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The meeting of the presidents of Belarus and Russia, Aleksandr Lukashenko and Vladimir Putin, took place in St. Petersburg on 23 July. The heads of state arrived at Konstantinovsky Palace together.  "Aleksandr Grigorievich, we are meeting today as agreed...", the Russian leader began the protocol part of the meeting. The Belarusian president remarked: "We agreed on the meeting six months ago."  "It's true. That's right. We agreed about this a long time ago," Vladimir Putin noted. “We are meeting in St. Petersburg today. The weather is good. It is a Sunday afternoon, but we always have something to talk about. At the beginning of the meeting, I would like to note that all our plans are being implemented, even at a better pace than we expected." The Russian leader noted the good state of the economies of the two countries, the expected economic growth by the end of the year: "I looked at the latest data. The Belarusian economy is expected to grow by 3.7% in 2023. These are the projected figures, but still. Our growth forecasts are a little lower. But this is a good indicator for us too. We expect the growth of more than 2%. Unemployment is low. In general, all the main indicators give us reason to believe that we will pass this year well and will have good growth." "Our plans in terms of the Union State are being fully implemented. We are moving confidently in all areas. Trade is growing. According to various sources, the data vary a little. According to our data, it is around $43.7 billion, if we speak in dollar terms. According to Belarusian statistics, it is almost $45 billion," the Russian president said. Aleksandr Lukashenko said that the cost of services provided should be into account too. "You are right," the Russian president concurred. The presidents also noted the successful operation of the Belarusian nuclear power plant. Its second unit has already been launched this year.  "We have made progress, satisfactory progress, to put it modestly. Of course, we will also talk about security issues in the region. I hope that today and tomorrow we will have the opportunity to discuss all this in an informal setting, in great detail," Vladimir Putin said. In his opening remarks, Aleksandr Lukashenko touched upon many issues, including the course of the special military operation, the lack of results of Ukraine’s counteroffensive, and NATO's military build-up in Poland. Another important topic is plans for the development of economic cooperation between Belarus and Russia. "We won't be able to do it in a day. Therefore, we will meet tomorrow. As far as I understand, you will find time for us to talk," the Belarusian president said addressing his counterpart. "Of course. I changed some of my plans. We can spend one and a half to two days," Vladimir Putin confirmed. "Great! We will settle these issues in a day and a half. Thank you for finding the time for the meeting we agreed six months ago. Therefore, there is nothing extraordinary here. We have been planning the meeting for a long time. When a need arises, we meet and discuss our tactical and strategic issues," the Belarusian head of state said. "As for the economy, I would like to suggest that our governments think through some kind of economic plan. The point is self-reliance. We will not kowtow to anyone. We have got brains. Resources are more than enough. We need a plan for the development of our Fatherland. As I say: two states, one Fatherland. We can do it. The main forces have been here, in Russia, since old times. It will be good if our governments come up with such a plan," the head of state said.  "Even if things are a little worse off, people will understand and support us. Because there will be the light at the end of the tunnel," the Belarusian leader said.  The countries have already begun to work in this direction, advancing cooperation in all areas, including in microelectronics, space, and agriculture. "We see good results everywhere. So we need to put everything together into a plan, appoint people in charge. Thus we will do our job strategically," the Belarusian president said. Aleksandr Lukashenko brought a map showing the deployment of Polish troops at the border of the Union State to a meeting with Russian President Vladimir Putin. The head of state noted that one of the Polish brigades is now deployed 40km away from Brest, another - about 100km away from Grodno. Aleksandr Lukashenko noted that there is no Ukrainian counteroffensive. "No, there is. It's just failed," the Russian president said. "It failed indeed. There are no results," the Belarusian leader confirmed. “What's next? They, as you said recently, have begun to engage Poland. They are making active use of mercenaries. I brought you a map showing the deployment of the Polish Armed Forces at the borders of the Union State, which you talked about. We see that they are setting the stage. One of the brigades has been deployed 40km away from Brest. They used to be 500km away, now the distance is 40km. We see it all. Another brigade has been deployed a little more than 100km away from Grodno. They have a division, but so far these are brigades. Poland opened a facility to repair Leopards on their territory. Rzeszow is becoming more active. The Americans are using its airfield to send hardware and so on.” The head of state noted the increased militarization of Poland, the deployment of significant forces to the borders of the Union State. "Naturally, Poland wants something in return. It's clear it will get money, weapons. This is understandable. But now there is a lot of talking ‘to admit Ukraine into NATO in parts’. You also noted this. What's behind it? This is a smokescreen," the president said. “Tear off western Ukraine. Under the guise of admission to NATO, so that the population is ok with that."    "They want to chop off western Ukraine and annex it to Poland. This is a payment to Poland for its active participation in this operation against the Russian army. The Americans support this," the Belarusian leader added. Belarusian President Aleksandr Lukashenko lauded the successes of the Russian army in the special military operation.  "Yesterday was a difficult day. This is according to our data. You will also share your opinion on this. It was a very difficult day. Fortunately, it ended well. According to our data, more than 15 Leopards [German-made tanks] and more than 20 Bradleys [US infantry fighting vehicles] were destroyed in one battle. This, I think, has never happened before," the head of state said.  “On the other side they used units fully equipped with foreign hardware," Vladimir Putin said. Aleksandr Lukashenko stressed that the destruction of such a number of hardware also testifies to the heavy losses of the Armed Forces of Ukraine: "We can estimate how many soldiers of the Armed Forces of Ukraine died considering the number of destroyed hardware. I know this because I served as an officer in the armored army back in the day. Therefore, I understand what it means to destroy so many infantry fighting vehicles and, most importantly, much vaunted Leopards.” The Belarusian president cited the U.S. estimates which indicate that the Armed Forces of Ukraine lost 26,000 soldiers since the start of the counteroffensive. "More," Vladimir Putin responded. "It's already more. Well, a week ago they estimated Ukraine’s irretrievable losses at over 26,000. From 4 June [from the launch of the counteroffensive]. I put their data down," the Belarusian president said. "Even more," the Russian leader said affirmatively.  Aleksandr Lukashenko continued: "Yesterday showed that this is the war against the entire NATO. They arm them; send a lot of mercenaries there. Yesterday was an important day because they made use of the main strategic reserves. This suggests that this thoughtless policy of throwing untrained people and mercenaries into hell will lead nowhere. During the meeting, Vladimir Putin noted that foreign mercenaries also suffer significant losses. "Huge losses. Because of their tactics," Aleksandr Lukashenko said.  "Because of their stupidity," the Russian leader replied. "They move in groups," the Belarusian president said. In turn, Vladimir Putin stressed that people of the countries whose governments are sending people to the war zone should also be aware of what is happening. "We will communicate this to the people so that they assess the actions of their rulers," he said. Belarusian President Aleksandr Lukashenko thanked the Russian president for the security guarantees to Belarus. "I would like to thank you. You are the first person in Russia who spoke about this openly and clearly. Aggression against Belarus will be like an attack on Russia. We take this into account in the construction of our Armed Forces," the head of state said during at the talks with Russian President Vladimir Putin in St. Petersburg. The presidents of Belarus and Russia toured the landmarks in Kronstadt after the official part of the talks in Konstantinovsky Palace. The heads of state first came to the Island of Forts Museum and Historical Park. There they were shown the main exhibit - the first Soviet nuclear submarine K-3 "Leninsky Komsomol". She was delivered to the Museum of Naval Glory in Kronstadt from Murmansk Oblast in the autumn of 2022. Another point of the joint informal program of the presidents was a visit to the Stavropegic St. Nicholas Naval Cathedral in Kronstadt, also known as the Naval Cathedral of St. Nicholas.

Belarus President Aleksandr Lukashenko has convened the Security Council. A number of matters concerning efforts to ensure Belarus’ national security are on the agenda. Aleksandr Lukashenko said: “Due to the tense situation in the world and directly at our borders, due to the sanctions-fueled pressure we cannot be absolutely calm and confident in tomorrow. NATO countries persistently pursue an expansionist policy, build up military presence around Belarus, and constantly stage provocative exercises at our borders in addition to taking other actions. They have already gone so far that their military personnel violate the state border. Well, we will clarify it today.” The President went on saying: “They justify their actions by some threats that allegedly originate from Belarus’ territory. The leaders of Poland and the Baltic states accuse Belarus of some mythic aggressive intensions that we’ve never had and cannot have.” He stated that the leaders of these countries are also whipping up hysteria around the presence of personnel of the private military company (PMC) Wagner in Belarus’ territory. “They went as far as to demand their immediate withdrawal from Belarus. At the same time, they themselves are increasing military budgets, amassing large military formations at our border,” he noted. “Everything is simple: neither Poland, nor Lithuania nor other Baltic countries should have a single foreign military officer or soldier on their territory. Only in this case they have the right to protest against the presence of the military from other countries here. Otherwise, these are unreasonable and stupid demands (not even requests and proposals, but demands).” In addition to that, in April Warsaw announced its decision to suspend its Conventional Armed Forces in Europe Treaty obligations in relation to Belarus, though this is actually the last legally binding international document in the field of arms control. “This is already a dangerous step, and we should keep reminding Poland’s leadership about this - so that their decisions will not come back to hurt them,” the Belarusian leader said. “How should we respond to this? I’m not even talking about the training of our self-exiled opposition on their territory for a military coup in Belarus. I want to warn once again that we will not hesitate to respond. Though, credit where credit is due, our self-exiled opposition members in Poland, Lithuania and especially in Ukraine understand what for they are being used,” the President added. At the same time Aleksandr Lukashenko stated that Belarus is ready to restore good relations with its neighbors, who cannot be chosen as he says. “However, in response to all our messages we hear only accusations and threats. It means that they don’t need any normalization at all,” he pointed out. In confirmation of what was said and in order to rule out any insinuations, Belarus has invited Poland’s representatives to observe the Collective Security Treaty Organization exercise Combat Brotherhood 2023, which will begin in Brest Oblast on 1 September. In this context the head of state suggested looking into a number of matters relating to efforts to ensure national security.

Thank you very much.  Dear Mr. Speaker Stephanchuk, Distinguished Members of the Verjovna Rada,Excellencies, dear friends. I am very grateful to be here today, on this very special day for my country. Today, 1st July,  Spain assumes the great responsibility of becoming the rotating Presidency of the Council of the European Union for the next six months. And I wanted that the very first thing I did in my new capacity was to address the people of Ukraine through their Verjovna Rada. I wanted to tell you that we are and will be with you as long as it takes. I wanted to tell you that we will support Ukraine no matter the price to pay. That we will be with you in the achievement of your aspirations to be a free and sovereign  country that decides its own destiny as a member of the European family. In short, I am here to express the firm determination of Europeans and Europe to fight against the illegal, unjustifiable and unjustified Russian aggression to Ukraine. Once again, I have the honour to address all of you in this temple of Ukrainian democracy. My first address took place in February, on the first anniversary of Russia’s aggression against your sovereignty and territorial integrity. Things have changed since then. Today Ukraine is in the midst of the counter-offensive against an enemy that is showing signs of weakness. We have all seen the events of last week. They speak for themselves. And, if one side shows weakness, it is because in front of him there is someone who shows the opposite: determination. It's what I can see, right here, and right now: determination, strength and courage. What I can see is a whole country that refuses to be subjected and fights for its independence with immense dignity. I know the price to pay is enormous. Especially in human lives lost. Nothing I can say here today can comfort a family that has lost a daughter, a son, a mother, a father or a husband. Men and women who gave their lives defending a free and democratic Ukraine.  Still, I want to do it from the bottom of my heart on behalf of my country, Spain. A country that mourns with you. A country that condemns every Russian attack against Ukrainian civilians, like the one at Kramatorsk. Victoria Amelina, a Ukrainian writer was there. Severely injured, now fights for her life. Victoria was close to the front line, because she wanted to document the tragedy. She wanted to collect the memory of infamy. The lost heritage. The broken lives. The crimes committed. We need women Victoria Amelina, to write history. To tell the facts as they happened and preserve the memory of those who suffer this tragedy. Excellencies, dear friends, we do not forget that the European aspiration of the Ukrainian people was one of the excuses that triggered the Russian reaction and, in turn, the invasion. It was only fair to honour this aspiration by granting you the status of candidate to the European Union. No one deserves it more than you, than Ukraine. However, I know that this is not an easy process, especially with an ongoing war. To become a member state requires changes, reforms and sacrifices. Not long ago, Spain faced this challenge as a candidate country. But, let me tell you, that the process to become an European Union member taught us important lessons. One of them is that undertaking reforms has a value in itself. Reforms make your governance and your economy better, more modern and transparent. They bolster international confidence and proximity. They attract investment. And, in time, they will grant you access to our European Union. A Union, which is more than just the largest internal market in the world. Which is, above all, a community of values: human dignity, freedom, democracy, equality, the rule of law and respect for human rights. Last week, the European Commission made a positive assessment of Ukrainians, of Ukraine’s progress concerning the required reforms. I congratulate you for the progress made, especially thanks to the legislative work of this Rada, and I encourage you to keep up with it. It is worth the effort. Congratulations. And of course we will be eagerly awaiting the report of the European Commission in the fall, which will set the basis for the future. Excellencies, We want a just and lasting peace in Ukraine. Only Ukraine can set terms and times for peace negotiations. Other countries and regions are proposing peace plans. The involvement is much appreciated, but, at the same time, we cannot accept them entirely. This is a war of aggression, with an aggressor and a victim. They cannot be treated equally. And ignoring the rules should in no way be rewarded. That is why we support President Zelenski’s peace formula, which is respectful with International Law and the UN Charter. Ukraine is paying a heavy prize in terms of destruction of cities and infrastructure. So, we need to make sure that the country is rebuilt, thus creating the conditions for its growth and prosperity. And we have already started. Today, Spain has decided to dedicate another 55 million euros, including offering 51 M€ through the World Bank Group to help finance Small and Medium Enterprises in Ukraine, as well as 4 M€ to the UN Development Program to provide schools in Ukraine with green-friendly and resilient energy systems. Reconstruction will take time and investment in many sectors. Spain is committed to accompanying Ukraine in this process. There are some areas, such as the railway infrastructure, in which our companies have the know-how that can make the difference. The Spanish government will support finance the necessary investments to adapt and upgrade infrastructures and productive sectors in your country. Yet, we understand that reconstruction and prosperity will only arrive if real, long-term security is achieved. My friends, in my view, it is clear that we cannot rely on the promises made after the Cold War anymore. We have to adapt to a different security environment, one in which concepts like peace, sovereignty or territorial integrity can no longer be taken for granted. The aggression on Ukraine has shown us that they need to be effectively defended. Not just with words, but with facts. Therefore, we will need to rethink the security framework to ensure that your country, Ukraine, will be able to live free from aggression or intimidation. As the President said, we are approaching the NATO Summit in Vilnius, which will follow on the commitments we made last year, in Madrid, the capital of Spain. Spain supports enhancing the political participation of Ukraine through the creation of a NATO-Ukraine Council, where you will no longer be an invitee, but a member, a full member. We are also in favour of enhancing the practical cooperation, to continue to adapt your defence sector to NATO Standards. These are, my friends, big steps forward that will be further discussed during the upcoming NATO Summit in Vilnius. Spain will continue to do its part as well: we are delivering more Leopard tanks, armoured personnel carriers and a field hospital with surgical capacity. We also continue to reach out to other countries and continents, to explain what is really happening here in Ukraine, but also to listen to their concerns, especially those related to food and energy security or insecurity, in this case. Excellencies, Last February, before my trip to Kyiv, someone in Madrid, in my city, was  wondering about the Ukrainian’s state of mind and asked me: “Do you think they are afraid?”. When I came back, after the visit, I had a clear answer to this question and I told them: Look, they are not afraid. They are going to win. It will take them weeks, or months. It will take tears, blood and sweat, but Ukraine is going to win this war. And they asked me “Pedro, Pedro, why?, why?”. And I said, “Because there are two battles. One happens in the battlefield. The other happens in the mind, because it’s a battle of ideas. And that one, the Ukrainian people have already won it”. Ukraine has chosen democracy in the face of those who despise it. Ukraine has chosen openness and freedom, in the face of those who fear it. Ukraine has chosen to sit, and discuss, and vote, and change, and evolve, in the face of those who only believe in force and obedience. Ukraine has chosen to be independent, to move freely, to trade, to invest, to prosper, to have hope, in the face of those who still have delusional dreams about old empires. The Ukrainian people have chosen the European way. The Ukrainian people ARE, you are Europeans. And you are Europeans not only because of a geographical imperative. You are Europeans by moral and spiritual commitment. So, dear friends. During this years, I have learned many things about Ukraine. Even some Ukrainian words. For instance, I have learned that "Mriya" (emriya) means “dream” in English, we say in Spanish Sueño. That was the name of the largest plane in the world, located at the Hostomel airfield when it was destroyed by Russian troops in February 2022. That plane brought medical supplies during the pandemic or carried humanitarian aid in natural disasters. It was a symbol, a pride for Ukraine. They destroyed the symbol, but they couldn’t destroy the idea. Now, I have learnt that Ukrainian engineers are already working on the reconstruction of that giant of the skies. Let me tell you that you are not just rebuilding an airplane: you are rebuilding a dream. One day, that dream will cross the skies again. And from there, here on the ground, we will see a new Ukraine reborn from the ashes of destruction. That’s what you fight for. You fight for peace, for security and prosperity for your children. And every Ukrainian soldier knows it. Russian soldiers fight because they are scared they will be punished if they don’t. They ask themselves everyday “what are we doing here?”. You are united, you stand on the moral high ground. They even rebel, as we saw a few days ago. That’s why they cannot win and you cannot lose. I came here today to tell you that Europe is open to those who make the choice. The European Union was built to prevent new wars. We chose to get together, to be “united in diversity”, and that made us stronger. Europe is with you, and you are one with Europe. Mui Yevropa! [¡Somos Europa!] Slava Ukraini [¡Viva Ucrania!]

Russia’s invasion of Ukraine imposed a sudden energy shock on Europe 18 months ago. Faced with the prospect of much less Russian gas, there were fears that Europe’s energy infrastructure would not cope with winter 2022-23, causing economies to crumble.   Yet a mild winter and the EU’s gradual rollout of a plan to reduce its energy consumption and buy more from alternative suppliers saw it emerge shaken but not beaten on the other side.  Germany, Italy and other gas-reliant nations pivoted from Russian dependency without major electricity shortages. Since then, there has been more good news. Energy prices have fallen steadily in 2023, while Europe’s gas storage levels hit 90% capacity three months ahead of the November target and could even hit 100% in September.    According to politicians like the German energy minister, Robert Habeck, the worst of the energy crisis is over.  Yet, as we shall see, it’s a little early to be so confident.  New vulnerabilities  The share of EU piped gas imports from Russia fell from 39% to just 17% between early 2022 and early 2023. To cope with this shift, the EU has become much more reliant on shipments of liquefied natural gas (LNG) than before.  LNG’s total share of EU gas imports rose from 19% in 2021 to around 39% in 2022, amid a rapid upgrade to infrastructure that aims to have grown LNG capacity by one-third between 2021 and 2024. (Indeed, 13% of LNG imports into the EU actually still come from Russia, whose shipments have also significantly increased since the invasion).  This LNG increase has made European countries vulnerable to volatility in that market – particularly as 70% of these imports are bought at short notice rather than using the long-term oil indexed contracts that prevail in Asia.  For example, we’ve seen Europe’s benchmark gas price ticking upwards in recent weeks due to concerns over strikes at Australian LNG plants. This shows that supplies remain tight and that there are many potential disruptions in our highly interconnected world market.  To synchronise demand for LNG, the European Commission has introduced initiatives like the EU Energy Platform, an IT platform that makes it easier for supplier companies in member states to jointly buy the fuel. However, it is uncertain what level of supplies can be channelled through this instrument as it remains untested. Additionally, the industry fears this kind of state intervention could backfire and undermine the functioning of the market.  As for pipeline gas, Norway has overtaken Russia to become Europe’s leading supplier, providing 46% of the requirement in early 2023 (compared to 38% a year earlier). This extra load has strained Norway’s gas infrastructure. In May and June, delayed maintenance work caused sluggish flows that drove up prices, again showing how tight the European market is at present. Extended maintenance work in Norway leading to more obstructions in future looks distinctly possible.  Meanwhile, the EU is still expected to have to buy around 22 bcm (billion cubic metres) from Russia this year. That’s the equivalent of around 11% of all the pipeline gas used by the bloc in 2022. A large proportion is coming through Ukraine, and with the current Russia-Ukraine transit agreement unlikely to be renewed after it expires in 2024, this supply route is in jeopardy.  As part of the pivot away from Russia, the EU managed to reduce gas consumption by 13% in 2022, according to the International Energy Agency (against a target of 15%). In the months ahead, war-weary EU states may not do so well on this front.  It will not help that prices have fallen, nor that some states didn’t pull their weight last winter. Only 14 out of 27 EU members introduced mandatory energy reduction policies, while eastern states like Poland, Romania and Bulgaria did little to reduce consumption. Should there be a physical shortage of gas in continental Europe this winter, this might undermine calls for solidarity.  What comes next  The harsh reality is that for at least another two or three winters, Europe will have to hope for mild weather across the northern hemisphere without major interruptions to global LNG supply if it is to avoid significant gas price spikes.  Even as things stand, European gas prices remain around 50% above their pre-invasion long-run average, which is hurting both households and businesses. This is particularly important for Germany, the EU’s industrial powerhouse, with its energy-intensive automotive and chemical industries. There are growing concerns that continued high energy prices could promote de-industralisaton as energy-intensive industries move elsewhere.  The good news is that pressure on gas should at least subside from the mid-2020s. Significant new supplies of LNG will come online in the US and Qatar and the market will re-balance. European gas demand should also get significantly lower – down 40% by 2030, according to the energy reduction plan.  There is even talk of a supply glut by the end of the decade, depending on renewable energy deployment accelerating in Europe, and a new generation of nuclear power stations coming on stream. This would significantly reduce Europe’s need to import gas for good, but will only happen if the bloc coordinates effectively.  We saw what can be achieved in the months after the invasion when France supplied gas to Germany to help reduce its dependence on Russia, then Germany later supplied more electricity to French cities to help with outages caused by nuclear reactor maintenance.  The challenge is to take the same approach to decarbonisation. While France tries to gather support for nuclear modernisation both at home and elsewhere in Europe, it is facing opposition from the likes of the German-led “Friends of Renewals” group, which advocates building out only renewable energy. Divisions like these may prove a serious obstacle in achieving a more rapid energy transformation away from fossil fuels.  So while Europe has managed to pivot away from Russia’s pipeline gas, it will remain exposed to the volatility of global gas markets unless it reduces its gas demand significantly in the coming years.

Dear President Zelenskyy, dear Ukrainian friends, Two years ago I represented the EU at the first international summit of the Crimea Platform. And I stated clearly that Ukraine’s territorial integrity must be fully restored. And this applied to Crimea and this applied to the region of Donetsk and Luhansk. And I stand by that today. Since Russia invaded your country, you have suffered nearly 550 days of death and destruction, and Crimea is being used as a strategic springboard to launch its brutal attacks. And last September, just like they did in Crimea, Russia tried to illegally annex Donetsk, Luhansk, Kherson and Zaporizhzhia, and this is again a cynical attempt to grab more land, to steal the identity of Ukrainian citizens, to abduct your children and to drive people from their homeland, like they are doing to the Tatars. I pay tribute to Mustafa Dzhemilev, the leader of the Crimean Tatar people, who travelled to Saudi Arabia with you, President Zelenskyy, in search of peace. Russia is perfecting the toolbox of terror and persecution that they applied in Crimea over nine long years, and they are now committing atrocities in cities and villages in the whole of Ukraine, many amounting to war crimes. The EU will continue to call for full accountability for these crimes, including for the crime of aggression, and will not recognise any illegal attempt to change the status of Ukraine’s territories, including the Autonomous Republic of Crimea and the city of Sevastopol, because respecting the sovereignty and territorial integrity of countries is a basic principle of the UN Charter and that’s why we support you, President Zelenskyy, and your peace formula based on these very principles. In Ukraine you are fighting for your freedom, you are fighting for your future and for your homeland, and in the EU we know you are also fighting for our common values. And that’s why we have imposed massive sanctions against Russia and that’s why we are supporting you with weapons and ammunition, and we will strengthen this support. We are also helping to meet your humanitarian needs, and we are determined to back your country with strong financial support. We stand with you in your fight for freedom, and we will stand with you as you rebuild your country. Our total support for Ukraine amounts to more than €76 billion. And we are preparing a multiannual financing plan of roughly €50 billion. Russia also continues to weaponise food, including by blockading and attacking your seaports. And this cruel Russian tactic hits the most vulnerable around the globe hardest. In the EU we continue to support the efforts of the United Nations and Turkey to get the Black Sea Grain Initiative back up running. And we are also strengthening our Solidarity Lanes through the EU to help get Ukrainian agricultural products to global markets. Ladies and gentlemen, this war is also a fight for your future, for your dream of a bright, democratic and more prosperous future within the EU. Last year Ukraine received EU candidate status. So your European Union future is no longer a question of if, it is a question of when. And later this year, the European Council will discuss the possibility of opening accession negotiations. And I am confident that the Ukrainian people and the leaders will rise to this historic moment. You can count on my personal support, you can count on the EU. We will stand by your side for as long as it takes. Slava Ukraini!

Putin’s rule over Russia will come to an end at some point, but when it will end as well as what the policy preferences of his successors might be are uncertain. It would be in the interests of the United States and Europe to signal on what terms they would be willing to cooperate with a post-Russian leadership. Vladimir Putin has been the ruler of Russia since the turn of the century. He may remain in power through 2036, as the 2020 revision of the Russian constitution allows him to, or perhaps even longer. Then again, he may be ousted suddenly and surprisingly any day now, as the recent Wagner mutiny and the apparent lack of effective opposition to it within the Russian security services and public suggest is possible. Maybe he will decide not to run for re-election in 2024, though this does not seem likely. Sooner or later, though, Putin’s rule over Russia will come to an end. What is not at all certain, of course, is who will replace him and what sort of foreign policy the new leader will pursue. It would appear, though, that there are only a few possibilities. One is that Putin will be succeeded by someone just like him who will continue Moscow’s hostile policies toward Ukraine and the West in general. Another is that Putin will be replaced by someone within his circle that decides Moscow needs to cut its losses in Ukraine and rebuild good relations with the West both to revive Russia’s economy and to hedge against an increasingly powerful China. While this might seem unlikely, Russian and Soviet history are replete with examples of new autocratic leaders dramatically reversing key aspects of their predecessor’s policies. Yet another post-Putin possibility is an authoritarian leader who wants to cut Moscow’s losses in Ukraine but who sees the survival of both autocratic rule and even Russia’s territorial integrity as best served through increasing reliance on Chinese support and guidance. It is also possible that Putin’s rule will end as a result of the rise of democratic forces which want Russia to become part of the West and cooperate or join the EU or even NATO. For this scenario to occur, there would have to be a dramatic change of heart within the Russian security services about what is in Russia’s and their own interests. While this seems highly unlikely, there have been examples in other where military-backed autocratic rule gave way to democracy. Finally, whether Putin’s successor is autocratic or democratic, he or (much less likely) she may simply be weak as a result of having to deal with a compounding internal crisis resulting from Putin’s policies, including popular discontent over Russian casualties in Ukraine, economic decline, and secessionism in non-Russian or even Russian regions of the Russian Federation. What Can Europe and the United States Do? Russia’s post-Putin leadership and its policy preferences, whatever they may be, will have an enormous impact on Europe and the United States as well as other countries and regions of the world. But while obviously they hope to see Putin succeeded by a new leader who will end the war, withdraw from Ukraine, and improve Moscow’s ties with the West, Europe and the United States will have very little ability, if any, to affect the post-Putin transition — especially if the person who succeeds  him comes from within his inner circle. Putin has sought to rally Russian public support for his war in Ukraine through claiming that the West wants to bring about the breakup of Russia. Whether Putin himself actually believes this, there appears to be no possibility of changing his mind about the West being his implacable enemy. The United States and Europe, though, would do well to signal to whoever might succeed Putin that this is not the case. Specifically, Washington and Brussels should make clear how they would like to relate to post-Putin Russia. Such messaging should include the following points: Just as the United States and Europe support the territorial integrity of Ukraine, they also support the territorial integrity of Russia. The West has no interest in seeing the breakup of Russia. The United States and Europe will lift their economic sanctions on Russia (including those on Moscow’s exports of oil and gas) in response to Russian withdrawals from Ukrainian territory. The more occupied territory that Russia returns to Ukraine, the more Western economic sanctions against Russia will be lifted. While Europe and the United States would like to see Russia become a Western-style democracy, they acknowledge that whether it does so or not is an internal matter which Russians alone will determine. The United States and Europe are prepared to have normal relations with any type of Russian government — democratic or autocratic — which is willing to behave non-threateningly toward the West, Ukraine, and other former Soviet republics. While they respect the Russian government’s desire to continue cooperating closely with China, Western governments want Moscow to know that the United States, NATO, and the members of the Quadrilateral Security Dialogue (US, Japan, India, Australia) are willing to discuss common security concerns about China (which many Russians besides Putin have had) if and when the new Russian leadership wishes to discuss them. The articulation of these messages by the United States, Europe, and, regarding the last point, Quad governments, will not magically lead the Russian people, much less Putin’s inner circle, to oust Putin and embrace the West. Indeed, it is possible that a Putin loyalist successor will spurn them. But if the United States and Europe do not signal under what terms they would be willing to cooperate with a post-Putin leadership, then Washington and Brussels may reduce the chances that a post-Putin leadership will be willing to cooperate with the West.

Turkish President Recep Tayyip Erdoğan seems to have changed course on his country’s foreign relations. At the last NATO summit in Vilnius, Lithuania, he finally lifted his veto on Sweden’s proposed membership in the alliance; but his agreement is still incomplete as it requires the approval of the Turkish Parliament. And Erdoğan has apparently made parliamentary approval contingent on the US Congress approving his country’s purchase of F-16 fighter jets, which many assume may now be a done deal. Moreover, during the talks on Sweden’s accession, Erdoğan reiterated Turkey’s desire to join the European Union (EU) and hoped for a revival of the long-dead EU membership process. Prior to the Vilnius summit, Erdoğan further showcased his foreign policy outreach by hosting Ukrainian President Volodymyr Zelenskyy in Ankara, signaling support for Ukraine in its ongoing war with Russia.  On the domestic front, Erdoğan has formed a new cabinet that signals better relations with the West, as the most ardent anti-western member of the previous cabinet, former Interior Minister Süleyman Soylu, has been left out. Additionally, the president aims to instill confidence in western markets by appointing respected figures like Mehmet Simsek as economy minister and Hafize Gaye Erkan as Central Bank governor. These appointments are seen as positive signals of an effort to strengthen economic ties with the West. This series of moves has triggered the hope, especially in western circles, that Turkey could return to the western fold and that Turkish-Russian relations will cool in parallel. However, pessimists, who see Turkey’s departure from the West as a done deal, disagree and are right to believe that Turkey’s relations with both the United States and European countries have fundamentally changed. It is no longer possible to go back to the early 2000s when Erdoğan was steering the country toward EU membership. The EU has no intention of admitting Turkey; but even if it did, the process would not be in Erdoğan’s favor. Nor is it possible to go back to the Cold War era, when Turkey was firmly embedded in the western geopolitical system. Turkey no longer sees Russia as a threat or an adversary in the sense that most western countries do. The fact that Turkey has resisted approving Sweden’s NATO membership for more than a year and that it will only do so in exchange for the delivery of F-16s shows how badly damaged Turkish-European and Turkish-American relations truly are. Therefore, pessimists point out that rather than signaling Turkey’s return to the West, the whole debacle proves how problematic and transactional Turkish-western relations have become. But these analysts overlook the fact that Erdoğan is pushing for a reorientation in foreign policy, and in his relations with the West in particular. This reorientation started long before the most recent presidential elections in May; but the president’s victory gave him a stronger hand to reboot his foreign policy, which is not aimed at bringing Turkey back into the West’s orbit, but rather at building better functioning relations with it. Turkey’s Departure from the West Turkey’s divergence from the West has taken place at the level of both political values and geopolitics. Over the last decade, Turkish democracy has been in serious decline. Especially after the transition to a hyper-presidential system in 2018, which eliminated all checks and balances in the political system, Turkey’s has become an increasingly autocratic regime. Turkish foreign policy has also become increasingly militarized, much to the chagrin of western capitals. Not only has Turkey used its military power in Syria, Iraq, and Libya but it has also deployed its navy to the Eastern Mediterranean, aggressively threatening the sovereignty of two EU countries: Greece and Cyprus. These aggressive policies were backed by an expansionist naval doctrine called Mavi Vatan (Blue Homeland), whose ideology has disturbed western policymakers. The naval officers who created and developed the Blue Homeland concept never concealed their pro-Russian leanings and deliberately propagated an anti-American and anti-western narrative. These officers, and the political circles associated with them—dubbed Eurasianists in Turkey—have become an integral part of Turkey’s ruling coalition. Turkey’s purchase of S-400 missiles from Russia took place in such a context and represents the culmination of Turkish-American tensions. Turkey’s autocratic turn at home and its militarized foreign policy, which often work against the interests of its western allies, were simultaneous and mutually-reinforcing processes. But said foreign policy reached its limits toward the end of 2020. Turkey became regionally isolated with an overextended military, and its aggressive foreign policy, the rise of authoritarianism, and the subsequent decline of the rule of law plunged it into a protracted economic crisis. This economic downturn began to undermine Erdoğan’s meticulously-built power, as evidenced by his party’s defeat in the 2019 local elections. Unable to sustain autocratic rule, anti-westernism, and an aggressive foreign policy all at the same time, Erdoğan began to seek a new direction. The essence of the new approach is to maintain his authoritarian rule at home while becoming a less confrontational actor in foreign relations. Reorientation in Foreign Policy This reorientation began first in the Middle East, where Turkish authoritarianism was never going to be a cause for concern. Turkey began to mend fences with Israel, Egypt, Saudi Arabia, and the United Arab Emirates, while at the same time aligning itself with the emerging Abraham Accords framework in the region. While accommodating western geopolitical interests, Turkey’s relations with Iran began to enter a more confrontational phase. One of the main motivations for this regional restructuring was economic: Turkey continues to receive significant form of foreign investment from Gulf states. Another motivation was geo-strategic: Turkey hoped that normalization with Israel, and to a lesser extent with supposedly pro-western Arab regimes, would help ease tensions with the United States. While reconciling with its Middle Eastern rivals, the Erdoğan administration was also looking for opportunities to curry favor with Washington and increase its own importance in the eyes of the Biden administration. One of the early opportunities came in the summer of 2021 after the US withdrawal from Afghanistan when Turkey immediately stepped in and offered to take over the protection of Kabul International Airport. This initiative earned Erdoğan his first personal meeting with Biden. However, the unprecedented rapid collapse of the Kabul government prevented Ankara from using the Afghanistan front as a base to build its relations with the United States. A second opportunity arose in February 2022 when the Russian invasion of Ukraine began. New Opportunities for Erdoğan The war in Ukraine has had contradictory effects on Turkey’s foreign policy and on Turkish-western relations. On the one hand, it increased Turkey’s strategic value and facilitated its reengagement with the West. On the other hand, it created additional difficulties as western countries demanded that Turkey sever its ties with Russia, a demand that Turkey rejected. Erdoğan ultimately managed to spread the idea that perhaps it would be better for everyone if Turkey remained relatively neutral. Erdoğan’s personal ties with Putin and the complex and highly interdependent Turkish-Russian relations placed Turkey in a special position among NATO countries. Turkey therefore tried to maintain a pro-Ukrainian line without being anti-Russian. So far, Erdoğan has managed to maintain this seemingly paradoxical position. Turkey has given full military support to Ukraine, and especially in the early days of the war Turkish drones were vital for Ukraine’s defense. To be sure, this support was better than that of many European countries. Politically, however, and while condemning Russia’s occupation of Ukrainian territory since 2014, it has not joined in imposing sanctions on Russia, and the two countries have maintained good diplomatic relations. Erdoğan clearly enjoyed his balancing role. His policies during the Ukraine war have earned the Turkish public’s respect and helped, at least indirectly, in his reelection as they contributed to his image as a world-renowned statesman. Turkey also enjoyed the economic benefits of its being Russia’s main economic outlet. Not only did Turkish-Russian trade increase, but Putin lent a helping hand in the run-up to the elections by agreeing to delay Turkey’s natural gas payments and depositing much-needed foreign currency in the Turkish Central Bank. Erdoğan justified this unique position by emphasizing his mediating role between Ukraine and Russia and between the latter and the West. In this context, securing the grain deal was a particularly important achievement that helped Erdoğan justify his balancing act. Now the deal appears to be in tatters, raising questions about his ability to maintain his role as mediator. The Turkish president has also raised eyebrows in Moscow by recently hosting President Zelenskyy and increasing his support for Ukraine’s NATO membership. He even tested the Kremlin’s nerve by allowing Azov fighters to return to Ukraine with Zelenskyy, an apparent violation of a prisoner swap deal brokered by Turkey. Despite all this, Erdoğan wants to stick to his original position and continue to play the role of mediator. He is counting on the fact that Putin currently cannot afford a falling-out. Erdoğan has already indicated that he expects to host Putin in Turkey in August for a one-on-one meeting, although so far the Russian side has not confirmed the visit. Russia’s reaction to Turkey’s recent moves, such as ratifying Sweden’s NATO membership and supporting Ukraine’s NATO membership, has also been rather mute. Therefore, Turkey’s pivot to the West does not mean that it will cool its relations with Russia. Erdoğan realizes that the longer he maintains his balancing role, the stronger his hand will be with both the West and Russia. A Revitalization of Turkey-EU Relations? If there is no going back to the Cold War era, there is also no returning to the early 2000s, when Turkey was pushing for EU membership. Despite surprising everyone by rekindling the dormant EU membership process ahead of the Vilnius summit, Erdoğan’s move is unlikely to breathe life into Turkey’s EU accession aspirations. This is primarily due to the fact that EU membership would not align with the president’s personal interests, as it would necessitate a higher standard of the rule of law that might curtail his currently unchecked and absolute authority in the country. The accession process revolves around aligning a nation’s internal standards with EU norms, known as the community acquis. Consequently, becoming an EU member would demand a transformation of Turkey’s domestic political system, which currently concentrates power in Erdoğan’s hands. Given this, how should Erdoğan’s statements on revitalizing the EU process be interpreted? Part of the explanation has to do with his transactional style of policymaking. A master of brinkmanship and bargaining, Erdoğan often raises demands and stakes just to get a better deal. This is why Turkey’s foreign policy disputes are often resolved at the 11th hour, as is still the case with Sweden’s NATO membership. But these tactical moves also reflect Erdoğan’s genuine desire to improve relations with the EU. It is important to note, however, that Erdoğan does not necessarily want Turkey to be inside the EU; he simply wants to do business with it. The EU remains Turkey’s primary economic partner, and Ankara has long been demanding a modernization of the Customs Union agreement with the bloc to boost its trade. Moreover, better relations with European countries are expected to be instrumental in attracting much-needed foreign investment. Gulf money has only carried Turkey so far, and to solve its deep economic problems it is necessary to attract the financial power of the West. Thus, Erdoğan wants more engagement with Europe on the economy, defense, security, and refugee issues, but not in the context of EU membership. In fact, the refugee deal signed between Turkey and the EU in 2016 was designed precisely around the idea that Turkey is not and will not be part of the EU. Accordingly, Turkey continues to block the movement of refugees toward Europe in exchange for financial assistance from the EU. The bloc has recently concluded similar agreements with North African countries, aiming to externalize its refugee problem. For this cooperation with Turkey to work, Turkey needs to be outside the EU, not inside it. Thus, Turkey’s desire to create better working conditions with the EU is emblematic of the nature of its reorientation toward the West. Furthermore, western capitals seem increasingly willing to respond positively to overtures made by the Turkish President. Western Reaction to Erdoğan’s Moves It is not only Erdoğan who has changed his position; the West has also changed its approach to him. Biden and other western leaders were distancing themselves from Erdoğan in anticipation of his loss in the presidential elections. Biden did not invite him to Washington and did not visit Ankara, despite Turkey’s growing importance in the context of the Russia-Ukraine war. Knowing how much Erdoğan values personal meetings, Biden used them as leverage to resolve stalemates like the one over Sweden’s NATO membership. Moreover, having learned Erdoğan’s style of politics over the years, western leaders successfully avoided becoming his punching bag ahead of the elections, as former German Chancellor Angela Merkel did during Turkey’s 2017 constitutional referendum. To achieve this, they followed a policy of ignoring rather than supporting Erdoğan. But when the elections were over and he was set to rule Turkey almost single-handedly for another five years, western leaders rushed to congratulate him. It is also becoming much easier for the West to work with Turkey on a geostrategic and security level. For the United States, Turkish-American security cooperation is shifting from the Middle East to the Black Sea. Turkish-American relations in the Middle East have inevitably taken on a more political and ideological character, with the two countries’ different threat perceptions and respective approaches to the Kurdish issue and to Kurdish actors in northern Syria remaining the biggest challenge in bilateral relations. In contrast, Turkey and the United States are more in agreement on the Black Sea. Moreover, within the Pentagon, EUROCOM’s approach to Turkey is much more friendly than CENTCOM’s, and has a better track record of cooperation. For Europe, Erdoğan’s commitment to the migration deal makes him a valuable partner, especially given the growing anti-immigration stance of the Turkish and European publics. Moreover, Erdoğan’s preference for working with the EU but for simultaneously not genuinely pushing for membership in it fits well with European policies. The EU and Erdoğan are more in agreement on their common desire to keep Turkey out but to simultaneously build better working relations. Overall, it seems clear that Erdoğan is eying a new reorientation in his foreign policy. At the moment he is at the height of his power at home and does not need to use the West as a punching bag for domestic political gains. Furthermore, economic conditions and regional developments are compelling him to lean more toward western powers. As a result, Turkish foreign policy is poised to take a new direction. Nevertheless, any improvement in relations will likely be limited to the geostrategic and economic realms and will not encompass a realignment of political values. Without common political values, the result will be significantly improved but will remain transactional between Turkey and its western partners. This paper was originally published by Arab Center Washington DC. Republished with permission. © Arab Center Washington DC, October 2023.

From a difficult accession process to full integration into the Schengen area and the Eurozone, ten years into its EU membership Croatia has been a “good EU pupil” and an example for EU candidates to follow. However, challenges remain in reaching European standards, particularly regarding administrative reforms and standards of living. When Croatia joined the EU on 1 July 2013 as the 28th Member State, it was the only European nation, except for Greece in 1981, to do so on its own. The newest EU Member’s accession was far from obvious due to complex political circumstances. Involved in the longest war in recent European history (1991-1995), Croatia was left with significant human and economic losses – 20 000 people killed and the cost of reconstruction amounting to 160 percent of GDP. The country’s difficulty to come to terms with war crime prosecutions, all of which were eventually acquitted, significantly impacted its relations with the EU. Consequently, Croatia missed the 2004 (Central and Eastern European States) and 2007 (Bulgaria and Romania) rounds of accession and, somewhat ironically, was placed in the membership package with the Western Balkan countries and later in the accession negotiations with the eternal EU candidate Turkiye. Troubled border issues with Slovenia, then already an EU Member, further compounded the accession – unnecessarily as the Court of Justice of the EU confirmed in 2020. Per aspera ad astra: a good pupil of the EU The enlargement fatigue, which came as a result of the slow integration process for new members, enticed the Member States and the European Commission to be more demanding on Croatia. In addition to the Copenhagen political criteria introduced for all new enlargements, Croatia’s membership negotiations involved an unprecedented 35 chapters with specific opening and closing benchmarks, 160,000 pages of the EU’s Acquis Communautaire, and an additional monitoring process between closing negotiations and full membership, which all led to a long accession process, just short of a decade. With hindsight, this level of scrutiny most likely helped Croatia join the Schengen area and the Eurozone on 1 January this year – ahead of several Eastern European States. With its public debt-to-GDP ratio on the downward trajectory (68.4 percent at the end of 2022), Croatia is also performing better than other Mediterranean Eurozone States. The war, for which the country never received any reparations, and then the “lost decade” between 2004 and 2013 with the Global Financial Crisis in 2008, critically slowed Croatia’s economic growth, meaning it began its membership in the EU as its poorest growth prospects. Ten years on, macroeconomic data paints a more positive picture. Croatia’s GDP growth in the second decade of its EU membership has almost tripled compared to the decade before – reaching a staggering 13.1 percent in 2021. Croatia’s EU funds absorption has also significantly improved with the country receiving €12.1 billion in total from different funds. EU membership has facilitated a number of infrastructure projects, from the Peljesac bridge, one of the EU’s largest infrastructure investments, to reconstruction following earthquakes that hit Croatia in 2020. The accession to the Eurozone has lowered borrowing costs and given impetus to exports. It is expected that it will also boost tourism. Joining the Schengen area and removing borders with neighbouring EU Member States has enabled visitors to travel faster, with record numbers of tourists expected this year. Remaining hurdles Despite stellar numbers, systemic challenges remain affecting Croatia’s microeconomic performance. Overrepresentation of employment in the public sector, high and complex taxation, and inflexible labour laws have contributed to a stifling effect on business activity. Croatia’s average net salary is about €1100, well below the EU’s average, and its GDP per capita is among the lowest in the EU, half the EU average. Croatia’s population has consequently declined by nearly 10 percent to 3.8 million since joining the EU, a significant loss for a small country of mostly its younger population. It therefore does not come as a surprise that the country’s unemployment rate has been steadily decreasing over the years – it is currently at 5.6 percent. Labour shortages are being filled by workers from Balkan countries, but also by Asian workers, a cultural opportunity and a challenge for the rather homogenous Croatian society. Among experts and the business community, Croatia is still perceived as a relatively corrupt country,  fairing only marginally better than Romania, Bulgaria, and Hungary. Several notable high-profile corruption cases in recent years demonstrates the scope of corruption. The EU-wide Public Prosecutor’s Office (EPPO), established in 2021 to investigate corruption specifically related to EU funds, recorded 23 investigations in Croatia last year, most of which concerned regional development and agricultural funds. While the different reforms are underway, the question is whether they will be sufficient to diversify the country’s economy, still largely dependent on tourism (20 percent of Croatia’s GDP) and stop the demographic hemorrhage. New horizons Since Croatia’s accession, the EU has also faced a number of challenges. From the 2015 migration crisis to Brexit, and humanitarian, energy, and economic challenges brought on by Russia’s invasion of Ukraine, the EU has been forced to rethink its enlargement strategy. It has recently accepted Ukraine and Moldova as new candidates for EU membership, with Georgia in the pipeline. This is in addition to the already lined up Western Balkan states. Given the persisting political tensions and socio-economic gaps, the integration of such a disparate group of countries presents a difficulty. For now, the current geopolitical situation and the ongoing war requires a cautioning of the EU’s openness. Croatia, as “good EU pupil,” can be a constructive factor in this process. It has been a strong supporter of further enlargement and with its recent experience can provide know-how and assistance. Croatia’s war, and the peacebuilding that followed, could be valuable for the post-conflict reconstruction of Ukraine. Unlike some of the EU’s “enfants terribles” among new Member States, Croatia has not challenged the rule of law or broader EU values. So far, it has proved reliable in protecting the EU external border, which is positioned on the challenging Western Balkan migration route. Much of its good reputation in Brussels can also be thanked to the country’s prime minister, Andrej Plenkovic, who belongs to a progressive line of European conservative leaders gathered in the European People’s Party (EPP) that still rules the EU, as the biggest party in the European Parliament. Given its size, geographical position, and strong European identity, Croatia’s accession to the EU has been an exception in many aspects. However, its performance over the first ten years demonstrates that exceptions can be politically wise. Much as its famous soccer team, Croatia has been in many ways punching above its weight. Its “success story” could thus give an impetus to European integration and serve as a model for future EU enlargements.

Welcome address by Christine Lagarde, President of the ECB, at the 9th ECB conference on central, eastern and south-eastern European countriesFrankfurt am Main, 17 July 2023 It is a great pleasure to open the ninth ECB conference on central, eastern and south-eastern European countries. The CESEE region – which comprises 21 different economies – can overall be considered a European success story in recent decades, having enjoyed rapid convergence towards higher-income countries. Between 2000 and 2021, the economic size of the region almost doubled to 40% of the euro area aggregate. And this strong growth has led to rising living standards, with average GDP per capita jumping from 36% to 54% of the euro area aggregate in the same period. But the world has changed dramatically since we last held this conference in 2019. A series of shocks have upended our old reality and replaced it with new uncertainties. Devastatingly, one of those shocks has been the outbreak of war in Europe – an event that we once thought consigned to the history books. Russia’s unjustified war against Ukraine and its people is a human tragedy. And it has had deep economic consequences for the CESEE region in particular. In parallel, the world is changing in ways which make the growth models of many CESEE countries more vulnerable, as these models generally involve high levels of trade openness and integration into global value chains. But as Graham Greene once wrote, a “feat of daring can alter the whole conception of what is possible.” And the challenge now facing the CESEE region is how to continue its convergence story and ensure that growth remains resilient in this new landscape. Fortunately, CESEE economies can already look back on a strong history of resilience – be it mastering the transition from central planning to market economies in the 1990s or recovering from the global financial crisis with impressive speed. I therefore have every confidence that they will be able to adapt to these new uncertainties. A changing geopolitical landscape There are two broad shifts reshaping the global economy that may have profound implications for the CESEE region: rising geopolitical tensions and weakening global trade. After a long period in which the United States was the sole superpower, the world is becoming more multipolar, with greater competition between major powers, less respect for international rules and norms and a waning influence for multilateral institutions. In this environment, even deep commercial ties may be insufficient to prevent trading relationships from becoming adversarial. This makes the global environment increasingly prone to shocks and the task of macroeconomic stabilisation for all countries much harder. Unfortunately, the CESEE economies know this all too well. Russia’s war against Ukraine triggered a massive shock to the global economy – especially to energy and food markets – and CESEE economies have been particularly exposed, given their geographic proximity to the conflict. While inflation has now started to come down, over two-thirds of economies in the CESEE region saw annual inflation hit 13% or above last year, with several countries seeing markedly higher price increases. By comparison, annual inflation in the euro area was 8.4%. Geopolitical tensions risk accelerating the second shift in the global landscape: weakening global trade. Since the global financial crisis, trade growth as a share of world GDP has plateaued. And we are also seeing rising levels of protectionism as countries reconfigure their supply chains to align with new strategic goals. Over the last decade, the number of trade restrictions in place has increased tenfold. The CESEE region, and Europe more generally, may be vulnerable to such a shift. Last year, trade as a share of GDP was higher than the euro area average for two-thirds of CESEE economies. And while other major economies, such as the United States, have seen trade as a share of GDP fall since the pandemic, in the euro area it reached a record high in 2022. A new foundation for strengthening resilience A changing geopolitical landscape means that, in the euro area and the CESEE region, we need to build a new foundation for strengthening resilience. This foundation rests on further deepening the European Union and its ties to the surrounding region. I see three key elements. The first is reinforcing openness within our region. Trade fragmentation could see the flow of goods and services increasingly being pulled towards different trade blocs, at the expense of countries outside those blocs. By leveraging our regional strength, Europe and the CESEE region can recreate some of the benefits of globalisation on a smaller scale. The euro area is already the main trading partner for most CESEE economies. And we can capitalise on this existing momentum. Between the year 2000 and last year, the share of euro area imports from the CESEE region increased from 5% to 10%. And the share of euro area exports to CESEE economies reached 11% last year, almost double that at the start of the millennium. Moreover, CESEE economies in particular can benefit from changing global trade patterns as companies seek suppliers closer to home. Survey evidence shows that firms in the CESEE region, and especially those based in the EU, are seen as highly reliable trading partners. The ECB also has a key role to play here as the guardian of the euro. Our monetary policy plays an important anchoring role for the CESEE region, as the euro is widely used in trade invoicing and financing. Euro cash also serves as an important store of value – demand for it surged in CESEE economies following Russia’s invasion of Ukraine. The second key element is increasing our collective security. Europe and the CESEE economies have already taken substantial steps to increase their energy security, given the dangerous historical reliance on Russian fossil fuels in their energy mix. In February 2022, the EU was importing around 36% of its natural gas from Russia. Within the space of nine months, that fell sharply to 13% as the EU reduced its gas consumption and diversified towards imports of liquified natural gas. Most, though not all, CESEE economies have also made significant progress in substituting energy imports away from Russia and in building up gas storage levels. But we cannot stop there. We need to accelerate our efforts to decarbonise and increase our energy independence. That is why initiatives that help to build renewable energy sources are so important – such as Next Generation EU and the EU’s recent energy support package for countries in the Western Balkans. The third key element is defending and spreading our common values. The attack on Ukraine was also an assault on European values – such as the respect for international law and human rights. That is why Europe has imposed unprecedented sanctions on Russia and provided substantial support to Ukraine following the invasion. To date, the EU has made available €38.3 billion in economic assistance and over €21 billion in military support. The strength of the EU’s response demonstrates not only its capacity for action, but also its appeal as a political project that others see the benefit of joining – what the West German Chancellor Konrad Adenauer once described as the “Magnet Europa” effect. The push for EU enlargement has recently gathered momentum as a consequence of Russia’s war. Last year, the EU granted Ukraine, Moldova and Bosnia and Herzegovina candidate status. And it launched the process to open accession negotiations with Albania and North Macedonia, while also becoming open to granting Georgia the status of candidate country, conditional on reforms. Conclusion Let me conclude. A series of shocks have dramatically changed the global landscape in recent years. And today, rising geopolitical tensions and weakening global trade mean that economies in the CESEE region need to build a new foundation of resilience. But the record of past crises has already demonstrated just how resilient CESEE countries can be. Despite an exceptionally difficult 2022, the prospects for the CESEE region are encouraging. There are clear structural strengths that stand to benefit CESEE economies in the medium to long run, such as well-educated workforces and strong ties with Europe. So the task at hand is how to channel that spirit of resilience to counteract these new uncertainties. And by leveraging our regional strength and further deepening our economic and political ties, I have no doubt that Europe and the economies in the CESEE region can flourish together. Thank you – and I hope you enjoy today’s proceedings.

Work meeting with the German Chancellor Olaf Scholz in Salzburg "I am very pleased that for the first time in over 10 years a Chancellor of the Republic of Germany is back in Austria in an official capacity. We are not only neighbours, but also closely interwoven culturally or in matters of economic relations. If we look at our border regions, they are in fact no longer border regions, because people have long since overcome these borders in the realities of their lives - whether as business people or when starting a family. And so, we have grown together a bit," said Chancellor Karl Nehammer at a joint press conference with Olaf Scholz at the Mozarteum University in Salzburg. The German Chancellor made his first bilateral visit to Austria and was received with military honours. In addition to bilateral issues such as energy supply, the working meeting focused on the fight against irregular migration and border controls within the Schengen area. "The partnership with the Federal Republic of Germany is particularly important because we are very often allies in the question of how we want to shape European policy and further develop the EU, always bearing in mind that there may also be different interests. In addition to excellent economic relations, Germany is one of our most important partners in tourism. We therefore have many points of contact here," the chancellor noted. Strengthening security means gaining people's trust in the European project Politically and in terms of content, there are major challenges to be tackled together: on the one hand, the Russian Federation's war of aggression against Ukraine with all its consequences, and on the other hand, irregular migration. The two heads of government agreed that, in order to have efficient external border protection, we must be able to quickly return those who are not allowed to stay to their countries of origin. However, this also meant that stable and sustainable relations with the countries of origin had to be established and expanded and that prospects had to be created in these countries, the Chancellor said: "Germany and Austria are on the same side here. Because only if we have credible external border protection and fast and swift asylum procedures, and if we can ensure order and security within the European Union in an orderly manner, will we win people's trust in the European project." The topic of Schengen was also discussed. He said the chancellor presented the Austrian perspective and described how 112,000 asylum applications had been filed in Austria in 2022, 75 percent of which had been registered for the first time, even though the applicants had crossed an EU country. "In Austria, the numbers are decreasing, but at the same time they are increasing in Germany. We are a community of solidarity within the EU, so we care about the numbers. And as long as the current Schengen system does not work, as you can clearly see from the border controls from Germany to Austria, we need joint efforts in Europe to strengthen the external border protection. We will therefore stand by Germany when it comes to pushing forward the Commission's measures," Nehammer said. He said there were steps in the right direction, such as pilot projects at the Romanian and Bulgarian borders and an agreement with Tunisia, which the chancellor believes will be forward-looking. Securing energy supply for the future with green hydrogen from Africa But Germany is also an important partner in the question of energy security. This year, Austria had already managed to fill its own gas storage facilities to 90 percent in August, to secure its gas supply and thus to strengthen its independence from Russia, the Chancellor said happily. This had also been achieved with the help of Germany, which had helped to set up gas alternatives. Work is underway on connectivity between Austria and Germany in order to benefit from the liquefied natural gas terminals that have been built, which will subsequently play an important role in Austria's security of supply. Germany will continue to be an important partner for Austria in the future when it comes to bringing green hydrogen to Austria via a pipeline infrastructure. For example, he said, a southern corridor is specifically planned with Italy to bring green hydrogen from Africa via Italy to Austria and Germany. "These are the issues that move us for the future - with the aim of becoming more independent of fossil energy, establishing security of supply for the people and continuing to work to ensure that the good partnership and friendship between our two nations within the European Union is developed further," the chancellor concluded.