The Scramble for Europe

By Richard Gowan

Do European diplomats secretly want to be irrelevant? Many have despaired of affecting events in Asia, where China and America are competing for authority. Some have even given up hope of influencing events in Africa, where Asian investors are in the ascendant.

Events in the Middle East have divided the EU's members between those (most obviously in Paris and London) who want a big part in crisis management and others who just want the whole horrible business over and forgotten (hello, Berlin and Rome).

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If the Libyan campaign turns out badly - or just drags on for longer than expected - more and more European officials will argue for staying out of further foreign entanglements. The EU may be on the road to becoming a sort of strategic suburbia: a collection of small, quiet and obsessively inward-looking communities suspicious of the outside world.

My colleague Nick Witney of the European Council on Foreign Relations argues that if the EU retreats from global affairs it could become a "spiky, hedgehog-like larger version of Switzerland." There's just one big flaw in this strategy. While many Europeans may want to leave the rest of the world alone, the rest of the world has rather different ideas.

Chinese policy-makers certainly don't want to leave Europe alone. In the last two years, China has pumped money into a series of beleaguered EU economies, ranging from a €4 billion deal for port facilities in Greece to a package of deals with Spain worth over €5 billion, including a contract for over €6 million of olive oil. Economists argue that many of these investments make good business sense (and who doesn't love olive oil?) but almost all analysts also assume that Beijing aims to buy some political influence as well.

If that's China's plan, it's hardly a new idea. Before the financial crisis undercut the Russian economy, Vladimir Putin reportedly advocated buying up German firms as the basis for a Russo-European partnership to off-set the rising Asian economies. Germany wasn't the only target. Last year, Wikileaks published American diplomatic cables speculating that Italian Prime Minister Silvio Berlusconi was "profiting personally and handsomely" from deals with Putin - often acting as Russia's champion in EU debates.

Neither Russia nor China can claim anything like America's influence in European affairs. US investors still have nearly €1.5 trillion lodged around Europe. Yet with the Obama administration apparently less than fascinated by European affairs, there are opportunities for the rising powers to get a new level of leverage on the continent.

This leverage comes with numerous political benefits as well as economic advantages. European governments may feel that they're losing influence, but they are still well-represented in international forums like the G20. In the run-up to last November's G20 summit in Seoul, Germany joined China in criticising US financial policy - heading off American attempts to put pressure on Beijing over the price of its currency. Chinese diplomats must hope they can use their influence in Europe to repeat this trick in future.

Although major emerging economies like Brazil and India have yet to match China's euro-splurge, they haven't forgotten Europe. Surveys of Brazilian and Indian investors suggest that they often prefer the relative stability of Europe to their own neighborhoods.

Two weeks ago, Brazil's president caused a stir by floating the idea of buying Portuguese sovereign debt or using other financial deals to help Lisbon out of its financial hole. If this suggestion has come too late to save Portugal from an EU bail-out, it nonetheless highlighted the rapidly-shifting balance of wealth from ex-colonists to the ex-colonised.

Far from enjoying a quiet retirement from global affairs, the EU may be confronted with a "Scramble for Europe" as Brazilian, Chinese and Indian investors vie for the best deals on the continent. European policy-makers, long used to American and Russian interference in their affairs, will have to respond to a far greater range of outside interests.

The shift of economic power away from the West is reshaping European political priorities. Leaders like Jacques Chirac and Tony Blair measured themselves by their roles on the world stage. Even if Libya has thrust Nicolas Sarkozy and David Cameron into the limelight as warriors, the current generation of European leaders measure themselves according to how much foreign investment they can attract. Last November, Sarkozy welcomed Chinese president Hu Jintao to Paris and celebrated €16 billion of deals. Earlier in the year, Cameron led a delegation to Delhi to woo Indian investment.

Critics complain that these photo opportunities reduce the EU's leaders to traveling salesmen. Cameron in particular has been attacked for putting commercial relations, rather than human rights or strategic concerns, at the heart of his foreign policy.

But to be a good salesman, you need a solid sales strategy. At present, European governments seem to be heading in different strategic directions. France and Germany (which enjoys more flexibility thanks to its export strength) continue to concentrate on relations with China and Russia. Although David Cameron invited Hu Jintao to London last year, his trip to Delhi symbolised his preference for boosting economic ties with rising democracies - UK officials highlight Brazil's importance as well as India's. Spain and Portugal are likely to continue to hanker after financial relationships with Brazil.

These diverging priorities have complicated European efforts to consolidate EU foreign policies in line with the Lisbon Treaty. National leaders, wanting to maximize their flexibility in dealing with new economic powers, have little interest in letting get in the way. The EU's formal summits with China and India are increasingly hollow exercises.

Unless the major emerging economies suffer significant setbacks in the years ahead - by no means impossible - they should have little difficulty dividing and ruling in Europe. It's possible to imagine a scenario ten years from now in which the UK regularly stands up for India's interests in the EU while France and Germany speak for China. That won't be a problem if Sino-Indian relations are stable - but if the two Asian giants are in a state economic or strategic tension, their friends in the EU might also find themselves at odds.

This hardly means that French or British troops will rush off to fight on different sides in a Himalayan war. Yet, as Russia has shown through its energy diplomacy over the last decade, it's not difficult for outside powers to manipulate individual European governments, making it well-nigh impossible to define coherent EU positions. In 2020, the greatest potentates in Brussels may be the Chinese, Brazilian ambassadors - alongside their US and Russian counterparts - lobbying against each others' interests.

If European governments coordinate their economic and foreign policies more effectively, they may be able to play the rising powers off against each, balancing India's influence against China's or Brazil's. But EU policy-makers should not imagine that they can somehow rake in cash from Asia and Latin America yet insulate themselves from competition between the emerging powers and the US for global influence.

Strategic irrelevance is not an option. Europe's ability to shape the outside world may be shrinking, but that doesn't mean that outsiders will refrain from shaping European politics to suit their needs.

Richard Gowan is a Policy Fellow at the European Council on Foreign Relations.

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