Russian assets scoop — Cars resurrected — Tunisia in focus – POLITICO

DRIVING THE DAY: CARS BACK FROM THE DEAD       

EU AMBASSADORS REVIEW CAR ENGINE DEAL: Ambassadors of the EU’s 27 countries will this morning review a deal struck Saturday by Germany and the European Commission, which paves the way for the sale of cars running on synthetic e-fuels even after combustion-engine vehicles are banned from 2035.

Berlin and Brussels struck the deal just hours after EU leaders left their summit in Brussels on Friday. The key is an agreed statement, endorsed by both the Commission’s Green Deal chief Frans Timmermans and Germany’s Transport Minister Volker Wissing, that commits to finding a legislative path to incorporate a carve out for e-fuels (which emit CO2 at the tailpipe) into the 2035 mandate at Berlin’s behest. The Commission says it will publish legislation by the fall, and the Germans say they want the process resolved by fall 2024. Josh Posaner has the full details here.

End of an ugly chapter: Now that its concerns have been resolved, the German government’s three-way coalition has agreed a set position for its ambassador after weeks of threats to crash the deal. Which should mean everything runs smoothly today — Germany should be in favor of the legislation as agreed, without reopening it. But given its history of second thoughts on this file, no one will declare victory until it’s really over.

Timing: The meeting of ambassadors starts at 10 a.m., so we expect to know by mid-afternoon whether the EU is on track to pass the 2035 zero-emissions sales mandate for cars and vans into law. Transport ministers are then expected to give the final rubber-stamp on Tuesday.

**A message from Meta: With the metaverse, firefighters will one day be equipped with augmented reality that will enable them to better navigate burning buildings and rescue people faster.**

Taking credit: As we reported, cars weren’t formally on the agenda at the leaders’ summit, but everyone was talking about the issue. Following the announcement on Saturday morning of a breakthrough, Austria’s Chancellor Karl Nehammer was quick to talk up the “green combustion engine” plan. “It’s about progress, not prohibitions,” he said. Nehammer also claimed he’d worked “side-by-side” with Germany on this over recent weeks.

Germany’s domestic e-fuels push starts: Not content with basking in the deal with Brussels, German media reported Sunday that e-fuels fan Christian Lindner, the country’s finance minister, was planning to reform Germany’s tax system to offer drivers lower rates if they fuel up on synthetic alternatives to gasoline. A legal proposal is on the way. That’s aimed at spurring production of such fuels in the coming years.

NOW READ THIS: Bickering between Berlin and Paris is deflecting attention from the EU’s mission to steer a course toward net zero via a clean-tech strategy that’s meant to keep Europe competitive with the U.S. and China, write my colleagues Charlie Cooper and Karl Mathiesen in this analytical piece.

RUSSIAN ASSETS SCOOP       

FROM RUSSIA WITH INTEREST: The EU is looking into investing frozen assets belonging to the Russian central bank to reap returns, according to a paper by the Commission set to be discussed on Tuesday by national experts, and obtained by my colleague Paola Tamma.

Show me the money: G7 countries, the EU and Australia together froze $300 billion of Russian central bank assets at the beginning of the war, two-thirds of which is believed to be in the EU. Member countries agreed on an obligation to report on the whereabouts of frozen Russian assets in its latest sanctions package against Moscow to try to get a clearer picture.

The Commission paper looks at the legal grounds for investing Russian foreign reserves, and finds that while Moscow should be able to recover the original capital and any contractually agreed interest prior to the assets being frozen, any returns in excess of that could be appropriated for the purpose of helping rebuild Ukraine. That approach would require tweaking the EU sanctions regime to allow investing central bank assets in short-term bonds and bills from EU sovereigns, and could generate around 2.6 percent annual returns.

Better together: The Commission’s paper stresses that taking coordinated action with G7 and other countries would have “both political and market advantages,” by avoiding spooking investors, who could shun European financial infrastructure if the EU acted unilaterally.

What if they lose it? The paper suggests investing in “liquid, highly-rated assets.” Investing in equity would carry higher returns, but raises “political and financial implications” if the EU were to reimburse Russia for losses incurred while investing its assets — whereas “the risk of losses on a high credit-quality, shorter-term portfolio at current yields seem very remote.” Still, “losses can never be excluded,” and so the question of “who bears any residual risk in case [of] such losses … will require a clear legal answer,” the Commission writes.

NORD STREAM MYSTERY LATEST: Five days before explosions damaged three of the four Nord Stream pipelines last year, a convoy of six Russian naval vessels was spotted in the area of the pipelines, German news site T-online reports, citing open-source intelligence research. The report again raises the specter of self-sabotage by Moscow. Russian President Vladimir Putin denies any responsibility for the attack and has blamed the U.S. and U.K. for it. (My colleague Charlie Cooper had this analysis of who had motives for blowing up Nord Stream.)

SANCTIONS CALL AS PUTIN GOES NUCLEAR: The West and Ukraine condemned Putin’s announcement on Saturday that Moscow would station tactical nuclear weapons in neighboring Belarus by July. The German Federal Foreign Office told reporters the decision was akin to a “further attempt at nuclear intimidation,” NATO called the move “dangerous and irresponsible,” and officials in the U.S. also expressed concern. Lithuania’s foreign ministry said in a statement Sunday that it will “discuss with its Euro-Atlantic partners how to respond,” and “will call for the adoption of new sanctions.”

TUNISIA IN FOCUS       

GENTILONI’S SENSITIVE MISSION: Europe’s Economy Commissioner Paolo Gentiloni is heading to Tunisia today to discuss EU financial assistance. The mediterranean country, once the most hopeful nascent democracy after the Arab Spring, descended into turmoil after President Kais Saied orchestrated what critics describe as a coup. “We want to help Tunisia to generate sustainable economic growth, new jobs and better opportunities for Tunisians, especially women and young people,” Gentiloni told Playbook ahead of his trip.

Money for reforms: “The EU needs a stable and prosperous Tunisia, which is why we are ready to consider additional macro-financial assistance if the necessary conditions are met. This means not only having a new IMF program up and running but also maintaining respect for human rights and shared democratic values,” Gentiloni said, adding he was looking forward to “intensive and, I trust, constructive discussions with the Tunisian authorities.”

Background: Years of economic hardship have accentuated the political instability in the country. The European Parliament and human rights watchdogs accused Saied of an authoritarian drift. Saied has claimed migrants from sub-Saharan Africa are trying to erase his country’s national identity. 

It’s migration that has mobilized EU leaders. They discussed the issue at last week’s summit, after Italy registered a surge in arrivals from Tunisia. A public report from Italy’s intelligence services in February claims that around half of migrant arrivals in 2023 left from Tunisia. Speaking to reporters on Friday, Italy’s Prime Minister Giorgia Meloni said she was warning fellow EU leaders that Tunisia’s financial woes “risk unleashing an unprecedented flow of migrants,” and stressed the need to “support the country’s stability,” my colleagues Gregorio Sorgi and Paola Tamma report.

Latest tragedy: At least 29 migrants died when two boats sank off the coast of Tunisia as they tried to cross the Mediterranean to Italy, the Tunisian coast guard said on Sunday. Reuters has more.

Money for Tunis: Rome is pushing the IMF to greenlight a $1.9 billion package to Tunisia, in the hopes it will provide a lifeline to the country’s struggling economy. Tunisia reached a deal with the IMF in September, but talks have been stalled for months as the government failed to deliver on reforms. 

EU cash on the table: Gentiloni will discuss with Saied and other members of government the potential disbursement of EU macro-financial assistance, but an announcement is not expected today. On Friday, Meloni said “the MFA is included in the IMF’s work, it is part of the same package,” and stressed that the unblocking of the IMF’s pot of money remains the top priority.

What’s next: Gentiloni’s trip kicks off a flurry of diplomatic activity: Home Affairs Commissioner Ylva Johansson said she’ll be heading to Tunisia in April and Meloni on Friday confirmed an upcoming joint Italo-French foreign ministers’ mission.

**NEW PRODUCT UDPATE – As of tomorrow, POLITICO’s China Direct newsletter becomes China Watcher. It will hit inboxes twice weekly (Tuesday & Thursday). POLITICO’s EU-China Correspondent Stuart Lau will be writing this expanded newsletter together with our colleague Phelim Kine from across the Atlantic in Washington. We’re living in a world where geopolitics are shaped and reshaped in Brussels, Washington, and Beijing — and we know how much you would want a full picture before making your decisions, no matter which government ministry, embassy, company, start-up or think tank you’re from. Sign up to China Watcher.**

CHINA CORNER       

REWRITING MERKEL’S CHINA PLAYBOOK: Germany’s opposition Christian Democrats are planning to shift away from the pragmatic stance toward China that characterized Angela Merkel’s 16 years as chancellor, claiming that maintaining peace through trade has failed, my colleague Gabriel Rinaldi reports. According to a draft position paper seen by Gabriel, the conservatives say the idea of keeping peace through economic cooperation “has failed with regard to Russia, but increasingly also China.” The paper is to be adopted by the CDU/CSU parliamentary group in the Bundestag around Easter.

CLINGING TO TIKTOK: Staff at the European Parliament were ordered to delete TikTok from any work devices by March 20. But MEPs and political groups are opting to stay on the video-sharing application, seeking to win over the platform’s user base of young voters. One of the ways they’re staying on the app is by using dummy phones, my colleagues Eddy Wax and Clothilde Goujard report.

WHAT SÁNCHEZ WILL TELL XI: Spanish Prime Minister Pedro Sánchez will tell China’s President Xi Jinping that any peace in Russia’s war on Ukraine should respect the latter’s “territorial integrity” and be “fair and lasting.” Sánchez is traveling to China to meet with Xi this week. Reuters has more.

VDL TAGGING ALONG WITH MACRON: And in case you missed this news last week, Ursula von der Leyen will travel with French President Emmanuel Macron to China on April 4, on her first journey to Beijing as Commission president.

IN OTHER NEWS       

CHANGING TIMES: Most European countries moved their clocks forward an hour on Sunday. For Greenland, that was the last time — come October, the island will keep summer time, unlike the rest of the EU.

Wait, didn’t Brussels promise to end clock changes? The Juncker Commission unveiled a proposal to abolish the twice-yearly time change back in 2018, with the European Parliament giving its backing too. But EU countries pumped the brakes, and while the EU was supposed to have done away with time changes by now, the plan remains in the deep freeze.

Any hope of progress? Not any time soon. The EU is preoccupied with other things, and in order to move forward with the plan, the file must be on the agenda of the country holding the rotating Council presidency. As of now, neither Spain nor Belgium, the countries that are next in line for the hot seat, have announced plans to push the proposal.

ISRAEL LATEST: The U.S. overnight urged “Israeli leaders to find a compromise as soon as possible,” as widespread unrest broke out in Israel after Prime Minister Benjamin Netanyahu fired his defense minister for objecting to judicial reforms the PM is seeking to enact. Photos and footage here, h/t ‏Tal Schneider. There’s a protest planned in Brussels this afternoon — more info below.

PLAYING CATCH-UP ON TECH: In a damning report out today, the leaders of Europe’s industrial titans warn that the Continent should speed up its investment in research and development, especially in information and communications tech, to stay competitive. “Compared to our global peers and competitors, Europe’s investment in R&D is relatively low,” says the report by the European Round Table for Industry — which assembles CEOs and chairs from companies like BASF, Airbus and ASML. “With a few exceptions, we’re far behind in the tech race in the ICT area, and this endangers Europe’s position in the next industrial revolution,” according to the text, seen by POLITICO’s Pieter Haeck.

DON’T MESS WITH MICHELANGELO: A school board in Florida made news last week after forcing out a principal for showing Michelangelo’s David to her art students — after complaints from parents that it was “pornography.” On Saturday, the mayor of Florence, Dario Nardella, shot back at the “ridiculous” decision: “I will personally invite the teacher to Florence to give her a recognition on behalf of the city,” Nardella tweeted. “Art is civilization and those who teach it deserve respect.”

**To help you navigate the latest trends in policy communications, POLITICO Media Solutions has published a unique report, providing you with actionable insights from top business, media, advocacy and government experts. Read it here.**

AGENDA       

— Commissioner Paolo Gentiloni in Tunisia; meets with the President Kais Saied.

— Commission Vice President Valdis Dombrovskis meets Latvia’s President Egils Levits in Riga.

— EU foreign affairs chief Josep Borrell in the Dominican Republic. Co-chairs the EU-Dominican Republic Political Dialogue; meets with President of the Dominican Republic Luís Abinader, joint press conference at 4:30 p.m.; participates in inauguration of EU-funded Latin American and Caribbean Cyber-Competence Centre with Minister of the Presidency of the Dominican Republic Joel Santos. Watch.

— Commission Vice President Věra Jourová speaks at conference on disinformation; receives President of the European Social and Economic Committee Christa Schweng and U.S. Ambassador to the EU Mark Gitenstein; speaks at Transatlantic Democracy Dialogue.

— Commission VP Margaritis Schinas in Cairo, Egypt; meets with Minister for Education Reda Hegazy.

— Commissioner Kadri Simson meets with Minister for Energy of Ukraine German Galushchenko.

— European Parliament’s Committee on the Internal Market and Consumer Protection debates right to repair and a Europe Fit for the Digital Age from 3 p.m. to 6:30 p.m., with Commissioners Didier Reynders and Margrethe Vestager. Watch.

— NATO chief Jens Stoltenberg meets with Czech Minister of Foreign Affairs Jan Lipavský at NATO headquarters.

— Council President Charles Michel in Bucharest.

— German Chancellor Olaf Scholz and Dutch PM Mark Rutte hold press conference in Rotterdam at 6 p.m.

BRUSSELS CORNER       

PSA — FLIGHTS TO MUNICH AND FRANKFURT CANCELED: Brussels Airlines canceled all flights to Munich and Frankfurt today due to the widespread strikes in Germany, reports RTBF.

ISRAEL DEMOCRACY PROTEST IN BRUSSELS TODAY: Expect some disruption around Schuman this afternoon, with a protest against the Israeli government’s proposed legislation due to be held outside the Berlaymont from 4:30 p.m. Details here.

TRIBUTE TO ANTOINETTE SPAAK: Politicians in Ixelles want to rename the Citizens’ Garden near the European Parliament in honor of former Belgian politician Antoinette Spaak, who died in 2020. The proposal will be submitted to the European Parliament. Spaak was the first woman in Belgian history to lead a political party and was an MEP for over 10 years. She was the daughter of Paul Henri-Spaak, one of the EU’s founding fathers.

BAD NEWS FOR LEGO LOVERS: Plans to build a Legoland amusement park in Gosselies, near Charleroi, have been scrapped, with the company choosing to shift its focus to China, according to VRT.

BIRTHDAYS: Former Spanish Prime Minister Mariano Rajoy; MEPs Isabella Adinolfi, Anna-Michelle Asimakopoulou and Izaskun Bilbao Barandica; Former MEP Gerard Batten; European Commission’s Leonardo Colucci; John Thompson, from Journalism.co.uk; POLITICO’s U.K. Editor Jack Blanchard.

THANKS to Joshua Posaner, Paola Tamma, Gregorio Sorgi, Pieter Haeck, Playbook reporter Ketrin Jochecová and producer Grace Stranger.

**A message from Meta: Some people say the metaverse will only be virtual. But one day, firefighters will use augmented reality to navigate burning buildings, saving crucial seconds when lives are on the line. With the metaverse, students will be able to immerse themselves in history, by visiting with woolly mammoths and experiencing how they lived tens of thousands of years ago. And doctors in A&E will use augmented reality glasses to visualise scans and make decisions faster. The metaverse may be virtual, but the impact will be real. Learn more about the possibilities in the metaverse.**

SUBSCRIBE to the POLITICO newsletter family: Brussels Playbook | London Playbook | London Playbook PM | Playbook Paris | POLITICO Confidential | Sunday Crunch | EU Influence | London Influence | Digital Bridge | China Direct | Berlin Bulletin | D.C. Playbook | D.C. Influence | Global Insider | All our POLITICO Pro policy morning newsletters