French President Emanuel Macron has long called for deeper EU integration, falling just shy of being an all-out federalist. In this regard, he has been quite forward-thinking, calling for a European army all the way back in 2016, years before the discussion revived following the Russian invasion of Ukraine. He has also remained one of the firmest European voices against the aggressive American rhetoric towards Greenland earlier this year, in stark contrast to both Germany’s Merz and Italy’s Meloni, who have espoused more atlanticist ideals.
However, this story is not about the vision of a European army, but about sovereignty. In the wake of the Greenlandic trouble, the EU has woken up to the fact that the US is shifting its strategic priority away from Europe and towards Asia, meaning it will now have to shoulder more responsibility by itself while an aggressive, heavily armed neighbour is breathing down its neck.
While Washington’s shifting priorities is not inherently terrible, the threat of the dreaded trade-bazooka, which was briefly locked and loaded, also made the EU realise just how reliant it is on American technology. For example, US-based firms control over 66% of the European cloud market, meaning a large majority of the EU’s data is hosted by the very firms the trade bazooka was taking aim at, putting the leaders of the member nations in rather awkward positions.
The wake up has since also extended to digital sovereignty, culminating in the French government personally pulling the plug on a 500 million euro deal between the French Eutelsat and EQT in order to protect sovereignty. The one issue? EQT is Swedish, and thus part of the very EU President Macron claims to want sovereignty for. On the surface, that brings into question President Macron’s true commitment to further European integration at the expense of some French sovereignty, but maybe there’s more to the story?
What Eutelsat Is, and Why It Matters
Eutelsat is a leading French satellite operator providing global connectivity and broadcasting across many different markets, making it the main European competitor to Starlink. Starlink, in turn, provides internet access across the entire world, whether you’re deep in the Amazon or on top of Mount Everest by beaming it down from satellites. They are essential to the war in Ukraine for both sides, so much so that when Elon Musk (owner and founder of Starlink) temporarily shut down Ukrainian Starlink access in 2022, it halted the offensive in Kherson and possibly changed the outcome of the war overall.
Recently, Starlink shut down Russian access to Starlink on Ukrainian request, which the Ukrainian leadership claims is already affecting the battlefield. This isn’t to praise Starlink, but rather to underscore just how important this technology is and why France would be keen to keep sovereign control over such critical infrastructure when the EU already has so little of its own. Eutelsat is much more limited in both its capabilities and size compared to Starlink, but is still the only European competitor.
Enter: EQT, a Swedish private equity firm and one of the largest in the world. Eutelsat was planning to sell its antennas to EQT in a leaseback setup, somewhat like selling your home but renting it back to live there. To be clear, the deal was in regard to the property and not technical operations, which was then to be spun into another company renting these structures out for commercial purposes with Eutelsat as its main customer. Eutelsat would then own 20% of this company, with 80% belonging to EQT.
The French government, themselves owners of around 29% of Eutelsat, vetoed the deal citing sovereignty. Their apparent fear is not necessarily that EQT is Swedish and therefore threatening French sovereignty, but rather that EQT as a private company could later decide to resell assets or prioritise returns over national security, and who knows who the next buyers could be?
What It Means for Us
Although both EQT and Eutelsat surely spent a lot of time and money on negotiating this deal, it was not a terrible loss for either. Eutelsat’s stocks briefly dropped, but have since recovered based on good earnings, and the main loss to EQT was in the manhours and the potential future earnings, if not the bad PR of having been blocked by a government, although that is not unusual enough to warrant concern. The loss to the Nordics is slim monetarily, insofar as there were no imminent plans to import any of Eutelsat’s operations, but what it does do is point to a broader point in the EU integration process.
EQT is a Swedish company flexing its muscles in the European market, as their own government and the EU has encouraged, yet France prioritises its own control over a potentially landmark intra-European deal for what essentially amounts to political theatre. While their assessment of the risk of future divestiture is predicated on a real possibility, it is a rather flimsy argument when the mere threat of a blocked deal would likely bring EQT back to the negotiating table, where France could then add some form of protectionist clause. Whether this would have worked or not we can never know, but this could certainly come off as a snub to Sweden. Worst case, it could even be interpreted as Macron seeking deeper integration, but only on French terms.
This story exemplifies the delicate balance between deeper EU integration and the members’ sovereignty. The blocking of this deal fits with President Macron’s bold style, though negotiation and guarantees on future exit plans could have formed the basis of a European satellite technology partnership. Despite his repeated pleas for further integration, Macron opted for the former.
Without a larger EU plan to ensure a deeper integration on terms everyone can be satisfied with, why should they risk such a strategic asset? Sweden, in this case, isn’t even a member of the eurozone. While this story is small in the grand scheme of things, it won’t be the last. As dual-use assets become more protected and politicians continue to gain political capital with protectionist measures, deals like this are likely to continue to fall through these cracks in the single market over the coming decade. This is troublesome for all the EU, including the Nordics, in a time where the EU needs to rebuild its credibility with investors, and show itself as a united market. The EU is taking steps to hopefully do this, such as EU-Inc, but this story somewhat contradicts that narrative.