Special highlights from EU decision making: sustainable finance and Nord Stream 2 project

This briefing includes our latest observations regarding the politics behind EU policies on the following subjects:

- Sustainable finance

- European Deposit Insurance Scheme

- Nord Stream Pipeline

- EU relations with the Middle East countries

- Green public procurement (premium subscribers only)

- Carbon Capture Storage and Utilisation (premium subscribers only)

- Due diligence in the mineral industry (premium subscribers only)

- EU framework on minimum income (premium subscribers only)

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Finance

Broad political support was confirmed in the EP for increasing the share of green bonds in the portfolio of the European Central Bank (ECB). However, what remains divisive among politicians is the ECB’s decision to accept bonds with coupon structures linked to certain sustainability performance targets as collateral. EPP group (including Merkel’s CDU/CSU), as well as a large part of the Renew group, do not see as opportune this ECB initiative to link bonds with sustainability performance targets based on the EU Taxonomy Regulation objectives. Notably, Macron’s EU team does back ECB’s position. 

European Deposit Insurance Scheme, as a way to finalise the Banking Union, continues to drive a wedge among decision-makers (and between Berlin and Paris). The positions expressed by Merkel’s CDU/CSU EU squad remain in line with the opposition of the German government, and this opposition extends to the rest of the EPP and ECR political networks. Notably, the Socialist family has mixed views on the matter (with the notable exception of the French socialists, who are in favour). On the other hand, Macron’s “EU team” reconfirms its commitment to the European-level scheme and also rallies the support of other Renew delegations. All in all, the political divisions forecast slow progress on this proposal and this year’s German elections should be relevant to watch (also) from this perspective. 

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Foreign Policy

The recent visit to Russia of EU’s foreign affairs Head Josep Borell highlighted the challenges in coordinating a fully coherent position on foreign affairs, as national interests still do not converge to a sufficient extent. The backing of Russia and the Nord Stream 2 gas pipeline from Germany, and to a lesser extent France, could therefore risk increasing divisions in the Council. One important element to consider, however, concerns the possible arrival of German Greens in the next national elections, which could drastically change Germany’s position in the Council as these MEPs consistently vote against the completion of the project.

In February’s plenary sitting, MEPs discussed the EU Association Agreement with Ukraine and used the occasion to reiterate their criticism of the Nord Stream 2 project. This is not the first time the European Parliament discusses the project in the context of debates concerning human rights abuses from Russia, as this particular issue was also raised when discussing Alexei Navalny in September and January plenaries. Given the direct involvement of Germany in the Nord Stream 2 project, it is interesting to note significant divisions amongst German MEPs, in particular within CDU/CSU and SPD. A deeper analysis of these groups’ individual voting behaviour further reveals difficulties in adopting a united position, as several MEPs changed their stance since September. 

Positions of German parties

In the context of the poisoning of Alexei Navalny in September, a strong majority of MEPs took the opportunity to raise concerns regarding the completion of the Nord Stream 2 project. The analysis of relevant votes highlights several trends within German delegations of different political groups, which are later confirmed in future votes despite some differences. In particular, Chancellor Merkel’s CDU/CSU team in the EP was very divided on the subject, with half of the MEPs remaining critical of cooperating with Russia on Nord Stream 2. This division can have serious implications for the project, as it will be hard for Chancellor Merkel to show a united position on the international scene when her MEPs are not cohesive themselves. German SPD members were also significantly divided, but a slight majority of them leaned towards supporting the project. 

 
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When debating the EU Association Agreement with Ukraine this plenary, a strong majority of MEPs reiterated its call to halt the Nord Stream 2 project. It is interesting to note that, while this proposal had a slightly stronger tone than the one in January’s plenary (in the context of the recent arrest of Alexei Navalny), it follows similar group dynamics. In particular, Chancellor Merkel’s CDU/CSU team in the EP seems to be slightly more united than in September, with an increased tendency to support cooperating with Russia, thus breaking away from their European political group: the EPP. One main distinction concerns German SPD MEPs, who seem to have united over time, and broadly support the project in both January and February votes. The support shown from SPD, who are in the current government, is very positive for the completion of the Nord Stream 2 pipeline, as it allows Chancellor Merkel to have a stronger position on the global scene. One exception can be found in MEP Maria Noichl, who has consistently voted against cooperating with Russia on Nord Stream 2. As identified in our influence matrices, it must however be noted that Maria Noichl has a stronger pro-regulatory stance than the rest of SPD and S&D MEPs. 

 
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Relevant insights from other delegations

While the most divided delegations remain the German EPP and S&D ones, looking at the voting behaviour of MEPs from other nationalities also reveals significant divisions. Notably, MEPs from Macron’s governing party seem to struggle to adopt a consistent position, as shown in the graph below. 

 
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While French Renew MEPs have remained united over time (with some slight exceptions), what stands out is their inability to find a stable position when it comes to the Nord Stream 2 project. Importantly, MEPs from Macron’s government have voted differently in January and February, only one plenary sitting apart, on two proposals aimed at halting the project. While President Macron has shown recent support for cooperating with Chancellor Angela Merkel on Nord Stream 2, in particular working towards a more sovereign European energy strategy, it must be noted that France has generally opposed the completion of the project. French minister for European affairs Clément Beaune notably called to abandon the Nord Stream 2 gas pipeline project between Russia and Germany over the imprisonment of Russian opposition figure Alexei Navalny. In light of this, the support shown by French Renew MEPs in January’s vote is highly insightful, as it might reflect either disagreement between President Macron and his representatives in the European Parliament or a more general lack of consistency, casting doubt on the actual position of the French government on the project.

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Main takeaways 

Despite being a consensual subject in most member states, we can see that some delegations were torn apart due to the national interests at stake. Moreover, this issue has also resonated for a while in the international sphere, given the US’ involvement and influence over the current balance of power. Biden’s arrival in the White House is not expected to change the position of the American government, which will likely continue to impose sanctions on European companies. EU’s foreign affairs Head Josep Borell also highlighted the Commission has pointed out several times that the Nord Stream 2 project does not lead to diversifying the energy sources of the European Union. However, he recognized the Commission’s inability to prevent companies from building the pipeline if the German government agrees with it. The outcome of the next German elections should be closely monitored, as Germany’s position could change if the Greens manage to secure a role in the next government. One thing is certain, closely following the developments of the Nord Stream 2 pipeline over the next months will give valuable insights into the EU’s energy policy and strategic autonomy. 

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Foreign Affairs

The discussion on EU-Ukraine relations sheds more light on the debate regarding the implementation of EU sanctions in the context of international relations. As highlighted by the recent visit to Russia of EU’s foreign affairs Head Josep Borell, it is reconfirmed that coordinating a fully coherent position on foreign affairs remains highly difficult, as national interests still do not converge to a sufficient extent. Nevertheless, we observe increasing convergence towards backing the application of an EU global human rights sanctions regime to the actions of Russian agents in Donbas and Crimea (even though, as we signalled in our previous analysis, there are divergences concerning the criteria of its applicability).

The debate regarding the humanitarian and political situation in Yemen reveals interesting divisions among MEPs on the EU’s policy toward the Middle East. When discussing the EU Global Human Rights Sanctions Regime, MEPs notably called out Saudi Arabia and the UAE as human rights violators. Conversely, the level of criticism of Iran seems to be decreasing among EU politicians, as indicated by a fresh vote in the EP. While there is a push for extending sanctions to Iran (alongside the other parties involved in Yemen), a significant share of politicians show reluctance in going after Teheran, in line with the likely easing of tensions between the US and Iran. An interesting split concerns the Renew Group, where many of the MEPs who voted against targeting Iran are from Member States which are rather close to the US, in particular from Central and Eastern Europe. Such stances would likely have been different in the case of re-election of Trump and his hard-line approach, while it seems that some policymakers from the region are now feeling more confident about a rapprochement (or at least a truce) with Teheran. Find a full breakdown of the vote here

EPP, ECR and ID groups reconfirmed their support for the European defence sector, by removing the proposal for a ban on arms export, deflecting the push from the left by arguing that this needs to remain a national competence. Unsurprisingly (given the high stakes for France), Macron’s EU representatives defected from the position of their European group and pulled their weight behind the opponents of the ban - this move was enough to remove the proposal for the ban from the EP resolution, as the left-wing forces who proposed it were left without the needed numbers. However, the balance of power on this matter remains thin (only a 50 votes majority) and may shift in the future.

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