The Economic and Geopolitical role of the Three Seas Initiative - a view from the Northern Corner of the Baltic Sea region

Speech by Professor Alpo Rusi
The Three Seas Initiative - Open Conference in Kaunas and Vilnius, April 16, 2018

The Three Seas Initiative (TSI) is a rather new European sub-regional project to strengthen energy cooperation, digital and infrastructure projects but also to push forward the European union as a whole. After Brexit, the annexation of Crimea and military conflict in Eastern Ukraine, Europe needs new engines.

”Europe was not founded by the Treaty of Rome”, as Prime Minister Margaret Thatcher said in her speech at Brügge University 1988. In her view Europe was emerged in the course of centuries and Magna Charta was one of the first European projects. Consequently, the goal of Europe, finalite, should always be a flexible and an ever closer union but never a closed union.

There have been a number of sub-regional groups, founded around more or less narrow interests within the EU and with a more or less integrated structure of cooperation, an old example being the Benelux, originally an economic union in the post-war time. The Weimar group was about to add Poland to a German-French axis later on. Visegrad group was  established to deepen cooperation between the Central European states. The deepening of the Nordic cooperation has been for many even an alternative to European integration since 1960s.

Every member state of the EU would like to have more visibility to its special interests within the union. One of the policy methods would be to promote sub-regional co-operation in order to get EU funds for that purpose. Finland for her part initiated the Northern Dimension of the EU just two years after joining the EU in 1997 and not without interests to have additional EU funds. The idea about the Nordic dimension of the EU emerged during the membership negotiations of the three Nordic countries 1992-1994. The argument was raised by President Martti Ahtisaari in his speech at Tartu university in June 1994. Finland wanted to support the EU membership of the Baltic states although the Soviet troops were still in Estonia.

While the prime actors, Poland and Croatia, insist that the Three Seas Initiative is not at all geopolitical, but rather a forum to better integrate common infrastructure and other priority projects North-South in the new EU states of Central Europe, it’s clear that geopolitics is not a secondary aspect or ruled out. Austria is part of the TSI because it depends on Russian energy (gas) as well as most of the Eastern European countries. For Estonia, the TSI cooperation is in the area of digital economy and cybersecurity priorities. Energy interdependence, cybersecurity and infrastructure projects could motivate Finland and perhaps Sweden to pay attention to the projects of TSI later on.

There is an unfortunate association of the TSI with an old initiative of Intermarum, originally a Polish project of balancing against Soviet Union and Germany in the 1920s. Finland was involved in the earlier plan to strengthen cooperation between the Baltic states, Poland and Finland until March 1922. The keyword Intermarium remained censored in Central and Eastern Europe during the Cold War era. After the collapse of the Soviet Union, the concept did not rise up because the geopolitical offer toward which the region strived was the EU and NATO integration. By definition, Intermarium is an historical project of regional integration, while the Three Seas Initiative is a project of regional cooperation closely linked to the EU.

Furthermore, the participation as a guest of honor of President Donald Trump in the TSI Summit in Warsaw last summer triggered off comments that the TSI is primarily an American project to promote its energy interests in Europe. Critical comments was heard even in Brussels. As my personal consideration, I would have invited President Macron and President Juncker to the founding Summit and President Trump later on. This is not to criticize Poland, but to emphasize the need to develop a solid connection to the EU institutions. Debates will go on whether sub-regional co-operative initiatives inside the EU are causing disintegration more than strengthening the EU, but “nothing to loose and much to gain”.

Energy cooperation is urgent. Gazprom is a case in point because it has been strangling EU energy markets for years, as the European Commission takes aim at its new pipeline, Nord Stream 2. The Russian firm's "abusive practices" were highlighted in internal commission documents, which came to light on Tuesday (10 April), pertaining to a seven-year old anti-trust dispute. Blocking Nord Stream II is also a high US priority. The objections document said the Russian firm had hindered cross-border sales of gas in Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and Slovakia. It said the "purpose was to segment the internal market along national borders" so that Gazprom could impose "unfair pricing" in the region.

Nord Stream 2 is to concentrate 70 percent of Russian gas sales to the EU on the German route if it is built as planned in the Baltic Sea in 2019. Critics fear this will help Gazprom to halt transit via Ukraine and to cut off CEE states for political reasons, as well as to maintain the "segmentation" of EU markets for the sake of higher prices. This Document said Denmark, Finland, Italy, and the Netherlands had also suffered from "significantly" excessive prices, but said the commission had decided to exclude this from its anti-trust proceeding. "Unfair and politically driven pricing (linked to the Russian Federation's policy in CEE) is the focal point of Gazprom corporate strategy," the commission annex said, referring to Central and Eastern Europe. Chancellor Angela Merkel’s latest comments may indicate a change in Germany’s policy concerning NS2.

In June, 2017 the US Congress passed and President Trump signed into law severe new anti-Russian sanctions that among other aims explicitly targeted investment in Nord Stream II. The latest US economic sanctions against Russia take direct aim at the companies involved in backing Nord Stream II pipeline across the Baltic, independent of Poland transit. If activated by the US President it would impose severe economic sanctions on EU companies involved in energy projects with Russia, such as Nord Stream II.

China is also a case in point. There are some contradictory views concerning the Chinese and to a certain extent Russian interests in CEE and the Balkans. Whether the TSI will be able to balance the US and Chinese interests is a matter of diplomacy in connection of which the TSI should take into consideration the interest of the EU. To be viable, initiatives such as the TSI should represent a complementary intermediate level between Brussels and the national level.

The Croatian president Kolinda Grabar Kitarovic has assured that the TSI cooperation “would benefit not only these twelve EU country members but the whole European Union”. The whole region, which suffers from structural weakness in terms of economic development, will need 50 billion Euros of investment to develop in the coming year. The TSI founding declaration of 2016 was a political framework based on which concrete projects will be designed to help Central and Eastern European countries catch up on their European partners.

According to official documents, the TSI aims at increasing Central European cooperation in the fields of energy security, infrastructural development, digital communication and transportation. The regions and the whole continent need more North-South connection to achieve the completion of the internal market that had been so far connecting the continent along an East-West axe. Via Carpathia is meant to become a transnational highway linking Klaipėda in Lithuania with Thessaloniki in Greece. The project is still in a conceptual phase, while the number of participating states has steadily increased. In Finland there are plans of building a tunnel from Helsinki to Tallinn sometimes in the early 2020s. This tunnel could be a Northern link to Via Carpathia and connect St. Petersburg by trail.

The TSI can be seen as the embodiment of the principle ‘Those who want more do more’. While it falls outside formal EU structures, it is not strictly speaking part of multi-speed Europe, but it clearly is an initiative of several member states coming together to collaborate more intensely on matters of mutual interest. Brussels should not grumble about separatism, but be happy that its newer member states try to take matters in their own hands. It’s a sign of growing up.