the future of eu-russia relations

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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Третий уровень Четвертый

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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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уровень

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.

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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!

the future of eu-russia relations

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