Contemporary Global Challenges in Geopolitics, Security Policy and World Economy

Zsuzsanna Szerényi – Erzsébet Kaponyi – István Benczes (eds.)

Corvinus University of Budapest International Relations Multidisciplinary Doctoral School 2020 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy

Zsuzsanna Szerényi – Erzsébet Kaponyi – István Benczes (eds.)

Contemporary Global Challenges in Geopolitics, Security Policy and World Economy

Corvinus University of Budapest International Relations Multidisciplinary Doctoral School 2020 Edited by: Szerényi, Zsuzsanna Kaponyi, Erzsébet Benczes, István

Typography, cover design: Jeney, László

Cover: Google Earth, 2018 Worldmapper: Military Spending 2017

ISBN 978-963-503-819-0

The volume was supported by the Pallas Athene Domus Meriti Foundation (PADME). Authors:

Aguiar, Giovanna Maria B. Kovács, Eszter Bartha, Bálint Mátyás, Máté Besgül, Bora Mezei, Attila Bouras, Ilham Nemes, Zsófia Castiblanco, Lizeth V. A. Özoflu, Melek Aylin Cossu, Elena Percze, László Salibah, Aleassa Lina Dhahi Sakha, Navid Saeedi Dorogi, Zoltán Sipos, Xénia Zsuzsanna Gurály, Roland Sztanó, Gábor Hercegh, Viktória Laura Tankovsky, Oleg Hnin, Mya Thida Tóth-Ferenci, Adrienn Kása, Bálint Urazymbetov, Bauyrzhan Kirilova, Neli Widjojo, Rosita Kovács, Antal Ferenc

Scientific review:

Benczes, István Kutasi, Gábor Csicsmann, László Lehoczky, Bernadett Dévényi, Kinga Magas, István Dobrovits, Mihály Matura, Tamás Endrődi-Kovács, Viktória N. Rózsa, Erzsébet Eszterhai, Viktor Szalai, Máté Gálik, Zoltán Széchy, Anna Gazdag, Ferenc Szerényi, Zsuzsanna Jeney, László Tétényi, András Kengyel, Ákos Vígvári, Gábor Korompai, Attila Vogel, Dávid

English proofreading: Johnson, Nicholas Saxon, Philip Klein, Attila Thiessen, Robert

Table of Contents

Preface – Rostoványi Zs. ��9

I. Political and Economic Processes of the Arabic World ��11

I.1. Saudi Aramco IPO: The Primary Reasons behind It – Bartha B. 13 I.2. Institutional Reforms in North Africa: the Example of the ‘Advanced Regionalization’ in Morocco – Bouras, I. ��27 I.3. Libyan Nationhood and Regionalism: Tribal Society in a Modern Era – Kása B. ��37

II. Current Challenges of Sustainability ��51

II.1. Interagency Cooperation of UN Agencies within the Framework of SDGs – Besgül, B. ��53 II.2. On the Effectiveness of the ‘Greening’ Component of the EU’s Common Agricultural Policy – Kovács A. F. ��71 II.3. Industry 4.0 and the Circular Economy – Nemes Zs. ��91

III. Security and Defence Policy Issues ��101

III.1. Russian Gas Export towards Bulgaria: Inconsistent Political Response Due to Energy Security Challenge – Kirilova, N. ��103 III.2. The End of the Superpower Era – Retrenchment of the USA and the Resurgence of Great Power Politics – Mezei A. ��121 III.3. Building Resilience as a Security Strategy for Donors and Hosts: The Case of the EU and Jordan Concerning the Syrian Refugees – Salibah, L. ��135 III.4. The Origins of Tunisia’s Women’s Rights Movement: A Social Movement Theory Approach – Sipos X. Zs. ��169 III.5. Onset Analysis of the Frozen Conflict Taking Place in Eastern- Ukraine – Tankovsky, O. ��183 III.6. Inequality and Marginalisation as Boosters of Violence: Studying Latin America from a Neo-Institutionalist Perspective – Castiblanco, L. V. A. ��203

7 Table of Contents ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ IV. Contemporary Challenges in World Economy ��217

IV.1. Traditions, Institutions, and Growth: the Case of Hungary – Cossu, E. – Aguiar, G. M. B. �� 219 IV.2. Companies in Different States: The Common Logic of Free Trade Agreements and Transfer Pricing – Kovács E. ��233 IV.3. The Institutional Economics Approach to Populism: Precising the Theoretical–Methodological Framework – Mátyás M. ��251 IV.4. How Robotisation is Changing Production-Related Decisions? – Gurály R. ��283 IV.5. How Does Digitalisation Influence Financial Inclusion in the Emerging Countries? – A Cross-Country Comparison – Sztanó G. 303 IV.6. Comparative Study on Sovereignty in Oil Dependent States – Sakha, N. S. ��323

V. Rising Powers of Asia ��339

V.1. Rebalancing and Counterbalancing of Myanmar between India and China – Hnin, M. T. �� 341 V.2. The Role of ASEAN on the Territorial Dispute in the South China Sea – Hnin, M. T. – Widjojo, R. ��359 V.3. Milestones of Eurasian Integration – Urazymbetov, B. ��387 V.4. Ambiguities in Chinese Strategy on the South China Sea – Herczegh V. ��401

V. Institutions and Policies of the European Union ��415

VI.1. Creative Industries in the Economic Structure of Midsize Towns in the Visegrad Countries – Dorogi Z. �� 417 VI.2. A Critical Analysis of the EU’s Image as a Model for Regionalism: Some Lessons from the Eurozone Crisis – Özoflu, M. A. ��435 VI.3. The Copenhagen Dilemma and Its Possible Solutions in the Council of Europe – Tóth-Ferenci A. ��453 VI.4. New strategies for the Hungarian (Political) Elite in the Light of Demographic Trends among Hungarians in Transylvania – Percze L. ��471

8 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Preface

This is the second time that the International PhD Conference has been organized by the International Relations Multidisciplinary Doctoral School of Corvinus University of Budapest. We hope this is a sign that we have created a tradition, and that the conference will be organized in the future as well. As in the previous year, most of the presentations given at this year’s conference will again be published in a collected volume in the form of edited studies, with the aim of promoting the publication performance of PhD students. The comprehensive profile of the Doctoral School, the diversity of its three subprograms – International and Security Studies, World Economy and Geopolitics – is reflected in the various topics of the studies in this volume. These include e.g. security and defence policy, challenges the world economy is facing nowadays, the institutions and policies of the European Union, the emerging powers of Asia, as well as sustainability and other important, highly relevant issues. The regions examined in the studies range from the EU through the Arab world to Latin America and Asia, and countries such as the United States, Russia, Ukraine, China, India, Jordan and Tunisia are analysed, to name just a few. The multidisciplinary nature of the Doctoral School has long been expressed in its name, mainly due to the fact that it is entitled to award degrees in two disciplines (economics and political science). Multidisciplinarity is also manifested in the diversity of the topics of this volume. Not only multidisciplinarity, but also interdisciplinarity, the presence of “frontiers” in the field of mutually interdependent disciplines can be traced inthe articles, as the authors refer to e.g. law, history, security policy as well as theories of international relations. The studies in the volume were carried out during an unprecedented, difficult period, as the coronavirus epidemic made traditional forms of education almost impossible all of a sudden, and doctoral training also had to switch to online education. All this coincided with the substantive and organizational renewal of the doctoral programs at Corvinus University of Budapest. Due to the fusion of the International Relations Multidisciplinary Doctoral School and the Doctoral School of Political Science, the Doctoral School of International Relations and Political Science was established on 1 July 2020, and the number of subprograms increased from three to four, by adding Political Science.

9 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Finally, let us express our gratitude to the Central Bank of Hungary and the Pallas Athene Domus Meriti Foundation (PADME) for the support they have given to the Doctoral School over the years, especially the Geopolitical Subprogram, which has made this volume possible.

Prof. Zsolt Rostoványi

10 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

I. Political and Economic Processes of the Arabic World

11 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

12 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ I.1. Saudi Aramco IPO: The Primary Reasons behind It

Bálint Bartha1

Abstract

In January 2016, Prince Mohammad bin Salman surprised the world by announcing that the Saudi government intended to initiate the biggest initial public offering (IPO) in history. Saudi Aramco is the world’s largest oil producer. Riyadh delayed the transaction several times, although it was the centrepiece of Saudi Arabia’s Vision 2030 plan to diversify the kingdom’s economy which is highly reliant on oil. The aim of this paper is to analyse the political reasons for the Saudi Aramco’s IPO delay. The paper’s main assumption is that the Kingdom overestimated Western investors’ financial leverage, because in spite of their qualms more than 5 million investors set aside concerns over the company’s close ties to a state with a controversial human rights record, and the uncertainty over the global oil industry’s future. The paper will analyse the key factors, and major internal and external political conflicts which had an effect on the Saudi Aramco’s IPO. As a result, the paper will challenge the necessity of the IPO from an economic point of view, because the timing was the worst possible.

Keywords: Saudi Aramco, IPO, Vision 2030, Saudi Arabia, oil market

1 PhD Student – CUB IR Doctoral School, [email protected]

I.1.1. Introduction is the world’s largest oil producer, it has 297,700 million barrels In January 2016, Deputy proven crude oil reserves, the Crown Prince Mohammad bin second highest in the world after Salman (MBS) announced that Venezuela (homepage of OPEC he intended to sell 5% of Saudi Annual Statistical Bulletin). Aramco in an international initial MBS expected to raise $100 billion public offering (IPO) to fund Saudi from the sale, valuing Aramco at Arabia’s ambitious economic $2 trillion. On December 11th, reform plans called Vision 2030. 2019, shares began trading only The oil company had been under on Tadawul, Saudi Arabia’s stock government control since it was exchange. It took four years to nationalized in the 1970s. Aramco initiate the deal, because of the lack

13 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ of transparency and continuous had an effect on the Saudi Aramco’s political crises. The Saudis IPO. As a result, the paper will postponed the IPO several times. challenge the Vision 2030 idea, More than two dozen banks were which aims to open and liberalise involved in the process, but most of Saudi society, but the key factors them flinched from the transaction are to the East: engage the Asian because the most important investors with stability and regional stock exchanges have certain security. requirements that Saudi Aramco could not, or did not want to, fulfil. I.1.2. Vision 2030 In mid-October, 2019 the investors informed Aramco’s management The economic development that they expected the value of the of Saudi Arabia is at or above the company to be between $1.1-1.7 level of Western democracies. trillion, far below the $2 trillion The GDP per capita figures of the target figure set by MBS. Then the Kingdom is the 38th highest in the Saudis decided to proceed with World, the same level as Portugal, a scaled-back IPO on the Saudi the Czech Republic or Estonia (IMF stock market instead of the most 2019). However, the structure of its important stock markets. economy is one-sided, and 90% The aim of this paper is of its export income comes from to analyse the political reasons oil production (homepage2 of CIA for Saudi Aramco’s IPO delay. Factbook). The Saudi economy The paper’s main assumption is is vulnerable, and it is exposed to that the Kingdom overestimated the oil market. Inorganic economic Western investors’ financial integration and the country’s leverage, because in spite of internal economic structure have their qualms more than 5 million not allowed the state to develop a investors set aside concerns over functionally redistributive system. the company’s close ties to a state According to Giacomo Luciani, with a controversial human rights we may distinguish between record, and the uncertainty over the production states and rentier global oil industry’s future (Jolly, states accordingly the source of J. – Ambrose, J. 2019). a state’s revenue (Luciani, G. 1994). The In a rentier state, the The paper will analyse the key factors, and major internal and 2 https://www.cia.gov/library/ external political conflicts which publications/the-world-factbook/geos/ sa.html – 2020. 03. 14.

14 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ state is independent from society, include reinforcing economic the tax system is underdeveloped, and investment activities, and and we cannot talk about political increasing non-oil industry trade representation. Almost 90% of the between countries through goods, Saudi Government’s export income consumer products and tourism. derives from oil exports. The Saudi Commission for Tourism Mohamed Bin Salman and National Heritage started recognized that the Kingdom’s issuing tourist visas in October economy is vulnerable, so he 2019. More than 100,000 tourists decided to initiate a programme visited Saudi Arabia in one month four years ago, called Vision (Binturki, T. A. 2020). A most 2030, which aims to make the impressive megaproject has also economy independent from oil been proposed, the so called Neom exports. The oil price is fluctuating project, which seeks to become the and too volatile to rely on solely, flagship of the country’s touristic and it cannot sustain economic and entertainment potential. That development. The Saudis have project envisioned a $500 billion, missed decades of technological ultra-high-tech economic zone in improvement. The developed the northwest part of the kingdom countries adopted new technologies near Egypt and Jordan. Yet, there and built infrastructure to serve will be comparatively few jobs for development. Demographic humans in the robot-filled facilities changes are also important: 40% envisioned for Neom, which so far of the population are under the has only completed a new airport age of 25; they are educated, well- and some palaces. informed, and they have access to To finance these ideas MBS the internet, and the social media initiated the IPO of Aramco stocks. (homepage3 of CIA Factbook). The The successor of the Arabian new generation is eager for change. American Oil Company, originally Transforming the Saudi economy established by the US, Aramco requires creating around one million is the largest oil producer in the new jobs in the next few years for world, with the lowest production the many young people entering the costs; consequently, it is the most workforce (Henderson, S. 2019). profitable company on earth. The programme goals It is standard practice in Saudi Arabia that the income of 3 https://www.cia.gov/library/ the government will likely be publications/the-world-factbook/geos/ invested outside the country. The sa.html – 2020. 03. 14.

15 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ kingdom has suffered losses on that mankind is living on borrowed several fintech investments. The time, and we have to reduce Public Investment Fund lost so far hydrocarbon usage. There was also in Uber and WeWork. For these internal pressure because, as the reasons, the IPO progress should Arab Human Development Reports be watched carefully by investors, (AHDR) found, there are three who often find themselves puzzled deficits in the Arab countries: a by the Kingdom’s decision-making freedom deficit, a lack of women’s processes (Henderson, S. 2019). empowerment, and a knowledge deficit4. All of these issues affect I.1.3. Reasons for the delay Saudi Arabia. The Saudi leadership In December 2019, the Saudi identified these problems, and Aramco stocks were traded for the they have decided to initiate a first time after years of preparation socioeconomic reform, which and delay. The income from the includes the following measures: transaction is going to be invested women can drive a car (2017), in the Vision 2030 economic cinemas will reopen after 40 years, development plans. The Saudi women will be allowed to visit government offered 5% of the football matches (2018), and so on. shares in Aramco (Gross, S. 2019). The economic aspect to the renewal A number of questions is the Vision 2030 project, which is emerged about the IPO: What is expensive. That is why they have Aramco worth? Will the IPO be decided to sell 5% of the shares transparent? Where will Aramco of the Saudi Aramco oil company shares be listed? Is the country every year, to generate cash for the stable enough to earn the trust of public investment fund. the international investors? Diversifying the economy is Transparency not a new idea: it has been a question in Saudi Arabia for decades. This There are several concerns time, the reason why now is the about the IPO. First of all, some time to diversify the economy, is worry whether the money thus not solely Mohamed Bin Salman, raised will arrive in the public but also the environment. In the fund, or it could instead be a tool of mid 2010s there were multiple pressures on the global oil market 4 Arab Human Development Reports from environmentalists arguing – http://www.arab-hdr.org – 2020. 06. 09.

16 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ corruption. Meanwhile, converting stock in the largest company in the to a public company is a game world should be sold through the changer, so the IPO can serve largest stock exchange (New York strategic goals for the state. Riyadh or London stock exchange) but due initially proposed to sell off 5% of to regulatory issues this plan was the company per year for ten years, not realised. The months of delay then afterwards stopping in order since the original idea of an IPO to maintain the control over the has been attributed to hesitation on company, but its plans are unclear. the Saudi leadership’s part about The state-owned oil company revealing the company’s financial never previously had to think details, as well as concern that its about the interests of investors, assets might become vulnerable to but now thanks to the bipartite legal action, particularly if Saudi ownership (both state and public), Arabia is found to bear any official it has to pursue strategies which responsibility for the 9/11 terrorist are good for the state, and good attacks (Henderson, S. 2019). for the shareholders. They have to From the legal point of view, it is issue quarterly reports about the hard to determine the outcome of a company, something they have litigation case, but if an American not done before. The Saudis had court finds the Saudi Government to disclose everything after they indirectly responsible for the terror became an open public company. attacks, due to the fact that 15 of the The company had other interests 19 hijackers were Saudi citizens, it besides oil reserves, but since an would be a political issue, not an independent third party has not economic one, because the company been able to verify the amount of could pay the compensation to the the oil reserves, the amount of the victim’s families. reserves still remains unclear. The company, until December 2019, Market value had not been listed on any market, it was not transparent, there was no The company’s total value free press in the country, and the was a big question. The Saudis political situation there was still expected that it was worth $2 shaky. trillion, which would have meant that selling off 5% would result in Regulatory a $100 billion inflow to the Saudi government. Western analysts It goes without saying that have expressed doubts about the

17 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ valuation, and its credibility, and it will maintain its oil production suggested instead a $1.1-$1.5 to flood the market to compensate trillion range. In December, 2019 for the 65% drop in prices in 2020 Aramco achieved a record, and the (Jacobs, T. 2020). market gave it a $1.7 trillion price tag, making it the world’s most Domestic attraction of valuable company. The stock price business hit an intraday high of 38.70 riyals on its second day of trading but has The Crown Prince subsided since then. emphasizes the importance of soft MBS did not get what he power. There are fundamentally two expected. The company was valued main sources of Saudi soft power: at 15% less than he anticipated and domestic policies and actions and has been losing value ever since. international policies and actions. Aramco is listed only in Saudi Saudi Arabia considered in the Arabia, meaning that Western Muslim world as the „Land of the investors were not present, and Two Holy Shrines”, referring to most of the shareholders are Saudi the two holiest places in Islam: Al- citizens, or Asian investors. Masjid al-Haram in Makkah and Besides the described issues, Al-Masjid al-Nabawi in Medina. the biggest challenge is the instable The government is financing internal political situation. A several projects abroad to extend its number of prominent Saudi Arabian soft power capabilities. princes, government ministers, and The overambitious MBS does business people were arrested in not tolerate opposition voices. The Saudi Arabia on 4 November 2017, Saudi Government is not scared to and detained in Riyadh Ritz-Carlton use force to shut down dissenting Hotel for alleged corruption and opinion. In October 2018 at the profiteering. The action resulted Saudi consulate in Istanbul agents that MBS consolidated his power of the Saudi government killed over all three branches of the Jamal Khashoggi, an American- security forces, making him the living dissident journalist, who was most powerful man in Saudi Arabia. constantly criticizing MBS and Today, the company is the Saudi government (Schmitt, increasing the oil supply at the time E. – Fandos, N. 2018). That when demand is falling down as the action astonished the international global economy is shocked by the community. A major foreign coronavirus. The company has said investment conference immediately

18 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ended in Riyadh, when the murder in August 2017, and provided of dissident journalist Jamal military and weaponry supports to Khashoggi cast a shadow over the the Houthis in Yemen, who fired proceedings. Critics argue that missiles at Riyadh in November such activities by the government 2017 (Eisenstadt, M. 2018). may cost the country years of In Riyadh, they assumed development, because a foreign that Tehran had shifted the balance investor does not want to live in of power to coincide with the such an environment: they would Iranian economic rebirth. If we rather go to invest in the United Arab are comparing the hard power Emirates or Qatar. Nevertheless, capabilities, it is clear that the only reporting suggests that in this advantage that Saudi-Arabia had instance, foreign executives were over Iran before the JCPOA was more interested in securing fee the economy. From that perspective income for new fundraising or the nuclear deal threatened the investment assistance for overseas Saudi-led Sunni block5, which projects rather than actually putting are US allies. To understand that money into the kingdom. we have to make a simple hard power comparison between the two International challenges regional superpower aspirants.

5 The United States after 1979 when Regional adversaries also they lost the Iran as an ally, turned threaten the Kingdom’s stability. towards the Sunnis. This is an Iran after the nuclear deal (JPCOA informal alliance which based on three – 2015) adopted a more assertive points: the US is the security provider; form of behaviour towards their Saudi Arabia is a leader on religious basis as the guardian of the two holy regional enemies, but it continued sites in Islam and ultimately the to conduct cyberattack against purpose of this covenant to contain the Saudi Arabia’s oil infrastructure Iranian leverage.

hard power capability Iran Saudi-Arabia index population 81 million 33 million Iran territory 1.6 million km2 2 million km2 neutral geopolitical position strategical strategical neutral 4th largest oil 2nd largest oil natural resources reserves, 2nd Iran reserves largest gas reserves

19 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ hard power capability Iran Saudi-Arabia index active personnel 523,000 251,000 Iran military 67 billion USD budget 20 billion USD (3rd highest in the Saudi-Arabia world) GDP 440 billion USD 684 billion USD economy Saudi-Arabia GPD per capita 5,500 USD 20,700 USD

Table 1: Hard power capabilities Iran and Saudi-Arabia, 2019 Source: compilation of the author based on the data of CIA Factbook6

6 Iran: https://www.cia.gov/library/publications/the-world-factbook/geos/ir.html – 2020. 03. 14.; Saudi-Arabia: https://www.cia.gov/library/publications/the-world- factbook/geos/sa.html – 2020. 03. 14. It is really hard to overcome meeting7, the state-owned Saudi the Iranian military capabilities Aramco oil processing facilities at (Table 1), despite the size of the Abqaiq and Khurais in eastern Saudi Saudi military budget, which is Arabia were attacked by drones almost 70 billion dollars yearly, a and cruise missiles. Yemen’s Iran- figure that represents 10% of the aligned Houthi rebels, at the centre county’s GDP, nominally the third of a civil war against Saudi-backed highest in the world. This simple forces, claimed responsibility, trying table shows that the only arrears to hide the Iranian involvement and that the Islamic Republic has is blame the Saudi intervention into its economy. The decade-long the Yemeni Civil War. The United sanctions have ruined the Iranian States and Saudi Arabia stated that economy, their inflation is over 30%, Iran was behind the attack while the for a long time they were unable European Union also jointly stated to export their oil production, and that Iran bears responsibility for it. from 2012 until the signing of the Iran has denied any involvement. JCPOA the annual GDP shrinkage Saudi Arabia was a strategic was more than 1% on average. That target. The attack temporarily is why Iran needed the nuclear deal halved Saudi Arabia’s oil production badly. and knocked out 5% of the world’s On 14th September 2019, oil supply. Global crude oil prices just a couple of days before the United Nations General Assembly 7 There were some expectations that behind the scenes President Rouhani and President Trump can meet, but it quickly evaporated after the attack.

20 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ spiked, for a couple of weeks, but outside effort to threaten or seize the Saudis calmed the market, oil fields in the Persian Gulf, is since they were able to rebuild the officially dead because Tehran is facilities in a short time (Diapola, too powerful, and with this attack it A. – Bloomberg 2019). is clear, that Saudi Arabia is ready The plan by Iranian neither to protect its neighbours nor military leaders to strike Saudi oil to enter a war against the Islamic installations developed over several Republic. Although Washington is months, according to the official trying to “lead from behind” – as we close to Iran’s decision making saw in the Libyan intervention – the (Georgy, M. 2019). The possible only evident response was the US targets were initially discussed and Defense Department’s announced categorized based on the possible deployment of 1,800 more US casualties and the rate of retaliation. troops to Saudi Arabia (Saab, B. Y. They dismissed those targets 2019). where any United States personnel With this attack Tehran sent could be harmed, because it could a message to Saudi Arabia and the provoke a massive counterattack. US as well. The Persian country The agreement on Aramco facilities showed that they have a very was almost unanimous. This idea, to sophisticated technology and they attack the enemy’s oil infrastructure are able to execute precise and is not new, as since the 1980s Iran quick attacks from more than 1000 has declared that if it cannot export km away. Despite its huge military oil, then none of its neighbours spending Saudi Arabia could do will either. The idea was to display nothing against those drones and Iran’s deep access to intelligence low-flying missiles. It has been and military capabilities. The attack clear in recent months that Riyadh’s has been the worst on Middle East strategy is now to be reconciled oil facilities since Saddam Hussein with the Yemenis in the interests of torched Kuwait’s oil fields during to calming down the tensions on its the 1990s Gulf crisis. border, because it is clear that they Riyadh said it believes are unable to focus on more than Iran conducted the attacks on its one adversary at the same time. oil facilities and will consider Tehran showed with this a military response once its attack that they are much more investigation is complete. The powerful than Riyadh thinks, and Carter Doctrine, which calls for an it still has an unbeatable advantage American military response to any on military side. However, the

21 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ balance of power inside Iran has Defence Minister and the Crown also shaped the regime. Supreme Prince at the same time, has in- Leader Ali Khamenei gave a green house challengers. If MBS wants to light to diplomacy and pragmatic consolidate his power it is crucial to conservatives like President Hassan find some modus vivendi with his Rouhani with the acceptance of biggest enemy in order to execute the JCPOA, but this agreement his sweeping socioeconomic and failed within 3 years. On the political reforms in Saudi Arabia, other hand, the hardliners, namely moderate the country’s Wahhabi the Revolutionary Guard Corps ideology, make Saudi Arabia a commander Qasem Soleimani got a more appealing destination for free hand to pursue their preferences international investment, and lay in Syria, Yemen, Lebanon and the groundwork for a prosperous Gaza. post-oil future. Recent events have showed that despite possessing I.1.4. Conclusion high-quality military hardware, the Kingdom cannot be a security It is not clear why Riyadh provider in the Middle East, and as went ahead with selling one of their it seems at least possible that the most important assets at the bottom US will withdraw from the MENA of the oil market. The only reason region, this appears unlikely to was that the Kingdom has cash happen within the foreseeable flow problems. Why else would future. Aramco would proceed with the As it is clear that there is no IPO, unless the State needed the stability in the region, it can be cash immediately? The Vision 2030 expected that the powers are going ideas did not correspond to reality, to balance against each other. This and the programme has so far been will accelerate the security dilemma financed by loans, which confirms unless a miracle happens and one of the above finding that the Kingdom the main actors gives up the game, has financial problems (IMF 2016). which today seems very unlikely. Although Saudi Arabia A transparent IPO could lead appears to be the brink of radical to a more transparent country, but change with the vision 2030 we should emphasise that only project, if we take a closer look 1.5% of the shares were sold on to the Saudi house, it appears that Tadawul for the first round and there is a power struggle in which most of the investors were Saudi Mohammed Bin Salman, who is the citizens, most of whom were locked

22 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ down at the Ritz-Carlton Hotel in grounds, unless the shareholders 2017. A successful Saudi Aramco are interested in financing the US- IPO is an indirect valuation of the Saudi partnership, which is again, Saudi economy. At the closure of very unlikely. the IPO Brent crude oil cost around The Western investors should $34/barrel, which could determine attend the next round of the IPO, the profitability of the company because this transaction could (homepage8 of BBC News). The determine future of the global US-Saudi strategic partnership oil market for decades. In 2020 relies on there being cheap and it is unrealistic to expect liberal plentiful oil on the market, in principles to hold sway in the return for which the US provides most closed Arabic country. Thus, security for the country. In the the West should design a feasible recent years the US has become cooperation if they do not want the 4th biggest oil exporter in to fall behind Asia, and want to the world, and it is important to receive more information about the emphasise that Saudi Aramco has Kingdom. around 1 million barrels/day of so far unused capacity, because that is Acknowledgement only provision for emergency times (homepage9 of CIA Factbook). If The present publication is the company is going to be more the outcome of the project „From public than it is today, a 1 million Talent to Young Researcher project barrel provision for the Americans aimed at activities supporting the cannot be sustained on cost/benefit research career model in higher education”, identifier EFOP- 8 https://www.bbc.com/news/topics/ cmjpj223708t/oil – 2020. 03. 15. 3.6.3-VEKOP-16-2017-00007 co- 9 https://www.cia.gov/library/ supported by the European Union, publications/the-world-factbook/ Hungary and the European Social rankorder/2242rank.html – Fund. 2020. 03. 14.

I.1.5. References

Binturki, T. A. 2020: How Do You Evaluate the Current Stage of the Implementation of the Saudi Vision 2030 Reform Program? https:// kki.hu/wp-content/uploads/2020/03/10_KKI_4_1_SAU_20200309. pdf – 2020. 03. 10. Eisenstadt, M. 2018: Iran After the JCPOA Withdrawal (Part 1): Lessons

23 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ from Past Pressure Campaigns https://www.washingtoninstitute. org/policy-analysis/view/iran-after-the-jcpoa-withdrawal-part-1- lessons-from-past-pressure-campaigns – 2020. 03. 01. Diapola, A. – Bloomberg 2019: Saudi Aramco Says Damage From Drone Attacks That Plunged World Oil Market Into Chaos Is Already Fixed. – Fortune 10. 14. – https://fortune.com/2019/10/14/saudi-aramco- oil-drone-attacks-damage-fixed/ – 2020. 03. 14. Gallarotti, G. 2014: Saudi Arabia’s Soft Power - International Studies, Vol 49, Nos. 3&4 2014 Gross, S. 2017: The Saudi Aramco IPO is a game-changer for the Saudi economy. – https://www.brookings.edu/blog/markaz/2017/06/06/ the-saudi-aramco-ipo-is-a-game-changer-for-the-saudi-economy/ – 2020. 03. 02. Gross, S. 2019: The Saudi Aramco IPO breaks records, but falls short of expectations. – https://www.brookings.edu/blog/order-from- chaos/2019/12/11/the-saudi-aramco-ipo-breaks-records-but-falls- short-of-expectations/ – 2020. 03. 02. Jolly, J. – Ambrose, J. 2019: Saudi Aramco becomes most valuable listed company in history. – Guardian 12. 11. – https://www.theguardian. com/business/2019/dec/11/saudi-aramco-shares-soar-as-it- becomes-world-largest-listed-company – 2020. 05. 18. IMF 2016: Saudi Arabia. – International Monetary Fund. – https://www. imf.org/external/pubs/ft/scr/2016/cr16326.pdf – 2020. 03. 13. IMF 2019: World Economic Outlook Database, October – International Monetary Fund. – https://tinyurl.hu/h4yE/ – 2020. 03. 14. Henderson, S. 2019: Understanding the Saudi Aramco IPO. – https:// www.washingtoninstitute.org/policy-analysis/view/understanding- the-saudi-aramco-ipo – 2020. 03. 03. Hertz, J. H. 1950: Idealist Internationalism and the Security Dilemma World Politics Vol 2. No. 2 (Jan. 1950), pp. 157-180 Jacobs, T. 2020: OPEC+ Moves To End Price War With 9.7 Million B/D Cut. – Journal of Petroleum Technology 04. 13. – https://pubs.spe. org/en/jpt/jpt-article-detail/?art=6871 – 2020. 06. 09. Luciani, G. 1994: The Oil Rent, the Fiscal Crises of the State and Democratization In: In: SALAM..., Ghassan(ed.) [1994], pp. 130- 155. Pacheo, F. 2020: Key to Aramco’s Calm January Lies in Hands of Saudi Stock Owners – https://www.bloomberg.com/news/

24 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ articles/2020-02-02/key-to-aramco-s-calm-january-lies-in-hands- of-saudi-stock-owners – 2020. 03. 03. Georgy, M. 2019: Time to take out our swords - Inside Iran’s plot to attack Saudi Arabia. – Reuters Special Report 11. 25. – https:// www.reuters.com/article/us-saudi-aramco-attacks-iran-special-rep/ special-report-time-to-take-out-our-swords-inside-irans-plot-to- attack-saudi-arabia-idUSKBN1XZ16H – 2020. 06. 09. Saab, B. Y. 2019: Trump Is Sending More Troops to Saudi Arabia. – https://foreignpolicy.com/2019/10/16/trump-deployment-troops- saudi-arabia-abandoning-syria-iran-attacks/ – 2019. 10. 30. Schmitt, E. – Fandos, N. 2018: Saudi Prince ‘Complicit’ in Khashoggi’s Murder, Senators Say After C.I.A. Briefing. – New York Times 12. 04. – https://www.nytimes.com/2018/12/04/us/politics/cia-senate- khashoggi-.html – 2020. 10. 20.

Other sources from the internet:

Arab Human Development Reports: – http://www.arab-hdr.org (Accessed March 8, 2020) BBC News: – https://www.bbc.com CIA Factbook: – https://www.cia.gov/library/publications/the-world- factbook/ OPEC Annual Statistical Bulletin: – https://asb.opec.org/index.php

25 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

26 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ I.2. Institutional Reforms in North Africa: the Example of the “Advanced Regionalization” in Morocco

Ilham Bouras10

Abstract

The process of regionalization was conceived, in the case of Morocco, in order to tend to a series of socio-economic issues resulting from the centralized set up of the institutional body of the country. The disparities that the different regions of the country saw emerge required the inclusion of the “territory” as a key element in the socioeconomic balance of the country. This paper analyses the process of the “advanced regionalization” which was implemented in Morocco in 2015 and was backed by the country’s Constitution. It focuses on the current state of implementing advanced regionalization, the core challenges it involves and the contribution of the European Union as an international actor. The analysis relies on a qualitative approach. It consists of combining the outcomes of the review of the relevant documents (constitution, laws, statements, etc) with the results of a review of the literature focusing on the specific question of advanced regionalization. The main findings of the paper are that, on one hand, while slowly but steadily moving forward, the advanced regionalization will need more time in order to allow for its internal organization related issues to be solved and to thus aim towards more optimal results. On the other hand, and regarding the international aspect, the EU’s input proves limited to technical support.

Keywords: advanced regionalization, Morocco, institutional reform, decentralization

10 International Relations Multidisciplinary Doctoral School

I.2.1. Introduction to the same rule, and as defined by the Cambridge dictionary can The concept of either refer to a certain part of the “regionalization” can be defined world (including several countries) in two major ways, depending or to the areas into which a single on whether we are considering country is divided officially. The the worldwide scale, or the case present paper concerns the second of one specific country. The term category which looks at the “region”, which is also subject region as a geographically defined part of a country with specific

27 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ characteristics, needs and set ups. in 1956 (Lacroix, Th. 2018). The Processes of regionalization present paper is going to address and decentralization are commonly the advanced regionalization noticed within the countries of the process in Morocco as a major South influenced by Structural gradual reform and to assess Adjustment Plans (Lacroix, Th. its evolution through the years. 2018). “Advanced regionalization”, While the historical background under this specific name, is defined of the decentralization process in as a “purely Moroccan project”11 due Morocco is briefly addressed in the to the fact that it is strongly related present paper, the main time frame to the political as well as the socio- of the analysis begins in 2011, economic set up of the country. It following the constitutionalization is thus a major reform project. The of the “Advanced regionalization” main idea of this reform is to bring and continues until the current year. the administrative territory closer The challenges of the advanced to the “real”12 territory, which regionalization, as a major is structured by the social and institutional reform, are also to be economic behaviors of the local discussed in the present paper, and populations (Berriane, M. 2015). finally, the paper will focus on the The advanced regionalization is European Union’s input. thus based on the diversity of the socio-economic realities of the I.2.2. From decentralization different regions of Morocco. Its to Advanced aim, in the precise case of Morocco, Regionalization: a brief is to disperse the public action in a more effective way, in order to history remedy disparities. The advanced regionalization The centralized set-up of marks a certain break up, Morocco’s administrative body considering the domination of the was inherited from the French centralized set up which had marked protectorate, which chose the the country since its independence city of Rabat as its capital and set its administration and the core 13 11 As it was defined by Khalid Safir, of its institutions there . Three who’s in charge of leading the implementation of the project, in an 13 Morocco’s capitals have changed interview with Medias24.com (Nhaili, throughout history until Rabat, which S. 2019) remains the current capital and is 12 As described Berriane, referring to the referred to as the “administrative physical territory (Berriane, M. 2015) capital” since it held all the central

28 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ years after its independence, still hinder it and their causes and Morocco started to implement origins. its strategy of “decentralization”, The transition from the general which grants more competences concept of regionalization, which is to local communities (Jafari, M. the highest form of decentralization – El Moujaddidi, N. 2016). The (Goeury, D. et al. 2017), to that of following year (1960) witnessed advanced regionalization was done the establishment of the Dahir14 gradually. On the 4th of January related to municipal organization as 2010, the King Mohammed VI well as the first municipal elections. announced during his speech The phase of “decentralization” the creation of a Consultative then took a major step forward, commission of regionalization marked mainly by the communal (Commission consultative de la charter of 1976 which addressed régionalisation/ CCR) (Lugan, the management of the resources B. 2011). Although it had been of local communities and the addressed in different forms in extension of the competences of the past versions of the Constitution, municipal councils (Jafari, M. – El it is the last revision of 2011 that Moujaddidi, N. 2016). mentions “regionalization” as an Regionalization and regional integral reform and confirms thus issues started attracting attention its constitutionality. In 2015, the many years prior to the launch of the organic law related to the region was “Advanced regionalization” process passed by the parliament to mark under its current form, having for the launch of the operationalization a main mission the handling of of the reform15. the many unbalances that were In terms of novelty, advanced the result of Morocco’s previous regionalization is a major reform; centralized politico-institutional in fact it can even be considered the setup. It is thus important to “biggest devolution of powers in evaluate the depth of the advanced Morocco’s institutional history”16. regionalization process, taking The first change that was done on the into consideration the concrete regional level was the decreasing of results of its implementation since the number of regions from 16 to 2015, as well as the challenges that 15 Organic laws are laws through which administrative and governmental elements of the Constitution are institutions of the Kingdom. applied. 14 The word “Dahir or Dhahir” (singular) 16 As described by Youssef Aït Akdim, refers to a royal decree made by the Author’s translation (see full article Moroccan king. Ait Akdim, Y. 2017)

29 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 12, with the aim of achieving a more far from the country’s political effective territorial management. and economic hubs (respectively On the organizational level, one of Rabat and Casablanca and their the major changes is the placement surrounding areas). Regarding the of the president of the region at the economic aspect of the advanced top of the institutional structure regionalization, increasing the as an elected regional official and competitiveness of the regions, in a therefore benefitting from electoral sense of open and globalized markets, legitimacy. The regions are thus is one of the main aims (Jafari, M. equipped with their elected council – El Moujaddidi, N. 2016). This and by resources allocated to its means that the improvement of development and management. the competitiveness of the regions The regional councils oversee the within the country, which is to be economic and social development achieved through a better allocation of the region and work along with of resources and an economic the State. And regarding the central activity focused on the assets of State, the coordination between the the region in question, is bound to local level and the central one is contribute to the improvement of handled by the Walis (officials in the overall economy of the country. charge of representing the King and The third and last category consists the government on the local level17) of the set of aims related to the and governors. implementation of local democracy. The aims of the process of This set of aims was conceptualized advanced regionalization can be to take regional governance to the summed up in three main categories: next level by strengthening the social development, economic democratic legitimacy of regional and democracy related aims. The political activity (through regional first category of aims consists and municipal elections) and of working on decreasing the through the representativeness of disparities caused by the centralized the specific needs of the regions. set up, contributing thus to a better distribution of the resources on the I.2.3. The advanced different regions and the overall regionalization: reform and improvement of the population’s challenges quality of life. This set of aims targets mainly the inclusion of the The advanced regionalization, regions which are geographically despite being particular to the 17 Ibidem Moroccan case took decades to get

30 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ to the stage it is at right now. It is population, rather than a motive nonetheless not exempt from facing related to the cultural or linguistic challenges, both on the conceptual difference between the regions, level and on the concrete one. despite Morocco being rich in Regarding the conceptual aspect, cultural and linguistic diversity. and although the advanced regionalization presents itself I.2.4. The input of the as a total break up with the past European Union institutional set up, and a complete reform, the extent of these changes The shaping of the advanced is still subject to evaluations. regionalization and the formulation The main challenges that the of its constitutive elements was advanced regionalization is facing mainly handled by the CCR. The are in relation to its organization, CCR was nonetheless not the only whether it is financial or human organ whose input was considered resources related. One of the in forming the regionalization central issues is the multitude of agenda, since EU and the World actors and the absence of clear Bank funded analyses were also precisions regarding their roles used in the process (Bergh, I. S. and field of intervention, which 2016). The EU’s contribution to can cause their responsibilities and the advanced regionalization is an missions to overlap (Jafari, M. – interesting point to analyse when it El Moujaddidi, N. 2016). comes to analyzing the Morocco-EU Morocco’s most advanced relations, and so for the following project of decentralization was reasons: first, and considering that conceived, unlike many other the advanced regionalization is a autonomy and regionalization very “local” project, analyzing the projects worldwide, based on EU’s involvement could potentially economic growth, competitivity help in the understanding of the increase and diminishing extent of its general conditionality inequalities, rather than on in the case of Morocco. The “regional identity” (Bergh, I. S. second reason for which advanced 2016 p. 11.). This means that the regionalization demonstrates once need for decentralization had for an again the limits of the EU-Morocco initial motive the need for solving relations (and mainly the limits of the inequalities that were caused the EU’s policy promotion as well as by the centralized set up in order general influence on policy making to improve the quality of life of the in Morocco) is the sensitivity of

31 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the advanced regionalization and do have a link to governance but its connection to the kingdom’s that are of a technical nature, like sovereignty (Bergh, I. S. 2016). twinning projects18, since “local Finally, the third element which can governance is a sensitive topic if be used in the same sense is the set it is not presented as a technical of internal issues that are inherent exercise” (Bergh, I. S. 2016). This to the Moroccan set up and which technical support, which can be can’t be addressed by mean of the noticed for example through the EU’s intervention. “Hakama”19 project, is adopted for Regarding the EU’s the mere reason that it is, as Lavenex conditionality, and as it has been and Schimmelfennig put it while demonstrated in the past in many referring to the EU’s democracy works done on Europeanization promotion in its neighbourhood, beyond Europe (see “less overtly political” (Lavenex, S. Schimmelfennig and Lavenex’s – Schimmelfenning, F. 2011). works on the EU’s conditionality But is the EU’s support in its southern neighbourhood), in the success of the advanced the advanced regionalization is regionalization necessary? It is not an exception in the sense that important to note that, in addition the EU’s conditionality when to the fact that the EU is Morocco’s it comes to Morocco’s ultimate biggest economic partner, the decentralization project is rather two parties are engaged in a weak. Here we can combine all “regulatory convergence” process. three reasons (conditionality, The process in question consists sovereignty and Morocco’s internal of the harmonization of rules matters) in order to explain why the and regulations between the two EU’s input is limited. entities (and needless to say that According to Sylvia Bergh more adaptation is to be done from (Bergh, I. S. 2016 p. 11.), the EU has the Moroccan side than from the not supported Morocco’s process EU one due to the difference of the of decentralization/ regionalization, sizes of the two economies), and apart from its funding of the previously mentioned studies and 18 Twinning projects consist of training other study visits, and so in order to the Moroccan Elite in order to avoid interfering with a sovereignty achieve the planned gradual à la carte implementation of the EU’s linked matter. In the same article, Acquis Communautaire through Bergh demonstrates that the EU administrative reforms. chooses to engage in activities that 19 Hakama: from Arabic, meaning “governance”.

32 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ so in order to allow for a smoother aforementioned elements allow integration of Morocco into the of a better understanding of the EU’s common market. In addition changes that shaped the Morocco- to this, Morocco and the EU are EU relations. According to Sylvia currently negotiating the conclusion Bergh, the changes that characterize of a Deep and Comprehensive Free the current relations are mainly due Trade Agreement (DCFTA), which to Morocco’s decreased dependence is ought to take the economic links on the EU (Bergh, I. S. 2016). between the two parties even further. These elements attest indeed of the I.2.5. Conclusion strength of the relations between Morocco and the EU, but it is The advanced regionalization important to note here that some of is a complex, multi-level process the processes involved (including that will take more time in order to the regulatory convergence) have fully reshape the institutional body been through a rough patch in the of Morocco. It can be defined as an recent years, since Morocco and the extension of the “nationalization” EU faced a series of issues related process of the Moroccan mainly to the Sahara question. The administration which followed most significant one of these issues the country’s independence, with followed the general court of the EU the main goal of detaching from making a series of rulings excluding the institutional legacy of the the Sahara from Morocco’s national French protectorate, which has territory, which meant the exclusion left a strongly centralized set-up, of the Sahara region from the resulting in the concentration of agriculture and fisheries agreement the country’s administrations in the concluded between the Kingdom capital. and the EU. This incident resulted As for assessing the in the suspension of political advancement of the reform, the dialogue between the two parties20. advanced regionalization has These issues were later unblocked, been progressing steadily (for and the dialogue resumed21. The example, 11 out of 12 Programs of regional development (PDR)22 were 20 See Special Report 09/2019: EU support to Morocco - Limited results [so far] together with the Parliament agreed to include the Commission’s replies https://www.eca. Sahara territory in the ENP, see http:// europa.eu/lists/ecadocuments/sr19_09/ www.senat.fr/ga/ga155/ga15512.html sr_morocco_en.pdf 22 In French: Programmes de 21 In March 2019, the European développement régional.

33 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ validated, and two Regional land remains important. This particular use plans (SRAT)23 were adopted). aspect can be further addressed in Regarding the current phase of future studies. the reform, an acceleration of the While 2020 is presented as a processes is expected, and it includes promising year for taking advanced as a main goal the implementation regionalization to the next level, of the National Charter for it is important to keep in mind the Administrative Deconcentration24 possible challenges that accompany (Nhaili, S. 2019). the upcoming legislative, regional While being inspired of other and municipal elections in 2021. regionalization experiences, the The question remains open for more input of the external actors is, as research on the development of the it was demonstrated through the complex reform that is advanced example of the EU, limited to the regionalization. technical support in the case of Morocco. This limit does not discard Acknowledgement the fact that the EU’s support of Morocco on the international level This publication was completed in the framework 23 Schémas Régionaux d’Aménagement du Territoire of CUB’s EFOP-3.6.3- 24 Charte Nationale de Déconcentration VEKOP-16-2017-00007 project. Administrative

I.2.6. References

Ait Akdim, Y. 2017: Document inédit : tout savoir sur la régionalisation avancée. – https://telquel.ma/2017/11/24/regionalisation-expliquee- aux-nuls_1570257 – 2020. 06. 09. Bergh, I. S. 2016: “Public sector governance reforms and ‘advanced regionalization’ in Morocco: What role for the European Union?” European University Institute, Robert Schuman Centre for Advanced Studies, BORDERLANDS Project Berriane, M. 2015: Dynamiques des territoires et politiques publiques: territoiresfonctionnels et territoires officiels. – In: Dupret, B. – Rhani, Z. – Boutaleb, A. – Ferrié, J.-N.: Le Maroc au présent: d’une époque à l’autre, unesociété au présent. – Dialogue des deux rives. – Casablanca: Fondation du Roi Abdel-Aziz, pp. 31–60. Goeury, D. – Slassi, L. – Benmoumen, Y. 2017: Qui gouverne les régions

34 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ au Maroc? – In: Tafra (ed.): La responsabilité des élus dans le cadre de la régionalisation avancée. – Chapter: 4. – Tafra, pp.28–53. Jafari, M. – El Moujaddidi, N. 2016: La régionalisation avancée au Maroc: Perspectives et défis. Advanced regionalization in Morocco: Prospects and Challenges. – Revue Organisation et Territoire 2. Lacroix, Th. 2018: Migration marocaine, régionalisation avancée et développement local. – In: Berriane, M. (coord.): Marocains de l’Extérieur 2017. – Rabat: Fondation Hassan II Lavenex, S. – Schimmelfenning, F. 2011: EU democracy promotion in the neighbourhood: from leverage to governance? – Democratization, 18. (4.): pp. 885–909. DOI: 10.1080/13510347.2011.584730 Lugan, B. 2011: Histoire du Maroc: Des origines à nos jours. – Paris: Ellipses Nhaili, S. 2019: Régionalisation avancée: retour sur un chantier stratégique. – https://www.medias24.com/regionalisation-avancee-retour-sur- un-chantier-strategique-3805.html – 2020. 06. 09.

35 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

36 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ I.3. Libyan nationhood and regionalism: tribal society in a modern era

Bálint Kása25

Abstract

This paper’s main focus is to explore underlying social hardships and focal points within the Libyan society with the purpose of proving their value to foreign actors’ mostly covert operations in the ongoing civil war. 20th century developments will receive prime attention due to the great scale of influence they have had on the current structure, operation and affairs. Throughout the argumentations, the paper will rely on a set of qualitative sources that are going to facilitate identifying the essential factors behind lack of order and hence stability. Consequently, the predominantly domestic nature of the persisting opposition is a central thought of this work. Expected findings include weak sense of nationhood, dominance of regional linkages over a single national bond, as well as sense of suppression fostered by dispersed and insufficient scale of modernity.

Keywords: Libya, tribalism, Qadhafi, civil war, proxy war

25 PhD student – CUB IR Doctoral School, [email protected]

I.3.1. Introduction also allow better estimation of crisis management and eventual It seems to be a characteristic remedies. It is not the purpose of of our age that when it comes to this paper to explore the missed crisis analysis and even crisis- opportunities stemming from this management, the symptoms of the overly-narrowed approach that is given problem are addressed, while ultimately leading up to multiple the roots of it remain untouched junctions of conflicts around or even neglected. Comprehensive the globe. Still, choosing one of analyses do not always receive the today’s major conflicts with direct necessary attention, sometimes and significant influence on foreign even in relation to major issues powers’ interests and conducting a with global relevance. Instead, deep investigation with the above- single narratives are preferred mentioned approach might take (Harchaoui, J. 2018). It is a pity one closer to the fundamental inasmuch as a deep and parallel understanding of the chaos itself. In investigation of those would light of these, Libya’s case will be

37 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ discussed throughout the following other. pages with the intention to identify With the commencement of those historic milestones within the the Arab Spring 1.0, a region-wide society that have led up to today’s transformation and subsequent opposition and lack of order as conflicts (commenced), some of well as stability. Many of these these lack sight of an end even from milestones can be traced back to the a decade’s perspective. Libya is a bipolar era (Haddad, S. 2014) and fitting instance for the reason that so by addressing them, one might the resolution today seems further gain a better understanding on their than five years ago. More and significance. Importantly, the goal more signs are out there proving of this paper is not to highlight the the existence of a proxy war in solution of the Libyan conflict at the country (Groh, T. L. 2019), all costs, for it would most likely where foreign countries justify or result in an over-simplification of a deny their involvement alongside sophisticated case with inaccurate their own agenda. The anarchy is and counterproductive assentation. complete and palpable. But this Instead, those factors are to be was not always the case. Even alleged that radiate the core issues during the ten-year time frame, throughout the multiple layers of foreign presence – and especially society, ultimately leading up to the opposition inside it – was not on the seemingly unresolvable chaos a constant intensity. Precisely, one with no visible light at the end might argue that after the removal of the tunnel. Unfortunately, this of the notorious dictator Qadhafi, is a matter significantly under- it was exceedingly marginal. The researched and under-discussed – subsequent change and trend of underdiscussed these years as the intensifying occurred around after resolution agendas predominantly the time of the outbreak of the include different methodologies Crimea and East-Ukraine crisis, as applied by foreign nations: well as the heated-up international humanitarian, financial, military, environment around the Syria civil- material, etc. aid (Dessi, A. – war. It would be a proper statement Greco, E. 2018). This paper offers to call these three the most important a Libyan perspective on the root junctures of our current time. Still, designated to present a universal arguably the Libyan conflict is background on the multiple grips the blurriest out of the three when that are being used to manipulate it comes to state and non-state domestic stakeholders against each actors’ involvement. Importantly,

38 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the first hypothesis of this paper a significant investment that never is going to argue that Libya’s had equal return but imperialist vulnerability to these actions roots motivations were prevailing, within its social structure that is contributing to a great deal of social up to date based on tribalism. In marginalization (Wright, J. 1982). itself, this would not constitute a Indeed, a sharp separation among problem – in fact many countries Arab and Berber tribes of Cyrenaica share this characteristic – but as a (East) and Tripolitania (West) was result of decades-old grievances present and developments were among these groups, they are more focused on the latter (Morris, K. prone to instigation. In order to 2010). After the Second World War, understand why the application of Libya became independent from such intricate strategies may be Italian colonial reign and in 1951, advantageous, the relevant period by establishing the United Kingdom of the country’s history must be of Libya, a new era began with the understood: the 20th century. The rule of King Idris, the first and only second hypothesis will argue that monarch of the country. A new the Libyan society went through its territory, Fezzan (Southwest) also biggest development phase during became part of the state resulting the bipolar era, which is also the in the birth of geographic borders source of underlying tension and existing still today. Nevertheless, sense of oppression. Finally, the last this also included the addition of hypothesis will prove that the sense multiple more Tuareg and Toubou of nationhood in Libya is still weak tribes to Libya. This has led up to and local patriotism outweighs it. two significant implications. Firstly, homogeneity was further decreased; I.3.2. From colonialism to the only common feature among coup d’état the various tribes was of territorial nature. Secondly – and from the At the beginning of the perspective of the future more 20th century, the relationship importantly –, this was not a fought between Libya and its new colonial out secession, the country was master, Italy was characterized abandoned and left to its own rule by challenges since Rome started purely because no better solution to destroy local communities’ was laid down. For the fact that means of income by preparing to this was a freedom reached without transform the infrastructure for sacrificed blood and stress, it might incoming Italian settlers. This was seem an enviable case. However,

39 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the lack of unified standup against by Standard Oil of New Jersey. an oppressor also represented the Up until the discovery, Libya’s lack of common ideology, cause importance exclusively relied on and national movement. Examining a strategic ground that had classic today’s liberal democracies, the Cold War – predominantly realist significance of these in relation thought – motivated relevance to their own development is for both West and East. Precisely, unquestionable. The task for Libya its geographic location qualified was not smaller than attempting it an essential part of strategies to forge fundamentally different of containment, defense and in tribes into an alliance that would general, influence. However, the contribute to a functioning state. new explorations elevated the role King Idris’s dedication to live of Libya as both the quality and up to this challenge was debated quantity of the country’s newly (Blackwell, S. 2003) but it was found commodity transformed not his personality that blocked regional and global markets (St social, economic or any other sort John, R. B. 2011) at a record pace of development aimed at state and opened a new chapter in the building. Libya was an exceedingly history of the whole oil industry poor country hit by regular droughts (Yergin, D. 1991). The explorations and locust plagues, there was no and subsequent upstream activities significant source of income to fundamentally changed the rely on. The room for movement country’s labor structure too, oil- was extremely narrow. At the industry became prominent. The same time, there existed a lack coming years of the 60s brought an of desire towards a modern state, intense US pressure to lure Libya to which formulated during the Italian the West through trade unions and colonial period (Vandewalle, D. labor policies within the oil sector 2012). A conservative attitude was due to their high influence over state-wide practiced and there was society. Precisely, anti-communist no intention to make an approach trade unions received support from towards Western values and state- Washington in an attempt to counter characteristics. the spread of groups deemed as Nevertheless, foreign actors’ radical (Bini, E. 2012). The US approach soon became hard to government’s intent was to prevent oppose. Overt American interests the establishment of strong trade significantly increased in 1959, unions in order to avoid strikes and when a huge oil field was discovered to ensure the steady improvement

40 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ of Libya to become one of the top domestically. The three territories oil-producing countries. At the possessed greater autonomy same time, the development of than the central government and Libyan life conditions was crucial they were immensely different. in order to oppose Communist Tripolitania was the closest to influence’s spreading. Economy- the attributes of modern state boosting steps followed with the with its denser, more educated Eisenhower-doctrine being the and experienced population, most comprehensive, and the oil- while Fezzan was the other end sector-transforming actions being of the scale. In this environment, the most debated ones. The Soviet American and British oil companies Union also provided economic continuously raised their presence help, especially at the coastal – in the country, requiring the import and mostly inhabited – parts of of skilled labor as the country was the country and opened its own not ready for this scale of demand. Embassy in Tripoli, which had However, the Libyan government strategic relevance (St John, R. B. also took measures to ‘Libyanize’ 1983). Shortly after the opening of workforce aiming to preserve this Soviet Embassy, small groups national sovereignty (Bini, E. 2019). constituting of Egyptian nationals Still, it aligned with American started attempts to influence society interests in repressing trade unions from bottom levels, including sympathizing with communist schools, small shops, markets, ideals. This has brought about the etc. with communist ideology (US dominance of corporations and the Embassy in Tripoli 1957). The total exploitation of workers in the bipolar game of chess was on in the subsequent period. It was also an Libyan society. opportunity for those, who sensed The federal state of Libya the vulnerability of the monarch. had an evolving issue: corruption And so, somewhat ironically, circulating around oil trade. With it ultimately contributed to the abundance of demand from the outbreak of the Six Day War, from Mediterranean Sea and no other which Qadhafi emerged to be the source of income, many tried to leader of the country. get rich through such deals in an environment far from decent. It I.3.3. Decades of ‘revolution’ was a single but important indicator of the incapability of the central In 1969, the Muammar authority to effectively govern Qadhafi-led Revolutionary

41 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Command Council (RCC) government held a total control over overthrew King Idris and began his the planned economy (Vandewalle, 42-year-long reign as the leader of D. 1998). The Jamahiriya did not Libya. The aspects of this revolution uphold a significant central army, were similar to the one executed in military power comprised regional Egypt by Gamal Abdel Nasser and militias (Anderson, L. 1986) that the newly established socialist party were all deployed in case of war. was immensely comparable to that On the other hand, an exceedingly of its Eastern neighbor’s. Until the wide-range of network of domestic introduction of the Jamahiriya, intelligence was maintained to the state of masses in 1977, this ensure nothing was missed (Aikins, single party-state was in place, M. 2012). The strong grip of state where debates and discussions was only eased by the end of occurred within the boundaries of the 80s. It was necessary, due to the Libyan Arab Socialist Union the combination of sharp fall of (ASU). The power of tribes started oil prices, unsuccessful military to decrease simultaneously with the conformation with Chad, inability to strengthening of central authority. supply the population appropriately The state of masses effectively but mostly due to a changing steered the country through the international environment. Libya “revolution” that achieved a central opened up to the world at the dawn motive in the everyday operations of the new century and a sort of (Mundy, J. 2018). Assets were liberalization commenced, only it taken and redistributed on a great was too late. scale and the number of workers’ Qadhafi’s actions in domestic associations was on a steady politics are best described as increase. The greatest sign of balancing (Ogun, M. N. et al. 2020) unpredictability was the lack of among the various tribes. Coming constitution and hence any legal from a small one of these that had baseline. Over 400 Congresses no vital debate with the others, he operated at municipality level effectively managed to maintain dealing with local issues while stability and control at the wheel national matters were meant to be (implemented Sharia law, built up handled in the General People’s an extensive surveillance web and Congress. However, the insufficient became domestically untouchable). attendance truly represented the As he was receiving the support of stage of democracy (Mattes, the Qadhafi, Maqariha and Warfalla H. 2008). The strong central tribes, he had comprehensive

42 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ influence over the military, I.3.4. The Gordian knot: police and surveillance bodies. real expectations for light at Even though public institutions the end existed, those were intentionally weakened (Combaz, E. 2014) and Nowadays, a heavy flow of the power was exercised through criticism is being directed towards these tribes (Smits, R. et al. 2013). Libya, countless researchers and Nevertheless, he was the first leader politicians pronounce it to be a failed of the country who effectively state (Engel, A. 2014). The severity attempted to modernize the state or accuracy of these claims receives and improve life conditions and support or refutation depending on living standards while maintaining subjective views. Notwithstanding, sovereignty and preventing getting a couple of factors should not be indebted to foreign actors. Efforts omitted from such debates. What on nationalization of the oil sector we call Libya today has gone composed a part of this strategy. through its biggest development Still, it was never an intention over the course of the past hundred to reach a workforce of Libyan years and has arguably reached its nationals above 70 percent within current stage at a faster pace than this sector due to the unavailability the average. The tribal society, of sufficient skilled labor in the which previously maintained a country. As a result of massive conservative attitude found itself oil incomes, GDP per capita was at the core of an extensively around a steady 6500 USD by the nationalized labor environment 1990s, which was multiple times under an administration that higher than that of Syria, Morocco, commenced to lay a previously Egypt, Jordan, Algeria, Tunis or unexpected magnitude of effort Lebanon (WorldBank 2019). On into organizing every aspect of life. the other hand, regional differences Paradoxically, this four decades did – most notably between Tripolitania increase attributes of nationhood and Cyrenaica – strengthened over within the borders. Obviously, the the decades leading up to tensions “failure” to avoid tribal oppositions on the Tripoli-Benghazi axis. have led to the massive unrest, which receives greater visibility today. Still, historic experience tells us that the great territorial size, scarcity of peoples and diversity of tribes (Kaplan, S. 2019) would

43 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ have required a lengthier timeframe new winners and losers. Thus, the to reach a thorough sense of national biggest criticisms against the GNA unity. – the inability to ever have been Furthermore, the lack of able to take control and to survive experience with democratic without tangible international institutions and political support – were actually triggered participation presented various by the UN itself. obstacles (Szmolka, I. 2014) in Another structural the UN-created Government of disturbance this seems to have aided National Accord (GNA). This vast is the strengthening of local identity ‘institutional vacuum’ rooted in at the detriment of tribal influence. influential tribes’ elevated role in The strongest support of this state matters (Munoz, G. M. 2014) argument is the battle for Tripoli, during the Qadhafi era but once which was preceded by a relatively this sort of ‘balancing’ ceased to fast march of the Libyan National exist, domestic politics became Army (LNA) deploying local anarchic for the first time. The tribes (Lacher, W. 2019) supported structure of society was broken by by various foreign groups. The the betrayal of the political elite stalemate was reached South of the (Bartu, P. 2014) resulting in a capital and a trench war developed further loss of credit and trust but as the territories of four powerful most importantly in an impairment tribes (Lacher, W. 2020) were of a slowly-reached level of reached. The subsequent defection integrity. At the same time, the role from Haftar’s troops and hence the of tribalism remained essential – if need to increase the involvement not even more important – within of outer parties, i.e. the Wagner security and political context. group came as a necessity. Namely, Many signs show that communities it manifested that multiple Eastern today attest a preference of tribal militias prefer their territories’ bonds over national requirements protection over the conquest of (Al-Shadeedi, A.-H. – Ezzedine, N. remote lands, even if those are 2019) as no single entity proves to be in country. In addition, Haftar’s influential enough. Unintentionally, circuitous taking of Benghazi also the UN has contributed to the status fits into this equation for it would quo since the Skhirat Agreement hardly have succeeded without the in 2015 neglected tendencies of support received from Russia, Egypt historic influence among tribes of and France. These raise questions West and East; it brought about on the real influence and capability

44 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ of the Commander of the East. In Cyrenaica but the generated value a greater context, this implies any was not reimbursed with sufficient sense of nationhood secondary developments (Martin, Ph. – at best behind regionalism and Weber, Ch. 2012). Instead, this local patriotism. On the other region accommodated the country’s hand, it should be noted that both poorest living standards and state Tripolitania and Cyrenaica have of infrastructure (El-Kikhia, O. firmly denied the possibility of M. 2013). This was the heritage splitting up the country (Hüsken, from being the No. 1 oil producing Th. 2013), which does signal the region in Africa for four decades. presence of some national bonding. Qadhafi’s stubbornness during Still, fundamental differences in the bipolar era could be balanced political orientation (Jalu, A. T. through the available channels 2017), radical views (Varvelli, but changes in world politics and A. 2013) and the presence of economics left the dictator without insurgencies and terrorist groups the room for movement he was used (Pusztai, W. 2014) will most likely to. Henceforth, he was not anymore hinder any meaningful development able to balance these underlying for the foreseeable future. tensions out, they only needed a Arguably the most important spark to come to the fore. constituents of the outbreak of the It seems obvious from the first Civil War were the sense of above pages that the Libyan society unjust, oppression, as well as lack is at a decisive crossroads. But the of sufficient representation among outcome of the Second Civil War territories. Nothing could exemplify is not purely a national matter. As this better than the fact that Qadhafi opposed to the first one, it entails first lost support in Benghazi. In an increasing number of foreign the capital of Cyrenaica and most actors in the form of proxies that urban-developed city – alongside participate due to geopolitical, Tripoli –, a deeply-rooted sense of economic and security reasons. abuse was perceivable as riots broke The problem is that these actors out. Tripoli was perceived to have are competing each other alongside been prioritized over the decades their own interests thus continuing amid of obvious differences in to fuel the flame of conflict. Most economic capacities. By the first notable instances include the decade of the new millennia, France – Italy and Russia – Turkey approximately 70 percent of dimensions but there are many Libya’s oil incomes originated in more. The core of this issue is that

45 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ this exceedingly high number of within today’s Libyan society that foreign participants are able to build have evolved and strengthened on the divided Libyan society. The during the Cold War. Unequal manifold tensions and oppositions return from invested labor and articulated above all serve the representation – among others – opportunity for these actors to have led to heightened tensions get involved. Purchasing oil from and eventually to riots against the the Civil War-torn country and regime. This conflict erupted with so financing military operations, significant European and NATO deploying UAVs to neutralize involvement but the aftermath hostile groups endangering brought about a predominantly operations of domestic militias, Libyan-paved path under the UN- providing training, weapons and created government. This entity other supply all constitute their overruled some decades-old toolset and they have immensely unwritten concepts functioning been part of past years’ happenings. within the society, contributing to Most importantly, they do not further fragmentation. The inability foster settlement among the parties of the international community- as (1) those are trying to get the recognized GNA to preserve its most favorable deal, which would power and the simultaneous build- guarantee them the desired rights, up of General Haftar by foreign or (2) they are welcoming the actors have together induced the financial attributes of the status subsequent fierce fights. As a result quo too much to be interested of significant social vulnerability, in stability. As a result, all the an extensive number of foreign foreign-mediated permanent truce powers could initiate building negotiations fail to achieve their up their proxies to take benefit articulated purpose. Any positive and influence the outcome of the advancement towards order stands struggle for political power in on vulnerable ground due to the Libya to their advantage. Hence, presence of the numerous points the conflict became even more of influence of patrons operating complex. The results of the proxies in the current conflict. investigation presented a weak but existing sense of nationhood, I.3.5. Conclusion which is preceded by regionalist motives deriving from systematic This work has explored inequalities inherited from the motives governing social issues Qadhafi-era and exploited by

46 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ various actors at the present time.

I.3.6. References

Aikins, M. 2012: Jamming Tripoli: Inside Gaddafi’s secret surveillance network. Huffington Post Al-Shadeedi, A.-H. – Ezzedine, N. 2019: Libyan tribes in the shadows of war and peace. Clingendael Anderson, L. 1986: The state and social transformation in Tunisia and Libya, 1830-1980. Princeton University Press Bartu, P. 2014: Libya’s political transition: the challenges of mediation. International Peace Institute, 2014. Bini, E. 2012: Oil workers, trade unions and the emergence of oil nationalism in Libya, 1956-1969. EUI MWP, 2012/27. Bini, E. 2019: From colony to oil producer: US oil companies and the reshaping of labor relations in Libya during the Cold War. Labor History 60. (1.): pp 44-56. Blackwell, S. 2003: Saving the King: Anglo-American strategy and British counter-subversion operations in Libya, 1953-59. Middle Eastern Studies, vol. 39. no. 1, 2003, pp. 1-18. JSTOR. Combaz, E. 2014: Political economy of Libya after the Qaddhafi regime. GSDRC, 2014. Dessi, A. – Greco, E. 2018: Search for stability in Libya: OSCE’s role between internal obstacles and external challenges. – Rome: IAI Research Studies El-Kikhia, O. M. 2013: Libya: The seeding of a new democracy. – Barcelona: European Institute of the Mediterranean ISSN: 1698- 3068. Engel, A. 2014: Libya as a failed state: causes, consequences, options. The Washington Institute for Near East Policy, 2014. Groh, T. L. 2019: Proxy War: The least bad option Haddad, S. 2014: The dangerous impasses of the Libyan transition. – Barcelona: European Institute of the Mediterranean ISSN: 1698- 3068. Harchaoui, J. 2018: Haftar’s ailing narrative. Carnegie Endowment for International Peace Hüsken, Th. 2013: Tribes, revolution, and political culture in the Cyrenaica region of Libya. – In: Bouziane, M. – Harders, C. – Hoffmann,

47 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ A. (eds): Local Politics and Contemporary Transformations in the Arab World. Governance and Limited Statehood Series. Palgrave Macmillan, London. Jalu, A. T. 2017: Libya: relapse in to crisis after Muammar Gaddafi (since 2011). International Journal of Political Science, Law and International Relations. Dire Dawa University, Ethiopia. ISSN: 2278-8832. Kaplan, S. 2019: Understanding Libya: the role of ethnic and tribal groups in any political settlement. Fragile States Lacher, W. 2019: Libya’s conflicts enter a dangerous new phase. Stiftung Wissenschaft und Politik Lacher, W. 2020: Libya’s fragmentation: structure and process in violent conflict. I. B. Tauris Martin, Ph. – Weber, Ch. 2012: Ethnic conflict in Libya: Toubou. The Norman Paterson School of International Affairs. Carleton University, Canada Mattes, H. 2008: Formal and informal authority in Libya since 1969. – In: Vandewalle, D. (eds) Libya since 1969. Palgrave Macmillan, New York Morris, K. 2010: The Arab Spring: the rise of human security and the fall of dictatorship, Internet Journal of Criminology Mundy, J. 2018: Libya. Polity Munoz, G. M. 2014: Taking stock of the Arab post-revolutionary period: elections, parties and public opinion. – Barcelona: European Institute of the Mediterranean ISSN: 1698-3068. Ogun, M. N. – Yurtsever, S. – Said, A. 2020: Libya’s past, present, and vision of the future. Cambridge Scholars Publishing. Newcastle, UK Pusztai, W. 2014: Libya: a country on the brink. Root causes of the current situation and possible solutions. Italian Institute for international political studies, 2014. Smits, R. – El-Kamouni-Janssen, F. – Briscoe, I. 2013: Revolution and its discontents: state, factions and violence in the new Libya. Clingendael St John, R. B. 1983: The Soviet penetration of Libya. – The World Today 38. (4.): pp. 131–138. St John, R. B. 2011: Libya: continuity and change (The contemporary Middle East). Routledge Szmolka, I. 2014: Theoretical framework and types of processes of

48 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ political change in Arab regimes. – Barcelona: European Institute of the Mediterranean ISSN: 1698-3068. US Embassy in Tripoli 1957: Proposed overseas internal security program for Libya. – Dwight D. Eisenhower Presidential Library. – Office of the Special Assistant for National Security Affairs – 1952–1961. – National Security Council Series – Briefing Notes – Box 12. Vandewalle, D. 1998: Libya since independence: oil and state building. London: Cornell University Press Vandewalle, D. 2012: A History of Modern Libya. Cambridge University Press Varvelli, A. 2013: The role of tribal dynamics in the Libyan future. Italian Institute for international political studies WorldBank 2019: Libya Wright, J. 1982: Libya: A modern History Yergin, D. 1991: The prize: the epic quest for oil, money & power. New York: Simon & Schuster, 1991.

49 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

50 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

II. Current Challenges of Sustainability

51 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

52 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ II.1. Interagency cooperation of UN agencies within the framework of SDGs

Bora Besgül26

Abstract

This paper aims to draw an accurate picture of the interagency cooperation of United Nations (UN) agencies within the framework of the newly established Sustainable Development Goals (SDGs). In order to understand how and to what extent different agents in the UN system cooperate, the research project applies semi-structured interviews with UN officials as the primary data collection method. Expert interviews have been selected within UNIDO, UNDP, UNODC, and WHO, taking into account that these agencies have strong cooperation due to the nature of their assigned tasks. Although UN funds and programmes are overall highly diverse, this research focuses only on the cooperation within the UNIDO-UNDP and UNODC-WHO partnerships and seeks to conduct a cooperation analysis that can be applied easily to other complex institutions within the UN system. The author also investigates to what extent the inter-agency cooperation has changed after the adoption of the SDGs and what are the virtues and shortcomings of the inter-agency cooperation as things stand. Overall, cooperation problems, horizontal governance, a lack of joint programming, and the absence of a decent communication channel hinder attaining a strengthened partnership between the agencies.

Keywords: United Nations, agencies, cooperation, Sustainable Development Goals

26 PhD Candidate – CUB IR Doctoral School, [email protected]

II.1.1. Introduction been strengthened, a problem which seems to have led to less efficient A crucial development service delivery. Nevertheless, in terms of UN interagency the adoption of the 2030 Agenda cooperation was the adoption of and its Sustainable Development the Millennium Declaration and its Goals (SDGs) in September 2015 Millennium Development Goals appeared to be the cutting edge of (MDGs) (Le Blanc, D. 2014). the United Nations system. The Although it can be claimed that United Nations agencies have these goals have been successful on aligned themselves with specific a large scale, it is hard to maintain goals which are cross-cutting, that the interagency cooperation has allowing for greater cooperation

53 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ among different agencies and their research by focusing only on ensuring effective implementation specific agencies. Agencies were in order to resolve one of the selected on the basis of the fields foremost criticisms the UN received they operate in common, and of in the time of MDGs (namely, that their links to another UN organ. UN activities were not unified The data collection process due to duplication of tasks and was conducted with semi-structured miscommunication) (Klingebiel, S. interviews with UN officials 1998). This research starts with the of certain agencies as United questions: How has inter-agency Nations Industrial Development cooperation changed after the Organization (UNIDO), United adoption of the SDGs? Plus: What Nations Development Programme are the virtues and shortcomings of (UNDP), United Nations Office on inter-agency cooperation now? Drugs and Crime (UNODC), and In order to answer these World Health Organisation (WHO). questions, the author has had to Moreover, the preliminary research investigate existent cooperations has revealed that no previous among UN agencies. However, research has been done in terms concentrating on every partnership of inter-agency cooperation in the in the UN system would make the time of SDGs. Even though SDG research very broad and hardly 17 aims to increase partnership for possible due to the high number the goals, it barely emphasises the of joint projects among agencies importance of the UN agencies’ as well as time and budget interagency cooperation. Finally, constraints. The activities of the because there is a practical UN funds and programmes are application for the future activities highly diverse (Barkin, J. 2015). of the UN, and there is an evidence- Some institutions have a sectoral based gap concerning interagency orientation (e.g. nutrition), others cooperation within the UN system, a target-group-specific one (e.g. researching this topic appears to be children). Meanwhile, the most both relevant and timely. To this extensive UN program, UNDP end, the paper aims to address this (United Nations Development evidence-based gap and to attract Programme), has no fixed focus but subsequent analysts into the topic. nevertheless plays a crucial role in Even though some documents coordinating the UN’s development point out the problem of inter-agency activities. Therefore, the author has cooperation in the UN system had to narrow down the scope of (Sixty-ninth General Assembly

54 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Thematic Debate United Nations there had been a proliferation of UN 2015), the existing literature puts its development-cooperation agencies, emphasis more on the possibilities entailing fragmentation of tasks of strengthening cooperation of UN as well as overlapping functions with the regional and sub-regional and duplicated work, inadequate organisations in the field S ( ilva, quality and insufficient cost M. L. 2003) and overlooks the awareness (Klingebiel, S. 1998). importance of cooperation among Further relevant research was UN agencies to reach desired done by Steffan Bauer and Frank targets. As emphasised earlier, Goal Biermann (Bauer, S. – Biermann, 17 itself also barely draws attention F. 2004). This study analyses to the UN agencies’ cooperation the progress of cooperation and with only some partial exceptions: collaboration between UNDP and “In order to gain access to science, the United Nations Environment technology, and innovation and Programme (UNEP), with a view enhance knowledge sharing on to the integration of their respective mutually agreed terms, improved policy objectives within the coordination among existing overall framework of Sustainable mechanisms, in particular at the Development (SD) in particular. The United Nations level, should be paper also indicates that the policy enhanced,” “Global macroeconomic integration for SDGs between stability, including through policy this cooperation is somewhat coordination and policy coherence, problematic due to administrative enhances policy coherence for pathologies. Additionally, it points sustainable development. (UNDP out that the structural imbalance Goal 17 Targets 2018). between environmental and development institutions obstructs Stephan Kliengebiel made policy integration on the ground. A the following claim about UN cohesive approach that recognises cooperation: some substantive how the SDGs are interlinked is profiles of some agencies were required (UNODC Guidance Note unclear – notably, UNDP’s 2018). Finally, after resolution A/72. functions; there was inadequate L52 of the General Assembly, UN political control and coordination Deputy Secretary-General Amina within the UN; there was Mohammed claims that there is insufficient coordination between strong evidence that the cooperation the UN and the specialized UN among the UN Agencies has so far agencies and, last but not least, been a cacophony whereas today

55 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ we have an opportunity to make a on cooperation and their targets, symphony for the SDGs, which can so they can also increase inter- make a real difference to the UN on agency cooperation. In this regard, the ground (UN News 2018). this paper suggests; “Paradigm In this respect, the Digital change in the paradigm change” by Era Governance (DEG) concept proposing that the new paradigm, can make a particular difference in cooperation with SDGs, fits in the context of the UN system; well with the new understanding reverse agentification and of public administration with the disruption, joined-up governance, concept of DEG, since it highlights a horizontal approach, re- networking, information and planning of back-office functions, knowledge management, the “best network simplification, interactive mixture” and horizontal governance. information-giving and searching, These principles should be used as restructuring on the ground of a means to achieving much needed demand, data warehousing, inter-agency cooperation. agile administrative processes, One of the most significant sustainability, providing electronic characteristics of Government services, utility computing, a new 2.0 – another name for DEG - form of automated processes, is networking, facilitating total channel streaming, and open-book information awareness for all government are some key elements participants in cooperation with and components of DEG which can net-centered governance to make be applied to the UN administration the right decisions and react at short system in order to achieve the notice. Moreover, it determines the increase in service efficiency and design, architecture, and processes effectiveness that the UN craves. of the working organization as a The UN is an platform – the stage of interaction intergovernmental organization for the smart masses (Karvalics, with social, environmental, and L. Z. 2008). The UN system, economic goals. “The work of inevitably, needs a new way the UN can be divided into two of networking which unites all broad categories: promoting the relevant agencies (UNIDO, economic and social development, UNDP, etc.), local institutions, and and enhancing regional and individuals within a single, joint international security” (Moran, T. platform. H. 2009). SDGs bring a change of Significantly, all the paradigm for international policies information and knowledge

56 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ processes must be planned, outcomes (Moran, T. H. 2009). maintained, watched, and, last but SDGs aspire for much-needed not least, measured. More reliable cooperation between UN agencies. and more professional knowledge However, whether UN agencies’ management is a must, since central relations are based on government 2.0 implies a solution for hierarchical (vertical) or horizontal supplementing needed knowledge governance remains an important from a broader community that question. There have been tensions crosses the borders of inter-agency between upper-ranked and lower- cooperation (Karvalics, L. Z. ranked employees over the delivery 2008). Then again, well-planned, of services and meeting the well-maintained, and measured community needs (ibid.). Pollitt information and knowledge and Bouckaert have emphasised management can contribute to the issue with their use of the total information awareness for the term “incompatible statements” agencies, enabling them to reach (Pollitt, C. – Bouckaert, G. 2004). information synchronously from Following the literature more comprehensively constructed review, the research indicates data sets. Importantly, DEG also that there is no quantitative data offers an opportunity to integrate available capable of measuring all knowledge processes of crucial the interagency cooperation of importance and accordingly, helps intergovernmental organizations agencies to achieve better service such as can be seen in the UN system. delivery. The new organisational Therefore, in this study, qualitative order is not based on a command data collection methods inevitably and control or hierarchical structure, came to the fore in order to answer but is more like a flat organisation, the research questions. Hence, which is known as a delayered the paper analyses cooperation (horizontal) organisational between chosen agencies in the structure. UN system by means of semi- The use of the Government structured interviews. The author 2.0 approach to the UN serves as expected to reveal the extent to practical foundation. The approach which UN agencies cooperate is mostly based on horizontal during the implementation of governance, which replaces UN services by conducting semi- hierarchical leadership with structured interviews with internal collaboration, shared responsibility, and external experts of the UN and coordination for decisions and system. The questions were

57 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ prepared under three different possible, as well as to talk to staff headings: introductory questions, members of different ranks in the specific areas of analysis, and agencies. Ultimately, the author concluding questions. The areas considers this study to be more of analysis section features five policy-oriented research rather than different sub-categories, which this causal research. study claims are essential points to be investigated: these are joint II.1.2. Interviews projects, knowledge, coherence, performance, and mainstreaming. The author has conducted On the other hand, this eight expert interviews: one study was limited due to the lack interview in the field of UNODC- of relevant documentation that WHO cooperation, three interviews can be tracked. Although the in UNIDO-UNDP cooperation, and agencies cooperated well with the two external university professors researcher, not all the answers were with a thorough knowledge of documented as files that can be the subjects and who cooperates accessed. Moreover, even though closely with the UNODC. it is possible to find documents on The first interviewees in both joint projects, it is unlikely that associations were chosen based they will help understand the true on the network of the author, who level of cooperation between the continued to select the following agencies. Therefore, it was essential interviewees with the snowball to conduct expert interviews as well method. However, in the field of as interviews with staff members UNODC-WHO cooperation, the who are involved in inter-agency desired number of interviews could communication. This research not be achieved due to very tight particularly emphasised this part schedules of staff members of the of the data collection methods. UN. Consequently, two university However, while the statements of professors from Vienna University experts are well-grounded, they are were chosen to complement the still subject to criticism on account one expert in this cooperation who of various types of unconscious/ had been interviewed before. On conscious bias or subjectivity. In the other hand, a semi-structured order not to fall into the trap of interview process was applied only seeing one side of the story, it because the questions to be asked is essential to talk to people from were predetermined, and the as many different backgrounds as difficulties of setting up another

58 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ interview with those interviewees operational recommendations of had to be taken into account. The the outcome document entitled ‘Our answers are anonymous in this joint commitment to effectively paper due to some of the statements addressing and countering the made by the interviewees in world drug problem’ adopted by the sensitive areas that could bring thirtieth special session of United them administrative problems Nations General Assembly.”27 in their institutions. Therefore, WHO is the directing authority indications such as „Interviewee in the UN system on health 1”, „Interviewee 2”, and so on have issues at the international level been used. The interviews were and is responsible for providing divided into parts comprising a leadership on global health matters. basic introduction to interagency On the other hand, UNODC is the cooperation; knowledge, directive entity for addressing and coherence, performance and countering the world drug problem, mainstreaming; and a conclusion preventing crime and violence, with recommendations regarding and strengthening the Member the chosen agency’s cooperation. States’s justice systems, and it is the convening agency of UNAIDS II.1.3. UNODC – WHO for the response to HIV among Interagency Cooperation people who use drugs. Both of these mandates are complementary Every interviewee stressed in nature and practice, as the the importance of good cooperation. expert from UNODC stated The organizations benefit from (Interviewee 1). On the other hand, cooperation on account of their the cooperation between UNODC systems and similar objectives. and WHO is not necessarily a According to Interviewee 1, the result of the SDGs framework, cooperation of UNODC-WHO according to Interviewees 1, 2, seemed to require an integrated and 4, 7. Despite this, SDGs approach to reach desired outcomes have become an additional since drug issues require both instrument that allows greater health (WHO) and law enforcement cooperation, serves as a means of (UNODC) to approach problems identifying common ground, and together. “The Executive Heads represents an aspect of strategic of UNODC and WHO committed engagement that is both holistic fully to implement within their respective mandates and roles 27 MOU was signed between UNODC and WHO in 2017.

59 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ and comprehensive, according to and treatment contribute to the Interviewee 2. Interviewee 2 stated achievement of SDG5 “Achieve that SDGs make projects even more Gender Equality and Empower All relevant, measurable, and give both Women and Girls,” Target 16.1 of organizations another instrument SDG 16 “Significantly reduce all for cooperation to strengthen forms of violence and related death existing efforts and thereby rates everywhere,” Target 16.2 “End foster both the information and abuse, exploitation, trafficking and knowledge management of DEG all forms of violence against and and overall coherence. According torture of children” and Target 16.4 to Interviewee 3, “All UNODC “By 2030, significantly reduce illicit programs are now tagged to SDGs, financial flows, combat all forms of meaning that all programming has organized crime”. One of the main to take into account the different principles of the UN, according to SDG targets and report on them. Interviewee 2, is to do evidence- UNODC is a custodian to some based programming in order to indicators also related to SDGs 3, get the numbers right. UNODC 5, 10, 11, 15, and 16. Therefore and WHO support networking as the work is mainstreaming to well as information and knowledge contribute to the achievement of management (and the overall these indicators”. knowledge and performance of the Cooperation within the UN) by conducting joint studies framework of SDGs is rather on homicide, which is one of the difficult to analyse, as it always SDG indicators, namely 16.1 intertwines with other SDGs and “Significantly reduce all forms of non-SDG-related matters; due to violence and related death rates their mandates, all the projects everywhere.” On SDG 5, for that UNODC and WHO jointly example, according to Interviewee undertake implement a focus on 2, UNODC has developed a SDGs. For example, according to comprehensive gender strategy Interviewee 2, UNODC-WHO joint agenda – the strategy for gender prevention work on substance/drug equality and the empowerment of use disorder is reflected in SDG women (2018-2021) -which is the 3.5 “Strengthen the prevention first institutional framework on and treatment of substance abuse, gender equality for the UN Office in including narcotic drug abuse Vienna (UNOV) and the UNODC. and harmful use of alcohol.” At The strategy was developed with the same time, drug prevention the recommendation of UN Women,

60 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ which assisted the development of has created a more effective and its terms of reference and reviewed efficient means of communication it. This gender strategy agenda is a to third parties as well. UNODC is clear example both of knowledge now able to get access to ministries management and of ensuring the of health in order to give advice participation of other agencies and provide assistance in scaling up and organizations (even though fundamental prevention, treatment, UN Women is not classified as and care assistance throughout the an epistemic community). The health sector in the Member States. strategy seeks to ensure that gender In contrast, the Health Ministries equality and the empowerment traditionally do not fall under of women are integral parts of all the scope of UNODC but WHO. aspects of the work of UNOV/ Thanks to the cooperation between UNODC in making the world safer UNODC and WHO, today, the from drugs, crime, and terrorism Ministries of Health in the Member and in ensuring the peaceful uses States have evaluated UNODC’s of outer space. Interviewee 5, in incentives and suggestions with turn, mentioned that UNODC and the same procedure as if they WHO have had an MoU since 2017 came from WHO and have which created a joint programme started to organise their health on the prevention of drug use and policies accordingly, especially drug use disorders; the treatment in the matter of drug matters and of drug use disorders; access sexually transmitted diseases. to controlled drugs for medical “This is significant for carrying purposes; new psychoactive out comprehensive programming. substances; prevention, diagnosis, We have reached over 30 countries treatment, care and support for HIV, globally in West Africa, Southeast viral hepatitis and tuberculosis; Asia, Southeast Europe, and Latin prevention of violence and America” (Interviewee 2). At the violence-related deaths; and finally, same time, there are challenges and monitoring drug use and its health obstacles. The main challenges, as and social consequences. UNODC Interviewee 2 mentioned, have been and WHO also conduct studies due to the different organisational on drug use disorders, aiming at structures and cultural differences understanding the root causes, as between the two organisations. well as on homicide. Although the mandates are related, The mainstreaming of the implementation carried out cooperation between UN institutions differently. Interviewee 3 said

61 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ that communication is not entirely II.1.4. UNIDO – UNDP efficient. The goals of the projects, Interagency Cooperation according to the interviewee, are significant, and, in his opinion, All the interviewees there is no decent communication mentioned the importance of channel with constant reporting constant cooperation in order to and information exchange. The achieve beneficial communication interviewee mentioned that very and successful ongoing work on joint often, only one side reports on projects. According to Interviewee progress, and which of the sides is 2, sufficient communication and more proactive usually depends on cooperation among the system are the project and funding (donors). vital to identifying common goals This statement highlights an and learning from each other, which, example of there being room for in turn, result in creating good better information and knowledge practices. At the same time, what management by means of Digital became clear from the interviews Era Governance (DEG) between is that cooperation is instead based UNODC and WHO. According to on joint projects and not directly Interviewee 2, a more structured on SDGs. It is because the projects coordination mechanism would include SDGs and are not created benefit cooperation between both per se because of one particular organisations. Similarly, additional SDG. However, the SDGs are cross- joint programming would further cutting issues in all agencies and increase efficiency and avoid have made cooperation stronger. duplications and donor fatigue. In this sense, interviewees 4 From the interviews, it and 6 state that the works of UNIDO became clear that the current and UNDP tagged to similar targets achievements are not directly a related to poverty reduction, creating result of the SDGs. However, the shared prosperity, advancing SDGs have provided an additional economic competitiveness, mechanism for cooperation and, as environment, and energy in which such, have made joint programming objectives embodied with the SDG more likely. Some of the best 9, which calls to “Build resilient practices include joint studies and infrastructure, promote inclusive comprehensive programming, and sustainable industrialisation including ministries of health and and foster innovation.” • To this law enforcement. end, in 2018, UNDP and UNIDO strengthened their cooperation

62 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ through an inter-agency Agencies. Instead, according to the agreement that combines the core interviewees, it has caused a lot of competencies and specialised internal conflicts and confrontations expertise of UNIDO with the broad since both agencies have a different country-level representation and organizational culture in addition delivery capacity of UNDP. The to being accountable to different operational focus of the agreement organs: UNDP to the General lies in two components: cost- Assembly (which is financed effectively expanding UNIDO field through voluntary rather than coverage through the establishment assessed contributions), UNIDO of UNIDO Desks in UNDP to the ECOSOC (which is funded Country Offices, and developing by both voluntary and assessed joint activities in private sector contributions). For example, while development. As a result, UNIDO UNIDO applies more to the use of Desks have been set up in 16 the tools of Government 2.0, UNDP countries, and UNDP and UNIDO would follow more traditional have developed several joint methods of knowledge sharing. programmes aimed at strengthening Moreover, with regard private sector enterprises and to coherence, information, and institutions in support of national knowledge sharing, Interviewee 5 development goals. said that it is only in a few projects However, the positive that the organizations are working expectation from the interagency together and that the cooperation cooperation agreement framework observed is rather weak. No constant established between UNIDO and communication or reporting is UNDP is just one side of the coin, taking place, but instead, there is a because the cooperation between task that has to be done. According UNIDO and UNDP turned out to Interviewee 4, much of the work to be very difficult due to some that the UN does is, in general, very reasons that were uncovered in interconnected and complementary: this analysis. Interviewees 4 and 6 when the work is coordinated or, mentioned that after the cooperation better still, if it is jointly carried interagency agreement was signed, out, this ensures effectiveness, a few UNIDO staff members were prevents duplications, and is positioned in the offices at UNDP, cost-effective. Consequently, which was supposed to increase the interviewee believes that the the level of communication and organisations should work on a networking of DEG between the better communication strategy.

63 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Interviewee 6 mentioned that the channel based on constant reporting variety of organisational structures and information exchange in the is one of the main differences, observed partnerships; or if there meaning that the communication is reporting, very often only one channels are different in both side reports on progress. It appears horizontal as well as vertical that knowledge management and organization structures, and, mainstreaming is performed well therefore, it is difficult to unify the by UNDP through monitoring and communication flow. Interviewee reporting by providing support 4 said that even though they to governments to integrate work with UNDP, he never meets SDGs. The participation of non- with them, not just because the members is secured in UNDP by communication is weak, but also the executive board and by the because the locations are different, participation of other organisations the headquarters of UNIDO is in in UNODC (UN Women) and Vienna and headquarters of UNDP by an access of UNODC to the is in New York. Finally, although ministries. The performance of the research paper focuses on the UN is also ensured through the cooperation of the agencies programme harmonisation (MoU within the framework of the SDGs, of UNODC and WHO from interviewee 4 pointed out that it is 2017). The mainstreaming of difficult to measure the cooperation the development activities and in terms of the SDGs because the paradigm is also seen in the efficient projects have had a longer lifespan reorganisation of offices (UNDP). than simply since the time the SDGs However, mainstreaming could were adopted until now. still be improved so as to achieve an efficient, more structured II.1.5. Conclusion coordination mechanism between the agencies. After the semi-structured On the other hand, the study interviews with UN experts, the has discovered that the SDGs study has revealed that there is have made the projects more significant coherence in the UNODC relevant and measurable, and have and WHO joint Programme on Drug given both organisations another Dependence Treatment as well as in instrument for cooperation to the activities of UNIDO and UNDP. strengthen existing efforts and However, it also discovered that thereby foster information and there is no decent communication knowledge management and

64 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ improve coherence as a whole. affordances of DEG which could SDGs were also found to be a usefully increase the efficiency and motive to strengthen development effectiveness of service delivery. cooperation across the whole UN The author strongly System and UN Agencies. However, recommends rethinking the the projects in question have a interagency cooperation and longer lifespan than the SDGs, and horizontal governance based on the some preconditions were secured “best mixture”, in the meantime shortly before the adoption of the adopting a new way of networking Agenda 2030, mainly thanks to that includes all the relevant local the resolutions of the UN General institutions and individuals on a Assembly on UN reform and global single electronic platform (so that governance. In other words, some all of the actors - local, regional projects started before the adoption and global - could share their of SDGs and will end after the SDG knowledge quickly and easily). period. Consequently, the author This would create more durable strongly recommends further and more professional knowledge research should be done after the management system, one which ongoing projects have ended. Then would cross the boundaries of the real impact of the SDGs may be interagency cooperation (so as understood more precisely. to ensure broader participation The research also introduces of epistemic communities and DEG into the UN system. It synchronised access to information seems that the solutions of from more extensively created DEG play an essential role in data sets). The author recommends the newly formed social and firstly prioritising horizontal technological environment. Even governance based on shared though some features of DEG responsibility and coordination, (restructuring, sustainability, and secondly encouraging MoUs joined-up governance, networking, and interagency agreements, since and information and knowledge MoUs have played an essential management) have already been role in improving coordination and applied in observed partnerships decreasing duplicated work among of UN Agencies, as revealed by agencies. interviews, there are still some other

65 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ II.1.6. References

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66 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ to the Management of Cooperation. Westport, Preager Publishers. Karvalics, L. Z. 2008: Towards Governing in the Digital Age. Kaul, I. 2013a: Financing progress in the post-2015 era : why we need a Monterrey plus conference. Kaul, I. 2013b: Global public goods: a concept for framing the post-2015 agenda?, Bonn: DIE (Discussion Paper 2/2013) Keohane, R. 2011: Neoliberal institutionalism. Security Studies: A Reader. Klingebiel, S. 1998: United Nations Development Cooperation: Challenges and reforms at the end of the 1990s. German development institute. Deutsches institut für entwicklungspolitik, 1998, (2), 4. ISSN 1434- 8934. Krasner, S. D. 1982: Structural causes and regime consequences: regimes as intervening variables. International Organization. Massachusetts Institute of Technology, 1982, 36(2), 21. ISSN 0020- 8183/82/020/185-21. Krippendorff, K. 2019: Content Analysis. London: Sage. Le Blanc, D. 2014: Issue 4: Towards integration at last? The Sustainable Development Goals as a network of targets. Division for Sustainable Development, UNDESA: Rio+20 working papers. New York City: United Nations, 2014. Martin, L. L. – Simmons, B. A. 1998: Theories and Empirical Studies of International Institutions, International Organization, Autumn. (Martin, L. L. 1998). Mitchell, R. B. – Keilbach, P. M. 2001: Situation structure and institutional design: reciprocity, coercion, and exchange. International Organisation, 55(4). Moran, T. H. 2009: The United Nations and transnational corporations: a review and a perspective. Transnational Corporations, 18(2). Najam, A. – Papa, M. – Taiyab, N. 2007: International Institute for Sustainable Development; Cleveland, C. J. (Topic Editor). 2007. „Global Environmental Governance: Elements of a Reform Agenda.” In: Encyclopedia of Earth. Eds. Cleveland, C. J. (Washington, D.C.: Environmental Information Coalition, National Council for Science and the Environment). Pearson, L. B. 1969: Partners in development: report of the Commission on International Development. London: Pall Mall Press. Pease, K.-K. S. 2008: International Organizations: Perspectives on Governance in the Twenty-First Century, Pearson Prentice Hall.

67 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Pollitt, C. – Bouckaert, G. 2004: Public management reform: A comparative analysis. Oxford University Press, USA. Silva, M. L. 2003: The Human Rights Based Approach to Development Cooperation towards a Common Understanding among UN Agencies. Tight, M. 2017: Understanding case study research: small-scale research with meaning. Sage. Walker, R. S. 2006: The Super Solution to Government Dysfunction The Ripon Forum, August/Sept. Young, C. – Ghoshal, S. 2016: Organization theory and the multinational corporation. Springer Zürn, M. – Faude, B. 2013: On fragmentation, differentiation, and coordination. Global Environmental Politics, 13(3).

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69 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ unov/en/unodc.html About WHO. World Health Organization [online]. [cit. 2018-10-30]. Accessed from: http://www.who.int/about/structure/en/ Structure of UNIDO. UNIDO [online]. [cit. 2018-10-30]. Accessed from: https://www.unido.org/who-we-are/structure UNDP cuts HQ staff, creates new lower-level jobs. DEVEX [online]. [cit. 2018-10-30]. Accessed from: https://www.devex.com/news/undp- cuts-hq-staff-creates-new-lower-level-jobs-83612 Historic New Sustainable Development Agenda Unanimously Adopted by 193 UN Members. Sustainable Development Platform [online]. United Nations [cit. 2018-08-21]: https://sustainabledevelopment. un.org/content/documents/8371Sustainable%20Development%20 Summit_final.pdf The role of the Secretary-General [online]. United Nations [cit. 2018- 08-21]. Accessed from: https://www.un.org/sg/en/content/role- secretary-general United Nations Industrial Development Organization (UNIDO). UNDP [online]. [cit. 2018-12-16]. Accessed from: http://www.undp.org/ content/unct/mongolia/en/home/agencies/united-nations-industrial- development-organization--unido-.html Rules of procedures of the general conference. UNIDO [online]. 1985 [cit. 2018-12-16]. Accessed from: https://www.unido.org/sites/default/ files/2009-11/Rules%20GC-E_0.pdf Sustainable development goals. UNDP [online]. 2018 [cit. 2018-12-16]. Accessed from: http://www.jposc.undp.org/content/undp/en/home/ sustainable-development-goals.html Rules of Procedure of the Executive Board of the United Nations Development Programme, of the United Nations Population Fund and of the United Nations. UNDP [online]. 2011 [cit. 2018-12-16]. Accessed from: http://web.undp.org/execbrd/pdf/9719131e.pdf Partnerships with international development organizations. UNIDO [online]. 2018 [cit. 2018-12-16]. Accessed from: https://www. unido.org/our-focus/cross-cutting-services/partnerships-prosperity/ partnerships-international-development-organizations UNODC-WHO Joint Programme on drug dependence treatment and care. UNODC [online]. 2009 [cit. 2018-10-01]. Accessed from: https://www.unodc.org/documents/drug-treatment/UNODC-WHO- brochure.pdf

70 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ II.2. On the effectiveness of the „greening” component of the EU’s Common Agricultural Policy

Antal Ferenc Kovács28

Abstract

This article addresses the effectiveness of the greening component in the EU’s new, post-2020 Common Agricultural Policy (CAP). Reflecting on the insufficiencies in the environmental performance of the current CAP, the EC regulation proposal for the new CAP places environment and climate goals at high priority, and ‘greening’, in addition to farmers’ income support, is in the centre of the proposed measures. In the new delivery model, Member States shall draw-up their own CAP strategies, aligned with their own, local, specific conditions. In this article it is proposed that CAP ‘greening’ is conceptually a Payments for Environmental Services (PES) program and Member States could reference research findings on PES effectiveness globally in their CAP strategy planning.

Keywords: agri-environmental programs, EU Common Agricultural Policy, greening, Payments for Environmental Services

28 Doctoral candidate, International Relations Multidisciplinary Doctoral School, Corvinus Universtiy of Budapest

II.2.1. Setting the scene The new CAP would be framed in three main objectives: (1) to foster The European Commission’s a smart and resilient agricultural Communication in 2017 set the sector; (2) to bolster environmental conceptual framework for the new, care and climate action to post-2020 Common Agricultural contribute to the environmental Policy of the European Union and climate objectives of the EU (CAP), titled “The Future of Food and (3) to strengthen the socio- and Farming” (EC 2017). Within economic fabric of rural areas. a new EU strategic context, the These objectives were designed new CAP model aims at more using inputs from evaluations on result driven, smarter, modern the performance of the 2014-2020 and sustainable agriculture in the next financial period (ibid. p. 10).

71 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ CAP29. simulation found, ex-ante, that both Conceptionally, the CAP the economic and environmental ‘greening’ mechanism is an impacts of CAP would be minor institution, which is aimed to pursue (Gocht, A. et al. 2017). farmers to choose agricultural Ex-post evaluations found practices and implement efforts CAP successful in the economic to conserve, or improve the state and social cohesion areas, of the environment. For these however, pointed out mixed results practices, direct payments are concerning environmental and granted to farmers, in the current, climate goals (EC 2018b p. 6). reformed CAP, in an amount of Allience Environment (Allience 30% of the member state’s annual Environment 2019) concludes budget (ceiling) for Pillar I30. that biodiversity, alongside other (European Parliament 2013 title environmental objectives, was III), therefore, from the perspective secondary to socio-economic of the overall performance of the concerns (Allience Environment CAP, the effectiveness of these 2019 p. 158). The EC states: payments is of crucial importance. … (CAP) had not always been Matthews envisaged the found sufficiently focused and the failure of CAP greening (Matthews, “greening” measures had not fully A. 2013). That time he concluded realized their intended potential (EC that … (the Commission) wanted 2018c p. 10). …implementation a universal set of measures …to of greening by Member States apply to all farms …avoid giving and farmers could be improved Member States discretion…and to deliver better on its objectives most importantly wanted greening (ibid. p.7). Simoncini and others to be associated with Pillar 1 in a recent paper, to enhance the payments in order to promote mainstreaming of biodiversity and legitimacy…(ibid., p.5). Gocht and ecosystem services, recommend others using a CAPRI model31 based further CAP reforms (Simoncini, R. et al. 2019). 29 2014-2020 refers to the multiannual The strategic objectives of the financial framework of the EU. new CAP have been designed with 30 CAP is composed of two pillars: agri- this background, and, in particular, environmental measures are part of details of objective (2) of the new Pillar I; Pillar II are focused on agri related regional development. 31 CAPRI is a modeling and analytical The Common Agricultural Policy framework of CAP ‘gereening’ Regionalized Impact, financed by the developed as part of the project: European Commission.

72 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ CAP point out the need for …higher 2020 CAP scheme32 (EC 2019b). ambitions…and more focus…on The core of the new delivery model resource efficiency, environmental is that, to implement the CAP, care, and climate action…(EC each Member State (MS), shall 2019b) The Commission identified design its own strategic plan (CAP three top priorities for the post- Strategic Plan) on the country 2020 CAP: higher environmental specific need basis (EC 2018a). and climate action ambitions, An improved system (Performance better targeting of support and Monitoring an Evaluation System, stronger reliance on the virtuous PMES) will support monitoring Research-Innovation-Advice nexus and evaluation of each MS’s as (EC 2018b, sec. 1.1). Further, as contribution to the objectives of regards the nine specific objectives, CAP, as well as the objectives three of them concern directly the in the EU’s environmental and environment and climate: climate legislation (EC 2019b p. 4) ⊕ contribute to climate change The new CAP would require strong mitigation and adaptation, as ambitions from MSs and improved well as sustainable energy; effectiveness in designing and ⊕ foster sustainable implementing the CAP ‘greening’ development and efficient element. Matthews concludes that management of natural the new CAP is … a potential, or resources such as water, soil the possibility, for MSs that wish and air; focus more on raising the level of ⊕ contribute to the protection environmental and climate ambition of biodiversity, enhance to do so (Matthews, A. 2018b). ecosystem services and That regards ambitions, during the preserve habitats and early phase of policy debate on the landscapes. post-2020 CAP, the Commission proposed the idea of national co- To emphasize the high priority financing of CAP Pillar I measures. on environment and climate, the MSs agri-ministers rejected the idea intervention logic of the new CAP upfront: a big question mark if the is built on a “need” basis, then ambitions are real. Nevertheless, it why the intervention is beneficial is foreseen that the idea will come for the environment and climate up again in future CAP proposals, and finally, where simplification as recommended strongly by rests, compared with the 2013- 32 Complexity also is a general critique of the 2014-2020 CAP

73 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Matthews (Matthews, A. 2018a). Member States. This would require genuine In the context of environmental ambitions from MSs, as well as economics, the concept of CAP creativity and innovation. Best ‘greening’ is not new. It is an practices and financing schemes for agri-environmental program PES programs, introduced later in (AEP), which has several decades this paper, could provide references of history in Europe and other in this endeavor. parts of the industrialized world. The environmental focus in the Historically, AEPs have either proposed new CAP implementation been managed by governments, would be reinforced by three covering whole national territories, central tools, each concerning or privately organized, focusing on ‘greening’. First, conditionality, a defined ecological area. Examples i.e. the linkage between payments for government lead programs are and delivery of environmental the Conservation Security Program obligations, meaning that, if the in the US, dating back the 1930s, obligation is not met, the payments or in Europe, in the early 1990s, may be reduced. Second, Eco- the Agri-Environmental Program, Schemes, new payment schemes for a supplement to the Common environment and climate conscious Agricultural Policy. (Council practices in Pillar I that will replace Regulation 2078/92). The Catskill environmentaly conscious practices project in the US33 and the Vittel in Pillar I and cross-complience in case in France34 are the most well- Pillar II in the current, 2014-2020 known AEPs organized privately CAP. Under the new regime, MSs will be offered the flexibility to 33 In the 1980’s New York city chose draw-up several eco-schemes, and natural filtration of its drinking water farmers would be allowed to choose reserves in the Catskill Mountains which one to apply. region, by providing long-term The construct of the new CAP payments for land management changes, as an alternative to investing implies strengthened subsidiarity in water treatment facilities. by shifting the responsibility of 34 Initiated in the 1990’s, Nestlé Waters, implementation from Brussels to the owner of Vittel, a prime brand of the national governments. The bottled water, in order to protect the EU will provide the framework, quality of water, entered into long- term contracts with the landowners in but the effectiveness of the policy the Vittel catchment area in North-East will largely depend on the strategic France to dramatically change their design and implementation by the agricultural practices (Perrot-Maitre, D. 2006).

74 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ in developed countries. The basic institutional and regulatory concept of both public and private environments and carry a mixture AEPs has been that changes in of both Pigouvian and Coasean agricultural practices would result features (Schomers, S. – Matzdorf, in conserving, or improving the state B. 2013). of the environment, i.e. resulting in Over the past three decades, healthier ecosystems and improved similar to government lead ecosystem services. In general, AEPs in industrialized countries, public programs tend to address Payments for Environmental nature conservation in its entirety Services (PES) have gained and complexity, while privately popularity in the developing world, organized programs usually focus primarily pursued by the World on a specific ecosystem service, Bank (Ferraro, P. J. – Kiss, A. e.g. maintaining the quality of 2002). By the end of the 2010s, a drinking water reserve. While more than 500 PES, or PES-like both types are meant to address programs have been implemented the problem of environmental globally. While the concept of externalities, there are several major the PES scheme is more-or-less conceptual differences between standardized, each program has its government and private programs. own particular features, depending Governmental programs are seen to on the geographical location, follow mostly the Pigou-concept: ecological conditions and socio- taxing negative and subsidizing economic framework. Over the positive externalities, beneficiaries past three decades enormous data are indirect and cannot be excluded and information have accumulated (e.g. from enjoying cleaner on implemented PES programs air). Private programs are more allowing research, among others, Coasean: enforceable property on the drivers of effectiveness rights (and low transactional costs) and efficiency, recently in the are preconditions. Beneficiaries are mainstream of scholarly discourse direct and others can be excluded. and the foci of this article. For example, one has to pay to visit In this article it is proposed and enjoy nature in a protected that, as CAP ‘greening’ is a construct park (Baumol, W. J. – Oates, W. that complies with the criteria E. 1988; Kerekes S. et al. 2018). of Payments for Environmental Nevertheless, both government Services schemes, research and private programs are usually findings on the effectiveness implemented within complex of PES programs would serve

75 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ reference to MSs CAP Strategic and ‘greening’ is a major element Planning. The setup of the article is in the CAP intervention logic the following: In Section 2, the new and direct payments mechanism. CAP regulation proposal, focusing Therefore, financial efficiency on ‘greening’ is put in context, and environmental effectiveness reviewing the policy background of the CAP ‘greening’ is of and intervention logic of both the crucial importance. To provide a current and the proposed new CAP. framework for further analysis Chapter 3 introduces PES and the in the subsequent sections, in research on PES effectiveness, this section the policy context of and argues why CAP ‘greening’ the CAP greening measures is is a PES-type construct and how reviewed. its effectiveness can be viewed in the PES framework. In Chapter 4, Policy framework of the potentials in the effectiveness of the CAP greening component new CAP will be discussed in the PES framework, then Conclusion The policy framework of the in Chapter 6 sets directions for CAP greening component is set by further research. the EU’s biodiversity strategy, along with the Birds Directive and Habitat II.2.2. CAP and its Directive. The headline target of the „greening” component Biodiversity Strategy to 2020 (EC 2011) positions the objectives of As agriculture has the EU in a global context: “Halting pivotal impact on climate and the loss of biodiversity and the environmental sustainability, CAP degradation of ecosystem services is a major instrument to implement in the EU by 2020, and restoring the EU’s environmental policies. them in so far as feasible, while Sustainable management of natural stepping up the EU contribution resources is one of the three policy to averting global biodiversity objectives in the 2014-2020 CAP loss. Among the six targets of (along with assuring viable food the strategy, Target 3. (Ensuring production and balanced territorial the sustainability of agriculture, development), and its greening forestry and fisheries) has particular component (CAP ‘greening’) relate relevance to the CAP:…by 2020 directly to the EU’s biodiversity the agricultural area …under strategy. CAP financing amounts to the CAP shall be maximized, so about 30% of the total EU budget, as to ensure the conservation of

76 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ biodiversity and to bring about The intervention logic of the measurable improvement in the current CAP is framed in the setup conservation status of species of horizontal, Pillar 1 and Pillar II and habitats that depend on measures. In the current, reformed or are affected by agriculture CAP, the long time existing direct and the provision of ecosystem payments to farmers (Pillar I) were services… Action 8 within Target complemented with measures with 3 is specified as follows: Enhance direct impact on the environment CAP direct payments to reward (European Parliament 2013), as environmental public goods such defined in Chaper 3 of the regulation: as crop rotation and permanent Payments for agricultural practices pasture; improve cross compliance beneficial for the climate and the standards for Good Agricultural environment. These payment for and Environmental Conditions ‘greening’ is conditional to the (GAEC)… (Allience Environment practices of diversifying crops, 2019 p. 4). the maintenance of permanent Since 2015, the economic grasslands and designating and policy context of CAP has ecological focus areas (ibid. Article changed significantly: agricultural 43, 2.). prices have fallen substantially; The architecture of the new international trade negotiations CAP (Figure 1) is supposed to moved from multilateral to deliver the higher environmental bilateral and the EU signed up to ambitions. Hereinafter, to discuss new international commitments: the detailes, the relevant EC COP21, i.e. the Paris climate Communication (EC 2018a) and a agreement and the UN Sustainable blog by Matthews (Matthews, A. development goals (SGD). The 2018b) are referenced. Increased commission concluded that, in flexibility towards implementation order to maximize its contribution and voluntary actions are two to the (EUs) Sustainable key elements of the setup and the Development Objectives the CAP whole system rests on enhanced must be modernized…simplified… conditionality.226 thousand station and made more coherent with other (Figure 1). EU policies… (EC 2018a).

77 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 1: Architecture of the new CAP Source: Matthews, A. 2018b

Policy framework of the be discussed later, would align CAP greening component with researchers’ findings that suggest conditonality to be one The core of the new proposal of the three key PES effectivenss on conditionality relates to the 10 factors. However, it is not clear, Good Agricultural Environmental if, in practice, payments would be Conditions (GAEC) in four effect reduced, or even rejected upon non- groups: (1) climate change; (2) performance. water; (3) soil and (4) biodiversity and landscape. In the proposal, Eco-schemes new requirements are added to crop rotation, maintaining In the new CAP, MSs would permanent grassland and ecological be required to draw-up various eco- focus area, in the currect CAP, schemes, depending on their local and direct reference is made to conditions and needs, defined as respect obligations under the voluntary schemes for farmers. Water Framework Directive and Eco-shcemes would be paid for the Sustainable Use of Pesticide additional to the basic income Directive. The requirement of support, or as a compensation enhanced conditionality (i.e. the for additional costs incurred. The possibility to reduce payments Commission would recommend upon non-performance), as it will designs for eco-schemes, however,

78 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Member States would be free to transactions between buyers and design their own ones, subject to providers of ecosystem services, approval by the Commission. or land-use practices that lead to the services. The orginal definition, Agri-environment- broadly accepted by the scholarly climate measures community, is attributed to Wunder (Wunder, S. 2005). A Payment for In the AECM scheme Environmental Services scheme is: beneficiaries are compensated for the 1. A voluntary transaction, costs incurred and income foregone where resulting from the commitments 2. A well-defined ecosystem made. As opposed to eco-schemes, service (or land-use likely to which incentivises farmers, under secure that service) AECM payments it was allowed 3. Is being ‘bought’ by a to make payments to both farmers, (minimum one) buyer as well as other beneficiaries. As 4. From a (minimum one) regards voluntary AECM, several ecosystem services provider intervention measures in the Rural 5. If and only if the provider Development Regulation would be secures the ecosystem services collapsed into a single scheme in provision (conditionality). the new simplified system. II.2.4. CAP „greening” in II.2.3. CAP „greening” in the PES framework the PES framework PES, an economic instrument, The PES concept is supposed to align with the underlying ecological processes. In the academic literature PES These processes are conceptualized is the acronym for Payments for as ecosystems and ecosystem Ecosystem Services, or Payments services represented with the for Environmental Services. cascade model (Figure 2): PES is a program of voluntary

79 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 2: Cascade model of ecosystems and ecosystem services Source: Haines-Young, R. – Potschin, M. 2010

Conceptually, the biophysical regulating (e.g. carbon absorption, structure, i.e. ecosystems, with water retaining, etc.), cultural (e.g. complex functioning provide touristic sites, etc.) and supporting ecosystem services to beneficiaries. services, this latter supports all In the PES scheme the beneficiary other services. The biophysical and is willing to pay for the ecosystem financial flows in the PES scheme service and the provider of the is shown in Figure 3. The essence service (with a title to the land where of the PES scheme is that payment the biophysical structure is located) is made to initiate the conservation, is willing to accept the payment or improvement of the biophysical and deliver the service. With broad structure that would entail improved academic consensus, ecosystem supporting functioning, finally functions and services are grouped resulting in improved provisioning, in four categories: provisioning regulating and/or cultural services. (e.g. supply of wood, fish, etc.),

80 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 3: PES scheme – biophysical and financial flows Source: author’s design

The PES program can Costa Rica, aiming at reducing be organized and the services deforestation (Pagiola, S. 2008). bought directly by the beneficiary, As information and experience or by an intermediary, such as accumulated from programs around the government. User-financed the world, the number of academic programs typically focus on writings has been growing and benefiting from a single ecosystem beyond analyzing individual service, for instance improved programs, research shifted on quality of waters enjoyed by empirical analysis and drawing the population of a downstream conclusions on structuring, design, settlement. A reforestation program governance, implementation and by the government can provide operational issues (Engel, S. 2016). benefits indirectly to people in large Schomers and Matzdorf suggest distances, as well. that pooling research findings and The concept of Payments experience both from developed for Environmental Programs in and developing countries would developing countries was developed result in research synergies for by World Bank economists as a all (Schomers, S. – Matzdorf, means to shift international aid to B. 2013). This article argues for environmental investments. The moving beyond this proposition first PES program, a construction and use research findings on PES on World Bank loan and ODA effectiveness in CAP Strategic funding, was implemented in Planning, outside the classic

81 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ domain of PES. by another article by Matzdorf, ascertaining that around the CAP ‘greening’, as a PES world PES commonly refers to scheme government lead payment schemes that cover territories at national level With reference to Matzdorf (Schomers, S. – Matzdorf, B. 2013). and Meyer, it is argued that the CAP This applies to CAP ‘greening’, ‘greening’ component, an agri- too, as the implementation of environmental policy instrument, CAP is managed on a member is conceptually a PES scheme state level. This classification (Matzdorf, B. – Meyer, C. 2014), leads to the proposition that as it fulfills all the conceptual findings related to PES programs requirements for PES, as defined globally would serve references by Wunder: to assessing CAP ‘greening’, as 1. farmers can voluntarily apply well. Figure 4 presents the logic of for direct payment, including the CAP green intervention in the the greening component; PES conceptual framework. The 2. the land-use, or land-use Member State government is the change (the subject of the service buyer, the farmers are the transaction) is defined: crop service providers. CAP payments diversification, maintaining are made for the services provided: permanent grasslands and diversifying crops, maintaining ecological focus areas in the permanent grasslands and meeting current CAP and eco-schemes the requirements in terms of EFA. in the upcoming CAP; It needs to be emphasized that 3. The buyer of the land-use the CAP payments are made for service is the government of the actions that lead to ecological the Member State – indirectly (socio-economic) outputs, not for the EU; the additionalities in ecosystem 4. The service provider is the services, per se. Therefore, farmer – all eligible farmers conditionalities of payments are in the EU can apply; linked to monitoring the actions 5. Conditionality: In principle, by the farmers’, and not for if the service is not provided, ecological improvements, which payment is withdrawn and is an important feature of the CAP penalty levied. model, addressed further in the Discussion section. This argument is supported

82 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 4: The 2014-2020 CAP in the PES conceptual framework Source: author’s design

The outcome of the CAP works at higher abstractions, using implementation is measured using meta-data, primarily sourced from the outcome, result and impact related academic papers (Schomers, indicators, set in the CMEF. Also, S. – Matzdorf, B. 2013). Recent the outcome can be assessed using research works on PES highlight that measures of improved ecosystems effectiveness would largely depend and ecosystem services additions. on the specific features of each PES This can lead to linking the outcome program. Börner and others, using of the CAP with ecosystems the approach of change theory, accounting, the global, United synthetize 30 influencing factors Nations lead program, which of PES effectiveness, classified in aims at integrating environmental three groups: context ~, design ~ and assets and services in the national implementation factors, and along statistical systems (Kovács A. F. five dimensions: costs, additionality 2018). (compared to the counterfactual), spill-over (indirect effects on Research on the lands not in the program), link- effectiveness of PES conditions (e.g. monitoring costs) programs and welfare effects (e.g. equity) (Börner, J. et al. 2017). As each Due to the differences and PES program is a unique institution availability of data, comparative with specific governance system, analysis of PES programs is difficult Meyer and others apply qualitative and complex, nevertheless several comparative institutional analysis recent studies report on analytic to investigate the governance

83 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ structures of PES programs in basis of environmental benefits Germany and China, respectively. (paying higher amounts to sites that This research suggests that in each provide higher benefits) (Engel, S. case (i.e. Germany and China) the 2016). preferred, effective institutional arrangements are dominated by a Conditionality combination of factors (Meyer, C. et al. 2018). Overall, scholarly Conditionality refers to the articles highlight three main idea that payments are made if factors, which are key to the and only if the ecosystem service outcome and effectiveness of PES is provided or an activity is programs: (1) geographic targeting, implemented that is clearly linked (2) payment differentiation and (3) to provisioning the service (Engel, conditionality. S. 2016). Payments can be made ex- ante, or ex-post. Implementation of Geographic targeting conditionality requires monitoring compliance and sanctioning non- Geographic, or spatial compliance. targeting means the method of It is concluded by various allocation of financial resources authors that applying these three over a selected geographic area on conditions is very data-demanding a costs-benefit basis. In practical and can significantly increase PES terms, it is a payment scheme aiming implementation costs, while the at yielding the most significant risks associated with the program’s increase in environmental service outcome remains high, due to other delivery (Wünscher, T. et al. 2008). influencing factors. Nevertheless, A comparative scenario analysis Engel references cases, when 50- showed that targeting, using spatial 100% increase in biodiversity data, would lead to higher efficiency benefits could be attained combining outcomes (ibid.). the tools of spatial targeting and payment differentiation, which Payment differentiation could compensate for an increase of about 70% in costs (Engel, S. As opposed to lump-sum 2016). payments per area, payments can be differentiated on the basis II.2.5. Discussion of provisioning costs (cost of providing the service), or on the In this article, it is argued

84 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ that CAP is a PES-like program, major change, compared with the therefore, research findings on current CMES, is the intent to select PES effectiveness can serve a limited, but more targeted set of useful references to studying the indicators that reflect whether the effectiveness of the CAP, but supported intervention contributes more importantly, designing the to achieving the objectives versus measures in the new CAP, i.e. the an established baseline. CAP Strategic Planning by Member Apart from the advanced States. monitoring system for the overall Research on PES effectiveness performance of CAP, the success identified three key factors that of conditionality depends on the drive effectiveness: conditionality, mechanism if individual farmers’ geographic targeting and payment practices meet the requirements, differentiation. It is reasonable and payment is made accordingly. to propose that the potentials for The author has not found evidence improved effectiveness of the new on reduced, or rejected payments CAP should be searched within due to non-performance regarding the context of these three factors. the current CAP. In the PES context, In particular, the subject for conditionality would mean payment investigation is the following: to conditional to action, therefore what extent the choices of Member the real effect of conditionality States offered by the flexibilities in on effectiveness in the new CAP the new CAP can direct the CAP would depend on a mechanism of mechanisms towards improved payment conditionality in place at conditionality, geographic targeting the MS level. It is not yet clear how and payment differentiation – so that such conditionality would be made to induce improved effectiveness of operational by the member states, CAP? supervised by the EC. As pointed out, enhanced In the proposed regulation conditionality is the foundation of the new CAP, improving the for every measure, both in Pillar targeting of payments refers to I and Pillar II. It is assumed that payments targeting farmers. This monitoring and evaluation would seems to be a socio-economic goal largely advance through the new and not an environmental one that Performance Monitoring and would influence environmental Evaluation Framework. Indicators effectiveness of the new CAP. The would be chosen aligned with the PES context suggests geographic CAP strategic objectives, and a targeting, rather than targeting the

85 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ farmers, meaning that payments such cases payments should be should be focused on geographic differentiated, likewise, when the locations with foreseen higher cost structures of the measures vary ecological impact. The new CAP in different locations. Nevertheless, would allow Member States to from a political perspective it draw-up eco-scheme alternatives would be difficult to effectuate that could account for different differentiated payments for the ecological impacts in different same measures within a given geographic locations. This Member State. could, in principle, drive the new CAP towards environmental II.2.6. Conclusion effectiveness. Likewise, payments for agri-environment-climate In this article it is proposed measures should be differentiated that CAP can be seen as a PES depending on geographic locations. program and findings on PES Or, alternatively, payment for such effectiveness would apply in case measures would be offered for of the new, upcoming CAP. It was farmers in areas with the highest presented that elements, that regard potential output, i.e. ecological the key drivers of environmental improvement. It has to be noted effectiveness, are embedded in that some elements of geographic the EC’s proposal for new CAP focusing already exist in the current regulation, nevertheless, there CAP. For example, payments for seems to be a gap between how certain agricultural or forestry the concepts of conditionality, practices in Natura 2020 regions. ecological targeting and payment Finally, payment differentiation are conceptualized differentiation is a very problematic by researchers in the PES issue. As discussed in the section framework, and the system of on the PES concept, in most PES interventions in the CAP. PES programs, including the CAP, findings could support further payments are made for measures, research on the intervention logic or acts that lead to improved and measures both regarding the ecological status. However, the current and the upcoming CAP, same agricultural measure in one so that Member States’ ambitions geographic location would result could be underlined by creativity in different ecological outcome in and innovative approaches in their another location. Environmental CAP Strategic Planning, aimed at a economics would suggest that in new, innovative CAP with enhanced

86 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ environmental effectiveness. University of Budapest and the Pallas Athene Domus Educationis Acknowledgement Foundation for their joint grant support to the author’s research The author acknowledges work including writing this article. and give thanks to the Corvinus

II.2.7. References

Allience Environment 2019: Evaluation of the impact of the CAP on habitats, landscapes, biodiversity: Final Report. EC DG Agriculture and Rural Development, Brussels. Baumol, W. J. – Oates, W. E. 1988: The theory of environmental policy, Second. ed. Cambridge University Press, New York. Börner, J. – Baylis, K. – Corbera, E. 2017: The Effectiveness of Payments for Environmental Services. World Dev. 96, 359–374. EC 2011: COM(2011) 244 final, Our life insurance, our natural capital: an EU biodiversity strategy to 2020. EC 2017: The Future of Food and Farming, COM(2017) 713 final. EC 2018a: Establishing rules on support for strategic plans to be drawn up by Member States under the Common Agricultural Policy (CAP Strategic Plans), Proposal for a Regulation of the EU Parliament and of the Council, COM(2018)392 final. EC 2018b: Impact Assessment, Accompanying Document to SWD (2018) 301 final. EC 2018c: On the implementation of the Common Monitoring and Evaluation Framework and first results on the performance of the Common Agricultural Policy, Report from the Commission to the European Parliament and the Council. EC 2019a: Direct payments 2015-2020, Decisions taken by Member States: State of Play as from December 2018, Information note. EC 2019b: The Post-2020 Common Agricultural Policy: Environmental Benefits and Simplification [WWW Document]. Eur. Commision. URL https://ec.europa.eu/info/food-farming-fisheries/key-policies/ common-agricultural-policy/future-cap (accessed 5.7.20). Engel, S. 2016: The Devil in the Detail: A Practical Guide on Designing Payments for Environmental Services. Int. Rev. Environ. Resour. Econ. 9, 131–177. https://doi.org/10.1561/101.00000076

87 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ European Parliament 2013: establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009. Ferraro, P. J. – Kiss, A. 2002: Direct Payments to Conserve Biodiversity. Science 298, 1718. https://doi.org/10.1126/science.1078104 Gocht, A. – Ciaian, P. – Bielza, M. – Terres, J.-M. – Röder, N. – Himics, M. – Salputra, G. 2017: EU-wide economic and environmental impacts of CAP greening with high spatial and farm-type detail. J. Agric. Econ. 68, 651–681. Haines-Young, R. – Potschin, M. 2010: The links between biodiversity, ecosystem services and human well-being. – In: Raffaelli, D. G. – Frid, C. L. J. (eds.), Ecosystem Ecology. Cambridge University Press, Cambridge, pp. 110–139. https://doi.org/10.1017/ CBO9780511750458.007 Kerekes S. – Marjainé Szerényi Zs. – Kocsis T. 2018: Sustainability, Environmental Economics, Welfare. Corvinus University of Budapest Kovács A. F. 2018: Environmental economic accounting to advance EU policies and private contribution to nature investments. Köz-Gazd. 2018, 178–190. Matthews, A. 2013: Greening CAP payments: a missed opportunity? Matthews, A. 2018b: National co-financing of CAP direct payments, European Policy Analysis. Matthews, A. 2018a: The greening architecture in the new CAP – CAP Reform. CAP Reform. URL http://capreform.eu/the-greening- architecture-in-the-new-cap/ (accessed 5.5.20). Matzdorf, B. – Meyer, C. 2014: The relevance of the ecosystem services framework for developed countries’ environmental policies: A comparative case study of the US and EU. Land Use Policy 38, 509– 521. https://doi.org/10.1016/j.landusepol.2013.12.011 Meyer, C. – Chen, C. – Matzdorf, B. 2018: Qualitative comparative institutional analysis of environmental governance: Implications from research on payments for ecosystem services. Ecosyst. Serv. 34, 169–180. Pagiola, S. 2008: Payments for environmental services in Costa Rica. Ecol. Econ. 65, 712–724. Perrot-Maitre, D. 2006: The Vittel payments for ecosystem services: a

88 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ „perfect PES case? Schomers, S. – Matzdorf, B. 2013: Payments for ecosystem services: A review and comparison of developing and industrialized countries. Paym. Ecosyst. Serv. Their Institutional Dimens. Anal. Divers. Exist. PES Approaches Dev. Ind. Ctries. 6, 16–30. https://doi.org/10.1016/j. ecoser.2013.01.002 Simoncini, R. – Ring, I. – Sandström, C. – Albert, C. – Kasymov, U. – Arlettaz, R. 2019: Constraints and opportunities for mainstreaming biodiversity and ecosystem services in the EU’s Common Agricultural Policy: Insights from the IPBES assessment for Europe and Central Asia. Land Use Policy 88, 104099. https://doi.org/10.1016/j. landusepol.2019.104099 Wunder, S. 2005: Payments for environmental services: some nuts and bolts. CIFOR Infobrief. Wünscher, T. – Engel, S. – Wunder, S. 2008: Spatial targeting of payments for environmental services: a tool for boosting conservation benefits. Ecol. Econ. 65, 822–833.

89 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

90 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ II.3. Industry 4.0 and the circular economy

Zsófia Nemes35

Abstract

Industry 4.0 and circular economy (CE) have been mutually interdependent concepts since the beginning of the 21st century. The key drivers behind them are undoubtedly very similar: enhancing productivity through more sustainable and efficient resource management (including waste as well), plus optimising material flows and building networks between different actors such as corporations, public sector organisations and customers. This paper aims to introduce the main pillars, goals and benefits of Industry 4.0, while reflecting on the potential correlations with CE and industrial symbiosis. The methodology is based on a literature review, focusing on global trends in industrial production innovation during the 2010s and the significance of the newest industrial revolution in terms of sustainability.

Keywords: Industry 4.0, circular economy, smart solutions, sustainability

35 3rd PhD student, IR Multidisciplinary Doctoral School – Geopolitical Doctoral Subprogram of CUB [email protected]

II.3.1. Introduction – What autonomously communicating with is Industry 4.0? each other along the value chain: a model of the ‘smart’ factory Industry 4.036 is a term of the future where computer- which refers to the so called fourth driven systems monitor physical industrial revolution and has been processes, create a virtual copy widely used in regulation and of the physical world and make policy-making processes, as well as decentralised decisions based on in practice, since the beginning of the self-organisation mechanisms.” 2000s. According to the definition (European Parliament – DG for of the Directorate General for Economic and Scientific Policy Economic and Scientific Policy of 2016 p. 6). the European Parliament, “Industry 4.0” describes the organisation An integral part of the concept of production processes based of Industry 4.0 is the development on technology and devices of a lifecycle approach to all products, which requires very tight 36 also referred as to I4.0

91 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ and intelligent business-to-business inclusion (Stock, T. – Seliger, G. networking from the raw material 2016). phase through production, delivery Figure 5 shows the four and use to the end of the product industrial revolutions and their life cycle. Key to this is a smart main achievements, starting from approach to design, manufacturing the introduction of the steam engine and logistics, which strives and mechanisation of production for the most efficient resource at the end of the 18th century, management possible, and provides continuing through the evolution an excellent basis for industrial of mass production and computer- symbiosis. This, of course, has very led, automated technologies until significant environmental benefits, we reach today’s ongoing and as it can greatly reduce the use developing phase which is based of raw materials and energy. The on ‘smart’ industry, and connects model can also contribute to the the whole process of production, social and economic dimensions distribution and consumption of sustainable development, e.g. it via the internet and different offers new forms of training and job applications. opportunities, and can help social

Figure 5: The Four Industrial Revolutions Source: Spectral Engines 2018

II.3.2. Industry 4.0 and the this new approach of industrial model of Circular Economy production and the concept of circular economy (CE) are very The connections between obvious: both aim at closing the

92 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ loop of material and resource Easier and faster adaptation to flows while creating a lot of added changes in the market and demand value across all dimensions of have always been in the focus sustainability. Industry 4.0 and of companies, and thanks to the CE may play crucial roles in the new technologies, access to data development of the so-called early- and the already mentioned smart industrialised countries, but their tools and solutions, this aim is effect is also highly relevant and becoming more and more realisable significant in the most developed – resulting in lower material and economies, e.g. Germany, where environmental costs, while shifting the original scientific background towards a circular paradigm and of the fourth industrial revolution leaving linear systems behind was created thanks to a manifesto (Garcia-Muina, F. E. et al. 2018). published in 2013 by the German According to the recent literature National Academy of Science and and the theoretical background of Engineering (Forschungsunion/ the concept, but even more based on Acatech 2013). the already existing best practices Industry 4.0 requires a high worldwide, connecting a circular level of research and development approach with smart industrial activity, computer technology, production may contribute to the smart solutions, newly invented competitiveness not just of certain applications etc. which affect companies, but also communities, the manufacturing equipment, regions, and even states (so from jobs, organisational issues, the micro to macro, from local to global production process and in the end, level). the product itself. In economic Networking and enhancing terms, the main aim is to bring cross-sectoral cooperation demand and supply as close as between companies, stakeholders, possible to each other, through NGOs, local communities etc. taking into consideration individual are both equally important in preferences and requirements from the implementation of CE and the customers’ side, and at the same Industry 4.0. The basic principles time, integrating the customer in of the cooperation are the same the value chain in the earliest phase in both cases – in actual fact, the (Hagel III, J. et al. 2015). one serves and supports the other The vision of circularity (Zimmerman, 2018). The word appears everywhere in the new ‘symbiosis’ appears everywhere business models of Industry 4.0. when it comes to describing a more

93 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ effective and environmentally the meanings. IoT is a vital element conscious production process. of smart manufacturing (Figure 6) Creating symbiosis starts with and makes it possible for physical exploring interdependence and the products of different industries to potential added value of coordinated communicate with each other via activities. Industrial symbiosis microchips and sensors embedded is one of the most important into the objects, as well as to dimensions of the circular economy be connected to the internet. In and the industrial revolution of the short, thanks to the IoT system, it 21st century. is possible to track the lifecycle of each product. This smart II.3.3. Industry 4.0 and the technology is crucial for managing Internet of Things (IoT) waste once a product cannot be used by the customer any more. More Internet of Things (IoT) precisely, it helps avoid producing is a commonly used buzzword, waste; instead, tracking the given usually referred to as a synonym product might contribute to finding for Industry 4.0. It is obvious that the most suitable form of reuse, there is an overlap between the recycle or any other sustainable, two; however, it is very important environmentally and economically to distinguish and precisely define beneficial solution.M ( cKinsey & Company 2010).

Figure 6: The role of IoT in Industry 4.0. Source: Zigurat Global Institute of Technology 2020

94 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ The Internet of things production. and Industry 4.0 are mutually 4. Faster and more effective interdependent concepts and innovation capacities, approaches towards the economic supporting collaboration development of the 21st century, between experts. providing digital solutions for making production and It must be highlighted that consumption of goods and services the original motivation or guiding more sustainable, effective and principle of Industry 4.0 was not easily accessible. If properly providing solutions to ecological/ implemented, IoT and Industry environmental challenges, much 4.0 can foster data, information, rather it was enhancing productivity material and resource flows, and and competitiveness. But at the same serve the transition of the economy time, while increasing productivity towards a circular model (CE). at corporate or sector level, all the innovation and initiatives have II.3.4. Benefits of Industry supported the change of traditional 4.0 – linear – patterns of economy and manufacturing. Current literature is The most important benefits focusing more and more intensively of Industry 4.0 can be summarised on the deep and detailed analysis and categorised as follows of the environmental impacts of Industry 4.0. The positive effects (Business Development Bank of can be as difficult to identify and Canada 2017): 1. Moving towards Overall measure accurately as the potential Equipment Effectiveness negative effects. However, the topic (OEE), boosting productivity is highly relevant for environmental and providing optimal economics, industrial ecology and solutions e.g. for equipment many other fields of science. Some maintenance. sources claim that even though 2. educing and saving costs of the positive theoretical correlation manufacturing, primarily between smart manufacturing, thanks to real-time production circularity and sustainability are monitoring and control. undoubted, the long-term effects 3. Improving quality through of such an economic/industrial a real-time control process, transition are still unpredictable and eliminating customer returns unclear (Bonilla, S. H. et al. 2018). and decreasing waste Measuring energy and

95 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ material efficiency through case of the world. There are already studies and research at companies existing best practices of Industry implies Industry 4.0 is a possible 4.0 in these industrial parks which tool for a complex environmental/ might contribute to a much better economic evaluation of the understanding of the issue and situation (Beier, G. et al. 2017). shed light on further important Other studies intend to analyse the correlations between CE and I4.0. effects of cooperation networks Since the 1990s, the number of between companies and institutions the so-called eco-industrial parks37 of the public sector – and pay has been increasing worldwide. special attention to how smarter “An EIP is an industrial park where technologies and new business businesses cooperate with each models appear in the sustainability other and, at times, with the local strategies of corporations and community to reduce waste and environment policies of different pollution, efficiently share resources regions or countries (Lin, K. et al. (such as information, materials, 2017). water, energy, infrastructure and natural resources), and II.3.5. Industrial parks, minimise environmental impact ecosystems and I4.0 while simultaneously increasing business success” (Pan, M. et al. The methodology of 2015). These entities are based evaluating the environmental on new, innovative solutions, ‘effectiveness’ of I4.0 is very and contribute to the renewal of complex and depends on what traditional industrial sectors. The researchers would like to focus eco-parks are appropriate tools on (networking, energy issues, for creating high added value in business models, value chain, environmental, economic and waste management etc.), but one social terms, as well as for paying thing is certain: despite all the special attention to the protection of methodological and conceptual natural resources and ecosystems. barriers, case study analyses are That is why it can be stated that crucial. The connections between eco-industrial parks include the the concept of circular economy key elements and aims of the and the practice of sustainable model of circular economy. When industrial production can be examining eco-industrial parks, examined through the operation of the concept of industrial symbiosis industrial parks in different parts 37 also referred to as EIP

96 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ (IS) must necessarily be taken examine the possibilities for how into consideration. The essence of physical entities like industrial IS is a sustainable, resource- and companies can become part of cost-efficient industrial production a virtual space which supports through creating synergies between maximising all benefits from their economic, governmental and collaboration. One of the most civil actors, in order to support dynamically developing EIPs of sustainability. Applying Industry the world is located in Singapore, 4.0 to EIPs might be the best way called Jurong Island. The artificial to create the highest value added in island has an extremely modern terms of environment protection, infrastructure and more than 100 economic and social benefits. multinational companies located One of the most important there, e.g. Shell, ExxonMobil conditions of creating and or British Petrol. The aim of maintaining a well-functioning mathematicians and IT experts is to symbiosis is the access to use data and cyberspace to optimise information and providing enough the symbiotic connections and data to the members of the network. circularity in this given example High quality ICT infrastructure (Pan, M. et al. 2015). is an essential element of any Why is it necessary to facilitate industrial ecosystem. The the spread and development of innovations of Industry 4.0 can help Industry 4.0 worldwide? The overcome the potential barriers of answer is strongly connected to communication between the actors one of the biggest challenges of of the cooperation network within our times: the rapidly growing an EIP; they may also optimise the population and consumption symbiotic relations and resource which lead to an extremely high flows and as a consequence, level of environmental risks and decrease the costs of sharing unsustainable use of resources. In information and any goods. the new terminology of Industry As has been discussed above, 4.0, experts, policy makers and the number of eco-industrial parks is practitioners often substitute the growing worldwide, and nowadays expression ‘supply chain’ with the question arises in many cases: ‘supply network’. The supply How can the model of Industry 4.0 network requires a very tight be ‘translated’, that is to say, applied partnership between manufacturers, to a symbiotic unit? There are some customers and a lot of other actors very interesting case studies which in order to establish an ecosystem

97 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ of production and logistics (World developed ones in years to come. Economic Forum 2019). From a However, smart manufacturing circular economic point of view, has numerous barriers which must the key issue is the optimisation of be taken into consideration. Some waste management and utilisation barriers can be interpreted as high of resource surpluses – the latter risks or challenges, primarily includes, in addition to waste, arising from cyber security and data other resources as well, such as protection issues. The potential by-products or even surpluses of risks of making even more and more human resources that can be shared data online available are, of course, within an industrial symbiosis. real and might concern all of those actors who would play a central role II.3.6. Conclusion in spreading I4.0. The crucial point is to have favourable regulation, The implementation of CE financial resources, technology and and Industry 4.0 are determining institutionalised cooperation which factors in the rise of developing can support the spread of smart economies as well as for the future industrial production and circular of the richest countries. It seems to economy – under secure conditions. be even more obvious that making This will definitely influence the the secondary sector circular and global competition between the adopting symbiotic models will three ‘great players’ (the EU, China play a decisive role in determining and the USA), and the sustainability which regions or countries will be and competitiveness of many able to rise and catch up the most developing economies as well.

II.3.7. References

Beier, G. – Niehoff, S. – Ziems, T. – Xue, B. 2017: Sustainability aspects of a digitalized industry. – A comparative study from China and Germany. International Journal of Precision Engineering and Manufacturing- Green Technology, 2017, 4, pp. 227–234. Retrieved from: https://link. springer.com/article/10.1007%2Fs40684-017-0028-8 (downloaded: 28.02.2020) Bonilla, S. H. – Silva, H. R. O. – Da Silva, M. T. – Gonçalves, R. F. – Sacomano, J. B. 2018: Industry 4.0 and Sustainability Implications: A Scenario-Based Analysis of the Impacts and Challenges. Sustainability, Vol. 10, Issue 10, pp. 1-24. Retrieved from: https://

98 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ www.researchgate.net/publication/328348779_Industry_40_and_ Sustainability_Implications_A_Scenario-Based_Analysis_of_the_ Impacts_and_Challenges (downloaded: 28.02.2020) Business Development Bank of Canada 2017: The benefits of Industry 4.0 are real. Retrieved from: https://www.cisco.com/c/m/en_ca/ digital-manufacturing/infographic/benefits-of-industry40.html (downloaded: 01.03.2020) Forschungsunion/Acatech 2013: Securing the future of German manufacturing industry – Recommendations for implementing the strategic initiative INDUSTRIE 4. Retrieved from: https:// www.din.de/blob/76902/e8cac883f42bf28536e7e8165993f1f d/recommendations-for-implementing-industry-4-0-data.pdf (downloaded: 22.04.2020) European Parliament – DG for Economic and Scientific Policy 2016: Industry 4.0 – A study for ITRE Committee, p. 6. Retrieved from: https:// www.europarl.europa.eu/RegData/etudes/STUD/2016/570007/ IPOL_STU(2016)570007_EN.pdf (downloaded: 28. 02. 2020) Garcia-Muina, F. E. – González-Sánchez, R. – Ferrari, A. M. – Settembre- Blundo, D. 2018: The Paradigms of Industry 4.0 and Circular Economy as Enabling Drivers for the Competitiveness of Businesses and Territories: The Case of an Italian Ceramic Tiles Manufacturing Company. Social Sciences, Vol. 7(12), pp. 1-31 Retrieved from: https://www.researchgate.net/publication/329412098_The_ Paradigms_of_Industry_40_and_Circular_Economy_as_Enabling_ Drivers_for_the_Competitiveness_of_Businesses_and_Territories_ The_Case_of_an_Italian_Ceramic_Tiles_Manufacturing_Company (downloaded: 05.03.2020) Hagel III, J. – Brown, J. – Kulasooriya, D. – Giffi, C. – Chen, M. 2015: The future of Manufacturing – Making things in a changing world. Deloitte University Press Lin, K. – Shyu, J. – Ding, K. 2017: A Cross-Strait Comparison of Innovation Policy under Industry 4.0 and Sustainability Development Transition. Sustainability (9) p. 786. Retrieved from: https://www. mdpi.com/2071-1050/9/5/786 (downloaded: 03.03.2020) McKinsey & Company 2010: The Internet of Things. Retrieved from: https://www.mckinsey.com/industries/technology-media- and-telecommunications/our-insights/the-internet-of-things# (downloaded: 04.03.2020)

99 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Pan, M. – Sikorski, J. – Kastner, K. A. – Akroyd, J. – Mosbach, S. – Lau, R. – Kraft, M. 2015: Applying Industry 4.0 to the Jurong Island Eco-industrial Park. Energy Procedia, Volume 75, August 2015, pp. 1536-1541 Retrieved from: https://www.sciencedirect.com/science/ article/pii/S1876610215010814 (downloaded: 03.03.2020) Stock, T. – Seliger, G. 2016: Opportunities of Sustainable Manufacturing in Industry 4.0. 13th Global Conference on Sustainable Manufacturing – Decoupling Growth from Resource Use. pp. 536- 541. Retrieved from: https://www.sciencedirect.com/science/article/ pii/S221282711600144X (downloaded: 29.02.2020) Spectral Engines 2018: Industry 4.0 and how smart sensors make the difference. Retrieved from: https://www.spectralengines.com/ articles/industry-4-0-and-how-smart-sensors-make-the-difference (downloaded: 01.03.2020) World Economic Forum 2019: Why strive for Industry 4.0; Retrieved from: https://www.weforum.org/agenda/2019/01/why-companies- should-strive-for-industry-4-0/ (downloaded: 02.03.2020) Zigurat Global Institute of Technology 2020: IoT and Industry 4.0 – Manufacturing of the Future. Retrieved from: https://www.e-zigurat. com/innovation-school/blog/iot-and-industry-4-0/ (downloaded: 01.03.2020) Zimmermann, T. 2018: Industry 4.0: Nothing is More Steady than Change. In Smart Grid Analytics for Sustainability and Urbanization. Hershey: IGI Global, pp. 1–26. Retrieved from: https://www.igi-global.com/ gateway/book/182354 (downloaded: 04.03.2020)

100 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

III. Security and Defence Policy Issues

101 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

102 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ III.1. Russian gas export towards Bulgaria: inconsistent political response due to energy security challenge

Neli Kirilova38

Abstract

This paper39 examines the relation of state ownership in Russian oil and gas companies, why they are interested in export through Bulgaria as a transit country towards Europe, and why they face an inconsistent political response by Bulgaria since its EU membership. The theoretical body is split in three parts, applying deductive approach. First, the role of state ownership is compared in motivation factors for multinational enterprises of Russia, China, India, and Turkey. Second, the importance of oil and gas companies for Russia is outlined, and the aim for monopoly of Gazprom on European markets. Third, a gap is found in the necessity to examine geopolitical factors shaping the individual interests of different EU Member States concerning energy import from Russia. The empirical part addresses the effects of the energy security strategies of Russia and the EU to the inconsistent political responses of Bulgaria. Among the main findings, three factors are identified to influence Bulgaria’s political decisions regarding its energy security. First, it is the geopolitical location as a transit route for Russia and Turkey towards the EU. Second, it is the high dependence on Russian import, and third, the obligation to follow EU rules for diversification of supply. In this context, it is concluded that Bulgaria could undertake stable political decisions regarding its energy market only if agreed with both Russia and the EU. The opportunities for EU-Russia compromise agreement on the energy security contradiction are examined on the example of Turkish Stream gas pipeline project. Recommendations for further analysis on Russian energy projects towards Bulgaria suggest research on the stability of political affiliation of its governments40.

Keywords: Europe, Bulgaria, Russia, energy, geopolitics?41

38 PhD Candidate – CUB International Relations Multidisciplinary Doctoral School, [email protected] 39 The paper has been written as a result of the CUB course ‘Emerging Asian MNCs Strategies’, with tutor Dr. Szunomár Ágnes 40 The structure of energy relations Russia-Bulgaria-EU is assessed. It does not reflect the change of circumstances due to COVID-19, such as the global fall of petrol price in April 2020. 41 List of abbreviations: EU – European Union FDI – foreign direct investment MNEs – multinational enterprises OFDI – outwards foreign direct investment

103 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ III.1.1. Introduction opportunities for compromise agreement between Russia and Previous studies have the EU, which could contribute explored which are the motivation for a stable political discourse of factors of Russian multinational Bulgaria, and the perspectives for enterprises for outward foreign Turkish Stream, are analysed. direct investment (OFDI) towards Europe, as well as the push and pull III.1.2. Theoretical factors of other leading regional Background investors such as China, India and Turkey. The current paper This section compares the briefly compares the role of state role of state ownership in the main ownership for them, outlining the motivation factors of Chinese, advantages and disadvantages of Indian, Turkish and Russian MNEs state ownership for Russian FDI to expand towards Europe. Then, it in oil and gas companies, with an shows the importance of Russian overview of the main Russian oil state interests in private oil and gas and gas MNEs investing in EU companies, and the need to examine countries. specific examples of Russian export This paper evaluates how to South-East European countries. political changes affect investment in gas-transit pipelines, for example Motivation factors for the change of Russian energy export China, India, Turkey and towards Europe after worsening Russia to invest in Europe the relations with Ukraine. In the case study of Bulgaria, it discusses China. The main motivation why Bulgaria attracts Russian factors for foreign direct investment energy investment, and which of Chinese multinational are the geopolitical reasons for enterprises explained by Schüler- contradictory political decisions Zhou, Schüller, and Brod, are towards Russian energy import. driven by the Chinese government The contradictory interests of which guides the global growth of Bulgaria, due to its EU membership its companies, while the domestic requirement for diversification and market growth is highly restricted. its geopolitical proximity with They see Europe as a target for Russia causing energy dependence, market and asset growth of Chinese are outlined as a source of blocking companies, especially in high-tech political decisions. Finally, the and brand names, while the global

104 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ financial crisis sets welcoming that their main disadvantages are investment climate (Schüler-Zhou, lack of experience and proper Y. et al. 2012). The main obstacle assessment of the foreign markets, in Chinese expansion towards as well as wrong choice of partners Europe is the lack of harmonized and inadequate governmental FDI policy, statistical reporting, policy. The lack of experience and and clear rules for MNEs location knowledge in investing abroad are among the EU Member States, disadvantages for companies not despite the common foreign and supported by the government. The trade policy of the EU (Schüler- private investment structure of Zhou, Y. et al. 2012). The Chinese Indian MNEs considerably slows government is strongly supportive down the process of expansion. for the OFDI of Chinese MNEs. Turkey is a regional power in However, it needs to approve in the EU neighborhood, ‘a natural heir advance which companies and of the Ottoman empire’ (Szigetvári where exactly could invest, using T. 2018 p. 14.). Turkey has specific the economy as a part of its foreign interest in growing its multinational policy strategy for growth and companies towards South-Eastern influence. Europe due to cultural proximity India. In contrast to China’s and minor geographic distance government expansion strategy, (Szigetvári T. 2018 p. 13.). Its the main motivation factors for interest preference is diversified foreign direct investment of Indian towards countries of the Southern multinational enterprises are Caucasus, Balkans, Southern based on India’s family ownership and Eastern Europe based on structure (Gerőcs T. 2017). Gerőcs industry specifics, where Bulgaria argues whether Indian companies is preferred for manufacturing are able to successfully compete (Szigetvári T. 2018 p. 24.) and with dominant Western companies as a main transit road of Turkish within the multipolar economy. export towards the EU (Szigetvári India is closely related to the T. 2018 p. 31.). Among China, British colonization, therefore its India and Turkey, only the least historically inherited competitive is highly interested in investing advantages include cheaper labour in Bulgaria due to its geopolitical market and quickly adopting location. Bulgaria provides for strategies to fit the European Turkey a transport link towards market requirements (Gerőcs T. Western Europe. This is among the 2017). However, Gerőcs argues main pull factors of Turkish MNEs

105 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ investment, based on geographic government, which is the case of and partially cultural proximity. China and Russia, have much more Russia. Weiner sees as chances for successful investment main pull factors for Russia the abroad. They have access to the combination of resources, markets necessary information of how to and strategic assets, considering that approach the foreign market, but control over gas pipelines would also the obligation to adhere to minimize the costs and secure the foreign policy goals of their the export for Russia. Among the country. Looking at the geographic main push factors for Russia are scope of aimed investment, Russia the flight of capital escaping state and Turkey would be the most capture and the unity with Russia’s interested in the South-Eastern part foreign policy aims (Weiner Cs. of Europe due to their geographic 2017 p. 22.). Weiner compares proximity and historical past, which Russian outward companies which would stimulate either rivalry or are mostly private, to the Chinese partnership. ones which are mostly government supported. Nevertheless, he State interests in Russian underlines that Russian embassies oil and gas companies and regularly provide information selection of markets allowing Russian companies to contact the foreign companies, State interests in Russian while in return the Russian state oil and gas companies. In the influences them via oligarchic case of Russia, despite declared ownership (Weiner Cs. 2017 independence of its state-owned p. 25.). Therefore, government energy companies, they comply support is essential for the rapid and with Russia’s foreign policy goals successful expansion of MNEs, but (Jirusek, Vlcek, and Henderson). it is only possible if the company is Oil and gas companies are of highest in line with Russia’s foreign policy strategic importance for Russia, as goals. well as those for defence, electricity Investment in South- and mining (Jirusek, M. et al. 2017). Eastern Europe. Considering The high importance of oil and gas the difference of motivation for Russia means that they could for foreign direct investment in be used as a political instrument multinational enterprises, after for influence. For example, the the brief comparison it is visible Russian oil company Lukoil is that companies supported by the suppressed by the government

106 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ to invest in Kazakhstan (Weiner and economic proximity, as well Cs. 2017 p. 28.), which shows its as administrative and cultural high dependence on governmental similarity (Weiner Cs. 2017 p. 30.). approval. The functioning of More specifically, Weiner considers Russian energy multinational Russia’s investment to be tied with companies follows the principle the presence of Slavic languages of oil companies buying refineries and Russian diaspora, and and gas stations abroad, and attracted by the positive narrative specifically Gazprom investing in for the historical past, which is infrastructure (Weiner Cs. 2017 p. present in Bulgaria. Analysing 44.). Gazprom is found to invest in its neighbourhood investments, Poland via EuROPol GAZ, along Weiner concludes that in the Baltic with Lukoil and Severstal, in the countries Russia faces Swedish Czech Republic via Vemex, in competition, in Poland it faces Hungary through a former Gazprom German competition, while political manager, M. Rakhimkulov and disputes destabilize the investment ownership by Gazprombank of the climate. Due to cultural and Hungarian bank ÁÉB’ (Weiner Cs. linguistic similarity, Russia tends 2017 p. 51.). Gazprom invests in to invest in South-Eastern Europe Slovakia via Vemex, Sofrusgas, the and the post-Soviet space (Weiner oil revenues of Russia via Lukoil, Cs. 2017 p. 37.). Weiner considers Yukos, and Transpetrol prior to that Russian multinationals mainly the privatization in 2002 (Weiner export towards their main trading Cs. 2017 p. 54.), while Slovenia partner - the EU, while the EU would benefit as a transit country weights less importance to Russian of South Stream. However, the import (Weiner Cs. 2017 p. 32.). created single gas and electricity Therefore, in his view, Russia needs market of the EU and the improved the EU’s south-eastern countries climate governance, in the view more than the EU needs Russia, of Deák, is a reason for change of neglecting the fact that Russian this established strategy, leading market could expand towards the to Lukoil selling European assets, East or to address bilateral relations. while Rosneft decreasing European investment (Deák A. 2017). The Gap: geopolitical Selection of markets. The interests of individual EU interest of Russian companies to Member States invest in Europe and Asia depends on location factors such as geographic The particular situation of

107 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ different south-eastern EU Member as a Member State since 2007 States is not widely discussed (Kirilova, N. 2015). This conflict in the literature, especially their of interest results in contradictory consideration due to geopolitical political behaviour of Bulgaria proximity and energy dependence regarding the import of Russian gas on Russia. Therefore, to identify (Kirilova, N. 2015). what are the specific interests of This contradiction raises the such countries, and whether an EU following questions: Why Bulgaria or other alternative could satisfy attracts Russian state-owned oil and the needs of their energy markets gas companies? Why its political should be explored. For this reason, decisions concerning the energy we will focus on the case study of transit pipelines are unstable – Bulgaria to find out whether Russia destabilising its partnership with needs export towards Bulgaria, both the EU and Russia at the same whether Bulgaria needs Russian time? import, whether its EU membership provides a better alternative, or III.1.3. Methodology and other options exist. methods Despite planning diversification energy policies, The methodology is based on the EU import for 2018 is mostly qualitative analysis of secondary from Russia, Norway and Nigeria data through publications in (Eurostat, 2018). By the end of European, Russian and Bulgarian 2019 Russia plans to finish three journals, combined with analysis gas pipelines - TurkStream under of the energy strategies of the EU, the Black Sea, Power of Siberia Russia and Bulgaria. The case towards China, and Nord Stream2 study of Bulgaria is applied to show towards Germany (Cholakov, whether the EU needs Russian P. 2019). A conflict of interest energy import or Russia needs oil appears if any of these routes is and gas export towards the EU. not in line with the EU regulations Bulgaria is examined as a transit for energy diversification. Such opportunity for Russian OFDIs, conflict of interest concerning the followed by an overview of the Russian energy import in Bulgaria Bulgarian energy market. Based on is the result of two main factors - this, it is discussed why Bulgaria its energy dependence on Russian attracts state-owned Russian oil gas and its commitments to comply and gas companies, and why its with the EU energy diversification political decisions concerning

108 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the EU - Russia energy relations 26.). For example, after worsening are unstable. The contradiction the Russia-Ukraine relations in between Bulgarian energy relations 2014, the Russian pipeline projects with Russia and its commitments as Nord Stream and TurkStream had to an EU Member State are examined. avoid crossing Ukrainian territory The opportunities for compromise in supplying the EU with natural agreement between Russia and gas (Cholakov, P. 2019). Therefore, the EU are outlined, and Turkish for Russia exporting gas through Stream in this context. alternative transit pipeline routes became highly important. Raychev III.1.4. Discussion: reasons outlines the importance of energy for contradictory political security within a contemporary decisions of Bulgaria hybrid war, showing the Russian pressure via cut of the delivery to Ukraine which blocks EU delivery; Russian view of Bulgarian dominance over gas fields near energy market – a transit Crimea; presenting itself as a opportunity towards the credible partner, simultaneously EU pursuing alternative energy markets (Raychev, Y. 2017). Through its energy security The Russian point of view strategy and particularly the on Bulgaria as a gas market is transport of gas, Russia implements ambivalent. Russia acknowledges its foreign policy goals in political, the close relations with Bulgaria economic and security spheres due to historical ties, cultural (Nowak, Z. et al. 2015). The similarity and energy dependence foreign investment of Russia, being (Kremlinwatch 2019). But it is a global player, reflects changes in aware of the political divisions the world order and global crises, within Bulgaria, some in support such as the global financial crisis of, while others opposing Russia in 2008, the worsening of Russia- (Kremlinwatch 2019). Russia Ukraine relations after 2014 and defines the current governmental the COVID-19 in 2020. The role stream from Bulgaria as ambivalent, of state ownership is positive in due to pressure of pro-Russian providing guarantees during crises, groups, while vocal criticism but it negatively affects the relations towards Russia is not expressed during interstate conflict due to its (Kremlinwatch 2019). Despite that, control over management presence Russia keeps the monopoly on the and interests (Weiner Cs. 2017 p.

109 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Bulgarian gas market since 1974, Bulgaria’s contradictory currently operated by Bulgargaz, needs: energy dependence delivering to the Bulgarian Energy on Russia, but Holding, while the latest contract diversification required by for supplies dates forth to 2030 the EU (homepage42 of Gazprom Export). A possible reason for this monopoly Bulgaria perceives Russia as is that in Bulgaria, Poland, and a security guarantor rather than a Hungary the energy companies are threat until its EU membership, after either state owned or favoured by the which the amity-enmity relations government, which is an obstacle develop (Hiteva, R. P. – Maltby, to market competition, while prices T. 2014 p. 125.). The National are centrally controlled in line with Security Strategy from 2011 states income (Labelle, M. 2015). Russia that energy stability is crucial, gains a huge part of its taxes via while the dependence on energy energy export - 67%, so it aims to resources leads to vulnerability. support elites in Bulgaria, Serbia, In Bulgaria, diversification of Turkey, Hungary and Germany suppliers and market participants (Cholakov, P. 2019). This would is needed, while state-ownership guarantee positive attitude of these and monopoly create obstacles countries to provide access to their for liberalization (Hiteva, R. P. territory for alternative energy – Maltby, T. 2014). The main transit routes. disparity is between the attitude of Bulgaria towards Russia before being an EU member welcoming Russia´s energy monopoly, and after being an EU member claiming that diversification is crucial for the stability, therefore gas market monopoly is unacceptable. This disparity is a root cause for Bulgaria´s changing attitude towards Russia´s 42 http://www.gazpromexport.ru/en/ energy investments, which is partners/bulgaria/ – 2019. 05. 25. further discussed.

110 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 7: Map of the Bulgarian natural gas pipeline network, which denotes areas with no access to natural gas Source: Hiteva, R. P. – Maltby, T. 2014 p. 124.

The prism of the Regional the energy security to obstacle for Security Complex Theory explains diversifying the energy market by the concept for Russia in Bulgaria, EU model (Maltby, T. 2015). In which changed from a guarantor of line with this argument, Politico

111 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ announced that the reason for a its obligations with the Western fall of the Bulgarian government in allies, not its relations with Russia 2014 was the withdrawal from South (Hanlon, B. 2018). But Bulgaria is Stream gas pipeline project, which nearly 100% dependent on Russian Bulgaria originally supported, but gas import (Nitzov, B. et al. 2010). due to EU requirements, it had to Oil import from Russia to Bulgaria leave (Gardner, A. 2014). Other is rather high, too (Nitzov, B. authors claim that Bulgaria stopped et al. 2010). Hiteva and Maltby the construction of South Stream outline as major deficiencies of the due to pressure not only from the Bulgarian energy policy the delayed EU, but also NATO, opposing to diversification of gas import, slow Gazprom’s leadership of the project liberalization of internal market, (Geropoulos, K. 2014). Among EU legislation, and low residential the main reasons for Bulgaria’s gasification. They examine the hesitative behaviour could be reasons for delay of a strategic the EU avoidance of Russia in its position for national gas pipeline external energy policy, aiming of Bulgaria as a source of power alternative routes and suppliers for opposing stakeholders (Hiteva, (Siddi, M. 2019). Siddi explores the R. P. – Maltby, T. 2014). Indeed, strategic importance of energy for a main challenge in the National the governments, which they aim Security Strategy of Bulgaria from to secure by all means, according 2011 is whether to choose nuclear to strategic EU policies. On this energy or the European Energy background, Bulgaria is considered Market renewables, while the to adapt to EU membership via monopoly of gas supply burdens revising its energy security strategy, the country (Decheva, R. 2015). and responding to unexpected Hiteva and Maltby argue that changes of Russia’s gas supply state ownership of Bulgargaz and in 2006, 2009, and increasing gas Bulgartransgaz, which closely prices (Maltby, T. 2015). collaborate with Gazprom, is an Analysis from 2012 proposes obstacle to the EU legislation, two guiding directions for Bulgaria’s and opposes the Bulgarian Energy energy security policy – to invest in Strategy’s objectives (Hiteva, R. P. green energy or to diversify its gas – Maltby, T. 2014). supply developing own reserves Due to the necessity to (Stefanov, R. – Tsanov, M. 2012). cover contradictory interests, the Some Western authors consider that Bulgarian attitude towards Russia Bulgaria has the duty to implement as a supplier is simultaneously

112 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ supportive and denying. A basic (Raychev, Y. 2017). The main contradiction is that Bulgaria challenge is a contradiction present interrupted two of the energy since Bulgaria’s EU membership projects of Russia, South Stream in 2007. The EU diversification and Belene, while officially not standards and Russia’s gas considering Russia as a threat to monopoly in Bulgaria leave the the security, rather than a “brother country in a stalemate. (Slavic) country” (Raychev, Y. 2017). In 2014 Bulgaria rejected Stability of Bulgaria’s participation in South Stream, the political decisions: via EU predecessor of TurkStream, after – Russia agreement. The the assessment that it did not comply compromise of Turkish with EU regulations (Cholakov, P. Stream 2019), not providing an opportunity for Russian gas pipelines to cross its Explaining the opportunities territory. But it did not state a clear for compromise agreement denial either, showing inconsistent between Russia and the EU is political response towards energy a necessary condition prior to trade with Russia. In 2018 Bulgaria Bulgaria undertaking any decisive explored options to restart joint with action. Both Russia and the EU Russia nuclear plant project Belene, are currently interdependent in assessed in 2013 by the government terms of energy security, looking of the same prime minister as for alternative guarantees for unprofitable and corrupt (Assenova, demand and supply in the long term M. 2018). This contradiction of the (Nowak, Z. et al. 2015). The legal same government is an indication foundation which sets the energy for attempt to serve the unilateral relations between Russia and the interest once of the EU, and second EU is based on several strategic time of Russia. Nevertheless, it documents. After the Russia- does not comply with either of Ukraine gas dispute in 2009, the EU them, showing that Bulgaria could and Russia created an Early warning not defend one single interest under mechanism aiming to prevent the same government, which makes interruptions of gas, electricity, it inconsistent. Externally it is not oil, and to provide communication clear whether Bulgaria opposes (European Commission, 2019). or accepts the actions of Russia, The EU-Russia energy dialogue, for which reason it should clarify set in 2000, was needed by the its national interests and goals EU which imports oil, uranium,

113 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ coal and natural gas, and needed (Pierini, M. 2018). It is possible by Russia which used its markets only in coherence with the EU (European Commission, 2019). regulations, with proven interest of This dialogue was interrupted after Russia and Turkey, and if Bulgaria 2014 due to the crisis in Ukraine. agrees to provide its territory for Both examples show that the EU transit towards Western Europe. and Russia implement an energy Surprisingly, despite its previously dialogue. However, it is not stable ambiguous response, since January due to the lack of stability in 2020, Bulgaria started receiving gas energy transit countries, such as in from Turkish Stream. Due to that, Ukraine. The stability in the EU- Russia decreased the price of gas Russia energy dialogue depends on import towards Bulgaria with 40% the stable political decisions of the in 2020. Analysing this opportunity energy security of transit countries. a year earlier, Bechev thought that Such stability could replace the the attempt of Russia to operate inconsistent political behaviour TurkStream via the Balkans would of Bulgaria regarding its energy not be successful. The geopolitical market, only if it is agreed with advantage for Russia in building both the EU and Russia. TurkStream was deepening the For Russian energy export, relations with Turkey towards the Bulgaria is a country of strategic Balkans and avoiding Ukraine, importance for transit, opening planning to cross Bulgaria, Serbia, access towards Western Europe. Hungary and Austria (Bechev, Due to its geographic location, D. 2019). Opposing Gazprom’s Bulgaria is seen in a similar way by interests, EU monopoly rules did Turkey – as a gas transport corridor not allow a company to own an towards the EU. In the context of infrastructure through which it may unsuccessful energy projects led sell its own gas (Bechev, D. 2019). by Russia, appears the question If the infrastructure was owned of how the gas transit pipeline by the Serbian Srbiajagas and the Turkish Stream could progress Bulgarian Bulgartransgaz, and if successfully. It is an energy export Bulgaria provided the investment project from Russia though Turkey of $1.6 billion which was not likely towards Bulgaria and the EU. Due to receive neither from Moscow, to Turkish Stream, the dependence nor from Brussels (Bechev, D. of Turkey from Russia increases, 2019), it could succeed. But the and the access of Russia to Europe main problem for the EU remained through the Balkans increases - the ownership of gas and transit

114 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ route could not belong to the same still obliged to comply with the EU company, in contrast to Gazprom’s diversification rules. The country interest to own both. needed to either prove interest It could be concluded that in operating the project, or to Russia is highly dependent on withdraw on time, without raising energy export towards the EU, any doubtful expectations. Russia even though it could diversify its already faced Bulgaria’s hesitation routes towards the East. One of in South Stream, the EU also faced the opportunities for a successful the unstable government choices project is Turkish Stream, but it is of the country. It was a matter of only possible if the EU regulations political will to implement one change or if Russia adapts to the stable decision, no matter whether EU standards. This means that approving the project or rejecting Gazprom cannot be simultaneously it. The only way for Bulgaria to the owner of the energy transit prove itself as a reliable partner pipelines and the natural gas. was by defending steadily a certain However, in order to sell shares decision. In recent decades, in the to local companies from Bulgaria light of unstable governance, stable and Serbia, they should possess decisions have been barely possible. enough funding to buy the shares. Therefore, Turkish Stream and any If Bulgaria cannot provide enough other energy transit project planned funding from Russia, or the EU, or to cross the territory of Bulgaria any other source, the project cannot are only possible during internal cross its territory. The fact that political stability. Bulgaria’s gas from Turkish Stream reaches political decisions should be, Bulgaria since January 2020 shows coordinated with both the EU and consensus in the political decision Russia, in the interest of the country. of the country to accept it. However, But the questionable consistency it is not clear how this was funded. of political decisions of Bulgaria’s There is no guarantee how this current government raises doubts would develop in the future. regarding the continuity of their It would be an achievement implementation. if the inconsistent line of political behavior was interrupted. But the III.1.5. Conclusion political uncertainty is a result of the contradictory needs of Bulgaria. The current paper provided It became even more dependent on a wider context of Russian state Russian gas, and at the same time owned MNEs compared with the

115 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ structure of Chinese, Indian and At the same time, the EU requires Turkish MNEs. It explored their Russia to change its approach, motivation to invest in Europe. It which is barely possible. This outlined Russian oil and gas state outlines the complicated situation owned companies Lukoil and of Bulgaria, between energy import Gazprom, reaching the EU markets from Russia and EU requirements and particularly Bulgaria as an for diversification. The only energy transit country. It assessed solution, which would allow the reasons for unsuccessful energy Bulgaria to take a decisive action, transit pipelines through the country, is that Russia and the EU discuss discussing the inconsistent political together with Bulgaria and agree response of Bulgaria after its EU how the energy transit pipelines membership which contradicted through the country to be addressed its dependence on Russian energy in a common approach. monopoly. The findings show that the III.1.6. Recommendations main reason for unstable political behaviour of Bulgaria towards the For further analysis of gas energy projects initiated by Russia pipeline projects, led by Russia is its obligation to comply with the and operated through the territory EU rules for diversification of routes of Bulgaria towards the EU, I and suppliers. At the same time, would highly recommend the Bulgaria remains highly dependent stability of Bulgarian governments on Russia’s energy import, whose to be explored. The reasons for monopoly over the Bulgarian gas change between pro-Russian and markets has been increased since pro-Western attitude of the same 2020. This contradiction captures government should be enlightened, Bulgaria in a position of perplexed and specifically the effect on the own interest, incapable to respond energy security of the country. to the needs of either Russia, or the EU. Specifically, Bulgaria needs Acknowledgement diversification of its markets in order to comply with EU rules. But The present publication is it is highly dependent on Russian the outcome of the project „From energy import, which creates Talent to Young Researcher project a limitation for diversification. aimed at activities supporting the Bulgaria cannot afford to lose research career model in higher Russia as an energy import partner. education”, identifier EFOP-

116 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 3.6.3-VEKOP-16-2017-00007 co- Hungary and the European Social supported by the European Union, Fund.

III.1.7. References

Assenova, M. 2018: The Revival of Russian Energy Projects in Bulgaria, Eurasia Daily Monitor, Vol.15, Issue 96, The James Town Foundation. Available at: https://jamestown.org/program/the-revival-of-russian- energy-projects-in-bulgaria/ Accessed: 06.03.2020 Bechev, D. 2019: Russia’s Pipe Dreams Are Europe’s Nightmare. Foreign Policy. Available at: https://foreignpolicy.com/2019/03/12/russia- turkstream-oil-pipeline/ Accessed: 06.03.2020 Bochkarev, D. 2006: Russian Energy Strategy in Making: General Trends and Political Implications. UCL Presses Universitaires de Louvain Cholakov, P. 2019: Russia’s proposed TurkStream 2 pipeline sparks Bulgaria. EU energy worries. DW World Europe. Available at: https:// www.dw.com/en/russias-proposed-turkstream-2-pipeline-sparks- bulgaria-eu-energy-worries/a-47726458 Accessed: 06.03.2020 Deák A. 2017: Emerging diversity in Russia’s energy relations: What role for Europe?. In The first Ghent Russia colloquium ‘EU–Russia Relations: How to get out of the ‘midlife’crisis?’. Ghent University, Ghent, 22 Sept. Decheva, R. 2015: Energy security and climate change in Bulgaria: The Bulgarian energy market. – In: Stenson, D. E. (ed.): ‘Europe’s Energy Future - How to combine energy security with reduced emissions’. European Liberal Forum Dempsey, J. 2014: Europe’s Energy Strategy and South Stream’s Demise. Carnegie Europe. Available at: https://carnegieeurope.eu/ strategiceurope/57386 Accessed: 06.03.2020 Durzhaven Vestnik 2011: National Security Strategy of the Republic of Bulgaria. – https://www.me.government.bg/files/useruploads/files/ national_strategy1.pdf Accessed: 06.03.2020 European Commission 2009: Early Warning Mechanism. Available at: https://ec.europa.eu/energy/sites/ener/files/documents/2009_11_16_ ewm_signed_en_0.pdf Accessed: 06.03.2020 European Commission 2011: Early Warning Mechanism. Available at: https://ec.europa.eu/energy/sites/ener/files/documents/20110224_ memorandum.pdf Accessed: 06.03.2020

117 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ European Commission 2014. European Energy Security Strategy. COM/2014/0330 final. Available at: https://ec.europa.eu/energy/en/ topics/energy-strategy-and-energy-union/energy-security-strategy Accessed: 06.03.2020 European Commission 2019: Energy. International Cooperation. Russia. Available at: https://ec.europa.eu/energy/en/topics/international- cooperation/eu-cooperation-other-countries/russia Accessed: 25.05.2019 Gardner, A. 2014: South Stream battle brings down Bulgarian government. Politico. Available at: https://www.politico.eu/article/south-stream- battle-brings-down-bulgarian-government/ Accessed: 25.05.2019 Geropoulos, K. 2014: EU – US Bulgaria Squeeze Freezes South Stream, Institute of Energy for South-East Europe. Available at: https:// www.iene.eu/eu-us-bulgaria-squeeze-freezes-south-stream-p697. html Accessed: 06.03.2020 Gerőcs T. 2017: Internationalization of Indian Multinational Enterprises. Motivations, Strategies, and regulation from the experience of Indian investments: a focus on Europe. Centre for Economic and Regional Studies HAS Institute of World Economics. Working Paper Nr. 234, pp. 1–40 Hanlon, B. 2018: Securing Bulgaria’s Future: Combating Russian Energy Influence in the Balkans, Alliance for Securing Democracy. Available at: https://securingdemocracy.gmfus.org/securing-bulgarias-future- combating-russian-energy-influence-in-the-balkans/ Accessed: 25.05.2019 Hiteva, R. P. – Maltby, T. 2014: Standing in the way by standing in the middle: The case of state-owned natural gas intermediaries in Bulgaria. Geoforum 54, pp.120-131 Jirusek, M. – Vlcek, T. – Henderson, J. 2017: Russia’s energy relations in Southeastern Europe: an analysis of motives in Bulgaria and Greece. Post-Soviet Affairs Journal Vol.33, Issue 5, pp. 335-355, Taylor & Francis Online, DOI: 10.1080/1060586X.2017.1341256 Kirilova, N. 2015: Energy policy of Bulgaria in the context of the EU-Russia relations: motivation for decisionmaking. – In: Gas Geopolitics in South-East Europe International Conference. – Sofia: Bulgarian Geopolitical Society, pp. 69–74. Kremlinwatch 2019: Reports: Bulgaria. Available at: https://www. kremlinwatch.eu/countries-compared-states/bulgaria/ Accessed:

118 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 25.05.2019 Labelle, M. 2015: Why Russia wins against the EU’s Single energy market. EnergySCEE. Available at: http://energyscee.com/tag/ bulgaria/ Accessed: 25.05.2019 Maltby, T. 2015: Between Amity, Enmity and Europeanisation: EU Energy Security Policy and the Example of Bulgaria’s Russian Energy Dependence. Europe-Asia Studies Journal Vol.67. Issue 5. Available at: https://doi.org/10.1080/09668136.2015.1046817Acces sed: 06.03.2020 Ministry of Economy, Energy and Tourism of Bulgaria 2011: Energy Strategy of the Republic of Bulgaria till 2020. – https://www. me.government.bg/files/useruploads/files/epsp/23_energy_ strategy2020%D0%95ng_.pdf Accessed: 06.03.2020 Ministry of Energy of Russia 2010: Russia’s Energy Strategy for the Period up to 2030. – http://www.energystrategy.ru/projects/docs/ES- 2030_(Eng).pdf Accessed: 06.03.2020 Naydenov, M. 2017: Hybrid war as a challenge to the national security of Bulgaria. Bulgaria Analytica. Available at: http://bulgariaanalytica. org/en/2017/12/14/hybrid-war-as-a-challenge-to-the-national- security-of-bulgaria/Accessed: 06.03.2020 Nitzov, B. – Stefanov, R. – Nikolova, V. – Hristov, D. 2010: The Energy Sector of Bulgaria. Atlantic Council Brief Issue. Dinu Patriciu Eurasia Center. Available at: https://www.atlanticcouncil.org/publications/ issue-briefs/bulgaria-energy-sector Accessed: 23.05.2019 Nowak, Z. – Godzimirski, J. – Cwiek-Karpowicz, J. 2015: Russia’s Grand Gas Strategy – the power to dominate Europe? EnergyPostEU. Available at: https://energypost.eu/russias-grand-gas-strategy- power-dominate-europe/Accessed: 06.03.2020 Pierini, M. 2018: Russia’s Gas Strategy Gets Help from Turkey. Carnegie Europe. Available at: https://carnegieeurope.eu/ strategiceurope/77855 Accessed: 06.03.2020 Raychev, Y. 2017: Russian hybrid war in Bulgaria. Academia.edu. Available at: https://www.academia.edu/37814158/Russian_hybrid_ war_in_Bulgaria Accessed: 25.05.2019 Schüler-Zhou, Y. – Schüller, M. – Brod, M. 2012: Push and Pull Factors for Chinese OFDI in Europe – In: Alon, I. – Fetscherin, M. – Gugler, Ph. (eds): Chinese International Investments. Part III: Chinese FDI in Europe and North America. Palgrave Macmillan, pp. 157-174

119 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Siddi, M. 2019: The EU’s Botched Geopolitical Approach to External Energy Policy: The Case of the Southern Gas Corridor, Geopolitics Journal, Vol. 24, Issue 1, Taylor & Francis DOI: 10.1080/14650045.2017.1416606 Silantiev, V. – Nurgalieva, N. 2015: Russian Federation: Energy Strategy. Encyclopedia of Mineral and Energy Policy. Spinger-Verlag Berlin Heidelberg Stefanov, R. – Tsanov, M. 2012: Bulgarian Energy Policy. Aspen Review Central Europe, Issue 2. Available at: https://www.aspenreview.com/ article/2017/bulgarian-energy-policy/ Accessed: 06.03.2020 Szigetvári T. 2018: Eastern Europe as investment location for Turkish OFDI, Centre for Economic and Regional Studies HAS Institute of World Economics, Working Paper Nr. 247, pp.1-39 Weiner Cs. 2017: International Expansion of Russian Multinationals. A focus on home-country push factors, Europe and five CEE countries. Centre for Economic and Regional Studies HAS Institute of World Economics. Working Paper Nr. 236, 1–73. Available at: http://vki. hu/wp_236_Weiner_pdf Accessed: 06.03.2020 Weiner Cs. 2018: Pull Factors Driving Russian Multinationals into five CEE countries. Centre for Economic and Regional Studies HAS Institute of World Economics. Working Paper 250, 1–40

Other sources from the internet:

EU – China NGO Twinning Program: – https://www.eu-china-twinning. org EU – China trade flows. Infographic: – http://one-europe.net/ eurographics/infographic-eu-china-trade-flows Gazprom Export: – http://www.gazpromexport.ru/en

120 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ III.2. The End of the Superpower Era – Retrenchment of the USA and the Resurgence of Great Power Politics

Attila Mezei43

Abstract

My paper tries to answer the question what actions should the USA take in order to keep its pre-eminence in the medium to long term future. The 21st century presents the USA with several challenges around the globe and the country needs to adjust its commitments to the new era. I try to examine the balance of power with the help of the neoclassical realist school. The increasingly multipolar world changes the contemporary realities of international relations and with the help of balancing strategies my paper tries to identify how the actions of the United States will shape the international relations in the coming decades. In my opinion, the inevitable retrenchment of the United States will bring back traditional great power politics.

Keywords: USA, neoclassical realism, balance of power, retrenchment, multipolarity

43 Corvinus University of Budapest International Relations Multidisciplinary Doctoral School; Ph.D. Candidate; [email protected]

III.2.1. Introduction The 9/11 terrorist attacks and the USA’s prolonged quagmires The 21st century ushered in in Afghanistan and Iraq were not a new era in international relations. foreseen by the leadership of the The quick dissolution of the Soviet country because their perception Union and the fast integration of about the capabilities of the United Central and Eastern European States were excessive. Quick and countries into the European Union decisive victories were envisaged increased the relative power of in both states by then President the United States tremendously. It George W. Bush (Butt, A. I. 2019). seemed that the unipolar world has However, as the United States finally arrived and the United States got overburdened by the costs of would dominate the world virtually these foreign adventures the balance uncontested. of power started to shift. Russia elected Vladimir Putin, a strong

121 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ president to lead the country out the new challenges of a rising China of its miserable place where it got and a defiant Russia coupled with after the fall of the Soviet Union. a more and more inward looking In addition to that, after the end of American population have caused the 1970’s China’s GDP growth has the United States to re-evaluate been outstanding thanks to several its place in the world. The threats reforms the country implemented to continued global primacy are (Zhu, X. 2012). summarized (Table 2). The costly “war on terror”,

122 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ actors external threats internal threats state Rising China Opportunist Russia non-state „War on Terror” disillusioned population

Table 2: Problems that threaten the global primacy of the United States of America Source: edition of the author

III.2.2. Isolationism or practiced before and after the First Global Leadership? World War cannot be repeated in the 21st century. The international The vast majority of system that the USA built after the international relations experts see Second World War, globalization the problems that the United States and the global interdependence of America, the current strongest of the world economy make it state in the international system virtually impossible to withdraw faces. However, there are different from the world stage as the country approaches to these problems. did a century ago. What does the United States need The post WWII system is still to do in order to ensure its primacy dominant regardless the attempt in the coming decades as well? of emerging (or re-emerging in Isolationism or leadership around case of Russia) powers’ efforts. the globe? The Bretton Woods system ended America faced similar in the 1970s, but the USD is still questions in the 20th century a major reserve currency and its as well. After each world war, role in the international economy is different approaches were adopted. still substantial. No other currency The main question is, what should comes close to its influence on the the USA do now, when the balance international economy. The Russian of power seems to change. In my ruble or the Chinese renminbi opinion, neither isolationism nor are both far behind the USD in global leadership should be the importance. answer. Furthermore, the United Nations is still a cornerstone of the The Case Against system, and every major power is Isolationism heavily invested in maintaining its relevance. There are no alternative In my opinion, the institutions in the world that isolationism that the country substantially threaten the power or

123 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ influence of the post-Second World States cannot withdraw from the War ones. There were initiatives to existing structure. If it would like create rival economic institutions to abandon or decrease its role without the Western powers. The unilaterally, the rising economic most glaring example for an effort powers such as China could utilize to create a quasi-economic alliance the vacuum and fill it, thereby is the BRICS. taking advantage of the system This informal group of states and exerting influence through it comprising Brazil, Russia, India, with relative ease. Additionally, China and South Africa could have the cautionary tale of the League been the most threatening initiative of Nations serves as a powerful to the power of the United States. analogy that dissuades the United However, the threat of combining States to leave the international the major emerging powers never structure. The story of the League really materialized. Nowadays showed that without the backing thanks to the different growth of of the great powers another major its members the BRICS countries conflict could broke out. do not seem to be successfully Those who see problems the cooperating against the USA. Its country faces (Table 2) can reach alternative international financial the conclusion that a major step institution the New Development back from the world stage would Bank (NDB) which intended to release the burdens the United provide an alternative to the IMF States has to carry thanks to its and World Bank has only a capital global engagement. The USA pays of $100 billion (Harper, J. 2019). In a lot financially in order to maintain comparison the IMF has more than the international institutions it two and a half times more money to helped to create. However, the distribute immediately if necessary United States cannot relinquish its (Wroughton, L. 2010). global commitments from one day In addition to the weak to another. Its defence umbrella alternative institutions that the rivals and its alliance systems keep a of Western states half-heartedly lid on a lot of problems. Nuclear started, all the major powers stayed proliferation and regional rivalries committed to the above mentioned would multiply if the United international institutions (UN, IMF, States withdrew its forces and WB etc.) that are the cornerstones commitments rapidly (Hicks, K. of the post-WWII international 2020). system. This means that the United

124 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ The Case Against Global the new president, and the new Leadership 2020 presidential election seems to follow the pattern of a decreased Isolationism seems not to be importance of foreign policy as an option. Should the United States well. Trump’s approach to foreign continue to be a global leader as was policy has not changed. The debates practiced during the presidency of among the leading Democratic George W. Bush? After the end of candidates were heavily focused the bipolar world, for nearly three on domestic issues and the topic decades the United States has vastly rarely changed to the foreign policy extended its commitments and its realm. Former Vice President Joe military deployments (Wertheim, Biden stresses the importance of S. 2020). American leadership around the The era of seemingly globe (Biden, J. R. 2020). As of this unchallenged unipolarity has ended, writing the former VP is defeated and the country seems to show the all of his rivals and he is the leading symptoms of overextension. The democratic candidate for presidency U.S. presidential election of 2016 (homepage44 of FiveThirtyEight). showed that the American people Even if Joe Biden would win the would like to leave global leadership 2020 US election, his rhetoric is behind. Trump won the presidency focused more on relying on allies with a nationalist and more inward rather than on going in alone. looking message. Global leadership Furthermore, Congress would be a and extension of external check on Mr. Biden’s more active commitments are especially hard in foreign affairs, because a vast a democracy where the voters are portion of the American population disillusioned. The prolonged and would not support a foreign policy unsuccessful endeavours to topple similar to the approach of President hostile governments and non- George W. Bush. state actors in the Middle East and The second top democratic replace them with strong friendly contender (who dropped out of the democracies failed to convince the race, but had a lot of support in voters to commit more resources the beginning of the Democratic around the globe. A lot of them primary) Bernie Sanders would wanted Trump’s “America First” not have changed the course of the approach (Kagan, R. 2018). More than three years have 44 https://projects.fivethirtyeight. passed since the inauguration of com/2020-primary-forecast – 2020. 03. 23.

125 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Trump administration’s ‘America independent variable as neoclassical First’ approach a lot. The former realists suggest. (Gideon, R. 1998 candidate would have implemented pp. 149–151.) a more value based foreign policy, although it would have backed this III.2.3. Balance of Power approach by diplomacy. Sanders (as well as Trump) would like to avoid I argued against the two another endless war, and would extremes: isolationism and global even roll back support for regimes leadership in the chapters above. that have been important U.S. allies The international system and the for decades such as Saudi Arabia. balance of power is constantly (homepage45 of Bernie Sanders) changing. This change explains the It seems that the American behaviour of states that is why it public left the idea of the global is important to define it carefully. leadership behind. If the public The balance of power as a concept does not endorse this policy the aims to describe the production of leadership of the country cannot certain constellation of forces in go down a path that resembles the the international system. Several course of American foreign policy international relations scholars tried in the 1990s and early 2000s. to capture this phenomenon. My This domestic factor cannot definition of the concept of what be left out of the equation when balance of power is: An inherent it comes to evaluating the foreign tendency of international politics policy of the country. Structural to produce a certain distribution theories lack the importance of of power that is acceptable by the unit level factors and emphasize major players of the world. the international system instead The distribution of power of paying attention to the internal in the beginning of the 21st characteristics of the states. century is no longer acceptable However, Innenpolitik theories for several major stakeholders in overemphasize the importance of the international system. States as domestic variables over systemic China and Russia feel themselves ones. In my opinion this approach emboldened to challenge the status is flawed as well, because the quo and the factors (Table 2) explain relative power should be the chief the behaviour of the United States. The seemingly unchallenged global 45 https://berniesanders.com/issues/ primacy of the USA has ended responsible-foreign-policy – and the country has to adjust its 2020. 03. 02.

126 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ course of action accordingly. On and the presidential races of 2016 the surface the United States is and 2020 show) disillusioned about still the primus inter pares, but the the constant overseas engagements. perception of relative power has Domestic factors such as this changed over the years. heavily affect the USA’s foreign I use the neoclassical realist policy decision making. school to analyse the situation, On one hand, structural realist because I think it describes the theories have a hard time explaining different foreign policy choices of the changes in contemporary the major powers better than other international relations. Offensive international relations theories. realism would prescribe the United In my opinion structural realist States an approach that is more theories (neorealism, offensive direct without leaving certain parts realism, defensive realism) do not of the world behind. In contrast, the take into account the unit level decreasing influence of the country factors that influences the foreign in the Middle East is a good policy decision making. And example of a decline in influence Innenpolitik theories highlight the and a strategic modest withdrawal domestic factors and downplay the from a region thanks to mainly importance of the systemic forces. domestic factors. In addition, The systemic pressures on defensive realism would suggest the United States would encourage that China and Russia would not more engagement without leaving have made several risky steps in several parts of the globe to order to upset the balance of power. be handled by allies. The main The annexation of Crimea and the thesis of John J. Mearsheimer’s Chinese activities in the South offensive realism is that states look China Sea are glaring examples that for opportunities to gain power. defy the logic of defensive realism. And defensive realism claims On the other hand, that preserving power rather than neoclassical realist theory suggests increasing it is the main goal of as the relative power of a state rises, states (Meirsheimer, J. 2014 p. 21.). it will seek influence abroad. This The United States has been is clearly the case with Russia and worrying too much about too many China and as the perceived relative problems connected to foreign power of a state such as the USA policy in the past century (Waltz, K. falls, its action and ambition will be N. 2008 p. 328.). This has made the scaled back accordingly. (Gideon, country’s population (as Table 2) R. 1998 p. 152.)

127 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ It does not matter that the means the United States has to alter absolute power of the United States its course if it would like to maintain does still overshadows China’s and its position as the strongest state in especially Russia’s. Both of the new the international system. contenders would like to challenge Balance of power theory the United States even though their suggest several approaches to the material and military capabilities in problems the United States faces. absolute term are dwarfed by the Table 3 shows how the threat USA. The perceived relative power of China and Russia has been of China and Russia has been encountered recently. increasing and this phenomenon

type mechanisms objectives examples confront/ formal alliances balance Triple Alliance vs. Triple Entente hard matching arms build- powerful/ Allied vs. Axis Powers balancing ups threatening NATO vs. Warsaw Pact state coordinated military restrain limited activity, short of power/ China vs. U.S. hard formal alliances threatening India and U.S. vs. China (2010-) balancing limited, asymmetrical behaviour arms build-ups restrain limited institutional Concert of Europe (1815-53) soft power/ alignments Russia and China vs. U.S. (1996-) balancing threatening informal ententes India and Japan vs. China (2014-) behaviour

Table 3: Types of Balancing Source: Paul, T. V. 2018 p. 22.

III.2.4. Retrenchment world without spheres of influence, and based their actions accordingly. The United States has been However, the Trump administration trying to save the world order de facto departed from this point of and its position with limited hard view. I agree with an international balancing and soft balancing relations scholar, Graham Allison’s behavior (Table 3). The George assessment that now is the time to W. Bush and Barack Obama return to great power politics and administrations emphasized a revive the approach of spheres

128 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ of influence in the coming years Russia, another regional power (Allison, G. 2020). Turkey also stepped in as a major This means that the United player in the Syrian civil war States has to rely more heavily on (Feaver, P. – Inboden, W. 2019). In its allies to carry out operations addition to that Turkey and Russia especially in the anti-terrorist front are both active in Libya as well to relive pressure on the country. (El-Gamaty, G. 2020). This part A good example for this approach of the world is not the major realm is France’s operations in Africa, the United States should focus its especially in Mali (Melly, P. 2019). resources. It should leave great The alliance system of the power politics to decide the future United States is extensive and of these regions instead of trying to leaves no corner of the world solve the problems by itself. behind. The country can utilize The relative perceived power these relationships to contain the of the USA declined since the war external threats. It shall retrench on terror started in the beginning from positions that are not vital to of the 21st century. Now, with a its national interest. The question is: more inward oriented president the what are the regions and problems country is beginning to withdraw that the United States should no from Afghanistan and hopes to longer waste resources solving? find a resolution to the 18-year- The internal factors of the country long war. It is not the outcome the pushes it out of regions such as the country hoped for in the beginning Middle East. Several endless and of combat operations, but it can costly wars threaten the president’s relieve a lot of stress and burden perceived leverage in the foreign from the shoulders of the country policy questions concerning the (Gazi, S. 2020). region. Furthermore, the EU, the In addition to the domestic United Kingdom, Australia, Japan, pressures, Russia entered the South Korea and Canada are all region through its ally: Syria. The major allies of the United States resurgence of great power politics with substantial economic and is the most visible in the Syrian military might. Even though the civil war. The country is not vital to Trump administration withdrew the the United States’ national interest USA from the TPP (Trans-Pacific and the Trump administration has Partnership), the trade deal was tried several attempts to withdrew salvaged. Australia, Canada and from the troubled region. Besides Japan led efforts to preserve the

129 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ deal to create a free-trade zone of overseas military bases and military 500 million people with 11 member operations in multiple countries cost states. In addition to these countries a lot. The comparative advantages Colombia, Indonesia and South over other societies have been Korea signalled their interest to join undercut by the diffusion of the the TPP. These steps show how the country’s economic, technological, allies of the United States could fill and organizational skills. In the place of the country in regions comparison, the rising states on where the country needs to scale the periphery such as China enjoy back its presence. (Daalder, I. H. – lower costs, rising rates of return Lindsay, J. M. 2018) on its resources and the advantages of relative backwardness. The III.2.5. Resurgence of Great constant high growth rate of China Power Politics has been increasing its relative position in the international system The second half of the 21st that produces a disequilibrium century and the beginning of the (Gilpin, R. 1981). 21st brought different eras in This disequilibrium is international relations. Now the balanced by the United States and inherent tendency of international its allies (Table 3). Compared to the politics produces a new past, the difference is the relative constellation of world order that position of the United States in the emphasizes great power politics system. In the coming decades the more than in the recent decades. country has to rely more and more As the relative power of the United on its allies to carry out the tasks of States declines, new challengers maintaining the liberal world order. appear on the international scene. The partial withdrawal otherwise The American taxpayers seem no known as retrenchment of the USA longer interested in paying virtually paves the way for the revival of alone the bill of maintaining the spheres of influence from their current liberal world order. The slumber. As the example of France United States has been encountering shows, the former colonial power both internal and external factors carries out anti-terrorist operations that increase consumption and the on the ground with its own forces costs of protection and production. in its former sphere of interest. The If we take a look at the enormous USA should pay special attention military budget of the country it is to rival great power’s overseas easy to see that maintaining several military bases. China’s base in

130 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Djibouti is troubling (Headley, My paper tries to show T. 2018). The USA should use the external and internal factors its alliance system and already that lead the strongest state in the existing international institutions international system to re-evaluate to counter the spread of foreign its positions around the globe. The military bases of its competitors. seemingly uncontested primacy The Russian naval base in Tartus of the United States enabled the (Syria) is a good example how country to send its military into these facilities can help expand the conflicts that cost a lot of resources. power projection capabilities of a These engagements drained the great power (Karmanau, Y. 2019). USA and its voters and made These foreign bases are much more them disillusioned about foreign important tools for influencing the endeavours. Furthermore, China and balance of power than the weak Russia have perceived their relative alternative institutions the emerging power grew in the international powers tried to create. system. This phenomenon has been Russia is active not just in making them challenge the position Syria, but in Europe as well. Eastern of the United States in the system. and Central European countries are The USA has been trying to threatened the most by the resurgent balance and maintain its dominant Russia. The sanctions of the EU position around the globe with and the increased military spending soft balancing and limited hard of European NATO member states balancing. (Paul, T. V. 2018 p. 22.) shows the burden-sharing of the On the surface, this strategy can alliance that seems to take place. remain the same. The country has (Beswick, E. 2019) Even though a wide alliance system across the the United States no longer has the globe. position it held in the 20th century, However, the approach to its allies have major military and foreign policy and the international economic potential. The USA system needs to be changed. The should encourage its allies to take United States needs to retrench up more responsibility to maintain from regions that are not vital to the current international system and its national interest and share more not let rival powers get opportunities burden of maintaining the dominant to grow without balancing them. position in the system with its allies. European allies can help contain III.2.6. Conclusion Russia since they are the ones who are the most incentivized to do so.

131 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ France and other stakeholders can military might to balance against help mitigate the threat international rising powers and keep them in terrorist organisations pose. check. If they miss this opportunity, Australia, Japan, South Korea and and follow outdated strategies, their other allies can use their economic relative position in the international power to contain China. system will deteriorate. These developments have been resurrecting spheres of Acknowledgement influence. The coming decades will no longer resemble the virtually The present publication is unipolar position of the USA as the outcome of the project „From was the case in the 1990’s and Talent to Young Researcher project early 2000’s. In my opinion the aimed at activities supporting the resurgence of great power politics research career model in higher is inevitable. The United States education”, identifier EFOP- and its allies can maintain their 3.6.3-VEKOP-16-2017-00007 co- pre-eminence in the international supported by the European Union, system with burden-sharing. These Hungary and the European Social states can use their economic and Fund.

III.2.7. References

Allison, G. 2020: The New Spheres of Influence – Sharing the Globe With Other Great Powers – Foreign Affaris, March/April 2020, Volume 99, Number 2.: pp 30-40. Beswick, E. 2019: EU countries increase military spending due to ‘growing perceptions of Russia threat’: report: Euronews https:// www.euronews.com/2019/04/29/eu-countries-increase-military- spending-due-to-growing-perceptions-of-russia-threat-report Accessed: 04.03.2020 Biden, J. R. 2020: Why America Must Lead Again – Rescuing U.S. Foreign Policy After Trump – Foreign Affairs, March/April 2020, Volume 99, Number 2.: pp 64-76. Butt, A. I. 2019: Why did Bush go to war in Iraq? – Al Jazeera https://www. aljazeera.com/indepth/opinion/bush-war-iraq-190318150236739. html Accessed: 26.02.2020 Daalder, I. H. – Lindsay, J. M. 2018: The Committee to Save the World Order – America’s Allies Must Step Up as America Steps Down –

132 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Foreign Affairs, November/December 2018, Volume 97, Number 6.: pp 72-83. El-Gamaty, G. 2020: Turkey, Russia and the Libyan conundrum – Al Jazeera News https://www.aljazeera.com/indepth/opinion/turkey- russia-libyan-conundrum-200118144000930.html Accessed: 09.03.2020 Feaver, P. – Inboden, W. 2019: The Realists Are Wrong About Syria – Foreign Policy.com https://foreignpolicy.com/2019/11/04/the- realists-are-wrong-about-syria/ Accessed: 08.03.2020 Gazi, S. 2020: US-Taliban truce begins, raising hopes of peace deal – Al Jazeera News, https://www.aljazeera.com/news/2020/02/pact- taliban-reducing-violence-start-saturday-200221094340829.html Accessed: 04.03.2020 Gideon, R. 1998: Neoclassical Realism and Theories of Foreign Policy – World Politics, Volume 51, Issue: 1, pp 144-172. Gilpin, R. 1981: War and Change in World Politics – Cambridge: Cambridge University Press, ISBN 0 521 27376 5 Harper, J. 2019: Have the BRICS hit a wall? – Deutsche Welle, https:// www.dw.com/en/have-the-brics-hit-a-wall/a-51182058 Accessed: 23.04.2020 Headley, T. 2018: China’s Djibouti Base: A One Year Update – The Diplomat https://thediplomat.com/2018/12/chinas-djibouti-base-a- one-year-update/ Accessed: 27.04.2020 Hicks, K. 2020: Getting To Less – The Truth About Defense Spending – Foreign Affairs, March/April 2020, Volume 99, Number 2.: pp 56- 62. Kagan, R. 2018: ‘America First’ Has Won – The New York Times, https:// www.nytimes.com/2018/09/23/opinion/trump-foreign-policy- america-first.html Accessed: 02.03.2020 Karmanau, Y. 2019: Russia plans to invest $500 million in its only navy base outside the former Soviet Union – here’s what it’s like there – Business Insider https://www.businessinsider.com/base-in-syria- helps-russia-expand-presence-in-mediterranean-2019-9 Accessed: 27.04.2020 Meirsheimer, J. 2014: The Tragedy of Great Power Politics, New York, Norton, ISBN 978-0-393-34927-6 Melly, P. 2019: Why France is focused on fighting jihadists in Mali – BBC. com, https://www.bbc.com/news/world-africa-50558972 Accessed:

133 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

134 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 03.03.2020 Paul, T. V. 2018: Restraining Great Powers: Soft Balancing from Empires to the Global Era, Yale University Press, ISBN 9780300228489 Waltz, K. N. 2008: Realism and International Politics – Routledge, 1st edition, ISBN13: 978-0-415-95478-5 Wertheim, S. 2020: The Price of Primacy – Why America Shouldn’t Dominate the World – Foreign Affairs, March/April 2020, Volume 99, Number 2.: pp 19-29. Wroughton, L. 2010: Q+A – How much money the IMF have? Reuters https://www.reuters.com/article/idINIndia-48574720100518 Accessed: 23.04.2020 Zhu, X. 2012: Understanding China’s Growth: Past, Present, and Future – The Journal of Economic Perspectives, vol. 26, no. 4, 2012, pp. 103- 124. www.jstor.org/stable/23290282 Accessed: 26.02.2020

Other sources from the internet:

Bernie Sanders: – https://berniesanders.com FiveThirtyEight: – https://projects.fivethirtyeight.com

135 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ III.3. Building Resilience as a Security Strategy for Donors and Hosts: The Case of the EU and Jordan concerning the Syrian Refugees

Aleassa Lina Dhahi Salibah46

Abstract

Resilience became a cornerstone of the 2016 EU Global Strategy on Foreign and Security Policy (EUGS), which refers to building state and societal resilience among EU neighbors as one of the key strategic priorities of the EU foreign policy, as well as an immigration combat tool, especially, after the 2015-2016 immigration crisis. Thus, building resilience aims to secure the EU and its neighbors. Thus, this paper’s question is What are the implications of building resilience as a security strategy for the donors in case of the EU and Syrian refugees hosting countries in case of Jordan? Although, the EU’s approach toward building resilience has been criticized as jeopardizing the national security of the hosting countries by affecting the economy and the social cohesion of the hosting countries, however, in this paper, based on document analysis from official websites for the EU and Jordan, and textual analysis, I argued that the implications of building resilience for the donors in case of the EU is that it is a strategy to achieve security on the national level while for Jordan as a hosting country, it is a strategy to achieve security on the national and humanitarian level.

Keywords: resilience, the Syrian crisis, national security, humanitarian security

46 PhD Student – CUB IR Doctoral School, [email protected]

III.3.1. Introduction High Commissioner describes the Syrian crisis (Grandi, F. 2020). “Syria is the biggest Nine years have already passed humanitarian and refugee crisis this on-going war in Syria with of our time, a continuing cause of no glimpse of a light at the end of suffering for millions which should the tunnel. Since 2011, the world be garnering a groundswell of has been watching one of its worst support around the world.” This is crises ever, with no signs of a how feasible peaceful resolution for the Filippo Grandi, UNHCR conflict in the near future. Until now,

136 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 400.000 people have been killed one of its five priorities of foreign since 2011 as estimated (Council and security policy as emphasized on Foreign Relations, 2020) in its 2016 Global Strategy (EUGS) ,millions have become displaced (European Union Extrenal Action, in their home, other millions have 2016). become refugees. The United Nation Refugee Agency (UNHCR) This shift was in parallel to has registered over 5.6 million the international community’s shift Syrian refugees mostly in Turkey, to building resilience of the refugees Lebanon and Jordan, Iraq and and the hosting communities in Egypt (The United Nations High response to the Syrian crisis , 2015 Commission for Refugees, 2020). Regional Refugee and Resilience While some of those refugees Plan (United Nations Development have dangerously managed their Program, 2019) .Hence, Building way through the Mediterranean to resilience as illustrated by the Europe, the majority remain in at commission as the ability of the the neighboring countries including states, societies, communities and Jordan. individuals to manage, tackle, adapt, and recover from shocks For this reason, the on-going and crises (European Commission, war in Syria does not only affect 2012) became the new approach Syria alone, but it has drastic for the EU and the international consequences on the whole region. community in response for this As for Europe , the ongoing crisis crisis. For this reason, this paper’s cannot be separated from its 2015- main question is. 2016 Europe Migrant Crisis , also known as the refugee crisis, when III.3.2. What are the Europe received more than 1.3 implications of building million asylum seekers, of whom resilience as a security 378,000 were Syrians , accounting for 29% of all of Europe’s asylum strategy for the donors in seekers , the highest share of any case of the EU and Syrian country (Pew Research Center , refugees hosting countries 2016). This crisis made the EU adopt in case of Jordan? a different approach to respond to its current problems, in particular, In order to answer this the refugee crisis. Hence, building question, the paper will proceed as the first section addresses ׃state and societal resilience became follows

137 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ how the Syrian refugee crisis has the EU’s empirical approach for been securitized to be considered building resilience in Jordan. For as a threat for both Jordan and the this reason, this paper primarily EU and the need for a different builds upon the analysis of various response. The second section texts, including oﬃcial EU’s and conceptualizes resilience, traces its Jordanian policy documents, origin and mapping it in the EU’s websites, NGO’s websites, NEWS humanitarian and development reports, and scholarly literature. policy, to understand the EU’s building resilience characteristics. III.3.3. Securitizing the Next, the paper proceeds to map Syrian Refugee crisis resilience in the EU’s foreign and security policy, tracing the context The impact of the on- of the EU’s-Jordan relation and going war is not only restricted to analyze the shift in the EU’s foreign Syria, but also the whole region and security policy in terms of its including Jordan. The sudden relations with its southern neighbors influx of refugees has magnified the including Jordan; this shift that country’s own problems; as Jordan moves from a duty-responsibility is a middle-low class country approach to a threat-responsibility with a very limited resources, an approach as illustrated in building increasing rate of poverty and a resilience. The following section high rate of unemployment amid a provides empirical insights on the region of turmoil, the Syrian refugee EU’s building resilience in Jordan crisis has placed financial, social, and some evidence on the ground. and institutional strains on Jordan Next, the significance of building as a host community. The latest resilience in response of the crisis Jordanian census of November for both Jordan and the EU is 2015 shows that there are about illustrated. Finally, the conclusion 1.4 million Syrian refugees in the and the implication for policy country’s different governorates. makers and upcoming research in As of April 2020, there were regard of resilience. 656,213 registered Syrian refugees and asylum seekers in Jordan by As for the methodology of the (UNHCR) (The United Nations this paper, a descriptive mythology High Commission for Refugees, is used to describe building 2020) which means that more than resilience, the characteristics of 50% of Syrian refugees in Jordan the EU’s resilient approach and are unregistered. The majority of

138 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the 656,213 Syrian refugees in and Azraq- consisting 16% of the Jordan live in the local communities total Syrian refugees registered rather than refugee camps. Out with UNHCR. The distribution of the registered Syrian refugees, of registered refugees in Jordan only (123,366) live in the official within the camps and the Jordanian camps for the Syrian refugees in governates according to the UNHR Jordan -Zaatari, Margeeb Alfhood, in March 2020 (Figure 8).

Figure 8: UNHCR Registered Syrian in Jordan April 15 2020 Source: Operational Portal Refugee Status UNHR, 2020

It is in the light of this and host communities. For this the distribution of refugees within reason, conceptualize national and the local communities that the humanitarian security is crucial for Syrian refugees are securitized and this paper to see how the refugees might be considered as a threat to were securitized. the socio-economic stability, social A classical definition of cohesion, political stability of the security has been an issue of debate, kingdom, its national security, especially from a realist view of and the humanitarian security of security which recognizes the state the refugees and the Jordanian as the main actor, and survival

139 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ as its ultimate objective, thus, it disasters and pollution; personal: simplifies the complex concept of implementing measures against security as almost a „synonym for physical violence, crime, terrorism, power”. Therefore, the concept domestic violence and child of security emphasizes the use of labor; community: implementing force and military power to deal measures against inter-ethnic, with external threats and ensure religious and other identity tensions; the survival of the state (Buzan, B. and political: measures against 1983). In addition, Joseph J. Romm political oppression and human indicates that the phrase ‘’national rights abuses (Human Security security’’ was not so often used until Unit, United Nations , 2009). World War II in the 1947 National For this reason, Buzan, Security Act, which established the Waever and Wilde categorize sectors National Security Council (Romm, of security analysis as follows: J. J. 1983). military -political security which Yet, the concept of security is the framework for the stability has been broadened after the cold of states, organizational systems of war, because threats were not only government and ideologies that give restricted to traditional military them legitimacy; economic security threats, but also of economic, and its essence is the access to the political, social, environmental resources, finance and markets form. The United Nations necessary to maintain suitable Office for the Coordination of levels of welfare and state power; Humanitarian Affairs (OCHA) societal security is concerned with expanded the definition of security sustainability and satisfied level of calls to emphasize the humanitarian development; and environmental security. Hence, security also covers security (Buzan, B. et al. 1997). tackling different threats including; The impact of the Syrian economic: indicates the need of refugees on Jordan can only be the creation of jobs and applying understood within the framework measures against poverty; Food: proposed by Buzan. The scope of applying measures against hunger this paper cannot cover in details and famine ;health: implementing the impact of the refugees on measures against disease, unsafe Jordan; the socio-economic impacts food and lack of access to basic of massive number of refugees and health care ;environmental: their pressure that burdened the implementing measures to address poor infrastructure of the country, environmental degradation, natural the extra demand on water, energy,

140 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ shelter, educational and health strict policy in front of refugees services, the competition on the (Rasheed, A. – Beaujouan, J. 2020). labor sector that had burdened the Consequently, refugees can country, the political and security be seen as a threat to Jordan on the impacts as the country is a part of a national and humanitarian level. coalition that targets terrorist groups As for Europe, the ongoing crisis and combats extremist radical cannot be separated from its 2015- ideologies, a threat to its internal 2016 Europe Migrant Crisis, also and external security is likely to known as the refugee crisis, when happen as al Rukban attacks (BBC Europe received more than 1.3 News 2016). This reason forced million asylum seekers, from which Jordan to adopt different policies 378,000 were Syrians, accounting to deal with security challenges in for 29% of all of Europe’s term of refugees from an open door asylum seekers, the highest share policy at first to more tightened and (Figure 9).

Figure 9: Number of first-time applications to Europe from countries of origin with a long -lasting conflicts in thousands (Syria, Iraq and Afghanistan from 2013 to 2015) Source: Pew Research Center, 2016

This chart illustrates the with other conflicted countries, it security fears of a new wave of has the highest share of applicants refugees to Europe especially .The securitizing of refugees as from Syria, when in compared a threat to Europe as they might

141 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ affect its social cohesion, fears five priorities and a key security from terrorists among refugees or policy (European Union Extrenal terrorist attack, beside the problem Action, 2016). of securing its borders in the face of Resilience as a word stems new wave of refugees. from the Latin word “resilire.” All of these can make “Salire” means to leap or jump; the refugees as a threat to Europe’s suﬃx “re” indicates repetition, or national security. For this reason, backward motion. As for its origin, and in parallel to the absent of a resilience is often traced back and foreseeable solution in the near attributed to the ecologist Holling future for the crisis, building who used the concept to refer to resilience of the refugees and the the ecological systems’ ability host community became the new to absorb change and disruption national, regional and international (Holling, C. S. 1973; Walker , approach in response of the Syrian J. – Cooper , M. 2011). Others refugee crisis for both Jordan and have emphasized the important Europe. The following section will contributions from psychology, conceptualize resilience as a term where resilience implies a shift in and its use in foreign and security the focus from vulnerability and policy for the EU and Jordan. deficits to protective factors and adaptive capacities (Bourbeau, P. III.3.4. Conceptualizing 2013). resilience Risk scholars as the risk scholar Wildavsky, illustrated The crisis of the Syrian and defined resilience as “the refugees does not only represent a capacity to deal with unanticipated humanitarian crisis, but moreover, dangers after they have become after the Europe Migrant Crisis , manifest, learning to bounce back” also known as the refugee crisis, (Wildavsky, A. 1988 p. 77.). which began in 2015, the European Consequently, resilience also found Union (EU) has taken the migration a home in the natural disasters and displacement as key priority in studies. the 2016 European Union Global As for the EU, building Strategy (EUGS) for Foreign and resilience has been integrated Security Policy. In other words, in into the EU humanitarian and order to respond to such a crisis, the development policy by the EU EU has adopted building resilience Commission from 2012, as it was of states and societies as one of its understood as the capability of

142 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ states, societies, communities and crises. Borrowing from the Global individuals to manage ,tackle , Alliance for Resilience Initiative, adapt, and recover from shocks it confirms that resilience-based and crises (European Commission, approach is the base to reduce 2012). However, it is important vulnerability, in particular, to to be mentioned here that the EU climate change-induced disasters was not the only one to consolidate (Tocci, N. 2019). resilience to its policies, others like In the Conclusion of the the UN, the US and other NGOs Council of the European Union on have also adopted it, but it is beyond The EU Approach to Resilience in the scope of this paper to trace the 2013, resilience has been stretched resilience history for them. to be more comprehensive; it was On the other side, mapping not only restricted to natural crisis, resilience in the EU humanitarian but also resilience to other kinds and development policy, as will of crisis including, for instance, be illustrated in the following conflicts and weak governance. section, is crucial to understand the More importantly, the council has characteristics of the EU building highlighted two important aspects resilience and how it is applied on of building resilience. Firstly, the its Foreign and security policy. humanitarian and development nexus and the significance of Mapping resilience in the their actors working together; EU humanitarian and secondly, the Council’s emphasis development policy that building resilience requires working closely with local Since its publication of communities, civil society, local The EU Approach to Resilience: authorities, and the private sector. Learning from Food Security Crises Nevertheless, it recognizes that in 2012 (European Commission, resilience is an overall national 2012), the European Commission government responsibility (Council has systemically used the term in of the European Union, 2013). its humanitarian and development Following that shortly, the policy. In this document, the European Commission published Commission has illustrated that the Action Plan for Resilience in resilience is the ability of the Crisis Prone Countries, designed states, societies, communities and to reinforce the momentum of individuals to manage, tackle, the resilience agenda (European adapt, and recover from shocks and Commission, 2013).The

143 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ importance of this document as present possibilities and chances Tocci confirms is that the three for development, which can be read characteristics of the EU building as a precursor for the EU framing resilience are clearly notable. refugees as an economic asset and First, the plan affirms that all EU a development opportunity for the s hosting states. This can׳actors (humanitarian, development, refugee political) should work diﬀerently be found in later policy documents and more eﬀectively together like Lives in Dignity: From Aid- to achieve resilience objectives. dependence to Self-reliance: Forced Second, it asserts the responsibility Displacement and Development of the national and local government (European Commission, 2016). to achieve resilience, which implies Growing concerns over the refugee the need for integrating resilience in and migration crisis in 2015 paved national policies and planning for the way for this policy which aims development. In addition, the plan to fostering the resilience and asserts that a resilience approach self-reliance of forcibly displaced has to be sustainable, multi- people. sectoral, multi-level, multi-partner, This illustration was crucial s׳and jointly planned by the people, in order to understand the EU communities, or governments at approach towards resilience and its risk (Tocci, N. 2019). characteristics, and since this paper Third, a resilience approach aims to illustrate resilience as a is characterized as people- security strategy of the EU towards centered and focused on the most the Syrian refugee crisis, the vulnerable groups .The indication following section addressing and is that resilience does not only mapping briefly the EU foreign and aim to increase their ability to security policy in term of its relation absorb shocks and to cope with with Jordan, the shift in its approach stresses, but it also constitutes an after the 2015 refugee crisis toward opportunity for transformation, in its Southern neighboring countries, regard to adaptation, to changing and its adoption of building environments, improving resilience as one of its five priorities livelihoods and economic in its 2016 European Union Global opportunities (Council of the Strategy (EUGS), in comparison European Union, 2013). with the 2003 European Security What is important here, in term Strategy (ESS). Though this shift of the Syrian refugee crisis, is the was not only restricted to Jordan, in indication of the notion that crises particular, but it was extended to be

144 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ a priority of building resilience of of the EU (the European Economic the EU as a whole, its states, and the Community and the European Southern and Eastern neighboring Community) started to design countries. various processes as a principal guide to their relationships with III.3.5. Mapping EU-Jordan Mediterranean countries, including foreign and Security Policy Jordan. The implementation of this was through several policy As Jordan is a significant frameworks including the Global partner of the EU at the global Mediterranean Policy of 1972 and regional level, and due to (Bocci, F. 2007), the Euro-Arab its important role in promoting Dialogue of 1973 (Allen, D. stability, moderation and inter-faith 1977) ,the Euro-Mediterranean tolerance in the Middle East, the Partnership (EMP)Barcelona EU has realized the important role Process of 1995 , the European of Jordan as a source of stability Neighborhood Policy (ENP) of in the region, and the importance 2003/2004, as well as the Union for of increasing its support for such the Mediterranean (UFM) of 2008 a significant actor in the region. (Youngs, R. 2015). Hence, the EU has sought for On the bilateral level, the EU the advancement of its relation and Jordan have an Association with Jordan and increasing its Agreement since 2002, which is cooperation with it on different considered as the main block for levels and across different sectors. their bilateral relationship. This In this regard, the mission of the EU agreement has linked them together Delegation to Jordan is to ensure and has established a strong the representation of the European partnership across many sectors. Union to the country ,to implement In October 2010, the EU-Jordan , to follow up and to advance their Association Council agreed on an bilateral relation in different fields advanced status’ partnership, which ranging from politics, economy, has resulted in an increase in the trade, security, rule of law ,external scope of political cooperation, open assistance and cooperation (Press up doors for greater integration, and information team of the an approximation of economic Delegation to Jordan, 2019). legislation and the reduction of On the multilateral level, trade barriers. The EU-Jordan Jordan- EU relation can be traced action-plan, which governed their back to the 1970s, when the founders cooperation from 2012-2016,

145 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ demonstrated this advanced status. is covered by the European In 2014, the EU and Jordan agreed Neighborhood Policy (ENP) 2003- on a mobility partnership that aimed 2004, which is a broad framework to improve the management of of bilateral agreements between the mobility and migration (Press and EU and other Southern neighboring inforamtion team of the Delegation countries through regional to Jordan, 2019). cooperation initiatives including In line with the 2015 revised the Eastern Partnership and the European Neighborhood Policy, the Union for the Mediterranean. This EU and Jordan have adopted the framework aims to strengthen the EU-Jordan Partnership Priorities. prosperity, the stability and security Under the Partnership Priorities, the of all members and It is based on cooperation is designed to mutually democracy, the rule of law and reinforce these objectives: i) macro- respect for human rights (Damen, economic stability, sustainable M. – Jongberg, K. 2019). and knowledge-based growth; Driven by overwhelming ii) strengthening democratic internal developments, including, governance, the rule of law and not restrictively, the Eurozone crisis, human rights; and iii) regional the entering into force of the Lisbon stability and security, including Treaty and regional developments counter terrorism. Moreover, it including the Arab uprisings in seeks to enhance cooperation 2011. The EU has revised the ENP in different issues including twice ;First, throughout the first migration and mobility, economic, months of 2011 in which the EU social and political inclusion of ,resorting to the ENP, as a response vulnerable groups, including youth to the Arab uprisings, demonstrated and women (Fakhoury, T. 2019). support for the emerging processes Further, as will be illustrated in a of political liberalization following section, Jordan signed (European Commission and High the 2016 Jordan -EU compact, Represntative of the Union For after London conference 2016 for Foreing Affairs and Security supporting Syria and the Region. Policy, 2011). The second revision The compact aims at improving the of the ENP was in 2015; the 2011 living conditions of refugees and revised ENP’s ineffectiveness to their host communities (Briefing accommodate the promise of the European Parliamentary Research Arab uprisings in line with the Service, 2017). outbreak of new conflicts in the As mentioned, Jordan southern neighboring countries

146 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ led to this review (Badarin, E. – and south neighbors, as the main Schumacher, T. 2020). objective of EU external action The significance of the (European Union Extrenal Action, 2015 ENP revision policy is its 2016) (Colombo, S. et al. 2017). implication in term of the EU foreign Borrowing from the 2012 and security policy in regard of its Commission Communication on ,s approach to resilience׳southern neighboring countries, the EU and how it became a watershed the EUGS defines resilience as ‘the for the EU-neighborhood relations ability of an individual, a household, that showed the de facto abolition a community, a country or a region of the EU’s long-standing ambition to withstand, adapt and quickly to pursue a values-based agenda, recover from stresses and shocks’ in favor of democracy promotion (European Commission, 2012, p. 5) in the EU southern neighborhood (European Union Extrenal Action, (Delcour, L. 2015). Moreover, the 2016). The implication of resilience, 2015 review of the ENP integrated in the EUGS on its relation with building resilience for the first time the southern neighbors, represents into the realm of EU foreign policy a complete shift in its paradigm towards the southern neighbors, towards its southern neighbors though vaguely and abruptly including Jordan. (Badarin, E. – Schumacher, T. Indeed, the European Union’s 2020). policy towards its Southern What is more, the latest ENP neighborhood has been through review was concluded in November different changes. From the 2015, eight months before the ‘Barcelona Process’ of the 1990s adoption of the 2016 European to the European Security Strategy Union Global Strategy (EUGS). (ESS) of 2003 (Youngs, R. 2015) policy frameworks ׳In that respect, it was closely ,the EUs coordinated with the deliberations championed and portrayed the EU leading to the EUGS. The Global as a normative power whose impact Strategy was presented in June resorted on being an exemplary 2016, after a comprehensive review source of peace, wealth, and of the EU’s external policies. In the democracy (Manners, I. 2003). EUGS, resilience is emphasized as The EU, reflecting on itself, saw a strategic priority out of the five the usefulness of its norms and priorities of the EU. The EUGS values starting from democracy, mentions the commitment to state free trade, human rights and rule of and societal resilience, to the east law, consequently, wanted to export

147 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ them to its southern neighbors as a optimistic view of Europe itself common interest for both (Paris, with the ESS opening assertion R. 2010). Thus, as the south was that ‘Europe has never been so seen by the EU as unstable and a prosperous, so secure, nor so free’ source of dominant threat, both the (Council of the European Union , ESS and ENP aimed to present a 2003, p. 3) has been transformed in fit-sized policy to stabilize the EU the EUGS with the acknowledgment southern neighbors by exporting of Europe insecurity as the opening EU’s norms. asserts that; ‘we need a stronger This narrative of duty- Europe. This is what our citizens responsibility dominated the EU deserve, this is what the wider foreign policy discourse even world expects. We live in times of during the initial response to the existential crisis, within and beyond Arab uprisings ,as emphasized by the European Union’ (European the first review of the 2011 ENP and Union Extrenal Action, 2016, p. its so called “strategic option” that 13). Hence, crisis and instability emphasize its support to the Arab are inventible and framed as normal risings (The European Parliament, while peace and stability are the 2011). exception (Dennison, S. – Witney However, driven by internal , N. 2015). and external development, the This shift in the EU’s view second review of the 2015 ENP about itself, the neighboring and the implied the significance of whole world; the need to embrace supporting its partners in the region. insecurity narrative, learn to live with More than ever, stabilization has it pro-actively, and the inevitability become the main principal guiding of shocks and crisis (Reid, J. – the EU’s new strategy for security Evans, B. 2014) transformed the and prosperity, through ‘more EU duty-responsibility to threat- effective partnerships towards a responsibility narrative. As a more stable EU Neighborhood’. result, building state and societal Achieving this goal required resilience of the EU, the southern mainly building resilience of [the] and eastern neighboring states partners with whom the EU will became the priority of the EU engage to enhance cooperation foreign and security policy and the on security and migration-related path to stability and security. issues (European Union Extrenal However, this shift does Action, 2016). not mean that the EU has simply s abandoned its normative agenda׳In addition, the EU

148 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ in favor of a crude transactional (Colombo, S. et al. 2017). one that makes the EU simply The same notion applies to overpasses and ignores severe Jordan, resilience was not absent violations of rights and laws by from the local mind as a response states beyond the EU’s borders for the Syrian crisis, the following (Bicchi, F. – Martin, M. 2006) section will map resilience in Jordan ,rather, the EU pragmatically planning toward the Syrian crisis as faces the reality that this agenda it became a security strategy against is insufficient to unstable region. the negative impacts of refugees. Thus, building resilience is like a middle ground between over- III.3.6. Jordan policies ambitious liberal peacebuilding and in response to the Syrian under-ambitious stability (Anholt, refugee crisis and the shift R. – Wagner, W. 2016). In other words, in order to to building resilience achieve these goals and to spread the EU’s norm, building resilience Amid a region of turmoil is essential. The emphasis is not and surrounded by intractable only on state resilience, but also conflicts, Jordan has always been a on societal resilience through safe haven for refugees and forced coping and learning. This requires migrants throughout its history. cooperation and working with the Although Jordan is not a signatory partners in the south, with emphasis to the 1951 Refugees Convention on the local and the host state’s and its 1967 Protocol, it has always responsibility of building resilience. shared the burden of refugees in the More importantly, the EUGS context of international cooperation emphasis on the state and societal and burden-sharing. Despite of all resilience implies not only the need the challenges it faces, as Jordan is for strengthening the capability of a middle-low class country with a states to prevent crisis and reduces very limited resources, an increasing their impact after occurring ,but rate of poverty and a high rate of also signifying the importance of unemployment, Jordan has received the political, social, economic, different waves of refugees. After and governance resources of receiving Palestinians since the first societies to prevent shocks, as well Arab-Israeli war of 1948, Jordan as to cope with them, not only by has also received refugees from absorbing them, but rather, by Lebanon during the 1975-1991 actively strengthening themselves civil war, Iraqis refugees in two waves; the 1991 Gulf War and after

149 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the American invasion in 2003, and certain extent. The government’s most recently Syrian refugees with adoption of a reactive and shifting the rising of the Syrian conflict approach, based on the course of since 2011 (Alougili, M. A. 2019). the Syrian conflict, enabled it to As mentioned earlier, the make such a containment (Jordan impact of the influx of 1.4 million Response Platform for the Syria refugees had added a large strain Crisis, 2014). on the country with increasing Tracing this shifting approach external and internal pressures and goes back to the rising of the conflict threats. On the external level, the in 2011. At first, Jordan followed up influx of refugees reflected the need an open policy and welcomed those to secure its borders fearing from refugees. This is not something terrorist attacks, as the latest 2016 new, as the country historically had Al-Rukban attack along the Syrian- open policies towards migration Jordan northern borders where five and refugees in general. Al Za’atari, soldiers were killed (BBC News the first official refugee camp for 2016), or fears from terrorists the Syrian refugees, was created by disguised among the refugees. As the UNHCR in July 2012, followed for the internal level, strains on by Mrajeeb Al Fhood in April the infrastructure with an increase 2013, by the United Arab States demand on water, electricity, of Emirates funding. Al Azraq was health and educational services, opened in April 2014, and King and more importantly, security Abdullah Park as a temporary services for the refugees and the camp in Irbid Governorate was local communities meant a great opened (Achilli, L. 2017). On the pressure on the already limited- other side, authorizing building resources country. Moreover, an camps thought as a way to increase increasing discontent among the international visibility and to local communities created another attract international aids through pressure on the government with encampment (Alshoubaki, W. fears of instrumentalizing this 2020). discontent to destabilize the country (Alougili, M. A. 2019). Although the government However, despite of all these was tolerant and welcomed the challenges, the government and, Syrian refugees at the beginning, by the help of the intranational those refugees were denied the community including the EU, has right to work and were strongly managed to contain the crisis to a incentivized to settle in camps rather

150 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ than in urban areas Neighboring. support, led to the formulation of the However, as the conflict escalated National Resilience Plan (NRP) in from 2013, security fears increased June 2014, a three-year programme restrictions over refugees and of high priority investments by the securitizing Syrian refugees began government in order to respond to by the government since then. the impact of the Syrian refugees In March 2013, the government in Jordan. According to this plan, established the Syrian Refugee Jordan intended to invest US$2.41 Camp Directorate (SRCD), later billion over three years in local was replaced by the Syrian Refugee institutions and host communities Affairs Directorate (SRAD) as a in these sectors: health, education, branch of Jordan’s security services water and sanitation, livelihood and aiming at policing refugees’ employment, energy, housing, and movements inside and outside social protection (United Nations the Syrian camps (Rasheed, A. – and Host Community Support Beaujouan, J. 2020). Platform, 2014). The rapidly increasing In line with the NRP, the number of the Syrian refugees in Jordan Response Platform for the the country changed the Syrian Syria Crisis (JRPSC) was created refugee crisis into a Jordanian crisis in September 2014. It aimed at that proved the inadequacy of its coordinating, guiding, and helping legal framework for dealing with in the preparation, implementation refugees. Jordan’s legal framework and monitoring of the (Jordan is based on its 1998 Memorandum Response Plan) JRP 2015 and of Understanding (MoU) signed the JRP 2016. The JRP was first with UNHCR, according to this launched in December 2014, a one- memorandum, Jordan accepts year programme. It was planned the definition of “refugee” as as a co-work between the Ministry contained in the 1951 Convention of Planning and International and agrees that refugees should Cooperation (MoPIC) and the UN receive treatment according to (Jordan Response Platform for the internationally accepted standards Syria Crisis, 2014). (Saliba, I. 2016). The significance of the 2015 For this reason, the JRP is that it reflected the drastic government realized the need to shift in the approach to the Syrian establish a better legal framework refugee crisis. Before 2013, the and a national policy to deal with priority of the Jordanian government such a crisis. Its efforts with the UN was the humanitarian relief to those

151 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ refugees, however, from 2014, to address the need of both the national and international actors refugees and the host communities worked together to implement an leading to discontent among the integrated and a comprehensive host communities and increased response to the crisis. Put differently, tension between the two sides. resilience approach was adopted Thus, the Jordanian authorities by Jordan and the UN. Based on a added two essential pillars to the long-term sustainable development 2016 JRP – refugees and resilience for both the refugee population and – to address both the needs of the host communities, it addressed the Syrian refugees and the host issues of social integration, capacity communities as a consequence of building, prevention of extremism, the demographic pressure there. with an emphasis on the protection In other words, building resilience of the Syrian refugees (Rasheed, A. for both the refugees and the host – Beaujouan, J. 2020). communities became the priority The JRP estimated almost of the Jordanian government, to US$3 billion to be pledged in ensure its stability, preserve its 11 strategic sectors. Donors’ social cohesion, and consequently contributions to the plan are its security. arranged through one channel, As a result, the country the Jordan Resilience Fund (JRF), managed to address those needs launched by Jordan and the UN. and preserve its social cohesion, As a result of the continuous though in a limited way. In the field influx of the Syrian refugees, and of education, for instance, several to emphasize on a more long-term initiatives that aim to address resilient planning, the JRP 2015 was disrupted social cohesion among renewed until 2020 in two periods: the host communities have made the JRP 2016–2018 and the current limited, but positive, progress. One JRP 2018–2020 (Rasheed, A. – of these initiatives, Generations for Beaujouan, J. 2020). The shift of Peace, that came into existence in the JRP, to cover two years instead 2015 and still going, as a result of of one, indicates a shift from cooperation between UNICEF and emergency intervention to a more the ministry of education in Jordan. sustainable, long-term planning to It aims to address violence at endure the crisis. schools and reduce it by designing However, the government’s different after-school activities strong commitment to achieve bringing Syrian and Jordanian development since 2014 failed students together (Salem, H. –

152 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Morrice, L. 2019). protection, humanitarian assistance Another way in which Jordan and resilience for refugees and has tried to achieve the refugee- their vulnerable host communities resilience pillars is by requiring (United Nations Development aid organizations to address both Program, 2019). refugees and host communities The final point to be to avoid tension between them. mentioned here is that the JRP According to the Jordan Response is parallel to another ten years Information System for the national policy Known as Vision Syria Crisis, the registration of 2025, launched in 2015. Its aims to any project and its obtaining the achieve sustainable and inclusive government approval require growth, with the reflection on targeting at least 30% vulnerable the government’s strong will to host (Jordanian) communities turn the Syrian refugee crisis into under the refugee component, and a development opportunity. An at least 30% refugees under the essential element of this vision resilience component (Rosanne & is the establishment of almost 18 Giulia, 2019). special economic zones to facilitate Finally, with the aim of exporting goods to markets in bringing a more regionally coherent the EU under relaxed rules of process that integrate refugee and origin, thus creating employment resilience programming, Jordan opportunities for Syrians and signed the Regional Refugee and Jordanians as agreed on the 2016 Resilience Plan (3RP), a jointly- Jordan-EU compact, as will be led plan by the United Nation illustrated in the following section High Commission for Refugees (Briefing European Parliamentary (UNHCR) and the United Nation Research Service, 2017). Development Programme (UNDP) After illustrating how launched in 2015. It constitutes building resilience became a one regional plan, with five strategic priority for both the EU separate chapters covering Turkey, and Jordan and how it contributed Lebanon, Jordan, Egypt and Iraq; to preserve Jordan’s stability, the each chapter comprises the national following section highlights the response plan for the Syrian crisis, EU empirical approach and its role in case of Jordan, it comprises the in building resilience in Jordan as Jordan Response Plan. This plan an international donor to highlight aims to achieve strategic regional some of its most important cooperation that could ensure instruments and its role in Jordan.

153 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ and the Region. From the first III.3.7. The EU building conference, the EU’s strong resilience in Jordan commitment to building resilience was emphasized. First, it has The EU has always looked to designed a financial tracking system consolidate its role in Jordan. This to confirm that it has delivered on was emphasized with the review its pledges committed through the of 2015 ENP and the partnership 2016 EU-Jordan compact. Second, priorities. In the context of building in order to ensure the development resilience, the EU aimed, and still of host communities, it has funded does, to integrate its instruments projects that have linked refugee in the national plans, and work aid to the establishment of new with a multitude of state and local institutions, for instance, the non-state actors in implementing implementation of an Election projects addressing directly issues Observation mission in Jordan of livelihoods, economic growth, (Briefing European Parliamentary protection and conflict resolution Research Service, 2017). As for the financial assistance, (Fakhoury, T. 2019). After the London 2016 since the beginning of the Syrian conference, Supporting Syria and crisis, the European Union is a the Region that brought together leading donor for supporting Jordan the world leaders, NGOS, and to deal with the impact of the private sectors to address the Syrian crisis .It has pledged since Syria crisis, the international then almost €2.1 billion through communities emphasized the need bilateral assistance (€812 million), ,not only to raise funding to tackle humanitarian aid (€360 million) and this issue, but more importantly, resilience assistance (€959 million). to set ambition plans to integrate These were directed through humanitarian and sustainable different instruments to address development for both the refugees the refugees-resilience pillars. The and the host communities. Since humanitarian aid provides services then, the EU approach toward such as healthcare, food and basic building resilience became its needs assistance, support during the priority (UNHCR, 2018). winter months, shelter, water and In addition, the EU has sanitation for both the refugees, at co-hosted the 2017, 2018, and the camps and other urban areas, 2019 Brussels Conferences for and also includes vulnerable Supporting the Future of Syria Jordanian families (Figure 10).

154 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 10: EU Financial Support to Jordan in Response for the Crisis since 2011 in millions € Source: Press and information team of the Delegation to Jordan, 2019I

Other instruments like the with The Jordan Response Plan Regional Trust Fund in Response (Press and inforamtion team of the to the Syrian Crisis the ‘MADAD Delegation to Jordan, 2019). The Fund’ was established in 2014. aim of this fund by focusing on It mainly tackles longer term education, livelihood, water and resilience and recovery needs sanitation, and health is helping in (economic, educational, social and achieving humanitarian security psycho-social) of Syrian refugees for the refugees and the vulnerable in neighboring countries such as Jordanian families so that they can Jordan, Lebanon, Turkey and Iraq. live in dignity as much as possible. Its support also extends to the host In the field of education, for communities. instance, this fund has contributed Through this fund, the EU with over €380 million till 2018 has committed €300 million as making the EU the largest donor resilience support for Jordan in line to deal with the Syria crisis in that

155 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ respect. The fund aims to support the concessional loans of $1.9 billion. education sector as a whole, through In turn, Jordan is required to meet its cooperation with the Ministry of certain targets. One of these targets Education and the Ministry of Labor is linked to formal labor market to improve training and skills to access. Jordan has to issue 200,000 facilitate access to the labor market work permits for Syrian refugees (European Commission, 2019). in specified sectors in return for Other instruments like the the EU commitment to relaxing Macro- Financial Assistance (MFA) trade regulations. In addition, aims to support Jordan’s economic Jordan must employ certain recovery and its economic reforms. quotas for the Syrian refugees The EU signed the first MFA in in different businesses, improve March 2014 in a programme of €180 the investment environment, and million, the MFA II was renewed legitimize Syrian businesses in in September 2017 to pledge the country. The objective of this additional €200 million and finally is to improve exports from 18 the Commission proposed MFA III designated economic zones and programme worth €500 million in areas, stimulate economic growth September 2019. The programme is and Jobs creation in Jordan. Finally, provided in a form of low-interest, Jordan commits to provide school long term loans that aim to support places to all Syrian children, and the country’s economic growth some work training opportunities and create more jobs (European (Barbelet, V. et al. 2018). Commission, 2019). The significance of this Above all, the 2016 EU- framework lies in different Jordan compact represents a great issues. first, it brings together the shift in the EU-Jordan thinking humanitarian and development about building resilience and sectors to create a more effective how they seize to instrumentalize response to the refugee crisis. It the refugees as a development shifts the nature of the response to opportunity and economic asset for the crisis from the humanitarian Jordan. This compact was signed in into the development pillar by February 2016, it aims at integrating extending the access of refugees humanitarian and development into the labor market (Rosanne, funding through multi-year grants A. – Giulia, S. 2019), this in turn, and concessional loans; $700 contributes to their humanitarian million to be pledged through annual security and the development of the grant loans for three years, and host communities.

156 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Second, linking trade to 136,437 Syrians aged 5-17 were refugees, by simplifying rules of enrolled in public schools from the origin, aims to enable Jordanian 232,127 constituting 59% of the companies in the manufacturing whole (Education Sector Working sector to diversify their products Group in response to the Syria and to create incentives for new crisis, 2019). and decent jobs for Jordanians and It might indicate that Syrians. As a result, according to Jordan does not compile with its the EU delegation in Jordan, 15 commitment, yet it does not seem companies have applied to gain the case. According to the 2015 benefits from the agreement, 13 Education Sector Working Group, have been authorized to export to less than 45% of Syrian children the EU, with 6 exporting a value (43,791 girls and 41,740 boys) of €19.26 million since July 2016 were in schools (Barbelet, V. et (Delegation of the European Union al. 2018). This means that Jordan to Jordan, 2019). has made a considerable progress Third, the compact has despite of all its challenges and it achieved a considerable progress in is trying to fulfill its commitment. education and labor market access Moreover, there are different for the Syrian refugees. When it challenges for the children that comes to education, even prior to cannot be addressed easily. The the compact, the government has strict administrative procedures been working to provide the Syrian make their enrollment very refugees their right of education by difficult, in addition, the increase expanding the use of double shift of the Syrian family dependency schools, with the first morning on children to earn money force shift for the Jordanian student, them to drop school to support their and the afternoon shift attended parents (Younes, M. – Morrice, L. mainly by the Syrian refugees’ 2019). children. However, According to As for the labor sector, the compact, Jordan pledged that the compact can be seen as a every Syrian refugee child would considerable progress towards be in school by 2016– 17, alongside the Syrian refugees. Prior to the a promised investment of $97.6 compact, Syrian refugees had to million to open an additional 102 apply for the same work permits double shift schools (Barbelet, as labor migrants, who pay almost V. et al. 2018). For this reason, in € 900 annually for a work permit. 2019/2020 school year, a total of The high fees and administration

157 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ procedures, including the missing their occupation. Moreover, the official documentation for those informality of Jordan’s economy, refugees, meant that only around the slow growth rates, the poor 3,000 permits were issued to foreign investment climate and the Syrians before (Barbelet, V. et al. high unemployment rates, have 2018). increased the difficulty in front of By the compact, the the creation of formal jobs (Huang, government committed to facilitate C. – Gough, K. 2019). the regulations and reduce the high By no means, it cannot be said fees. Syrians are recently required to that the compact is flawless or it is pay only JD10 (12 €) administration the best solution possible. Yet, there fees. Moreover, as of July 2018, the are some advantages too. First, government had taken the needed the government is always taking steps to open formal employment more steps to make it workable, opportunities for Syrians. While as the 2018 review indicates, more In 2017 46,000 work permits were work permits were issued (Huang, granted in sectors approved for C. – Gough, K. 2019). More foreign workers, in July 2018, a importantly, this compact is the total of 105,000 work permits were first inclusive response to tackle issued to Syrian refugees and the the refugees crisis in Jordan, it’s a total became 179,445 as of January more sustainable and a longer-term 2020 (The United Nations Refugee solution (Barbelet, V. et al. 2018). Agenecy, 2020). Syrians have also The claim is never to argue been formally allowed to work that nothing is expected from outside the camps for almost one Jordan now, on the contrary, this month before coming to renew compact, its positive and limited their work permits (Rasheed, A. – progress show the government’s Beaujouan, J. 2020). commitment to the refugee- However, there are many resilience pillars, yet , more is barriers which remain in front of expected on that turn to help those those refugees. There are restrictions refugees and to address their basic over the economic sectors since needs to be less dependent on the they are not authorized to work in humanitarian aids. all sectors and sometimes those The final section of this paper do not correspond with the typical will address the significance of skills profile of Syrian refugees. building resilience to address the For instance, tertiary-educated Syrian refugee crisis for both of the Syrians cannot get permits in EU and Jordan.

158 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ III.3.8. The Significance bread subsidies (Alougili, M. A. of building resilience to 2019) makes building resilience a address the Syrian crisis for better strategy to tackle the issue. Through the compact, for instance, the EU and Jordan it aims to decrease a greater competition between the Jordanian The significance of building and Syrian through a certain resilience for both the EU and quota for the refugees in certain Jordan stems from different reasons. sectors and special economic When it comes to Jordan, the zones. This contributes to preserve already heavy -burdened country social cohesion and avoidance of with its own problems, finds itself politicizing the refugees. dealing with an enormous pressure Moreover, a less restricted to respond to the refugee’s basic administrative procedures for needs. This tremendous sudden those refugees in camps allows increase in the population means them to rely on themselves , run more demand and competition for their own shops, get benefit from access to public services, schooling, the educational programs run by health services, infrastructure and different organizations in the camp, jobs. The unforeseeable resolution they can even be seen as an example for the Syrian crisis accompanied of humanitarian innovation as in the with fears of those to return case of Zaatari camp, for instance, home. According to UNHCR where it is partially powered Jordan spokesperson Lily Carlisle, using renewable solar energy only 20,000 Syrian refugees (Pasha, S. 2019). For this reason, have returned to Syria after the building resilience for Jordan is a borders reopening in October2018 pragmatic policy that contributes (Turnbull, E. 2019). meaning that with a limited but a positive impact a better solution is needed. for those refugees and their host In addition, the escalation communities. of tension between the host As for the EU, supporting communities and refugees, the Jordan is also important and this dissatisfaction among the Jordanian stems from different logic and Public, and fears of refugees to be reasoning. First of all, the EU’s politicized or instrumentalized to approach to Syrian refugees in destabilize the country as in the Jordan-as in the Arab Region- is light of the 2018 mass protests webbed within a broader crisis when refugees were linked to the governance. By 2015, the arrival government decision for cutting

159 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ of more than one million refugees secure its southern borders and to the European Union (EU), with increase those refugees’ capacities the highest share of those to the to prevent them from leaving into Syrian refugees, led to an intra- Europe. EU governance crisis on matters As Geddes and Scholten of refugee resettlement and asylum assert that the EU attempts to policymaking. It also triggered a keep people in their place through big wave of securitization in which working on non-migration policies, the EU tightened border controls through empowering the adaptive (Fakhoury, T. 2019). capacity of those refugees to remain The so-called ‘refugee crisis’ where they are instead of leaving narrative was in full swing and (Geddes, A. – Scholten, P. 2016). refugees were framed as a threat Also, Bourbeau suggests that such and a source of vulnerability stability at home needs a strong (Castañeda, H. – Holmes, S. M. focus on requirements for change in 2016). The European Agenda of third countries through resilience, Migration 2015 was adopted back which goes parallel to the European then. It emphasizes the importance states’ sovereignty and security of of formulating more efficient their national and common borders border control policies, and It also (Bourbeau, P. 2013). To spell it out highlights the significance of greater differently, the EU new approach cooperation with third countries, and represents a refugee containment supporting the countries bearing the strategy that aims not only to burden of displaced refugees. This provide humanitarian assistance to makes building resilience an ideal refugees and host populations but solution. In the Jordanian case, it also falls within a broader politics usually concentrates on addressing of stabilization, development and the pressure on the limited capacity improvement of local asylum and resources to address the needs regimes that aspires to contain of this huge number of refugees the refugee movement as close as (Badarin, E. – Schumacher, T. possible to Syria (Fakhoury, T. 2020). In other words, EU building 2019). resilience in Jordan through Moreover, adopting resilience the 2016 compact, its funding, comes along a more pragmatic integrating the refugees into the and realistic approach of the EU labor market, and easing rules of towards Jordan, within its southern regulation to encourage trade, all borders.EU realizes the importance come within the EU strategy to role of Jordan as a peaceful partner,

160 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ and a corner stone for the stability crisis by the EU and Jordan make in the region. Hence, building its resilience a pragmatic approach resilience, through supporting and a strategic security to preserve its economy, is crucial to avoid a their national security. The Key new crisis that might lead to a new characteristics of the EU resilience empowering the ׃ wave of refugees (Rosanne, A. – thinking including Giulia, S. 2019). At the same time, humanitarian-development nexus, this new strategy helps to improve responsibilizing local governments the EU’s image, after it has been of crisis-affected countries, and criticized for its strict policy in shaping refugees as an economic dealing with the refugees amid the development opportunity lead and 2015 immigrant crisis, as the UN legitimize EU resilience-building Secretary-General, Ban Ki-moon efforts in Jordan. My examples expressed in front of Australian about the EU building resilience in Parliament in April, 2016 that Jordan illustrate the significance of EU policies negatively affect the its contribution in that respect and obligation of member states under its implication for both Jordan and international humanitarian law and the EU. European law (Kingsley. P. 2016). Drawing on my analysis, In that respect, building resilience one conclusion of this paper is shows a pragmatic approach toward that for Jordan building resilience the crisis without endangering its in response to the Syrian refugee national security and receiving crisis is illustrated as a strategy to more refugees. promote national and humanitarian security with a positive but limited III.3.9. Conclusion impact. Building on Buzan, Waever and Wilde ,categorizing In a time of a prolonged sectors of security, (Buzan, B. et crisis, with no foreseeable solution al. 1997), building resilience in in the near future, it might be Jordan preserves essential sectors unsurprising that the EU, as a donor, of national security including and Jordan, as one of the largest political, economic, social and hosting countries of those refugees, environmental sectors. turn to resilience: a concept that By integrating the refugee- embedded effectiveness, efficiency, resilience pillars, the kingdom and sustainable reduction of needs. managed to prevent politicizing In this article, I have argued that and instrumentalizing refugees securitizing the Syrian refugee as a mean for destabilization,

161 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ decreased the public dissatisfaction camps as in Zaatari. In addition, with the influx of the refugees this compact and other EU financial and preserved its social cohesion instruments like the EU regional through integrating the refugees trust fund contribute to address into the labor market with a specific the basic needs for those refugees quota and in specific sectors to in line with the Regional Refugees reduce competition with Jordanians and Response Plan. The positive .On the economic level, increasing impact of these instruments in the the access of resources, organizing educational sector proves to be of it, and decreasing the demand on great influence. The enrollment the basic needs for the refugees of 136 000 Syrian Children in the and most vulnerable Jordanian 2019-2020 year in comparison with families proves its positive impact. 43000 in 2015 is a clear evidence The EU contribution in this respect here. The access for other services is crucial, in particular in sectors like health or water are also in like education, water, solid waste progress according to the UNHCR. management, where the EU has As for the EU, building the largest share in addressing the resilience may prove to be a needs in these sectors which in turn, strategy to contain refugees in the contributes to Jordan’s national region and prevent migration to stability and security. Europe and to protect its national As for the humanitarian security, as migration policies security for those refugees, many experts like Andrew Geddes asserts. instruments prove its positive but The decreasing number of the limited impact. Of these instruments Syrian asylum seekers to Europe is the EU Jordan compact that in comparison with the 1000000 pledges the government to issue 200 in 2016 can be seen as an indicator 000 work permits for the refugees. for its efficiency .However, one of Although only 172000 had been the implication of this paper is that issued by 2019, and not all of those more empirical research is needed Syrians are working, but this cannot in order to understand the exact be seen other than a means to help impact and efficiency of building those refugees to be more self- resilience for Jordan and the EU. reliant since prior to this compact, In addition, it concludes that the strict -local policies prevent those current instruments may seem refugees from access to the labor effective yet the policy makers market. Now some of those refugees need to make it more workable and are running their own shops in their address the need of all the refugees

162 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ not only the registered one. to achieve a peaceful resolution for And finally, building the on -going war in Syria because resilience may seem workable to this is the real help and this is what decrease the negative impacts of the the Syrians are desperate to see to Syrian crisis, but this cannot deny end their suffering. the fact that we need more efforts

III.3.10. References

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164 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ eu: https://www.europarl.europa.eu/factsheets/en/sheet/170/the- european-neighbourhood-policy Delcour, L. 2015: (2015, December 5). The 2015 ENP Review: Beyond Stocktaking, the Need for a Political Strategy. Retrieved from https://www.academia.edu/: https://www.academia.edu/19671963/ The_2015_ENP_Review_Beyond_Stocktaking_the_Need_for_a_ Political_Strategy Delegation of the European Union to Jordan. (2019, May 23). Trade. Retrieved from https://eeas.europa.eu/: https://eeas.europa.eu/ delegations/jordan/1357/jordan-and-european-union_en Dennison, S. – Witney , N. 2015: (2015, January 6). Europe neighbourhood Crisis as the New Normal. Retrieved from Euorpean Council of Foreign Relations : https://www.files.ethz.ch/isn/192243/Europes_ Neighbourhood.pdf Education Sector Working Group in response to the Syria crisis. (2019). Education Quarterly Dashboard. Amman: Inter Agency Coordination Unit. European Commission 2012: (2012, October 3). The EU approach to resilience. Learning from food security crises. Retrieved from ec.europa.eu: https://ec.europa.eu/echo/files/policies/resilience/ com_2012_586_resilience_en.pdf European Commission 2013: (2013, June 19). Commission Staff Working Document Action Plan for Resilience in Crisis Prone Countries 2013- 2020. Retrieved from ec.europa.eu: ec.europa.eu/echo/files/policies/ resilience/com_2013_227_ap_crisis_prone_countries_en.pdf European Commission 2015: (2015, March 2015). EU Resilience Compendium Saving lives and livelihoods. Retrieved from ec.europa. eu: https://ec.europa.eu/echo/files/policies/resilience/eu_resilience_ compendium_en.pdf European Commission 2016: (2016, April 26). Communication From the Commission to the European Parliament ,the Council,the European Economic and Social Committee and the Committee of the Regions Lives in Dignity from aid dependence to seld relience. Retrieved from ec.europa.e: https://ec.europa.eu/echo/files/policies/refugees- idp/Communication_Forced_Displacement_Development_2016. pdf European Commission 2019b: (2019, November 9). Responding to the Syrian Crisis EU Support to Resilience Iin Jordan. Retrieved

165 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ from https://ec.europa.eu/: https://eeas.europa.eu/delegations/ jordan/1357/jordan-and-eu_en%20. European Commission 2019a: (2019, December 19). Commission welcomes agreement on €500 million Macro-Financial Assistance programme for Jordan. Retrieved from https://ec.europa.eu/: https:// ec.europa.eu/commission/presscorner/detail/en/IP_19_6833 European Commission and High Represntative of the Union For Foreing Affairs and Security Policy. (2011, March 8). Joint Communiacation to the European Council,the European Parliament ,the Economic and Social Committee and the Committee of the Regions A partnership for Democracy and Shared Prosperity with the South Mediterranean . Retrieved from https://ec.europa.eu/: https://ec.europa.eu/research/ iscp/pdf/policy/com_2011_200_en.pdf European Parliament, The 2011: (2011, April 7). Review of the European Neighbourhood Policy – Southern Dimension . Retrieved from https://www.europarl.europa.eu/: https://www.europarl.europa.eu/ sides/getDoc.do?pubRef=-//EP//NONSGML+TA+P7-TA-2011- 0154+0+DOC+PDF+V0//EN European Union Extrenal Action. (2016, June 28). Shared Vision, Common Action:A Stronger Europe A Global Strategy for the European Union’s Foreign And Security Policy. Retrieved from eeas.europa. eu: https://eeas.europa.eu/sites/eeas/files/eugs_review_web_0.pdf Fakhoury, T. 2019: (2019, November 1). The European Union and Arab Refugee Hosting States: Frictional Encounters. Retrieved from www.academia.edu: https://www.academia.edu/40822797/The_ European_Union_and_Arab_Refugee_Hosting_States_Frictional_ Encounters_Tamirace_Fakhoury Geddes, A. – Scholten, P. 2016: The Politics of Migration and Immigration in Europe. Uk: SAGE Publications. Grandi, F. 2020: (2020, Febraury 5). Syria Emergency. Retrieved from https://www.unhcr.org/: https://www.unhcr.org/tr/en/syria- emergency Holling, C. S. 1973: Resilience and Stability of Ecological Systems. Annual Review of Ecology and Systematics, 1-23. Huang, C. – Gough, K. 2019: (2019, March 11). The Jordan Compact: Three Years on, Where Do We Stand? Retrieved from https://www. cgdev.org/: https://www.cgdev.org/blog/jordan-compact-three- years-on

166 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Human Security Unit, United Nations . (2009, June 6). Human Security in Theory and Practice Application of the Human Security Concept and the United Nations Trust Fund for Human Security . Retrieved from https://www.undp.org/: https://www.undp.org/content/ dam/turkey/docs/news-from-new-horizons/issue-41/UNDP-TR- HSHandbook_2009.pdf Jordan Response Platform for the Syria Crisis. (2014, September 9). Jordan Rsponse Plan For the Syria Crisis 2015 Appeal. Retrieved from https://reliefweb.int/: https://reliefweb.int/sites/reliefweb.int/ files/resources/JRP%202015%20Appeal_ENG.pdf Kingsley. P. 2016: (2016, April 28). Ban Ki-moon attacks ‚increasingly restrictive’ EU asylum policies. – The Guardian – Retrieved from www.theguardian: https://www.theguardian.com/world/2016/ apr/27/austria-set-to-bring-in-stringent-new-law-on-asylum-seekers Manners, I. 2003: Normative Power Europe: A Contradiction in Terms? Journal of Common Market Studies, 235-258. Operationl Portal Refugee Status UNHR. (2020, April 15). Jordan: Statistics for Registered Syrian Refugees (as of 15 April 2020). Retrieved from The United Nation Refugee Agency: https://data2. unhcr.org/en/documents/download/75575 Paris, R. 2010: Saving liberal peacebuilding. Review of International Studies, 337-365. Pasha, S. 2019: Developmental Humanitarianism, Resilience and (Dis) empowerment in a Syrian Refugee Camp. Journal of International Development, 244-259. Pew Research Center . (2016, August 2). Number of Refugees to Europe Surges to Record 1.3 Million in 2015. Retrieved from https://www. pewresearch.org/: https://www.pewresearch.org/global/2016/08/02/ number-of-refugees-to-europe-surges-to-record-1-3-million- in-2015/ Press and inforamtion team of the Delegation to Jordan. (2019, May 23). EU response to the Syrian crisis. Retrieved from https://eeas.europa. eu/: https://eeas.europa.eu/delegations/jordan/1357/jordan-and-eu_ en Press and information team of the Delegation to Jordan. (2019, May 23). Jordan and the European Union. Retrieved from eeas.europa.eu: https://eeas.europa.eu/delegations/jordan/1357/jordan-and-eu_en Rasheed, A. – Beaujouan, J. 2020: The Syrian Refugee Policy of the

167 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Jordanian Government. In Syrian Crisis, Syrian Refugees Voices from Jordan and Lebanon (pp. 47-65). London: Macmillan. Reid, J. – Evans, B. 2014: Resilient Life: The Art of Living Dangerously . London: Polity. Romm, J. J. 1983: Defining National Security: The Nonmilitary Aspects (Pew Project on America’s Task in a Changed World). US: Council on Foreign Relation. Rosanne, A. – Giulia, S. 2019: Under the guise of resilience: The EU approach to migration and forced displacement in Jordan and Lebanon. Contemporary Security Policy , 311-335. Salem, H. – Morrice, L. 2019: A review of social cohesion initiatives and challenges with a focus on Jordan and education. UK: University of Sussex. Saliba, I. 2016: (2016, March 5). Refugee Law and Policy: Jordan. Retrieved from www.loc.gov: https://www.loc.gov/law/help/ refugee-law/jordan.php The United Nations High Commission for Refugees. (2020, February 27). Total Persons of Concern by Country of Asylum . Retrieved from data2.unhcr.org: https://data2.unhcr.org/en/ situations/syria#_ga=2.186073641.1068275618.1583169791- 2057972421.1581251828&_gac=1.48942036.1583399977. CjwKCAiA44LzBRB-EiwA-jJipBhIKfnKZM3wni9yzDtL-5t4IFug qCAs1Z1C1H2qQIWaWGKzyGfKxBoC8RkQAvD_BwE The United Nations Refugee Agenecy. (2020, January 7). Economic Inclusion of Syrian Refugees Jordan January 2020. Retrieved from https://data2.unhcr.org/: https://data2.unhcr.org/en/documents/ download/73935 Tocci, N. 2019: Resilience and the role of the European Union in the world. Contemporary Security Policy, 130-150. Turnbull, E. 2019: (2019, July 5). 20,000 Syrians have returned home since border reopening. – UNHCR. Retrieved from https://www. jordantimes.com/: https://www.jordantimes.com/news/local/20000- syrians-have-returned-home-border-reopening-%E2%80%94-unhcr UNHCR 2018: (2018, March 13). Supporting Syria and the Region. Retrieved from webarchive.nationalarchives.gov.uk: https:// webarchive.nationalarchives.gov.uk/20180313172041/https://www. supportingsyria2016.com/ United Nations and Host Community Support Platform. (2014, January

168 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 5). National Resilience Plan 2014-2016. Retrieved from http:// extwprlegs1.fao.org/: http://extwprlegs1.fao.org/docs/pdf/ jor145353.pdf United Nations Development Program 2019: (2019, December 5). The Regional Resilience and Refugee Plan. Retrieved from https://www. arabstates.undp.org/: https://www.arabstates.undp.org/content/rbas/ en/home/library/crisis-response0/regional-strategic-overview.html Walker , J. – Cooper , M. 2011: Genealogies of resilience: From systems ecology to the political economy of crisis adaptation . SAGE Journal, 143–160. Wildavsky, A. 1988: Searching for Safety. New Jersey: New Brunswick, NJ : Transaction Publishers. Younes, M. – Morrice, L. 2019: The Education of Syrian Refugees in Jordan Summary of Demand-Side Constrains and Interventions . UK: the University of Sussex. Youngs, R. 2015: Twenty Years of Euro-Mediterranean Relations. London: Routledge.

169 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ III.4. The Origins of Tunisia’s Women’s Rights Movement: A Social Movement Theory Approach

Xénia Sipos47

Abstract

International relations remain state-centric; non-state actors however, also contribute to shaping political, economic and social processes of the international order. From among these, women’s rights movements in Tunisia are examined in this paper. The growing significance of women in all fields of the Tunisian society can be observed since the country’s independence from France (1956). The article aims to define the elements that played an important role in shaping women’s rights on the macro level, the factors that contributed to women’s empowerment on the micro one, and the ways of interaction between the two levels. The complexity of the topic requires the application of a multidisciplinary approach where the interactions of different actors are taken into account on both macro and micro levels. Besides clarifying the basic concepts, both qualitative and quantitative analyses are applied to identify the aforementioned conditions. The Tunisian case study is analysed on the basis of the top-down ‒ bottom-up approach through the application of the social movement theory of Anthony Oberschall, according to whom several conditions (discontentment, risks, and political opportunities) contribute to the mobilization of social movements. While the process of Tunisian feminism is described as a state-controlled process, the research proves that the roots of Tunisian feminism have long been present in the Tunisian society.

Keywords: gender equality, Arab Spring, social movement theory, Tunisian feminism

47 PhD Student – CUB IR Doctoral School, [email protected]

III.4.1. Introduction committed against women and abrogating the law of 1973 The Arab Spring brought that, in accordance with Islamic about an active participation of principles, banned Muslim women women’s rights activists and from marrying non-Muslim men organizations with the aim of (Moghadam, V. M. 2018). Moreover, achieving total equality in all as a consequence of the outstanding fields, including the same share in role Tunisian women played in the inheritance, eradicating violence Arab Spring, a widespread debate

170 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ also started in the post-Arab Spring Personnel (Personal Status Code, period. The debate had its effect henceforward referred to as CSP) mainly on the drafting of Tunisia’s abolished polygamy, provided new constitution between 2011 women the right to divorce and to and January 2014, the first draft child custody, and set a minimum age of which intended to bring in the for marriage48. In 1958 Bourguiba ‘complementary clause’ of article introduced compulsory education 28: “women are complementary for young women and people to men” (complementarity clause) living in rural areas (Chabchoub, (Norbakk, M. 2016). A. 2014). Moreover, with the In order to better understand introduction of family planning in the current processes and the the 1960’s and the legalization of discourse on gender equality as an abortion in 1973 (Jomier, A. 2011) outcome of the events of 2011 it is Tunisia anticipated France, where indispensable to retrace the situation it was only legalized in 1975.49 of Tunisian women from the years Concerning the political arena, before the coming to power of the aforementioned achievements the first president of independent brought about an outstanding Tunisia, Habib Bourguiba number of female representatives (1958‒1987) (Boulares, H. 2011), sitting in the Tunisian parliament. until the beginning of the 1960’s. According to the ranking of the The time frame is also restricted until the first half of the 1960’s 48 Code du Statut Personnel [1956], as by this period the measures http://observatoire-enfance.tn/ of the modernization process of documents/code%20du%20statut%20 personnel_fr.pdf (Retrieved 22 Bourguiba had already had their February, 2020) effect on Tunisian women. Several 49 According to Islam, abortion is only aspects prove that Tunisia stands allowed if pregnancy poses a serious out from other Muslim countries threat to the life of the woman and in terms of women’s rights. Above a choice must be made between the life of the mother and her baby. The all, in 1956 Le Code du Statut legalization of abortion in Tunisia was also exceptional if we compare Tunisia with other Muslim countries in the region. Except for married women who can prove that pregnancy carries a physical threat to their health, in Morocco abortion is strictly prohibited by the law and is punished by imprisonment or fines E( l Amraoui, A. ‒ Naami, M. 2018).

171 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Inter-Parliamentary Union (IPU) document determined that 30% based on information provided by participation is necessary for the national parliaments since 1997, a interests of women being taken into significant increase can be observed account51. regarding the proportion of seats The paper aims to approach held by women in the Tunisian the question of Tunisian feminism parliament. Compared with data through the application of the from 1997 when women made social movement theory which will up only 6.7% of all seats of the enable the writer to identify the parliament and Tunisia was only the interactions of different actors on second Arab country in the ranking the level of the political leadership after the Syrian Arab Republic and that of the sub-state actors. By (9.6%), in 2004 a significant taking into account the historical, increase took place (the proportion political, economic, social and of seats held by women increased even cultural characteristics of to 22.8% from the ratio of 11.5% of the North African country at the the previous years). With regard to dawn of its independence and by the up-to-date ranking of IPU (as of applying the social movement 1 October, 2019), with 78 female theory of Anthony Oberschall representatives out of the 217 (Oberschall, A. 2001), the paper places in the National Constituent seeks to analyse the circumstances Assembly (NCA), which means which resulted in encouraging a 35.9% representation, Tunisia women to stand up for their rights occupies the 31st place worldwide and which pushed the government and ranks the highest among other to dedicate a significant role to Arab countries50. The proportion of the empowerment of women in its seats held by Tunisian women can modernization efforts. Concerning also be regarded as an outstanding the contribution of non-state actors achievement if we compare it with the international standard, i.e. the 51 See under The Convention on the Elimination of All Forms of requirements of the United Nations Discrimination against Women Convention on the Elimination (CEDAW) and its Optional Protocol of All Forms of Discrimination Handbook for Parliamentarians against Women (CEDAW), which [2003]. Inter-Parliamentary Union, https://www.ipu.org/resources/ 50 See Women in national parliaments. publications/handbooks/2016-07/ Inter-Parliamentary Union, handbook-parliamentarians- https://data.ipu.org/women- convention-elimination-all-forms- ranking?month=10&year=2019 discrimination-against-women-and- (Retrieved 22 February, 2020) its-optional (Retrieved 3 April, 2020)

172 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ to shaping political, economic and situation of women at the dawn social processes in a still state- of the country’s independence, centric international order, it can it is indispensable to give a brief be said that the establishment of overview of the concept of social a strong and dominant position movements and their classification. of Tunisian women in the society It must be underlined resulted in the proliferation of civil that social movements cannot societies. Among them, the creation be explained under one single of l’Union Nationale de la femme concept. However, as all definitions tunisienne (National Union of agree on the main aims of these Tunisian Women) in 1956 can be movements, the paper states in highlighted52 as this organization the conceptual explanation that still plays an important role and social movements are created to determines the shaping of the find answers to certain problems, political and social processes. and usually mobilize large masses Finally, the paper aims to verify that of people for the sake of achieving while the empowerment of Tunisian common benefits or resisting women is described as being state- against social issues they believe controlled (state feminism), the would be harmful for the whole roots of Tunisian feminism have society. Concerning the feminist long been present in the Tunisian movement, DeFronzo and Gill society. identified some overlaps between different social movements. On the III.4.2. Social movement one hand, representatives of the theory: an answer to social feminist movement stand up for problems? the achievement of equal rights for both genders. In order to realize this goal they de-construct and rebuild In order to be able to analyse the existing stereotypes about the whether Tunisia disposed of all position of the disabled group, i.e. the necessary circumstances that in this case women. Therefore, enabled it to form a social movement feminist movements are categorized with the aim of improving the as identity movements. On the other hand, feminist movements also 52 See under the official website of demonstrate similarities with reform L’Union Nationale de la femme tunisienne (National Union of Tunisian movements as representatives of Women), http://www.unft.org.tn/ both social movements attempt fr/index.php?rub=248&srub=296 to overthrow existing norms with (Retrieved 23 February, 2020)

173 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the aim of triggering change they changes in the group’s resources believe would beneficial for the and/or opportunities as well as whole society (Defronzo, J. ‒ changes in power relations are seen Gill, J. 2020). Anthony Oberschall as necessary circumstances that distinguished the macro and micro result in the rise of collective actions levels from each other and identified (Jenkins, J. C. 1983). The paper those elements that contribute to does not work with the traditional the formation or growth of social hierarchical division of macro movements. According to him, and micro levels as most of the both social, cultural, organizational circumstances present on the macro and political changes can end level can be better understood on up in the creation of new social the level of the sub-state actors movements. Concerning the and thus the two levels merge into macro level, Oberschall identified each other. Instead, it analyses four conditions that can trigger the aforementioned necessary the coming into being of new conditions in general, regardless movements: dissatisfaction, of the given level where these changes in aspirations/values and conditions seem to appear. It must belief in the ability of triggering be emphasized that while the social change, increased capacity to movement theory of Oberschall realize the aim of the movement provides a great basis for analysing and finally, changes in opportunities the necessary conditions which shed (e.g. more favourable political light on the origins of the Tunisian environment) (Oberschall, A. women’s rights movement, it must 1997). With regard to the micro not be forgotten that the theory is level, the participation in collective a Western understanding of the actions depends on the deliberation formation of social movements and of the possible advantages of such thus has its own limits. In order to an act and the probability of the get a more comprehensive view of fact that the movement will achieve the activities of Tunisian women, in its main goals (Oberschall, A. the long run the cultural and special 2001). Jenkins further reinforced historic context of the North African the aforementioned findings country cannot be neglected from of Oberschall and stated that the research. grievances are constant elements of As the Tunisian case study triggering the formation of social of the evolution of women’s rights movements, consequently social movement analyses the evolution conflicts of interests, long-term of women’s rights movements in

174 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Tunisia, the question of how gender significant facts that arise out of operates in social movements and each other. The colonial period went to what extent collective actions hand-in-hand with the adoption contribute to the social construction of certain elements of the Western of gender must be mentioned, culture, among them an increased too. Since gender hierarchy is belief in the ability of carrying out constructed through organizational changes to improve the conditions practices both on the level of of women. As a consequence the political leadership and that of the Western impact and the of the society, it is important to actions taken by the forerunner of approach the evolution of Tunisian Tunisian feminists, such as Tahar feminism in the context of early Haddad (1899‒1935), a feeling representatives of the movement of dissatisfaction infiltrated the and see whether women were the early representatives of Tunisian first advocates of fostering broader women’s rights activists. rights and opportunities for women. As it has already been highlighted above, contrary to III.4.3. Circumstances Western feminist movements, up leading to the formation until gaining independence from of social movements ‒ the France in March 1956, Tunisian feminism must be understood in Tunisian example the context of the colonial past of the North African country and its Dissatisfaction and belief in struggle for independence. In fact, the ability of carrying out this struggle was also a personal changes rivalry between Bourguiba and Salah Ben Youssef on the basis While Oberschall separately of the secular versus religious mentioned the necessary conditions conservative values which further leading to the formation of new had a great impact on the Tunisian social movements, the paper feminist discourse (Willis, M. J. merges dissatisfaction with belief in 2014). Arfaoui distinguished three the ability of carrying out changes waves of the Tunisian feminist as well as increased capacity to movement and indicated the period realize the aims with changes in between the 1920’s and 1956 as opportunities. The logic behind this the birth of Tunisian feminism division and the discussion of these (Arfaoui, K. 2007). In order circumstances under two separate to refer to the colonial context subchapters is explained by two

175 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ of the North African country, in the colonial period (Arfaoui, it must be mentioned that the K. 2007). Similarly to Tunisia, first wave of Tunisian feminism the same process took place in was also interlocked with the Morocco where great supporters of greater participation of women women’s rights such as the Islamic in the nationalist movement for scholar, Allal al-Fassi (1910‒1974) independence. Although the social denounced the inferior position activity of women at that time of women and called for general highly depended on the support of reforms that aimed at revising the their male relatives, the first wave traditional practices (polygamy, the was significant from the point of obligation of wearing a veil (hijab), raising women’s awareness for the early marriage, etc.) deeply rooted socioeconomic problems that posed in the religion (Gray, D. H. 2013). a serious obstacle to achieving Based on these facts, it can be said equal conditions for women. The that while the traditional social high rate of illiteracy (nine tenths of patterns established a patriarchal women were illiterate in the 1920’s) society in Tunisia which could is a good example that carrying out be seen through all government radical changes was inevitable. organizations and every aspect of Starting from the 1920’s, upper- life, men as forerunners of women class women stepped up to demand empowerment played an important broader opportunities for women role in the reconstruction of gender to receive compulsory education roles in a rather conservative and access to teaching jobs as a society. The general dissatisfaction preliminary condition to ensuring as a result of unequal opportunities greater chances for women in in education, the labour market the labour market, participation and political participation raised in political life and in all spheres awareness among women and of the society. However, it is also resulted in upper-class women indispensable to mention that the taking the role for the benefit initial activities of women’s rights of other female members of the advocates not only took place with society in the hope of achieving the approval of male relatives and their emancipation following their encouragement, but were also their independence. However, influenced by such great men like the initiatives coming from the reformist Tahar Haddad who great reformer men proves that openly raised his voice against Tunisian feminism was in fact a the injustices women used to face “masculinized” feminism.

176 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ take actions for achieving equality Increased capacity, changes in opportunities. Between 1911 and in opportunities 1956 the North African country saw a duplication of its own population In the forthcoming, the under the age of 35. This meant that characteristics of the Tunisian by 1956 the total population reached society in light of the state-building 3 782 000 with an approximate process as well as the socioeconomic annual growth of 75 000 people challenges following the country’s (De Lemps, A. H. 1958) and while independence will be demonstrated. between 1911 and 1921 the annual First of all, it must be growth only reached 8%, this rate emphasized that in Tunisia, the increased to 25% between 1936 centralization of power brought and 1946 (Tlatli, S. E. 1957). As about a strong political leadership a result of this rapid population with President Bourguiba growth, a change took place in the taking this role in 1957. Due to structure of the population: 41.8% the poor indicators of human of Tunisians were under the age of development, Bourguiba realized 14 and 9% between the age of 14 that a modernization process was and 19. This also meant that in total inevitable to set the country on the half of the Tunisian population was path of development. Therefore, the under the age of 20 in contrast to ideology of liberation was replaced the age group above 60 where this by the idea of state-building which rate only reached 6.7% (De Lemps, compared with the initial aim of A. H. 1958). The rapid population women’s rights activists, resulted in growth was closely connected with their reduced role (Sadiqi, F. 2008). challenges in schooling: the data The process of state-building indicates that in 1956 the literacy under President Bourguiba and the rate only reached 15% and only measures that he took to set the one child in thirty received a high- country on the path of modernization school education. Owing to the cannot be understood without educational reforms Bourguiba having a general knowledge about introduced in 1958, women and the socioeconomic challenges the people living in rural areas could country had to face following the also benefit from schooling. obtainment of its independence Thus during the first decade of in 1956. Moreover, these independence the number of those socioeconomic challenges also pupils who attended primary school raised awareness among women to rose from 15% to 90%. Moreover,

177 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the number of university students in understanding the formation also demonstrated a significant of social movements and the role growth, from 2000 to 10 000 women’s rights activists played students being enrolled in academic in ameliorating the situation of studies (Tessler, M. A. ‒ Keppel, Tunisian women following its M. E. 1976). However, despite the independence is through the CSP aforementioned socioeconomic in which President Bourguiba challenges, the economic growth abolished polygamy, provided showed a steady increase: the women the right to divorce and to GDP reached 2.37% between child custody and set a minimum 1938‒1950, 3.41% between age for marriage. Taking into 1950‒1960 and further rose to account the low literacy rates at the 6.92% between the period of 1970 time of Tunisia’s independence and and 1980. This continuous growth the burden that the rapid population would only be abated between 1980 growth posed on the economic and 1990 with a GDP growth rate growth of the country, it can be of 3.56% (Avakov, A. V. 2010). As said that immediate measures were a consequence, the rejuvenation necessary to ameliorate the situation of the population posed a serious of the people, namely, achieving challenge to the economy of the gender equality which could ensure newly independent country both a privileged position for women from the point of view of schooling in the society. Referring back to and production. Therefore, only two the social movement approach solutions were left for the newly of Oberschall, it is important to independent Tunisia: to rely on highlight that with a president who foreign aid or take immediate steps started a modernization process with to slow down the rapid population the aim of setting the country on growth. the Western model of development, Bourguiba chose the latter the political environment was quite option and started an economic favourable for carrying out changes. development program which meant The growing dissatisfaction coming that everything, including female from the direction of sub-state actors participation in the labour market, was also present. In this regard, it was subordinated to the political must be seen whether carrying out direction of Habib Bourguiba these reforms was the result of the who saw female participation as pressure from those women’s rights compatible with the traditional activists and reformers who were roles of women. One crucial point mentioned above, or whether the

178 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ initiatives of President Bourguiba of women’s rights organizations were taken to set an example for in the future. Even though Tunisia other Arab countries in the region. disposes of all those elements Jomier argued that there was no that constitute a convenient pressure from women’s rights environment (e.g. heterogeneous organizations on the government society, educated youth capable of to introduce the CSP, therefore this triggering change, absence of the decision was a natural outcome of intervention of the military in state the measures of the government to affairs) for the proliferation of civil improve the situation of women societies, women’s movements in Tunisia and to ensure their were deeply affected by the political privileged position in the society leadership of the country. Therefore, (Jomier, A. 2011). Charrad also the changes following the Arab reinforced the argument of Jomier Spring must be understood in the and pointed out that the CSP was context of the political direction introduced right after Tunisia gained the previous regimes of the country its independence from France, so at decided to choose. Moreover, the that time there were no grassroots aforementioned context is the organizations present who could reason the post-Arab Spring period push the government to accept the is seen as a starting point of a wide CSP (Tchaicha, J. D. ‒ Arfaoui, K. debate on the gender question and 2017). While the CSP could be seen an increased role of women’s rights as a progressive measure from the organizations in social and political government to abolish inequalities affairs, namely, the drafting of the between men and women and to new constitution between 2011 and establish the basis of a secular state, 2014. Arfaoui concluded that in fact, the absence of women in participating III.4.4. Conclusion in the promulgation of the CSP demonstrated the weakness of The paper aimed to women’s rights organizations demonstrate the growing in taking important decisions significance of non-state actors in (Arfaoui, K. 2007). Based on these the shaping of economic, social findings, the CSP can be seen as and mainly political processes of a crucial point that established a a still state-centric international dominant role for the government order. The author decided to select in taking unilateral decisions and the Tunisian case for analysis thus determined the limited role as women’s rights organizations

179 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ also played an important role in out changes and the favourable the events during and following political circumstances under the Arab Spring. However, it which the government launched was also found to be important to its modernization process had its demonstrate that understanding effects at the turn of the millennium. the events of the post-Arab Spring Compared with the beginning of period and the outstanding role of the 1950’s the fertility rate shrank women in Tunisia compared with from 6.9% to 2%, the net rate of other Arab countries necessitates primary school enrolment reached the tracing back of the roots of 99%, the ratio of literacy between the formation of women’s rights men and women became equal and movements. Based on the social Tunisia scored the highest values movement theory of Anthony on the Gender Development Index Oberschall and the application of in the Maghreb in 2002 (0.734) a new approach, the paper tried to (Avakov, A. V. 2010). All these elaborate the Tunisian model of indicators underpin the conclusion the formation of social movements that a correlation does exist between (Figure 11). Since both the macro fertility and education. However, and micro levels of analysis it must be mentioned too that the showed some overlaps, the new research encountered challenges approach also meant the merging of during the quest for statistical both levels. By bringing statistical data as most of the data are only data from the colonial period and available from the 1960’s, thus the first years of the presidency the research resulted in a limited of Habib Bourguiba the paper number of statistical data to work illustrated those socioeconomic with. challenges which on the one hand The paper aimed to verify triggered dissatisfaction from sub- that even though Tunisian feminism state actors and urged activists was closely controlled by the state, to stand up for demanding a its roots had long been present in wider range of rights for Tunisian the society. As the research has women. On the other hand, the mentioned, Tunisian feminism challenges urged the government was rather a “masculinized” to take necessary measures to rein feminism given impetus by in the rapid population growth and great reformers such as Tahar reduce the high rates of illiteracy Haddad which proves that the and unemployment. The growing environment could be favourable abilities of sub-state actors to carry for women’s rights activists to

180 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ step up for the common benefit of movements for independence, but Tunisian women. However, the the state-building process in which socioeconomic challenges pushed everything was subordinated to the the political leadership to introduce national development overwrote the such measures which would serve conventional way of the evolution the common good of the whole of feminism. Therefore, in Tunisia society. This is the context in the empowerment of women which the CSP came into being reflected a bi-directional process and this is the discourse in which and the interactions on the level of the empowerment of Tunisian the political leadership and the sub- women must be understood since state actors resulted in a reverse the very beginning. Women’s situation with the state being the rights activists have been present key player in the formation of the since the struggle of nationalist social movement.

Figure 11: Demonstration of the main elements of the mobilization of social movements on the macro and micro level Source: Edited by Sipos Xénia based on the social movement theory of Oberschall, A. 2001

III.4.5. References

Arfaoui, K. 2007: The Development of the Feminist Movement in Tunisia 1920s-2000s. ‒ The International Journal of the Humanities 4 (8): pp

181 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 53-61. – https://www.researchgate.net/publication/307758688_The_ Development_of_the_Feminist_Movement_in_Tunisia_1920s- 2000s (Retrieved 23 February, 2020) Avakov, A. V. 2010: Two Thousand Years of Economic Statistics: World Population, GDP and PPP. ‒ New York: Algora Publishing. Boulares, H. 2011: Histoire de la Tunisie. Les grandes dates. ‒ Tunis: Cérès. Chabchoub, A. 2014: Bourguiba et Moi. ‒ Dubai, Al Manhal. Code du Statut Personnel. (Issued on 28 December 1956, with the latest modifications taking place on 26 July, 2010). ‒ Imprimerie Officielle de la République Tunisienne Publications de l’Imprimerie Officielle de la République Tunisienne 2012. – https://www.ilo.org/dyn/natlex/ natlex4.detail?p_lang=fr&p_isn=73374&p_count=96182&p_ classification=01.03&p_classcount=1024 (Retrieved 23 February, 2020) Defronzo, J. ‒ Gill, J. 2020: Social Problems and Social Movements. ‒ Lanham ‒ Boulder ‒ New York ‒ London: Rowman&Littlefield. De Lemps, A. H. 1958: La situation économique de la Tunisie. ‒ Les Cahier d’Outre-Mer 11 (43): pp 272-290. – https://www.persee.fr/ doc/caoum_0373-5834_1958_num_11_43_2085 – (Retrieved 29 February, 2020) El Amraoui, A. ‒ Naami, M. 2018: “Does Morocco’s strict abortion law need reform?”. ‒ Al Jazeera. 25 February, 2018. – https:// www.aljazeera.com/indepth/features/morocco-strict-abortion-law- reform-180224224122230.html (retrieved 23 February, 2020) Gray, D. H. 2013: Beyond Feminism and Islamism. Gender and Equality in North Africa. ‒ London ‒ New York: I.B. Tauris. Inter-Parliamentary Union. Handbook for Parliamentarians. “The Convention on the Elimination of All Forms of Discrimination against Women and its Optional Protocol”. https://www.ipu.org/resources/ publications/handbooks/2016-07/handbook-parliamentarians- convention-elimination-all-forms-discrimination-against-women- and-its-optional (Retrieved 15 April, 2020) Inter-Parliamentary Union. Women in national parliaments. https://data. ipu.org/women-ranking?month=10&year=2019 (Retrieved 22 February, 2020) Jenkins, J. C. 1983: Resource Mobilization Theory and the Study of Social Movements. ‒ Annual Review of Sociology 9: pp 527-

182 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 553. – https://www.annualreviews.org/doi/abs/10.1146/annurev. so.09.080183.002523 – (Retrieved 23 February 2020) Jomier, A. 2011: Secularism and State Feminism: Tunisia’s Smoke and Mirrors. ‒ Books and Ideas. https://booksandideas.net/Secularism- and-State-Feminism.html (Retrieved 22 February, 2020) Moghadam, V. M. 2018: The State and the Women’s Movement in Tunisia: Mobilization, Institutionalization, and Inclusion. ‒ Institute for Public Policy of Rice University. – https://www.bakerinstitute.org/ media/files/files/e83637ea/cme-pub-carnegie-moghadam-092618. pdf (Retrieved 23 February, 2020) Norbakk, M. 2016: The women’s rights champion. Tunisia’s potential for furthering women’s rights. ‒ CMI report. – https://www.cmi. no/publications/5973-the-womens-rights-champion (Retrieved 23 February, 2020) Oberschall, A. R. 1997: Social Movements. Ideologies, Interests and Identities (second paperback printing). ‒ New Brunswick ‒ London: Transaction Publishers. Oberschall, A. R. 2001: Action, Collective. – In: Smelser, N. J. ‒ Baltes, P. B. 2001: International Encyclopedia of the Social & Behavioral Sciences: pp 49-54. ‒ Oxford: Pergamon. Sadiqi, F. 2008: Facing Challenges and Pioneering Feminist and Gender Studies: Women in Post-colonial and Today’s Maghrib. ‒ African and Asian Studies 7: pp 447-470. Tchaicha, J. D. ‒ Arfaoui, K. 2017: The Tunisian Women’s Rights Movement. From Nascent Activism to Influential Power-broking. ‒ London: Routledge. Tessler, M. A. ‒ Keppel, M. E. 1976: Political Generations. In: STONE, R. A. ‒ SIMMONS, J. 1976: Change in Tunisia. Studies in the Social Sciences. ‒ Albany: State University of New York Press. Tlatli, S. E. 1957: Tunisie Nouvelle. Problèmes et Perspectives. ‒ Tunis: Imprimerie Sefan. Union Nationale de la Femme Tunisienne (National Union of Tunisian Women UNFT), http://www.unft.org.tn/fr/ (Retrieved 23 February, 2020) Willis, M. J. 2014: Tunisie Nouvelle. Politics and Power in the Maghreb. Algeria, Tunisia and Morocco from Independence to the Arab Spring. ‒ New York: Columbia University Press.

183 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ III.5. Onset analysis of the frozen conflict taking place in Eastern-Ukraine

Oleg Tankovsky53

Abstract

The paper discusses the background of the ongoing frozen conflict in Eastern- Ukraine. Within the country groups of the Post-Soviet region, especially among those countries which became independent from the Soviet Union directly, this is not the first case to experience these kinds of conflicts. Prominent examples are Moldova and Georgia for frozen conflicts from the mentioned region. These countries are facing major geopolitical challenges since declaring their independence. This paper aims to analyze the background of the ongoing conflict in Ukraine, to understand the real cause behind the breakout of violence. The paper forms the hypothesis that the real driving forces and motivations were not ancient hatred or the involvement of the Russian Government, but rather the clash of local elites and their promises of opportunities for better living. To prove this, the paper uses the scholarly work of Civil War Studies focusing on qualitative methods. The paper suggests that although the involvement of the Russian troops was proven, the conflict itself cannot only be considered as a hybrid-war between two Eastern- European countries, as it also shows signs of a classic civil war. The paper will discuss all the criteria of a classic civil war, and in the conclusion it will form a clear statement regarding this conflict.

Keywords: Ukraine, Donbass, frozen conflict, onset analysis, ethnic conflict

53 PhD Student – CUB IR Doctoral School, [email protected]

III.5.1. Introduction the incumbent government’s sovereignty (Johnson, C. 2008). The number of new armed During the bipolar world order the conflicts have declined in the past main reason behind this was more seventy years and civil wars in obvious: the two major actors in recent periods are far more common foreign policy were fighting proxy than international wars (Singer, wars against each other. But the J. D. – Small, M. 1994). Instead current case in Ukraine is a vastly of interstate wars a new wave different situation from past events. of conflicts has started in which This topic is highly relevant and different kinds of militias and armed important, as the conflict is still groups have begun to challenge ongoing and the root causes from

184 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ both sides have not yet been view. The main goal of this study is analyzed. On the other hand, the to analyze the onset of the Ukrainian case of Moldova (Kaufman, S. J. armed conflict, its origins, and how 1996) and Georgia (Nodia, G. O. this very problematic situation 1995) are showing very similar could have occurred between these processes. These kinds of frozen two ethnic groups. The paper forms conflicts prevent them from joining the hypothesis that the real driving any military alliances, which could forces and motivations were not have an impact on the geopolitical ancient hatred or the involvement and economic challenges they may of the Russian Government, but face in the mid- to long-term. rather the clash of the local elites During the last 5 years since and the promising of an opportunity the outbreak of the Ukrainian for better living. Without the conflict, many analyses have financial backing and influence been published about the Russian of these elites, would this conflict intervention and the combination have started anyway or not? In of various methods used in this parallel, the dynamics of the East- conflict A( llison, R. 2014), that is Ukrainian conflict will be examined to say, the expression of a hybrid and analyzed as well, in order to war has gained traction among gain an informed understanding scholars. On the other hand, in the of these very complex events. scientific works of civil war studies, It is an important and highly the topic of Ukraine has not been relevant question to understand widely discussed, and an onset the real driving forces of the analysis in the case of this conflict conflict, as previously the Russians has been glaringly missing. The aim and Ukrainians had a friendly of this work is to provide a deeper relationship over past decades. By understanding of the main reasons uncovering the main causes behind of the outbreak of the conflict, and the deterioration in their relations, a to present a comprehensive view similar conflict could be averted in of the conflict, as manipulations the future. and fake news are presented on In the first part of the both sides. The purpose of this study the basic context of the study is to create an overview from armed conflict is presented using articles written not only by western normative and descriptive methods scholars, but also by Russian and as a facilitating means by which Ukrainian scholars in order to stay the different aspects of the two authentic and present a balanced sides can be observed. In this part

185 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ a brief overview of the historical rigor, and reliability (Moravcsik background in Ukrainian - Russian A. 2014), which will be useful in relations will be presented, how analyzing the onset of the armed relations developed through the conflict. In this section the concepts centuries, especially during the of security dilemma, opportunism, period of the Soviet Union, in order humanitarian intervention and the to better understand the grievances dichotomy of greed vs grievance and ancient hatreds between the two will be used to analyze the ethnic groups. It will be highlighted conflict. The motivation behind the how the nationalistic policies rebellion will be examined on the developed over the past 25 years basis of these aspects, and on the since Ukraine became independent. other hand an explanation will be The roles that these nationalistic provided as to how this opportunity policies played in the everyday occurred for the revolting groups. lives of Ukrainian citizens will be The preferences and perceptions listed, and also how these policies of the eastern Ukrainian ethnic changed after the revolution. A Russians will be listed, along with short overview will be given on the motives and driving forces of how the language laws changed in the Ukrainian government as well. the past thirty years, as this will help Lastly, the end of the conflict us in understanding the motives and and how it might continue or perceptions of the rebel side. be solved in the near future will In the second part of the be presented in parallel with case study the real motives and a geopolitical outlook on the driving forces will be analyzed in conflicts in the region. At the end order to understand the onset of of the study the findings and results the conflict. In this part qualitative of the study will be stated with research methods would be more a conclusion regarding the main suitable, as this part will focus research question. primarily on exploratory aspects, provide insights into the problem, III.5.2. The main context of uncover trends and dive deeper. the armed conflict Qualitative methodology deals with high flexibility and applicability: a Literature review – civil or textual record exists for almost every hybrid war? major international event in modern world history. It also delivers After Russia’s actions (or impressive explanatory insight, reactions) in the Ukrainian conflict

186 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the expression “hybrid war” has already in ancient times most been widely used. At the same time, wars consisted of these multiple it has also become a threatening aspects. Therefore, warfare can expression in the Baltic States, be considered as a hybrid method Poland or even Kazakhstan as the of the armed conflict, but the war fear from a similar intervention itself does not have any new or using conventional or irregular unconventional aspects. armed forces, financing anti- The only new thing that establishment protests or very emerged with this conflict is the effective Russian language based efficiency of the informational misinformation campaign has been warfare from the Russian side. For rising. Therefore, it is worthwhile example, during the 2004-05 Orange discussing the question, whether Revolution in Ukraine, or the 2008 the frozen conflict in Eastern- Russia-Georgia War, Russia was Ukraine can be considered a already using information warfare hybrid war rather than a civil tools, but they were much less war. Hybrid war is a blending of effective (Kofman, M. – Rojansky, conventional and non-traditional M. 2015). According to a recent tactics to achieve political–military poll, the number of pro-Russia objectives (Hoffman, F. G. 2007). voters among the Russian speaking Based on another definition, hybrid population of Ukraine jumped warfare is a military strategy significantly due to television-fed which employs political warfare perceptions that ethnic Russians and blends conventional warfare, would become second-class citizens irregular warfare and cyberwarfare in Ukraine. On the other hand, with other influencing methods, these manipulations could be much such as fake news, diplomacy, stronger among the population of lawfare and foreign electoral Crimea as their majority (85%) intervention (Standish, R. 2018). In do not perceive themselves as my understanding, the expression European (O’Loughlin, J. – Toal, “war” itself is misused. It is correct G. 2015). In fact, non-linear or non- to state that conventional, irregular, traditional warfare, as it is described political and information tools have in Russian Military Doctrine been used in the described conflict (2010), is simply the attempt to in a combined way. However, it catch up to the level of the United is also important to note that this States’ methodology of global war is not a new method of modern on terrorism which has already warfare, since it turns out that been used in Iraq, Afghanistan, and

187 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ elsewhere (Gerasimov, V. 2013). there were some clashes between On the other hand, armed them. Regarding the aspects of the conflicts are considered as civil theoretical definition, the fights wars if there are more than were internal, the resistance was 1,000 deaths, if there is effective effective on both sides, and the resistance from the rebel side, number of deaths were far more and the national government’s than 1,000 in the year of 2014. involvement is also required This means that the armed conflict (Collier, P. – Hoeffler, A. 2007). that happened in Eastern-Ukraine According to Sambanis, a civil war meets all the criteria of a civil war. is any armed conflict that involves Nevertheless, in spite of the fact military action internal to the that recently Ukrainian officials metropole, the active participation often refer to the conflict as a war of the national government and between Ukraine and Russia, in effective resistance by both sides the beginning of the conflict it was (Sambanis, N. 2004). There is termed as Anti-terrorist operations another definition by Kalyvas: civil (Sutyagin, I. 2015), which also war is an armed combat within refers more to a civil war than an the boundaries of a recognized interstate war. It is also important sovereign entity between parties’ to note that the involvement of subject to a common authority at irregular Russian troops, which was the outset of hostilities (Kalyvas, a supportive intervention on the S. 2003). According to the most side of the rebels, has been proved commonly used and also measurable and confirmed K ( ofman, M. et al. definition, civil wars are those 2017). But this is more a reference internal conflicts that count more to the means of the warfare and not than 1,000 battle deaths in a single to the war itself, since without the year, and also include cases with original motive of the rebels there at least twenty-five battles within would not have been any fights nor a year (Blattman, C. – Miguel, E. any need for these involvements. 2010). In my understanding, the Based on these definitions, usage of the expression ‘hybrid- can the armed conflict in Ukraine war’ due to the external support of be considered as a civil war? Russia on the side of the rebels is not Predominantly, the country has two appropriate, as with this approach different identities with two major most of the civil wars in the 20th groups using a different language, century could be considered hybrid and even in the previous centuries wars because an external world

188 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ power could always be found in Ukraine, Ukrainians migrating to the background as a supporter. I other parts of Russia, but there were reckon that this is not the right no conflicts recorded between them. interpretation. On the other hand, the In the First World War 3.5 million scholarly works of civil war studies Ukrainians were fighting for the provide a better understanding of Russian Tsar, but ethnic atrocities the whole standoff. Nevertheless, to were recorded only between Polish be as precise as possible, the case and Ukrainian groups (Serhienko, of the Ukrainian armed conflict is Y. G. – Smoliy, A. B. 1994). a very unique one. Similarities can Between the two world wars be found to the cases of Moldova the situation was already more and Georgia, but there are major problematic. Right after WWI there differences as well. were three different Ukrainian revolutionary movements and Historical overview the country was totally divided. It was a very chaotic situation in The current population of which practically everyone was Ukraine is divided based on the fighting against everyone. The end spoken language and we can result was that western Ukrainians allocate them to exact territories. became citizens of the newly This is highly important as over emerged Polish Republic, and the the centuries it changed the local central and southern Ukrainians population’s dialect and identity became citizens of the Ukrainian for the long term, which has led to Soviet Socialistic Republic (Smele, the highly divided country that we J. 2015). In the first couple of are facing today. The first event years during which extremely of Ukrainian nationalism was the nationalistic leadership was in Khmelnitsky led Cossack uprising power in Ukraine, many changes (Subtelny, O. 1988). However, the came about such as an elevated uprising was against the Polish – importance of the Ukrainian Lithuanian Empire, and as a result language, culture, history, and of the fights Cossack Ukrainians literature. Then during the 1930’s became part of the Russian Tsar’s these policies changed after Stalin Empire but they did not receive came to power and new approaches their autonomy, which they were were implemented. Every nation expecting. During the 19th century was equal, it was a golden age for there were some major migration each ethnic group living in the movements; Russians migrating to territory of Ukraine (Dumitru D.

189 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ – Johnson, C. 2011). However, more nationalistic view than the there was an important event in communist leaders had, which this period, namely, the Holodomor affected all the minorities living in or known as the great famine. the territory of Ukraine in a negative Scholars do not agree whether this way. There are many statistics famine was genocide or not, but about how the number of minorities the Ukrainian parliament recently changed in the past 25 years, and declared that it was (Kasianov, how they declined as a result of H. 2014). Even to this day, the nationalistic policies (Sidor, D. Ukrainian population has bad 2005). Recently, the country has memories about this famine and been quite divided in the use of blame the Russians for it. During language. Even in Kiev, 50% of the Second World War under the the population speaks Russian as Nazi regime Ukrainian nationalistic their first language. Until 2012, movements were rising again, but the previous language law dating without any significant result. As from the Soviet times was in force, a result of the Second World War which did not really regulate the multi-ethnic territories became part use of language at all. Then during of Ukraine such as Ruthenia and the reign of Yanukovych, a new areas previously ruled by Poland, modernized bill was accepted by such as Romania. There was another the parliament: any language other territorial change later, when in than Ukrainian would be considered 1954 Khrushchev transferred a regional minority language if Crimea from the Russian SFSR to it was used by more than 10% of the Ukrainian SSR (Kubijovyc, V. the local population. As a result 2016). minority languages could be used in courts, schools and government The language question institutions in these regions. After since the independence of the revolution, on the first day of the country the interim government this bill was repealed. The first decision of From the 1990’s after the the new government was to dismiss dissolution of the Soviet Union the use of the Russian language huge changes came in Ukraine. as a regional language all across The national language became Ukraine (BBC, 2014). Following massively important again, while this, many Russian speaking Russian was a state language Ukrainian citizens felt that this was too. The new governments had a not their country anymore, nor did

190 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ they feel safe. Of late there have nationalistic Ukrainians increased been many discussions and ongoing in the past five years, their influence debates regarding the new language is still insignificant for the overall law accepted in May of 2019, which population of the country. has banned the use of Russian language in cultural products, III.5.3. Onset analysis movies, books, songs, etc., not to mention banning the official use The main background of the language. The language and driving motives of the law has been highly criticized and conflict described as ill-defined, illegal, and unconstitutional. Currently, The huge country of forty-two it is being reviewed by the Venice million people has been struggling Commission and has also been with its identity questions already discussed at the UN’s Security for 25 years, ever since it became Council (brought up by the independent from the Soviet Union. Russians). None of the Ukrainian governments It also worth noting how the could resolve the internal divisions country was divided by the election or build strong political institutions, results. In the western and central implement economic reforms, territories pro-EU powers always overcome corruption and reduce led in the polls, whereas in the the influence of powerful oligarchs. eastern and southern territories All the presidents have allowed which are dominated by Russian oligarchs to gain increasing control speakers, most of the time pro- over the economy, which is how the Russian powers were elected. country found itself in the situation But this divide never caused any by 2010 in which Ukraine’s fifty ethnic atrocities in the country richest people controlled nearly before. Thanks to their common half of the country’s gross domestic history and culture, people always product (Wilson, A. 2013). believed that they were the closest According to these numbers it’s relative nations in the world. My not even a question that elites are conclusion would be that there was dominating not only the economic no significant hatred between the life of Ukraine but the political two sides before the Euromaidan life too. In each region or county, revolution, until 2014 when the we can easily allocate an oligarch new nationalistic government came who controls the region. Why is into power. Although the number of this important? Because without

191 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ their support the chance for a eastern part of the country. violent conflict would be relatively Posen already in 1993 came small. In order to understand the up with this theory regarding the onset of the Ukrainian conflict, we real security dilemma, and he need to examine this question in warned the political leaders that this detail: what was the main driving kind of approach in Ukraine could force of the whole process, greed lead to a conflict later. According to or grievances? This is a classic Posen, a security dilemma is when question in every civil war case offensive and defensive military study and both greed and grievance forces are more or less identical can be a right assumption. (Posen, B. 1993). If offensive In favour of understanding the operations are more effective than onset of the conflict the perceptions defensive operations, actors will of the parties need to be examined. choose the offensive options if The pro-European nationalistic they wish to survive. In case of Ukrainians consider Ukraine as a Ukraine this theory is correct in regional power. According to the two aspects. Firstly, there was the country’s resources it could even occupation of Crimea by Russian be true. Unfortunately, as a result forces. They had superiority on the of non-consistent governance in peninsula, and the political crisis the past 25 years, it was never in Kiev was still not resolved. That true. While in most cases Ukraine was an unexpected opportunity could act as an independent for Moscow (Marxsen, C. 2014). actor in world politics, Ukraine But after these events, Russian always had a strong and close speaking eastern Ukrainians cooperation with Russia (Rose, wanted to have a similar process, W. 2000). The security dilemma that’s why eastern oligarchs started was never a major question for to fund and financially support the Ukrainians, in spite of the fact local militias to revolt against Kiev. that in the Budapest Memorandum After the violent regime change they received assurances from led by the far right nationalists, the world’s great powers for their the local population of Eastern safety and integrity. Nevertheless, Ukraine started to fear them, which some western Ukrainian oligarchs was another important reason that decided to lead the country towards led to the conflict. From another the EU and NATO. And that was perspective, Ukrainian leaders have the time when the real security always faced the security dilemma, dilemma occurred, especially in the as their big brother Russia was

192 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ much stronger and they had always the Red Cross and also by the been dependent on them. For this Russian government, but regarding reason they had to act in accordance humanitarian intervention the with Russian interests. events in Crimea were more Among civil war scholars, significant. As the peninsula the question of humanitarian is mostly inhabited by ethnic intervention also plays an important Russians, and there was a threat by role. In this case it is less important, the far right nationalistic groups, but still worth providing a brief Moscow had the opportunity to overview of this question too. intervene. It could be analysed in According to Evans and Sahnoun, another case study whether it was humanitarian interventions are legal, not to mention the geopolitical highly important in case of a civil background. Ultimately, according war, in order to protect innocent to official statements made by the civilians. Based on that, these kinds Russian Government, the most of operations are rather described important factor for intervening was as the responsibility to protect the that they wanted to protect the local people than as an intervention by a Russian population, as they were third party (Evans, G. – Sahnoun, afraid of an attack by the far right M. 2002). In their opinion a thugs against Crimea. Based on stronger third party always has my readings and knowledge of the the right to protect civilians, and topic, the main reason for Russia’s this is more important than the annexation of Crimea was the sovereignty of a state. On the other opportunity and chaos left behind hand, Luttwak argues against this after the unexpected regime change statement. According to him we in Kiev. It can even be claimed that should never make interventions; the invasion was Russia’s reaction rather he argues that countries have or answer to the revolt that took to “make war to make peace” as in place in the Ukrainian capital in the long term this is a more peaceful late February 2014. solution of the conflict. Hatred This question of greed or between ethnic groups will be less grievance plays an important role relevant after the conflict has been in civil war literature as well. Paul solved internally, and the peace can Collier and Anke Hoefflers provide stay for longer than in case of an us with an influential scheme of intervention (Luttwak, E. 1999). analysis. They have introduced In Donbass, some a conceptual dichotomy in the humanitarian aid was sent by literature: greed vs. grievance.

193 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ The greed argument refers to self- as it represented only the western interested, even selfish behaviour regions of the country. It was not as the main motivation behind accountable either, as the level civil wars, whereas the grievance of corruption was still one of the approach identifies discontent highest in the world; only in a few and frustration as the primary Central-African countries was the motivation for political action situation worse. And if we have a (Collier, P. et al. 2005). Later look at whether the government Collier and Hoeffler modified their was able to protect its citizens or original concept and changed it into not, then we can state that it wasn’t a broader meaning as opportunity. in their capabilities either. After As greed is an important motivating the regime change pro-Russian factor for any side, without having militias could rise up against the a good opportunity itself it doesn’t central government in the eastern amount to anything – Ukraine territories. Had there been strong being a good case in point. All the leadership, not to mention the political leaders were led by greed government’s legitimacy, this could in past decades, but this was not not have happened, at least not on enough to start a war; they were not such a large scale. even interested in it. But when a It can be clearly stated that the political standoff occurred between pro-European more nationalistic the two identities of Ukraine it was oligarchs had the opportunity to start the perfect time to drive the country an uprising based on Yanukovych’s into a violent conflict. We can see decision in late 2013 not to sign the great examples for this theory in the commercial treaty on the Deep and Ukrainian case. Comprehensive Cooperation with According to another the EU. But after the regime change explanation weak states and weak in Kiev, the pro-Russian elite had governance always create an the same chance, however their case opportunity for frustration that was even more problematic since motivates insurgency. According to recruiting soldiers to fight against Levi a strong state is representative their own government is never and accountable to its people, and easy. The decision of an individual able to protect the population from to participate in a rebellion always violence (Levi M. 2006). In the depends on potential costs and case of Ukraine neither conditions benefits. Insurgents will join an were met. The Poroshenko uprising only if the expected government was not representative, benefits are higher than what is

194 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ offered by the current status quo it can be claimed that the main (Muller, E. N. – Opp, K.-D. 1986). driving force of the violence both in This is why most of the opportunity Kiev and Eastern Ukraine, were not theorists do not perceive domestic the grievances or ancient hatreds, violence as an emotional reaction to but rather the influence of their grievances but rather as a rational nationalistic and greedy leaders. response to the circumstances. To summarize the beginning On the other hand, among of the violence, the onset and the most important driving forces the main driving force of the of a civil war we can usually find conflict, we can state that the not only the opportunity, but the most important ingredient was the motivation as well (Zeynep, T. et. opportunity presenting itself on al. 2011). As the Ukrainian society both sides. On its own, however, has always been relatively divided, this opportunity would never have the motivation for an uprising led to a violent conflict, but it was was hiding in the dark waiting for definitely the spark which had been an opportunity. The nationalistic missing previously. Regarding pro-western elites always wanted the motivations of the parties, to get closer to Europe and the security dilemma played an break up with the Russians, but important role as well, which led they could never recruit enough to fear later. Compared to other supporters for this idea. On the similar conflicts, we can maintain other hand, pro-Russian elites that ethnic differences did not play always believed in the country’s an important role, as only some integrity and in its Russian based far right nationalistic Ukrainians identity. Minor clashes between shared this approach. These the two perspectives had already nationalists were always in the been registered during the last 15 minority; they never had any major years, but in most cases economic support from the population. In spite interests played the most important of being a divided country having role. As long as both parties could two different identities – in fact realize their major incomes from there are no significant differences the country, there was no need of between them either culturally or any armed conflict. But as a result historically – this has never been of the revolution, this stable status a real problem in Ukraine. The quo changed, and the economic other important driving force of the stability of the Eastern part of the armed conflict was the political and country was threatened. All in all, ideological differences between

195 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the elites, who could successfully constitutional reform in Ukraine. influence their population in a From this point we are talking about nationalistic way. Without the help a frozen conflict, as the ceasefire and support of the elites, violence is still in power, but there was no would never have started either in peace treaty signed. Both sides Kiev or Eastern Ukraine. The crisis withdrew their heavy weapons occurred because of many reasons, sooner or later, they successfully such as the more than twenty years exchanged their prisoners, but the of weak governance, a corrupt central government still couldn’t economy dominated by oligarchs, regain its control over the Russia- heavy reliance on Russia, and sharp Ukrainian border, and they didn’t differences between Ukraine’s introduce any constitutional linguistically, religiously, and reforms (Bentzen, N. 2016). ethnically distinct eastern and The DPR and LNR territories western halves (McMahon, R. are integrated into the Russian 2014). economy, and both territories use the ruble as their currency. Nobody End of the Conflict knows what will happen in the near future in Eastern Ukraine. After the escalation of the Some fights are still being recorded fights in January 2015 the European between the sides, but they are not leaders organized a second summit significant and the front lines have in Minsk in order to negotiate a not changed since the signing of ceasefire as soon possible. As a the treaty. The election of the new result, on the 12th of February president has also not resulted the Minsk II treaty was signed by in any change in the conflict yet. the parties. Leaders of Belarus, Basically, this is a very similar Russia, Germany, France, Ukraine, situation to that which was noted DPR and LNR participated in the in Transnistria, Abbhazia or South- negotiations. Following the 16 Osetia. According to international hours of overnight discussions law, the central governments of the parties agreed to a package Ukraine, Moldova or Georgia do not of peace-making measures. The have the right to join any military negotiations were observed by the cooperation (such as NATO) until OSCE as well (OSCE, 2015). They they reach their total territorial agreed on the withdrawal of heavy integrity. For this reason, the current weapons from the front line, the status quo is very much in favour of release of prisoners of war, and on the Russian government. How long

196 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ these frozen conflicts can survive, is obviously not in their interests. The the crucial question – and anyone’s question of the security dilemma guess. Until a long term agreement played an important role on both is reached concerning the status of sides as well. It can be claimed these territories, the situation will that the unexpected happenings probably stay the same. and the reactions of these events is what ultimately led to this III.5.4. Conclusion violent conflict. We examined the motivations and perceptions of both At the beginning of the study sides. There were no significant the historical background between ancient hatreds between the parties; the Russians and Ukrainians was animosity did not play an important discussed. Following that, the real role in the shared Russian- driving forces of the violent conflict Ukrainian history during the last were defined. Based on the findings, centuries. Nationalistic aspirations the most important components in were neither prevalent nor popular the conflict were the motivations in Ukraine; the Poroshenko and perceptions of the oligarchs administration, however, took and the local elites. The cultural major steps in that direction. divisions and identity differences In essence, the general would have never led to a conflict population never really supported in this case, as the Ukrainians the government’s operations and Russians have much more against the rebels. The question in common with each other than of humanitarian intervention has they have differences. According also been discussed, as the eastern to Posen this cautious situation Ukrainian Russians started to revolt was always present in Ukraine; the against Kiev after the process took elites just had to wait for the perfect place in Crimea and they were opportunity. expecting a similar outcome in their Based on the analysis, the case as well. On the other hand, for main reason behind the dynamics the eastern oligarchs the situation in of the fights were the wrong Kiev was not sustainable at all due measures carried out by the newly to the ban of the Russian language formed government. Had they in schools and in the media. This begun to negotiate with the eastern conflict was a nightmare for every militias, no fights would have been participant, except for the far right necessary. This would have led to radicals; tragically, these kinds of a more federal country, which was violent people always show up

197 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ when they have the opportunity tool to intervene in the interests to fight. My answer to the main of the local ethnic Russians, their question is that the conflict would political, economic, military and not have occurred without the help national interests. As far as is of the local Russian elites. What is known from other conflicts, this also important to note is that if the is a methodology for spreading Ukrainian government’s reaction influence based on power which to the revolts in the Eastern part would have been familiar to other of the country had been peaceful, military powers as well. The the whole situation would never paper’s aim was to provide a clear have flared up, or at least not in understanding of the interests and the immediate future. Without the motives in case of each participant. support of the elites on both sides As a result, it can be claimed that the conflict could not have escalated the Ukrainian case is a very unique to the extent that it did, which is one and cannot be particularly why the elites must be mostly held compared to other similar conflicts responsible. in the Post-Soviet region, as the role To conclude, based on the of the local elites was significantly events and outcomes, we can claim higher than in any other case. that the hybrid war against Ukraine appears instead to be an unplanned Acknowledgement series of actions and reactions rather than a consciously planned The present publication is chain of events on both sides. the outcome of the project „From The intervention of the Russian Talent to Young Researcher project conventional and irregular forces aimed at activities supporting the in Ukraine should be analyzed in a research career model in higher much more flexible way. It has also education”, identifier EFOP- been suggested that the expression 3.6.3-VEKOP-16-2017-00007 co- “hybrid-war” itself is a misused supported by the European Union, term. Basically, it describes the Hungary and the European Social employment of every possible Fund.

III.5.5. References

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198 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ available at “The Military Doctrine of the Russian Federation,” February 5. 2020. HTTP://CARNEGIEENDOW-MENT.ORG/ FILES/2010RUSSIA_MILITARY_DOCTRINE.PDF Bentzen, N. 2016: Ukraine and the Minsk II agreement: On a frozen path to peace? EPRS, European Parliamentary Research Service, 2016. Downloaded on the 17th of November 2019 from: http://www. europarl.europa.eu/RegData/etudes/BRIE/2016/573951/EPRS_ BRI(2016)573951_EN.pdf Blattman, C. – Miguel, E. 2010: Civil war. Journal of Economic literature, 48(1), pp.3-57. Collier, P. – Hoeffler, A. – Sambanis, N. 2005: The Collier-Hoeffler Model Of Civil War Onset And The Case Study Project Research Design. – In: Collier, P. – Sambanis, N.: Understanding Civil War: Evidence And Analysis (Washington, Dc: The World Bank, 2005) Collier, P. – Hoeffler, A. 2007: Civil war. Handbook of defense economics, 2, pp.711-739. Dumitru D. – Johnson, C. 2011: Constructing Interethnic conflict and cooperation - Why Some People Harmed Jews and Others Helped Them during the Holocaust in Romania World Politics 63, no.1, pp 1-42 Evans, G. – Sahnoun, M. 2002: The Responsibility to Protect, Foreign Affairs (November-December) pp. 99-110 Gerasimov, V. 2013: The Value of Science in Anticipating [in Russian], Military-Industrial Courier, February 27, 2019, HTTP://WWW. VPK-NEWS.RU/ARTICLES/14632 Hoffman, F. G. 2007: Conflict in the 21st century: The rise of hybrid wars (p. 51). Arlington: Potomac Institute for Policy Studies. HRMMU 2014: Report on the human rights situation in Ukraine, 15 November 2014, Office of the United Nations High Commissioner for Human Rights, Downloaded on the 17th of November 2019, from: HTTP://WWW.OHCHR.ORG/DOCUMENTS/COUNTRIES/UA/ OHCHR_SIXTH_REPORT_ON_UKRAINE.PDF HRMMU 2016: Report on the human rights situation in Ukraine 16 February to 15 May 2016, Office of the United Nations High Commissioner for Human Rights, pp 6, Downloaded on the 17th of November 2019, from: HTTP://WWW.OHCHR.ORG/DOCUMENTS/ COUNTRIES/UA/UKRAINE_14TH_HRMMU_REPORT.PDF Johnson, C. 2008: Partitioning to peace: Sovereignty, demography, and

199 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ethnic civil wars. International Security, 32(4), pp.140-170. Johnson, J. – Köstem, S. 2016: Frustrated Leadership: Russia’s Economic Alternative to the West, Global Policy, Wiley Online Library, pp 212. Kalyvas, S. 2003: What is Political Violence? On the Ontology of Civil War, Perspectives on Politics 1(3) pp. 475-494 Kasianov, H. 2014: Holodomor and the Politics of Memory in Ukraine after Independence. Holodomor and Gorta Mór: Histories, Memories and Representations of Famine in Ukraine and Ireland, pp.1932-1933. Kaufman, S. J. 1996: Spiraling to ethnic war: elites, masses, and Moscow in Moldova’s civil war. International Security, 21(2), pp.108-138. Kofman, M. – Migacheva, K. – Nichiporuk, B. – Radin, A. – Oberholtzer, J. 2017: Lessons from Russia’s Operations in Crimea and Eastern Ukraine. Rand Corporation. Kofman, M. – Rojansky, M. 2015: A Closer look at Russia’s “Hybrid War”, Kennan Cable, No. 7 l April 2019, The Wilson Center, Washington, HTTPS://WWW.FILES.ETHZ.CH/ISN/190090/5-KENNAN%20 CABLE-ROJANSKY%20KOFMAN.PDF Kubijovyc, V. 2016: Encyclopedia of Ukraine, University of Toronto Press, Toronto Levi M. 2006: Why Do We Need a New Theory of Government, Perspectives on Politics, p. 5 Luttwak, E. 1999: Give War a Chance, Foreign Affairs (July-August) pp. 36-51 Marxsen, C. 2014: The Crimea Crisis – An International Law Perspective, Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Comparative Public Law and International Law Heidelberg Journal of International Law) 74/2 (2014), 367- 391, Downloaded on the 17th of November 2019, from: HTTPS:// PAPERS.SSRN.COM/SOL3/PAPERS.CFM?ABSTRACT_ ID=2520530 McMahon, R. 2014: Ukraine in Crisis, Council on Foreign Relations, May 5 2014, downloaded on the 17th of November 2016 17:55, from: https://www.files.ethz.ch/isn/178008/p32540.pdf Moravcsik A. 2014: Trust, but verify: The transparency revolution and qualitative international relations. Security Studies, 23(4), pp.663- 688. Muller, E. N. – Opp, K.-D. 1986: Rational Choice and Rebellious Collective Action, American Political Science Review, pp. 471-487

200 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Nodia, G. O. 1995: Georgia’s identity crisis. Journal of Democracy, 6(1), pp.104-116. OCHA 2015: Ukraine: Situation report No.29 as of 27 February 2015, United Nations Office for the Coordination of Humanitarian Affairs, 9 March 2015, downloaded on the 17th of November 2019 from: HTTP://RELIEFWEB.INT/SITES/RELIEFWEB.INT/FILES/ RESOURCES/SITREP%20%2329%20FINAL_1.PDF OSCE 2014: Press statement by the Trilateral Contact Group, Organization for Security and Co-operation in Europe, 9 September 2014, downloaded on the 17th of November 2019, from: HTTP://WWW. OSCE.ORG/HOME/123124 OSCE 2015: Package of Measures for the Implementation of the Minsk Agreements (in Russian), Organization for Security and Co-operation in Europe. 12 February 2015, downloaded on the 17th of November 2019, from: HTTP://WWW.OSCE.ORG/RU/ CIO/140221?DOWNLOAD=TRUE O’Loughlin, J. – Toal, G. 2015: Mistrust about Political Motives in Contested Ukraine, Washington Post, February 13, 2019, HTTP:// WWW.WASHINGTONPOST.COM/BLOGS/MONKEY-CAGE/ WP/2015/02/13/MISTRUST-ABOUT-PO-LITICAL-MOTIVES- IN-CONTESTED-UKRAINE/ Posen, B. 1993: The Security Dilemma and Ethnic Conflict, Survival 35, no. 1: 27-47 Rose, W. 2000: The security dilemma and ethnic conflict: Some new hypotheses, Security Studies, Taylor & Francis Sambanis, N. 2004: What Is Civil War, Journal of Conflict Resolution 48 (6) pp. 814-858 Standish, R. 2018: Inside a European Center to Combat Russia’s Hybrid Warfare. Foreign Policy, 18. Serhienko, Y. G. – Smoliy, A. B. 1994: History of Ukraine, Svit press, Lviv Sidor, D. 2005: Celj politiki ukrajinskih vlastej - nasilystvennaja assimilacija rusinskoho naroda, online library, downloaded on the 17th of November 2019, from: HTTP://WWW.UHLIB.RU/POLITIKA/ VOSSTANIE_MENSHINSTV/P3.PHP#METKADOC3 Singer, J. D. – Small, M. 1994: Correlates of war project: International and civil war data, 1816-1992 (ICPSR 9905). Ann Arbor, MI: Inter- University Consortium for Political and Social Research.

201 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

202 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Smele, J. 2015: Historical Dictionary of the Russian Civil Wars (1916– 1926), Rowman & Littlefield, p.476 Subtelny, O. 1988: Ukraine a History, University of Toronto Press, London, pp 106 Sutyagin, I. 2015: RUSSIAN FORCES IN UKRAINE. RUSI BRIEFING PAPER, 9. United Nations 2014: General Assembly A/RES/68/262, United Nations. 1 April 2014. Downloaded on the 17th of November 2019, from: HTTP://WWW.SECURITYCOUNCILREPORT.ORG/ATF/ CF/%7B65BFCF9B-6D27-4E9C-8CD3-CF6E4FF96FF9%7D/A_ RES_68_262.PDF Wilson, A. 2013: Ukraine, Pathways to Freedom, Council on Foreign Relations, Downloaded on the 17th of November 2019 17:55, from: http://i.cfr.org/content/publications/ images/csmd_ebook/PathwaystoFreedom/ChapterPreviews/ PathwaystoFreedomUkrainePreview.pdf Wilson, A. 2014: The High Stakes of the Ukraine Crisis, Current History, 30 July 2015, Downloaded on the 17th of November 2019, from: HTTP://WWW.CURRENTHISTORY.COM/WILSON_ CURRENT_HISTORY.PDF Zeynep, T. – Enia, J. – James, P. 2011: Why Do Civil Wars Occur? Another Look at the Theoretical Dichotomy of Opportunity versus Grievance, Review of International Studies Rev. Int. Stud. 37.05: 2627-650.

203 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ III.6. Inequality and marginalisation as boosters of violence: Studying Latin America from a neo-institutionalist perspective

Lizeth Vanessa Ayala Castiblanco54

Abstract

The origin and persistence of violence in the less developed regions have been a highly debated topic, in which the case of Latin America is yet to be resolved. This region is one of the most violent ones in the world even though there are no ongoing armed conflicts between states. In this context, the question of what the main drivers of violence in Latin America are arises. The complexity of this phenomenon requires explanations that consider both political and economic factors to provide a deeper understanding of the situation. This paper addresses this question by following the neo-institutionalist approach of North, Wallis and Weingast, who argue that there is a so-called “limited access order” in which participation in organisations and benefits is restricted, triggering violence and social unrest. The study analyses two main boosters of violence in Latin America: limited access to land ownership as the main expression of inequality, and the prevalence of clientelism and corruption as typical operating schemes of the dominant coalitions in the region. It gives rise to a complex assessment of the so-called limited access order and its particular characteristics in Latin America, in which both inequality and marginalisation have had an impact on the development of violence in the region. The research contributes to the study of violence from a neo-institutionalist perspective and implies ways to better understand other limited access order regions in the world.

Keywords: Latin America, neo-institutionalism, violence, inequality, clientelism

54 PhD student – Corvinus University of Budapest IR Doctoral School, lizethayala@ usantotomas.edu.co

III.6.1. Introduction persisted throughout human history. All societies face this problem to Violence is one of the most a greater or lesser extent. While it important problems in human has not been possible to eliminate societies. The problems people violence completely, some societies have coexisting peacefully have have managed to contain and diminish it. However, the control

204 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ of violence has not been achieved privileges and rents (economic in many parts of the world yet. assets) of the elites in the dominant Nowadays, this problem, with coalition depend on the limited some exceptions, is more prevalent entry to the coalition, and this is in less developed regions. enforced by the continued existence From the economic neo- of a certain political regime institutionalist perspective, some controlled by them. In this social proposals have shed light on the order, violence should be controlled problem, enabling an understanding and contained by the dominant of the phenomenon of violence. coalition. In this sense, North, Wallis and On the contrary, open access Weingast provided a valuable order exists when a large number of contribution to the field N ( orth, individuals have the right to access D. et al. 2009). They proposed resources and form organisations the existence of different social that can engage in a wide variety orders, each distinguished by their of economic and political activities mechanisms to deal with violence. in a society. The right to have Social orders are patterns of human access to these benefits is defined organisation in which societies impersonally. Impersonality means create rules that give individuals that all the sectors of society are control over resources and social treated equally. Impersonality functions. According to these makes equality possible. The authors, there are two main social particular identity of individuals is orders in the modern world: limited not taken into account; thus, there access order and open access order. is no room for dominant coalitions Limited access order is or nepotistic relations. This forms a kind of order in which there the basis for civil society, with is a dominant coalition whose many groups capable of becoming members have special benefits. politically active when their The dominant coalition is made interests are threatened. up of elites that agree to respect Based on the proposal of each other’s privileges including North, Wallis and Weingast, it is access to resources and creation of possible to state that limited access organisations. By limiting access order, also called natural states order, to these privileges to members of is the dominant social organisation the dominant coalition, elites create in Latin America (North, D. et al. incentives to cooperate rather 2009). None of the countries of this than fight among themselves. The region exhibit the characteristics of

205 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ open access societies. This means Following the proposal of that, in each of these countries, there North, Wallis and Weingast, two is a dominant coalition that limits main particularities of limited access to valuable resources and access order in Latin America maintains a set of privileges, thereby were identified. The first one is the preventing violence among the restricted access to land ownership as participant actors of the coalition. the main form of inequality in Latin Latin America’s colonial past has American societies. Considering been an important precedent in this the important economic role of sense. Many of the elite groups who land, the rents created by its use defeated the foreign conquerors have strengthened the elite groups clung to power, perpetuating an and have maintained a dynamic of environment of inequality and poverty and inequality in the rest marginalisation in which they have of society. The second aspect is had exclusive access to resources the prevalence of clientelism and and the opportunity to create their corruption as typical operating organisations. schemes of the dominant coalition In limited access societies, in Latin American countries, a as in Latin America, the existing situation which has triggered dominant coalition manipulates widespread social marginalization, the economy to create rents by which has in its turn led to strong limiting access to organisational social unrest. These two key factors membership and valuable have had a crucial impact on the resources. This situation holds emergence of different forms of the coalition together, enables violence that the elites have not elite groups to make credible been able to fully control yet. This commitments to support the regime is a paradox because dominant and, most importantly, refrain from coalitions seek to reduce violence violence. However, the control of in the societies where they function violence also depends upon many instead of increasing it, but this has other factors, particularly in the not been the case in Latin America. case of Latin America. Therefore, The neo-institutionalist as will be explained, the system approach proposed by North and imposed by dominant coalitions others allows an understanding of in this region has not been able to the logic behind the social orders; control the violence but has instead in this case, limited access order increased it due to the negative as the prevalent pattern of social externalities that it has created. organisation in Latin America

206 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ (North, D. et al. 2009). At this availability of land in the world point, it should be noted that Latin has decreased gradually in the last America is a very heterogeneous few decades (Kaswamila, A. 2016). region, which means that the One of the major causes of land limited access order is present at a loss is deforestation through human different stage of development in intervention, which has intensified each country. Nevertheless, the aim since the time of the Neolithic of this paper is to highlight the role Revolution, and especially of inequality and marginalisation during the Industrial Revolution as boosters of violence, regardless – precisely, the two revolutions of the differences in state structure considered as boosters of new and the sophistication of the social orders by North and others organisations the elites are able to (North, D. et al. 2014). maintain. Considering the importance of this resource, one of the main III.6.2. Land ownership and rent sources for the elites in Latin inequality in Latin America America has been the oligopoly of land, as the access of the peasant Latin America is a region in population to land ownership has which countries’ economies are still been restricted for a long time. As a very dependent on the land. They result, inequality in the distribution are still agrarian societies to a large of land in Latin America is a very extent, which can be explained by serious problem. According to the the fact that they are very rich in data of the Food and Agriculture natural resources. Actually, this Organization (2017), in terms of region has the largest arable land the Gini coefficient applied to land reserves in the world (UN 2014). distribution, Latin America reaches However, the distribution of land 0.79. A very high number compared ownership is one of the most unequal with Africa and Asia that reach 0.56 in the world. This condition is a and 0.55 respectively. very serious and unsolved problem Dispossession of land in Latin America is an issue with very in the region (Guereña, A. 2016). It is important to highlight deep roots. Since independence, that, according to classical land distribution was openly economic theories, land is one of inequitable. The leaders and the main factors of production for groups that defeated the Spaniard the economy, together with capital conquerors retained their upper- and labour. Unfortunately, the class privileges, perpetuating a

207 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ legacy of inequality in broad sectors to find an appropriate place to of society. From that time until now, work and live. This situation has the struggle for land ownership perpetuated social inequality and, has caused numerous conflicts in in many cases, has encouraged Latin America. The dispossession the creation of guerrilla groups or of peasants is a common pattern in criminal gangs, which are recurrent many countries – states seize their perpetrators of violence in Latin lands and force them to leave – America. In particular, guerrilla triggering violent revolutions, some groups emerged during the Cold of them with terrible consequences. War backed by leftist ideologies – The „Landless Workers Movement” after this period some of them laid in Brazil, the Colombian internal down their arms and continued their conflict due to the lack of agrarian efforts as political parties. reform, and, in general, the violent Through the accumulation of eviction of peasants in all Latin land, the Latin American elites limit American countries are some access to valuable resources and the examples of this phenomenon activities derived from them. They (Guereña, A. 2016). use their power to influence political Land plays a crucial role in and regulatory decisions that may Latin American economies since affect their interests around land, it is not only the main factor of ensuring the distribution of benefits production but also one of the in their favour (Guereña, A. most important sources of wealth. 2016). Moreover, the rents created Therefore, social status and power by the use of land strengthen relations are determined, to a great the dominant coalitions in these extent, by the structure of land countries. Thus, there is an urgent tenure (Vogelgesang, F. 1996). In need for a reorganisation of landed Latin America, 48.6% of people property in Latin America that that live in rural areas are poor allows for an opening of economic (FAO 2018). This is explained by and political competition for land the fact that, once the land is taken ownership and the subsequent away from peasants, elite groups integration of marginalised give it to large national and foreign communities, decreasing violence companies to exploit. Generally, in these societies. More access landless peasants have just two to land ownership for peasants is options: work for low wages for crucial in order to reduce persistent large landowners, or move to the inequality and social unrest in the cities, where it is difficult for them region. Likewise, it is necessary

208 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ to establish an institutional control based on impersonal rules that Personal relations are guarantee property rights to all fundamental to accessing people in these societies. organisations and exclusive Moreover, a better distribution privileges in Latin America. This of land ownership may improve is one of the main characteristics of the economic performance of limited access orders and, indeed, these countries. It has been shown, this region is a very good example for example, how the extreme of it. “Personalisation” is a very concentration of land ownership important factor, not only within slows long-term economic growth the elite groups but also when (Deininger, K. – Squire, L. 1998). external actors want to interact with In effect, redistribution leads to them. This condition has turned greater agricultural productivity, the region into a fertile ground favuoring improvement in rural for phenomena such as corruption incomes and economic growth in and clientelism. The analysis of general (Vollrath, D. 2007). In these two dynamics is crucial connection with this, it is important to understand the relationship to note that, for most Latin American between the elite groups and the countries, commodities are their rest of society in Latin American main export products. However, the countries. In both cases, the strong dependence on the export dominant coalition takes advantage of raw materials has made these of its position and privileges to countries vulnerable to external establish power relations with shocks, which is a very common other actors. This results in the pattern of the economy in countries perpetuation of a highly personified with limited access order. In this system of social relations. As sense, remaining in an economic North and others pointed out model based on extractivism is “non-elites are not masses of also a hallmark of significant undifferentiated individuals who backwardness that prevents these are treated impersonally (North, D. societies from progressing towards et al. 2009). Protection is extended a more advanced pattern of social through patronage or clientage organisation. networks” (p. 35). The existence of these III.6.3. Corruption and dynamics in Latin America is clientelism: Dynamics of related to the historical legacy of marginalization the colonisation times – as in the

209 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ case of land distribution exposed socially unequal persons or groups above. The colonial system (Schroter, B. 2010). This results imposed an economic and social in the development of personal model called “hacienda” in which networks of exchange in the large tracts of land were controlled context of negotiated relationships by a few landowners. This model between the dominant coalition was based on the concentration of and the rest of society. In Latin land ownership and the monopoly America, clientelism is observed of the labour force in the hands when politicians or bureaucrats of the landowner. Thereby, the create laws or modify the existing landowner was the most important ones to generate privileged rents and powerful actor, and the for specific individuals with state establishment of relations with backing (Pritzl, R. 2000). In this him went through the exchange way, clientelism turns the political of favours at his convenience. system in a negotiated relations Thus, these societies were based network devoid of impersonality. on hierarchical power, loyalty Likewise, there is a serious and submission by establishing problem of corruption in Latin relationships of exchange. Over America. According to Treisman, time, the ‘hacienda model’ became corruption is defined as the misuse the fundamental basis of economic of public goods for personal gain production, political system, and (Treisman, D. 2000). Corruption social relations in Latin American occurs more frequently in scenarios countries. Although this model of low alternation in power, formally disappeared, it was the where political actors are strongly origin of phenomena such as embedded in institutional structures clientelism and corruption. (Morales, M. 2009). Limited The concept of clientelism, political competition increases the according to Gordin, is referred chances of the government elite to an asymmetric relationship of to commit acts of corruption. In power that involves a particularistic the case of Latin America, a big transaction associated with the percentage of politicians have been distribution of public goods in involved in the theft of public funds. exchange for favours (Gordin, Currently, the corruption in this J. 2006). Clientelism establishes region has reached unprecedented informal relations of power that levels. As a consequence, social facilitate the mutual exchange of unrest has resulted in higher levels services and goods between two of violence.

210 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ The phenomenon of Ackerman, S. 2001). The recent corruption networks in Latin discovery of big corruption scandals America could be also analysed in Latin America has resulted in from the perspective of interest a lack of credibility among the groups, as was proposed by Mancur institutions and has triggered a tide Olson (Olson, M. 1965). According of distrust in traditional politicians to this approach, corruption emerges and in democracy in general, in the context of interest groups. which has been reflected in the last An interest group is the formal or elections of several Latin American informal union of individuals that countries. are grouped around homogeneous To sum up, in limited access interests. These groups arise when societies, like the Latin American it comes to defending or imposing ones, there is no reinforcement of their particular interests through the rules by impersonal means, as the political process. In this sense, happens in open access societies. every group strives to obtain a On the contrary, who you are and better collective position amid the what your position is are important competition or take ownership of issues when it comes to obtaining the rent revenues generated by rights and having access to the state interventions. However, organisations and resources. This this necessarily implies the access is limited because personal marginalisation of certain sectors relations are important not only of society. These sectors promote within the dominant coalition but violence due to their exclusion from also when external actors interact the social dynamics of personalist with it. It is important to note privileges. that, in the last couple of decades, Corruption has become political changes in some Latin an inherent condition of Latin American countries have allowed American countries. In fact, the members of the excluded groups to generalisation of this practice reach the highest offices, as in the has gradually established it as a cases of Evo Morales in Bolivia social norm (Mishra, A. 2006). Its and José Mujica in Uruguay, systematic and planned nature has opening the possibility of a social established corruption as a new transformation. However, this way of rent-seeking. Moreover, it is still a fledgling phenomenon is a determining factor in the levels since the dynamics of exclusion of inefficiency and injustice in perpetuated by traditional elites the distribution of income (Rose- remain the most prevalent pattern

211 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ in Latin American societies today. opportunities as a result of the high levels of poverty and inequality in III.6.4. The failure in the society. The land, as the main controlling violence: The production factor in Latin America, effects of inequality and and its unequal distribution is one of the most important drivers of marginalization this phenomenon. This kind of marginalisation makes excluded Despite being a region that people try to find other ways to live, does not have ongoing armed in many cases criminal activities. conflicts between states, Latin The other cause of violence is America has the highest rates of social unrest. Popular indignation violent deaths, which makes it at the increasing clientelism and one of the most dangerous places corruption dynamics is an incentive in the world. Central America and for creation of illegal groups that South America have 25.9 and 24.2 fight against the elite groups in homicides per 100,000 inhabitants order to take away their privileges respectively, compared to 13.0 in or remove them from power. Africa, 5.1 in North America, 3.0 The fact that access to in Europe, 2.8 in Oceania and 2.3 organizations and resources is in Asia (UN Office on Drugs and limited and there are exclusive Crime 2019). The reality behind privileges for certain groups these figures is very complex. generates a strong social discontent Many analyses of violence in that leads to high levels of violence Latin America tend to focus on in Latin America. Since several superficial criteria; however, this groups find illegal ways to have situation is a result of deeply rooted access to the arms market, the problems (Solis, J. – Cerna, S. monopoly of violence by the state 2014). Dynamics of inequality is not a fulfilled condition in the and marginalisation that persist region. Thus, the use of violence in Latin American countries are is not exclusive to the dominant an important part of the unsolved coalition. This is a very serious problems that have to be taken into threat for the elite groups in the account in any new approximation region. A violent environment is of this phenomenon. detrimental to the interests of elites In this sense, persistent because they could lose their rents. violence in this region could Consequently, elite groups be explained mainly by two are able to avoid conflicts among causes. One of them is the lack of

212 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ themselves, but not conflicts Colombia, “Rondas campesinas” in caused by other actors in society. Peru, and “Colectivos Chavistas” in This means that, although violence Venezuela. However, the results of among the dominant coalition these programmes were mixed and members is controlled through frequently controversial as some of the incentives of maintaining their the groups exceeded their functions negotiated privileges, violence that and began paramilitary actions results from inequality and social generating even more violence than unrest is difficult to control. This before their creation (Koessl, M. condition has implied, in fact, the 2015; Moya Sánchez, T. 2018). loss of rents. Colombia is a clear example of this situation in the III.6.5. Conclusion region. This country had an internal conflict of more than fifty years Throughout the analysis, it because of the lack of agrarian was possible to observe that the reform which was prevented by colonial era left an important legacy elite groups in order to maintain the in Latin America, which is reflected unequal distribution of land. This in the unequal land distribution prolonged conflict caused a great and the perpetuation of clientelist loss of rents because of the illegal relations in this region nowadays. occupation of large extensions of These two factors are crucial to territory, the extortion practices understanding the origin and the carried out by rebels, the loss of persistence of violence based on economic resources and, in general, the dynamics of inequality and the cost of the war (Clavijo, S. marginalisation. In the first place, 1998; Restrepo, J. – Aponte, D. the problem of land distribution 2009). in Latin America is quite serious. It is important to highlight Land ownership has been a key rent that in some countries, elites tried source for the elites. The hoarding of to control violence in certain parts land by a handful of elites has been of the territory by giving arms one of the main reasons for the high to some groups of the society levels of poverty and inequality that aiming to restrict the activities of affect mostly peasants and rural criminal gangs. Examples of this people. Consequently, many social kind of policy were programmes conflicts have arisen provoking an such as the surveillance and increasing level of violence in Latin security cooperatives “Convivir” American countries. and “Soldados de mi pueblo” in Furthermore, the economic

213 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ and political dynamic of the elite externalities such as inequality groups revolves around corruption and marginalisation, the main and clientelism. On the one hand, consequence of which has been the corruption, in the form of the emergence of violence. To solve this abuse of power to obtain personal problem, Latin American countries benefits, has perpetuated the misuse have to provide to all the sectors of public resources. Moreover, the of society equal opportunities for way to interact with the dominant participation both at the economic coalition is, in most of the cases, and the political levels, as open through bribes and exchanged access societies have done. In this favours. On the other hand, the sense, reforms that encourage a predominance of economic and more equal land distribution must political relationships organised be promoted. Clientelism and along the lines of nepotistic corruption must be banished from personal networks guarantees that the political sphere. Unfortunately, access to key resources remains the dominant coalitions of Latin restricted to a certain group of American countries do not seem people. The continuation of the to have an interest in changing the colonial asymmetric relations situation and may be willing to based on power hierarchies is a continue dealing with the violent pattern replicated under the current environment as long as they keep clientelism mechanisms. These their privileges. dynamics created a system of Finally, on a side note, interactions characterised by highly another interesting issue to consider personified relationships in which when analysing the inequality and only certain persons have access marginalisation in Latin America is to organisations and resources, the role of religion in legitimising a situation which prevents their the social order but remaining as a democratisation. The consequence factor that has been unable to prevent is the marginalisation of many violence. Since independence and sectors of society and, overall, the for a long time, the Catholic Church increase of social unrest which was a very powerful and privileged results in the massive replication of institution in the Latin American violence in these societies. countries. Despite the fact that it To sum up, limited access has lost influence in recent decades, order in Latin America has prevented its legacy is still present in many violence among the coalitions in ways in the region. It had an impact power but it has created negative on the formation of elites and the

214 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ maintenance of the status quo. research in this area. The importance of submission and the exaltation of poverty can Acknowledgement be considered as teachings of the Catholic Church that helped control The present publication is certain demands of the population the outcome of the project „From and fostered existing inequities Talent to Young Researcher project in society. However, although aimed at activities supporting the the Catholic Church managed to research career model in higher promote a certain social order, it education”, identifier EFOP- has been unable to help control 3.6.3-VEKOP-16-2017-00007 co- the violence in the region. This supported by the European Union, paradoxical role of religion in Latin Hungary and the European Social America is an underexplored but Fund. thought-provoking topic for further

III.6.6. References

Clavijo, S. 1998: Dividendos de paz y costos de la guerra en Colombia: La fuerza pública y su presión fiscal. – Bogota: Universidad de Los Andes. Deininger, K. – Squire, L. 1998: New ways of looking at old issues: inequality and growth. – Journal of Development Economics 57: pp 259–287. FAO 2017: Latin America and the Caribbean is the region with the greatest inequality in the distribution of land. – Food and Agriculture Organization – http://www.fao.org/americas/noticias/ ver/en/c/878998/ FAO 2018: Panorama de la pobreza rural en América Latina y el Caribe: Soluciones del siglo XXI para acabar con la pobreza en el campo. – Food and Agriculture Organization – http://www.fao.org/3/ CA2275ES/ca2275es.pdf Gordin, J. 2006: La sustentabilidad política del clientelismo: Teoría y observaciones empíricas en América Latina. – Barcelona: CIDOB. Guereña, A. 2016: Desterrados: Tierra, poder y desigualdad en América Latina. –Oxfam Latin America. Kaswamila, A. 2016: Land degradation and desertification: A global crisis. – Rijeka: InTech.

215 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

216 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Koessl, M. 2015: Violencia y habitus: Paramilitarismo en Colombia. – Bogota: Siglo del Hombre Editores. Mishra, A. 2006: Persistence of Corruption: Some Theoretical Perspectives. – World Development 34 (2): pp 349–358. Morales, M. 2009: Corrupción y democracia: América Latina en perspectiva comparada. – Gestión y Política Pública 18 (2): pp 205– 252. Moya Sánchez, T. 2018: Grupos civiles armados en Venezuela: ¿Actores de un ‘aparato organizado de poder’? – ANIDIP 6: pp 110-144. North, D. – Wallis, J. J. – Weingast, B. R. 2009: Violence and social orders: A conceptual framework for interpreting recorded human history. – Massachussets: Cambridge University Press. Olson, M. 1965: The logic of collective action: Public goods and the theory of groups. – Massachussets: Cambridge University Press. Pritzl, R. 2000: Corrupción y rentismo en América Latina. – Buenos Aires: Konrad Adenauer Stiftung. Restrepo, J. – Aponte, D. 2009: Guerra y violencias en Colombia: Herramientas e interpretaciones. – Bogota: Pontificia Universidad Javeriana. Rose-Ackerman, S. 2001: La corrupción y los gobiernos: Causas, consecuencias y reforma. – Madrid: Siglo XXI. Schroter, B. 2010: Clientelismo político: ¿Existe el fantasma y cómo se viste? – Revista Mexicana de Sociología 72 (1): pp 141–175. Solis, J. – Cerna, S. 2014: Inseguridad y violencia en America Latina: Una mirada crititca a sus causas estructurales. – Anuari del conflicte social, pp 456-509. Treisman, D. 2000: The Causes of Corruption: A Cross-National Study. – Journal of Public Economics 76 (3): pp 399–457. UN 2014: América Latina tiene las reservas de tierra cultivable más grandes del mundo. – https://news.un.org/es/story/2014/ 12/1318361 UN Office on Drugs and Crime 2019: Global Study on Homicide: Homicide trends, patterns and criminal justice response. – https:// www.unodc.org/documents/data-and-analysis/gsh/Booklet2.pdf Vogelgesang, F. 1996: Los derechos de propiedad y el mercado de la tierra rural en América Latina. – Revista de la Cepal 58: pp 95–114. Vollrath, D. 2007: Land distribution and international agricultural productivity. – American Journal of Agricultural Economics 89 (1): pp 202–216.

217 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

218 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

IV. Contemporary Challenges in World Economy

219 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ IV.1. Traditions, Institutions, and Growth: the Case of Hungary

Elena Cossu55 – Giovanna Maria Borges Aguiar56

Abstract

Institutions are an organized group of people with a particular purpose. Therefore, if we want to understand institutions, we need to understand the people that are part of it. In this context, this work aims at understanding the role of traditions and trust in Hungary in order to understand its institutions, its societal order, and its economic performance. Traditions and trust are here identified in the institutional economics framework. The approach comes from the observation that, during the years 1987-2015, Hungary has been particularly puzzling in showing both economic growth and order based on smaller communities and personalistic relations. We use data from the European Social Survey to map the beliefs connected to this definition, such as level of trust, importance of traditions. We will therefore consider ‘beliefs’ as the independent variable, and ‘GDP growth’ as the dependent variable. We find that both in Europe and in Hungary more specifically, a more closed and conservative society go hand in hand with higher GDP growth rates for the year 2002-2018. The work aims at proving that we can find both in Europe and Hungary a new middle ground between a limited and an open-access order defined in the institutional economics framework.

Keywords: institutional economics, traditions, Europe, convergence, economic performance

55 Assistant Research Fellow, PhD Student – CUB IR Doctoral School, elena.cossu@ uni-corvinus.hu 56 PhD Candidate – CUB IR Doctoral School, [email protected]

IV.1.1. Introduction explain economic divergence. In this context, this works aims at This work is inspired by the identifying what makes Hungary works of Douglass North and by the different in terms of its economic institutional economics framework. environment. It does so by first It is in particular inspired by what focusing on the reasons proposed the author identifies as the “central by North, excluding the irrelevant puzzle of human history” (North, ones, and then integrating them D. 1990), which accounts for with ideas of other authors that help the systemic reasons that further us operationalize them (North, D.

220 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ et al. 2009). other scholars. Finally, we will This work is, in general, review possible future directions more of a part of the literature that for the field and pose the research tries to understand how political question. and economic regimes affect each other. The general goal is to The New Institutional position Hungary on a value map Economics and Hungary based on North’s framework and to understand in this way how the Douglass North is mainly country’s institutions traditionally known for being one of the perform. As a consequence, the first major representatives of the new part of the paper will discuss the institutional economics discipline. different institutional economics The primary contribution of this approaches and we will conclude field is the challenge it poses this section by saying that the to neoclassical economics. The approach that can account for the “mainstream” of economics differences among societies more postulates that people have rational in detail is the one that focuses on preferences, their goal is profit cognition, beliefs, and experience. maximisation, and that they act In the second part, we will describe based on rational information. more in detail how these elements However, North always questioned can be used to elaborate a specific if we can truly see these assumptions methodology based on descriptive unfolding through time. According statistics and fact-finding analysis, to him, humans do act intentionally, and how to perform a macro-analysis but through the lenses of cognition, with individual characteristics. culture, and experience (Wallis, J. 2015). IV.1.2. Literature Review For this reason, it is fundamental to differentiate between The goal of this section is “rules of the game” (institutions) to understand the relationship and the actors that play the game between culture and institutions (organisations). Institutions change and its different approaches. In the slowly, but they are what determine first part, we will review North’s the structure of, and possible main contributions to the field. changes in, an economy. In fact, Next, we will review how the if we focus only on the individual relevant concepts apply to Hungary, level as in neoclassical economics, especially through the work of it is impossible to see how these

221 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ bigger dynamics unfold. The case is They also reduce uncertainty made clear in one of North’s main by shaping everyday life. The books, which is called “Institutions scope of institutions is to create a Institutional Change and Economic stable but not necessarily efficient Performance” (North, D. 1990). human interaction. In this sense, The book is in a way a continuation institutions are as well the natural of “Structure and Change in outcome of human interaction Economic History” (North, D. based on the natural limits to human 1982). In the earlier book, the author capacities for cognition and culture. had already explored the concept of Seeing how cognition and culture beliefs and ideologies. The former, shape economic performance together with norms and culture, becomes a fundamental problem in are defined as “the cumulative establishing a framework for how experience of society passed down institutions influence a particular through culture and formed through place and time. repeated interactions of many The real question is to people through norms of behaviour” understand if a society is limited (Wallis, J. 2015). Beliefs are the access order (based on personal continuous and marginal change relations) or open access order that actors cannot manipulate. They (based on unpersonal relations). are a function of what happened in The open and limited access the past and can impede change in orders are in fact characterised by the present. In a similar way, they almost polarised patterns. In the can be a way to understand why a open access order, we can witness society structures itself in a certain social and economic development, way instead of another. Also, why contained or almost no negative a society goes down a certain path economic growth, rich and vibrant instead of another one. civil societies, and bigger and more North states that institutions decentralised governments. On the are the rules of the game and other hand, in limited access order that these rules include formal societies we can find slow-growing rules, informal rules, and norms economies, polities without consent of behaviours. More precisely, of the governed, a relatively small institutions are “the humanly number of organisations, smaller devised constraints that shape and centralised governments, human interaction” (North, D. 1990 and a predominance of personal p. 3). For this reason, institutions relations. This distinction creates a shape the system of incentives. rigid dynamic: if you want a more

222 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ prosperous society, you need to analysis of cognition, beliefs, and have better institutions. If you want culture. This uncertainty is given better institutions, you need better as well by the fact that the focus on rule of law, perpetually living institutional economics and Eastern organisations and consolidated Europe has so far been focused political control of the military. on the transition from planned to But how to have better capitalist economy (Neuber, A. institutions? According to this 1993; Gehlbach, S. – Malesky, paper we should look at the E. J. 2012). As a consequence, relationships between cognition, is Central and Eastern Europe a culture, and experience on one limited or open access order? Or in side; and economic performance between? on the other. We should look at Other works already tried to institutions as a projection of the measure the impact of institutions values of the society they represent. on economic performance Once we do this, we can link the (TABELLINI 2010). However, the values to economic performance to difference of this work stands in categorise societies as open access doing it specifically for Hungary order, limited access order, or a and by connecting the North combination of the two. framework. Hungary is chosen as a representative country of Central Which beliefs and which and Eastern Europe. When in fact economic performance people think about Central and in Central and Eastern Eastern Europe, the idea is more Europe? about its “convergence towards the West” rather than understanding Central and Eastern Europe its intrinsic characteristics. In shows attributes of the open and other words, in a world in which limited access orders. We can neoliberalism hold sway, there see sustained economic growth, is no space for the fundamental polities with the consent of the question that should drive social governed, a relatively small number sciences: how do we explain the of organisations, and a declining political and economic differences civil society. As an external between countries? And in a way observer, it is unclear whether influenced by North: can economic personal or impersonal relations prosperity and poverty be viewed as are predominant. The paper aims a consequence of specific cultural at looking at this through its patterns? And how can we create

223 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ effective economic institutions? preferences over outcomes or the consequences of their actions. Economics and Beliefs In fact, „They evaluate different options, including democracy and The question then becomes: non-democracy, according to their how do cognition, culture and assessment of their (economic and experience shape economic social) consequences” (Robinson, performance? This question is J. – Acemoglu, D. 2006). However, much more complicated than it according to the authors, individuals looks. It puts together different act strategically and for this same fields, from institutional economics reason, they use game theory as to behavioural economics. It takes a main theoretical framework. In into account microeconomics, contrast, in this work, we assume as it deals with how individuals that choices do matter, as in North’s make their choices. On a broader framework. sense, economics is the science Some of these gaps have of how individuals organise their already been filled. For example, resources. But do individuals think Zak (Zak, P. – Knack, S. 2005) the same when taken singularly and states that „cheating is more likely in a group? And do they really act (and trust is, therefore, lower) when “rationally based on all available the social distance between agents information” anyway? is larger, formal institutions are According to North (North, weaker, social sanctions against D. et al. 2009), a society is the cheating are ineffective, the amount aggregate number of individuals invested is higher, and the investors’ collectively dealing with a range wages are lower. (...) when formal of individual decisions in such institutions are weaker, adversely a way to produce common and impacting income growth”. Other shared beliefs about choices, contributions are given on the consequences, and outcomes. This impact of size family on economic is shaped by a fundamental causal growth (Greif, A. 2020), and social belief: that there is a connection capital and trustworthiness on between actions and the world institutions and growth (Keefer, P. around us. – Knack, S. 2004). According to the other main On a level more connected authors on the topic (Robinson, J. to institutional economics, some – Acemoglu, D. 2006), individuals work has already been done to have indeed well-defined understand the Hungarian case in

224 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ terms of values and institutions. In other countries with a similar level his paper “Hungary on the world of economic development, as for value map”, Keller (Keller T. the year 2009. 2010) uses the work of Inglehart (Inglehart, R. 1997) to understand IV.1.3. Methodology and which characteristics of Hungary Variables are outside the other trends and peculiar of this specific nation. The As mentioned before, the goal author maps fifty societies in terms is now to map Hungarian values of closed-open minded, secular- and to link them to the economic rational, and traditional-religious performance. Hungary is once approaches. These values are again chosen as a representative selected according to Inglehart’s example. This, however, poses value theory (Inglehart, R. 1997), a number of questions. First and which categorises the history of all foremost, we need to clarify what human societies into two macro- we mean by values. According to phases: modernisation, which North, societies change in response makes some societies evolve from to random events and according to religious to rational beliefs, and slow but constant dimensions which post-modernisation, which make he identifies in cognition, culture, some societies evolve from rational and experience. We will here focus to performance-innovation beliefs. on tradition and trust, as the main Inglehart proves this passage elements that characterise the by analysing more than twenty difference between a limited access variables. Keller, on the other hand, and open society. We also imply uses three specific dimensions that such a set of shared beliefs extrapolated from this theory and implies shared ideas about choices, from the available European Social consequences, and outcomes. Survey variables. The author finds We do not focus right now on that, even if adjusted by GDP cognition and experience, even if growth, age and education level, we might do that in later works, Hungary comes out at the extremes for two different reasons. For what of both “Western” and “orthodox” concerns the former, it depends on cultures. It also comes out as the fact that the field itself is still especially closed, based on values at an embryonic stage for what of self-expression, and rational, as concerns macroeconomics. Also, based on secular-rational values. the dimension that would be useful All of this especially if compared to in terms of institutional economics,

225 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ which are the social dimensions data availability for the longest time of behavioural economics, can be span possible, which is between analysed in terms of values and 2002 and 2018. In other words, beliefs (Loewenstein, G. et al. 2014). countries are selected on whether The social dimensions include trust, the data is available for both the first dishonesty, reciprocity, and social and last European Social Survey norms. For what concerns the latter, round available. further work about Hungarian We choose the variables that culture needs to be explored. better represent the divide between If we then decide to analyse a personalistic versus an impersonal the traditions and trust according to society. For this reason, we choose North’s framework, we will need to look at the level of trust in people, to select which variables are both in the country’s own parliament, in available in data terms and can be the legal system, in the police, in linked to the open and limited access politicians, in political parties, and orders. Such variables ca be found in the European parties. We choose in the European Social Survey57. For such variables because we assume what concerns GDP, this work uses that a limited access society would the GDP (constant 2010 US$) from have low trust level in supranational the World Bank Open Database. institutions. We map the variables The percentage variations are also for Hungary and for the year 2018, calculated using these values. We which is the most recent available. select some countries58 based on the We also map the importance of following customs and traditions as 57 More specifically the variables are: it is very representative for what we imptrad (Importance of traditions), trstep (trust in the European are looking for. parliament), trstplc (trust in the In the second part we take this police), trstprt (trust in your country’s same variable, the importance of parties), ppltrst (trust in people), trstlgl following customs and traditions, (trust in the legal system), trstplt (trust and we calculate the average for in the politicians). 58 The countries are: Austria (AUT or different countries in Europe and AT), Belgium (BEL or BE), the Czech across different European Social Republic (CZ or CZE), Finland (FIN Survey Rounds (from 2002 to 2018). or FI), France (FRA or FR), Germany We also calculate the average GDP (DEU or DE), Hungary (HUN or growth for the same period, and we HU), Ireland (IRL or IE), Italy (ITA or IT), the Netherlands (NLD or NL), put the countries on a graph. On the Norway (NOR or NO), Poland (POL vertical axis we have the change or PL), Portugal, Switzerland (CH or CHE), and the United Kingdom (GBR or BG).

226 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ in the importance of traditions and customs, while on the horizontal IV.1.4. Mapping the axis we have the variation in gross Relevant Beliefs in Hungary domestic product. We compare the and Europe average of these variables to other countries in Europe to see if there is We chart different relevant any unusual trend or outlier. Finally, variable according to the institutional we repeat the same exercise, but framework (Figure 12–13). We we input the single available years find that Hungary has a normal for Hungary instead of different distribution for all variables, but it countries. We have the variation has a high trust level for the police of the importance of traditions on and the legal system. On the other the vertical axis and the variation hand, the country values very much in gross domestic product on the traditions and customs. horizontal one.

Figure 12: Levels of Trust and Importance of Traditions in Hungary Source: Edited by Elena Cossu based on the data of ESS Round 9: European Social Survey Round 9 Data (2018). Data file edition 1.2.

227 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 13: Levels of Trust in Hungary Source: Edited by Elena Cossu based on the data of ESS Round 9: European Social Survey Round 9 Data (2018). Data file edition 1.2.

These figures show us that the distributed, shows moderate level perception of Hungary as a limited of trust across all variables. access society based on personal We calculate the average of relations rather than impersonal all the previously shown variables ones is fundamentally wrong (Figure 14) and we put them next to (Figure 12–13). The country, even each other in reference to different if the figures are not perfectly countries in Europe.

228 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 14: Averages of the Levels of Trust and Importance of Traditions in Hungary and Other European Countries Source: Edited by Elena Cossu based on the data of ESS Round 9: European Social Survey Round 9 Data (2018). Data file edition 1.2.

Here we see that even the more the country in question compared to other countries incremented the level it believed Hungary does not appear as an traditions were important. For outlier. Also, we can intuitively see example, the fact that Ireland, that on average European countries Poland, and Hungary are in trust the police more than the other the right side of the scatterplot institutions. showed that these three societies became increasingly more prone IV.1.5. Change in to give relevance to traditions Conservatism and GDP between the years 2002-2018. Growth in Hungary and The GDP (constant 2010 US$) variation shows as well that there Europe is a correlation between this and the importance of traditions. The Figure 15 shows the most correlation, of course, does not interesting result. When we look imply causation. There are many at the change in importance of intervening variables that could traditions, the more we go right explain the existence of this

229 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ relation, including “the catch- a society towards more impersonal up” with other economies during relations and more economic these years due to historical and prosperity go hand in hand. With technical reasons. Nevertheless, this analysis, we prove that at least the institutional economic theory for what concerns Europe such would predict that the opening of assumption does not hold.

Figure 15: Change in importance of traditions Versus Change in GDP (constant 2010 US$), 2002-2018 Source: Edited by Elena Cossu based on the data of ESS Round 9: European Social Survey Round 9 Data (2018) Data file edition 1.2., and the World Development Indicators, The World Bank (2020)

We now want to look at paradigm of impersonal relations one case more specifically to and economic growth correct undercover the dynamics in this (Figure 16). However, in recent process. We take Hungary as one years, the tendency has turned major example of becoming less with higher relevance of traditions democratic while economically and sustained economic growth. growing over the years (Toplisek, The reasons for such turn could be A. 2019). We find that except for multiple and go beyond the scope the recent years, and 2018 more of this paper. However, they show specifically, Hungary did prove the a new model worth exploring in the

230 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ future.

Figure 16: Average in importance of traditions Versus GDP (constant 2010 US$) for Hungary, selected years Source: Edited by Elena Cossu based on the data of ESS Round 9: European Social Survey Round 9 Data (2018) Data file edition 1.2., and the World Development Indicators, The World Bank (2020)

IV.1.6. Conclusion hand in hand with more gross domestic product growth. This The analysis of the level of implies multiple things. First, it trust and the importance of traditions suggests that countries that have in relation to the gross domestic grown in the last two decades have product variations showed that the a different pattern compared to the institutional economics paradigm is ones that developed their potential not reflected in the data concerning in previous times. However, it Europe for the years 2002-2018. also shows the Hungary is a prime The overmentioned paradigm is one example of something in between a that states that the more impersonal limited and an open access society, societies and economic prosperity or more specifically a system go hand in hand. In reality, what we both tending to conservatism and see is that an increase in preferences economic prosperity. toward customs and tradition goes

231 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

IV.1.7. References

Davis, L. – North, D. 1971: Institutional Change and American Economic Growth - University Press. Dzionek-Kozłowska, J. – Matera, R. 2015: New Institutional Economics’ Perspective on Wealth and Poverty of Nations. Concise Review and General Remarks on Acemoglu and Robinson’s Concept - Alexandru Ioan Cuza University of Iaşi Economic Sciences 62(SI): 11–18. Gehlbach, S. – Malesky, E. J. 2012: The Grand Experiment That Wasn’t? New Institutional Economics and the Postcommunist Experience Greif, A. 2020: – Family Structure, Institutions, and Growth: The Origins and Implications of Western Corporations Inglehart, R. 1997: Modernization and Postmodernization : Cultural, Economic, and Political Change in 43 Societies – Princeton University Press Keefer, P. – Knack, S. 2004: Social Capital, Social Norms and the New Institutional Economics – MPRA Paper Keller T. 2010: Hungary on the World Values Map – Review of Sociology 20: 27–51. Loewenstein, G. – Sutherland, R. – Samson, A. 2014: Behavioral Economics Guide 2014 (with a Foreword by George Loewenstein and Rory Sutherland) Neuber, A. 1993: Towards a Political Economy of Transition in Eastern Europe – Journal of International Development 5(5): 511–30. North, D. 1966: The Economic Growth of the United States, 1790-1860 – Norton. North, D. 1982: Structure and Change in Economic History – Politics & Society 11(4): 511–12. North, D. 1990: Institutions, Institutional Change and Economic Performance – Cambridge University Press. North, D. – Wallis, J. – Weingast, B. 2009: Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History – Cambridge University Press. Robinson, J. – Acemoglu, D. 2006: Economic Origins of Dictatorship and Democracy. – Cambridge, UK: Cambridge University Press. Robinson, J. – Acemoglu, D. 2012: Why Nations Fail - Small Differences

232 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ and Critical Junctures – The Weight of History, Chapter 4. Smith, A. 1776: The Wealth of Nations – Books 1-3. London etc.: Penguin Classics. Toplisek, A. 2019: The Political Economy of Populist Rule in Post-Crisis Europe: Hungary and Poland – New Political Economy 0(0): 1–16. Wallis, J. 2015: The Ideas of Douglass North – CEPR Policy Portal. Zak, P. – Knack, S. 2005: Trust and Growth – SSRN Electronic Journal

233 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ IV.2. Companies in Different States: The common logic of free trade agreements and transfer pricing

Eszter Kovács59

Abstract

This paper explores the strategic decisions of multinational enterprises (MNEs) selling their products to related parties in international markets. In order to minimize cost and maximize profit, companies manipulate their intrafirm activities: they set the transfer price (TP), change the location of their operations (by production displacement, providing services etc.), or create artificial transactions. These patterns guide the formulation of some theory and the development of a microeconomic model. The optimal choices firms make depend heavily on three considerations: where the competitive advantages are at a higher level, where lower tax and tariff rates are paid, and where to produce at a lower level of cost. Firms’ reactions to a given import tariff or corporate income tax (CIT) are illustrated by game theory. We identify companies and countries as common actors in economies and examine interactions between them with a scenario analysis of the 8-way interaction. We concentrate on an MNE perspective and evaluate the cooperating behavior of inter-companies which take actions to reach higher profit levels in our game. The game is continued and free trade agreements (FTAs) appear. Profit still retains its centrally important role to multinational enterprises well beyond other political interests. The results suggest that a situation where the lower tax rates combined with eliminated tariff rates generate greater profitability to MNEs.

Keywords: free trade agreements, multinational enterprises, transfer pricing, game theory

59 Corvinus University of Budapest, PhD student, [email protected]

IV.2.1. Introduction and intra-group firms and their relationship to the literature operating environment (depending on tariffs, taxes, and regulations) Tariff and tax policies have through game theory has not been frequently been analyzed, since probed by many papers. Global free trade agreements have spread trade trends have changed, since all over the world. However, modern free trade agreements modelling the interactions between may result not just in free trade, but in the elimination of non-

234 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ tariff barriers. This phenomenon the context of country-firm relations. creates increased intra-firm trade Rosenthal studies the problem of between related companies which setting transfer prices in a vertically are determined to transfer prices integrated supply chain with a to maximize their profits. Some cooperative game (Rosenthal, E. researchers have provided evidence 2008). Pogorelova examines the of this. For example, Blouin and complex nature of transfer pricing others argued that transfer prices with the determination of strategic are used for corporate tax and tariff considerations of organizations savings (Blouin, J. et al. 2018). guiding the application of game The application possibility of theoretic models (Pogorelova, L. game theory offers another view, 2015). Sung and others study the since compared to usual economic impact of rule of origin (ROO) models the actors’ decisions can requirements, accompanied by also be modelled. Modelling of free trade agreements (FTAs), on economic situations with the help a multinational firm’s production of game theory has been adopted decisions (Sung, H. L. et al. 2016). by researchers and economists. Zissimos identifies a new terms- The mainstream decision-making of-trade externality related tariff evaluation approaches introduce setting (Zissimos, B. 2009). different actors in a trade policy who While prior literature finds contribute to the desired outcomes. evidence that corporate income The strategic interdependence taxes or tariff rates separately among countries’ tariff-setting influence on MNEs’ transfer pricing decisions was first illustrated by behavior, the literature has not Harry Johnson (Johnson, H. 1953). addressed the two considerations He regarded tariffs as the outcome together from a game theoretical of a static game, where the rules perspective. are the following: there are two In this paper, we develop countries – two goods, and the a model and investigate a game players are welfare-maximizing involving the introduction of governments. Gowa and Mansfield strategies, and the selection of report an application of the the best strategy for a corporate prisoner’s dilemma which is the group. It could be a new, newly standard optimal tariff game (Gowa, approach in the literature. Our J. – Mansfield, E. D. 1993). In a goal in developing the model is to multinational enterprise context, provide a simple rationale for the several researches have focused on MNEs’ behaviour. Choosing the

235 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ best option means the highest profit benefits has drawn attention to the for players. Determining what is fact that there is a need for close optimal is based on the responses to cooperation among economic several questions: What prices are actors. As Freund and Ornelas set by related parties? Is it known highlight (Freund, C. – Ornelas, how much the firms should pay via E. 2010), the most popular form of tariffs or taxes to a certain country? reciprocal trade liberalization in the How will a parent company and its past 15 years has been the regional affiliates react to a given set of tariff trade agreement (RTA). On 9 March or tax rate changes? As a result, 2020, 304 RTAs were in effect theoretical results are obtained. (homepage of WTO Database). The Cobden–Chevalier IV.2.2. Boundaries have Treaty was the first modern bilateral disappeared, players have trade agreement between Britain become interconnected and France. It was concluded in 1860 when France eliminated import barriers to British The appearance of manufactured goods. Britain in turn multinational enterprises (MNEs), removed import prohibitions from and the creation of free trade French commodities. Each country agreements around the world has reduced its tariffs and granted continued to increase for over half the other most-favored-nation a century. These processes have (MFN) consideration. After the opened the borders of national 1944 Bretton Woods conference, economies, in both economic intergovernmental economic and physical terms. MNEs have relations and interactions emerged. integrated their processes, while In 1948, the General Agreement countries have chosen a certain form on Tariffs and Trade (GATT) of interaction. In the early years, the became the first multilateral trade major principle was liberalization agreement, with 23 signatories. under non–discrimination; since It included more than 45,000 then this trend has shifted to the tariff concessions. The Uruguay creation of free trade agreements. Round negotiated between 1986 With the “modernization” of and 1994 created the World Trade these agreements, the concept Organization (WTO) in 1995 with has changed; now FTAs mean the the signatures of the contracting elimination of tariff-, and non- parties. The WTO extended tariff barriers (GEP 2015). The reductions in duty to services, importance of access to mutual

236 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ created the dispute settlement aid understanding. Interactions are procedure and negotiated analyzed from many points of view. intellectual property rules for the In this paper, I refrain from first time. Regional trade agreements analyzing international economic created under the first wave of relations in terms of distinctions regionalism are inactive today, due among competition, coordination, to political and economic changes. cooperation and integration, but I In the 1990s, increased economic introduce intra-group transactions interdependence prompted the as a necessary part of global free creation of new organizations; trade. Therefore, I argue that any thus the second wave was more type of interaction may be preferred. successful (Kutasi G. 2014). Competition refers to conflicting Several different types of parties who are involved in a interactions are possible, inter game to gain certain advantages. alia, extending through a gradual Coordination assumes a kind of deepening of interactions in commitment, a willingness to four stages: 1. competition, 2. displacement towards the other coordination, 3. cooperation, and party. Commitment is not certain 4. integration. Economic relations in this case. Cooperation means begin with a mutual understanding compliance with rules which are that brings participants together. derived from commitment. In this In the world economy global situation, the commitment is certain, conditions have changed and and parties only decide on the interdependency has intensified as degree of interaction. Integration international collaborations have occurs when parties choose a form emerged in the last fifty years of commitment, and determine (Palánkai T. et al. 2014). There is the degree of dependence. Table 4 an impressive amount of literature shows these strategic options, with that examines trade relations, darker tones indicating stronger their aspects, features and effects; characteristics (Feldstein, M. S. however, many theories tend to 1988). increase the confusion, rather than

willingness to interaction interdependency commitment competition coordination cooperation

237 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ willingness to interaction interdependency commitment integration

Table 4: Types of integrations by the gradual deepening of their characteristics Source: Edition of the author

These concepts introduce the others highlight the importance optional strategy of players from of international cooperation, since a game theoretical perspective. uncoordinated national policies In game theory, coordination is have caused global crises (Frieden, the harmonization of individual J. et al. 2012). However, this study interests, while cooperation occurs only shows the generally accepted when the individual’s actions are view and does not deal with extreme directed to a common purpose opinions. that does not necessarily coincide A number of empirical with the individual’s own interests research studies have demonstrated (Kóczy Á. L. 2006). In this research, that free trade agreements appear I deal with only the cooperation of to have a relatively large positive corporate group members. effect on the behavior of a In the global economy, all multinational firm within a free participants’ common cooperation trade area. Antrás and Foley pointed is better placed to achieve higher out that increased multinational global growth, while individual firm activity in a regional free trade instances of cooperation by actors area is likely to generate benefits does/do not necessarily generate within the region, as multinationals higher utility. That is why we have typically exhibit high levels of to differentiate between utility, productivity, pay high wages, and profit, and the welfare level. On the create positive spillovers for other microeconomic level, customers firms (Antrás, P. – Foley, F. 2009). may cooperate or compete in CHEN (2009) highlighted that an order to acquire greater utility. increasing number of multinational Global companies, in general, firms move their production inside compete with each other to an integrated zone, and benefits maximize utility, while intragroup are generated by lower costs and cooperation creates increased profit better access to markets; thus free for members, and cooperation trade agreements are dedicated to between nations generates higher achieving global economic growth. welfare for countries. Frieden and International trade transactions

238 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ involve complex issues, and thus is carried out concerning trade must be examined jointly. and the enhancement of welfare, Before making a decision on it essentially creates winners a transfer price, firms must consider and losers in the economy. This the possible revenue, the costs situation provides a context to of their activities, and preferable investigate which scenario brings taxation and tariff assumptions, greater economic benefits to various particularly when corporate group players. members operate in a broad It is especially important international network and their to note the rule of origin, which activities are highly integrated. determines product requirements Many examinations have analyzed regarding the “made in” label. optimal MNE strategies (Hyde, FTA members export to other C. E. – Choe, C. 2005; Dürr, O. member countries without tariffs, M. – Göx, R. F. 2011). Different but the regulation requires that the countries may prescribe different exported product should originate administrative requirements that from a member country. Most FTAs may create additional options to (CETA, NAFTA, EU – Mexico maximize profit. Global firms need FTA, etc.) apply the ROO in several to comply with tax and tariff laws, product categories. while countries tax their profits. Main characteristics of a Modern free trade corporate group agreements A general presentation of The general trend is that MNEs helps to understand the modern trade agreements consist optimal strategy of these firms, of eliminating tariff and nontariff which is profit maximization. barriers (free movement of capital MNEs’ core activity describes the flows), protecting intellectual participants’ contributions to value property rights (patents, copyright), creation and highlights the main operating investor-state dispute functions, risks and assets used by settlements (ISDS), and rule of members within the group. Their origin (ROO) regulations, and business activity helps to understand harmonizing regulatory standards how the profit is allocated between (Laursen, F. 2003; Gnangnon, S. subsidiaries. A corporate group K. 2018; Rodrik, D. 2018). When divides its activities into divisions a government’s economic policy (such as procurement, production,

239 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ wholesale, services, marketing, standards, all participants in a logistics etc.) and places them in corporate group must be taxed on the relevant markets (Yao, L. – the basis that they act following Yinzheng, S. 2016). the arm’s length principle in their transactions. The OECD (2017) Firms and transfer prices highlights the importance of real pricing and determines the arm’s The operation of MNEs length principle in Article 9 (1) includes several intercompany of the OECD Tax Convention: transactions between related „[When] conditions are made or parties. To price these transactions, imposed between ... two [associated] companies use a transfer price (TP) enterprises in their commercial that could be below, above or equal or financial relations which differ to the real market price. “Transfer from those which would be made prices are the prices at which an between independent enterprises, enterprise transfers physical goods then any profits which would, but and intangible property or provides for those conditions, have accrued services to associated enterprises.” to one of the enterprises, but, by (OECD, 2017 p. 17.) reason of those conditions, have The taxable profit of entities not so accrued, may be included is based on the transfer prices that in the profits of that enterprise and have been used among parties. taxed accordingly.” The principle is Normally, TP would alter the a comparison between dependent calculated profit before tax of and independent parties. entities but this does not affect how that combined profit is split between IV.2.3. Model the related parties. Consequently, this means that profit will shift from In this section, we develop a one country to another. If those simple extension of microeconomic entities are taxpayers in different profit model and set up a game countries, transfer pricing therefore to define and analyze players’ affects the share of that combined possibilities concerning profit profit taxable by each country. maximization. For this experiment, we use a 3 player – 3 country game, Pricing in line with the and determine the combinations “arm’s length principle” of these factors, thus the model contains 8 strategies (Figure 17). According to international Under perfect information

240 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ conditions, players will select an (strategies), and the consequences option that is the best strategy for of the players’ choices (payoff). profit maximizing. The object of the game is to find Three basic elements are the winning strategy, or strategies required and established to create (Axelrod, R. – Hamilton, W. D. and use a game theoretic model: 1981; Kóczy Á. L. 2006; Colman, the players, the laws of a game A. M. – Gold, N. 2017).

players N = {3} strategies S = {Scenarios} payoffs π = {Profit of a player}

Table 5: Basic elements of the game Source: Edition of the author

To set up a game, it is L, then L < N, and similarly for ~; necessary to set axioms. According Axiom 3. Continuity: if L ≤ M ≤ N, to Neumann and Morgenstein then there exists a probability p ϵ (Neumann J. – Morgenstein, O. [0,1], such that pL + (1 – p) N ~ M; 1944), utility theorem rational Axiom 4. Independence: if L ≤ M, behavior operates under axioms, then for any N and p ϵ [0,1], pL + which are completeness, transitivity, (1 – p) N ≤ pM + (1 – p) N. continuity, and independence. An individual who has to decide Assumptions: The players are when faced with the probabilistic interconnected, they are parts of a consequences of different choices corporate group and cooperate with is to behave as if the players were each other: the producer subsidiary maximizing the expected value (P) procures the materials from of some function. In future, this its input provider company (I), is defined in terms of the possible manufactures final goods in outcomes at some specified point. country B and sells the products to its other related party, who is a Axiom 1. Completeness: either M Distributor (D). Company P has is preferred, L is preferred, or the two options for procuring input individual is indifferent. L < M, M materials, and two options for < L, L ~ M; selling: from inside, or outside of Axiom 2. Transitivity: assumes that country B. Country B and Country preferences are consistent across C are potential FTA members, any three options. If L < M and M < while Country C is outside the

241 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ agreements (Figure 17). Country according to ROO. Country B does A has both a location advantage not impose tariffs on raw materials relating to inputs and a corporate imported from country A. Firm I income tax advantage, while provides all the input materials to country B has low factor skills. The Company P, while P sells all its governments apply a variant CIT products to Company D. Products rate (t) on reported profit. Without are homogenous. Finally, we a free trade agreement, if two of the assume that t^C>t^B> t^A. Given three countries (namely countries these assumptions, we expect the B and C) interact, a specific tariff three players to seek greater benefit rate (T) is applied on import goods, in their strategies.

Figure 17: (a) (b): Model Source: Edition of the author

For the sake of simplicity, not centralized, but they can make the research does not address the decisions together; thus their allocation of costs to certain types choices depend on the decisions of costs, except in situations where made by states. Although states this may be explicitly necessary for are actors in our game, in this the analysis of the corporate income research study, we analyze only the taxes and tariff examined, as the MNEs’ perspectives and reactions division of revenues is not intended to a certain settlement made by a to be discussed; therefore, we use a government. simple variant of general equation In our transfer pricing of profit used in microeconomics. problem, we formulate a The players’ decisions are cooperative game with total profit

242 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ sharing. In cooperative games, needs to be generalized according to parties are allowed to formulate game theoretic settings. Supposed coalitions in order to reach higher that the three players are presented profits. It can happen that a player with their options. creates significant advantages for With three intra-group firms the others at his/her own expense and three countries in the model, (Axelrod, R. – Hamilton, W. D. we are able to define the following 1981). strategies from the producer’s point The structure of this game of view.

Figure 18: Decision-tree for companies’ profit analysis Source: Edition of the author

To construct a payoff matrix set of total costs include the cost of for the model, we obtain the profits materials and goods sold to relevant for all companies and scenarios. Let companies, and operating as well as the set of total revenue include the other costs. price and quantity of products sold In our model, we use the to the other related party. Let the following abbreviations.

ⅈ: index (I; P; D) to represent the companies, respectively

xi: product quantity

pi: price applied by company i

ci: company i’s costs

TRi: company i’s total revenue

TCi: company i’s total costs

243 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

πi: company i’s profit according to strategic options t: tax rate (different in country A, B, and C) τ: tariff rate applied by country C

ri: raw material price appearing in companies I, P and D

fi: final goods production price relating to companies P and D m: margin applied by company D

oi: operating expenses appearing in company i

ei: Other costs appearing in Company i ρ: rule of origin value (0< ρ >1)

Table 6: List of mathematical symbols used in determining profit Source: Edition of the author

Option 1 When all members of a corporate group operate in country B, tariff payment obligation cannot be interpreted. Regarding tax payments, the three companies are obliged to pay the same CIT rate (t^B). Therefore, Company I’s profit is:

on condition that the three firms’ costs and product prices are as follows:

The corporate group’s total profit is:

Option 2 The corporate group decides to appear in foreign markets, so the producer exports the products to its related party D, to country C.

244 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ In this situation, the distributor firm faces a tariff rate (τ) and a higher CIT rate (t^C) compared to option 1. Companies I and P’s profits are as in eqs. (1). In country C, as the government imposes a tariff rate on import goods, and determines a CIT rate, its profit is:

with full corporate group profits as in eqs. (2).

Option 3 The headquarters of the MNE is obliged to reallocate its profits to a lower CIT rate country, thus one part of the value chainis moved to another country. Since the corporate tax rate is the lowest in country A, the materials have been imported and shipped from country A, and the final products have been sold to D, operating in country B. The manufacturer and the wholesaler MNEs’ profit is determined as in eqs. (1); Company I’ s profit is given by:

The full corporate group profit is derived from eqs. (2). Option 4 When the corporate group locates its input production in country A and exports the final product to its distributor, a related party operating in country C, it faces a lower tax rate, and a tariff rate compared to option 1. The lower level of CIT increases, while the tariff rate reduces the total corporate profit. I’s profit is as in eqs. (4), P’s profit as in egs. (1), and D’s profit as in eqs. (3).

Option 5 All corporate group members operate in country B, thus tariff elimination has no influence on the members’ profit levels.

245 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Option 6 Company P procures its input goods in country B, and sells the final goods in country C. Firm D decides to comply with ROO to make tariff-tree transactions, which is why it produces inputs within the free trade agreement.

Option 7 Company I (located in country A) provides its input materials to Company P (located in country B), which produces and sells the final goods in country B. For tax optimization, all members ofthe company group are able to manipulate transfer prices.

Option 8 The procurement process occurs from country A, while final goods are sold to country C. In this situation, the corporate group is forced to make a choice. On the one hand, if it manipulates the transfer prices to save profits in country A, where the lowest tax is, it will only be able to obtain its raw materials at a high price. On the other hand, if it intends to exploit the benefits of a free trade agreement, the company is not able to manipulate transfer prices to precisely the point where:

IV.2.4. Analysis of results necessary to pay tariffs, and the CIT rate is the highest in country C, In a game theoretic model, it is certain that the total profit level rational players must select the best is lower than in option 1, thus the strategy among all alternatives in payoff is worse than in country B. order to maximize their rewards Let this payoff be E. (CHEN 2008), which, at the same Regarding options 3 and 7, we time, is the purpose of the game. face the lowest tax rate in country A, If all players operate in and as the corporate group allocates country B, they will all reach a its profits to country A, this is the different level of profit. At the most profitable of all the options. group level, the corporate group’s Let this scenario’s payoff be A. payoff is B, which means a certain Options 4 and 6 suggest a profit level is included in tax rate complicated structure, which is (see options 1 and 5). why it is hard to define the payoff; In option 2, since it is however, we can be certain that it is

246 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ worse than B, although it is better a free trade agreement is less than than in option 2. Let this payoff be the ROO value, the distributor C or D. company has to pay customs duties, Finally, concerning option but is able to manipulate its transfer 8, if the MNEs are committed to prices. Therefore, the payoff of this comply with ROO, they cannot option is worse than A, but better move their profits; at least, not as than D. much as they can in options 3 and The predicted strategies of the 7. In that case, where the value game are presented as a solution: added to a product created within

Table 7: Payoff matrix for Companies I, P, and D Source: Edition of the author

247 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

and to be a game, in the strong benefit from free trade, even if they sense, the following conditions manipulate their transfer prices. must hold for the payoffs: Our model can explain this fact.

A > B>C>D>E IV.2.5. Conclusion

With these options Model based analysis with determined, we showed why three game theory offers a relatively rational players might cooperate, broad introduction to multinational even if it appears that it is in their enterprises’ strategic decisions individual interest not to do so. concerning profit maximization. We conclude that rule The main objective of this paper of origin and transfer pricing was to determine and characterize are essential parts of analyzing the optimal decisions of players. multinational enterprises and Our theoretical analyses focused free trade agreements, since they on the behavior of multinational influence the players’ strategies on enterprises. We used a game both sides: on the corporate and the theoretic model to analyze how government side. firms react to different corporate Reviewing these options, we taxes. In addition to our work, we assume trade liberalization usually presented the effects of nontariff lowers import prices, benefitting rates. The relationship between the importer country. However, tariffs and taxes created different rules of origin affect exporter strategies which are applicable to companies’ decisions regarding raw large corporations. material procurement or production Our main findings are location. the following: Firstly, a firm’s MNE’s profit allocation strategy necessarily changes when activity across countries is more the additional tariff disappears likely when the tax gap is large. compared to the original sets. A When exporting within the FTA, free trade agreement increases firms have to give up profit the profits after tax of an MNE. shifting, at least to ensure value Secondly, raising the tax rate added criteria can be preserved. It encourages the company to shift its should be noticed that even though profits to another country where tax companies sell products without rates are lower. Thirdly, reciprocal tariffs, it does not mean they tariff elimination – ceteris paribus

248 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ – affects the company’s decisions for further research. It is intriguing relating transfer pricing. These to investigate how states react to findings are in line with the general MNEs’ decisions: i.e. What is the economic view and are in close degree of the concessions? What accord with the real corporate are parties willing to advance to decisions, and might describe the each other in terms of optimal main characteristics of a corporate tariffs and tax rates set. group concerning its profit maximizing activities. Acknowledgement As a final note, analyzing FTAs with ROO, we conclude The present publication is ROO has a positive and negative the outcome of the project „From effect at the same time; it can be Talent to Young Researcher project a good tool for tax authorities to aimed at activities supporting the prevent profit allocation, but also a research career model in higher poor tool, since firms stop utilizing education”, identifier EFOP- tariff concessions to relocate their 3.6.3-VEKOP-16-2017-00007 co- activities in order to save profits. supported by the European Union, We have introduced an MNE Hungary and the European Social perspective, but there remains room Fund.

IV.2.6. References

Antrás, P. – Foley, F. 2009: Regional Trade Integration and Multinational Firm Strategies. – NBER Working Paper 14891 Axelrod, R. – Hamilton, W. D. 1981: The Evolution of Cooperation. – Science, New Series 211 (4489) Blouin, J. – Robinson, L. – Seidman, J. 2018: Conflicting Transfer Pricing Incentives and the Role of Coordination. – Contemporary Accounting Research 35 (1) Colman, A. M. – Gold, N. 2017: Team Reasoning: Solving the Puzzle of Coordination. – Psychon Bull Rev 25 Dürr, O. M. – Göx, R. F. 2011: Strategic incentives for keeping one set of books in international transfer pricing. Journal of Economics & Management Strategy 20: 269–298 Feldstein, M. S. 1988: Distinguished Lecture on Economics in Government: Thinking About International Economic Coordination. – The Journal of Economic Perspectives 2 (2)

249 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Freund, C. – Ornelas, E. 2010: Regional Trade Agreements. – Annual Review of Economics 2010 (2) Frieden, J. – Pettis, M. – Rodrik, D. – Zedillo, E. 2012: After the Fall: The Future of Global Cooperation. – International Center for Monetary and Banking Studies Global Economic Prospects (GEP) 2015: Trade, Regionalism, and Development. – The International Bank for Reconstruction and Development – The World Bank Gnangnon, S. K. 2018: Multilateral Trade Liberalization and Economic Growth. Journal of Economic Integration 33 (2) Gowa, J. – Mansfield, E. D. 1993: Power Politics and International Trade. – American Political Science Review 87(2): 408-420 Hyde, C. E. – Choe, C. 2005: Keeping two sets of books: The relationship between tax and incentive transfer prices. Journal of Economics & Management Strategy 14: 165–186 Johnson, H. 1953: Optimum tariffs and retaliation. Review of Economic Studies 21 (2): 142-153 Kóczy Á. L. 2006: A Neumann-féle játékelmélet. – Közgazdasági Szemle – 53 (1): 31–45 Kutasi G. 2014: The Spreading of Regional Intergrations in World Economy –In: Palánkai T. (szerk.): Economics of Global and Regional Integration – Budapest –Akadémiai Kiadó Laursen, F. 2003: Comparing Regional Integration Schemes: International Regimes or Would-be Polities. – Jean Monnet/Robert Schuman Paper Series 3 (8) Neumann J. – Morgenstein, O. 1944: Theory of Games and Economic Behaviour. – Princeton – Princeton University Press OECD 2017: OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. – Paris – OECD Publishing Palánkai T. – Benczes I. – Jody, J. – Kengyel Á. – Kutasi, G. – Miklós G. – Nagy S. Gy. 2014: Economics of Global and Regional Integration. – Budapest – Akadémiai Kiadó Pogorelova, L. 2015: Transfer Pricing and Game Theory – Intertax 43(5): 395-404 Rodrik, D. 2018: What Do Trade Agreements Really Do? – The Journal of Economic Perspectives 32 (2) Rosenthal, E. 2008: A game-theoretic approach to transfer pricing in a vertically integrated supply chain. – International Journal of

250 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Production Economics 115: 542-552 Sung, H. L. – Kun, S. P. – Yong, W. S. 2016: Multinational Firm’s Production Decisions under Overlapping Free Trade Agreements: Rule of Origin Requirements and Environmental Regulation. – Sustainability 9 (1) Yao, L. – Yinzheng, S. 2016: Trade Liberalization and Corporate Income Tax Avoidance. Tsinghua University Zissimos, B. 2009: Optimum Tariffs and Retaliation: How Country Numbers Matter. – Vanderbilt University

Other sources from the internet:

WTO Database: – http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx

251 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ IV.3. The Institutional Economics Approach to Populism: Precising the Theoretical- Methodological Framework

Máté Mátyás60

Abstract

This work follows up on Zoltan Ádám’s similarly titled article presented and published at the International Economic Forum on Reform, Transition and Growth of the Corvinus University of Budapest. It undertakes the same effort of investigating the question of what populism is and how it may be conceptualised in the institutional economics context. However, this work arrives at rather different findings. It brings in a broader range of literature on populism studies and connects them through electoral behaviour to institutional economics. For more contrast, it also applies the same case study method Ádám uses focusing on post-communist Hungary. As a result, with identical transaction cost considerations, this paper makes the case that instead of a “a form of government that reduces political uncertainties inherently present in liberal democracies”, more feasibly, populism is a political behaviour – a strategy utilised by political actors aimed at reducing political and economic competition. The work demonstrates how this conceptualisation makes more precise operationalisation and analysis possible by re-interpreting Ádám’s analysis of Hungary’s post-transition political economy; and concludes with proposing novel considerations of populism as a universal, global political economic phenomenon.

Keywords: populism, institutional economy, political economy, political economic transition

60 PhD Student – CUB IR Doctoral School, [email protected]

IV.3.1. Introduction: phenomenon. (Ádám Z. 2018) populism as stable Very similar in its structure and governance? goal to (Zankina, E. 2016), the two studies choose somewhat different strategies to define populism and In a pioneering contribution demonstrate its mechanisms – to the understanding of populism, yet arrive at similarly alarming Ádám writes that institutional conclusions. Both claim that economics stands to contribute populism is about reducing to the understanding of a widely transaction costs, therefore, it is a contested, infamously slippery

252 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ rational choice of the electorate. study directs the attention to this But they caution how populism paradox. Agreeing with the goals “hollows out” democracy and the set out by the said analyses64, this rule of law61. Going one step further, study aims to give a contrasting Ádám sees little room for limiting account of populism’s definition such anti-democratic tendencies and consequences by arguing because as he argues, populism that populism, in essence, does may be seen as the coveted stability not “reduce transactional costs” by many62. (Zankina, E. 2016 p. 182.) equally Therefore, getting the for every relevant actor (or groups “stability aspect” of populism right thereof). Rather, populism is a is crucial. Indeed, Ádám himself political strategy which aims to cautions from characterising create differentiated transaction populism fully stable63. The present costs. While it cuts transaction costs for some, it raises for others; 61 “…I argue that populist parties create a democratic and institutional and the repeated, intentional deficit and contribute to a shift application of this strategy – rather from representative to procedural than utilising a specific ideology – democracy. Although the ‘soft’ is what essentially makes an actor populists do not contest the principles populist. The strategic selection of of democratic governance, their increased use of informal power whose transaction costs decrease – coupled with procedural but value- who get included in the populists’ empty adherence to democracy alliance – as opposed to whose threatens the very foundation of transaction costs increase, will get democratic rule which is a priori excluded is the essence of populist value-driven.” (Zankina, E. 2016 p. 195.) political strategy. 62 “…more predictable and hence To support this point, the eliminates a considerable amount of paper adopts a strategy in three uncertainties surrounding political exchange is the survival of the regime point of view of individual political or with its patterns of redistribution business actors.” (ibid.) and allocation of power. In societies 64 “…to understand what makes characterized by a limited capacity populism a rational choice for an of people to hold their government increasing number of people in an accountable and impose checks on increasing number of people in an power, such political stability appears increasing number of countries. I attractive as opposed to its alternative, assume the underlying reasons have to which is essentially anarchy.” (Ádám do with the terms of political exchange Z. 2018 p. 95.) in democracies (…) with political 63 “this is not to say that predictability transaction costs” (Ádám Z. 2018 p. of political actions increases from the 63.)

253 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ major sections. First, it reviews and behaviour. This motivates the compares the literature on which theoretical choices in the second both Ádám and Zankina build. section, the case study analysis. This entails the brief overview of In it, after justifying the analytical the transaction cost concept-related strategy and the case selection, institutional economics scholarship the paper investigates the political and how it is related to populism economy of mass media in post- studies in both authors’ work. It finds communist Hungary 1989–2020 that additional strands of populism qualitatively. The third main conceptualisations need to be added section re-contextualises the – and the explicit link between the findings: the conclusion that sustained support for populism is populism is a political strategy of missing in both works. Hence the imposing differentiated transaction literature basis is augmented with costs and offers new ways of a brief consideration of electoral researching the phenomenon. A summary concludes. The study implies that there is a narrow path for more optimistic evaluations of the chances of non-populist politics in eastern Europe. Populism is not found to be as stable as the already existing accounts suggest, some of the possible pain points – as argued, primarily in the media – are identifiable.

IV.3.2. Comparative literature review: linking institutional economics and populism scholarships through electoral behaviour

Institutional economics: transaction costs

It is curious that in spite of the fact transaction costs are central

254 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ to both Zankina’s and Ádám’s (Williamson, O. E. 1985), distinct accounts, neither of them clearly interests (and interest groups) define the concept in their texts65. may very well arise67 based on the The most explicit and detailed differentiated effects of transaction description in their cited literature cost increases and reductions. is found in (Furubotn, E. G. – This diversity blunts the uniform Richter, R. 2005 p. 48.)66. This analysis of “social costs”: one terminology merits closer attention cannot suppose a uniform effect of because focusing on it leads to the same transaction cost change analytical choices that are different on different actors and groups from the Bulgarian and Hungarian thereof. These diverse effects case studies of populisms. Namely, require a differentiated treatment since transaction costs pertain of transaction cost analysis with to the functioning of different a keen attention as to who is the institutions, they are likely to be subject of transaction cost changes; different for different institutions – and are born by diverse sets of 67 That transaction costs are specific to decision-makers in diverse ways. certain individual organisations and Although they are rarely quantified institutions is in line with most of the literature, not only deduced from (Furubotn, E. G. – Richter, R. 2005 65 However, they both refer to the same p. 48.). e.g. Dahlman analyses them body of institutional economics when “...assuming the existence of some evoking the term. They include the side effects, namely, a difference seminal works of Coase, Williamson, between social and private costs...” Douglass-North, Olson, etc. in both (Dahlman, C. J. 1979 p. 144.) As accounts. this study has been conducted from 66 “…transaction costs include the costs a constructionist point of view (akin of resources utilized for the creation, to that of the selectorate theory maintenance, use, change, and so on (Mesquita de, B. B. et al. 2003), of institutions and organizations (…) relational sociology (Donati, P. transaction costs consist of the costs of ed. 2011; Dépelteau, F. – Powell, defining and measuring resources or C. J. eds.), agent-centric historical claims, plus the costs of utilizing and institutionalism (Scharpf, F. W. 1997; enforcing the rights specified. Applied Büthe, T. 2016), it also points out that to the transfer of existing property “social costs” are also born by specific rights and the establishment or transfer individuals (or groups thereof) which of contract rights between individuals may also have further distinct political (or legal entities), transaction costs and economic implications – not to be include the costs of information, treated uniform across the board when negotiation, and enforcement.” understanding social and political (Furubotn, E. G. – Richter, R. 2005 economic macrophenomena (Mayntz, p. 48.) R. – Scharpf, F. W. eds. 1995 p. 44.).

255 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ which stakeholder, interest group, this study elects to focus mostly on network is impacted by what kind government–private exchanges. of change and how it affects their To better understand the links and perceptions of interests and political applicability of transaction costs economic outlook. in the populism context, the next Moreover, such a detailed subchapter turns to the scholarship definition also helps to establish of the concept of populism. different categories of the concepts. Williamson creates a The concept of populism three-fold categorisation: search and information costs, bargaining In both case studies of and decision costs, policing and Bulgaria and Hungary, the authors enforcement costs68 (Williamson, resort to somewhat dissimilar O. E. 1985). What complicates conceptualisations of populism – the transaction cost analysis of and draw conclusions from those. populism is the above referenced In the comprehensive overview of inevitable diversity of a massive populism scholarship (Gidron, N. macro-phenomenon: different sorts – Bonikowski, B. 2013), the vast of actors undertaking different sorts array of populism definitions can be of transactions. As emphasised by divided into three major groups: the Ádám, there are formal and informal ideational (e.g. Mudde, C. 2017), transactions – in the author’s discursive stylistic (Moffitt, B. judgement, institutions – at play; 2016), and the political mobilisation but perhaps even more importantly, (termed political strategic here)69 private–private economic (on traditions (Weyland, K. 2001; the market), government–private 2017). Perhaps the biggest economic (legal-regulatory) weakness in Ádám’s account is and political (voting) exchanges that it discounts the entire strategic complicating transaction cost school of thought to the point of considerations. The three not mentioning it70. Nevertheless, categories of transaction costs may arguably, the strategic approach have different weights in different contexts. Due to populism being the 69 This is also based on, and compatible central concept of this investigation, with the structure of the authoritative handbook on populism. (Kaltwasser, C. R. et al. eds. 2017) 68 In his revised version of the paper 70 Although the work refers to published a year later (Ádám Z. (Weyland, K. 2001; Pappas, T. S. 2019), Ádám also introduces these 2014; Müller, J.-W. 2016), but their distinctions – as also discussed later. core findings are not utilised.

256 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ is the most compatible with the institutional economic – studies. conceptual and methodological But political strategic definitions toolkit of institutional economics. suit the purposes of institutional This is because to link ideological economic analysis as they directly and discursive stylistic reference institutions. As early understandings of populism with as 1985, Mouzelis writes that institutional economic outcomes, “Any failure to take into serious one must suppose that policymaking account the organisational aspects is based on policymakers’ of populism not only results in the ideological considerations or what populist phenomenon results in the they explicitly express. However, populist phenomenon appearing as especially in the context of a set of disembodied ideological populism, this approach may be themes, it also tends to dilute very misleading71. the specificity of a concept that This study therefore holds could otherwise be very useful…” that ideational and discursive (Mouzelis, N. 1985 p. 341.) stylistic approaches, while suitable This is the basis on which Kurt for different kinds of analyses such Weyland developed perhaps the as legal and political sciences, are most influential political strategic ill-equipped to serve as conceptual definition of populism: “populism grounds for economic – also is best defined as a political strategy through which a personalistic leader 71 Additionally, the authoritative seeks or exercises government ideational definition of populism power based on direct, unmediated, promulgated by Mudde defines it as institutionalised support from large a “thin-centred ideology” (Mudde, C. 2004). Beyond the theoretical numbers of mostly unorganized problem how ideology, a concept followers.” (Weyland, K. 2001 p. takes a physical property so much as 14.)72 to have a thin “centre” and how such a thin “centre” may be consequential and operationalised for political 72 Notice how directly these economic analysis, as Gidron and conceptualisations reference Bonikowski observe that “Thin- organisations and institutions in centred ideologies are those that do relations to seeking or exercising not provide answers to all the major government power – policymaking. socio-political questions…” (Gidron, However, while policymaking N. – Bonikowski, B. 2013 p. 6.) and sustained government power Moreover, Aslanidis also points out rests on “direct, unmediated, similar weaknesses, even though he uninstitutionalised” mass support, puts forward a discursive approach. the linkage between the two is not (Aslanidis, P. 2016) explicit.

257 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

political ideology political style political strategy a set of interrelated a way of making definition a form of ideas about the claims about politics; of mobilization and nature of politics and characteristics of populism organization society discourse texts, speeches, parties (with a focus unit of parties and party public discourse on structures), social analysis leaders about politics movements, leaders qualitative or comparative relevant automated texts tinterpretive textual historical analysis, methods analysis, mostly of analysis case studies partisan literature Kazin, Laclau, Roberts, Weyland, exemplars Mudde, Kaltwasser Panizza Jansen

Table 8: Characteristics of the three approaches to populism Source: Gidron, N. – Bonikowski, B. 2013 p. 17

This study argues73 that while after introducing Weylands’s policymaking in a democratic definition: “What matters here polity74 rests on elaborate then is not the content of policies institutional designs with a plethora or the style of discourse employed of actors participating, the primary by political actors, but rather the logical linkage between mass relationship of those actors toward support and government power are their constituents.” (Weyland, elections (and their institutional K. 2001 p. 11.) Depending on the foundations). As Gidron and sets of actors supporting populists Bonikowski immediately add in their – indeed, the intricate, interrelated review of the populism scholarship networks of interests –, incentives to draft policies in one certain way 73 This is deduced from the selectorate or another may be very different theory (Mesquita de, B. B. et al. 2003) from what “social” transaction costs 74 Definitions of polity abound in would prima facie predict. As it has political science. For sake of brevity, been argued mass electoral support this study uses it in a sense similar to “political class”, “political elite” – is a vital component in sustained, referring to individual actors who have effective populist politics. Hence in immediate opportunities or are (close this literature review it is necessary to) to substantially influence top-level to include electoral behaviour political decisionmaking regardless of considerations into its transaction ideology, membership, or identity.

258 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ costs-centred investigations. such as economic inequality are positively associated with Electoral behaviour and voting for populist candidates institutions (for example Rodrik, D. 2018). However, there are studies (Dalton and Klingemann contesting the economic sources 2007) recounts several different of populist electoral support75 approaches to examining electoral (Inglehart, R. – Norris, P. 2016), support. They include classical instead favours a socio-cultural, theories of social position (e.g. demographic factors to explain class and religious divisions the support for the phenomenon. explaining outcomes of party These accounts vary widely, too competition); partisanship and (for example (Bustikova, L. 2019; party identification (which draws Santana, A. et al. 2020) in terms on the previous school’s insights of their focus, conceptualisations, and aims to explain the growing methods, explanatory power, and personalisation and issue voting conclusions. The often-emphasised tendencies in contemporary politics personalisation, leadership and by changing socioeconomic charisma elements (also emphasised settings), economic voting (a well- 75 “…the economic anxiety, discontent, known enterprise researching the loss of legitimacy, fairness concerns interaction between economic that are generated as a by-product developments and voters’ choices of globalization rarely come as rational utility maximisation), with obvious solutions or policy and political communication perspectives. They tend to be inchoate and need to be channelled in a (Semetko, H. A. 2007). particular programmatic direction Accordingly, “the rise through narratives that provide of populism” has been widely meaning and explanation to the groups researched from the corresponding in question.” (Rodrik D. 2018 p. 23.) plethora of viewpoints. These Or “The evidence (…) suggests that the rise of populist parties reflects, attempts have produced a mixed above all, a reaction against a wide record. There are impressive range of rapid cultural changes (…). accounts claiming that globalisation It is not an either/or story, for the – e.g. Chinese import penetration two sets of changes may reinforce each other in part – but the evidence (Autor, D. et al. 2016) –, trade in this study suggests that it would openness and regional economic be a mistake to attribute the rise integration and the ensuing of populism directly to economic socioeconomic structural changes, inequality alone.” (Inglehart, R. – Norris, P. 2016 p. 30.)

259 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ by (Ádám Z. 2019) can also be of mass communication, media contested in their definitions, economics have changed drastically mechanisms, and effects. What due to the infocommunicational seems to correlate in a certain case revolution of the 1990s and 2000s study at one point in time regarding with the advent of the internet the same populist phenomenon and social media. A strong, but seems to be completely off at often neglected line of populism a different date. There is also scholarship theorises (see for research analysing the international example (Mazzoleni, G. 2003; background of these changes on the 2008; 2014; Aalberg, T. et al. eds. international relations aspects of 2017; Waisbord, S. 2011; 2018) populism (for example Krouwel, and offers evidence (e.g. Murphy, A. – Abts, K. 2007) – whether J. – Devine, D. 2018) on the link it is “authoritarian diffusion” or between the changes in the mass “integration maturity” (in the EU media and the rise of populism. context (Endrődi-Kovács V. 2013). Therefore, this study applies Indeed, the turbulent changes the logic that – as much of the since the end of the Cold War political communication literature bipolar international system have attests – voters base their electoral reconfigured much of the global choices not on perfect information political economy, and roots of and rational cost-benefit analysis populism can be discovered in these (Huckfeldt, R. 2007 p. 113.)76, trends. Nevertheless, 1989 and but on the availability – supply 2004 (in case of eastern Europe’s – of information (Schmitt- European integration) seems to be Beck, R. 2004). That may be rather far from directly explaining tainted by organised interest the “populist explosion” (Judis, J. groups, democratically elected B. 2016) of the 2010s, especially governments themselves: “…the the latter half of it; and mostly systematic attempts by government intertwined with the globalisation officials and policy elites, as well arguments. as by pressure and single-cause However, this paper offers groups, to gain access to and to integrate the positive elements manage the media for the purpose of previous scholarship in a of enhancing respective interests communicational perspective. The 76 This bounded rationality approach implicit supposition behind this is also in line with the epistemic theoretical choice (made explicit foundations of institutional economics here) is that the political economy (Williamson, O. E. 1985; Furubotn, E. G. – Richter, R. 1994).

260 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ or to damage antagonists (…), media systems with the dominant neo-populist leaders and parties political elites of a country, the would engage in different forms of established news media reflect the ‘communication strategies’ (…). values and views of the elites to ‘For their different reasons, the which they themselves belong.” media and the movement needed (Mazzoleni, G. 2003 p. 16.) This each other. The media needed degree of polity–media integration stories, preferring the dramatic; – in terms of institutions, coalitions the movement needed publicity and alliances, political economic for recruitment, for support, and interdependencies – is investigated for political effect. Each could in the single case study context be useful to each other: each had of post-communist Hungary. effects, intended and unintended, Hungary has been chosen because on the other.’” (Mazzoleni, G. 2003 it has travelled perhaps the most p. 17., quoted by Gitlin, T. 2003 p. remarkable political economic 24.) Hence, the role of the political trajectory in eastern Europe as economy of information supply, the authoritative political scientists transaction cost analysis thereof Levitsky and Way observed: “The is at the centre of this current clearest case of this new pattern investigation. of competitive authoritarianism is Hungary” (Levitsky, S. – IV.3.3. Case study: politics Way, L. 2020 p. 60.). Indeed, and mass media in post- the reconstitutionalisation of communist Hungary the country’s legal, political and party system, drastic changes in its economy even in comparison The case study method and with other populist regimes77 selecting the case of post- communist Hungary 77 Both the lack of meaningful, large- scale sanctions and sustained Based on the above review and constitutional supermajorities have arguments, the interaction among not co-existed in similar contemporary political parties and media outlets political economic regimes (such in Bulgaria, Israel, Russia, or Turkey). are compared to electoral outcomes Indeed, by the end of the current with media coverage serving as term, PM Orbán is set to become the the direct channel of information longest-serving head of government which shapes voters’ electoral of Hungary since 1848. In Europe, his choices because “Depending on time in office has only been rivalled by Chancellor Merkel of Germany the degree of integration of the (whose CDU/CSU party has not

261 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ justifies the scrutiny. (ibid.) The prioritising the political economic transaction cost perspective exchanges among them: the polity is augmented with an agent- (political parties) and media actors centric historical institutionalist78 (and different media outlets, analytical toolkit here, focusing organisations) as well as the on the main stakeholders79 and electorate (voters)80.

attained legislative majority in general elections). In similar dominant party interests, and the way in which they systems in Malta and Bulgaria, the pursue those interests will be affected largest political parties also failed to by the opportunities and constraints of achieve supermajorities. the broader institutional configuration 78 See footnote 11. and by institutional feedback.” 79 “An agent-centric historical (Büthe, T. 2016 p. 489.) institutionalist analysis requires the 80 Although not specifically analysed analyst to identify the key stakeholders here, operationalisation may be quite and determine the interests that such precise using party’s vote counts, potential actors are likely to pursue, opinion poll support, and media then theorize how those actors, their audience sizes. See also footnote 25.

Figure 19: The simplified logical scheme of political economic exchange relationships (interactions). The inner group of boxes show interaction flows anti-clockwise; the outer boxes characterise interaction flows clockwise. Source: the author’s own edit

These are the political and economic exchange relationships,

262 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ interactions based on which interrelated one is well established transaction costs of each stakeholder in Hungarian academia. Unlike group and network are considered. many other post-communist For this reason, the history of these eastern European countries, during exchanges is reviewed in post- the transition, the legal regulation communist Hungary (1989–2020), of Hungarian media had been briefly describing the pre-2010 era unresolved (Paál V. (ed.) 2013). and then turning to the ongoing Neither the weakening remnants populist political economy of the of the state communist party, nor mass media under populist Fidesz the divided democratic opposition rule. actors amongst themselves were able to compromise on transitioning the media system81 from communist state media to democratic, market- Analysing the political based free media. (ibid.) The economy of the mass “frequencies moratorium” was media in post-communist not introduced until a democratic Hungary resolution could be reached by democratic political means. This The notion that the froze in the media governance relationship among actors in the and market structures inherited polity and media is a complicated, from state communism. The monopoly of public television and radio broadcasters (often reaching multiple millions of viewers and listeners)82 were in place until 1997 (Gálik M. 2004), and many of the newspapers went through “spontaneous privatisation”83 –

81 The term is borrowed from the seminal work (Hallin, D. C. – Mancini, P. 2004). 82 The evening news of the public service programme may have reached as many as four million people in the 1990s (Kollega Tarsoly I. ed. 2000). Also available at https://mek.oszk. hu/02100/02185/html/516.html 83 Influential newspapers often ended up in foreign owners’ portfolios who

263 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ usually a highly opaque process but the governing right-wing managed by the communist entailing MDF (1,214,359)85 and successor party MSZP (Paál V. ed. its junior coalition partners did not 2013). manage to secure that86. Moreover, As soon as the first free, the first freely elected governing democratic elections in 1990, the majority could not entirely control “media war”84 had begun among the monopolistic public service members of leading right-wing broadcasters over the course of the and liberal parties. The stakes “media war”, either (Paál V. ed. were high: ending the “frequencies 2013). moratorium”, regulating the Their opposition won a Hungarian media system – and massive electoral victory in 1994: thereby also controlling key MSZP (1,780,009) alone had media outlets’ content output. obtained the majority of seats in Introducing a media law would the National Assembly. However, have required a qualified majority, they chose to form a coalition government with the second biggest were either party allies or indifferent liberal party SZDSZ (1,064,788) to towards intervening in Hungarian command a supermajority in the domestic politics. Sipos also recounts parliament87. Some observers claim right-wing MDF attempts at gaining control over privatised newspapers, but their attempts failed either 85 Hungary’s mixed electoral system politically or economically (Sipos B. consisted of two rounds of elections 2010). The largest daily Hungarian effectively until 2014. The reported newspaper (1990 until 2016), numbers throughout this analysis Népszabadság, had direct MSZP party are the number of votes each party’s foundation stakes in its ownership national list had received in the first structure. (Gálik M.2004) For more round of elections (before 2014); on foreign ownership in Hungarian their source is the National Elections media, see also (Galambos M. 2008). Bureau’s (Nemzeti Választási Iroda) 84 The sequence of these political website. It is also important to note events were publicly named as that the turnout fluctuated somewhat such and termed identically by between 56.26% (1998) and 70,22% academia, too. See for example (2018); and the population have (Bárány A. 1998; Bajomi-Lázár slightly fallen under 10 million in this P. 2001; Rovó A. 2019). Relatedly, era. the concepts of “media balance” or 86 FKgP (576,315), KDNP (317,278)); “media imbalance” (médiaegyensúly, against its liberal (SZDSZ (1,050,799), médiaegyensúlytalanság) and “media FIDESZ (439,649)) and left-wing dominance” (médiafölény) had also (MSZP (535,064) been introduced in Hungarian public 87 Opposition parties: MDF (633,157), life (Sipos B. 2010). FKgP (476,127), KDNP (379,322),

264 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ that one of the main reasons for this rejected90 (Gálik M. 2004). decision had been to legislate a new However, in 1998, the Fidesz media law and secure domination party (1,340,826) managed to form over the Hungarian media system a right-wing majority coalition – (Paál V. ed. 2013)88. The uneasy after transforming itself from the left-liberal coalition’s infighting junior liberal, anti-communist party constituted the second phase of to a right-wing catch-all party and the “media war” which ultimately despite finishing only second to the resulted in a compromise Media ruling left-wing MSZP (1,497,231) Law of 1996 (effective from 1997) hit hard by corruption scandals. (Cseh G. – Sükösd M. 2001). The (Juhász G. 1999; Paál V. ed. 2013) tremendous change, introducing From the 1998 general election, commercial competition in thus far Hungary’s party system started monopolistic electronic national to transform from a multipolar media and new regulation and one to a clear-cut bipolar party oversight institutions89, however, system (Fricz T. 1999; Horváth, also happened under dubious A. – Soós, G. 2015). This featured circumstances. The two major competition between the left- national commercial TV channels’ liberal parties91 and the right92. (TV2 and RTL Klub) tenders were 90 While the author describes the two not selected and implemented major national commercial TV transparently – incomplete offers channels as neutral towards politics illegally (as ruled by a Hungarian (Gálik M. 2004; Bátorfy, A. – Urbán court) approved; and an entirely Á. 2020 p. 49.), other commentators viable and legal application was have also pointed to certain biases in their coverage. Altogether, Gálik’s observation that infotainment rather than focused political coverage Fidesz (378,678) became more and more dominant with 88 Outgoing right-wing MDF PM the advent of commercial television Boross is quoted to have said: “I am in Hungary is apparent. ((anonymous convinced that (…) free democrats Member of Parliament 2002)) [SZDSZ] joined the coalition 91 With the ever-dwindling support for primarily (…) to grab the media liberal SZDSZ (344,352), and the world. I believe that it is obvious in massively popular left-wing MSZP. the television and radio, too, how 92 With Fidesz gradually winning over they are executing mid-level personel other parties’ – MDF (127,118), changes.” (Paál V. ed. 2013) FKgP (597,820), KDNP (did not get 89 Of course, the Media Law of 1996 into parliament) – supporter base. also established a novel regulatory However, the extremist right-wing framework – with rules convenient to (MIÉP) also entered parliament in the governing parties. 1998 and remained a potent “force”

265 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Thus, changes in the polity, the M. 1999; Political Capital 2002; party system and the media system Urbán Á. 2004) was hardly a coincided – even though right- serious challenge to the booming wing attempts to create a friendly commercial media – although, media “ecosystem” largely failed93. finally, the right-wing could With PM Orbán’s Fidesz and its establish smaller media outlets junior coalition partners in charge, promoting messages favourable however, the third phase of the to the governing parties (Sipos B. “media war” ensued: the previously 2010). multi-party decision-making boards Ultimately, the 2002 of public broadcasting media and elections brought about a slight, national mass media oversight but consequential defeat for PM institutions became increasingly Orbán’s Fidesz (2,306,763)96 amid a less diverse – to the point of Fidesz unilaterally controlling them94. opposition delegates on the boards. The repeated failure over several Nevertheless, Fidesz holding sway months to elect presidents to lead over the fast decreasing public the broadcast providers typifies the service broadcasters95 (Vásárhelyi operational disorders that plagued the system. Viewer ratings for public- in Hungarian politics as the “Jobbik television channels began to drop phenomenon” (Róna D. 2016) later immediately after the launch of attests. commercial channels, a trend that 93 Already the first freely elected continued in the years that followed. National Assembly’s right-wing In 2008 the largest public channel parties had tried to establish and was watched by 11% of Hungarian acquire their own media outlets (e.g. viewers; by 2012 the percentage Napi Magyarország, Magyar Nemzet, had dropped to 9.2%.” (Polyák G. etc.); nevertheless, it was late in the 2015 p. 282.) Not even today is the 2000s when right-wing media truly transformed public service media a managed to become a “force” to major player on the market. reckon with. (Bajomi-Lázár P. 2001; 96 Fidesz achieved this on a party Paál V. ed. 2013) list joined with MDF. This may be 94 Commonly called as the “maimed interpreted as an increase in its vote curatoria” (csonka kuratóriumok) after share, but other smaller right-wing the media oversight and governance parties were annihilated (neither FKgP bodies’ and boards’ “missing” or KDNP could enter parliament on opposition members. (Political its own right anymore). It is widely Capital 2003; Paál V. ed. 2013) believed that “…Fidesz and Viktor 95 The public service TV channels that Orbán concluded that they had once enjoyed a monopoly, suffered not been radical enough, and they a huge loss of audiences: “Between attributed their electoral defeat to the 1999 and 2002, i.e. under the first presumed persistence of the ‘left- Fidesz government, there were no liberal media dominance’ and their

266 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ sharpening divide between the left- K. 2010), but previous trends on the liberal and right-wing camps. The market did not change98. Indeed, MSZP–SZDSZ coalition (2,361,997 the EU does not have a strong, and 313,084, respectively) coalition independent media policy, the reclaimed their positions in media regulatory and governance powers and information authorities; and are mostly left at the member states’ sustained a coalition government discretion. (European Parliament until 2010. The “media war” lost its 2018) saliency as an immediate political Over the course of the “media issue – but attempts to gain control war”, it remained constant that and exert influence by other means97, governing parties heavily controlled establishing commercial mass the “money taps”99 (Bátorfy, A. media outlets remained in practice – Urbán Á. 2020). However, this (Sipos B. 2010). Additionally, while started to prove insufficient (and Hungary’s EU accession had a increasingly unsustainable after profound impact on the country’s the 2008 financial crisis) for the political economy, its implications left-liberal parties in the more and for the Hungarian media system more competitive media system. have been far more modest. The During the left-liberal MSZP- international factors, such as SZDSZ coalition’s eight years, “integration maturity” (Endrődi- massive changes – exogenous to Kovács V. 2013) cannot be seen polity-media networks – upended as bearing strong influence on the power relations on the media political economy of the Hungarian markets and in their political ties. media. Some authors show nuanced difference in regulatory affairs and 98 For example, there are no decipherable content output of the Hungarian signs of trend reversals on the market media before and after the country’s of dailies and weeklies. (MATESZ EU integration (Gálik M. – Nagy 1993) 99 Bátorfy and Urbán evaluate the pre-2010 era’s government media anti-government coverage.” (Bátorfy, spending as “relatively balanced” A. – Urbán Á. 2020 p. 49.) (Bátorfy, A. – Urbán Á. 2020 p. 97 For example, civil society organisation 49.). That is, in comparison to the had been another way of mobilising post-2010 trends; governments mass support – but, ultimately, and administrations of both sides (Greskovits B. 2017a; 2017b; 2020) effectively boosted “friendly” media find that despite their important role outlets’ revenues by direct government in consolidating Fidesz mass support, or state-owned enterprise advertising they were unable to be the “winning or by directing party-connected solution” against the left-liberal camp. businesses advertising to them.

267 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ With the advent of popular access the 2008 global financial crisis hit to broadband internet, online the population and the state budget mass media gained increasing tangibly. This also played a role in audiences100. Also, fringe news and right-wing opposition media and opinion websites, communities, and communication networks’ influence social media became influential101. and popularity. In 2008, foreign These processes started to level the mass media investors decreased mass media landscape somewhat their portfolios all across eastern – divided between the left-liberal Europe’s tight markets – making it and right-wing political parties. easier for domestic actors to shore Left-liberal politics has also up stakes. (Bátorfy A. 2017) These become more and more fraught processes played out at a time when with large-scale corruption and traditional mass media outlets mass political scandals from 2006 suffered from the double crisis of onwards. Under these conditions, falling advertising revenues and even left-liberal leaning media the increased competition with outlets turned out to be less loyal new, online media103. With Fidesz and more critical to the government (Bátorfy A. 2017)102 at a time when news outlets to criticise even their “own side” (Paál V. ed. 2013); while 100 In 2000, Origo.hu became regarding the campaign leading up the most widely read online news to the 2010 general elections which outlet according to the company’s granted Fidesz its first legislative website. (homepage of New Wave supermajority, analysts point to Media Group). Its readership has an overwhelming negative news soon reached 1 million, and by 2018, agenda which “…Fidesz did not it grew above 2.7 millions monthly become ‘more balanced’ in the eyes (Bátorfy, A. – Urbán Á. 2020) of the voters, but the agenda – in 101 With regards to one of the major line with priming theory – re-tuned party system changes, the emergence the competition to be about issues of the right extremist Jobbik party, unfavourable to MSZP.” (Beck L. et (Róna D. 2016) emphasises the role of al. (szerk.) 2011 p. 213.) Facebook as well as its partisan online 103 “Advertising revenue has been media outlets (e.g. Kurucinfó, Barikád shrinking in almost all segments of the (later renamed Alfahír)) building on market. In the Hungarian television a vivid nationalist subculture which market it dropped by 42% between goes back to the 1990s. 2008 and 2013; print media saw a 102 The notion of “loyal journalism” 48% decline.156 Though digital appeared soon after the democratic media (internet and mobile) registered transition (Bajomi-Lázár P. 2001 a 95% surge in advertising revenue pp. 149–151.) in the highly partisan during this period, most of this growth Hungarian media system. Paál benefited global intermediaries mentions the tendency of liberal (primarily Google) rather than

268 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ – and also the right-wing extremist than rapid. The Media Law of Jobbik (Róna D. 2016 – building 2011 transformed the industry’s up an increasingly potent media regulation and oversight bodies and communication network, the (Bayer J. 2011) – stacking them 2010 elections brought about a with Fidesz political actors and drastic change in the party system loyalists. The public media also and competition therein. went through a similar, drastic Most of Hungarian media Fidesz-led reform with astonishing scholars agree that with the first one- additional budget resources which party populist Fidesz (2,706,292) affected its content, too – most of two-thirds supermajority in the the observers characterise it as a National Assembly obtained in government mouthpiece ever since. 2010,104 the media system went Perhaps a more novel development under a systematic capture (see for was the introduction of taxes in a example Bajomi-Lázár P. 2013). manner that disproportionately As PM Orbán’s party re-constituted affected companies106 and media the post-communist state, the media outlets (Polyák G. 2015 pp. system also had to conform to the 298–301.) strategically important new political reality. The toolkit for the Fidesz party. As usual for of the populist transformation of previous governments, too, Fidesz the Hungarian media system was has re-routed the government not so much exceptional105, rather advertisement expenditures in an even more strategic manner – on Hungarian content providers. In a larger scale than ever before the small Hungarian media market, (Bátorfy, A. – Urbán Á. 2020). the recent policies that I have been discussing have destabilized the Interestingly, at first, the strategy economic situation of the entire media did not prove to be an unwavering market, thereby making the media success if one considers Fidesz substantially more susceptible to outside influence.” P( olyák G. 2015 p. of Hungary: “When Orbán took over 308.) with a two-thirds majority in 2010, 104 MSZP (990,428), Jobbik he did not have to invent a political (855,436), and for the first time, the system based on centrally controlled, green party LMP (383,876) entered hierarchical power structures and the parliament. Their combined vote vertical political exchange. All he count of 2,229,740 falls significantly had to do was further centralize the behind Fidesz vote count. control over political and economic 105 Indeed, in his revised 2019 resources.” (Ádám Z. 2019) article, Ádám makes a similar 106 See for example the investigative observation regarding Fidesz strategy journalism piece by (Erdélyi P. – for transforming the political economy Magyari P. – Plankó G. 2014).

269 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ electoral support. Even though media outlets soared. This time in 2014, Fidesz won its second even the largest players in several two-thirds national legislative types of media, such as the leading supermajority, this was due to the online news outlet, Origo.hu or the electoral reform they introduced second largest national commercial previously and tailored to their own television stations, TV2 – had been electoral needs (Ádám Z. 2019): in acquired by Fidesz-friendly business fact, Fidesz vote count was lower actors. (ibid.) Related companies than in 2006 (2,264,780) when PM (e.g. audience measurements, PR Gyurcsány’s MSZP had defeated and communication agencies, them107, but still translated into two- publishing houses), too got thirds of the seats in the parliament. purchased by the Fidesz network The next year, 2015 marked a actors. (ibid.) “As of 2017, the major shift in media policy. A rather Fidesz media juggernaut included all public fallout between one of the of Hungary’s regional newspapers; richest businessmen in the country its second-largest commercial (often characterised as an oligarch), television company and second Lajos Simicska108 and PM Orbán most popular news website; its sole rippled through the entire media national commercial radio network; market. Simicska had to give up its only sports daily; its only news its manifold stakes in media and agency; and a large number of communications from mass media papers that purvey what can only be outlets to advertising companies. called yellow journalism.” (Krekó (Polyák G. 2015) Not unrelated, P. – Enyedi Zs. 2018 p. 46.) In the Fidesz-linked investments in mass general elections of 2018, Fidesz (2,824,551) achieved its third 107 This is at rather similar turnout supermajority electoral landslide levels (2006: 67,83%; 2014: 61.84%). in the National Assembly with its 108 It is widely known that the highest vote count ever109. A couple former college roommate of PM of months after the elections, in an Orbán,“…Lajos Simicska, the owner of companies that operate numerous unprecedented move, several media media outlets, is one of Fidesz’s owners donated their multibillion founders. He served as the party’s stakes to a single, centralised financial director between 1993 and foundation Central European Press 1998 and as the president of the tax authority in 1998 and 1999” (Polyák 109 Opposition parliamentary parties: G. 2015 p. 54.) went on to become an Jobbik (1,092,806); MSZP (682,701); influential businessman winning large LMP (404,429); and for the first time, government procurements until his former MSZP PM Gyurcsány’s left- fallout with the PM. liberal DK party (308,161).

270 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ and Media Foundation (Közép- IV.3.4. Discussion and final Európai Sajtó– és Médiaalapítvány, remarks: contextualising KESMA) which had been the results and outlook made exempt from competition authority scrutiny by the PM’s The above analysis shows co- order (Magyar Közlöny 2018), movements among developments and now effectively controls the in the party system and the vast majority of Hungarian media media system. However, the market, some studies estimate as conclusion that these phenomena many as 78% percent of it (Mérték are interrelated especially in Médiaelemző Műhely 2019). the context of populism needs With that, the populist Fidesz-led further corroboration from several centralisation and concentration methodological viewpoints of the Hungarian media system (comparative case studies, seems to be complete – with dire quantitative analyses, etc.). For consequences to plurality and the 110 that, conceptualisations focusing quality of democracy in Hungary . on notions other than transaction Politically, there seem to be no costs, i.e. audience costs (for potent challenger in sight111. example Fearon, J. D.; Schultz, K. 110 The risk levels of media A. 2001; Slantchev, B. L. 2006), pluralism is one of the lowest in party system institutionalisation the EU (Bognar et al. 2019), and (e.g. Enyedi Zs. 2016; Enyedi Zs. – according to evaluations from the Bértoa, F. C. 2018), etc. may not Freedom House, Hungary’s quality of only be valid, but necessary to be democracy ranks the lowest being the only “partly free” country in the block. utilised. But for the purposes of this (Freedom House 2019) paper, the following transaction 111 In the local elections in October costs considerations may be 2019 Fidesz lost the Budapest mayoral deducted. elections alongside with a few other bigger towns. This, nevertheless, populist hegemony; the latest opinion is still a far cry from an opposition polls still show an overwhelming lead capable of potently challenging its in Fidesz electoral support.

Fidesz opposition Fidesz opposition electorate, -related socioeconomic voters -related media actors search & – – + – – information costs bargaining costs – – – – –

271 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Fidesz opposition Fidesz opposition electorate, -related socioeconomic voters -related media actors policing and + – + – + monitoring costs

Table 9: The findings of the study. + signs indicate increases in transaction costs, – signs indicate decreases Source: the author’s own edit

Different kinds of transaction reduced immensely. The party costs exert differentiated effects and its allies have certainly been depending on an actor’s position making it easier for their members within the political economy to access information, negotiate and stakeholder networks. For new deals, and carry them out on opposition parties and their allies, a more personalised, individual, most transaction costs have private discretionary basis113. This drastically soared, with perhaps, the is especially true for Fidesz-linked exception of bargaining costs. This media actors: information is the is because there is only one relevant currency of mass media – and not actor who remains to be bargained only that, but also revenues from with, and that is the central, Fidesz- government and government- led network. However, that actor is linked advertising have exploded more difficult to deal with due to (Polyák G. 2015; Bátorfy A. its monopolistic position and anti- 2017; Bátorfy, A. – Urbán Á. pluralistic, non-consensual populist 2020). Opposition and independent strategy112. media have been starved from As for the Fidesz party-led this, significant outlets are having networks – in not only the media, financial difficulties, even going but the wider economy –, their bankrupt (such as leading daily transactional costs have been newspaper Népszabadság in 2016). Additionally, their access to 112 This is unless one believes in government information has been collusion among members of the opposition and the governing party 113 Ádám presupposes horizontal as some of the influential cartel and vertical political exchanges party literature suggests (Katz, R. and a sort of populist incorporation S. – Mair, P. 2009). The existence and de-institutionalisation which of such trends in post-2010 Hungary centralises power (Ádám Z. 2019). In have been claimed time and again, but consequence, this study finds similar without sufficient proof. trends.

272 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ made more difficult. of actors whose consent one The key stakeholder is, needs to win to implement any however, the electorate, individual agreement have been reduced. voters as they are not only the Although this can be argued to give consumers of mass media, but also Fidesz actors an upper hand in any determine the political support negotiation with the electorate, it for government actors who gain is certainly true that the populist the power to manage most of the polity still depends on the votes of transaction cost scheme. While the wider public. Therefore, this it is difficult to characterise such interdependency still mitigates a big group uniformly, most of Fidesz power, thus altogether, the them can certainly feel that search electorate’s bargaining costs can be and information costs have gone considered to have decreased since down regarding political exchange. 2010. Policing costs borne by the KESMA media outlets dominating electorate, lastly however, might be an overwhelming majority of argued to have increased. Without the Hungarian media landscape external watchdogs, checks and (Mérték Médiaelemző Műhely balances, the monolithic Fidesz 2019) – and therefore, political network alone monitors and verifies information – supply a unified, the implementation of any political unison message – sparing the exchange. Corruption diverts electorate the cognitive burden of massive resources from their original comparing contested arguments and purposes, the efficiency of public facts, cognitive dissonance which services deteriorates. Nevertheless, emerges in a pluralistic information taken together over the ten years of environment. Bargaining costs Fidesz governance, the increase in can also be considered to have policing costs does not offset the – decreased because with Fidesz’s perception of – “benefits” resulting 10-years dominance, the number from the electorate’s search and information as well as bargaining costs reductions. Therefore, the strategically important stakeholder group, the electorate’s transaction

273 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ cost considerations play well into may rise117. This paper, by offering the Fidesz party political strategy, a differentiated analysis, puts the and may explain its sustained media as a collection of political electoral support. economic actors who channel – These findings may be seen and mediate (hence the name) – as somewhat already reflected among the electorate and the polity upon in Ádám’s revised paper in into the focus of transaction cost 2019.114 However, as the present investigation of populism. The paper argues, understanding the media-centric political strategy network positionality of actors analysis of populism is also and their groups (whether they consistent with the informational are included in Fidesz and its autocracy (Guriev, S. – Treisman, media, business, political, social D. 2019) concept. “winning coalition”115) – rather The analysis shows that than presupposing “vertical” and political actors’ rhetoric and policies “horizontal” exchanges among them are important, but it is possible – is crucial for properly appraising and even necessary to understand the transaction costs consequences. populism as a political strategy for Ádám draws important – modified engineering mass support. In fact, – conclusions which the present as a political strategy, it can be analysis also supports116, and devoid of ideological, policy, and himself revises the “populist discursive-stylistic considerations, stability” argument by reflecting yet still be a meaningful on how certain transaction costs (behavioural) analytical category. This suggests that going beyond the 114 “As decisions are centralized and more concentrated, bargaining median voter paradigm, populists and enforcement costs are reduced. do not behave to appeal to the However, other types of political “centrist” voter anymore rather than transaction costs may increase at the to increase polarisation, mobilise, same time.” (Ádám Z. 2019 p. 389.) and expand their supporter base 115 The term is borrowed from (Mesquita de, B. B. et al. 2003) and while denying opponents the utilised in the same manner. chance to legitimately organise. 116 “…through extensive clientele Thus, it is a political behaviour building, distorted elections, and primarily, rather than an ideational skilfully engineered redistributive or stylistic phenomenon118. When policies, Orban was able to keep a sufficient part of the electorate on board to attain two more two-thirds 117 See footnote 53. victories at elections in 2014 and 118 This is not to deny the analytical 2018.” (Ádám Z. 2019 p. 397.) usefulness of the ideational and

274 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ applied systematically by an actor previously monopolistic political – the populist; or a stable alliance economic structures – introducing of populist actors such as a party, political economic competition into coalition, junta, etc. – it leads to a previously non-competitive field. autocratisation (Lührmann, A. – If populism is further applied in this Lindberg, S. I. 2019) due to the context, to re-monopolise the polity anti-pluralistic, centralising logic and economy, it only changes the of the populist political behaviour. nature of autocracy. But if it is Populism is the political strategy, abandoned for accommodating behaviour which, when applied pluralistic interests, it can be consistently, is capable of degrading regarded as the political strategy a democracy into autocracy, and of democratisation119. To what even further, to dictatorship. If extent one or the other processes multiple, non-aligned political arising from populist behaviour actors systematically apply the and strategy (or the combined strategy, it leads to increased applications thereof) actually polarisation. This is in line with ensues, what are the real-world Ádám and Zankina and much of examples and implications, is up the literature on populism’s impact for debate and further research. on democratic quality (Gidron, N. Such a perspective questions – Bonikowski, B. 2013). However, the stability of populist politics. depending on who (what kind of Indeed, in his revised study, collection, networks of actors) and Ádám identifies several potential to what extent applies populism, it weaknesses of it. The current may also lead to the breakdown of study suggests another addition – of primary importance – to stylistic-discursive approaches, but these with regards to the media to specify and nuance their field of application. The ideational and 119 This feeds back into (Ádám discursive-stylistic conceptualisations Z. 2019 p. 387.) arguing against the may be very useful for understanding established viewpoint that populism (and perhaps forecasting) campaign can be a democratising “force” communicational or elite coordination (Mudde, C. – Kaltwasser, C. R. strategies. However, for understanding 2017). This study finds that applying economic policymaking, they are populist strategies may introduce more much less potent. It is, however, democratic features into a political possible to combine them to create an system, but logically speaking, the even more precise understanding of more systematically applied populism real-life political economic processes. is, the more likely it is that populism Such as (Mouzelis, N. 1985) will decrease pluralism and turn out to envisages. be anti-democratic.

275 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ system. Hungary’s example may the political economy of the be interpreted that populist actors Hungarian mass media suggests can hold onto power only as long as profound co-movements in polity– they control mass media. media networks’ properties (size, resources, cohesion, etc.) and IV.3.5. Summary parties’ electoral performance. The tentative conclusion is offered This study has revisited the that an electoral behavioural, transaction cost analysis of the key mass communications approach case of populism, Hungary after to populism as a political strategy 2010 with the aim of nuancing and is superior to the dominant re-focusing previous attempts at ideological or discursive-stylistic understanding the phenomenon. conceptualisations in political After reviewing seminal works on economic research. the subject, it has showed the need of adding additional strands of Acknowledgement populism and electoral behaviour research to the investigation which The present publication is tilted the analysis towards the the outcome of the project „From political economy of the media. Talent to Young Researcher project Therefore, this study aimed to aimed at activities supporting the showcase parallel developments research career model in higher in the party system and the media education”, identifier EFOP- system. Due to spatial constraints, 3.6.3-VEKOP-16-2017-00007 co- the analysis cannot be complete; supported by the European Union, but the above description of Hungary and the European Social Fund.

IV.3.6. References

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283 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Media Reform, and Populism in Latin America’. Communication, Culture & Critique 4(1): 97–117. Waisbord, S. 2018: ‘Why Populism Is Troubling for Democratic Communication’. Communication, Culture and Critique 11(1): 21– 34. Weyland, K. 2001: ‘Clarifying a Contested Concept: Populism in the Study of Latin American Politics’. Comparative Politics 34(1): 1. Weyland, K. 2017: ‘Populism: A Political-Strategic Approach’. In The Oxford Handbook of Populism, Oxford University Press. http://oxfordhandbooks.com/view/10.1093/ oxfordhb/9780198803560.001.0001/oxfordhb-9780198803560 (February 20, 2019). Williamson, O. E. 1985: The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. Nachdr. New York, NY: Free Press [u.a.]. Zankina, E. 2016: ‘Theorizing the New Populism in Eastern Europe’. Politologický časopis - Czech Journal of Political Science 23(2): 182–99.

Other sources from the internet:

New Wave Media Group: – http://nwmgroup.hu

284 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ IV.4. How Robotisation is Changing Production-Related Decisions

Roland Gurály120

Abstract

In this paper I examine the effect of robotisation on the decision of firms regarding where to place their factories. The main research question is whether, due to technology developments, the place of production will flow back to capital intensive states and regions, or whether instead labour intensive regions will be able to maintain their current share of production? To answer this question, I outline a methodology framework which considers both quantitative and qualitative factors, e.g. labour, the level of robotisation, capital, geography and investment related decision making. To understand the relationships among the quantitative factors, different versions of the production function have been studied, while for the qualitative part, some FDI analytic methods have been used. In the comparative analysis section, the level of robotisation is compared with the level of economic development in key selected states and the current FDI trends are examined. After researching the issues, I found that in the examined period probably there will not be an overall definite shift from the current production sites as labour costs are in most cases no longer the deciding factor in the majority of investment decisions today.

Keywords: robotisation, production function, trend analysis, FDI decision making

120 PhD student – Corvinus University Budapest, [email protected] corvinus.hu

IV.4.1. Introduction labour market. One of the main problems researchers face when Automation is a global trend analysing the effects of automation which attracts more and more is that there is no widely accepted attention nowadays. Researchers definition for what kind of activities from different disciplines should be considered and what the (engineers, economists, social timeframe should be. scientists, etc.) are trying to Another problem is that there understand its impact on many are relatively few well-established issues: technological efficiency, economic studies in the field. In economic efficiency, our current terms of scientific work, automation and future life standards and the and robotisation are still mostly

285 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ technical science related issues, affect the economic shape of certain and most of the related papers and organisations, sectors, regions, analyses are from this domain, countries and even continents? notably the research discussions The above-mentioned high- that are currently taking place in level questions are very complex the IT discipline. In the social, and a fully adequate answer to them political, and economic context is indisputably beyond the limits of the topic is still less dominant. the current paper. In this paper I Obviously, there are a lot of have therefore narrowed down the discussions – sometimes even with investigated subject to areas where the involvement of scientists – on the effects are better demonstrable. certain new elements of automation In terms of the examined area, and with particular emphasis on the I distinguish between automation wider impact of digitalisation: such and robotization. Automation as the effect of mobile phones on in my understanding is a wider our lives, how self-driving cars will process that impacts basically reshape our future, etc., but in terms everything: manufacturing of establishing new frameworks, industry, the transport industry, or theories for the likely impacts, the service sector, households there is still a lot to be done. What and the IT industry in general is generally in focus is the possible (clouds, software maintenance, disappearance of certain jobs and/ AI, etc.). It is also crucial to note or job categories. Some estimations that automation, as it is understood project that one-quarter or even half in most cases, is a new process of today’s jobs might be endangered going through a growth curve, it in the medium-term (Ford, M. is happening now, and even the 2015). framework within which it could The analysis seldom goes be investigated is still forming. It deeper: e.g. what will the effect is inevitably difficult to analyse the of automation/robotisation on the effects of a process which is very principles of economics, since wide in its scope and has little or (in labour is a cornerstone of many some cases) no history. theories? Moreover, the analysis Consequently, in this paper usually does not go further to I concentrate on robotisation only. answer questions like: what will be Under the term “robotisation” I the spill-over effects of changing mean physical robots in the wider (at least partially) from human sense (not only humanoids), workers to robots, and how will it whose tasks are automatically

286 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ to execute physical actions. One century’s worth of data available on of the related definitions is: “a the efficiency gains, the costs and device that automatically performs benefits. However, in order to make complicated, often repetitive tasks the analysis more traceable (when (as in an industrial assembly line)” and where possible), I focus only (Merriam Webster dictionary) on two decades: the last decade Narrowing the investigated for data inputs and the decade to area still further, I concentrate only come for forecasting the likely on robotisation in manufacturing tendencies. This should ensure that industry. The reason is that in this only grounded future development sector, robotisation is not a new scenarios are investigated. This phenomenon since the first industrial timeline is in line with a recent robot, Unimate, was produced report from PwC, titled: “Will in 1961 and installed in GM’s robots really still our jobs?” factory for die casting handling (Hawksworth, J – Berriman, R. and spot welding. As robotisation 2018). They differentiate three became widespread in the 70s, “waves” of the current industrial there is already approximately half- revolution (Table 10):

Wave 1: Automation of simple computational tasks and analysis of Algorithmic wave structured data, affecting data-driven sectors such as financial to early 2020s services. Wave 2: Dynamic interaction with technology for clerical support Augmentation wave and decision making. Also includes robotic tasks in semi- to late 2020s controlled environments such as moving objects in warehouse. Wave 3: Automation of physical labour and manual dexterity, and Autonomous wave problem solving in dynamic real-world situations that require to mid-2030s responsive actions, such as in transport and construction.

Table 10: Automation waves, description and impact Source: Hawksworth, J – Berriman, R. 2018 p. 2.

Regarding the economic different sectors quite differently. dimension, as mentioned, many In terms of potential job losses, the studies focus on the potential manufacturing sector is the second job losses within an economy most impacted after transportation or in different sectors. One of and storage. According to their the important conclusions of the calculations, in manufacturing above-mentioned PwC report industry during the second wave is that automation will affect approximately 20% of the jobs can

287 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ be lost and in the third wave another institutional changes. With the 20% (Hawksworth, J – Berriman, help of these methodologies I will R. 2018) In this paper I have chosen a try to answer the main research different path: I concentrate on how question: in the light of technology robotisation affects the decisions of developments, will the place of firms (mostly larger multinational production flow back to capital organizations) concerning FDI intensive states and regions, or will today and how this decision making labour intensive regions be able to mechanism might be altered in the maintain their current production examined period. I also investigate share? what kind of geographic effects The novelty of the paper is these changes might cause. first that it attempts an analysis of In terms of methodology robotisation from many angles; and used, first, I will consider the second, that it links different type production function: in which form of methods to it, both quantitative it is adequate to the new situation (like the production function) and and can it help us answer the main qualitative (like the FDI related research question of the paper? I theories) and examines different will then investigate how the level dimensions: it considers both micro of robotisation can be measured, and macro levels, while addressing and what indicators can be used an economic issue with growing for that. Finally, to understand the significance. decision mechanism of firms, some FDI principles will be interpreted. IV.4.2. Methodological In the comparative analysis framework and literature part, I show the level of robotisation review in different states and how it correlates with their development As mentioned in the level. I will show that the more introduction, the current discussion developed a state is the higher the on automation and focuses on the chance that the level of robotisation increase in efficiency versus the is higher. Then I convert this finding possible loss of jobs generally, to the level of firms, to show what e.g. some researchers focus on is the factor-mix for firms making the positive effects of technology investment decisions, and to what development (Toader, E. et al. extent robotisation might impact 2018) and say the automation this. Macro level conclusions are will continue to create more jobs then derived from the micro level as it has happened during every

288 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ industrial development waves from tech companies combine to power the first industrial revolution and it modern economies.” (Lund, S. et will continue to bring great benefits al. 2019). They mention that some to our life (Autor, H. D. 2015). middle-income countries, such as Others say that this time it might be China and Mexico might catch up different as the jobs lost might not in the new era of globalisation, be substituted with the same amount but many developing countries of new jobs (Ford, M. 2015) or will face significant difficulties they focus on the possible wage if they are not able to change inequality increase due to the higher from their cheaper labour driven level of automation (Acemoglu, economic contribution. The same D. – Restrepo, P. 2018). More conclusion is made by executing balanced analysis says that “About a different methodology: capital half of all workers will confront is overwhelmingly important, the need to significantly adapt to and this has been proved via the new workplace environment” an extended multiple-cone HO (OECD 2018). The debate usually analysis that was used to compare focuses on the pluses and minuses, the different development path of but all more or less agree that the two countries with similar roots: effects will be large: many experts Singapore and Malaysia. The forecast significant changes due to related conclusion is: “capital automation (Manyika, J – Sneader, accumulation is the key driver J. 2018). determining countries’ industrial There is also more or less development and differences in agreement that the developments production technology employed in will be unevenly spread each country” (Suzuki, K. – Doi, Y. geographically, e.g. that developed 2019). Automation experts are also economies and especially the higher convinced about it: “Improvements industrial ones will benefit more in automation technology such than most of the developing ones. as robotics are poised to bring Michael Spence and his co-authors more automated manufacturing argue that the developed world will production work to developed be the ultimate winner of the current countries, rather than offshore it to changes. “All these trends play to the lower-wage countries” (Atkinson, strengths of developed countries, R. D. 2019). If even the supporters where skilled work forces, large of automation think that the gains quantities of capital, huge customer will be unevenly distributed bases, and dense clusters of high- geographically, then it worth

289 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ analysing deeper what are the particularly labour, capital and (in driving forces behind new possible the extended versions) technology. investments in a more robotised The production function is world. the relation between the inputs To answer the research (quantities of physical inputs) and question, I first gathered the set of the outputs (quantities of goods) factors to be investigated: of a production firm. The term ⊕ Labour: this indicator can be expressed with reference provides information about to the service sector as well, but the availability of labour as my investigation focuses on the (number and skills) and the manufacturing industry, the above general cost of manufacturing mentioned one suits the current workers (and their managers) purpose. in a state or region. The function in its simplistic ⊕ Level of robotisation: is form is formulated as (Mankiv, N. expressed by an indicator G. 2009): showing the relative level of Y=F(K,L) robotisation in a certain state. Where, ⊕ Capitalisation: indicates what Y: is the output of goods is the relative availability of K: is capital budget for investments into L: is labor robots for example. ⊕ Geography: shows the The function therefore says characteristics both the state/ that output can be increased if a region where the investor is firm decides to increase capital located and both the state/ (investment) or labour (number of region where the investment employees) or both. The function is to be made. can be considered in an extended ⊕ Decision making manner, e.g. the Cobb-Douglas mechanisms: manifest what production function where other are the driving forces for factors are considered, e.g.: making an investment. F(K,L) A K^α L^(1-α) Where: To provide a part of the α: measures the share of analytic framework, the production capital in income function is a useful method as it A: if its greater than zero it integrates a lot of the factors that measures the productivity of the are interesting for the analysis, available technology (Mankiv, N.

290 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ G. 2009). 1990). However, it is not necessary Also, the production function to go into a deep understanding can be analysed at different levels. of the production function, as for It can be at an organisation level the current analysis only its basic as mentioned above, but also a characteristics are necessary. The generic, industry wide one can ultimate goal of the firms is not be formulated: “..the production production volume, but to generate function sets the highest possible profit. It can be calculated with limit on the output which a firm embedding the production function can hope to obtain with a certain into it as: combination of factors at the Profit=PF(K,L)-WL-RK given state of technical knowledge where during the production period. This WL: is labour cost maximum output …holds for all RK: is capital cost other firms in the same industry.” (Mankiw, 2009) (Aigner, D. J. – Chu, S. F. 1968) To summarise, the factors Besides, the aggregate production that can increase profit are: function is also formulated by ⊕ Larger workforce Solow as follows: ⊕ Larger capital Q=F(K,L,t) ⊕ Better technology (e.g. Cobb- t represents time here, but Douglass) in the context of making technical ⊕ Lower labour cost change possible: “I am using the ⊕ Lower capital cost phrase „technical change” as a ⊕ Lower technology cost shorthand expression for any kind (Combining the Cobb- of shift in the production function. Douglass production function Thus slowdowns, speedups, with the Mankiw profit improvements in the education of function) the labour force, and all sorts of things..” (Solow, R. M. 1957) If capital and its cost is Obviously, the production considered as constant for the function has newer updates, sake of simplicity, what can be e.g. the New Keynesian Model observed is that the labour and developed by Calvo (Calvo, G. A. technology improvement are in 1983), its extension as a Simple competition with each other both New Keynesian Model (Sims, E. in terms volume and in terms of 2010) or for example a model on costs. In terms of volume: a firm exogenous growth (Barro, R. J. can increase its output either by

291 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ employing more workers or by some quantification for robotisation. investing in better technology. In This is not a straightforward task terms of costs: a firm can choose as there is not a clear definition to invest where the labour costs are of what robotisation is and it is less or can choose to upgrade the even harder to calculate it. On the production capabilities its present other hand, there are organisations firm by improving technology. dealing with this issue and as I am Normally the two intentions are dealing with robotisation in relative executed in parallel. But their ratio terms and not in absolute ones, it to each other is still interesting as is appropriate to choose a study of it reveals to what extent labour and one organisation in the field and use technology cost count. their data. To answer that I consider The Information Technology other factors as mentioned at the and Innovation Foundation (ITIF) beginning of the section. is one of the possible sources. One The first one to be answered of their reports shows the number is the level of robotisation. Above, of robots implemented. More in the Cobb-Douglass version of importantly it shows the number of the production function, technology robots relative to the manufacturing development was already involved, workers, so this statistic fits my but here – in line with the new wave exercise quite well. Figure 20 of automation as mentioned in the shows the ranking of the most introduction – I would like to show robotised states in the world.

Figure 20: Number of robots used in 2017/10,000 workers Source: on the bases of ITIF data Atkinson, R. D. 2019 p. 5.

292 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ This ITIF statistics gives tendencies are important here, I valuable input not only in terms use the GDP/capita as a simplified of the level of robotisation but indicator for that. This indicator is it can also serve as a geographic not necessarily the best fitting one indicator at the same time. In terms to represent K in the production of geography the other component function, but the correlation is needed to make comparisons is the obvious: the more developed states, availability of capital, as besides with a higher GDP/capita, have labour and the level of robotization more money to spend generally this was the other important factor and it is also generally valid for the from the production function. companies located in developed Again, as the current analysis does states. Figure 21 shows the GDP/ not aim to make precise calculations capita order of the selected states. on absolute values and only relative

Figure 21: GDP/capita in USD in 2018 Source: WorldBank (for Taiwan IMF Datamapper data for 2019 is cited)

The last items for the as it relates to human behaviour and methodological framework is the strategies in different situations and most complex one: the decision- consequently, it is more a qualitative making mechanism behind a approach. There are several FDI foreign direct investment (FDI) theories in existence, with a large decision. It is not only complex but literature. Here I introduce only also quite different from the others the most relevant ones as the aim is

293 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ to arrive to a comparative analysis country, pull factors are those where the FDI related decision which make a certain firm/location/ making is only one element. country attractive for the investor. Firms consider a wide range of One of the key principles affecting factors (although at different levels) this categorisation is the motives when deciding for an OFDI decision. of the investor: the decision can be Probably the most cited framework based on market-seeking, resource is established by Dunning and it is seeking, efficiency seeking, asset called the OLI paradigm (Dunning, seeking. Within the categories many J. H. 1979). The OLI paradigm factors can be found, for example divides the factors that impact market size, market growth, access the decision making of firms into to regional markets, country specific three categories: Ownership, consumer structures, etc. (Dunning, Localization and Internalization J. H. 2004). Also, location factors advantages. Ownership means: can be split into quantitative the investing company has special (transportation, labor, material human capital, and knowledge cost, taxes, etc.) and qualitative (e.g. skills, know-how, patents, ones (land characteristics, labour etc.) that is transferable to another market, infrastructure, etc.) location to create additional value (Clodnitchi, R. 2018). To show there. Localization: the firm invests the positive effect of pull factors, into another firm or establishes Singapore can be mentioned: their a greenfield location in order to road to success was paved by an get closer to customers, save on intensive economic policy which transport costs, obtaining cheap focused on education, research inputs, avoiding trade restrictions, and development, and by creating etc. Internalization: the firm chose a well-established institutional to own a certain external site as it framework which contributed to can gain better control as compared the success of the local sites of to licensing/subcontracting the transnational companies and their production for example. subcontractors and enabled them to Another important move upwards in the global supply classification is to categorise the chain (Magasházi A. 2018). factors as push and pull factors. Push factors are the internal or IV.4.3. Comparative macro domestic factors that enable and/ level analysis or force the organisation to pursue investment outside its home Referring back to the

294 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ methodological section, the factors Capital: following the to be analysed together are labour, reasoning in the methodological capital, level of robotisation, section, GDP/capita will represent geography and the decision-making the relative (possible) share of mechanism for investments. As capitalisation. mentioned in the methodological Geography: The presentation section, the current paper focuses of the three factors above in on identifying general correlations different states on the basis of ITIF and drawing some high-level and IMF data. conclusions; deeper analysis of Decision making: as certain factors will be done in mentioned in the methodologies subsequent work. Therefore, the part this factor is quite different different factors are presented in from the other four, therefore it is the following manner: analysed separately. Labour: Labour is represented Regarding the above, my as a relative share, e.g. number of analysis focuses on the first four workers and their wages, to the factors. Mixing the two figures level of robotisation, e.g. number of from the methodologies section, robots on the basis of ITIF numbers. I represent the relative share of Robotisation level is also robotisation (to labour) in selected represented as a relative share to the key states and at the same time the number of workers and their wages relative maturity level of the certain in a certain state (ITIF numbers). state (GDP/capita). (Figure 22)

Figure 22: Number of robots used in 2017/10,000 workers Source: on the bases of ITIF data Atkinson, R. D. 2019 p. 5. and GDP/capita in USD in 2018, WorldBank (for Taiwan IMF Datamapper data for 2019 is cited)

295 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 22 has two main 2019) show that there is a heavy messages. First of all, it indicates that growth in robotisation, the rate the difference in robotisation is very has risen from 66 robots/10,000 large, and the most robotised state workers (in 2015) to 85 (in 2017), in relative terms, Korea has more an almost 30% increase in only 2 than seven times more robots than years. the world average. Other important Second, the GDP/capita level economies such as Brazil, India or ranking of a certain state does not Russia have an almost negligible necessarily correlate to the level of level of robotisation. In actual robotisation, as the straight orange fact, the difference in order might line shows large differences. not indicate the real picture, as in The fact that certain states over- nominal terms the gap is widening or underperform their expected as robotisation is growing. The robotisation rate when wages are growth rate is quite incremental: also considered is also discernible ITIF numbers (Atkinson, R. D. (Figure 23).

Figure 23: relative ratio of robotization compared to wages Source: based on ITIF findingsA tkinson, R. D. 2019 p. 5.

Wages are worth taking into investing in a robot is different in account as the payback period for an economy where the wages are

296 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ high than in an economy where hardware robots as defined earlier) the wages are low. The outcome is not yet present. of the scaling nevertheless shows Despite the differences significant differences. For some between certain states, as in this economies, a clear justification can paper I focus on general trends, be easily found: for example, China the question here is, is there is is a production focused economy, a correlation between levels of so it makes obvious sense to robotisation and the economic invest more in robots, probably prosperity of a given state? for manufacturing reasons. Following an update of the data used Switzerland on the other hand is in Figure 22 with trend analysis the quite strong in the banking sector, results are presented (Figure 24): where robotisation (in the sense of

Figure 24: Number of robots used in 2017/10,000 workers with trend analysis Source: on the bases of ITIF data Atkinson, R. D. 2019 p. 5. and GDP/capita in USD in 2018, WorldBank (for Taiwan IMF Datamapper data for 2019 is cited)

The trend clearly shows that a might imply that the technology generally higher level of economic gap could increase in the future. development means a higher level This, in turn, raises the theoretical of robotisation. In other words, possibility that certain investments the more developed states are will not mature as firms located investing more in robotisation and, in the developed economies with as mentioned above, the process of a high level of robotisation (e.g. robotisation is accelerating. This being on the left side of Figure 24)

297 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ in the future might not make some world (e.g. first Europe and after the investments in a developing state, second world war from USA also) as they would ensure the required to developing continents, countries. production is achieved with a However, recently the direction of higher level of robotisation instead. the flow became quite mixed and However, to understand if this is the share of IFDI in developing really likely to happen as a general countries outstripped developed trend, I also consider some of the countries (2018). (UNCTAD: FDI related principles mentioned in WIR, 2019.) Recent statistics show the methodological section. that for example the outward FDI Foreign Direct Investment (OFDI) of China (what is considered (FDI) essentially proceeds since the as the main “production-hub” of the start of international trade in mass world) exceeds inward FDI (IFDI) levels. The immediate high level (UNCTAD: WIR, 2019) This result assumption often associated to FDI runs counter to the assumption investments in the manufacturing from a statistical point of view, sector by following the logic of the e.g. as mentioned the new era of production function is that a large robotisation is already underway, organisation from a developed so why is it not perceptible in the country, where the labour costs data? are high, looks for efficiency Without going deeper in the improvement and therefore FDI related theories, an outcome outsources part of its production to to be observed that labour is a developing country, where labour mentioned but it is only one factor costs are low. If this assumption among many other factors. Such is mostly true, robotisation as observations notwithstanding, a possible substitute for cheap the fact that there are many other manufacturing labour will likely factors does not necessarily mean to change the motives of firms. that the labour factor is not the most Therefore, it is inevitable to take a dominant factor affecting decision look at current FDI statistics and to making. To investigate that, there is assess the motives and factors for a need to see the weight attached to FDI decisions. the various different factors behind Originally the obvious path FDI decisions. Undoubtedly, it was that the investment went from is not an easy task to accomplish. the more developed parts of the On one hand these decisions are usually made at an organization level and they are mostly acting in a

298 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ globally competitive environment. Chinese OFDI decisions are not Therefore, their business decisions efficiency – seeking, they are often and motives are usually not shared resource – seeking (e.g. the ones in publicly, or when they are shared, Africa) or market-seeking (in the we cannot know if the shared facts developed countries) (Kamal, M. completely cover the real motives. et al. 2019). For example, investors seldom label This means that the an investment openly as market assumption that OFDI decisions are seeking, or as a step to use cheaper dominated by the search for cheaper labour. Besides, the decisions are labour costs than exist in the home often made by only a few persons country, is not valid. Therefore, (in some extreme cases by only one the answer to the part of the initial ultimate owner) and they might be research question that asks whether unaware of their full set of motives due to the robotization the place of and the weightings attached to them production will flow back to capital in making the final decision. intensive states and regions, is no, Despite this, there are some it is quite unlikely to happen this quantified outcomes. An example way in the examined period for for that used the data of 35,000 the examined sector. On the other cross border investment projects in hand, the answer for the second the European Investment Monitor part of the research question, e.g. database (data assessed from 1997 that labour intensive regions will be till 2010) and found that in the able to maintain their current share EU-15 investments were mainly of production, still needs some resource seeking ones, whereas consideration. in the EU-12 investors were There are lot of changes in the dominantly looking for markets global economy and robotisation (Serwicka, E. et al. 2014). So is only one them. Here I am not what is surprising that efficiency only thinking of crises, effects of seeking, within which labour cost war, pandemics, but also other is classified, is not the primary aim developments mainly arising due to when targeting the economically globalization, which is changing the two very different (especially in the motives and nature of investments observation period) parts of Europe. as well. One of them is that the When looking outside Europe “labour intensiveness” label on and considering Asian FDI policies, a state or region becomes quite the motives can be different again. relative, as first of all the relative It is quite clear that most of the ratio towards the investor is likely

299 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ to alter over time, and besides that, due to this factor dominantly) the same region can be as attractive are currently in a changing or non-attractive in terms of its environment and therefore in the market, while there can also be future they can attract their current a range of other factors, cultural, and future investors due to changes language commonalities, etc. that in the factor mix for FDI decisions. are emerging or shrinking or else Labour costs will still play a role in valid on a case by case basis. many cases, but this factor will be In the case of Tesla for less of a dominant consideration and example, the factories are highly this is not only due to robotisation. robotised. The company has How these developments affect already two factories (called decisions that are likely to happen Gigafactories) in the USA and it and what role robotisation will will open two more in China and play within them still needs to be Germany (homepage121 of Tesla). If studied. The initial conclusion is the company had strictly followed that in the new environment during the initial conclusions of the macro the examined period, most regions analysis of this paper, it would have and/or countries labelled as labour extended its USA based factories intensive are likely to keep the or built new ones there. However, investors in their manufacturing there are a lot of other factors that industry and even attract some might play a role, and the market- more, but this attraction will be less seeking explanation is an obvious based on labour cost than assumed interpretation for such plans. by the initial research question. Also, Tesla is positioned as an environmentally friendly company, IV.4.4. Conclusion so lowering greenhouse emissions due to transportation might also When analysing how be a factor in their decisions over robotisation might affect the where to produce their cars. decision of firms regarding where So to answer the second to place their factories, I set up a part of the question, the countries, methodology framework where regions that were previously chosen I considered factors like labour, due to their relatively cheaper capital, level of robotisation, labour costs (or more precisely, geography and decision-making they were labelled to be chosen mechanisms. To understand the correlation among the first four, 121 https://www.tesla.com/ different versions of the production gigafactory-berlin – 2020. 06. 09.

300 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ function was studied, while for the With the analysis I could decision-making part, some FDI give an answer to the initial principles were presented. research question: will the place In the comparative analysis of production flow back to capital section first, current statistics were intensive states and regions, or will analysed e.g. the level of robotisation labour intensive regions be able to versus the manufacturing workers in maintain their current production key states, and also the correlation share? The answer is that in the of robotisation to the GDP level of examined period it is not likely to a particular state. The trend is that have a reverse flow of FDI from the more developed states generally developing states to the developed employ a higher number of robots, states, although there are some so in theory the possibility to divert/ indications that the developed eliminate FDI away from labour states might gain more due to the intensive states or regions is open. current trends in globalisation, However, when looking at including automation. In addition, the FDI statistics and motives the less developed regions and states result was the opposite. Developing might maintain their current states are increasing their share in investors and even may attract incoming FDI and also the majority more, but this process is less likely of the FDI related decisions are not to happen due to their cheap labour aiming for pure efficiency increase, but more because of other emerging so labour cost is not the dominant positive factors that might turn to factor nowadays in investment be attractive for the investors. decisions.

IV.4.5. References

Acemoglu, D. – Restrepo, P. 2018: Modelling Automation – AEA Papers and Proceedings VOL108: pp 48-53 Aigner, D. J. – Chu, S. F. 1968: On Estimating the Industry Production Function – The American Economic Review Vol.58 (No.4.): pp 826- 839 Atkinson, R. D. 2019: Robotics and the Future of Production and Work – Information Technology & Innovation Foundation: pp 3-6 Autor, H. D. 2015: Why Are There Still So Many Jobs? The History and Future of Workplace Automation – Journal of Economic Perspectives, Volume 29, Number 3

301 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

302 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Barro, R. J. 1990: Government spending in a simple model of endogenous growth. Journal of Political Economy 98 (S5): pp 103-125. Calvo, G. A. 1983: Taggered Prices in a Utility Maximizing Framework - Journal of Monetary Economics, 12, (3): pp 383-98. Clodnitchi, R. 2018: Systems competing for mobile factors: decision making based on hard vs. soft locational factors -Vol 12 (4) - Management & Marketing. Challenges for the Knowledge Society: pp 633-651 Cobb, C. W. – Douglas, P. H. 1928: A Theory of Production - American Economic Review 18: pp 139-165. Dunning, J. H. 1979: Explaining Changing Patterns of International Production: In Defence of the Eclectic Theory – Oxford Bulletin of Economics Statistics Vol 41 (4): pp 269-295 Dunning, J. H. 2004: Institutional reform, FDI and European transition economies, - in International Business and Governments in the 21st Century – Cambridge, Cambridge University Press: pp 1-34 Ford, M. 2015: Rise of the Robots: Technology and the Threat of a Jobless Future, - HVG könyvek (Hungarian edition): p 137 Hawksworth, J – Berriman, R. 2018: Will robots really steal our jobs? An international analysis of the potential long term impact of automation – PwC: pp 2-6 Kamal, M. A. – Ullah, A. – Zheng, J. – Zheng, B. – Xia, H. 2019: Natural resource or market seeking motive of China’s FDI in asia? New evidence at income and sub-regional level – Economic Research, Volume 32 (Issue 1) Lund, S. – Manyika, J – Spence, M. 2019: The Global Economy’s Next Winners, What it takes to Thrive in the Automation Age – Foreign Affairs, July/August Magasházi A. 2018: Szingapúr globálisan behálózva – Magyar kitekintéssel – Savaria University Press Alapítvány: p 231 Mankiv, N. G. 2009: Macroeconomics - Worth publishers, 7th edition: pp 48-51 Manyika, J – Sneader, J. 2018: AI, Automation, and the Future of Work: Ten Things to Solve For - McKinsey OECD 2018: Background report for the Canadian G7 Innovation Ministers’ Meeting Serwicka, E. – Jones, J. – Wren, C. 2014: The Motives for the FDI Location Choice in the ‘Old’ and ‘New’ Europe - European Regional Science

303 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Association (ERSA) conference, At Saint Petersburg, Russia Sims, E. 2010: Simple New Keynesian Model - Graduate Macro II, Spring edition Solow, R. M. 1957: Technical Change and the Aggregate Production Function - The Review of Economics and Statistics Vol. 39 (No. 3): pp. 312-320 Suzuki, K. – Doi, Y. 2019: Industrial development in Malaysia and Singapore: Empirical analysis with multiple‐cone Heckscher– Ohlin Model – Review of Development Economics Vol 23 (3): pp. 1414-1431 Toader, E. – Firtescu, B. F. – Roman, A. – Anton S. G. 2018: Impact of Information and Communication Technology Infrastructure on Economic Growth: An Empirical Assessment for the EU Countries – Sustainability UNCTAD 2019: World Investment Report (WIR)

Other sources from the internet:

IMF Datamapper: – https://www.imf.org/external/datamapper TESLA: – https://www.tesla.com WorldBank: https://data.worldbank.org/indicator/

304 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ IV.5. How does digitalisation influence financial inclusion in the emerging countries? – A cross-country comparison

Gábor Sztanó122

Abstract

This research paper examines the impact of financial technologies in the emerging countries, with a special focus on cross-country heterogeneity in terms of financial inclusion. Although the level of financial digitalisation and access to financial services are diverse in the emerging countries most of them experienced the recent trend of digitalization in the past decade. Financial inclusion has improved globally in recent years, but with large heterogeneity among regions, and sometimes within the same country as well. In order to assess the level of inclusion, two new indices have been developed: one for the traditional dimensions of financial inclusion, and one for digital advancements. The empirical contribution of the paper shows that improvement in digital financial solutions are significant primarily in countries where the traditional financial inclusion is better. Some countries, such as Kenya, Uganda, Iran and Mongolia outperform their peers, while other countries still have room for further expansion in financial technology.

Keywords: financial inclusion, financial development, emerging countries, Findex survey

122 PhD student, International Relations Multidisciplinary Doctoral School, World Economy Subprogram, Corvinus University of Budapest, gabor.sztano@uni- corvinus.hu

IV.5.1. Introduction academic findings at least three processes have influenced these In previous decades, the recent trends. financial sector was characterised The first one is the group of by technological innovations that innovations that were delivered by made transactions faster, cheaper, non-banking firms, the so-called and more convenient. In the last 10 ‘fintech industry’, which has gained years, this change has continued substantial importance all over the more rapidly, although in a slightly world, besides the innovations different way. According to recent coming from traditional banks.

305 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ The second influence is based on Monvoisin, who emphasised the the digital innovations that reached importance of a crisis experience the B2C sector, as average people in the emergence of new financial have become the primary users approaches. The new megatrend of these new technologies. Third, was born after the global financial digital financial solutions shaped crisis, but the development is still the way that we should regard ongoing and follows a different financial inclusion and financial path in various countries and literacy, as more people are able regions. I am going to show the to use financial services, including most important differences, while many of those who were unserved, analysing data retrieved from the or underserved in the emerging World Bank and highlighting some countries. Fintech solutions are positive examples of fintech success cheaper than traditional banks, stories (Ansart, S. – Monvoisin, V. therefore they can provide services 2017). in less profitable business segments, This paper is organised and furthermore, they may be as follows. Chapter 2 provides influential in emerging regions, a literature review on financial where the entry-costs are too high inclusion and development, for traditional banks. and the problems related to The main causes and results their measurement. Chapter 3 of this rapid development is an summarises the current experiences element of professional debates. based on the World Bank’s Fintech On one hand, it is a valid argument survey, while in Chapter 4 I am that the new wave of digitalisation, going to present a new methodology the third industrial revolution, hit to assess the financial advancement the financial sector as one of the of a given country, with specific sectors that just mildly adapted regard to digital financial issues. new technologies. As Arner and Chapter V.5.5. concludes. others noted, emerging platforms, companies and technological IV.5.2. Financial solutions simply became ‘too large development and inclusion to ignore’, for policymakers and thereby they became an integrant Financial development part of the economic ecosystem is defined by the World Bank (Arner, D. W. et al. 2015). as the development of the However, in a way this is a similar countries’ financial system, the argument to that of Ansart and measurement of which consists

306 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ mainly of macro-level indicators. – transactions, payments, savings, The four dimensions of financial credit and insurance – delivered in developments are depth, access, a responsible and sustainable way’ efficiency and stability, and are (Pearce, D. – Ortega, C. R. 2012). measured by several indicators. Financial development and For example, the depth of financial inclusion are two different concepts system is regarded as a proportion but they definitely have an impact of credit compared to the GDP, or on each other. Financial inclusion is similarly the size of stock market more user-oriented, though: policy capitalization and the amount goals usually state that more and of marketable government debt. more people should be involved, Efficiency is regarded as the size of and not merely be provided with the interest margins in case of credits, possibility of financial inclusion. and among others, turnover in case As the financial services offered of exchanged stocks. Stability is by institutions could be regarded connected to the performance of as supply, financial inclusion is the financial sector, as compared the demand that can be defined to others; therefore, it is described on a micro-level. In the literature with indicators such as liquidity financial services usage is mostly ratios, volatility or sensitivity to connected to end-users such as the external shocks. The accessibility household, and in many cases also dimension of financial development to micro, small, and medium-sized is quite natural, and closer to a enterprises. microeconomic approach. In case As many authors argue, a of financial institutions, the number financially more inclusive society of people that use financial services could reduce poverty and decrease daily is the most important one, inequality (for examples Demirgüc- but similarly the number of ATM Kunt, A. et al. 2018; Ozili, P. 2018). machines and commercial bank Increasing financial inclusion branches could be measured as well. globally, and therefore providing This latter dimension comes closest access to financial services to more to the concept of financial inclusion. people around the world, is also one At the same time the World Bank of the Sustainable Development defines the following: ‘Financial Goals adopted by the United inclusion means that individuals Nations. and businesses have access to useful Although financial inclusion and affordable financial products is mostly measured in terms of and services that meet their needs accessibility to formal financial

307 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ services like bank deposits, loans be similar in terms of various or ATMs, or the number of bank solutions, the business model and accounts / debit cards per 1000 the legal position can largely differ, persons, digital financial services not only country-by-country, but may open new horizons in also on the same market. As virtual financial inclusion and in financial currencies are highly volatile and development. difficult to regulate users are often The IMF categorises digital discouraged from using them, but financial services based upon innovative payment systems are the user needs it fulfils, and largely encouraged, especially if it differentiates solutions connected shows a bank-like business model. to payment, saving, borrowing, Fintech solutions in borrowing are risk management and advising mostly used in credit evaluation areas (IMF 2019). The most visible by traditional banks, while in and so far, most developed area of some regions issuing microcredit financial services is the payment has grown in popularity over the infrastructure. Increase in mobile past decade and shows a potential payments and P2P payments have way forward for less-developed rapidly grown recently, sometimes regions as well. Risk management in line with the development of the and advising are areas that may classical bank services, sometimes have potential expansion both for autonomously. Virtual currencies traditional banks and new financial are highly debated not only within service providers too. professional circles, but among Ozili argues that there are users as well. While many virtual five channels of digital financial currencies like Bitcoin, Ethereum, improvement that may help to etc., are regarded as risky increase financial inclusion (Ozili, investments, the technology has P. 2018). advantages nonetheless, therefore 1. Fintech services are cheaper many central banks are planning to and more affordable for introduce their own, legal, virtual poorer people. currency, often called ‘CBDC’. 2. As they are not burdened So, both in terms of payments by as many regulations as and savings, traditional banking banks, fintechs can focus on services are developing together improving technology and with new fintech solutions, causing security. uncertainty at times. However, 3. Fintech companies may help although the technology might regular banks become more

308 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ sustainable and help them in react by refraining from using their data-driven processes. services. 4. Because of less regulation, it The connection between is easier for fintechs to access financial innovation and financial emerging funds. inclusion, and in general the impact 5. Being location-free fintechs of financial inclusion has become are not only convenient one of the most dynamically growing but enable people to access fields in development economics. financial services anywhere. Regarding the respective literature, theoretical discussions on the topic From the viewpoint of mostly concluded that financial fintech companies, developing and technology has a positive impact emerging countries are suitable on emerging markets, offsetting the places to expand market share, possible risks. and for gaining new customers. Among others, Philippon Additionally, the regulative argues that financial technologies environment is usually supportive make financial services cheaper – or at least not as restrictive since and therefore more affordable, these countries have less experience meanwhile the usage of big in regulating financial services. data may enable the financial At the same time, it must sector to reach a broader range be added that these innovations of users. In his contribution he are not free of risk or concerns highlighted the usage of big data for regulators of all kinds. As by robo-advisors that may help to mentioned earlier these companies overcome prejudices, but the fact are not regulated like other banks, that financial advice is provided and since they provide mostly by non-humans poses a challenge cross-border services this makes it to regulators (Philippon, T. 2020). more difficult to protect consumer This argument is close to those put rights. Regarding issues related forward by Thomason and others. to cyber security the landscape is They argued that the technology, quite unclear: although banks are and specifically the blockchain obliged to protect their systems, technology may provide an fintech companies ‘cannot make affordable digital identity for less mistakes’. In the event that a fintech creditworthy customers, thereby company loses its credibility in helping to overcome the current protecting data and being resilient, barriers (Thomason, J. et al. 2018). their customers are more likely to Looking at the empirical

309 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ findings of the respective literature development. After building the it is hard to find evidence on the model with market frictions, net impact of such technologies, such as enforcement constraints, for several reasons. Firstly, these information asymmetries and trends are still ongoing and in most theft, they calibrated the model cases, they have not been fully for the Kenyan economy and used developed; therefore we cannot a firm-level survey showing that be certain of the medium or long- companies benefited from mobile term impact. Secondly, as has been money solutions (Beck, T. et al. shown, there is large heterogeneity 2018). among countries and many other Regarding the reactions of factors also coexist at the same the households I found two similar time. Thirdly, digital finance is not papers, with interesting contrasts. a stand-alone phenomenon; we also Using survey-data Jünger and need to consider changes in the Mietzner explained the factors that institutional, legal and economic make it more likely for German environment. households to use Fintech solutions, On the other hand, many while Li, Wu and Xiao did the papers argue that technology may same for Chinese households. indeed have impacted parts of The first paper found that German the financial sector. For example, households with a higher education Bayero found that awareness of and financially more literate were technology, customer value, and more sensitive to Fintech. In China, infrastructure are associated with households with a lower income financial inclusion in a cohort of and less financial literacy gained Nigerian adults. In his paper he more from using digital financial used a survey-based approach, services (Jünger, M. – Mietzner, arguing that the business model of M. 2019; Li, J. et al. 2019). service providers is not significant, but that the customer approach IV.5.3. Recent trends in toward technology and availability financial inclusion is indeed significant (Bayero, M. A. 2015). Regarding country-level data, Using a quantitative the digitalisation of the financial general equilibrium model Beck sector is far from complete, but and others found that mobile the rapid progress is worth further money has a positive impact consideration. As mentioned earlier, on growth and macroeconomic the first level we can analyse is

310 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ rather the accessibility of financial underserved, and their integration services than financial inclusion. into the financial system – either In this chapter I am going to use via traditional banks or other digital two databases that were published solutions – is an identified goal of by the World Bank. In the Global many policymakers. Bank account Financial Development Database ownership is quite similar to the many variables are collected in approach of counting those people connection with financial services whose wages are transferred to and financial development. Nearly their bank accounts. Therefore, the half of them are statistical data on ratio of the people who have an the respective economy, or on the account in a financial institution local financial markets; the other (among those older than 15-years- half are survey-based, connected to old), and the ratio of working the Findex database, which is the people receiving their wage by other database I am going to use. transfer to a bank account are two This latter is a cross-country survey- indicators that show the general, based database that quantifies the classical approach to financial level of financial inclusion of the services. Regarding digital financial respective countries at a given time. services, the ratio of people who Participants in the Findex survey made or received digital payments are asked to answer questions seems to be logical, and is therefore concerning how they use financial used. The ratio of people who services, if they do. In the case that use their mobile phones or the they do not use financial services internet to access their accounts is – e.g. they do not have an account considered to be a proxy of digital – the causes of being unserved are financial literacy, even though also investigated. this accessibility belongs to the Although there are several holding of a normal bank account, good proxies for measuring the maintained at a financial institution. accessibility to conventional In the database there is an indicator, financial services, it is challenging namely, the ratio of people who to find suitable measures for the claimed to have a mobile money advancement in digital financial account, nevertheless these services. The fact that someone has innovations are not widespread a bank account is the basic indicator enough to draw meaningful cross- in measuring financial accessibility. country conclusions. Those who do not have access Regarding global numbers, are called financially unserved or the majority of people already have

311 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ access to financial services: nearly in an account via the use of mobile 69 percent of the responding adult- banking and mobile payment. age people said that he/she has Account ownership and usage may an account at a financial market be regarded as traditional proxies institution. This figure is a notable of financial inclusion, while usage increase in the last decade as the of mobile banking and mobile same ratio was 51 percent in 2011, payment capture the importance and 62 percent in 2014. Similar of the new, technology-driven to earlier years there is some digital involvement. There is heterogeneity in the accessibility heterogeneity among the regions in regarding users’ gender and age. In terms of the popularity of banking 2017, 72 percent of male responders services (Figure 25). Those who said they had a bank account, while have a bank account mostly use it 65 percent of the women responders to receive wages. Except for Sub- did so. Older adults (above age 25) Saharan Africa and South Asia the with a higher income and living in majority of people with an account urban areas, had greater financial receive their wages via their accessibility. account. Many people who qualify Beyond account ownership it for a governmental subsidy have is worth looking at the results from opened an account because it was survey questions related to wages required for receiving state funds. – whether the wage was received

Figure 25: Regional differences in using different types of financial services Source: Global Findex Database, own calculation

312 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

In recent years traditional The popularity of digital banks started to develop online solutions might be proxied mostly banking applications, and the by the usage of digital payments. Findex survey has undertaken A small majority of people used to investigate their popularity. digital payments in 2016, but also Although a mobile phone and with a large heterogeneity among internet connection is required to regions. In poorer regions, digital access online banking platforms, it payment usage is also smaller, but is closely connected to traditional a more detailed analysis would banking services as they build on be needed in order to assess the a normal bank account, therefore difference between emerging and having a traditional account in a advanced countries. financial institution is a prerequisite. In general, we may say that This is in line with survey results classical banking solutions may showing that in regions with high largely correlate with modern incomes the popularity of online financial ones, but there are some banking is greater. Digital solutions results worth noting. In East Asia such as digital wallets in Sub- & the Pacific region it appears that Saharan Africa, or innovative digital the difference in usage between payment systems in East Asia, traditional and new financial are independent from traditional solutions is smaller, but in regions services, and they represent the like Sub-Saharan Africa and South new wave of fintech services. Asia it is still large.

313 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 26: Change in popularity of chosen financial services in various countries Source: Global Findex Database, own calculation

Regarding trends there people. Similarly, in Mongolia, the are many countries that made a usage of digital payments rose from significant improvement between 61 percent to 82 percent in 3 years 2014 and 2017 (Figure 26). In (for further remarks on the Findex most cases the improvement was survey Demirgüc-Kunt, A. et al. a jump from a very low base – 2018). in Tajikistan, Armenia, Senegal As noted by the IMF in their neither traditional banking – proxied policy paper world regions differ by bank account usage, nor the from each other in the advancement more innovative digital solutions and level of technological adoption. were very popular in 2014, but an In Africa, mobile payment gained improvement was visible in the considerable ground and markedly abovementioned 3 years. In some enhanced the level of financial countries, and these cases are the inclusion. On average the level of more important, the change was financial development and inclusion smaller in absolute terms but the improved significantly in the last outcome is more visible. In China decade in Asia. However, this in 2014, 42 people of 100 said coexists with a large heterogeneity: that they used digital solutions intra-regional differences are more for payment purposes compared pronounced as highly developed to 2017 when it increased to 68 countries compete with emerging

314 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ regions; differences within First, I am going to create two countries are also substantial. composite indices to capture the In Europe financial inclusion is level of financial inclusion based relatively large, with differences, on the question responses in the although Fintech startups still have survey. Out of the two indices one room for further growth alongside tries to capture the development traditional banking services. In of conventional banking in the Latin-America many central banks respective country, the other reflects are considering the adoption of the popularity of digital financial CDBC, but at the same time the solutions. As we mentioned, the regulatory environment differs latter is more challenging but still widely. Mobile money services are possible to estimate. These numbers under-developed compared to the will be compared to the scores in the penetration of the internet and the peer-group, and to the development number of mobile phones in the of the respective economy, proxied region (IMF – WorldBank Group by GDP per capita. 2019). In the survey many questions In the empirical part I am were asked about banking habits going to further elaborate on this and most of the results reported heterogeneity by trying to provide are presented as percentage points a robust methodology to assess of the responders who answered financial development in the positively for the binary questions light of new financial solutions, (yes/no). In order to create the two and by providing a comparative composite indices three variables assessment based on the Findex for each index were selected Survey prepared by the World Bank from the survey to represent the Group in 2017. most important characteristics of traditional and digital financial use. IV.5.4. Measuring In order to make them comparable, traditional and digital answers from each country inclusion were converted into scores: the respective countries’ survey results were divided by the result of the In the empirical part of the country that reached the highest paper I am going to quantify the score. Therefore, the scale became level of financial inclusion in the relative and comparable by saying wide range of countries based on that the survey results had been the last update of the World Bank’s translated to a development level Findex survey conducted in 2017.

315 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ that was compared to a theoretical corresponded with general habits, best result. The received scores related to financial services, and have been simply averaged and measured in the entire population multiplied by 100 in order of of the respective country. Although convenience, so both indices vary survey-based indicators usually from 0 to 100, where the most have several disadvantages, the financially inclusive country scores nature of the topic and the carefully the highest, but not necessarily 100 conducted sampling clear doubts points. about systematic distortion (for the The indicators that were methodological annex Demirgüc- selected for use were those that Kunt, A. et al. 2018).

max. value max. value people who have a people received digital Denmark Norway financial account (% age payments in the past year (97.3%) (89.8%) 15+) (% age 15+) people made digital debit card ownership (% Netherlands Norway payments in the past year age 15+) (98.8%) (98.8%) (% age 15+) people who used the people who borrowed from Norway internet to buy something Denmark a financial institution (% (39.5%) online in the past year (% (81.4%) age 15+) age 15+) Norway Norway traditional inclusion (99.7 digital inclusion (99.16 points) points)

Table 11: Indicators used in composing the inclusion indices Source: Findex survey, own calculation

Having the composite general development (income) will indices for the traditional and be compared in a further analysis. digital inclusion, it is possible to As we may have predicted, high compare the level of inclusion income economies performed in different regions and in the pretty well, and regions where different income groups. Using the financial inclusion is known to be country categorisation of the IMF, widespread scored at the top. These peer groups have been constructed, results suggest that composite therefore countries in the same indices are robust enough, and they region, with a similar level of capture the level of development

316 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ in an appropriate manner. Regions region is interesting: they have the in high-income countries of Latin best score in the digital dimension, America & Caribbean, and in with relatively small differences the Middle East & North Africa compared to the traditional reached a relatively weak score, dimension. The financially less and each country achieved lower inclusive region is South Asia, in scores in digital inclusion. In both dimensions. Based on peer Europe & Central Asia, and in East group average scores it is possible to Asia high income countries reached conclude that countries with higher a higher score than in traditional income scored relatively better inclusion. In the upper-middle in both dimensions. Therefore, income category it seems that the the financially historically well- difference between traditional developed high-income countries, and digital inclusion is larger especially in Europe and in North than in the high-income group. In America have digitalised their this income category, East Asia financial system, and people have performed relatively well, while become highly acclimatised to Sub-Saharan Africa outperformed this. In Asia, countries are very the Middle East & North Africa. In heterogeneous, while in Africa the lower middle-income group, the digital inclusion has been relatively gap between traditional and digital more successful in poorer countries inclusion widened further. Europe than other regions. Despite the & Central Asia reached better scores closeness to the USA and the in both dimensions, while East- and general level of development, South Asia had better scores in the people in Latin-America seem to be traditional dimension only. In low underserved by financial services, income countries the Sub-Saharan both in traditional and digital terms.

317 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ income traditional digital region group inclusion inclusion East Asia & Pacific 74 77 Europe & Central Asia 75 78 high Latin America & Caribbean 61 44 income Middle East & North Africa 69 61 North America 87 87 East Asia & Pacific 61 47 upper Europe & Central Asia 49 39 middle Latin America & Caribbean 42 27 income Middle East & North Africa 39 26 Sub-Saharan Africa 46 38 East Asia & Pacific 38 18 Europe & Central Asia 39 28 lower Latin America & Caribbean 30 17 middle income Middle East & North Africa 27 12 South Asia 33 15 Sub-Saharan Africa 28 23 Latin America & Caribbean 24 15 low South Asia 19 7 income Sub-Saharan Africa 20 16

Table 12: Group average scores in traditional and digital inclusion Source: Findex survey, own calculation

Although averaging of intuitive; although digital financial the scores showed the regional services developed, traditional differences, it is an interesting banking did not become any worse. finding to observe how traditional On the graph below, we may and technology-driven inclusion visually identify those countries progresses: in most of the countries that differ from their peers, in any better traditional inclusion occurs dimension. After filtering the high- with better digital service, and income countries, deducting the among the regions, most of the time peer average from the score and the region that is developed in one using a scatter-plot diagram we area also performed relatively well can classify the countries into four in the other, except in a few cases. groups. In high income countries it is quite Countries marked with II

318 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ seem to perform better in both peers, while group IV has better scores, while group III scored lower traditional inclusion, but worse than their peers. Group I has better digital services when compared to digital financial inclusion than their their peers.

Figure 27: Difference of individual country scores from the group average Source: Findex survey, own calculations

As most of the countries are in For the traditional index: either Group II or Group III we may conclude that based on the indices lg(GDPcap)=-70.75+13.64*INCL constructed, the traditional and digital inclusion usually comove. For the digital inclusion index: To assess the relative development compared to the GDP lg(GDPcap)=-95.63+15.68*INCL the following regression was used:

lg(GDPcap)=a+b*INCL+ ε

Using linear regression, the following parameters have been regressed:

319 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 28: Emerging countries that stand out in financial inclusion compared to its own level of development Source: Findex survey, own calculations

Based on the equation above, differ from the predicted line with the estimated level of financial at least one standard deviation. In inclusion has been calculated based case of traditional inclusion, it is on one single factor: the level of 16; in case of the digital inclusion GDP per capita in the respective it is 14-point deviation from the country. Those countries that regressed line. scored better than their GDP would Therefore, we found that predict have gained relatively more a significant difference from the financial inclusion compared to estimated level comoves together: itself, while those who did not meet four countries, namely Kenya, Iran, the theoretical score lagged behind Mongolia and Uganda perform somewhat. better in both traditional and digital As this equation (and all dimensions, while countries such the regressions) is estimated to as Congo, Argentina, Iraq, Mexico have the minimum distance from underperformed. In the latter the observations on average, countries there is a potential space the majority of the values are for further expansion of digital distributed around the curve. financial solutions. Therefore we shall define that those Limitations are at least countries stand out whose scores twofold. Firstly, the data was

320 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ constructed based on a survey, she has an account at a financial which is typically limited in terms market institution. This is a notable of errors, willingness to answer increase over the last decade as the and coverage. Secondly, the same ratio was 51 percent in 2011, design of the survey primarily asks and 62 percent in 2014. questions about traditional bank Concluding the empirical services; very few questions deal part of the paper it has been found with digital solutions. Additionally, that traditional and digital financial it is impossible to differentiate inclusion mostly comove: in responders that used digital peer group analysis most of the services connected to a traditional countries either outperform or bank account from those who used underperform in both dimensions Fintech solutions solely. at the same time, while compared to general development only IV.5.5. Conclusion a few countries outperformed significantly, and those which did, Financial development and also differed in the same direction. inclusion are two different concepts The financial inclusion of four but they definitely have an impact countries (Mongolia, Kenya, Iran on each other. Financial inclusion and Uganda) offers a good example is more user-oriented, though; to the other emerging countries policy goals usually state that and may be interesting to discuss increasingly more people should be further. involved, and not only be provided with opportunities for financial Acknowledgement inclusion. Ozili argues that there are five channels of digital financial The present publication is improvement that may help to the outcome of the project „From increase financial inclusion (Ozili, Talent to Young Researcher project P. 2018). aimed at activities supporting the Regarding global numbers, research career model in higher the majority of people already education”, identifier EFOP- have access to financial services: 3.6.3-VEKOP-16-2017-00007 co- nearly 69 percent of the responding supported by the European Union, adult-age people said that he/ Hungary and the European Social Fund.

321 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

322 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ IV.5.6. References

Ansart, S. – Monvoisin, V. 2017: ‘The new monetary and financial initiatives: Finance regaining its position as servant of the economy’, Research in International Business and Finance. Elsevier B.V., 39, pp. 750–760. doi: 10.1016/j.ribaf.2015.11.020. Arner, D. W. – Barberis, J. N. – Buckley, R. P. 2015: ‘The Evolution of Fintech: A New Post-Crisis Paradigm?’, SSRN Electronic Journal, (January). doi: 10.2139/ssrn.2676553. Bayero, M. A. 2015: ‘Effects of Cashless Economy Policy on Financial Inclusion in Nigeria: An Exploratory Study’, Procedia - Social and Behavioral Sciences. Elsevier B.V., 172, pp. 49–56. doi: 10.1016/j. sbspro.2015.01.334. Beck, T. – Pamuk, H. – Ramrattan, R. – Uras, B. R. 2018: ‘Payment instruments, finance and development’, Journal of Development Economics. Elsevier, 133(February), pp. 162–186. doi: 10.1016/j. jdeveco.2018.01.005. Demirgüc-Kunt, A. – Klapper, L. – Singer, D. – Ansar, S. – Hess, J. 2018: The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. Washington, DC: World Bank Group. doi: 10.1596/978-1-4648-1259-0. IMF 2019: Fintech: the experience so far. IMF – WorldBank Group 2019: ‘Fintech: the experience so far’, Imf Policy Paper, (June). Jünger, M. – Mietzner, M. 2019: ‘Banking goes digital: The adoption of FinTech services by German households’, Finance Research Letters. Elsevier, (March), pp. 1–8. doi: 10.1016/j.frl.2019.08.008. Li, J. – Wu, Y. – Xiao, J. J. 2019: ‘The impact of digital finance on household consumption: Evidence from China’, Economic Modelling, (September). doi: 10.1016/j.econmod.2019.09.027. Ozili, P. 2018: ‘Impact of digital finance on financial inclusion and stability’, Borsa istanbul Review. Elsevier Ltd, 18(4), pp. 329–340. doi: 10.1016/j.bir.2017.12.003. Pearce, D. – Ortega, C. R. 2012: ‘Financial Inclusion Strategies Reference Framework’, World Bank, (June), p. 60. – http:// siteresources.worldbank.org/EXTFINANCIALSECTOR/Resourc es/282884-1339624653091/8703882-1339624678024/8703850- 1339624695396/FI-Strategies-ReferenceFramework-FINAL-

323 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Aug2012.pdf. Philippon, T. 2020: ‘On fintech and financial inclusion’, BIS Working Papers, (841). Thomason, J. – Ahmad, M. – Bronder, P. – Hoyt, E. – Pocock, S. – Bouteloupe J. – Donaghy, K. – Huysman, D. – Willenberg, T. – Joakim, B. – Joseph, L. – Martin, D. – Shrier, D. 2018: Blockchain – Powering and Empowering the Poor in Developing Countries, Transforming Climate Finance and Green Investment with Blockchains. Elsevier Inc. doi: 10.1016/b978-0-12-814447- 3.00010-0.

324 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ IV.6. Comparative Study on Sovereignty in Oil Dependent States

Navid Saeedi Sakha123

Abstract

Currently, states with economies relatively dependent on oil have serious issues with managing their economies. By way of illustration, their fiscal policies, wealth distribution, and foreign policies depend on the oil income. Hence, the oil revenue affects interests, opportunities, and threats of a state. Consequently, sovereignty of these states is profoundly under the influence of the existence of oil and the global oil market. Although there is a similar impact on their economies and policies, their basic characteristics force them to take different attitudes toward managing the oil revenue. For example, arable land traditionally affects how much an oil state is relied upon, and its agriculture is an important factor in the managing of the oil revenues. This article introduces factors in order to better understand the differences and similarities of oil dependent states.

Keywords: oil dependent states, comparative analysis, sovereignty, state formation

123 PhD student – CUB IR Doctoral School, [email protected]

IV.6.1. Introduction the economic and political risks of the ‘resource curse’ highly depends Sovereignty is discussed on country context as implementing in many oil exporting countries the same policies would not be (Ostrowski, W. 2008; 2011; a hundred percent successful if Phillips, J. et al. 2016). Oil revenue implementing is possible at all. impacts sovereignty in different Though countries are unique ways. The issue has baffled the in how they gained influence from economy and politics of exporting natural resources, they can be countries for many years. Each defined by factors explaining their country has been trying to reduce differences and similarities. Even its dependency on this revenue. though national oil companies Although some countries have manage oil reserves in many been successful in diversifying countries, the governance of their economies, others are still the companies is very different struggling with this matter. Hedging (Marcel, V. 2006). Their culture,

325 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ strategy, relations with foreign companies, other states, and internal IV.6.2. Selecting Countries ethnic and economic parties are also different. Twenty countries have been Oil revenue provides chosen for comparative analysis political parties with a favorable of economies of oil dependent resource in order to seize power states. The countries were chosen in different territories. Territories based on the higher than ten value are geographic spaces that are of their oil rent indicator presented occupied by certain institutes. by the World Bank (Table 13). Consequently, geographic factors Venezuela, Syria and Yemen have must be considered in comparing been excluded because of their high the sovereignty of the oil dependent instability in the recent decade. states. In this article geographical Ten years average of oil rent is and historical factors will be calculated because the measure has discussed that are important when been increasing and decreasing due comparing the oil dependent to price variation. countries.

oil rent (% of GDP) – ten population country name year average (2007–2017) (2018) Kuwait 48,46005240 4 137 309 Libya 45,59870515 6 678 567 Iraq 43,36415544 38 433 600 Congo, Rep. 39,37753117 5 244 363 Saudi Arabia 38,25646494 33 699 947 East Timor 35,76729506 1 267 972 Oman 33,56869215 4 829 483 Angola 30,61964888 30 809 762 Equatorial Guinea 30,00982555 1 308 974 Gabon 26,67060754 2 119 275 Azerbaijan 24,90845195 9 942 334 Qatar 24,06470271 2 781 677 Algeria 21,47362910 42 228 429 United Arab Emirates 21,19306067 9 630 959 Iran 20,47091576 81 800 269 Chad 19,45659262 15 477 751

326 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ oil rent (% of GDP) – ten population country name year average (2007–2017) (2018) Brunei 17,75970428 428 962 Kazakhstan 14,49420048 18 276 499 Turkmenistan 11,13579151 5 850 908 Nigeria 10,38545983 195 874 740

Table 13: Oil rent and population Source: World Bank

IV.6.3. Sovereignty expand on both sides of borders. Provinces in the vicinity have more Sovereignty is about economic structures and relations. establishing an autonomous state Regions and provinces share the and independently making and same environmental challenges and implementing regulations, laws characteristics. and policies (Brown, W. 2011). A Territory, sovereignty, and sovereign state can enforce laws power are three concepts closely and regulations that are respected linked together (Paasi, A. 2003). by external and obeyed voluntarily Territoriality is an effective by most of the domestic interest instrument to reify power. State groups (Krasner, S. D. 2007). Other institutions seek to maintain their states respect the sovereign state’s power in their territory. Besides, autonomy and cooperate with it territoriality gives states the base to based on mutual agreement. Also a construct state-society relations. sovereign state gives its citizens a Borders and territories framework to undertake economic are built on societies that are activities and pursue their goals. not discrete. Territories are not The separation of the historically fixed. Territories of sovereignty to domestic and modern states are built on areas that foreign aspects which is inferred had a previously different social, to as a “territorial trap” (Agnew, economic, and political order. J. 1994) can be misleading. In formation of modern states, A state’s sovereignty does not capitalism and global division simply separate world to “us” and of labour has played a key role “them”. Space does not introduce (Paasi, A. 2003). Countries can a boundary to a state’s society, have diverse economic patterns economy, and politics. Ethnics in different provinces. However, policies do not compensate for this

327 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ diversity. States’ major goal is to secure their sovereignty through IV.6.4. Distance from Major maintaining power. Economic Powers distribution and securing economic resources can play a vital role in Distance plays a crucial role preserving power. In this matter in conflicts and rivalries (Tir, J. geographic factors can play vital – Diehl, P. F. 2002). Contiguous role. states have a higher probability Oil wealth has various effects of conflict and enduring rivalries. on oil dependent states. Some States have always been under examples of the effects are civil the influence of major powers that wars, regime durability, power are closer to them. This situation balance, and state institutions has been modelled in geopolitics (Smith, B. 2004; Bjorvatn, K. et by gravity theory and entropy- al. 2012). However, the effects are maximization models (O’Sullivan, not fixed in all countries. There P. 1995). Regional and global are similarities and differences in military and economic powers have both economic and institutional a great influence on the economy implications. Although national and politics of states. Economic oil companies (NOCs) are formed relations are highly influenced in nearly all countries, they have by distance while economically different sovereignty implications powerful countries have a wider for their countries (Marcel, sphere of influence. Hence V. 2006). NOCs have different geographic distances combined strategy, culture, and governance. with historic relations can highly States differ in their influence the state economies, geographic characteristics. As policies, and sovereignty. a matter of fact, each of them is Oil dependent states are unique. However, there are some in different regions and parts of political and economic geographic the world. However, they can variables that can help to compare be categorized by their regions sovereignty of oil exporting (Table 14). North African Countries countries. In this article five are near Europe and have always variables are considered in order been in close contact with Europe. to compare the oil states: distance Sub-Saharan African Countries from power poles, trade routes, were under European states’ sphere state formation, arable lands, and of influence. However, due to their social fractions. more distance and lack of access

328 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ to the Mediterranean Sea, these of them were under the rule of the countries have a rather historical Ottoman Empire for a while. After impact from Europe. World War 1, European countries The former Soviet Countries were involved in the region. were a part of the Soviet Union. However, due to their distance After the dissolution of the Soviet their influence was limited. The Union, these countries remained most influential force in this region under Russia’s influence. They are appeared through economic and all landlocked. Kazakhstan has a sea power. Iran is slightly different land border with both Russia and from other countries. Iran was China. Turkmenistan has only a an autonomous country and was sea border with Russia and is of not under Ottoman rule, whereas almost similar distance from both southern parts of the country were Russia and China. Azerbaijan has heavily under the influence of the a land border with Russia and is UK, and the northern part of the close to Turkey and the Black Sea. country was under the influence Kazakhstan has been mostly under of the Soviet Union. Due to the the influence of Russia, but it is advantage of sea power in this changing due to China’s growing region, the United States became trade and investment in the country. the main influential power after the In addition, Russia has the military United Kingdom. Middle Eastern upper hand in Kazakhstan, though Countries have more economic Azerbaijan has tighter relations relations with the EU. However, with the EU. they are mostly under the influence Persian Gulf Countries are of the US. far from other global powers. Many

329 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

distance import origin (2017) (%) f c f m region cou RU CN DE US RU CN EU US s b former- KZ 1759 2070 2484 6475 38,00 17,00 21,00 3,90 RU RU Soviet TM 2476 2440 2493 6966 10,00 11,00 30,00 2,10 RU nm country AZ 2800 3052 1927 6630 17,00 9,70 26,00 3,30 RU US IR 3034 2872 2530 7258 2,60 37,00 23,00 0,24 – nm IQ 3312 3400 2079 6934 0,86 28,00 12,00 2,10 UK US KW 3413 3294 2430 7280 1,70 16,00 22,00 11,00 – US UK Persian QA 3529 3201 2784 7629 0,23 7,70 36,00 3,80 UK US Gulf country UK AE 3564 3112 2994 7822 0,78 16,00 23,00 4,90 UK US FR SA 3810 3589 2632 7525 0,79 19,00 34,00 8,00 – US OM 3618 3060 3180 7998 0,38 6,30 13,00 4,00 – US North DZ 4965 5753 2672 5460 4,40 17,00 45,00 3,50 FR US Africa LY 4579 5029 1750 6274 1,70 13,00 45,00 1,40 IT US TD 5175 5356 2504 6854 0,21 24,00 37,00 3,50 FR FR US NG 5887 6164 2901 6624 1,90 28,00 32,00 6,00 UK Sub- FR Saharan GA 6388 6400 3579 7207 0,05 15,00 43,00 2,70 FR FR Africa CG 6214 6139 5718 7410 0,62 9,00 31,00 2,70 FR nm AO 6808 6467 4317 7982 1,10 21,00 39,00 3,10 PT nm GQ 6285 6376 3410 7030 0,07 22,00 45,50 9,70 UK nm South BN 3959 2257 6590 8965 0,02 21,00 9,00 8,30 UK UK East Asia TL 4974 3382 7782 9204 17,00 6,00 1,20 PT nm

Table 14: Country distance from economic and military poles and its implications cou = country, f c s = former colonial status, f m b = foreign military base, nm = none major, AE = United Arab Emitares, AO = Angola, AZ = Azerbaijan, BN = Brunei, CG = Congo Rep., CN = China, DE = Germany, DZ = Algeria, EU = European Union, FR = France, GA = Gabon, GQ = Equatorial Guinea, IQ = Iraq, IR = Iran, IT = Italy, KW = Kuwait, KZ = Kazakhstan, LY = Libya, NG = Nigeria, OM = Oman, PT = Portugal, QA = Qatar, RU = Russia, SA = Saudi Arabia, TD = Chad, TL = East Timor, TM = Turkmenistan, UK = United Kingdom, US = United States of America Source: The Observatory of Economic Complexity, Britannica Dictionary, The World Factbook (CIA)–

330 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Access to South East Asian international security implications. oil dependent countries is mostly Choke points such as the Hormuz by sea powers. Brunei Darussalam Strait and the Malacca Strait create can be accessed through the specific security implications for South China Sea. It was under the the countries that depend on the influence of China, Japan, and the routes for trade. United Kingdom. Timor-Leste was Oil dependent countries rely under Portuguese sovereignty, and on trade routes not only because it remained that way for a long time. of the energy transport and trade Both countries have wide economic but also for their overall economic relations with Asian countries and political activities. The routes especially Indonesia and China. are significant not only due to African countries have exporters’ policies but also because more economic relations with of world energy security. Since any the EU. European countries had a disruption in the energy supply can vast presence in the region in the affect the importer state’s economy, colonial era and the continent is it usually takes part in policies now of great importance for the EU. regarding energy routes for example It should also be noted that there are by financing and interfering in the US military bases in North African security of surrounding regions of countries. Furthermore, China is the trade routes. increasing its economic relations The Hormuz Strait is a with Sub-Saharan countries. gateway for trade of the Persian Gulf Countries. In 2018, twenty IV.6.5. Trade Routes one million barrels per day flew through the Hormuz Strait, that Trade routes are very equals to 21% percent of global important for states in order to secure petroleum liquids consumption. their economy and sovereignty. Since it is the only trade route for Landlocked countries depend on most of the region’s countries, their their neighbor’s infrastructure, relations have been affected by this peace, and politics (Faye, M. L. geographic phenomenon (Jafari, et al. 2004). Landlocked states V. A. 2012). Controlling three often have trouble accessing islands, which are important for the global markets and lag behind in geopolitics of the strait, has been their economic development from under dispute between Iran and the their neighbors that have access to UAE for a long time (Caldwell, D. sea routes. Sea routes often have 1996).

331 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Since the importance of the Diversifying the trade routes is a Hormuz Strait for global energy great challenge for these countries security, regional countries such since this matter heavily relies on as Iran can threaten to shut the their neighbors’ foreign policies strait as a means of power balance (Faye, M. L. et al. 2004). in international disputes. On the The neighbors of landlocked other hand, the United States has states try to benefit from the needs measures in order to secure the route of diversifying trade routes. The (Talmadge, C. 2008; Katzman, Caspian region and Iran relations K. et al. 2012). All states of the are affected greatly by energy region have reacted to this matter dynamics of the region (Miles, C. since they have no other option for 1999; Atai, F. – Azizi, H. 2012). their trade. Saudi Arabia is the only Azerbaijan and Turkmenistan one in the region which has a sea proposed pipelines that would go route other than the Persian Gulf. through Iran to reach international However, transporting all the oil sea routes. The United States has production to the Red Sea ports by hindered both plans in order to Saudi Arabia is a great challenge. prevent Iran from playing a major Landlocked countries of role in the region’s geopolitics. the former Soviet states have Azerbaijan’s pipeline went through a different situation. They rely Georgia and Turkey with higher heavily on infrastructure provided costs. For Turkmenistan another by their neighbors in order to export pipeline route had been proposed and import different products. that went through Afghanistan, Most energy routes going out of Pakistan, and India which has not Turkmenistan and Kazakhstan been executed since because of the were through Russia and their regional relations (Maini, T. S. – main export targets were European Vaid, M. 2013). countries. Hence, they relied on Sub-Saharan Countries Russia in their economic and foreign mostly face the Gulf of Guinea and policies. However, in recent years the South Atlantic Ocean. Hence, China expanded its infrastructure to they have better accessibility for these two countries. Azerbaijan had foreign states and companies. There a similar situation to other former are many diverse destinations Soviet states. However, Azerbaijan for the export of these countries expanded its energy export routes based on contracts of these states. to the Mediterranean Sea through However, North African states Georgia and Turkey to Ceyhan port. remained mostly under European

332 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ influence due to their vicinity to the less accountable than other states. Mediterranean Sea. Most of the oil Oil revenue gives politicians direct and gas of Algeria and Libya goes means to seize power without to European countries. concerning other domestic sources South East Asian oil states in the state formation process. face a different situation. Brunei is However, there is difference in close to the South China Sea and is context of the countries that prevent a great source of energy for China us from radical and firm conclusion in order to bypass the Malacca (Moore, M. 2004). The history of strait to China. Since there are states explains the differences of many energy consuming countries state formation among different oil in the region, energy security has dependent states and forms of state a great implication for relations apparatuses relations with citizens. of the states in the region (Hong, State formation processes have Z. 2010). Timor-Leste and Brunei an impact on state’s approach in Darussalam export most of their oil building institutions. to countries in the region. Hence, Most of the oil dependent these countries as energy exporters countries had regime transformation play a significant role in forming after the discovery and export relations of the region. Timor of oil in commercial quantities. exports most of its oil to Singapore Furthermore, oil revenue had a so Timor is not susceptible to great role in the formation of many Malacca Strait security. However, of the states such as Saudi Arabia, Brunei exports its oil to other Kuwait or the UAE. Although the regions especially India. Hence, regime transformation differed in its oil must pass through the strait each country, oil revenue gave each and any conflict in the region can of the states an opportunity to seize damage its exports significantly. power regardless of their domestic economic structure. Subsequently, IV.6.6. State Formation sovereignty has a different relation with state legitimacy comparing State formation in rentier to resource poor countries. Oil states is influenced by oil revenue dependent countries mostly rely which is in contrast with the on authority in order to enforce European model of state formation sovereignty in the countries. (Schwarz, R. 2008). Rentier states Table 15 shows some of the rely less on domestic taxation state fragility index and the year revenue. Consequently, they are constitution of countries drafted.

333 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Middle Eastern Arab countries Constitution which is the base for have the best situation on the list. the legal system and formation of After those, the former Soviet a modern state can be considered states come on the list that are least when the nation-state relation fragile. The state legitimacy and has been formed. Most of the human rights index are in a bad countries drafted their constitutions situation in all countries. Other than after the oil in their countries had these two indexes, Middle Eastern been exploited Furthermore, the Arab countries are doing well in countries which drafted their other state fragility measures such constitution before exploiting oil as economic inequality. revenue amended it profoundly. As Since state’s revenue and a matter of fact, most of the Middle fiscal policies are very important Eastern countries formed after oil determinants of state formation had been discovered in the region and governance, oil revenue which and oil revenue played an important consists of a significant portion of role in their formation such as Saudi the oil dependent states’ revenues Arabia and Qatar. The countries in had a profound impact on state other regions are not exceptions. formation (Moore, M. 2004). The

first modern human state economic public region cou constitution rights legitimacy inequality service drafted year former- KZ 7,3 7,3 3,9 2,0 1995 Soviet TM 8,9 9,7 6,4 5,0 1992 country AZ 8,3 9,0 5,5 4,8 1995 IR 8,1 8,9 6,7 8,7 1906 IQ 6,7 8,5 3,6 3,4 1970 Persian KW 9,1 9,7 5,3 6,4 1962 Gulf QA 9,3 8,4 4,7 3,2 1972 country AE 7,6 6,6 2,8 1,6 1971 SA 4,7 6,1 6,8 7,9 1992 OM 6,4 6,4 4,6 1,3 1996 North DZ 6,6 7,4 6,0 5,4 1989 Africa LY 8,3 8,0 8,1 8,9 1951

334 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ first modern human state economic public region cou constitution rights legitimacy inequality service drafted year TD 8,8 9,6 9,0 9,1 1957 NG 7,5 7,0 4,2 2,9 1999 Sub- GA 8,9 9,0 5,3 3,9 1961 Saharan Africa CG 8,4 9,0 8,1 8,9 2002 AO 6,7 8,0 9,3 8,7 1975 GQ 7,4 7,8 5,9 6,3 1968 South BN 7,1 7,7 7,5 1,5 1959 East Asia TL 8,6 9,8 8,1 8,1 2001

Table 15: Fragility index, constitution draft year cou = country, AE = United Arab Emirates, AO = Angola, AZ = Azerbaijan, BN = Brunei, CG = Congo Rep., DZ = Algeria, GA = Gabon, GQ = Equatorial Guinea, IQ = Iraq, IR = Iran, KW = Kuwait, KZ = Kazakhstan, LY = Libya, NG = Nigeria, OM = Oman, QA = Qatar, SA = Saudi Arabia, TD = Chad, TL = East Timor, TM = Turkmenistan Source: Fund For Peace, Britannica Dictionary, The World Factbook (CIA)

IV.6.7. Arable land economy. On the other hand, oil revenue has political and economic Oil dependent countries with effects on agricultural, rural, and the highest GDP per capita tend to peasantry bases of the country. have low arable lands. Countries Oil dependent states distribute with higher arable lands didn’t oil wealth by various means such as succeed in achieving high revenues tax policies, investing in different (Figure 29). The agricultural sector sectors, and giving resources to has been vulnerable in oil economies state owned enterprises. Though due to different economic effects these means can distribute wealth known as ‘Dutch disease’ and to affect state-society relations and ‘resource curse’ (Katouzian, M. A. bolster their political power, they 1978; Pollard, H. 1985; Okonkwo, have changed the economic balance I. C. 1989). The effect of oil revenue of countries between sectors and on agriculture is both economic and regions. This matter profoundly political. Fluctuations and shocks of affects the agricultural sector. The oil price affect the prices of tradable countries with less arable land such goods and movements of resources as Middle Eastern Arab countries in and out of different sectors of an have fewer problems in managing

335 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ their economy. However, countries bases are more sensitive to policies with more arable lands and agrarian and regulations.

Figure 29: Arable Land Relation with GDP per Capita Source: World Bank

IV.6.8. Social Fraction – have been establishing to address Polarization this issue. There are articles opposing Ethnolinguistic and the the view that ethnic and religious various effects of religious diversity diversification can affect state have been discussed such as the institutions and economy in a civil war, conflict potential, and meaningful way (Fish, M. S. – Brooks, R. S. 2004). However, economic development (Montalvo, ethnolinguistic and religious J. G. – Reynal-Querol, M. 2005a; 2005b). Countries with a higher polarization measures have been ethnic and religious diversification introduced to better address the have higher unrests and probability matter of ethnics and religions. of civil war which harms economic The measure considers the distance development. Resources are between ethnic groups in a country. allocated to resist the unrests and The polarization index has been policies are set more considering introduced to better justify civil security instead of economic wars and domestic conflicts that development. State institutions the diversity index couldn’t prove

336 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ (Montalvo, J. G. – Reynal- have drafted their constitution after Querol, M. 2005a). The index’s the exploitation of oil reserves. impact has been measured on other The countries that drafted their economic and political measures constitution before the exploitation too (Brückner, M. – Gradstein, M. of oil reserves faced difficulty in 2015; Python, A. et al. 2017). adjusting their political, economic, and social structure in order to IV.6.9. Conclusion manage oil revenue. An example of this situation is Iran which drafted Oil dependent countries its constitution in 1906. But, have been acting in different ways. afterwards went through different However, they have in addition, unrests which have been related to similar behaviors. In order to oil revenue’s effect. better understand their foreign The oil dependent states and domestic policies, this article that have difficulty in building suggests various geopolitical their nation-state relations have measures are to be probed. This difficulty in absorbing different paper gives a theory and suggests ethnic groups under one nation. some measures in order to interpret Oil dependent states, as developing the states’ behavior states, have attempted different Arable land has very important ways to discipline the different economic and political implications ethnic groups in their countries. for countries. Countries with more In order to better understand this arable land have a bigger agrarian matter, one should, in addition, social base. Taxing of the agriculture consider the threat of civil war from base can give revenue for central ethnic groups. government. On the other hand, Distance from major powers agrarian society has a specific social and trade routes give states and and economic structure. However, political parties opportunities and oil economics have different social threats in managing their territories. and economic criteria. Countries Different political parties can absorb with a less agrarian social base resources and aid from global or seem to have fewer problems in regional powers which can affect managing oil economics. domestic politics and sovereignty. State formation in oil states Distance and trade routes form provides information about how the countries’ relations with their oil has been building their nation- neighbors that have similar ethnic state relation. Most of the countries and religious divisions.

337 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

IV.6.10. References

Agnew, J. 1994: The territorial trap: The geographical assumptions of international relations theory. Review of International Political Economy, 1(1), 53–80. Atai, F. – Azizi, H. 2012: The Energy Factor in Iran–Turkmenistan Relations. Iranian Studies, 45(6), 745–758. Bjorvatn, K. – Farzanegan, M. R. – Schneider, F. 2012: Resource curse and power balance: Evidence from oil-rich countries. World Development, 40(7), 1308–1316. Brown, W. 2011: Walled states, waning sovereignty. Ethics & International Affairs, 25(1), 98. Brückner, M. – Gradstein, M. 2015: Income growth, ethnic polarization, and political risk: Evidence from international oil price shocks. Journal of Comparative Economics, 43(3), 575–594. Caldwell, D. 1996: Flashpoints in the Gulf: Abu Musa and the Tunb islands. Middle East Policy, 4(3), 50–58. Faye, M. L. – McArthur, J. W. – Sachs, J. D. – Snow, T. 2004: The challenges facing landlocked developing countries. Journal of Human Development, 5(1), 31–68. Fish, M. S. – Brooks, R. S. 2004: Does Diversity Hurt Democracy? Journal of Democracy, 15(1), 154–166. https://doi.org/10.1353/ jod.2004.0009 Hong, Z. 2010: Energy security concerns of China and ASEAN: trigger for conflict or cooperation in the South China Sea? Asia Europe Journal, 8(3), 413–426. Jafari, V. A. 2012: The Geopolitics of the Strait of Hormuz and the Iran- Oman Relations. Katouzian, M. A. 1978: Oil versus agriculture a case of dual resource depletion in Iran. The Journal of Peasant Studies, 5(3), 347–369. https://doi.org/10.1080/03066157808438052 Katzman, K. – Nerurkar, N. – O’Rourke, R. – Mason, R. C. – Ratner, M. 2012: Iran’s Threat to the Strait of Hormuz. Krasner, S. D. 2007: Sovereignty. The Blackwell Encyclopedia of Sociology. Maini, T. S. – Vaid, M. 2013: Roadblocks remain to TAPI pipeline construction. Oil and Gas Journals.

338 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Marcel, V. 2006: Oil titans: National oil companies in the Middle East. Brookings Institution Press. Miles, C. 1999: The Caspian pipeline debate continues: Why not Iran? Journal of International Affairs, 325–346. Montalvo, J. G. – Reynal-Querol, M. 2005a: Ethnic diversity and economic development. Journal of Development Economics, 76(2), 293–323. Montalvo, J. G. – Reynal-Querol, M. 2005b: Ethnic polarization, potential conflict, and civil wars. American Economic Review, 95(3), 796–816. Moore, M. 2004: Revenues, state formation, and the quality of governance in developing countries. International Political Science Review, 25(3), 297–319. Okonkwo, I. C. 1989: The erosion of agricultural exports in an oil economy: The case of Nigeria. Journal of Agricultural Economics, 40(3), 375– 384. Ostrowski, W. 2008: Regime maintenance in post-Soviet Kazakhstan: The case of the regime and oil industry relationship (1991-2005) [PhD Thesis]. University of St Andrews. Ostrowski, W. 2011: Rentierism, Dependency and Sovereignty in Central Asia. Sovereignty After Empire: Comparing the Middle East and Central Asia, 282–303. O’Sullivan, P. 1995: Geopolitical force fields. Geographical Analysis, 27(2), 176–181. Paasi, A. 2003: Territory. A companion to political geography. Oxford, Blackwell. Phillips, J. – Hailwood, E. – Brooks, A. 2016: Sovereignty, the ‘resource curse’and the limits of good governance: A political economy of oil in Ghana. Review of African Political Economy, 43(147), 26–42. Pollard, H. 1985: The erosion of agriculture in an oil economy: The case of export crop production in Trinidad. World Development, 13(7), 819–835. Python, A. – Brandsch, J. – Tskhay, A. 2017: Provoking local ethnic violence–A global study on ethnic polarization and terrorist targeting. Political Geography, 58, 77–89. Schwarz, R. 2008: The political economy of state-formation in the Arab Middle East: Rentier states, economic reform, and democratization. Review of International Political Economy, 15(4), 599–621.

339 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

340 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Smith, B. 2004: Oil wealth and regime survival in the developing world, 1960–1999. American Journal of Political Science, 48(2), 232–246. Talmadge, C. 2008: Closing time: Assessing the Iranian threat to the Strait of Hormuz. International Security, 33(1), 82–117. Tir, J. – Diehl, P. F. 2002: Geographic dimensions of enduring rivalries. Political Geography, 21(2), 263–286.

341 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

V. Rising Powers of Asia

342 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ V.1. Rebalancing and Counterbalancing of Myanmar between India and China

Hnin Mya Thida124

Abstract

Myanmar is a small country with great geostrategic significance between India and China. It is important for Myanmar to maintain good relations with these powers. As a small and fragile state struggling with domestic constraints and international pressure, Myanmar usually relies on the diplomatic shield of its great neighbors. Myanmar’s bilateral relations with these two countries have been an important role for all successive Myanmar governments. After 2011, the relations have been remarkable changes in Myanmar domestic politics when the first elected government took power into office. Then, Myanmar could adjust its foreign relations deviation from the conventional way of bandwagoning strategy to China. Under the incumbent government since 2015, Myanmar has expanded its international relations in regionally and globally. In a scenario, there may be criticism that the improvement of bilateral ties with India can diminish Sino- Myanmar relations interpreting Myanmar’s defiance to China. This paper will be based on the analysis of the past and present situation of Myanmar-India relations. The research will attempt to explore the recent progress of Myanmar-India relations and how these changes effect Sino-Myanmar relations.

Keywords: balancing strategy, Belt and Road Initiative, China, India, Myanmar

124 PhD student – CUB IR Doctoral School, [email protected]

V.1.1. Introduction strategic neighbor as its security buffer between their intense Myanmar, a member of rivalry. Because of these sharing ASEAN countries (Association borders, most of their frontier of South East Asian Nations) is areas and borderlands have always situated between India and China. encountered with sensitive issues Myanmar’s geostrategic location at concerning insurgency problems, the tri-Juncture of East Asia, South border trade, cross-national Asia and Southeast Asia is essential criminal issues. for these two countries. Both Myanmar and India have countries share long border with long standing border of unfenced Myanmar and consider this small 1,640 Km and a long coastline

343 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ border of 2,276 Km sharing part of was strategically important for Bay of Bangel. For India, Myanmar India especially in implementing is the natural ‘Land-bridge’ and its Look East Policy. It is also the the only ASEAN country sharing only one country at the intersection land boundary with India as the of India’s “Neighborhood First” nexus between India, Southeast policy and “Act East” policy and is Asia and East Asia (Yhome, K. also essential in practicing India’s 2015). Myanmar stands at the regional diplomacy in Indo-Pacific center of the India-Southeast (Atmakuri, A. – Izzuddin, M. Asia geography that makes its 2020). geopolitical significance. Myanmar

Figure 30: Myanmar between India and China Source: The Myanmar Embassy, Tokyo

In the early years of its military government in Myanmar, independence, Myanmar had India practiced the negligence adopted and applied non-aligned policy by condemning the regime’s foreign policy with the purpose of brutal act upon democratization preserving its sovereignty. Under the movements. But, after recognizing

344 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Chinese predominance in relations with these giants are not Myanmar since 1988, following always excellent. Its geostrategic the government’s suppression of significance between these two 1988 students’ uprising and at the countries and within region always same time the Tiananmen Square’s entails Myanmar into a struggle incident in China, New Delhi balancing with or against them. made readjustment its foreign Moreover, both of these countries policy toward Myanmar. Another are seeking access to Indian reason why India’s ‘constructive Ocean, through Myanmar, for the engagement’ or ‘rapprochement development of their landlocked to Myanmar’ was its thirst for provinces in Southwest China and economic development as the result Northeast India (Zhao, H. 2008). In of severe economic crisis of 1991 compared with China, India has not (Gottschlich, P. 2017). taken the serious problems and any Since that time, bilateral confrontation with Myanmar. It can relations between the two be said that bilateral relations could countries have been improving. remain on good terms without any The ‘Look East Policy’ under the confrontation. administration of Prime Minister Myanmar’s relations with P.V. Narasimha Rao (1991- China is more fluctuant than the 1996) tried to reinforce economic relations with India. Behind the development focusing on Asian ‘Pauk-Phaw’ relationship, the markets and an extension of trade Myanmar government has been relations towards Southeast Asia. recognizing Beijing’s growing It is the significance of Myanmar influence on the country and, at the which is situated the tri-juncture of same time, its over-dependence on East Asia, South Asia and Southeast China. Myanmar has attempted to Asia in order to accomplish India’s mitigate its heavy reliance on China new foreign policy orientation. but there was no option except to do In recent years, the popularity of so because of military rule which Belt and Road Initiative which is was imposed sanctions by West. Chinese grand strategy is an impetus Myanmar’s regime in 2011, the to India to leverage its multifaceted Chinese introduction of Belt and cooperation with Myanmar in all Road Initiative and implementation sectors as well as aiming at driving of strategic deep-sea ports and Myanmar away from Chines sphere special economic zones in of influence. Myanmar has put Myanmar into Myanmar’s bilateral a new enlightenment. There is the

345 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ permanent truth that a stuck state India relations were good under between great powers is always Prime Minister Nehru from India balancing its relations in dealing and U Nu from Myanmar and they with those countries. Based on played the leading role in Non- this, this paper will try to analyze aligned Movement together. In the improving Myanmar-India 1951, the two countries signed a relations and how it affects on Treaty of Friendship referred to Myanmar-China relations. as ‘for ever thereafter’. In 1954, The remainder of this article the five principles of Peaceful is structured as follows: first, Coexistence were signed between it outlines the brief history of India, China and Myanmar. These Myanmar’s relations between India five principles are the following and China. Second, it presents (Eekelen van, W. 2016): growing Myanmar’s significance 1. mutual respect for each as the geo-economic crux beyond other’s territorial integrity its occupied geostrategic focus and sovereignty, with three sub-topics. Third, it 2. mutual non-aggression, discusses the progress of Myanmar- 3. mutual non-interference in India relations and the analysis each other’s internal affairs, of its impacts on Sino-Myanmar 4. equality and mutual benefit relations. The fourth is the result and and discussion part following the 5. peaceful co-existence. conclusion section as the last. At that time, the bilateral V.1.2. Traces of Relations: relations were like-minded and Myanmar between India India assisted Myanmar in battling and China with Communist insurgencies by providing arms and financial aids from Commonwealth countries. Myanmar and India possessed However, the 1962 military the same historical background of coup led by General Ne Win being under British colonial rule in Myanmar strained the well- and Myanmar (Burma at that time) established relations. The military was the largest part of British India. junta put the country in the Moreover, their similar religious xenophobic “Burmanization” of belief has led the two countries to society and introduced “Burmese closer ties and more understanding Way of Socialism” followed in bilateral relations. At the early by nationalization of private years of independence, Myanmar-

346 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ businesses and expropriation of present, Myanmar-India relations is property without compensation dramatically developing under NLD as well as the exodus of around government (National League for 300,000 people of Indian origin Democracy). Myanmar was one of (Lee, L. 2014). Since that time, only two Southeast Asian countries New Delhi neglected its small to attend Prime Minister Narendra non- democratic neighbor for long Modi’s swearing ceremony when time until it started to recognize he won re-election in May 2019. the ascent of China and Chinese On the other side, Myanmar influence toward Myanmar. In and China have possessed long- 1988 the student uprising had been standing close relations since brutally suppressed by military, Myanmar gained its independence India became the first country in 1948. The term ‘Pauk-phaw’ that officially condemned the or fraternity has been used and authoritarian Myanmar regime and accepted as diplomatic rhetoric the only one neighbor accepting to depict Sino-Myanmar relations fleeing dissidents. (Chan, D. S. W. 2017). But the term In the mid 1990s, India’s of ‘Pauk-Phaw’ is debatable when policy toward Myanmar moved China’s overwhelming influence from its opposition of military in Myanmar has increased time rule to a pragmatic approach, non- by time. The two causes may be interventionist policy. New Delhi Myanmar’s longtime domestic abandoned its strong support to instability and Chinese hegemonic pro-democracy forces in Myanmar position on its internal affairs and chose the engagement with particularly its control over ethnic ruling military regime because armed organizations (EAOs) in the cooperation of Myanmar Sino-Myanmar bordering regions. government was essential in order Both causes have the prominent to accomplish its geostrategic reasons why these consequences and geo-economic purposes are brought about and how they are. (Gottschlich, P. 2015). Moreover, All successive governments the achievement of India’ Act took priority to have national East Policy, the friendly relations consolidation and ending the with Myanmar was essential armed conflicts between army for India. Under the ‘Act East and these EAOs. The incumbent Policy’, Myanmar is the important NLD government (The National bridge to connect India to other League for Democracy), the first Southeast Asian countries. At democratically elected government,

347 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ has prioritized the national transition in 2010 in which the first reconciliation through peace elected government held the power. negotiation process in believing that The new government conducted its only peaceful Myanmar continues foreign policy reorientation to the its economic development. For the West especially the United States latter, the most powerful EAOs that could assume as Myanmar’s settling at Myanmar-China border, effort to take away from China. are illegally supported by China Even Myanmar government could as they are ethnic Chinese origins, make a gallant decision to suspend Han ethnic Chinese as Kokang in the most controversial project Myanmar and Jingpo ethnic Chinese of Ayeyarwady Myitsone Dam as Kachin ethnic of Myanmar construction against China in 2011. (Han, E. 2017). Occasionally, these Myanmar relations with India Myanmar ethnics of Chinese origins and China is always up and down in are used to be the tools that can history but the robust one. During enable to threaten the stability of the 1990s, the relations have been Myanmar by Chinese government. changing more pragmatically On the other hand, China plays an and positively by New Delhi and important role in Myanmar peace Beijing focusing on their national process as negotiator between interest. Moreover, Myanmar’s central government and EAOs. democratic transition in 2011 have The State Law and Order vigorously altered the long-time Restoration Council (SLORC) geopolitical structure opening the (1988-1997) and the State Peace country’s new strategy. and Development Council (SPDC) (1997-2010) faced with V.1.3. Myanmar as a Geo- the international isolation and economic Juncture beyond sanctions and then had extreme its Geostrategic Hub dependence on China for economic investments and diplomatic between Two Major Power protection (Han, E. 2017). As a Neighbors consequence, China became the main consumer of Myanmar’s India’s Return to natural resources and main investor Myanmar in all economic sectors. But the remarkable geopolitical change After passing the deserted was materialized in the aftermath period to Myanmar, the following of Myanmar peaceful democratic reasons were traced behind that

348 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ policy changes by India: the oil and gas, is attractive for India economic development of India’s to fulfill its increasing domestic Northeast; India’s increased interest demand for oil and gas. The oil in trade and investment with and gas fields in Myanmar such as ASEAN; India’s search for energy Shwe, Yadana and Yetagun were security; and the growing influence expected to meet these necessities of China in Myanmar (Zhao, and this could support India to get H. 2008). Firstly, Indian armed cheaper and more secure routes successionist ethnic insurgencies than transporting through pipelines have settled along Myanmar from Central Asia that would need -Indian border of India’s northeast to cross Iran, Afghanistan and regions. It has been the most Pakistan. crucial reality for India to achieve Finally, it was the rise of China strong cooperation with Myanmar that India could be stimulated to government in combating these get closer relations with Myanmar insurgencies so as to achieve peace by analyzing its previous policy and prosperity in these regions. failure. India and China are long Northeast India has always been the time regional rivals. Myanmar is most formidable problem for New strategically situated between them Delhi’s policy priority. as a buffer state and that strategic Secondly, India’s increased small country might be the risk or interest in trade and investment opportunity for their great power driven by “Look East Policy” status. Myanmar is in vital position pushed India towards accelerating for the security of both countries as its integration with ASEAN well as the back door for both. After countries. “Look East Policy” was 1988 student uprising, the isolated initiated in 1991 by the Narasimha Myanmar military regime, faced Rao government with the purpose with strong economic sanction by of developing political contacts, the West, was totally dependent on improving economic integration and China by exploiting and importing strengthening security cooperation all its natural resources. As long with Southeast Asian countries as China became the only one (Haokip, T. 2011). According to reliant partner for Myanmar, its this, Myanmar is the only one influence on Myanmar was larger country that can connect India with as well. That was the strong desire Southeast Asia as a ‘land-bridge’. of India to remove Myanmar from Thirdly, the abundance of natural the Chinese sphere of influence. resources of Myanmar including Moreover, Myanmar is an important

349 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ member of Bay of Bengal Initiative infrastructural projects with the aim for Multi-Sectoral Technical of bolstering trade in the ASEAN- and Economic Cooperation India Free Trade Area (Atmakuri, (BIMSTEC), an organization that A. – Izzuddin, M. 2020). India also enable to accomplish New Delhi’s affirms Myanmar as a gateway to aims of increasing bilateral and link the rest of Southeast Asia for multilateral cooperation with its economic development. regional countries. Likewise, some infrastructure projects are being implemented such The Important Interest as the India-Myanmar-Thailand of India and China in Trilateral Highway and Kaladan Myanmar Multi-Modal Transit Transport (KMMTT) that that provides In 2015, with the changing connection from Sittwe deep-water of Myanmar politics through port to Kolkata. India aims to use democratization, Indian Sittwe port as a counter balancing government upgraded its policy to to China’s BRI in Indo-Pacific improve relations toward Myanmar. region. The construction of Sittwe India always recognizes Myanmar port is part of the Kaladan multi- as its crucial partner because of model transit transport project to its membership in Association of expand a multi-modal sea, river and Southeast Asian Nations (ASEAN), road transport corridor for shipment its critical role in the fight to end of cargo from eastern port of India insurgency in its northeast border to Myanmar through Sittwe port as and its importance in implementing well as north-eastern part of India Mode’s Act East Policy. New Delhi via Myanmar. has been investing in ASEAN-wide

350 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 31: Myanmar’s Economic Corridors Source: www.beltandroad.news

Belt and Road Initiative China in BRI project. In mainland (BRI), also known as One Belt, Southeast Asia, Myanmar is the One Road (OBOR) is Chinese high important country as the linking ambitious grand strategy launched the southern Chinese province by Chinese President Xi Jinping of Yunnan with Myanmar’s aimed at connecting China and the Kyaukphyu port that allows oil rest of the world with a network and gas delivered to China without of roads, high-speed rail, power bypassing Malacca straits, i.e., as a lines, ports, pipelines, and other land corridor to overcome the so- infrastructures networks. Under called Malacca dilemma. Moreover, BRI, more than 60 countries from it can provide China to access the Asia, the Middle East, Europe and Indian Ocean that is necessary both Africa, will take part in the project for trade and security and also from based on three key pillars such military point of view. as utilizing industrial capacity, Accordingly, it can assume nurturing a network of economic that the interests of both India and interdependence, and fostering China meet at the same point of regional stability and prosperity strategic Western part of Myanmar, (Heng, K. – Po, S. 2017). Like any Rakhine state. India is worried other ASEAN countries Myanmar about China-Myanmar Economic has launched cooperation with Corridor (CMEC) that is vital for

351 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ China to reduce its reliance on proper management on that issue Malacca Straits and access to Bay of and fully realized the country’s Bengal and Indian Ocean. There is real situation on conflicts between already running oil and gas pipeline ethnic Rakhine people and migrated from Myanmar to China under this Bengalis people following the project. For China, the strategic attack of ARSA (Arakan Rohingya advantages coming from this Salvation Army). In his visit, the project area are more crucial than oil following joint statement was and gas transportation. The CMEC released: involves the Kyaukphyu deep-sea port with a special economic zone ‘India condemned the recent (SEZ), the China-Myanmar border terrorist attacks in northern Rakhine State, where several members of economic zone and new Yangon the Myanmar security forces lost urban development project. While their lives. Both sides agreed that China is running the Kyaukphyu terrorism violates human rights port project with special economic and there should, therefore, be no zone, India is developing the Sittwe glorification of terrorist as martyrs’ (Roche, E. 2017) port project simultaneously. Myanmar stands as one of The Progress of Myanmar- the strategic neighbors of India India Relations: A Threat sharing borders with a lot of Indian for China and Hope for northeastern states including Myanmar? militancy-hit Nagaland and Manipur states. Many of the tribes In 2017, Indian Prime in India’s Northeastern region are Minister Narendra Modi visited ethnically linked to some Myanmar Myanmar as his first bilateral visit tribes and at least five major militant to Myanmar. That was the third groups from India’s Northeast have by an Indian prime minister in been fighting for their autonomy five years and second by him in setting up in Sagaing region of three years. At the historical visit, Myanmar border (Zhao, H. 2008). Prime Minister Modi met with There are a lot of cooperations State Counsellor Aung San Suu between India and Myanmar to Kyi who was strongly criticized fight against the insurgent groups. by international community in On 16 May 2019, the two countries concerning with the Bengalis issue carried out a three-week-long in western part of Myanmar. He military operation to fight several supported Myanmar’s government militant groups hiding along Indo-

352 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Myanmar border. In addition, as part of its ‘Act East Policy. For they signed a Memorandum of Naypyidaw, these military purchase Understanding (MoU) on defense assists Myanmar’s maritime cooperation aimed at enhancing interests and maritime security, military training, joint surveillance, especially on the back of its and maritime security (Delhi, A. B. neighbors Bangladesh and Thailand N. 2019). acquiring submarines from China In July 2019, Myanmar (Atmakuri, A. – Izzuddin, M. and India signed a defense 2020). Under India’s “Naval cooperation agreement aiming Diplomacy”, the Indian navy at advancing military-to-military initiated CORPAT (Coordinated cooperation between Indian Armed Patrol) with Myanmar since 2003. Forces and Tatmadaw (Myanmar According to CORPAT, India Army) (Panda, A. 2019). It was has done military exercises with signed after the extensive talk other countries like Bangladesh, between Commander-in-Chief Indonesia and Thailand. of Myanmar’s Defense Services India looks Myanmar as an Senior General Min Aung Hlaing important buffer for its national and India’s Minister of State for security interests, it provides Defense Shripad Yesso Naik military and also conducts joint (Delhi, A. B. N. 2019). Indian military exercises with Myanmar government delivered Myanmar Army like the India-Myanmar navy Advanced light Torpedo Bilateral Military Exercises ( (TAL) Shyena torpedoes which IMBAX-2017 and IMBEX 2018– were manufactured by Bharat 2019) (Atmakuri, A. – Izzuddin, M. Dynamics Limited (BDL), a public 2020). In July 2019, during a visit sector enterprise under the control of Commander-in-Chief of General of India’s Ministry of Defense Min Aung Hlaing to India, a new (“Indian Torpedoes Delivered to Memorandum of Understanding Myanmar Navy,” 2019). Again on defense cooperation was signed in the same year, Myanmar navy aiming at advancing military- acquired a diesel-electric Kilo- to-military cooperation between class submarine, INS Sindhuvir, Indian Armed Forces and Tatmadaw which India had modernized after (Myanmar Army) (Panda, A. 2019). purchasing from Russia in the Myanmar army has bought 1980s (Siddiqui, H. 2019). most of its military weapons and India has launched military fighter jacks mostly from China engagement with regional countries while facing with arm-embargo

353 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ imposed by West. But there is and sensitive issue in bilateral growing unsatisfaction in Myanmar relations. That may be satisfied military because of substandard and with Myanmar people’s desire unqualified military weapons as and decrease the risk of tensions well as lack of sufficient technical between the two countries. It may support by China. Some fighter be China’s trade-off between the pilots from Myanmar Air Force Mega Dam Project and Kyaukphyu often lost their lives in air crush port and special economic zone that accidents. Coincidently, India’s can bring a wide range of interests “Made in India” arms industry has through BRI. The good-well visit identified Myanmar as a key to of President Xi highlights how increasing its military exports and important Myanmar’s role is for then Myanmar bought India’s first Beijing. locally produced anti-submarine Most recently, a delegation torpedo, called TAL Shyena in led by President of Myanmar 2017. “Made in India” initiative visited India according to the was launched in September 2014 cordial invitation of the President with the aim of becoming India as a of the Republic of India from 26 global manufacturing powerhouse to 29 February 2020. Both sides and production hub and the defense welcomed the synergies between industry has regarded as one of the Myanmar’s independent, active government’s key strategic plans and non-aligned foreign policy and (Rossiter, A. – Cannon, B. J. 2019). India’s Act East and Neighborhood On the one hand, there is an First policies (“India-Myanmar incredible change in Myanmar- joint statement during the state China relations. In January 2020, visit of the Myanmar President President Xi Jinping paid a two-day to India,” 2020). New Delhi also visit to Myanmar on the occasion revealed its support for the steps of the 70 years anniversary of Sino- taken by the Government of Myanmar relations. He was the first Myanmar addressing the challenges Chinese leader to visit Naypyidaw in Northern Rakhine State in which after Jiang Zemin back in 2001. the crisis happened between ethnic During his visit, 33 projects were insurgent group and army. signed for joint projects between Furthermore, India the countries. The most significant reiterated its support to Myanmar fact is that China didn’t ask to start government’s repatriation process Ayeyarwady Myitsone dam project for displaced persons from Rakhine that was the most controversial State that was signed an agreement

354 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ between Myanmar and Bangladesh. regarding the displacement and For Myanmar, the situation of suffering of all communities Rakhine State, which is located affected by this violence, and in the western part of Myanmar, it has made great strides for is complex and challenging issue restoration of the rule of law, peace that has drawn much attention by and stability and preparation for the international community. On repatriation of displaced people 25 August 2017, the violence was from Rakhine State. In order to triggered in Rakhine State when the solve this issue, the Governments extremist group known as Arakan of Myanmar and Bangladesh Rohingya Salvation Army (ARSA) signed the “Arrangement on Return committed the collective attacks on of Displaced Persons from Rakhine Myanmar security forces (more than State” on 23 November 2017, the 30 police posts). Later, this terrorist Terms of Reference (ToR) for groups targeted, attacked and the Joint Working Group on the threatened innocent civilians in the repatriation of displaced Myanmar Rakhine state. This was not the first residents from Bangladesh time for these violence attack and (Embassy of the Republic of the they carried out similar assaults on Union of Myanmar, Belgrade, police posts that nine police officers 2019, p.3). As a result, Myanmar had been killed in October 2016 has been received full support by (Rakhine 2017). Myanmar Army India as New Delhi understands the planned a military operation to prevailing situation on the ground fight against these militants in order and recognizes Myanmar’s effort to protect the lives of civilians and to accomplish main objectives to to maintain the sovereignty of the establish peace, stability, rule of country. The brutal terrorist attacks law and sustained development of ARSA led to the escalation of in Rakhine State, meanwhile violence and the subsequent mass international community impose displacement of Muslim people flee pressure on Myanmar government into Bangladesh which has changed based on unreliable and one-sided the entire situation and negatively narratives and sources which could affected the perception and attitude only hinder progress (ibid). So, of the international community on India’s stance on this issue from the Rakhine issues. The Government side of Myanmar means to provide of the Republic of the Union of the Myanmar government the Myanmar fully shares the concern diplomatic shield in international of the international community arena. Moreover, regarding defense

355 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ and security cooperation, New that was one of the deterrence Delhi agrees to assist Naypyidaw for peace reconciliation process in the capacity building of the of Myanmar. Furthermore, the Myanmar Defense Services and growing concern of Chinese to enhance maritime cooperation influence over Myanmar, the by recognizing the importance of mount of antagonism between local addressing maritime challenges and people’s and Chinese investment strengthening maritime security. companies because of social discontent and the lack of Myanmar V.1.4. Result and Discussion government’s specific rules and regulations in order to settle the Although India is regarded as disputes have lost the mutual trust the largest democratic state in the in bilateral cooperation. In the past, world, it had never kept exhorting although the isolated Myanmar Myanmar in its democratic norms was bandwagoning China with no because it strongly embraces the option, the new geopolitical shift principle of non-interference based has paved the way for Myanmar on the “Five Principles of Peaceful to achieve more opportunities to Co-existence” since 1950s. extend its international relations Moreover, trade and economic around the world. linkages were weak compared to In the current situation, Myanmar’s economic relations Myanmar is struggling with with China. The less economic economic setback, political connections meant the less risk of instability and social unrest. Apart possible clashes between the two from these challenges, the country sides. In comparison with China, has faced with international India did not deliver the serious pressures to deal with the problems and any confrontation displaced Myanmar residents from with Myanmar. For all of these Bangladesh. Both India and China reasons, India could build steady give full confidence to Myanmar relations with Myanmar without effort in solving this issue. As a less leading to the terrible bilateral powerful state with international relations. pressure, Myanmar absolutely Considering China, Beijing’s needs the diplomatic support by illegal support of Myanmar EAOs these neighbors. However, as a with arms and ammunition was small country between two powerful a cause of being disappointed states, Myanmar inevitably faces by Myanmar government and with both threats and opportunities

356 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ offered by both sides. Myanmar which they have no other choice should establish friendly relations of by doing this way in dealing with both giants to take advantages with those powers (Womack, B. of Sino-Indian rivalry using its 2006). This is because of the power strategic value instead of leaning disparity between small and great on one power. powers. However, despite their Under the NLD government vulnerability, small countries could led by Aung San Suu Kyi, some take a number of measures to reduce political analysts surmised that their vulnerability, such as: the Naypyidaw would intimate with strengthening of national defense the West by leaving China behind. capabilities; entering into defense But in reality, Myanmar is getting agreements with other states; closer to China than the previous underpinning security through time. The incumbent government is economic growth; promoting consciously aware of the fact that it internal cohesion; and adopting will not be beneficial for Myanmar sound diplomatic policies at both to make any confrontation with bilateral and multilateral levels Beijing. The government’s policy (Tan, A. T. H. 2017). By analyzing is to build friendly relations with all current scenario, it can be assumed countries in the world. Currently, that Myanmar government can well there are remarkable improvements handle its good relations with both in Myanmar-India relations. The India and China by strengthening permanent truth is Myanmar is economic cooperation in western always an important neighbor part of Myanmar by utilizing its both for India and China because bargaining strength. So, this is of its geostrategic significance. If the interesting point of Myanmar Myanmar can grasp its role between government’s strategy in managing the two powers, it can possibly its relations with these two great bring its economic development powers for the sake of its own and political power. national interest without destroying From the point of view any of those relations. of the asymmetrical theory of international relations explored by V.1.5. Conclusion Brantly Womack, small countries used to choose cooperative To sum up, China is the most strategy to great powers instead important economic partner for of confrontation or competitive Myanmar meanwhile India is also means except in one condition in the reliable one that can support

357 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Naypyidaw to develop its military bilateral ties. That would be the capability and diplomatic support successful proof of Myanmar’s in encountering international balancing strategy paving the way pressure. On the other hand, of development of Myanmar. The Myanmar inevitably rely on better the Myanmar-India relations, Beijing’s diplomatic support and the lesser Chinese influence in protection in United Nations Myanmar even if Myanmar cannot Security Council. Under the clever totally get rid of China’s role in its and proper management of Aung country. In a nutshell, the progress San Suu Kyi, who is a smart leader, of Myanmar-India relations can be Myanmar will never allow itself to an impetus for the development become a foe or competitive one of Sino-Myanmar relations in any with any of those powerful states. way. It is never ever impossible for Myanmar to incline one side. It is Acknowledgement obviously seen that today Myanmar has pursued friendly relations with The present publication is all countries with its great effort. the outcome of the project „From While Myanmar is escalating its Talent to Young Researcher project relations with India, there is some aimed at activities supporting the concern that its political shift can research career model in higher deteriorate Sino-Myanmar relations education”, identifier EFOP- or that will trigger Beijing’s anger to 3.6.3-VEKOP-16-2017-00007 co- Naypyidaw. In reality, the relations supported by the European Union, between Myanmar and Beijing Hungary and the European Social are increasing in parallel with Fund. the progress of Indian-Myanmar

V.1.6. References

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358 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Delhi, A. B. N. 2019: India-Myanmar ink pact to enhance defence cooperation [WWW Document]. India Today. URL https://www. indiatoday.in/india/story/india-myanmar-ink-pact-to-enhance- defence-cooperation-1574897-2019-07-29 (accessed 1.27.20). Eekelen van, W. 2016: Five Principles of Peaceful Coexistence. Brill Nijhoff. https://doi.org/10.1163/9789004304314_005 Embassy of the Republic of the Union of Myanmar, Belgrade 2019: THE SITUATION IN RAKHINE STATE AND UPDATED INFORMATION ON REPATRIATION OF DISPLACED PERSONS FROM RAKHINE STATE. Gottschlich, P. 2015: New Developments in India–Myanmar Bilateral Relations? J. Current. Southeast Asian Affairs. 34, 139–163. https:// doi.org/10.1177/186810341503400206 Gottschlich, P. 2017: The India-Myanmar Relationship: New Directions after a Change of Governments? 48, 171–202. Han, E. 2017: Geopolitics, Ethnic Conflicts along the Border, and Chinese Foreign Policy Changes toward Myanmar. Asian Security. 13, 59– 73. https://doi.org/10.1080/14799855.2017.1290988 Haokip, T. 2011: India’s Look East Policy: Its Evolution and Approach. South Asian Survey. 18, 239–257. https://doi. org/10.1177/0971523113513368 Heng, K. – Po, S. 2017: Cambodia and China’s Belt and Road Initiative: Opportunities, Challenges and Future Directions 1, 1–18. India-Myanmar joint statement during the state visit of the Myanmar President to India [WWW Document], 2020: Mizzima Myanmar News Insight. URL http://mizzima.com/article/india-myanmar-joint- statement-during-state-visit-myanmar-president-india (accessed 3.3.20). Indian Torpedoes Delivered to Myanmar Navy [WWW Document], 2019: The Irrawaddy. URL https://www.irrawaddy.com/news/burma/ indian-torpedoes-delivered-myanmar.html (accessed 3.4.20). Lee, L. 2014: Myanmar’s Transition to Democracy: New Opportunities or Obstacles for India? Contemp. Southeast Asia 36, 290. Panda, A. 2019: India, Myanmar Conclude Defence Cooperation Agreement [WWW Document]. URL https://thediplomat.com/2019/07/india- myanmar-conclude-defense-cooperation-agreement/ (accessed 2.5.20). Rakhine 2017: What sparked latest violence? – BBC News.

359 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Roche, E. 2017: Why ties with Myanmar are important for India [WWW Document]. Livemint. URL https://www.livemint.com/Politics/ s1mwTGkL8Mr7Ki8rFhg4LM/Why-ties-with-Myanmar-are- important-for-India.html (accessed 3.4.20). Rossiter, A. – Cannon, B. J. 2019: Making arms in India? Examining New Delhi’s renewed drive for defence-industrial indigenization. Defence. Studies. 19, 353–372. https://doi.org/10.1080/14702436.2 019.1685880 Siddiqui, H. 2019: Act East Policy: India gives Myanmar Kilo Class submarine and trains their sailors. Finance. Express. URL https:// www.financialexpress.com/defence/act-east-policy-india-gives- myanmar-kilo-class-submarine-and-trains-their-sailors/1795683/ (accessed 2.5.20). Tan, A. T. H. 2017: Singapore’s Survival and its China Challenge. Security Challenges. 13, 11–31. Womack, B. 2006: China and Vietnam: The Politics of Asymmetry. Cambridge University Press. Yhome, K. 2015: The Burma Roads: India’s Search for Connectivity through Myanmar. Asian Survey. 55, 1217–1240. Zhao, H. 2008. China and India: Competing for Good Relations with Myanmar. J. East Asian Affairs. 22, 175–194.

360 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ V.2. The Role of ASEAN on the Territorial Dispute in the South China Sea

Rosita Widjojo125 – Hnin Mya Thida126

Abstract

The South China Sea (SCS) is known for its significant strategic and economic role in the Indo-Pacific. The South China Sea is bordered by Brunei, Cambodia, China, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Taiwan and Vietnam. It is one of the most important commercial trade routes in the region. However, it is simultaneously becoming the source of tension between China and other South East Asian nations for territorial control. In recent years, China has been asserting greater control, and ASEAN has sought to resolve maritime issues in the region. As the SCS is surrounded by mostly ASEAN member countries, problems arise when each country, including China, lays claim to the land and sea features in the SCS, driven mostly by strategic interests. Being members of ASEAN, where member countries need to resolve regional issues to maintain regional stability, ASEAN members with a claim in the SCS have their own national interests that make conflict resolutions complicated. At the 34th ASEAN Summit (June 2019), all member states agreed to adopt the ASEAN Outlook on the Indo-Pacific. The document emphasized ASEAN’s role to strengthen regional commitment by respecting international law, especially the United Nations Convention on the Law of the Sea (UNCLOS). Maritime cooperation is seen as a peaceful settlement to resolve potential disputes.

Keywords: ASEAN, South China Sea (SCS), maritime territorial disputes, UNCLOS

125 University of Sopron, Széchenyi Istvan Doctoral School of Economics and Management, PhD student 3rd year, [email protected] 126 Corvinus University of Budapest, International Relations Multidisciplinary Doctoral School, PhD student, 2nd year, [email protected]

V.2.1. Introduction disputed maritime regions, mainly in terms of securing access to natural The South China Sea (SCS) resources and trade routes. As the has been one of the major issues SCS contains an abundant source in world geopolitics. Strategic of oil and natural gas deposits, as interests have placed the South well as being a major international China Sea (SCS) as one of the most trade route, the ongoing struggle is mainly between China and six

361 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ASEAN states (Malaysia, the countries, such as Indonesia, Philippines, Brunei, Vietnam, also have a claim in the SCS, Singapore and Indonesia). China although indirectly, to ensure claims the entire sea as its territory that the abundant gas resources (through its controversial nine-dash in the Natuna islands fall under line), creating tension with ASEAN Indonesia’s authority for its and also the United States (US) exclusive exploitation (Severino, interest in its geopolitical strategy to R. C. 2010). The United States prevent Chinese domination in East (US), although not supporting any Asia. The SCS is one of the most country’s claims, also seeks to complex disputes involving many ensure that its warships and aircraft countries and has the potential to are free to navigate in or above escalate into a great power conflict the waters of the SCS, to keep its (Kempston, T. – Thomas, N. 2013). trading links with South East Asia. According to Severino, Japan also has interests of securing conflict arises because each country the trading flows and energy imports surrounding the SCS has a strategic through the SCS. Under the United interest in the SCS (Severino, R. Nations Convention on the Law C. 2010). China fears threats from of the Sea, or UNCLOS, coastal the southeast, while some accuse states are entitled to an Economic China of exerting dominance in the Exclusive Zone (EEZ) and beyond SCS to achieve a certain amount that are considered the high seas or of control in the region. Vietnam international waters, common to needs to impose control in the all nations. However, each country SCS to avoid being surrounded by has different strategic interests and Chinese power. The Philippines with China imposing more power feels compelled to extend its zone in the SCS, maintaining peace and of jurisdiction westwards to the stability becomes a fragile issue. SCS, having been invaded by This paper would like to Japanese forces at the start of the address concerns regarding the SCS Pacific War. A vast area of the SCS issue between China and ASEAN, separates East Malaysia and West which have persisted for more than Malaysia, but the SCS also serves 50 years. On the one hand, China as a connection to both parts. Brunei is one of the most important trading Darussalam wants to ensure its partners of ASEAN, but on the claimed exclusive economic zone, other hand, the SCS issue could put which overlaps with other claims. ASEAN into an increased potential Severino added that other confrontation with China. The

362 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ focus on ASEAN integration and V.2.2. ASEAN as a Regional community-building has earned Organization secondary attention because of the energy spent on dealing with SCS The Establishment of issues. Countries find themselves ASEAN squeezed over how they should define regional interest, how to The Association of South ensure unity and solidarity in East Asian Nations or ASEAN accordance with the “ASEAN was established on August 8, Way” – which utilizes compromise, 1967, in Bangkok, Thailand, consensus, and consultation while with the signing of the ASEAN prioritizing informal decision- Declaration (or Bangkok making processes and non- Declaration) by the founding states conflicting ways of addressing of ASEAN: Indonesia, Malaysia, outstanding issues – and how the Philippines, Singapore and to ensure the mutual trust and Thailand. Brunei Darussalam joined confidence that have supported in 1984, followed by Vietnam in the ASEAN community thus far 1995, then Lao PDR and Myanmar (asiatimes.com). Therefore, this in 1997. Cambodia joined in 1999, paper’s objective is to provide and these countries make up the ten insight into ASEAN and China in the Member States of ASEAN (www. SCS conflict, by taking into account asean.org). The map of the region how ASEAN member countries are and the member states is presented seeking to settle the issue without (Figure 32). fragmenting the relationship within The aims and purposes of ASEAN. By using exploratory ASEAN, as stated in the ASEAN study and supported by secondary declaration, are as follows: information from previous studies 1. To accelerate the economic and recent developments in the growth, social progress region, the main points in this paper and cultural development are the following: identifying the in the region through joint main causes of the dispute; reasons endeavors in the spirit of why the SCS dispute is threatening equality and partnership ASEAN unity; and strategies for in order to strengthen the how ASEAN could overcome this foundation for a prosperous dispute. and peaceful community of Southeast Asian Nations; 2. To promote regional peace

363 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ and stability through abiding effectively for the greater respect for justice and the utilization of their agriculture rule of law in the relationship and industries, the expansion among countries of the of their trade, including the region and adherence to study of the problems of the principles of the United international commodity Nations Charter; trade, the improvement of 3. To promote active their transportation and collaboration and mutual communications facilities assistance on matters of and the raising of the living common interest in the standards of their peoples; economic, social, cultural, 6. To promote Southeast Asian technical, scientific and studies; and administrative fields; 7. To maintain close and 4. To provide assistance to each beneficial cooperation with other in the form of training existing international and and research facilities in the regional organizations with educational, professional, similar aims and purposes, technical and administrative and explore all avenues for spheres; even closer cooperation 5. To collaborate more among themselves.

364 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 32: ASEAN Member States Source: www.weform.org, 2017

The ASEAN Vision comprised three pillars: the ASEAN political and security community, The ASEAN Vision 2020, the ASEAN economic community adopted by the ASEAN leaders on and the ASEAN socio-cultural the 30th Anniversary of ASEAN, community. agreed on a shared vision of ASEAN For the ASEAN political and as a cooperation of Southeast Asian security policy, each member agrees nations, outward looking, living to rely exclusively on peaceful in peace, stability and prosperity, processes in the settlement of intra- bonded together in partnership regional differences and to regard in dynamic development and in their security as fundamentally a community of caring societies. linked to one another and bound The ASEAN Community was by geographic location, common established in 2015, which vision and objectives. It has the

365 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ following components: political prosperity. Household purchasing development; shaping and sharing power is rising, propelling the of norms; conflict prevention; region into the next frontier of conflict resolution; post-conflict consumer growth. The region peace building; and implementing must now meet the challenges of mechanisms. providing enormous investment in The ASEAN economic infrastructure and human-capital community formed the ASEAN development to ensure it realizes its Economic Community (AEC) full potential (www.weforum.org, blueprint with a vision for 2025, 2017). in which it is aimed towards (1) Today, ASEAN can be A Highly Integrated and Cohesive regarded as a successful regional Economy; (2) A Competitive, organization preserving the peace Innovative, and Dynamic ASEAN; and stability in the region, promoting (3) Enhanced Connectivity cooperation within and outside the and Sectoral Cooperation; (4) community. Compared to the EU A Resilient, Inclusive, People- as a regional organization, ASEAN Oriented, and People-Centered has similarities and differences ASEAN; and (5) A Global ASEAN. with the EU. The main differences In the ASEAN socio- are the means of settling disputes cultural community, the ASEAN (KOH, T. 2017): Socio-Cultural Community 1. The EU has the European (ASCC) blueprint also formed Parliament with the power a vision for 2025, committed to to legislate, as well as the creating opportunities for human power to veto budgets and development, including culture and appointments. ASEAN information, education, youth and has the ASEAN Inter- sports, health, social welfare and Parliamentary Assembly development, women and gender, which has the power of moral women and children rights, labor, suasion only. civil service, rural development and 2. The scope of power of the poverty eradication, environment, secretariat. The European trans-boundary haze-pollution, Commission acts like a disaster management and government and is entitled humanitarian assistance. Despite to enter into treaties. The their distinct cultures, histories and commission has the power languages, the 10 member states of to put forward proposals ASEAN share a focus on jobs and for legislation. The ASEAN

366 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Charter has enhanced the negatively affected (Zhang, Y. – power of the secretary- Wang, Y. 2019). general. One of his most important responsibilities V.2.3. Geopolitical Aspects is to issue an annual report in the South China Sea card on each member state’s compliance with its The geopolitics of the South obligations. China Sea 3. The decision-making process, in which ASEAN takes all The South China Sea is a its decisions by consensus. marginal sea that is part of the The EU can decide by taking Pacific Ocean and is the center of votes. There is a system maritime Eurasia. It encompasses of weighted voting, with an area from the Karimata and different countries being Malacca Straits of Taiwan. The given different numbers of South China Sea (SCS) is one of votes. However, in the area of the world’s busiest waterways with common foreign and security 50% of world annual trade passing policy, decisions are based on through the region. It is significant unanimity. not only for its essential trade route but for its abundant natural Southeast Asia is a huge resources such as gas, oil and its rich neighboring region for China, to fish productivity. It is also critical which it is connected by land and because of the world’s important the South China Sea. As the ASEAN linking point at the Malacca Strait, becomes a community bringing which connects the South China all countries together, China’s Sea and, through extension, the relations with ASEAN are based on Pacific Ocean with the Indian two tracks: its bilateral relationship Ocean. The region is also vital for with each member, and its collective the Northeast Asian countries of relationship with ASEAN as a Japan, South Korea and Taiwan as whole. While handling complex 80 percent of crude oil imports to bilateral relations with each these countries passes through this country, China has given priority region. According to the United to developing the relationship Nations’ Conference on Trade and with ASEAN. With rising disputes Development (UNCTAD), roughly over the South China Sea, China’s 80 percent of global trade by relationship with ASEAN has been volume and 70 percent by value is

367 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ transported by sea and 60 percent of Therefore, it is important maritime trade passes through Asia not only for claimant states, but via the South China Sea (“How also for other countries, to secure much trade transits the South China the Sea Lanes of Communication Sea?,” 2017). (SLOCs). Moreover, the region is In addition, historically the subject of more than a dozen and geographically, the SCS is overlapping and interconnected a key commercial thoroughfare disputes over islands, reefs, shoals connecting Asia with Europe and rocks scattered throughout the and Africa, and its seabed is rich SCS and thus, being an important with natural resources. One third waterway, it is essential to have a of global shipping, or a total of well-recognized international rule US$3.37 trillion of international of law. Nowadays, China’s assertive trade, passes through the SCS. acts of establishing artificial islands About 80 per cent of China’s oil and the installation of weapons imports arrive via the Strait of over these areas threaten not only Malacca, in Indonesia, and then sail the sovereignty of claimant states across the South China Sea to reach but also the maritime security of China. The sea is also believed to the region. As a strategic point, contain major reserves of natural the SCS issue has gone beyond resources, such as natural gas and the economic aims and become oil. The US Energy Information important for maritime security, Administration estimates the area peace and stability. Moreover, contains at least 11 billion barrels the South China Sea joins the of oil and 190 trillion cubic feet of Southeast Asian countries with the natural gas. Other estimates are as Western Pacific, acting as the throat high as 22 billion barrels of oil and of the global sea route (Kaplan, R. 290 trillion cubic feet of gas. The D. 2011). Thus, all Southeast Asian SCS also accounts for 10 per cent countries have a great interest in of the world’s fisheries, making it a establishing peace and stability in key source of food for hundreds of the region. millions of people.

368 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 33: Geographical Positioning of Southeast Asian Countries Source: www.quora.com, 2018

Figure 33 outlines the Mainland Southeast Asia and geographical positioning of Maritime Southeast Asia. The Southeast Asian countries in the former part is historically known South China Sea. The Southeast as Indochina, including Cambodia, Asian countries are mainly divided Laos, Myanmar, Peninsular into two geographic groups: Malaysia, Thailand and Vietnam.

369 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ The Maritime Southeast Asia ideological war of two powerful comprises Brunei, East Malaysia, blocs. Current threats have stemmed Indonesia, the Philippines and from climate change, pandemics, Singapore. Among them, the five border war and terrorism as well as member countries are connected to organized crime syndicates. Thus, the dispute in claiming land features all countries in the region have and waters in the South China Sea come to realize that they must adopt as they have immense strategic a more collaborative approach to interests in it. Although the rest address the unconventional form of the countries are not directly of threats (Oegroseno, A. 2016). involved in the dispute, these This perspective has influenced clashes impact hugely on all of the process of solving the SCS the ASEAN countries as this is not dispute too. On the other hand, simply an issue of territorial dispute the territorial and sovereignty but also indicates the complex issues are invariably associated geopolitical and geo-economic with patriotism and nationalism problems underpinned by possible which lead to drawbacks in conflict military threats posed by China in resolution. In the SCS dispute, all terms of building artificial islands claimant states are less likely to in the disputed waters. settle the issue through adjudication or arbitration. Instead they resort ASEAN and SCS Dispute to various dispute settlement mechanisms like negotiation, Most of the ASEAN enquiry, mediation, conciliation, countries are small and medium- regional agencies or arrangements, sized countries with disparities in or other peaceful means (ibid). their economic development and In the same way, China prefers diverse political systems. Despite to resolve the issue in a bilateral their disparity, all Southeast Asian way with each claimant state, but countries have clearly recognized it is also the desire of ASEAN the changing strategic environment to settle the dispute through the such as the regional security, social strength of ASEAN as a coherent economic development, threat entity. ASEAN centrality plays spectrum, and norms and rules of an important role in preventing states at the regional and global the association from being stuck level. In the region, the structures between great power rivalry and in of threats are changing in tandem protecting its resilience. The SCS with the situation driven by the dispute has resulted in the member

370 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ countries themselves arriving at a reflect on the issue, the effect on common ground of consensus over stakeholders can influence the the issue. All member countries outcome. have close economic relations or In ASEAN, the ASEAN political cooperation with either or Summit and the ASEAN Foreign both the US or/and China and no Ministers’ Meeting are the two country wants to incur the anger of forums for dealing with the SCS these two powers. The competition issue (Gerstl, A. 2017). ASEAN between China and the United had made historical success in States has strongly impacted on dealing with the SCS - including ASEAN in which Washington the 1992 ‘ASEAN Declaration impels ASEAN to play a stronger on the South China Sea’ and its leadership role in the conflict, while united response by revealing Beijing insists that ASEAN has no the photo evidence of Chinese role to play in its “near seas”, as assertiveness on Mischief Reef in the disputes are of a bilateral nature 1995. ASEAN aims to establish (Valencia, M. 2009). an effective conflict resolution So, it is one of the facts that framework that is a legally binding the priority of own national interests Code of Conduct (COC), and of each member state entails a stresses its full implementation in barrier to settling the dispute. As all its aspects accordingly. In 2002, a result, the 45th ASEAN Foreign ASEAN and China were able to Ministers’ Meeting which was issue the Declaration of Conduct held in Cambodia failed to issue a (DOC) on the Parties in South joint communiqué. It was Beijing’s China Sea (DECLARATION ON attempt to put Cambodia as the THE CONDUCT OF PARTIES IN ASEAN Chair to block a joint THE SOUTH CHINA SEA, 2012). communiqué consisting of China’s In 2013, the Philippines succeeded aggression in SCS (Roberts, C. in the international arbitration B. 2018). The outcome was a against China. In 2014, the United terrible experience of deteriorating States and the Philippines signed ASEAN unity. Beijing also uses an enhanced defense pact with economic diplomacy towards the aim of strengthening bilateral disputants and non-disputant relationships. countries by capitalizing on these In April 2018, the 32nd countries’ economic dependence ASEAN Summit was held in on it. Although China’s economic Singapore. At the Summit, two diplomacy does not directly important documents were released:

371 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the ASEAN leaders Vision for a continuously presented its Resilient and Innovative ASEAN argument that the issue is not a and the Zero Draft of the Chairman’s matter of ASEAN because these Statement of the 32nd Summit. are bilateral disputes (Thayer, C. The former consists of a nine-page 2018). Recently, it can be seen that document divided into a preamble bilateral relations between China and five sections including 37 and Cambodia is progressing over points. Point (3) of the preamble time. In February 2020, Cambodian addresses peace and security in Prime Minister Hun Sen visited general terms and specifically China and showed Phnom Penh’s focuses on nuclear weapons, on firm support of Beijing’s fight noninterference in internal affairs against the coronavirus epidemic. of ASEAN member states, and on The very close ties between China maritime issues. With regard to and Cambodia may be a worrisome the maritime issues, it states that sign and could be construed as a “maritime cooperation are enhanced set-back in solving the South China in accordance with internationally- Sea dispute. Indonesia, not included accepted treaties and principles, as a disputant country, has proposed including the 1982 United Nations to boost its defense measures near Convention on the Law of the the South China Sea, that is, in its Sea (UNCLOS)” (Thayer, C. Natuna islands by building a port 2018). In the Zero Draft, it could and military air base runway. This be seen that seven of 37 points is proof of how the SCS issue has are devoted to the South China concerned other countries as well. Sea issue. In June 2018, the 24th Regardless of the SCS ASEAN-China Senior Officials’ dispute, ASEAN-China relations in Consultation welcomed the official economic and strategic cooperation announcement of COC in the South have been steadily developing. China Sea and underscored the In June 2008, ASEAN and the need to make progress in dialogue People’s Republic of China and consultation to ensure mutual reaffirmed the importance of their trust and confidence, stressing the strategic partnership and agreed importance of fully and effectively to further strengthen their close implementing the DOC toward an relations at the 24th ASEAN-China effective COC (ASEAN, China Senior Officials’ Consultation reaffirm strategic partnership, (ASEAN, China reaffirm 2018). strategic partnership, 2018). The Philippines has Both parties agreed to strengthen

372 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ their economic relationship, priority on regional peace and including the implementation of security through constructive the ASEAN-China Free Trade engagement among member Area (ACFTA) and the ACFTA countries. The 1967 Bangkok Upgrading Protocol. The China- Declaration, which is the foundation Indochina Peninsula economic of ASEAN, states that regional corridor (CICPEC) is also one of peace and security is one of the the economic cooperation projects purposes of the Association. Apart between China and ASEAN from the Bangkok Declaration, member countries. It was initiated there are two significant provisions in 2010 and incorporated later into of guidance for the mechanism of the Belt and Road Initiative. This conflict resolution. They are the economic corridor aims to connect ASEAN Concord and the Treaty of several cities in Southern China Amity and Cooperation (TAC); both with major cities of Vietnam, Laos, were signed in 1976. The former Cambodia, Thailand, Malaysia regards promoting cooperation and Singapore with highways and among the member states through railroads (Xinhua Insight: New political, economic, social, Momentum over China-Singapore cultural and security programs. Economic Corridor/ Shanghai The latter highlights the specific Daily, 2014). China said the aim principles and policies for conflict of CICPEC is to promote the “co- management:(KOH, T. 2017): construction of the China-ASEAN 1. Mutual respect for the Free Trade Area and the Maritime independence, sovereignty, Silk Road” bringing regional equality, territorial integrity prosperity and benefit to people and national identity of all along the route. Thus, the economic nations; integration between ASEAN and 2. The right of every state to China would be estimated to lessen lead its national existence free the political tensions in the SCS from external interference, dispute because of their strong subversion, or coercion; focus on mutual economic interests. 3. Non-interference in the internal affairs of one another; Conflict Management in 4. Settlement of differences or ASEAN disputes by peaceful means; 5. Renunciation of the threat or Like other regional use of force; and organizations, ASEAN has placed 6. Effective co-operation among

373 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ themselves (Askandar, K. et “global war on terror” (Simon, S. al. 2002). W. 2015). Furthermore, President Obama initiated the “Pivot to The Treaty of Amity and Asia” strategy with the purpose of Cooperation has already formulated counterbalancing China especially the dispute settlement Mechanism deterring Chinese assertiveness in in which the regional arrangement the SCS and the growing maritime is a means to resolve the disputes capability of Beijing. The United as mentioned in Article 33 of the States aimed to contain ‘the rise United Nations Charter. Regardless of China’ by integrating and of the mechanism available to establishing closer relations with reconcile the territorial dispute, the Southeast Asian countries. most important factor is the political Moreover, Washington joined courage among the claimant states the East Asian Summit (EAS) in to commit to a settlement of the 2011. In 2013, the United States had dispute through a third party’s identified six strategic partners and involvement (Oegroseno, A. 2016). Singapore probably tops the list, The great powers’ competition although there is no formal defense in the region has had an impact on strategy between the two states the regional geopolitical situation (Simon, S. W. 2015). In contrast to especially by means of the contest the Obama administration, Donald between Beijing and Washington. Trump administration’s “free and The United States’ strategic goals for open Indo-Pacific” framework Asia have been notably emphasized pays less attention to Southeast since the end of the Cold War and Asia or ASEAN as the secondary have given its Pacific Command the importance to the US after Northeast task of disseminating the freedom Asia (Storey, I. – Cook, M. 2017). of the sea lanes of communication In 2019, Trump and Secretary of (SLOCs). Although Washington State Mike Pompeo failed to attend had recognized the significance the annual ASEAN-United States of Southeast Asia, the region did leaders’ summit and other ASEAN- not always play an important related meetings as well. role in US foreign policy. But the On December 21, 2019, situation changed under President however, the U.S. Congress passed Obama’s administration (2001- the State, Foreign Operations, and 2008) following the 9/11 attack by Related Programs Appropriations terrorists, designating Southeast Bill. This legislation contains $2.5 Asia as the “second front” of the billion to implement the Gardner-

374 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Markey Asia Reassurance Initiative it has used the hedging strategy Act (ARIA) (Thayer, C. 2020). in relation with the great powers, In the four provisions of ARIA, particularly the regional great the first one calls on the Trump powers. But the great power rivalry administration to engage with between the US and China has ASEAN as the premier “problem- threatened ASEAN’s unity and its solving regional architecture” efforts to maintain regional peace (ibid). Although ARIA’s and stability. The two powers have provocations might bring clashes been attempting to establish closer with Trump’s policy orientation, it relations with member states in can be seen as a glimmer of hope a way that actually exacerbates for ASEAN to be endorsed by U.S. this dispute through Washington’s to the region. The role of Southeast funding of capacity-building Asia under Trump’s presidency projects in ASEAN member states, has diminished in comparison while Beijing provides individual with former President Obama’s states with aid (Yang, A. H. 2015). administration in three main ways: On the other hand, Beijing’s (1) Trump’s intention to dismantle economic diplomacy as a soft power the Pivot to Asia strategy initiated has been substantially employed by Obama; (2) Trump’s withdrawal in Southeast Asia and ASEAN’s of America from the Trans-Pacific excessive economic dependency on Partnership (TPP); and (3) the China has been counterbalanced by strong emphasis of Trump’s the US’s military engagement in the administration on combating ISIS region. in the Middle East at the expense of The Belt and Road Initiative other regions including Asia, much (BRI) plays a critical role in less Southeast Asia (Storey, I. – analyzing ASEAN-China relations. Izzuddin, M. 2017). The Belt and Road Initiative The United States is the (BRI), also known as One Belt, country that has continuously One Road (OBOR) is a highly claimed freedom of navigation in ambitious grand strategy launched the SCS according to the United by Chinese President Xi Jinping Nations on the Law of the Sea aimed at connecting China and the (UNCLOS). Among ASEAN rest of the world with a network countries, Singapore has also asked of roads, high-speed rail, power for the freedom of navigation lines, ports, pipelines, and other although it is not a member of the infrastructure networks. Under the disputant countries. For ASEAN, BRI, more than 60 countries from

375 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Asia, the Middle East, Europe and Southeast Asian countries (Yu, Africa, will take part in the project H. 2017). Meanwhile regional based on three key pillars such economic integration plays a as utilizing industrial capacity, significant role for ASEAN nurturing a network of economic countries in minimizing external interdependence, and fostering uncertainties and global economic regional stability and prosperity vulnerabilities, and the more (Heng, K. – Po, S. 2017). Southeast comprehensive attachment to Asia is involved in both the Silk ASEAN is of paramount importance Road Economic Belt and the 21st for China. Century Maritime Silk Road of Belt Amid the escalation of US- and Road Initiative (BRI) which China rivalry, Southeast Asian hopes to foster the development of countries are well experienced in participating countries. Each of the dealing with great powers in the participating countries is essential region by using the most effective in successfully implementing strategies and holding the relations China’s BRI. in balance. The ascent of China and The holding of the second the United States’ involvement in iteration of China’s Belt and regional affairs effected changes in Road Forum (BRF) in April 2019 Southeast Asia from the traditional highlighted the important role of balance of power strategy to the Southeast Asia, with nine Southeast balance of influence strategy by Asian countries except for inviting great powers’ competition Indonesia attending the Forum. At and their participation in regional the wider cooperation mechanism economic and diplomatic affairs under the BRI, it concluded in order to develop the stakes in the Belt and Road Accounting the region’s peace and prosperity Standards Cooperation Mechanism (Ciorciari, J. D. 2009). (with Vietnam and Laos) and a statement of intent for cooperation V.2.4. The South China for pesticide quality specification Sea (SCS) Dispute and the setting (with Cambodia, Myanmar, Effect on ASEAN Unity Philippines, Thailand and Vietnam) (Parameswaran, P. 2019). China The SCS Dispute as a realizes that the success of the Threat to ASEAN BRI depends on the support and participation of other countries, Globalization, from the particularly the neighboring positive side, tends to incentivize

376 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ countries in certain regions to can be seen as examples of these form groupings to enhance their regional groups. However, recent international status, and to better developments show that issues and cooperate in terms of economic, conflicts can endanger the group socio-cultural and political with the risk of disintegration, such considerations. The European as Brexit and the migrant crisis in Union (EU), the Visegrad Four, the EU. Similarly, the SCS dispute NATO, ACP (Africa, Caribbean and is a threat to the unity of ASEAN as Pacific) group of states, and ASEAN, a regional organization.

Figure 34: China’s Nine-Dash Line in the South China Sea Source: www.dw.com, 2015

ASEAN was formed in strengthen relations with China, 1967 with the support of the Japan and South Korea in order to West, notably the USA and the counterbalance the US influence in UK. In its early days, ASEAN’s the Asia-Pacific region. As China function was to act as a buffer grew to be a new world power in the in the region in the midst of the 2000s, China began to have bigger Cold War, to prevent the spread ambitions in the Asia-Pacific region, of communism, and to enhance notably in the SCS, which has long development in the Southeast Asia served as the busiest international region. As the Cold War ended in sea trade route. China’s maritime the mid-1990s, ASEAN began to and air power expansion in the

377 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ SCS has been driven by attempts that any land or water in the nine- to establish a zone of supremacy dash line belongs to its “historical with economic activities as the maritime right” (Zhen, L. 2016). main objective (Gilley, B. 2019). Only four ASEAN member states Meanwhile, the US shifted its are claimant states to the SCS, attention to the Middle East. The namely Brunei, Malaysia, the SCS became a vulnerable area Philippines and Vietnam. Indonesia with many countries occupying has maintained the official position parts of the sea, and unlike land, that it is not a party to territorial it is difficult to establish a clear disputes in the SCS but China’s border among these countries and nine-dash line includes “traditional sometimes the exclusive economic fishing grounds” that fall within zone (EEZ) of one country overlaps the exclusive economic zone off with that of another. Figure 35 Indonesia’s Natuna Islands (Hoang, shows conflict areas in the SCS. T. H. 2019). For example, China As in this case, ASEAN countries claims more than 80 per cent, while failed to unify themselves to deal Vietnam claims sovereignty over with China’s growing power; this the Paracel Islands and the Spratly requires a change in the political Islands (Figure 34). Meanwhile, and sovereignty aspects among the Philippines claimed ownership ASEAN member states. of the Spratly archipelago and the The SCS dispute is one of the Scarborough Shoal (Figure 34), most complex and multi-layered with Malaysia and Brunei claiming geopolitical issues in the world. It the southern parts of the SCS. In July involves territorial and maritime 2016, a ruling by the International claims made by China, Taiwan, Tribunal in the Hague determined Vietnam, the Philippines, Malaysia, that China had no “historic rights” Brunei and Indonesia, and the over the sea, and ruled that some tension centered on the area in of the rocky outcrops claimed by which China claimed a “nine-dash several countries could not legally line” in the SCS, encompassing be used as the basis for territorial approximately 90 percent of the claims. Beijing rejected the ruling waters. The line runs as far as 2,000 and described it has having “no kilometers from mainland China, binding force”. The South China reaching waters close to Indonesia Sea territorial dispute has emerged and Malaysia, and it is used by as a challenge to the unity of the China as a geographical marker to organization. ASEAN has discussed assert its claim. China maintains drawing up a code of conduct to

378 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ be signed with China governing Beijing is reluctant to sign on to a disputes in the South China Sea, but multilateral agreement.

Figure 35: Areas in the SCS Dispute Source: www.eonomist.com, 2017

How ASEAN Could Similarly, Vietnam, the most Resolve the SCS Dispute outspoken critic of China, has softened its stance. In April 2018, The South China Sea the government said it would be territorial dispute has emerged willing to hold talks with China as a challenge to the unity of the to resolve disputes in the area “in organization. Southeast Asian accordance with international law”. nations have traditionally rejected However, there are many looking for a bilateral solution with challenges ahead in the quest to China, the region’s main economic realize its goals. For example, the and military power. Despite this, incredible economic, political, one year after the landmark ruling religious, cultural, and linguistic against China’s territorial claims, diversity amongst the ASEAN Philippine President Rodrigo member states creates barriers to Duterte agreed to solve the dispute unity and community building. with China through bilateral talks. The ‘ASEAN Way’ is anchored

379 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ on consultation and consensus and largely optional, means of amongst all ASEAN member states dispute settlement in the form of (Zhang, Y. 2019). There are worries diplomatic, or non-adjudicative, that ASEAN may not respond modes, consultation, good offices, effectively to meet these challenges mediation and conciliation, to the as the consensus can only be quasi-judicial, arbitration, but no based on the ‘lowest common court (Naldi, G. J. 2014). denominator’, and each member ASEAN has been working has veto power to oppose, postpone, with China on an official code or derail decisions and actions of conduct to avoid clashes in on urgent or critical problems the disputed waters. A binding (Morada, N. 2017). ASEAN will agreement has been discussed continue to ensure its members’ for years to little avail but in sovereign rights and benefits as a August 2018 it was revealed that ‘shared identity’, not a governing all parties had agreed on a single organization, while enhancing the draft negotiating text. ASEAN has role of collective governance. It discussed drawing up a code of is argued that, despite ASEAN’s conduct to be signed with China promises, the ‘internal’ relevance governing disputes in the SCS, but of the community to each of its Beijing is reluctant to sign on to a members remains largely secondary multilateral agreement. ASEAN is to national politics and policy also the only multilateral platform priorities within each of the ASEAN that China has agreed to engage member countries (Tay, S. S. C. on the SCS issue. This presents 2017). The challenge is to be bold Beijing with a dilemma in dealing enough to condition minds to create with ASEAN as a group and at the a new and reformed ASEAN by same time pursuing bilateralism agreeing to forge a new consensus with each claimant state (Hoang, (Fuzi, A. 2017). In the ASEAN T. H. 2019). China’s aversion to Charter of 2007 the Member ASEAN’s collective approach on States committed themselves the SCS issue was well reflected to the peaceful settlement of during the formulation of the disputes. The Protocol on Dispute DOC Guidelines. The key issue is Settlement Mechanisms adopted in whether ASEAN member states 2010 builds on this commitment. should consult among themselves The Protocol provides Member first before they consult with States with a framework enabling China. ASEAN members insist recourse in advance to traditional, on such a consensual approach

380 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ towards China, while the Chinese and a maritime Code of Conduct side does not think this is in line (COC) outside of ASEAN and with the understanding of the DOC. adopt that unified position together The whole issue of the SCS is not (Parameswaran, P. 2016). a matter between ASEAN as an organization and China, but among V.2.5. Conclusion the relevant countries (Severino, R. C. 2010). The reasons why China With China emerging as a new prefers bilateralism are self-evident: power this has changed its position in bilateral contexts, individual and ambition in the region. Along Southeast Asian claimant states do with the withdrawal of the US not have the collective bargaining power in the Asia-Pacific, it poses power of ASEAN. Dealing with a threat to ASEAN’s credibility each member state separately and as a regional organization that bilaterally would give China an previously managed to secure peace overwhelming leverage to dictate its and prosperity in the region. ASEAN terms, through coercion, co-option needs to adapt to these changes and/or commercial incentives by confronting the challenges of (Hoang, T. H. 2019). regional militarization, economic, Southeast Asia is most civilian, and environmental influential when it works together, security issues. ASEAN itself is so multilateralism will continue in a dilemma in regards to SCS to be critical. ASEAN should maritime disputes, although it rely more on support from the repeatedly defends a rule-based larger constellation of countries regional order and international committed to freedom of navigation law such as UNCLOS. Practically, and the protection of freedom of ASEAN has not taken effective and the seas to avoid being coerced into determined action over the issue unfair agreements over resource such that it can counterbalance development or rules of the road. Chinese hegemony. Fortunately, If ASEAN continues to struggle, the SCS issue does not impact on there may be opportunities for a the economic cooperation between subgroup to work mini-laterally to ASEAN and China. Furthermore, put forward solutions. For example, ASEAN should try to grasp its Indonesia, Vietnam, Malaysia, significant position in the BRI Brunei, and the Philippines could as a counterbalancing tool to the negotiate a consensus view on Chinese assertiveness in the South delineating maritime boundaries China Sea. The most important

381 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ thing that can overcome the SCS new and emerging challenges. dispute is to achieve the unity of ASEAN itself. Each country should Acknowledgement prioritize the common interest over its own national interest. One The present publication is way to enhance that is to review the outcome of the project „From the ASEAN Charter so that it Talent to Young Researcher project accommodates ASEAN towards aimed at activities supporting the becoming more functional and research career model in higher people-oriented, providing greater education”, identifier EFOP- cla¬rity in the conduct of relations 3.6.3-VEKOP-16-2017-00007 co- between states and in resolving supported by the European Union, issues. It would also allow ASEAN Hungary and the European Social to address power projections in the Fund. region and to adapt more quickly to

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383 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Economic Interdependence: A Challenge to Cooperation. ASEAN- Canada Research Partnership Working Paper Series. Working Paper No. 7. Menon, J. – Lee, C. 2019: An Evolving ASEAN: Vision and Reality. Asian Development Bank. https://www.adb.org/sites/default/files/ publication/528626/evolving-asean-vision-reality.pdf (accessed 03.31.20) Morada, N. 2017: ASEAN Community Building: What it Really Means to Be a Community. in ASEAN at 50: A Look at its External Relations. pp.19–30. http://www.kas.de/wf/doc/23550-1442-2-30. pdf (accessed 7 December 2018). Naldi, G. J. 2014: The ASEAN Protocol on Dispute Settlement Mechanisms: An Appraisal. Journal of International Dispute Settlement, Volume 5, Issue 1, March 2014, Pages 105–138, https://doi.org/10.1093/ jnlids/idt0 Nguyen, T. L. A. 2015: Origins of the South China Sea Dispute. In: Huang J., Billo A. (eds) Territorial Disputes in the South China Sea. Palgrave Macmillan, London. Oegroseno, A. 2016: CSCAP REGIONAL SECURITY OUTLOOK 2016 (pp. 44-46, Rep.) (Huisken R., Cable O., Ball D., Milner A., Sukma R., & Wanandi J., Eds.). Council for Security Cooperation in the Asia Pacific. doi:10.2307/resrep22266.15 Copy Parameswaran, P. 2016: Understanding Total Competition and China’s Challenge in the SCS. – The Diplomat – https://thediplomat. com/2020/02/interview-understanding-total-competition-and- chinas-challenge-in-the-south-china-sea/ (accessed 3.1.20) Parameswaran, P. 2019: Southeast Asia and China’s Belt and Road Initiative. https://thediplomat.com/2019/05/southeast-asia-and- chinas-belt-and-road-initiative/ Roberts, C. B. 2018: ASEAN, the “South China Sea” Arbitral Award, and the Code of Conduct: New Challenges, New Approaches. Asian Polit. Policy 10, 190–218. https://doi.org/10.1111/aspp.12391 Severino, R. C. 2010: ASEAN and the South China Sea. Security Challenges, 6(2), 37-47. Retrieved April 17, 2020, from www.jstor. org/stable/26459936. Simon, S. W. 2015: The US Rebalance and Southeast Asia : A Work in Progress. Asian Survey, 55(3), 572-595. JSTOR. https://doi. org/10.1525/as.2015.55.3.572

384 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Storey, I. 2014: Discordes en mer de Chine méridionale : les eaux troubles du Sud-Est asiatique - Politique étrangère, autumn issue,(3), 35-47. https://www.cairn.info/revue-politique-etrangere-2014-3-page-35. htm. Storey, I. – Cook, M. 2017: The Trump Administration and Southeast Asia: Enhanced Engagement. 2017, 9. Storey, I. – Izzuddin, M. 2017: Roundtable: The Trump Presidency and Southeast Asia. Contemporary Southeast Asia: A Journal of International and Strategic Affairs, 39(1), 1–2. https://muse.jhu.edu/ article/657969 Tay, S. S. C. 2017: ‘imperatives for a New ASEAN Leadership: integration, Community, and Balance’, in Baviera, A. and L. Maramis (eds.) ASEAN@50 volume 4: Building ASEAN Community: Political- Security and Socio-Cultural Reflections, pp.48–66. http://www. eria.org/ASEAN_at_50_4A.4_Tay_final.pdf (accessed 7 December 2018) Thayer, C. 2018: The South China Sea and ASEAN’s 32nd Summit Meeting [WWW Document]. URL https://thediplomat.com/2018/04/ the-south-china-sea-and-aseans-32nd-summit-meeting/ (accessed 2.7.20). Thayer, C. 2020: (2020, January 7): Asia Reassurance Initiative Act: Framework for a US Indo-Pacific Strategy? https://thediplomat. com/2020/01/asia-reassuran Tran, P. N. M. 2019: ASEAN and the South China Sea: Vietnam’s Role as Chair – Asia Maritime Transparency Initiative, Center of Strategic and International Studies, USA Valencia, M. 2009: The impeccable incident: Truth and consequences. China Security, 5(2), 22–28 Yang, A. H. 2015: The South China Sea Arbitration and Its Implications for ASEAN Centrality. In S. Lee, H. E. Lee, & L. Bautista (Eds.), Asian Yearbook of International Law (Vol. 21, pp. 83–95). Brill; JSTOR. https://www.jstor.org/stable/10.1163/j.ctvbqs7d3.8 York, M. 2015: ASEAN’s Ambiguous Role In Resolving South China Sea Disputes - Indonesian Journal of International Law, vol. 12, no. 3, 2015, pp. 286-310. Yu, H. 2017: China’s Belt and Road Initiative and Its Implications for Southeast Asia. Asia Policy, 24(1), 117–122. https://doi.org/10.1353/ asp.2017.0029

385 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

386 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Zhang, Y. 2019: Strengthened ASEAN Centrality and East Asia: China’s Role. – In: Tay, S., – Armstrong, S. – Drysdale, P. – Intal, P. (eds.): Collective Leadership, ASEAN Centrality, and Strengthening the ASEAN Institutional Ecosystem, Jakarta: ERIA, pp.107-125. Zhang, Y. – Wang, Y. 2019: ASEAN in China’s Grand Strategy. ASEAN@50. Vol. 4. Building ASEAN Community: Political– Security and Socio-cultural Reflection. Zhen, L. 2016: What’s China’s ‘nine-dash line’ and why has it created so much tension in the South China Sea? – South China Morning Post – https://www.scmp.com/news/china/diplomacy-defence/ article/1988596/whats-chinas-nine-dash-line-and-why-has-it- created-so (accessed 2.10.20)

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387 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ (accessed 2.10.20). XINHUA INSIGHT: New momentum over China-Singapore economic corridor/ Shanghai Daily. (Sep 17, 2014). Retrieved April 28, 2020, from https://archive.shine.cn/article/article_xinhua.aspx?id=241473

388 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ V.3. Milestones of Eurasian Integration

Bauyrzhan Urazimbetov127

Abstract

The Eurasian Economic Union is the largest and the most successful integration among post-Soviet integrations. Today, five countries are members of the union and four countries have free trade agreements with the union. However, like other unions the Eurasian integration has faced problems during the process of integration. For example, the issue of authoritarianism, corruption, the domination of Russia, the lack of balance between national interests and the union’s interests in the decision-making process, and the different rates of development among member states are some of the obstacles to integration. Such issues in the integration process interfere with the successful development of both the union and individual member states. Moreover, core issues might derail the development of the state or union by taking it in the wrong direction and creating serious systemic problems in the future. This article will examine the core issues and milestones of the Eurasian Economic Integration by use of a qualitative approach through the content analysis method with supporting arguments.

Keywords: Eurasian Economic Union, Russia, Kazakhstan, regional integration, economic and political issues, geopolitics

127 PhD Student – CUB IR Doctoral School, [email protected]

V.3.1. Novelty and usage of which spread after World Relevance of the Topic War 2 (Skriba, A. S. – Altukhov, A. O. 2019). Regional integration Regional integration is is a progressive and multi-stage an important part of a state’s economic integration, which development and in light of modern transfers to the political plane at day realities no country is able the final stage; the European Union to effectively exist and develop (hereinafter EU) or the Eurasian without integrating into the world Economic Union (hereinafter EEU) are two examples of this (Skriba, A. economy (Dobrovolsky, A. M. 2019). From the perspective S. – Altukhov, A. O. 2019). The EU of international relations, the is often highlighted as an example term “regional integration” is a of being one of the most successful relatively new phenomenon, the and complete realizations of

389 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ regional integration. Skriba and potential and important advantages Altukhov claim that other future that accompany globalization regional integrations as well as (homepage of European the EEU, will follow the EU’s Commission. Globalization and practice (Skriba, A. S. – Altukhov, the EU economy). This is just one A. O. 2019) in order to minimize example of many used by the EEU problems during the integration in their emulation of the EU. process. The global effect of the The process of Eurasian EU’s economic integration resulted integration started right after the in the creating and developing of collapse of the Soviet Union. regional integration theories, such There were several attempts as regionalism, neo-functionalism, at creating a strong and stable federalism, spillover theory, etc regional integration such as the (Skriba, A. S. – Altukhov, A. O. Commonwealth of Independent 2019). States, the Collective Security Also it is worth mentioning Treaty Organization, the Eurasian the effect of globalization on Economic Community and the economic integration. Here it Eurasian Economic Union (Zhukov, is also possible to point to the S – Reznikova, O. 2006). Despite example of the EU where, even the willingness of countries within though globalization brought the post-Soviet region to achieve with it enormous advantages and economic stability and build strong opportunities, it simultaneously economic integration, none of the brought growing competition above-mentioned organizations in all spheres of services and or unions have reached that goal trade (homepage of European yet mostly because of flawed Commission. Globalization institutional design. Furthermore, and the EU economy). The the lack of economic resources and European Commission also interstate competition in the post- claims that due to globalization, Soviet region also interrupted the EU firms and companies were attempts of Central Asian countries given access to new developing to create regional economic markets and financial resources. projects (Zhukov, S – Reznikova, Consumers in turn gained access O. 2006). It was precisely because to a huge assortment of goods with of such problems in creating strong competitive prices – and this factor, economic integration, that the along with growing production and Eurasian integration (EEU) led by increased salary rates, illustrates the Russia borrowed the institutional

390 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ structure framework of the EU, developing economies of South which opened the way to create Korea, Singapore, China, Japan, and develop several regional Taiwan and Hong-Kong. Today, projects in the post-Soviet space five years after the establishment (Zhukov, S – Reznikova, O. 2006). of the EEU, there are already At the same time, the creation of five member states in the union. the EEU symbolized the readiness Kazakhstan, Belarus and Russia of the EEU’s founding countries are the founding states, thus their (Russia, Belarus and Kazakhstan) membership counts from 1st of to be transformed into highly January 2015, with Armenia and institutionalized and legalized Kyrgyzstan joining on 2nd of frameworks and to copy the January 2015 and 12th of August European experience in Eurasian 2015, respectively. It is also worth integration practice (Zhukov, S – noting that the land territory of the Reznikova, O. 2006). union is over 20 million square Therefore, by borrowing the kilometres, which is around 14 elements of the EU project, the percent of the world’s entire land EEU tried to implement and use area, with a total population of institutionalized legal regimes with 183.8 million people. Additionally, binding effect. the potential of the EEU in energetic Kazakhstan, Belarus and and agricultural industries makes Russia agreed to establish the it a globally significant player EEU by using the institutional in the international arena. The frameworks of the EU, thereby picture (Figure 36) shows the map expanding the West’s influence of the EEU with member states in Central Asia from the East (homepage of BAKIT Certification as a counterpart to the rapidly and Compliance).

391 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 36: The map and brief information of EEU Source: homepage of BAKIT Certification and Compliance

The map illustration above of integration, along with the shows how territorially huge authoritarian regimes of member the EEU is. Even with only five states, highly corrupted systems, countries in its membership, it lack of democracy and transparency, is already playing a significant and the lack of comprehensive goals role in the global market due for all member states (Osadchaya, to its powerful agricultural and G. – Vartanova, M. 2018). production capabilities. The goal of the research is However, along with the to examine and analyze the major development of the EEU has also problems of Eurasian integration. come trouble. As was mentioned While collecting the above, before the creation of information the content analysis the EEU, post-Soviet regional methodology was applied. The integrations were failures. The content analysis methodology, major debilitating issues related to the instrument of investigation, Eurasian integration have political was used to define specific words, and economic roots. For instance, topics or definitions by studying dominant political interests publications, articles, books and significantly interrupt the process other secondary sources in text

392 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ formats (homepage of Columbia economy, and military capabilities University Mailman School of than the other two founding states. Public Health). Moreover, after the collapse of The qualitative method the USSR, Russia was always approach was implemented in order considered as the successor of the to form a complete picture of the Soviet Union, which meant that problem through a deep and detailed the most of the Soviet authority analysis of the EEU’s integration was transferred to the Russian milestones. The main information Federation. was taken from secondary sources From the very first steps of including academic journals, the integration, the problem of newspapers, certain publications authoritarian regimes of member and articles. The work is intended states caused issues. Authoritarian to investigate main milestones regimes do not rely on traditional based on the EEU’s experience. The means of legitimization, nor do main part of the paper begins with they adhere to globally applied the observation of main integration procedures of government issues and milestones. formation based on free and open elections. Their leaders believe V.3.2. Global Milestones that their rule is perpetual and that affect the integration does not require the consent of the process of the EEU people. Authoritarian governments eliminate their competitors so that there is no opposition, and control The EEU’s integration all forms of media, believing began with Russia, Belarus and that through such means they Kazakhstan – where all three maintain stability in the country. countries were seeking for economic Such thinking is not only deeply advantages and stability. Since the flawed but also counterproductive collapse of the USSR, Kazakhstan since it only serves to destabilize has aimed to establish economic a country. The Eurasian Economic regional integration. Russia and Commission for example has done Belarus were the first countries a good job in building a common interested in such integration and market for goods, services, capital only in 2015 was the EEU officially and labor within the region. Russia established (homepage of Eurasian on the other hand still puts its Economic Union). Unofficially, the interests above other countries’ leading country was always Russia, interests in the decision-making as it has a much larger population,

393 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ process. The problem is that the this was a violation of the EEU’s decision of the Commission can public procurement rules and be changed or even vetoed by the thereby canceled a dozen relevant decisions of Vice-Ministers of orders of the Russian government. member states. In this way, the Nevertheless, in the end a higher Commission, which is actually standing body vetoed the decision thought to be a supranational body, of the Commission (Eliseev, A. does not have any true power within 2019). Another example of the the EEU. Moreover, the judicial Russian government’s vetoing of the system of the EEU is also under the Commission’s decision concerns constraints of member states. For price discrimination against example, the Commission cannot Kazakh and Belarusian buyers in appeal to the EEU Court to force 2017. Upon further investigation, the member states to follow the the EEE court determined that rules and norms of the union. At the the actions of the Novolipetsk same time, it would be amiss to say Metallurgical Combine Plant and that the EEU Court has not made the Russian company VIZ-Steel any progress in its development. violated the price policy by adding It has started to build a doctrine a macroeconomic risk coefficient of priority of EEU rights and to to the final price of their products, prioritize the rule of law of the EEU which overestimated the selling over the national law (Eliseev, A. price by more than 20% of the base 2019). It is also worth mentioning price. The Eurasian Commission the case of a member state’s attack imposed a $3.5 million fine on on the progressive decisions of the Russian companies, which the Commission of the EEU. unfortunately was ineffectual since Russian government and municipal the ruling was overturned (Eliseev, authorities regularly announced A. 2019). tenders to purchase fabrics for Today, countries of the post- the needs of the Russian Ministry Soviet space generally have the of Defense, who prescribed same problems as before: poverty, in advance which Russian high inflation, aggravation of manufacturers they should buy environmental problems, social fabrics from. Thus, Belarusian and inequality, drug addiction, terrorism, Kazakhstani manufacturers were unemployment, corruption, not even included in the tenders, technological backwardness in which resulted in the Commission most industries, as well as the making the decision in 2015 that emigration of specialists, engineers,

394 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ and scientists to countries of the armed conflicts and separatism in West (Nemtsev, I. A. 2017). Most a number of regions, for instance, of the post-Soviet countries feel the Georgia, Ukraine, Chechnya, pressure of the world market and Armenia, Azerbaijan, North and its strong alliances, such as the US, South Ossetia, Abkhazia and so Germany, France, Italy and other forth) (Nemtsev, I. A. 2017). The EU member states. The problems struggle of elites for power, the also include energy security, which decline in industrial production includes the wear and tear of the resulting from a reorientation enterprises of the fuel and energy towards raw material development, complex, outdated infrastructure which does not lead to an effective technologies (power lines, vehicles, economy, the deterioration of the gas pipelines), and energy and heat quality of life of the population saving technologies are practically and the growth of crime were all not used. The problem can be influential in accelerating conflicts considered the lack of state ideology, within the post-Soviet region. a goal that could mobilize people Moreover, it would be interesting to solve regional problems. In to cite A. G. Dugin, Soviet and international relations, the problem Russian philosopher, political areas are the difference in structural scientist, sociologist, translator transformations in the conditions of and public figure, who said: “…the the formation of a market economy, collapse of the USSR was a social the lack of competitive production, and industrial catastrophe, which and disagreements in the sphere of consequently led to the coming economy and business (Nemtsev, to power of corrupt, criminal I. A. 2017). Although post-Soviet elements and agents of influence region was always a plum for of the United States – all this was hegemonic powers. unprecedented in scale. The 90s of The post-Soviet space itself the twentieth century for Russia was creates huge geopolitical interests a monstrous geopolitical disaster, towards world powers as a region Russia has turned into a secondary, which is territorially located corrupt, decaying third level power between the cultures of East and that is rapidly losing weight in West. The collapse of the USSR the international arena and is on led to the disintegrational processes the verge of disappearing…” within the region accompanied Russian President Vladimir Putin by color revolutions, interethnic also stated that the collapse of the and territorial conflicts (including USSR was the largest geopolitical

395 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ catastrophe of the century, and that cannot be doubted: the integration many of its current problems are processes within these institutions the consequences of this process are neither based on direct (Nemtsev, I. A. 2017). territorial expansion of Russia Although there is a presence (as it was during the period of the of hegemonic behavior of Russia Russian Empire), nor, obviously, in post-Soviet space, it is important based on communist ideology to say that the EEU member states (as it was in the Soviet period). are more afraid of falling under the Therefore, it is logical to assume pressure of Russia and of losing that the philosophy of integration their state independences, which in of the post-Soviet countries will turn stops the integration process. affect the whole of Eurasia - A particularly strong fear of falling based on the cultural, ethnic and under the influence of Russia is historical identity of each society, noticeable in the example of the re-entering into a single historical Ukrainian authorities, where (under “large space”. At the same time, the influence and with the financial the integration of the post-Soviet support of the United States) for space (and later the Eurasian space) several years there has been an remains a necessary condition for increase in nationalist parties and solving the problems of the region. organizations. Russophobia, the Furthermore, member desire for European integration, is states of the EEU with their trade prevalent. Events in Ukraine led orientation towards third countries to increased tension in the entire with developing economies are Eurasian region, a decrease in causing another possible risk to the regional security, which entailed an integration process. For all member “economic war” between the West states of the EEU the main export and Russia and weakened the vector goods are natural resources or their of Eurasian integration. Therefore, primary processing products, which the issues of regional security in turn are more interesting to the and integration in the Eurasian markets of third countries because space have become even more of their similar demand for natural relevant. It should be understood resources and types of goods, that there is no single concept of claims Kuzmina Elena (Kuzmina, Eurasian integration: “the Eurasian E. 2017). Moreover, Kuzmina, philosophy of integration has so far Head of Sector of the Center for been developed rather weakly and Post-Soviet Studies, IMEMO RAS fragmentarily. The only thing that EAT Primakova, identifies four

396 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ risks which could be identified as Moreover, the diminished milestones of EEU integration. For ability to import finished goods instance, the need for specialization from third countries at the end of and enhanced production in these 2014 as a result of the sharp drop countries. The minimum number in world oil prices and foreign of common production projects exchange earnings from energy of member states as well as the exports, reinforced the need for lack of a detailed program for EEU member states to meet the development of production demand with their own industrial capacities and opportunities, products. The substitution of results in a slowdown in mutual imported products from third trade within the EEU. The primary countries is becoming a priority trade effects from participation in area of cooperation within the the Customs Union are exhausted union. However, an assessment of within a few years, not to mention the national development programs the absence of customs duties on of industries of the EEU member the majority of goods in the EEU. states revealed that countries are This is what happened in terms of considering a single economic trade between the EEU countries. space only from the standpoint of During the first three years of additional export opportunities operation of the Customs Union, for national economies. Even trade between Russia, Kazakhstan so, this is supposed to saturate and Belarus grew rapidly, but then their domestic markets only with unfortunately it started to decline. their own products using import In order to increase trade again substitution. The industry priorities within the EEU it is necessary for the development of industrial to develop new industries and complexes of the EAEU countries increase the range of goods in the have a high degree of coincidence, region. Simultaneously, there is a as well as the nomenclature of need to develop the specialization exported industrial goods, which of countries in the manufacturing leads to their competitiveness rather sector, as Nursultan Nazarbayev, than complementarity. the first President of the Republic Another risk revolves around of Kazakhstan has repeatedly the lack of investment in the sphere said, so that we produce only a of innovation. Integration mainly minimal amount identical goods in occurs in traditional sectors of the common market (Kuzmina, E. the economy that are exhausting 2017). their potential, in particular, in

397 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the field of energy, chemical and economies, since the pace of petrochemical industries, and their economic development will metallurgy. These products have depend not so much on resource low added value. According to the opportunities as on the innovative UN classification, the cost of a nature of capital, as well as on the similar weight of high-tech products ability of a business to generate is ten times higher than the cost of knowledge and to market it as raw materials of the same weight. innovative products. In addition, In the context of the new integration integration in the innovation sphere policy (the implementation of will overcome barriers associated measures to form a coordinated with the lack of a common border policy), the development of a and appropriate transport and coordinated industrial policy communication capabilities on the with effective mechanisms for path to the formation of a common building up productive capacity single market. However, the main is of paramount importance. The stumbling block is the lack of Economic Commission for Europe mutual investment in these sectors. (ECE) has identified the main Countries invest in their national directions of industrial policy. industry as far as possible. Perhaps This is the aerospace industry the only exception is the Russian- (including the production of Earth Kyrgyz Development Fund, which remote sensing satellites and the allocates funds for production and helicopter industry), the automotive infrastructure projects. industry, the production of road- Then, the lack of transport building machinery, machinery infrastructure, the insufficient and equipment for agriculture and level of logistics and other types of forestry, and hoisting and transport infrastructure within the EEU pose equipment. This also includes the serious problems for integration. production of industrial products Although the development of for railway transport, electrical transport infrastructure in all appliances, electronic and optical countries is proceeding rapidly, the equipment and component unification of national transport base, machine tools, and power systems into a single transport engineering. However, specific and logistics space is still a rather joint projects have not yet been distant prospect. A big plus in the developed. Integration in the development of this sphere, of innovation sphere could increase course, is the participation of EEU the sustainability of national states in international transport

398 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ corridors, primarily between China ground of the Russian Railways and the European Union, as well as network, which constrains the the North – South corridor. In 2014, increase in the speed of transit the United Transport and Logistics container trains. The automotive Company (UTLC) was created in infrastructure has its own problems: the EEU with the participation of its underdevelopment, and the Russia, Kazakhstan and Belarus, poor quality of roads, especially which is an operator providing non-main roads. Specialists see rail transportation and forwarding the solution to these problems services. Its aim is to service in increasing the speed of transit cargo transportation between the container trains, expanding the use countries of Southeast Asia and the of information technology both EU countries through the territory in transportation and promoting of the EEU and to reorient container transport services, as well as traffic from sea to rail. The main expanding the geography of transit driver for the development of container services. These are only international corridors today has the main obstacles, each of which been the emergence of standardized contain a more detailed gradation documents, for example, an invoice of the problems connected with the for transit traffic on the East - development of integration in the West routes through Zabaikalsk, EAEU (Kuzmina, E. 2017). Erlyan, Dostyk, Khorgos, Suifenhe. It is reasonable to conclude Another important factor is the that the authoritative regimes of signing of an agreement between member states and their differing the railways of China, Belarus, interests in development, in Germany, Kazakhstan, Mongolia, particular the lack of a common Poland and Russia on deepening aim of the member states in EEU’s cooperation on the organization of development are creating major container trains in the China-Europe hurdles to success. Furthermore, service. The main development orientation to the market of problems are the growing demand third countries, the need for the for rolling stock for transportation development of new production under the conditions of an and specialization, the tendency imbalance in the volume of cargo toward competitiveness rather than flows, limited throughput of border seeking mutual benefit, the lack of crossings between neighboring investment in innovation, and the countries, as well as the limited lack of transport infrastructure are throughput of the Eastern training the milestones which are being faced

399 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

400 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ by all member states of the EEU. need to change their perception of In order to create opportunities and the EEU’s authority that extends to take steps forward from this point, all member countries and to make Russia, Belarus and Kazakhstan this authority supranational.

V.3.3. References

Aitikeeva A. A. – Dzhanybekov U. D. – Aitikeev A. A. 2017: Some problems and prospects of the Eurasian Economic Union (EAEU) and the integration of enterprises of the Kyrgyz Republic with the enterprises of the EAEU in the context of globalization // Young Scientist. - 2017. - No. 41. - S. 32-35. - URL https://moluch.ru/ archive/175/45904/ (accessed: 02.29.2020). Dobrovolsky, A. M. 2019: Essence of International Economic Integration // Actual problems of economic sciences and modern management: collection of articles. XXIV International scientific-practical conference No. 7 (17). - Novosibirsk: SibAK, 2019 – PP. 18-22. URL: https://sibac.info/conf/economy/xxiv/149423 (accessed: 02.04.2020) Eliseev, A. 2019: A cast of authoritarian systems. What the Eurasian Union achieved and did not achieve in five years. TUT.by. 31/05/2019. URL: https://news.tut.by/economics/639843.html (accessed: 03.03.2020) Kuzmina, E. 2017: 5 Key Risks of Eurasian Economic Union. Eurasia Expert, 16/10/2017. URL: https://eurasia.expert/5-klyuchevykh- riskov-evraziyskogo-ekonomicheskogo-soyuza/. (accessed: 01.03.2020) Nemtsev, I. A. 2017: Russia in the Eurasian world: problems and prospects // International relations. - 2019.- No. 2. - S. 147 - 153. DOI: 10.7256 / 2454-0641.2019.2.23258 URL: https://nbpublish.com/library_ read_article.php?id=23258 Osadchaya, G. – Vartanova, M. 2018: Difficulties of economic integration of the EAEU member states and the possibilities of overcoming them. Journal of International Economic Relations. 8.617.10.18334 / eo.8.4.39323. Plotnikov, V. A. – Toropygin, A. V. – Kosov, U. V. 2013: Modern problems and perspectives of political integration in Eurasian Region // SZIU RANKiGS. – 2013. – pp. 148. Skriba, A. S. – Altukhov, A. O. 2019: The EU-Russia Geopolitical

401 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Contradictions and Participation of the Post-Soviet States in Regional Economic Integration. Outlines of global transformations: politics, economics, law. 2019;12(2):51-70. (In Russ.) https://doi. org/10.23932/2542-0240-2019-12-2-51-70 Zhukov, S – Reznikova, O. 2006: Economic interaction in the post-Soviet space // Caucasus and Globalization. 2006. No1. URL: https:// cyberleninka.ru/article/n/ekonomicheskoe-vzaimodeystvie-na- postsovetskom-prostranstve (accessed: 04.05.2020)

Other sources from the internet:

BAKIT Certification and Compliance: – https://trcu.eu/customs-union/ Columbia University Mailman School of Public Health: – https:// www.mailman.columbia.edu/research/population-health-methods/ content-analysis Eurasian Economic Union: – http://www.eaeunion.org/?lang=en#about- history European Commission. Globalization and the EU economy: – https:// ec.europa.eu/info/business-economy-euro/economic-and-fiscal- policy-coordination/international-economic-relations/globalisation- and-eu-economy_en

402 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ V.4. Ambiguities in Chinese strategy on the South China Sea

Viktória Laura Herczegh128

Abstract

In this paper, I intend to observe the way my focus case country, The People’s Republic of China tries and most often manages to maneuver its international policy in a paradoxical way that it would serve its long-time goals. For this case study I rely on the South China Sea dispute, which, being the most complex and most relevant territorial conflict of the Southeast Asian region, provides source material for identifying patterns of ambiguous, contradictive strategies. In my work I describe two incidents concerning multilateral agreements where such strategical elements are present and analyze the background as well as the possible reasoning behind Chinese strategy. I observe the positions of the other active participant states and look into future implications regarding the maritime dispute.

Keywords: China, Code of Conduct, power, negitation, arbitration

128 PhD student – CUB IR Doctoral School, [email protected]

V.4.1. Introduction This paper focuses on the regional form of the category. Inequality between states Certainly, the existence of – in the global and the regional an – unofficially designated – sense as well - has been shaping great (leading) power and, as a the development of international consequence, „lesser” states already relations since the beginning implies inequal relations, yet when of history. Inequality exists in a clash of interest emerges in the multiple specific forms, such as given region, the situation becomes economic inequality (of which considerably more complicated. worldwide patterns can be scoped), In an ideal case, in any or the historical experience of great sort of conflict between states, powers that, by their stability and an acceptable solution could be might, may guarantee international reached by taking already existing order in a global context or between international rules, regulations and the states of a more specific region agreements into consideration. If (Ayoob, M. 2002). there is no precept that would be

403 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ applicable to the dispute in question, mainly include the Spratly Istands, new rules should be created and the Paracel Islands, Scarborough introduced by (or with the close Shoal, various boundaries in the assistance of) legal authorities. Gulf of Tonkin and some further However, as sovereign states may maritime features that are not choose to not abide by any segment regarded as part of the South of international law, or even break China Sea. The official legal stage a treaty, disputes, especially those of the territorial conflict has been including multiple states, are going on since 2013, when the neither simple nor ever quick to Republic of the Philippines brought resolve. Mentioned violations are their claims against The People’s often followed by coercive actions Republic of China to court. In 2016, or intervention by other participant the Permanent Court of Arbitration states. ruled in favor of the Philippines. Aforesaid factors would However, since China has rejected already complicate any international the ruling, as of yet there is no conflict situation, especially one resolution recognized and accepted that includes an already present and by all affected states (Kim, J. 2015). relevant power-based inequality This paper aims at discussing between its actor states. the ambiguous elements of Chinese The South China Sea dispute behavior in the South China Sea is a case that encompasses all dispute through two agreements traits described above. Most times of legal nature, with the intention referred to as simply dispute, it to get answers to the following is in fact a manifold collection questions: of bigger and smaller conflicting What are the common claims within the region, including points of Chinese strategy in issues the People’s Republic of China, the concerning international law, and Philippines, Vietnam, Indonesia, what is China’s overall attitude Malaysia, Brunei and the Republic towards international law? What of China (Taiwan). Those claimant are the possible historical reasons states are interested in acquiring the for such controversial behavior? rights of exploration and potential Can China, as a great power, keep exploitation of natural gas and up its foreign policy based on both crude oil, fishing stock, and, most friendliness and assertivity for importantly, strategic control a long time – and does the East of shipping lanes essential for Asian superpower even intend to successful global trade. The claims do so? Furthermore, to what extent

404 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ can other participants of the South my work is that the above described China Sea dispute have influence behaviour is far from being new on what the near future holds for or uncommon among states in this hot spot conflict dominated by regional leading positions (Ayoob, China? M. 2002). For this specific paper, I intend to observe such patterns V.4.2. Ambiguities of a great exhibited by the People’s Republic power – the Chinese case of China in the South China Sea dispute, throughout the legal Among the active participants process that has been going on for of the South China Sea dispute, the almost a decade now. People’s Republic of China wields The elements of this the most power regarding all aspects contradictory behavior consists of finance, economy and politics. In of can be effectively indentified fact, of course, it has risen to the by tracing concrete events in the level of being a global superpower, course of the disputes, with special yet for this specific research it is regard to specific proceedings of more effective to take a closer look international law and the powerful at the regional function of the East state’s (in this case China’s) Asian state. immediate response to them as The role of implementing well as their following attitude and rules and regulations and making actions. sure that each and every state My assumption is that adheres to them is something by pointing out and describing that the leading powers of certain the ambiguous parts of China’s regions tend to take on. That by behavior in the South China Sea itself may appear evident and above dispute, a certain shifting quality all beneficial to the amicability of could be distinguished. relations between states. However, One essential aspect of this situations may instantly become study is that I intend to observe more ambiguous if one counts with China’s overall conduct in the the fact that the country wielding conflict from a defensive realist the most power in the region – thus viewpoint. As opposed to offensive in given conflict able to act the part realism, defensive realism suggests of the main peacekeeper - may not that having excessive power does always subject itself to the rules it not necessarily equal security (in guards. this case for a regional leading The theory that I introduce in state). On the contrary, via

405 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ provoking a balancing co-operation UNCLOS agreements of territorial among other states, it might end up seas and exclusive economic zones. with just as much risk as lacking or Also, Manila wished to reaffirm having a limited amount of power their right to access the disputed (Raditio, K. H. 2015). Therefore, Scarborough Shoal’s fishing ambiguous behavior projected grounds (McDorman, T. L. 2015). by leading states in international At the very beginning of the conflict situations can be considered proceedings, China declared that as part of a strategy aimed at gaining they would not participate in the and maintaining a „right amount” arbitration, explaining their refusal of power. more elaborately in a position paper (white paper) later, in December V.4.3. The Arbitration 2014. In 2016, Beijing openly referred to the ruling in favor of the Is the People’s Republic of Philippines’ appeals as „null and China the kind of hegemon that void”. Chinese reasoning was that would settle for the right amount the tribunal lacked jurisdiction and of power? Undoubtedly, the the arbitration itself was completely Permanent Court of Arbitration illegitimate, as the Philippines Tribunal’s judgment in the case of should have first chosen the option Philippines v. China was as grave to settle the disputes through of a humiliation for the People’s exclusively bilateral negotiation Republic of China as it was a (Taffer, A. 2015; Rosyidin, M. clear win for the Philippines. The 2019). case, most often referred to as the Such non-compliance is South China Sea Arbitration, was something that could be expected brought to the Permanent Court from the People’s Republic of of Arbitration by the Philippines China. After all, a state may choose in 2013. It primarily concerned not to abide by the rules and the clarification of the legal status regulations of international law, of some maritime features in especially in a case where those do the area under UNCLOS. The not appear to agree with their claims Philippines’ main goal was to and needs. The Chinese statements’ get a legal declaration of the fact tonality might be assertive, yet that the nine-dash line – a line of it does not deviate from the East demarcation based on an 1947 map Asian superpower’s overall policy that China used to corroborate its of handling disputes. claims – is invalid as it violates However, as it often happens

406 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ in a situation of non-abiding, national interest, be anti-hegemonic complicating factors may arise. and support the Third World. There Here, the main issue is closely is one particular step China took connected to the convention that that demonstrates the willingness to the Philippines’ arbitration lawsuit comply with those guidelines: the and the court’s eventual ruling was East Asian state supported a group based on. The People’s Republic of developing countries from Latin of China took part in negotiating America and Africa (Mauritius, UNCLOS from 1973 to 1982 and Algeria, Colombia, Venezuela) in was among the signing and ratifying their demand for a more extensive, states in 1996. Although there 50-200 nautical mile (nm) territorial has been some discussion about sea under full national sovereignity, withdrawing from the convention, against the United States and China has not chosen to take that the USSR, two hegemons with step (Raditio, K. H. 2015). intentions to limit weaker states’ The fact of Chinese ratification maritime rights. Even though still being valid definitely makes the internal discussions in China were situation inconvenient. One may constant during the negotiations of pose the question why the People’s UNCLOS, especially in the final Republic of China even agreed stage, the need for acceptance as a to officially accept the contents freshly seated member of the UN of this document. The territorial (15 November 1971, as People’s claims based on the nine-dash line Republic of China) was present. were already present during the China standing with mentioned negotiations and certain provisions leading developing countries in this of UNCLOS go straight against issue is particularly interesting, as those very claims. some of the Chinese officials taking A likely explanation for that part in the UNCLOS negotiations lies in history. In the early 70s, by that time had already realized when the negotiations of UNCLOS that the requested 200 nm territorial began, China, still in the throes of the sea would not necessarily be of Cultural Revolution (1966-1976), Chinese national interest (Rosyidin, was in need of putting ideology M. 2019). before interest. Participating in At the beginning of or at any the negotiations and later ratifying point during the legal proceedings the convention were actions that of the Philippines’ arbitration supported the guidelines given by lawsuit, China could have the former leadership: protect the withdrawn from the convention.

407 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ It appears, however, that keeping V.4.4. Paradox strategies the ideology alive and, even more importantly, maintaining the role This paradoxical stance of a valuable, contributing member makes the South China Sea dispute of international organizations such even more complex. Double as the UN still holds more (long- standard elements can be identified term) significance than the option and quite clearly defined here: the to withdraw and thus become free state wielding the most power – in of UNCLOS regulations, with that this case the People’s Republic of probably also be able to the course China – has actively participated in of legal proceedings (Weissmann, the negotiation and has officially M. 2010). signed the document on which the Certainly, the choice of eventual resolution of the dispute withdrawal would not have had any would be based on, yet refuses to immediate threat upon the regional comply with its contents in the (and global) position of the People’s same territorial dispute where the Republic of China. Nevertheless, outcome would not match their it would have turned its relations national interests. more uncertain with the group of Now, Beijing is more free to states negotiating and ratifying put their national interest before states (overall 157 signatories). ideology: since the 70s, through Although non-compliance in the all-round economic reforms and South China Sea Arbitration and the opening-up policy, the East declaring the ruling as being „null Asian state has managed to gain a and void” is not an amicable or significant degree of recognition contributing move either, it is from the West. With the arrival less of an openly assertive one. In of the 21st century, owing to a the official sense, China is still a manifold structural transformation signatory of UNCLOS, more than of unprecedented pace, the People’s that, a state that has used some of Republic of China has risen to the the convention’s contents to aid status of an economic superpower. less powerful countries’ claims. It However, a position like that often is only this one case Beijing does comes with opposition. not abide by and holds its historical The East Asian superpower claims (based on the nine-dash line) has managed to shed the appellation unwaveringly. Red China – a name with negative connotations, referring not only to communist-controlled China

408 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ (1927-49), but to China during the escaped – or at least delayed open Cultural Revolution as well. Even conflict with the UN or with any of though the expression is now almost the signing nations of UNCLOS. exclusively used for these past In contrast to Western analyses, eras of the state, a new name for a the People’s Republic of China, similar phenomenon has emerged while more politically assertive along with the rise of China. China and defiant from an international threat, first utilized by officials legal point of view, has not become of the United States, now often more aggressive militarily. China appearing in Western press, means could have dislodged any of the the imminent danger the enormous islands controlled by other smaller power of China is believed to pose claimants (Vietnam, Malaysia and for the US and to the entire Western the Philippines) but they have not world in not only a political and done so. The patterns explained economic sense, but also in the are more characteristic of an often military field, taking the newly confusing strategy of lawfare powerful Beijing as a harbinger of based on retardation rather than armed conflict P( owles, M. 2010). threatening aggressivity. Would China go to war? One way to counter the assumption is by V.4.5. The Code of Conduct observing the ambigouous, often contradictory elements – some of In order to identify further which can be indentified as double ambiguities and double standard standard patterns – of Chinese elements in the progress of the strategy in the South China Sea South China Sea dispute, one has dispute. to look no further than another Beijing has chosen to stay essential document, one that is a signatory of the UNCLOS, yet meant to accelerate the course would not comply with the ruling of reaching an agreement in the of the South China Sea Arbitration. issue. The Association of Southeast By complicating the matter this Asian Nations (ASEAN) first way, the possibility of a successful endorsed the idea of a Code of resolution is even further from the Conduct (COC) for the maritime current status of the issue. With area of the South China Sea in this, China has not only avoided 1996. Negotiations of the possible any immediate obligations to give contents of it, however, proved to up any claimed territories in the be inconclusive. Thus, in 2002, the maritime area in question, but also People’s Republic of China and

409 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ASEAN settled for a (nonbinding) settlement of the dispute should Declaration on the Conduct of be conducted through friendly Parties in the South China Sea negotiations, enquiry, mediation, (DOC). The very first draft of conciliation and other means that guidelines for the imprelementation the participants are able to agree on. of DOC was drawn up in 2005, but Vietnam concluded that nothing in not adopted for a few years. Despite the COC shall prevent the peaceful the promising initiatives, tensions settlement of disputes under Article on the South China Sea were 33(1) of the Charter of the United present throughout the 2000s and Nations. The article lists other have escalated steadily since 2009, means such as arbitration, judicial confirming the need for a powerful settlement, resort to regional official agreement between the agencies or arrangements, or other claimant states. peaceful means decided by the Consequently, following parties concerned. more negotiations, in July 2011, the In the second section of the set of preliminary guidelines drawn draft, the Philippines, Indonesia and up in 2005 was finally adopted. In Singapore, Cambodia and China, August 2018, after consultations on respectively, propose four separate a potential COC, an agreement on options on the duty to cooperate. a single draft negotiating text for The People’s Republic of China’s the COC was officially announced contribution is partly identical to (Thayer, C. 2013). the other options but the detail it The 19-page draft is structured provides on six areas of cooperation into three sections: preambular is exceptional. The areas are provisions, general provisions and the following: conservation of final clauses. It does not define the fishing resources, maritime exact geographic scope of the South law and security cooperation, China Sea. navigation and search and rescue, A large part of the draft maritime scientific research and is devoted to the prevention, environmental protection, marine management, and settlement of economy including aquaculture disputes in the South China Sea and oil and gas cooperation, and among the parties. However, it does marine culture. Most significantly, not contain any specific reference to China’s suggestion on cooperation the mechanisms that could lead to on the marine economy states that a successful resolution. A proposal cooperation is to be carried out made by Vietnam states that the by the littoral states and shall not

410 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ be conducted in cooperation with should have no influence on its companies from countries outside position in any legal proceedings, the region. present or future. Still, in nature, In a sub-section of the draft it is contradictive enough from the headed Self-restraint/Promotion, part of China to actively participate China suggests that military in the makings of the COC but to activities in the region shall be be unwilling to comply with the conducive to enhancing mutual trust. arbitration. The pattern is notably Beijing also calls for exchanges similar to that of Chinese attitude between defense and military towards UNCLOS: amicable forces as well as undertaking joint contribution in potentially feasible military exercises among China official ways to resolve the conflict and member states of ASEAN on a but non-acceptance of the legal regular basis. Interestingly, China verdict that would provide a way to and the Philippines agreeingly have a conclusion. inserted point six that calls for the Certainly, differences just and humane treatment of all between the two incidents can be persons who are either in danger or observed. The first notable one in distress in the South China Sea is that the contents of which are (Kang, H. K. 2012). detailed above is merely a draft, The draft certainly takes on the consultations for the COC have several notable requirements for yet to be concluded, the document managing the tension surrounding itself announced and ratified. If the the current dispute and possibly for process continues at the pace it has achieving and keeping a sustainable been moving forward so far, it can level of peace between the states take several years until the COC of the region. However, would the officially comes into action. This, COC have the necessary impact in again, fits well with the strategy action? of retardation China seems to have The process, agreed on by adopted for this situation of conflict. all ASEAN member states and Second, the draft includes not the People’s Republic of China, only the states holding territorial is a well-made tool to remove claims in the South China Sea any triggers of the conflict rather dispute, but all members of ASEAN. than a mechanism designed for Thus, it is not ideal for negotiating the resolution of the dispute. the management of resources in Thus, China participating in the areas of overlapping claims. A negotiations of such a co-operative truly effective COC would include

411 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ additional negotiations among the and conflict management. claimants on some of the potential Certainly, some elements triggers for conflict in which the of the draft are ambitious and observing (non-claimant) ASEAN promising, yet taking all the member states have no direct stake. differences among the negotiating Furthermore, a Code of Conduct is parties into account, a COC in its not exclusively meant for dispute current form would prove to be management and stability building ineffective. Furthermore, its legal in the South China Sea, but should status remains undecided, as the emphasize freedom of navigation draft does not include any reference and human security of the large to the COC as a treaty under fishery communities in littoral international law. ASEAN countries. Thus, ideally, besides the existing international V.4.6. At the negotiating law and norms, the Code of table Unplanned Encounters at Sea should be an essential part of the What does the People’s COC. Republic of China expect from the In November 2018, an Code of Conduct? The currently agreement was reached to finalize ongoing negotiation period for the Code of Conduct within a final and official COC benefits three years, starting in 2019. A China for multiple reasons. carefully negotiated, thoroughly While the talks have been worded COC – including the going on for a while now with only additional agreements between a few points securely agreed on and claimant states - would hold the further conflicting views appearing, possibility to allow participants Beijing has been establishing a so- to adjust their positions without called new status quo militarizing violating any element of domestic its claimed and occupied maritime or international law. However, features, intending to normalize its negotiation of the COC has proven control in the disputed waters. A difficult, yielding no significant stable, sustainable status quo seems breakthrough so far. Among the to be fitting well with China’s factors hindering the finalization, current stance as well as their future there is the undefined geographic objectives. scope of the South China Sea as Here, a perceptible similarity well as disagreement among the with the UNCLOS situation claimants over dispute settlement has to be noted. China, as an

412 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ active participant of the COC operates in a simple way: If any negotiations, appears willing to one out of the 10 ASEAN member reach an agreement that would states objects to a proposal, that is provide resolution for the territorial enough to overrule the others. disputes. However, Beijing has That is exactly what stated that they would refuse to join happened back in July 2012, when or ratify a COC of binding quality, a joint ASEAN Foreign Ministers’ one that could legally challenge Communiqué failed to be issued Chinese claims. That provides the due to the fact that Cambodia, negotiators with a promisingly then the ASEAN chair and a close worded yet ineffective draft with economic partner to China, sought conflicting elements. Again, this to minimize the internationalization sort of contradictive attitute allows of the South China Sea dispute, in China to avoid open conflict with hopes of keeping optimal relations any of the participants as well as any with Beijing (Thayer, C. 2013). obligation to enter an agreement that would risk their claims in V.4.7. Conclusion the area. Also, with the artificial island building and militarization The ambiguities can be going on, China could be able to observed in both cases: China’s redefine the geographic scope of attitude towards UNCLOS (along the disputed areas and along with with that, the South China Sea that, the scope of disputed areas in Arbitration) and the Code of favor of their geopolitical interests Conduct. Active participation and aims (Rosyidin, M. 2019). in the negotiation process but Consensus between ASEAN straightforward non-compliance members is certainly not strong with some part of the contents. In the enough regarding this specific meantime, assertive presence and issue. Although there is a perception activities in the region, resulting in that consensus is key for ASEAN frequent minor clashes, tension and to address challenges in conflict constant open resentment from the situations such as the South China US and from active participants of Sea, a narrow understanding of the conflict as well as from regional individual members’ national observer states, yet none that would interests has undoubtedly seriously threaten the current status constrained attempts at developing quo. As of now, Chinese strategy, firm cooperation in the region. The based on contradictive actions and current decision-making process retardation, seems to be efficient.

413 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

414 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Of course, politics based on consensus between ASEAN states. a pattern of ambiguities can rarely If the Code of Conduct – or any be sustained for a long period of similar agreement in the future time. However, as long as it is in no – is negotiated by all members, participant’s best interest to wage perfect accord cannot be expected, war with the People’s Republic of taking into account the mere fact China, the East Asian superpower that claimant states and passive can await – and build towards - a observers do not have the same better setting of the conflict, one interests in the region. Furthermore, in which even an eventual legal some of the claimants have solid process may have a more beneficial political and economic ties to the outcome for them (LI 2010). People’s Republic of China, which It is not certain that a definitely may alter their stance in considerably better setting will future discussions. come in the future. Nevertheless, If Vietnam as 2020 ASEAN for China, the current international Chair considers the factors strategy has so far resulted in described and works towards successful retardation. Right strengthening ASEAN ties so now, it is a better way of conflict that they can be more durable management than giving up their than those of individual member claims or kickstarting war by states with China, the East Asian wielding „too much” assertive superpower might reconsider using power without balancing it out with the described ambiguities as part of amicable actions. their strategy – or at least, doing it The outcome will greatly as openly as it has been doing in the depend on the strength of the cases of UNCLOS and the COC.

V.4.8. References

Ayoob, M. 2002: Inequality and Theorizing in International Relations – The Case for Subaltern Realism. – International Studies Review 4 (3) pp. 27-30. Chung, C. P. C. 2016: Drawing the U-Shaped Line – China’s Claim in the South China Sea. – Modern China 42 (1) pp. 51-72. Kang, H. K. 2012: South China Sea – Everlasting Antagonisms. Institute of Peace and Conflict Studies, pp. 8-12. Kim, J. 2015: Territorial Disputes in the South China Sea – Implications for Security in Asia and Beyond. – Strategic Studies Quarterly 9 (2)

415 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

416 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ pp. 110-131. Li, M. 2010: Reconciling Assertiveness and Cooperation? China’s Changing Approach to the South China Sea Dispute. Security Challenges 6 (2) pp. 50-61. McDorman, T. L. 2015: The South China Sea Arbitration – Selected Legal Notes. – Asian Yearbook of International Law 21, pp. 3-10. Powles, M. 2010: The China Threat – Myth or Reality? – New Zealand International Review 35 (1) pp. 20-24. Raditio, K. H. 2015: China’s Shifting Behavior in the South China Sea – A Defensive Realist Perspective. – American Journal of Chinese Studies 22 (2) pp. 309-322. Rosyidin, M. 2019: The Dao of Foreign Policy – Understanding China’s Dual Strategy in the South China Sea. – Contemporary Security Policy 40 (2) pp. 214-238. Taffer, A. 2015: State Strategy in Territorial Conflict – A Conceptual Analysis of China’s Strategy in the South China Sea. – Contemporary Southeast Asia 37 (1) pp. 85-102. Thayer, C. 2013: ASEAN, China and the Code of Conduct in the South China Sea. SAIS Review of International Affairs 33 (2) pp. 77-84. Weissmann, M. 2010: The South China Sea and Sino-Asean Relations: A Study in Conflict Prevention and Peace Building. Asian Perspective 34 (3) pp. 41-68.

Other sources from the internet:

United Nations Convention on the Law of the Sea: - https://www.un.org/ depts/los/convention_agreements/texts/unclos/unclos_e.pdf

417 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

VI. Institutions and Policies of the European Union

418 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ VI.1. Creative industries in the economic structure of midsize towns in the Visegrad Countries

Zoltán Dorogi129

Abstract

In this study, the creative economy of medium-sized towns with a population of between 100,000 and 300,000 in the Visegrad countries was analysed. The selection of this group of countries is justified by its diverse composition, colourful economic structure and variety of industrial backgrounds. The research focuses on the creative economy of the medium-sized towns in the East-Central Europe, and examines it in terms of the presence of so-called knowledge-intensive sectors. In this context, we also separate the individual economic sectors according to both a narrower and a broader interpretation of the creative economy. We found that in the sphere of the creative and knowledge-intensive economy, the sectors that are viewed as creative according to a broader interpretation are more typical, as opposed to the creative and research and development activities that are suggested by the more classical, narrow interpretation.

Keywords: medium-sized towns, East-Central Europe, Visegrad countries, creative industries

129 PhD student – CUB IR Doctoral School, [email protected]

VI.1.1. Introduction of tercialisation, which means that a strengthened service sector The creative economy is an can also be seen in the number increasingly important part of the of enterprises and employees. economy, as more and more groups Within the tertiary sector, the of actors have the opportunity privileged role of the creative to become involved in creative industries is given in recognition thinking: in addition to research of its creativity, its highly added institutes and creative professionals, value-orientated thinking and its corporations and smaller companies approach towards the organisation have also established creative of work, all of which explain why units. In the European Union’s creativity is today seen as one of the economy, the last few decades have factors underpinning international been characterised by a process competitiveness. The presence of

419 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ creative industries in midsize towns filtering system of the database can add dynamism to the economic allows collecting data at the role of these settlements, which settlement level. can in turn boost their national and international role, contributing VI.1.2. Differences in the to the wider appreciation of the definition of the creative macro-region as a whole. This economy research therefore seeks to answer the question of whether the creative Richard Florida’s “creative industries can be regarded as class” approach to the creation success factors contributing to the and operation of the knowledge competitiveness of midsize towns economy emphasises the conscious in the Visegrad Countries. The collaboration of local actors creative industries are so-called soft (Florida, R. 2002). Based on these, factors, lauded as one of the factors the facilitator of the knowledge influencing competitiveness today. economy is the highly qualified This study is a quantitative human resource, plus the group of methodological research based inhabitants who know and utilise on secondary data. To examine its talents: for this reason, Florida’s the creative industries, I used the analysis supports an increase in topology developed by Eurostat the number of researchers and (EuroStat 2009) and the ACRE engineers (Talent). To create and use project for knowledge-intensive knowledge, it is essential to provide activities. The data was collected the appropriate technological from the EMIS - Emerging Markets background, the institutional and Information Service, which is an infrastructural environment of R&D international economic - financial (Technology). However, people’s database that has been created to attitude to work is also important, support investors. It obtains data i.e. openness to innovations, from the national financial and tax search for answers continuously registers, ensures the authenticity and the socio-cultural, economic, of data that the sources are the and organizational background national bases of annual financial (Tolerance) (Hollander, H. et al. and tax reports of companies. The 2019). (Figure 37)

420 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 37: Appearance of creativity and relationship among creative industries Source: KEA European Affairs 2006 p. 42.

In addition to industry, the more determined by cooperation tertiary sector has become more of innovation, creativity and important, based on a higher level public administration. Florida, of application of knowledge, R already basically considers because skilled and highly skilled today’s economy as a whole to workforce is not only capable of be a creative economy, where more efficient work processes, the most important resource is but also produces higher added knowledge; its proper exploitation value due to increasingly complex ensures the development of the activities (Ságvári B. 2005; DG economy (Hollander, H. et al. Internal Market, Industry, 2018). Growing number of workers Entrepreneurship and SMEs participates in creative industries, 2016). Creativity is defined in the the so-called creative class has been literature as one of the key factors formed which is responsible for for competitiveness (Hall, T. – producing knowledge, developing Hubbard, P. eds. 1998; Florida, newer and newer responses (Peck, R. 2002). According to them, the J. 2005; DG Internal Market, competitiveness of cities is more and Industry, Entrepreneurship and

421 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ SMEs 2016). To understand the a uniformly accepted definition. importance of creativity and the Strictly speaking, the interpretation creative industry, it is necessary approaches creativity from the point to define the phenomenon of view of culture and creative art, more precisely by placing it in while the broader one demonstrate context (UNCTAD 2010; 2013). the aspects of intellectual work, Literature of scientific research so practically any intellectual also offers an opportunity for activity is perfectly acceptable (DG this, as it is characterized by a Education and Culture 2010). broader interpretation instead of (Figure 38)

Figure 38: Outline structure of the creative economy Source: Ságvári B. – Lengyel B. 2009 p. 19.

Creativity and cannot be measured and compared competitiveness have become part in isolation, but instead need to be of the definition of knowledge- evaluated on the basis of the goods based economy, but it is important they produce and their market value to note that examples of creativity (Ságvári B. 2005). A study by

422 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the European Commission (KEA for the long term in respect of European Affairs 2006) seeks to different territorial breakdowns, answer the basic questions relating something which makes spatial to creativity, while the connected analysis possible. High-tech, nomenclature defined by the OECD medium-high-tech manufacturing is based on technological standards, sectors and knowledge-intensive and defined by factors of production, service sectors were nominated technology and product knowledge due to technological standards. intensity (OECD 2001). Creativity In the framework of the ACRE contributes to specialisation, Project130, activities were separated involving both the industrial and and this classification has become service activities of regions, where generally accepted. The IT sector, these actors are able to produce research and development, creative the greatest added value, thereby industries, legal-business, financial gaining a significant competitive activities and knowledge-intensive advantage (DG Education and activities were distinguished in Culture 2010). This process of the ACRE classification. Eurostat specialisation in turn points towards adopts the following breakdown: new, potentially viable economic medium-high-tech manufacturing, activities and sectors, as well as to high-tech manufacturing, high- cooperation opportunities (Borsi tech knowledge-intensive service, B.– Viszt E. 2010). Specialisation other knowledge-intensive service, gives rise to new potential sectors market knowledge-intensive of the economy, so by recognising service, financial knowledge- them, it is possible to encourage intensive service (Jeney L. – Varga their activity (Szakálné Kanó I. Á. 2016). The data was collected 2012). Among other things, in from the EMIS – Emerging Markets cities demand is growing in the Information Service, which is an service sector for smart solutions in international economic – financial the area of healthy lifestyle, sports, database created to support health, tourism, and culture. The investors. It obtains data from the creative industries already represent national financial and tax registers a new approach towards both job and ensures the authenticity of data creation and economic activities that the sources are the national (Kovács Z. et al. 2011). Eurostat’s 130 ACRE Accommodating Creative classification of economic Knowledge – Competitiveness of activities is based on the OECD European Metropolitan Regions nomenclature; data is also available within the Enlarged Union, ID: 028270, http://acre.socsci.uva.nl/

423 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ bases of annual financial and tax factors is important and influences reports of companies. The filtering competitiveness, as the economies system of the database allows of these towns and their narrower collecting data at the settlement areas are more exposed to external level. This analysis was prepared changes (Kresl, P. K. – Ietri, for 2017, due to the fact that the D. 2016). Analysing the creative changes generated by the economic economy shows how innovations crisis have already taken place; they and the knowledge are utilised have been integrated into the urban actors in the market, as well as to economy. It is possible to choose what extent this is a real competitive the group of active, operating advantage for other actors in the companies by omitting non- economy (Peck, J. 2005; Szirmai functioning, inactive organisations. V. szerk. 2009). In her monograph, The areas of activity can be Éva Kiss draws direct attention selected on the basis of the Eurostat (Kiss É. 2010) to the fact that the classification presented above. processes restructure the economic structure, taking place as a result VI.1.3. Creative industries of the economic reorganization of midsize towns in V4 of the last decades (Montalto, Countries V. et al. 2018), especially in the industrial sector. The use of space in developed sectors is more The aim of my research is moderate due to their smaller space to map the creative sectors in the requirements, but this does not mean midsize towns of the Visegrad a decrease in their significance and Countries, which also draws competitiveness. Specialisations attention to the competitiveness appearing in more industrialised of this group of settlements and areas, as well as horizontal-vertical the macro-region within the collaborations (clusters, supplier European Union (Hollander, H. networks, other forms) increase the et al. 2018; 2019). Outsourcing of competitiveness of market actors, mostly labour-intensive production thus they can play a significant role activities can be observed from the in shaping the spatial structure of central regions towards peripheral the narrower and wider area.The ones, as a result of global economic relationship that exists between policy trends in the recent years creativity, the creative environments (Lengyel, B. – Ságvári, B. 2009; and the competitiveness of regions Kiss É. 2010). In the case of midsize and cities has long been a well- towns, the role played by these

424 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ known phenomenon. In addition regional centres, so although they to international companies and play a significant role at the national universities, academic research level, they nevertheless receive institutes, the micro, small and less attention in studies of global medium-sized enterprise sector competition (Montalto, V. et al. also demand attention in the study 2018). However, their influence of the creative economy. Due to and their spatial organising power their resilience, these actors are extends to their neighbouring area, able to react to changes as soon to a region, and they usually have as possible, search for solutions, the actors and the institutional apply them and appear on the background that together determine market (Hollander, H. et al. 2019). its economy. Their economic Furthermore, these organisations and cultural coordinating role is are at the forefront of specialisation, enhanced by the universities and as they perceive market needs as research institutions located here. early as possible, so they can take My study group includes midsize advantage of their potential. From towns from all Visegrad Countries: the point of view of the Visegrad 3 from the Czech Republic, 28 Countries, progress is made in the from Poland, 8 from Hungary, increase of the proportion of tertiary and one from Slovakia (Appendix and quaternary activities in the 1). According to Eurostat data, economy of this region, the number the population of the Visegrad of people employed in creative Countries at the 2011 census was activities, and the expansion of 63.8 million. The selected group of investments in this area. (Borsi B.– midsize towns had a total population Viszt E. 2010; Jeney L. – Varga of 6.14 million, 9.62 percent of the Á. 2016) Despite the outstanding group’s population. In the Czech nature of the research field, it is Republic, 367 thousand people basically one of the less studied (3.5) lived in midsize towns, in areas for midsize towns (Jelinek Poland 4.37 million people (11.48), Cs. et al. 2013; Kresl, P. K. – Ietri, in Hungary 1.16 million people D. 2016). Midsize towns with a (11.72), in Slovakia 240 thousand population of between 100 and people (4.4 percent) (Figure 39) 300 thousand people are typically

425 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 39: The population share of midsize towns in the total population in Visegrad Countries, 2011. Source: EuroStat

426 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 40: Geographical distribution of midsize towns in the Visegrad Countries Source: Edited by Zoltan Dorogi

As a result of the analysis of opposed to the classical, narrow- the economic processes and spatial interpretation, which restricts the structure of the midsize towns in group only to creative and research the Visegrad Countries (Figure 40), and development activities. In it can be stated that in the field the field of the creative economy, of creative sectors the activities the over-representation of are typical from the perspective background activities and areas of the broader interpretation, as supporting the economy can be

427 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ clearly seen (Figure 41): legal and environment. In contrast, financial business management, business activities reached only 0.34 percent management activities (44 of the total creative activities. percent), engineering and technical As the basis of the creative and services, telecommunications knowledge economy, the role and information services (22.7 of the manufacturing industry is percent). Obviously, these activities prominent, especially in the field are more strongly connected to of highly added value sectors: local-regional enterprises and chemicals, pharmaceuticals, institutions; these ensure their machinery and car industry. daily operation as a background

Figure 41: Proportion of creative activities in the midsize towns of the Visegrad Countries according to the ACRE classification, %, 2017. Source: EMIS

The share of creative and development and classical creative knowledge-intensive sectors in activities (Table 16) account the narrow viewpoint is moderate for barely 13.74 percent of all among other typically supportive enterprises. areas. Scientific research and

428 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Film, video, television program Broadcasting production, sound recording publishing Other Professional, Scientific, and Arts, Entertainment, and Recreation Technical Services Publishing Industries Gambling Industries Sports, entertainment and leisure activities

Table 16: List of creative activities from the classical, narrow viewpoint. Source: Compilation of Zoltan Dorogi

Concentration can be observed industry the setting up of creative in some activities, but further activities can also be more efficient. research is needed on industrial Two-thirds (67.4 percent) of high- and economic specialisation at tech knowledge-intensive services settlement level (Figure 42). IT (28.5 percent) were related to IT technologies are connecting to technologies, 25 percent to R&D both high-tech manufacturing and activities, and a further 7.6 percent high-tech knowledge-intensive to cultural activities. The share services. High-tech manufacturing of other knowledge-intensive (4 percent) and medium-high- services is only 4.6 percent, but tech manufacturing (17.8 percent) the creative industries mostly fall account for 21.8 percent of all into this category (99 percent). businesses, more than one-fifth of Market-oriented knowledge- all activities. This shows a strong intensive services accounted for connection of creative activities 44.66 percent of all activities, while with the manufacturing industry, so the ratio of financial knowledge- on the basis of the manufacturing intensive services was 0.34 percent.

429 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

Figure 42: Proportion of creative activities in the midsize towns of the Visegrad Countries according to the EuroStat classification, %, 2017. Source: EMIS

The concentration in the financial sector may be connected medium-high-tech and high-tech to the fact that in the midsize manufacturing industries, as well as towns these institutions typically in the field of high-tech knowledge- appear only in one location, while intensive services, can be described their main activities mostly take as a kind of specialisation, based on place in the cities. The presence existing manufacturing capacities. of creative activities also provides Legal and business matters account an attractive milieu for knowledge for almost half of the activities in capital, a closer connection with the creative sector, and the data for other stakeholders, for learning midsize towns, analysed one by one, about and transferring knowledge can show the correlations between and innovations (Lengyel, B. – number/ratio of legal and business Ságvári, B. 2009; Hollander, H. et activities and the importance of al. 2019; Montalto, V. et al. 2019). the creative sectors. After that, Orientations range from Fordist, IT, information technology and assembly-type work to highly services are highlighted, which skilled activities, and the emergence can be a kind of indicator of and expansion of new industries creative activities in the Visegrad signals new directions for economic Countries. The low figures for the actors as a result of investments

430 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ (Lux G. 2009). Specialisation analysed group of midsize towns. makes the new potential sectors Based on the internal proportions of the economy clear, and it is of creative activities, it can be seen possible to encourage these sectors that a broader approach to creativity by recognising them and seeking clearly prevails, as opposed to accurately to understand their the classical interpretation of needs, as they contribute both creativity. A high proportion of to attracting investments and to activities is related to background regional economic development. economic activities, a fact which draws attention to the existence VI.1.4. Conclusion of a critical mass or cluster of economic actors. The distribution According to the research, of activities also confirms that the the creative industries also appear creative sectors are often related to prominently in the economic the existing, knowledge-intensive structure of the midsize towns manufacturing industry, so the in the Visegrad Countries with a existence of that industry facilitates population of between 100 and the establishment of creative 300 thousand, which supports the industries. Due to this, on one hand, modernisation of their economies. it can be said that the traditions Thus, the midsize towns take and economic structure of midsize part in the global economic towns determines the development process that is accompanied by of the creative industries at the the reorganisation of economic settlement level. On the other hand, activities. The strengthening of the presence of IT services and the creative industries is clearly information technology shows the linked to the tercialisation of the adaptability of the population and economy, and to the establishment the economy, a fact which points to of the knowledge industry. By the growing importance of creative establishing links with industry and workers. Thus, as the midsize towns becoming embedded in the local seek new economic ways forward, environment, developing creative both support for the established industries indicate the strengthening economic factors and the seizing of of the competitiveness of the new opportunities look achievable.

VI.1.5. References

Babbie, E. 2007: The Practice of Social Research. – Belmont: Thomson

431 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Wadsworth Barta Gy. 2002: A magyar ipar területi folyamatai 1945–2000. – Pécs– Budapest: Dialóg Campus Kiadó Bryman, A. 2012: Social Research Methods. – Oxford: Oxford University Press Borsi B.– Viszt E. 2010: A kreatív és kulturális ágazatok (CCI) szerepe és növekedési lehetőségei a Budapest Metropolisz Régió gazdaságában. – Budapest: GKI Gazdaságkutató Zrt., 38 p. Buzás N. (szerk.) 2005: Tudásmenedzsment és tudásalapú gazdaságfejlesztés. – SZTE Gazdaságtudományi Kar Közleményei. – Szeged:JATEPress, 350 p. Czirfusz M. 2013: Bevezetés: A kreatív város. – In: Jelinek Cs. – Bodnár J. – Czirfusz M. – Gyimesi Z. (szerk.): Kritikai városkutatás. – Budapest: L’Harmattan, pp. 263–271. DG Education and Culture 2010: The entrepreneurial dimension of the cultural and creative industries. – Amsterdam: Colorset, 238 p. DG Internal Market, Industry, Entrepreneurship and SMEs 2016: Boosting the competitiveness of cultural and creative industries for growth and jobs. – Luxemburg: Európai Bizottság, 345 p. DG Internal Market, Industry, Entrepreneurship and SMEs 2019: Impulse paper on the role of cultural and creative sectors in innovating European industry. – Luxemburg: Európai Bizottság, 41 p. Egedy T. – Kovács Z. 2008: The creative knowledge sector in the Budapest Metropolitan Region. – In: Kertész A. – Kovács Z. (eds.): Dimensions and trends in Hungarian geography. – Studies in Geography in Hungary; 33. – Budapest: Geographical Research Institute, Hungarian Academy of Sciences, 149–167. European Cluster Observatory 2011: Priority Sector Report: Creative and Cultural industries, – Bruxelles: European Union, 52 p. EuroStat 2009: Science, technology and innovation in Europe, Luxemburg, 243 p. Florida, R. 2002: The Rise of the Creative Class. – New York: Basic Books Florida, R. 2005: Cities and the Creative Class. – New York: Routledge, 208 p. Hall, T. – Hubbard, P. (eds.) 1998: The Entrepreneurial City. Wiley, Chichester., 370 p. Hollander, H. – Es-Sadki, N. – Merkelbach, I. 2018: European Innovation Scoreboard. –Luxemburg: Európai Bizottság, 104 p.

432 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Hollander, H. – Es-Sadki, N. – Merkelbach, I. 2019: European Innovation Scoreboard.– Luxemburg: Európai Bizottság, 95 p. Jelinek Cs. – Bodnár J. – Czirfusz M. – Gyimesi Z. 2013: Kritikai városkutatás. – Budapest: L’Harmattan Jeney L. – Varga Á. 2016: A kreativitás térszerkezeti változása Magyarországon az ezredforduló után.– In.:TÓZSA I. (szerk.): Humán tér-kép. A humán és fejlesztéspolitikai tényezők földrajza Magyarországon tanulmánykötet. – Budapest: Gazdaságföldrajz és Jövőkutatás Tanszék, BCE, pp. 16–57. KEA European Affairs 2006: The Economy of Culture in Europe. – Brussels, 355 p. Kiss É. 2010: Területi szerkezetváltás a magyar iparban 1989 után. – Budapest–Pécs:Dialog Campus Kiadó, 224 p. Kovács Z. – Egedy T. – Szabó B. 2011: A kreatív gazdaság földrajzi jellemzői Magyarországon. – Tér és Társadalom, 25. (1.): pp. 42–62. Kresl, P. K. – Ietri, D. 2016: Smaller Cities in a World of Competitiveness. – London: Taylor and Francis, 200 p. Lengyel, B. – Ságvári, B. 2009: Kreatív foglalkozások és regionális tudásbázis: Fogalmak, folyamatok és területi összefüggések. – Tér és Társadalom, 23. (4.): pp. 1–26. Lorenzen, M. – Andersen, K. 2009: Centrality and creativity: Does Richard Florida’s creative class offer new insights into urban hierarchy? – Economic Geography, 4.: pp. 363–390. Lux G. 2009: Az ipar hagyományos terei: a régi ipari térségek. – Tér és Társadalom, 23. (4.): pp. 45–60. Martin Prosperity Institute 2015: Creativity and Prosperity: The Global Creativity Index. – Toronto: Rotman, 68 p. Montalto, V. – Tacao Moura, C. J. – Langedijk, S. – Saisana, M. – Panella, F. 2018: Are capitals the leading cultural and creative cities in Europe? – Luxemburg: Publications Office of the European Union, 16 p. Montalto V. – Tacao Moura C. J. – Alberti V. – Panella F. – Saisana M. 2019: The Cultural and Creative Cities Monitor. – Luxemburg: Publications Office of the European Union, 120 p. OECD 2001: Science, Technology and Industry Scoreboard: Towards a Knowledge-based Economy. – Paris: OECD 212 p Peck, J. 2005: Struggling with the creative class. – International Journal of Urban and Regional Resarch, 29. (4.): pp. 740–770.

433 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

434 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Ságvári B. 2005: A kreatív gazdaság elméletéről. – Budapest: ELTE- ITHAKA, 29 p. Ságvári B. – Lengyel B. 2008: Kreatív atlasz. A magyarországi kreatív munkaerő területi és időbeli változásáról. – Budapest: DEMOS Magyarország Alapítvány, 205 p. Szakálné Kanó I. 2012: Tudásintenzív ágazatok térbelisége: innovációs és koncentráció. – In: Bajmóczy Z. – Lengyel I. – Málovics Gy. (szerk.): Regionális innovációs képesség, versenyképesség és fenntarthatóság. – Szeged: JATEPress, pp. 109–131. Szirmai V. (szerk.) 2009: A várostérségi versenyképesség társadalmi tényezői: hogyan lehetnek a magyar nagyvárostérségek versenyképesebbek? – Budapest–Pécs: Dialog Campus Kiadó, 320 p. Trócsányi A. 2008: A kulturális gazdaság szerepe a varosok megújulásában – Pécs adottságai és esélyei. – In.: Kultúra – területfejlesztés: Pécs – Európa Kulturális Fővarosa 2010-ben. – Pécs: PTE Földrajzi Intézete, Imedias, pp. 231–244. UNCTAD 2010: Creative Economy Report. – The challenge of assessing the creative economy: towards informed policy-making. – Geneva, 423 p. UNCTAD 2013: Creative Economy Report 2013 Special Edition. – Paris: One United Nations Plaza, 190 p.

435 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ VI.1.6. Appendix

population population midsize town cou midsize town cou 2011 2011 Bielsko-Biała PL 174534 Olomouc CZ 99527 Bytom/Beuthen PL 176902 Olsztyn PL 174645 Chorzów PL 111692 Opole/Oppeln PL 131867 Częstochowa PL 236796 Pécs HU 156049 Dąbrowa Górnicza PL 125905 Płock PL 124553 Debrecen HU 211320 Plzeň CZ 167648 Elbląg PL 124668 Radom PL 221287 Gdynia PL 249139 Ruda Śląska PL 142510 Gliwice/Gleiwitz PL 187474 Rybnik PL 140924 Gorzów Wielkopolski/ PL 124534 Rzeszów PL 179952 Landsberg W. Győr HU 129527 Sosnowiec PL 216420 Kalisz PL 105386 Szeged HU 168048 Kecskemét HU 111411 Székesfehérvár HU 100570 Kielce PL 202196 Tarnów PL 176902 Košice/Kassa SK 240433 Toruń PL 111692 Koszalin/Köslin PL 109248 Tychy PL 236796 Legnica/ Liegnitz PL 103238 Wałbrzych/ Waldenburg PL 125905 Liberec CZ 101607 Włocławek HU 211320 Miskolc HU 167754 Zabrze PL 124668 Nyíregyháza HU 119746 Zielona Góra/ Grünberg PL 249139

Appendix 1: List of midsize towns and number of their population in the Visegrad Countries, 2011 Source: compilation of Zoltán Dorogi

436 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ VI.2. A critical analysis of the EU’s image as a model for Regionalism: Some Lessons from the Eurozone crisis

Melek Aylin Özoflu131

Abstract

With its sui-generis institutional structure, the European Union (EU) is the most successful regional grouping in the world today. Therefore, it is usually referred to as a role model for other regional initiatives. In this respect, the mainstream literature puts its emphasis on the EU’s exportability to other regions as an example of diffusing regionalism. In this context, this research seeks to address how the Eurozone crisis has affected the concept of regionalism in Europe. Accordingly, it argues that because of the eruption of the crisis within the European political context, the EU’s image as the diffuser of regionalism might have been stalemated. This is because it triggered the nationalist and sub-nationalist waves along with the sentiments of Euroscepticism and anti- globalization all around Europe. In this vein, this article will investigate how the concept of regionalism is contested by the crisis context of the EU both at the sub-national and the supra-national levels.

Keywords: regionalism, new-regionalism, European Union, Eurozone crisis, regionalization

131 Corvinus University of Budapest, PhD Candidate, melekaylinzoflu@gmail. com

VI.2.1. Introduction projects mainly driven by functional motives such as the access to the After the end of the Cold international markets in the face War, which would imply the of the fast-growing economic and transformation of the traditional financial globalization process Westphalian nation-state and have gained a remarkable pace national borders, regionalism (Barbieri, G. 2019). European has gained critical importance in integration, having a common the face of the changing power identity, common goals within a distribution in the international specified geographical region is system. In the multipolar world described as the most successful and order, the collective regional important example of supranational

437 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ regionalism. That is why it is Hopkins, J. 2007; Ellison, D. 2008) usually referred to as the ‘model’ previously associated the factors for other regional initiatives. In this driving the desire for subnational respect, the mainstream literature regional autonomy with ethnic puts its emphasis on the EU’s identity and democratization, exportability to other regions as the this paper contributes to the model of diffusing regionalism (for existing literature by including the overviews see Börzel and Risse, repercussions of the crisis which 2009; Lenz, 2015; Risse,2015; threaten the political economy Haastrup,2013). However, this interests of the subnational regional research argues that because of entities. Therefore, this article aims the eruption of the Eurozone crisis to fill this gap by contributing to the within the European political relevant regionalism literature. context, the EU’s image as the To this end, this article aims diffuser of regionalism might be to explain how the EU’s image as a stalemated. This is because the successful example of regionalism Eurozone crisis has aggravated the has been affected by the Eurozone tension between the supranational crisis. The hypothetical background and subnational regionalism of this article argues that the along with the sentiments success of the European integration of Euroscepticism and anti- as a diffuser of a certain model of globalization all around Europe. regionalism cannot be maintained Therefore, the well-known phrase unless the Member States are ‘Sovereignty is Back, Integration willing to give up their individual Out’ at the supra-national level interest to the collective interest. uttered by Andrés Malamud is Accordingly, this article will highly in question (Malamud, first briefly discuss the concept A. 2012). In addition, it has also of regions and regionalism in reverberated the tension between order to build up a definitional supranational and subnational standpoint. That would provide a regionalism within the EU whose basis for the connection between supranational structure has heavily regionalism and context of the EU. affected the distribution of sovereign Secondly, it will shift to the EU and representative powers within and its integration process within the domestic political context of the the framework of the success of member states (Tostes, A. P. 2013). regional integration. Then, it will While scholars (Kenichi, O. 1993; deal with the Eurozone crisis as Alesina, A. – Spolaore, E. 1997; triggering the cleavages among the

438 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ member states. In this way, it will the States (Russett 1967). In question whether repercussions of this respect, political, economic the crisis did put the EU’s image as and cultural factors play in the a role model for regionalism into transformation of the regions danger. After clarifying this inquiry, (Väyrynen, R. 2003). For example, this article will be concluded with during the Cold War, the regions some findings of the research. were divided based on political and military motives which reinforced VI.2.2. Regions and the establishment of organizations Regionalism such as the North Atlantic Treaty Organization (NATO). However, Despite the widespread the fragmentation of the great- interest in regionalism, there is a power blocs since the 1980s led to lack of consensus on the definition the rise of sub-regional and micro- of the term within the literature. regional organizations such as the Regionalism is interpreted Visegrad Four, Shangai group and differently by different academic Baltic Council of Ministers. fields in different contexts and time- On the other hand, a periods. Therefore, regionalism constructivist definitional emerges as a contested phenomenon. standpoint explains the appearance In part, it comes from the fact that of the regions with the redefinition there is also no consensus on the of the norms, identities, civic groups definition of the concept ‘region’ (Väyrynen, R. 2003). The idea of what constitutes a region is subject itself (Mansfield, E. D. – Solingen, E. 2010). In fact, where one region to political actors’ perceptions, ends and the next begins is not their interpretations, and social clear. Moreover, every academic constructions (Katzenstein, P. J. discipline has its own definitional 2005). Söderbaum defines that standpoint to provide a basis for values and objectives contribute to the framework of research. Within the creation of a particular region the international relations, there is or type of world order (Söderbaum, a cleavage between rationalist and F. 2003). Falk in his valuable constructivist interpretations of contributions to the existing the term. Rationalist explanations literature explains the contributions define regions through using more of regionalism in achieving world material delineations such as order values including peace, economic, institutional and intra- human rights and democracy (Falk, and interregional ties between R. 2003). Katzenstein argues that

439 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ “regions are politically made” for the sake of forming cooperation (Katzenstein, P. J. 2005 p. 9.). This at the regional level (Hurrell, A. may be interpreted as that there are 1995). Here, the tension between no natural ‘regions’. Accordingly, ‘full’ sovereignty of the states and through social construction, regions subordination of the individual are formed based on a collective interest to the collective interest perception of identities which leads emerges. The issue is often in to the creation of culture blocs. question within the context of the Actors create the social facts to European integration which has which agentive or non-agentive necessitated states’ giving up their functions are assigned. In this sovereignty in specific areas to the sense, constructivism regards the supranational competency of the construction of the regions as a EU. server to the political and economic The context and content ends. of the regionalism became also Hettne argues that subject to the transformation international relations treat regions because of the shifting nature of as “supranational subsystems of world politics and the recent rise the international system” (Hettne, of globalization (Hettne, B. – B. 2005 p. 544.). This subsystem Söderbaum, F. 1998; Söderbaum, consists of certain geographical F. 2012). Thus, there is a distinction proximity within which the states between the old and new debates of having shared perceptions interact regionalism. Old regionalism refers extensively (Thompson, W. R. to the limited scope of free trade 1973). In this sense, high economic arrangements and security alliances interdependence between a group within the bipolar world structure of countries along with the shared (Söderbaum, F. 2003). On the other political attitudes and values hand, new regionalism is used as a emerges (Deutsch 1957). Moreover, post-Cold War term when economic they are tied by their security globalization, which is boosted concerns. That is why considering by regional institutionalization the economic, ecological and and regional groupings, has risen strategic interdependence, states of dramatically (Rumley, D. 2005). a given region are counted as being Moreover, the post-Cold-War era the members of the same ‘club’. implied the increasing importance Therefore, Hurrell argues that states of regionalism in the multipolar should prioritize regional interests world which provides a suitable rather than the national egoisms ground for the rising powers to exert

440 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ their influence by strengthening transformation of the notion of their international positions thanks traditional ‘Westphalian” nation- to regionalism (Hettne, B. 1994). state in the face of globalization In this respect, new regionalism is (Cooper, Hughes & de Lombaerde associated with the transformation 2008). Moreover, emphasis on the of the global structure towards weakened capacity of the state in globalization with the change in the state-society complexes brings world order, relative decline of the also Polanyian ideas regarding the US hegemony, emergence of the political role of the civil society economic blocs i.e. EU, NAFTA, (Söderbaum, F. 2003). Asia-Pacific, growth of economic interdependence, transnationalism VI.2.3. The European and increased importance of the Integration and non-state actors (Hettne, B. – Regionalism Söderbaum, F. 1998). Therefore, today the regionalism appears as a Regionalism as an attempt of more complex phenomenon. the open-ended process of region Accordingly, since there formation is often associated with the are different interpretations of institution-building (Söderbaum, the regions, there is no consensus F. 2012). In fact, there are several on the definition of regionalism regional organizations besides the either. While some theorists define EU covering the cooperation of regionalism from a state-led states in economic, security and perspective as a state-led project political spheres such as the African (Gamble, A. – Payne, A. 2003), Union (AU) or the Association of others regard regionalism as a Southeast Asian Nations (ASEAN). political project which promotes Nevertheless, with its highly specific type of ideas, identities and elaborated institutionalization ideologies within a given regional towards becoming a regional space (Bøås, M. et al. 2003; Hettne, trading hub (Malamud & Schmitter B. 2003; 2006). In fact, the latter 2011), European integration often definitional standpoint comes from provides the main role model to the fact that many new regionalism theorize the regional experiments. theorists incline to go beyond the Moreover, while international state-centric approach in explaining organizations such as ASEAN regionalism to which the non-state remains a purely intergovernmental actors are also heavily involved. organization, the EU encompasses Such an explanation implies the some degree of supranationalism as

441 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ well (Camroux, D. 2008). 2006). In this sense, from a neo- In order to fully acquire the functionalist perspective, European dynamics of regional integration integration is mostly referred to as initiatives, it is necessary to point a spillover of a common policy into out the main difference between areas of other common policies. regional cooperation and regional Therefore, European integration is integration. In this way, the sui- regarded as a form of incremental generis formation of European cooperation in economic, social integration may be uncovered in a and political fields. This form of more systematic way. Accordingly, cooperation invoking the idea of regional cooperation refers to joint ‘ever closer Union’ was based on attempts of neighboring states to the calculation that each new step reach a cooperative solution in towards more integration which specific areasW ( inters, L. A. – necessitated short-term sacrifices Schiff, M. 2002). In this respect, would bring long-term gains to the regional cooperation (especially member states (Hall, P. A. 2015). economic) refers to the regional In fact, there are numerous phenomenon in the rest of the other theories explaining world (Christiansen, T. 2001). European integration with However, because of past problems different perspectives and reasons and thus lack of trust between including intergovernmentalism, them, there is a high possibility functionalism, neo-functionalism, that they end up not reaching any liberal institutionalism or cooperative solution. Moreover, constructivism. However, what other constraining factors include matters most for the main purpose financial burden-sharing and of this article is to enlighten complex decision-making process the underlying reasons for such aiming to maximize the interests of integration. Whatever the approach each state. is, the main driving factor in On the other side, Haas argues promoting regionalism through that the study of regional integration integration has been the preservation explains the reasons why states give of sustainable peace and peaceful up their full sovereignty in specific coexistence in the region (Haas, areas (Hettne, B. 2006). The 1971). European integration was concept of integration is categorized achieved through the elimination by Joseph Nye as economic of the rivalry between France and integration, social integration, and Germany and through de facto political integration (Hettne, B. solidarity to prevent the repetition

442 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ of the two world wars. were followed by the member states To this end, Germany was (Egan 2010). With these aspects of highly ready to adopt a federal transborder elimination of the rise system which would weaken the of the nationalism and economic German nationalism for the sake liberalization, EU is seen as the true of European integration that would agent of the globalization boosted overcome its economic and political and completed by regionalist isolation from the rest of Europe. aspirations. In this sense, European integration The decades of European aimed to overcome or abandon the collaboration resulted in the mentality of ‘nationalism’ which establishment of the European had led to detrimental rivalry Monetary Union (EMU) which between European nations (Szul, appeared as the integral aspect of the R. 2015). That is why European Union. The institutional design of integration emerged as an antidote the EMU was based on the uneven to the Nation States and nationalism integration of macroeconomic which would European integration policies encompassing centralized and regionalism as two allies. In this monetary policy and decentralized respect, European integration has fiscal policy (Schimmelfennig, F. foreseen weakening of nationalism, 2014). Accordingly, the monetary decentralization of the State power policy is handled at the independent both in political and economic level of the European Central terms. In fact, the envision to Bank while the EU has no legal preserve the peace did go hand in competence over the fiscal policy hand with the economic growth in of the Member States such as the war-torn continental Europe. taxation, getting into debt or bailing Economic unification marked the out (Schimmelfennig, F. 2014). This removal of barriers, curtailing of institutional structure has paved state intervention and preventing the way for the aggravation of the of distortion of competition and Eurozone crisis, which appeared the free movement of goods, as an impediment to its image of services, capital and labor with a the diffuser of regionalism. The certain degree of harmonization structural reforms implemented of the legislation at the European during the crisis will be enlightened level (Egan 2010). To this end, in the following to provide an the stages towards the economic elaborative analysis of the EU’s integration i.e. Free Trade Area, commitment to its wave of Customs Union, Single Market regionalism.

443 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ regional frictions at the sub-national VI.2.4. European level, which was witnessed during Integration as Sub-National the Eurozone crisis highly stemmed and Supra-National from the divisions between central and regional governance. Regionalism This is because Western Europe is encompassed of a variety of This article regards two- subnational regional structures such faceted regionalism in Europe as federal, constitutional/legislative namely as sub-national and supra- and local government regions as national. While sub-national clearly outlined (Hopkins, J. 2007). regionalism is explained as related (Table 17) Accordingly, during to regions as the part of the nation- the crisis, the EU’s supranational states, supra-national regionalism competency has triggered an is explained as related to the already existent tension between integration of states belonging to the national governments and sub- the same world region (Szul, R. national regional entities that have 2015). Highlighting this difference no place at the international table. is of critical importance since the

constitutional/legislative local government regions federal systems regions (examples) Germany Spain France Austria Italy Sweden Scotland, Wales & N Belgium Denmark Ireland (UK) Aland (Finland) Poland Azores and Madeira (Port)

Table 17: Sub-national regional structures in Western Europe Source: Hopkins, J. 2007, p. 23

These frictions were 2015). Therefore, from a political aggravated because of the system economy perspective, subnational of redistribution of money from regions economically doing better richer regions to poorer ones than the other regions are viewed as in the example of Spain and as the principal losers (Ellison, D. Catalonia or Scotland and the 2008). Alesina and Spolaore explain United Kingdom (UK) (Szul, R. that integration to the supranational

444 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ institutions deepening the trade ambitious and successful as being relations reduces the dependency on the most developed model of the state, which in return triggered regionalism so far, the integration the aspirations for greater regional came to the point where massive autonomy (Alesina, A. – Spolaore, cleavages among the member E. 1997). The demands for self- states along with the politicization determination of the richer regional emerged. This is where the entities came into question. The hypothesis of this article comes real paradox here is that regional from as already defined that the entities aspire self-determination success of the European integration by becoming independent from the as a diffuser of a certain model of national governments however that regionalism cannot be maintained does not necessarily mean that they unless the Member States are have an anti-Eurosceptic stance. willing to subordinate the individual The most remarkable example interest to the supranational level representing this paradox is of collective interest. The crisis Scotland which already organized emerged as the rising of conflicting a referendum for independence in interests and priorities of the 2014 (Schnapper, P. 2015). EU’s Member States which triggered role in the Scottish referendum the drift towards nationalism and campaign is beyond the scope of Euroscepticism within the European this research. Nevertheless, this political context (Özoflu, M. A. separatist movement has also 2017). As a result, the Eurozone affected the supranational level Crisis has first brought the sense when the regions have attempted of solidarity into question which to call for a referendum on would result that the notion of independence in the Member States European identity as the facilitator because of the possible domino of the aspirations of regionalism effect in other sub-national regions would be contested (Özoflu, M. e.g. Catalans, Corsicans, Flanders A. – Kahraman, S. 2019). That was and Basques. because of the fact that the reason for adopting common currency was VI.2.5. The Eurozone Crisis an ambitious step towards building of 2009 an upper collective identity at the European level (Galpin, C. A. Against the promising 2015). In this sense, that can be background of the European also interpreted as an ambitious aim integration described as often towards realizing the aspirations of

445 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ regionalism. Therefore, the crisis elites triggered a mass reaction at was interpreted as both an economic the public level. In their valuable and an identity crisis. Later, it also contribution Hooghe and Marks turned into a political one because (Hooghe, L. – Marks, G. 2009) of the design flaws of the EMU argue that the European public (Ergin, N. E. 2013) and because shifted from ‘permissive consensus’ of the friction between solvent and to ‘constraining dissensus’ with insolvent States which invoked regard to the EU-level decision- harsh bailout debates (Nicoli, F. making mechanism. In this respect, 2017). Eurozone crisis symbolizes In this sense, the Eurozone the post-functionalist moment crisis reactivated the core- when the politicization of the periphery divide or North/South European integration has increased split- manifested itself as Germany unprecedently (Schimmelfennig, F. versus Greece or Spain- within 2014). Accordingly, long-standing the EU encountered at the level financial crisis has triggered the of ‘supranational regionalism’. protectionist tendencies at the The member states which have EU-wide level (New Delhi Times been unwilling to subordinate Bureau 2014). The concrete proof their individual interests to the of such tendencies was the rise collective interest have been the of Eurosceptic parties within the ones financially doing well such as European political setting. It was Germany and the Netherlands. The affirmed by the victory of the Greek tension, especially between Greece radical left SYRIZA which adopted and Germany, was self-evident an anti-austerity stance in January during the bail-out negotiations. 2015 (New Delhi Times Bureau Firstly, the ‘conditionality’ which 2014). In a general overview, was imposed on Greece and other deteriorating economic situation debtor member states, was a highly that invokes the tendency of repeated term along with a threat of preserving national priorities limits ‘Grexit’ during each round bailout the suitable ground which provides negotiations (Theodoropoulou, regions to act in collaboration in the S. 2016). Germany was economic sphere. extremely strict regarding the In this respect, the fiscal austerity measures and protectionist tendencies are felt necessary policy changes in Greece also at the sub-national level by (Theodoropoulou, S. 2016). increasing dissatisfaction with the Austerity measures taken by the interregional distribution of funds

446 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ in regions. The crisis has triggered were looking for functionally the calls for independence from efficient and politically feasible member countries’ richer regions solutions (Hooghe, L. – Marks, (Erlanger, S. 2012). This is because G. 2009). Therefore, measures the richer and more productive were envisaged towards creating regions consider themselves as emergency funds and increasing being exploited by poorer regions the budgetary discipline in the within the Member States (New member states (Beukers, T. 2013). Delhi Times Bureau 2014). There Moreover, they came in the form of happened a cleavage between intergovernmental treaties to avoid them as net givers and net takers. both the increase in supranational That is why the independence competency of the EMU and debates of some regions from the revision of the major treaties, which member states came to existence. could have implied the ratification The most salient example that can by referendum in the Member be traced for the repercussions of states. The response was based the economic crisis on the policy on the strengthened cooperation on regionalism at the sub-national of article 136 of Treaty on the level has been Spain. Accordingly, Functioning of the European Union the economic performance and (TFEU) which was introduced to austerities along with the revealed “(a) to strengthen the coordination corruption and political sclerosis and surveillance of their budgetary pushed Catalonia, which is a discipline…” in order to “…ensure relatively richer region, towards the proper functioning of economic independence (Mason, P. 2017). and monetary union” ( article On the other hand, to provide 136(1) TFEU). an elaborative analysis of the EU Accordingly, the first as an example of regionalism in important step was taken to the context of crisis, mentioning revise the infamous non-bail out EU level measures to solve or at clause which had triggered the least manage the crisis is of critical triple sequence of financial crisis, importance. In fact, the Eurozone sovereign debt crisis and Eurozone crisis has resulted in critical crisis (Schimmelfennig, F. 2014). initiatives towards more fiscal The infamous non-bailout clause unity and centralized control over was replaced by the temporary national banks and budgets. This assistance mechanism European can be described as the ‘functional Financial Stability Facility (EFSF) spillover camp’ by the elites who providing temporarily financial

447 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ assistance to highly indebted Compact entered into force in 2013 Greece, Ireland and Portugal in to bind national commitments to June 2010 (European Commission). run the balanced budgets towards Afterwards, the permanent ensuring national fiscal disciplines international financing institution (Glencross, A. 2013). It is of critical European Stability Mechanism importance to highlight that the (ESM) was established in 2012 intergovernmental treaties signed (European Stability Mechanism). during the crisis i.e. the ESM treaty By creating €500 million fund, and the Fiscal Compact did not the establishment of the ESM was require the unanimous ratification aimed to assure markets for long- of all participating countries term commitment to the single (Kumar, R. 2014). Therefore, the currency (Glencross, A. 2013). reluctant member states could not In addition, the vision for block the deepening. Accordingly, prosperous EMU was introduced ratification of the Fiscal Compact in 2012 by the President of the within the specified one-year European Council (European time frame was mandatory for the Council 2012). In this direction, Eurozone Member States. the budgetary framework was The mandatory nature of integrated. EU institutions agreed the ratification can be interpreted to establish a single supervisory as the top-down manner of the system (SSM) and single resolution measures in the face of the crisis. mechanism (SRM) for banks as Even so, the introduction of the the two-pillars of the banking new mechanisms to preserve the union (European Commission). Euro implied the further deepening Besides, economic governance of of the EU which appeared as the EMU was reinforced. European unintended consequences of the Semester was initiated along with crisis. In this respect, despite the the legislative packages known massive increase in politicization as the Six-Pack (2011) and Two- of the European public and the Pack (2013), which were aimed rise of the Eurosceptic parties, the to strengthen the discipline of the technocratic level of integration Stability and Growth Pact which which was foreseen by the neo- limited government budget deficits functionalist agenda was achieved to 3 percent and public debt levels to be realized by the political leaders to 60 percent of gross domestic of the member states. Although EU product (Krecké, E. 2018). With level measures did not pave way for the German initiative, the Fiscal the establishment of radically new

448 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ frameworks such as EU treasury or protectionist tendencies due to the post of minister of finance, the new longstanding financial crisis in the mechanisms can play crucial roles EU have led the rise of nationalism in the prospective crises. and Euroscepticism. Nevertheless, the EU has managed to introduce VI.2.6. Conclusion the new mechanisms in order to save the Euro. While the EU’s image as This research aimed to find a role model for regionalism might out the nexus between European have been negatively affected integration and its promises as a during the crisis because of the diffuser of regionalism to the other politicization and Euroscepticism, regions in the EU’s crisis context. the technocratic integration was Considering the main fundamentals still achieved. In this respect, even of the integration, it is observed that in the context where the Union’s the two phenomena; regionalism raison d’être is shaking, the EU and European integration were showed its political commitment to parallel during the post-war its famous motto better together. period. This was based on the diminishing role of the nation-state Acknowledgement and redefinition of international (interstate) relations. It created a The present publication is conviction that regionalism and the outcome of the project „From the EU were “natural allies”. Talent to Young Researcher project The Eurozone crisis has initiated aimed at activities supporting the the disruption of the successful research career model in higher continuation of these aspirations education”, identifier EFOP- because of the tendencies towards 3.6.3-VEKOP-16-2017-00007 co- the nationalism at the supra- supported by the European Union, national level, and separatism at Hungary and the European Social the sub-national level. Accordingly, Fund.

VI.2.7. References

Alesina, A. – Spolaore, E. 1997: On the number and size of nations. The Quarterly Journal of Economics, 112(4), 1027-1056. Barbieri, G. 2019: Regionalism, globalism and complexity: a stimulus towards global IR?. Third World Thematics: A TWQ Journal, 4(6), 424-441.

449 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Beukers, T. 2013: The Eurozone crisis and the legitimacy of differentiated integration. http://diana-n.iue.it:8080/bitstream/handle/1814/29057/ MWP_2013_36_Beukers.pdf?sequence=1&isAllowed=y Bøås, M. – Marchand, M. H. – Shaw, T. M. 2003: The weave-world: the regional interweaving of economies, ideas and identities. – In: Söderbaum, F. – Shaw T. M. (eds.): Theories of New Regionalism (pp. 197-210). London: Palgrave Macmillan. Camroux, D. 2008: The European Union and ASEAN: Two to Tango. Notre Europe, (65). Christiansen, T. 2001: ‘European and Regional Integration’. – In: Baylis, J. – Steve S. (eds): The Globalization of World Politics: An Introduction to International Relations (pp. 494–518). Oxford: Oxford University Press. Ellison, D. 2008: Subnational regionalism in a supranational context: the case of Hungary. Romanian J. Eur. Aff., 8, 60. Ergin, N. E. 2013: Hasta adam Avrupa: Avro krizi: Avro bölgesinde borç krizi ve krize karşı alınan tedbirler. Maliye Hesap Uzmanları Derneği. Erlanger, S. 2012: (2012, October 7) Europe’s Richer Regions Want Out. Cnbc, Retrieved from https://www.cnbc.com/id/49317832. (Accessed on 21.02.2020). European Commission: European Financial Stability Facility (EFSF). https://ec.europa.eu/info/business-economy-euro/economic- and-fiscal-policy-coordination/eu-financial-assistance/loan- programmes/european-financial-stability-facility-efsf_en (Accessed on 09.04.2020). European Commission 2017: Statement on the events in Catalonia. (2017, October 2). Retrieved from http://europa.eu/rapid/press-release_ STATEMENT-17-3626_en.htm. (Accessed on 18.01.2020) European Commission: What is banking union. https://ec.europa.eu/info/ business-economy-euro/banking-and-finance/banking-union/what- banking-union_en#relatedlinks. (Accessed on 30.04.2020). European Council 2012: Towards a genuine Economic and Monetary Union Report by President of the European Council Herman Van Rompuy. (26.07.2012) https://www.consilium.europa.eu/ media/33785/131201.pdf. (Accessed on 30.04.2020) European Stability Mechanism. https://www.esm.europa.eu/assistance/ lending-toolkit. (Accessed on 09.04.2020).

450 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Falk, R. 2003: Regionalism and world order: The changing global setting. In Söderbaum F. – Shaw T. M. (eds.): Theories of new regionalism (pp. 63-80). London: Palgrave Macmillan. Galpin, C. A. 2015: Euro crisis... identity crisis? The single currency and European identities in Germany, Ireland and Poland (Doctoral dissertation, University of Birmingham). Gamble, A. – Payne, A. 2003: The World order Approach. – In: Söderbaum, F. – Shaw T. M. (eds.): Theories of new regionalism (pp. 43-62). London: Palgrave Macmillan. Glencross, A. 2013: The EU response to the eurozone crisis: Democratic contestation and the New Fault Lines in European Integration (No. 3/13). Discussion Paper. Hall, P. A. 2015: The euro crisis and the future of European integration. In The Search for Europe: Contrasting Approaches, 46-67. Hettne, B. 1994: The new regionalism: implications for development and peace. The New Regionalism: implications for Global Development and International Security, Helsinki, United Nations University World Institute for Development Economics Research. Hettne, B. 2005: Beyond the “New” Regionalism. New Political Economy, 10(4), 543–571., p.544. doi:10.1080/13563460500344484. Hettne, B. 2006: Beyond the “New” Regionalism. In A. Payne (ed.), Key Debates in New Political Economy (pp. 128-160). New York, Routledge. Hettne, B. – Söderbaum, F. 1998: The new regionalism approach. Politeia, 17(3), 6-21. Hooghe, L. – Marks, G. 2009: A postfunctionalist theory of European integration: From permissive consensus to constraining dissensus. British journal of political science, 39(1), 1-23. Hopkins, J. 2007: The Future of Sub-National Governments in a Supra- National World-Lessons from the European Union. Victoria U. Wellington L. Rev., 38, 19. Hurrell, A. 1995: Explaining the resurgence of regionalism in world politics. Review of international Studies, 21(4), 331-358. Katzenstein, P. J. 2005: A world of regions: Asia and Europe in the American imperium. Cornell University Press. Kenichi, O. 1993: The rise of the region state. Foreign Affairs, 72(2), 78- 79. Krecké, E. 2018: (23.05.2018). Geopolitical Intelligence Services.

451 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

452 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ The European Semester: More power to eurozone governments. https://www.gisreportsonline.com/the-european-semester-more- power-to-eurozone-governments,politics,2559.html. (Accessed on 30.04.2020). Kumar, R. 2014: The Eurozone Crisis and the Future of Europe: The Political Economy of Further Integration and Governance. Springer. Malamud, A. 2012: Sovereignty is back, integration out: Latin American travails with regionalism. In J. Roy (Ed.) The state of the union (s): The Eurozone crisis, comparative regional integration and the EU model, (pp.177-190) University of Miami. Mansfield, E. D. – Solingen, E. 2010: Regionalism. Annual review of political science, 13, 145-163. Mason, P. 2017: (2017, October 23). Catalonia, Lombardy, Scotland … why the fight for self-determination now?., The Guardian, Retrieved from https://www.theguardian.com/commentisfree/2017/oct/23/ we-need-to-understand-why-catalonia-lombardy-scotland-are- reposing-question-of-self-determination (Accessed on 24.02.2020) Müftüler-Baç, M. 2015: The Revitalization of the Turkish-European Union Relations: Old Wine in New Bottles?. IPC-Mercator Policy Brief. New Delhi Times Bureau. (2014, August 17). EU: Regionalism vs Nationalism., New Delhi Times, Retrieved from https://www. newdelhitimes.com/eu-regionalism-vs-nationalism123/. (Accessed on 20.02.2020) Nicoli, F. 2017: Hard‐line Euroscepticism and the Eurocrisis: Evidence from a Panel Study of 108 Elections Across Europe. JCMS: Journal of Common Market Studies, 55(2), 312-331. Özoflu, M. A. 2017: Rethinking European integration process in the light of crises (Master’s thesis, Middle East Technical University). https://open.metu.edu.tr/handle/123456789/26561. (Accessed on 30.04.2020). Özoflu, M. A. – Kahraman, S. 2019: Rethinking European integration process in the light of crises introduction. Köz-gazdaság-Review of Economic Theory and Policy, 14(1), 53-67. Rumley, D. 2005: The geopolitics of Asia-Pacific regionalism in the 21st century. The Otemon Journal of Australian Studies, 31(9). Schimmelfennig, F. 2014: European integration in the euro crisis: The limits of postfunctionalism. Journal of European Integration, 36(3),

453 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 321-337. Schnapper, P. 2015: From One Referendum to the Other: the Scottish Dimension to the Debate over Europe. Revue Française de Civilisation Britannique. French Journal of British Studies, 20(XX- 2). Söderbaum, F. 2003: Introduction: theories of new regionalism. In Söderbaum F., Shaw T.M. (eds.), Theories of new regionalism (pp. 1-21). London: Palgrave Macmillan. Söderbaum, F. 2012: Regionalism. The Wiley‐Blackwell Encyclopedia of Globalization. Retrieved from https://doi. org/10.1002/9780470670590.wbeog488. (Accessed on 24.02.2020) Szul, R. 2015: Sub-National Regionalism and the European Union., Mazowsze Studia Regionalne,17, 41-52. Theodoropoulou, S. 2016: What solidarity in the Eurozone after the Greek crisis of 2015?. In B. Vanhercke, D. Natali and D. Bouget(eds.), Social policy in the European Union: State of play 2016, 33-60. Thompson, W. R. 1973: The regional subsystem: a conceptual explication and a propositional inventory. International Studies Quarterly, 17(1), 89-117. Tostes, A. P. 2013: Regionalism and political pepresentation in comparativeperspective: the European Union and MERCOSUL. Contexto Internacional, 35(2), 387-413. Väyrynen, R. 2003: Regionalism: old and new. International Studies Review, 5(1), 25-51. Winters, L. A. – Schiff, M. 2002: Regional cooperation, and the role of international organizations and regional integration. World Bank.

454 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ VI.3. The Copenhagen dilemma and its possible solutions in the Council of Europe

Adrienn Tóth-Ferenczi132

Abstract

Scepticism towards effective multilateralism has been growing in recent years. The article has a focus on the particular situation of the Council of Europe and intends first to present the enlargement dilemma of the Organisation in the mid-nineties, whether to further invite Eastern European countries before their compliance with the requisite standards or let them wait for accession until their legal and institutional structures align more closely with European standards. The decision on an early invitation determined the path for the Organisation in the subsequent decades and besides institutional renewal, it led to political and legal challenges. The paper aims to present one political and one legal case study to illustrate the crisis of the main bodies of the Council of Europe, by using statistical data to support the arguments. Therefore, both qualitative and quantitative analysis are conducted to seek an answer to the question: how can the Organisation solve its own Copenhagen dilemma? The article also presents an outlook for the latest developments, namely the establishment of a new complementary procedure for monitoring the “rule of law” as a possible solution to future institutional challenges.

Keywords: multilateralism, Council of Europe, institutional crisis, Copenhagen dilemma, rule of law mechanism

132 PhD Candidate, Corvinus University of Budapest, International Relations Multidisciplinary Doctoral School/International and Security Studies Sub-program, Head of Department of the Ministerial Commissioner’s Cabinet responsible for the Development of Neighbourhood Policy of Hungary, Ministry of Foreign Affairs and Trade, E-mail: [email protected]

VI.3.1. Introduction 2014) similar to other regional or global cooperation formats. The Council of Europe is It can be regarded as a thematic a classical intergovernmental institution focusing on human organisation133 (Lindseth, P.-L. rights, democracy and the rule of and supranational organisations, 133 A broad range of literature distinguishing the key factors and is available on the terminology of functions of the different formats international, intergovernmental (Lindseth, P.-L. 2014).

455 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ law standards, a legally binding VI.3.2. ”Go East”, the convention system and serious historical enlargement monitoring structure developed since its foundation. As a result, Pre-enlargement period the Council of Europe has become a unique multilateral organisation This chapter aims at of its kind, and is regarded as the giving a general overview of the continent’s leading human rights milestone events and documents organisation. The Council of Europe leading to eastern enlargement; is often confused with the European it will not seek to provide an Council, another institution of the exhaustive, chronological analysis European Union responsible for of the pre-enlargement period. planning Union policy. It seems It is a basic principle that both that the two organisations are statutory organs of the Council comparable but also differ in many of Europe135, the Committee of 134 respects (Hlavac, M. 2010). In Ministers136 and the Parliamentary light of the recent institutional and Assembly137 in general closely financial crisis of the Council of follow the tendencies and events Europe caused by - among others of Greater Europe for a timely and - a concrete, classical geopolitical comprehensive response to all kinds challenge, namely the annexation of challenges. In the Europe of the of Crimea, it appears to be justified 1980s fundamental changes were to examine the factors leading to the in the air. The Organisation has situation which nearly paralyzed paid increasing attention to Eastern the Organisation. Will the Council European countries since 1985. The of Europe learn its lessons and seek Committee of Ministers dedicated a for effective guarantees to prevent special session to relations with the similar circumstances in the future? Eastern part of Europe in January 1985 (Gazdag F. – Kovács P. 1999 p. 15.). In its Declaration commemorating the 40th 134 Some scholars argue that the anniversary of the Organisation, European Union’s supranational the Ministers for Foreign Affairs elements – especially the EU laws’ of the member states welcomed the supremacy over the laws of individual Member States – distinguish it from reform process in some countries international organizations. The European Union is really a sui generis 135 Hereinafter referred to as CoE project that has not been attempted 136 Hereinafter referred to as CM anywhere else (Hlavac, M. 2010). 137 Hereinafter referred to as PACE

456 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ of Eastern Europe and the possible for ethnic problems (PACE future co-operation to establish RECOMMENDATION 1124 genuine democracies throughout (1990)). Europe (DECLARATION of the 84th Session of the Committee Dilemma of continued of Ministers). The Parliamentary enlargement Assembly decided to “grant special guest status for national The openness towards legislative assemblies of European Eastern European countries and non-member countries which have coordinated efforts to identify the shown their interest and which apply possible fields of cooperation, such and implement the Helsinki Final as a common European cultural Act and the instruments adopted at heritage led to the membership the CSCE138 conferences…” (PACE of Hungary and Poland in the RESOLUTION 917 (1989)). The European Cultural Convention, in Parliamentary Assembly defined the 1989. Later Hungary, as the first fundamental criteria for accession, country from the Eastern European stressing the importance of full club, joined the Organisation on 6 implementation of commitments November 1990. agreed in the CSCE framework During the first three years (PACE RECOMMENDATION of European democratic transition 1119 (1990)) and highlighting the nine countries from the former protection of minorities through Soviet-dominated area acceded an urgent appeal to all parties officially to the Council of Europe: concerned to refrain from violence Hungary, Poland, Bulgaria, and seek peaceful solutions Estonia, Lithuania, Slovenia, Czech Republic, Slovak Republic, Romania (CoE WEBSITE, 47 members states). This relatively rapid transformation generated an institutional adaptation to the challenges of the new mission. New mechanisms and structures characterized the face and image of

138 Conference on Security and Co-operation in Europe renamed to Organization for Security and Co- operation in Europe (OSCE) on 1 January 1995.

457 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the CoE in the last three decades. commitment of the Organisation This institutional development to eastern enlargement, some deserves to be given a separate voices questioned the necessity analysis, which this paper will not and meaningfulness of a rapid undertake to present. enlargement process. Those who However, the invitation to raised concerns were convinced that join the Council of Europe was an accelerated integration would not an unconditional offer. The lead to the weakening of values heads of States and Governments and principles, and the Council of of the member states of the Council Europe would be sold out (Gazdag of Europe met in Vienna, on 9 F. – Kovács P. 1999). This question October 1993. At the First Summit, became an issue of the election the Vienna Declaration clarified process of the new Secretary the criteria of accession. The General in 1994. The Government of fundamental requirements were to France submitted the candidature of sign and ratify the Convention for Catherine Lalumière, the Secretary the Protection of Human Rights and general in office in November Fundamental Freedoms, abolition 1993, in the hope of her re-election of the death penalty as a part of for a second term (CM (93)195, it139, compliance of the institutions Confidential140). At the same and legal system with the basic time the Government of Sweden principle of the Council of Europe, submitted the candidature of Daniel free and fair elections on universal Tarschys for the post in December suffrage, freedom of expression, 1993 (CM(93)222, Confidential). and respect of national minorities The Office of Secretary General (VIENNA DECLARATION AND Lalumière prepared a discussion ACTION PLAN, CoE Summit, paper for the 94th Session of Vienna, 1993). At the First Summit of Heads of 140 The Committee of Ministers States and Governments in Vienna, Resolution Res(2001)6 on access to Council of Europe documents the number of members increased recalls the rules governing access to from 23 to 32. Despite the official its documents (except those relating to “human rights” and “monitoring” 139 The Council of Europe has meetings) since 1 January 2001, made abolition of the death penalty namely: i. documents classified a precondition for accession. No “restricted” are declassified a year executions have been carried out in after being issued, ii. documents any of the Organisation’s 47 member classified “confidential” are states since 1997. On Council of declassified ten years after being Europe website/Achievements issued.

458 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Ministers for Foreign Affairs to “in the short term this radical pursuit generate a common reflection on the of an open-door-policy will…. development of the Organisation entail increasing heterogenization and on the implications of within the Organisation. It may be continued enlargement, particularly accompanied by risks in the form of the Russian Federation’s of a lessening of member States’ accession (CoE IN THE NEW common resolve and a weakening EUROPE, DISCUSSION PAPER of the Organisation. By virtue 1994). The Paper highlighted of its size, diversity and great- that the Council of Europe had power status, Russia also raises become the European institution special problems of integration” most capable of facilitating the (DISCUSSION PAPER p. 6). The democratisation process of Central Secretary General in office predicted and Eastern Europe, however that “the accession of such countries through the enlargement process as Russia and Ukraine is liable to its role and forms of actions had cause an immediate increase in also significantly evolved. The the number of applications lodged Reflection paper also pointed out under the European Convention that the new role of the Organisation on Human Rights” (DISCUSSION is “highly influenced by the renewed PAPER p. 10). outbreak of armed conflicts on our By way of comparison, the continent…as well as the emergence candidate of Sweden for the post of new challenges (migration, rise of Secretary General was deeply of intolerance, social exclusion, convinced that the Council of etc.) and welfare state crisis”. Europe should effectively promote The Secretary General concluded the democratisation process by that the Europe of the Council of formulating serious conditions for Europe was less homogeneous the newcomers. The values and and more unstable compared to principles of the Council of Europe the period before 1989. Secretary were never dealt with so intensively General Lalumière was deeply and thoroughly as during the concerned about the prospects enlargement. This process gave of future enlargement, especially new impetus to the honouring the admission of the Russian of obligations and commitments Federation. She raised the political by the member states in both and institutional impact of future organs of the Council of Europe. Russian membership on the activity The enlargement process helped of the Organisation, warning that the Organisation to identify new

459 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ activity fields, the compilation and Organisation entry into force of the two legally binding instruments on national The open-door policy of the minority protection141 which can be Council of Europe exerted a serious considered as a major step forward impact on the activity and role of in the regulation of a highly sensitive the Organisation and improved its area. The efforts by the Council of visibility in the cooperation between Europe aiming at promoting the international organisations. The development of democracy and new mechanisms of institutional rule of law mechanisms in Central reform helped the Council of Eastern Europe also contributed to Europe to redefine its mission, but the pre-accession strategy of the the Organisation also faced different European Union (Tarschys, D. political and legal challenges 1999 pp. 21–22.). nearly a decade later. The internal The enlargement process of and inter-state conflicts of the new the Council of Europe was affected members determined the political by the election of Daniel Tarschys agenda after a while, for which as Secretary General in April 1994. the human rights organisation During his mandate between 1994- endeavoured to articulate legal and 1999, Andorra (1994), Latvia, human rights answers. The Council Albania, Moldova, Ukraine, North of Europe progressively developed, Macedonia (1995), the Russian improved and strengthened the Federation, Croatia (1996) and supervision process to help member Georgia (1999) were granted states comply with the norms and full membership (COUNCIL standards of the Organisation, and OF EUROPE WEBSITE, 47 to uphold the highest democratic MEMBER STATES). and human rights standards. Both statutory organs established their VI.3.3. Consequences of own monitoring procedure through „early” invitation convention and non-convention- based mechanisms. However, the From institutional legal implications were much more renewal to the political tangible and highly visible. One of and legal challenges of the the most recognised achievements of the Council of Europe membership 141 The Framework Convention for is the right of individual application the Protection of National Minorities to the European Court of Human and the European Charter for Regional or Minority Languages

460 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Rights142. The opening up to to 800 million people throughout Eastern Europe enlarged this right the Council of Europe area and resulted in immense growth in the 142 Each member State must ratify workload of the Court. By the end the European Convention of Human Rights and Fundamental Freedoms of 2010 the Strasbourg Court was when joining the Organisation and faced with 139, 650 applications the Court rules on individual or State pending before a judicial formation applications alleging violations of (In Annual Report, ECtHR143 2010). the civil and political rights set out in the European Convention on Human 143 European Court of Human Rights. Rights

Figure 43: Annual report 2010, European Court of Human Rights, p. 147. Source: Website of the European Court of Human Rights: https://www.echr.coe.int/ Documents/Annual_report_2010_ENG.pdf

Case studies the selection of the case studies was to present those events which have As both political and legal raised serious questions in recent questions are the focus of this paper, years as regards the credibility, the most outstanding examples operation and functionality of the were selected144. The reason behind Council of Europe. According to the author’s personal experience 144 Selection based on the author’s the political case nearly paralyzed personal evaluation. the Organization in financial terms.

461 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ As to the implementation debates decided not to implement its of the legal case, the supremacy of financial obligation towards the the Court was questioned. Council of Europe. Accordingly, Russia has not contributed to the Political case study ordinary budget of the Organisation – Suspension of since 1 July 2017. As the situation voting rights of the escalated, the Assembly searched Russian delegation for solutions on how the Russian in the Parliamentary Federation could return and the Assembly Council of Europe could save face. The functioning of the Council of The direct event generating Europe was at stake in June 2019. the institutional and financial crisis At that time the Parliamentary of the Council of Europe was Assembly adopted a resolution on 10 the reaction of the Parliamentary April 2019 (PACE RESOLUTION Assembly of the Council of Europe 2277 (2019)), which called on the to the Russian annexation of Russian Federation to appoint a Crimea. The Organisation always delegation to the Assembly and to seeks to respond first to the most resume obligatory payment of its pressing current political events contribution to the Organisation’s and the Assembly immediately budget, failure of which could decided to limit the mandate of the lead to the suspension of its Russian parliamentary delegation representation rights in the whole (PACE RESOLUTION1990 Organisation146. This resolution (2014)). In response to this clearly shows the deep interest of decision, the Russian delegation the Council of Europe to preserve left the parliamentary forum, so the platform characteristic of the Russian parliamentarians did not Organisation. In order to keep take part in the activities of the Russia in, the Parliamentary Parliamentary Assembly for five consecutive years. Given the fact (2014) points 15.1, 15.2, 15.3). that the Assembly suspended their 146 Article 9 of the Statute of rights145, the Russian government the Council of Europe says: “The Committee of Ministers may suspend 145 Voting rights, the right to be the right of representation on the represented in the Bureau of the Committee and on the Consultative Assembly, the Presidential Committee Assembly of a member which has and the Standing Committee, the right failed to fulfil its financial obligation to participate in election observation during such period as the obligation missions ((PACE RESOLUTION1990 remains unfulfilled.”

462 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Assembly was ready to disregard CM/Del/Dec(2019)1340/H46- its own criteria formulated only a 17). However, Russia is reluctant few years earlier. Following serious to implement the judgment of the debates in the PACE for years, the Court. The Russian Federation147 Russian parliamentary delegation considers the Moldavian Republic finally submitted its credentials and of Transdniestria as a sovereign the Assembly ratified them on 26 state and does not wish to interfere June 2019 (PACE RESOLUTION with the domestic affairs of another 2292 (2019)). country. As a response to the ruling of the Court, Resolution No. 21-P of the Russian Constitutional Court was adopted and came into force in July 2015. The resolution suggested Legal case study – Non that the legislators should introduce implementation of the a special legal procedure according Court’s judgements to which the RF Constitutional Court can resolve the issue of whether it Although the issues related is possible or impossible, based on to the functioning of the Court and the principles of supremacy of the implementation of its judgements RF Constitution and prevalence seem to be purely legal problems, of the RF Constitution over other the Court faced more serious laws, to enforce a judgment of the challenges than the simple increase European Court of Human Rights in the workload in recent years. with respect to a complaint against In the case of Catan and Others Russia (Zagonek, J – Boulatov, versus Moldova and the Russian P. 2016). Both the political and Federation, in 2012 the European legal cases raise the issue of the Court of Human Rights found enforcement capability of the Russia to be in violation of the Council of Europe, but the latter one European Convention On Human called into question the provision of Rights. A series of decisions were the Convention for the Protection adopted by the Human Rights of Human Rights and Fundamental Meeting of the Ministers’ Deputies Freedoms148. - among others - during the March session in 2019 and stated 147 Hereinafter referred to as RF. 148 Article 46 on the Binding force that the Russian Federation was and the execution of judgments of responsible for the violation of the Convention for the Protection education rights (CM DECISION of Human Rights and Fundamental Freedoms.

463 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Union, we appear not to have VI.3.4. The Copenhagen any instrument to see whether the dilemma and efforts to find rule of law and the independence a solution of the judiciary still command respect” (Reding, V. 2012). The notion became widespread in the The term „Copenhagen political discourse of the European dilemma” is used in the context Union and adequately describes the of the European Union and refers situation that had evolved in the to the recently detected problem Council of Europe by 2017. As the when a member State appears not latter one was an active part in the to comply with the mandatory Euro-Atlantic integration process, conditions set before its accession. considered as an ante-room of The expression was used by the European Union for many of Viviane Reding, Vice-President of its members states, it seems to be the European Commission in the justified to borrow the expression debate of the European Parliament describing the syndrome so on the political situation in perfectly. Of course, the situation Romania, on 12 September 2012, in the two Organisations is not when she pointed out a general and identical. In contrast to the EU, new phenomenon: „...we face a the Council of Europe developed Copenhagen dilemma. We are very rigorous monitoring mechanisms as strict on the Copenhagen criteria, one of the achievements of eastern notably on the rule of law in the enlargement. Still, the detailed accession process of a new Member and theoretically well-functioning State but, once this Member system has an Achilles heel, namely, State has joined the European the Organisation has no real means to sanction non-compliance. This implies, in practical terms, that the respect for human rights and rule of law principles on the ground is up to the political will and interest of State parties149, in cooperation with

149 Author’s personal opinion based on experience gained in the Rapporteur Group-Human Rights (GR-H), Rapportuer Group-Legal Cooperation (GR-J), Rapporteur Group-Social and Health Questions

464 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the Organisation. Nevertheless, and committed to regular and open the syndrome of not respecting dialogue with the political leaders the commitments defined by the on sensitive issues. The Venice Copenhagen criteria for accession Commission elaborated the rule of to the European Union gradually law checklist152 to fulfil its main appeared in the Council of Europe objective, to promote the rule of law and nearly led indirectly to the and democracy (RESOLUTION inoperability of the Organisation by RES (2002) 3). 2019.150 Since these efforts have The Council of Europe was failed to achieve satisfactory aware of the problem and made results, the Ministers of Foreign several attempts to fine-tune the Affairs instructed the Ministers’ supervisory procedure at different Deputies in Helsinki, at their levels, such as launching awareness 129th Session of the Committee raising measures, adequately of Ministers on 17 May 2019, “to defining the obligations with a develop – in co-operation with the view to clarifying the criteria, Parliamentary Assembly – a clearly and increasing transparency. The defined complementary procedure, Parliamentary Assembly decided which could be initiated by either to introduce “a periodic overview the Parliamentary Assembly, the of groups of countries …to Committee of Ministers or the launch issue-based, cross-country Secretary General, and in which all monitoring in close co-operation three of them would participate”. with the relevant Assembly The Ministers “agreed further committees as a complementary General in 2009. He was re-elected measure to the country-by-country in June 2014, he was the first to win monitoring” (PACE RESOLUTION a second term https://70.coe.int/ 2018 (2014)). Secretary General home/#160562 Thorbjørn Jagland151 was pragmatic 152 The checklist intends “to provide a tool for assessing the Rule (GR-SOC), Rapporteur Group- of Law in a given country from Education, Culture, Sport, Youth and the viewpoint of its constitutional Environment (GR-C) as well as in and legal structures, the legislation Human Rights (DH) meetings of the in force and the existing case-law. Ministers’ Deputies in the Council of The checklist aims at enabling an Europe between 2011-2016. objective, thorough, transparent and 150 See the political case study of the equal assessment.” (RULE OF LAW present paper in Chapter III. 2.1. CHECKLIST, Venice Commission 151 Former Norwegian Prime 2016 https://www.venice.coe.int/ Minister and Foreign Minister webforms/documents/?pdf=CDL- Thorbjørn Jagland became Secretary AD(2016)007-e.)

465 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ that such a co-ordinated response the French Presidency of the … encouraging member States, Committee of Ministers, from May through dialogue and co-operation, to November 2019, efforts were to take all appropriate measures to made to finalise and adopt the new conform with the principles of the mechanism within a reasonable Statute, …, and may ultimately lead timeframe. The Joint Committee154 to a decision to act under Articles 8 held several meetings to clarify the or 9 of the Statute153, which lies with details of competence issues of the the Committee of Ministers”; (CM two organs related to the modalities DECISION OF 129TH SESSION). of the new procedure. As a result of this co-operation, vivid debates, Adoption of a rule of law and informal consultations in mechanism the Committee of Ministers, the latter one adopted the decision Following the decision of on the complementary procedure the Helsinki Session, intensive for the application of Article 8 consultations started to elaborate of the Statute of the Council of the framework and content, the Europe, as a consequence of a responsibilities and competences serious violation by a member of the three main actors, namely State of fundamental principles the Committee of Ministers, the and values of the Organisation Parliamentary Assembly and under Article 3 of the Statute the Secretary General. During (CM CDECISION CM/DEL/DEC (2019)129/2) on 5 February 2020. 153 Article 8 Any member of the In the appendix to this decision the Council of Europe which has seriously violated Article 3 may be suspended Committee of Ministers defines from its rights of representation and requested by the Committee of 154 The Joint Committee is Ministers to withdraw under Article composed of representatives of 7. If such member does not comply the Committee of Ministers and with this request, the Committee representatives of the Parliamentary may decide that it has ceased to be a Assembly. The Secretary General member of the Council as from such of the Council of Europe is entitled date as the Committee may determine. to attend the meetings of the Joint Article 9 The Committee of Ministers Committee in an advisory capacity. may suspend the right of The functions of the Joint Committee representation on the Committee and are to examine the problems which on the Consultative Assembly of a are common to the Committee of member which has failed to fulfil its Ministers and the Parliamentary financial obligation during such period Assembly. https://assembly.coe.int/nw/ as the obligation remains unfulfilled. Page-EN.asp?LID=JointCommittee

466 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the basic principles and practical standards, as well as continuous, modalities of the new mechanism. serious disrespect for the principles They highlight that: “The primary of the Organisation will not be aim is to bring a member State, further tolerated. However, it is through constructive dialogue and important to note that the procedure co-operation, to comply with the is reversible: „should the member obligations and principles of the state remedy the situation and bring Organisation, hence as far as possible it into compliance with the Statute to avoid imposing sanctions. This the decision can be revoked”. procedure, of an exceptional nature, Otherwise, “in case of exclusion, is complementary to existing rules the State concerned will have to and regulations, building upon reapply for membership” (CM/Del/ the 1994 Declaration155, and its Dec (2020)1366/1.7). implementation will not require any changes to the Statute. It will VI.3.5. Conclusion not affect existing procedures and mandates arising from statutory or The Council of Europe conventional control mechanisms.” celebrated its 70th anniversary The appendix contains clear in 2019. With the experience of provisions for the steps, the seven decades in the protection of initiators, the indicative timeframe, human rights, guaranteeing the rule the road map and its implementation, of law and democratic principles as well as for the possible decision, this Organisation undoubtedly including the voting rules on the contributed to developing the suspension of a member State’s normative basis for the single right. Although the possibility European legal area. Through to suspend or exclude a member its close cooperation with other state not being in compliance international organisations, by with the basic principles of the inspiring and mutually strengthening Council of Europe was always each other’s activities, the Council incorporated in the Statute, the of Europe became an active part recent decision is a clear message of the European human rights that violation of the norms and architecture. In some fields its role and mission go beyond the standard 155 Declaration on compliance with commitments accepted by member setting activity of the United states of the Council of Europe Nations or the European Union. (Adopted by the Committee of The legally binding conventions Ministers on 10 November 1994 at its on the protection of national 95th Session) - Decl (10/11/94)

467 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ minorities and their supervisory complementary procedure will mechanisms elaborated in the mid- succeed in achieving what its nineties can be considered unique. committed supporters hoped for in However, sceptical voices could terms of the enforcement of norms say that any legislation is only as and standards. Bearing in mind good as its enforcement. The policy that the real goal is not to punish of the Council of Europe is focused the members states but to motivate on dialogue, cooperation, follow- them with strengthened tools, in up activities and assistance. The the event that the Committee of Organisation has sought to avoid Ministers decides to apply the sanctions or confrontation and, as exclusion option, the mechanism a matter of fact, it has not really must be considered to have failed158. disposed of any kind of efficient In the light of the findings restrictive measures156. After of the present paper the Council the historical enlargement and of Europe apparently has a institutional reform in the 1990s, double history. During the first the Council of Europe now faces period lasting from its foundation another type of challenge: soft until the eastern enlargement power human rights instruments, the Organisation focused on the “normative institutionalism” developing the institutional versus classical, “power realism”157 and legal framework of liberal which demands new approaches democracies along the rules of and methods. No one can predict intergovernmentalism. After the whether the newly established door was opened to Eastern Europe from a fully different historical, 156 Sanction capabilities of political, social background, the intergovernmental organisations would CoE irrevocably turned a “new deserve separate analyses if the terms page”159. sanctions and intergovernmentalism are mutually exclusive factors. 158 The Conclusion reflects the 157 Expressions in quotation marks author’s opinion. borrowed from Professor Ferenc 159 After Professor Ferenc Gazdag, Gazdag, unpublished reviser opinion unpublished reviser opinion given to given to the present article. the present article.

VI.3.6. References

CM DECISION CM/DEL/DEC(2019)129/2 on A shared responsibility for democratic security in Europe; Ensuring respect for rights and

468 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ obligations, principles, standards and values adopted by 129th Session of the Committee of Ministers (Helsinki, 17 May 2019): https://search. coe.int/cm/Pages/result_details.aspx?ObjectID=090000168094787e CM DECISION CM/Del/Dec(2019)1340/H46-17, H46-17 Catan and Others v. Russian Federation (Application No. 43370/04) https://search.coe. int/cm/Pages/result_details.aspx?ObjectID=0900001680937585 CM DECISION on Complementary procedure between the Committee of Ministers and the Parliamentary Assembly in response to a serious violation by a member State of its statutory obligations, CM/Del/ Dec(2020)1366/1.7 , adopted on 5 February 2020, https://search. coe.int/cm/Pages/result_details.aspx?ObjectID=09000016809a5214 CM DECISION on the Complementary procedure between the Committee of Ministers and the Parliamentary Assembly in response to a serious violation by a member State of its statutory obligations - Practical modalities for a complementary procedure between the committee of ministers and the Parliamentary Assembly in response to a serious violation by a member state of its statutory obligations, adopted on 5 February 2020, https://search.coe.int/cm/Pages/result_details. aspx?ObjectID=09000016809a65cf CM DECLARATION on the Future role of the Council of Europe in European construction, (adopted and signed at the 84th Session of the Committee of Ministers, 5 May 1989, on the occasion of the 40th anniversary of the Organisation) https://rm.coe.int/ CoERMPublicCommonSearchServices/DisplayDCTMContent?doc umentId=0900001680535ad9&format=native CM Declaration on compliance with commitments accepted by member states of the Council of Europe (Adopted by the Committee of Ministers on 10 November 1994 at its 95th Session) - Decl (10/11/94) https://search.coe.int/cm/pages/result_details. aspx?objectid=090000168053661f CM RESOLUTION Res(2001)6 on access to Council of Europe documents https://search.coe.int/cm/Pages/result_details. aspx?ObjectID=09000016805e2a9f CM(93)195, Confidential, Election of the Secretary General - Candidature for the post / 18 November 1993 (CM-Public) https://search.coe.int/ cm/Pages/result_details.aspx?ObjectId=090000168063db53 CM(93)222, Confidential, Election of the Secretary General - Candidature for the post / 22 December 1993 (CM-Public) https://search.coe.int/

469 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

470 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ cm/pages/result_details.aspx?objectid=09000016804b8d5b CoE DISCUSSION PAPER BY THE SECRETARY GENERAL, on the development of the organisation and on the implications of continued enlargement, particularly of the Russian Federation’s accession, Restricted CM(94)78 https://search.coe.int/cm/pages/result_details. aspx?objectid=0900001680523515 COUNCIL OF EUROPE WEBSITE, 47 MEMBER STATES https://www. coe.int/en/web/portal/47-members-states) EUROPEAN COURT OF HUMAN RIGHTS, ANNUAL REPORT 2010 https://www.echr.coe.int/Documents/Annual_report_2010_ENG. pdf Gazdag F. – Kovács P. 1999: Az Európa Tanács 1949-1999, SVKI Hlavac, M. 2010: Less Than a state, more than an international organization: The Sui generis nature of the European Union. Munich Personal RePEc Archive PAPER https://mpra.ub.uni-muenchen.de/ id/eprint/27179 Lindseth, P.-L. 2014: Supranational Organizations in Ian Hurd, Ian Johnstone, and Jacob Katz Cogan, eds., Oxford Handbook of International Organizations (OUP, 2016). https://papers.ssrn.com/ sol3/papers.cfm?abstract_id=2517896 PACE Joint Committee, PACE Website https://assembly.coe.int/nw/Page- EN.asp?LID=JointCommittee PACE RECOMMENDATION 1119 (1990) on Situation in Central and Eastern Europe, http://assembly.coe.int/nw/xml/XRef/Xref- DocDetails-EN.asp?fileid=15153&lang=EN&search=MTExOXxjY XRlZ29yeV9zdHJfZW46IkFkb3B0ZWQgdGV4dCI= PACE RECOMMENDATION 1124 (1990) on Relations with the countries of Central and Eastern Europe (General policy of the Council of Europe) http://assembly.coe.int/nw/xml/XRef/Xref-DocDetails-EN. asp?fileid=15158&lang=EN&search=MTEyNHxjYXRlZ29yeV9zd HJfZW46IkFkb3B0ZWQgdGV4dCI= PACE RESOLUTION 2292 (2019) in challenge, on substantive ground, of the still unratified credentials of the Parliamentary delegation of the Russian Federation, http://assembly.coe.int/nw/xml/XRef/Xref- DocDetails-EN.asp?fileid=28049&lang=EN&search=KjoqfHNlc3 Npb25wYXJ0X3N0cl9lbjoiMjAxOSAtIFRoaXJkIHBhcnQtc2Vzc 2lvbiJ8Y2F0ZWdvcnlfc3RyX2VuOiJBZG9wdGVkIHRleHQi PACE RESOLUTION 1990 (2014) on reconsideration on substantive

471 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ grounds of the previously ratified credentials of the Russian delegation, http://assembly.coe.int/nw/xml/XRef/Xref-DocDetails- EN.asp?fileid=20882&lang=EN&search=KjoqfGNhdGVnb3J5X3 N0cl9lbjoiQWRvcHRlZCB0ZXh0InxzZXNzaW9ucGFydF9zdHJf ZW46IjIwMTQgLSBTZWNvbmQgcGFydC1zZXNzaW9uIg== PACE RESOLUTION 2018 (2014) on The progress of the Assembly’s monitoring procedure (October 2013-September 2014) http:// assembly.coe.int/nw/xml/XRef/Xref-DocDetails-EN.asp?fileid=212 93&lang=EN&search=KjoqfGNhdGVnb3J5X3N0cl9lbjoiQWRvc HRlZCB0ZXh0InxzZXNzaW9ucGFydF9zdHJfZW46IjIwMTQgL SBGb3VydGggcGFydC1zZXNzaW9uIg== PACE RESOLUTION 2018 (2014) on the Progress of the Assembly’s monitoring procedure October 2013-September 2014 http://assembly. coe.int/nw/xml/XRef/Xref-DocDetails-en.asp?FileId=21293 PACE RESOLUTION 2277 (2019) on the role and mission of the Parliamentary Assembly: main challenges for the future http:// assembly.coe.int/nw/xml/XRef/Xref-DocDetails-EN.asp?fileid=27 662&lang=EN&search=KjoqfHNlc3Npb25wYXJ0X3N0cl9lbjoiM jAxOSAtIFNlY29uZCBwYXJ0LXNlc3Npb24ifGNhdGVnb3J5X3 N0cl9lbjoiQWRvcHRlZCB0ZXh0Ig== PACE RESOLUTION 917 (1989) on Special guest status with the Parliamentary Assembly, adopted on 11 May 1989 http://assembly. coe.int/nw/xml/XRef/Xref-DocDetails-EN.asp?fileid=16328&lang =EN&search=OTE3fGNhdGVnb3J5X3N0cl9lbjoiQWRvcHRlZC B0ZXh0Ig== Reding, V. 2012: European Parliament, Plenary debate on the political situation in Romania, statement by V. Reding, 12 September 2012. https://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP// TEXT+CRE+20120912+ITEM-011+DOC+XML+V0//EN RESOLUTION RES (2002) CDL(2002)027-e 3Adopting the Revised Statute of the European Commission for Democracy through Law https:// www.venice.coe.int/WebForms/documents/?pdf=CDL(2002)027- e&lang=EN Tarschys, D. 1999: Fél évszázad egy szervezet történetében. – In: Gazdag F. – Kovács P.: Az Európa Tanács 1949-1999, SVKI VIENNA DECLARATION AND ACTION PLAN, Council of Europe Summit, Vienna, 8-9 October 1993 https://rm.coe.int/ CoERMPublicCommonSearchServices/DisplayDCTMContent?doc

472 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ umentId=0900001680536c83 Zagonek, J – Boulatov, P. 2016: Russian law on the priority of the RF Constitution over resolutions of intergovernmental human rights bodies, White & Case LLP https://www.whitecase.com/publications/ alert/russian-law-priority-rf-constitution-over-resolutions- intergovernmental-human

473 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ VI.4. New strategies for the Hungarian (Political) Elite in the Light of Demographic Trends among Hungarians in Transylvania

László Percze160

Abstract

A newly established and permanently changing world order is characterized by a kind of multipolarity (multi-centered world order is being unfolding). Besides power units like the USA and Russia, other emerging countries, China and India are going to play a decisive role in the future. The region of Central and Eastern Europe including the Carpathian Basin became more the part of the Western European sphere of interest, yet geographically lays at the border as a kind of buffer zone. The 20th century brought an artificial disintegration of this socially and economically integrated area. Inthis particularly complex geopolitical structure, the fate and the future of a still-existing Hungarian minority in the so called “Szeklerland”, in Transylvania is very remarkable. A significant question occurs whether such a small community in Romania is ableto define its own elite group. Moreover, does it have a clear vision/scenario for the future? The future demographic trends among the Hungarian population in Transylvania will undoubtedly have a major impact on the future strategies of its elite, mainly on a political level. The question is whether the elites are ready to face a significant decrease of Hungarians, especially in the so-called diaspora regions in the next ten years and whether they can go on with the existing strategies or they will need to readapt or change them in order to ensure the continuity of their representation.

Keywords: Carpathian Basin, minority, demography, elite, strategies and scenarios

160 PhD Student – CUB IR Doctoral School, [email protected]

VI.4.1. Preface of political processes and the functioning of political institutions, The political elite, by the thus participating in decisions most accepted definition, consists that affect the society as a whole of individuals who, through their (Putnam, R. D. 1976; Higley, positions in power organizations J. – Moore, G. 1981). However, and movements, have a regular the specificity and interpretation and serious influence on the results of a minority elite is rather more

474 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ complex. are elected in constituencies, on This paper is trying to unfold the basis of a closed list system and demonstrate as a pilot the and independent candidatures, demographic situation in order to according to the principle of be able to give a basis for a further proportional representation. The research of the Hungarian minority two Chambers have different elites in Romania. The overall numbers of members: The Chamber purpose is to outline the challenges of Deputies is composed of 332 facing the minority elite (political) Deputies, and the Senate, of 137 in the country through exploring senators. Thus, for the election the expected demographic situation of the Chamber of Deputies the in the forthcoming ten years. The representation norm is of one review of the methodological deputy to 70,000 inhabitants, and problems and difficulties of the elite for the election of the Senate, of research, mainly in the political one senator to 160,000 inhabitants. science literature, is relatively The electoral threshold is 5% on available. However, the elite national level or 20% in at least research in Romania is not as rich 4 constituencies, and 8-10% for in a Central European comparison. coalitions or electoral alliances. In this article, our subject of The President is elected in a two- the research will be approximate round system for a five-year term, through a literature review method. and the winning candidate has to With the help the current knowledge obtain a majority of 50%+1 of the including substantive findings votes of all registered voters. (stated by Erdélystat) as well as While ethnic bloc voting theoretical and methodological among Hungarians in Transylvania contributions to our particular has been a constant driving force topic, we will be able to define the behind the electoral success forthcoming challenges facing the of RMDSZ and its political elites. monopoly over the past 30 years, assuring political representation The Romanian electoral for the Hungarian minority on the (political) system national level, it is worth noting the decreasing trend among the The Romanian electoral number of voters during the same system is a bicameral system, timeframe: it went down from 7.2% composed of the Chamber of of votes in 1990 to 5.24% in 2012. Deputies and the Senate, which Another important fact is that

475 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the majority of Hungarians live in and secondly, because it forecasts so-called diaspora regions, thus a serious decrease in the number 60% percent of voters are from of Hungarians in Transylvania regions where they form a minority. within the next 10 years, especially It is some of these regions where in the so-called diaspora regions electoral disinterest, increasing (Maros, Kolozs, Arad, Brassó, assimilation, an ever-fracturing Temes, Fehér, Hunyad, Máramaros, collective identity, and a significant Szeben, Beszterce-Naszód demographic loss projected for the counties). According to the analysis next 10 years – all lead the question: the necessity for new strategies for whether the existing strategies of the Hungarian Political Elite in the Hungarian political elite will the Light of Demographic Trends have to be changed in order to among Hungarians in Transylvania assure political representation on a occurs. national level in the near future. Hungarian population VI.4.2. Demographic trends in Transylvania: historic in Romania context (1910/19 – 2011/2018) Hungarian population in Transylvania: forecast for Following the Treaty of 2011-2031. Trianon (1920) the ratio of the Hungarians in the Romanian In 2016 ErdélyStat, a site population remained almost dealing with Transylvanian unchanged until the 1970s. statistics and analyses published the According to former calculations digital version of a comprehensive (Kiss T. 2010) based upon the 1966 analysis on the expected evolution census the number of Hungarians of the Hungarian population in the was 1 619 592, thus Hungarians made up 8.5% of the total upcoming decade (Kiss T. – Csata I. 2016): Hungarian population in population of Romania, and 23.8% Transylvania: forecast for 2011- of Transylvania. Today, according 2031. the statistics based on the 2011 These statistics have census, the number of Hungarians a special significance and is is 1 237 764, but the ratio dropped extremely relevant mainly for significantly compared to earlier two reasons: first, it is the first of decades, to only 6.5% of Romania’s its kind in the post-1990 decade population, and to 19.1% of the

476 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ population in Transylvania. policies of the government161, yet, is also true that other natural factors It is also worth mentioning played a significant role in this that while in 1910 Hungarians made process:as well as other factors: up 64% of the urban population emigration, decreasing birth rates, in Transylvania, by the 1990s the aging population, and increasing most important cities (Kolozsvár, assimilation among the younger Nagyvárad, Marosvásárhely etc.) generations in the so-called have become predominantly diaspora regions and big cities. Romanian, due to the Romanization 161 Lucian Boia, Cum s-a românizat România, [How Romania Became Romanian] Humanitas, 2015

Hungarian % of total population year population Transylvania Romania 1966 1 619 592 23,8 8,5 1977 1 713 928 22,5 7,9 1992 1 624 959 20,8 7,1 2002 1 431 807 19,6 6,6 2011 1 279 402 18,9 6,3

Table 18: The number and proportion of Hungarians in Romania and Transylvania according to the censuses of the period between 1966 and 2011 The number refers to the whole territory of Romania (99 percent of Hungarians of Romania live in Transylvania) Source: Kiss T. 2015 on the basis of census data

Today, according to the (15.93%) counties162. 2011 census, more than half of the Therefore, in the past 30 Hungarians of Transylvania live in years, the demographic trends have regions where they form a minority, been negative for the Hungarians and they make up the majority only in Transylvania, meaning that in two counties, Hargita (85.21%) their ratio dropped by 2% relative and Kovászna (73.74%), while they to the number of Romanians, form a relatively large percentage of most affected being the so-called the population in Maros (38.09%), diaspora regions. This fact is Szatmár (34.65%), Bihar (25.27%), extremely important with regard Szilágy (23.35%) and Kolozs 162 http://www.recensamantromania. ro/rezultate-2/

477 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ to the political context, as out of probability for mortality in some the approximately 1.2 million cultures change in a somewhat slow Hungarians only about 600 000 live way so there may be formulated in Szeklerland where they form the more or less realistic hypotheses majority of the population. Thus, related to their future evolution. the majority of the Hungarian According to the study voters live in regions as a minority, when it comes to the migration and the mobilization strategies and immigration, the capacity of applied by the political elite (bloc forecasting of the demographer voting under the slogans for is quite limited. There are some national unity) should be applied in theories that try to fix the location of a different way. migration within a human walk of life. And indeed, in some societies, The methodology entering the labour market, certain stages of the educational course of The cohort component life or the founding of a family have up until the recent past was a a great chance to draw a spatial predominant method in the field displacement. In spite of this, of population projection and it migration does not have a place still is a widely used method. Its universally recordable within the advantage comes from the fact that human stage of life. proceeding from the age structure The number of migrants (that is recorded by census or other depends on factors, that can change administrative database) it is able to on the short term (for example approximate in a relatively accurate migration politics) or those that way the expected evolution of are not in the range of competence the number and structure of the of the demographers (for example population. This is true primarily the evolution of economic trends). for the number of deaths and birth Thus, the forecast calculations of rates. These predominantly depend population cannot be considered on the age structure because the as forecasts for the future, only as number of death cases depend on model-calculation, in other words: the level of aging and the number “if…than’’ type of statements. of births depends on the size of the female contingent with the fertile “Our own forecast age. calculations, that model the On the other hand, the evolution of the Transylvanian willingness for childbearing and the Hungarian and the total Romanian

478 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ population between the years 2011 we are speaking about a minority and 2031 can be considered also population, we had to determine as a “if…than” type of analysis.” (with the tools of demography) its states Erdélystat. borders and also what we consider „The question is even more to be ethnic border crossing.” complicated due to fact that because

Figure 44: Hungarian population in Transylvania: forecast for 2011-2031 Source: Erdélystat

„It is also important, that VI.4.3. The results of in opposition to an analysis of the population-forecast ours, that was based on the 2002 according to the ethno- demographical data, now we did not define the Hungarian demographic regions community as an ethnic group, but a language-based one. We forecast The Szeklerland region in the the population on four levels. eastern part of Transylvania is the These are the following: Romania, most compact Hungarian ethnic Transylvania, the 16 counties of block, and the sole region being Transylvania and the 50 educational populated overwhelmingly by micro-regions.” states Erdélystat. Hungarians. Szeklerland comprises Hargita and Kovászna counties, and the East-Central part Maros county. The proportion of Hungarians in this territory is 80 percent. The

479 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 475 thousand Hungarians living by the leaders and partisans of the there make up 38 percent of the Democratic Alliance of Hungarians entire Hungarian community. The in Romania (DAHR)163. Hungarian majority of the territory creates a unique opportunity Regional differences for putting to work minority institutions, the use of the Hungarian The border-region called language, as well as to formulate Partium (Bihar, Szatmár and Szilágy ethno-political claims. It is worth counties) is another area with a mentioning that unlike the central relatively high concentration of and southern regions, Szeklerland Hungarians. According to the 2011 and its inhabitants share a strong census 315 thousand Hungarians sense of regional identity, forming a live there making up 25 percent strong electoral basis for RMDSZ, of the Transylvanian Hungarian where electoral mobilization was community. The proportion of the and is the strongest. Hungarians in these three counties There are two distinct is 28 percent on average, but in the patterns of electoral participation ethnically mixed North-Western of the Hungarian minority: part of the region almost half of the lower turnout in ethnically non- population is Hungarian. competitive counties (i.e. low Central Transylvania is ethnical diversity, with the size of composed by Kolozs county and Hungarian minority below 8% or the Western part of Maros county. above 50% of the county’s total Hungarians make up 22 percent population); higher turnout in of the population. The two main ethnically competitive counties political and cultural centres of the (i.e. higher ethnical diversity, with Hungarian community Kolozsvár the size of the Hungarian minority and Marosvásárhely, with 16 percent between 8% and 50% of the of Hungarians and 45 percent county’s population). of Hungarians, respectively) are The findings support the situated in Central Transylvania. “strategic mobilization hypothesis” The number of Hungarians in this according to which electoral region is 262 thousand making up mobilization was unevenly 21 percent of the Transylvanian distributed due to various stakes 163 Tatar, Marius Ioan: Ethnicity, attributed to voting in different strategic mobilization and voting in electoral districts, followed by a the Romanian parliamentary elections pragmatic cost/benefit logic adopted of 2008, Journal of Identity and Migration Studies, 5(2), 86-107, 2011.

480 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Hungarian community. expected, while in the cases of Northern- and Southern Bihar and Maros a slight decrease Transylvania and Banat are also of ratio is likely. In all the counties home of Hungarian communities of outside of the mass Hungarian significant size. These communities areas we can count on a significant are dispersed, and live locally in a decrease of ratio. minority situation. The proportion The bottom line of the analysis of the Hungarians is below 10 is that the Hungarian population of percent in all of the counties Transylvania will decline at roughly situated in these three regions, yet the same rate as that of the country the total number living dispersed as a whole, meaning that the total in these extended areas makes up population will fall to 16.68 million 17 percent of the Transylvanian by 2031 from the 20.12 million in Hungarian community. 2011 while the ratio of Hungarians From obvious reasons, and will edge lower to 6.52 percent due to several factors the latter from 6.64 percent. regions are the most vulnerable, Although the mortality rate in and according to the study, the Transylvania decreased in the last latter regions will suffer the highest few years, the Hungarian population population loss in the next ten years, in the Hungarian-populated regions and also due to certain assimilation decreased rapidly according to the trends (inter-ethnic marriages latest statistics, which represents etc.) and a shift towards the so- the changes in the Hungarian called mixed parties (USR, PLUS, population in the first few months POL). Thus, there are significant of 2018. signs indicating that the electoral The Hungarian population preference of Hungarian voters decreased rapidly in Szeklerland, living in minority areas may need between January and November re-evaluation. 2018, approximately 61,738 children were born, which is 197 It is worth noting, that the more childbirths than in 2017 changing of the language ratio between the same months. In in some counties depends on a the first part of 2018, the rate of great extent on the initial starting childbirth was low, but in the point. Thus, from the counties of second part of the year, it increased Szeklerland and Partium in the significantly. Between August and case of Hargita, Kovászna, Szatmár November, 24,321 children were and Szilágy a growing of ratio is born which is more than the 23,080

481 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ in 2017. In the first eleven months, The rate of natural decrease 76,493 people died which is 812 between January and November less than in 2017. 2018 is approximately 1,047 which is significantly more than in 2017 This strong positive trend (796). However, the number of leads back to November 2018 marriages increased in Szeklerland: when only 6,794 death cases were in the first eleven months of last registered, which is 431 less than year, 2,597 couples got married, two years ago. In the first eleven which is an average growth of months of 2018, the population of 1,5%. Szeklerland decreased by 14,755 In the region of the Partium, people which is still a very high 10,544 children were born until the rate and devastating number, but it end of 2018, and 13,706 people is a positive fact that, in 2017, the passed away. Kolozs and Maros population decreased by 15,764. counties are the most significant The population’s decrease was the Hungarian-populated regions of strongest in March 2018, when Central-Transylvania. Here, 11,562 Szeklerland lost 3,200 Hungarian children were born, and 13,896 residents in one month. The residents died in 2018. The statistics decreasing tendency in Szeklerland revealed that the population’s continues In the counties of Hargita decrease became more intensive in and Kovászna, 4,839 children were Central-Transylvania in the last few born in the first eight months of 2018 years, especially last year. Temes which is 22 less than the previous is the only Transylvanian county year’s statistics. In the same year, among the Hungarian-populated 5,886 people died in Szeklerland regions where the number of which is a 4% of growth since 2017 childbirths is more than the when 5,657 residents passed away. mortality rate: 6,630 children were The low decrease of born in 2018, and 6255 people died. childbirth and the growing number In South- and North-Transylvania, of death cases is a combination, the population’s decrease is not as which means that the population significant as in any other region. decreased the most in Szeklerland from all the Transylvanian regions. The decline in the number of newborns was far more accentuated among Hungarians living in minority, in the so-called ‘diaspora regions’. If the Hungarian

482 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ community living in Romania is at home as well as in their everyday not prepared to meet this challenge, social interactions. According to the there is a big chance that a lot of statistics only 32.2 of the children Hungarian language educational living in mixed marriages were institutions will have to close in the registered as Hungarians by their coming decade. The result of this parents during the 2011 census164. process could mean a break up in the chain of Hungarian language Another well-known K-12 education in the diaspora sociological fact is that people regions. with a lower educational and social status are more prone to VI.4.4. Threats and assimilation. One has to emphasize weaknesses the rapid dissolution of the Hungarian language educational Linguistic and cultural system in the area of the dispersed assimilation in the diaspora Hungarian communities. The regions of Transylvania cultural and linguistic assimilation of Hungarians is thus a lot more Another important factor of accentuated in the diaspora regions, the declining number of Hungarians as presented in a study published by is cultural, linguistic assimilation. KSH (Kapitány B. – Kiss T. 2010). This phenomenon is particularly As the authors point out in relevant in the so-called diaspora the case of Kolozsvár, which has regions. Assimilation can be long been the cultural center of attributed to a number of factors, Transylvanian Hungarians, the and mixed marriages are one of ongoing trends in the Hungarian the most important among them. education system can serve as a According to the latest statistics, relevant paradigm: while there the rate of mixed marriages in are 5 Hungarian schools for Szeklerland is 4.3 percent; in the Hungarian elite in the city southern Transylvania it is 44.2 center, between 2005 and 2010 percent while in the Bánság region the number of Hungarian classes it amounts to more than 50 percent. decreased from 10 to 5 in the It is a well-known statistical fact suburban regions, the residence of that most of the children growing the working-class Hungarians. The up in mixed marriages will attend situation is even more dramatic in Romanian schools, and they tend to use Romanian as their first language 164 http://regi.itthon.ma/ erdelyorszag.php?cikk_id=2690

483 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ the southern diaspora region: for language use, the educational instance, in Szeben county out of system and national symbols were the 800 children with Hungarian the primary factors driving ethnic ancestry (many of them from mixed mobilization. marriages) only 400 were registered Yet it is worth noting, while as Hungarians at birth, and only there is no relevant statistical 129 of them started their education analysis on the 2019 EP elections, in Hungarian. it has been observed, that for the With regard to the entire first time after 1990 a significant education system in Hungarian number of Hungarian votes the significant decrease of children from the Central and minority in the elementary schools was areas, especially in the big cities registered in 1996/1997. In the like Kolozsvár, Marosvásárhely case of high schools the critical and other urban centers went to point was reached in 2004/2005. the so-called mixed parties, the Universities were first hit by it in Freedom, Unity and Solidarity 2008/2009, and while the number Party (PLUS) and Save Romania of university-aged Hungarians Union - or rather Romanian party was 108 595 in 2009, this number coalitions with an ethnic message dropped to 68 834 in 2018. for Hungarian voters. Previously, in the local elections of 2016, similar Demographic loss and the trend was going in Marosvásárhely, Future strategies for the with regard to the mixed Freemen’s Political Elite Party (POL). RMDSZ lost a significant number of votes, mainly An important study published in the big cities and the regions by Tamás Kiss concludes that in where Hungarians are a minority. the past 30 years Transylvanian These developments are signalling Hungarians have been an extremely an important shift in electoral politically activated ethnic group by behaviour. the RMDSZ, one of the most stable ethnic parties in the region (Kiss T. As for electoral perspectives 2016). Yet, according to the same of the Democratic Alliance paper, empirical evidence shows of Hungarians in Romania that while ethnic block-voting (RMDSZ), the party representing seems to persist, there was a shift Hungarian speakers of Romania, in voters’ motivations. In the 1990s the proportional evolution of ethnopolitical claims concerning Hungarian speakers among

484 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ voting age population is of crucial between RMDSZ and its voters importance. The main question have undergone a gradual, yet is, whether future demographic significant shift. The ethnic evolutions will make it possible block voting of Transylvanian for a party representing Hungarian Hungarians was closely connected speakers to pass the threshold of to the concept of a self-standing and 5 percent at future parliamentary parallel “Minority Society,” and to elections. According to the the practices of institution building projection results the proportion that the minority elites engaged in of Hungarian speakers will remain in the early 1990s. quite stable at national level in However, since its first the next two decades. In 2031 the participation in the Romanian proportion of those with Hungarian government in 1996, RMDSZ mother tongue will be of 6,4 among has gradually departed from the total population and 6,5 among this strategy, a phenomenon that the voting aged population. was also closely connected to a The political chances of so- process of elite change within called mixed parties, or Romanian the organization. The present parties with a mixed message – for RMDSZ leadership puts less Hungarian voters - was discussed165 and less emphasis on policy in an essay and an analysis (Kiss T. programs that could reinforce – Székely I. G. 2018) published in the institutional system of the 2012. minority; consequently, it is unable Over the past two decades (and unwilling) to organizationally RMDSZ has been the most stable integrate the community activists of actor in the Romanian party system, the minority society who previously with a strong and constant electoral had played a key role in the process support based on ethnic voting, of (electoral) mobilization. At the fuelled by the need for Hungarian rhetorical level, RMDSZ did not unity. abandon the goal of building a However, as Tamas Kiss parallel Hungarian minority society, argues in his article (Kiss T. – but in its linkages to the Hungarian Székely I. G. 2018), beyond this electorate, clientelistic exchanges apparent stability, the linkages have become predominant.

165 Miklós Bakk – István-Gergő Székely: Egy regionalista vegyes párt Consequences esélyeiről Erdélyben [On the Chances of a Regionalist Mixed Party in As a consequence of these Transylvania], 2012.

485 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ events, and with the perspective chance that the electoral preference of a significant decrease of of many Hungarian voters will Hungarians in the diaspora regions, turn to Romanian parties. At the in our view the Hungarian political same time, voters will probably elite is facing new challenges, be inclined to vote for Romanian as the electoral threshold for the parties, as they will think that parliamentary representation in the pose no threat to the RMDSZ Romania is 5%, and during the last parliamentary representation on the parliamentary election in 2016 it central level. 2. With only a minor had 6.19% of the votes, while in chance for the RMDSZ to be in the EP elections it had 5.3% of the coalition governments in the future, votes. According to scholars the the party will lose its weight and difference is the result of a greater importance in the political arena - presence of the Romanian voters. thus becoming less to Hungarian According to experts the situation voters in the diaspora regions and could become even more critical cities. for RMDSZ, as the 2016 elections These two effects even more saw a turnout of 39.5%, and while strengthened by the demographic the majority166 of Hungarians voted trends projected for 2030, which for RMDSZ, it barely passed the may jeopardize the parliamentary electoral threshold (5%) with a representation for the Hungarians result of 5,1%. thus making it inevitable for Two major consequences of RMDSZ to develop new strategies the present election system will for electoral mobilization. very probably have a negative effect, as pointed out by a Quaestum VI.4.5. Conclusion and 167 Analysis study in 2012. 1. The discussion first one, the motivation for voting for Hungarian candidates will The above examined decrease dramatically in counties demographic exploration could be with less than 7% Hungarian a field for a further investigation, population. There is a strong which can be linked to the strategies of the elite (political) based on in- 166 Tibor Toró: Minority Elites and Political representation in Romania depths interviews regarding the after 1989. The self organization of teh future strategies of the Hungarian hungarians at the local level, a case elites, the demographic issue and study. the projection for the near future 167 http://itthon.transindex. will be of great importance as the ro/?cikk=17409

486 Contemporary Global Challenges in Geopolitics, Security Policy and World Economy ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ possible strategies for them. among Hungarians living in the The Hungarian political diaspora regions - in our view all elite, which predominantly these are posing a new and pressing means RMDSZ, will be facing an challenge to the RMDSZ which important challenge: it has to find will have to find the appropriate the proper tools to find the ever responses and strategies in order to increasing assimilation trends ensure the political representation among the Hungarians living in the of the Hungarian community in the diaspora regions, otherwise it might future. lose the majority of its electoral The future demographic basis. According to the statistics, trends among the Hungarian Hungarians living in the diaspora population in Transylvania will are less compelled to vote based undoubtedly have a major impact on ethnic preferences168, and their on the future strategies of its elite, weakening national identity means mainly on a political level. The this trend will become stronger in question is whether the elites are the future. ready to face a significant decrease Negative demographic of Hungarians, especially in the so- trends, a significant decrease in called diaspora regions in the next number of Hungarians projected for ten years and whether they can 2030, a weakening national identity go on with the existing strategies or they will need to readapt or 168 https://www.researchgate. net/publication/314164896_Egy_ change them in order to ensure the regionalista_vegyes_part_eselyeirol_ continuity of their representation. Erdelyben

VI.4.6. References

Bárdi N. 2005: Generation Groups in the History of Hungarian Minority Elites. Regio, 2005. 109–124. Bárdi N. 2006: A romániai magyar elit generációs csoportjainak integrációs viszonyrendszere (1918–1989). – In: Bárdi N. – Simon A. (szerk.): Integrációs stratégiák a magyar kisebbségek történetében. – Fórum Kisebbségkutató Intézet, pp. 41–68. Bárdi, N. 2013: Otthon és haza Spectrum Hungarologicum, Vol. 6., 2013 JYVÄSKYLÄ – PÉCS Bárdi N. – Éger Gy. (szerk.) 2017: Magyarok Romániában, 1990–2015, [Hungarians in Romania 1990-2015, Studies on the Hungarians from

487 International Relations Multidisciplinary Doctoral School, CUB ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ Romania] Tanulmányok az erdélyi magyarságról, Károli Gáspár Református Egyetem, L’Harmattan Kiadó, Budapest, 2017 Higley, J. – Moore, G. 1981: „Elite Integration in the United States and Australia” American Political Science Review1981/3. 581–597. Kapitány B – Kiss T. 2010: Erdélyi magyarság: csökkenő létszám, változatlan arány, KSH Népességtudományi Kutatóintézet, 4 Kiss T. 2010: Adminisztratív tekintet Az erdélyi magyar demográfiai diskurzus összehasonlító elemzéséhez az erdélyi magyar népességstatisztikai konstrukciójáról, [The Administrative Eye, On the Structure of Transylvanian Hungarian Demographic Statistics with regard to the Comparative Analysis of Hungarian Demographic Discourse] Kriterion, Kolozsvár Kiss T. 2015: Increasing Marginality, Ethnic Parallelism and Asymmetric Accommodation. Social and Political Processes Concerning the Hungarian Community of Transylvania, p. 36, The Central and Eastern European Online Library, Issue: 18 Kiss T. 2016: Beyond the Ethnic Vote Shifting Determinants of the Electoral Behavior of Transylvanian Hungarians, pp. 133-149. Kiss T. – Csata I. 2016: Demographic perspectives. A projection of the Hungarian-speaking population of Transylvania for the time period between 2011 and 2031. Kolozsvár – Brussels: Kós Károly Akadémia – Wilfried Martens Center for European Studies Kiss T. – Székely I. G. 2018: Shifting linkages in ethnic mobilization: The case of RMDSZ and the Hungarians in Transylvania, Published online by Cambridge University Press: 20 November 2018 Papp Z. A. 2011: Some Social and Demographic Features of the Hungarian Diaspora in the West and Its Institutions. – In: Bárdi N. – Fedinec Cs. – Szarka L. (szerk.) 2011: Minority Hungarian Communities in the Twentieth Century pp. 642–660. Putnam, R. D. 1976: The Comparative Study of Political Elites (London: Prentice-Hall 1976) Toró T. 2016: Hungarian Minority Politics in Post-Socialist Romania: Interests, Strategies, and Discourses, Acta Univ. Sapientiae, European And Regional Studies, 10 (2016) 79–106. Toró T. – Toró T. Z. 2014: A temesvári magyar közösség politikai önszerveződése az 1989-es temesvári események után. [Self- organization of the Hungarian Community in Temesvár after the Events of 1989]. – In: Bárdi N. – Gidó A. – Novák Cs. Z. (eds.):

488 Együtt és külön: az erdélyi magyarok önszerveződése [Together and Apart: Self-Organization of Transylvanian Hungarians] (1989–1990), pp. 15-51. Institutul pentru Studierea Problemelor Minoritătilor Nationale, Cluj-Napoca. Tóth Sz. 2012: Hungarian Elites in the Romanian Parliament during the Interwar Period, In: Parliamentarism and Political Structures in East-Central and Southeastern Europe in the Interwar Period, eds. Sorin Radu & Hans-Christian Maner, pp. 187-215, “Lucian Blaga” University of Sibiu Publishing House Vincze G. 1999: Illúziók és csalódások. Fejezetek a romániai magyarság második világháború utáni történetéből, [Illusions and Deceptions. Chapters from the History of Hungarians in Romania after WWII] Csíkszereda, Státus, 1999 Corvinus University of Budapest International Relations Multidisciplinary Doctoral School

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