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With Trump's defeat at the end of 2020, the threat of national-populism was thought to have been contained. Russia's attack on Ukraine, with all the economic difficulties and uncertainties regarding European and global security, reinforced the perception that Putin's friends in Europe, namely populist nationalists, would have a harder time selling their proposals. NATO enlargement was pushed and capitalized on by supporters of the liberal order, whether conservative or social democratic. Some saw Marine Le Pen's defeat in May 2022 as the first confirmation of this downward trend.  Outside of Europe, Bolsonaro's embarrassing experience in Brazil was coming to an end, despite the desperate attempts of his supporters to disrupt Lula's inauguration, which crudely imitated the events of January 6th in America. The containment of the economic crisis after the initial months of panic over a possible energy shock, along with the advancement of Biden's "reconstructionist" agenda and the poor results achieved by the Trumpian Republicans in the US mid-term elections, seemed to dispel that threat. The stalling of Russia's special operation in Ukraine was another positive factor for liberal analysts. ONLY AN APPARENT SETBACK But alongside these "positive" signs, there were others of the opposite nature that suggested a more cautious evaluation. While Trump's protégés may have stumbled, the master himself, despite initial judicial setbacks, was strengthening his aspirations to return to the White House. His conservative rivals (DeSantis, Haley, etc.) were lagging far behind him in the polls, even though the presidential contest was still a long way off. Meanwhile, the Republicans were preparing for yet another hijacking of the political system with the artificial and irresponsible "debt ceiling" crisis (1), which had tied up President Biden's already limited political energy for weeks. The amicable understanding between Moscow and Beijing served as a compensation for the mistakes and incompetence displayed by the Kremlin and/or the Russian armed forces in Ukraine. In Europe, successive elections have been contradicting the predictions of a decline in national-populist enthusiasm. On the contrary, the far-right has been actively asserting its influence in a region that had long been resistant to their ideas: Scandinavia. The Social Democrats' narrow victory in Sweden and Finland has paved the way for coalition governments between the conservative right and xenophobic nationalists. In Italy, the comeback of the conservative triad was completed last fall, but this time led by the most explicitly nationalist party, the successor of fascism: the Fratelli (Brothers). Giorgia Melloni became the first far-right leader to head a government in Western Europe since World War II. In recent months, there has been a growing perception that national-populism, once considered a critically ill patient, is in robust health. This has raised concerns among academics and liberal analysts, prompting calls to strengthen centrist alternatives once again. The triumph of New Democracy in Greece (which will be further strengthened by the June rerun elections) should be noted, apparently due to the efforts of the conservative-liberal right wing represented by the European People's Party. However, Mitsotakis, despite his cosmopolitan image, liberal economic policies, and American education, has pursued a migration policy similar to that advocated by the far-right across Europe, with little opposition from his European counterparts. A similar narrative was once employed by Sarkozy in France. In December of last year, his party, Les Républicains, elected its new leader. Éric Ciotti emerged as the most extremist candidate in the race, bearing little difference from Marine Le Pen and hardly any from Éric Zemmour, the xenophobic propagandist with no political affiliation who failed in the last presidential election. Macron's challenges stemming from the severe social crisis caused by the pension reform have given rise to the resurgence of the ailing traditional right-wing party, now under the influence of its far-right faction. In Germany, polls indicate a rise of the xenophobic Alternative for Germany (AfD). And in Central Europe, which is so influenced by German dynamics, national-populism is not letting up either. It continues to hold firm in Hungary and the Czech Republic and may revalidate its dominance in Poland this autumn, although the ruling PiS (Law and Justice) is reinforcing its autocratic actions with the excuse of the war in Ukraine. The latter is the great exception as far as Russia is concerned. The ultra-conservative Polish nationalists of PiS are the most fervent enemies of Moscow in Europe, for well-known historical reasons, hence they have only empathized with right-wing populists alien to any pro-Russian fickleness. ERDOGAN, CHAMPION OF TRIUMPHANT NATIONALISM The latest election results at the two ends of the Mediterranean, Spain and Turkey, confirm the consolidation of this trend. Erdogan has won with an unqualified commitment to populist nationalism, in this case compatible with a pragmatic harmony with the Kremlin. The average Turk, and certainly the most popular strata, care little that their President is on good terms with Putin, even at the cost of irritating his formal NATO allies. Only Turkey's interests count, and that means an autonomous foreign policy, free of servility and dependence. This is Erdogan's discourse, together with other levers that have worked well for him in the past: the fallacious exploitation of the Kurdish terrorist danger, the manipulation of economic levers, the abusive use of the instruments of the State and other tricks typical of authoritarian regimes. Nothing has deprived him of obtaining in the second round what he lacked in the first round: the support of the extremist residual sectors with which to complete an electorate addicted to strong manners, to supreme authority, to the illusion of a country jealous of not obeying anyone's impositions. A liberal Turkish analyst, Soner Cagaptay, resident in the United States, affirms that Erdogan has assumed the "model of Putin's authoritarian regime", and points out its main characteristics: persecution of political opponents, absolute control of the media, emptying of the real functions of the institutions, purge of the apparatus of power, etc. In this ever closer confluence, according to Cagaptay, Erdogan's gratitude to his Russian colleague for having been the only world leader of weight to support him after the attempted military coup in 2016 has played a major role. The fact that the two countries have sometimes different geostrategic interests does not detract from a more than fruitful diplomatic and security cooperation. Erdogan sells drones to Ukraine, but does not participate in the economic siege against Russia and mediates in the crucial issue of Ukrainian grain exports. Where the West sees contradictions and even disloyalty, most Turks appreciate independence, security and firmness. The opposition has failed through a combination of bungling (misreading Erdogan's popularity) and impotence (stifling exercise of power). The challenger Kilicdaroglu believed that by imbuing his discourse with a nationalism of occasion and incorporating into his grand coalition extremist forces suspicious of the current President, he could attract a sector dissatisfied with the economic crisis and authoritarian abuses. This has not been the case. Once again, the copies work worse than the original.  AYUSO, BETWEEN CONSERVATISM AND NATIONAL-POPULISM The recent Spanish electoral result has its own profiles, as all of them, but it is not alien to this new growing trend of national-populism. And not only because of the rise of VOX, after a period in which it seemed to regress (like its counterparts in the rest of the West). Perhaps the great winner of the regional elections has been Isabel Díaz Ayuso. Despite being the leader in Madrid of the Popular Party (of conservative-liberal line on the European board, like the French Ciotti), her style of government, politics and propaganda is very similar to right-wing populism, although she is careful not to repeat the xenophobic clichés of VOX.  The relationship with his adversaries resembles the one practiced by Trump, because of his direct, apparently uncomplicated, confrontational registers and without the slightest concern for liberal political correctness. Like the former hotelier president, he had no qualms about stirring up the shadow of the "pucherazo" in the days leading up to the elections, just in case things went wrong. The president of Madrid is similar to Giorgia Meloni in her repugnance for ideological subtleties, but her discourse is more astute. Ayuso uses plain language, sometimes populachero, to show that she is not afraid to fight with the left in a priori adverse terrain. Against all evidence, he defends his management of essential public services, which he has significantly weakened. Meloni is already doing so, without delay. With Erdogan he coincides in brazenly using the invented complicity of his rivals with the "terrorists and/or separatists" (Kurds or Basques and Catalans, as the case may be), in order to discredit them. These are simplistic and fallacious messages, which count on the complacency of most of the media, hence they are effective, in times of tribulation and crisis, of exaggerated international threats and social anxieties derived from the effects of the pandemic. 

Silvio Berlusconi, Donald Trump, and Boris Johnson have recently been in the spotlight. Berlusconi's passing has drawn attention due to his long and controversial personal and political life. Trump is facing a new and potentially perilous legal prosecution. Johnson, on the other hand, has been excluded from a return to the forefront of politics by a committee within his own party, at least in the near future.  All three will be remembered as prominent figures of political populism, a conservative current that primarily but not exclusively offered an alternative to the weakened traditional conservative right. They also presented a challenge, to a lesser extent, to centrist liberalism and social democracy, both of which were undergoing an identity crisis. While there are differences among them, all three were "mass seducers," capable of attracting millions of voters without necessitating trust in their words or actions, regardless of the credibility of their policy proposals. Berlusconi and Trump had scandal-ridden private lives characterized by exaggerated, even exhibitionist, philandering and machismo. Johnson has been somewhat more discreet, but he can hardly be considered a champion of the decency demanded by his conservative base. His actions, even during the pandemic, have led to his current ostracism. Johnson has been the most articulate, educated, and socially privileged among the three, coming from an elite background and rising within the ranks of the Conservative Party. In contrast, Trump and Berlusconi emerged from a state of political obscurity. Trump later colonized the Republican Party, transforming it and, some argue, leading it towards destruction. Berlusconi, on the other hand, disregarded the established post-war party, Christian Democracy, which he deemed corrupt, ineffective, and obsolete. He built something new with highly populist traits, exemplified by the rallying cry of Forza Italia!, appealing to football fanatics. While it maintained its brand for 30 years, its decline appears to have reached its lowest point, as it is now the weakest force within the right-wing coalition, trailing behind Fratelli and Lega with barely 20% of the MPs among the three factions. Each of them has been a product of their respective times, like any political leader. However, all three have also been game-changers, agents of change during their era. Trump upended the political system in the United States, altering the balance within the two-party system, reshaping the dynamics of the conservative electorate, and simultaneously exposing the flaws within American democracy. Berlusconi dismantled the system of the First Republic, which revolved around a binary dynamic between the dominant Christian Democracy (DC) in government and the Italian Communist Party (PCI) as the permanent opposition. A minor game consisted of various companion parties (socialists, social democrats, liberals, and republicans) aligning with the dominant party. Il Cavaliere disrupted the delicate balance of this pentaparty system of the Center-Right with a new political culture or rather, the absence of any political culture at all. He applied show business principles to public administration, treating his party as a personal company, driven by the goal of success. Trump did not go as far as Berlusconi. He lacked the talent, patience, and management team that the Milanese businessman possessed. Both individuals had opaque, suspicious, and potentially fraudulent businesses, but to varying degrees and extents. Additionally, they operated within different legal and political environments, albeit under the umbrella of capitalism. They shared the ability, with the help of pseudo-informational media (owned by Berlusconi in the Italian case and manipulated in Trump's New Yorker case), to obstruct, influence, delay, neutralize, or render judicial investigations ineffective in the medium and long term. Both were or have been elusive figures in the political circus they orchestrated around themselves. Johnson, on the other hand, reshaped the political landscape but relied on an existing base. His intention was not so much to transform the rules as it was to exploit them to his advantage. Even Brexit, which many consider his significant achievement, was not originally his project. He appropriated it, infused it with his personal touch, and made it a pivotal factor in the UK's most consequential strategic shift in 50 years. Berlusconi has now become a part of history, or is on the path to doing so. His state funeral has been deemed inappropriate, and the obituaries, as is often the case, tend to either overly praise or justify his fraudulent political career. He was never a statesman but rather a swindler who knew how to exploit the weariness, fatigue, disbelief, and cynicism of an electorate that was at its wit's end. Few believe that Forza Italia will survive the death of its founder. Johnson finds himself once again in a state of uncertainty (not for the first time), facing reprimand from his own party members and being disregarded by the Prime Minister, to whom he once granted the influential position of Chancellor of the Exchequer, overseeing the Kingdom's finances. Such rough-and-tumble politics is not uncommon within the Tory world. Even someone of greater stature, like Margaret Thatcher, fell victim to similar episodes of apparent betrayal, disloyalty, and abandonment. Trump is inching closer to a return to the forefront, despite facing intense legal scrutiny in various cases related to fraud, tax evasion, mishandling of sensitive public documents, obstruction of justice, political conspiracy, and more. The outcomes of these ongoing court cases are likely to turn into a spectacle with evident electoral implications, provided he can maintain control over them, which is no small feat. The numerous rivals who have emerged in recent weeks to challenge him for the Republican nomination do not seem to possess sufficient substance. Trump's greatest adversary is himself. However, his greatest advantage is also himself, as he possesses the ability to connect with a sizable segment of the population that remains unmoved by the hollow discourse of the political elite on democracy and values. These three great tenors of populism have served as inspiration for lesser local figures, with different backgrounds and similar political styles. It is worth clarifying that not all those who deserve to be labelled populist in the media are similar or assimilable. Confusion is frequent. Within the right-wing political landscape in Europe, several key themes prevail among these figures: - national primacy. - a rather outdated form of patriotism. - almost absolute rejection of immigration. - a very traditional conception of the family - demagogic interventions in the liberal economy. However, they are divided by a fundamental dispute: relations with Russia. Two clear groups emerge:  1. The Identitarians, who have maintained a cooperative and non-confrontational relationship with Putin. This group within the European Parliament includes figures such as Marine Le Pen in France, Lega Salvini in Italy, AfD in Germany, Flemish Vlaams Belang in Belgium, and xenophobic factions in Finland and Denmark, among others. Trump could also be placed within this group, although his ideological formulations are not well-defined.  2. Conservative nationalists, staunchly anti-Russian. This is particularly true for the ultra-nationalists in former communist countries, with Poland's Law and Justice (PiS) party at the forefront (excluding Hungary's Orbán, who maintains a cordial relationship with Putin). This group includes NVA in Belgium, the far-right VOX in Spain, Greek ultra-rightists, Swedish xenophobic factions, and more recently, the far-right nationalists under Giorgia Meloni. Johnson's coexistence with this group was not necessarily his own choice, as the Tories were already integrated into the European Parliament group that brings these parties together, known as the European Conservatives and Reformists, before he became the party leader. Berlusconi, being as flexible on the international stage as he is in business, managed to avoid affiliating Forza Italia with either of the two nationalist currents. Instead, he secured membership in the European People's Party (EPP), which made no secret of its position. The EPP did not make any concessions to Victor Orbán's FIDESZ until it had no choice but to initiate an expulsion procedure against him, which ultimately had no effect as Orbán decided to leave the group voluntarily. If Berlusconi had not been admitted to the EPP, he would have likely aligned with the identitarian faction, which maintains a friendlier stance toward Russia. To provide an idea of the strength of nationalism in Europe, the ultra-conservative branch comprises 66 MEPs, while the identitarian branch consists of 62 MEPs, totaling 125 seats. In comparison, the People's Party has 177 seats, and the Socialists have 143 seats. However, when combining the votes obtained by both nationalist factions in the most recent national elections held in each EU member state, it becomes evident that the two nationalist factions have garnered the largest number of votes, surpassing 48.7 million votes. This total is nearly 700,000 votes more than the conservative liberal or Christian Democrat parties within the European People's Party. The Social Democrats trail behind with over 42.2 million votes. 

Pivot to Asia - The Global South is on the march in their attempt to reshape the international system. How will this new order impact the old world? An increasing number of countries from the Global South, especially in Asia, are pushing to redefine the current global order. Three key trends to watch in this attempt to reshape the international system are the (potential) creation of a new economic order, the expansion of the BRICS grouping, and the transformation of China-Russia relationship after the invasion of Ukraine. In this changing international balance, Europe is losing its influence in the Global South, including in Asia. After centuries of global predominance, Europe’s strongest legacy is its role as a major normative power in global affairs. However, this reputation as a rule-setting power is set to change.   Why it matters 1. A (new) economic order. The debate over a “new Washington Consensus” has gained momentum after US national security advisor Jake Sullivan delivered a speech at the Brookings Institution on April 27th. The final communiqué by the G7 countries which met in Hirosahima on May 19-20 is the result of a similar strategic shift within the group, one that implies a move from economic interdependence to economic security. This shift is coupled with a major change in how the G7 intends to deal with emerging economies, such as their rival China and other partners in Asia that might soon become economic competitors in critical technologies. The G7’s sentiment has moved from promoting globalization and open markets to building industrial capacity in critical sectors, while securing existing and creating new strategic supply chains. Europe’s efforts in this context might not be enough: the investments envisaged so far are too little to reverse Europe’s dependency (often on China) in critical sectors. The EU must focus increasingly on diversifying its supply chains through securing access to rising economies in the Indo-Pacific. Here, joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) could represent an opportunity.  2. BRICS+? The BRICS foreign ministers’ summit in June was yet another steppingstone toward enlargement. The countries that expressed a significant interest in joining the grouping are Iran, Saudi Arabia, the United Arab Emirates, Cuba, Democratic Republic of Congo, Comoros, Gabon, and Kazakhstan: all these countries sent their representatives to Cape Town. Egypt, Argentina, Bangladesh, Guinea-Bissau and Indonesia participated virtually. While the membership process might be a long one, the group’s upcoming expansion highlights the Global South’s political will to rise its voice, with a plethora of actors eager and able to leverage the new competition between powers which is shaping up after the Ukraine war. In this framework, Asian countries such as China and India are competing with one another to lead the BRICS.   3. China and the Stans. On May 19, Xi Jinping met in Xi’an with the (leaders of) the five Central Asian “Stan”-countries (Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, and Turkmenistan). Russia, the region’s traditional kingmaker, was noticeably absent. The meeting kickstarted – for the first time offline – a summit named C+5 and highlighted Beijing’s belief that it can now make deals within the region without Moscow’s supervision. China’s newfound independence in Central Asia and Moscow’s growing dependence on Beijing after the war in Ukraine provides new insights the on China-Russia relationship: although the two countries are united by their common desire to contest the US-led world order, the Sino-Russian relation seems increasingly tilted in China’s favor. This instable relationship could result in a stronger Chinese presence in Central Asia.  4. Loss of strategic centrality. Europe does not only risk becoming increasingly peripheral in world affairs, but also losing its bargaining power with the emerging Indo-Pacific economies. On the one hand, the EU needs to diversify its supply chains away from China and likely towards the ASEAN; on the other, the Global South – and by default its Asian members – is more aware of the current strategic window of opportunity to redesign the global balance of power.   Our take We are witnessing rapid changes in the international arena. In the coming months there will be increasing requests to review global norms. Therefore, the leading event will be the upcoming BRICS Summit in August: the meeting will probably certify the process to accept new members. Among the countries that are voicing their desire to reset the rules, some are considered by the West (mainly) as rivals, such as China, and as partners, like India. Therefore, Washington and Brussels cannot simply accept or dismiss their requests. Asia is claiming its century: the integration of this claim for a renewed global order into the current world order has just started. Its most important implications will be on the economic side, namely the redistribution of industrial capacity and trade relation in the context of de-risking from China.  Spotlight: G7  The G7 Hiroshima Summit has sent some clear messages to the rest of the world. The decision to invite President Zelensky to the gathering was a move meant to reinforce the unity of the members regarding the Ukraine invasion in the face of Russia — and China, too. The West has criticized China’s 12-point position paper on the Ukraine war, since it does not call for Russia to abandon occupied territories. The G7 countries have also announced a strengthening of the sanctions, seeking to curb products that could be used by the Russian military. The other important takeaway of the G7 is the joint statement directed at China, which includes a strong criticism of Beijing’s “economic coercion” and invites the PRC to play according to international rules. The G7 have also reiterated their position on divisive topics such as security in the Indo-Pacific and Taiwan, retreating their commitment to preserve peace and stability in the region. Despite the joint statement and the declarations by the leaders on the challenges posed by China, the G7’s stance on Beijing is still a balancing act. While concerned about being overly vulnerable with China, G7 economies and their industrial base remain strongly interconnected with the Asian country and despite calls for “de-risking”, such as cutting China out from some sectors like raw materials, it is impossible at the time.  Experts’ viewsThe implications of China’s activism among the BRICS countries  The next BRICS Summit will take place at a critical juncture for the Global South. Russia is still at war, Brazil has a new administration eager to flex its muscles globally, and China has reached unprecedented influence across the developing world. Since they are all connected by the same desire of multipolarity away from US and Western hegemony, it is likely that the BRICS will try to offer a roadmap towards a new international order. This roadmap, however, is far from consensual: will Russia embrace the peace dialogues offered by Brazil or African nations – and what role will China play in brokering any such proposal? Will China and the other BRICS be able to cooperate economically to promote development worldwide? Are the BRICS ready for its first enlargement, and who is most likely to join in the coming years? This arrangement will require some mutual concessions and the outcome will help shape the future world order.  Guilherme Casarões, Fundação Getulio Vargas  The push to strengthen and even expand the BRICS, especially by China, should be viewed more broadly through the lens of a pragmatic Chinese foreign policy. It has not only sought to strengthen ties within BRICS but with other regions and countries who are instrumental for its trade and infrastructure connectivity imperatives.  This happens against the backdrop of a shift towards a multipolar world order with China as a rising power and rising geo-political tensions. Given that this bloc advocates for issues that are relevant to the Global South (global governance reform, support for a rules-based international order and multilateralism in times when countries retreat to unilateral measures), it is no surprise that other countries in the South wish to join. Regarding this summit, I see no major implications for the bloc, the core business of the BRICS will continue with South Africa advancing its five priority areas. However, we can anticipate a discussion on its formal expansion. Trading with local currency seems to have found new impetus following the sanctions placed on Russia. All this notwithstanding, it is important to note that the ‘de-dollarisation’ in trade debate is not a new concept for BRICS and its less about challenging the dollar but strengthening other currencies against external economic shocks. The real test is for the host country depending on whether President Putin attends the heads of state summit in August, given Pretoria’s obligations under the Rome Statute and domestic law.  Luanda Mpungose, South African Institute of International Affairs (SAIIA)  China’s push for a stronger BRICS on the global stage is advancing along a number of trajectories. Firstly, there is the BRICS expansion as well as the BRICS+ format that are likely to bring the majority of the Global South into BRICS-related platforms of economic cooperation. The implementation of the BRICS+ format may serve as a precursor for liberalizing trade across the Global South and exploiting the potential for boosting South-South trade and investment ties. The expansion in the membership of the Shanghai-based New Development Bank as well as the creation of its regional centers will increase the scope for connectivity projects across the developing world. There is also the greater use of national currencies (most notably the yuan) via de-dollarization as well as the R5 BRICS common currency project that if launched would mark a key transformation of the global financial system.  Yaroslav Lissovolik, BRICS+ Analytics   What and Where Thailand is ready to Move Forward   The May elections in Thailand resulted in a clear victory for the opposition parties. Led by Pita Limjaroenrat, Move Forward has won 152 seats, becoming the most voted party in the elections. This party is the heir to Future Forward, which was dissolved by the military government in February 2020, and was born out of the 2020-2021 protests against the army and the monarchy. The second party in the country is the historic Thai opposition party led by the Shinawatra family, the Pheu Thai. However, while the population has expressed its preference, there is no guarantee yet that Move Forward, and the opposition, will govern. Indeed, to be elected Prime Minister, and form a government, Pita will need to win the majority in the bicameral parliament made up of the elected 500 seats in House of Representatives and the 250 seats of the Senate – whose members are handpicked by the military. The Move Forward coalition with Pheu Thai and the other opposition parties so far can count on little more than 310 votes, a long shot from the majority needed to govern. The opposition must garner support among the senators – which generally have little interest in going against the military that put them in power – or among the parties that have yet to declare their allegiance.  Cambodia: Hun Sen is getting rid of the competition ahead of July elections  On the 14 of May, Cambodia’s opposition party – the Candlelight Party – has been disqualified from running in the upcoming July elections by the country’s election commission. The party has allegedly failed to submit the necessary documentation to participate in the electoral race. With the exclusion of the Candlelight Party from the coming elections, the only possible competitor to the ruling Cambodian People’s party (CPP) of PM Hun Sen – who has been in power for 38 years – has been eliminated. This is not the first time that the main opposition party has been cut out of the electoral race. For instance, in the 2017 the Cambodian court, which is heavily colluded with the CPP, dissolved the Cambodian National Rescue Party (CNRP) before the 2018 general elections – a party that was given new life when its members created the Candlelight Party. However, the members of the opposition continue to be persecuted by Hun Sen’s forces with many political exponents arrested on charges of treason, assaulted, or forced to leave the country. With the opposition forces largely depleted and the main party banned from running for elections, Hun Sen is likely guaranteed another term.   The United States seeks to expand influence in the Indo-Pacific  Washington took advantage of two key international events to strengthen its strategic position in the region. During the Quad Leaders’ Summit, which took place on the sidelines of the G7 in Hiroshima, President Biden, Australia’s PM Albanese, PM Kishida of Japan and PM Modi of India stressed their unity and stated their plans to invest in digital infrastructure in the region. Throughout the meeting they did not mention China directly in their statements, but their references to the country were clear. The Quad expressed concern over the militarization of the region and the use of both economic and military coercion to alter the status quo – a clear reference to Chinese activity in the South China Sea. Another important step for the US to consolidate its position in the region is the announcement of the Supply Chain Agreement under the framework of the Indo-Pacific Economic Framework for Prosperity (IPEF). The agreement includes the 14 IPEF partner countries, namely Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, the US, and Vietnam. A year following the launch of the IPEF, this agreement is the first practical measure undertaken by the group. The group did not announce any official trade commitments, there is expectation among partners for increased cooperation and monitoring of supply chains fragility. The concrete development is still unclear, but the agreement signals the need for Indo-Pacific countries to avoid supply chain disruption and to minimize their dependence on the region’s main economic player, China.  Semiconductors: China fires back   China has gone on the offensive in competition over the semiconductor sector. The Cyberspace Administration of China (CAC) has stated that products by Micron, the US largest memory chip maker, are a “security risk for the information infrastructure supply chain” barring infrastructure operators from buying them. While additional information has yet to be revealed, some negative impacts are expected for Micron even if China and Hong Kong accounted for only 16% of the revenue of the company in 2022. The measure is a retaliation to America’s effort to cut China out from the semiconductor sector and slow the development of its industrial base. Since October 2022, the Biden Administration has imposed strict controls over chips export, followed by the Netherlands and Japan, preventing China from accessing and producing more advanced semiconductors. China’s declaration comes also after the leaders of the G7 grouping released a statement criticizing the country’s economic coercion tactic. After the move from Beijing, Micron fears that their products will be replaced by South Korean competitors, Samsung and SK Hynix, on the Chinese market. In the rising technological row between the US and China, there is also fear that Beijing might choose to put some export controls over other sensitive technologies, such as solar panels – where China dominates the whole supply chain.    TREND: Despite rate hikes, Asian unemployment is faring well (but not for everyone)  In the current context of high inflation and high rates, unemployment has turned out to be one of the main socio-political issues of Asia. With skyrocketing prices hurting businesses and consumers, many central banks in the West have adopted more hawkish monetary policies during the last year. Yet, the soaring cost of money has forced many businesses into a tight spot with concerning consequences on the employment level. Some countries though – like Japan, China, and Indonesia – have made the unorthodox choice to not significantly raise rates during the last year, while others – like South Korea and India – have adopted similar policies to those of the FED and the ECB. However, the results vary. In Japan the unemployment rate has been quite steady at around 2.6% for some time now, but in China the range (5.2-5.7%) was wider, especially due to the uneven nature of the post-Covid economic recovery. Yet, as the economy is slowly returning to normal, Beijing’s unemployment rate is gradually decreasing. Meanwhile Korea has consolidated a positive trend, with the last available figure at 2.5%, but the reforms of the labor market proposed by President Yoon Suk-yeol may cause some issues. The critical indicator though will be youth unemployment. Employment in aging societies, like those of East Asia, will increasingly become a core issue to maintain the viability of existing social welfare programs. So far China has a staggering 20.8% unemployment rate in the 16-24 years old age group which is particularly concerning, as it is the 7.2% recorded in South Korea. Japan is faring quite well but unemployment in the 25-34 years old age bracket has risen since the beginning of the year from 3% to 4%.

France is looking to give political impetus to reform of the global financial architecture. Others should swing in behind its gambit  Almost 500 days into the war in Ukraine, Europeans and Americans are anxious about their relationship with the global south. While the transatlantic allies are united, they have been left perplexed by the often tepid reaction of third countries to Russia’s aggression. And the gap between north and south appears only to be growing. The global crises of the last five years – covid-19, Russia’s war on Ukraine, inflation, climate change – have pushed Europeans’ focus inward, while these challenges have plunged much of the developing world into economic decline alongside exacerbating energy and food insecurity. Worse, some of the solutions put in place to overcome these crises – border closures, sanctions, re-shoring – have had major negative impacts on the global south. Meanwhile, the multilateral system has spiralled further into crisis, accelerated by the effects of the US-China rivalry, and has failed to provide relief to developing and vulnerable countries. More deeply affected by this ‘polycrisis’ than the global north, they have much less resource to tackle its consequences: dozens of low-income and medium-income countries now face crippling debt. To start to address these problems, President Emmanuel Macron is holding an ambitious event that seeks to focus political attention on the injustices and inequities of the current global financial architecture. Hurriedly decided on after last year’s COP27 in Egypt, his Summit for a New Global Financing Pact will bring leaders, civil society advocates, private actors, and international financial institutions together in Paris. The gathering’s goal is to find ways to build a more inclusive and equitable financial system, one that enables the climate transition and promotes biodiversity without jeopardising development. From its colonial and post-colonial history, and with its permanent seat on the United Nations Security Council, France maintains many close relationships on other continents. In response to brewing discontent and despair, Macron has stressed the need to address global south grievances, using frequent speeches to do so, whether in New York, Washington, or Bratislava. He is now once again engaged in an ambitious yet hasty endeavour: inspired by COP21 in Paris in 2015, the president believes diplomatic elbow grease goes a long way in mobilising around global issues, and he has made good use of it. As early in his first presidency as 2018, he launched the Paris Peace Forum, an annual event bringing together leaders and civil society to work towards a revived and innovative multilateral order. After President Donald Trump rescinded the Paris Agreement on climate change, Macron launched summit after summit on aspects of the issue (One Planet, One Ocean, and One Forest). To tackle the impact of covid-19 on Africa, in May 2021 France hosted the summit on the financing of African economies. This time, the goal is to reinvent the global financial architecture. Ever since the paradigm shift brought about by the pandemic, Macron has argued for a new approach – a “Paris consensus,” in a reference to the 2015 Paris agreement on climate change – to replace the market-orientated Washington consensus with net zero, sustainable economic development goals. In his view, the metrics used in the past are “not valid any more to fight against poverty, for the decarbonisation of our economy, and for biodiversity”. He is therefore pushing to reform the global architecture to incentivise net zero investments for a sustainable future. Macron’s idea behind the new summit is to give a political boost to an issue all too often discussed only on a technical level, and in silos. No one expects an actual “pact” to be signed, but France – along with the summit’s steering committee, which is composed of states and international organisations – is aiming for a political declaration that would muster firm commitments from world leaders, and force consequences down the line. And world leaders are indeed showing up: the secretary general of the United Nations, the new president of the World Bank, the president of the European Commission, the US Treasury secretary, the president of Brazil, the German chancellor, and the Chinese prime minister are all expected to attend, along with 40 heads of state, one-third of whom will be from Africa. As so often before, Macron hopes to be transformational in record time. The summit planning started with high ambitions, but sources say it has had to adapt due to a lack of time and focus. Initially launched around the Bridgetown initiative of Barbados prime minister Mia Mottley, France had aimed to include topics other than climate, such as health and poverty, and sought a G20 presidency endorsement by India. Unfortunately, Indian prime minister Narendra Modi will be in Washington during the summit and, despite the fact that India is co-chairing the summit’s steering committee and the expected presence of Lula and Li Qiang, the event may not in the end be a show of force for the global south. NGOs have been privately critical of the lack of inclusivity and transparency of the working groups, and disillusionment is running high. Some concrete results could still emerge from the four working groups, if negotiations are successful. Among the ambitions floated are debt suspension clauses for natural disasters, reallocation of special drawing rights, scaling up private capital flows through improved de-risking instruments, freeing up more concessional resources from multilateral development banks, and new international taxes (such as a levy on maritime transport). In an increasingly fragmented world, a united political declaration in support of these changes at the conclusion of the summit would be a win for everyone. However, a more modest but attainable goal from the summit would be the emergence of a “coalition of ambition,” in which a number of committed countries, or “champions,” take on specific challenges and sustain the diplomatic effort beyond the summit in Paris. Many other opportunities to build on momentum created in Paris will shortly follow: the African Climate Action Summit, the SDG summit, the New Delhi G20 Leaders Summit, and COP28 in Dubai. Since this summit has no mandate, it can only be a success if it is able to agree actions that then endure. For global south countries, the gathering should in turn create opportunities to strengthen support for their demands in all these upcoming forums. The success of the Paris summit will also depend on the capacity of states and other major players to take on the challenge – including Europeans. Germany is backing France in this effort, but most Europeans have yet to show their commitment to the process. Thirteen world leaders have penned a declaration of good will in an op-ed ahead of the summit, although without offering specific pledges or a timeframe for results. Unfortunately, the American president will not attend the summit, nor will the Italian, Canadian, or British prime ministers. The choice to stay away may stem from irritation at yet another grandiose French summit. But rich industrialised countries have no excuse for lacking interest in the dire situation of developing and vulnerable countries. It also puts responsibility on France to continue to move the ball forward after the summit – and not be content with the impression that it tried. Even if France may indulge in summit-mania, and however imperfect the event will inevitably turn out to be, Europeans and Americans must realise that France’s solo act is worth supporting. With clear steps taken by France ahead of the summit, such as the reallocation of 30 per cent of its special drawing rights (about €7.8 billion), Macron is defending his concept of an effective multilateralism in action, one that delivers. With Russia seeking to peel global south states away from the West, Europeans and the United States need to take up concrete actions that correct the imbalances of the current system and offer developing countries greater voice and power. By finally accepting that the institutions set up after the second world war must change, they would enhance their own credibility among global south states while escaping multilateralism limbo. The only way to salvage international cooperation – and to push back against the narrative of an inevitable north-south polarisation – is to demonstrate that it bears fruit for all.

After many years of struggle against Islamist terrorism, the invasion of Ukraine in February 2022 was an electric shock for France. The country now seems more committed to a reinforced Euro-Atlantic security partnership. Since 2012, France has been under a constant threat of Islamist terrorist attacks. These reached their peak in 2015 with the deadly assault on the Charlie Hebdo newspaper in January and at the Bataclan theatre in November. These threats explain why the French government has decided to intervene where terrorists are most likely to proliferate – the goal being to neutralise them before they could reach France or other European countries. The two regions where the French military have operated against terrorists have been in the Middle East and the Sahel. Meanwhile, the relationship between Paris and select NATO allies have to led to some difficult diplomatic tensions. “What we are currently experiencing is the brain death of NATO,” Emmanuel Macron told The Economist in October 2019. At the time, the United States (US) had failed to consult NATO before pulling forces out of northern Syria, while Turkey – another important NATO ally – pushed inside Syria, threatening US and French interests with no reaction from the alliance. Russia’s invasion of Ukraine modified Paris’ defence and foreign policy but perhaps not enough to face the challenges ahead. France and NATO: A difficult partnership Following the “brain death” episode, the tensions between France and Turkey escalated and reached a peak in June 2020 when, according to the French Navy, a Turkish ship flashed its radar at the French vessels during operation Sea Guardian. This mission was a NATO maritime security operation in the eastern Mediterranean, deployed after the United Nations imposed an embargo on arms supplies to Libya. Once again, NATO did nothing to reprimand Turkey for its anti-alliance behaviour. These episodes are just two in a long series of tensions between France and NATO. It is rather well known that France and some of its NATO allies have been barely civil since the end of the Cold War; the most complicated relationship being the one with the US. If Macron has been frustrated at the absence of a reaction from the alliance, France has also manoeuvred to upset its allies also. To understand France’s at times awkward relationship with the US, one must note that there are strong French political currents opposed to a supposed American hegemony. The far left and the far right are the most obvious, but even moderate conservatives may sometimes adopt a discourse reminiscent of Charles De Gaulle from the 1960’s that pushed France outside of NATO’s integrated command. Today, those against “Atlanticism” are either anti-capitalism (far left), pro-sovereignty (far right) or for national or European independence (conservatives). They all share a more-or-less anti-liberal ideology and they all tend to perceive Russia positively. The far left seems to think Russia is the successor of communist Soviet Union. The far right and the conservatives are fond of Putin’s anti-Islam discourse and his defence of traditional values. Meanwhile, many people serving in the French military are also sympathetic to Russia. This broad support for states that may “resist US hegemony” in France may explain the initial moderation of president Macron’s position vis-à-vis Russia. This anti-American sentiment is reinforced by the fact that France still seems to see itself as a major player in international relations. In April 2023, after a visit to China, Macron told journalists that Europe must resist becoming America’s “vassal.” This infuriated many allies in Europe, North America, and Japan, and it did nothing to strengthen European defence capabilities or strategic autonomy, paradoxically one of Macron’s goals before going to China. NATO: The inescapable actor According to President Macron himself, the war in Ukraine revived the “brain-dead” NATO. On the other hand, it seems to have had the opposite effect on French ambitions to be a central global player or a European security leader. Declarations regarding security guarantees to Russia, and the fact that France has contributed relatively less to the defence of Ukraine than some of its allies, have weakened its stature in Europe. That’s why Paris seems ready to work more closely with NATO, even if some incoherence still weakens the clarity of the message. Three things point in the direction of greater cooperation between France and its NATO allies. The first, following Macron’s speech in Bratislava in May 2023, is the new Loi de programmation militaire (military programming law) for military manoeuvres. The best example of recent joint military manoeuvres is ORION 2023 that started in 2021 and was terminated in May 2023. These were the largest exercises in thirty years for the French military and they involved, in their final phase during the Spring 2023, around 14 allies, including Indian air force Rafale jets. In ORION, France proved it was ready to act as a NATO framework-nation in a high-intensity-warfare scenario. This reassured France’s allies who were rattled by president Macron’s various statements since 2019. With its departure from the Sahel, France has at last been able to focus more seriously on European security. Another signal pointing at a switch in the French posture towards Transatlantic security was Macron’s speech in Bratislava. The French president wanted to reassure his allies about the role of NATO in European security. He did not emphasise “strategic autonomy,” preferring to highlight the importance of becoming better allies to the United States. He even mentioned that Vladimir Putin’s aggression in Ukraine had revived NATO. The last element regarding France’s decision to play a more constructive role in Transatlantic security is the military programming law for 2024-2030. At first sight, this law is impressive: with an estimated cost of €413 billion over the next seven years, this would bring the defence budget to €69 billion in 2030, up from €44 billion in 2023 and €32 billion in 2017. The problem is that, like Germany or the United Kingdom (UK), we don’t know if this new money will really boost European military capacity. In the case of France and UK, a large part of the military budget is dedicated to nuclear deterrence rather than for the needs of a high intensity conventional conflict like the one in Ukraine. What is more, inflation will chew through a relatively important part of this new budget. It is an important question then to ask if the new defence budget will boost France’s conventional military capacity to face a high intensity conflict in Europe or other technological capabilities to help project power far from France’s borders. Only time will tell. But allies must keep an eye on what the French government does rather than on what it says. With the importance of the populist and radical political movements, and also the constant threat of terrorism, a return to self-centred defence and foreign policy is always a possibility.

Other countries see arms exports as a strategic instrument. Germany should do the same. Arms cooperation with the Soviet Union and the Russian Federation has been the country's security policy foundation since India's independence. The friendship between the two states is primarily a deep dependence of New Delhi on Moscow. A dependence from which the Indian government wants and needs to break free, as the descent of the second largest arms exporter is just shifting the strategic tectonics in large parts of the global South. Cancellations, overdue payments, and delivery problems Already last year, astonishment arose after T-90 main battle tanks were photographed in Ukraine, which, according to some journalists, were a version used only by India. At the same time, some of these models were in the custody of the Russian state-owned Uralvagonzavod for modernisation. However, the theft of the Indian battle tanks could never be proven beyond doubt. Whether New Delhi could be informed about the whereabouts of its tanks has not been made public. In a report to the Indian parliament as early as 2022, it was stated that the Russian Federation would retain weapons systems produced for India. The type and scope were not specified. In short, the Kremlin declared its own requirements. In April 2022, New Delhi cancelled an order for 48 Mi-17 helicopters, followed in May 2022 by India's unilateral suspension of negotiations for Kamov Ka-31 naval helicopters. In addition to the considerable order volume of more than USD 500 million for the order cancelled in May alone, the Russian defence industry also lost reputation, as it now became public that the most important buyer of Russian defence equipment doubted the timely implementation of the order. The most recent conflict in Russian-Indian arms cooperation was a problem triggered by the sanctions in the payment processing of air defence systems, as Russia continued to press for payments in US dollars. A proposal by the Indian government that Moscow could invest the rupees gained from arms deals in Indian capital markets was rejected by the Russian side.  In New Delhi, the displeasure was directed less against the sanctions themselves, which prevented the transaction in US dollars, but against Russia's lack of goodwill: after all, the Russian Federation had provoked the foreseeable US sanctions in the first place through its invasion and now showed no accommodation in processing the payment. The Indian government is nevertheless displeased with "the West", as its dependence on the Russian Federation is a result of its lack of access to Western weapons systems and it is now being criticised for this very dependence. This criticism of Western criticism can hardly be dismissed out of hand. Russia dominates the low-price segment The Russian Federation plays a significant role in security policy, especially for the so-called "Global South". Russia was the second largest arms exporter in 2021, whereby this refers to the value of the exported weapons systems. In the lower price segment, the Russian Federation was the most significant exporter. In the 21st century, the Kremlin continues the role of the Soviet Union and for decades hardly needed to fear competition from comparably priced suppliers. Technical dependence in weapons systems is of course the more relevant factor. This affects the supply of spare parts: In combat aircraft, various components are subjected to extreme stress, which is why an aircraft has to be overhauled and wear parts replaced at fixed intervals. The operation of aircraft in particular requires a constant supply of spare parts. The supply of ammunition is also decisive: the delivery problems with ammunition for the Gepard anti-aircraft tank were an illustrative example, but the production of artillery ammunition is more decisive in Ukraine war. In air defence, too, the crucial question is whether one can muster more missiles than the attacking enemy. Shortages of ammunition can be decisive for the war. It is also widespread practice for most complex weapon systems to be overhauled, maintained and in some cases modernised at regular intervals. In the process, not only wear parts are replaced, but also technically advanced and new systems are integrated. For example, the Leopard 2A0 main battle tank, which went into series production in 1979, is technically extremely different from the Leopard 2A8, which will be delivered to the Bundeswehr from 2025. New versions of a weapon system are sometimes produced, but usually manufacturers try to upgrade existing systems. If this regular upgrading fails to take place, the weapon system will be overtaken by technological developments. The "Trophy Active Protection System" of the new generation Leopard 2 covers the vehicle with a 360-degree radar and fires a highly automated projectile-forming charge at approaching projectiles. In the early 1980s, there was nowhere near the computing power required for such technology. Today, it is essential for modern tank weaponry, as illustrated by the first weeks of the invasion of Ukraine, when technologically obsolete Russian tanks were shot down in rows. This practice is also common in ships. The Brandenburg-class frigates, in service since 1994, are comparatively new and yet radar and missile technology in particular has advanced. Among other things, the frigates of this class have been retrofitted with the MASS decoy system, which has only been in production since 2004. These two quite different weapon systems exemplify how weapon systems have been upgraded against the technically latest generation of projectiles. In the absence of such upgrades in an arms cooperation, the outdated models are easy to combat on the battlefield. The dependency between arms exporter and arms importer thus exists far beyond mere procurement. Especially when a state has opted for a long-lived weapon system, upgrades and spare parts create a massive dependency relationship. Arms cooperation has strong political implications This dependence on the Russian Federation has an enormous influence on Indian foreign policy. India's voting behaviour on Russia's war of aggression in the UN General Assembly has been making negative headlines since March 2022. The fact that India is one of the few democratic states to have abstained in all relevant votes so far is causing disgruntlement in the Western world. In India, it is openly communicated that the voting behaviour is primarily due to dependence on Russian weapons systems. Numerous attempts by Western diplomats and politicians to argue that India should side with them have accordingly come to nothing. India's government may share the arguments for a rules-based international order, but that does not change the fact that its own security interests have priority. India cannot afford any sign of military weakness - for this, arms cooperation with Moscow is indispensable in the medium term. India's security challenges often fly under the radar of the European public. Clashes like the one in Ladakh in 2020 are described as "skirmishes" in the press. A term that probably no journalist would choose if 20 German soldiers had been killed in an incident. That New Delhi feels threatened is by no means unfounded. The conflict with the nuclear power Pakistan, which has been going on since India became a state, is increasingly taking a back seat, but is still very present and linked to the rivalry with China. The People's Republic of China, Pakistan's most important arms supplier, is the second nuclear power with a direct border with India and claims parts of India's territory as "southern Tibet". The overarching level of the Indo-Chinese rivalry is China's aspiration to become a hegemonic power, which goes hand in hand with containing India's sphere of influence on the Asian continent. Chinese territorial claims in the Indian Himalayas, the Northeast and Bhutan are serious threats to India. In particular, there is concern in New Delhi that China may try to conquer the so-called "Siliguri Corridor", also known as the "Chicken's Neck of India". The Siliguri Corridor is a strip of land only twenty kilometres wide around the city of Siliguri in the Indian state of West Bengal and the only point of connection for the eight states of northeast India with the rest of the country. China also poses a threat at sea. For India, a possible military use of the Belt and Road projects is tantamount to complete maritime encirclement by China. If the ports in Pakistan, Sri-Lanka, Bangladesh, and Myanmar were used as Chinese naval bases, they would effectively cover the maritime area around India. A destroyer can reach any point within India's 200-mile zone in less than 24 hours from these ports and have access to shipping in the Arabian Sea, the Laccadive Sea, the Gulf of Bengal and the Andaman Sea. Chinese naval bases in Djibouti, the Strait of Malacca and the west coast of Africa form a second ring around India. Given the territorial claims China is aggressively pursuing in the region and also on Indian territory, Beijing can be clearly identified as the aggressor in the Indo-Chinese conflict. Moreover, in 2022 China had a defence budget 210 billion USD larger than India's and is clearly superior in terms of defence technology. The threat situation could hardly be more tangible. India's diversification is a marathon, not a sprint In recent years, India has been the largest buyer of Russian weapons, albeit with a declining trend. The use of Russian weapon systems is pronounced in all three branches of the armed forces. The majority of the tank force is equipped with T-90s (1,200 tanks in active service) and T-72s (2,400 tanks in active service). Only a few units use the Arjun main battle tank, which is produced in-house. In combination with the main battle tanks, the Indian Army can draw on around 1,800 BMP-2 infantry fighting vehicles and 800 BTR-80s. The armoured force is completed by a good 700 BMD and BRDM-2 airborne and reconnaissance tanks. A total of about 7,000 tanks from Russian production (or Indian licensed production) make up India's land forces. This gigantic number, combined with the age of most of the vehicles, only gives an idea of how huge the need for spare parts and upgrades must be. Although the Indian Air Force has implemented two solid future projects with the French Rafale multi-role fighter (36 aircraft in active service) and the indigenously produced HAL Tejas (30 aircraft in active service), Russian MiG-29 (68) and Su-30MKI (263) fighters form the backbone of the air force. The navy has 42 more MiG-29s, which also form the main armament of the aircraft carriers. Away from air combat, around 250 Russian helicopters of different variants ensure the flexibility of the Indian armed forces. The navy, with a recently commissioned aircraft carrier of its own production and the Kolkata-class destroyers, has less dependence on Russian technology. However, the Indian Navy's older aircraft carrier, as well as the nuclear submarines and the majority of the frigates are of Soviet and Russian production, respectively. The various classes of frigates, all of which have Indian names, are Russian technology. Exemplary is the newly launched Talwar class, which is a modified version of the Soviet Krivak class. The seven ships were built in St. Petersburg and Kaliningrad. The Indian military is just one of many examples of armed forces that have a heavy dependence on Russian weapons systems. Algeria, for example, has purchased over 300 T-90 main battle tanks and 46 Su-30MK fighter aircraft from Moscow since 2005 alone. Malaysia and Vietnam have recently received 18 and 12 Su-30s, respectively. Venezuela has purchased $15 billion worth of Russian aircraft, helicopters, and missile systems since 2000. Azerbaijan and Armenia have equally received extensive Russian arms imports ranging from tanks to helicopters in recent years. Uganda has amassed a Soviet-Russian tank fleet of around three hundred vehicles over many decades. The examples could be continued. India stands out merely because of its size, but the dependence on Russian weapons systems is glaring in many states of the global South. These states are now facing the "Russian arms question". States of the Global South are looking for an alternative It is obvious that the Russian arms industry will lose its position in the global security architecture. This does not necessarily mean that it will no longer have a prominent position, but it will lose market share regardless of the outcome of the war. There are four reasons for this: (1) In the coming years, the Russian defence industry will have little capacity to take on larger orders, as it will have to compensate for its own losses from the war. (2) It has become apparent that production is dependent on numerous foreign components, the availability of which is limited for the near future due to the sanction. (3) Furthermore, the acquisition of new Russian weapons systems is associated with possible political consequences for the purchasing state or at least with a loss of reputation in the West. (4) The most serious reason is the performance of Russian weapon systems in Ukraine. For example, technical defects in missiles were unexpectedly high; Russia was unable to gain air superiority even after more than a year; there is no footage of Russian tanks firing while moving and hitting targets with pinpoint accuracy; Russian artillery is surprisingly inaccurate in its aiming; and pictures of broken-down vehicles have gone around the world. Russian troops have had to procure drones from Iran and prestige projects such as the A-14 main battle tank or the Uran-9 unmanned tank have not yet been seen on the battlefield. The hypersonic missile "Kinschal", which was staged as unstoppable, was shot down many times by Western air defence systems. The sinking of the flagship of the Black Sea Fleet completed the bad image. The "Russian arms question" therefore becomes quite urgent. Since building an effective arms industry is unrealistic in the vast majority of states, few options remain. One can wait for the regeneration of the Russian arms industry or switch to the Chinese alternatives. India, even more than other states, is looking for a third way, as the Chinese alternative is not an option. From India's point of view, weapons systems from NATO countries or from Israel are the only chance for diversification. The Indian government is pushing joint ventures or production in India, not so much to strengthen its own economy, but rather to lower the cost of defence equipment. The question of cost is, of course, even more decisive for states that would also have access to Chinese armaments. Already in the past, some states opted for Soviet and later Russian products, either because they did not have access to other weapon systems for political reasons or because they were simply cheaper. A Leopard 2 main battle tank already costs 15 million euros in the A7 version. The Russian T-90 costs about 3.5 million euros. The example is not optimally chosen because the Leopard 2 has a different technical level and weighs about 20 t more. However, this would be the alternative from the point of view of a state that would want to switch from a Russian to a German battle tank. The price factor is still an important variable today. Should the arms industries of the NATO countries be economically unable or not politically mandated to fill the Russian vacuum, China will most likely take over this role. In South Asia, this development has already progressed, as Pakistan was dependent on an alternative to Russian arms imports due to good Indo-Russian relations. Pakistan has been the largest importer of Chinese arms from 2010 to 2020, far behind Bangladesh and Myanmar. In this sector, 38 per cent of all Chinese exports from 2006 to 2020 went to Pakistan. China's defence sector would in all likelihood be prepared for increased arms exports, as the industry grew precisely in the years when there was no reason for high arms spending in Europe. Comparing 2003 to 2007 and 2008 to 2012, China's arms exports grew by 162 per cent. China is ready. Germany should see its arms industry as a strategic tool Not only Russia and China, but also the USA, Israel and France see their powerful arms industry as a strategic instrument of their foreign policy. In Germany, the debate about domestic arms production has turned 180 degrees. The Bundestag debates on the acquisition of weaponised drones from 2008 onwards seem naïve today, the blanket opposition to arms exports is hardly represented in public discourse anymore, and the image of arms companies has also changed fundamentally. The IRIS-T air defence system protects the lives of civilians in Ukraine. Sentences such as "Armament research has no value for society" or "One can assist other countries in other ways than with howitzers" in German leading media seem out of date. In 2022, Germany has moved from an ivory tower discourse of ethics to an ethics of responsibility that recognises the new geopolitical reality. After this first step, it is important to initiate a strategic debate. It is in Germany's interest that states do not move away from their dependence on Russia into China's orbit. It is also a direct European security interest to minimise Russian arms exports. The Russian arms industry employs 2 to 3 million people, which corresponds to about 20 per cent of total industrial jobs. No other economy is so dependent on its arms industry. Since it is a majority state-owned industry, a decline in exports would directly affect the state budget. On the one hand, a decline in exports would result in a lack of revenue; on the other hand, procurement costs for the country's own armed forces would rise considerably. Moreover, the monopolised structure entails the risk that the failure of a single Russian company would result in the loss of far-reaching military capabilities or necessitate costly state support. By denying the Russian defence industry sales markets, Russia's military capabilities are weakened in the long term and, at the same time, its economy as a whole. The type and volume of arms exports are undoubtedly an indicator of friendship between states. Many Russian customers from Venezuela to Syria are not strategic partners of Europe. Possible competition with the Russian or Chinese arms industry must be decided on a case-by-case basis. Arming Cuba, North Korea or Iran with German technology is obviously not in the strategic interest, but in other cases, such as Saudi Arabia - which is by no means a value partner - the German government has already decided in favour of arms exports for overriding strategic reasons. India's arms build-up is minimal risk and of critical strategic importance. The foreign and security policy institutions as well as the party landscape in India are very stable, which is why a change of policy is not likely. There is a great willingness to break away from dependence on Moscow. India is a stability factor in the Indian Ocean and stands for free sea routes. With a defence budget of over 80 billion USD per year, the country would be a major customer for the German defence industry. France and the USA have already been playing a significant role in the modernisation of the Indian armed forces for years and are taking a very proactive and accommodating approach. India-NATO relations have already been mapped out by these two NATO partners. From a German perspective, one can now at least follow this line retrospectively or decide not to play a security role in South Asia. With its more than 3,000 km long border with China and a kind of "Cold War" in the Indian Ocean, India is one of the states with which China could soon have a major military confrontation. Due to its sheer size and long land border, India is, from the US perspective, the most important potential partner in a possible escalation with China, along with Japan and Australia. India is therefore likely to be given privileged access to US weapons systems and will itself seek US security proximity. In the event of a conflict, India, for all its self-confidence, will not be able to stand up to China alone, as it is inferior to China in terms of defence technology. The Russian defence industry is still decisive for India's military planners - but many things are now being recalibrated here. For India - as for many other states - Germany must answer the question of how "the expansion of security and defence cooperation" is implemented. The Indo-Pacific Guidelines mention participation in forums, exercises, and evacuation planning as well as the deployment of liaison officers and "various forms of maritime presence". The states in the region are well aware that the German Navy is not a security factor in the region. The arms policy approach in Germany's guidelines is expressed in the thirteen mentions of arms control. If this is the Indo-Pacific strategy of the German government, it currently has no serious security policy dimension. In short, if Germany does not use its powerful arms industry as an instrument of security policy, then the toolbox is empty. Armament cooperation is a common and effective instrument of foreign policy for France or the USA, for example, but also for the Russian Federation and China. Especially for a nation that seeks to avoid military engagement, it is the only realpolitik option for action apart from "soft power". Germany should understand its arms industry as a strategic instrument.

Public support for Ukraine is holding up in allied countries, but preparations should be made for scenarios in which support ebbs away. As the war in Ukraine drags on, the direct economic cost to Europe and other countries is rising. Through unprecedently high and now long-lasting inflation, the war has increased financial fragility in households across the European Union and risks eroding public support for Ukraine. But the evidence shows that public opinion stands firm. EU countries and institutions have committed financial, humanitarian and military support to Ukraine, totalling €62 billion as of 24 February 2023, exactly one year on from Russia’s invasion. The total is estimated to be around €70 billion as of 23 May 2023.  Source: Bruegel based on Trebesch et al (2023). Bilateral commitments from EU member states had reached €26.18 billion by 24 February 2023, with most of this figure consisting of military aid (€16.02 billion). Commitments from European institutions hit €35.53 billion in February 2023. The biggest chunk of this was an €18 billion package to support Ukraine’s immediate needs and maintain macroeconomic stability throughout 2023 – one example being the gaping hole in Ukraine’s finances, the budget deficit currently at a quarter of Ukraine’s GDP.  The European Investment Bank has pledged €668 million in liquidity assistance, while a series of €500 million tranches contributed by the EU to the European Peace Facility (EPF)  for military purposes now amounts to €3.6 billion committed. This support is relatively small and sustainable. The €70 billion, encapsulating financial, humanitarian, military, emergency budget and resources for those fleeing the war, is only 0.44 percent of EU GDP. The European economy has also been affected by high energy prices. The European Commission predicted in its spring 2023 inflation forecasts that euro-area inflation will be 5.8 percent this year. This is a little higher than anticipated during the winter. According to the European Central Bank, euro-area food prices were 15 percent higher in April 2023 than in April 2022. With euro-area inflation at 8.4 percent in 2022 (European Commission, 2023), €100 in 2021 is only worth €86 in 2023. It is understandable that the public is impatient with the level of costs it faces every day and adapting energy consumption in the face of energy scarcity. Figure 2 shows the proportion of Europeans who changed their habits to save on energy or dipped into savings due to inflation.  Source: Bruegel based on European Commission (2022). Interviews conducted between 18 October and 4 December 2022 with a representative sample of citizens, aged 18 and over, in each EU country. Figure 2 shows that 71 percent of EU citizens changed habits at home to save on energy. In only one country, Slovenia, did less than half of citizens change habits (49 percent). Furthermore, 37 percent of EU citizens had to take money from their savings as a direct consequence of inflation, ranging from 58 percent in Greece to 16 percent in Croatia. European public opinion: remarkably stable The more expensive the war becomes, the more one might expect European public support to decrease. Indeed, there has been an overall decline in support for measures backing Ukraine. Figure 3 shows a pattern of slow overall decline across France, Germany, Spain, Italy and Poland. The proportion of those in favour of sending arms or of economic and financial sanctions has fallen.  Source: Bruegel based on Ifop (2023). Despite this decline, as of February 2023, support for sanctions and direct assistance to Ukraine remained solid, above 50 percent in all but one case. EU-wide persistent public support signals that European citizens understand that the outcome of the war is of critical importance to their own futures. Eight months into the war, the average approval rate amongst the EU27 for EU support for Ukraine was an astonishing 73 percent (European Parliament, 2022). Only four countries – Bulgaria, Cyprus, Slovakia and Greece – reported approval ratings of less than 50 percent. Furthermore, an average of 59 percent of citizens in eight Central and Eastern EU countries believe that sanctions against Russia should remain in place according to a poll conducted in March 2023 (Hajdu et al., 2023). Meanwhile, a poll from the Kyiv International Institute of Sociology in February 2023 showed that 87 percent of Ukrainians said that under no circumstances should Ukraine give up any of its territory, even if the war lasts longer. This is an increase from 82 percent in May 2022 . The different blocs There are some significant disparities in popular support in different EU countries. Krastev and Leonard (2023) noted that three different blocs of public opinion have emerged: the northern and eastern hawks (Estonia, Poland, Denmark and the United Kingdom), the ambiguous west (France, Germany, Spain, Portugal) and the southern weak links (Italy and Romania). Figure 2 shows persistent support in countries from each of these groups. Amongst even the least supportive member states, some interesting results are observed. When individuals were asked to choose between two opposing statements on whether sanctions were worth higher prices or not, Hungary was the only one out of nine EU countries surveyed where the majority believed that sanctions were not worth it (Figure 4).  Source: Bruegel based on Ipsos (2023). Surprisingly, the number of those who believe that the most important thing is stopping the war as soon as possible, even if Ukraine had to forfeit territory to Russia, actually declined almost across the board according to January 2023 polling reported by Krastev and Leonard (2023). Notable declines were seen in Romania and Italy – those characterised as the ‘southern weak links’. This may be due to citizens becoming more willing to support Ukraine for the long run.  Source: Bruegel based on Krastev & Leonard (2023). The United States US aid to Ukraine in the first year amounted to 0.37 percent of US GDP (Trebesch et al, 2023). The willingness in the US to bear costs for supporting Ukraine has followed a similar pattern to the EU of slow decline across the political spectrum.  Source: Based on Figure 5, Telhami (2023). This decline may signal ‘impatience’ with the war in Ukraine (especially amongst Republicans), but there are also signs of persistent support. The current level of US military expenditure to support Ukraine was either too little or about the right level according to 42 percent of respondents, as opposed to 33 percent who said it is too much. Interestingly, there is a strong preference for support staying on course for one to two years (46 percent of respondents) versus only 38 percent who would accept providing support to Ukraine for ‘as long as it takes’ (Telhami, 2023). Whilst there is a clear division along party lines, there is reduced support amongst Democrats and Republicans. This means that the future of American support for Ukraine may change even before the 2024 elections. Lower support across the political spectrum during the upcoming electoral season could result in reduced backing from the Biden administration or in Congress, as both sides vie for votes. This is before a potential Republican victory, which under certain scenarios, may stop or dramatically limit support from the US. Conclusion   An erosion in public support for Ukraine might have been expected as the cost and economic consequences of the war began to impact EU households through inflation. But support for Ukraine has remained strong, suggesting that the public understands fully the wider implications for European security of the outcome of the war. The public sides overwhelmingly with the Ukrainians, which are clearly perceived as the victims of an aggression. This is consistent with the growing support for maintaining or increasing defence spending. Most NATO citizens (74 percent in 2022 versus 70 percent in 2021; NATO, 2023) think that defence spending should either be maintained at current levels or increased (with some significant differences from 85 percent to 52 percent, but always with a majority supporting). Just 12 percent think less should be spent on defence.   Public support could decline more in the future. If news from the battlefield suggests a protracted conflict in which neither side can prevail militarily, then time and the potential decline in US support may affect EU public opinion. A successful Ukrainian counter-offensive would play an important role in the continuance of Western support for the war. In the absence of progress on the battlefield, voices calling for a peace settlement, even on unfavourable terms to Ukraine, might gain traction in the public debate. In upcoming elections, this could benefit political parties less favourable to supporting Ukraine for ‘as long as it takes’. European leaders must therefore prepare for several scenarios. Significant Ukrainian successes in the battlefield in the near future could pave the way for a positive settlement and the restoration of Ukrainian sovereignty and its reconstruction. The EU must also prepare for the more complex outcome of a protracted war, which would require sustained efforts to support Ukraine militarily (Grand, 2023) and economically. This would require further and constant political efforts to keep public opinion on board, preserving European and Western unity in a potentially degraded economic and political environment.

Abstract The Russian invasion of Ukraine has inflicted a significant blow to the EU’s defence strategy, jeopardising its ability to contribute adequately to the transatlantic security architecture and slowing the development of a continental strategic autonomy. In view of this, Germany and Italy should strengthen bilateral defence cooperation, particularly regarding industrial and procurement policies. As Berlin and Rome are two pillars of Europe’s industrial defence basis, closer bilateral cooperation would facilitate EU defence consolidation and enhance Europe’s military credibility. The future Italian-German Action Plan, the specifics of which are still unknown, is an excellent opportunity to establish a joint defence strategy centred on sectors of mutual interest. 1. European defence after 24 February 2022  As we are writing, a full-scale war is unfolding in Europe, with a nuclear power as the aggressor. War crimes against civilians are being committed on a massive scale and – as of June 2023 – more than eight million refugees have crossed the borders to seek shelter in the EU. As put by the European Court of Human Rights, Russia’s unprovoked invasion of Ukraine arguably represents the greatest challenge to human rights since World War II (WWII). The war has deteriorated the global security and macroeconomic environment, while inflation, food emergency and the worsening climate crisis are negatively reinforcing each other. The war deeply affected the European security architecture. In the years prior to the war, the Ursula von der Leyen-led European Commission had already been advocating for the Union to take significant steps to strengthen the EU’s position as a geopolitical player worldwide, establishing a series of tools – such as the European Peace Facility (EPF) and the Strategic Compass – to boost EU defence capabilities. The Russian invasion of Ukraine compelled the EU revise its plans, as it was clear that the bloc was far from prepared to face a crisis of such geopolitical magnitude right across its borders. Policies and tools designed well in advance to cope with hard security challenges would have certainly improved the efficacy of the European response. The absence of such supranational structures of political-military coordination opened the doors to centrifugal tendencies, only partially contained by the urgency to address the calamitous emergency of the conflict. Ostensibly, the inadequacy of the EU as a security provider is one of the key factors pushing some member states – and especially those on the Eastern borders – to rely even more on NATO as a guardian of stability.  The request to join NATO by the Finnish and Swedish governments in the face of the Ukrainian war might be interpreted as a negative signal for the credibility of the EU as a defensive alliance, weakening any perspective of Europe to develop an autonomous defence policy. And while the news may be welcomed by those who see NATO as the primary security provider for the continent, it is less enticing for the EU member states who are not part of the Atlantic Alliance. Contrary to the purpose of the two organisations to “play complementary, coherent and mutually reinforcing roles” on security issues, this cannot occur if European countries are unable to stand on their own two feet militarily and independently contribute to transatlantic security and burden-sharing.  Current EU defence arrangements are currently insufficient to strengthen a European pillar in NATO, let alone leaving the door open for true strategic autonomy. The practical objectives set out by the Strategic Compass (i.e., the creation of a rapid deployable force of 5,000 units) are obviously unfit to face major conventional military challenges stemming from Russia, but also from a potential conflict over Taiwan or in the Middle East and North Africa region (the latter of which features far less prominently in the latest NATO Strategic Concept). Against this backdrop, it is unlikely that in the near future the Compass will play a significant role in reshaping the organisation of CSDP missions of crisis management and capacity-building.  The war may also undermine the EU efforts to strengthen the European defence market, whose integration has long been welcomed also by the US. In this regard, the priority is arguably the development of the European Defence Fund. At the outset, this instrument had a dual purpose: promote the research and development of modern military systems required by the member states and nurture the intraEuropean supply chains. In other words, the EDF was devised to increase the competitiveness of EU defence companies while strengthening the European Technological and Industrial Base (EDTIB). The initial success of the EDF calls, which resulted in the funding of dozens of multinational initiatives, indicates at least some desire on the part of European companies and governments to invest in the project and embrace this political priority. However, already today the EDF budget of just eight billion euro over seven years is a far cry from the investment needed to reduce the fragmentation of a sector wherein the major EU players represent only a portion of the overall internal market. For decades, the EU defence industry has faced stiff competition from the United States, the United Kingdom, and even South Korea, to the point where many non-EDTIB companies now have profound roots in the procurement traditions of member states. As a consequence, the EU industry lags behind international competitors in key sectors such as disruptive technology, as the European Defence Agency (EDA) acknowledged last year. Aware of this situation, the EU Commission in 2022 launched the European Defence Industry Reinforcement through Common Procurement Act (EDIRPA), an instrument that should convey common procurement projects by providing the member states willing to cooperate with both financial incentives and a common procurement platform. However, this platform could even involve associated countries and thus bring into the EDTIB complementary contractors from the UK, Norway, Switzerland, or the US. The effect of this newly established strategy on the EDTIB has yet to be determined and will depend heavily on its implementation; the impact of both the EDF and EDIRPA will be limited if allocations go toward further fragmentation of military stockpiles and will spur additional duplication of capabilities across domains. The creation of a new European main battle tank (also called as the Main Ground Combat System – MGCS) is an example of the limited role that EU procurement might play in the near future. The MGCS has a history dating back to 2015, when it was evident that the EU tank fleet needed an upgrade to keep up with global competition and the EDA was tasked with the responsibility to coordinate the Member States’ investments in R&D. The effort to expedite the delivery of a new model was further accelerated in response to the Ukraine conflict. Yet, in 2022, the only tank project nearing maturity was the new “Panther”, which was the result of a unilateral German initiative led by Rheinmetall and Krauss-Maffei Wegmann. Considering that Italy and France chose to upgrade their legacy tanks and that the only quasi-European programme, the Franco-German MGCS, is hobbling back, the most likely outcome will be the widespread acquisition of nationally developed systems (including the Korean K2) instead of a common European design. Indeed, the never-ending debate over the development of the MGCS is only the tip of the iceberg when it comes to concerns about the EDTIB’s future. Inevitably, the shipment of defence systems to Kyiv will deplete the EU member states’ strategic readiness. To fill the void, the EU nations will most likely initiate a new phase of national procurement to replenish existing stocks. If the procurement of these systems (primarily tanks, artillery, armoured vehicles, missile defence systems, man portable equipment and various kinds of ammunition) prioritises off-theshelf solutions, even if this is in accordance with EDIRPA guidelines, the European Defence Agency’s effort to achieve European interoperability that can embrace NATO standards will be jeopardised. 2. The Italian-German contribution to European defence cooperation  Italy and Germany seem to be on the verge of signing off on an “Italian-German Action Plan” for expanding bilateral cooperation, which is anticipated to encompass a variety of topics ranging from industrial issues to foreign policy. Among the sectors of envisaged cooperation, defence is one of the most prominent. Indeed, the two nations are pillars of the European Defence Industrial and Technological Base and home to renowned prime contractors such as Leonardo, Rheinmetall, ThyssenKrupp AG, and Fincantieri. The investments of these two nations in acquisition, research, and development represent a significant portion of total European military expenditures. This privileged position in the EU landscape makes even more significant the commitment of Rome and Berlin to increase their military spending as a reaction to the Russian aggression. Meeting in Versailles in March 2022, all the EU member states vowed to establish new capabilities and prepare strategic enablers to operate jointly whenever necessary. Nevertheless, the scale and time of this commitment differs between the two countries. Italy should in theory reach the NATO target of spending 2 per cent of its GDP in defence by 2028. The pace of such an increase is very much uncertain, and Italy’s defence budget remains deeply unbalanced, with substantial expenditures focused on personnel costs and few resources directed to exercise and maintenance. Instead, Chancellor Olaf Scholz’s Germany has responded to the Zeitenwende (“historical turning point”) of Russia’s invasion of Ukraine by setting up a one-off fund of 100 billion euro, the Sondervermögen (“special fund”), and a commitment to bring the Bundeswehr’s regular budget in line with the 2 per cent threshold for years. Yet, doubts exist on whether the fund will suffice given inflationary pressures and Berlin’s yawning gap in defence capabilities. It is estimated that Germany will likely need to spend some 300 billion euro worth to put the Bundeswehr in a position to once again be a credible military tool. Differences also exist in the strategic priorities of the two countries. Growing Italian defence investments over the last decade have focused mainly on improving the armed forces’ ability to project power into the “wider Mediterranean”, establishing for instance the carrier strike group Cavour and an amphibious landing group. Germany, on the other hand, is emphasising a return to territorial defence: it recently (re-) instated structures such as a territorial headquarter (Territorialen Führungskommando) for domestic operations and logistical support to allied operations in Europe, putting the Eastern flank front and centre in its strategic outlook.  The disparities in the two countries’ budgetary provisions are thus both qualitative and quantitative, as Italy’s stagnating defence expenditures are allocated differently than Germany’s growing defence budget. This must be balanced against differences in public opinion. Despite Russia’s aggression and the country’s international obligations, the majority of Italians oppose any increase in military spending. In contrast, the German electorate is experiencing change of heart, as it has abandoned long-standing scepticism defence matters and is now massively supporting the government’s stance on strengthening the national military capacity.  The was in Ukraine is offering the opportunity to the two nations to improve their complementarities in several sectors, starting with major investments to plug the holes in basic defence capabilities caused by underspending in ground-based air defence, an improved focus on dual-use technologies, and a promotion of a more integrated procurement process that prioritises ammunition and the development of strategic enablers such as cyber and space capabilities.  A comprehensive political-industrial-military approach would provide Berlin and Rome with a common ground for enhancing their strategic response to the unfolding crisis in Ukraine. Italy and Germany should focus on filling voids in the respective armed forces; more investments in dual technologies such as space capabilities and cyberwarfare, as well as other traditional domains, would also be essential.  The two countries should also commit to joint procurement as the only way to preserve and boost Europe’s Defence Industrial and Technological Base (EDTIB) in the aftermath of an unprecedented spike in demand for defence goods. The stir provoked in France and Italy by the German-led European Sky Shield Initiative, which appears to favour US- and Israeli-made ground-based missile defence systems at the expense of their European counterparts, is revealing: when there is an emergency, there are a few possible trading partners today that could be associated in procurement without compromising medium- to long-term development plans. Therefore, strengthened cooperation in the field of procurement would allow for more transparent communications with international partners, promoting the excellence of the two national industries without fuelling protectionist impulses which would waste resources (or efficiency) on short-sighted projects.  A holistic spending approach, seeking complementarity and rewarding the excellence of small and medium-sized businesses, would be advantageous to the majority of industrial sectors, given the number of prospective investment domains. Italy and Germany are home to a large number of small and mediumsized enterprises (SMEs) in the defence industry, and these firms frequently hold the keys to the two nations’ competitive advantage in sectors such as sensor technology and electronic and cyber warfare. Both nations have a vested interest in influencing European programs, such as the EDF, to more effectively stimulate innovation within their respective defence ecosystems.  Similarly, the two countries should create synergies within initiatives funded through the EDF. Italy and Germany are already working together in the European medium-altitude, long endurance, remotely piloted aircraft system (MALE RPAS) programme, which is a PESCO project co-financed through EDF and managed by OCCAR that has the objective to empower Europe with a modern and competitive intelligence, surveillance and reconnaissance (ISR) system. Interestingly, both countries share similar sensitivities when it comes to the employment of armed drones, despite the fact that Italy decided to arm its drones without the decadeslong parliamentary and public debate that marked Germany’s decision to equip its own Heron TP drones with weapons. Moreover, both Rome and Berlin are extremely cautious when it comes to automation, and military interlocutors in both countries stress the importance of keeping a human in the loop.  Space is another area of potential cooperation. The protection of Italian assets (defence from kinetic attacks as well as cyber threats) feature prominently in Rome’s 2019 National Space Security Strategy. Cooperation with Berlin could boost complementarities in sectors with a strong electronics component. The two nations are jointly working on strategic enablers trough the Defence of Space Assets (DoSA), a PESCO initiative whose goal is providing training for space military operations, space resilience and access to space and in-space operation. Both of these projects – obviously started before the breakout of the Ukrainian war – are evidently connected with the upcoming defence challenges that Europe, and thus the two countries, will be facing in a next future. Cooperation is also feasible in the field of electronics, which entails crossdomain capabilities with dual-use benefits for the civilian sector. In this regard, Leonardo’s acquisition of Germany’s Hensoldt is encouraging, as it could facilitate the establishment of economies of scale in the field and pave the way for new collaborations in other industries. Notably, reciprocal support could be conceivable in the areas of avionics, manned-unmanned teaming and combat cloud technologies. Given Germany’s decision to purchase F-35 multirole jets to replace its aging Tornado fleet, Berlin could greatly benefit from Rome’s special relationship with the US and British aerospace industries, as well as its experience in the F-35 programme via the Cameri production facility. A further area in which cooperation should be reinforced is underwater technologies. In this field, Italian and German companies are already collaborating, and the realisation of the U212 NFS submarine is a good instance of the brilliant results that can be achieved together. Cooperation between Fincantieri and ThyssenKrupp could be furthered also considering the expanding interest in the underwater environment and research in underwater unmanned vehicles (UUVs). Italy’s long-standing necessity to protect its critical seabed infrastructure in the Mediterranean basin makes it an appealing partner to Germany, which is especially alarmed over potential repeats of the Nord Stream sabotage. The establishment of the German-led NATO Critical Undersea Infrastructure Protection Cell may offer some further chances of bilateral and multilateral cooperation in this regard.  Germany and Italy should also do more together on land systems, notably tanks and mechanised vehicles. Germany has a strong European lead in this realm, while Italy has some positive experiences with the Centauro and a non-negligible niche of turret making. The challenge will be to facilitate Italian participation in the Main Ground Combat System (MGCS) project, managed by the FrancoGerman consortium KNDS. From a German perspective, MGCS is supposed to eventually foster a Europe-wide consolidation of land systems technologies and production. An Italian contribution, joining the consortium and transforming it in a true European initiative, would be especially timely given the urgent need for Italy to modernise its armoured fleet, but also to raise Europe’s overall production capacities and match the mounting continental demand for tanks. Furthermore, Italy is currently examining options to create a new hub for land systems, in order to rationalise the current industrial supply chain and procure a successor to the Dardo infantry fighting vehicle (IFV). The offer by Rheinmetall to produce its new Lynx IFV in partnership with Italian companies within the national borders should be carefully considered in order to foster much-needed economies of scale in this domain. Another enticing area of bilateral cooperation for Berlin could be a partnership designed to support its decision to make the Bundeswehr greener. Germany has already demonstrated a developing awareness of the environmental impact of its military activities. This correlation is recognised by both NATO and the EU, and it is believed to be particularly significant in three fields (listed in decreasing importance): static pollution produced by military barracks and other defence buildings; pollution generated by the systems themselves and military mobility; and the dispersion of ammunitions or other wastes, particularly to sea. Italy, for its part, has already devised a strategy to address the dilemma between defence and the ecological transition. The lion’s share of this strategy consists of a plan to control the energy supply of all military installations on Italian territory, renovate vital defence-related infrastructures, and increase the military’s mobility’s sustainability. Research into alternative energy sources for the military, such as solar panels, may reduce the reliance of forward operational bases on petroleum runs, which are particularly susceptible to guerrilla attacks when deployed in contested territories. Conclusions and outlook The so-called Zeitenwende is proving to be all but easy to live up to for Germany, while Italy still has to prove it perceives any urgency when it comes to a change of pace in defence spending. In this situation, cooperation between the two states can help to alleviate the burden imposed by the radical changes both countries will need to implement in their defence policies. Both countries’ defence budgets are currently being increased, but while this was necessary after a long period of underfunding of the respective armed forces, it also comes with some risks. The primary danger is that both Berlin and Rome will use the concept of European strategic autonomy to appease national industrial champions rather than actually implementing plans to strengthen EU defence initiatives. Despite some positive signals, it is uncertain how much of Germany’s 100 billion euro special fund will be invested in multinational strategic armament projects. Similar risks are present in Italy, which badly needs to replenish its stocks after the latest shipments to Ukraine.  The authentic European commitment of the two nations should inevitably result in joint efforts, beginning with technological and industrial advancement. Italy and Germany have declared their willingness to increase their defence expenditures to 2 per cent of GDP, as agreed upon at the 2014 NATO summit in Wales. This old threshold, which after 24 February 2022 has become a starting point rather than a ceiling for many within the Alliance, will not necessarily enhance the EU’s defence profile. In contrast, national increases in the defence expenditures that are not coordinated may paradoxically be detrimental to the strategic autonomy of the EU. As a result of Russia’s invasion of Ukraine, the imperative need of many EU countries to purchase or upgrade weapons has a negative impact on the European industrial base. In the future, countries with a proclivity to cooperate, such as Germany and Italy, should maximise the potential of strategic, industrial and cultural synergies in the defence sector. This cooperation should begin as a bilateral effort within the framework of the forthcoming Italian-German Action Plan and, whenever feasible, translate into bilateral initiatives in the defence industry. Initiating pragmatic projects and generating industrial and political realities is the most effective method to advance European integration. This is something that can be accomplished more easily by beginning with a bilateral perspective while remaining open to the eventual participation of other EU nations.

The Russian financial sector has taken a double hit from sanctions – both in infrastructure (affecting financial transactions) and in technology (affecting the hardware and software). Infrastructural sanctions imposed by Western countries in reponse to the war on Ukraine (de-SWIFTing, overcompliance, and breaking of correspondent relationships) affected their operational activity. Moreover, the Russian government banned the use of foreign software and equipment imports, which has been a drag on business development. The financial sector was able to withstand the first shock. However, the most recent restrictions on access to advanced technologies, especially from the US and the EU, will lead to import substitution based on technologies of yesterday.  - Since the war began, every second Russian company has lost tech support and access to cutting-edge technology. - Import substitution leaves tech companies scrambling for what they can get, not what they actually want or need, and stunts business development. - The financial sector is shifting from creating innovations to ensuring technological security and supporting current operations. Following Russia’s invasion of Ukraine, a coalition of Western countries led by the European Union and the United States imposed a large array of sanctions. Since then, the Russian financial sector has taken a double hit, namely sanctions on the infrastructure, affecting financial transactions, and on the technology, like software and hardware, it needs to operate. Infrastructure sanctions restrict banks’ ability to make payments (disconnection from the SWIFT global payments system and overcompliance). Technology sanctions create hindrances to technical upgrades and innovation. Before the war in Ukraine, the Russian financial sector was a world leader: it was third in financial technology penetration, in the top 10 in digital banking development, and fourth in the transition to cashless payments during the pandemic. Since Russia’s invasion of Ukraine and the imposition of sanctions in 2022, it has lost this competitive position.   The sanctions against Russia’s financial sector have largely isolated Russia from access to the global financial system. Inside Russia, however, only a small fraction of Russians have felt these restrictions. Russian payment infrastructure was and remains resilient primarily due to the financial messaging system (SPFS), the Russian equivalent of SWIFT, which was developed in 2014 and through which banks are required to exchange data within Russia. In 2022, traffic in the system increased by 22 percent. There are currently 469 participants, including 115 non-Russian banks from 14 countries. Among the foreign countries, banks in Belarus, Armenia, Kazakhstan, Kyrgyzstan and Switzerland are connected to the system. Due to the risk of new sanctions, Russia’s central bank does not disclose detailed statistics. Direct messaging channels allow for direct international transactions with those banks connected to the SPFS, including those bypassing SWIFT. Minimizing the damage of sanctions that target Russia’s financial sector infrastructure is considerably more difficult. Former partners, even in friendly jurisdictions like some post-Soviet countries, have been slow to help Russia with system-level transactions. It will take considerable time to build new payment infrastructure channels, as the technological constraints are much more difficult. The lack of access to modern technology keeps banks’ IT systems in their current state and impedes fintech development and innovation. Pain and Risk About 85 percent of software used in the Russian financial sector is produced abroad. For hardware, the situation is even worse. Only large-scale assembly takes place in Russia. For this reason, the departure of companies that ensure the viability of the financial sector has been particularly painful for the financial sector - companies like Oracle, SAP, Cisco, IBM, Intel, AMD, Diebold Nixdorf and NCR (ATMs). Every second Russian company was left without technical support after the war began. For Russian banks, it was impossible to quickly switch to domestic solutions, as the right quality and scale were simply not available on the market. Virtually all operations of a modern financial institution, from client services to internal operations, are heavily dependent on the smooth operation of software and equipment. This makes the financial system particularly vulnerable on the technological side. Banks and non-financial institutions may face operational risks due to the lack of servers and software. This could make systems more vulnerable to cyber-attacks, raise the risk of technical failures due to a shortage of equipment and maintenance specialists, and require failing equipment to be replaced with either used Western-made products or Chinese analogues. The Bank of Russia, which supervises the financial sector, pointed out these risks for the first time almost a year after the invasion. Import Substitution Software The withdrawal of foreign companies has left the Russian financial sector with a huge gap in software and services. Also, in October 2022, the government banned Russian banks from using foreign software, a rule that applies even if there are no domestic equivalents. This has forced critical information infrastructure facilities to urgently seek domestic solutions. The combination of these two factors has given a boost to software development in Russia. Thus, according to Ilya Sivtsev, CEO of Astra (developer of operating systems and PostgreSQL database management system (DBMS) based on open source code), the company’s revenue in 2022 doubled to over RUB 6.5 billion (USD 65 million) and the share of its revenues from the financial sector increased from 4 to 22 percent. Astra’s outlook for 2023 is for double-digit growth.  Astra’s figures generally reflect the situation in the Russian IT market in 2022: there was rapid growth due to the departure of foreign competitors. As Deputy Prime Minister Dmitry Chernyshenko, who oversees the industry, reported, IT firms in 2022 grew revenues by 35 percent and earned RUB 2.38 trillion (USD 27 billion). Despite the reduced presence of foreign companies, turnover in the Russian IT market has grown. Switching to Russian software instead of foreign software may not be the most significant challenge, but it is an expense that businesses could have invested in furthering business growth. With all the advantages of the Russian DBMS, migration from the US-made Oracle software may lead to performance degradation of 30-50 percent. This is a serious limitation for the financial sector, whose mission-critical core system (processing, the core of an automated banking system) requires high-speed interaction with databases. The banking applications must also be transferred to the new DBMS. In addition, information security risks that could jeopardize the stability of the financial system have increased. The massive migration to new IT solutions reduces the cybersecurity of the entire system. The growth of the Russian software market is limited by two factors: the Russian government’s permission for companies to use unlicensed foreign software and the country’s own borders. Before the war, Russian IT companies were rather active on the markets of neighboring countries, providing various services (e.g. 1, 2, 3 )–from the integration of IT systems and products to the provision of services to companies and private customers. Russian solutions were often cheaper and technical support in Russian was an important advantage in the regional Commonwealth of Independent States (CIS) market. And while Russian companies were also looking to expand abroad before the war, they will now have to compete there with Western companies that have left the Russian market and whose technological development is not restricted by sanctions. The relationship between customers and integrators running programs to implement products from different vendors has also changed. The customers say, “I want it like SAP, but faster and better,” while the integrators say, “My offer is limited, so take what I have or you will run out too.” In other words, customers have to accept a downgrade in software and hardware capacity for certain technologies. Import Substitution and Hardware Because it was not profitable, the equipment needed for  assembly in Russia is not produced in the country. Until 2022, only large-scale assembly from imported components was carried out in Russia. And the financial sector is not the only one waiting for servers, storage systems, controllers and components – industry, the public sector and retailers are also in line. In their search for equipment, Russian companies have turned to parallel imports, obtaining what they need from countries that have not imposed sanctions. They have also acquiesced to lower requirements for equipment quality and delivery deadlines. However, there are no systemic solutions or supply lines yet. Right at the beginning of the conflict, the US applied the Foreign Direct Product Rule (FDPR) mechanism to Russia. The FDPR prohibits exports to sanctioned countries of equipment that US companies were involved in developing or manufacturing – thus it affects companies outside the US in so-called third countries. This mechanism is primarily aimed at keeping the defense industry from importing technology. However, civilian products that can be classified as “dual-use” (military and civilian) are also largely subject to the restrictions – including the kinds of equipment needed by the financial sector. That has made systematic and large-scale purchases much more difficult. Third countries are willing to restrict technology exports to Russia, and the US is constantly updating its sanctions lists to include intermediaries. Nevertheless, loopholes in sanctions frameworks and delays in sanctions decisions allow Russia more room to adjust, finding new partners in Asia or new ways to bring hardware to Russia. Chinese partners, for example, support Russian companies not only with equipment but also with chips. Shipments of microchips and other semiconductors from China to Russia  are 2.5 times higher than than pre-war level; China now accounts for more than 50 percent of semiconductor imports to Russia. By the end of 2022, China supplied 40 percent of Russia’s imports and purchased 30 percent of its exports, and the RMB had become the only (albeit less convenient due to its incomplete convertibility) alternative to the euro and dollar for Russia’s international payments. In 2022, trade turnover between the two countries reached an astronomical USD190 billion, and it is quite likely that within these imports are sanctioned goods that Russia desperately needs. Reports that China is helping Russia circumvent sanctions, especially in the technology sector, are mounting. The Russian IT sector’s focus on Chinese suppliers and their products – from servers and data center equipment to bulk purchases of consumer electronics – reflects Moscow’s growing and asymmetrical dependence on Beijing. For second- and third-tier Chinese companies, this opens up opportunities to enter the Russian market. For example, Sber, Russia’s largest bank, is testing its own custom-made laptops. Sber’s partner, the Chinese company Shanghai IP3 Information Technology, is a contract manufacturer that takes orders for electronic devices and commissions them from Chinese production facilities. Whereas before the war Russian companies were free to choose their equipment and electronics suppliers, taking advantage of the wide supply on the market to obtain favorable prices, the choice has now narrowed to Chinese manufacturers. The lack of alternatives also forces them to accept less attractive terms. Innovation Inhibited The sanctions bottleneck in both hardware and software is shifting the focus of IT specialists in the Russian financial sector from creating innovations to ensuring technological security and supporting current operations. The most prominent example is the introduction of payment stickers for Russians who can no longer make contactless payments with their smartphones. A payment sticker has an embedded near-field communications (NFC) chip that exchanges data with a payment device. In other words, it is a bank card chip stuck onto an iPhone, as iPhone owners are considered to be the highest-paying target group, and banks have a vested interest in maintaining the usual number and volume of card transactions. Android smartphone owners will still have the option of making contactless payments via a MirPay wallet linked to their domestic payment system card. Frank RG, the Russian financial information publication, estimates that 12 of Russia’s 25 largest banks already offer stickers to their customers. Tinkoff, the leader in innovative banking, plans to issue over 1 million stickers by July 2023. At state-owned Sberbank, over 100 000 people applied for stickers within three hours of their offering. Issuing stickers is more expensive for the bank than standard payment card issuance, bankers acknowledge. Russian financial institutions have become so similar to IT companies that they are almost indistinguishable. Sberbank alone employs 38,000 IT specialists, Sberbank President Herman Gref reported to Vladimir Putin in March 2023. Besides the purely financial challenges, such as ensuring the sustainability of the payment infrastructure, the financial sector needs to work with the IT industry on providing non-sanctioned hardware and software, finding indigenous solutions to replace Western ones, and localizing instead of scaling up. An important but not decisive obstacle to innovation is the mass exodus of IT professionals. Competition for the remaining specialists is fierce and will only increase. The government is making gigantic efforts to keep the remaining skilled workers in the country. The slowness in changing the taxation of departing Russians seems partly related to the fear that most foreign IT professionals who continue to work in Russia will no longer do so. Prospects for the Financial Sector The Russian financial sector’s resilience to sanctions on its financial infrastructure has been limited to Russian territory. The sanctions have largely isolated Russia from the international financial infrastructure. Russia’s demand to allow banks to use SWIFT (e.g. under the Grains Agreement) is a clear indication of this. Technological restrictions and the withdrawal of Western companies from the Russian market may seem less painful at first glance, but this is not the case. Their impact is longer-term: declining quality of hardware and software, forced investment at IT, cybersecurity, and operational risks. And while infrastructural constraints have had only a temporary impact on the ability of the financial sector to operate smoothly, technological constraints have significantly limited its potential for growth and development. The Russian financial sector’s dependence on foreign, especially Western, software and hardware manufacturers is high. This poses a significant risk to Russia’s financial stability, especially if Western countries tighten sanctions against the Russian IT sector.

The war in Ukraine accelerated a global energy crisis just as the world was beginning to recover from the Covid-19 pandemic. Venezuela has the largest crude oil and the eighth largest gas reserves in the world and can therefore offer an alternative for Europe to replace its fossil fuels imports from Russia. The problem is, of course, that EU–Venezuela relations have been in a sorry state since the EU denounced President Nicolás Maduro’s re-election in 2018 as neither free nor fair. Since then, the EU has adopted targeted sanctions against the Venezuelan government, thus adding to the maximum economic pressure that former US President Donald Trump imposed on Caracas in an attempt to fatally weaken Maduro. This approach has yielded no result in that respect, and the war in Ukraine, and its energy security implications for the EU, creates the occasion for a revision of EU and US strategies. The hope is that a “more carrots, less sticks” approach could convince Maduro to engage in meaningful dialogue with the opposition. The EU must seize this opportunity of rapprochement and readiness and push forward the recommendations put forth in its electoral observation mission’s report of 2021, reconcile internal disputes to focus on the big picture, give momentum to dialogue efforts, consolidate support among regional allies and rekindle its efforts towards humanitarian relief.A failed pressure strategyVenezuela used to be among the most prosperous countries in Latin America, but is now home to one of the largest external displacement crises in the world next to Syria and Ukraine, according to the United Nations High Commissioner for Refugees. When he came into power in 2013, President Maduro inherited from his predecessor Hugo Chávez a country in economic turmoil, high in debt and on an increasingly authoritarian track. The slump in oil prices in 2014 added fuel to the fire, prompting a wave of unrest to which Maduro responded with repression. He then tried to replace the democratically elected National Assembly, which had an opposition majority, with a loyalist Constituent Assembly in 2017. But it was after the 2018 presidential election, when Maduro secured a second term in what are widely considered rigged elections, that Venezuela descended into a full-blown political crisis. Juan Guaidó, speaker of the National Assembly, used a constitutional clause to declare himself interim president until new elections could be held, backed by more than 60 countries worldwide. In the following years, various negotiations attempts between Maduro and the opposition failed to solve the country’s political dispute, prompting fatigue in the opposition ranks while eventually consolidating Maduro’s authoritarian grip. As the political crisis unfolded, the EU and the United States responded with sanctions against the Maduro regime, although with different goals. The Trump administration pursued regime change through a maximum pressure strategy. Instead, the EU combined targeted restrictive measures with humanitarian aid and support for dialogue and mediation efforts. EU efforts have been hampered by: internal divergences, especially on the recognition of Guaidó as interim president; multipolar competition and the perceived excessive proximity with the United States; and regional fragmentation and polarisation. Sanctions have failed to produce substantial change as Russia and China, and to some degree Iran and Turkey, have continued trade (including in oil) and strengthened economic ties with the Maduro regimeHow has the EU mitigated constraining factors on its policy?There have been two issues over which the EU struggled, even failed, to reach consensus. The first was the recognition of Guaidó as interim president. While most member states eventually did so, Italy and Cyprus dragged their feet, until the issue became irrelevant in early 2021 when the term of the National Assembly of which Guaidó was speaker expired. EU divergences stemmed from the political composition of member state governments and their view of the EU’s role in the world. Left-leaning governments in the EU tended to frame the recognition of Guaidó as a US-led, “interventionist” initiative, while right-leaning governments advocated a confrontational approach to Maduro, including through the recognition of Guaidó. It was a missed opportunity to show EU unity and put the spotlight on the EU’s difficulty to reach agreement over its foreign policy. Second, internal disagreements within EU institutions and member states revolved around the opportunity to send an electoral observation mission to local and regional elections in November 2021, out of fear that this could whitewash the Maduro regime. The mission eventually garnered enough support to be deployed and was later largely perceived as a success by EU member states. The EU electoral observation mission (EOM) produced a report with recommendations that have become the benchmark for the conditions for a free and fair election in the agenda of the Mexico-based talks between the government and the opposition. The region’s fragmented and polarised approach to the Venezuelan crisis has been another factor hampering EU efforts. Trump’s push for regime change, embraced by most Latin American countries led by right-wing governments in 2019–20 (crystallised by the creation of the so-called Lima Group) exacerbated geopolitical tensions in the region. The EU-backed creation of the International Contact Group (ICG) in 2019, which aimed to promote dialogue but did not bear fruit because it coincided with the recognition of Guaidó and the EU's rapprochement with the Lima Group. Regional polarisation was epitomised by the appointment of a Guaidó representative in the Organization of American States, despite Maduro’s decision to withdraw from the pan-American body, and the prolonged stalemate in the Community of Latin American and Caribbean states (CELAC). The EU was dragged into a polarisation spiral where its policies were associated with those of the Trump administration, even though they had different objectives. Besides, Trump’s policy of maximum pressure as an instrument for democratisation proven ineffective in a context of geopolitical competition with China and Russia. Their support for the Maduro regime allowed it to survive, even though at the cost of the country’s descent into economic disaster. Russia in particular also invested political capital by participating in the Mexico talks as the government’s accompanying country.A changed scenario, a new strategy?President Biden’s election and Latin America’s shift towards the left created openings for a more constructive international engagement with Venezuela, which have further widened after the outbreak of the Ukraine war, providing the EU with a new set of foreign policy options. The EU and the US, together with Canada and the United Kingdom, have signalled a willingness to agree to conditional sanctions relief. The Biden administration has permitted American oil company Chevron to resume limited oil operations in Venezuela in exchange for an agreement by Maduro and the opposition to continue dialogue after a year of stalemate. The talks have made no progress other than an agreement to turn up to 3 billion US dollars of frozen government fund into aid to be distributed by the UN and the International Red Cross to alleviate the domestic humanitarian predicament. Although a more concessions-based foreign policy towards Venezuela may not lead to the regime change some have hoped for, it could still make Maduro willing to allow for fairly free and democratic elections in 2024, when his second term comes to an end. However, it is clear that the humanitarian crisis will not be over shortly, and the implementation of the 2022 agreement between government and opposition is proceeding slowly. Increased EU humanitarian aid could help promote goodwill in Venezuela and in the region, and thus is not solely to be considered an altruistic gift, but an important part of the EU’s foreign policy arsenal. Finally, Venezuela and the broader region of Latin America and the Caribbean is not only important due to its natural resources, but an important political partner for the EU in its bid to defend a rule-based global order. This has become ever more evident since the war on Ukraine, which has seen some Latin American countries refusing to pick sides. Over the last few years the political landscape in Latin America changed with the election of leftist presidents in almost all countries in the region, with interest in seeking a negotiated response to the crisis in Venezuela. The International Conference on Venezuela convened by Colombian President Gustavo Petro in Bogotá in April 2023 is an illustration of the region’s renewed engagement on the issue. The upcoming EU–CELAC summit in July, the first in eight years, is an opportunity to engage with regional partners to foster political cooperation on global and regional issues, including Venezuela. The EU’s pragmatic rapprochement with Venezuela offers the prospect for some progress in the negotiations between government and opposition, but it should not be perceived as a relegation of EU’s commitment to democratic norms. The EU should not waste the opportunity to step up its diplomatic engagement with the region and coordination with the US and like-minded countries to ensure that Maduro concedes a real level playing field for the 2024 elections while at the same time pursuing its strategic goal of diversifying energy supplies. This article is brief published under JOINT, a project which has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 959143.