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Challenges and Opportunities in Europe

 

This week, President Obama is meeting with European leaders to discuss security and economic issues amidst continued uncertainty surrounding Ukraine’s future and recent European elections. The European tour offers the opportunity to further the kind of multilateral leadership the President reiterated during his foreign policy speech at West Point last week. And there’s no shortage of challenges. With uneasy NATO allies in Eastern Europe, the United States must offer right-sized reassurance to partners without unnecessarily provoking a Russian response. While this mark may have been hit by Obama’s announced $1 billion initiative to adjust U.S. military activity in Europe, follow-through will depend upon finding the right funding sources in the Pentagon’s half-a-trillion-dollar base budget. While Ukraine’s recent elections were successful, sustained and coordinated assistance to Kiev by the transatlantic community remains necessary for the economic and political stability of the country despite Russia having demobilized two-thirds of its forces on the Ukrainian border – a signal that the West’s response of imposing economic costs on Russia has successfully deescalated the crisis to an extent. Finally, successful and responsible negotiation of the Transatlantic Trade and Investment Partnership remains a high hurdle. The agreement would undergird American economic leadership but faces valid concerns from the labor community amidst some skepticism from legislatures in the United States and European Union, particularly after the recent European elections.

The United States is taking right-sized steps to continue to reassure NATO allies – but these measures must be funded appropriately.

Right-sized reassurance: In Poland, President Obama announced the European Reassurance Initiative (ERI), a $1 billion program that would make modest adjustments to U.S. military activities in Europe. The initiative includes a number of steps that are substantial enough to signal continued U.S. commitment to NATO allies who are in need of reassurance, but modest enough not to provoke a Russian response. Measures include: “Increase exercises, training, and rotational presence across Europe but especially on the territory of our newer allies…deploy detachments of U.S. planners to augment the capability of our allies to design and host a broad range of training and exercise opportunities…the prepositioning of equipment and improvements to other reception facilities and infrastructure in Europe. Increase participation by the U.S. Navy in NATO naval force deployments, including more persistent deployments to the Black and Baltic seas.”

Need for appropriate funding sources: However, the problem is that the initiative is slated to be paid for through Overseas Contingency Operations (OCO) funding, which is not subject to the caps on spending imposed by the Budget Control Act (BCA). For that reason, the OCO has been used to skirt the BCA caps on the Pentagon by paying for programs unrelated to the costs of war – the purpose of OCO funds – that belong in base spending. Measures in the ERI, such as training, are activities typically covered in base spending and, if they are to be funded, should come from the base budget. A similar problem faces the President’s Counterterrorism Partnership Fund, as NSN has previously noted. Funding base programs through the OCO also encounters sustainability problems. As Defense News has editorialized, “Effectively, OCO has been a giant slush fund that gets less oversight than the base budget. Now Congress, the military and industry must figure out how to live without it — or rush to make haphazard cuts later if they fails to do so.” [Fact Sheet: European Reassurance Initiative, 6/3/14. Defense News, 6/2/14]

Advancing U.S. economic leadership by getting the Transatlantic Trade and Investment Partnership (TTIP) right. The TTIP is a free trade and investment treaty being negotiated which “could bring annual economic gains of about €119 billion ($164 billion) to the European Union (EU) and €95 billion ($131 billion) to the United States,” according to Sinan Ülgen of the Carnegie Endowment. However, the challenges to passing the deal may be mounting, given some skepticism in Congress – which has opposed fast-track authority for passing the treaty – and the recent EU elections that benefited parties skeptical of globalization. Union leaders across the Atlantic have laid out key expectations that should be met. American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) President Richard Trumka said, “Trade policy for the privileged few must end. TTIP must work for the people, or it won’t work at all.” European Trade Union Confederation (ETUC) General Secretary Bernadette Ségol stated, “European and American trade unionists are united in supporting a free trade deal between the EU and US only if it promotes workers’ rights, generates quality jobs, upholds public services and procurement, democratic decision making and international conventions.” [Sinan Ülgen, 6/3/14. Richard Trumka and Bernadette Ségol, 5/21/14]

Following Ukraine’s successful election, sustained U.S. and European commitment is necessary to support Kiev’s progress towards stability and security in the face of serious challenges.

 Continued commitment to Ukrainian economic health: Julie Smith of Center for a New American Security, former Deputy National Security Advisor to the Vice President and current National Security Network board member, explains the long-term need for supporting Ukraine’s economy: “the transatlantic partners will have to avoid a situation where support drops off once Ukraine falls off the front pages of the world’s newspapers (assuming it actually does). Getting Ukraine on the healthy path of stability and prosperity will take years, if not decades, of work and billions of dollars, a fact that neither side of the Atlantic can afford to underestimate.” While Ukraine has received sizable emergency funds from the United States, European Union, and International Monetary Fund, the IMF forecasts a difficult near-term outlook that “expects Ukraine’s troubled economy to shrink by 5% in 2014 amid weak investor and consumer confidence, before partially rebounding in 2015 with 2% growth,” according to the BBC. [Julie Smith, 4/10/14. BBC, 5/1/14]

Helping Ukrainian security as instability persists: Cory Welt of the Center for American Progress explains that in eastern Ukraine, militant separatists “are still in control of most of Donetsk and Luhansk, which together make up some 15 percent of Ukraine’s population.” Supreme Allied Commander of Europe, General Philip Breedlove, recently reiterated that Moscow has irregular forces active in eastern Ukraine in support of separatists and is offering financial assistance as well. After meeting with Ukrainian President-elect Petro Poroshenko, President Obama “announced $5 million in new military aid for Ukraine, including body armor, night vision goggles, and communications equipment. That’s an escalation from a previous $18 million in aid from the U.S.,” according to The Hill. NATO is expected to announce its own security assistance package in the coming weeks. [Cory Welt, 5/29/14. The Hill, 6/4/14]

Assisting Ukrainian energy security: Russia is effectively threatening to cut off delivery of liquefied natural gas to Ukraine, upon which Kiev is dependent. To mitigate Ukrainian dependence on Russian natural gas, the United States might export sizable quantities of natural gas to European and Ukrainian markets, although that would face challenges in terms of infrastructure, higher prices, and time. The Washington Post noted, “The earliest gas exports won’t come until late 2015 or 2016, and most won’t get started until 2017 through 2019.” As Daniel Weiss of the Center for American Progress explains, a complimentary option is that “the United States could help Ukraine launch a massive mobilization to retrofit its apartment and government buildings to slash energy waste…This would reduce Ukrainian purchases of Russian gas, and create jobs both in Ukraine and the United States,” which could reduce Ukrainian spending on natural gas by up to two-thirds. [Washington Post, 3/25/14. Daniel Weiss, 4/24/14]