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The geopolitical implications of vaccine rollout programs across Europe

18 March 2021 Bibianna Norek Blanka Kolenikova Brendan Melck Dijedon Imeri Eoin Ryan Ewa Oliveira da Silva Jan Gerhard Janet Beal Petya Barzilska

The EU's centralized approach to procurement and vaccine regulation has aided internal cohesion while raising supply delays; there are vast differences in institutional capacity to generate an uneven pace of vaccination. The European Union (EU) adopted a centralized approach to its vaccination strategy, outsourcing vaccine procurement to the European Commission, which so far has signed advance purchase agreements (APAs) for up to 2.6 billion doses with seven different vaccine producers on behalf of member states. Vaccines are then allocated on a per-capita basis and distributed by member states. The current strategy has encouraged internal cohesion in the EU, especially by making access to vaccines easier to obtain for smaller member states; it also precluded a repetition of hoarding practices that was evidenced in 2020 with personal protective equipment (PPE) products. However, the Commission's emphasis on keeping vaccine costs low and refusal to waive vaccine producers' liability have inadvertently contributed to an initially slower vaccine rollout compared to the United States and the United Kingdom. AstraZeneca, for example, signed a contract with the UK three months earlier than the EU, prompting the multinational to prioritize delivery to the UK at the first sign of production problems.

The problem of protracted negotiations with vaccine producers and corollary supply delays sprang from, and was compounded by, production constraints. For instance, on 15 January, Pfizer announced it would have to delay deliveries to six Nordic and Baltic countries through February due to an upgrade to its production facility, although the Commission expects Pfizer/BioNTech to make up the shortfall from April, when its new facility in Marburg (Germany) begins to operate. Two EU officials later claimed that as of mid-February, Pfizer/BioNTech had not yet delivered some 10 million doses that were due in December 2020, about one-third less than originally planned. Moderna also announced it would fall behind initial delivery targets for France and Italy, which would receive 25% and 20% fewer doses through February, respectively. AstraZeneca similarly announced it would only deliver 25% of the 100 million doses the EU expected by March, because of production problems at its manufacturing site in Belgium. These announcements have, in turn, delayed or even halted vaccination programs across the EU. For instance, in the French regions of Paris, Hauts de France and Bourgogne-Franche-Comte local authorities announced a temporary suspension of vaccinations from 2 February due to shortages, and in Portugal the government declared that its inoculation campaign faced a delay of up to two months.

Vaccination target for Q3 remains broadly realistic

Despite early production delays hindering the ramp-up of vaccination programs across the EU, the Commission's target to inoculate 70% of the EU's adult population by September remains broadly realistic. Most member states have sufficiently robust institutions that provide flexibility in adapting prioritized groups as national epidemiological situations and vaccine supply availability evolve. However, differences in institutional and workforce capacity, vaccine delivery infrastructure and supply chain management among EU member states will continue to generate an uneven pace of vaccination. Countries like Sweden, Finland, and Belgium, which generally have more capacity to organize and deliver vaccines, are likely to have performed better than the average when assessed at the end of the third quarter of the year, while Italy, Ireland, and Denmark are likely be on target to vaccinate 70% of the adult population. The Netherlands too is likely to eventually catch up due to robust administrative capacity, but Bulgaria faces undershooting with just over 1,100 doses per day unless it radically ramps up vaccination efforts. Effective rollout, in turn, is likely to determine the pace at which restrictions are eased, a key driver behind economic recovery.

Domestic vaccine shortages driving 'vaccine protectionism' against non-EU countries

Domestic vaccine shortages will drive 'vaccine protectionism' directed towards non-EU countries. The Commission on 29 January imposed export controls on all COVID-19 vaccines. Producers now require authorization from member states to be able to export COVID-19 vaccines outside the EU. Some notable exemptions were made including the Western Balkans, EFTA countries, and countries covered by the World Health Organization's (WHO) COVAX facility, the global initiative that seeks to pool resources to procure and distribute vaccines on an equitable basis to low- and middle-income countries. The imposition of export controls reflected growing concerns in Brussels over vaccine shortages and prompted the Commission to effectively impose a hard border to prevent vaccine exports to the UK, a measure that was triggered by AstraZeneca's announcement to cut vaccine deliveries to the EU but not the UK. Although the decision to impose a hard border for COVID-19 vaccines was almost immediately revoked following a furor in London, Dublin, and Belfast, the episode underscored the potential for vaccine shortages to escalate into political confrontation between the bloc and other developed countries with high purchasing power. It also highlights the risk of a potential repetition of previous hoarding practices that caused shortages in PPE products such as facemasks and surgical gloves across the globe.

Continued shortages and mounting political pressure on the Commission and national governments would raise the risk of further drastic measures by EU institutions. In a letter to EU leaders, European Council President Charles Michel mentioned the possibility of empowering EU institutions to temporarily nationalize vaccine production and confiscate patent rights. Such a step would be a measure of last resort, the letter added. However, these risks will decrease as vaccination production picks up pace and authorities move on from inoculating elderly and at-risk groups - generally a slower process - to the general population. Once a greater share of Europeans are covered, the EU is also likely to focus more on delivering vaccines to poorer countries, which would help restore some of the international credibility it lost over its perceived fumbling of procurement and vaccine protectionism. It has already pledged EUR850 million (USD1 billion) through the COVAX facility, and once all vaccines that figure in EU contracts are approved by the EMA, it would allow the bloc to also share its excess vaccine supply.

Posted 18 March 2021 by Bibianna Norek, Research Analyst, Europe & CIS, Country Risk, S&P Global Market Intelligence and

Blanka Kolenikova, Associate Director, Europe & CIS, Country Risk, S&P Global Market Intelligence and

Brendan Melck, Senior Research Analyst, Life Sciences, IHS Markit and

Dijedon Imeri, Senior Analyst, Country Risk, S&P Global Market Intelligence and

Eoin Ryan, Senior Analyst and

Ewa Oliveira da Silva, Senior Analyst, Life Sciences and

Jan Gerhard, Senior Analyst Country Risk Europe, S&P Global Market Intelligence and

Janet Beal, Senior Research Analyst, Life Sciences, IHS Markit and

Petya Barzilska, Sr. Research Analyst II, Europe & CIS Country Risk, S&P Global Market Intelligence


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