Danger and Opportunity in Eastern Europe

A STEP TO THE RIGHT

Eastern Europe is undergoing important changes that could erode Europe's security and damage U.S. interests. The enlargement of both NATO and the European Union was supposed to consolidate political and economic reform in the region and aid its integration with the West. The recent rise of nationalist and populist forces in several countries in eastern Europe, however, threatens to undermine the reform process. Enlargement fatigue in the EU and growing calls for protectionism within western Europe could further hinder continued efforts to create a single European market and fully integrate the new EU members.

At the same time, the balance of power is shifting on eastern Europe's outer periphery. The collapse of the "Orange coalition" (the group of political leaders who led the 2004 Orange Revolution) in Ukraine has brought to power a government much less open to reform or eager for close ties to the West. This is likely not only to slow Ukraine's integration into Euro-Atlantic institutions but also to have a dampening effect on reform within the other former Soviet states. In addition, after a decade of weakness and passivity, Russia has reemerged as an important regional and international actor, especially in the energy field.

These changes have gone largely unnoticed by policymakers in Washington despite the important implications they have for U.S. interests. The United States has invested considerable energy and resources over the last several decades promoting a Europe whole and free that could act as a strong, cohesive partner and help the United States manage security threats emanating from beyond Europe's borders. If eastern Europe reverts to old patterns of nationalism and parochialism and the process of European integration falters, much of this investment will have been squandered.

REFORM FATIGUE

In general, the last decade was a period of economic growth and increasing prosperity in eastern Europe. But the tide of liberal economic reform has recently turned. Pro-Europe and pro-market parties have lost ground throughout the region and have been replaced in several countries by coalitions championing nationalism and populism.

Poland provides the most striking example of this trend, which began there with the victory of the conservative party Law and Justice (known by its Polish acronym, PiS), headed by Jaroslaw Kaczynski, in the September 2005 parliamentary elections. The PiS consolidated its electoral success by winning the presidential election a few weeks later, when Lech Kaczynski, Jaroslaw's twin brother, unexpectedly triumphed over Donald Tusk of the pro-market-reform and pro-Europe Civic Platform. The Kaczynski brothers are suspicious of free-market reforms and favor a strong role for the state in the national economy and in other areas such as education and the media. In foreign policy, the PiS seeks to enhance "Polish national interests," which has led to conflicts with the EU and some of Poland's neighbors, particularly Germany. Domestically, the PiS' positions on many social issues, such as gay rights, are at odds with the positions of many western European states and are a source of further tension. This rightward drift in Polish politics has been accentuated by the entry into the ruling coalition of two fringe parties, the populist Self-Defense Party -- which draws its main support from farmers -- and the nationalist and Catholic League of Polish Families. Both parties oppose free-market reforms and have been critical of Poland's membership in the EU.

Forces hostile to economic liberalization have also gained power in Slovakia: in June 2006, the political party Smer-Social Democracy, headed by the populist Robert Fico, won a decisive victory over Prime Minister Mikulas Dzurinda's Slovak Democratic and Christian Union in parliamentary elections. Despite Dzurinda's impressive record of economic and social reform, Slovak voters turned their backs on him in favor of Fico and a coalition that includes two right-wing parties hostile to market reforms.

The surprise victory of Rolandas Paksas over the incumbent Valdas Adamkus in the Lithuanian presidential election of December 2002 provides another example of the rise of populism in the region. The election took place only a few weeks after Lithuania was invited to join NATO and the EU. Given his key role in achieving these long-standing national goals, Adamkus was expected to win easily. Paksas, however, ran a skillful campaign that focused on Lithuania's social and economic problems and appealed to many of the losers in the country's transformation. (Paksas was later impeached, but that he won at all is noteworthy.)

At first glance, the victories of the nationalists and the populists appear paradoxical, given the economic growth and prosperity much of eastern Europe has enjoyed recently. But the region has also experienced a corresponding increase in inequality and unemployment. Prosperity has been confined largely to the major cities, whereas small towns and rural areas have suffered under the reforms. It is in these areas that people have voted for the nationalists and the populists, who have promised less reform and more social justice. Poland's PiS, for example, draws its support from the country's rural east and its "rust belt" -- areas that have been hard hit by postcommunist economic measures -- whereas the more progressive Civic Platform receives its support from Warsaw and the more prosperous north and west. Right-wing parties have also benefited from a popular backlash against corruption. Many of the incumbents in Bulgaria, the Czech Republic, Poland, and Slovakia had been tarnished by scandals, and those incidents featured prominently in the campaigns.

Eastern Europe is also undergoing an important generational transition in leadership that could have far-reaching implications for the region's political future. In the Czech Republic, the departure of former President Václav Havel, who embodied the moral conscience of Czechoslovakia's Velvet Revolution, has had a particularly acute effect. Havel's successor, Václav Klaus, is a Euroskeptic who lacks Havel's international stature. In Poland, many of the key figures of the Solidarity movement, who spearheaded the overthrow of communism, have also retired or been marginalized. Most notably, Lech Walesa, the movement's leader and Poland's first president, has retreated to splendid isolation in Gdańsk. A similar process is also evident in the Baltic states. The death of Estonia's Lennart Meri, the grand old man of Estonian politics and the nation's first postcommunist president, has left a political vacuum. In Lithuania, President Adamkus, who was reelected after Paksas was impeached in 2004 and who guided the country's entry into NATO and the EU, still commands respect, but he is 80 years old and near the end of his career.

These eastern European leaders can be compared to the first generation of statesmen who rebuilt Western Europe after World War II: Konrad Adenauer, Alcide De Gasperi, Charles de Gaulle, and Jean Monnet. In a similar fashion, Havel, Walesa, and others laid the political foundations for eastern Europe's postcommunist course. Many were dissidents who had suffered under communism and who had a strong dedication to individual freedom and Western values. They also were committed Atlanticists who believed in the importance of maintaining strong ties to the United States. But this generation is now retreating from the political scene. And in its place is emerging a crop of leaders for whom the communist period is a distant memory and the United States less of a beacon and an inspiration. As memories of the communist period fade, the strong commitment to Atlanticism exhibited by the first generation of eastern European leaders is likely to wane.

NEW NATO, NEW CHALLENGES

Joining NATO was a key security objective for all of the eastern European countries, which saw membership in the organization as protection against a resurgent Russia. The NATO that these countries have joined, however, differs significantly from the one that existed during the Cold War. The old NATO was primarily configured to deter a Soviet attack against its members; the new NATO is focused on countering threats such as terrorism, weapons of mass destruction, rogue states, and other dangers that emanate from beyond Europe's borders. NATO's transformation poses several important challenges for its newest members. They have had to carry out two military revolutions in less than a decade. The first was to adapt the obsolete, tank-heavy forces they inherited from the Warsaw Pact to NATO standards at a time when their economies were weak and undergoing extreme change. No sooner had they begun to make these highly disruptive -- and expensive -- changes than they were faced with the more demanding challenge of adapting their militaries to an alliance that increasingly emphasizes flexible and mobile forces that can be deployed rapidly to distant crisis areas for long periods of time.

The basic dilemma that the eastern European states face today is whether to join this effort to create high-tech expeditionary forces that can operate effectively with other NATO units in remote areas, such as Afghanistan. Creating such forces would give NATO's new members more political and military clout within the alliance. But it would require an expensive shift of resources at a time when political calls for spending more money on social programs are multiplying throughout the region.

NATO's force transformation also poses a significant psychological challenge. Many officials in eastern Europe continue to think of security in terms of territorial defense. In Poland, for example, many PiS leaders favor maintaining a large standing army based on conscription in order to defend against a resurgent Russia. Reformers in the Polish Ministry of Defense, however, argue that Poland needs a small professional army that can contribute to NATO's new missions.

INTEGRATION IRRITATION

The EU's recent addition of eight members from eastern Europe -- and the likelihood that it will add two more (Bulgaria and Romania) by 2007 or 2008 -- has had a significant impact on the organization's political balance and decision-making. In particular, enlargement has made it much harder for France and Germany -- the main motors of EU integration in the past -- to drive the integration and enlargement processes in directions that could turn the EU into a counterweight to U.S. power. The debates within the EU in the run-up to the Iraq war underscored the degree to which enlargement has changed the political dynamics within the organization. Whereas France and Germany opposed the war, the leaders of the Czech Republic, Hungary, and Poland, together with the leaders of Denmark, Italy, Portugal, Spain, and the United Kingdom, openly supported the U.S. position. This rift made clear that Paris and Berlin did not speak for all of the EU and that the group's new members were determined to have their say in the construction of the "new Europe."

On the other hand, the slowdown in reform within the EU since the Lisbon summit in the spring of 2000 -- where member states resolved to strengthen the EU's research capacity, promote entrepreneurship, and facilitate the exploitation of information technologies -- has made the new members' integration more difficult. The richer countries have been increasingly unwilling to allocate large sums of money to help the poorer ones. At the insistence of big contributors such as Germany, Sweden, and the United Kingdom, the budgetary guidelines adopted in December 2005 allocated fewer funds to the newer members than many people in those countries felt was deserved. The "services directive" adopted by the EU's Council of Ministers at the end of May 2006 was another slap in the face for the new members. They wanted better access for their service workers and companies to the entire EU. The measure was supposed to create a single borderless market for service providers, who represent more than two-thirds of the EU's economic output. But the final version of the directive was significantly watered down by France and other western European states who feared an influx of cheap workers (the infamous "Polish plumbers"), who would presumably steal jobs.

Economic protectionism within the older member states has, in fact, increased in the past year. Calls for economic patriotism have given rise to efforts to create national champions designed to protect key strategic industries from foreign competition. Hence, the Spanish government encouraged a merger between the Spanish energy companies Endesa and Gas Natural to prevent a takeover of the latter by the German utility giant E.ON, and the French government engineered the union of the state-owned utility Gaz de France with the Belgian-French utility company Suez to prevent Suez from being taken over by the Italian energy concern Enel.

A similar trend has developed in eastern Europe, where Euroskeptics have gained ground. In early 2006, the EU threatened to take Poland to court when the PiS-led government tried to block an attempt by UniCredit of Italy to merge a Polish bank it controlled with a German bank it had recently purchased. Several weeks later, Poland provoked the ire of the EU by blocking a measure on value-added tax that had been approved by all 24 other members.

However, the nationalist and populist parties in eastern Europe are unlikely to take radical steps to cut their countries' ties to the EU. First, the Euroskepticism of these parties is not shared by the populations at large. Polls consistently show strong support for EU membership among the publics in all of these states. Second, the eastern European members are major recipients of EU development aid. Poland, for instance, will receive nearly 60 billion euros over the next seven years, making it the largest recipient of EU funds by far. Whatever their discontent with EU policies, few eastern European leaders would be willing to renounce such largess.

IDENTITY CRISIS

Membership in the EU has also accentuated tensions between eastern Europe's commitment to Atlanticism and its European identity. This has manifested itself most acutely in the defense arena. In general, the countries of eastern Europe regard the U.S. presence in the region as indispensable for their security and do not want to see it reduced. At the same time, they do not want to be forced to choose between the United States and western Europe; they want good relations with both. Hence, eastern Europeans were uncomfortable during the run-up to the Iraq war when the Bush administration attempted to differentiate between "old" and "new" Europe, a move they felt was aimed at forcing them to choose sides. This discomfort is also reflected in the region's simultaneous support for a common European Security and Defense Policy and insistence that links to NATO should not be weakened as a result.

These tensions have been felt most intensely in Poland, thanks to Warsaw's particularly strong ties to Washington. Some EU officials have warned Poland that it should temper its pro-American enthusiasm now that it is a member of the EU. Warsaw's decision to buy American-made F-16s instead of fighters built by European countries particularly irritated EU officials, who felt that as a member state Poland should have kept its purchasing within the continent. As Romano Prodi, head of the EU Commission at the time, bluntly warned Warsaw in April 2003, "You can't entrust your purse to Europe and your security to America."

It would be wrong, however, to assume that the new entrants into the EU will automatically follow the U.S. line on all issues. On many foreign policy issues, especially Iraq, popular attitudes in eastern Europe do not differ markedly from those in the rest of Europe. Such attitudes constrain how much even populist or nationalist governments can deviate from the European mainstream. Moreover, eastern Europeans have strong economic reasons to maintain close ties to "old Europe," especially Germany, which is the main trading partner and leading investor for many of these countries.

Even in Poland -- the most pro-American country in eastern Europe -- there has been a perceptible growth of popular support for the EU, particularly among the young. This is in part an outgrowth of Poland's increasing integration into Europe. But it also reflects disenchantment with current U.S. policies, especially on Iraq. More and more Poles have come to question whether Warsaw's unqualified support for Washington on Iraq serves Polish interests. There is also a feeling among many Poles that the Bush administration takes Polish support too much for granted and is unwilling to accommodate important Polish interests, especially the desire of Poles to travel to the United States without a visa. If these sentiments continue to grow, they could weaken Warsaw's traditionally strong pro-American orientation.

NEW TIES THAT BIND

Changes in the political climate in eastern Europe are also affecting patterns of interaction within the region. During the last decade, eastern European states displayed a high degree of regional solidarity. The Czech Republic, Hungary, Poland, and Slovakia created the Visegrad Group to promote economic and political cooperation and coordinate policy before the first round of NATO and EU enlargement. Albania, Bulgaria, Croatia, Estonia, Latvia, Lithuania, Macedonia, Romania, Slovakia, and Slovenia banded together to create the Vilnius Group, or V-10, in 2000 to promote solidarity and cooperation among aspiring NATO members.

Although the countries of the new Europe share a number of features -- particularly the desire to shed the political and economic shackles imposed by communism and to integrate into Euro-Atlantic institutions -- they are a diverse group with very different historical and cultural traditions and different levels of economic development. Slovenia has more in common with Hungary and Austria, for instance, than it does with Bulgaria or Romania. Poland has stronger ties to the United States than it does to many countries nearby -- or to western Europe, for that matter. Even among the Baltic states -- perhaps the most homogenous group in the new Europe -- there are important differences. Lithuania has strong historical ties to Poland and considers itself to be as much a part of central Europe as of the Baltics. Estonia maintains closer ties to Finland than to most countries in eastern Europe.

As the goals of EU and NATO membership are attained, the regional cooperation evident in recent years could give way to existing differences and lead to new alignments. Poland may gravitate toward NATO's "Big 5" (France, Germany, Italy, Spain, and the United Kingdom), for example, while Hungary may come to cooperate more closely with countries in central Europe, such as Austria, Croatia, and Slovenia, and regions such as Bavaria. The Baltic states, in turn, may align their policies more closely with those of the Nordic states.

At the same time, new political ties are beginning to emerge. The most significant development in this regard has been the far-reaching rapprochement between Poland and Ukraine since the early 1990s. Historically, relations between these two states have been characterized by considerable tension and mistrust. Over the last decade and a half, however, the two countries have succeeded in overcoming their animosities and have developed remarkably cordial relations. This reconciliation has been buttressed by an expansion of economic ties and military cooperation, exemplified by Warsaw and Kiev's decision to set up a joint battalion to participate in international peacekeeping operations under NATO and the UN. The unit has already been successfully deployed to Kosovo.

The recent collapse of the Orange coalition, however, is a major setback for efforts to anchor Ukraine more closely to the West. The new national unity government, headed by Prime Minister Viktor Yanukovych, is dominated by corrupt oligarchs and figures from the discredited Kuchma era. Although President Viktor Yushchenko favors a pro-Western course, including eventual membership in NATO and the EU, his power has been reduced by constitutional reforms introduced in January 2006 that increased the powers of the prime minister.

The reversal in Ukraine is likely to have a significant impact on the other ex-Soviet states in the area and make it much harder for Georgia and Moldova to pursue their own westward courses. Moscow may be tempted to step up pressure on both countries to curtail their ties to Europe and the United States. In Belarus, President Aleksandr Lukashenko -- Europe's last surviving dictator -- will feel free to tighten his autocratic rule with impunity.

The collapse of the Orange coalition is a defeat for Poland in particular. Warsaw had been the strongest advocate of Ukraine's integration into Euro-Atlantic institutions, and former Polish President Aleksander Kwaśniewski played a key role in brokering a deal to resolve the crisis in Ukraine in November and December 2004. With the collapse of the Orange coalition and the return to power of forces Warsaw helped defeat two years ago, the Polish government has been forced to scramble to retain some influence with Kiev.

RUSSIA'S RETURN

The changes on Europe's eastern periphery have been reinforced by the reemergence of Russia as a significant regional and international actor. Under Boris Yeltsin, Russia adopted a policy of benign neglect toward most of the former Eastern bloc and, except for a vocal and ultimately unsuccessful effort to stop the first round of NATO enlargement, largely ignored the region.

This period of indifference has now ended. President Vladimir Putin has embarked on a systematic effort to restore Russian influence in eastern Europe and its periphery. Rather than relying on military power, as his Soviet predecessors did, Putin has sought to use economic instruments -- above all Russia's energy exports -- to expand Moscow's power and clout.

In the Baltic states, Russia has sought economic influence over Latvia's energy sector by targeting the oil export terminal at Ventspils, which is one of the few ice-free winter ports in the Baltic region. In early 2003, the Russian state monopoly Transneft stopped oil deliveries to Ventspils, causing serious economic losses to the port. Transneft maintained that it cut back because it was sending oil to its own terminal at Primorsk, on the Gulf of Finland. The real aim of the move, however, appears to have been to force the management of Ventspils to sell control of the port to Transneft.

Russia has employed similar tactics in Lithuania. In July, Transneft halted crude oil deliveries to the Mazeikiai refinery, Lithuania's largest oil refinery. The rupture came just weeks after a deal between the Lithuanian government, the Russian state-controlled oil firm Yukos, and Poland's PKN Orlen that would have allowed PKN Orlen to purchase the facility. Most observers saw the halting of oil shipments as an attempt to tilt the deal in Yukos' favor.

Putin has also sought to use the energy weapon against Yushchenko. Moscow's decision in December 2005 to significantly increase the price of gas it sold to Kiev had some economic justification -- Ukraine had been paying below-market prices for Russian gas -- but it was clearly calculated to increase Ukraine's economic difficulties and weaken Yushchenko on the eve of Ukraine's parliamentary elections.

Russia's reemergence as a strong, self-confident political and economic actor in its neighborhood has coincided with another important trend: the intensification of the relationship between Russia and Germany, especially in the field of energy. Under former Chancellor Gerhard Schröder, Germany followed a "Russia first" strategy, with Berlin giving priority to improving its ties, especially its economic ones, with Moscow. The most controversial aspect of this growing economic cooperation has been the agreement to build a gas pipeline beneath the Baltic Sea directly connecting Germany and Russia. The agreement was signed shortly before Schröder left office in September 2005. (He has since gone to work full-time for the Gazprom-led consortium building the pipeline.) The deal provoked an outcry in Poland and the Baltic states because it would allow Russia to cut off the gas to these countries without affecting the supply to western Europe.

Eastern Europe's hopes that Germany's policy would shift under Chancellor Angela Merkel have been disappointed. Although Merkel has pursued a less overtly pro-Russian policy than did Schröder, the change has largely been one of tone and style, not substance. Merkel has continued to give priority to increasing economic ties to Russia and has refused to cancel the Baltic pipeline.

The intensification of Russian-German cooperation worries many eastern Europeans, who fear that it could lead to a "new Rapallo" -- that is, that Russia and Germany will collaborate behind the backs of eastern Europe and the West, as they did between the two world wars. These fears are exaggerated, however. The Treaty of Rapallo was a product of a particular set of circumstances: cooperation between two international pariahs who needed each other. Today, Germany is thoroughly integrated into the West through a myriad of ties. While it has important economic interests in Russia, it is not likely to pursue these at the expense of its links to the West.

To allay eastern European anxiety, Germany needs to balance its strategic interest in economic cooperation with Russia with a more dynamic Ostpolitik. The centerpiece of this should be an intensified effort to improve relations with Poland, which have significantly deteriorated since the era of former German Chancellor Helmut Kohl and are badly in need of repair. Berlin should therefore make the improvement of relations with Warsaw a top priority.

This effort at rapprochement, however, cannot be a one-way street. Poland also has to do its part. To date, the Polish leadership has shown little interest in reaching out to Germany. Such a policy, however, is short-sighted. Warsaw cannot afford a go-it-alone strategy, especially at a time when Moscow is flexing its energy muscles. It needs allies, above all in Berlin.

WASHINGTON'S OSTPOLITIK

Developments in eastern Europe demand greater attention in Washington. This is all the more urgent because the process of EU integration is stalled and Moscow, buoyed by rising oil prices, is in an assertive, self-confident mood. Eastern Europeans are unsettled by these trends, and they are looking for signs that the United States still takes their security seriously.

One of the most important steps Washington could take would be to ease the tighter visa restrictions imposed after 9/11. The restrictions are a source of great resentment throughout the region and have contributed to a decline in the number of eastern Europeans able to study in and travel to the United States. Easing these strictures would remove a major irritant in relations between Washington and the region and do much to improve the United States' image there, especially among the younger generation.

In addition, Washington should not try to sow division within Europe or play off one part of it against another, as some in the Bush administration are inclined to do. Such a policy is counterproductive. It will not only alienate key western European allies whose support is necessary to manage new security challenges, but it will also make the leaders of eastern European states uncomfortable. They do not want to be forced to choose between the United States and Europe.

What the United States should do instead is promote eastern Europe's closer integration into the EU. Germany's presidency of the EU in the first half of 2007 will provide a good opportunity to give political impetus to this enterprise. Such an effort could give new momentum to the German-U.S. partnership -- which was badly frayed in the Schröder years -- and reaffirm the United States' commitment to enhancing stability and security in Europe in the aftermath of the split over Iraq.

Washington should also encourage Poland to play a constructive role in Europe and to do more to strengthen its ties to its neighbors, especially Germany. A good relationship between Warsaw and Berlin is a prerequisite for stability in central Europe. Given its good relations with both countries, Washington could play an important role in fostering better links between the two.

Missile defense is likely to become an important issue in bilateral relations between the United States and Poland. Warsaw has expressed interest in the possible deployment of a missile defense system on its soil. Washington, however, should not take Warsaw's acquiescence for granted. Any agreement will need to be ratified by its Parliament, and the Polish government will need to show how a missile shield could enhance its own security, not just that of the United States. Washington needs to recognize the political nature of the debate in Warsaw and do a better job of providing the Polish government with factual data on the benefits of deployment on its territory. The impact on security in the broader Baltic region, including relations with Russia, will also need to be considered.

Finally, the United States should support Ukraine's integration into Euro-Atlantic institutions, including NATO. However, given uncertainty about the orientation and priorities of the Yanukovych government, it would be prudent to give Kiev time to show its colors before offering it a "membership action plan." However, the door to membership should be kept open for Ukraine if it succeeds in moving forward with a vigorous and coherent program of political, economic, and military reform.

Taken together, these steps would help put U.S. relations with eastern Europe on a firmer footing and strengthen the process of European integration. Ultimately, U.S. interests are best served by the emergence of a strong, cohesive Europe. A weak and divided continent is not an asset but a liability for the United States.