Europe’s new economic statecraft: A strong Anti-Coercion Instrument

Now that Europeans have imposed unprecedented sanctions on Russia in response to its full-scale invasion of Ukraine, they may be tempted to believe they are prepared to face the new geo-economic order. But that would be a mistake. The world is entering a difficult era in which geopolitics shapes a growing share of the global economy and EU trade, at the expense of rules-based economic relationships. The European Union is more dependent on such relationships than the US and China are.

The West’s unity in sanctioning Russia comes in reaction to an exceptionally dire moment for the European security order. The measures were facilitated by President Vladimir Putin’s mistakes – launching a full-scale war of aggression, moving to wipe a European country off the map, and calling its Jewish head of state a Nazi drug addict. This blatant aggression all but guaranteed EU unity. Putin was probably surprised that some of the sanctions targeted the Russian central bank – as their effects on the Russian economy are so severe that they make retaliatory energy blackmail against Europe less likely for now (despite Putin’s demands that Europeans pay for Russian energy in roubles).

In the coming months, there will be no guarantee that the EU and its member states can count on similar unanimity and the absence of heavy retaliation by Russia or another third country. They need to brace for a long-term economic war with Russia – in which Moscow might, at various points, use energy as a weapon. China might help Russia coerce the EU or might engage in a separate economic spat with the union further down the road. Europeans should prepare to address these threats partly by building a strong Anti-Coercion Instrument. This would equip the EU with tough, highly efficient economic countermeasures that the European Commission could trigger with the support of a qualified majority of member states.

The EU could quickly establish such a defence mechanism. Now that the Commission has proposed it, member states and the European Parliament urgently need to complete the process.

Russia’s war on Ukraine holds important lessons for Europeans as they do so. To adapt to the new geo-economic order, they could:

• Create a process that facilitates truly swift countermeasures. The economic war with Russia shows how important it is to act quickly – even in situations that are less than conducive to full European unity. Member states still need to decide how much say they have in the imposition of countermeasures – but there is a danger they will introduce a process that is far too lengthy and complex. Russia, like other third countries, could have easily pressured a single member state to block tough sanctions. This means that, on a purely strategic level, there is a strong argument for centralising much of the process in Brussels. At the same time, member states should be closely involved in the process without losing sight of the EU’s strategic interests. This could involve intensive consultation mechanisms and a system in which member states can stop the Commission from implementing countermeasures (rather than one in which they are required to approve any such countermeasures beforehand).

• Ensure an Anti-Coercion Instrument covers war in Europe. The EU could consider enlarging the ACI’s scope to adopt tough countermeasures through the instrument in times of war in Europe. The current proposal for the instrument only addresses violations of a member state’s sovereignty. This is because, for many Europeans, war in Europe seemed unthinkable until recently. Now that the situation has radically changed, they should prepare to counter threats when there is no direct violation of the sovereignty of a member state but an active military conflict in Europe calls for a powerful response. Putin would probably have taken the threat of EU countermeasures more seriously if they had not required full unanimity (but still involved member states very closely and gave them the opportunity to approve any action through a qualified majority vote).

• Develop an Anti-Coercion Instrument that addresses dire threats to the international order. The EU could consider enlarging the scope of the anti-coercion instrument even further to cover flagrant breaches of the UN Charter elsewhere in the world. In a multipolar global order, it is hugely significant for the EU that geographically distant partners such as Japan and Australia joined the transatlantic alliance to sanction Russia. This partnership makes it far more difficult for Russia to cope with the sanctions – not least because Beijing would probably be less hesitant to assist Moscow and thereby isolate itself. But, ultimately, the war in Ukraine and the Sino-Russian statement in early February show that this is a battle for the future of the world order. And a large coalition of multilateralists and democracies could also be important in responding to wars in other parts of the world. In these scenarios, Japan and others will likely ask the EU to show solidarity with them in return. Of course, it will require difficult, in-depth deliberations to adapt an Anti-Coercion Instrument to such conflicts. Europeans could impose countermeasures through a slower and more inclusive decision-making process when they respond to dire threats to the international order. Indeed, one could argue that it would be sufficient to impose sanctions via unanimity in response to wars outside Europe. But Europeans would then need to be clear-eyed about the risk that an aggressor could disrupt the EU’s response simply by increasing pressure on one member state.

An Anti-Coercion Instrument would help the EU protect itself from economic coercion. It could also help strengthen the alliances and partnerships that are so essential to its response to war in Europe. In this dangerous new environment, Europeans need to do everything they can to prepare for long-term economic war and the struggle for European security.

his is the second commentary in our series on Europe’s new economic statecraft. Read the first one here.