Article

Trouble at the EU’s borders

The expansion of the European Economic Community and its transition to the European Union resulted in Russia ‘feeling surrounded’. Moscow now sees Nato as a threat.

| 8 min read

In 1957, six Western nations signed the Treaty of Rome to create a customs union and the path to the European Union (EU) was set. France and Germany joined with the Netherlands, Belgium, Luxembourg and Italy. They were all newly created or surviving democracies following World War Two.

In 1973, they were joined by the UK, Ireland and Denmark. In 1981, Greece joined and in 1986 Portugal and Spain were also admitted – Greece and Spain had ended military and dictatorial rule. In 1995, Austria, Finland and Sweden joined, giving the European Economic Community (EEC) its first frontier with Russia.

In 2004, after the fall of the communist Union of Soviet Socialist Republics (USSR) a major eastwards expansion occurred. This brought in Cyprus, Czechia, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. This expansion gave the EEC new Russian borderlands, as well as and substantial territory from the former USSR. In 2007 Bulgaria and Romania joined, and in 2013 Croatia.

Concurrently, there was a progressive expansion of the powers and duties of the EEC. It became the European Union (EU) with common policies on defence, home affairs and borders – as well as trade, industry, environment transport and the whole panoply of government action. Successive treaties included the Single European Act, Maastricht, Amsterdam, Nice, and Lisbon. They embedded a single currency, a stronger sovereign Court of Justice and a more powerful European Commission (EC) as the proposer of laws and administrator of departments and budgets.

Departures from the EU

The departure of Algeria, Saint Pierre and Saint Barthelemy were related to becoming more independent of France. Greenland voted to leave in a 1985 referendum. The UK voted to leave in 2016. Switzerland voted against joining the European Economic Area, which would have been a prelude to joining the EU in 1992. Successive Norwegian governments inclined to join never thought they could win a referendum to do so.

The EU has found referenda difficult. Denmark voted against the Maastricht Treaty in a referendum and settled for a permanent opt out from joining the euro which it has exercised. France voted down the Constitutional Treaty, which was repackaged and re-presented by the EU. Sweden declines to do what it takes to join the euro though its treaty obligations say it should.

The European Union has been much involved in Ukraine.

Turkey has been a candidate for membership for many years but has drifted away from serious prosecution of its case. The government there is not keen on many of the EU requirements that would be imposed and is not finding compromises with EU negotiators. The EU wants Ukraine to become a member, but the long and damaging war following Russia’s invasion complicates progress.

The EU is getting heavily involved in the financing of Ukraine and seeking more leverage over domestic policy. Albania, Montenegro, Bosnia, Serbia, North Macedonia, Georgia and Moldova are all candidates with varied chances of entry. They all take the centre of the EU eastwards, draw it closer to Russia’s borders and influence – and add countries that would need financial assistance. Kosovo too is a potential candidate, though not a recognised country as far as Serbia is concerned.

There have been more wars in Europe over the last 80 years, though nothing on the scale of 1939-45 World War Two which started in Europe with the involvement of all the great powers. France and Germany have developed a partnership after years of wars and the allied armies have long since ended their occupation of Germany. The US and Germany have been reconciled as allies against the USSR/Russia.

In the 1990s, as the Soviet Union broke up, there were savage wars in the Balkans. Serbia fought to prevent the secession of Croatia and Slovenia from Yugoslavia. Both have now become EU members. A vicious civil war in Bosnia saw an eventual peace with an independent Bosnia and Serbia following Nato military intervention. The arguments between Serbia and Kosovo remain to be decided. The EU is involved, as it now supports candidate status for Serbia and is thinking of offering the same to Kosovo.

The EU has been much involved in Ukraine. It backed protests against the elected President of Ukraine in 2014 as he was thought to be too pro-Russia. Following his forced departure, Russia illegally seized Crimea and posed as the defender of pro-Russian people in Ukraine. They extended this into the Donbas and have now occupied parts of southeast Ukraine. Many in the US think Europe should increase its contribution to resolving the Ukraine issues.

Russia’s strategy

Russian leader Vladimir Putin thinks the break-up of the Soviet Union was a tragedy. The iron control exercised by the single-party state apparatus prevented the ethnic and religious tensions of the Balkans spilling into war – and kept the states on the USSR/Asian borders similarly in order and suppressed. The explosion of conflicts in the Balkans and in Georgia – and the unresolved tensions in Moldova, Kosovo and a number of other places – has given Russia the opportunity to intervene and to work with forces that do not favour an EU or Nato solution.

Investors seek reassurance that these wars and continuing disputes in Europe will not escalate into a much bigger general war. So far, Nato and the West have kept out of the fighting in Ukraine. The West did intervene in former Yugoslavia without precipitating a wider war. The policies needed to become EU members can be contentious as we saw in the 2014 political upheaval in Ukraine and currently in Georgia.

Russia claims to feel surrounded – and sees Nato as a threat. Nato has clearly set out that it is a defensive alliance that does not invade countries or seek to advance its territory other than by agreement. As Nato expands eastwards – and creates a larger border for itself with Russia – so it will need to increase its defence spending and capability to make its deterrence credible along a very long stretch of territory.

The invasion of Ukraine has led to a bigger Nato, with Sweden and Finland joining, taking NATO closer to Russia in the north. Our base case assumes these local and regional conflicts will not escalate into war between the main powers.

Outstanding disputes to watch

  • These include the continuing war in Ukraine over how much of that country Russia occupies or whether Russia can be forced out by military action. Nato and the EU are crucial sources of weaponry and finance, and the aim is to admit Ukraine to the EU and Nato in due course.
  • The issue of Kosovo is unresolved, with Kosovo claiming independence from Serbia and seeking EU membership against Serbian opposition. Serbia has some Russian support and is a friend of China.
  • Georgia seeks EU membership whilst some forces and people in Georgia want to be closer to Russia. Russia has already helped the independence claims of South Ossetia and Abkhazia from Georgia.
  • Russia supports breakaway Transnistria in Moldova though Russia has not recognised it as an independent country. Many in Moldova want to pursue the application for EU membership and shift policy away from Russia.
  • Russia has to be more careful about stirring up pro-Russian people in the Baltic Republics, as they are protected by the Nato guarantee. The alliance now stations more forces in the Baltic Republics as part of its first line of defence against possible Russian threats.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

Trouble at the EU’s borders

Read this next

Uncrystallised funds pension lump sum (UFPLS) explained

See more Insights

More Insights

Article
China’s central bank criticises Fed policy
By Charles Stanley
20 Jun 2024 | 16 min read
Article
G7 backs Ukraine and tackles migration
By Charles Stanley
17 Jun 2024 | 6 min read
Article
Tariff wars over electric cars
By Charles Stanley
14 Jun 2024 | 7 min read
Article
Rising migration on both sides of the Atlantic
By Charles Stanley
10 Jun 2024 | 6 min read