Sidra Khan
The prolonged conflict in Ukraine has reshaped global geopolitics, prompting major powers to seek new opportunities and enhance their influence. Despite international sanctions, Russia has shown strategic agility. Since the Ukraine crisis began, the US and China have intensified efforts to gain influence in Europe, resulting in unexpected alliances and placing Russia at the centre of a struggle between the two superpowers. President Putin's statement on Feb 29, 2024, suggests that Russia sees its actions in Ukraine as a pre-emptive move to safeguard its European interests from a perceived threat from the West. This hints at a potential alignment with China against US influence, which could reshape global power dynamics.
Recognising Russia's strategic importance, the US has reinforced its historic role as the security guarantor in Europe. President Biden seeks to strengthen transatlantic ties and position the US as pivotal to Europe's defence by providing significant aid to Ukraine and coordinating sanctions with European allies. Nonetheless, concerns persist about potential escalation with Russia and an overemphasis on military means over diplomacy.
The US is vigorously fortifying its relationships with European allies. The Biden Administration has committed to supplying the EU with an additional 15 billion cubic meters (bcm5) of Liquefied Natural Gas (LNG), opting for collaboration with the EU as a whole rather than engaging bilaterally with individual member states. To further illustrate this point, it is noteworthy that in 2022, Europe's LNG imports from the US constituted 41.5% of its total imports. However, in 2023, this figure escalated to 48.5%, primarily due to Europe ceasing its LNG imports from Russia in response to the Ukraine conflict. (Fig 1).
Washington is also discussing finalising new comprehensive trade deals with the EU to curb steel and aluminium imports from China. Meanwhile, the proposed Indo-Pacific Economic Framework (IPEF) seeks to establish high-standard rules on digital trade, clean energy, supply chain resilience and other areas to shape the road rules for emerging industries.
On the defence front, the US is deepening cooperation with Eastern NATO members near Russia through increased weapons sales, joint training exercises and intelligence sharing. Washington is also lobbying EU countries to limit or ban Huawei's involvement in strategically critical 5G network infrastructure over espionage concerns, reducing China's access to sensitive data and technology.
While the US maintains solid military and economic ties with its European allies, it faces challenges in entirely replacing Russian energy dependencies and addressing European concerns around trade issues. It risks losing momentum if the US stumbles in finalising new deals or fails to ease energy shortages. Amidst these challenges, the US has strategically leveraged its economic ties with the EU, evident in the persistent growth of exports from 2020 to 2023. This showcases a proactive approach to enhancing trade collaboration and offsetting geopolitical vulnerabilities.
From 2020 to 2023, there was a persistent upward trajectory in exports from the US to the EU. Commencing at $232.85 billion in 2020, the trade volume ascended to $272.78 billion in 2021, surged further to $350 billion in 2022, and culminated at an impressive $368 billion by 2023, underscoring significant advancements in their trade collaboration.
This consistent growth pattern in US exports to the EU reflects the US's concerted efforts to bolster its influence within the EU's trade framework, as illustrated in Figure 2. The US has effectively capitalised on the geopolitical situation, stepping in to fill the void left by other players and solidifying its position as a critical trading partner for the EU.
Meanwhile, China has taken a more cautious stance, refusing to condemn Russia's military actions while calling for negotiations and restraint on all sides. Beijing is challenging the dominant US-led global order while presenting itself as a credible alternative in trade and development enterprises.
By leveraging the Ukraine conflict, China has expanded its economic footprint in Europe, positioning itself as a neutral mediator. This is evident through initiatives like the Belt and Road Initiative (BRI), including investments in critical infrastructure like new rail links between Serbia and Hungary and providing economic assistance to conflict-affected nations facing sanctions. Additionally, China is advancing its economic interests by advocating for an investment agreement with the European Union and promoting cooperation through forums such as the China-Central and Eastern European Countries (CEEC) summits.
From 2020 to 2022, Chinese trade with the EU steadily increased, from $332.1 billion 2020 to $386.8 billion in 2021, peaking at $491.6 billion in 2022. However, in 2023, there was a sharp decline to $165 billion (Fig 3). This drop coincides with the ongoing Ukraine conflict and China's stance towards Russia, which has been met with disapproval by EU countries. The significant decrease in trade volume in 2023 suggests that the EU has been shifting its trade focus away from China and towards other partners, notably the US. The US has emerged as a beneficiary, with its exports to the EU showing a consistent upward trend, with the US gaining more influence at the expense of China.
The Russia-Ukraine conflict has significantly reshaped the security and economic landscape of Europe. This has been evidenced by the expansion of NATO, which has grown to include 31 member countries, with Finland joining the alliance (April 2023). Concurrently, the cessation of energy supplies from Russia has increased Europe's reliance on the US for economic and military support.
This geopolitical shift has created opportunities for China to expand its infrastructure development, trade, and investment in Europe. However, the ongoing global rivalry between the US and China and a decline in Chinese trade with Europe in 2023 suggests this will be challenging. It is now incumbent upon China to devise alternative strategies to capitalise on these economic opportunities in Europe. However, the terms and conditions under which this will occur remain uncertain.
In conclusion, the future of Europe, at least for the foreseeable future, appears to be marked by economic, political, and military instability. These dynamics underscore the need for a nuanced understanding of the situation and strategic responses from global powers.