Why defrosting the EU-China investment deal will be difficult

Good morning. A scoop to start out: Kyiv is willing to discuss with Moscow the status of Crimea if its troops attain the border of the Russian-occupied peninsula, a high adviser to president Volodymyr Zelenskyy advised the FT.

Immediately, our Brussels group picks over the carcass of the EU’s moribund China funding deal, and our man in Turkey says a go to by Russia’s overseas minister will check Ankara’s diplomatic dance.

There shall be no Europe Specific tomorrow or on Monday. Have an awesome Easter weekend.

Shelf life

Three years in the past, EU fee president Ursula von der Leyen hailed the EU-China Complete Settlement on Funding as an “necessary landmark” within the two economies’ relations.

Immediately, Brussels views the CAI in a far much less constructive gentle, write Sam Fleming and Andy Bounds.

Context: The EU-China deal has been within the deep freeze since 2021 after China slapped sanctions on members of the European parliament in response to EU penalties. Relations have slumped to their lowest ebb in many years, amid tensions over the Ukraine war and Taiwan.

The fee president last week warned that the EU was going to need to “reassess” the deal, in a speech that warned Beijing is changing into “extra repressive at house and extra assertive overseas”.

The tone from China has been markedly extra upbeat.

Fu Cong, China’s ambassador to the EU, last week advised the Monetary Instances that politicians ought to muster the “braveness” and political pressure to ratify the settlement. Beijing wished each side to raise their sanctions to unblock the deal, he mentioned, including that China was keen to hearken to “views or proposals from the opposite aspect”.

So why the distinction? In its heyday, the CAI was seen as conferring greater financial wins on EU enterprise than their Chinese language counterparts.

Immediately, nonetheless, it has gained political points of interest in Beijing. Any progress would sign that Europe is standing aside from the US and its makes an attempt to decouple important components of its financial system from China.

Because the US-China rivalry hardens, Beijing is keen to grab on something that means deep financial ties with Europe.

As von der Leyen and France’s president Emmanuel Macron meet their counterparts in Beijing at present, there may be little stress again house for the CAI to be reheated in its present kind.

Amongst member states there are two camps: those that again von der Leyen’s harder method to China, and people that don’t assume it’s robust sufficient. “I can’t consider something the Chinese language may supply that will revive CAI,” mentioned one EU diplomat.

The BDI, Germany’s enterprise federation, yesterday echoed von der Leyen’s name for a reassessment earlier than ratification can resume.

There are additionally much more alluring prizes on the EU’s agenda, together with an elusive trade deal with the 4 Mercosur economies in South America.

As Brussels appears at methods of “de-risking” points of its commerce with China, together with outbound funding screening, the CAI — in its present kind no less than — appears set to stay caught on the shelf.

Chart du jour: In bulk

Solely 2-10 per cent of containers flowing by way of EU ports yearly are literally checked by authorities, in line with a report published by Europol yesterday. A simple opening for criminals and drug traffickers: Final yr, some 160 tonnes of cocaine was seized in Rotterdam and Antwerp alone.

Balancing act

Russia’s high diplomat Sergei Lavrov begins a two-day go to to Turkey at present, testing Ankara’s prowess at managing its relationship with Moscow whereas appeasing western allies, writes Adam Samson.

Context: Russia has turn out to be an more and more necessary buying and selling companion for Turkey, after president Recep Tayyip Erdoğan declined to hitch western sanctions towards Moscow, irritating Nato allies. Russia accounted for five.4 per cent of Turkish exports in February, towards 2.3 per cent in the identical month final yr.

Lavrov’s assembly together with his counterpart Mevlüt Çavuşoğlu comes at a fragile time, simply over a month earlier than a pivotal election.

A number of executives in an Erdoğan stronghold in central Turkey advised the FT that they had been completely satisfied to serve Russia. A lot of common residents mentioned if it was of their nation’s financial curiosity to retain relations with Moscow, it was the precise factor to do.

This issues an awesome deal to Erdoğan, whose reputation has been severely dented by Turkey’s financial disaster. Analysts say the elections on Could 14 shall be his hardest check in twenty years in energy.

Erdoğan has performed a pivotal function within the Ukraine battle that has garnered favour from the EU and the US, together with brokering a deal for Ukrainian grain exports and delivery Kyiv cheap drones.

However issues have risen in western capitals over whether or not Turkey helps Russia’s conflict effort by exporting so-called twin use items: seemingly innocuous objects that may even have army purposes.

Turkey has mentioned that it discovered no cases of this and is ready to research if supplied with examples.

What to observe at present

1. Ursula von der Leyen and Emmanuel Macron meet China’s president Xi Jinping.

2. Sergei Lavrov meets Mevlüt Çavuşoğlu in Turkey.

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