The EU – Japan trade partnership. The media reported that the EU and Japan announced that they reached a new free trade deal. In fact, the EU and Japan, has reached a Trade Partnership Agreement and they continue to negotiate a Strategic Partnership Agreement which includes a free trade agreement and a policy component between the two parties. What the EU and Japan have established with the new document is cutting down tariff barriers on trade with goods. There is no new understanding relating to trade in services, nor there is any mention about standardization or investor related treatment that would facilitate freer exchange between the two. However, the document and all official communication on the matter add that a “specific new agreement” will follow. The benefit of the “new” deal is the signal that the EU and Japan both wanted to send to the U.S. and the world. That is a political statement: that both countries are committed to free trade. The commitment, of course, remains to be proven in next sessions of negotiations and the “specific new agreement” that will follow.
Nord Stream 2 and the U.S. sanctions on Russia. On July 26, the Federal Network Agency in Bonn asked for the exclusion of five projects related to the expansion of the Nord Stream-2 gas pipeline project from the German gas transmission network development plan. At the beginning of August, the U.S. renewed sanctions against Russia which are also affecting the Nord Stream 2, as the bill also affects the European companies that are investing, together with Russian companies, in projects that are strategic for Russia. Germany and the EU Commission both have criticized the sanctions bill text. But they can’t do much to retaliate and so, it becomes even more unlikely that the Nord Stream 2 will become reality.
This was a busy month for Poland. At the beginning of the month, the U.S. President Donald Trump has visited Warsaw to confirm again (after meeting with the Romanian President the previous month) the American commitment to its strategic partnerships in Eastern Europe. On July 29, the European Commission launched the infringement procedure against Poland after President Andrzej Duda has approved a law that the Commission had seen to be violating the EU rules because the it dictates different retirement ages for male (65 years) and female (60 years) judges. This comes after the EU has threatened with calling for Article 7 (which would have triggered Poland losing its vote in the EU Council) due to judicial reforms passed by the Polish parliament on July 24. The reforms would have given too much power to the governing party and their passage has sparked protest throughout the country, determining the Polish President Andrzej Duda to veto two of them, only signing into law the third – the one triggering the infringement process. Since Duda vetoed the two bills, protests seized in Poland and the matter became another case where Poland will negotiate with Brussels over what comes due to the infringement process recently launched.
Eastern Ukraine tensions growing. The pro-Russian rebel leader of the self-proclaimed Donetsk People’s Republic (DNR) Alexander Zakharchenko has proposed on July 18 that the republic be renamed Malorossiya under a new federal system in Ukraine. Russia has denied support for the idea and it is unclear yet why the leader wanted the change in name. In the same time, the ceasefire continued to be broken increasingly during the last half of the month, pointing to potential growth in tension in the region.
The American line. The U.S. Vice President Mike Pence has visited Estonia, Georgia and Montenegro in July, looking to encourage these countries in their alliance with the West. While Georgia is not a member of NATO, it participates in NATO missions and military exercises, being a close NATO partner. Montenegro has recently become a NATO member and Estonia is on the NATO Eastern frontline. The visit draws a line against Russian influence.
France signs major energy deal with Iran. Iran signed the first major deal for its energy sector since the sanctions were lifted in 2016. The French company Total is leading the consortium that signed a $4.8 billion deal with Tehran to develop the South Pars gas field which is said to be the largest natural gas field in the world. French Total has taken a 50.1 percent interest in the South Pars project, the state-owned China National Petroleum Corporation 30 percent and Iran’s Petropars 19.9 percent. The consortium expect production for the Iranian market to begin from 2021. While Iran hopes to increase investor confidence, also looking to support the development of its energy sector, France’s Total has been waiting for this opportunity for more than 2 years already, as it started discussing investment opportunities since 2014. While such investment is costly, especially when the oil price remains at low levels, this is also a win French diplomacy. There are other French businesses looking for opportunities to Iran and the current deal, paves ahead good prospects for business.