US subsidy spat overshadows transatlantic talks

Good morning and welcome to Europe Express.

It is a busy week on the foreign policy front, with the head of the EU’s diplomatic service travelling to the US at a delicate moment in transatlantic relations. We will look at how the recent spat over green subsidies risks poisoning the well, in addition to Europe’s failure to agree on a price ceiling for Russian oil shipments — a cap that has been pushed by Washington for months and should kick in next week.

If not resolved by tomorrow, US secretary of state Antony Blinken might have a word with his European counterparts on the sidelines of a Nato foreign ministers’ meeting in Bucharest.

Later in the week, EU council chief Charles Michel travels to Beijing for his first tête-à-tête summit with China’s president Xi Jinping whose zero-Covid policy has sparked protests over the weekend.

And in regulatory news, we will look at why the EU parliament is siding with farmers in their call to cull wolves and other large predators.

A good time to catch up

The secretary-general of the EU’s foreign service is in Washington this week for a set of regular meetings designed to streamline co-operation between Europe and the US. There are 369bn reasons why this trip will be a little less comfortable than normal, writes Henry Foy in Brussels.

Stefano Sannino arrives in the US slap bang in the middle of a simmering row over Washington’s new Inflation Reduction Act (IRA), a $369bn subsidy dump for green technologies that Brussels claims will unfairly lure its companies to relocate to the US, in breach of World Trade Organization rules.

The disagreement is rapidly growing into the worst EU-US falling out since the nadir of the Trump presidency, with European officials crying foul or demanding that the EU gets some special carve-outs to soften the blow.

Sannino and his host, deputy secretary of state Wendy Sherman, are not economic and trade officials. Close friends and regular interlocutors, they would rather talk about foreign policy aims such as closer co-ordination on the war in Ukraine, an aligned approach towards China, and the future of US-EU defence co-operation.

But senior EU officials admit that even as they stick to their lanes, the IRA will lurk like a bad smell.

“Are [the US] taking decisions without thinking about all the consequences for Europe? Yes,” said one.

“There is a risk that [the IRA] will have an impact on decisions that we have taken in the past and may take in the future,” regarding co-operation with the US, they added. “There is a lot of nervousness from that point of view on both sides of the Atlantic.”

The IRA spat comes at a particularly delicate moment. The US has played a monumental role in supporting Ukraine while also beefing up military deployments in eastern Europe to shore up Nato defences.

As such it is particularly frustrated at what it sees as the EU dragging its heels on providing financial aid to Kyiv, and an unwillingness among some EU members to take a harder line towards China.

At the same time, some EU capitals are becoming increasingly vocal about how western sanctions have hurt Europe more than the US, noting that European energy prices are far higher than in the US (which is also exporting lucrative LNG to Europe to fill in the gap left by Russian supplies).

“On the economic level, [EU-US relations] have always been based on competition,” said the senior EU official. “It is not like we are discovering anything now that we didn’t know existed before.”

Chart du jour: Brexit effect

While EU immigration to the UK has dropped post-Brexit, non-EU migrant arrivals have rocketed. Read Martin Wolf’s latest take on this and other perverse Brexit effects.

Culling wolves

The EU is desperately trying to revive its natural flora and fauna as part of its green goals, even proposing a “nature restoration law”. But it seems that some animals are less welcome than others, writes Andy Bounds in Brussels.

The European parliament on Thursday voted in favour of amending the protected status of wolves, bears and other large carnivores under the Habitats Directive. That could allow farmers to cull them to save their sheep. In France, more than 10,000 sheep are killed by wolves every year while, in Romania, bears kill a handful of humans every year.

The resolution, which is non-binding, passed by 306 votes to 225. The charge against the wolves was led by the European People’s party, the main centre-right group.

“Growing populations of large predators are threatening the traditional way of farming in several European countries, not only in mountainous regions where pastoralism is an important part of agriculture. They also have a wider effect on rural communities and on tourism”, said Herbert Dorfmann, EPP group spokesman on parliament’s agriculture committee, who championed the proposal.

“When populations change, their conservation status must follow.”

The EPP is the party of commission president Ursula von der Leyen, whose beloved pony was savaged to death by a wolf in September.

Presumably that will not affect her officials’ decision on whether to propose the parliament resolution as policy.

“We share the call to fully and better use the instruments available under the current legal and policy framework, with the aim to address conflicts between the wildlife protected species and livestock farmers,” the commission said. The commission will now assess the parliament’s recommendations and examine “where additional action would be needed”, it said.

What to watch today

1. European Central Bank president Christine Lagarde answers questions in the European parliament

2. EU foreign ministers meet in Brussels for a development council

. . . and later this week

1. Nato foreign ministers gather for a two-day meeting in Bucharest tomorrow

2. EU council president Charles Michel meets China’s president Xi Jinping in Beijing on Thursday

Notable, Quotable

If you chop up the resources excessively, if you don’t support big transformational projects, it’s doubtful that you’ll achieve a permanent impact

• Recovery scepticism: In an interview with the Financial Times, Natàlia Mas, the top economic official in the Catalan regional government is flagging the risk of Madrid squandering billions of euros in EU recovery funds by putting too much emphasis on small projects.

• Drone trial: Norway’s ban on Russians flying drones faces its most prominent test as a court case opens tomorrow against Andrey Yakunin, the son of a former close associate of president Vladimir Putin. Yakunin spoke to the FT from a jail in Norway, maintaining his innocence.