Representatives of the Three Seas Initiative (TSI) gathered on October 19, 2020 for a fifth annual summit, which has been rescheduled from June 2020 and was held online due to the ongoing COVID-19 crisis. The Tallinn Summit was a crucial moment for the Initiative to address outstanding issues: the lack of wherewithal and a firm roadmap for implementing its infrastructure projects, challenges to political leadership and internal cohesion as well as questions regarding the roles in the initiative of the United States, Germany, and the European Commission.
Authors: Łukasz Janulewicz and Zsombor Zeöld
Founded in 2016 on the initiative of the Polish and Croatian Presidents, Andrzej Duda and Kolinda Grabar-Kitarović, TSI brings together twelve EU member states (the founders plus Austria, Bulgaria, Czechia, Estonia, Hungary, Latvia, Lithuania, Romania, Slovakia, and Slovenia) with the aim to improve the underdeveloped North-South connectivity in the region, boost intra-regional trade, and foster digital transformation of national economies. At the same time, several infrastructure projects promoted by the format have the potential to contribute to resilience on NATO’s Eastern Flank by contributing to energy supply diversification and cyber security as well as military mobility.
TSI emerged in a changing geopolitical landscape. Brexit shifted the political center of gravity in the EU towards the German-French tandem. The United States has increasingly challenged Russian and Chinese influence in the region, particularly in the energy and digital sectors, making TSI an attractive transatlantic forum. This put TSI into a double role of a European and transatlantic format.
TSI has long sought a unique added value for the implementation of connectivity projects and moved beyond political declarations. For this purpose, an investment fund has been set up and national governments gradually took on a larger role. Despite strong US interest over the past years, clear deliverables will be necessary to ensure long-term US involvement in the format. TSI still has to battle allegations of an anti-EU nature despite close entanglement in EU infrastructure frameworks and ongoing support from the European Commission.
Project implementation and the Three Seas Initiative Investment Fund
The key challenge for TSI so far has been to prove its added value. The vast majority of the projects on its priority list have not been set up by the initiative, being rather already at various stages of planning or implementation. Almost all energy and transport projects are also included in the EU’s Trans-European Transport Network (TEN-T) and Project of Common Interest (PCI) frameworks.
TSI’s initial role was political agenda setting, promoting the issue of North-South connectivity in the eastern half of the EU. Even within the region, enthusiasm was limited at the outset as Polish intentions were viewed with scepticism. The project was criticized as a revived Intermarium, Poland’s failed interwar-era plan for a bloc between Germany and the Soviet Union under Polish hegemony. With a focus on the economic aspects and growing US and EU involvement, TSI has successfully established itself as a political forum to promote regional connectivity and key related infrastructure projects.
This does not solve the added value problem, however, as the question remains what the format itself can contribute to project implementation. The answer given by member states has been the Three Seas Initiative Investment Fund (TSIIF). Given that EU funds will no longer be able to fuel infrastructure development in the region to the same degree, in 2019 the national development banks of Poland and Romania set up the fund to attract private investment for TSI-supported infrastructure projects. Over the course of 2020, several member states followed suit to join the fund: by October 2020, Estonia, Latvia, Bulgaria, Hungary, Lithuania, Croatia, and Slovenia formally joined or explicitly pledged their funding to TSIIF.
Maintaining US support
US involvement has been crucial to the progress of TSI so far. President Trump’s presence at the 2017 Warsaw Summit increased political interest across the region and reduced concerns among Poland’s neighbours. The TSIIF’s received a significant boost in 2020 when Secretary Pompeo announced Washington’s willingness to contribute $1 billion. While Pompeo’s recent visit to Central and Eastern Europe demonstrated ongoing US commitment, TSI members will need to ensure they maintain long-term US interest in what has become an important format for their relations with Washington. That the US attached conditions to its funding offer early on highlights that it expects clear deliverables and that TSI members to step up their own commitments.
The US focus so far has been on the energy pillar and the LNG import and distribution infrastructure within the region to support supplier diversification to counter Russia’s dominant position on energy markets in the region. TSI projects have contributed to reduce the monopolistic status of Gazprom across the region and supplier diversification has been sought by all member states. But this has not been uniformly perceived as an immediate security issue across the board. Unlike Poland and the Baltic States, other TSI members like Austria or Czechia support the Nord Stream 2 pipeline. In such cases, diversification is mainly an economic issue to lower prices rather than motivated by concerns over Russia’s reliability as a supplier or its perception as a direct national security threat.
European anchoring and the role ofBerlin
As a market, the TSI region is currently not separable from the presence of German, French, British, and other European companies. Berlin tried to join the initiative after initial reluctance as a mean to re-engage with Central Europe as part of Foreign Minister Heiko Maas’s New Ostpolitik. Germany became a TSI partner in 2018, a status like the United States and European Commission. Unlike Washington, however, Berlin has neither pursued specific issues nor announced any direct contributions. Its unwavering support for the Nord Stream 2 pipeline remains contradictory to TSI’s aims on energy security, even if, as stated above, some TSI members are not opposed to the project themselves. Furthermore, even just a symbolic German involvement has been deemed important by countries like like Czechia or more recently Croatia, for their own engagement in TSI. In the absence of clear political initiatives, German business interests are involved in several TSI priority projects. The TSIIF has also confirmed talks with potential German investors, reflecting Germany’s status as the region’s main trading partner. Part of TSI’s rationale is to diversify trade within the region to tap growth potential beyond its current strong focus on Germany. Nevertheless, Berlin will certainly seek to maintain its strong economic interests in the region, while taking advantage of investment opportunities provided by TSI related projects, such as the enlargement of the Świnoujście LNG terminal.
The new European Commission played a more prominent role in the proceedings than Germany did. The Commission remains a key partner for implementing TSI-promoted projects through the TEN-T and PCI frameworks. After initial reluctance towards the initiative, the Commission engaged in it similarly to Germany following President Trump’s presence at the 2017 Warsaw Summit.The EU budget will remain an important part of infrastructure financing in the region. In return, the potential of TSI to provide external funding for EU goals like cohesion and connectivity is likely to maintain Brussels’s political support for the initiative.
TSI after Tallinn
Following several breakthroughs for the TSI in 2020, the Tallinn Summit was not able to fully resolve the aforementioned issues.
Financial contributions to the TSIIF highlight a strong imbalance so far and can raise doubts about political commitment and credibility of TSI member states. Poland initially provided €500 million for TSIIF, which it announced in Tallinn to increase to €750 million. Every other TSI member has provided or pledged only €20 million each, or €23 million in the case of Slovenia. Together with €300 million pledged by the United States as part of its match funding for existing contributions, the fund now stands at €1.2 billion. With three quarters of TSI members now on board, the fund can claim to take off from Tallinn with some momentum. Nevertheless, the disproportionally modest financial contributions on behalf of most TSIIF members dilutes this success.
The concrete US financial commitment in combination with recent bilateral agreements on 5G and nuclear power cemented US engagement in Central Europe shortly before an unpredictable US presidential election. Despite being closely tied to the Trump presidency, the election of Joe Biden is unlikely to significantly alter US policy towards TSI. Washington’s involvement enjoys broad bipartisan support in Congress and Biden’s foreign policy advisor Michael Carpenter expressed ongoing support for the format.
It had initially been announced that the fund’s UK-based investment advisor, Amber Infrastructure Group, would present a few flagship projects at the summit. Amber stated it had itself invested €10 million in the fund to demonstrate its confidence in the undertaking. The first formal investment decision was announced a few days later. It was the acquisition of a major Poland-based rolling stock company. For the time being, it is a good first life-sign but hardly a flagship project. With a long-term endeavor like infrastructure investment, it will take some time to assess the fund’s added value and its contribution to major infrastructure projects. Nevertheless, future updates about investments and investor interest will indicate a trajectory. As it serves as a wholly commercial endeavor, officials are kept outside of the decision-making process, which may make them hesitant to earmark more public funds to that purpose.
It remains unclear how far the increased role for governments will transform TSI into a platform for cross-border coordination and the implementation of concrete project. Most member states’ interest in TSI tied to the promotion of a few key projects of major national importance. Smaller and more flexible formats like the Visegrad Group are more likely to have a direct impact on project implementation, with TSI remaining mainly a consultative forum that might take up a stronger coordination function alongside the investment fund with a more effective intergovernmental component.
The Tallinn Summit has not given any clear indication of fundamental structural reforms of TSI. Among possible solutions discussed beforehand were reducing the frequency of high-level summits to a bi-annual schedule and the creation of permanent working groups that could make an ongoing contribution to project implementation. With Bulgaria officially tasked with hosting the next annual summit, the annual schedule has prevailed for now. The technical secretariat, set up by the Estonian government to support the organization and public profile of the summit has proven successful. TSI members approved in the Summit’s final declaration that a secretariat will remain operational. It remains to be seen whether this means a permanent secretariat, which Hungary has expressed an interest in hosting, or whether subsequent rotating summit hosts will maintain their own secretariats as a best practice. A permanent institution performing as strongly as the Estonian one would be important in upholding the international profile and visibility of TSI independently of political circumstances in individual host nations. Taking into account the political crisis in Bulgaria, this might prove a very immediate concern. Nevertheless, the Bulgarian foreign minister has already started heading the work of the TSI coordination group.
What should concern policy-makers are four outstanding issues:
- Tallinn highlighted that TSI remains unsuccessful in providing a cohesive political platform for the security concerns of some of its members and those of the United States. 5G and the digital pillar of TSI have been on the US agenda in Tallinn, explicitly referring to Chinese influence in the region. However, one needs to clearly disentangle the utility of TSI as a forum for US declarations on the matter from any substantial contribution that TSI can make in this regard. The signing of numerous joint declarations on 5G security between the US and several TSI members resulted from bilateral contacts, not joint participation in TSI. In turn, TSI members––Austria and Hungary––maintain their openness towards Huawei. Just one day after the summit, Hungary’s government announced a major Huawei investment in the country. Such limits on internal cohesion have also meant that TSI did not become a major format for energy security vis-a-vis Russia. For several member states supply diversification remains a purely economic issue to reduce prices while Russia is neither seen as a direct threat nor an unreliable supplier;
- The Tallinn Summit joint statement referred to the US-led Blue Dot Network, a counterproposal to the Chinese Belt and Road Initiative. This could pave the way for showcasing the framework through TSI infrastructure projects successfully undergoing the network certification process. This would strengthen the transatlantic element of TSI and geopolitical signalling while not impinging on the EU frameworks supporting the projects. Despite its mentioning in the joint statement, fully embracing the Blue Dot Network might not prove possible given divergent national positions on Russia and China;
- During the Tallinn Summit, the notion of TSI being directed against the EU re-emerged. This issue seemed to have been firmly put to rest, particularly with regular participation from EU institutions and the German government. However, it was notable that speakers in Tallinn repeatedly felt compelled to deny any such notion. While a Euronews report saying that TSI might be ‘an American-funded alternative to the EU’ can be seen as an extreme outlier, yet suspicions regarding TSI seem to persist. The US role might be perceived as less divisive under the Biden administration, viewed as keen to re-embrace the EU after the tumultuous years with Trump in office. A clearer German stance on its role and involvement in the initiative could further benefit TSI’s perception.
- The 2020 Summit further complicated the issue of external partners. The possibility of the TSIIF to invest in projects connecting TSI members with non-members has the potential to make a strong contribution in both the Western Balkans and Ukraine. The Western Balkan countries had been invited to join previous Three Seas Business Summits to support infrastructure connections amidst a sluggish EU enlargement process, especially with growing Russian and Chinese influence in the region. To the East, Ukrainian President Volodymyr Zelensky has expressed interest in TSI. With the potential of US LNG exports to Ukraine via Poland and that of improving Ukrainian infrastructure ties with CEE, Kyiv’s long-term involvement could have sent a strong signal. No visible progress was made on this issue in Tallinn, however. Bulgaria, as the host of the next summit, added some complexity by suggesting a role for Greece and Cyprus. This would expand the format into the Aegean and Eastern Mediterranean, motivated by ongoing gas exploration, and to underpin the importance of the Alexandroupoli LNG terminal.
The Tallinn Summit struggled to deliver a clear vision and roadmap beyond the summitry. Holding the mostly-online meeting reduced the agenda, including the cancellation of the Business Forum. The public elements clearly underlined the important role the United States is playing in the format. The conditional offer of match-funding member state contributions to the TSIIF highlights that the US expects more from the TSI countries themselves. So far, US incentives have yielded limited results in mobilizing their funds. The Tallinn Summit did not provide further clarification on how Berlin sees its role in the format. Germany seems content with business opportunities for its corporations in TSI projects while politically observing from the sidelines after its membership failed in 2018.
Poland’s significant financial contribution confirms its leadership role in TSI. Warsaw will have to convince its partners to increase their financial pledges further to unlock the full US funding offer. Hesitation towards Polish leadership might not have been overcome quite yet. Germany, on the other hand, remained invisible in Tallinn after a prominent role it played at the last year’s business forum. Despite repeated reassurances of support, Berlin is not visibly stepping up its engagement. As the host, Estonia promoted the so far underdeveloped digital pillar with its smart connectivity proposal. It remains to be seen to what extent TSI might become a vessel to promote this vision, also as a potential coalition within the EU to influence relevant Digital Single Market frameworks.
More broadly, the main geopolitical question is whether TSI can serve the reinforcement of NATO’s Eastern Flank against Russian and Chinese threats, but also provide a bridge towards the Western Balkans or Ukraine. Notably, attending delegations emphasized the security dimension more firmly than in previous years. The format has not yet shown any signs of influencing national perceptions of Russia and China, however.
TSI remains a work in progress and assessing a single summit is inevitably a snapshot. However, on an initiative that in large parts still exists only in the form of summits, it is not unfair to pass such a momentary judgment.