Not since the lead up to the Iraq War when Donald Rumsfeld divided “old” and “new” Europe like a sledgehammer, has the EU faced a more divisive challenge than that of Russia. Such is the point of departure for a very valuable new report published by the European Council on Foreign Relations, a new Soros-backed think tank which is dedicated to promoting European unity. I highly recommend you read it. Despite Europe having three-and-a-half-times the population of Russia, ten times the military spending, and an economy 15 times as large, there remains an enormous reluctance among EU members to exercise any power vis-à-vis Russia. The authors of the report have collected data from a wide range of interviews with high ranking bureaucrats and diplomats across European governments, and offer a “power audit” to help guide policy and remind Europeans that they aren’t quite as weak as they may think.
The descriptive components of the report will surprise no reader of this blog, however it is the prescriptive conclusions that offer the most insight. The authors divide EU members as falling into two traditional policy paradigms on Russia – those who favor “creeping integration” with Moscow (a strategy which seeks to integrate Russia into as many institutions as possible and allow their investment in European energy, even when they break rules), and those who favor “soft containment” of Russia (a strategy which calls for Russia to be excluded from the G8, NATO expansion, and blocking their participation in the energy sector). They conclude that these two approaches should be thrown out, and that Europe should tightly unify and pursue a “rule of law”-based policy paradigm which combines elements of both approaches, tough but sensible policy focused on pragmatic and realistic objectives.It would work like this: 1) keep Russia engaged in international institutions, but when they are slow to adopt the norms and commitments, conditionally exclude them from talks; 2) if an EU country has a bilateral policy with Russia, it must reinforce the common EU policy points; 3) focus on integrating with countries on Russia’s periphery and encourage them to adopt European norms of transparency, and invest in their energy infrastructure; 4) demand enforcement of outstanding agreements such as the ECT, and 5) give the EC the right to pre-approve major energy deals.These recommendations are a breath of fresh air, even if at first glance they seem more idealistic than what is politically possible. To begin with, we can anticipate fierce resistance from Moscow on many of these points, and such a policy strategy must be prepared to handle these challenges. Point three especially will motivate the Kremlin to react strongly – we know from diverse sources that the current leadership views these sovereign states of their periphery to be their “backyard”, and it wouldn’t surprise me at all to very soon see an adapted version of the Monroe Doctrine to declare their sphere of influence.However, although the report acknowledges two of the most important characteristics of the EU-Russia dynamic, the authors don’t really account for them in their policy recommendations: the Kremlin’s dramatically different perspective on law, and the influential impact of complicit corporations and financial institutions supporting Russia’s agenda. There should be more focus on incentive creation to make preferred policy outcomes the most appealing option, rather than a “punishment” that causes resentment and deeper mistrust.It is rather difficult to imagine the rule of law strategy working without taking into account both the legitimate right for Russia to ask for better terms under certain agreements, yet also recognizing the fundamentally different view Moscow’s policy-makers have of institutions. On page 26 of the report, the authors quote Konstantin Kosachev, who says “The EU uses the same language and the same arguments with Russia that it uses with Serbia, Moldova or Turkey. You say that you must behave and do what we say. For countries that want to be members, it’s okay to violate their sovereignty. That cannot work with Russia. Russians think they are a great power and for a great power it is completely unacceptable to ask for something and not get it.”This emotional sensitivity to the rhetoric and appearance of agreements is very important – as though a mutually beneficial arrangement with Russia can only be had if it is done in way that makes it look like a ‘victory’ for Moscow.The failings of taking into account the Russian conception of law as an expression of power in the energy field is neatly summarized by Katinka Barysch, who comments on how the “reciprocity” concept of energy investment has backfired on the EU: “In fact, the EU and Russia mean different things when they talk about reciprocity, in line with their very different approaches to energy policy: market and rules-based in the EU; state-controlled in Russia. For Europeans, reciprocity means a mutually agreed legal framework that facilitates two-way energy investment. For Russia, reciprocity means top-level talks to identify assets of similar market value, and then swap these assets. Since the EU is not making headway on the Energy Charter Treaty, while Gazprom has been acquiring more and more downstream assets in Europe, it looks like the Russian idea of reciprocity is prevailing at present.”And what should be done policy-wise to encourage a constructive role for corporations and international financial bodies in crafting Russia policy? This is quite a new area, and the influence of these groups has been steadily increasing in recent years. By and large, the report illustrates the culmination of a number of trends which were barely visible only a few years ago. Back in September in 2006, the International Herald Tribune published a polemic article I authored which argued that Russia was using energy to disaggregate Europe’s unity, and use business partners to lobby for their interests (such as the case of Gerhard Schröder). At the time, this argument was vigorously resisted, by many of my colleagues, across the political spectrum. Today there is far less doubt that the conduct of certain corporations and financial institutions has been detrimental to rule of law, human rights, and the EU’s relationship with Russia.On page 14, the authors write the following paragraph:
Russia has strengthened its political relationships by recruiting big business to act as a lobbyist for the Russian cause inside key EU countries. Its state controlled companies have built partnerships with companies such as E.ON and BASF in Germany, ENI in Italy, GDF and – to a lesser extent – Total in France, and Gasunie in the Netherlands. Even in the context of deteriorating relations with the UK, Russia decided to buy out rather than expropriate Shell and BP in Sakhalin II and Kovykta, respectively. Gazprom forced Shell and BP to sell controlling stakes in the projects for less than their market price but retained these companies as minority partners. Gazprom needed the technical expertise of these companies in order to be able to develop the gas fields. However, a Russian expert told us that Gazprom had also decided to keep BP and Shell as partners as part of a deliberate attempt to build up a pro- Russian lobby. It worked. Within weeks of the deal, BP’s chief executive Tony Hayward was publicly defending the Russian position.
The authors of the report are absolutely correct in their recommending that Europe not be afraid to enforce treaties, defend contractual obligations, and show everybody how a fair, rule-based system should work (in fact, by staying silent in the face of violations, it is no wonder that Russia sees only power above law). However the strategy is missing an incentive/disincentive approach to tackling the problem. We should also be thinking of innovative ways to encourage deeper integration and engagement with Russia – but they clearly aren’t the only ones who need to be reminded how and why these improvements must be made.There is so much interesting information in this report to digest that I will likely return with more commentary soon.