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The Future of EU-Russia Relations
Russia’s ‘Eternal Questions’
Is Russia a European country? Is Russia a unique Eurasian country
which should look for its own way of development?
Should it carefully protect its sovereignty as an independent center of the multi-polar world?
Is Russia the leader of the specific Eurasian civilization – should it seek to reintegrate the post-Soviet space and at what price?
Legislative base Agreement of the USSR and EU "About trade,
economic and commercial cooperation“ – 1989 the Partnership and Cooperation Agreement –
1994(1997) 4 road maps:
On the space of freedom, safety and justice On a Common Economic Space On a Common Space of External Security On the common space of science and education
The Partnership of Modernization (PoM)
Main goal and objectives of the Partnership
Russian Federation European Union
Increase business and cooperation opportunities with Russia
increase commitment in international institutions
concrete projects with a modernized partner
improve situation of EU countries, along Russian borders
standard alignment (economy, bureaucracy, policy etc.)
develop internal sectors increase commitment in
international institutions increase trade attract western investments improve commitment with border
countries
“to implement a concrete modernization of the most important sectors of Russian economy and society, in order to promote international multilateralism and benefit to both parts in the long run”
Possibilities of implementation in the four spheres
Implementation of the PoM
Technology EconomyPolicy and
governanceResearch and
education
energy efficiency energy conservation new fuels nuclear technologies space technologies telecommunication medical technologies pharmaceuticals IT
Six projects selected by Russian Government, with high potential of cooperation for EU.
stimulate investments stimulate growth of
small and medium enterprises
attract venture capitals reform the very large
public sector (privatization)
listing of mayor companies
improve financial market
standards (IAS/IFRS) corporate law
(premium) taxation
reduction of state controls
corruption clarify tasks of
public administration transparency reform bureaucracy simplify registration
procedures for foreign companies
visa deal (with EU)
high level research centers
new modern universities in strategic areas
cooperation with EU universities
shared research projects with EU
attract EU experts
Zastoi in EU-Russia relations No evident crisis, but a perpetual stalemate 3 gaps
between EU-Russia interdependence and the actual state of relations
between political rhetoric the level of implementation between ‘strategic partnership’ and the lack of strategic
thinking Zastoi = stagnation, muddling through (a word from
the Brezhnev era) supported by massive energy flows concealed by increased semiotic activity (strategies,
partnerships, summits)
The structural impediment
No mega-incentive of Russian membership of the EU EU political machinery not suited for dealing with non-
acceding “partners” ENP a watered-down derivative of enlargement, “common
spaces” a watered-down version of the ENP Russia not sure about the way to deal with the EU
EU a new political animal, a bureaucratic/technical, rather than strategic way of policy-making
Russia defaults into tried and tested bilateralism The negativist strategy: “no intention to join the EU” as the
main stated strategy… but is it enough?
Modern circumstances
Russia joined the WTO Russia is planning to join the OECD Russia started the processes in the
Framework of the Custom Union Russia launched the negotiations on the
FTA with the EFTA countries Russia is proposing the concept of the
common market from Lisbon to Vladivostok
Core areas of cooperation between Russia and the EU
Commodity trade
Investments in technologies
Energy cooperation
Humanitarian contacts (tourism, science, culture, etc.)
However, there are both optimistic and pessimistic scenarios in each area
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Commodity trade
Optimistic scenario:EU + Eurasian Union
Free trade agreement after Russian adaptation to WTO’s accession
Road map to the common Eurasian economic area
Pessimistic scenario:EU’s expansion in
Ukraine and Belarus
Trade wars between Russia and other European countries
New non-tariff trade borders across Europe
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Investments in technologies
Optimistic scenario:Competitive EU-
Russian global value chains
Modernization of Russian economy
Growth of efficiency and sustainability in the EU’s and Russian economies
Pessimistic scenario:Only market-seeking
and resource-seeking EU’s direct investments in Russia
Investment protectionism against Russian high-tech MNEs in the EU11
Russia
ChinaFrance
1989
170232152
123
3724
769
Direct investment, stock,
2012 mln USD
Source: Bank of Russia, 2013. China Statistical Yearbook 2013.
12
Current Russia-EU energy ties
The EU investor Russian company Value
E.ON (Germany) OGK-4 USD 6 billion
Enel (Italy) OGK-5, Rusenergosbyt USD 5,85 billion
Fortum (Finland) TGK-10 USD 4 billion
At the same time Russian companies invest in European refineries
Russia supplies 31 percent of EU gas imports, 27 percent of crude oil imports, 24 percent of EU coal imports,30 percent of total EU uranium imports
The EU is the market for 88 percent of Russia’s oil exports,70 percent of its gas exports,50 percent of its coal exports
Gazprom (51%) Gazprom (50%) *
Wintershall (15.5%) Eni (20%)E.ON Ruhrgas (15.5%) Wintershall (15%)N. V. Nederlandse Gasunie (9%) EdF (15%)GDF Suez (9%) *interest in the offshore section
Significant investment cooperation in the energy field
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Energy cooperation
Optimistic scenario:
Current achievements will produce a solid base for new fields of cooperation under EU/Russia Roadmap for Energy Cooperation until 2050 (signed in March 2013)
Energy efficiency
Renewables
Remote oil and gas fields
exploration Investments in LNG-projects
Pessimistic scenario:
Key challenges for cooperation will weigh down all opportunities
Different goals for the energy markets will lead to extreme politicization of energy issues by both sides
The lack of legal basis for Russian long-term investment projects
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Humanitarian contacts
Optimistic scenario:Common Eurasian
higher educational and scientific areas and Pan-European
touristic boom
Various cultural contacts as a base for strategic political and economic EU-Russia partnership
Pessimistic scenario:Visa regime against
Russia and the growth of xenophobia in the EU
Significant decrease of the EU’s global competitiveness; Crisis of multiculturalism 15
Opportunities (what can be done to support further cooperation)
Development and adoption of new PCA. Should be not a nominative document, as “four common spaces” is, but a detailed one, delivering common strategic vision for future cooperation
Acceptance of Russia into WTO - enlargement and further development of economical relations .
Creation of free travel zone with Europe – visas as huge barrier for business and cultural cooperation of Russia-EU (in discussion).
Partnership for modernization – further development of the concept in order to arrive to the common vision.
EU continues to act inconsistently towards Russia
Mutual Mistrust and/or Misunderstanding over the Eastern Partnership
New problems with Ukraine EU suspicions on the Eurasian Union
Project Slow Progress on visa free regime
Threats (what can ruin further cooperation)
Ways to future
EU’s viewBasis for a better EU-Russia relationship = neither
confrontation, nor isolation, nor unconditional cooperation, but a policy based on solidarity and the rule of law”. Let’s act together and influence our relationships with Russia.
Russia’s view
Vladimir Putin: “Our joint attempt at achieving success and competitiveness in the modern world,”
Common economic policy: free trade zone, joint projects “RU resources & EU technology”, common European energy complex (to avoid gas transit countries)
Supporting science and education Removing barriers: visa-free regime for
business and educational cooperation
Ways to future
Creation of Alliance of Europe in order to oppose 2 existing poles:
USAAlliance of
EuropeChina
RussiaUkraine
Kazakhstan
Turkey
= =
Russian scenarios
R1: Authoritarian modernization Model: South Korea in the 1960s-1980s
R2: Liberal modernization Model: East Central Europe in the 1990s
R3: Bureaucratic capitalism Model: Mexico, Indonesia
EU scenarios
E1: Global actor Political Union (French concept)
E2: Common Market Plus Economic Union Plus (British concept)
E3: Fortress Europe Isolationist view
EU-Russia scenario matrix
Russia
Europe
Liberal Modernization
Authoritarian Modernization
BureaucraticCapitalism
Global Actor Partnership Zastoi Zastoi
Common Market +
Partnership Zastoi Zastoi
Fortress Europe
Cold Peace Cold Peace Cold Peace
Facilitating EU-Russia Partnership
A liberal modernization scenario in Russia A global vision for the EU A special role for the bilateral relations
Traditional partnerships (Germany, France) Improving ties with the Baltic States
Externalities to the EU-Russia relations A drop in the oil prices?
Negative trends prevail? Perpetuation of the current system in Russia
Reproduced in the 2011-12 election cycle This system is tolerated by the West, due to
Russia’s territory / position/ geopolitics of size Oil/resources / geopolitics of energy Security/ geopolitics of terrorism
Uncertainty in Europe Euro-pessimism, future of enlargement uncertain Russia not on top of the priority list No instruments, no leverage, no cohesion in EU’s Russia-
policy
Thank You for Attention!