially those who live in the big cities: Even if the entire state apparatus works to secure six more years in power for Putin, the whole process seems unreal to many. Despite Putin’s consistently high approval ratings, a discussion has started to brew among intellectual and elite circles and even in the streets over what will come after Putin. Is he still the right person to determine the future of the country, and does he have answers to the country’s real problems? How much does he really understand the reality in which most Russians live?

The Anti-Putin

With his own campaign, opposition leader Alexei Navalny is making the weaknesses of Putin’s system clear. He is the only one waging a real election campaign, and by addressing topics like corruption, social justice, and freedom, the only one truly communicating with the people.

While Putin’s campaign relies on a negative worldview—the world is evil and Russia is surrounded by foes—Navalny appeals to Russian’s patriotism and their positivity, above all among younger Russians. Russia is a wonderful country, he says, and if it were not for the corrupt elites it could do much better—and Russian citizens have the power to change their country. While Putin speaks of the past, Navalny speaks of the future. He is the only real candidate, and he campaigns as if he could win the election.

Even if he never had a chance to be allowed to run, he has already changed Russian politics. With his social media presence, his website, and his YouTube channel, he is in continuous contact with his public, informing and motivating his supporters. Through a crowd-funding campaign, he has managed to open 84 regional offices and attract more than 200,000 volunteers.

With his ironic and lively videos, Navalny reaches young people whom Putin has failed to reach and who are not afraid to take to the streets. For the first time in post-war history, many young Russians are becoming engaged in politics. They do not see themselves as liberals, but rather as patriots; they want to live like people in the West, while maintaining their differences.

These self-organized campaigns worry the Kremlin. It has not organized them, and it cannot control them. Particularly when it comes to elections, authoritarian regimes do not like to leave anything to chance, even when there is little actual risk of losing control. Putin would also win if elections were free and fair, after all. This element of uncontrolled irrationality is something the powerful in Russia cannot allow. Thus, they are trying to silence Navalny: Putin will not speak his name, as though he would deny his very existence.

According to political scientist Alexander Kynev, Navalny is the first person in modern Russia to communicate a liberal political discourse in a language people can understand. He presents himself as a patriot and a nationalist; he supported the annexation of Crimea; and, unlike traditional Russian liberals, maintains few contacts abroad—yet his platform is a synthesis of freedom and justice. He is trying to create change within the system, and he is ultimately calling into question the fundamental power structure governing the state – yet another reason he is not allowed to campaign.

Ksenia Sobchak’s campaign, on the other hand, is targeted at a minority of Russians. With her references to European values, sanctions, the legalization of drugs, and LGBT rights, Kynev believes that Sobchak is consciously bypassing the majority and speaking to only a small group of the Russian population. She is committed to appealing to all the values that the regime has described as “liberal decadence” for years. In doing so, she is legitimizing the official discourse on the decadent, liberal elite, and making herself one of the political leadership’s favorite candidates.

Navalny is competing in earnest – he wants to build a parliamentary majority and change the system. Sobchak has no chance and will not win a majority of the vote for the foreseeable future. She has gained media access, however, and the chance to address the public in ways that are barred to Navalny. Thus, she has become a candidate for the powerful. There is no candidate “against everyone,” as Sobchak describes herself; each candidate either supports the current political arrangement or does not. And even opposing the current political constellation can be, in a certain sense, futile: Navalny’s appeal to boycott the election entirely will predominantly find an audience among the young people who would not have voted anyway.

Mobilization with Social Media

The video Navalny published in March 2017 revealing the riches amassed by Prime Minister Dmitry Medvedev has now been seen 26 million times. The fact that so many young people were engaged via social networks in such an apathetic, apolitical, paternalist system shows that even Russian society is going through a process of fundamental change.

The Putin system has been holding the lid down on Russian society since at least 2012, but pressure has been growing faster than outsiders have realized. Many Russian regions have seen an increasing number of spontaneous demonstrations, usually concerning social justice or mistakes made by local administrators. These protests have no common goal, and there are still no political leaders who could assemble these outcroppings of anger into a coherent movement. But it is evident that another six years of stagnating economic growth—particularly alarming in an emerging economy like Russia—will not be enough to satisfy people.

That means that President Putin, so successful in his international relations, will have to devote even more attention to domestic politics, and he will have fewer tools and resources to pacify his citizens and the country’s elites. He has no answers to challenges like digitalization, the future of education, the country’s demographic problems, and migration.

The country’s isolation and the black-and-white thinking of its leaders will simply not suffice in an increasingly complex world. One should not underestimate Putin’s flexibility and adaptability, but it is already clear that in many key areas Russia has gone off the rails. Representatives of the more liberal economic elite inside the system, like Sberbank head German Gref, are pushing for an improvement of the country’s geopolitical environment to prevent Russia from falling further behind in technological and social competitiveness. The brain drain of the past few years has led to a shortage of qualified specialists in technical fields, no matter how many personal visits Putin makes to important Russian technology companies like Yandex.

Putin’s power is built on two elements: First, it is based on his apparent closeness to the people and his image as a populist leader. Putin is becoming a sort of sacred figure within the state, a leader who single-handedly directs all the governing institutions—which tends to undermine the tough everyman image he projects in his televised discussions. Second, it relies on the institutionalization of Putin himself and his supposed ability to change the bureaucracy. He has begun to remove his old friends and acquaintances from his time in St. Petersburg and the KGB from key positions, replacing them with young, professional and technocratic officials.

A Shrinking Circle

As a result, Putin’s role within his system has grown even larger—he now makes all the decisions himself. His close circle has contracted so much that there is almost no one left to serve as any kind of counterweight. Sooner or later, this will inevitably lead to the question of how much responsibility he bears for the mistakes of his administrators.
At the same time, representatives of the security services have gained prominence in the bureaucratic apparatus. Vladimir Pastukhov, a political scientist and research associate at the University College London, says the competition among various groups within Putin’s circle to gain influence and resources is becoming an institutionalized battle between the civilian and military bureaucracies. That makes the system even more opaque and calls into question the degree of control Putin is able to exercise himself.

The prosecution of former Minister of Economic Development Alexey Ulyukaev and legal action against film director Kirill Serebrennikov have worried the elites. Whether someone is close to Putin or not, no one is safe. Putin’s system demands absolute loyalty; he has less and less patience for statements and behavior that indicate any kind of independent thought. If this trend continues, it can lead to destabilization.

The Russian presidential election may seem a boring, forgone conclusion. However, look more closely, and the fundamental changes reshaping Russian society become clear. If the political system cannot find answers to the questions Russians are increasingly asking, it will eventually be replaced. The longer the lid is held down, the longer the current challenges are ignored, the likelier it is that eventually there will be an explosion

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© Sputnik/Mikhail Klimentyev/Sputnik via REUTERS

The most common complaint about Russia’s foreign policy theses days is that it is becoming more aggressive and expansionist. Both US and European policymakers believe that Russia is now a serious challenge to global peace and stability. However, while this description might be accurate—Russia has already proven how dangerous it can be, especially to its neighbors—there is another phenomenon that has come to characterize Russia’s foreign policy: its absence. In its place, Russia has amassed a patchwork of interests, alliances of convenience, and grudges.

Contemporary Russian foreign policy was born in 1999, as Russian leadership—and more importantly the Russian public—began to grow deeply disillusioned with the West. At the time, the survival of Russia’s political elite depended upon both the suppression of separatism within Russia and the restoration of Russia’s global role. When Putin was elevated to the position of president, he tried to restore the country’s political relationships—not only with post-Soviet states, but also with the former USSR’s most corrupt allies. He paid visits to North Korea and Cuba during his first year in office and wrote off more than $40 billion of Soviet-era debts owed by Mongolia, Vietnam, Ethiopia, Syria, Nicaragua, and other nations between 2000 and 2004. This did little to establish beneficial relationships, but these steps were quite popular inside Russia and contributed to the ascent of Putin’s approval ratings in the early 2000s.

When Putin began to consolidate his position, he used the 9/11 terrorist attacks in the US to dramatically shift the country’s foreign policy. In exchange for its support for the Western mission in Afghanistan, Russia was able to improve its economic relations with both the US and Europe. Moscow founded the Russia-NATO council in 2002, with Putin calling European integration a “hope” for Russia. It seemed that Russia was briefly able to accept Washington’s special role in the world and maintain a steady rapprochement with the West.

A Short-Lived Honeymoon

The honeymoon ended in 2003 with the Bush administration’s occupation of Iraq. Russia sided with Germany and France against the invasion, and for a brief time, it was possible to imagine the beginnings of a new Moscow-Berlin-Paris alliance. But it was short-lived: Moscow turned its back on Europe after the major European powers denounced its behavior towards Ukraine during the Orange Revolution of 2004/05. With the exception of brief overtures to the West, like the ”Partnership for Modernization” with the EU and a ”reset” with the US, Russia had returned to its skepticism of the West.

This culminated in Russia’s ”pivot to the East,” as the Kremlin called its decision to rely more on a rising China to buttress Russia’s geopolitical ambitions, and ”Eurasian integration,” another response to the hardening of Russia-Western relations. The deep alienation from the West after the Ukraine crisis also led Russian leadership to develop relations with the most authoritarian regimes in the world, from Iran to Venezuela and Syria to Sudan. These connections cost money, and for a dubious rate of return: Over the last five years, Russians lent to and invested in Venezuela and Syria without achieving any foreign policy effects at all. Russia’s involvement in Syria in 2015 was meant to force the West to recognize Russia’s claims in the post-Soviet space, but neither the Americans nor the Europeans expressed any willingness to fight terror alongside a nation that was itself perceived as a terrorist power.

Thus, Russian foreign policy has come a remarkable full circle: it started with pure anti-Americanism, entered situational alliances with the United States and major European powers, then pivoted to the East, and ended by building ineffective partner-client relationships with disreputable political regimes. With Putin seeking another presidential term, extending his time as Russia’s leader to a quarter of a century, it is obvious he lacks any agenda for engaging with the world in the future.

A Domestic Imperative

President Putin might be not a very good strategic planner, but his actions are at least well thought out. Experts have been predicting his fall since 2002, but his regime remains reasonably healthy, and no organized opposition exists in the country. Putin’s foreign policy has been one of the foundations of his hold on power, and it reflects the shifting roles of Russia’s elites and its public in domestic policies.

When Putin assumed presidential power in the early 2000s, he sought popular support rather than that of the elites. This changed in 2002/03: With all the major state-owned corporations under the control of his allies and Russian businesses subdued, Putin’s major focus shifted to the interests of the elites. This is when the era of constructive foreign policy began. Until at least 2007, Russia’s foreign policy was largely underpinned by a desire to connect with the West, driven by Russian businessmen who wanted to join the global financial elite. Moscow opposed NATO and EU enlargement in the post-Soviet zone, but until the end of former President Dmitry Medvedev’s tenure, Russia cooperated productively with the US and Europe.

The decisive change came in 2011. Putin was disturbed by the implications of the Arab Spring revolutions, which had deposed a number of local strongmen, and felt his suspicions confirmed by massive street rallies held throughout Russia in response to the rigged 2011 Duma elections. In 2012, Putin won re-election with only 63.3 percent of the popular vote, a much lower margin than his 71.3 percent in 2004 and Medvedev’s 70.3 percent in 2008. He refocused his attention on the public and tried to galvanize support, especially since economic growth was faltering.

Without any vision for the future, the Kremlin decided to bet on a set of ideas for a post-Soviet reconstruction, a plan outlined in an article Putin published in the Izvestia newspaper in late 2011. These ideas failed: By the end of 2013, it was clear that Ukraine was moving westwards, and the benefits of closer ties with Kazakhstan and Belarus were negligible. In November 2013, the Levada Center recorded the lowest ever popular support for Mr. Putin—60.7 percent, compared with 85.9 percent when he allowed Medvedev to take over in April 2008. The occupation of Crimea in February and March 2014 and the subsequent war in Ukraine had far more to do with domestic concerns than global considerations. It was one of Putin’s boldest moves and it resonated strongly with the public. From this time on, Russia’s foreign policy began to vanish, replaced by an imaginary discourse meant to serve domestic political needs.

A Besieged Fortress

The Russian government has no actual need to improve the country’s relationships with the West because it derives its legitimacy predominantly from the current showdown. It also has little need to be active on other foreign policy vectors, since it simply has nothing to offer except the sale of energy resources and weapons. Welcoming international pariahs like Venezuela’s Nicolás Maduro or Sudan’s Omar al-Bashir should not be considered an element of foreign policy. The Kremlin simply wishes for Russia to look like a besieged fortress, under attack by the West.

And it has worked well: Putin’s approval ratings haven’t dipped below 80 percent since the annexation of Crimea, even though the economy has stagnated and personal disposable incomes have declined for the fourth year in a row. As it becomes more obvious that Putin is unable to provide Russians with improved conditions or Russia with expanding international influence, his only realistic option is to claim that only because of him, Russia is successfully withstanding growing external pressure. No one in the Kremlin wants relations with the West to improve. This would not make much of a difference to Russia’s economic landscape, and without an ”enemy” it would become much more difficult to explain why the country’s economy is performing so poorly, why military spending is so high, and why corruption is rampant.

The dismantling of Russia’s foreign policy also allows the government to change the entire worldview of the Russian people. As the country’s self-image as a besieged fortress has become more deeply ingrained, the Kremlin has tried to extend it, turning the whole history of the country into a story of defensive wars and praising the wisdom of ”strong rulers” who led the country to victory. Ivan the Terrible and Josef Stalin, the rulers who were responsible for the most brutal repressions of the Russian people in history, are nowadays the most glorified leaders in the nation’s history. For facilitating Putin’s political victories, some politicians have in fact suggested extending voting rights to 27 million people killed during World War II. More absurd initiatives are certain to follow. Books published with the support of foreign NGOs are confiscated, Russian non-profits that receive foreign grants or produce research for foreign customers are pressured; the country is being brainwashed, and its self-made isolation is a contributing factor.

To see that the Kremlin will not change its course now, one need only look at how its foreign policy actors have changed their language. Any trace of diplomatic politeness has completely disappeared. Putin described US sanction policy as ”clownery that cannot be tolerated;” Aleksey Pushkov, the chairman of the State Duma’s foreign policy committee, described the United States as a power ”approaching the point of a mental breakdown.” All of this underlines the fact that Russia’s foreign policy statements are used not to manage relations with other countries, but rather to impress a domestic audience.

A Vicious Cycle

This development could in fact be rather good for the Western powers. Many see Russia as a revisionist power that wants to change the borders of Europe and rewrite the rules that took hold after the end of the Cold War. But it has not been successful in this pursuit. Putin wanted to consolidate the post-Soviet space and keep Ukraine inside Russia’s sphere of influence, but instead of regaining Ukraine, he had to settle for Crimea; the Eurasian Union looks dysfunctional, with even Armenia disgruntled with its rules; China has not been a valuable investment partner; and the West is tightening its sanctions. In 2008 and 2014 Putin had targets he could invade and occupy without having to directly confront the West militarily, but now he does not. The country’s shift to domestic rhetoric in its foreign policy reflects the clear fact that the Kremlin realizes it has no chance of military expansion, and no means with which to respond to Western sanctions.

Under these conditions, Moscow’s only rational course is what it has already chosen: Abandoning any hope for positive change and nurturing a domestic climate of fear and hatred. This approach allows Russian authorities to both mobilize their subjects’ political and electoral support and channel hundreds of billions of rubles from the budget to fund the military and military equipment manufacturers (who represent, along with their family members, up to 11 percent of the Russian population). This strategy precludes any full-scale military conflict with the NATO countries for two obvious reasons: First, the Russian people do not want to go to war. No one was killed in Crimea, and during the subsequent conflict in Donbass the highest estimates of casualties among Russian servicemen are around two to three thousand people. In Syria, the combined losses of the regular army and the mercenaries Russia employed totaled less than 300. A single day of direct engagement with NATO forces would claim many more lives.

The second is that the Russian army isn’t fit for a full-scale war. It possesses only about a tenth of the tanks, armored vehicles, and guns that the eastern flank of NATO forces in Europe (not counting Greek and Turkish armies) can command. Even with 4.3 percent of its GDP spent on defense, Russia will need 30 to 40 years to catch up with its main opponents in just one theater. At the same time, the country possesses no means to respond to Western sanctions and nothing to offer in exchange for these sanctions being lifted. Thus, Putin is now able only to interfere with foreign elections and influence public opinion abroad by either waging disinformation campaigns or secretly funding fringe political parties. The Kremlin is stuck in its current foreign policy stance. Like a caged dog, it can only bark louder and louder.

The main challenge Putin’s regime now faces is the need to preserve its popularity within Russia while maintaining the international status quo—avoiding becoming a rogue state or attracting further sanctions. The West’s response to such a tactic should be based on a deep understanding of its own strategic superiority and the recognition that Putin’s Russia will run out of steam much more quickly than Brezhnev’s Soviet Union did. The gap between Putin’s non-existing foreign policy and his desperate rhetoric may broaden, but it will produce neither substantial benefits for Russia nor existential threats for the West.

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Artwork © Dominik Herrmann

Italy has found itself in the middle of a vicious election campaign leading up to the March 4 vote. It is more of an election war, really, fought with lies, propaganda, distortion, intolerance, violence, and a torrent of hatred.

A glance at the country’s social media is enough to get a sense that this is not simply a matter of differences of opinion, nor is it about persuading voters. Anyone with a different view is not simply a political opponent―they are an arch enemy, who must be destroyed along with their ideas. In Italy, political confrontation has always oscillated between drama and melodrama. But the punches being swung this time around are increasingly brutal.

The weekly newspaper L’Espresso produced a catalogue of such insults at the end of last year, gathered under the title “Die, You Bastard.” The collection showed that regular social media users are far from the only ones unscrupulously venting their rage. Politicians and media outlets seem to completely underestimate the potential for violence that comes from these tirades of hate.

For example, just before parliament voted on the controversial new electoral law last year, an MP from the Five Star Movement (M5S) wrote to Ettore Rosato, a Social Democrat who helped draft the bill, saying: “Rosato, let’s make a pact: if the constitutional court approves your law, we’ll burn you alive.” Meanwhile, Vittorio Feltri, editor-in-chief of the daily Libero―allied to the populist Northern League―posted on Facebook: “Dying of malaria is not normal. The infection is coming from far away, from black Africa. Stop the intake!”

For its part, a far-left movement dug out a photo of former Prime Minister and leader of the Christian Democrat, Aldo Moro, who was kidnapped by Red Brigades militants on March 16, 1978, and found dead a few weeks later in the trunk of a Renault 4. His kidnappers had taken the photo during his captivity and passed it to the Italian media. The public was shocked, and even today the photo is seen as a dramatic testament to a period of trauma.

Yet that didn’t stop the left-wing extremists from swapping Moro’s face for that of Matteo Salvini, leader of the Northern League―complete with a gag over his mouth. The doctored image was captioned: “I have a dream.” The next day, the Rome-based daily Il Tempo published a similar picture, this time with the image of lower house speaker Laura Boldrini.

In fact, Boldrini seems to have become the object of the most vile and extreme attacks―because she is a woman, because of her pro-refugee stance, and because she is on the left. One activist for the “Us with Salvini” list responded to an alleged rape by an immigrant by asking: “When will this happen to Boldrini and the women of the Social Democratic party?” This was outdone by an even more alarming post featuring an image of a beheaded Boldrini and the words: “This is the end she had to meet in order to appreciate her friends’ customs.”

Throwing Up the Media

The press, of course, have not been left out, and the former leader of the M5S movement, Beppe Grillo, has been particularly vicious. “I’d like to eat you all up and get so full that I can vomit you straight back out again,” he told the press on one occasion.

Grillo’s aggressive and powerful rhetoric is not the only reason that there seem to be no more taboos when it comes to verbal confrontation. But it is undeniably a factor. In 2005, Grillo wrote a blog post announcing the start of his “Parlamento Pulito” (“Clean Up Parliament”) campaign. It targeted 20 MPs who had retained their seats in parliament despite being convicted of crimes. Grillo bought a whole page in the International Herald Tribune to expose the issue. He attracted a lot of attention from abroad, but far less in Italy itself, starting with the media. So he changed his tactics, and organized the first national “V Day” for September 8, 2007. V stands for the expletive vaffanculo, meaning “fuck off.” This time around, Italians and the country’s media were listening.

Political disputes in Italy have always been something of a gladiator fight. But the current confrontation has flagrantly crossed the boundaries of civility so often that Amnesty International Italy has started the campaign “Count to Ten.” “There’s not an hour that goes by in which social media, or traditional media, aren’t reporting on the latest hate-filled statements, and anyone can be the target, whether migrant, woman, Roma, LGBT person, or a member of a religious minority,” the NGO wrote on its website. The campaign features a barometer measuring the hate level in the run up to the election.

It is hard to say whether this project is really achieving its goal of getting people to dial down their tone. But the threat is certainly real—these hate tirades are followed by actions, as the last few weeks have shown. A few days after an 18-year-old was murdered in the city of Macerata and a group of Nigerians came under suspicion, an Italian man embarked on a shooting spree targeting African immigrants. During a visit by Boldrini to a Milan suburb, the right-wing extremist group Casa Pound publicly burned a straw puppet effigy of the lawmaker. Brenda Barnini, mayor of the Tuscan town of Empoli, was sent an envelope containing two bullets, a swastika, and the message: “You prefer niggers to your own countrymen. We will finish you.”

Hugo von Hofmannsthal once wrote: “Words are not in the power of men; men are in the power of words.” At the moment, Italy seems to be in the power of some particularly nasty ones.

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