The Transatlantic Relationship and the Russia-Ukraine War

Abstract

The Russia-Ukraine war triggered a new burst of solidarity across the Atlantic. The reactivation of the battered NATO alliance came easily under the pressure of an external shock. Yet, pulling together to react to Russia's belligerence is not sufficient to announce a new era of transatlantic partnership. The reason lies in the different interests that underpin American and European policies such as reliance on economic sanctions, the promotion of democracy, NATO strategy towards Russia, and economic coordination. Loosely sharing common values is not enough to reinforce the transatlantic relationship. Neither is a decision to stop the atrocities that Russia is committing against Ukrainians. Western leadership requires a coherent vision of Western interests. In the new world order, such coherence cannot be taken for granted.

The transatlantic relationship deteriorated significantly over the past three decades. Prior to Russia's full-scale invasion of Ukraine in 2022, both Europeans and Americans would have been hard pressed to define an overarching common purpose.¹ Their security policies, economic agendas, and ideological commitments remained compatible in the short run, but too uncoordinated to provide a joint vision for a changing global order. The North Atlantic Treaty Organization (NATO), the security alliance that united the two sides of the Atlantic, had been drifting in the aftermath of the Global War on Terror that followed the 11 September 2001 attacks. Europeans and Americans continued to share values—probably more closely with one-another than with any other part of the world—but those shared values no longer translated easily into a common strategy that reflected a special relationship reminiscent of Cold War collaboration.² Instead, Europeans embraced dreams of strategic autonomy while Americans seemed ready to give up on the idea of a unified West.³

Russia's 2022 invasion of Ukraine appeared to give the transatlantic relationship renewed resolve.⁴ The speed at which Democrats and Republicans jointly approved over $54 billion in aid to Ukraine was uncharacteristic of the isolationist tendencies that had become increasingly prominent across the foreign policy establishment and the wider American electorate.⁵ Europeans also showed a greater sense of collective responsibility than might have been expected.⁶ Known for its slow and cumbersome foreign policy decision-making, the European Union (EU) reacted quicker than usual and showed unusual unity and determination in the first stages of the war. That determination included the European Union's first-ever compensation of member states who delivered lethal weapons to a third country and the activation of a temporary protection instrument that granted immediate access to the labor market, housing, and medical and social welfare assistance for the millions of Ukrainians who fled to the European Union. The EU and the United States also worked together to levy unprecedented sanctions on Russia. The measures they agreed upon ranged from individual travel bans and foreign asset freezes to restrictions on the trade in gas and oil, the targeting of military industries, the sequestering of foreign exchange reserves from the Russian Central Bank, and the severing of major Russian financial institutions from the global financial economy.⁷

As Russia's full-scale invasion grinds into a third year, however, that Western unity has begun to fray. Between November 2023 and April 2024, the United States Congress proved unable to pass legislation to fund additional security assistance. The European Council was able to agree on additional funding, but only after overcoming repeated national vetoes and against a backdrop of deep division between France and Germany. More important, neither the Americans nor the Europeans appear confident in the ability of the other side of the Atlantic to live up to their joint commitments long-term. The United States shows signs of retreating to isolationism, and the European Union shows an increasing desire for “strategic autonomy.”

The reason for this division lies in the different interests that underpin American and European policies, such as NATO strategy towards Russia, the promotion of democracy, the virtues of economic coordination, and reliance on economic sanctions. The return of war on mainland Europe has not eliminated doubts among the transatlantic partners about the principles of solidarity that define NATO's strength. Europeans and Americans have struggled to get behind a broader democracy versus autocracy agenda. And they have failed to establish joint economic policies for dealing with a new, more plural world order. More fundamentally, perhaps, the reason lies in the lack of an overarching vision of the leading role of the West in the global system.

This argument has four sections. The first sketches the long-running inconsistencies across the Atlantic in how to deal with Russia that the full-scale invasion of Ukraine did not solve. The second highlights the difficulties for the transatlantic partners in defining a common democracy versus autocracy agenda in a postinvasion world. The third brings together the unsuccessful attempts to establish joint economic policies to maintain Western leadership in the new global worder. The fourth section concludes with the implications of this analysis for the future of that Western leadership in the absence of a coherent vision of Western interests. In the new world order, such coherence cannot be taken for granted.

Inconsistent Russia Policy

Russia's 2022 invasion of Ukraine only appeared to give the transatlantic relationship renewed resolve reminiscent of Cold War collaboration. Looking at the different interests that underpinned U.S. and EU policies towards Russia since the fall of the Soviet Union and the rise of Vladimir Putin's authoritarianism, it is not surprising to see that Western unity falter as Russia's full-scale invasion grinds into a third year.

The absence of a unifying Russia policy stems from various factors and follows a legacy of indecision. In their recent history, the United States and the EU often appeared to be working at cross purposes on how to build a NATO policy on Russia. Europe's dependence on inexpensive energy imports from Russia as a cornerstone of its economic growth model put it in an even more vulnerable position in relation to Vladimir Putin's regime. Germany, Europe's largest economy, was Russia's greatest champion for its inclusion into the rule-based liberal economic order.⁸ In turn, the United States did not fully appreciate the scale of the threat coming from Putin's revisionism to invest more in NATO's Eastern Flank.

Furthermore, the EU's ability to enforce a unified approach toward Russia has been hindered by the divergent foreign policies pursued by certain member states, often influenced by leaders such as Viktor Orbán in Hungary, Robert Fico in Slovakia, and political parties like the Lega in Italy, the National Rally in France, the Alternative for Germany (AfD), the Freedom Party (FPÖ), and the Austrian People's Party (ÖVP) in Austria. These actors, through their pro-Putin stances and policies, challenge the EU's efforts to present a unified front on matters concerning Russia's geopolitical ambitions and security threats to today. In turn, internal divisions in U.S. politics leading to extreme issue-polarization do not even allow for the creation of a predictable foreign policy agenda on Russia.

NATO and Russia's Security Culture

Subsequent White House administrations have leveraged the obvious differences between Europe and the United States in their defense capabilities to meet their changing agendas. But the exercise of this leverage left Europeans and Americans with little or no sense of coordination regarding security threats coming from Russia. The problem was not that one side of the Atlantic was more hawkish than the other. Rather it was that different threat perceptions and forms of dependence on Russian markets or energy resources created deep divisions on both sides of the Atlantic. As a result, Europeans and Americans often appeared to each other to be working at cross purposes. At the NATO 2008 Bucharest Summit, U.S. President George W. Bush pushed for Ukraine and Georgia to have a clear prospect for NATO membership (Art. 23), forcing the hand of European heads of state to agree to his position in writing. That position was strongly opposed by France and Germany because they worried about Russia's security concerns and preferred to integrate Russia in trade and economic exchange instead.

Americans and Europeans were not clear on a Russia policy even after the Kremlin became more belligerent. Russia's invasion of Georgia in 2008 did not galvanize the countries in NATO into spending more on their own military capabilities. During Barack Obama's administration, the White House pivoted to Asia and reduced its attention to Central and Eastern Europe. President Obama's reaction to the 2014 annexation of Crimea was to focus primarily on sanctions and diplomacy—pushing back on Russian insistence that it had been provoked by the threat of U.S. intervention, but also acknowledging that Russia will not “be dislodged from Crimea or deterred from further escalation by military force.”⁹ Republican Party leaders were also ambivalent. NATO summit declarations that followed the annexation of Crimea reveal NATO's interest to maintain dialogue with Russia and to moderate its aggressive stance towards its neighbors through diplomacy.

A short-term joint U.S.-EU regional security policy was noted in the “Minsk Agreements” mediated by France and Germany between Ukraine and Russia. However, these failed agreements from 2014 and 2015 did not reveal a policy toward Russia's increased belligerence but rather delivered an ad hoc set of solutions that focused on isolating and containing the emerging conflict in Ukraine's South-East to the Donbas region. Moreover, Europeans failed to agree on whether these agreements were sufficient to deter Russia. NATO's Eastern members, unlike their Western counterparts, were rattled to the core by Russia's belligerence and tried to persuade the United States of the need to invest more in its Eastern Flank. NATO's Eastern Flank signed a joint declaration in 2015 aimed at redirecting more of the alliance's attention to the region.¹⁰ Yet, the debates among EU member states that followed showed regional rifts as southern European EU members have systematically prioritized threats emanating from the Middle East and North Africa, while those in the east pointed to Russia.¹¹

Transatlantic inconsistency on how to deal with Russia only worsened under the 2017–2021 administration of Donald J. Trump. Interest on the part of the Trump administration to create a common NATO stance on Russia was absent. President Trump admired Russian President Vladimir Putin. That bond continues to this day, even after the full-scale invasion of Ukraine. Trump's lack of commitment to NATO's Article 5 creates much angst among member states. While French President Emanuel Macron decided to accelerate the cause of European strategic autonomy during Trump's mandate, Russia's full-scale invasion of 2022 and Ukraine's dependence on U.S. military aid to resist the invading force showed how far from that target Europe still is.

The possibility that the Trump wing of the Republican Party would ever regain the U.S. Presidency is a daunting prospect for Europeans. While on the campaign trail in February 2024, Trump reconfirmed his commitment to liberate the United States from the responsibility of NATO's Article 5 and suggested he would “encourage [the Russians] to do whatever the hell they want” to NATO members states who did not invest in their defense capabilities.¹² For his part, Macron has insisted that Europe was “never the vassal of the United States” and reiterated that Europeans must develop the capacity to provide for their own security.¹³

EU Energy Dependence

Another major point of difference between the United States and Europe was the European Union's long-standing dependence on Russia for energy, particularly natural gas, which plays a crucial role in its economic growth and stability. That dependence determined the will and pace with which Europeans could recast their foreign and economic policies towards Russia once Putin's authoritarianism and anti-Western stances became more apparent around 2011–2012. Balancing between pursuing cooperation with Russia and maintaining a transatlantic alliance became increasingly challenging for European policymakers after the annexation of Crimea. In the years between the annexation of Crimea and the full-scale invasion of Ukraine, the two sides of the Atlantic argued over the construction of gas pipelines with Russia and the risks associated with increasing European dependence on Russian energy resources.¹⁴

Those arguments did not end in a joint commitment to find ways to shake off dependence on Russian gas and maintain economic growth. During the decade prior to the full-scale invasion of Ukraine, the European Union's dependence on Russian natural gas continued to grow, reaching just over 40 percent of gross available energy derived from natural gas in 2020.¹⁵ A significant portion of the EU's natural gas imports came from pipelines like Nord Stream and TurkStream facilitating the transportation of gas to European markets. Russia's top pipeline gas consumer in the EU had also been its main economy, Germany.

Germany's excessive energy dependence on Russia limited the ability of the EU to challenge Russia's growing authoritarianism by targeting its energy sector through sanctions.¹⁶ Built on the legacy of a cooperative approach in its foreign policy vis-à-vis Moscow since 1969—known as Ostpolitik—Germany's interlocking of its economic development with the import of Russian gas made it particularly predisposed to cooperation with Russia. After the annexation of Crimea in 2014, the United States pressured Germany to condemn Russia's actions more strongly.¹⁷ Germany's reluctance to shake off its dependence on Russian gas and the start of the construction of Nord Stream 2 in 2016 led to even more tensions between Berlin and Washington. Speaking at a NATO Summit in July 2018, Trump called out Germany over its gas importing from Russia and the investment in Nord Stream 2: “Germany, as far as I’m concerned, is captive to Russia because it's getting so much of its energy from Russia. . . . We have to talk about the billions and billions of dollars that's being paid to the country we’re supposed to be protecting you against.”¹⁸ Even so, German Chancellor Angela Merkel remained committed to the Nord Stream 2 project which was completed in 2021.

Fragmented Approaches to Foreign Policy

Economic and energy interdependence between some member states and Russia also influenced diplomatic relations and political dynamics. The disaggregated character of the European Union's Common Foreign and Security Policy gives member states considerable flexibility to devise their own approach to bilateral relations.¹⁹ This permitted Russia to build relations of trust with favorable European politicians and parties, creating their own “Trojan Horses” within the EU.²⁰ Those relationships are proving beneficial to Russia's anti-Western interests today. Most notably, Hungary's leader, Viktor Orbán, has expressed support of Russia's policy in Ukraine and stalled critical aid in support of Ukraine's war effort. The National Rally of France, led by Marine Le Pen, has also shown support for Russia and Putin's policies in the past, including for Russia's annexation of Crimea. The Alternative for Germany has advocated for closer ties with Russia and has been critical of sanctions imposed on Russia by the EU. Italy's Lega has historically maintained close ties with Russia and has supported close economic ties between Italy and Russia even after the annexation of Crimes. The Austrian Freedom Party has also been critical of EU sanctions against Russia. The leaders of these parties all have personal ties with Putin to different degrees.

The Russia-Ukraine war did not strengthen the EU's fledgling Common Foreign and Security Policy in ways that prohibit individual members from maintaining their own at times contradictory international agendas. This outcome reflects the European Union's long dependency on NATO for security and on the United States for nuclear deterrence; within that context, there was little space for Europe as a whole to formulate a security policy of its own. That dynamic is changing. As Macron explained speaking in Stockholm on the eve of Sweden's joining NATO, Europe should not wait for the outcome of the American elections to decide how its security prospects should look:

There is no future for us or for our children if we are not able to build a new security architecture, to control our own arms and [to safeguard] our neighbors in the whole of the [European] region. But it is up to us to decide for ourselves and not to delegate [this responsibility] to the great powers, even if they are very good allies, because they live on the other side of the ocean.²¹

Despite Macron's remarks, however, the European Union remains uncommitted to amplifying its own foreign and security policy capabilities. Germany's long relationship with Russia and fears of provoking Putin provide the political background for Chancellor Olaf Scholz to backpaddle on the transformation of the German defense policy. And many European parties’ interest in upholding Russian interests on the continent seem inimical to coordinated actions. In the meantime, the United States seems to lack a political consensus at home on what its role should be at the global level.²²

Democracy Promotion as an Unconvincing Goal

The second fundamental pillar of collaboration that seemed to have been renewed by the Russia-Ukraine War is the democracy versus autocracy agenda of the Global West. This more ideological project sits on top of the management of interdependence between the United States and Europe. As Joseph Stiglitz pointed out, the expansion of global markets both deepens and widens interdependence and so strengthens the case for coordination beyond the markets.²³ We return to these economic considerations later on.

At this point in our argument, what matters is that democracy promotion, the war on terror, and the promotion of multilateralism are ideological projects that require coordination. As former U.S. Ambassador to Moscow Michael McFaul points out, democracy promotion aims at ensuring that the governments involved in any coordination will also abide by the rule of law, that they will work to protect human rights, and that they will seek to avoid violent conflict.²⁴ The global war on terror was to push back against violent nonstate actors who sought to weaken trust, promote conflict, and ultimately overturn the whole liberal capitalist system.²⁵ The strengthening of effective multilateralism sought to ensure that no one country—no matter how powerful—could manipulate international relations to its own benefit.²⁶

These more ideological projects were never subject to strong agreement across the Atlantic. Although they all live in capitalist economies, Americans and Europeans have different conceptions of how states should relate to markets and hence also differ on how a globalized economy should come together. As Jeffrey Kopstein noted, they all live in democracies, but they have different views on how democratic institutions should look and function, and hence also on how best to promote democracy.²⁷ They all face the threat of terrorism but have different beliefs about how it should be managed.²⁸ And they differ on what constitutes the “effectiveness” of multilateral institutions.²⁹

These divisions on how states should relate to markets and how a globalized economy should operate are not irreconcilable, but they are difficult to tackle in the absence of a commitment to a superseding ideological project.³⁰ A large body of scholarly works shows that as the bipolar, Manichean model for explaining the world was replaced by the complexity of multilateralism and pluralistic views of democracy, the two sides of the Atlantic drifted apart under the influence of their competing interests and perspectives.³¹ More fundamentally, important voices on both sides of the Atlantic began to challenge not just the various ideological projects that defined much of the post-Cold War period but also the technocratic argument for policy coordination.³²

This brings us back to the framing of the underlying conflict in the relationship. Not everyone agrees that democracy promotion is part and parcel of the transatlantic community's reason for existence. There is no longer a clear consensus about what democracy should look like or what promoting democracy means.³³ During President Joseph R. Biden's administration, both sides of the Atlantic stated that the promotion of democracy is the key to solving the issues faced by European and American societies and raising the standing of their shared values in the world. Nevertheless, the EU and the United States do not commit to this joint ideal in similar ways.

The Biden administration frames the promotion of democracy as an all-encompassing democracy versus autocracy strategy: “the challenge of our time is to demonstrate that democracies can deliver by improving the lives of their own people and by addressing the greatest problems facing the wider world.”³⁴ European counterparts have a more functionalist approach to democracy. Věra Jourová, vice-president for values and transparency at the European Commission, declared that “there is plenty of work [to do] on both sides of the Atlantic to convince the people that democracy can deliver a reasonably good life.”³⁵

The Russia-Ukraine war underscored these differences in framing. Building a joint foreign policy after February 2022 was not only about supporting Ukraine's victory over Russia. Ultimately, the transatlantic partners need to react to the rise of authoritarianism, including from Iran, North Korea, and China, countries who signed deals in support of Russia's war effort. President Biden and the Democratic Party were unambiguous in their agendas and embraced a democracy versus autocracy rhetoric in the wake of Russia's second invasion of Ukraine, not least to set themselves apart from Republicans in the 2022 U.S. midterm elections. Secretary of State Antony Blinken reaffirmed the democracy versus autocracy agenda in the strategy towards a China which is cooperating with the Putin regime:

Even as President Putin's war continues, we will remain focused on the most serious long-term challenge to the international order—and that is posed by the People's Republic of China. China is the only country with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military, and technological power to do it. Beijing's vision would move us away from the universal values that have sustained so much of the world's progress over the past 75 years.³⁶

The EU's Strategic Compass has a less determined position on such issues and notes only that security policy should be framed around a “competition of governance systems.”³⁷ The European Union and China are committed to a comprehensive strategic partnership, a strategy reiterated even after Russia's invasion of Ukraine.

When President Biden called for a summit for democracy, many European allies were uncomfortable with the idea in principle; when the U.S. State Department published the list of invited participants, many Europeans were even more uncomfortable with the idea in practice.³⁸ That is because the United States did not invite Hungary, an EU member state, to the Summit for Democracy in 2021 or 2023. In the EU, Hungary remains an equal partner among EU member states, substantiating the EU's “authoritarian equilibrium” within which Hungary is too important to the functioning of EU institutions and political coalitions to be disciplined effectively for departing from liberal or democratic norms.³⁹ But double standards also characterize the United States' approach to democracy promotion. It is important to note that the United States did invite Poland to the Summit of Democracies despite its similar problems with rule of law at the time. Poland has long been considered America's “protégé in the East.”⁴⁰ Its strategic role in the war against Russia is also significantly more important than Hungary's.

The change of government in Poland after the 2023 elections only softens and does not eliminate the tensions within U.S. policy and across the Atlantic. Meanwhile, 2023 elections in Slovakia and the Netherlands point in the opposite direction—as does early polling on 2024 elections to the European Parliament and in the United States. More important, the question of double standards was never limited to Europe. If anything, it has been more prominent whenever attention turned to North Africa, Sub-Saharan Africa, and the Middle East. Such issues are an inevitable part of the transatlantic relationship, particularly in moments of violent conflict.

Ultimately, despite the rhetoric promoting democracy, the war in Ukraine shows the EU and the United States trade skills and resources with those regimes they also identify as ideological competitors. Neither Americans nor Europeans systematically prioritize commitment to the rule of law and human rights as a precondition in the selection of allies and partners. To replace Russian gas, the United States and governments in Europe partnered with Gulf states and softened their positions toward oil-rich Venezuela. In the meantime, the EU still needs to buy gas from Russia despite condemning its war with Ukraine. More important, many banks and companies stopped operating in Russia in such a way that they could easily come back, while many stayed and are buying more time. Examples include Austrian Raiffeisen Bank, Italy's Unicredit, France's Auchan, the United States’ Johnson & Johnson and Proctor & Gamble, Germany's Siemens and Bayer, and many others.⁴¹

Efforts to frame Russia's war against Ukraine as a battle for democracy against authoritarianism are also diminished by their national politics. The United States and the European Union are struggling to shore up democracy at home. For the Biden Administration, that struggle pivots around widespread election denial and growing right-wing extremism within the Republican Party. Biden's response has been to focus on domestic politics—particularly with respect to economic policy—and to craft a foreign policy for the middle class.⁴² Meanwhile, the European Union wrestles with illiberal governments and the rise of far-right parties that are at best Russia-neutral and most often Kremlin enablers. European institutions have responded with new economic policies to finance recovery from the pandemic and to foster a just transition to a more sustainable economy, but such efforts are not enough to ensure that the rule of law is adequately protected from far-right take over.⁴³

The democracy against authoritarianism framing of the transatlantic relationship that followed the Russian invasion confronts other obstacles as well. The democratic credentials of Ukraine are symbolically important, and Ukrainian President Volodymyr Zelensky's leadership has been transformative.⁴⁴ In institutional terms, however, Ukrainian democracy is still a work in progress. The same applies to the Ukrainian government's ability to guarantee the promotion of the rule of law while under martial law. Hence, while the European Union has agreed to start accession negotiations with Ukraine as part of a larger commitment to foster peace and security in the region, European leaders recognize that the actual accession process is a long and complex obstacle course of challenging institutional reforms before Ukraine gets anywhere close to full membership.⁴⁵ Full membership in NATO appears even more distant so long as Ukraine has hostile troops on its territory.

More fundamentally, the transatlantic partners did not mobilize to ensure that their democracy versus authoritarianism framing resonates well outside Europe and North America. Not all the world's democracies agree that the principle of democracy is at stake in Russia's war against Ukraine. Countries with colonial histories are critical of the Global West and their foreign policies and often deem them hypocritical.⁴⁶ They also see hypocrisy in the attention Western leaders give Ukraine, while those same leaders neglect brutal conflicts in the Global South.⁴⁷ No country from Africa or Latin America placed sanctions on Russia. A joint EU-U.S. vision on how to engage the Global South in this ideological confrontation with Russia was also missing.

Power, Interdependence, and Unsuccessful Joint Economic Policies

Major economic transatlantic frictions also loom over the ability of the United States and Europe to come together to maintain the challenged liberal world order they have generated jointly. The original formula for the consolidation of the West rested on the idea that the creation of a security community between the United States and Europe could be underpinned by the promotion of cross-border trade and investment.⁴⁸ This trade in goods and services would create overlapping forms of interdependence, including a complex division of labor across the Atlantic, but it would also create incentives for governments to work together to shape the world in their common interest.⁴⁹ The multilateral economic and financial institutions that make up the Bretton Woods System were created to facilitate that cooperation at the global level while NATO provided security in Europe.

The fit between a global economic arrangement and a regional security organization was never perfect, and neither was the relationship between economic interdependence and the notion of the West as a “security community.” If interdependence creates strong incentives for transatlantic partnership, it also creates important vulnerabilities. Robert Keohane and Joseph Nye show that this has always been the case.⁵⁰ In the classic formulation, all parties shared these vulnerabilities to differing degrees both in mechanical terms and in terms of their political sensitivity to them. Hence a sudden rise in global energy prices might cause a global slowdown, but the drag it created on economic performance would differ from one place to the next and so would the political response.

Virtually every Cold War decade carried within important tensions across the Atlantic.⁵¹ At times, it appeared that the structures themselves were unsustainable—and that both the threat itself and the transatlantic partnership it fostered may have been exaggerated.⁵² The technocratic solution to this problem was increasing coordination across the Atlantic. As Richard Cooper wrote in his 1968 book, The Economics of Interdependence: Economic Policy in the Atlantic Community, all parties need to work together when no government can achieve its policy objectives acting alone or without taking the reactions of the other side into account.⁵³

This coordination often took place through the Bretton Woods institutions, where the transatlantic partners had a controlling interest. As countries in other parts of the globe began to press for greater influence over those institutions, the transatlantic partners shifted their coordination efforts to more informal arrangements, like the Group of Seven (G7) leading industrial nations.⁵⁴ The transatlantic partners were able to make this shift because they controlled a significant share of world economic activity, and so their effective coordination would have an impact on global economic conditions.⁵⁵ But the effectiveness of that move to more informal arrangements diminished with the rise of emerging markets to a point where transatlantic cooperation no longer solved the problems related to interdependence. Instead, efforts to cooperate across the Atlantic became a source of friction.

Tensions in the Transatlantic Economy

The Transatlantic Trade and Investment (TTIP) partnership is a good illustration of how divisions on both sides of the Atlantic deepened the tensions between them. That agreement was meant to build on the depth of economic integration across the Atlantic to create jobs and growth through progressive regulatory convergence. Instead, it gave rise to controversies about food safety, negotiating tactics, and judicial redress.⁵⁶ There are clear areas where regulatory convergence is warranted and where the desire to promote common regulations is strong on both sides of the Atlantic. Nevertheless, a blanket rule in favor of cooperation proved to be politically challenging both in Europe and in the United States.

Those challenges extended to finance as well as trade. In the shadow of the global economic and financial crisis, it would be easy to imagine that financial markets regulation would be an area where convergence across the Atlantic would find strong support. The reverse was in fact the case. Although most European countries and large multinational banks favored inclusion of financial markets regulation in the TTIP negotiations, the U.S. Treasury department was staunchly opposed to any such initiative.⁵⁷ The election of Donald Trump as President of the United States effectively put an end to TTIP. Importantly, Trump's replacement by Joe Biden did not revive the conversation. Instead, as National Security Advisor Jake Sullivan explains: “President Biden has prioritized investing in innovation and industrial strength at home . . . [in ways that] enhance the United States’ capacity to deliver inclusive growth, build resilience, and protect national security.”⁵⁸

Exchange rate coordination is a further area where cooperation should be likely among special partners. Nevertheless, efforts to stabilize the dollar against European currencies have failed time and again. Indeed, the creation of Europe's economic and monetary union is largely a result of that failing. A major objective of irrevocably fixing exchange rates was to strengthen the “zone of monetary stability” within Europe. Hence, most European economists were surprised to discover that fluctuations in the euro-dollar exchange rate proved to generate some of the most powerful and asymmetrical shocks across the euro area.⁵⁹ This vulnerability did not stop European policymakers from trying to work with their U.S. counterparts to stabilize relative currency movements. What they found when they did so, however, is that the official position of the United States government was consistently that a strong dollar is in America's interest no matter what the level of the euro-dollar exchange rate. This was as true when the euro rose above dollar parity in 2002, as it was two decades later when it crashed below dollar parity.⁶⁰

There are areas where cooperation shows some movement forward, but standing differences between the United States and Europe increase the risk for meaningful progress. The regulation of technology is one example. The EU established itself as the main regulatory superpower in the digital space. This is at odds with the United States model that supports rapid innovation with less regulation of digitalization and technologies. The United States and the EU aimed to bridge this gap by building a framework of norms and principles “to uphold and reform the rules-based multilateral trading system” during the U.S.-EU Summit in Brussels in June 2021.⁶¹

Regulators on both sides of the Atlantic continue to struggle to adopt complementary digital rules given their very different starting points. They have nevertheless made some progress at working together. The creation of an EU-U.S. Trade and Technology Council (TTC) at that June summit marked an important step forward. During the TTC in Pittsburgh the following September, Secretary of State Antony Blinken added to the moment by underscoring that “when we’re working together, we have a unique ability to help shape the norms, standards and rules that govern the way technology is used, technology that affects the lives of virtually all of our citizens.”⁶² While the good will is there, concrete results are less evident: agreeing on shared rules and standards is still a work in progress.⁶³

More meaningful success can be found in the area of corporate taxation. When the Biden administration announced a proposal to establish a global minimum corporate income tax in late March 2021, that came as a surprise to most observers in Europe—particularly those in Ireland and the Netherlands that relied on American unwillingness to cooperate on tax issues to insulate their own tax regimes from efforts to promote common standards in Europe. Over the summer of 2021 and into the autumn, the Biden administration underscored the seriousness of its ambitions. Along the way, European governments managed to coax those in strategically low corporate tax jurisdictions like the Irish and the Dutch to drop their objections to common standards.

The result was not an iron-clad arrangement; the common standards contain significant carve outs and loopholes. Nevertheless, it was a powerful demonstration of how the transatlantic partners can work together—albeit on an ad hoc basis. Then divisions reemerged on both sides of the Atlantic. Republicans in Congress resisted any effort to translate the agreement into legislation. Similarly, the Hungarian and Polish governments initially refused to sign onto the new tax regulation. They were not opposed to cooperation in principle, but they were eager to exert leverage over the European Commission to force it to release the grants available for the country’s national recovery and resilience plans over “rule of law” concerns. Hungarian prime minister Viktor Orbán did not drop that veto before the European institutions signaled a willingness to make financial concessions in December 2022.⁶⁴

The Weaponization of Interdependence

The vulnerabilities and sensitivities that arise from economic interdependence are not the only source of friction. Recently, scholars such as Henry Farrell and Abraham Newman have begun to highlight a different sort of vulnerability that stems from the relative influence any given actor may have over the institutions that bring countries together economically, politically, or socially.⁶⁵ When most economic actors use the dollar for international transactions, for example, this gives significant power to the U.S. Treasury through its regulatory authority over those banks that manage (and clear) dollar-denominated transactions.⁶⁶ That power extends to any organization—like the Society for Worldwide Financial Telecommunications (SWIFT) that is controlled by U.S. banks. In a similar way, U.S. authorities have significant power over the internet because of the predominance of large U.S. technology companies in hosting the domain name servers that provide essential nodes for digital communications, the data server farms that make up the digital “cloud,” and the fiber optic cables, satellites, or cellular communications networks that connect all these elements.⁶⁷

The problem arises when the U.S. government uses its power to sanction foreign actors for doing business with third parties, to eavesdrop on sensitive communications abroad, and to prevent foreign actors from engaging in global trade, finance, or telecommunications.⁶⁸ Such practices could represent a legitimate exercise of U.S. power, but they also create a powerful disincentive for other governments to cooperate willingly with U.S. authorities and to bind themselves to global institutions or other infrastructures that expose them to being instrumentalized in the service of U.S. foreign policy.⁶⁹

The Obama and Trump Administrations may have succeeded in compelling European cooperation in successive sanctions regimes against Iran using these instruments, but the fines on European banks and the threats to make SWIFT board members personally liable for failure to comply with U.S. foreign policy have created lasting suspicions across the Atlantic. They have also provided incentives for other countries to imagine ways to build parallel networks for finance, telecommunications, and even the internet. These consequences were unintended but not unexpected. Analysts have warned throughout this period of the potential for weaponized interdependence to have structural consequences.⁷⁰

The problem for the U.S. government is that the weaponization of interdependence by the United States sets a dangerous precedent. Governments in other countries have the potential to use similar strategies to restrict access to rare earth minerals or crucial waterways, for example. There are many structures involved in globalization that can be accessed by other powers to assert influence. This was the lesson learned by the Organization for Petroleum Exporting Countries (OPEC) in the 1970s. That lesson is now being applied in the debate about 5G telecommunications. If a national government can control access to that technology, it can control access to the data that flows through it. This is why the Trump and Biden Administrations have been so concerned about Chinese government influence over the Huawei company—which they effectively closed out of European and American markets.⁷¹

Another problem is that the weaponization of interdependence is a wasting asset—not just because of rising levels of suspicion or tit-for-tat competition but because the kind of complex division of labor that interdependence represents is a source of growth and innovation.⁷² Any effort to insulate the national economy from the vulnerabilities that come with interdependence winds up cutting off these more positive influences at the same time. Moreover, this is true not only for the country that imposes the sanctions but also for those who get caught up in their enforcement through the threat of secondary sanctions.

This is where the implications for the transatlantic relationship are manifest. The unprecedented sanctions levied against Russia after February 2022 included important restraints on the ability of third parties to do business with that country. Those secondary sanctions have also run alongside increasing restraints on technology transfer to China, particularly in relation to advanced microchips. According to Jake Sullivan, this policy is part of a broader strategy put in place by the Biden administration to reshape the global economy in the interests of the American middle class.⁷³ This strategy includes increased state funding for domestic microchip production and for investment in renewable energies.

This new U.S. foreign economic policy places America's European allies in a complicated dilemma. Europeans not only have to find a way to compete with American subsidies for microchip production and renewable energy while purchasing increasing volumes of gas and oil from the United States, but they also have to reevaluate their relationship with China.⁷⁴ In the worst case, the risk is that Europeans will soon face a choice between doing business with China and doing business with the United States that most European governments would prefer not to make.⁷⁵

European countries trade heavily with China. In terms of goods imports, trade with China is more important than trade with the United States. Some countries, like Germany, are more entangled in the Chinese economy while others, like Italy, are surprisingly less.⁷⁶ European countries also rely heavily on China for foreign direct investment both in firms and in infrastructure. The composition of this investment has been changing significantly and much of the investment into firms concentrates in just four countries—France, Germany, the United States, and Hungary.⁷⁷ As a result, the dependencies created by trade and investment from China fall unevenly across the European Union. In turn, this makes it hard for the European Union to come up with a coherent China policy and even harder for the EU to coordinate that policy across the Atlantic.

United States policy toward China changed decisively during the Trump administration from one based on constructive engagement to one focusing more clearly on strategic competition. The Biden administration has continued along much the same lines.⁷⁸ By contrast, European capitals remain divided as to how best to work with and in China. The question is whether they can strike a durable balance between Washington and Beijing. The two sides of the Atlantic started collaborating again under the Biden administration and are rhetorically much closer. But the legacy of inconsistency in U.S. leadership led Europeans to question the principles of reciprocity that underscore the transatlantic relationship. The development of an explicit “anticoercion instrument” to be deployed by the European Commission through its authority over trade policy is a direct response.⁷⁹ Whatever they choose in relation to China, European governments will feel coerced. The question is whether and how they will push back.

From Transatlantic Partnership to Strategic Autonomy

Overall, both sides are interested in seeing their economies thrive. Together, the EU and the U.S. economies account for about half of world GDP and nearly a third of world trade flows. Each is highly sensitive to economic instability in the other's financial markets and economic systems. Each is the other's main source and destination of foreign direct investment. Having a common transatlantic approach to trade and the economic issues facing the United States and the EU like the one embodied in TTIP is in many ways imperative. The goal is not simply a kind of regulatory convergence in the interests of greater economic efficiency but also a pattern of transatlantic economic policy coordination to strengthen the ability of each side of the Atlantic to achieve its policy objectives without impinging on the ability of the other to meet their needs. That end state has not been achieved so far. Trade disputes and trade barriers—such as tariffs, subsidies, and overlapping or incompatible regulatory frameworks are still working against the creation of a coordinated transatlantic economy.

More important, the two sides of the Atlantic have shown a strong tendency to act independently. The 2022 Inflation Reduction Act (IRA) is a good illustration of how this looks from the European perspective. The passage of that legislation amplified European concerns that the United States is set to focus on revamping its domestic economy first and foremost, attracting European companies with subsidies, and ignoring potential effects for Europe's growth in the process. The IRA placed Europeans in a dilemma; for them, agreeing to pull resources together in a similar European Sovereignty Fund is considerably more strenuous.⁸⁰ The European Union does not have a large federal fiscal system to create tax incentives or provide subsidies. Efforts to do so at the national level threaten to undermine the rules for competition in the European Union's internal market.⁸¹

The European reaction has been to underscore the importance of “strategic autonomy,” both prior to and increasingly after Russia's full-scale invasion of Ukraine.⁸² The goal is not simply to insulate the European economy from strategic competitors like China but also—and perhaps more importantly—from lobbying by American multinationals and from undue influence of the U.S. government. Europeans do not want to sever ties with the United States, but they do want to have a say in what choices they face and how those choices will be framed. That goal will face American resistance.

Conclusion

Russia's brutal expansion of its war against Ukraine appeared to change the diminished transatlantic cooperation—delivering a “shock of recognition” that the world remains a dangerous place within which the transatlantic alliance takes on existential significance.⁸³ Initial solidarity with Ukraine was manifest, a coherent sense of what the transatlantic relationship stands for was not. This analysis has shown that the sources of fragmentation for the transatlantic relationship are lasting, as the disagreement is not only between the transatlantic partners but also within the United States and Europe. This fragmentation complicates cooperation in areas such as a unified policy in dealing with Russia and promoting democracy, and it becomes evident in failed attempts to establish joint economic policies.

The conclusion here is pessimistic. Transatlantic unity in the face of Russian aggression is a temporary exception to the longer run deterioration of the special relationship between the United States and Europe. This pessimism is not fatalistic. There are many ways that both sides of the Atlantic could strengthen the bonds between them both in terms of economic policy and more broadly.⁸⁴ There is also significant good will on both sides. The question is whether either side will take the initiative. If recent history is any guide, both sides are more likely to miss the opportunity for reasons that have much to do with domestic politics.⁸⁵ Neither side wishes to see a further weakening of transatlantic solidarity, but both have other priorities.

The implications of this analysis are important for the future of the transatlantic relationship as well as for how Western leadership might look like without a coherent vision of Western interests. In the new world order, such coherence cannot be taken for granted. Yet the transatlantic partnership needs to be about more than crisis management if it is to endure. The two sides of the Atlantic share history and values that make it relatively easy to cooperate. They also participate in a wide array of complex transnational governance arrangements that ensure some degree of cooperation will take place. Their relationship is structural as well as emotional. But that is not enough.

Meanwhile, the rest of the world is even less interested in maintaining transatlantic solidarity than either Americans or Europeans. If anything, other parts of the world prefer to stand up to Western leadership. They hope for a more transactional world order with less pretension to grand ideological projects, let alone hegemony. The aspirations of those nations that do not share the Western experience and identity include prosperity, security, and the kind of “orderliness” that makes it possible to do business across national boundaries. The incoherence of the “West” is not only compatible with such aspirations but nurtures them.

That transatlantic partners and non-Western nations offer only vague aspirations for a rule-based global order means few effective guidelines for either the exercise of power politics or the peaceful resolution of conflict. As Sarah Danzman and Sophie Meunier argue: “Previously order was achieved through multilateral rules enforced through shared norms and binding commitments. . . . Now, the global order seems to be shifting to a system where the main actors view economic integration more suspiciously and are more inclined to employ increasingly assertive policy tools to retaliate against the unilateral actions of others.”⁸⁶ The return of large-scale violent conflict may not have succeeded in galvanizing the transatlantic partnership. But a weakening of the Western Alliance contributes to conditions that are more favorable for the increased frequency of large-scale violent conflict.

Acknowledgments

We would like to thank the two anonymous reviewers for their transformative suggestions that greatly strengthened the argument. We are grateful to the PSQ editor and managing editor for their patience with our delivery of a definitive article on a fast-changing situation. The usual disclaimer applies.

Footnotes

Author notes