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461. The geopolitics of digital financial technologies: A chance for Europe?

Author:
Brigitte Dekker, Arief Hühn, Pim Korsten, and Maaike Okano-Heijmans
Publication Date:
01-2022
Content Type:
Special Report
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
Geopolitical tensions are permeating the digital domain. During the 1990s, the emergence of the internet still involved optimism and high hopes for digital technology as a force for openness, connectedness and freedom for all. Yet contrary to these promises, a trend of centralization, is prevalent in the digital economy. This trend of centralization, with the subsequent problems of gatekeeping, ecosystem lock-in, disproportional rent-seeking and monopolists that set market rules, is now also evident in the financial industry. Whereas smaller financial technology (fintech) companies, including many European firms, revolutionized the financial sector in the 2000s – disrupting traditional banks and their vested interests – we now witness a concentration of power and data in this sector, either in incumbent firms or within Big Tech companies. In response, governments in China, the European Union (EU) and the United States (US) are devising regulations, while at the same time technology innovators are building a radically new infrastructure to underpin our financial sector: Decentralized Finance (DeFi). The geopolitical implications of this disruptive transformation of the financial sector – through both fintech and DeFi – require forward-looking government responses that protect and promote European interests in the long term. This Clingendael Report first reflects on these trends of centralization in digital finance and decentralization in ‘traditional finance’. The paper examines the relationship between geopolitics and finance and looks at the position of the EU and its member states. The analysis considers the medium to longer-term implications in the following three domains: economic competitiveness and innovation; financial–economic and social stability; and inclusivity and equality. Data governance, data protection and data portability between financial services are key concepts in each of these areas. Building on these insights, the report argues for a push towards greater awareness among European policymakers on the potentials of DeFi to counter Big Tech’s rising influence in the European financial system with a decentralized, human-centred and value-based system. At the same time, the regulatory and security risks of DeFi – and the trend of decentralization in general – must be addressed. The report also highlights the need to help people to develop digital skills and become responsible and resilient digital citizens, and calls for enhanced dialogues with officials and technology company executives in like-minded countries on current developments. New approaches, such as multi-stakeholder consultations and increased rapprochement with the open-source and crypto-communities, are needed to facilitate knowledge exchange and best practices that will improve (regulatory) responses.
Topic:
Science and Technology, European Union, Geopolitics, Internet, and Digital Finance
Political Geography:
China, Europe, and United States of America

462. Growing stronger together: Towards an EU–ASEAN digital partnership?

Author:
Maaike Okano-Heijmans and Brigitte Dekker
Publication Date:
02-2022
Content Type:
Special Report
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
In December 2021, the EU and Singapore launched talks towards a digital partnership agreement that could prove a building block for broader EU–ASEAN cooperation. This Report assesses the strategic value of increased cooperation in the field of digital connectivity, also acknowledged in the EU’s Indo-Pacific strategy of September 2021, and considers the practical challenges and opportunities of stronger ties between the two blocs and their member states in this increasingly important realm. The authors argue that three domains could form the basis of a future, shared, EU–ASEAN approach to digital connectivity: (1) digital infrastructure; (2) data governance and digital trade regulation; and (3) the digital economy and financial technologies (fintech). A bloc-to-bloc approach should run in parallel with strengthened ties by the EU and its member states with specific ASEAN member states. Together, these building blocks will serve EU and ASEAN long-term interests, promoting economic competitiveness and inclusive growth, as well as openness, transparency and freedom in the digital realm.
Topic:
European Union, Partnerships, ASEAN, and Digital Policy
Political Geography:
Europe, Asia, and Singapore

463. A new formula for collaboration: Turkey, the EU & North Africa

Author:
Nienke van Heukelingen
Publication Date:
03-2022
Content Type:
Special Report
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
Over recent years, relations between Turkey and the European Union (EU) have been difficult and driven more by crisis management rather than equal partnership. Yet, despite this downward spiral, both blocs remain key partners on domains such as trade, migration and counterterrorism and repeatedly express their interest in developing a more cooperative and constructive relationship. This report is a product of the ‘Searching for a New Formula for collaboration between Turkey and the EU in/with North Africa’ project, which investigated the extent to which Turkey and the EU could collaborate in and with North Africa, more specifically, Morocco, Egypt and Algeria. North Africa was chosen because it offers an underexplored area of research for Turkey-EU relations; Morocco, Egypt and Algeria were selected for specific study as they are the countries with which both Turkey and the EU have the highest trade volumes in the region. Moreover, there are currently no joint projects between Turkey and the EU in Morocco, Algeria or Egypt, although the region is an area of strategic importance for both Turkey and the EU. The recent war in Ukraine has also increased the value of North Africa as a provider of agricultural products and gas for the region. Libya and Tunisia were excluded from the research to narrow the scope of the project. To avoid the traps of reproducing ‘neo-colonial’ or ‘neo-Ottoman’ discourses and of following a top-down approach, this study used action research as a democratic, participatory and collaborative research methodology. It engaged diverse participants from Turkey, the EU and North Africa in semi-structured in-depth interviews, conferences and a survey. Through a cyclical process, the study devised a tripartite collaborative model and concrete project ideas under five major policy options in which cooperation between Turkey, the EU, Morocco, Algeria and Egypt could be actionable. This report gives a detailed account of the abovementioned tripartite collaborative model and the subsequent project ideas which were designed to be mutually beneficial for all three blocs –Turkey, the EU and North Africa. It should, nevertheless, be mentioned that current geopolitical uncertainties in the wider region could challenge the implementation of these projects. The civil war in Libya, the political tension between Turkey and Egypt or Morocco and Algeria, and the influence of China and Russia in the region could pose potential risks for collaboration. However, we maintain that such uncertainties make it even more timely to seek opportunities for a future collaborative environment in the Mediterranean as, ‘if the Mediterranean is weak, all Mediterranean countries are weak’.
Topic:
Foreign Policy, Migration, European Union, Crisis Management, and Trade
Political Geography:
Europe, Turkey, and North Africa

464. Investors beware: Europe’s top firms are highly exposed to China

Author:
Ties Dams and Xiaoxue Martin
Publication Date:
04-2022
Content Type:
Special Report
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
Europe’s top firms are highly exposed to China, and therefore to China-related geopolitical risk. This risk is only set to increase in the coming years, as geopolitical tensions between China, the US and the EU are not expected to decrease. Moreover, case studies of LVMH, HSBC, ASML and BMW show that some of Europe’s biggest listed firms could and should offer investors more transparency on their risk-management strategies. Intelligence on China and geopolitical risk exposure is key for investors, and investors that get ahead of the curve may have the edge in the long term. This report is aimed at investors in Europe’s biggest listed firms. It argues that investors have a growing need for transparency amongst European biggest companies with regard to their strategies in dealing with China-related geopolitical risk. Even investors without direct interests in China are or will be affected by China-related geopolitical risk due to the various forms of exposure of companies in the European home market. This means that investors may be increasingly exposed to the risks linked to great power competition, without having the knowledge necessary to anticipate geopolitical changes. As geopolitical tensions between China, the US and the EU are not expected to decrease, investors would be wise to seek greater transparency about European companies’ exposure to the Chinese market – and indeed get ahead of the curve and gain a competitive advantage by investing in those firms that have forward-looking geopolitical strategies in place. This report aims to put this point on investors’ strategic agenda by making the following three points: Europe’s top firms are highly exposed to China. China-related geopolitical risk is spreading. Case studies suggest that Europe’s top firms may not be sufficiently transparent about geopolitical risk management.
Topic:
Geopolitics, Business, Investment, and Risk
Political Geography:
China and Europe

465. The Russians are coming! The Russians are coming? Russia’s growing presence in Africa and its implication for European policy

Author:
Guido Lanfranchi and Kars de Bruijne
Publication Date:
06-2022
Content Type:
Special Report
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
The growth of Russia’s presence across Africa over the last decade has generated significant international concern, further exacerbated after Moscow’s invasion of Ukraine. Russia’s engagement can affect the interests and policies of the European Union (EU) and its member states (MS) in Africa. How should European policymakers understand these developments and respond to them? To answer this question, this report looks at Russia’s engagement in Africa, reaching three main conclusions. First, Moscow’s engagement with Africa has so far remained limited as compared to that of other global players, particularly in the economic domain. The current level of (media) attention devoted to Russia’s role in Africa is thus not supported by sufficient evidence of its actual engagement in the continent. At the same time, however, the growth of Russia’s presence is a real trend. Second, Russian actors are guided by a rather loose strategy when it comes to Africa. The Russian state has some interests that act as a broad framework. However, the actual engagement is carried out not only by state actors, but also by state-backed conglomerates and politically connected private businesses. These latter actors have their own specific interests, which are not always fully aligned with those of the Russian state. While state actors are often driven by geopolitical considerations, Russian companies are more interested in economic opportunities. Third, Russia’s engagement in African countries is significantly shaped by the different national contexts and by the interests of African governments. For instance, in a strong state like Ethiopia, Russia’s engagement takes place exclusively at the governmental level. By contrast, in Sudan and Mali (contexts with weaker state structures), other Russian actors like PMCs and private businesses are involved. Yet, in all three cases, Moscow’s presence tends to grow when relations between African governments and their international partners (especially in the West) deteriorate, often in the wake of authoritarian turns. This shows the opportunistic nature of Russia’s engagement, as well as the complex trade-offs faced by EU/MS governments when engaging with African governments. These findings have significant consequences for the policy response of the EU and its member states. This report suggests that: (i) Rather than trying to respond reactively to Russia’s presence, EU/MS should focus on strengthening their own relations with relevant African partners. Addressing some of the political and economic imbalances in the Europe-Africa partnership may be an effective way to strengthen such relations, and by doing so to reduce the chances of an increase in Russia’s influence. (ii) In countries where this preventive strategy is difficult to implement (e.g. when facing authoritarian governments), decisions on whether/how to engage should go beyond debates about Russia’s (potential) presence, and be based instead on a comprehensive understanding of EU/MS interests and norms. Partnerships with non-governmental actors (e.g. the private sector, traditional authorities) may allow EU/MS governments to remain engaged despite souring ties with the government. (iii) In countries where Russia’s presence is already established, evidence-based and context-specific assessments of this presence should inform the EU/MS policy response. This can allow EU/MS governments to avoid overreacting to Russia’s influence, while also not underestimating its dangers. (iv) To pursue their interests in an increasingly multipolar world, EU/MS governments should try to strengthen their leverage vis-à-vis Russia (as well as other actors). To do so, EU/MS policymakers should leverage more strategically the engagement of European businesses across Africa.
Topic:
Foreign Policy, European Union, and Engagement
Political Geography:
Africa, Russia, and Europe

466. A new conflict management strategy for Syria: Creating a Safe, Calm and Neutral Environment

Author:
Malik al-Abdeh and Lars Hauch
Publication Date:
07-2022
Content Type:
Special Report
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
The search for peace in Syria faces a deep crisis. The battlefield has reached a stalemate, the Constitutional Committee never emerged from its cul-de-sac, and the UN’s ‘step-for-step’ approach suffers from flawed conceptual underpinnings as well as a lukewarm reception. Meanwhile, Syria remains divided into three areas that risk drifting further apart amid deteriorating humanitarian conditions. This reality on the ground should serve as a marker for recalibrating Western policy on Syria beyond the current focus on sanctions, accountability, and humanitarian aid. Western policy makers – mostly those from the US, European Union and Turkey – must base a much-needed new conflict management strategy on three ‘ground truths’: 1) the conflict is largely frozen and Syria is likely to remain divided into competing areas of control that are supported, or overseen, by external powers for the foreseeable future; 2) questions of national legitimacy and power sharing are not currently solvable and must be temporarily put on the back burner; c) diplomatic efforts to stabilise Syria and prevent partition are likely to be more effective when they focus on restoring practical connectivity between the different areas of control in terms of flows of people, goods and trade/aid/investment, as well as education. Such a strategy can take shape by operationalising the UN-sanctioned concept of a ‘safe, calm and neutral environment’ (SCNE) via a clear set of principles for engagement, a detailed stakeholder/interest mapping of the various conflict parties, and a focus on pragmatic measures to improve daily conditions. The objective of such a strategy is to enable a durable return to relatively normal life for Syrians still living in the country, and to create linkages between the country’s war-torn parts that can open windows of opportunity in the longer term for a political process reflecting the intention of UNSCR 2254.
Topic:
Conflict Resolution, Diplomacy, Syrian War, Peace, and Conflict Management
Political Geography:
Middle East and Syria

467. How To Talk About Migration in Africa: Classic Hurdles and Six Recommendations for European Policymakers

Author:
Victoria Rietig and Alia Fakhry
Publication Date:
01-2022
Content Type:
Special Report
Institution:
German Council on Foreign Relations (DGAP)
Abstract:
Europeans are entering a decisive period for their relationship with African countries, on migration and beyond. Efforts to strengthen cooperation abound, but many migration initiatives are plagued by frustrations on both sides. So how to break through this vicious cycle and improve the unhealthy relationship? This paper analyzes trends in African migration policies and puts forward six recommendations for European policymakers and experts about how to prepare for their next encounter with their African counterparts – be it a friendly and informal chat or a negotiation.
Topic:
International Relations, Migration, European Union, and Asylum
Political Geography:
Africa, Middle East, and North Africa

468. NATO’s 2030 Reflection Process and the New Strategic Concept: Implications for the Security in Northern Europe

Author:
Robin Allers, Rachel Lutz Ellehuus, Claudia Major, Christian Mölling, Paul O'Neill, and Johannes Gullestad Rø
Publication Date:
01-2022
Content Type:
Special Report
Institution:
German Council on Foreign Relations (DGAP)
Abstract:
The NATO 2030 reflection process was sparked by worries that the Alliance might falter as a forum for political consultation. Germany, Norway, the United Kingdom, and the United States all have a shared interest in ensuring NATO's coherence, improving the credibility of its deterrent, and strengthening its capacity to act. This report from the Security in Northern Europe (SNE) project presents contemporary views on NATO's Strategic Concept 2030 from Berlin, London, Oslo, and Washington D.C.
Topic:
Security, Defense Policy, NATO, and Alliance
Political Geography:
Europe

469. Risky Thinking: How Scenarios Can Help the EU Bounce Back from Strategic Shock

Author:
Roderick Parkes and Mark McQuay
Publication Date:
03-2022
Content Type:
Special Report
Institution:
German Council on Foreign Relations (DGAP)
Abstract:
Since coming to power in December, the Scholz government has blundered into a series of foreseeable crises: medical shortages; reliance on Russia for gas; Ukraine’s need for robust support. France’s President Macron anticipated all three crises, giving weight to his calls for Europeans to pursue autonomy and reduce dependence on the outside world. Policy makers are now demanding scenario exercises that illustrate the obvious dangers of interdependency to back up their policy shift.
Topic:
European Union, Crisis Management, Risk, and European Commission
Political Geography:
Europe

470. Defense and Deterrence Against Geo-Economic Coercion What Germany and the EU Can Learn from China and the United States

Author:
Markus Jaeger
Publication Date:
03-2022
Content Type:
Special Report
Institution:
German Council on Foreign Relations (DGAP)
Abstract:
The geo-economic conflict between the United States and China as well as uncertainty about America’s longer-term commitment to a liberal and rules-based multilateral order pose risks to Germany’s economic prosperity and national security. The new German government must systematically identify economic dependencies and develop a forward-looking and comprehensive strategy to address vulnerabilities.
Topic:
Defense Policy, European Union, Deterrence, and Geoeconomics
Political Geography:
South America and North America