The answer is simple: certainly Germany. But above all Russia, cooperating with Berlin. The arrangement in the sphere of military and energy security is thus also simple. The greater the American presence in Central and Eastern Europe, the lower the chance of a return to the times of the Russian-German condominium. An invitation of President Andrzej Duda to the White House and talks with President Donald Trump are another step towards strengthening Polish security.

One and a half billion dollars. That much money, with its teeth clenched, Gazprom had to transfer to the accounts of the Polish state-owned energy company PGNiG. This is the result of an international arbitration decision that has been implemented by the Russian company, which is a body de facto implementing Kremlin policy. The arbitration concerned the inflated gas price that Poland had to pay to the Russians, the price that was accepted by Donald Tusk's cabinet in 2010 in an annex to the so-called Yamal contract. In fact, the battle for compensation started only after the Law and Justice (PiS) party came to power while the consistency and professionalism of the team of lawyers I brought to PGNiG as the vice-president of the company, played a huge role in this process. We showed that in the clash with Russia we do not fight a losing battle. Not only have we recovered a large sum of money for Poland and its citizens, thanks to which since July 1 the price of gas for individual consumers in Poland has dropped by 10 percent, but also our policy of energy diversification allows to completely give up Russian gas. At the end of 2022, when the Yamal contract expires, Poland will become independent from Russia in terms of energy. It will strengthen our independence and security even more. This is possible thanks to the alliance with the United States – although much is said about Fort Trump and increasing the American contingent in Poland, after all not less important is the development of energy cooperation between our countries.

• Read also: Will America Punish Germany?

Energy alliance

The cooperation in the domain of gas is one of the pillars of the Polish-American alliance. Under the rule of the Law and Justice party, Poland started to import liquefied gas from the USA, thus reducing its dependence on Russia. The first transport of American LNG was delivered to the President Lech Kaczyński LNG Terminal in Świnoujście in June 2017. In the fall of 2018, PGNiG signed long-term agreements with three American companies. This is intended to be one of the pillars of Poland's energy independence. Thanks to LNG, but also to the Baltic Pipe (the construction of the gas pipeline connecting Poland with deposits in Norway has just started) as well as own extraction, Poland will become fully independent from Russian gas, even being able to support its neighbors’ diversification efforts. The gas pipeline connection with Lithuania is already under construction, there is also an agreement among Poland, Ukraine and the USA, thanks to which the American gas imported to Świnoujście, would be send to the Ukrainian market. Besides, a possible nuclear power plant in Poland – discussions with the Americans on this matter are already being held – could also support Lithuania in terms of energy. President Andrzej Duda's visit to the USA and the arrangements made there confirm that American companies and capital will be the strategic partners in the Polish nuclear project. The value of the Polish-American contract for the construction of a nuclear power plant in Poland is worth about 30 billion dollars. Furthermore, Poland and the USA are united by their objection to the Nord Stream 2 – a Russian-German project that strikes at the safety of our entire region. It was the Americans who imposed sanctions which halted the construction of the gas pipeline, whilst at the beginning of June a bill, which significantly extended the scope of the sanctions, was presented to the US Senate. Its adoption would de facto make it impossible to complete Nord Stream 2 for good.

• Read also: The International Monetary Fund in Bosnia and Herzegovina – new support highlights widespread divisions

Military alliance

In the sphere of energy security, we have long had Poland and the USA on the one hand, as well as Russia and Germany on the other. But recently this contention has also moved into the area of military security. And so Germany, which skimps on military spending (consequently the Bundeswehr is in a deplorable condition), thus could hardly be regarded as a strong NATO ally, is protesting against the withdrawal of some US forces from their territory. As Trump has rightly pointed out on more than one occasion, Berlin receives free military protection without strengthening its defense itself and is even financing (through gas cooperation) an enemy of the West – Russia. Now the dissatisfaction of the Germans is probably due to the fact that a part of these withdrawn American soldiers will be relocated to Poland. Although during the meeting between Trump and Duda no specific declarations were made regarding this matter, it is known that the US military presence in Poland will be strengthened through the transfer of soldiers from across the Oder River. This means that more Americans will arrive to Poland’s territory than the 1,000 soldiers initially determined back in June 2019. As a reminder, today there are about 4,500 of them, including around 900 in the international NATO forces. On June 24, 2020, President Donald Trump received the President of Poland Andrzej Duda at the White House. It was the first official meeting of the US leader after the coronavirus pandemic which caused a freeze in direct contacts with foreign leaders. It confirmed Poland's status as the key ally of the USA in Central and Eastern Europe and one of the most important partners in NATO. Under Trump, Poland is also gaining importance in US policy towards Russia. We remember how Barack Obama's policy turned out. The Russian reset emboldened Putin to attack Ukraine and annex Crimea. That is why the Polish-American alliance is the worst-case scenario for Russia. It stands for a strong US presence in our part of Europe and, simultaneously, strengthening Poland. Moscow will do everything to undermine Poland's strategic partnership with the USA.

Janusz Kowalski – Secretary of State at the Ministry of State Assets and the Government Representative for the reform of ownership supervision over state-owned companies. Local Councillor in the city of Opole (2002-2006) and the Deputy-Mayor of Opole (2014-2015). Member of the Energy Security Bureau at the office of the President Lech Kaczynski. He has worked in the Bureau of National Security as well as in the Ministry of Economy (Bureau for the diversification of energy sources lead by Piotr Naimski). Former Vice-President of the Board at PGNiG S.A. From 2018 to 2019 Member of the Board at PWPW.

Author: Redakcja Warsaw Institute

More than 19,000 terminated visits in medical facilities, cancelled scheduled treatments and patients being hastily transported to other hospitals in order to perform life-saving operations. This is not a scenario of a disaster movie, nor the effect of the global pandemic caused by the SARS-CoV-2 virus. This is the result of a completely different virus – a digital work of engineers whose ill-considered or irresponsible activities can destroy the systems and computer networks of life-saving units.

Exactly three years ago, the day before one of the most important national holidays in Ukraine, the most devastating cyber-attack in history began. The operation, connected to the 2014 Hybrid War between Russia and Ukraine, hit enterprises and governments on every continent. NotPetya, taking advantage of a loophole in the SMB protocol, made public by Shadow Brokers, took control of the victim's computer only to irrevocably destroy all data stored on it. In the first hours of the attack, more than 12,000 computers were infected in Ukraine alone, which was the target of the operation. The exact number of all infected machines is unknown, however, more than 2,000 companies and enterprises worldwide suffered from the attack, according to data of Kaspersky company.

NotPetya, whose authorship is attributed to the Sandworm group that originated from the Russian military intelligence, spread automatically using self-replicating mechanisms. Although the authors of the malicious code anticipated the possibility of “saving” certain targets by placing a specific vaccine on selected machines [1] protecting them from the activation of the irreversible mechanism of data destruction, yet the facilities providing medical services were not given any special treatment. In the United States the infrastructure of hospitals, such as Princeton Community Hospital (Princeton, WV) as well as Heritage Valley (Beaver, PA and Sewickley, PA) were attacked. The lack of access to patients’ medical records and specialist equipment controlled by the infected computers resulted in cancellation of scheduled operations. The situation was brought under control and within a few days the facilities returned to full operational capacity [2], but it is not hard to imagine the magnitude of problems that the attack caused to the patients of the affected hospitals. The financial losses were also enormous – the pharmaceutical company Merck (producing, among others, medicines supporting cancer treatment) estimated its financial losses at USD 1,300,000,000 [3]. 30,000 personal computers and over 7,500 servers connected to the company's network were destroyed.

• Will America Punish Germany?

• The International Monetary Fund in Bosnia and Herzegovina – new support highlights widespread divisions

On the other hand, the statistics mentioned at the beginning of the article are the result of North Korean WannaCry ransomware. Korean malware, similarly to NotPetya, used exploits stolen from the NSA, which allowed to take control of the computer's operating system. However, unlike NotPetya, it allowed for the recovery of encrypted data after the victim paid a fee in bitcoins which was set by the authors. Cybercriminals associated with the North Korean regime paid out BTC 52.2 from a digital wallet in which they collected ransoms. At the time of the withdrawal, the ransom was worth USD 143,000 – today around USD 500,000. This is the value of the lives of people who were waiting for the specialist help in infected hospitals. The authors of the malware probably did not reflect on deliberately infecting the hospitals, but they did nothing to protect the medical facilities from the jeopardy that was spreading in the blink of an eye. WannaCry installed itself on 3,000-4,000 new computers every hour. In England alone, 80 out of the 236 National Health Service (NHS) units were infected. 34 of them were severe enough that they were not able to provide services. The losses were estimated at GBP 92,000,000.

While a visit to a family doctor cancelled due to a cyber-attack could be disappointing at most, a postponed planned procedure or operation can cause serious problems. Neurosurgeons from Tyumen Hospital had to complete the brain surgery of a 13-year-old girl without the use of specialist equipment to monitor the patient's condition, after the LCD screens went out and computers prompted to pay the ransom.

In December 2019, a deliberate attack was aimed at the Warsaw Coma Clinic for Children. Hospital employees received phishing emails with infected documents. After their careless opening, the malware led to the freeze of the whole IT system of the clinic. In this case the life of the patients was not endangered and the clinic's data was recovered from the back-up copies. Cybercriminals deliberately attacked the medical facility, demanding a ransom of PLN 30,000. Two months earlier, a similar situation occurred in three American hospitals (Alabama) and seven hospitals in Australia [5]. Likewise, the attacks were motivated by the desire to extort the ransom payment.

During the global COVID pandemic, criminals did not slow their pace down. The information about the attacks targeted at hospitals were heard from all parts of the world in recent months. Czechia, France, the United States are just the examples. Most of the attacks, as the previously described ones, had only one aim – to make the criminals rich. These individuals were hoping that the targeted hospitals and laboratories will be an easy prey in the hard times. Other ones were politically motivated – multiple institutions providing various kinds of aid were attacked in order to fuel the negative social moods in the affected countries [6]. An attack on the US Department of Health and Human Services (HHS) in March 2020, which, according to experts, was aimed at disrupting the pandemic-oriented actions of the US administration, is one of the examples. Other attacks, accompanying the pandemic, are related to industrial espionage. The race for medicines and a vaccine, which will generate a fortune in the future, caused the laboratories of institutions conducting research on SARS-COV-2 coronavirus to be repeatedly attacked by hackers in recent weeks. Their objective was to steal as much information regarding the work progress on the virus as possible. Such attacks were made public by laboratories in the USA, England and Israel, among others [7].

Wiktor Sędkowski – graduated in Teleinformatics at the Wrocław University of Science and Technology, specialized in cybersecurity field. He is an expert on cyber threats. CISSP, OSCP and MCTS certificates holder. Worked as an engineer and solution architect for leading IT companies.

Author: Redakcja Warsaw Institute

Claiming that Berlin is not paying enough towards NATO, on 15^th June 2020 President Donald Trump declared a reduction in the number of U.S. troops stationed in Germany. If his words become reality, the contingent of US soldiers stationed in the NATO’s northern flank will be diminished by as much as 9 500.

As per the The Wales Declaration on the Transatlantic Bond adopted at the Newport NATO Summit in 2014, all NATO members need to increase their defence expenditure to reach 2% of their state’s GDP by 2024, including the increasing of spending on technical modernization (20% of total defence expenditure) in the ten-year perspective. In the final summit declaration, the spending cap was included as a soft notation rather than a punishable requirement. This was a necessary compromise aimed at a large group of countries that were not so keen on increasing their defence budgets and not yet ready to take some of what was agreed in Whales as an obligation.

Read also: The International Monetary Fund in Bosnia and Herzegovina – new support highlights widespread divisions

Since the summit six years ago many countries are still to increase their spending to the desired level. In 2019 the aim of 2% GDP being spent on defence was achieved by nine members: Bulgaria (3,25 %), U.S (3,24%), Greece (2,24%), Estonia (2,13%), Great Britain (2,13%), Romania (2,04%), Lithuania (2,03%), Latvia (2,01%) and Poland (2,00%). At the same time, rest of European member states were still under optimal level, including Germany, whose defence budget was as low as 1,38% GDP.

Today it seems that 2020 will bring the end to the free-riders era, that saw U.S. willingly covering the growing gaps in NATO’s expenses caused by NATO members avoiding the agreed defence spending. After weeks of rumours, President Donald Trump has officially declared that he is going to reduce the number of American troops stationed in NATO’s northern flank, saying: ‘we're protecting Germany and they're delinquent. That doesn't make sense. So, I said we're going to bring down the count to 25,000 soldiers.’

The POTUS decision was criticised by diplomats both from Germany and U.S. ‘America's forward presence has never been more important than it is today, as our nation confronts the threats to freedom and security around the world posed by Vladimir Putin's Russia and the Chinese Communist Party’ – said Liz Cheney,  Republican Representative.

Noting that more open dialog is necessary in this case, NATO tried to be a mediator in the conflict between Washington and Berlin with little success. From NATO’s point of view, Trump’s decision is does not make any sense, especially from the military point of view. American troops have been stationed in Germany non-stop since as early as 1945. Thus, U.S. Army Europe has been a witness to the most crucial events in the German history, like the end of World War II and the Reunification of 1990. When the Berlin Wall fell, 2000 American soldiers were present all-around West Germany. Considering the past animosities, the beginning of the German-American military cooperation was quite a challenging undertaking. Defeated Germans were forced to accept Allied presence in their own country. This should also be remembered, that after the end of WWII all of German soldier were captured and sent to POW camps in US and Europe. In all, 425,000 German prisoners lived in 700 camps throughout the United States, many of whom never returning to their old homeland. Due to the power vacuum and the lack of defence capabilities, the Americans alongside the Brits and French decided to permanently remain in Germany, as well as in the whole Western Europe to provide security and balance to the growing threat from the Soviet Russia.

As of today, American soldiers are stationed in 41 bases and facilities scattered around Germany like 5th General Hospital – Stuttgart-Bad Cannstatt, Artillery Kaserne – Garmisch-Partenkirchen, or the Ramstein Air Base in Ramstein-Miesenbach – which is also the biggest American’s air base in Europe. However, the most important American base in Germany is located near to Stuttgart. This facility serves as the headquarters of American Army in Europe – US European Command (USEUCOM) – from where all American’s activities in all 51 European countries are being coordinated.  The main mission of the US troops in Europe is to support NATO Allies, deter Russia, enable global military and humanitarian operations and counter trans-national threats in order to defend the Homeland. In total Germany is now home to more than 38 000 American troops, making Germany the second largest American contingent only to Japan.

Read also: “We can hardly imagine the UK without the presence of Poles" – Boris Johnson writes about Polish-British friendship on the occasion of VE Day

It is important to remember that should Donald Trump’s decision to limit the overall number of American troops in Germany turnout to be true, the European security would be under serious threat. Firstly, any disagreement between Alliance members will be viewed as NATO’s unity being undermined, something that is extremely desired by Russia. Secondly, the Europe-US transatlantic relation would also feel the negative effects of this decision. Europe would no longer feel sure about U.S. support of European security issues. This is crucial also from the Polish point of view as Warsaw views the American presence in Europe as a security guarantee, deterring Russia and China away from the region. Thirdly and lastly, Donald Trump who is often called a “Game Changer” in international relations, seems to try to change American approach to foreign relations to be less euro-centric. However, doing so will make many believe that USA is no longer treating Russia as the main threat to global security, instead putting China as the greatest contemporary threat.

If the German contingent will ultimately be limited, the U.S is likely to want to relocate the 9 500 troops somewhere else in Europe. Many commentators suggest Poland as a new destination – both thanks to the close PL-US diplomatic ties and the strategic importance of Poland’s central location. However, Ambassador Kay Bailey Hutchison (Permanent Representative of the United States to the NATO) said that for now, Washington is still looking at where the US troops could be deployed to in order to be the most effective in protecting Europe and deterring threats to its security.

Julia Grzybowska – President of the Board of Warsaw Institute. A graduate from MA studies in European Studies at the University of Warsaw (with distinction). A scholarship holder and graduate of the European Academy of Diplomacy who specializes in Internal Security. She gained her professional experience in the governmental, non-governmental, and media sectors.

Author: Redakcja Warsaw Institute

Extreme situations caused by the spread of COVID-19 disease have brought to light the deep-seated structural problems of many nations, highlighted political tendencies of those in power and intensified internal conflicts of many societies. Bosnia and Herzegovina (BiH) is no exception to this principle. The country has once again heard news of corruption, severe shortages in healthcare and weaknesses in its social security system. The infamous phenomenon distinguishing BiH, however, was the conflict which lasted over a month and made it impossible to use the loan granted to the country by the International Monetary Fund (IMF) – seemingly, the necessary means to save the crisis-stricken economy.

Bosnia and Herzegovina is one of the five countries, along with Albania, North Macedonia, Moldova and Kosovo, which have been supported under the Rapid Financing Instrument (RFI) by a loan dedicated to help the healthcare and to alleviate the economic consequences of the extraordinary situation caused by the pandemic of the new coronavirus. The EUR 330 million grant included a favorable interest rate (1.05%) and a grace period of 39 months. The allocated amount makes BiH the biggest beneficiary among the aforementioned countries of the scheme.

The future problems related to the loan were already predicted at the stage of drafting the letter of intent, required when applying for IMF’s aid. Politicians from the Croatian Democratic Union of BiH (HDZ BiH) were obstructing its sending, pressing for an unprecedented inclusion of the cantons (strongly autonomous units of BiH Federal administration) on a par with the Federation of Bosnia and Herzegovina, the Republika Srpska and the Brčko District, which are traditionally present in such documents. The compromise was reached on April 11, when the leaders of the three largest parties, assisted by the EU delegation, IMF representatives and the US Ambassador Eric Nelson, agreed on the distribution of funds, according to which the Federation of BiH accounted for 62% of the amount and the Republika Srpska for 38%. The smallest one, the Brčko District, was allocated half a percent of the sums allocated to the larger entities. The cantons were eventually regarded as constituents of the Federation.

Bosnia and Herzegovina's administrative and territorial organization is based on the Dayton Peace Agreement (DPA) and the country's constitution being its part. The document which ended the war lasting from 1992 to 1995, divided the country into the Republika Srpska and the Federation of Bosnia and Herzegovina. The former is distinguished by a relatively homogeneous population (82% of the inhabitants are Serbian) and a high degree of centralization. The Federation of Bosnia and Herzegovina, created in 1994 to end the fights between Croatian and Bosniak forces (Bosnian Muslims), was further divided into ten cantons. Each of them has its own parliament, government and a number of autonomous powers. The Federation is inhabited mainly by the Bosniaks (70%) and Croats (22%). The Brčko District is a separate administrative unit, in existence since 2000, which accounts for less than 1% of the country’s area. An extremely complex political system is a source of imperishable tensions, further, an extensive and costly administration effectively blocks the country's development and creates a fertile ground for corruption at all levels of government.

• Read also: Will the Russians reduce natural gas prices for their allies?

After the approval of the International Monetary Fund's board on April 23, the abovementioned EUR 330 million were transferred to the Central Bank of Bosnia and Herzegovina. According to the adopted procedure, a special decision of the Council of Ministers of BiH had to be delivered so that the Bank could transfer the funds to the relevant ministries. Despite the principles and formulations previously set out in the letter of intent, the Federal Minister of Finance – Vjekoslav Bevanda, continued to press for raising cantons to a rank equal to the other BiH’s components.

The conflict which lies at the root of the stalemate that lasted over a month is a divergent vision of the state system of the two most important parties of the Federation – the Bosniak Party of Democratic Action (SDA) and the Croatian HDZ BiH. The first one, due to the size of its political base, advocates Unitarianism and the transfer of competencies to the highest – state – level of power. The Program Declaration adopted at the party's congress in September 2019, stressed the desire to pursue the creation of the Republic of Bosnia and Herzegovina – this name was is use during the war following the secession from the Socialist Federal Republic of Yugoslavia (SFRY).

• Read also: Digital Heart of the Three Seas

It was not until the peace agreement that the fights ended and the country was renamed as Bosnia and Herzegovina – a name accepted by all parties of that conflict. Furthermore, the party's program included an idea that provided for the resignation of the current Presidium (three presidents representing the three constitutive nations of BiH) and the appointment of a one-man president. The SDA also opposes new administrative divisions and supports constitutional reforms that would centralize the system and decision-making processes within the country. On the other hand, the strongest party of Bosnian Croats is pushing for the idea of creating a third entity, which would consist of regions inhabited mostly by the members of this nation. It was this goal that was meant to be served by the unprecedented inclusion of cantons in the agreement with the IMF. Such recognition would give the cantons an international subjectivity and could legitimize the future aspirations of Dragan Čović, President of the HDZ BiH. According to the latest census, Croats represent 15% of Bosnia and Herzegovina’s population. The party of D. Čović currently holds power in three cantons – Posavina, West Herzegovina and Canton 10. In all of them the vast majority of the inhabitants are Croatian. In the Herzegovina-Neretva Canton, the HDZ BiH shares power with the SDA, which reflects the composition of the region's population – 53% Croats and 41% Bosniaks. The second most important demand of the party is to change the way the heads of state are elected. Currently, BiH's Presidium is composed of the representatives of three nations, whose ethnicity is not taken into account in the election. The aim of HDZ BiH is the principle that each nation will elect its own representative. The election of Željk Komšić, who, in the opinion of D. Čović, was chosen by the Bosniak electorate to represent the Croats, has given a new dynamic to these requirements. In his efforts to achieve even tighter decentralization and to strengthen ethnic divisions within the country, the Croat allied itself with Milorad Dodik, a Serbian member of the BiH Presidium. The foundation of his political strategy is to strive for the transfer of state competences to the level of the Republika Srpska, which his party, the Alliance of Independent Social Democrats (SNSD), has been ruling for years.

The nature of the canton economies ruled by the HDZ BiH, which are strongly dependent on tourism thus currently deprived of income, has led V. Bevanda to resign from the previously required clause and release the funds. In a decision delivered on June 3 to the Central Bank of BiH, the cantons were presented as an integral part of the Federation. The formal avoidance of their distinction took place after the approval by the Parliament of the Federation of BiH of the amendment to the budget for 2020, according to which 50% of the credit funds will go to the cantons. However, the repayment of the entire amount will be the sole responsibility of the Federation's government. The budget amendment, favorable for the Croatians, was already adopted on April 28, which indicates the importance they attach to building a formal basis for their political agenda.

Withholding the necessary funds, apart from the immediate negative consequences for the country’s economy and society, sends a disturbing signal to the widely understood international community. The support of international entities still remains a significant part of Bosnia and Herzegovina's finances. According to Andrew Jewell, the IMF representative in BiH, the current blockade of financial aid may have an impact on the organization’s future decisions regarding the cooperation with the country. Moreover, this situation does not facilitate the creation of an attractive investment profile of the country, in which the lack of such investments is so profound.

Jakub Bawołek – A graduate from MA studies in international security at the University of Wroclaw. He gained professional experience in the media, the Polish Embassy in Sarajevo and the Chancellery of the Senate of the Republic of Poland.

Author: Redakcja Warsaw Institute

Russia’s allied countries – Belarus, Armenia and recently also Kyrgyzstan – are demanding that Moscow reduces natural gas prices. Such demands have been formulated in Minsk or Yerevan for a long time, but nowadays, in the face of gas markets crash in Europe (among others), they are intensifying even more. Nevertheless, there is no indication that the Russians will make any concessions. And certainly not for free.

The matter of Russian natural gas supply to the countries of the Eurasian Economic Union (EAEU) has gained attention in recent months, when Armenian Prime Minister Nikol Pashinyan and Belarusian President Alexander Lukashenko agreed to cooperate in order to obtain Moscow’s approval to reduce the natural gas price. Furthermore, more insightful observers could also note that Kyrgyzstan has also joined Armenia and Belarus over time. Thus, at present, all EAEU members who import Russian natural gas (Kazakhstan is also a member of the Union, but it is a gas exporter), are demanding that the Russians change the conditions of cooperation. Where did such a situation come from, if we are referring to the countries allied with the Kremlin (whether by choice or by force)?

• See also: Will the dollar remain an instrument of US international dominance?

First of all, the reality of natural gas supplies in the EAEU has to be understood. In the case of Armenia, Belarus and Kyrgyzstan, the Russians have a monopoly over natural gas, controlling the transmission infrastructure, and at the same time remaining the dominant (or even sole) gas distributor. Therefore, the current situation has nothing to do with the principles of the free market. On the one hand, Russian Gazprom sells natural gas to Armenia, Belarus and Kyrgyzstan, while on the other hand, its local subsidiaries are formal purchasers and further distributors of this raw material. In practice, this means that natural gas prices for Russia's allies are set politically, and are often a subject of broader negotiations. Such situation is particularly evident in the case of Belarus, where talks on the energy cooperation terms are regularly combined with negotiations on the general principles of further Russian-Belarusian integration.

Although relations between Russia and its allies could be rough and difficult, in principle, the Kremlin has so far provided relatively favorable conditions for its partners’ natural gas imports. Apart from the periodic crises, when gas supplies served the Russians as a tool of coercion in negotiations, the EAEU member states could generally count on significant reductions, in contrast to, for example, prices in Europe. However, this situation has dramatically changed in recent months, with the unprecedented crash of natural gas markets (an oversupply in storage after a very warm winter with a simultaneous outbreak of the COVID-19 pandemic).

Currently, the “price at the border”, i.e. the price at which Gazprom's subsidiaries buy the Russian gas, is USD 127 per 1000 m³ (35314.7 ft³) in the case of Belarus and USD 165 per 1000 m³ in terms of Armenia and Kyrgyzstan. However, the price in Western Europe at the end of May 2020 was about USD 40 per 1000 m³ (in the Dutch TTF hub). Nevertheless, such a diametral change does not affect the conditions of natural gas supply within the EAEU. The price of the raw material in the case of Armenia, Belarus or Kyrgyzstan is fixed and not related either to market prices or the crude oil rates.

Consequently – do the Russian allies have a chance of obtaining more favorable conditions for natural gas import in the next few months? At the moment it seems that rather not necessarily. Especially since Russian Gazprom itself is also facing serious business problems (low commodity prices, difficulties in implementing the Nord Stream 2 project, etc.) and because of that it might be reluctant to grant additional discounts on the gas it sells.

If there were to be any concessions from the Russians, these would be limited and rather short-lived, e.g. be in effect only for a few months. Furthermore, it could be assumed that any discounts would also have to be a part of a bigger picture, being linked, for instance, to political or business concessions from Belarus, Armenia or Kyrgyzstan.

It is, however, definitely unlikely that the Kremlin would be able to do its allies a favor in terms of the fundamental policy, i.e. agreeing to a generally understood revision of the natural gas pricing system within the Eurasian Economic Union. Both Armenia and Belarus are demanding uniform transmission tariffs to be set throughout the EAEU, which in practice would prevent the Russians from setting completely arbitrary prices of raw material for their allies. Yerevan and Minsk argue that this type of task results directly from the previously adopted goal of creating a common gas market by 2025. The point is, however, that the authorities in the Kremlin have a different perspective.

• See also: “We can hardly imagine the UK without the presence of Poles" – Boris Johnson writes about Polish-British friendship on the occasion of VE Day

Vladimir Putin himself spoke on the subject in May, unequivocally rejecting the possibility of accepting the arguments of Armenia and Belarus at this stage. As the Russian president pointed out, the unification of transmission tariffs will only be possible after the introduction of… a common budget and tax system within the EAEU. For the time being it would be difficult to get a clearer message about the Kremlin's position on natural gas cooperation with its allies.

Mateusz Kubiak– a graduate of Eastern Studies and International Relations at the University of Warsaw. Caucasus geopolitics expert.

Author: Redakcja Warsaw Institute

The US dollar (USD) – one of the world's most powerful currencies. Present in international trade even where the United States is not a party, used to settle oil market transactions, a strong foreign policy instrument. The US is aware of this, using the dominant position of its currency to build economic power and to fight in the global game of influence.

In 1944 in Bretton Woods, USA, delegates of the allied Member States decided to establish an international monetary system based on maintaining fixed exchange rates for US dollar, which in turn was exchangeable for gold on demand. Thanks to these decisions, the global position of the dollar has grown significantly. After Nixon abolished the gold parity in 1971, the dollar became a fiduciary currency – its value was now determined by the central bank basing on the exchange rate.

In order not to forfeit the dominant position of the dollar, the United States decided to conclude an agreement with Saudi Arabia to unify the oil prices. From that moment onwards, all oil sales were to be made in US dollars. This is how the system of petrodollars was born, the one, which generated an artificial demand for the American currency worldwide.

An instrument of power

Consequently, the USD is now the dominant global reserve currency used by numerous foreign governments. The petrodollar system has provided the US with another, not less important advantage – the US has now been able to maintain a steady deficit in its balance of trade, incurring debts with foreign entities. As a result, American economy is one of the largest and fastest growing in the world, while being the most indebted ($23 trillion in 2019). Thanks to the strong and stable dollar, some countries are also willing to choose the USD as their official currency, which is referred to as dollarization.

• See also: Digital Heart of the Three Seas

The dominant position of the dollar is a powerful foreign policy instrument, providing the possibility of enforcing the compliance with economic sanctions against American opponents. Both domestic and foreign entities are reluctant to conduct business with the addressees of sanctions due to the possible penalties. For example, BNP Paribas has been sentenced to a $9 billion fine for violating sanctions against Iran, Cuba and Sudan. Other entities, such as HSBC Holdings Plc, Standard Chartered Plc, Commerzbank AG, United Co. Rusal and Clearstream Banking SA had to pay high fines for similar violations as well. A glaring example was also the dispute with Iran when the US imposed sanctions on the Iranian economy, simultaneously threatening to punish anyone who would continue trading in dollars with this country. This decision had a negative impact on Iran's trading partners, primarily China, Turkey, South Korea, India and Germany.

Foreign policy impact on the USD exchange rate

The strength of the dollar is guaranteed by the system of petrodollars as well as the common use of this currency for transactions in international trade. A weaker and uncertain economic situation of competitors due to sanctions (e.g. Iran, Russia) results in an outflow of money to the safe American harbor. This is particularly evident in recent times, when the global lockdown and the problems of other economies, additionally compounded by the price war in the fuel market, have pushed investors to embrace the USD, causing its strong growth. The exchange rate of the American currency is also influenced by the popularity of the US President. When POTUS is perceived as a strong executive body, which cannot be denied to Donald Trump, it encourages stockholders to invest in the dollar.

Nevertheless, it is difficult to assess the impact of the trade war between the USA and China. The dollar's exchange rate in this respect will depend on the global economic performance of the United States (which so far has been robust), the actions of the Federal Reserve and the monetary policies of central banks around the world. What is certain, however, is that the main trading partners of the US – China and Japan – possessing a significant share of US debt, will not allow a sharp devaluation of the dollar which would result in the depreciation of their own reserves.

Should we expect an end of the dollar domination?

Although the developing energy sector is increasingly influential over the GDP growth of the US, America's wide economic diversity reduces its dependency on this industry. Through diversification, the authorities are trying to protect themselves from the possible effects of losing the dominant dollar position, which seems to be more and more likely. Last year, Saudi Arabia threatened to abandon petrodollars if the US continues its attempts to subjugate OPEC states by pushing through the proposal of the No Oil Producing and Exporting Cartels Act (NOPEC), which would make the actions of cartel member states dependent on US judiciary.

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In turn, Iran and Venezuela have signed oil contracts in their own currencies instead of dollars. In recent years, China has introduced forward contracts for oil denominated in yuan, while Russia has concluded a number of trade agreements with China and Iran, which completely ignore the US dollar. Europe is also showing efforts for an alternative system of reserve currency, which in the future may result in the substitution of the dollar by the euro – its main competitor. Less consumption of fossil fuels as a consequence of the progressive transition to renewables, especially in Europe, may reduce demand for the dollar, although it is unlikely to cause its significant devaluation until the world finds a proper substitute.

The loss of the dominant position of the dollar would certainly be reflected through a decline in US geopolitical and economic influence. At the same time, it would force the US to reduce its spending and potentially also hit the so far booming American economy. It seems that the Americans have to be prepared for such a scenario in times when the global balance of power is becoming multipolar and the position of the dollar, although strong, is no longer as “inviolable” as it used to be.

Jakub Łyjak– graduated from law at the University of Adam Mickiewicz University in Poznań and economics at the Poznań University of Economics. He also studied Business Administration (Betriebswirtschaftslehre) at the Westfälische Wilhelms-Universität in Münster. He gained professional experience in the field of law and non-governmental organizations, including Polish Entrepreneurship and Leadership Association and Center for American Studies.

Author: Redakcja Warsaw Institute

While Russia's activity in the Arctic is relatively widely commented on, much less known are the recent actions taken by the Russians at the opposite pole – in the Antarctic. Despite the international ban on the extraction of natural resources there, Moscow recently conducted seismic surveys, estimating the abundance of local oil and gas deposits. There is still a long way to go before the actual race for Antarctic resources, but this issue will increasingly appear in the public debate.

This February, the Russian state-controlled company Rosgieołogija announced the completion of the seismic surveys program as part of the so-called “65^th Antarctic Expedition”. During this campaign, sections of the Riiser-Larsen Sea off the coast of Eastern Antarctica with a total length of about 4,400 km (2,734 mi) were profiled. This was the first such case on the part of Russians since the 1990s. As explicitly stated in the official press release, the aim of the research was, among others, to investigate the “oil and gas potential of the Antarctic shelf.”

The following stage of the “Expedition” was summarized two months later, in mid-April. As reported by Rosgieołogija again at that time, the company also carried out aero-geophysical surveys (specialist photographs taken on board the aircraft, which help to make estimates of the area's raw material abundance) on a total area of about 15,000 km² (5,791 sq. mi) in the south-western part of the Queen Mary's Coast. Although this time there was no direct indication of the motivations behind the conducted surveys, it seems obvious that their reason was again the desire to recognize the raw materials potential of the region.

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The aforementioned announcements have gone unnoticed, which is hardly surprising in the face of the ongoing COVID-19 pandemic. However, the matter of interest has its significance, as it is commonly estimated that there are huge deposits of oil and gas and other natural resources in the Antarctic. For instance, the Russians themselves highlight that up to 70 billion tons of hydrocarbons can be expected in the sectors they have profiled around the Antarctic so far. What then stands in the way of these resources being exploited?

First of all, at present the so-called Antarctic Treaty of 1959 remains in force, to which a number of countries, including Russia, but also the United States or Poland, are parties. One of the subsequent protocols to the aforesaid agreement, the so-called Madrid Protocol of 1991, prohibits any activities leading to the extraction of natural resources in the region, except for scientific research. This provision is to remain in force at least until 2048, when a decision on its maintenance or revision has to be made. However, this issue will certainly be discussed many years in advance – through official conferences and meetings as well as behind-the-scenes trading and lobbying activities.

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Secondly, for the time being, the climatic and geographical conditions in the region are also an issue. Antarctica remains ice-capped, essentially being isolated from the rest of the world. As a result, regardless of any Antarctic Treaty provisions, it is hard to imagine that any mining project around the South Pole currently has its economic and business justification. This situation will only change over the next decades and with the expected melting of glaciers (in addition to possible further technological advances). The “opening up” of the Antarctic to man will at the same time enable more profitable attempts to exploit the natural resources there.

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Even if oil and gas production in the Antarctic is still a distant future, it is already worth following the developments in this area. This applies both to possible further drilling and research in the region, but also to the strategies and concepts released by the individual countries. Much is said about the race for the Arctic (including the United States, e.g. through the efforts of Donald Trump to buy Danish Greenland), likewise the exploitation of Antarctic resources may become a geopolitically significant topic in the next decades.

Coming back to Russia itself – who knows if Moscow does not believe that when the extraction of oil and gas in the Antarctic is possible (and profitable) one day, then Russian entities will be in a privileged position, having experience of similar undertakings at the opposite geographical pole – in the Arctic. Although the pace of development of Russian projects in the Far North has slowed down due to the sanctions imposed by the USA and the European Union after the annexation of Crimea in 2014, these restrictions have not stopped the development of Russian competences in the LNG sector and do not prevent oil companies (such as Rosneft) from formulating ambitious investment plans. Only time will tell whether the Russians' strategy towards the Arctic will also prove useful in the Antarctic.

Mateusz Kubiak- a graduate of Eastern Studies and International Relations at the University of Warsaw. Caucasus geopolitics expert.

Author: Redakcja Warsaw Institute

Much like to the rest of the world, Poland is painfully suffering from the crisis triggered by the Wuhan coronavirus pandemic. Thanks to relatively early and decisive measures taken by the Polish government, the course of the pandemic by the Vistula did not take as dramatic development as in many other European countries.

On the contrary, it could be stated that Poland is one of those countries in the European milieu that is handling the pandemic well. The fact still remains, however, that preventive measures, social distancing and, above all, freezing of entire branches of the economy, affect the economic situation of the country.

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Despite the difficult situation, positive information emerge as well. Microsoft – the global technological tycoon, announced at the beginning of May its decision to invest 1 billion dollars in Poland. The funds are to be earmarked for the creation of the first region of data processing in Central and Eastern Europe. As Mark Loughran, CEO of the Polish branch of Microsoft said, Poland has a chance to become the digital heart of Europe. Undoubtedly, this investment is a significant step in this direction.

It is particularly salient that Microsoft's project is combined with the establishment of a strategic partnership with the National Cloud Operator (OChK), a Polish company established by PKO Bank Polski and the Polish Development Fund (PFR). Thanks to this, OChK gains the opportunity to extend its offer with solutions of the Azure cloud platform, which is crucial for the development of the Internet of things (IoT) and artificial intelligence (AI) in Poland. This has a very quantifiable relevance for the digital transformation not only of Polish enterprises, but also of public administration.

Microsoft's investment is particularly significant in the face of profound transformations around the world. Accelerating the development of the Polish economy based on the application of state-of-the-art solutions and technologies is a huge opportunity for wise and effective recovery from the current crisis.

In September 2019, the National Cloud Operator concluded a strategic partnership agreement with Google, resulting in the creation of the Google Cloud region in Poland, which constitutes the hub of technical infrastructure and software for the entire region of Central and Eastern Europe. The investment of another global tycoon makes the bold vision of the Polish Digital Valley, i.e. establishing Poland a technological hub for the entire region, more realistic. The importance of easy, convenient, but also safe access to most of the modern solutions for the economy cannot be stressed enough, especially when strong developmental stimuli are needed.

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Nevertheless, cloud solutions are still used to a very limited extent. Consequently, it is highly significant that Microsoft intends to launch a long-term program for improving digital competences on the Polish labor market in parallel to its investment. Training courses, workshops and hackathons in the fields of cloud computing, the use of AI and machine learning, advanced data analysis as well as IoT are foreseen under the program. According to the plans, 150,000 employees, IT specialists, teachers, students and others from Poland would participate in the scheme.

The investment and development of the national cloud in the country by the Vistula accord seamlessly with the plans to create a regional technological hub in Poland. This is yet another example of serious financial and organizational involvement of the USA in the Three Seas Initiative. In a way it could be stated that Mike Pompeo's $1 billion investment promise in Three Seas, made during the Munich Security Conference, begins to materialize. Certainly, the U.S. Secretary of State intended a completely different venture, related to investments in the energy sector and the Three Seas Investment Fund, nevertheless, it would be hard not to notice the broader context of Google and Microsoft’s operations in Poland. Undoubtedly, the business driver is dominant, but it demonstrates the importance and location of Poland as well as the region in American plans worldwide.

Microsoft's undertaking should also be perceived in the context of the Three Seas Initiative, whose main objective is to strengthen cooperation between the Member States, especially in the field of infrastructure. This concerns energy and transport, but also digital infrastructure. From this perspective, locating two data centers of key importance for the region in Poland by two leading American companies in the world, places our country in the very heart of Three Seas’ digital connections. This is an outstanding starting point for Poland’s further actions.

Paweł Pawłowski – Warsaw Institute’s Expert. He graduated law at the University of Warsaw, where he is currently a PhD student at the Institute of Sciences of the State and the Law. A graduate of a scientific internship at The Institute of World Politics and Babson Entrepreneurship Program at Babson College.

Author: Redakcja Warsaw Institute

On 25 March, less than two months after the formation of the government, a vote of no confidence against Prime Minister Albin Kurti was passed. The road to the collapse of the young government was opened by the prospect of a state of emergency and the support of the President’s initiative by the Democratic League of Kosovo (LDK), a grouping included in the government which, in turn, was critical of this idea. However, Isa Mustafa, LDK’s leader, admitted that the real reason for the deposition of the Council of Ministers was the Prime Minister’s protest against the unconditional withdrawal of 100% duties on goods imported from Serbia, which seriously threatened relations with the United States, Kosovo’s most important ally. The recent conflict has not only divided Kosovo’s internal scene, but has also highlighted the increasing friction between the USA and the EU.

The early parliamentary elections in October 2019 brought the opposition parties to power. One of them was Albin Kurti’s anti-establishment party, Vetëvendosje (English: Self-determination), which reached first position. Kurti’s main points postulated over the last few years concern social issues, the fight against corruption of a system dominated by parties that grew out of the controversial Kosovo Liberation Army (UÇK), the referendum on the reunification of Kosovo with Albania, and the disapproval of the exchange of border territories forced by the presidents of Serbia and Kosovo. It was the presidential dialogue behind closed doors, together with Belgrade’s international campaign against Kosovo, that led to the introduction by former Prime Minister Ramush Haradinaj of 100% duties on goods imported from Serbia and Bosnia and Herzegovina (which also does not recognise the independence of the Republic of Kosovo).

In spite of external pressure, the sanctions blocking dialogue lasted from the end of 2018 right up until 20 March of this year, when duties on raw materials were removed and 1 April, when the remaining restrictions were replaced by “political and economic reciprocity in relations between Kosovo and Serbia”. As explained by the incumbent Deputy Prime Minister of Kosovo, Haki Abazi, the government’s aim is to use practices similar to those introduced by the Belgrade authorities for exports from his country – the non-recognition of sanitary certificates, Kosovo vehicle registration plates, or the constitutional name of the southern neighbour on commercial documents. Since 1 April, documents relating to goods entering the Kosovo market must include a name not recognised by the Serbian authorities – the Republic of Kosovo. Imports from Serbia in the first two weeks after the abolition of duties amounted to EUR 7.1 million, almost four times less in comparison with the same period before the introduction of sanctions.

Richard Grenell, President Donald Trump’s Special Envoy for dialogue between Belgrade and Pristina, pressed for an unconditional, non-tariff barrier-free abolition of duties. Following the Prime Minister’s failure to comply with these requirements, the US government agency Millennium Challenge Corporation has announced the possibility to freeze the four-year development aid to Kosovo of USD 49 million. Republican Senator David Perdue also called for the withdrawal of US troops serving in Kosovo. Washington’s increased involvement has so far resulted in the signing of letters of intent by the Presidents of both Balkan states expressing their willingness to establish an air and rail link between the capitals and the construction of a motorway linking Belgrade and Pristina. Continuing the negotiations in the presidential format, Grenell ignores the governments of both countries and the decision of the Constitutional Court of Kosovo stating the leading role of the Prime Minister in talks with Belgrade. Washington’s current policy emphasises less confrontational economic issues that would ultimately lead to a political agreement. Although the Department of State has officially denied that the subject of the talks was the change of borders, the previous positions of Hashim Thaçi and Alexander Vučić (President of Serbia) and the need to achieve international success before the November Presidential elections in the US make this dangerous prospect still present in the public debates of the societies concerned.

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The intensifying diplomatic presence of Washington filled the vacuum left by the policy of Federica Mogherini, the former High Representative of the Union for Foreign Affairs and Security Policy. The lack of transparency in the dialogue and the idea of exchanging territories along ethnic lines, which is unpopular in Europe and among Kosovan and Serbian citizens, has led to a loss of credibility for the EU, the suspension of negotiations and the introduction of the above-mentioned duties. Visa liberalisation is an additional aspect that tarnishes the EU’s image in Kosovo. Kosovo citizens are the last in the Western Balkans who are obliged to apply for special permits to enter the EU. The lack of political will of Member States, despite the positive recommendation of the European Commission, makes it difficult to gain public support for the European agenda. The March opinion polls revealed that according to Kosovan citizens, the issue of visas should be the most important objective of the Kosovan foreign policy, ahead of the state’s EU aspirations and negotiations with Serbia. An attempt to re-establish the EU’s role as an intermediary between the parties was made by the appointment of Miroslav Lajčak as the Special Envoy responsible for the normalisation of relations between Belgrade and Pristina. In an interview after assuming the new function, he stated that it is up to the European Union to guide the negotiations. However, when asked about the border revision, he replied that his aim is to find a solution that would satisfy both parties and all EU Member States. Both Lajčak and Borrell, who appointed him, come from countries that do not recognise Kosovo’s independence. Although they represent the positions of the 27 Member States, this fact was not omitted by the Kosovan media and public opinion.

The Euro-Atlantic rift was the strongest on the eve of the vote on the future of Albin Kurti’s government. In a joint letter, the US, UK, German, French and Italian Ambassadors called for the maintenance of government at a critical time of the COVID-19 pandemic. The French and German Foreign Ministries called for the Democratic League of Kosovo to reconsider the request. On the same day, however, the US Embassy in Pristina supported the vote scheduled for the following day. 

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In a situation of political impasse, Albin Kurti remains Prime Minister, holding office in a manner limited by the temporary nature of his government. Motivated by increased support of his own grouping, he aims to schedule another parliamentary election once the pandemic is over. The President and his allies, on the other hand, support the formation of a new government, with another politician as a leader. Kurti maintains that, under the Constitution, as the winner of the elections, he has the right to nominate a candidate for President of the Council of Ministers. After being invited by the President to propose a new Prime Minister, he accused the Head of State of double standards – in 2010 and 2017, after the overthrow of the government, the Presidents dissolved Parliament and scheduled new elections. The incumbent Prime Minister added that he did not refuse to propose a candidate, although he did not do so. As Vetëvendosje failed to provide the name of the future Prime Minister, Thaçi turned to the runner-up of the elections, the Democratic League of Kosovo, which immediately accepted the entrusted mission. After the presentation of the candidate, it began negotiations with other parties, resulting in the announcement of a coalition agreement with the Alliance for the Future of Kosovo (the party of former Prime Minister Haradijan) and the Serbian List, linked to Belgrade, the largest party of Kosovo Serbs. Politicians also announced the upcoming agreement with the New Kosovo Alliance and smaller national minority parties. During the extraordinary session of Parliament scheduled for Saturday, 2 May, Avdullah Hoti’s candidacy was supposed to be voted through. Claiming that these steps were unconstitutional, Kurti asked the Constitutional Court to settle the dispute. On 1 May, the extraordinary session of Constitutional Court announced the suspension of the session of parliament scheduled for the following day and President’s decree on the appointment of the LDK’s representative until 29 May, when the court will decide whether this decision complies with the country’s fundamental laws.

Jakub Bawołek – A graduate from MA studies in international security at the University of Wroclaw. He gained professional experience in the media, the Polish Embassy in Sarajevo and the Chancellery of the Senate of the Republic of Poland.

Author: Redakcja Warsaw Institute