Geopolitical Competition and the Rise of Economic Security: The War in Ukraine has initiated trade wars, protectionism and economic alliances and rivals, signaling the return to geopolitical competition. What has emerged from this is the elevation of the concept of ‘economic security’ to equal footing with traditional notions of security. The economy is now understood by many as a component of broader national security – a concept labelled as integrated security. The EU was one of the very first to respond to the aforementioned risks through this concept, and became the first major economy to outline a strategy for economic security in June, 2023, building on its FDI regulation of 2019. Not all are in agreement on the urgent necessity of such a strategy, with some member states dragging their heels. Ireland is one such state.
Economic security and its relationship with FDI screening has been comprehensively discussed in the CSD’s Forging the Shield,[i] which described the growing relevance of the concept of economic security as a component of integrated national defence strategies, and explored numerous state’s approaches to promoting, partnering and protecting through the lens of the European Economic Security Strategy’s (EESS) three policy strands.
The EU’s Regulation 2019/452 established a framework for FDI screening in the bloc, but did not oblige any member state to adopt their own investment vetting mechanism. As may be expected, a number of these states dragged their heels in implementing their own FDI regimes. Leaving such blind spots in the single market, the absence of screening mechanisms in these member states provides ample opportunity for adversaries target sensitive assets to access the internal market and exploit to their liking.
Ireland’s Relationship with Foreign Direct Investment: Few countries in Europe have benefitted from FDI as much as the Emerald Isle. In the space of four decades, the Republic of Ireland has gone from the ‘sick man of Europe’,[ii] crippled with extreme corruption, perpetual industrial action, serious economic mismanagement and severe inflation (without even mentioned a brutal sectarian conflict four hours away from its capital) to one of the EU’s richest countries.[iii] FDI was one factor that contributed to this ‘Irish Miracle,’ but Ireland’s relationship with it remains rocky. Dublin is now considered one of the most attractive European cities for investment in Europe, and Ireland itself also ranks high when compared to other countries. Those who decide to invest in the capital would be rubbing shoulders with giants like Google, Amazon, IBM, Intel and Meta, to name a few.
Yet, the wealth generated from such foreign investment has been slow to trickle down. There is significant economic and social divide between those in the capital and those in rest of the country, and even between those in the north side of Dublin and those in the south side, where these companies set up shop. A common joke amongst Dubliners refers to the discovery of civilization beyond the M50 – Dublin’s motorway ring-road. ‘FDI’ also conjures up nightmares of the post-Celtic Tiger financial crash of 2008 amongst much of the population. Thus, the Republic of Ireland certainly has reason for caution with FDI. If it needs further cause for concern, it need only look across the Irish Sea, where England has notably struggled with the impacts of welcoming vast amounts of Russian money in recent years.
The Kremlin’s Influence on Ireland’s Economic Landscape: As much as traditional notions of security are concerned, the Kremlin has also caused the Emerald Isle diplomatic headaches recently – causing the Irish government to be violently awoken from its neutrality day-dream. Putin has identified Ireland as the weak link in the Euro-Atlantic security apparatus. Whilst an estimated 75% of underwater communication cables connecting Europe and their trans-Atlantic allies pass through Irish territorial waters, the Irish Navy is severely neglected. With its strategic location at Europe’s edge in the North Atlantic and proximity to the GIUK gap, “few countries are as important in securing Europe’s vast Western borderlands.” Despite this, “Ireland lacks the basic abilities to defend its sovereignty,”[iv] it essentially has no radar, no submarines, limited cyber-defence abilities, ineffective intelligence services, a tiny army, and, perhaps most embarrassing of all, it must rely on its former imperial overlord for the security of its airspace.
With Putin clearly having identified Ireland as the weakness link, coupled with EU pressure and the glaring example of the effects of Russian coercive capital from across the Irish Sea, one may expect the Republic of Ireland to eagerly follow the EU’s lead and implement some form of FDI screening, as a component of a broader Economic Security strategy, in an effort to shore up its national security. Instead, this comprehensive security strategy has been missing in action, lost in the works for four years now. An investment screening regime has still not commenced, and is not expected to until September.[v]
Such complacency in one-member state undermines the economic security of the whole EU, offering Russian companies a backdoor into the EU and the Eurozone and opportunities to exploit its strategic economic footprint in critical sectors of Europe’s economy. This has been particularly felt in the energy sector.[vi] Ireland is not particularly exposed to Russia’s energy leverage, but Russia’s presence in its critical industries remain. Russian companies have benefitted from Dublin’s famed financial services sector, with some Irish banks reporting exposures to Russia having provided large amounts of loans to Russian customers. In addition, Ireland was exposed to around €14,084.67m in Russian FDI stocks in 2020 – shortly behind countries like the UK and Switzerland but more than the combined amounts of FDI stocks in France, Spain, Portugal, Poland, Belgium, and Italy (€13,970.26m).[vii]
Still, arguably the Kremlin’s largest source of financial leverage in Ireland comes in the form of its Rusal Aughinish. Europe’s largest refinery of Bauxite, the chief commercial component of aluminium, can be found in Ireland’s county Limerick, on the River Shannon at Aughinish. It is “an essential part of the European supply chain for aluminium.”[viii] The refinery, though, is not in Irish hands but those of formerly-sanctioned Russian oligarch Oleg Deripaska, as part of his RUSAL empire. Previous sanctions imposed on Rusal, the Russian parent company of Aughinish Alumina, were lifted by the US Treasury in part due to the lobbying efforts of the Irish governments on US officials, who cited the impact the sanctions were having on the local community.[ix] Upon the lifting of the 2018 sanctions, then Tánaiste and Minister for Foreign Affairs Simon Coveney posted on Twitter that ‘it was very good news for Aughinish Alumina and west Limerick.’ Following the invasion of 2022, Putin and his pal Oleg Deripaska was once again able to benefit from the Irish government’s lobbying efforts to reduce the effects sanctions had on Aughinish Alumina, this time ensuring that they were limited to exports to the US and UK.[x] For the sake of around four hundred jobs in Limerick and Kerry, the Kremlin exploited its economic footprint, got the Irish government to do its bidding for Russia and ensured profits kept flowing, whilst Putin’s network of oligarchs maintained control over yet another European natural resource with which it can leverage the EU.
The Consequences of Ireland’s Complacency in Security Matters: Ireland’s politicians have come to realise that, in this age of renewed geopolitical competition, it cannot rely on the goodwill of neighbours to protect it in terms of traditional notions of defence. Yet the Irish state continues to show complacency in other notions. Following the EU’s lead, Ireland gave full effect to the EU’s FDI Screening Regulation through its Screening of Third Country Transactions Bill, which made its way throughthe Dáil Éireann in October 2023. By the time it the regime becomes active, it will be four years since the EU’s investment screening framework came into effect – almost the same length Ireland’s comprehensive, integrated security strategy has been missing in action for.
Any Western-aligned state, no matter how neutral one may wish to be, can be under no illusions in this current climate – let alone one that has unexpected importance to the Euro-Atlantic security alliance. The complacency Ireland has shown has left both it, and Europe, extremely vulnerable to the Kremlin’s playbook. Engaging different partners, including representatives from governments, businesses, and civil society, is crucial for fostering collective responsibility and promoting long-term economic resilience. Additionally, implementing an integrated security strategy that combines various mechanisms such as FDI screening, trade diversification, and technological innovation, along with traditional notions of national defence, is essential to effectively address contemporary economic security challenges.[xi]
[i] Markov, D. & McLaren, R., Forging the Shield: National Economic Security Policies in an Era of Global Uncertainty. (Sofia: Center for the Study of Democracy, 2024).
[ii] Mitchell, D.J. & Clemens, J., Tax Competition Helps the Global Economy. Fraser Institute.
[iii] Collins, S., Irish people second-richest in EU last year despite high cost of living. Irish Independent, 23 March, 2023.
[iv] Drea, E. (2022). Ireland Is Europe’s Weakest Link. Foreign Policy.
[v] Enterprise Ireland, Inward investment screening. The Department of Enterprise, Trade and Employment; Government of the Republic of Ireland, 2024.
[vi] Sabev, M., Georgiev, G. & McLaren, R., Safeguarding the Foundations: Strengthening Civil Security in Bulgaria, Montenegro, North Macedonia and Serbia. (Sofia: Center for the Study of Democracy, 2024).
[vii] CSD calculations based on data from the Russian Central Bank, cited in Shentov, O., Stefanov, R. & Vladimirov, M., The Kremlin Playbook in Europe. (Sofia: Center for the Study of Democracy, 2020).
[viii] RTÉ News (2022, April 8). Aughinish shareholder Deripaska sanctioned by EU. RTÉ News: Business.
[ix] Department of Enterprise, Trade and Employment (2019 28th January), Statement by Tánaiste and Government Ministers on Aughinish Alumina, The Government of the Republic of Ireland.
[x] RadioKerry News (2024, April 16). Russian owner of Aughinish Alumina reportedly says new sanctions won’t affect operations. RadioKerry News.
[xi] Markov, D. & McLaren, R., Forging the Shield: National Economic Security Policies in an Era of Global Uncertainty. (Sofia: Center for the Study of Democracy, 2024).
