Note: this entry was originally published in February 2015, with ongoing updates and edits since then. Though the daily ebbs and flows of the news cycle may make it seem like some of these issues – like the Greek debt crisis – have been resolved, in reality these are deep-seated problems that continue to simmer under the surface.
Italians have become very concerned [Corriere della Sera] about ISIS’ recent inroads into Libya, adding a new twist to a humanitarian crisis that has been going on for years [The Migrants Files]. Deutche Welle summarizes the situation in Lampedusa:
“The residents of the island are waiting and hoping that no war breaks out right at their doorstep. There are frightening new rumors that have found their way across the Mediterranean.
The Italian secret service is said to have worked out that more than 250,000 refugees currently living in camps in Libya are willing to risk the dangerous trip to Europe. Rumor has it that Islamist terrorists are forcing people to flee in order to cause chaos in Europe. With it comes the worry that terrorists are among the refugees flooding into the continent.”
Meanwhile Russia and China may be waiting for the right opportunity to bail out Greece in case that country actually exits the Euro, desperately seeking financial support anywhere it can get it. China’s COSCO made big investments [WSJ] in Greek port facilities, and Greece’s new government halting [AFP] of its privatization plans turned out to be temporary. A Chinese naval fleet paid a friendly visit [Xinhua] to the port just days ago, which no less than Greek prime minister Alexis Tsipras took the time to visit. To put day-to-day developments into perspective, here’s how the flow of global trade [map] looks like.
There’s also been talks [Hurriyet] of Cyprus allowing increased use of its naval and air facilities by Russia. Remember that Cyprus, where a lot of Russian money is parked, has been facing its own severe financial crisis fairly recently.
Now note that Russia and China announced [Interfax] in 2014 that they’d hold their first-ever joint naval exercise in the Mediterranean in the spring 2015. Russia’s ability to sustain naval forces in the region so far solely relies on access to their facilities in Tartus, Syria. The Russians reportedly evacuated [RT] that naval base in June 2013, though their defense ministry denied [Pravda] having done so. I’m eagerly awaiting to see how large and sustained this naval drill will be as a show of regional interest and projection ability from China and Russia, as well as a way for them to demonstrate very visibly that they are willing to cooperate right in the backyard of the Western world.
On the Black Sea, there have been concerns ever since Russia’s annexation of Crimea that they wouldn’t stop there, but also follow the Ukrainian coast from Mariupol to Kalanchak, and possibly all the way to Odessa then the Transnistria breakaway region in Moldova. There, a new pro-EU prime minister has just been appointed [Reuters]. Expect the young Chiril Gaburici to have his work cut out for him.
Overall, there is a strong confluence of interests and tensions at play in the same space and time. That doesn’t mean Russia and China will make a significant, let alone concerted and thorough, push into the region, but it seems certain they are gauging Europe’s lack of determination and probing for relatively cheap opportunities to step in and serve their military and economic interests in one swoop. Sounds very much like a “Balance of Power” approach from the Cold War, doesn’t it?
The FT thinks that the sums at stake are too large for an Eastern bailout to be credible. Yes, if you look at debts at full value in hard currency. But if there’s a Greece default and Euro exit, I’d say all bets are off, opening the door for deals paid in kind or in Renminbi, in the process showing the world that weakening and possibly displacing the US dollar and Euro as reserve currencies is more than talk.
The Russians might be tactical, but the Chinese are playing a long game and may well be satisfied by incremental progress such as having their currency become [East Asia Forum] part of IMF special drawing rights. In the meantime they’ll let the EU and IMF exhaust themselves, and countries like Greece, before throwing a lifeline. But wait until it’s over to say it’s over.
Europe has a weak underbelly, and the EU is doing preciously little to address these weaknesses, leaving already struggling nation states under a huge amount of pressure. Watch this sea, and watch what happens in places such as Lampedusa, Piraeus or Limassol!
Remember that for years mainstream politicians and media would have you believe that talks of any member of the Euro ever leaving the currency union were sheer lunacy or idiocy. Then all of a sudden this scenario is presented as a distinct possibility. Political, economic, and military alliances break down under pressure all the time, don’t let anyone tell you otherwise. This is not just Zero Hedge fringe talk. Instead, this is what history in the making looks like!
Updates, Developments & Opinions
“There is clearly a connection between the refugee crisis and the elevated terror danger in Germany,” conservative lawmaker Stephan Mayer said after a closed-door briefing in parliament on the investigation.
10/18/16 – Germany and EU talk tough on returning ‘IS’ fighters [DW]
09/21/16 – Fear and frustration for refugees on Lesbos [DW] | Calais migrants: Work begins on UK-funded border wall [BBC]
09/12/16 – China and Russia launch joint naval drills in South China Sea [FT]. Scratch my back, I’ll scratch yours – see the 05/22/15 entry below.
09/07/16 – Austria says may sue Hungary over migrants, plans new border restrictions [Reuters]
08/31/16 – Italy rescues 3,000 migrants from Mediterranean as arrivals surge [Reuters]… ” bringing the total to almost 10,000 in two days and marking a sharp acceleration in refugee arrivals in Italy.”
08/17/16 – Russia ups the ante in Ukraine with eye on G20 [FT], quoting the ISW saying Russian tank drills took place in Transnistria on Aug. 8-9. They may target the final months of Obama’s second term as a good window of opportunity to make a deeper push into Ukraine. Putin likes to launch operations during Olympics, as Le Monde notes [in French].
08/09/16 – Merkel Critic Says Chancellor’s Refugee Policy Is a ‘Time Bomb’ [Bloomberg]
08/01/16 – Germany hits out at Turkish ‘blackmail’ over visas [FT]. Ankara threatens to renounce its migrant treaty with the EU.
07/27/16 – FBI Chief Warns ‘Terrorist Diaspora’ Will Come to the West [Bloomberg]. Catching up with Italian concerns expressed 18 months earlier.
06/29/16 – Former EU Commissioner Verheugen: “Brexit was a healthy shock” [DW].
One thing that drives a serious divide through the EU – and arguably through Britain – has been the uncoordinated and inefficient handling of Europe’s refugee crisis. The number of refugees arriving this year in Europe is lower as compared to 2015, however that is largely due to the closure of the Balkan route and the EU’s deal with Turkey, which effectively put Greece at the forefront of enforcement. The United Nations’ refugee agency (UNHCR) has called conditions in Greek camps “inhumane”. Some 3,000 refugees have drowned attempting to cross the Mediterranean this year, nearly 1,000 more than in 2015.
06/23/16 – Migrant crisis: 4,500 rescued in Mediterranean in one day [BBC].
06/22/16 – Moldova asks Russia to stop recruiting its citizens to Army [AP]. You rarely hear about it in Western media, but it’s very much on the Russian agenda, as shown by the frequent coverage on Russian government mouthpiece Sputnik.
06/21/16 – SASC Supports Marine Lt. Gen. Waldhauser’s Nomination For AFRICOM Commander [USNI News].
06/17/16 – More funding lifts China’s Belt and Road strategy to $1.2 trillion [JOC]. Trillion with a T. Not all of this will pan out, but the scale is staggering, on the order of 10x the inflation-adjusted cost of the Marshall Plan.
06/08/16 – The Mediterranean Microcosm [War On the Rocks]
05/26/16 – CNN Exclusive Explores ISIS Fighters Mixing In with Refugees. A “new threat” that I mentioned here more than a year earlier…
04/19/16 – China’s Mediterranean Odyssey [The Diplomat], and its limits, as the Chinese have found in Libya.
02/25/16 – The astonishing new numbers behind the migrant crisis [WaPo / IOM].
01/14/16 – EU migration commissioner warns refugee crisis ‘getting worse’ [DW]
01/12/16 – China’s Cosco Group has just made the sole bid for a majority share in Piraeus Port Authority [Greek Reporter]. See also One Port, Two Worlds: China Seeks Dominance in Athens Harbor [Der Spiegel, April 2015]:
“In the span of four years, Cosco has quadrupled container traffic, to just under 3 million units a year. If all goes well, annual capacity will be expanded to 6.2 million containers in 2016. Together with Pier I, that would put it in the same league as Europe’s largest ports in Hamburg, Antwerp and Rotterdam.”
12/03/15 – Putin: Turkey will regret jet shooting ‘more than once’ [AJ]
11/29/15 – Turkey, EU agree 3-billion-euro aid deal to stem migrant crisis [DW]
11/26/15 – China Retools Its Military With a First Overseas Outpost in Djibouti [NYT]. That’s 2,500 km south east of Port Said, and about 3600 km north (by sea) of the China-financed Tanzanian port being built in Bagamoyo. I wrote about this eventuality on Defense Industry Daily back in February 2014. There is also another smaller Chinese project in Lamu, Kenya.
11/26/15 – Caspian Sea Port of Baku builds for China-Europe overland links [JOC].
11/15/15 – ISIS’ attacks two days ago in Paris, unprecedented (in Western Europe) in their scale and organization, were predicted by savvy observers such as judge Marc Trevidic (for instance in this 09/30/15 JDD article, in French). It’s not yet certain whether one of the terrorists had spent some time in Syria. It seems very likely that other similar coordinated attacks will take place in Europe in the months to come.
10/21/15 – Russia’s Syria strategy poses challenge to Nato in Mediterranean [FT]
10/10/15 – First round of talks for Limassol port privatisation [in-cyprus]. COSCO said to be among the interested parties.
09/17/15 – CMHI and COSCO acquire equity interests in Kumport terminal in Turkey [press release]. The deal was done with help from VTB Capital, a Russian investment bank which incidentally also helped Cyprus sell some of its sovereign bonds.
09/14/15 – Putin shifts fronts in Syria and Ukraine | From west to east, Europe tightens borders as refugees scramble [both WaPo]
09/08/15 – The New Silk Road and Eastern Europe [PIIE]
08/18/15 – Germany expecting 650,000 refugees this year [DW]
07/22/15 – Did Putin Sell Out Greece? [BB View] | Thibault de Montbrial on Islamic terrorists planning to use mass immigration as a vehicle to infiltrate Europe [in French]
07/05/15 – Russia: Powers in the balance [FT]
07/02/15 – Could China or Russia Bail Out Greece if Europe Won’t? [Slate]
06/25/15 – Russia’s Pivot to China Is Real [Bloomberg View]
06/15/15 – A new age of isolation for Europe? [DW]
05/22/15 – China and Russia Conclude Naval Drill in Mediterranean [The Diplomat]
05/14/15 – Ankara skittish over role in NATO alliance [DW]
05/13/15 – Shell Game? How Greece’s Latest IMF Repayment Cost Athens Very Little [WSJ] | The View from Vilnius [Scott Sumner]
04/20/15 – What’s Behind the Surge in Refugees Crossing the Mediterranean Sea [NYT] | The victims of the migrant disaster in the Mediterranean [Die Zeit].
04/13/15 – More cooperation in the Mediterranean region to combat terrorism [DW]. Spain is trying to revive Sarkozy’s failed Mediterranean Union.
04/09/15 – A leaked memo [Reuters] from the Finnish finance ministry said Finland must prepare itself for Grexit possibility. For now: Greece Meets Deadline to Repay IMF Bailout Loan [WSJ], but that’s a drop in the bucket [WSJ debt timeline].
04/08/15 – Europe’s manhandling of Greece is a strategic gift to Russia’s Vladimir Putin [The Telegraph]
04/03/15 – Long live Ruthenia [TE]
04/01/15 – To Russia with love: Greece’s flirt with Moscow [DW]
03/27/15 – China, Europe and the Maritime Silk Road [Clingendael, PDF]. See also China’s foreign ports [The Economist, June 2013], China’s port operators harbour global ambitions [FinanceAsia], and extensive work by Clingendael, a Dutch think tank.
03/24/15 – Chinese Company to Run New Haifa Port [Haaretz]
03/23/15 – Presidents, Bankers, the Neo-Cold War and the World Bank [Nomi Prins]
03/21/15 – RealClearDefense with US Senate Armed Services Committee Chairman John McCain on Mariupol, Moldova, and the Baltic countries.
03/17/15 – Europeans defy US to join China-led development bank [FT]
03/09/15 – Defiant Greece at daggers drawn with EU creditors [The Telegraph]
03/03/15 – Moldova: Europe’s next powder keg? [DW]; Is Islamic State a credible threat to Mediterranean shipping? [Seatrade]
03/02/15 – China and Russia vs. the United States? [The Diplomat]
03/01/15 – Europe puts future at risk by playing safe [FT].
02/26/15 – Russia and Cyprus sign military deal for Mediterranean ports [DW]. Meanwhile it looks like Greece is buying a few months of respite with its creditors, at the expense of straining [Greek Reporter] the freshly elected Syriza parliamentary group. Michael Pettis offers a very good framework to think about the Europan debt crisis.