PetroChina planning temporary halt of US LNG buying

PetroChina Co may tempo- rarily halt purchases of spot US liquefi ed natural gas spot cargoes through the winter to avoid potential tariff s amid a trade confl ict between the US and China, according to sources with knowledge of the strategy. Under the plan, PetroChina would boost buying of spot car- goes from other countries or swap US shipments with other nations in East Asia to avoid paying addi- tional tariff s, said the people, who asked not to be identifi ed because the information isn’t public. PetroChina, a unit of the state- owned China National Petroleum Corp, couldn’t immediately com- ment when contacted by Bloomb- erg. China said last week that it was considering a 25% tariff on US LNG, which had been missing from previously targeted goods, in a di- rect hit to American gas exporters. The move comes ahead of the winter heating season when de- mand and prices typically peak and shows that Chinese President Xi Jinping may be willing to suf- fer some pain to avoid backing down from US President Donald Trump’s trade dispute. PetroChi- na in February signed a 25-year deal to buy US LNG from Cheniere Energy Inc, with a portion of that supply expected to start this year. While China is currently the third- largest buyer of US LNG, American cargoes only made up about 5.7% of its imports over the last year, according to Sanford C Bernstein & Co. China’s proposed tariff may temporarily benefi t other suppliers, US Department of Energy Deputy Secretary Dan Brouillette said in an interview in Tokyo on Wednesday, noting that he doesn’t expect any detrimental impact to the US energy industry.




Globalisation with Chinese characteristics

By Barry Eichengreen/Berkeley

US President Donald Trump’s erratic unilateralism represents nothing less than abdication of global economic and political leadership.
Trump’s withdrawal from the Paris climate agreement, his rejection of the Iran nuclear deal, his tariff war, and his frequent attacks on allies and embrace of adversaries have rapidly turned the United States into an unreliable partner in upholding the international order.
But the administration’s “America First” policies have done more than disqualify the US from global leadership.
They have also created space for other countries to re-shape the international system to their liking.
The influence of China, in particular, is likely to be enhanced.
Consider, for example, that if the European Union perceives the US as an unreliable trade partner, it will have a correspondingly stronger incentive to negotiate a trade deal with China on terms acceptable to President Xi Jinping’s government.
More generally, if the US turns its back on the global order, China will be well positioned to take the lead on reforming the rules of international trade and investment.
So the key question facing the world is this: what does China want? What kind of international economic order do its leaders have in mind?
To start, China is likely to remain a proponent of export-led growth.
As Xi put it at Davos in 2017, China is committed “to growing an open global economy.” Xi and his circle obviously will not want to dismantle the global trading system.
But in other respects, globalisation with Chinese characteristics will differ from globalisation as we know it.
Compared to standard post-World War II practice, China relies more on bilateral and regional trade agreements and less on multilateral negotiating rounds.
In 2002, China signed the Framework Agreement on Comprehensive Economic Co-operation with the Association of Southeast Asian Nations.
It has subsequently negotiated bilateral free-trade agreements with 12 additional countries.
Insofar as China continues to emphasise bilateral agreements over multilateral negotiations, its approach implies a diminished role for the World Trade Organisation (WTO). The Chinese State Council has called for a trade strategy that is “based in China’s periphery, radiates along the Belt and Road, and faces the world.” This suggests that Chinese leaders have in mind a hub-and-spoke system, with China the hub and countries on its periphery the spokes.
Others foresee the emergence of hub-and-spoke trading systems centred on China and also possibly on Europe and the United States – a scenario that becomes more likely as China begins to re-shape the global trading system.
The government may then elaborate other China-centred institutional arrangements to complement its trade strategy.
That process has already begun.
The authorities have established the Asian Infrastructure Investment Bank, headed by Jin Liqun, as a regional alternative to the World Bank.
The People’s Bank of China has made $500bn of swap lines available to more than 30 central banks, challenging the role of the International Monetary Fund.
Illustrating China’s leverage, in 2016 the state-run China Development Bank and Industrial and Commercial Bank of China provided $900mn of emergency assistance to Pakistan, helping its government avoid, or at least delay, recourse to the IMF.
A China-shaped international system will also attach less weight to intellectual property rights.
While one can imagine the Chinese government’s attitude changing as the country becomes a developer of new technology, the sanctity of private property has always been limited in China’s state socialist system.
Hence intellectual property protections are likely to be weaker than in a US-led international regime.
China’s government seeks to shape its economy through subsidies and directives to state-owned enterprises and others.
Its Made in China 2025 plan to promote the country’s high-tech capabilities is only the latest incarnation of this approach.
The WTO has rules intended to limit subsidies.
A China-shaped trading system would, at a minimum, loosen such constraints.
A China-led international regime would also be less open to inflows of foreign direct investment.
In 2017, China ranked behind only the Philippines, Saudi Arabia, and Indonesia among the 60-plus countries rated by the OECD according to the restrictiveness of their inward FDI regimes.
These restrictions are yet another device designed to give Chinese companies space to develop their technological capabilities.
The government would presumably favour a system that authorises other countries to use such policies.
In this world, US multinationals seeking to operate abroad would face new hurdles.
Finally, China continues to exercise tight control over its financial system, as well as maintaining restrictions on capital inflows and outflows.
While the IMF has recently evinced more sympathy for such controls, a China-led international regime would be even more accommodating of their use.
The result would be additional barriers to US financial institutions seeking to do business internationally.
In sum, while a China-led global economy will remain open to trade, it will be less respectful of US intellectual property, less receptive to US foreign investment, and less accommodating of US exporters and multinationals seeking a level playing field.
This is the opposite of what the Trump administration says it wants.
But it is the system that the administration’s own policies are likely to beget. – Project Syndicate

* Barry Eichengreen is professor of Economics at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund. His latest book is The Populist Temptation: Economic Grievance and Political Reaction in the Modern Era.




Ambassador of Ukraine, President of Qatar Petroleum discuss cooperation in energy sector

Ambassador of Ukraine to the State of Qatar Yevhen Mykytenko in the city of Doha on August 7 held a meeting with Mr. Saad Sherida Al-Kaabi, President and CEO of Qatar Petroleum, the press service of the Ukrainian Embassy reports.

“The parties reviewed bilateral cooperation in the energy sphere, particularly possibilities of supplying of hydrocarbons to Ukraine,” reads the report.

The Ambassador invited representatives of Qatar Petroleum to take part in the XVI International Forum “Fuel and Energy Complex of Ukraine: Present and Future”, which will be held in Kyiv from November 6 to 8.

Hydrocarbon raw materials are oil, natural gas (including oil, associated gas), gas condensate, which are marketable.




Poland buys more LNG, reduces reliance on Russian gas

WARSAW, Aug 3 (Reuters) – Poland’s dominant gas firm PGNiG said on Friday that its LNG purchases from Qatar and elsewhere jumped by 60 percent in January-July from a year earlier, as the country diversifies its sources to reduce reliance on Russian gas.

PGNiG has to buy certain amounts of gas annually from Russia under a long-term deal with Russia’s Gazprom, which expires in 2022 and which Warsaw has said will not be renewed.

In the first seven months of this year, PGNiG’s imports from Gazprom rose by 6 percent, it said, but the Russian share of PGNiG’s total gas imports fell by 2 percentage points from a year earlier to 75 percent.

LNG, purchased from Qatar, Norway and the United States, accounted for 19 percent of PGNiG’s total gas imports during the period, an increase of 6 percentage points from a year earlier.

PGNiG has been buying more LNG via a terminal at the Baltic Sea in Poland also plans to build a gas link to Norway by 2022, which would give it access to gas from the North Sea.

“PGNiG is getting prepared to start supplying the Polish market with gas produced on the Norwegian continental shelf,” PGNiG said.

The company also said that gas consumption in Poland rose to 17 billion cubic metres (bcm) last year, from 15 bcm two years previously.




PetroChina and Qatar holding advanced talks on LNG supply deals

Reuters are reporting that PetroChina Ltd is in advanced discussions with Qatar to purchase LNG under short- and long-term agreements.

China needs to secure LNG to supply its push to replace coal with cleaner burning natural gas to reduce air pollution. After Beijing started the program last year, China has overtaken South Korea as the world’s second-biggest buyer of LNG.

Tying up with Qatar, the world’s biggest LNG producer, makes sense as the Middle Eastern country seeks buyers for a planned output expansion.

One of the deals under discussion as late as last week covers several million tonnes of annual supply starting this year though 2022, said two of the sources briefed on the discussions. The price and volume is yet to be finalised.

A third source, who was also briefed on the matter, said PetroChina is also discussing a longer-term agreement with Qatar, without giving further details.

China’s LNG imports may surge by 70% over the next three years to 65 million t in 2020, according to consultancy SIA Energy. Last year, China imported a record 38.1 million t, 46% more than the previous year.

“The short-term deal is to supplement an existing long-term agreement,” said a Beijing-based industry executive.

PetroChina started supply talks with Qatar, the world’s largest LNG exporter, several months ago to cover a growing long-term supply gap as demand is set to rise faster than domestic fields could produce.

Despite growing competition from rival exporters such as Australia, Russia and the US, Qatar stands among the most competitive suppliers to China due to the size of its output, geographic proximity and low cost, said Chen Zhu, managing director at consultancy SIA Energy.

The talks with Qatar follow China’s decision to add LNG from the US to the latest list of US goods under tariffs amid the trade war between the world’s two-largest economies.

China’s imports are bound to grow as the country has only secured 43 million tpy of imports and is expected to need 65 million tpy of imports by 2020, rising to 87 million tpy by 2020, according to SIA Energy forecasts.

“Given the growing appetite for imported LNG, China has to look for new LNG sources and investments. This will benefit new projects in Qatar, Canada West Coast, Russia, Mozambique, Australia and Papua New Guinea,” said Chen.

Qatar is looking to expand its LNG capacity to 100 million tpy from 77 million tpy currently.




Complementary LNG forces to the fore in Qatar

Ras Laffan in Qatar is home to the world’s most productive LNG liquefaction complex, the world’s largest LNG carrier fleet and the world’s newest LNGC repair yard

Located within the Erhama Bin Jaber Al Jalahma Shipyard complex at Ras Laffan in northern Qatar, the joint venture Nakilat-Keppel Offshore & Marine Ltd (N-KOM) facility has successfully delivered in excess of 800 marine and offshore projects to date.

N-KOM has leveraged the extensive experience and technical know-how of its parent companies to become recognised as an expert in handling gas carriers and a variety of other vessels. The company offers a comprehensive range of repair, conversion, maintenance and fabrication services to the marine, offshore and onshore sectors, while its track record of safe, quality and timely deliveries has helped the facility win new and repeat business.

Cavalcade of LNGC repairs

The N-KOM shipyard has attracted numerous LNG carriers for routine docking and membrane tank repair and maintenance work so far in 2018. Among the LNG carriers repaired are vessels from Shipping Corporation of India (SCI), Maran Gas Maritime, Nakilat Shipping Qatar Ltd (NSQL), Teekay Shipping, Shell, MOL LNG Transport, K-Line Shipmanagement and NYK LNG Shipmanagement.

Most of these vessels underwent routine drydocking and repairs such as cargo tank inspections, overhauling of main engine cylinders, LNG cargo and spray pump servicing, general steel repairs, and hull treatment and painting. In addition, load tests for lifeboats and other related inspections have been carried out.

Evidence of the N-KOM yard’s popularity with LNG shipowners and managers can be seen in the fact that the facility has been fully booked for repairs in the months of July and August 2018.

 “The growth of the LNG spot market has resulted in a significant increase in inquiries for repairs from LNG vessels that have not traditionally traded in the Middle East Gulf area”

N-KOM has two graving docks and one floating dock able to accommodate LNG carriers of up to the 266,000 m3 Q-max size, as well as an alongside berthing capacity of 3,150 m. Handling the complexities of repair work on sophisticated ships such as LNG carriers is facilitated by the yard’s well-equipped cryogenic cleanrooms.

N-KOM points out that the presence of prominent maritime service providers such as Gaztransport & Technigaz (GTT), Goltens, Wärtsilä, Wilhelmsen Ships Service, Turbo Technik and Cargotec operating within the shipyard helps smooth the overall repair process, offering convenience to shipowners and managers patronising the facility. In addition to its team of GTT-qualified membrane welders, N-KOM works with various specialist membrane repair contractors.

The growth of the LNG spot market has resulted in a significant increase in inquiries for repairs from LNG vessels that have not traditionally traded in the Middle East Gulf area. Given the reputation of the yard, in terms of experience, quality standards and the range of equipment and services available, vessel owners have been keen to book their ships at N-KOM as they align repositioning manoeuvres with routine ship maintenance requirements.

Earlier this year N-KOM received an award for the ‘Best Behavioural Safety Initiative’ during a safety workshop organised by Shell International Trading and Shipping Company Ltd (STASCO) for its contractors. The yard was lauded for deploying effective strategies and achieving successful measurable results, with a specific focus on safety and quality. N-KOM reports that the Shell award bears further testament to its commitment to high operating standards.

Ballast treatment

N-KOM continues to see interest in ballast water treatment system (BWTS) installations, and the yard has experience in handling such installation work for several vessels.

Understandably for large LNG carriers, the choice of BWTS is relatively limited. The focus is on those systems that can meet not only the ballast volume and flow requirements of the ship, but also the need to complete the necessary ballast treatment operations in line with their cargo-handling timescales.

On the plus side, LNG carriers have sufficient space and power available to enable the installation of a BWTS able to meet its needs. N-KOM cautions that the engineering of the retrofit process should be carefully planned and rehearsed before drydocking.

One of the challenges in this process involves optimising installation processes and the costs of manhours and materials. From interactions with ship operators, N-KOM observes that there have been delays on the part of owners in selecting the BWT systems, albeit with reasonable justifications.

The maturity of the technology, equipment approvals and regulations are the main three parameters that pose serious challenges to the operators. As such, adequate planning and preparation are highly recommended to facilitate the correct choice of BWTS in a timely manner.

N-KOM is able to observe the choices of shipowners to ensure compliance with the more stringent air emissions requirements coming into force, most notably the 0.5% global sulphur cap that becomes mandatory on 1 January 2020. The yard has noted that a number of owners with modern ships that still consume relatively large amounts of fuel, such as large tankers, are exploring exhaust gas scrubbers as one of the solutions.

N-KOM has already been booked for scrubber retrofits for a series of very large crude carriers belonging to a major Greek tanker operator. The yard expects that the remainder of 2018 and the whole of 2019 will be a busy time in terms of scrubber retrofits.

Nakilat’s expanding outreach

It has also been a year of significant developments at Qatar Gas Transport Co Ltd (Nakilat), the Qatari shipowning and marine services partner in the N-KOM operation. Established in 2004, Nakilat remains the essential transportation link in the supply chains developed to ensure the delivery of LNG exports from Ras Laffan to markets worldwide. The company’s outreach extends to more than 90 receiving terminals across 26 countries.

The 210,000 m3, 2009-built Al Sadd, one of the 31 Q-flex size LNG carriers in the Nakilat fleet

In March 2018 Nakilat expanded its joint venture partnership with the Greek shipping company Maran Ventures Inc to include two additional LNG carriers, boosting the number of vessels jointly owned by Nakilat and Maran Gas from 13 to 15 vessels.

Nakilat reports that strategic alliances with renowned partners have been fundamental to the company’s success. Furthermore, opportunities to grow its international presence in this manner, to capitalise on growing global energy demands, are under continuous review.

In this respect, Nakilat’s pursuance of a presence in the floating storage and regasification unit (FSRU) niche market achieved success in June 2018, when a landmark agreement was signed with Excelerate Energy of the US. The establishment of a joint venture company between the two parties gave Nakilat a 55% stake in one of Excelerate’s FSRUs – the first such vessel to join the Qatari shipowner’s fleet. Nakilat states that this deal marks the beginning of its growing involvement with the FSRU sector, with the promise of further outreach to developing LNG markets.

Nakilat now either fully or partly owns 65 LNG carriers, four large LPG carriers and one FSRU. NSQL, the company’s in-house ship management affiliate, now manages and operates 18 vessels, comprising the four LPG carriers, six Q-max size LNG carriers and eight Q-flex LNG carriers.

Nakilat’s 70-ship fleet includes 14 Q-max and 31 Q-flex LNG carriers, the world’s largest such vessels. The cargo-carrying capacity of the Nakilat LNGC fleet totals over 9M m3, making it the world’s largest such fleet, with about 12% of the overall capacity. The fleet transports more than 60% of Qatar’s LNG exports.

Qatar is reviewing a possible expansion of the LNG liquefaction capacity at Ras Laffan, from the current level of 77M tonnes per annum (mta) to 100 mta by the early 2020s.

Irrespective of that decision, Nakilat will continue to extend its outreach and LNG regasification, power generation and small-scale LNG are among the areas the company will continue to explore for possible opportunities to expand its business portfolio. However, should the project to expand Ras Laffan output to 100 mta get the green light, both N-KOM and Nakilat can look forward to a significant incremental jump in business activity.




Saudi-Canada Fight Shows Need for Pipelines, Oil Group Says

The escalating trade battle between Canada and Saudi Arabia highlights the need for more pipelines to move oil and natural gas around the northern nation to improve its energy security, according to the Canadian oil industry’s largest trade group.

“Geopolitical tensions, whether they be with our largest trading partner, the U.S., or with other countries, illustrate the opportunity we have to improve energy security within our own borders and to expand our exports to global markets to ensure we are getting the best price for our products,” Brunnen said in an emailed statement.




Turkey admits to 3 more years of missing inflation target

Bloomberg/Ankara

Turkey’s central bank yesterday acknowledged it won’t meet its 5% inflation target for three more years, disappointing investors seeking signs that monetary policy would tighten.
Although governor Murat Cetinkaya pledged to raise borrowing costs when needed, his prediction of 6.7% inflation by the end of 2020 was seen as a dovish signal by investors who gathered in Ankara for the bank’s quarterly inflation report. He expects prices to rise 13.4% through this year and 9.3% through 2019.
This was the first time the governor provided an above-target forecast for three years into the future since taking office in 2016, and it comes with the inflation rate at its highest in 15 years. For investors surprised that the bank didn’t raise borrowing costs at its last rate meeting on July 24, it’s another indication monetary policy makers will put a premium on stimulating economic activity, according to Erkin Isik, a strategist at Turk Ekonomi Bankasi AS in Istanbul. That’s an agenda demanded by President Recep Tayyip Erdogan.
“The upward revision to medium-term forecasts suggests that the bank will prioritize growth over inflation and let inflation remain high for much longer,” Isik said by e-mail as Cetinkaya spoke.
The lira fell during the governor’s speech and was trading 0.4% lower at 4.90 per dollar at 12:31pm in Istanbul.
Unlike in his previous inflation reports, Cetinkaya went out of his way to explain last week’s rate decision. This year’s 500-basis-point increase in lending costs will take time to have an impact on demand conditions, which are set to soften with a re-balancing in the economy, he said.
His base-case scenario of a “moderate” slowdown in growth after last year’s 7.4% expansion is partly based on expectations the government will lower spending. Continued expansionary fiscal policies would result in higher inflation, according to the inflation report.
Taking into account the high inflation rate and current account deficit “at a time of tightening global financial conditions, such a situation would result in a higher country risk premium and increase the pressure on foreign-exchange levels, necessitating a tighter monetary policy stance to rein in price gains,” the report read.
Erdogan has repeatedly stressed he wants interest rates to come down, taking the anomalous approach that cheaper money would help to tame inflation by stimulating growth.




Higher Oil Price Boosts BP’s Recovery; Profit Up Fourfold

Higher oil prices and increased output helped BP Plc (NYSE: BP) quadruple its second-quarter profit from a year earlier as the oil major finally shakes off the after-effects of 2010’s Deepwater Horizon spill and the last oil market slump.

Second-quarter results have been a mixed bag for the world’s top oil companies. Total SA (NYSE: TOT) beat forecasts and boosted production targets while Royal Dutch Shell Plc (NYSE: RDS.A) launched a $25 billion share buyback program despite profits falling short of expectations.

U.S. majors Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) disappointed Wall Street.

BP confirmed it would increase its quarterly dividend for the first time in nearly four years, offering 10.25 cents a share, an increase of 2.5%. The company bought back shares to the tune of $200 million in the first half.

In a further sign of recovery, BP last week agreed to buy U.S. shale oil and gas assets from global miner BHP Billiton for $10.5 billion.

The deal, BP’s first major acquisition in 20 years, marked a watershed for the company in the United States as it looks to leave behind the $65 billion fallout from the deadly explosion of its Deepwater Horizon rig in the U.S. Gulf of Mexico.

Benchmark Brent crude futures, currently over $74 per barrel, rose about 16% in the first half of 2018 and are up about 60% since June last year.

BP’s output in the first six months of the year was 3.662 million barrels of oil equivalent per day (MMboe/d), including production at Russia’s Rosneft, of which it owns just under a fifth, from 3.544 MMboe/d a year earlier. That helped underlying replacement cost profit, BP’s definition of net income, rise to $2.8 billion, exceeding forecasts of $2.7 billion, according to a company-provided survey of analysts.

The company earned $0.7 billion a year earlier and $2.6 billion in the first quarter. BP’s shares were up about 1.2%, hitting a two-week high in early trading.

BP has paid around $2.4 billion of expected 2018 costs of just over $3 billion related to Deepwater Horizon, and plans to split the outstanding payments equally between the third and fourth quarters, CFO Brian Gilvary said.

Meanwhile, the company has tightened its investment budget for this year to about $15 billion from previously up to $16 billion and increased its divestment guidance to over $3 billion from $2 billion to $3 billion.

Gearing, the ratio between debt and BP’s market value, declined to 27.8% at the end of the quarter from 28.1% at the end of March. Net debt was $39.3 billion at the end of June compared with $40 billion at the end of March.

“With gearing nudging down sequentially, dividends raised, and execution on track, 1Q and 2Q are the start of a new positive trend for BP,” Bernstein analyst Oswald Clint said.




Time for Europe to redefine its interests

By Mark Leonard/Berlin

Donald Trump is the first US president to think that the US-led world order is undermining US interests.
Though the current order obviously benefits the United States, Trump is convinced that it benefits China even more.
Fearing China’s ascendance as another pole of global power, Trump has launched a project of creative destruction to destroy the old order and establish a new one that is more favourable for the US.
Trump wants to pursue this objective by engaging with countries bilaterally, thereby always negotiating from a position of strength.
He has shown particular disdain for traditional US allies, whom he accuses of free riding, while also standing in the way of his demolition derby.
Likewise, Trump cannot stand multilateral organisations that strengthen smaller and weaker countries vis-à-vis the US.
Given his “America First” strategy, Trump has spent his presidency undermining institutions such as the World Trade Organisation, and abandoning multilateral agreements such as the Trans-Pacific Partnership (TPP), the Iran nuclear deal, and the Paris climate accord.
And because Trump has been able to pick new fights so fast, other countries have struggled to keep up, let alone form effective alliances against him.
In recent weeks, Trump has set his sights squarely on the European Union.
As Ivan Krastev of the Institute for Human Sciences recently observed, the EU now faces the possibility of becoming “the guardian of a status quo that has ceased to exist.” As a committed Atlanticist and multilateralist, it pains me to admit that he is right.
The time has come for Europe to redefine its interests, and to develop a new strategy for defending them.
First and foremost, Europeans will have to start thinking for themselves, rather than deferring to the US foreign-policy establishment.
The EU clearly has an interest in preserving the rules-based order that Trump hopes to tear down, and its interests with respect to the Middle East – particularly Turkey – and even Russia have increasingly diverged from those of the US.
Europeans should of course try to work with the US whenever possible; but not if it means subordinating their own interests.
Europeans must also start investing in military and economic autonomy – not to break away from the US, but to hedge against America’s abandonment of its commitments.
Fortunately, there is already a healthy debate in European capitals about increasing national defence spending to 2% of GDP; and both the EU Permanent Structured Co-operation framework (PESCO) and French President Emmanuel Macron’s new European Intervention Initiative (EI2) represent steps in the right direction.
The question now is whether France’s Force de Frappe (military and nuclear strike force) can be extended to provide a credible deterrent for the rest of the EU.
On the economic front, Europe is facing a dilemma as it weighs its values against its business interests.
Former Belgian foreign minister Mark Eyskens once described Europe as “an economic giant, a political dwarf, and a military worm.” But Europe is now in danger of becoming an economic dwarf, too.
The fact that the US can threaten secondary sanctions on European companies for doing business with Iran is deeply worrying.
Though the EU is standing up for international law, it remains captive to the tyranny of the dollar system.
Looking ahead, the EU needs to gain more leverage for dealing with other great powers such as China and the US.
If Trump wants to make the transatlantic relationship more transactional, then the EU needs to be ready to trade across different policy areas to make deals.
Consider the US Department of Defence’s recent request that the United Kingdom send more troops in Afghanistan.
If the EU were taking a muscular approach, it would deny any reinforcements until the US drops its threats of secondary sanctions on European companies.
Moreover, Europe needs to develop a strategy for political outreach to others.
The G7 is supposed to be the cockpit of the West, but at its recent summit in Quebec, it seemed to be short-circuiting.
So shocking was Trump’s behaviour that some senior European officials now wonder if US allies should form an independent middle-power alliance, lest they be crushed between the rocks of a rising China and a declining America.
In an increasingly deal-based world, a new G6 might offer a defence of the rules-based system.
Still, one wonders if the EU is capable of putting up a united front.
With the bloc splintering into distinct political tribes, it is becoming easier for other powers to pursue a divide-and-conquer strategy.
This has long been Russia’s strategy, and it is now being adopted by China and the US, too.
For example, in 2016, southern and eastern EU member-states that rely on Chinese investment managed to water down a joint EU statement on China’s territorial encroachments in the South China Sea.
Similarly, Trump routinely reaches out to eastern and southern EU member-states in order to sow divisions within the bloc.
For example, US Department of State officials reportedly made it clear to Romania that the US would not press it on rule-of-law violations if it breaks ranks with the EU and moves its embassy in Israel to Jerusalem.
With US-EU relations already fraught, the Trump administration will be all the more tempted to engage in such tactics.
It is unclear how the EU should respond.
It could impose heavier costs on countries that break ranks on foreign policy, or it could invest more in security so that even countries on the periphery feel as though they have something to lose by undermining EU cohesion.
Alternatively, the EU itself could strike a deal with member states, whereby it would go easy on internal political matters in exchange for foreign-policy co-operation.
Whatever is decided, the EU urgently needs to chart a new course.
Rather than being perpetually surprised and outraged by Trump’s affronts, Europeans must develop their own foreign policy with which to confront his behaviour. – Project Syndicate

* Mark Leonard is Director of the European Council on Foreign Relations.