After all the excitement of an amazing US presidential election, here we stand in the cold light of dawn, wondering what happens next. What can we Europeans expect of President Barack Obama? As others have pointed out, his first duty will be to serve the interests of those who elected him and not the political priorities of friends and neighbours, so we should not raise our hopes too high.

Yet things do seem very different this time. All the evidence suggests that Senator Obama will be a president who is deeply committed to a multilateral approach and who perceives international co-operation as fundamental to meeting the challenges which the US faces. His July trip around Europe gave a strong indication of his global perspective. The deeply unpopular image of America across the world causes him real distress.

Obama was careful during his campaign to avoid giving too many hostages to fortune, but trade was one exception, as the candidate argued that free trade agreements such as NAFTA were responsible for job losses and that outsourcing of production benefited businesses while damaging the interests of their workers.

A strengthened Democrat majority in Congress will not make it any easier to resist protectionist sentiment and no doubt we can expect some early measures such as support for the US auto industry – a distant echo of President Bush’s support to steel and farming in the early days of his first term. There may well be tax changes as well, which make outward investment less attractive to US firms.

There is a small window of opportunity. Over the coming weeks people will seek to breathe new life into global trade negotiations. The new trade commissioner Baroness Ashton has raised the hope of progress for the Doha Round in what I thought a rather convincing BBC interview and Pascal Lamy has offered to stay on at the WTO in pursuit of an agreement.

So will the November 15 summit in Washington open the way for trade talks as the Brazilians hope, I wonder? And will President Sarkozy speak for free trade during the meeting? Maybe it will be easier in the absence of ex-Commissioner Mandelson!

Climate change is an issue where we can confidently assume that the new president will chart a new course. Take a look at his manifesto on energy and climate change. He espouses emissions trading, wants renewables to provide 25 per cent of energy needs by 2025 and sees further investment in biofuels and new technologies. Nuclear power and energy saving also feature on his wishlist.

Europe should feel comfortable with this agenda, but faces some fundamental challenges of its own, in particular whether it can deliver on the commitments already made, without which its current position of leadership will melt away. The broader challenge is to bring China, India and similar economies more directly into global decisions. Real progress by Europe and the US will be an essential precursor of movement here.

The evolution of US policy towards Russia will be of special interest to Europe, intertwined as it is with the issue of Star Wars missile defence.

Medvedev’s clumsy reference to Russia’s anti-missile missiles in Kaliningrad (or are they anti-anti-missile-missiles?) is hardly likely to change US policy, but I suppose was intended to put pressure on the EU and to drive in deeper any wedge between the US and Europe. After all, Russia already has such armaments in situ. For Polish prime minister Donald Tusk Medvedev’s statement was political and not military.

Obama is a man who will take his time. Once in office he will no doubt weigh up the efficacy of the anti-ballistic missile system, its budgetary cost and its political implications. The Pentagon is asking for $65.5 billion for development at a time of severe budgetary pressures. Any improvements in US-Iran relations would also come into the picture. If there is a change in US policy it will be rationally thought through and set in a wider context than just providing comfort for Russia.

The Europeans are keen to seize the initiative on a reform of global economic management at the November 15 Washington summit and produced a detailed set of proposals when they met in Brussels on November 7.  The current mood in the US will certainly be responsive to tougher regulation, maybe going further than the European Commission, for instance, would want. How far a new president will respond to giving more power to international organisations such as the IMF remains to be seen. Once again the Democratic dominance in Congress will be an important factor.

Finally there are those issues such as the Middle East conflict and the war in Afghanistan. While Europeans hope for a more proactive US role in the peace process they can also expect the new president to demand greater support against Al-Qaeda. This may be the most challenging element in transatlantic relations over what promises to be a period of far-reaching change.

The OSCE seems to have serious doubts about Georgia’s role and there are even suggestions that the conflict was provoked by Vice President Cheney in order to boost McCain’s cause in the US elections.

Rash initiatives by the Georgian government in South Ossetia were almost certainly the trigger for the Russian action, but a trigger which Moscow had long been anticipating. The campaign was surely a far-reaching and thoroughly planned operation to damage the regime of President Mikhail Saakashvili, to assert Russia’s right to dictate political developments in its near abroad and to block NATO expansion in Ukraine and the Caucasus.

The tensions had been building for some time, apparently including a mounting level of cyber attacks on Georgian official websites similar to those previously experienced by Estonia, and reprisals against Russian sites by so-called “hacktivists” who specialise in DDOS – Distributed Denial of Service, where websites are sabotaged by swamping.

It is the scale of Russian actions in Georgia which may prove deeply counter-productive for Moscow. It seems likely to strengthen the US presence in the region and will raise the level of scepticism about Russia’s good faith in its international dealings. It will no doubt give quite a boost for those who wish to build new oil and gas pipelines which bypass Russia. Much will depend on how quickly the Russians withdraw from occupied Georgian territory and engage with OSCE and EU. There is no denying, though, that NATO expansion now looks much more challenging than it was before August 8. European members of the Alliance will have no enthusiasm for extending the guarantees of Article 5 to the Caucasus.

The European Union has acted quickly with its ceasefire proposals, some strong words and convening of a special summit in Brussels, where deep divisions of opinion were papered over and a united Franco-German position carried the day.

Europe is at pains to stress that the EU makes common cause with the Americans, but its rhetoric has been much more cautious. Sanctions have been rejected and dialogue sustained. If President Sarkozy and his colleagues can make real progress in their talks with the Russian leadership, even to the extent of launching a programme to resolve the “frozen conflicts” of South Ossetia and Abkhazia, then that would be a very considerable achievement

Russia needs the EU quite as much as the EU needs Russia, if only to counterbalance and moderate American policies in the region. While keeping the pinch of salt to hand (and remembering the black belt), it’s interesting to see what President Medvedev had to say to Euronews in defending the Russian position and expounding on the EU-Russia relationship.

So a new Club Med is born! More than 40 presidents and/or prime ministers turned up in Paris on July 13 for the launch of the Union for the Mediterranean. It was a welcome diplomatic triumph for President Sarkozy, embattled as he is by a disillusioned and critical French public opinion.

When asked many years ago what was the collective term for a gathering of political leaders, British Prime Minister Callaghan suggested it was a “Lack of Principals”, and of course everybody is highly sceptical about the purpose and the prospects of the new body. It embraces all 27 member countries of the EU, the Balkans, the countries of the Maghreb and the Middle Eastern countries bordering the Mediterranean – 44 states in all including the Palestinian Authority. There are a few conflicting interests among that lot!

I must declare some sympathy with Colonel Gadhafi of Libya, who refused the invitation to Paris and gave a speech explaining why. It was the word Union which really got to him, given his lifelong experience in striving to create unions which failed, between Arabs, the Africans, the Maghreb countries, Libya and Egypt, Libya and Tunisia etc etc.

For example, he said, how could one possibly envisage a union between the countries of North Africa and those in Scandinavia “where it is common to see people walk around naked”. Quite so. It’s those Danish summer beaches!

Let’s agree with the Libyan leader that this is not a Union. But that doesn’t mean that it has no potential value. When Sarkozy originally floated the idea following his election it had the marks of a personal ego trip. He saw its membership confined to countries bordering the Med, quite firmly under French leadership, albeit with some financial support from the EU budget and widely perceived as a half-way house for Turkey in place of EU membership.

This formulation was well calculated to upset the Germans and everyone else, which it duly did, but with the help of Angela Merkel, Sarkozy’s brainwave has been transformed into a full-fledged EU initiative under the Barcelona process. See Stanley Crossick’s blog.

The Paris launch seemed to have a far more substantial political dimension than the Barcelona meetings ever did, so maybe the organisation can provide a valuable new forum for engagement between Europe and its neighbours and between the neighbours themselves. It is certainly conceived as a more balanced relationship, with a joint presidency and a secretariat outside the EU.

Europe needs to find traction for its role in advancing peace in the Middle East and the Paris meeting was notable for constructive comments made by the Israeli prime minister and the Syrian leader – see Mark Mardell’s blog - although a commitment to deal with weapons of mass destruction in the region had rather a hollow ring. If the new Union could really tackle problems of that scale it would be something special indeed.

But let’s look at some of the more practical long-term aims, which could offer major benefits to the region, such as cleaning up the Med, managing water resources (which is one of the conflict triggers in the Middle East), developing solar energy capabilities, improving transport links and tackling natural disasters. Really effective action in these areas could be a major contribution to the wellbeing of the region as a whole – and an experience in working together.

One issue of fundamental importance to the non-EU participants is better access for their food exports to European markets, but I saw no mention of that in the communiqué or reports of the Paris meeting. Given Mr Sarkozy’s attacks on Commissioner Mandelson for his stance on Doha it looks like deliberate avoidance, yet must surely be a fundamental element in helping to build the economies of our southern neighbours.

As the Doha Round reaches its climax (or anti-climax) perhaps this issue will be decided in another forum.

The immediate challenge is to decide where the secretariat is to be based, with the aim of having a fully operational organisation by the end of 2008. Let’s hope some of the high-flown rhetoric can be translated into tangible results and above all that the Union of the Mediterranean will provide a mechanism for the EU to make a substantive contribution to peace in the Middle East.

I may be sceptical about the timetable for EU enlargement of the European Union following Ireland’s referendum, but there has been one welcome development as France takes over the presidency: the French Senate has voted by 297 votes to seven to scrap the obligation to hold a national referendum over Turkish membership.

The issue is scheduled for final decision on July 7, when the National Assembly will be asked to revoke a recent bid to retain the clause.

Of course Turkey was not named in the legislation, which was introduced into the constitution by President Chirac in 2005. It applied to any candidate country representing more than 5 per cent of the EU population, but nobody doubted its target. It has seriously damaged relations between France and Turkey and cast a shadow over France’s chairmanship of the enlargement negotiations for the next six months.

Mr Sarkozy no doubt remains sceptical about Turkish membership, but this move would restore an element of good faith while talks continue. Chirac’s 2005 gesture did seem a somewhat cynical response in the face of opinion polls of the time.

August is the traditional month for invasions. Foreign politicians are on holiday, much of the harvest has finished and there’s time to consolidate before winter sets in. So this time it was Georgia.

None of us who were around at the time will forget the August day in 1968 when Soviet bloc troops invaded Czechoslovakia to scupper the Prague Spring. On that very evening Mstislav Rostropovich and the USSR Symphony Orchestra gave a deeply moving performance of Dvorak’s cello concerto at a London Promenade Concert – a very poignant memory.

So has nothing changed? Russian troops moved into Georgia on August 8 2008, 40 years almost to a day later. But it’s not at all clear whether this was the launch of a more aggressive Russian foreign policy and reversion to an earlier model, or a justifiable response to Georgian military action in South Ossetia, an echo of the NATO campaign in Kosovo with different characters, as the Russians would claim. Truth is always the victim in these circumstances.

The OSCE seems to have serious reservations about Georgia’s role in the whole affair and there are even suggestions that the conflict was provoked by Vice President Dick Cheney in order to boost McCain’s cause in the US elections.

Rash initiatives by the Georgian government in South Ossetia were almost certainly the trigger for the Russian action, but a trigger which Moscow had long been anticipating. Its campaign was surely a far-reaching and thoroughly planned operation to damage the regime of President Mikhail Saakashvili, to assert Russia’s right to dictate political developments in its near abroad and to block NATO expansion in Ukraine and the Caucasus.

The tensions had been building for some months, apparently including a mounting level of cyber attacks on Georgian official websites similar to those previously experienced by Estonia, followed by reprisals against Russian sites by other so-called “hacktivists” who specialise in DDOS – Distributed Denial of Service, where websites are sabotaged by swamping.

It is the scale of Russian actions which may prove deeply counter-productive for Moscow. It seems likely to strengthen the US presence in the region and will raise the level of scepticism about Russia’s good faith in its international dealings. It will no doubt give quite a boost for those who wish to build new oil and gas pipelines which bypass Russia. Much will depend on how quickly the Russians withdraw from occupied Georgian territory and engage with OSCE and EU. However on NATO membership for Ukraine and Georgia the Russians may well have made their point. To offer NATO protection for these two countries under Article 5 would be to play for very high stakes.

The European Union has acted quickly with its ceasefire proposals, some strong words and convening of a special summit in Brussels, where deep divisions of opinion were papered over and a united Franco-German position carried the day.

Europe is at pains to stress that the EU makes common cause with the Americans, but its rhetoric has been much more cautious. Sanctions have been rejected and dialogue sustained. If President Sarkozy and his colleagues can make real progress in their talks with the Russian leadership, especially to the extent of launching a programme to resolve the “frozen conflicts” of South Ossetia and Abkhazia, then that would be a very considerable achievement

Russia needs the EU quite as much as the EU needs Russia, if only to counterbalance and moderate American policies in the region. While keeping the pinch of salt to hand it’s interesting to see what President Medvedev had to say to Euronews in defending the Russian position and describing Russia’s relationship with the EU.

Allemagne quartorze points, Royaume-Uni 14 points, la Russie 272 points, Ukraine 230 points, la Grèce 218 points. So it was a runaway victory for the Russian entry in the Eurovision Song Contest, held in Belgrade on May 24, and oblivion for most west European entries. The centre of gravity moves further east. See you in Moscow in 2009!

Some (western European) commentators see the modern contest as a great conspiracy of political block voting, with the Nordics, the Balkans, the East Europeans voting for their neighbours and so swinging the results.
 
But it seems the reality is much more complicated. It reflects the complex ethnic mix in so many European countries. The fact that Estonia, Latvia, Lithuania and Ukraine each gave the full 12 points to the Russian entry (as did Israel) reflects the size of the Russian ethnic population in these countries rather than any political block vote.
 
Likewise for the former Yugoslavia, with its intermixing of Serbian, Bosnian and Slovenian populations. Bearing in mind that you cannot vote for your own national entry, what more natural than to vote for your ethnic identity? Douze points for the cousins. By the same token, Turkey always does well from the German voters, mirroring its population of 2.6 million of Turkish extraction, although I see that this year Greece took Germany’s 12 points and Turkey only 10.
 
If you managed to miss three hours of the actual final, then you can treat yourself to a (brief) taster of any of the finalists - and maybe decide that the outcome was not so unfair after all. There’s an amalgam of western pop and eastern music which can work rather well – and is maybe part of a changing European identity – an eastwards shift in our cultural centre of gravity.

Elation in Brussels at the unexpected success of Boris Tadic’s pro-European Democratic Party in Serbia’s general election has quickly turned to frustration as the Socialist Party, with 20 seats in the new parliament, decides whether to throw in its lot with the nationalist Radicals led by Vojislav Kostunica. Tadic’s party won the most seats, but not enough to form a government on its own. (Former ambassador to Belgrade, Charles Crawford, has forthright views on Mr Kostunica).

Both the Democratic Party and the Radicals are courting the Socialists. This was the party of Slobodan Milosevic, but it has greatly changed since his days, much as other communist parties of eastern and central Europe have done. Solana has indicated the EU’s acceptance of a socialist party role in a pro-Europe coalition and many members of the party see a commitment to a pro-EU government as a passport to full membership of Europe’s socialist mainstream.

I’ve no doubt there are those in Europe and the US who would dearly like to influence the outcome, but there’s probably little that can be done other than continuing to stress the benefits of integration within the European family.
 
The signing of the Stabilization and Association Agreement (SAA) with Serbia at the end of April was an important step. But presumably a new Radical-Socialist government would renounce the agreement because a majority of EU countries has recognised Kosovo. They would certainly refuse to co-operate in finding and arresting Mladic and Karadzic which itself would block implementation of the SAA.
 
To judge by the exchange of vitriol in the aftermath of the elections, we are in for a period of bitter in-fighting and uncertainty . The prospects of a rapid move towards Serbian EU accession seem to have faded considerably unless a pro-Europe coalition can be formed after all. The outcome will be a watershed in the future of the Balkans
 
It’s not only Serbians who can’t agree. It seems that NATO and the European Union are still unable to talk to one another in Kosovo, although this is quite clearly a joint operation between the two bodies. According to a recent paper from the Centre for European Reform, the Turkish government will not allow a proper relationship to develop. CER have put forward its own ideas for bringing the two organisations together, with the Anglo-French relationship at the heart of its proposals.

Alarm bells have been ringing in certain European ministries. Proposals now under discussion would bring defence-related trade under the auspices of the single market and diplomats are worried. I gather that France is calling for a legal opinion on whether European single market legislation can apply to defence-related products –  just a few weeks before the French take over the presidency; an EU intergovernmental committee on arms exports demands to be consulted on the proposals; and an argument breaks out in the European Parliament because the defence sub-committee must have its say.
 
The European Commission has been struggling for years to create a single market for  Europe’s defence-related industries. A great idea, everyone agrees. Why should the defence sector – and the taxpayer – be denied the benefits of an EU-wide defence procurement market based on a common licensing system for cross-border trade?

It should mean more competition, lower prices, quicker delivery, common standards. In other words a more efficient European defence industry and better value for money.

But defence is no ordinary sector. For decades the Commission shied away from any attempt to tackle the defence trade issue. It was a no-go area – a minefield indeed.  Member states needed only to quote Article 296 of the Treaty to claim exemption from single market rules for virtually all deals with defence and security connotations.

Much has changed. A common security and defence policy requires defence capabilities which in turn require a stronger European industry. The position of EU defence companies has weakened in relation to US competitors. The cosy relationships between defence ministries and their national suppliers have faded or vanished. And the European Court of Justice has narrowed the scope for use of Article 296.

The Commission has moved steadily in building the case, but there is evident resentment in some quarters that it should be pushing its nose into areas which have until now been governed mainly by inter-governmental agreements and foreign policy considerations. What’s more, the new legislation would further narrow the scope for governments to favour certain strategic industries. I recall President Sarkozy’s commitment to protect eleven key sectors.
 
The Council of Ministers and the European Parliament are working on two proposals submitted by the Commission last December, the first extending the principles of public procurement to defence products and the second outlining a generalised licensing system to replace the individual licences currently issued by member states for any defence-related export to another EU country. (For the current informal procurement arrangements see here).

The Commission’s proposals are being considered in the Council by the Internal Market group, but a note issued by the Council’s Working Party on Conventional Arms Exports (COARM) reveals a deep-seated concern that foreign policy considerations are being overlooked.

Take this for instance: “The export of defence products constitutes a strong political act at the heart of member states’ foreign policy. Consequently, exports of defence products to third countries must remain within the competence of member states, both in terms of export regulation and export policies”. Tough talk indeed. COARM demands that it be involved in examining the new proposals.

The current licensing system for defence sales does seem absurdly cumbersome. Governments issue individual licences by company and by transaction for sales to another EU country. According to the Commission’s impact assessment some 11,500 such licences have been requested each year since 2003. Not one has been refused.
 
But exports outside the EU are COARM’s biggest concern.  Defence goods or components might be re-exported, maybe years after they were delivered to another EU country. COARM insists that the original country of export should still be able to impose conditions on the sale and continue to exercise control long after the goods have been sold. And it is clear that foreign policy considerations will be of fundamental concern. Just consider the sensitivity of certain sales to Burma, China or various African countries.

COARM uses the Commission’s impact assessment as its reference point and maybe this is not surprising, as the Commission’s assessment is studiously cautious on the foreign policy implications of the proposals.

The French have filed specific questions to the Council’s legal service: whether single market legislation is appropriate for armaments? Whether the EU might intervene in export of weapons to third countries? And whether intergovernmental co-operation could continue once European laws were in force? (The Code of Conduct on defence exports, for instance, is an agreement between governments).

Heide Rühle, the European Parliament rapporteur in IMCO, the internal market committee, has asked for similar legal guidance, but became distinctly irritated when the parliament’s defence sub-committee SEDE also asked for legal support – none of their business, she said. Her committee chair, Arlene McCarthy, even questioned whether the French government might be interfering with the work of her committee.
 
So there are big issues at stake. There will no doubt be moves to protect some national sensitivities, but it looks as if the new legislation will go through, and is likely to have far-reaching implications for Europe’s defence sector.

According to latest reports, the likelihood of former British prime minister Tony Blair taking over as EU President in 2009 seems to be fading. The Independent newspaper reports a “secret” agreement between the big three, Brown, Sarkozy and Merkel, not to support any candidate for the job who does not have wholehearted approval of the other two.

Merkel is said to have reservations about Blair given Britain’s abstinence from the euro, from Schengen and from various Lisbon provisions. That does make sense when appointing a person who would be responsible for managing the agenda of European Councils for a renewable 2 ½  year term and with top-level global representative functions.
 
On the other hand the trio will want someone who is one of their own, so Prime Minister Juncker of Luxembourg would fit the bill, with the added bonus of coming from a small member country.

What kind of job will the EU President have anyway, given that the post relates only to the quarterly European summits and not the specialised councils? It is difficult to see the appointee as a major driver of policy – indeed the President of the Commission would be a convincing rival in many policy areas. More important will be the continuity role, avoiding the twice-yearly turmoil of transferring presidency between national leaders.
 
In practice the revamped Solana job of High Representative could be much more interesting and influential than of EU President. A seat in both Commission and Council, a budget of €10 billion, a clear mandate for international negotiations. Now that’s a job description which Blair could find extremely attractive.

The surge in world food prices, oil prices at well over $110 a barrel and measures to boost the use of biofuels in the US and Europe are putting policy-makers into crisis mode.
 
It is extraordinary how this situation has taken fire in just a few months and how intertwined the different factors are. A perfect storm, indeed. International organisations warn that the rising cost of food will threaten the stability of nations, especially developing countries. Even for a country like China food inflation is a major threat to the government.  A “silent tsunami” is how the head of the World Food Programme has described the global situation.
 
The European Commission has responded with an increase in emergency food aid, just as it should, but we are witnessing more than a short-term crisis. Commissioner Louis Michel pulled no punches when he spoke to the European Parliament recently. While announcing an increase in EU food aid spending to nearly €300m so far this year, he also warned just how dangerous the international situation was becoming.

The current food price situation focuses attention on the future of the common agricultural policy. You might think that high market prices for cereals (somewhat mitigated by the strength of the euro) would reduce the need to spend European taxpayers’ money on expensive support arrangements for EU agriculture, but that’s not how French farm minister Michel Barnier sees it.
 
For him the present situation proves the need for an expensive protectionist policy. He even urges other countries to follow suit and build their own c.a.p., so everyone would aim for autarkic self-sufficiency. His German counterpart Horst Seehofer is walking in the same direction. On the other hand this particular view was swiftly rebutted by Agriculture Commissioner Mariann Fischer Boel who took a pro-trade stance, just one month before her proposed overhaul of the CAP.
 
Of course agricultural ministers always resist change, but these interventions suggest that longer term moves to review the future of the c.a.p. will run into stiff opposition. We can probably kiss goodbye to any hope of completing the Doha Round before the US elections. Interestingly, Brazil is making tariffs on biofuels a key aspect of its position on Doha.
 
Pressure on the EU biofuels commitment continues to build. Commission President Barroso has asked for an assessment of the impact of biofuel production on food prices and on development. The Commission press room is thick with rumours of division in the college. Some officials are briefing that the 10 per cent commitment for biofuels in transport fuel by 2020 has been sidelined, while others dismiss any such talk.
 
Among member states the British appear to be reconsidering their biofuels commitment after a national 2.5 per cent obligation came into effect. Prime Minister Gordon Brown is concerned that some biofuels do not meet the necessary sustainability criteria and may call for changes in the EU targets.

The fact is that European and American subsidies for biofuels, which were designed to prime the pump until the industry could become viable in its own right, have produced a host of unpredictable and positively absurd consequences.
 
For instance, it seems that a big chunk of Europe’s biofuel industry has been put out of action because of the imports of “splash and dash” biodiesel from the US. All you need is a tanker load of biodiesel, maybe exported from the EU or South America, add 1 per cent of mineral oil, collect a subsidy of €200 per tonne from the US administration and then ship it back to Europe where you collect further subsidy. The EU companies have now lodged a formal anti-subsidy and anti-dumping complaint.
 
The debate over GMOs is going to hot up as well. It takes on a new urgency as world food prices continue to soar and is bound to provoke some intense debate in Commission, Council and in the member states. No doubt there are risks to be analysed and assessed, but I wonder how the arguments against the use of genetically modified crops could stand up in the face of a major world food crisis and massive malnutrition in developing countries.