Key View

The EU's standing in the global geopolitical order is set to be challenged over the coming decade by numerous factors, both internal and external.

A shift from a unipolar system, based around the pre-eminence of the US, to a multipolar system will leave the EU searching for new partners.

The loss of the UK as a member state will see the economic and military clout of the EU diminished.

Relations with some major and semi-major powers, such as the US and Turkey, will remain strained but will not break.

A lack of united military capability at the EU level means Russia will remain an antagonist rather than partner of the EU.

The EU has, over the course of the past several decades, acted as a significant geopolitical power in its own right. While its larger and more economically, politically and militarily influential member states have, of course, clashed and disagreed on major foreign policy stances, by and large the EU has spoken as one when it came to interactions with other global powers such as the US, Russia and China. However, five-to-10 years from now the bloc's geopolitical standing could look very different. The EU faces notable challenges to its geopolitical position over this period, including the increasing economic and political clout of emerging markets such as China and India, the withdrawal of the UK from the union, and the evident internal divisions that could make it more difficult for the union to present a united front on the world stage.

A Multipolar World

For most of its duration as the EU (as opposed to its less integrated predecessor, the European Community and the European Economic Community) from 1993 onwards, the bloc has existed in a unipolar world, with the US as the undisputed global superpower following the collapse of the Soviet Union in 1991. However, with the US pursuing a more unilateral and seemingly less euro-centric foreign policy under the Trump administration, and emerging markets such as China and India seeking to flex their growing economic muscle on the world stage, the EU will have to contend with a different geopolitical environment in the late 2020s.

The EU has often attempted to act or been seen as the 'moral arbiter' in global geopolitics, often advocating diplomacy rather than military intervention, with notable exceptions such as in the Balkans in the 1990s. This comes in comparison to its close ally the US, which has often been seen as more likely to engage in military action, particularly during the presidency of George W. Bush (2001-2009). With other nations coming to the fore alongside the US, the EU is unlikely to shift dramatically from its historic trans-Atlantic alliance, but could certainly seek to forge closer ties with Asia's emerging giants in order to maintain geopolitical influence.

Brexit Diminishes EU's Clout

The loss of the UK as a member state in March 2019 will undoubtedly result in a reduction in the geopolitical influence of the EU from its present level. While the UK is just one of 28 member states, it represents the bloc's second-largest economy in GDP terms (after Germany) and possesses the second-largest armed forces (after France). It is difficult to gauge a concept such as geopolitical influence quantitatively, but the combined economic might of the EU after Brexit will be notably reduced from its current levels. The nominal GDP of the EU-28 in 2017 was EUR15,350bn, a figure that would be reduced to EUR13,022bn following Brexit, a decline of 15.2%. Similarly, the combined military expenditure of all EU member states in 2016 was EUR199.4bn, which would fall by 23.7% to EUR152.1bn without the contributions from the British Ministry of Defence.

EU Economic And Military Influence Diminished Without UK European Union - Nominal GDP and Military Expenditure Source: Eurostat, Fitch Solutions

One important factor in the EU's favour in relation to Brexit is that our core view is for a 'soft' Brexit, which keeps the UK closely tied into the economy and institutions of the bloc as part of the single market and a form of customs union or arrangement ( see ''Soft' Brexit Becomes Core View As UK Government Flounders', July 20). As such, the UK is unlikely to act in a unilateral manner, and instead will continue to follow the broad economic and foreign policy direction of the EU. However, should no deal prove possible and the UK leave the bloc in a 'cliff edge' Brexit, after a period of inevitable economic and political upheaval, the country would be able to make its own free trade deals and pursue relations with outside parties separately from the EU. This could see the two sides at odds going forward.

Relations With Major Powers Strained, But Not Broken

At present, the EU finds itself with few friends among major powers in the geopolitical landscape. Its historical closest ally, the US, has shifted to an 'America First' footing under the administration of President Donald Trump. This has seen major tariffs imposed on EU aluminium and steel, and outright criticism of EU institutions and member state governments emanating from the White House with regularity. In five to 10 years time, however, the relationship could have shifted notably.

Should Trump be defeated, impeached, or fail to seek re-election in 2020, we would expect the next US president to have a much less combative tone towards the EU, raising the chances of the re-establishment of previously strong and friendly ties. However, should Trump be re-elected in 2020 on what would likely prove another populist, protectionist platform, it could see ties remain frosty until January 2025, when Trump would leave office. The EU has persevered in finalising and implementing trade deals with Canada and Japan respectively during the course of the Trump presidency. However, the size of the US economy combined with the volume of trade the EU sends across the Atlantic and the major contribution the US makes to NATO operations in Europe, mean that the bloc is likely to seek to mend ties with Washington D.C. as soon as possible.

Poor relationships with national leaders are not just harming EU relations with the US, but also Turkey. When he first came to power in 2002, Turkish President Recep Tayyip Erdogan was seen as a potential close partner of the EU, with a broadly reformist policy agenda and seeming inclination towards improving trade and political links with Europe. However, in recent years this initial optimism has faded, as Erdogan's policies have shifted in a more illiberal and Islamist direction. Moreover, while Turkey is a NATO member and arguably the most strategically important NATO member state in Europe, Ankara has signaled increasing ambivalence towards its NATO allies, while courting closer relations with Russia ( see 'Turkey's NATO Membership Intact For Now, But Long-Term Exit Risks Rising', September 12) and China.

In previous years, the potential for eventual EU membership was seen as a crucial policy anchor for Turkey, keeping it both committed to maintaining democratic norms, enacting economic reforms and fostering closer defense links with European nations (in spite of long-running tensions with neighbouring Greece). However, with the prospect of EU membership off the table for the foreseeable future (there remains debate as to whether it was ever truly on the table), Erdogan is increasingly free to dominate and shift Turkey's policy agenda and outlook as he desires. Nevertheless, given the crucial geographic position of Turkey as a gateway to Asia and the Middle East, and a key staging post for NATO missiles and air forces, we do not expect the EU-Turkey relationship to break down irreparably.

Contending With Russia To Dominate Foreign Policy Focus

While the primary security risk facing the member states of the EU internally over the coming decade will remain the threat of Islamist terrorism, the main external risk is an increasingly assertive and unpredictable Russia. There appears little prospect of a change in political leadership in Russia, with Vladimir Putin's current term ending in 2024 and the potential for him to run for a further term that would last until 2030. Since the Russian annexation of Crimea in February 2014, relations between Russia and the EU have been at rock bottom, with sanctions imposed on various sectors of the Russian economy and powerful individuals within the Russian establishment, while troop numbers have been built up on the Russo-EU border.

While the Kremlin has been seen to act with impunity with regard to respecting EU and international norms, most recently in the Salisbury nerve agent attack in the UK in March 2018 on a former Russian spy, allegedly carried out by Russian operatives, there have been concerns that the territorial integrity of EU member states could be at risk. Most notably, the Baltic States have voiced concerns that Russia could seek to annex regions of their land due to a perceived threat to the ethnic Russian minority in these areas (the same reasoning given behind the Crimea annexation). At present, the only forces available to counter any potential intervention would be domestic ones, and potentially those from NATO allies should Article 5 of the mutual defence pact be invoked.

However, there is no stand-alone EU defence force at present. Ceding defence policy to a supranational body has, so far, proved too controversial for member state governments, although this could shift in the coming years. In June 2018, nine states signed a letter of intent to establish a European Intervention Initiative (EI2), which would enhance military cooperation between its members, including the UK (which would be allowed to remain involved after Brexit). EI2 would be separate from NATO and the EU's Common Security and Defence Policy (CSDP). The CSDP has facilitated coordination between the security forces of member states, but is still far from the prospect of member states contributing troops and materiel to a military force that they would not have sovereign control over.

The shadow cast by Russia on the EU's eastern border also means that the bloc is unlikely to be able to shift its focus to other areas. The EU, as an organisation representing some of the richest nations on Earth, has often sought to encourage humanitarian intervention around the world where required. However, this could increasingly be left to other supranational bodies, such as the UN, or indeed non-governmental organisations, with EU member states more concerned about protecting their eastern borders physically and countering any Russian-backed cyberattacks than taking the lead in halting conflicts elsewhere around the world.

China Is Likely To Become Increasingly Important To The EU In The 2020s

Trade and transportation links between Europe and China will improved gradually under 'Belt and Road', meaning that Beijing will become a more prominent player in Europe economically, and probably politically, than ever before. Chinese influence is likely to be felt initially in Eastern Europe, due to Belt and Road-related trade and investment, but many Western European economies are likely to dramatically step up their commercial ties with China, which is likely to overtake the US as the world's largest economy well before 2050. Indeed, the rise of China has failed to generate angst in Europe as it has in the United States. However, there are also risks to the EU from the rise of China, if Beijing comes to blows with Washington, DC, in the Indo-Pacific region. A Sino-US conflict could emerge in a number of flashpoints and force European nations (especially core NATO members) to choose whether to side with the US or sit out the conflict.