The Three Seas Initiative From Vision to Action [REPORT]
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What is the Three Seas Initiative?
The Three Seas Initiative is a Central European launched and led project, supported by the US, that seeks to address some of the unfinished business of building a Europe whole, free, and at peace. Its specific objective is to accelerate the development of cross-border energy, transport, and digital infrastructure in the region by attracting capital to commercially viable projects. The Three Seas area – the countries between the Baltic, Black, and Adriatic Seas — includes EU member states mostly from “post-1989 Europe”: that part of Europe that fell to Soviet conquest at the end of World War II and suffered for the next 45 years not only from political domination by the Soviet Union but economic mis-development that continues to hinder its growth.
Central Europe’s Soviet-era infrastructure that developed over the decades of communist rule was designed to maximize Moscow’s leverage of these countries and limit regional economic interaction that might have given the “satellite” states of the USSR options to resist or ameliorate Soviet control. Thus, energy and transportation infrastructure was (and remains) both relatively weak overall and East-West oriented, reflecting Moscow’s interest in ties with Germany, but neglected in a North-South direction. Even today, it is much harder to travel by rail, road, or plane from Warsaw to Bucharest than it is to travel between Warsaw and West European cities. That mis-development remains a strategic liability for the region, especially in energy: the region’s Soviet-era legacy system of gas pipelines gives Moscow, by design, the ability to exert leverage over the Three Seas region through its relative (though now, happily, declining) dependence on Russian-origin gas. Conversely, infrastructure investment in the region would yield substantial benefits, both economic and strategic.[1]
The Three Seas countries are all European Union member states and have benefitted from the EU’s impressive projects that have invested in transport infrastructure. They are aware of this and support for EU membership remains high, especially in Poland, one of the key leaders of the Three Seas Initiative. But Warsaw and the other Three Seas capitals– also sought to develop the Three Seas area as a regional group within the EU to encourage more support. This includes cross-border projects that would link the countries within the Three Seas region with each other as well as with Germany and Western Europe and projects that would address the Kremlin’s still-impressive ability to use energy as a strategic tool, a problem potentially exacerbated by the Nord Stream gas pipeline projects.
Three Seas’ strategic context.
The strategic context of the Three Seas Initiative has been paramount from the start and its strategic case has grown over time. First, its proponents have argued that Three Seas can help develop the physical underpinnings of the region so it can become in reality, not just in theory, part of an integrated European market, i.e., Three Seas helps make a united Europe a fact.
Second, the Three Seas leaders sought to involve the United States in the project from its beginning, not as a member but as a long-time and committed supporter of the region, as the US has been (at its best) since 1918 and President Woodrow Wilson’s 14 Points Speech, and especially after the peoples of the Three Seas region overthrew communist rule in 1989. They seek US involvement not only as a source of investment capital but as a strategic guarantor. For many, if not most, leaders in the Three Seas region, the US role in their part of Europe is of immediate and not just sentimental concern.
The Poles and other leaders of the Three Seas Initiative had a point. After the Three Seas countries starting to join the EU in 2004, many in the US started to assume that the special role that the US had played in Central and Eastern Europe was over; that America’s work there was done. Many Central European thought leaders were concerned as early as 2009 that the US was backing away from this role. These concerns had a basis in some of the early Obama Administration moves (e.g., its clumsy handling of missile defense). Russian President Vladimir Putin’s attack on Ukraine in 2014 and the Kremlin’s general turn toward subversion and aggression abroad and repression at home was taken as a threat by most of the Three Seas governments and beyond. This intensified their desire to keep the United States – that they saw despite the Obama Administration’s ill-fated “reset” with the Kremlin as generally less tempted by premature amelioration with the Kremlin than some West European governments — to remain engaged in their region.
The Obama Administration, however, also regarded Putin’s invasion of Ukraine as a turning point and in its wake abandoned what was left of the reset and led NATO to eventually send battalion-strength combat forces to the Baltic States and Poland and sent in addition an armored brigade to Poland on a rotational basis. Poland and other regional governments have intensified their efforts to keep the US engaged, and in addition to its role in NATO, Three Seas would add a structured economic dimension to the US role.
China represents another sort of great power challenge to Central Europe. It started courting the Central and Eastern Europe, including the Three Seas countries, with its “17+1” initiative, a Central Europe version of its global One Belt One Road infrastructure initiative. “17+1” was launched in 2012 through a summit in Warsaw, during the time of the previous, liberal Polish government that, like most European governments, looked upon China as a welcome course of investment and not as a strategic challenge. That view has changed as China’s government has become more assertive and even bullying (e.g., in its fight with the mayor of Prague), and as some recipients of One Belt One Road projects have complained about its unwelcome elements, such as debt traps and Chinese control over their economies.[2]
While there remain plenty of Central European officials happy or even eager to welcome Chinese investment, the reaction against perceived China Great Power bullying has been relatively swift. In 2021, for example, Latvia’s foreign minister[3] and a leading Bulgarian liberal politician[4] both described the Three Seas Initiative as a potential defense against suspect Russian and Chinese influence alike and welcomed the US role in Three Seas as a counterweight against both.
Three Seas’ emphasis on strengthening energy infrastructure has taken on special importance given the debate over the Nord Stream 2 gas pipeline. The Soviet-era legacy energy infrastructure in the Three Seas left the region (and nearby countries like Ukraine) dependent on Russian gas, with access to other gas sources relatively difficult. By giving Russia the option of exporting gas directly to Germany, bypassing Central Europe, Nord Stream 1 and 2 strengthened the Kremlin’s ability to exploit that infrastructure weakness to gain strategic leverage over the Three Seas region.
Happily, many of the Three Seas governments (Lithuania, Poland, Croatia, Romania and Bulgaria especially) have worked to expand energy infrastructure to mitigate the mis-development in gas infrastructure. Projects include new LNG import facilities, a new pipeline from Norway to Poland (Baltic Pipe, that enjoyed EU backing, due to be completed in 2022), new or repurposed pipelines to bring gas (even Russian gas) from Germany east to Three Seas countries and Ukraine. Three Seas seeks to build on these efforts, expanding them to include projects addressing non-Russian controlled gas needs in Hungary and the Balkans. If successful, these would substantially mitigate Nord Stream 1 and 2’s strategic risks, and the similar risks of more southern pipelines bringing in Russian or Russian-controlled gas.
Finally, Three Seas followed the strategic logic of US-European (and EU) relations for the past 75 years. The US has consistently supported a strong, united Europe since 1945 (with the baleful exception of President Trump and some around him) and since 1989 and arguably before has regarded Central and Eastern Europe – which includes the Three Seas region — as an integral part of that undivided Europe. The US championed both NATO and EU enlargement to advance that overall strategic purpose; Three Seas address one element of that larger purpose and thus US support for it was consistent with long-standing policy. Indeed, Three Seas gives the US common strategic purpose with the European Union executive arm, the European Commission, whose mandate includes projects to make that integration real. Far from being an instrument to weaken the EU by bringing the US into issues of Europe’s construction, as some Three Seas skeptics feared, the Initiative has the potential (and even purpose) to bring together the US and EU in common purpose, applying to new tasks the tradition of US support for the great European project.
Origins and evolution of the Three Seas Initiative
The conceptual origins of the Three Seas Initiative began in 2012-13, in conversations between Polish business executives who were thinking about the next stages of Polish and regional development and (co-author of this piece) Ian Brzezinski. They agreed that European integration for Poland and the other countries of post-1989 Europe required physical underpinnings in the form of infrastructure to match the impressive political and organizational steps the region had taken since the 1990s. EU and NATO membership needed to be matched, they believed, by corresponding economic development.
The Atlantic Council followed up by establishing a task force — chaired by former US National Security Advisor General Jim Jones (USMC-ret) and Pawel Olechnowicz, then President of the Management of Board of Grupa Lotos, a Polish energy firm, and directed by Ian Brzezinski and David Koryani — that produced a 2014 report, “Completing Europe[5],” elaborating on the infrastructure gap in Central Europe and suggesting ways to reduce it. The then-President of Croatia, Kolinda Grabar-Kitarovic embraced the concept of a Central European-led initiative to promote infrastructure, hosting a summit on the margins of the UN General Assembly in September 2015 that addressed the conclusions and recommendations of the Atlantic Council report. That and other meetings hosted by Croatia led to formal launch of the Three Seas Initiative.
The first full Three Seas Summit was also held under Croatian auspices in Dubrovnik in 2016. The Dubrovnik Statement[6] was a political statement that characterized the initiative as an “informal platform for security political support” for infrastructure projects in the region “without creating a parallel structure to the existing mechanisms of cooperation. Thus, geo-politics and geo-economics preceded commercial and organizational structures in Three Seas Initiative. Nevertheless, Central Europe since 1989 had developed a history of informal, political groupings that served to advance regional outlooks and limit re-nationalized politics that crippled Central Europe’s ability to act together in the 1920s and 1930s, so the political signal was important.
The Three Seas Initiative Warsaw Summit in July 2017 brought the new Administration of President Donald Trump on board as a major supporter of the initiative. Trump attended the Summit in Warsaw as part of his visit to the Polish capital; the Atlantic Council, while non-partisan, reinforced the Summit’s messaging via a simultaneously held Warsaw Global Forum. The Warsaw Summit’s Joint Declaration[7] was explicit that Three Seas intended to strengthen the European Union as whole and, while still modest on the practical side of the initiative, established a “3 Seas Business Forum”- a personal recommendation of President Trump who felt it imperative for the initiative to more systematically harness the power and capacities of the private sector.
Nevertheless, President Trump’s skepticism (or worse) about the EU in general led to suspicions in Germany and the EU that the Trump Administration saw Three Seas as a mechanism to divide the EU. Some speculated that the US, using its long history of support for Central Europe, might see Three Seas as an opportunity to advance its national interests at Europe’s expense. This was a new variant on a years’-old concern that Central Europe could become Washington’s “Trojan Horse” in Europe. There had been little basis for such suspicions until Trump’s occasional hostility toward the EU revived them; Trump’s seeming embrace of some of the Euro-skeptic governments in Central Europe led some in Western Europe to interpret his administration’s support for Three Seas in a darker light than warranted.[8]
These concerns were exacerbated by some of the Euro-skeptic rhetoric coming from Warsaw in 2015. While the language in Three Seas declarations was pro-EU, some unofficial Polish speculation noted that Three Seas had origins in the pre-War Polish notion of an “Intermarium” alliance of Central Europeans, a valid idea but failed initiative that sought to enable the countries “in-between” to better deal with challenges from Soviet Russia and revanchist Germany. This was interpreted by some in Europe as a Polish effort to form a regional group, bringing in the US to give it weight, at the expense of European solidarity. This was a mistaken interpretation both of the Intermarium concept and Polish aims in Three Seas (which, after all, had its origins under the previous, liberal Polish government). But it did negatively affect the initial German approach to Three Seas.
The Bucharest Summit held in September 2018 had sub-text of Three Seas solidarity with the EU and Europe, skillfully promoted by the Romanian government hosts. Summit participation this time included not just the US (including Energy Secretary Rick Perry), but also the President of Germany, the President of the European Commission, the President of European Investment Bank, as well as representatives from the EBRD, and IBRD. It also featured the most practical steps to date to transform Three Seas from a political to an operational project. The Joint Declaration welcomed a list of priority infrastructure projects, and Letter of Intent to create a Three Seas Investment Fund with the mandate to identify commercial financing for 3SI projects. The LOI was led by Poland’s Development Bank and signed by governmental development banks of Latvia, Czechia, Slovakia, Romania, and Croatia.
The 2019 Ljubljana Three Seas Summit also featured top level West European representation, with both EU Commission President Jean-Claude Juncker and German President Frank-Walter Steinmeier in attendance, along with US Secretary of Energy Perry. The Summit declaration was explicit that Three Seas is “complementary to the existing EU strategies and program” and welcomed establishment of the Three Seas Investment Fund (3SIIF), led by Poland’s Bank Gospodarstwa Krajowego (BKG) and Romania’s Export-Import Bank.
The virtual Tallinn Three Summit held in October 2020 was, at last, able to note the beginning of a shift from the political to the operational: it highlighted pledges of investment into the Three Seas fund by nine of the twelve member states – with Poland increasing its pledge from $500M Euros to 750 million Euros. The United States delegation not only reiterated the pledge made by Secretary of State Mike Pompeo the previous February (at the Munich Security Conference) of up to $1 billion in potential Three Seas Investments, it operationalized it announcing a $300 million investment into the Three Seas Fund. IMF Managing Director Kristalina Georgieva gave the project a boost just before the Tallinn summit, noting the need for regional infrastructure.
On December 2, 2020, the Three Seas Investment Fund’s manager, Amber Infrastructure Group announced the first Three Seas investment project, a regional digital infrastructure project led by an Estonian firm Greenergy Data Centers OU. As of April 2021, the fund has made two investments, one in each in the transport and digital sectors with a third said to be imminent in the energy sector.
The Three Seas Initiative developed slowly, but steadily grew from a political project based on sound strategic objectives – whose importance tended to grow over time – into an operational project with a commercial logic behind it. In the process, it picked up regional buy-in and managed to shed some unfortunate baggage and ease initial (and generally unfounded) German and EU concerns. Three Seas had US support from the start — a rare case of a Trump Administration embrace of a multilateral initiative – and also managed to survive the transition from the Trump to Biden Administration, no small feat given the politics of US foreign policy team transitions.
Despite its association with the Trump Administration, some on the Biden campaign foreign policy team supported Three Seas early on and they brought those views into the Administration. Less than a month in office, Secretary of State Antony Blinken gave a video statement for a Bulgarian-hosted Three Seas foreign ministers’ meeting in which he supported the initiative on both strategic and operational grounds, praising its public-private partnership approach embodied by the Three Seas Fund. Those familiar with the culture of new US Administrations will appreciate the unusual nature of this endorsement by a new Secretary of an initiative often associated with the previous Administration.
Taking Three Seas to the next stage
The Three Seas Initiative needs to accelerate the transition of its potential into accomplished business achievements that bring new infrastructure to the region. Having achieved an early and strong endorsement from the Biden Administration, it needs also to strengthen its support within the EU Commission and key member states, Germany especially. As it does, it should advance its “branding” as a pro-business, pro-European initiative that can advance, simultaneously, regional, European/EU, and transatlantic interests in the Three Seas region’s development. Critical to its success will be its business logic as a public-private initiative able to attract private capital based on reliable rates of return on investment.
Further Development and Internationalization of the Three Seas International Investment Fund. The Fund is off to a solid start having generated some $1.4 billion dollars in capital commitments from nine of its member states, the United States and the Amber Infrastructure Group (which committed 10 million Euros of its own capital). This puts the Fund well on track to achieve its goal of achieving a pool of $3-5B Euros with which to catalyze and support regional infrastructure development.
In addition to securing Fund investments from member states Austria, Czech Republic and Slovakia, the Three Seas Initiative would benefit from a more collaborative strategy and effort among its member states to convince the development banks of other key transatlantic countries, such as Germany, France, Denmark and Norway to invest in the Fund. The Germans may be willing to take a second and more positive look at Three Seas; if they do, the Three Seas stakeholders should welcome it.
Such investments would have a three-fold effect.
First, this would show broad European support for Three Seas, (timely given Russian pressure, dramatically highlighted by the recent revelation of a 2014 GRU sabotage operation on Czech territory and the truculent Kremlin reaction). Second, participation by key development banks would increase the willingness of international financial institutions like the European Investment Bank and European Bank for Reconstruction and Development to invest in the Fund. Finally, this combination of capital, including the USG investment, would make the Fund all the more appealing to the primary target set of investors: international private and commercial finance.
A key challenge in this regard will be to convince countries and entities including Germany, France, and European Commission of the need to respect the independence of the Three Seas Fund from governmental influence – not just from the 3SI member states but also that of other significant institutional investors. That independence is critical to the Fund’s ability to attract commercial capital.
A key current objective of European IFIs is to direct 3SI investments into green technologies and away from oil and gas infrastructure. This is laudable, and it is possible that some European support to energy infrastructure could be earmarked for green projects. That could be fit into the Three Seas objectives, which could be broadened to include a green energy pillar.
Given Kremlin’s use of gas as a political weapon, and threats to use Nord Stream 2 in that context, Germany especially would seem to have an obligation to support energy projects – including gas projects – that would mitigate Nord Stream 2’s downside risks, such as LNG facilities and gas interconnectors. Gas is not green but is greener than coal and Germany’s staunch defense of Nord Stream 2 means that it is past purity on green-only energy projects.
Indeed, following the US Government’s controversial decision in May to waive some sanctions regarding Nord Stream 2 (although it imposed others), the US and Germany reportedly started discussions about such mitigation measures. Belatedly, the US reportedly has started consulting with Poland and Ukraine about this as well. As of this writing, it is not clear whether these discussions will result in serious measures, but increased support for 3SI projects would logically be part of credible arrangements. 3SI could be part of a solution to a nasty problem that has divided Europe.
Three Seas Secretariat: Aside from the management of the Three Seas Fund, the Three Seas Initiative remains a largely episodic undertaking featuring annual summits and Business Forums complemented by 3SI Sherpa meetings and policy institute conferences. There is no standing structure with which governments, IFIs, and businesses can engage nor is there a continuous effort to market the Initiative and economic potentials of the Three Seas Region.
To raise itself to a higher level of effectiveness, the Three Seas Initiative should establish an international secretariat. Featuring a small staff that combines infrastructure, investment, and diplomatic expertise, a 3SI Secretariat should be based in a key West European financial center, such as Brussels, Berlin, London, or Amsterdam, a location that combines both an accumulation of commercial and governmental finance and geopolitical power.
The functions of the Secretariat should include the following:
- Marketing the economic vibrancy the Three Seas region and the opportunities it presents for profitable infrastructure investment
- Developing and making publicly available a continuously updated data base of infrastructure projects across the Three Seas region
- Serving as the logistical organizer of the annual Three Seas Summits and Business Forums as well as other events to drive the Initiative forward
- Fostering collaboration among Three Seas nations that would increase the region’s attractiveness to international infrastructure investors. (This could include generating initiatives to further harmonize national regulations governing – and too often complicating — cross-border projects and to incentivize foreign direct investment into Three Seas infrastructure projects.)
A Three Seas Secretariat could stand alone, or it could be stood-up as part of and be funded through the Three Seas Initiative Investment Fund, leveraging a small portion of the funds invested by Three Seas member states. Regardless of these options, a Secretariat has the potential to significantly elevate the profile of the Three Seas Initiative, increase its ability to effectively interface with commercial capital, and thereby increase its effectiveness as a beacon attracting international investment to the Three Seas region.
Extending the Three Seas Vision: An underlying and driving motivation of the Three Seas Initiative is the objective building a Europe that is undivided, secure, prosperous and free. The membership of the Three Seas Initiative consists only of EU member states, a fact that leverages the attributes of EU membership attractive to investors, including more established and trustworthy legal systems, regulatory harmonization, and other factors associated with stable and prosperous economies. EU member States, of course, do not encompass all of Central and Eastern Europe, including Ukraine, Moldova and the non-EU states of the Western Balkans.
The Three Seas Initiative needs to more clearly articulate a vision that encompasses these nations of Central and Eastern Europe whose eventual infrastructural integration is key to the completion of an undivided Europe. Three Seas Initiative fora that engage these European states on more regular basis should be established and effort should be made to identify and promote commercially viable infrastructure projects that would further bind these states and the Three Seas region.
In sum, the Three Seas Initiative has put itself on a road for potential success. Its political and strategic footing is sound. It needs now to prove itself in commercial and business terms, and is poised to do so.
[1] For a recent IMF assessment in the impact of infrastructure investment in the region, see: Central, Eastern, and Southeastern Europe After COVID-19: Securing the Recovery Through Wise Public Investment (imf.org)
[2] Should insert a supportive article re 1B1R problems
[3] US leadership in NATO is important to Latvia – foreign minister (baltictimes.com)
[4] Safeguarding Democracy Among Eastern Europe’s Three Seas – Just Security
[5] Link
[6] Link to Dubrovnik Statement
[7] Link
[8] For a recent example of German skepticism about Three Seas, see https://visegradinsight.eu/nudge-in-the-right-direction-three-seas-initiative/
