Good morning and welcome to Europe Express.
G7 leaders are gathered in Schloss Elmau since yesterday, discussing, among other issues, the idea of an oil price cap on Russian imports, as the FT reports. Our colleagues on the ground (or rather, in the crisp mountain air of the Bavarian Alps) will bring you up to speed with what to expect today and tomorrow, the last day of the summit.
Another summit happening this week outside Brussels is the Nato leaders’ gathering taking place in Madrid. In this interview with the FT, Nato secretary-general Jens Stoltenberg says he expects leaders to change the alliance’s posture in the east, shifting the focus to a full defence of allied territory.
With the end of the French presidency of the Council of the EU fast approaching, energy and environment ministers in Luxembourg today and tomorrow will try to secure a political agreement on the council’s negotiating position for the climate package dubbed Fit for 55.
We’ll also hear from Hungary on its U-turn on an agreement about minimum corporate taxation and why there are very limited chances for Budapest to change its mind again anytime soon.
Alpine overtures
It is difficult enough for G7 leaders in the Bavarian Alps to project a truly united front as the war in Ukraine takes its toll on their economies. Sustaining outward displays of consensus will be even tougher today as the summit brings in a wider group of leaders, write Sam Fleming and Guy Chazan in Schloss Elmau.
The G7 summit, which is hosted by German chancellor Olaf Scholz and kicked off yesterday, has extended invitations to other big economies, among them India, South Africa, and Indonesia.
The motivation is notionally straightforward. The G7 and EU have been clear in their drive to push back against Russia’s aggression — even if they regularly part ways when it comes to the means towards that end — but other parts of the world are far less convinced.
To some of them, this looks like a regional, European conflict that is ensnaring their citizens because of the ever-worsening economic fallout from soaring energy and food prices.
G7 leaders may regard the principles at stake — rule of law and willingness to respect neighbours’ territorial integrity — as universal. But that is of only partial interest to emerging economies that are grappling with the mounting risk of a world recession.
Macky Sall, Senegal’s president, last month upbraided EU leaders at a Brussels summit, for instance, claiming that western sanctions on Russian banks had made it difficult or impossible for African countries to buy grain from the country.
Speaking to the Bundestag a few days before the summit, Scholz stressed the need to listen to such views. Countries of the “global south” that were still suffering from the after-effects of the Covid-19 pandemic were, he said, now threatened with famine.
“If we don’t succeed in showing solidarity with these countries, powers like Russia and China will exploit that,” he said. For that reason, he said, it wasn’t just about the G7, Nato and the EU projecting unity. All the democracies of the world must be seen to “stand together in the fight against Putin’s imperialism, and the struggle against hunger and poverty, health crises and climate change”.
Hence the important role that this year’s “partner” nations will play in the G7 deliberations. They were carefully selected. Indonesia and India are the current and future presidents of the G20, Senegal is heading up the African Union, and Argentina is chair of the Community of Latin American and Caribbean States.
Scholz’s aides say they are confident they can bring them all round to their way of looking at the Ukraine conflict. Aides say there were already signs of a “rethink” when Scholz met the leaders of Senegal and South Africa during a whirlwind African trip late last month. “We notice that our arguments are getting through,” said one. “If we keep talking to each other, repeatedly, intensively, then our positions can get closer together.”
Cooperation with middle-income countries will be critical if some of the G7’s key initiatives are to bite. For its planned oil price cap to work, the G7 will require at least some buy-in from nations including India, which is a big importer of Russian oil and has traditionally had close defence ties with Russia.
Narendra Modi, the Indian prime minister, has however kept his cards close to his chest when it comes to the notion of an oil price cap, officials say.
At a press conference yesterday, Charles Michel, the European Council president, underscored the difficult balancing act that leaders will need to strike at the planned G20 summit in Indonesia later this year.
G7 leaders are loath to sit in a room with Vladimir Putin as he continues to wage war on Ukraine, yesterday raining missiles on the country in a new round of attacks.
But they also supported a multilateral approach, Michel said, adding: “Do we want to kill the G20, which is an important body, especially in those circumstances? There is no easy solution.”
Chart du jour: Trembling for gas
The Netherlands’ Groningen field holds enough gas to replace three years of Russian supplies to the EU. But extracting that gas has caused earthquakes and thousands of damages claims. Read more here about why the Dutch government has been reluctant to increase production again, despite pressure from other EU capitals.
Last-ditch attempt
The French EU presidency will make a last-ditch attempt today and tomorrow in Luxembourg to agree the council’s negotiating position on the package of policies that aim to reduce the bloc’s carbon footprint by 55 per cent by 2030, dubbed Fit for 55, writes Valentina Pop in Brussels.
Failure to achieve an agreement now would slow the process down by several months before negotiations can start with the European parliament and the EU commission, diplomats say.
“The goals on all Fit for 55 files are more or less accepted by everyone,” said a senior EU diplomat. “The discussions revolve around how we cater for those goals, some member states need more time or have a different approach but in the end will reach the same goal.”
Adding to the complexity is the reality that an agreement on one of the files can affect targets and an overall agreement on the other files. “Nothing is agreed until everything is agreed,” the diplomat said.
The incoming Czech EU presidency in listing its priorities has already expressed a preference for parts of the overall package, namely the “thorough implementation of the main short-term objective, ie remove dependence on Russian fossil fuels”.
Energy efficiency and the use of renewable energy are also files that the Czech presidency wants to advance — but also the far more controversial “role of nuclear energy in ensuring the EU’s energy security and meeting the EU’s climate goals”.
On the agenda of energy ministers today is also a discussion on the gas crisis, as several member states, including Germany and the Netherlands, have announced emergency measures and urged the population and industries to save energy ahead of a possible move by Russia to cut off gas supplies completely ahead of the upcoming winter.
The European Commission was still in data-collecting mode, said another EU diplomat. “First we’ll get an overview from the commission on what is happening at member state level, then it will condense best practices and put forward proposals on what could be done,” the diplomat said. “It is hard to tell at this point in what direction those proposals will go.”
Not Hung(a)ry for taxes
For EU officials aghast at Hungary’s last-minute veto of the OECD tax deal earlier this month but hopeful that its opposition could be bought off with something else, Budapest has a clear message: while war rages in Europe, tax increases are off the table, writes Henry Foy in Brussels.
Balazs Orbán, prime minister Viktor Orbán’s political director, said Hungary would only be open to further discussions on the minimum corporate tax rate once the guns fall silent in Ukraine — and claimed that France, the deal’s biggest proponent, should be thankful that Budapest stopped them signing off on a disaster.
“First we need peace and then we can discuss it . . . we can stabilise the economy and the inflation rates. And then we can sit down and discuss it,” Orbán — who is no relation to Viktor — told Europe Express.
“Right now, when we are in the middle of the crisis, when stagnation will arrive, energy prices skyrocket, the inflation rate, etc . . . and then we come up with an idea that we introduce a tax raise? Well, it’s nonsense.”
Orbán also warned other EU leaders that they needed to demand an immediate ceasefire in Ukraine if they wanted to stave off an economic crisis this year.
France had made the EU’s agreement on the minimum tax — so-called pillar two of a two-part global deal drawn up by the OECD last October — a key objective for its six-month EU presidency, which ends this week. Budapest’s eleventh-hour U-turn, after supporting the deal previously, left Paris fuming.
Patience among the other 26 EU members towards Hungary had already been scarce before the tax veto, given Budapest’s opposition to the Russian oil embargo, and its block on sanctioning the head of the Russian Orthodox Church.
Orbán said it wasn’t fair to criticise Hungary for wanting a delay, when the French were only in a rush to get the deal signed off so that they could claim credit while they held the EU’s rotating presidency. The incoming Czech presidency, for its part, has not listed this file among its priorities.
What to watch today
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G7 leaders meet at Schloss Elmau, in Germany, today and tomorrow
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EU energy ministers meet in Luxembourg
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EU and Nato officials take part in the German Marshall Fund’s Brussels Forum
. . . and later this week
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Environment ministers meet in Luxembourg tomorrow
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Nato leaders meet in Madrid Tuesday-Thursday
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Czech EU presidency starts on Friday
Notable, Quotable
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Ukrainian retreat: Ukraine’s retreat from the eastern city of Severodonetsk after weeks of fighting against Russian forces was a “tactical” move to avoid a repeat of the fateful Azovstal siege in Mariupol, according to the country’s military intelligence chief.
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Migrant deaths: More than 20 people died when about 2,000 migrants tried to breach the perimeter fence separating Morocco from the Spanish enclave of Melilla.