Chatham House, The Royal Institute of International Affairs

The partnership between the United States and Europe has been an anchor of the world’s economic, political and security order for more than seven decades, but we should not take it for granted. The transatlantic relationship faces many dangers. However, the issues that bring the two sides together ultimately carry much greater weight than those that might divide them.The US and the EU have notably different perceptions and interests, the navigation of which requires nuanced diplomacy. Although each side brings different ideas and experiences to the table, numerous areas of actual and potential collaboration can be identified. The rules-based international order benefits both the US and the EU, and it urgently needs their collaborative support.

In this paper, we consider the main objectives of GPV 2027 (gosudarstvennaia programma vooruzheniia, Russian for "10-year state armament programme") and examine whether Russia’s financial and defence-industrial capabilities are sufficient to meet them. We then consider how the Russian armed forces are likely to be equipped by the mid-2020s, should the main objectives of GPV 2027 be achieved. Although the programme itself is classified, enough details have entered the public domain – for instance, through statements by officials, news reports, federal budgets and draft budgets – for educated inferences to be made as to its broad contours, likely priorities and strategic direction. Such assessments are the basis of this paper.

International climate commitments and the global shift towards a decarbonized economy are challenging tried and tested models of development. This presents serious risks and opportunities for countries like Ghana, Tanzania, Guyana and Mozambique, where there are hopes that fossil fuel discoveries will transform their economies. Drawing on discussions with national governments, multilateral development banks (MDBs) and donor agencies, and a series of modelled scenarios, this paper sets out how carbon risk – defined in this paper as the economic risks associated with dependence on or exposure to high-carbon sectors – will affect developing countries with fossil fuels in the coming decades. It also makes recommendations for governments and their development partners that should enhance economic resilience and competitiveness throughout their transition.

This paper is one of a series on biomass produced by Chatham House. Between them these papers aim to provide an analysis of the growth in the use of wood for power and heat and a discussion of its impact on the global climate and on forests. In addition, the series intends to reach conclusions on the appropriate treatment of woody biomass for energy in policy frameworks. This paper provides background information on the use of woody biomass for power and heat within the EU – the main global source of demand for non-traditional uses of biomass – and examines patterns of demand and supply in nine EU member states, together with the policy frameworks that support the use of biomass for energy.

The report makes the case that while the transatlantic relationship may currently be traversing a period of divergence, this need not lead to a structural split over the longer term. Notwithstanding the present choppy waters, the fundamentals in relations between the US and Europe remain strong, and the prospects are mostly positive.

This report is the culmination of an 18-month study by Bruegel, Chatham House, the China Center for International Economic Exchanges and the Institute of Global Economics and Finance at The Chinese University of Hong Kong. The project was supported by a senior advisory group, with input from former ministers on both the European and Chinese sides.

The report identifies key trends and areas of potential economic collaboration in the coming decade. It cites the ‘significant opportunities’ and benefits for the two global powers to deepen their economic ties, with scope for an ‘enormous increase’ in investment in both directions. The study, however, also documents the obstacles - including significant differences between political and economic systems - which could frustrate increased collaboration, and argues that building a genuine strategic partnership will require greater effort from both EU and Chinese leaders.

The European Union and its member states have faced almost a decade of political tumult. If the EU is to move beyond crisis management towards political and economic renewal, a prerequisite is to understand better the foundation of public and ‘elite’ attitudes to the EU, and where these align and diverge.
This paper is based on a unique survey conducted between December 2016 and February 2017 in 10 countries that polled two groups: a representative sample of 10,000 members of the public; and a sample of over 1,800 of Europe’s ‘elite’, individuals in positions of influence from politics, the media, business and civil society at local, regional, national and European levels.

The vulnerability of satellites and other space assets to cyberattack is often overlooked in wider discussions of cyberthreats to critical national infrastructure. This is a significant failing, given society’s substantial and ever increasing reliance on satellite technologies for navigation, communications, remote sensing, monitoring and the myriad associated applications. Vulnerabilities at the junction of space-based or space-derived capability with cybersecurity cause major national, regional and international security concerns, yet are going unaddressed, apart from in some ‘high end’ space-based systems. Analysing the intersection between cyber and space security is essential to understanding this non-traditional, evolving security threat.
Cybersecurity and space security are inextricably linked. Technologies in satellites and other space assets are sourced from a broad international supply base and therefore require regular security upgrades. And the upgrades via remote connections could serve to make space assets vulnerable to cyberattacks. In everyday life, satellites are regularly used to provide internet services and global navigation satellite system (GNSS) technologies which are increasingly embedded in almost all critical infrastructure.

While a new Bretton Woods-style agreement is highly unlikely, the US and Europe should help update the existing monetary system with a new set of best practices and norms.
Many of the seemingly ‘established’ norms of monetary policy are in fact quite recent, having emerged since the breakdown of the Bretton Woods system in the 1970s. These norms include inflation targeting, central bank independence from political authority, and the separation of monetary policy from regulatory activity such as bank supervision. Central bank orthodoxy has also, until recently, largely ignored the international ‘spillover’ effects of monetary policy.
The 2008–09 financial crisis and its aftermath changed the picture. Monetary policy was recruited to assist governments in stabilizing financial markets and restoring liquidity. And conventional assumptions about the primacy of central banks’ responsibility for price stability were challenged as quantitative easing (QE) proved less inflationary than feared. Indeed, eight years after the crisis, the inflation rate – the most significant driver of monetary policy under the old regime – remains consistently low in most major economies.
In this context, the United States faces some unique challenges. The dollar’s status as the global reserve currency means that the US Federal Reserve’s decisions often have international ramifications. Emerging markets are becoming more exposed to spillovers from US policy, as globalization renders their economies and financial systems more interdependent and as finance becomes increasingly important relative to other economic activity.
In Europe, the euro’s problems reflect similar shortcomings to those that undermined the 1944 Bretton Woods system. Launched in 1999, the euro was in effect an attempt to maintain fixed exchange rates between member states. However, the single currency’s designers underestimated the difficulty of maintaining such a system across multiple national economies, each with different growth profiles and fiscal policies. The euro’s structural problems have been exacerbated by the secular shift from a world of politically ‘subservient’ central banks, as existed before the creation of the European Central Bank (ECB), to the current system in which the ECB is highly independent.
Despite the current strains on the monetary system, consensus on a formalized new international framework in the mould of Bretton Woods is unlikely. A more plausible outcome is the organic development of a new set of norms articulating principles both for the mechanisms by which central banks pursue price stability and for the governance of central banks themselves. The United States and Europe are likely to be at the forefront of this process. They should proactively shape the new norms to ensure that they meet the challenges of today’s evolving economic landscape.