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The Soft Power Failure of the EU: Russia walks off — Michael LaBelle (Ep 51)

Russia walks off – Michael LaBelle

This week Michael LaBelle provides a rough description of why the EU has lost its soft power.

Rising gas prices, the military aggression of Russia, and rule of law breaches in former Communist states are heralding a new era for the EU. This ‘post-acquis’ era is marked by rising nationalism and populism which undermine the foundation of the EU’s soft power.

The question that needs to be answered is, ‘Why did the EU lose its soft power?’ This question cannot be answered without including the hard power of NATO.

The Post-Cold War environment saw NATO’s eastern expansion, which is now questioned by the hard military might of Russia. The expansion of democracy in former communist countries, once represented by EU membership, represents a new socio-political system expressing soft power. At the same time, the hard power of NATO also went East. Jointly, these institutions now are perceived to threaten the borders and sovereignty of Russia.

The EU has been slow, and even incapable of acting against its own member states who have discounted the democratic norms which are the foundation of the European Union. The EU’s soft power derives from a descriptive cultural experience of individual liberty and respect for human rights. The Cold War-era institutions of the Helsinki Commission, European Court of Human Rights, and others symbolize a common pursuit of both the Soviet and Western countries to establish common rights within Europe. Now, these institutions are sidelined as nationalists and populists reclaim sovereignty given over to these Cold War institutions, including the EU.

The EU’s Single Energy Market (SEM) was built and functioned as a place for companies and governments to ‘come and play’ (as Goldthau and Sitter state). Money could be made by neighboring countries selling gas and electricity by the rules within the SEM. However, over time, as competition and neoliberal rules took over from national governments’ long-term agreements with Russia, participation in the EU’s SEM was not a favorable place to play.

Gas is now near-enough, thanks to LNG and new pipelines, a global commodity. Russian gas is breaking the Soviet gas bridge and finding alternative buyers. For most companies and countries wanting to play in the SEM, there are other places to sell their gas. During the Cold War, gas was more than a commodity, it was a tool to build relations between the Soviet Union and Western (and even Eastern) countries. And to transfer money and technology. This was soft power at play. The Western European countries were attractive for their cash, knowledge, and business relations that could be developed over time (as described by Thane Gustafson in his book, The Bridge). Thus, gas, while a commodity was also a relational tool creating trust and commerce between two different political-economic systems.

The downgrading of gas to a mere commodity overseen by market rules and regulations favoring consumers, means producers are no longer incentivized to participate in a market that has strings attached. The SEM is described by scholars Goldthau and Sitter, as a soft power tool with a hard edge. Meaning the market is attractive to foreign and domestic entities who will play in the market, but there are hard rules and regulations which dictate how participation is done. For Russia in 2021 and 2022, participation is defined as satisfying contractual commitments, but not sending higher levels of ‘free’ gas to participate in the market.

The EU’s soft power is also undermined from within by member states. The growth of populism and nationalism delivers scathing blows against the legitimacy of the European project. NATO was a product of the Cold War – expressing hard power. But the EU is a product produced from World War Two seeking stability and being founded on a common platform of not only economic union, but also political and social union to prevent war between European countries. Therefore, the EU cannot be defined only through rules, regulations, and legislation, but through social and political norms that perceive democracy and individual liberty as foundational to society.

Breaches of the rule of law perceived to be happening in Hungary and Poland, and staggered efforts by the EU to reclaim a semblance of democratic norms in these countries, demonstrates an overly prescriptive governance system unable to have soft social and political norms genuinely accepted by these governments. For these two countries and others, negating the acquis that guided their EU membership by conforming legislation and social systems to an EU norm, meant sacrificing Communist practices of non-market economies and social control. Clearly, these historical practices have not disappeared.

In a post-acquis era, returning to Communist top-down political management appears to be the best way to deliver low-cost energy and societal control. There’s little space for fair elections or expression of individual rights. While the hard power of Russia may not appeal to the Polish government, the nationalistic and populistic tendencies are a return to a form of governance that the parties in power in both Hungary, Poland, and Russia appreciate. And, depending on how you count, over fifty percent of voters support this form. Legitimacy from the ground-up or from the top-down? For nationalists, there is no question. Why should the state be second to a multilateral governance organization preaching liberty with high energy prices? The soft power benefits that attract all three of these countries to the EU, whether the SEM or development funds, is not enough for them to give up historical practices of a nationalistic sovereign state.

Michael LaBelle

The soft power of the EU, to be attractive while also persuading partners to be democratic and neoliberal in commerce is lost. The built-up EU institutions and mechanisms, seen in the SEM or the European Emission Trading System (ETS) provide stringent rules and regulations, not all member states are willing to abide by. Add to that democratic norms, such as respect for press freedom, then membership to the EU has a high cost.

Unfortunately, for the EU, holding soft power, means you can’t kick out those that do not play by your rules. But they can choose to leave. Russia (and the UK) decided they are better off not playing by the EU’s rules. For Hungary and Poland, they decided it’s better to stay in but pay no attention to the rules. For the EU, to build back its soft power, some hard power could be useful.

January 13, 2022

Transcript of The Soft Power Failure of the EU

Building the EU’s Gas Transition with Russia — Thierry Bros (Ep 49)

Thierry Bros – Episode 49

This week we speak with Thierry Bros, he’s a professor at Sciences Po in Paris. In the introduction I use the term  ’eminent expert on gas’ and after listening to this interview you will be using this term too.

On the podcast, I try to keep introductions short but pay attention to his experience on the EU- Russian gas roundtable or his lead with the liberalization of the French gas market. I’m really honored for him to come onto the podcast to discuss his latest study done with Jean-Arnold Vinois, published by the Jacque Delors Energy Centre, titled, High Energy Prices, Russia Fights Back? In my opinion, this is one of the best reports on the current crisis in the gas market. It is direct, clear, and full of advice and information.

Thierry provides a succinct path for how the European Commission – and national governments need to navigate the current crisis and overall energy transition. He is very clear in stating, we can’t jump from 2020 to 2050. In his view, the Commission forgot this.

In this episode, we balance his perspective between the market deciding on the technologies to get us to net-zero, and governments subsidizing our way through a green transition. That is, making energy affordable to households but smoothing the volatility that is caused by phasing out fossil fuels- and the natural rhythm of commodity markets.

There is €30 billion coming from the EU’s Emissions Trading System (ETS), this money should be used to assist households with the transition and put into R&D for new technologies – not given to large corporations to fund incremental improvements.

Towards, the end we get to Russia- EU gas relations. Here Thierry’s perspective is clear: The EU Commission needs to step up and engage with Russia over Nord Stream 2 and the medium-term role of gas in the EU. He cites the disparaging treatment the EU has given towards Russia on the role of gas in the green transition. As EU suppliers dry up – like the Dutch and Norwegian fields, Russian gas is increasing its share in the EU. A long-term strategy needs to be developed to ensure sufficient investment occurs to weather the transition phase. For Thierry, he believes in the long-term viability of Carbon Capture and Sequestration (CCS).

But I would say, regardless of your view on CCS, gas is with us for the long-term, the current under investments, and high prices, like what I discussed with Adam Cyzewski, the Chief Economist of PKN Orlean, in episode 44, it is clear, jumping to a 2050 energy mix, without a deliberate strategy over infrastructure and without ensuring stable relations with gas suppliers, is not viable. Rather, a phased transition is needed that involves specific milestones and partnerships.

Thierry Bros

My suggestion is to listen to this episode and read the gas report, you’ll learn a lot about the causes and solutions to the current gas prices.

Finally, there is an incredible amount of information in these podcast episodes – just like this one – I do make the transcripts available on the My Energy 2050 website. Just as a note, I’ll be using these interviews to inform my own research, so if you are also a researcher, I suggest you check out the transcript – and even cite the episode in your publications. That actually helps my own citation scores and makes doing the podcast more fun than writing another journal article.

Finally, for comments, I suggest to jump on the LinkedIn or Twitter posts of the episodes and leave comments there. Social media is a great way to share knowledge and grow the quantity of high-quality information about how to make the energy transition a reality.

Transcript of the episode

Seeking Stability & Circularity for European Metals — Chris Heron and Cillian O’Donoghue (48)

Building the Circular Economy – Eurometaux

The complexity of manufacturing from a global supply chain has never been more apparent than now. With supply shortages caused by the impact of Covid-19 and efforts to combat climate change, we are entering a new period, as I have stated in the past about Carbon Storms, where a confluence of events disrupt or place pressure on once stable markets.

At the end of 2021, there are shortages even with the common material of magnesium, with European production of cars, planes, and other lightweight aluminum alloys ceasing. The global shortage of computer chips sent the message of how integrated – and tight – global supply chains are. Now as Europe continues to produce everyday products like cars, but also higher-tech equipment necessary for the energy transition, there is a serious supply problem for European industry.

For this episode, we are joined by Chris Heron and Cillian O’Donoghue. Cillian, As you’ll hear, the interview with these representatives of the European Metals Association (Eurometaux)  is perfect timing to understand both the current shortages and what is needed to improve the situation for European manufacturers.

I think you’ll find many parts of this episode surprising. And certainly informative. Previously, I just thought Europe needed to be producing everything at home to ensure the security of supplies for these materials, but as you’ll also find out, bringing it back home, may not be the answer.

Europe’s high energy prices and other key competitive factors, making the rebuilding industry a challenge. Rather, diversification of sourcing may be a more competitive and secure way forward.

Also, bringing back industry to Europe – requires lower priced energy. The factory has to be competitive in Europe. And now with the big effort to decarbonize power and electrify everything, rebuilding the European smelting and resource sector may be beyond the rationale.

In terms of energy, as Cillian points out, smelters and factories can use wind and solar, but these are intermittent power sources, so it’s necessary to develop large scale storage options – Hydro is a great example, but for other sources, a steady supply is important to ensure continual operation. This is not to say it can’t be done, but the challenges are there.

In regards to building the circular economy, we put our hands down into the recycling box to find out that recycling can happen in the sector. But as Chris points out, the materials going into batteries or other new technologies are not at a sufficient level within the economy to create a recycling loop. Therefore, we need to rely on raw materials to build up a base for recycling.

Eurometaux – Circularity in European metals

We then get to the sources of raw materials. How can the industry source the materials from mines or locations that do have high environmental and social standards?  As I’ve discussed in previous episodes, Maty .. And Martin..  Verifying the supply chain becomes very important.

Towards, the end we get to the carbon border adjustment mechanism that is being proposed by the EU Commission, to ensure that materials brought into the EU are made with sustainable energy. However, according to Chris and Cillian,  this turns out to be deficient in its application. Listen to find out why.

Related episodes:

The Value of Climate Accounting — Martin Wainstein (Ep. 35)

The Equitable Battery Alliance: Innovating fair supply chains – Mathy Stanislaus

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