6 years of the Three Seas Initiative. Limited success and untapped potential

Six years of the Three Seas format is a good time to evaluate its effectiveness, and real and tangible effects. The Three Seas Initiative is already well-known in Poland and worldwide, and it is also a flagship project of the foreign policy of the United Right coalition. An analysis of facts, figures and completed projects allows a moderately positive assessment of this undertaking. The initiators of the project, with Poland playing a leading role, saw the potential of the region and accurately defined the development gaps that required investment, but the pace of work and the importance attributed to this initiative by the Member States are not equal to the role played by Poland. There are many challenges ahead for the members of the Initiative to turn this moderate success into a stable and forward-looking platform for cooperation.

Key to cooperation – the game of connectivity

The outcome of the 1st summit in Dubrovnik in 2016 and the wording of the declaration adopted after it revealed the modus vivendi of the cooperation. The Three Seas presented itself as a pro-EU format that does not undermine common European values and does not inhibit integration. It has proved to be a platform focused on cooperation within the Union to enhance its regional strength and complement the EU’s role as an investor and stabiliser in the region. The need to assuage the fears of Western Europe turned out to be a significant obstacle, and it took (and will continue to take) a lot of energy and resources to convince the rest of the EU what the Three Seas Initiative is not and does not intend to be.

The Three Seas Initiative has no political or geopolitical ambitions. Its objectives focus on the development of infrastructure connections – connectivity – primarily in three areas: transport, energy and IT. The projects under the Three Seas are intended to promote economic integration and strengthen the position of the participating countries in the EU so that they do not become bogged down in a geopolitical grey zone and subjugated by Western EU countries or Russia.

Energy infrastructure is of particular interest here. The Three Seas countries share a high degree of dependence on a single gas supplier: Russia. For example in 2020, Bulgaria met 76% of its gas demand from Russia.

Over-reliance on Russian supplies was highlighted by President Andrzej Duda in his speech at the first Three Seas Summit in 2016, and was echoed by the Summit’s co-host, Croatian President Kolinda Grabar-Kitarović. Energy projects are a priority for the Three Seas, and they include such investments as LNG terminals, the construction of gas interconnectors or the synchronisation of the electricity grids of the Baltic States with those of EU countries. Such projects are already being successfully implemented. These include the LNG terminals on the Croatian island of Krk, in Świnoujście and the Baltic Pipe, which is nearing completion. The construction of the Poland-Slovakia and Poland-Lithuania gas pipelines is also in progress. The following interconnectors are planned for the future: Bulgaria-Romania-Hungary-Austria, Slovakia-Hungary-Romania, and Poland-Czech Republic, as well as the Eastring and Adriatic gas pipelines.

Transport projects are another focus of the efforts of the Three Seas. They are based on the Trans-European Transport Networks (TEN-T), the EU programme for developing rail, road, air, maritime and inland waterway links. The implementation of the TEN-T network in the Three Seas countries lags behind the EU average, especially in the development of the railway network, therefore the list of projects includes mainly work on transnational motorways and railways. The project of Via Carpatia route is already in progress, while future plans include the Via Baltica route, Rail Baltica, Rail-2-Sea Gdańsk-Konstanța, the Black Sea motorway in Bulgaria, the construction of the Danube-Oder-Elbe water corridor and the expansion of port infrastructure and multimodal transport, such as the port in Rijeka, Slovenia.

The third pillar is digital infrastructure, which is so far the least specified area of cooperation and the fewest common projects are related to this area. In these cases, there are no implementation schedules or precise cost estimates. In few projects of this type the steps towards realization have been taken, but some have already started: Digital Platform on monitoring hydrographic bases in the 3SI region or the 3 Seas Digital Highway project, i.e. the construction of a network for the secure transmission of data from the North to the South.

Geopolitics is not a thing of the past

The most significant challenge for the Three Seas is obtaining funding as infrastructure projects, especially cross-border projects, need a massive injection of cash to be realised. Poland plays a leading role in this, but without the support of other members to develop the initiative, this will remain an missed opportunity.

Equally important for the future of the initiative will be the proper handling of relations with the United States under the Biden government and with the European Union, mainly Germany. There is a cross-party consensus of support for the Three Seas in the US. The aspect of US-Chinese rivalry plays no small part. In 2012, the Chinese launched the 16+1 platform, linking Beijing with the Three Seas and Balkan countries. It has proved disappointing, with few projects completed, Lithuania leaving this year, and more ambitious plans torpedoed by the US, as in the case of Huawei and the construction of a 5G network. From the EU perspective, Chinese investments also lack transparency and adherence to legal procedures, which are standard in European conditions.

American involvement rests on two pillars: geopolitical rivalry and balancing Chinese influence in the region, and building the US position as a supplier of energy carriers to the European market.

That the U.S. is serious about the initiative is evidenced by high-level American delegations sent to the annual summits and the financial support provided to the initiative. The US has pledged to invest USD 1 billion. To date, only 300 million has been transferred to the Fund. On the one hand, US support is welcomed, but on the other hand, the amount of USD 1 billion is not much compared to the needs of the region and US capabilities, and the disbursement mechanism is de facto conditional and depends on further contributions from the member countries.

The US supports the expansion of transmission infrastructure, including terminals to receive liquefied natural gas supplies, to push Russian gas out of the continent, particularly in Central and Eastern Europe.

The Three Seas Initiative, which does not involve the core of the EU, was initially viewed with some distrust by Brussels. Gradually, as the EU and its institutions became more confident in the intentions of the Three Seas, they began to look more favourably on the initiative. Today, the region receives significant funding from the Cohesion Policy or the European Regional Development Fund, and others such as the Connecting Europe Facility, under which, for example, the Via Carpatia project is being implemented.

Germany has a particular interest in the Three Seas, stemming from the nature of its foreign policy, which is to promote economic cooperation and investment. However, the desire expressed by the German Ministry of Foreign Affairs to join the Three Seas was met with a meaningful silence by almost all the Member States. Germany’s participation in this initiative as an observer and funder is highly desirable, but its membership status as the EU’s largest economy could weaken integration and undermine the purpose of the project.

Empty treasury of the Three Seas Fund

The IMF estimates that closing the development gap in the infrastructure of the Three Seas region requires annual expenditures of 3-8% of the GDP of the member countries until 2030. On the initiative of BGK (Bank Gospodarstwa Krajowego) and the Romanian Exim Bank, a letter of intent was signed at the 2018 Summit on the establishment of the Three Seas Fund. The intention was to act as an accelerator for public-private ventures and operate on a commercial basis. Therefore, the Fund functions as a complement, a guarantee and an incentive for private investors to carry out large-scale projects in the region.

The target value of the resources to be manager by the Three Seas Fund is EUR 5 billion. Current estimates say that around EUR 1.2-1.4 billion has already been raised. The Polish contribution to the Fund has been EUR 750 million. This amount represents more than half of the contribution, but the real obstacle to giving momentum to the activities of the Three Seas Initiative is the uneven capital commitment from the other members. The underfunding is evident in the level of investment coverage of joint infrastructure projects. The list of 77 projects has a financial coverage of merely 12%. Another problem is that only 9 out of 12 countries of the Initiative have joined the Three Seas Fund. Austria and the Czech Republic, i.e. the largest economies of the Three Seas after Poland and Romania, and Slovakia remain outside the Fund. The breakdown of the sums paid into the Fund shows that the Initiative enjoys interest almost exclusively from Poland and the USA, while the contributions of the other members remain marginal.

Dark clouds on the horizon

From the Polish point of view, the Three Seas Initiative appears to be a successful platform for cooperation, but attention should be paid to the place of the Three Seas in the politics of the member countries. So far, all the presidents of the Member States have never appeared at the initiative’s summits together, and the forms of involvement and the ranks of the state delegations have varied.

It was only at the third summit in 2018 that the Three Seas Initiative Business Forum was inaugurated, and the Three Seas Initiative Investment Fund, the Network of Chambers of Commerce and Industry and the Business Council were established. A common list of future investment projects was adopted. Croatia and Hungary submitted the highest number of projects (17 each). At the other extreme is the Czech Republic, which submitted just one project, and Austria, which did not submit any project at all.

Of the list of 49 approved projects, by the end of 2020, three have been implemented, 14 have made marginal progress and 30 projects have not been started at all. The most important factor here is financial: the funding raised covers only 12% of the costs assumed for the entire list of projects.

The glass is half full

The Three Seas Initiative is a pioneering initiative that addresses the issue of connectivity in the Central and Eastern European region. The empowerment of Poland and the region, which was the main reason behind the establishment of the Initiative, can be described as a limited success. It was an important achievement to establish this kind of cooperation and to convince a large group of countries to participate in this format without discrediting it as opposing the EU or Germany. The Three Seas Initiative has been a PR success and is perceived as a platform for strengthening the EU and transatlantic relations.

The creation of the Three Seas Fund and the list of projects of common interest should be appreciated. Due to the urgent need for investment in infrastructure and the fact that the region is underdeveloped as compared to Western Europe, it was necessary to establish an initiative with the aim to overcome the region’s structural weaknesses and the legacy of being behind the Iron Curtain. The Three Sees Initiative has the potential to effectively close development gaps and contribute to reducing the peripherality of the region, but it requires greater political will and financial commitment from the member states. The implementation of projects such as the Via Carpatia route, the LNG terminals on Krk island and in Świnoujście, and the expansion of gas interconnectors will greatly contribute to strengthening the position of the member states and the region as a whole and, as a result, the strength of the EU will also grow.