Professor Erika Szyszczak, Professor Emerita, and Fellow of UKTPO, University of Sussex, Written Evidence (RUI0002)

Implications of Russia’s invasion of Ukraine for UK-EU relations

Professor Erika Szyszczak, Professor Emerita, and Fellow of UKTPO, University of Sussex

2 October 2023

Summary

-          The EU reacted quickly to the Russian escalation of war with Ukraine, building upon developments since 2016 to create an EU Common Foreign and Security Policy (CFSP) in response to growing external threats and the lessons learnt from an EU-level response to the COVID-19 pandemic.

-          Sanctions are the main form of CFSP. These have been introduced in stages because of sensitivities of some Member States to energy risks. There is evidence that sanctions combined with the oil price cap have weakened Russia’s economy. But also, evidence that Russia is supported by allies such as China and Turkey and that sanctions are being evaded by EU exports being channelled to countries with trading links to Russia.

-          The European Commission has taken a central and enhanced role of developing the sanctions policy.

-          The enhanced role for the European Commission is  attributable to the strong leadership  played by Ursula von der Leyen. It is by no means certain, that faced with a future crisis, the European Commission would retain its central role.

-          For the first time the EU has entertained the idea of using EU resources to fund defence projects.

-          The EU is developing a distinctive form of economic statecraft through Open Strategic Autonomy (OSA).

-          Trade has been weaponised by Russia, disrupting supply chains for food, and disrupting energy supplies. OSA has been used by the EU to tackle defence/security risks and economic risks created by the US, China, and Russia.

-          The OSA straddles both trade/economic and security threats; the EU uses a range of legal bases to develop trade defence instruments .

-          The European Commission plays a significant role in the investigation and enforcement  of new trade instruments, and this is why it is viewed as a geo-political actor.

Question

1. How would you assess the EU’s overall foreign and security policy response to the Russian invasion of Ukraine?

The EU is developing a form of economic statecraft to build resilience against external shocks, using trade policy and foreign policy measures. It is not a new policy in response to the Russian invasion of Ukraine, but part of an ongoing adaptation of its external relations policy.

The EU was slow to develop economic statecraft, but in recent years it has turned its attention towards securing economic resilience and economy security through foreign, security measures and trade measures, in response to the different challenges.

The most recent Russian invasion of Ukraine exposed EU [over] reliance on Russian gas creating vulnerability and risk for the EU.

The COVID-19 pandemic exposed the risk to the UK and the EU of relying on highly concentrated supply chains. New forms of threats, data breaches, cybercrime or cyber-attacks, foreign interference and disinformation using social media forced the EU to marry foreign policy and defence with trade and economic resilience.

The most recent iteration  of An EU Approach to Enhance Economic Security, published on 20 June 2023, identifies the need for a more comprehensive approach to risk management which has been intensified since the most recent Russian invasion of Ukraine:

•              risks to the resilience of supply chains, including energy security;

•              risks to physical and cyber security of critical infrastructure;

•              risks related to technology security and technology leakage;

•              risks of weaponisation of economic dependencies or economic coercion.

The risks are to be assessed by the European Commission and Member States, with the Council reviewing progress and reporting to the European Council on an annual basis.

Any measures taken by the EU must satisfy the principles of proportionality and precision.

Indications of the kind of measures anticipated in these principles are in the form of tightening export controls and improving screening at the national level of foreign investment. New Frameworks are proposed to add to the existing OSA strategy: a Critical Raw Materials Act, the Net-Zero Industry Act, and the Strategic Technologies for Europe Platform. These will develop ideas of “Clubs” – for example a Climate Club, a Critical Raw Materials Club – as a means of de-risking and forming alliances with like-minded states.

The EU suffers from the legacy of separating the exclusive competence for the EU to act in the sphere of trade from the more limited competence to develop a foreign policy. This entrenched the differential structural and institutional architecture of the EU and limited the capacity to of the EU to respond to geopolitical changes.  [1]

The EU differs from the US, where Pentagon-led economics allows for a greater role for foreign policy to determine internal economic policy and external trade-related policies. In a  short space of time, the EU has used sanctions against Russia, put in place a Strategic Compass in Security and Defence,[2] as well as modernising existing trade defence measures and implemented a wide range of trade defence legal instruments to match threats to trade and internal security posed by the Russian war, as well as the economic security threats from the US and China.

The EU has brokered an internal  political consensus on the measures and acted without the need for a Treaty amendment, manipulating the mosaic of available legal bases  to develop new instruments.

External Challenges

The EU has faced a decade of crises which has allowed for experimentation in new forms of decision-making and policy development. This has informed, and anchored, the response to the Russian acceleration of aggression towards Ukraine from February 2022.

The election of President Trump in 2017 marked a shift in US policies: opposition to new international agreements, the stymied WTO appellate process,  the fuelling of  trade wars with China, Canada, Mexico, and the EU, fragmented and fractured the global trade system. The situation has not radically changed under President Biden, with continued US emphasis on bolstering the domestic economy at the expense of opening international trade, see for example, the Inflation Reduction Act 2022. 

In parallel, China, a systemic rival to the EU, conducts an aggressive trade policy, through retaliatory measures  and the use of subsidies to bolster domestic production and  direct investment in EU countries.

The EU, along with states such as South Korea, Japan, has  been  ensnared by the polarised trade wars conducted between the US and China, and, as with other states, it becomes the victim of collateral damage created by disruption to supply chains or through sanctions. Indirect damage may occur through spillover effects, for example US restrictions in imports from China may lead to greater Chinese exports to the EU. There may also be direct collateral damage, seen for example,  in the US putting pressure on ASML,  a Dutch company, and then the Dutch government, to stop exporting microchip technology to China.

Added to global trade disruption the EU is managing several generational challenges, inter alia:  the green and digital transitions, terrorist attacks, the effects of Brexit, climate change, cybercrime, irregular migration from outside of the EU , the COVID-19 pandemic.

These factors have disrupted supply-chains, exposed the fragility of global inter-dependence, and eroded the mantra of ‘free trade’. The EU is developing a policy of de-risking,  protecting supplies of critical raw materials and minerals, an innovative approach to industrial policy, a green industrial policy, policies of friend-shoring, climate clubs, and building new transatlantic bridges.

The EU has adopted a policy of Open Strategic Autonomy (OSA) to embrace the new narrative of how foreign policy and trade risks can be pursued through a range of  legal instruments. But the EU is constrained by the need to reach a political consensus between 27 Member States, the EU Institutions (European Commission and European Parliament), alongside the constitutional constraints imposed by EU law and the basic Treaties (TEU and TFEU) and international law.

Different Stages of OSA

There are 4 distinctive stages of OSA evolution:

•              2013 to 2016: focus on security and defence; referred to as strategic autonomy.

•              2017 to 2019: response to defend EU interests in a hostile geopolitical environment: Brexit, the Trump Presidency and China's growing assertiveness.

•              From 2020: the Covid 19 pandemic shifted the focus to mitigating economic dependence on foreign supply chains.

•              From 2022, OSA has broadened its scope to almost all EU policy areas, with the Russian invasion of Ukraine highlighting the need for OSA in defence and energy matters.

Tocci describes the launch of the EU Global Strategy  2016  as the watershed change for EU security and defence. [3] The EU response to the COVID-19 pandemic ushered in new forms of speedier action, giving the European Commission a central and enhanced role to develop EU-level responses.

Question

1. To what extent does the EU’s response represent a departure from its previous approach to foreign and security policy? Is this likely to be a durable shift?

In the month following the escalation of the war in Ukraine the EU adopted a new Strategic Compass in Security and Defence, a policy initiated two years earlier. The war in Ukraine placed EU defence issues much higher on the EU political agenda – at this time France held the Presidency of the Council - triggering greater interest in joint EU defence spending and procurement. A new short-term  European Defence Industry Reinforcement through Common Procurement Act  2023-2024 was adopted using finance from the EU budget. This was a major change in policy.[4]  The Member States have been reluctant to use EU resources for other proposals from the European Commission such as energy bonds, or an open defence trust fund. Thus, these are changes which may pave the way for financing an EU-level defence policy. But future security risks are perhaps less likely to be the proximate security risk posed by Russia against an ally of the EU. The risks identified in the Communication An EU Approach to Enhance Economic Security are more likely to be the focus of EU planning in the immediate future.

Question

2.           How would you assess coordination and cooperation between the EU, the UK and other partners on the imposition, implementation, and enforcement of sanctions against Russia, Belarus and individuals from those countries since the Russian invasion of Ukraine?

  A timeline  comparing the adoption of different forms of sanctions against Russia can be found at:

https://www.piie.com/blogs/realtime-economics/russias-war-ukraine-sanctions-timeline

This provides evidence that the UK coordinates sanctions through the G7,  as well as responding in tandem to moves by the EU, US, and Canada. The EU has adopted a set of 11 Sanctions Packages against Russia and institutions, corporate bodies and individuals supporting Russia and extended sanctions to Belarus.[5]

Initially the EU moved cautiously against Russia because of differences between the Member States over politically sensitive energy sanctions. The discovery of the Russian atrocities at Bucha was a turning point where measures were stepped up, in the 5th Sanctions Package.[6]

An extension to the reach of sanctions was introduced on 5 June 2023 in Council Decision (CFSP) 2023/1094  adding to Council Decision (CFSP) 2022/329 and Council Regulation (EU) 2022/330  to permit the designation of immediate family members of leading Russian business individuals operating in Russia on the sanctions list. 

Question

1. Witnesses to the Committee’s previous inquiry into the future UK-EU relationship raised some concerns about the effectiveness and enforcement of the sanctions that have been imposed. Do you agree with this? If so, how should this be addressed by the EU, UK, US and other partners?

All the major states imposing sanctions against Russia have used remedies and enforcement mechanisms to make the sanctions more effective. In 12 Member States breaking sanctions is a criminal offence (as in the case in the UK). There is evidence that the US [7] is more robust than the UK and individual Member States in imposing fines for sanctions violations.

The question to ask is: “What is the purpose  of sanctions? “ There is evidence that Russian economy/currency has been affected because of sanctions and these have made it hard for Russia to finance the war and could lead to social/military unrest due to the diversion of public expenditures towards military production and the associated fall in disposable incomes for Russian consumers.[8] And the cap on oil prices and rising costs of transporting Russian oil are major factors in weakening the Russian economy and the value of the rouble.

There is disagreement whether reducing the G7 cap on the price of oil could be the final blow to the Russian economy, or whether Russia will continue to be bailed out by allies such as Turkey and China.[9]

In March 2023 the EU stated that it had reached the last of its sanctions resources and was seeking new strategies. [10] The concerns for the EU and the UK are to tighten the implementation of sanctions, co-operation with allies in blocking circumvention through third countries which have experienced suspiciously large increases in their imports of goods that are prohibited for export to Russia,[11] coupled with tougher enforcement in the EU Member States. It is  important to keep public opinion aware of firms still trading with and in Russia and any firms circumventing sanctions.

Question

  b.         Is there a need for greater coordination and cooperation between the EU and the UK on sanctions? If so, in what ways should this be developed?

              The UK and the Member States have similar sanctions measures and enforcement mechanisms but greater cooperation on information and data exchange, including movement of Russian nationals, people associated with Russian firms and capital and assets would raise awareness of suspicious activity and behaviour of individuals and firms.

              One issue is how to rebuild Ukraine and whether seized Russian assets should be deployed for this purpose. While Ukraine will take centre stage, and hopefully not just the government but representatives from industry, civil society, a broad range of global actors/states/institutions should be involved. It will be a question of where the lead comes from.  The UK could play a significant role.

Question

  c.          Are there any lessons to be learned for future coordination between the EU and UK on sanctions policy in respect of other states? 

              Much depends on the reason for the future sanctions. The EU had to respond quickly because of the proximity of the war to EU borders and the effects on the EU economy, especially trade in energy and foodstuffs. As the data bases show the G7 states acted in tandem. The UK would benefit from being involved in European Commission decision-making, data, and knowledge-sharing. But the evidence shows that the European Commission worked closely and secretly with the US at a personal level, fearing leaks if the Member States could access too much detail of the plans. It would be unlikely that the UK would be involved in such intimate early discussions on sanctions.

It is an “unknown” whether future sanctions will require such a deep and fast response as was required in the Russia-Ukraine conflict. It would depend upon the security risk.

Question

5.               Some experts have identified a more “geopolitical” EU that is more assertive in its role as a foreign policy and security actor following the Russian invasion of Ukraine. Do you agree with this assessment? If so, what implications does it have for the UK?

a.              In what specific ways has the Russian invasion of Ukraine changed the EU’s wider approach to external affairs?

b.               What is your understanding of the concept of EU strategic autonomy and how it has evolved since the Russian invasion of Ukraine? What relevance does this have to the UK’s relationship with the EU?

One reason for the slow development of EU CFSP , which has made the EU vulnerable, is the separation of trade-related policies (usually adopted through qualified majority voting in the Council) and foreign, defence and security -related policies in the EU Treaties (usually require unanimity voting).

In contrast to trade policy, the Member States have been reluctant to relinquish national sovereignty in the field of foreign policy where unanimity decision-making in the Council is required. Historically the Member States had different defence and security interests and priorities, and strategic cultures. The escalation of Russian aggression towards Ukraine in 2022  exposed differences between the Member States, both in the Council, and the European Parliament, with shifts in national defence policies, different military procurement. This has  hampered the co-ordination of meeting Ukraine’s requests for military weapons, support, and training. The Ukraine crisis triggered a need for greater co-ordination at the EU-level to develop new approaches towards trade-related sanctions and foreign policy initiatives.

Sanctions are the most frequent CFSP Decisions,  using Article 29 TEU, which gives the Union general competence to adopt foreign policy positions, and this is the generic legal base for CFSP action.  [12]

Constitutionally, the EU Treaties separate out internal market and external commercial action from foreign and defence security matters. But today many of the measures taken as foreign and security measures have their legal base in trade competence. The OSA straddles external and internal competence opening an approach to trade defence which may have constitutional constraints  imposed by the EU legal order, as well as international law. 

Question

1. In what specific ways has the Russian invasion of Ukraine changed the EU’s wider approach to external affairs?

Bosse 2022 argues that:

“the EU’s response to the 2022 Russian was against Ukraine has been widely described as unprecedented in scope and unexpected speed, displaying rarer unity among its member states.”

The European Commission has assumed a greater role in developing wide-ranging sanctions against Russia and enhanced its role in developing defence and security policy, and in turn, links to the idea that the European Commission has enhanced its role as a geo-political actor.

Normally the Member States, through the COREPER II process, play a leading role in developing sanctions but the 2022 Russian invasion heralded a necessity for speedier action and resulted in a more important role for the European Commission President, Ursula von Leyen. This may be attributed to her own brand of dynamic leadership of the European Commission, her international standing and respect, as well as the calibre of her Cabinet staff, especially Björn Seibert. Importantly, the powerful central role played by von Leyen provided a “one stop” link to coordinate with the US  allowing for co-ordination of US and EU policies.[13] This can also be seen as a vulnerability for the EU if a future Commission President does not have similar personal qualities and close contacts with the US administration.

Given that there were tensions, and differences between the Member States the European Commission managed the Member State responses to its Sanctions Packages proposals through COREPER II, often calling meetings of smaller groups, “confessionals”, to find and iron out problems/red lines. The normal Working Party of Foreign Relations Counsellors (RELEX) was side-lined by the European Commission. [14]

One issue for the UK is the secrecy surrounding the meetings. In future, links with the European Commission, at the same level as that enjoyed by the US, would allow for greater coordination of sanctions policies.

Foreign policy is not included in the TCA but there was an understanding that post-Brexit the EU and UK would work closely on a Sanctions policy. Compared with the US (which uses sanctions more liberally as part of a foreign and economic security policy) the EU and the UK were slower to introduce sanctions against Russia and have weaker enforcement. 

The Russia (Sanctions) (EU Exit) Regulations 2019 came fully into force on 31 December 2020. They are intended to ensure that certain sanctions relating to Russia, imposed after the annexation of Crimea in 2014, continue to operate effectively. These were amended 17 times until 2022 and then a new Regulation was adopted in 2023 which has been amended twice.

https://www.legislation.gov.uk/uksi/2023/440/contents/made

Question

3. What implications, if any, do developments in the EU’s defence policy and approach to resilience since the Russian invasion of Ukraine have for the UK?

The EU OSA has an external security and defence dimension and an internal economic security dimension. The EU narrative has been played out with an audience of Russia as the primary security risk focus and the US and China as the primary economic focus. But with increased sophistication of cyber-attacks the boundaries between economic and security risks are blurred.

With the exit of the UK,  the task of adapting a new trade security policy is easier for the EU. The UK is also free to develop trade policies unfettered by compromise between 27 other Member States, the European Parliament, and the European Commission, as well as  EU constitutional constraints.

The UK faces many of the same economic risks as the EU. The UK is relatively inexperienced in developing new trade remedies and may be fettered by government interventions.[15] The Trade Remedies Authority  is a new public body, much smaller and less experienced than the  European Commission.

The UK is a third state vis a vis the EU and shares many of the concerns of the EU in relation to trade security. But is also a potential target of the OSA. UK individuals and firms trading in the EU must undertake extra due diligence to comply with the new trade defence measures such as the investment screening, foreign subsidies, and, when adopted, the Forced Labour Regulation.

The European Commission has increased its influence over policymaking and increases its powers, playing a central role in investigating alleged breaches of the new Trade Defence Instruments. It is difficult for individuals/firms to gain legal standing to challenge any Commission decisions unless the individual/firm is directly affected by the European Commission decision. The UK government has lost its privileged legal standing to challenge the decisions of the European Commission before the CJEU. Extra screening by individuals/firms creates a double burden, where it is also required to comply with UK and EU sanctions policy.

The EU and the UK are entering a new phase in post-Brexit relations with the focus on enforcing the EU-UK Trade and Cooperation Agreement (TCA) where fundamental differences emerge, or where the UK chooses to diverge from EU law. Enforcement of the TCA is multi-tiered, including consultation and arbitration procedures,  Specialised Committees and Working Groups and later the (Joint) Partnership Council. Potential remedies range from safeguard measures to general rebalancing, and specific measures against harmful effects of subsidies.

The  European Commission has assumed new roles and responsibilities for enforcing trade defence as the EU has rapidly developed a new range of trade defence measures, bringing greater experience to the table. But also, the European Commission has enhanced its role in the formulation of sanctions and foreign, security and defence policy, and from the experience of the responses to the COVID-19 pandemic and the Escalation of Russian aggression towards Ukraine there is a greater willingness of the 27 Member States to co-ordinate and implement policies at the EU-level.

Received 2 October 2023

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