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Imagine a future in which countries desperate for investment give up a patch of their territory and subcontract governance to a board chosen by a foreign corporation. Sound like the East India Company of the past? Until the 2021 election of Honduran president Xiomara Castro, the past was now—Zones for Employment and Economic Development (Zonas de Empleo y Desarrollo Económico in Spanish, or ZEDEs) had been permitted to establish their own near-tax-free paradises in company-governed territorial fiefdoms. The investor-governed territories include one that accepts its own cryptocurrency and allegedly tramples rights of indigenous and Afro-Caribbean populations, another where small farmers were forced to sell their land—all were criticized by the United Nations as threatening basic human rights and criticized by Honduran civil society for worsening problems of tax evasion and narcotrafficking. What is clear is that they violated basic democratic principles of representative government and undermined national sovereignty, including denying the validity of international labor and environmental treaty obligations agreed by the Honduran state.   It all began when a 2009 Honduran military coup ousted a democratically elected president. The next Honduran president and the Congress passed a law to cede portions of its territory to corporate investors as “charter cities” but were blocked by the Supreme Court. In response, Congress impeached the judges, packed the court, and engineered a new law to create ZEDEs. According to a study published in Central American Journals Online, ZEDEs are comparable to the Spanish colonial model, creating foreign-controlled economic zones on Honduran territory. The president of the Congress, Juan Orlando Hernández, went on to be the next president, governing two terms after his handpicked Supreme Court-sanctioned reelection. Eight years later, Hernández now sits in a U.S. jail awaiting trial for narco-trafficking, the same charges on which his brother was sentenced to life in a U.S. prison. Last year, the first opposition government elected since the coup made doing away with ZEDEs part of its electoral campaign, and among the first laws passed by the new Congress was ZEDEs elimination. The law passed unanimously, including votes from the very party that had put the ZEDEs in place. The reversal was the culmination of a broad civil society movement that brought together women, indigenous, Afro-Honduran, labor, and local business interests. Predictably, only the foreign investors want the paradises to remain. It is worthwhile to look at the record of the ZEDEs. They found resonance among conservative Honduran economists and were championed by Paul Romer, an economist who extrapolated from the experience of places like Singapore and Hong Kong to presume that cities could carve out independent regulatory regimes to promote development in the midst of poorly governed areas. Originally part of an oversight board to the charter cities, Romer resigned in response to Honduran government evasion of oversight processes and lack of “transparency.” Romer’s fears appear to have been well-founded, as the oversight board established for the ZEDEs is now a self-perpetuating body that even a think tank founded to support charter cities views skeptically for including "Ronald Reagan’s son (a conservative media personality), anti-tax activist Grover Norquist, and a member of the Habsburg dynasty.” It goes on to say that “the ZEDEs were clearly more of an ideological exercise than a practical exercise to generate development.” Romer may have gotten out just in time for additional reasons, as the record of the ZEDEs has been poor in terms of economic, environmental, and democratic impacts. Compared to what Honduras would have collected otherwise, even conservative estimates suggest the tax exemptions offered to the ZEDEs would cost equal to almost half of current sales taxes by 2025 and a value equal to all current import taxes by 2026. Worse, some of the ZEDEs build investor paradise workplaces and residences but appear to provide almost no public services, except their private police, even as they deny the Honduran state sufficient tax revenue to provide schools, health clinics, and courts. Pitched as model cities, ZEDEs are actually far from that, including one that offered preferential treatment for agricultural investments and mining concessions, evading existing environmental and other regulations on decidedly nonurban activities. In the face of social opposition to the ZEDEs, the Honduran Congress had toughened punishments for blocking property or businesses, making it easier for ZEDEs private security forces to repress protesters. Private security force and paramilitary violence against opponents of megaprojects like ZEDEs is common in Honduras—and in one case a lawyer representing indigenous communities opposed to the original charter cities law was murdered, sparking condemnation from the State Department, but impunity for the killers meant there was no proven link to his political work. In spite of this poor record, most of those who want to preserve the ZEDEs point to potential benefits without any evidence. Supporters claim ZEDEs will be a boon to employment, but rates of unemployment have remained unchanged since ZEDEs began, estimates of the actual number of ZEDEs jobs created hover around 15,000 in the eight years ZEDEs have been on the books, and ZEDEs undermine and evade existing labor legislation. Supporters present ZEDEs as complementary to U.S. nearshoring, but estimates of benefits to Honduras from nearshoring lag behind eight other Latin American countries, none of which have ZEDEs. Supporters argue ZEDEs will head off growing Chinese influence, but China is one of the countries interested in investing in ZEDEs. Supporters suggest ZEDEs will address problems of corruption, but the director of the ZEDE oversight board was secretary of the presidency to the jailed former president and has continued to draw a salary even after fleeing to neighboring Nicaragua to escape his own corruption and narcotrafficking investigations. Supporters argue ZEDEs will generate trade, investment, and growth, but since the ZEDEs law was passed in 2013, trade as a percentage of GDP dropped in five of eight years and is now lower than it was before, foreign direct investment decreased as a percentage of GDP every year except 2018, and GDP growth was below 4 percent in six of the eight years. Overblown aspirations have two main problems: first, they violate basic democratic principles of citizen representation, adherence to rule of law, and international treaty obligations; and second, in the eight years since ZEDEs were allowed, none of these promises have been fulfilled. Why the sudden kerfuffle about an obscure scheme abandoned by its founder, instituted by a corrupt politician now in jail in the United States, revoked by the country that adopted it, and that showed minimal actual impact? Perhaps because one ZEDE investor has provided grants to think tanks to start a dialogue on the issue, the results of which may have convinced some in the State Department, the U.S. Embassy in Honduras, and a few members of Congress, even threatening the newly elected Honduran government with reprisals such as withdrawal of aid, forced restitution payments, or limiting the Honduran share of the Partnership for Central America, the private sector investment plan led by Vice President Kamala Harris. For the richest country in the hemisphere to threaten to withhold or extract resources from the third-poorest country lends credence to the critiques of those who viewed the ZEDEs as colonial. Worse, withholding funds or forcing restitution would undermine the core intent of the Harris plan—invest in Honduras to stem outmigration, address low growth, and improve governance. Instead of listening to those who are advocating for a few private corporations’ desire to cash in on their fiefdoms, the United States should be supporting stronger Honduran institutions, starting with respecting the democratic will of the Honduran people.

Russian Deputy Prime Minister Aleksandr Novak has announced that Russia’s production and exports of liquefied natural gas (LNG) rose by almost 9% to around 33 million tonnes (c. 46 bcm) in 2022. Most of the Russian LNG was produced at the Yamal LNG project (c. 20 million tonnes), whose main shareholders include Russia’s Novatek (50.1%), France’s TotalEnergies (20%) and China’s CNPC (20%) and the Silk Road Fund (9.9%). Nearly 15 million tonnes from this project went to Europe (up 14% y-o-y), and around 5 million tonnes were shipped to China. In addition, more than 10 million tonnes were produced in the Gazprom-controlled Sakhalin-2 project in the Russian Far East, an increase of 2% year-on-year. The main customers for this gas were Japan (the Japanese companies Mitsui and Mitsubishi are shareholders in the project) and China. According to Chinese customs data, a total of 6.5 million tonnes of LNG were shipped to the PRC from Russia in 2022, up from 5.7 million tonnes a year earlier. LNG is also being produced in two small-scale projects in the Leningrad region in the Baltic Sea. The Novatek-owned Vysotsk terminal produced around 700,000 tonnes and the Gazprom-owned Portovaya LNG produced around 350,000 tonnes. Gas from both projects was supplied to the European market. The deputy prime minister also asserted that Russia intends to deliver on its ambitious plans to double its LNG production in the next few years, and increase its LNG exports to 100 million tonnes in 2030 as a result. This would be achieved mainly through the development of Arctic LNG projects, including the Novatek-owned Arctic LNG 2. This expansion has been promised even though Russian production may decline in 2023 due to planned maintenance work on two (out of four) Yamal LNG production lines. CommentarylLNG was the only Russian fuel whose supplies to Europe increased in 2022. Consequently, the importance of LNG has increased both with regard to Russia’s exports (LNG accounted for 25% of all Russian gas supplied to the EU) and the EU’s imports (less 20% of the EU’s total LNG imports).lIt will be very difficult, if possible at all, to realise Russia’s ambitious plans for a robust increase in LNG production in the years to come. Forecasts from the Russian Ministry of Energy published in May 2022 showed that LNG production will be much lower than previously assumed. Under the current baseline scenario, LNG exports are projected to reach almost 31 million tonnes in 2023 and 35.7 million tonnes in 2024, compared to the previous target of over 50 million tonnes. lAs a result of sanctions following the Russian invasion of Ukraine, Russia’s LNG sector has been cut off from the Western technology and equipment which played a key role in the development of this sector. Many foreign companies (German, French, Spanish and others) have withdrawn from cooperation with Russia in this area; for example, one of the shareholders in Arctic LNG 2, France’s TotalEnergies (10%), has stopped investing in the project and started the process of completely withdrawing from the venture, which should be finalised in the first half of 2023. Nonetheless, the Russian authorities are insisting that they will manage to complete the construction of the first Arctic LNG 2 production line by December 2023 (about 90% of the work had already been done when the sanctions were introduced), and that the next two lines will also be put into operation according to the original schedule, that is, in 2024 and 2026. Leonid Mikhelson, the CEO of Novatek, has affirmed that the corporation has managed to purchase the necessary equipment by cooperating with companies from countries such as Turkey and the United Arab Emirates. Russian companies are also working on developing their own gas liquefaction technologies. At present, these are inefficient (the production lines are capable of producing a maximum of 1 million tonnes per year) and often fail. It is unlikely that Russia will be able to fully replace Western technologies and equipment by circumventing the sanctions or developing its own solutions. Indeed, the effectiveness of such efforts so far proven to be limited.  

China’s silence towards the European Union’s electric vehicle probe could mean that a more harmful retaliation is on its way During her State of the Union address on 13 September, European Commission President Ursula von der Leyen announced that the European Union would undertake an anti-subsidy probe against the Chinese electric vehicle (EV) sector. This signalled a major step in the EU’s shift to a more aggressive trade defence against China and raises the question of how China will react, given the importance of the Chinese market to key sectors of the European economy (including the auto and luxury sectors), and also given China’s crucial role in providing goods to the EU for the green transition? An EU-China High Economic and Trade dialogue on 25 September in Beijing, between EU Trade Commissioner Valdis Dombrovskis and his Chinese counterparts, may have given a glimpse into China’s mindset. There were fears Chinese officials would respond aggressively to von der Leyen’s announcement during Dombrovskis’s visit but this was not the case. Nevertheless, the silence may be deceptive. Three main factors should be taken into account when considering potential Chinese retaliation. Subtle but harmful retaliation First, China might file its own anti-subsidy investigation at the World Trade Organisation against key European sectors. This would not be difficult since Europe has ramped up its subsidies massively since the pandemic, and more recently has attempted to gain more ‘strategic autonomy’ in sectors including semiconductors. There is very little the EU can do about this potential retaliation, which would be costly for the sectors targeted and for the EU’s image as a free-trade and WTO champion. Second, China could try to persuade EU governments that the Commission-led investigation should be withdrawn. A similar probe happened in early 2014, when the EU launched an anti-subsidy investigation into solar panels produced in China. President Xi Jinping visited then Chancellor Angela Merkel right after the anti-subsidy investigation was announced. Subsequently, the issue was settled quickly, with the Commission withdrawing the case from the WTO. Based on this previous experience, China might prefer to take up the issue bilaterally, possibly with Germany again, rather than enter discussions with the Commission. But a major difference this time is the relative importance of the auto sector in the EU compared to solar power. The auto sector accounts for 14 million jobs in Europe and a good part of the EU’s exports. Exports of cars and components are heavily concentrated in a few EU countries, especially Germany. These exports to China have plummeted in 2023, with a close to 30% drop, and Chinese competition in third markets and even the EU market, has become much more intense. Third, also unlike the solar-panel probe, it is the Commission and not the sector being harmed that has filed the case. It will be harder for the Commission to withdraw the investigation because it would lose credibility. Merkel decided to accommodate Xi Jinping’s request in 2014 because she wanted to save the auto sector, even at the cost of hurting a smaller part of the German economy – the solar panel companies. The new investigation aims to protect the automotive sector. There could be consequences for major European auto companies producing electric vehicles in China, but jobs in Europe are now more important than the future of those companies in China. In any case, the future of European manufacturers is bleak; they seem to have already lost the EV race to their Chinese competitors. China will find it much harder to move the EU away from its decision to pursue an anti-subsidy investigation, differently to what happened in 2014. Lessons to learn There might be a lesson for Europe in what happened to Apple in China in September. Days before Apple’s launch of its new iPhone 15, Huawei launched its Mate 60 with upgraded functionalities which require high-end semiconductors. Beyond raising doubts about the effectiveness of US-led export controls on advanced semiconductors, this announcement constituted a direct challenge to Apple’s phone sales in China. Chinese officials were also prohibited from using iPhones and rumours spread in Chinese media in advance of the Apple launch about the underwhelming quality of the iPhone 15. Investors dumped Apple stock globally and the company lost about 6% of its value in a few days. China’s retaliation against the Commission’s anti-subsidy investigation might not be as direct and transparent, but it will still be harmful and might offer less room for the EU to respond. Europe’s strategic dependence on China is greater than in 2014 and this probe has the potential to cause a bigger fall-out for the EU. China has strengthened its position as a global power and uncompetitive behaviour could hit European core sectors harder because China has more power to retaliate. On the flip side, the stakes are higher for the EU given the importance of the auto sector in terms of jobs and exports. For that reason, China may not manage to deter the EU’s investigation as easily as it did in the past. But this may prompt China to threaten even larger retaliation.

Russia’s war on Ukraine has pushed the climate crisis off the agenda. But we need a ceasefire and global demilitarisation for a 1.5°C world War brings death and destruction – not least to the environment and climate. Russia’s invasion of Ukraine offers a depressing reminder of that fact, and further increases the military sector’s already enormous global CO2 footprint. In addition, the eastern Ukrainian cities where fighting is taking place are home to fossil fuel infrastructure such as chemical factories, oil refineries, and coal mines, the bombing of which produces a cocktail of toxic substances that has devastating environmental impacts. Efforts to arm the two sides, moreover, are consuming materials and resources that could otherwise go towards tackling the climate crisis. Based on the global C02budget, humanity has less than eight years to ensure it still hits its 1.5-degree warming target. To do so, we need to urgently implement reforms in all areas, to bring about ‘systemic change’, as the IPCC report from early April puts it. The military sector barely gets a mention in this almost 3,000-page document, however, with the word ‘military’ coming up just six times. You might thus conclude that the sector is of little relevance to the climate emergency. The reality is rather different. Using military hardware results in huge quantities of emissions. In the war in Ukraine, 36 Russian attacks on fossil fuel infrastructure were recorded in the first five weeks alone, leading to prolonged fires that released soot particulates, methane and C02 into the atmosphere, while oil infrastructure has been ablaze on the Russian side too. The oil fields that were set on fire in 1991 during the second Gulf War contributed two per cent of global emissions for that year. While greenhouse gas emissions are one of the most significant impacts of war, the quantity emitted depends on the duration of the conflict and on what tanks, trucks, and planes are used. Another is the contamination of ecosystems that sequester CO2. Staff from Ukraine’s environment inspectorate are currently collecting water and soil samples in the areas around shelled industrial facilities.Military emissionsThe ramifications for the climate can be catastrophic in scale. According to a study by the organisation Oil Change International, the Iraq War was responsible for 141 million tonnes of C02equivalent emissions between its outbreak in 2003 and the report’s publication in 2008. By way of comparison: some 21 EU member states emitted less CO2equivalent in 2019, with only six states topping that figure. Post-war rebuilding also produces significant emissions. Estimates suggest that reconstruction in Syria will lead to 22 million tonnes of CO2 emissions. The rebuilding in Ukraine, too, will consume vast amounts of resources. At the World Economic Forum in Davos, President Volodymyr Zelensky stated that at least 5 billion US dollars of reconstruction funding was needed per month. Every effort should thus be made to achieve an immediate ceasefire – both for the sake of the climate and to avoid further human suffering. Emissions from armed forces and military equipment cause considerable environmental harm around the globe. And yet, bowing to pressure from the US, military CO2 emissions were excluded from climate treaties such as the Kyoto Protocol of 1997 and the Paris Agreement of 2015. As a result, they do not form part of their binding agreements and are neither surveyed systematically nor published transparently. The consequent lack of data means we can only make vague estimates as to the military sector’s impact on global heating. According to a study by Neta Crawford, co-director of the Costs of War project at Brown University, the US defence ministry alone is a bigger contributor to the climate crisis than individual countries such as Sweden or Portugal. This makes it the largest institutional source of greenhouse gases in the world. Globally, the military sector is estimated to generate around six per cent of all CO2emissions.Germany’s roleWith its new €100bn fund for the military, Germany seems willing to countenance further far-reaching climate impacts. This military investment will tie up financial and intellectual resources, making it highly unlikely that the 1.5-degree target can be achieved. That countries wish to better protect themselves against potential Russian aggression is understandable. But the public debate around this issue needs to balance an uncertain increase in security against a reduction in our ability to fight climate change. The German military was already responsible for around 4.5 million tonnes of CO2 equivalent emissions in 2019, significantly more than the 2.5 million tonnes contributed by civilian aviation within Germany. This is now set to increase. Just one of the F-35 jets ordered from Lockheed Martin emits around 28 tonnes of CO2 equivalent per tank of fuel. For comparison: the average annual emissions footprint in Germany is 11.2 tonnes per head. The income from the sale of fossil fuels provides ongoing funding for Russia’s war of aggression. From 24 February to 24 April 2022, the country’s fossil fuel exports via sea routes and pipelines had an estimated value of €58bn. The EU accounts for 70 per cent of that total, or €39bn, while Germany is the largest single importer of Russian fossil fuels at €8.3bn worth. Our fossil fuel dependency is thus a factor in both the climate crisis and the invasion of Ukraine. And yet representatives of politics and business are using the war as an excuse to delay the necessary socio-ecological transformation. While corporations still stuck in the fossil fuel age – such as BP, Shell, and Saudi-Aramco – are posting record profits, the climate crisis continues apace. The likes of Rheinmetall and NATO chief Jens Stoltenberg may champion climate-neutral warfare using eco-friendly tanks and hydrogen fuel, but this is surely not the answer. Western armed forces, security experts, and arms manufacturers are well aware of the significane of climate change, as evidenced by the numerous security strategies, policy statements, and sustainability reports published on the subject in recent years. These outline ways to adapt to a changing climate while ensuring the doctrines of growth and hegemony are nonetheless defended against any and all resistance.Ceasefire nowTogether with the EU and NATO, Germany is preparing for scenarios such as war, environmental disaster, and influxes of refugees in order to ensure its foreign policy will still be fit for purpose and its security interests protected. A cynical approach given that the worst affected – those who, as some see it, Germany needs protecting from – will be those who have contributed least to global warming. And one that seems even more absurd when you consider that the environmental destruction brought about by military investment and resource-related conflicts will help to further heat the climate. At the same time, steps are being taken to reduce dependence on fossil fuels. Nonetheless, a Greenpeace report published last year demonstrates that the majority of all EU military missions have links to the protection of oil and gas imports. This dangerous relationship between fossil fuels, military missions, and war needs to end. More arms mean more damage to the climate, not greater security. Rising defence budgets among NATO states will simply convince Russia and China to increase military investment in turn. At $2.1 trillion, global arms spending has already reached record levels. As the war in Ukraine goes on, the biggest challenge of the 21st century – the climate crisis – has slipped down the agenda. We mustn’t forget, though, that efforts to tackle that crisis can only succeed if all countries – including Russia – work together. The immediate demand is for a ceasefire, followed by measures to build trust, such as international disarmament treaties. Moreover, Russia will need outside help if it is to transition to a climate-friendly energy industry. What’s required is a fundamental socio-ecological transformation, with policy-making dictated by the needs of all. That may seem inconceivable at present, but what’s the alternative? Unchecked global warming would be catastrophic for the planet’s entire population.