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Strategies & Market Trends : Investment in Russia and Eastern Europe

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To: Rob Shilling who wrote (886)1/6/1999 11:16:00 PM
From: CIMA   of 1301
 
Slovakia Pushes Desire for NATO Membership

Summary:

* Slovakia's renewed push for membership in NATO reflects a new
sense of urgency in Central Europe. With Russia rebuilding its
empire and Western Europe both indifferent to Central Europe and
increasingly uncomfortable with U.S. leadership, Central Europe
must move quickly to keep the U.S. engaged if it is to avoid
becoming the forgotten backwater between hostile camps.

Analysis:

In his New Year's Day address, Slovak Prime Minister Mikulas
Dzurinda stressed his country's strong desire to join NATO,
though he expressed the fear that 1999 could be "the last
chance." The same hope and fear was also expressed by Slovak
Foreign Minister Eduard Kukan, in a December 31 report by the
Czech news agency "CTK," when he said that Slovakia's chances of
joining NATO remained slim, but he hoped that talks would
commence in the near future regarding membership.

Slovakia's chances of joining NATO significantly improved
following the September parliamentary elections that resulted in
a pro-Western government succeeding that of the authoritarian
leader Vladimir Meciar. Yet although NATO will formally invite
the Czech Republic, Hungary and Poland to join the alliance in
April 1999, during NATO's next summit in Washington, Slovakia
will not be part of that group. One reason is that the new
Slovak government has yet to stabilize the country's internal
political situation, a significant precondition for entry into
NATO. The EU also offered this rationale for its rejection of
Slovakia's entry into that organization. However, the political
dynamics of Europe are changing such that Slovakia may be in a
position to play these organizations off against each other to
obtain membership in both.

For Slovakia, membership in the EU and NATO has become the
paramount goal. Integration into the EU guarantees a more
extensive market for its goods and potentially greater amounts of
investment and foreign aid with which to revitalize its economy.
Membership in NATO enhances the security of Slovakia's eastern
border by enabling it to coordinate its defense against Russian
pressure with Poland to the north and Hungary to the south -- and
of course with U.S. troops theoretically in the middle of it all.
Given the critical strategic location of Slovakia for the defense
of NATO, particularly after Poland and Hungary are admitted,
Slovakia should be able to easily draw on the support of the U.S.
for admission into the organization. Moreover, Slovakia's
leaders realize -- as do the leaders of the other Eastern and
Central European countries -- that the EU commitment to expansion
is waning and that a foothold in NATO may be the only means by
which to gain leverage on possible EU membership.

The EU's current move to slow the process of expanding European
integration is a product of the growth in Western Europe's social
welfare policies. Exemplifying this is Germany which, under its
new Chancellor, Social Democrat Gerhard Schroeder, took over the
presidency of the European Union on January 1. Germany's Social
Democratic Party has long been a proponent of slowing EU
integration out of a concern that, if the Union's borders are
opened to the East, the EU would be flooded by cheap labor from
Central and Eastern Europe. This, in turn, could potentially
drive up the costs of the social welfare programs currently being
instituted throughout Europe and already strained in Germany's
case by the burden of Eastern Germany.

Therefore, lacking support from the rest of Europe, Slovakia has
turned to NATO, hoping that the U.S. influence in that
organization will prevail. What Slovakia has to offer to NATO is
its location. Slovakia is located in the heart of Europe and is a
pivotal country from a strategic point of view. It occupies a
300-mile-long stretch of territory running from Ukraine to
Austria. Were Russia to dominate Slovak foreign policy and
national security, Slovakia would then undermine the defense of
Poland, Hungary, Austria and the Czech Republic. This means that
Slovakia must be tied to the West, as it would become, in the
absence of such ties, an Achilles heel for the whole of Europe.
This puts Slovakia in a good bargaining position to obtain U.S.
support.

On the other hand, Western Europe has grown uncomfortable with
U.S. leadership, and is pursuing its own military alliance,
though thus far only in addition to NATO. But as NATO's
significance and U.S. influence in Europe wane together, so they
might rise together, or so Slovakia hopes. Slovakia is hoping to
keep the U.S. engaged and committed to an expanded and vital
NATO, as without U.S. interest Central Europe may become a
neglected and insecure backwater between the EU and the new
Russian-Belarus-??? Federation.

Slovakia's drive for membership in NATO may place the U.S. at
odds with Germany and the rest of Europe. The EU has and will
grow without the U.S., but NATO, the main European defense
structure, cannot. Hence, while many in the new Europe are
opposed to U.S. influence, they remain tied to the U.S. through
the North Atlantic Treaty Organization. The EU, with its
continental-wide market and its tariff structure, is designed to
foster a regional economic specialization and interdependence
that is ultimately divorced from the U.S. and the North Atlantic
connection. The crux of the current situation is that the U.S.
recognizes the strategic importance of extending NATO's sphere of
influence far enough into Central and Eastern Europe for NATO to
remain effective; whereas the EU favors turning its back on
applicants from Central Europe out of its concern that the cost
of propping up the population of those countries may far outweigh
any economic benefits derived from their membership.

Given the divergent responses of the EU and NATO to applicants
from Central Europe, Slovakia's plea may raise the level of
tension between the U.S. and Europe even more. However, it may
also hasten a revival of U.S. and European cooperation. For the
fact remains that the old Soviet Empire is beginning to regroup
under Russian leadership and this may indeed pose a problem that
neither the U.S. nor Europe can confront alone.

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