The debate over biofuels has heated up on both sides of the Atlantic in recent weeks, with the current prime biofuel - ethanol made from corn - now being blamed as a contributing factor to the dramatic rise in the price of food around the world.

Until recently, it was seen by many as a silver bullet for cutting dependence on oil, thus helping energy security and reducing greenhouse gas emissions. Not everyone agreed with the idea. In the winter 2006 issue of European Affairs, John Ritch, head of the World Nuclear Association, pointed out that it remains to be seen whether “biofuels” actually constitute a long-term contribution to a sustainable strategy for clean energy. In the climate crisis, a not insignificant factor is the shrinkage of “carbon sinks” as the world’s forests get converted to farm land. So the limited amount of farmland is a constraint. And “clearing woods to plant these crops actually heightens our vulnerability to amassing more greenhouse gases in the atmosphere,” he wrote two years ago.

Now, the impact in terms of displacing food crops to raise ethanol has emerged as another, more immediate drawback for biofuels. In the U.S., for example, Congress increased incentives for ethanol production designed to raise output from seven billion gallons a year to 36 billion by 2022, with 15 billion of that coming from corn. The remainder will be derived from “next generation” sources such as prairie grasses and wood chips, but it could be years before this advanced ethanol will be available on a commercial scale. This mandated, subsidized biofuel uses corn as its main foodstock and last year absorbed a quarter of the U.S. corn harvest. When combined with surging demand for corn abroad fueled in part by the cheap dollar, the effect has been to displace other crops, reducing their supply and raising prices for other foods from bread to beef that depend on wheat. By next year, as much as one-third of U.S. corn production is expected to go into ethanol.

Another source of consternation (and transatlantic frictions) are biodiesel-production subsidies in the European Union and in the United States. The U.S. government provides a $1 subsidy for every gallon of biodiesel that is blended in the U.S. for export. Europeans complain that this has given American producers an unfair advantage in EU markets, where “artificially cheap” American products are putting EU producers out of business. Many European nations and the EU also provide somewhat less generous subsidies to biofuel producers, but there has been pressure for them to eliminate such support. Some have said that a high demand for biofuels in Europe has made subsidies unnecessary.

This subsidy was intended to help the American biodiesel industry, but it seems that foreign companies have discovered a way to take advantage as well. Biofuel producers from Europe and elsewhere ship their biodiesel to the U.S., where they add a “splash” of regular diesel, qualifying their product for American subsidies. The fuel is then shipped back to Europe for sale, where it is also eligible for EU subsidies. This loophole, which has been a cause of public complaints since late last year, ironically results in even higher carbon emissions from the back-and-forth transatlantic shipments.

Another objection to biofuels among environmentalists is the high demand for water at big ethanol-production facilities. This has added to strains on the water table in Florida and other localities in the U.S. There are growing concerns, too, that ethanol was oversold as a product that would reduce greenhouse gases. Some new U.S. ethanol plants are powered by coal, and truck corn from hundreds of miles away, gobbling up fossil fuels. Acreage displaced for energy crops here may be replaced by plowing virgin lands in Africa and South America, causing major releases of carbon. And although corn ethanol plants that are built after next January 1 will have to show they are reducing carbon, most plants needed to meet the 15 billion gallon mandate will already have been built by then.

The new attention to ethanol’s downside has prompted statements in Congress about rolling back federal support for biofuel production in the face of rising food prices. House Majority Leader Steny Hoyer suggested on May 1 that he favored moves in this direction. At the urging of the livestock, poultry and hog industry, the governor of Texas and 28 Senators have asked the administrator of the Environmental Protection Agency to set aside ethanol requirements at least temporarily to help ease corn prices. The New York Times published an editorial on Sunday calling on Congress to roll back subsidies and rethink its support of ethanol. But the ethanol boom has brought windfall profits to farm states, so there are doubts about whether this policy can be changed fast, especially in an election year.

In the EU, fingers are being pointed at the U.S. on this issue. EU trade commissioner Peter Mandelson did so in an op-ed published in the Guardian (UK). “We can already see that large-scale biofuel production, especially in the U.S., may be one of the factors pushing up food prices,” he wrote. “The race to grow maize for ethanol subsidies in the U.S. reduces the supply of food crops on world markets and drives up the cost of this important staple.” (”Maize” is the grain that Americans call “corn.”) Despite the EU’s mandate that biofuels account for ten percent of transport fuel by 2020, Mandelson argued that European biofuel production is having “only a minimal effect” on food prices.

Amid these recriminations, there is talk in the EU of scrapping biofuel subsidy programs, Already, these is increased pressure on EU officials to lower or abandon the ten percent target, especially in Germany where at least one-tenth of the nation’s cars do not have engines adapted to run with a significant admixture of ethanol. In the UK, all petrol and diesel sold at pumps is now required to contain at least 2.5% biofuels. But Prime Minister Gordon Brown signaled a retreat from biofuels last month, acknowledging the global food crisis and saying that Britain must be “more selective” in its support for biofuels.

See Also:
Editorial: Rethinking Ethanol, New York Times, 11 May 2008
Nuclear Rising on Both Sides of the Atlantic, European Affairs, Winter 2006
U.S. Biodiesel Subsidies Anger Europeans, National Public Radio, 10 April 2008
Biofuels: EU plans to scrap ‘needless’ farmer aid, Business Report, 15 April 2008
Demands for crackdown on biofuels scam, The Guardian (UK), 1 April 2008
Biofuel Boondoggle: US Subsidy Aids Europe’s Drivers, Christian Science Monitor, 8 June 2007
Congress’ ethanol affair is cooling, Washington Times, 1 May 2008
Op-Ed: Keeping the Crop in Hand, The Guardian (UK), 29 April 2008
Pressure Grows on EU to Abandon Biofuels, Der Spiegel, 16 April 2008
Petrol must now include biofuels, BBC News, 15 April 2008
Brown’s biofuels caution welcomed, BBC News, 22 April 2008

Correction: This post was edited on May 13 to better reflect the different subsidies allocated for biodiesel and ethanol.

Parliament’s Marek Siwiec does Q&A with European Affairs

Marek Siwiec, 53, is a Polish politician who is a vice-president of the European Parliament, where he belongs to the European Socialists faction. Between 1997 and 2004, he was the chief of the Polish National Security Office under President Aleksander Kwasniewski, a key international policy post in the presidency. Siwiec visited Washington in May with a delegation of the European Parliament and spoke with European Affairs during a brief Q&A session.

Q: How well does Washington understand trends in the European Union?

A: Like any superpower, the United States has a tendency of over-simplify foreign problems. It tends to ignore trends that emerge quietly, without dramatic developments that compel attention among U.S. policy-making elites. This applies to the EU, which is still not well understood in Washington.

Q: What do U.S. policy-makers grasp?

A: Americans understand the Schengen accord and our customs union because they are familiar with free travel and free trade. But they often don’t understand our approach to juridical issues or internal-security problems. The EU cannot really be understood by comparisons with any other system.

Q: Is this damaging?

A: U.S. policy-makers still tend to operate with the cold war era’s reflex of preferring to build bilateral policies with each individual European country. Take the visa-waiver question: the regime should be the same for all EU member states in the EU but it isn’t. Of course, it doesn’t help that we in the EU have not managed to develop a cohesive foreign policy of our own yet.

Q: Do you see any positive trend?

A: Transatlantic trade and direct investment are spectacularly large, so the EU and U.S. have a responsibility to work together on a broad range of global policies. I counted eight or nine European Commissioners who have given speeches in Washington in the last few months talking about cooperation on a whole list of subjects: justice, anti-trust, accounting standards, economy, environment, open skies and so on. Very slowly, the EU is gaining credibility in Washington.

Q: How is the Parliament evolving?

A: It is not yet the legislative body it is supposed to be, but it is changing. It started as little more than “democratic window-dressing.” Many parliamentarians were people who had not been very successful politically in their own countries. That’s changed: now there is two-way traffic between being an MEP and a foreign minister or vice-premier in a national government.

Q: Is this change affecting your role?

A: The parliament has a dramatically more energetic role, and it is actively looking for policy areas where it can make an effective difference. Right now, we’re involved in roughly 40 areas of EU policy, but once the Lisbon treaty takes effect, that number will more than double, to about 90.

Q: What about your impact?

A: We are getting more powers. Recently, we forced multinational phone companies to reduce roaming charges for their mobile-phone subscribers in Europe – a change that affected several hundred million people in their daily lives. There was no other institutional set-up ready to tackle this problem, so we did. Looking ahead, I expect to see the parliament doing more and more of this sort to thing, in being responsible to the voters who now put us into office by direct elections.

Q: What sort of issues do you have in mind?

A: Look for us to be increasingly active on questions that interest the European electorate: human rights, environment, consumer issues – a whole range of these questions. Take the example of the U.S. program to operate secret “rendition” flights through airfields in Europe. No government involved in this practice has acknowledged publicly what happened. We took it on with parliamentary methods. In trying to push into such an area protected with high-level laws and secrecy, we had only limited success. But something important happened. I am convinced that as a result of our efforts such things will not happen again in the future.

Q: What did the matter tell us about the parliament?

A: It showed we had enough courage to tackle such a sensitive issue, and it was an important sign of our special role. The European Commission gets its mandate from the EU’s Council of Ministers, which represents the governments of the member states. That set-up implies some limits on what those bodies are going to do. In contrast, the parliament can operate outside that mandate of governments because we are the voice of the people. It was a milestone when the parliament succeeded in putting enough pressure on the Commission to block the appointment of an Italian nominated to be a Commissioner and get him replaced. (Incidentally, the successor, Franco Frattini, has just gone back to Italy as a cabinet minister in the new government.)

Q: What is the biggest change you think the parliament should push?

A: The Parliament has enough status to help bring about constructive discussion about big changes in the Common Agricultural Policy. The time has come. Those subsidies usefully maintained our agriculture when crop prices were low. Now food prices have risen enough for farmers to stay in business, comfortably, on a free-market basis. We need to start making the point that the money spent on price supports should go on other forms of help to farmers. Right now. There is a big “civilization gap” between rural and urban areas in many of our countries – for example, in Poland. We have large populations living far away from access to culture, health care and many other benefits. So I would say, “dear farmer, let’s talk about spending the money not on your potatoes but on other things that can benefit you in other ways.”

Q: Looking outside the EU’s borders, what foreign issues are on the front burner in the parliament?

A: Like other EU institutions, we’re trying to assess some broad international geopolitical issues such as the Middle East problem. One of the reasons for my visit here to Washington is to address the American Jewish Congress on the 60th anniversary of Israel’s foundation. Right now, Washington is trying to establish a balance sheet for its eight years in office, and it’s a complicated question in the Middle East. But taken from the angle of Israel’s security, I think the outcome has been negative. Many new phenomena have emerged: Hama’s control in the Gaza Strip, Hezbollah gains in Lebanon. This cannot be blamed entirely on Washington, I think, but things are moving in a bad direction and the lame-duck administration cannot do much. So the question is: Where was the mistake? What policy changes are needed? Can the EU change its future role? It is not the right time – and should not be the time – for Washington to try any spectacular action, so the EU should try to be present in a way that encourages positive trends in the region (precisely the trends that are not dominant right now). I think we can see that our approach to exporting democracy can backfire by bringing to power factions – like Hamas – that gain a mandate for their dangerous regime. Above all, the EU has to have ambitions to become not just a payer but a player.

Q: How can the EU ever have political leverage in an area where one side of the conflict, Israel, mistrusts you?

A: We have to get beyond a situation where our policy is being set by CNN and other television networks that constantly focus on showing violence and often violence shown as attacks on Palestinian civilians. We have to think more carefully about defining our long-term vision for this part of the world. We need to convince our societies to focus on the need for long-term stable peace in the region. I think a particularly helpful contribution is coming from the so-called “new Europe,” where countries, particularly Poland, are friendly toward Israel. It’s time for Europe to stop thinking of Israel just as a troublemaker and start to recognize Israel as a democracy that can be an attractive partner for us in many ways. For this, we need to move beyond a pattern that consists only of commemorating the holocaust and the rest of the past and move toward a vision of Israel and Europe in the 21st century. When Poland got back its freedom 20 years ago, we discovered some ugly truths about our past and Polish people’s relations with Jews. We faced these difficult facts and had tough discussions among ourselves coming to terms with them. We had the freedom to do it, and the truth we now come to hold has reinforced our authentic freedom. This new situation could give us a new attitude in the Middle East.

 ______________________

* Answers have been edited for clarity.

Another coordinated cyber attack - this time on the websites operated by Radio Free Europe/Radio Liberty (RFE/RL) - was launched over the weekend that marked the one-year anniversary of the “cyber war” offensive against Estonia. That three-week internet barrage on Estonia’s civil electronic portals occurred amid ire in Moscow about Estonia’s decision to move a Soviet war memorial out of the city center in the Estonian capital, Tallinn. Labeled the world’s first “cyber war” by some observers, the episode is recounted and analyzed in depth in Kertu Ruus’s article in the newest issue of European Affairs.

This time, the principal targets were RFE/RL’s sites in Belarus, which were put out of action for several days until the attacks were publicly reported - and then abruptly ceased. April 26, the day the attacks began, was the 22nd anniversary of the Chernobyl disaster, and RFE/RL had been planning live internet coverage of a large rally that day protesting the plight of uncompensated Chernobyl victims - many of whom lived in Belarus and were in the zone of heavy radioactive fallout from the reactor that suffered a meltdown in neighboring Ukraine. At the time, in 1986, both those countries were part of the Soviet Union and ruled from Moscow.

The recent cyber attacks came just days after the so-called “Hackers Panel” convened in London at the annual InfoSecurity Europe conference. The panel includes “white hat” hackers, who help companies tighten up their digital security by searching for flaws in their defenses. This year the hackers, who for the first time broke their usual custom of anonymity, warned that major nationwide British shopping chains were likely prime targets for future cyber attacks. “If someone wants to have a pop at the UK, they are unlikely to go for the government web servers,” said Steve Armstrong, an expert in hacking and a member of the panel. “They will go for the lower hanging fruit - companies which are seen as good representatives of the country.”

Related Post:
Lessons from Estonia: Homeland Security Chief Says Cyber Threat “on par with 9/11″, 18 April 2008

See Also:
RFE/RL Websites Hit By Mass Cyberattack, Radio Free Europe/Radio Liberty, 28 April 2008
Radio Free Europe says it’s under cyber attack, Associated Press, 28 April 2008
Hackers warn High Street chains, BBC News, 25 April 2008

More news about Germany’s “new emigration”

The German government has started subsidizing moves by unemployed Germans to help them get to jobs they find abroad. Known as “mobility incentives,” these payments cover moving costs for workers and their families anywhere in the world. The amounts range from 100 euro to around 1000 euro, depending on circumstances, and cover several separate items from actual travel to the cost of moving furniture or buying new furniture and other basic necessities.

Officials at the European Commission in Brussels told Reuters that they were unaware any of other EU country offering such help for moves abroad.

As reported by National Public Radio (April 16, 2008) and Forbes (April 15, 2008), this assistance has drawn mixed reactions in Germany. Some economists say it is a bad policy for a nation with a shrinking population and a comparatively low birth rate. Some critics describe it as a recipe for disaster because Germany already has a shortage of skilled labor that is now acute in some industries such as engineering and car-making and also looms in sectors such as retail sales, health care and finance. More generally, “depopulation” has become an issue in some areas, especially the formerly Communist east Länder. The funds are also available for relocations inside Germany.

So far, the number of beneficiaries has been limited, apparently in the hundreds. Officials in Germany were quoted saying that statistics were not yet available because the program is administered through local authorities, not the central government.

The German authorities apparently feel the program may prove a useful step in fighting unemployment which is in excess of 3.5 million people - about eight percent of the labor force (one percentage point higher than the eurozone average).

Related Post: The mobility initiative fits into a larger picture of a degree of greater readiness among Germans to emigrate, which we noted here last week.

Airbus has followed up its whopping U.S. deal of in-flight refueling tankers with a second, slightly smaller sale of similar aircraft to Britain. The British deal, confirmed by EADS chief Louis Gallois in an interview with a French newspaper, will be worth approximately $26 billion (£13 billion) over 27 years. The RAF will take 14 of the tankers from AirTanker, a European consortium led by EADS, the defense subsidiary of Airbus, using the airframe of the A330 civilian airliner. Their date for entering service is 2011. The contract reportedly will create 600 new jobs and safeguard another 3,000 in Britain, where the wings are built for the Airbus airframe.

The UK sale marks the second big defeat for a major military sale in less than a month for EADS’s chief rival in the United States, Boeing. The U.S. contract, initially worth $35 billion, is being formally challenged by Boeing, which is confident of being able to mobilize strong support in Congress to make the Air Force re-examine the decision to award the contract to a European consortium. If there is an all-out showdown with the Pentagon, Congress could refuse to fund the program, making the Air Force modernize its existing fleet of Boeing-made tankers.

Boeing has filed an official complaint about flaws in the procurement process that it lost last month, and “it is a list of specifics that look too serious to just be brushed aside,” according to John Pike, who heads GlobalSecurity.org, an on-line service of strategic analysis based in Washington..

The complaint must be reviewed by the Government Accounting Office (GAO), so, Pike said, “it is too soon for EADS to start counting any chickens” in this deal.

Related Post:

Pentagon Contract a “Massive Breakthrough” for European Companies, 6 March 2008

See Also:
KC-X Boeing Protest, GlobalSecurity.org

EADS wins £13bn RAF tanker deal, BBC News, 27 March 2008

EADS: Unveiling $26 Billion Deal With United Kingdom, Stratfor Strategic Forecasting, 27 March 2008

Airbus parent EADS wins British tanker refueling deal, International Herald Tribune, 27 March 2008

Air tanker deal set to be sealed, Financial Times, 27 March 2008

The Bush administration pushed ahead this week in its face-off with Russia over independence for Kosovo - and Russia pushed back in the Caucasus.

Since warning that recognition of Kosovars’ demands could trigger similar separatist ambitions in Abkhasia and elsewhere in Georgia, Moscow has announced plans to move more Russian “peacekeepers” into the breakaway province of Georgia - a step that alarmed Georgian leaders as a possible step toward full recognition threatening to partially dismember Georgia.

President Mikhail Saakashvili of the Republic of Georgia was on an official visit to Washington, where he obtained President George W. Bush’s backing for NATO, at its forthcoming summit, to offer to open a negotiating process that could ultimately bring Georgia into the Western alliance. Bush also announced that he was approving Kosovo as a candidate to receive U.S. military assistance.

This escalation between Washington and Moscow marks the outbreak of a new Cold War, according to Stratfor, an on-line geopolitical think-tank. Of course, the United States outweighs Russia and it is geographically remote from the theater of conflict. That leaves the Europeans in the front line. For the moment, they are trying to keep out of the way, but they will end up having to play major roles as independent actors in this new Cold War, Stratfor’s analyst said.

The current diplomatic inertness in the European Union can be seen in the three main governments: Germany, France and the United Kingdom are not interested in confronting Russia.

“Berlin made this very clear when it expressed a lack of interest in NATO expansion, the independence of Kosovo and the Ukraine gas issue. This is not surprising, given that the Germans are dependent upon Moscow for energy. Beyond energy, Germany’s wider economic relationship with and its proximity to Russia inform its lack of appetite for confrontation with the Kremlin,” Stratfor said.

France has its international ambitions targeted elsewhere, mainly in re-asserting its stature in Europe and emerging as a more credible player in the Middle East. “It wants no part of this new West-versus-Russia competition,” Stratfor says. Britain is preoccupied domestically.

But this will change, Stratfor predicts. Germany is re-emerging on its own again as an international power player; Britain ultimately cannot detach itself from any major U.S. geopolitical commitment; and France will ultimately find it untenable to ignore this clash. “Europe’s geography - and the fact that, unlike during the original Cold War, there isn’t an iron curtain in place - will force the Europeans to jump in or at least choose sides.”

Related Article: “The Start of Cold War II?” Stratfor’s Political Diary, 21 March 2008

The presumptive Republican Presidential candidate, Senator John McCain, has started telling Europeans that his White House will want effective teamwork with its European allies - a marked change from the way in which the Bush administration often seems to brush them off.

In his concept, the key word of a stronger transatlantic partnership is “together” - with a new emphasis on U.S. readiness to be “willing to be persuaded by” European allies in order to get united action by democracies in Europe and the rest of the world.

A key U.S.-European cleavage - over Iraq - is unlikely to be healed by a McCain presidency. He has consistently supported the war in Iraq and argued for deeper, longer American involvement, not less. Even now in calling for more powerful U.S.-EU cooperation, McCain may dismay some Europeans with his emphasis on hard military power over the soft power options that many allies feel were scandalously neglected by the current Republican incumbent in the White House. (more…)

European foreign ministries feel “preoccupation and anxiety” over the possibility that Russia is preparing to extend official recognition to Abkhazia, the breakaway province of Georgia, the European Commission’s top official for external relations, Benita Ferrero-Waldner said this week. Her comment was published Monday by the EU Observer, an on-line news service, as EU foreign ministers gathered for a meeting in Slovenia, which currently holds the EU’s rotating presidency.

Her sense of alarm echoed calls by Sweden and Poland for the EU to take a stronger stance in support of Georgia in the wake of Moscow’s action last Thursday in opening free trade with the territory. Commissioner Ferrero-Waldner stressed European support for Georgia and cited spreading alarm in Europe that “Russia may be paving the way for recognition of Abkhazia.” This territory on the Black Sea has set up its own government and is protected by Russian peacekeepers, but it has not been recognized by anyone.

Moscow, in improving ties with Abkhazia, seems to be intent on fulfilling its own dire warning that Western-backed independence for Kosovo last month could create a precedent for further “Balkanizing” splits in the Caucasus. Moscow has not cited Kosovo in its statements about Abkhazia, but Slovenia’s foreign minister, Dimitrij Rupel, who chaired the EU meeting, was quoted saying that “Russia and [the rest of] the Confederation of Independent States have decided to draw certain parallels with Kosovo.”

Officials in Georgia lashed out at Russia’s attitude. The speaker of the country’s parliament, Nino Burjanadze, called Russia’s recent actions “really bad news” for Georgia. He predicted that the Russians’ abandoning the international embargo on direct trade with Abkhazia “means that they are going, step by step, in the direction of the annexation of this territory.”

Related Posts:
Kosovo’s Independence Boosts Copycat Separatists in Georgia, 7 March 2008
Kosovo: A Real Geopolitical Precedent, 14 February 2008

See Also:
EU foreign ministers concerned Russia to recognize Abkhazia (EU Observer, 11 March 2008)

In the upcoming issue of European Affairs, economist J. Paul Horne takes a look at the long-term outlook for the falling dollar. Citing a lack of willingness on the part of U.S. authorities to reverse the current downward trend, Horne speculates that their negligence may be part of a plan to pay off massive American debt in less-worthy dollars– a bleak forecast for foreign investors, to be sure. Along the way, Horne also offers a deft analysis of the current market situation and the extent to which subprime mortgages are to blame.
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Michael Mosettig reviews the new book Life of a European Mandarin by Derk-Jan Eppink, who was a civil servant at the European Commission for more than a decade. 

Life of a European Mandarin.
By Derk-Jan Eppink. Ianoo. 386 pages.

Reviewed by Michael D. Mosettig

Two decades ago television viewers in Britain and the United States were alternately amused and appalled as they laughed through episodes of “Yes, Minister,” a British situation comedy about the way government bureaucracies really work at the top among insiders. In the series, a clever, glib high-ranking civil servant named Sir Humphrey would run circles around his Cabinet minister, aware that his power came from institutional memory and career longevity while the minister, an elected Member of Parliament, would soon be off on other pursuits.

Now, a former civil servant of the European Commission has turned out on paper the Brussels equivalent of “Yes, Minister,” an amusing memoir of how things work and don’t work at the Berlaymont headquarters of the commission. Perhaps the Life of a European Mandarin can be worked up into a European-wide sitcom – “Yes, Commissioner” – though to be true to Brussels protocol it would have to be dubbed and aired in 23 languages.

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