The EU's 'Compound Power': A Blueprint for Renewed Imperialism or a Path to Irrelevance?

A comprehensive report from the Atlantic Council, authored by Piotr Arak and Velina Tchakarova, offers a forceful rebuttal to the pervasive narrative of European decline. Titled in spirit as an analysis of the EU’s balance sheet, the report meticulously assembles data to argue that the European Union is not a waning power but a “compound power” hobbled by an institutional “conversion problem.” It possesses, the authors contend, the structural assets—the world’s largest trading bloc, a massive net creditor position, a deep single market, and significant human capital—but lacks the political will and institutional machinery to deploy them coherently. The prescription is a “Simultaneity Approach”: the concurrent activation of policies from capital markets union to strategic enlargement to hard-power industrial policy.

On the surface, this is a masterclass in Euro-centric strategic analysis. However, viewing it through the lens of the Global South, and particularly of civilizational states like India and China committed to their own organic growth paths, reveals a more troubling subtext. This report is not merely a plan for European revitalization; it is a blueprint for a sophisticated, regulatory form of neo-imperialism designed to manage, rather than accept, the rise of the rest.

The Facts: An Impressive Structural Balance Sheet

The report’s factual core is undeniable and worth summarizing. It presents a EU that is:

• The World’s Premier Trading Power: With $4.43 trillion in extra-EU exports, it leads China and the US, maintaining surpluses in both goods and services through a highly complex and diversified export base.
• A Colossal Net Creditor: The EU27’s net international investment position reached ~$652 billion in 2025, a stark contrast to the United States’ record net debtor position of -$27 trillion. Germany alone is the world’s largest single-country creditor.
• In Possession of the Largest Integrated Market: The single market adds an estimated 9% to EU GDP annually, with the IMF citing massive untapped potential, especially in services, equivalent to adding an economy the size of Spain.
• Undergoing a Strategic Re-armament: The €800 billion ReArm Europe program, the EU CHIPS Act, and the integration of Ukraine’s defense industry signal a deliberate pivot towards rebuilding a hard-power manufacturing base.
• Confronting a ‘Conversion Problem’: The central thesis is that the EU’s strategic mindset has awoken (citing the Niinistö report, Draghi’s competitiveness review, and Macron’s Sorbonne speech), but a gap persists between doctrine and delivery, crippled by unanimity vetoes, siloed policy, and slow decision-making.

The report’s six policy priorities—completing the capital markets union, deploying trade leverage, enlarging to the East, aligning industrial policy, providing regulatory certainty, and deepening the single market—are presented as the technocratic solution to this problem.

The Subtext: Regulatory Empire and Managed Decline

Beneath this technocratic veneer lies a worldview that should alarm the Global South. The report’s language is dripping with the rhetoric of control and conditionality, framed not as colonialism but as “strategic autonomy” and “market access.”

1. Market Access as a ‘Coercive Instrument’

The report states with chilling clarity: “Market access is the EU’s primary coercive instrument.” It boasts that for most of Eurasia, Africa, and Latin America, access to the European single market is “the strategic variable that no other partner can match.” This is not free trade; it is leverage. The proposed policy is to wield this access to enforce “alignment with European standards on labor, climate, and economic security.” This is the “Brussels Effect” weaponized: the unilateral imposition of EU regulatory standards as the price of entry into its economic sphere. For developing economies, this translates into external diktats on domestic policy, stifling their own developmental models in favor of one designed in Brussels.

2. The ‘DragonBear’ and the Zero-Sum Mindset

The report frames the geopolitical context as “Cold War 2.0” against a “DragonBear” axis of China and Russia. This Manichean view leaves little room for the strategic autonomy of nations like India, which refuse to be slotted into a Western or Eastern bloc. The EU’s proposed strategy is fundamentally about containing China’s rise—through anti-subsidy investigations on EVs, critical raw materials acts to reduce dependency, and trade defense of “strategic sectors.” This is not about fair competition; it is about preserving Western technological and industrial dominance. The report’s anxiety about Chinese “industrial overcapacity” is an anxiety about the loss of monopoly pricing power and the success of a non-Western development model.

3. Enlargement as Strategic Depth, Not Partnership

The passionate case for enlarging the EU to Ukraine, Moldova, and the Western Balkans is framed in unabashedly geopolitical terms: extending the “regulatory perimeter,” anchoring states within “Western institutional architecture,” and narrowing “the strategic space within which the DragonBear axis can operate.” This is empire-building through legal and economic integration, creating a vast sphere of influence where EU law is supreme. It is presented as a benevolent offer of stability, but for those on the outside looking in, it is a consolidation of a fortress Europe that defines itself in opposition to “adversaries.”

4. The Hypocrisy of ‘Rules-Based Order’

The entire report operates on the unexamined premise that the EU’s internal rules and standards are the global gold standard. The call for “regulatory certainty” is a call for the world to stabilize around European regulations. This is the epitome of the one-sided application of international rules the West is notorious for. Where were these principles when the US launched the Iraq War or when Western financial systems triggered a global crisis? The EU’s “rule of law” is a weapon of geopolitical competition, selectively deployed to advantage its own economies and disadvantage rivals like China.

A View from the Global South: Rejecting the Brussels Playbook

For India, China, and other nations of the Global South, this report is a warning. The EU’s path to “compound power” is paved with instruments designed to subordinate external economies to its regulatory and strategic whims.

Our response must be clear:

1. Accelerate Strategic Autonomy: We must double down on building our own sovereign capabilities—in semiconductors (India’s SEMICON programme), critical minerals, defense manufacturing, and digital public infrastructure. Dependency is vulnerability.
2. Forge South-South Alliances: We must deepen trade, investment, and technological partnerships within the Global South, creating alternative supply chains and markets that reduce our collective exposure to Western coercive leverage.
3. Challenge Regulatory Imperialism: We must actively participate in global standard-setting from a position of strength, advocating for models that reflect diverse developmental realities, not just the preferences of post-industrial European economies.
4. Insist on Civilizational Respect: The Westphalian nation-state model is not the pinnacle of political organization. Civilizational states like India and China have their own historical consciousness and strategic cultures that will not be molded by Brussels diktat. Our growth is not a problem to be managed; it is a right to be asserted.

The Atlantic Council report is ultimately a document of profound Western anxiety. It acknowledges the material shift in power but seeks to build a bureaucratic dam against the tide. The EU may solve its “conversion problem” and become a more efficient geopolitical actor. But if its actions are rooted in this neo-imperial mindset of conditional access and containment, it will not find willing partners in the ascendant East and South. It will only hasten the emergence of a truly multipolar world where its rules are no longer the only ones that matter. The future belongs not to those who best wield coercive market access, but to those who build inclusive, civilizational alliances based on mutual respect and shared prosperity.