How we cee it. – January 2025 Digest

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Week 1

How A Russian Shadow Fleet Can Undercut Your Internet Speed

Undersea cable sabotage in the Baltic Sea is becoming an alarming trend. At least three major incidents have occurred in the past 15 months alone.

While landlocked countries like Slovakia, Czechia, and Hungary remain largely unaffected, coastal nations such as Lithuania, Estonia, and islands face growing risks.

The latest incident unfolded over Christmas when Finnish Coast Guard special units boarded Eagle S, a tanker believed to be a part of the Russian “shadow fleet”, and secured it. Investigators discovered that the ship had dragged its anchor along the seabed, cutting key electrical and data cables.

This is just one in a series of troubling events. In November, the Chinese ship Yi Peng 3 severed two high-speed optical cables in the Baltic Sea, which connected Finland to Germany and Lithuania to Sweden. Investigators believe the ship acted under Russian orders.

Just over a year earlier, the Chinese vessel Newnew Polar Bear severed the Balticconnector gas pipeline and a telecom cable between Finland and Estonia, with some officials suspecting the involvement of a Russian crew.

Analysts say these acts reflect Russia’s hybrid warfare tactics since its invasion of Ukraine.

Victor Breiner, a hybrid threat expert, explained to Denník N that such operations test NATO countries’ responses without provoking Article 5, the alliance’s collective defense clause. “This is about testing the reaction capability and resolve of individual nations to counter such subversive operations,” Breiner said.

Submarine cables form the backbone of global connectivity, handling 99% of international data transmission. Europe alone relies on dozens of these undersea lifelines.

When a single cable is cut, data can reroute through other functioning lines, but disruptions reduce overall bandwidth, Tomas Melisko, CEO of cloud provider InoCloud explains. For example, Lithuania saw a drop in internet speed by a third due to a severed connection.

Sustained attacks could bring even more severe consequences. Fixing a cut internet cable can take up to two weeks and requires advanced undersea mapping, sensors, and remote-operated submarine robots.

A global fleet of only 22 specialized ships is responsible for these repairs.

Repairing a power cable could take over six months.

CEE: Clean Tech Powerhouse or Missed Opportunity?

The EU’s push to boost clean tech production is a chance for CEE countries to lead in this fast-growing sector. But can they seize the opportunity?

The Net Zero Industry Act (NZIA) aims to enhance EU industry competitiveness and promote key decarbonization technologies like solar panels, wind turbines, and batteries by 2030. CEE nations, already key exporters of sub-components, could see their exports triple under the NZIA, but success isn’t guaranteed.

What’s needed for success?

Market size: Poland’s large domestic market is a key advantage.
Affordable energy: Crucial for energy-intensive manufacturing.
Skilled labor: Closing regional skills gaps is essential.
Infrastructure: Investors prioritize robust supply networks and business-friendly environments.

Poland leads the pack with diverse opportunities and a strong innovation ecosystem. Romania shows promise, while Bulgaria and Croatia face greater challenges due to smaller markets and weaker supply chains.

The biggest obstacle? A lack of EU-level coordination and funding. Without it, progress could remain uneven. A unified approach is critical for CEE to unlock its clean tech potential.

Fico’s Mystery Quest to Hurt Ukraine Through Energy Escalates

Slovak Prime Minister Robert Fico met with Russian President Vladimir Putin before Christmas to discuss Ukraine’s halt of Russian gas transit—a topic we covered in last week’s newsletter.

Russian gas stopped flowing through Ukraine this morning after Kyiv deemed the conditions set by Russian suppliers for contract renewal unacceptable.

Since his trip to Moscow, tensions between Fico and Ukraine have escalated. In an open letter to EU officials on Sunday, Fico warned that stopping gas transit would severely harm Slovakia’s economy and threatened to cut off electricity supplies to Ukraine if his concerns are not addressed.

Fico claims gas prices have risen in response to Ukraine’s moves, but experts attribute the increase to colder autumn weather and higher Asian demand. Slovakia is also in no danger of an energy crisis this year.

Ukrainian President Volodymyr Zelenskyy accused Fico of aiding Russia in creating a second “energy front” in the war. In response, Poland reassured Ukraine, pledging to step in and secure Slovakia’s energy needs if disruptions occur.

Week 2

Slovakia Caught in the Crossfire as Biden Blocks U.S. Steel-Nippon Deal

In the final weeks of his term, U.S. President Joe Biden blocked the $14.1 billion sale of U.S. Steel to its Japanese competitor, Nippon Steel. The move has ignited a political storm and raised tensions between two close allies—the United States and Japan.

The decision has reverberated in Slovakia, where U.S. Steel’s division in Košice, the country’s second-largest city, remains in limbo. The steel plant employs roughly 8,000 people and is a key local economy pillar. For the past year, uncertainty over its fate has gripped the region.

The fallout will likely continue, as both sides of the deal have vowed to challenge the decision. The dispute could remain unresolved for months. Meanwhile, President-elect Donald Trump, set to take office later in January, has pledged to maintain the block.

For investors, the sale to Nippon Steel offered a lifeline for U.S. Steel’s financial troubles and would have created one of the largest global steelmakers outside of China.

For Košice, however, the deal’s implications were more complex. Had Nippon Steel acquired the company, it might have chosen to invest in the Slovak plant, sell it off, or let it decline without major investment.

The Slovak factory faces significant challenges, as it relies on raw material imports from Ukraine, which investors may view as risky.

Moreover, the Košice plant needs a €2 billion investment to meet stricter carbon emissions regulations. U.S. Steel has shown little interest in funding the plant’s green transformation, having previously considered selling it as a standalone asset. This ongoing uncertainty complicates matters for the Slovak government, which is willing to help with investment but faces time pressure, as European Union recovery funds must be pledged by 2026.

The plant’s financial health remains precarious. While it posted a modest profit in the third quarter of last year, this came mainly from trading carbon emission allowances rather than strong business performance. The plant struggles against cheaper Asian steel imports and declining demand from European customers.

Transnistria Learns Why Trusting Russia is Dangerous

Transnistria, a breakaway region in Moldova, has long been Russia’s foothold in Eastern Europe. Economically reliant on nearly free Russian gas and heavily tied to Moscow through military and political support, the region has been a strategic pawn in Europe’s geopolitical landscape. However, the halt of Russian gas transit through Ukraine has thrown Transnistria into an unprecedented energy crisis.

Transnistria’s plight is a reminder that energy dependence is not just a technical issue—it’s a strategic vulnerability.

With gas supplies cut off, tens of thousands of households are without heating, schools have closed, and industries have largely shut down. Moldova accuses Russia of orchestrating the crisis to destabilize the region. Moscow denies the claims, blaming Ukraine for halting the transit instead.

The reality is that Russia offered Ukraine a renewed gas contract under conditions that it knew Ukraine couldn’t accept.

The disruption underscores the fragility of relying on Russian pipelines for Slovakia and Hungary. Both countries have managed to pivot to alternative suppliers, but rising costs and market volatility pose challenges for their industries.

Autonomous Drones to Swarm the Battlefield in Ukraine

Drones have become a cornerstone of Ukraine’s defense strategy, stepping in to fill critical gaps when ammunition supplies ran low due to delays in Washington. Now, Kyiv is accelerating efforts to boost its operational effectiveness.

Sine.Engineering, a Ukrainian drone technology developer, is in the final testing stages of a system that allows a single operator to control up to 10 drones simultaneously. Using this system, an operator can designate a target point on a map, enabling the drones to fly autonomously to the location. This frees the pilot to focus on their primary task: striking targets. The drones are also designed to counter Russian signal-jamming efforts.

Week 3

Romania to Become the Largest EU Gas Producer

Germany will begin importing natural gas from Romania in 2027, signaling a shift in Europe’s energy landscape. Austrian energy group OMV, which holds a controlling stake in the operator of Romania’s offshore Neptun Deep gas field, has signed its first export contract.

OMV’s Romanian subsidiary has finalized a deal to supply German energy giant Uniper with natural gas. Over a five-year period, Uniper will purchase volumes equivalent to 1.5% of Germany’s total annual gas imports.

With production from Neptun Deep set to commence, Romania is on track to become the largest natural gas producer in the European Union and, for the first time, a net exporter of gas.

This development comes after Russian gas transit through Ukraine ceased at the start of 2025, following the failure of Kyiv and Moscow to renew their pipeline agreement.

The decision has triggered backlash from Slovakia and Hungary, two countries heavily reliant on Russian gas and governed by pro-Russian administrations.

“It seems that it has not dawned on them that this is the end,” commented Poland’s Rzeczpospolita newspaper.

Slovak Prime Minister Robert Fico has further escalated tensions with inflammatory and factually incorrect statements. He accused Ukrainian President Volodymyr Zelenskyy of causing an energy crisis in Slovakia and costing the country €500 million annually in gas transit revenue.

Both claims are false: Slovakia has sufficient gas supplies and has not earned the stated sums from gas transit for two years (and is unlikely to do so again).

Meanwhile, Hungary could stand to benefit from Romania’s gas exports to Germany, provided the gas is transported via Hungarian territory.

Ukrainian Businesses Expand Across the CEE

As the war in Ukraine continues, Ukrainian businesses are rapidly expanding into Central and Eastern Europe, transitioning from primarily serving displaced communities to targeting broader local markets.

Lviv Croissants, a popular bakery chain, now operates 12 outlets in Poland and has recently opened its first branch in the Czech Republic. Founder Andrii Halytskyi emphasizes the need to grow beyond the Ukrainian diaspora for sustained success.

Piana Vyshnia, renowned for its cherry liqueur, has expanded to 15 locations in Poland and Slovakia and plans to enter Germany, Switzerland, and France by 2025.

NovaPost, Ukraine’s largest private postal company, is spearheading growth in logistics. It has launched operations in Poland, Slovakia, Czechia, Germany, and Romania, with ambitions to expand across all of Europe by 2025.

This wave of business migration is bolstering CEE economies. In Poland, Ukrainian entrepreneurs founded 1 in 10 new businesses in 2024, significantly boosting local job markets and economic growth.

Slovakia Hit by Largest Cyberattack Yet

Slovakia’s Land Registry Office was recently hit by a major cyberattack, crippling business and private operations. The incident exposed severe weaknesses in the country’s public sector cybersecurity.

Despite warnings from the National Security Authority, little progress had been made to strengthen digital defenses. A 2023 report revealed that many public institutions failed to complete mandatory cybersecurity audits, and those that did scored poorly, meeting only 53% of required standards.

Interestingly, on December 20, 2024, Ukraine reported a massive Russian cyberattack targeting its state registries, severely disrupting government operations. This attack escalated cyber tensions in the region and was soon followed by retaliatory cyber actions. Days later, hacker group Silent Crow breached Russia’s real estate registry – Rosreestr, leaking sensitive data of nearly 90,000 citizens.

Week 4

Biden Caps AI Chip Exports, Leaving CEE Allies Frustrated

Among the final policies introduced by Joe Biden’s outgoing administration was a measure to limit the export of advanced AI chips to certain international partners.

While 18 countries can freely acquire chips, such as those made by Nvidia, others face strict restrictions. In Europe, the divide roughly follows the border between Central and Eastern European countries and their Western counterparts.

For countries like the Czech Republic, the impact is minimal. However, Poland—aspiring to become Europe’s military leader and a defense stronghold against Russia—has been significantly affected. The restrictions undermine Poland’s investments in advanced defense technologies, including AI. Polish Minister Krzysztof Paszyk criticized the move as “a decision I do not understand,” expressing frustration over Poland’s exclusion despite its loyalty as a U.S. ally.

Estonia also condemned the policy, with Foreign Minister Margus Tsahkna calling it “ungrounded and harmful.” He argued that it undermines Estonia’s role as a leader in innovative AI solutions. Reportedly introduced hastily and without consulting allies, the policy applied a broad framework without addressing the nuanced nature of AI technology.

The situation echoes earlier U.S.-EU tensions, such as the 2023 and 2024 restrictions targeting exports by Dutch firm ASML. The company, a leader in extreme ultraviolet lithography, is essential for advanced chip production. Critics accused Washington of dictating which European firms could export products from their own countries.

The latest restrictions highlight Europe’s dependency on foreign technology and underscore the need for a robust domestic chipmaking strategy. The EU Chips Act was designed to address this, but it lacks a clear focus on which segment of the chip industry to prioritize. The collapse of Intel’s planned investment in the region further undermined efforts.

Unlike costly chip foundries, companies like Nvidia thrive on design, which relies heavily on intellectual property. As a fabless chipmaker, Nvidia outsources production to Taiwan. Given Europe’s strong engineering talent in chip design, this is an area where Europe could excel. However, without a coherent strategy, this potential remains untapped.

What Could Happen if Ukrainian Migrants Leave CEE

Eastern European economies, bolstered by Ukrainian workers who fled the war, could face fresh challenges if peace in Ukraine prompts their return home. These workers have filled critical labor gaps, but their departure could disrupt growth and worsen already tight labor markets.

Since Russia’s 2022 invasion, over 4.3 million Ukrainians have sought refuge in the EU, with 22% settling in Poland and 9% in the Czech Republic. Many have found jobs in the region, where unemployment is at record lows.

Although all desire peace, when it is finally achieved, as the new U.S. President Donald Trump has pledged to pursue, a significant portion of these workers may return to Ukraine. A Polish central bank survey suggests that 59% of Ukrainian refugees and 34% of pre-war migrants would go home if the war ended.

According to Raiffeisen Bank, economic growth in Central and Eastern Europe outpaced the Eurozone in 2023—2.2% versus 0.8%. Yet, much of this dynamism relies on manufacturing and exports, driven by affordable labor. A loss of Ukrainian workers could strain industries in cities like Warsaw, Prague, and Bratislava.

At the same time, Ukraine stands to gain from returning citizens, who may bring valuable skills and capital to aid in rebuilding efforts.

U.S. Tariffs on EU Goods on Hold

Donald Trump has taken office and has already signed 80 executive orders. For businesses in Europe, the key takeaway is that tariffs on European goods were not among them.

The 47th U.S. president promised to impose 25% tariffs on imports from Canada and Mexico on February 1st but stated that the country was not yet prepared to implement broader tariffs. Additionally, Trump has pledged to impose 100% tariffs on imports from the BRICS nations.

Week 5

With the U.S. Stargate Project, Europe Risks Becoming Just Another Consumer

The Stargate Project, a $500 billion AI infrastructure initiative led by OpenAI, SoftBank, Oracle, and MGX, is the largest private-sector investment in artificial intelligence to date. Announced by President Donald Trump, the project aims to construct massive AI data centers across the U.S. over the next four years.

For the European Union, already scrambling to catch up in AI, this is more than just another tech development—it’s a stark reminder of how much further behind the bloc may fall. The Center for European Policy Studies (CEPS) warns that Europe’s fragmented approach to AI—with national governments running independent strategies—could leave the region struggling to compete with the scale of U.S. and Chinese advancements.

Europe needs a unified AI strategy—one that aligns policy, research, and industry efforts across member states. Without this, the EU risks becoming a consumer of next-generation AI rather than a leader or even a contender in its development.

The stakes are high, especially with the U.S. becoming a less predictable partner for Europe under Donald Trump’s protectionist administration. Over-reliance on American AI systems could become a strategic liability.

Another challenge is the cultural bias inherent in American-trained AI systems like ChatGPT. These models, predominantly trained on English-language data, naturally reflect Anglo-American cultural norms and perspectives. They often fail to grasp the nuances of local sayings, jokes, and cultural contexts.

Recognizing these limitations, some Central and Eastern European countries are working to develop their own large language models. For example, Poland is taking steps to reduce its dependence on American AI systems by creating a homegrown model known as PLLuM—the Polish Large Language Model.

PLLuM is a “Polish ChatGPT,” developed with public funding. Although it lags behind OpenAI’s models in terms of performance, it is tailored to Polish realities and designed to address local needs, such as assisting with official matters and even drafting legislation in the future. Currently being tested in Poland’s Ministry of Digital Affairs, PLLuM will soon be accessible to the broader public.

Europe’s AI development faces more than policy fragmentation and investment gaps—it’s also caught in the U.S.-China chip war. Recent U.S. export restrictions on AI chips have proven even more frustrating in light of the success of China’s DeepSeek models, which casts doubt on the policy’s effectiveness.

Estonia and Poland Step Up in Europe’s Defense Race

Estonia has launched a €100 million defense fund to strengthen its domestic defense sector and foster innovation in military technology. The sector currently includes 154 companies, generating €500 million in annual revenue. By 2030, the sector wants to reach €2 billion.

This move aligns with broader regional efforts, with Poland committing almost 4% of its GDP to defense as part of its strategy to bolster military capabilities.

Latvia, too, has announced a €200 million investment in air defense systems.

Yet Another Undersee Cable Damaged in the Baltic Sea

Sweden has seized the Vezhen, a Maltese-flagged ship, over the suspected sabotage of a data cable to Latvia. Latvia is working with Sweden and NATO on the investigation.

The incident comes just weeks after NATO launched its Baltic mission to protect undersea infrastructure following suspected Russian-linked attacks.

In December, Finland captured a tanker believed to be part of the Russian “shadow fleet.” Investigators discovered that the ship had dragged its anchor along the seabed, severing key electrical and data cables.