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20.10.2014
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Cliff Hague's Blog

Europe and its neighbours

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The news that the Qatari emir Hamad bin Khalifa Al Thani has bought six islands in the Ionian Sea for 8.5m Euro is a further indication of changing relations between Europe and its neighbourhood. The EU - and those of us who live in it - still see Europe as the centre of the world. After all that’s what our maps show us and how our daily news bulletins are packaged. This world view is built on a long history during which time - for good and for ill - this small continent really did lead the world.

Qatar
Qatar is an extreme example. It is a mainly barren peninsula of less than 12,000 square kilometers, with less than two million people, 1.5 million of whom live in Doha. Many of the residents are foreign workers, with the number of Qatari citizens put as low as 250,000. This absolute and hereditary emirate used to be one of the poorest nations, now it is possibly the richest in terms of GDP per capita. It is home of the Al Jazeera TV station. The wealth is based on oil and gas. However, oil output is peaking and Qatar has been seeking other ways to secure its future. Overseas investments and international tourism are key parts of the strategy.
Thus Doha bid unsuccessfully to host the 2016 Summer Olympic Games, but Qatar will host the football World Cup in 2022. The decision to award the competition to this small state, with no football tradition or suitable stadia, shocked the football world. However, international relations specialists who had tracked the links between Qatar and France, and between France and the international body responsible for football, FIFA, would have been less surprised. At the time of the bidding for the World Cup, France was urging Qatar to buy five of its Airbus 380 planes. A few days before the vote Qatar agreed to increase its order for the aircraft. The distinguished former French footballer Michel Platini, vice-president of FIFA, has been vocal in his support of Qatar as the venue for the 2022 finals. FIFA recently announced that the competition may have to be moved from its traditional northern summer slot and be held in the winter because of fears about the possible effect of the extreme summer heat on participants. Is it naïve to suggest that this could have been examined before, rather than after, the decision to award the competition to Qater? It’s not a sudden burst of global warming that has made the Persian Gulf very hot in summer.
The Qataris have also bought Paris St Germain, potentially one of Europe’s biggest football clubs. Qatari money is being poured in and David Beckham has been signed to enhance the global marketing of the club.

Europe’s neighbourhood
Europe’s relationships with its neighbourhood is the theme of a new report that I co-authored. Europe’s neighbourhood includes 23 countries – from Greenland through Russia, Moldova and the Ukraine to the arc around the eastern and southern rim of the Mediterranean. While it is easy to assume that this latter group of countries look to Europe, the reality, as demonstrated by Qatar, is that there are competing poles in the Middle East. There are a number of rapidly growing global cities in these countries that are neighbours of Europe. Moscow and Istanbul are not only of considerable size, but also well integrated in global business networks. Istanbul is growing rapidly through a combination of natural increase and in-migration. St. Petersburg, Ankara, Cairo and Casablanca are other significant metropolitan areas. Business connections between global cities within the EU and such capitals and urban agglomerations in the neighbourhood seem likely to increase in future. The report cites the example of Moroccan ports posing significant challenges for Spanish port operations.
However, demographic trends differ across the neighbourhood as a whole. The neighbours in the east, like the eastern countries of the EU are experiencing dwindling and aging populations, while to the south the picture is of growing “child-heavy” population structures.

Energy
Energy is an important issue for Europe’s neighbourhood relations. The EU is one of the biggest importers of energy in the world: it imported 45% of its energy resources in 1997 and 53% in 2007, and the figure could reach 70% in 2020. The level of external dependency is greater for oil (83% in 2007) than for natural gas (60%) and coal (35%). Most of the current major world oil and natural gas producers are situated in Europe’s neighbourhood. Almost 70% of the known oil reserves and 80% of natural gas reserves are located in a geographical zone which includes the former USSR, Northern Africa, Norway and the Middle East. Furthermore, several neighbourhood countries are providing essential transit routes connecting the EU to these reserves (Ukraine, Belarus, Turkey). Most of the natural gas imported by the EU arrives through international pipelines.
In the 1960’s today’s EU Member States were mainly surrounded by countries exporting mining and agricultural products and energy to some degree, whereas Europe exported products and services higher up the value chain. Today, the EU Member States are surrounded by countries mainly exporting energy. As the Qatar example shows, this represents a significant economic and political transition.

The Arctic Ocean
Thinning of the polar pack ice has allowed for increased navigation. With global warming and less sea ice, marine shipping is expected to increase in the Arctic. Extensive oil and gas activity has occurred in the Arctic, mainly on land and mostly in Russia. So far Russia has produced about 80% of the oil and 99% of the gas extracted in the Arctic and is expected to be the main Arctic petroleum producer also in the future. Canada and Alaska also have done some offshore petroleum production. Production of oil and gas from fields in the Norwegian Sea began in the 1990s, and in 2007 from the “Snøhvit” gas field in the Barents Sea. The sub-arctic parts of the Arctic area support some of the largest fish stocks and fisheries in the world, notably in the Barents, Norwegian, Iceland and Bering seas. Last but not least, this is a pristine wilderness environment. In short, the Arctic is coming under unprecedented development pressure. International co-operation will be essential to future management of this region.

Europe’s changing position
Viewed from the neighbourhood it is Europe that is on the edge, and the Arctic, or the Middle East or North Africa which is at the centre of the map. Europe depends heavily on the energy pipelines connecting it to places in, or passing through, its neighbourhood. There are also dynamic regional hubs in the neighbourhood of Europe, e.g. Istanbul, Moscow, Tel Aviv, Cairo. EU cities and regions will need to look towards these rather than vice versa. The seas around Europe can be a source of “blue growth” but will require careful management through partnerships with countries outside the EU.
The role of some regions in the neighbourhood is changing from a source of unskilled labour to a destination for highly skilled labour emigration (Istanbul), or a competitor for international trade links and transport hubs (e.g. the competition between ports in Spain / Morocco). Also the relation between Portugal and Brazil has led to reversed migration trends during the economic crisis. Europe is no longer the main show in town.

by Cliff Hague, member of the Innovation Circle Network