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  1. 1. CREDITSCentre for European StudiesDesign: RARO S.L.Printed in Brussels by Drukkerij Jo VandenbulckeBrusselsCentre for European StudiesRue du Commerce 10Brussels, BE – 1000The Centre for European Studies (CES) is the official think-tank of the European People´s Party (EPP)dedicated to the promotion of Christian democrat, conservative and like-minded political values.For more information please visit:www.thinkingeurope.euThis publication receives funding from the European Parliament.© Centre for European Studies 2009Photos used in this publication: Centre for European Studies 2009The European Parliament and the Centre European Studies assume no responsibility for facts oropinions expressed in this publication or their subsequent use. Sole responsibility lies on the authorof this publication.2
  2. 2. The New Eastern EuropeTable of ContentsExecutive Summary and Recommendations .................... 51 The New Eastern Europe ............................................... 10 1.1 Defining the New Eastern Europe ............................. 11 1.2 Europeʼs Interests in the New Eastern Europe.......... 132 Governance and Political Development ....................... 15 2.1 A Mixed but Bleak Picture.......................................... 15 2.2 The Failure of Western Policies: Ignoring Security and Sovereignty............................. 173 Security .......................................................................... 21 3.1 Weak States in Europe.............................................. 22 3.2 Unresolved Conflicts.................................................. 24 3.3 Opportunities for Security Cooperation ..................... 264 Energy Politics .............................................................. 27 4.1 Europeʼs Energy Woes and the Role of the New Eastern Europe ......................... 27 4.2 Russiaʼs Declining Production ................................... 31 4.3 The Promise of Caspian Natural Gas Suppliers........ 34 4.4 The Caspian corridor: Europeʼs Choice .................... 37 3
  3. 3. The New Eastern Europe5 Russiaʼs Resurgence .................................................... 38 5.1 Governance ............................................................... 39 5.2 Security...................................................................... 41 5.3 Energy ....................................................................... 446 Americaʼs Retreat? ........................................................ 477 The EUʼs Challenge ....................................................... 508 Conclusions .................................................................... 544
  4. 4. The New Eastern EuropeExecutive Summaryand RecommendationsTwo decades after the fall of the Berlin wall, those Europeannations that were locked up inside the Soviet Union remainonly half free. They are locked in limbo, both in terms of theirforeign relations and their domestic realities. In terms offoreign relations, they are caught in no manʼs land betweenthe increasingly secure and wealthy members of the EU andNATO, to their west, and an increasingly aggressive andauthoritarian Russia, to their east. This limbo is reflected alsoin their domestic politics, as they continue to be torn, todifferent degrees, between progressive, democratictendencies, and the forces of authoritarianism and instability.Indeed, the six states of the “Eastern Partnership” – Armenia,Azerbaijan, Belarus, Georgia, Moldova, and Ukraine – canbe termed the “New Eastern Europe”. Torn to variousdegrees in different directions, these states all share afundamental insecurity problem: no proven and agreed uponmechanism exists for the handling of security issues in theregion. The consequences of this were most obviouslyillustrated during the 2008 war in Georgia, in which Moscowshowed its ability and readiness to flout the most crucialprinciples of the post-cold war European securityarchitecture, including the prohibition against the use of forceto alter internationally recognized borders. Yet, for a varietyof reasons including the global financial crisis, Europeanleaders have yet to act to address the challenges to theEuropean security order that are geographically concentratedin this area. 5
  5. 5. The New Eastern EuropeIf allowed to endure, this situation of limbo will ensure thatthe states of the New Eastern Europe remain a primary focusof European security – but for the wrong reasons. Whilethese states have important and positive roles to play inbuilding Europeʼs security as a whole, they are not likely toremain a focus point because of the opportunities theypresent, but rather because of the instability and crises likelyto develop in the area as a result of their currentpredicament.It is in the interest of the EU and NATO to prevent such ascenario from developing, and to promote the building ofmore secure, democratic and prosperous nations in theireastern neighbourhood. Moreover, Europeʼs interestscorrespond exactly to the interests of the nations andpeoples of these six countries.Europe has proven in the past that it has the ability to exert atransformative influence on its neighbours. That said, thechallenges in this region differ from those of the 1990s inCentral and Eastern Europe. The former member-states ofthe Soviet Union face a much steeper uphill battle to buildand reform their states; the countries of the EU and NATOare less certain whether the states in question really dobelong to the European project; and Russia is activelypursuing an adversarial agenda directly at odds withEuropean interests in the region. Despite all this, however,there is little question that both the states and peoples of thisregion remain strongly attracted to the West. It remains to beseen whether Europe will be ready to meet this challenge.6
  6. 6. The New Eastern EuropeRecommendations • The economics-based approach implies by definition the use of sound economic analysis in competition cases, since economic theory provides the right tools to evaluate the impact of business conduct on consumer welfare. • As such, Europe must categorically reject the concept of “privileged interests” or the division of the continent into “spheres of influences.” Such concepts are incompatible with the basic principles of European security; moreover, they have been proven in the past to undermine rather than build stability. • Europe should treat the countries of the New Eastern Europe as sovereign subjects, and reject any suggestion that they be treated as objects in dialogues between great powers. Above all, Europe should never negotiate the fate of these countries with other powers over their heads. • Europe should invigorate the Eastern Partnership and invest resources and efforts in this promising initiative, which can grow into the primary instrument for the Europeanization and stabilization of the region. For that to happen, however, considerably larger levels of high- level attention and financial resources will be needed. • Europe should take seriously the security concerns of its eastern neighbors; include especially the problem of unresolved conflicts, but also the external challenges to their sovereignty and independence. European leaders should consider launching and deepening a yearly dialogue on security issues with the regional states, in which governance issues should be included, as well as avenues for the development of further security cooperation. 7
  7. 7. The New Eastern Europe • Europeʼs potential to contribute to the resolution of the unresolved conflicts of the region is generally underestimated, as is the threat these conflicts pose to Europe. Concerning the Armenian-Azerbaijani conflict and the conflict over Transnistria, a greater effort toward European engagement is needed. • An expanded European security presence on the ground is needed in the most vulnerable areas, in particular Georgia. In particular, the EU Monitoring Mission (EUMM) can be fruitfully developed. More broadly, a stronger political commitment toward a security presence on the ground will require the improvement of the military and civilian conflict management capabilities within the EU. The recently approved Lisbon Treaty provides opportunities for this. • Europe should further develop the southern energy corridor, and expedite the building of the Nabucco natural gas pipeline. With a potential to transport both Middle Eastern and Caspian gas to Europe, the project should be of the highest priority to the new European Commission. • European officials should reiterate in all meetings with Russian counterparts their commitment to the principles of European security as outlined in the Charter of Paris. They may also recall Russiaʼs repeated written commitment to these principles. While continuing to seek a dialogue over their ʻcommon neighborhoodʼ with Russia, European leaders must communicate more clearly the centrality of all partiesʼ respect for the sovereignty and independence of the states in question.8
  8. 8. The New Eastern Europe• As a result, European officials should be mindful of the explicit and implicit implications of recent Russian demands for an institutionalized “New European Security Architecture.” While engaging in dialogue with their Russian counterparts, they should be careful not to allow the pillars of European security – the 1975 Helsinki Final Act, the 1990 Charter of Paris, and the pivotal roles of the OSCE and NATO – to be undermined. Any proposals implying any reduction in sovereignty for the countries of the “common neighborhood” should be rejected. In this context, European leaders should be mindful that the security problems in the region are largely a result of the current dominance in Moscow of imperial ambitions. Such thinking is not necessarily going to continue to dominate Russian thinking in the long term. In other words, Russiaʼs adversarial policies may in the long term give way to more cooperative ones as a result of domestic development in Russia.• In view of the U.S. Governmentʼs recently reduced interest in Eastern Europeʼs security, it is imperative that the EU and the U.S. make more persistent efforts at achieving a strategic consensus on relations with the neighborhood countries and Russia. Europe and America today need a transatlantic Eastern policy.• Turkey is a key country to Europe in its own right, but also an important interlocutor with regard to the New Eastern Europe. As such, European leaders should include discussion on policies toward this region in talks with their Turkish counterparts, seeking to find common interests. 9
  9. 9. The New Eastern Europe1 The New Eastern EuropeTwenty years ago, the Iron Curtain still divided Europe intoEast and West. The two sides lived in different worlds: thevalues underlying their political and economic organizationdiffered, as did their levels of freedom and living standards.Western Europe was free and democratic, and came to enjoyan unprecedented level of welfare. Meanwhile, EasternEurope lived under the stagnant and repressive rule ofCommunism. These notions of Western and Eastern Europewere so enduring and firmly rooted that it is difficult eventoday for many Europeans to mentally detach themselvesfrom the divisions that existed during the Cold War. Today,however, cold war-era divisions have little meaning. Mostmembers of what formerly was the Warsaw Pact are now fullyintegrated into the preeminent institutions of the continent: theEuropean Union and NATO. In a sense, they have ʻreturnedto Europe,ʼ as Vaclav Havel termed it. The past two decadeshave been an amazing success story. Seldom, if ever, havesocieties changed so remarkably for the better in such a shortspace of time as during the transformation of East-CentralEurope in the 1990s. That has in turn implied a quantum leapin the struggle to create a Europe “Whole and Free”, thevision that U.S. President George H. W. Bush formulated inMainz in May 1989. However, as significant as that step mayhave been, still more remains to be done. Success in theconstruction of democratic and modern societies has beengeographically limited to Central-Eastern Europe and theBaltic republics. Indeed, of the thirty-odd post-Communistnations that emerged from the collapse of Communism, mostof the Western Balkans and the former Soviet Union have notdeveloped in a similar fashion.10
  10. 10. The New Eastern Europe1.1 Defining the New Eastern EuropeThe states bypassed by this development can be roughlydivided into four distinct categories. The closest to Europe isthe Western Balkans, where the trauma of the wars thatraged during f the 1990s still endures - a fact testified to byongoing disputes between states and unruly arrangementswithin them. While much remains to be done before thisregion is fully integrated into Europe, its future in Europe ishardly disputed, and the regional states have managed toconstruct rudimentary democracies.The most distant consists of the five republics of Central Asia- countries that have the consolidation of a form of semi-authoritarian or authoritarian rule in common with oneanother,1 and who have increasingly turned to the east andsouth for models of development and trade partners. WhileEurope has important interests in Central Asia, the regiondoes not realistically have a European future. Indeed,government institutions across the West increasingly treatCentral Asia under departments covering Asia.The third category is Russia. Given its size and its formerhegemonic status in the Communist bloc, Russia poses veryspecific challenges. Since Vladimir Putinʼs coming to powerin 1999, Russia has chosen an increasingly authoritarianmodel of political and economic organization, and no longerseeks to adopt Western values and institutions. Indeed,Moscow is very unlikely to adapt to European regulatorystructures. Instead, the Russian leadership has built an1 Semi-authoritarian systems are understood in this paper in the definition of Marina Ottaway,as “ambiguous systems that combine rhetorical acceptance of liberal democracy, theexistence of some formal democratic institutions, and political liberties with essentially illiberalor even authoritarian traits." Marina Ottaway, Democracy Challenged: The Rise of Semi-Authoritarianism, Washington DC: Carnegie Endowment for International Peace, 2003, p. 3. 11
  11. 11. The New Eastern Europealternative model, which it terms “sovereign democracy”. Inspite of the name, the Russian political system hastransitioned from one form of authoritarian rule to another.Moscow views itself as both a partner and a competitor toEurope - but certainly as an equal. The Russian governmenthas unequivocally voiced its ambition to restore a sphere ofexclusive influence that remains to be defined. Although thiscertainly includes the former Soviet Union, it is an openquestion as to how far into East-Central Europe it wouldextend. Moscow explicitly seeks to remake Europeansecurity structures, targeting the role of NATO and the UnitedStates primarily, which it views as a threat to its influenceover the European continent. While Russia is a member ofthe Council of Europe, its present domestic and internationalbehavior makes a mockery of the values and principles ofthat organization. Russia is an important power that Europewill have to maintain relations with, but which neither desiresnor warrants integration with the rest of Europe.The final category, and the one which will be the subject ofthis paper, is the region which may be termed the “NewEastern Europe”. It consists of the states wedged betweenthe EU and Turkey, in the West, Russia and the CaspianSea, in the East, and Armenia, Azerbaijan, Belarus, Georgia,Moldova and Ukraine. While they are in many waysdisparate, several common factors characterize these states.Firstly, they share a European identity, exemplified by theirmembership of the Council of Europe and their interest indeepening cooperation with the EU. Secondly, they are theprimary target of Russiaʼs plans for its self-declared “sphereof influence”, but seek to maintain their independence fromMoscow. Indeed, although with great variations, theirsocieties are stuck in a no manʼs land between democracyand authoritarianism, from the more authoritarian Belarus tothe more democratic Georgia and Ukraine. Thirdly, with the12
  12. 12. The New Eastern Europeexception of Belarus, all states are marred by significantinternal tensions or unresolved conflicts. Finally, unlike thecase of East-Central Europe in the 1990s or the westernBalkans today, the carrot of membership of the EU or NATOis all but absent in the medium term for these states, earlierhopes to the contrary notwithstanding.1.2 Europe’s Interests in the New Eastern EuropeThe states of the New Eastern Europe pose particularopportunities and challenges for the EU and NATO. Thesestem not only from concerns arising from the instability of theregion that have a direct bearing on the rest of Europe, butalso from objective European interests there –two factorswhich are, of course, intertwined.While European in their own right, these states are notincluded in the most significant European cooperativestructures. The parallel enlargement of the European Unionand NATO in 2004-7 greatly increased the security andeconomic prospects of its new member states; but it alsoconsiderably amplified the gap between members and non-members. Poland and Ukraine did not differ greatly in status in1999, yet ten years later differences were palpable. NATOmembership led Poland to be included in a solid securitymechanism, while Ukraine was left with no such resource. TheSchengen treaty provided Polish citizens with greatopportunities to travel and work in the rest of Europe.Ukrainians lack these opportunities, and also saw their accessto the important Polish market reduced. With enlargementfatigue dimming the prospects of new countries gainingmembership, the risk of a new wall cutting through Europe ispalpable. The problems and challenges of non-memberstherefore appear more permanent than transient in character. 13
  13. 13. The New Eastern EuropeIrrespective of where one stands on the question of thesecountriesʼ future membership of the EU and NATO, their veryproximity to the boundaries of these institutions means thatthey are deeply intertwined with the rest of Europe.Consequently, the EU has a stake in their security andprosperity, which impact directly on that of the EU itself.Europeʼs interests in the region can be divided into threecategories – security, governance and economics. As theRussian invasion of Georgia showed, the unresolvedconflicts of the region are not “frozen”. Rather, they aredynamic processes that become more and more dangerousas they were left to linger. The war also forced Europe toaccept, somewhat reluctantly, that conflicts in the region area European security problem. The region is home to securitythreats that Europe can afford to ignore only at its own risk.Aside from the very real danger of military conflict, these alsoinclude soft security risks like organized crime and drugtrafficking. Moreover, the region is an important transit areato NATO operations in Afghanistan and to the Middle East. Inthe field of governance, Europe has a clear stake in thedevelopment of democratic states in its easternneighbourhood. In the long term, this is linked to the securityof both the region itself and Europe as a whole, becausemore democratic states in the region will also be moresecure. Finally, Europe has important interests in theeconomies of the region. They are an important source ofenergy for Europe, and their economic development iscentral to reducing the gap in living standards between theregionʼs states and the rest of Europe – something which isin turn a crucial factor for the development of smoothrelations with the EU itself.14
  14. 14. The New Eastern Europe2 Governance and Political DevelopmentThe countries of the New Eastern Europe have a checkeredrecord in terms of governance – used here as a broad termencompassing democracy, accountability and human rights.The assessment must be relative, however. Their recorddoes appear dismal if compared with the new EU and NATOmembers to their west; but in comparison with the normacross the former Soviet Union, several of the regionʼs states– particularly Georgia and Ukraine – stand out as moresimilar to southeastern European states than to their post-Soviet neighbours. Important progress has therefore takenplace. Nevertheless, these countries have all stated theirdesire for closer ties with the EU and NATO, and aretherefore obliged to compare themselves to standards totheir west, not to their east.2.1 A Mixed but Bleak PictureIn political terms, the region is by no means homogeneous.One can talk of a continuum with a consolidated authoritariangovernment in Belarus on the one hand, and transitionalregimes with substantial democratic features in Georgia andUkraine on the other. Armenia, Azerbaijan and Moldova rangein between, with Moldova being the most pluralistic of thethree, and Armenia and Azerbaijan becoming less and less so.In spite of this disparity, the regionʼs states share numerousproblems, though all to different degrees. A central issue isthe weakness of state institutions and the strength of informalpower structures. These can take the form of the individual 15
  15. 15. The New Eastern Europeauthority of a president, as is the case in Belarus; thedomination of regionally based elites, as in Azerbaijan orArmenia; or the sustained influence of an informal “kitchencabinet” surrounding the president, as is the case in Georgia.While the power of presidents may be great on paper, theability of the state leadership to govern the country isseverely limited by a lack of resources and trained officials,as well as by the persistence of strong power networksbased on region, kinship, or economic interest that wield realpower in and especially outside the capitals, thwarting centralgovernmental authority.The weakness of institutions also leads to substantialproblems of accountability. Corruption and mismanagementpermeate government institutions, and form key impedimentsto good governance. Transparency Internationalʼs indexconfirms this picture: in 2009, four of the regionʼs statesranked in the bottom third of the index.2 Moldova performedslightly better, ranking 89th. Only Georgia, having conducted aserious anti-corruption program following the Rose Revolution,stands out, ranking 66th in the world – a ranking which leavesit just behind Italy and ahead of Greece and Romania.Electoral performance is another key problem, given thatmost of the regionʼs states have yet to pass the ultimate testof democracy: the ousting of an incumbent leadership and itsreplacement with opposition forces. Ukraine and Moldovaappear to have progressed the most in this regard, actuallyachieving changes in government through elections. In spiteof its progress in other areas, Georgia has a less developedelectoral environment, though its recent elections were2 Armenia at 120, Belarus at 139, Azerbaijan at 143 and Ukraine at 146 of 180 countries.See Corruption Perceptions Index 2009, at
  16. 16. The New Eastern Europedeemed to constitute serious progress. Election in Armenia,Azerbaijan and Belarus cannot be said to be free or fair. InMoldova and Ukraine, even if elections may offer thepossibility for opposition forces to win, they are notnecessarily fair, given the efforts by forces on all sides of thepolitical spectrum to influence results in ways that are oftenhighly questionable, if not illegal. Moreover, in these twostates electoral politics generate substantial politicalinstability, rather than acting as a stabilizing element.Finally, the regional states often fail to live up to theircommitments in terms of human rights. Even in the moreadvanced states of Georgia and Ukraine, the judicial systemsleave much to be desired, not having undergone significantreform yet. Media freedom remains problematic across theregion, with television in particular still strongly influenced orcontrolled by the government, and journalists subjected togovernment repression in several states, notably Azerbaijanand Belarus.2.2 The Failure of Western Policies: Ignoring Security and SovereigntyThe democratic deficit in the region has been a keyimpediment to the regionʼs European integration and todeeper EU engagement with the regional states. However,Western policies are partly to blame for the general lack ofdemocratic progress in the region.The main focus of Western strategies to supportdemocratization in the region has been on achieving free andfair elections, while a secondary focus has been thestrengthening of civil society. These are important objectivesby any measure. However, the focus on elections and civil 17
  17. 17. The New Eastern Europesociety has often been excessive, and has overshadowedthe deeper and equally important question of buildingfunctioning state institutions. Moreover, the resourcesinvested in these objectives have been insignificant incomparison to those invested in East-Central Europe,despite the greater challenge that the region presents.It is therefore clear that Western assistance to the region haslargely failed to achieve its stated objectives. As will bediscussed later in this study, Western policies have failed to fullygrasp that the challenge posed by Moscow to the West in thisregion is not only geopolitical, but also ideological. Moreover,the Western states fundamentally misunderstood the regionʼspolitics and their implications. In the early 1990s, a “transitionparadigm” was prevalent in Western thinking. It assumed, insimplified form, that “any country moving away from dictatorialrule can be considered a country in transition towarddemocracy.”3 This proved to be correct in East-Central Europe,where European engagement was the most ardent. But it didnot prove correct elsewhere, where the socialist state systemcame to be replaced by other forms of semi-authoritarianism.The transition paradigm suffered from determinism: it failed toforesee that a transition away from authoritarian rule could verywell lead to the consolidation of another form of authoritarianrule. It also made the mistake of over-emphasizing elections asthe key to promoting democracy. As political theorist ThomasCarothers has observed, it failed to “give significant attention tothe challenge of a society trying to democratize while it isgrappling with the reality of building a state from scratch orcoping with an existent but largely nonfunctional state.”43 Thomas Carothers, “The End of the Transition Paradigm,” Journal of Democracy, vol. 13no. 1, 2002, p. 8.4 Ibid., pp. 8-9.18
  18. 18. The New Eastern EuropeThe failure of policies concentrating on elections and civilsociety has led to a new consensus that the building offunctioning, sovereign states – what Fukuyama calls“stateness” – is a prerequisite for the development ofrepresentative and participatory institutions.5 However, onecould argue, as Fareed Zakaria has done, that the prematureimposition of electoral democracy on a country can do moreharm than good, if it is the case that it ignores thedevelopment of constitutional liberties, the rule of law, andfundamental state institutions. In such conditions, electoraldemocracy has tended to give way to illiberal democracy,which in turn risks being transformed into popularauthoritarianism or even fascistoid regimes. If elected rulersare not subject to strong constitutional limitations on theirpower, there is a considerable risk that they will end upignoring legal limits and even depriving their citizens ofrights, ruling by decree and doing little to develop civilliberties.6 Russia is an excellent example of this. As Zakariaargues, the best examples of emerging liberal democracies5 “The development-policy community thus finds itself in an ironic position. The post-ColdWar era began under the intellectual dominance of economists, who pushed strongly forliberalization and a minimal state. Ten years later, many economists have concluded thatsome of the most important variables affecting development are not economic butinstitutional and political in nature. There was an entire missing dimension of stateness—that of state-building—and hence of development studies that had been ignored amid allthe talk about state scope. Many economists found themselves blowing the dust off half-century-old books on public administration, or else reinventing the wheel with regard toanticorruption strategies.” Francis Fukuyama, “The Imperative of State-Building,” Journal ofDemocracy, vol. 15 no. 2, 2004, 17-31. See also a fully developed argument in FrancisFukuyama, State-Building: Governance and World Order in the Twenty-First Century (Ithaca:Cornell University Press, 2004).6 In his original article “The Rise of Illiberal Democracy”, published in Foreign Affairs,November 1997, Zakaria argued the case as follows: “Democratically elected regimes, oftenones that have been re-elected or reaffirmed through referenda, are routinely ignoringconstitutional limits on their power and depriving their citizens of basic rights and freedoms.From Peru to the Palestinian Authority, from Sierra Leone to Slovakia, from Pakistan to thePhilippines, we see the rise of a disturbing phenomenon in international life -- illiberaldemocracy.” 19
  19. 19. The New Eastern Europeare those where a strong constitutional liberal infrastructuredeveloped in parallel or prior to the liberalization of theelectoral system.7Western policies not only ignored institutions, they alsoignored the reality of limited state sovereignty and the deepsecurity deficit of the region. The interrelationship betweensovereignty and democracy is nowhere more relevant than ina region where one of the most striking characteristics hasbeen the failure of states to build sovereignty, starting at itsvery basis: territorial control. However, sovereignty is theprecondition of a functioning political system capable ofensuring law and order, as well as a regulatory framework,and of facilitating the political participation of its citizens andguaranteeing their rights. Good governance is hence verydifficult to establish in the absence of sovereignty and inconditions of continued insecurity. Indeed, the same reasonsthat prevent the building of sovereignty and good governance– unresolved armed conflict and the strength of entrenchedand non-transparent informal networks – also thwart theaspirations of the people of the region to live in safety,protected by law, and able to participate in politicalprocesses, selecting their own leaders.The failure to build secure and sovereign states in the regionis directly related to the weakness of their democraticcredentials. It is hence in Europeʼs long-term interest to buildsovereignty, governance and democratic governmentsimultaneously in these regions. So far, however, the Westhas pursued its goals for security and governance separately.7 Zakaria, op. cit.20
  20. 20. The New Eastern Europe3 SecurityThe EU and NATO have a deep stake in the peace andstability of their eastern neighbours. This was true evenbefore the 2009 Russian invasion of Georgia, whichhighlighted the dangers of conceiving of the regionʼsunresolved conflicts – which are continuously changingprocesses – as “frozen”. Yet European governments andinstitutions chose not to engage meaningfully in conflictmanagement and security provision in the region, apparentlybelieving that inaction comes at no cost. Western inactionpartially contributed to relations between Russia and Georgiabeing allowed to spiral out of control.8The war in Georgia, however, forced Europe to take on theunintended role of stability provider in Georgia, through itsfinancial contributions to Georgiaʼs reconstruction, as well asthrough the creation of an EU Monitoring Mission along theconflict zones. Whether European leaders liked it or not, theyhad to accept that the war in Georgia was a Europeansecurity problem. In this respect, much has changed sincethe conflicts broke out across the region in the early 1990s.From that time until 2008, Western powers and organizationskept their distance, partly as a result of their deference toRussiaʼs role in the former Soviet Union, but mainly due tolack of interest, as eyes were far more focused on the Balkanconflicts. Yet, it had been EU and NATO enlargement, anddevelopments in the region itself, that were responsible forbringing these regions and their conflicts to the EUʼsdoorstep.8 Stephen Blank, “From Neglect to Duress: The West and the Georgian Crisis Before the2008 War” and James Sherr, “The External Implications of the Russia Georgia War”, inSvante E. Cornell and S. Frederick Starr, The Guns of August 2008: Russia’s War inGeorgia, Armonk: M.E. Sharpe, 2009. 21
  21. 21. The New Eastern EuropeOf the six states of the region, two (Armenia and Belarus), fortheir own specific reasons, reluctantly accepted the Russiansecurity umbrella, which was institutionalized through theCollective Security Treaty Organization. The remaining fourhave refused to join Russian-controlled security structures,seeking instead integration into the West. There are thereforefour European states – Azerbaijan, Georgia, Moldova andUkraine – for whom no security mechanisms whatsoever arein place, in regions where internal and external securitychallenges are considerable, and where states arecharacterized by their weakness. Clearly the insecurity ofthese countries cannot but affect the security of the rest ofEurope.3.1 Weak States in EuropeAt the end of the Cold War, European leaders vowed to buildan undivided Europe. The gradual expansion of the majorEuropean institutions – the Council of Europe, NATO and theEU – contributed greatly towards the construction of a Europewhere all countries share basic values and norms ofdemocratic governance, market economy and rule of law.However, several developments – primarily enlargementfatigue and Russian opposition – have caused the expansionof European institutions to stop while still incomplete. The EUhas, perhaps understandably, focused on consolidatinginternally and digesting its new member states. That has led togreat progress in the construction of stronger and more securestates in Central and Eastern Europe. Yet paradoxically it hasalso contributed to highlighting and even exacerbating theweaknesses of the states of the New Eastern Europe.The states of this region are often described as authoritarian.Of course, the word authoritarian should not be confused22
  22. 22. The New Eastern Europewith strength. Quite to the contrary, the authoritariantendencies of their governments are very much the result oftheir own perceived weaknesses, which in turn relates totheir Soviet past. Unlike the states of Central and EasternEurope, these states were not independent before or duringthe Cold War. As a result, the task of building the basicinstitutions of a state – from border controls and police toparliament, bureaucracy and tax collection – was muchgreater. And whereas the West offered substantial economicresources and the carrot of future membership to the Centraland Eastern European states, the states of the New EasternEurope received none of this, in spite of the greaterobstacles which they faced. It is therefore not surprising thattheir political and economic development has lagged farbehind their western neighbours. As a result, a new dividingline is gradually emerging in Europe, where the states ofNew Eastern Europe risk seeing the weaknesses of theirstates perpetuated, and their western neighbours gainingprosperity and security through their EU and NATOmembership.State weakness has its origin in several inter-relatedproblems. One that has already been mentioned is theproblem of institutional weakness, which leads to an inabilityto perform the functions of government correctly. All of thesestates are characterized by the dominance of informalnetworks of power in place of formal institutions – aformidable impediment to the consolidation of democracyand good governance.9 Related to this is the considerablescale of corruption and organized crime that, to variousdegrees, permeates state institutions in these states.9 For a description of the problem of informal power networks in the Central Asian context,see S. Frederick Starr, Clans, Authoritarian Rulers and Parliaments in Central Asia,Washington: Central Asia-Caucasus Institute Silk Road Paper, 2006. 23
  23. 23. The New Eastern EuropeHowever, perhaps the most serious problem of theseregional states - and a problem which also affects otherareas - is the territorial problem that all, apart from Belarus,are experiencing. There are unresolved territorial conflictsbetween Azerbaijan and Armenia, Georgia and Moldova, anda potential territorial issue in Ukraineʼs Crimea.3.2 Unresolved ConflictsIn 2006, a study of the role of the region in European securitycame to the following conclusions: The EU membership of Romania and Bulgaria brings the frozen conflicts to the EUʼs very doorstep. …Continued instability in these conflict zones cannot but affect Europe. Should these conflicts erupt to large- scale violence – an eventuality whose likelihood is growing, not receding, Europe will be affected significantly … the EUʼs proximity to the region would require the Union to play a leading role in conflict resolution and peacekeeping. Indeed, this is made all the more pressing by Russiaʼs partial role in the conflicts, making it unviable as a peacekeeper and honest broker. Building stability in this environment is hence an increasingly important priority for the EU. This, in turn, can only be achieved through the resolution of the conflicts of the region.10While the EU was forced to intervene only belatedly in amuch deteriorated security situation in Georgia, the conflictsof Transnistria in Moldova and Mountainous Karabakh in10 Svante E. Cornell et. Al., The Wider Black Sea Region: An Emerging Hub of EuropeanSecurity, Silk Road Paper, Washington DC: Central Asia-Caucasus Institute, November 2006.24
  24. 24. The New Eastern EuropeAzerbaijan remain unresolved, and the Crimean issue inUkraine looms large, especially as the 2017 deadline for theclosure of the Russian naval base at Sevastopol approaches.The bottom line is that the security order establishedfollowing the collapse of the USSR – or rather the lack ofsuch an order – has manifestly failed to resolve theoutstanding security concerns in the region. In fact, withNATO and EU membership for any of the regionʼs states offthe table for the foreseeable future, a deeply troublingsecurity situation has emerged, especially as a result ofRussian ambitions to acquire a zone of exclusive influence,and of its determination to exploit territorial conflicts andseparatism for that purpose.Unfortunately, Europe does not appear to have learnt thelesson of its failure to engage in conflict management andresolution in Georgia. Since 2008, no concerted andpurposeful European efforts have emerged to step up theprocess of conflict resolution in Transnistria and MountainousKarabakh. Indeed, Europe remained a mere spectator duringthe serious crises in Moldovan politics and in Ukraineʼseconomy in 2009. As for Karabakh, Europe hasenthusiastically supported the rapprochement betweenTurkey and Armenia – a laudable process in its own right –but has failed to match this with enthusiasm for resolving thelingering conflict between Armenia and Azerbaijan. This hasbeen the case, moreover, in spite of continuous protestationsfrom Turkey that it would in all likelihood be impossible tobring the rapprochement with Armenia to a conclusionwithout some progress towards a resolution in the Armenian-Azerbaijani conflict. Though everyone realizes theseprocesses are tightly linked, for better or for worse Europehas chosen to ignore this reality. 25
  25. 25. The New Eastern EuropeNevertheless, the Georgian war illustrated that the insecurityof the states of the New Eastern Europe, and in particulartheir unresolved conflicts, have a profound impact onEuropean security and on the EU and NATO. To begin with,any return to violence in Transnistria, or much more likelybetween Armenia and Azerbaijan or Russia and Georgia, willrock the entire foundations of European security, just as the2008 war in Georgia did. Redoubled efforts to manage and, ifpossible, resolve these conflicts would in this regard be muchless costly in both political and economic terms compared tothe resources that would be needed if a flare-up was tomaterialize. Secondly, the internal political and economicinstability of the regional states cannot but affect the EU andNATO. The embedded organized crime in these countries isa problem that deeply affects the EU, irrespective of theSchengen treaty.3.3 Opportunities for Security CooperationIt may seem from the above that the states of this region onlycreate problems for Europe in terms of security. However,they also provide opportunities. To begin with, the states ofthe New Eastern Europe are key transit points for Euro-Atlantic operations in Afghanistan. Several of them havecontributed to peacekeeping operations in Kosovo, Iraq andAfghanistan – contributions that have moved from thesymbolic to the substantial.Georgiaʼs contribution toAfghanistan, 800-strong in 2010, will place it among the tenlargest contingents in stability operations in that country.Ukraine and Georgia also provided some of the largestcontingents to Iraq – 1,650 and 2,000, respectively.Moreover, the contribution of the regional states to Europeʼsenergy security – discussed in the previous section – makesthe region a strategic arena for Europe to enhance its26
  26. 26. The New Eastern Europesecurity in. Put simply, in spite of all their problems, theregional states are gradually becoming providers, and notonly consumers, of security. Their capacity to become netcontributors to Europeʼs security in the future should not beunderestimated.In sum, the EU and NATO have compelling reason to engagethemselves more profoundly in the security of the NewEastern Europe. Ultimately, the region is part of Europegeographically and politically, and that makes its securityproblems the problems of Europe as a whole. Whatʼs more,the region provides important opportunities for Europe toenhance its security in the medium to long term. It is clear,however, that Western governments have not sufficientlyinternalized these realities in their policies.4 Energy Politics4.1 Europe’s Energy Woes and the Role of the New Eastern EuropeOver the past decade, growing attention has being paid toEuropeʼs energy supplies, and particularly to that of naturalgas. This process has been dictated as much by economicsas by politics. The central issue is of an economic nature:Europeʼs growing dependence on imported fossil energy.This is a result of the depletion of Europeʼs own fossil fuels,coupled with the past and projected growth of Europeanenergy consumption. Even in the most optimistic scenarios,improvements in energy efficiency and in the development ofalternative energy sources will not be enough to reduce the 27
  27. 27. The New Eastern Europeprojected consumption of fossil fuels. This ensures Europeʼsgrowing dependence on imported oil, and in particular onnatural gas, a cleaner-burning commodity than oil, which isfound in relative abundance in Europeʼs proximity.In 2003, indigenous European production of natural gasaccounted for the first time for less than half of Europeʼsconsumption of gas; in 2007, of a total consumption of 500billion cubic meters, 300 bcm were imported. In 2030,Europe is expected to import 80 percent of its natural gas,compared to 50% in 2003. This implies a near-exponentialincrease in imports.11 But where will this gas come from? Theonly truly global commodity in the gas market is LiquefiedNatural Gas (LNG). However, LNG will, even in optimisticscenarios, constitute only 15% of world demand for gas by2020.12 Thus, Europe will remain largely dependent on gas-producing areas in its geographical proximity that can delivergas by pipeline. Indeed, some of the worldʼs largest gasreserves are in Europeʼs proximity – the former Soviet Union,Iran, and North Africa together account for over two thirds ofthe worldʼs gas reserves. Their effective transportation toEurope, however, requires functioning infrastructure andentails political complications.While Southern Europe is dependent on gas supplies notfrom Russia but from North African suppliers, the role ofRussian gas in the European energy mix is remarkable: over50 percent of Europeʼs imported gas came from Russia in2006, compared to slightly less than a quarter each for11 EU forecast, EU Energy, issue 86, July 2, 2004. Also Bruce Pannier, “Energy: NabuccoChief Eyes Iranian, Russian Gas Despite U.S. Objections”, RFE/RL, 23 June 2008.12 Linda Cook, ”The Role of LNG in a Global Gas Market”, Oil & Money Conference,London, 21 September 2005. (
  28. 28. The New Eastern EuropeAlgeria and Norway.13 This reality makes the energy situationin the former Soviet Union fundamentally important for thefuture of the European market.Unlike oil, there is no global market for natural gas. Asidefrom small quantities of LNG that can be transported acrossoceans, gas is transported via pipelines from producer toconsumer, generating dependence both for producers andconsumers and making natural gas a strongly politicizedcommodity. If consumer markets are diversified, thisgenerates political leverage for the consumer. However, inthe absence of diversification, leverage is created for theproducer, who can extract political or economic concessionsfrom consumers whose economies are dependent on energysupplies. Russia, Europeʼs main source of gas, has a strongtrack record of using its energy policies for political purposes– purposes that are often diametrically opposed to Westerninterests. Indeed, a 2007 Swedish Defense ResearchAgency study found no less than fifty-five instances ofpolitically motivated Russian manipulations of supply to othercountries - mainly, but not exclusively, to former Soviet orCommunist states.14The New Eastern European states play a key role inEuropean energy security. First, the region includesproducers of energy, primarily Azerbaijan, which is endowedwith rich oil and natural gas reserves. Secondly, the regionconstitutes a transit area for both Russian and Central Asianenergy resources to the EU: Ukraine and Belarus are transitcountries for Russian energy, Georgia and potentially13 EU figures in Energimyndigheten, Europas naturgasberoende: åtgärder för tryggadnaturgasförsörjning Eskilstuna: Energimyndigheten, p. 21.14 Jakob Hedenskog and Robert Larsson, Russian Leverage on the CIS and the BalticStates, Stockholm: Swedish Defense Research Institute, June 2007, 29
  29. 29. The New Eastern EuropeUkraine are transit countries for Azerbaijani energy, and thethree latter are transit countries for Central Asian reserves.It is in this context that a Southern corridor for natural gassupplies to Europe is being developed. The new energy-producing states of the Caspian basin – Azerbaijan,Kazakhstan and Turkmenistan – have all expressed stronginterest in exporting their most valuable resource to Europe.As a result of major recent infrastructural projects,Azerbaijanʼs oil and gas fields are now linked to Turkey,making it possible to export these resources to Europe. TheBaku-Tbilisi-Ceyhan (BTC) oil pipeline laid the ground for theSouth Caucasus energy and transportation corridor, whichalso consists of the South Caucasus gas pipeline (SCP) andthe Baku-Tbilisi-Kars railroad.15 This was a majorachievement for the construction of new supply routes forEuropean energy, but only a first step in the construction of abroader corridor linking the EU to the totality of Caspianproducers. Indeed, this has led to the concept of a SouthernEnergy Corridor being developed, which would link Europewith energy-producing states both in the Caspian region andin the Middle East. The realization of this corridor depends onthe construction of a set of pipeline projects, the most crucialof which is the Nabucco pipeline project, which is intended todeliver Caspian gas to Europe.The construction of the Southern Energy Corridor is oftentermed an anti-Russian project, and phrases such as“bypassing” or “circumventing” Russia are often used.16 Yetthese characterizations implicitly accept a notion that there is15 See S. Frederick Starr and Svante E. Cornell, eds., The Baku-Tbilisi-Ceyhan Pipeline: OilWindow to the West, Washington, DC: Central Asia-Caucasus Institute, 2005.16 Joshua Kucera, “Caspian Basin: Russia And Turkey Raise Obstacles For Us EnergyPolicy”, Eurasianet, 28 January 2009; Bruce Pannier, “Nabucco Pipeline Conference EndsWith EU Support, But No Cash”, RFE/RL, 27 January 2009.30
  30. 30. The New Eastern Europea technical, economic or political justification for relyingentirely on a Russian route for the export of these countriesʼresources. However, there is no such justification. Russianroutes are not technically less challenging or economicallyless costly than direct routes from the Caspian to Europe.Neither are they politically more advantageous. Yet the policydoes contradict the Kremlinʼs stated ambition of seeking amonopoly over the export of energy resources – in particularof natural gas – of the states of the former Soviet Union. Thatmakes the policy anti-monopolistic, but by no means anti-Russian. This fact was best illustrated by the three pipelineprojects supported by the United States in the 1990s for theexport of Caspian resources. Aside from BTC, the U.S.(unsuccessfully) supported a Trans-Caspian pipeline forTurkmenistanʼs gas, as well as (successfully) a purelyRussian export option: the Caspian Pipeline Consortiumproject linking Tengiz in Kazakhstan to Russiaʼs port ofNovorossiysk. Had the policy been anti-Russian, the U.S.would have supported a non-Russian export option forKazakh oil instead.4.2 Russia’s Declining ProductionRussia possesses the worldʼs largest natural gas reserves.However, for both technical and political reasons, Europefaces a growing need to diversify its supplies. More thanreserve statistics, what matters is production figures, which inturn are directly linked to investments in extraction andtransportation infrastructure. It is here, long before anypolitical considerations enter the equation, that there is causefor concern.In spite of its giant reserves, Russia is not in a position tosingle-handedly provide a substantial portion of Europeʼs 31
  31. 31. The New Eastern Europegrowing gas consumption. As former Russian DeputyMinister of Energy Vladimir Milov observed in 2006, Russia“faces an investment crisis, especially in gas,” and has “donenothing” to invest in infrastructure that would enable it toincrease production substantially.17 Unfortunately, thesituation has not changed. Part of the problem lies in themonopolistic position occupied by the Gazprom corporationin Russiaʼs natural gas sector. A notoriously opaque andmismanaged firm, Gazprom is an arm of the Russian staterather than a modern corporation built for profit. Onnumerous occasions, Gazpromʼs decisions have appeared tobe motivated not by efficiency or by profit, but rather by thepolitical considerations of the Kremlin.18 More broadlyspeaking, Gazprom is unable to conduct the type of reformsneeded to maintain its competitiveness, because it performsa political function as much as it does an economic one. AsAnders Åslund has put it,”the problem is that Gazprom is notvery good at producing gas”.19Gazprom has consistently failed to invest in new fieldinfrastructure, relying on large Soviet-era fields for the bulk ofits production. Hence, since 2007, Gazpromʼs output hasactually begun to decline.20 Russiaʼs natural gas productionhas reached a level that cannot grow – let alone generatesubstantial new export capacities – without substantial17 “How Sustainable is Russias Future as an Energy Superpower?”, Summary ofpresentation by Vladimir Milov at Carnegie Endowment for International Peace, 16 March2006. [].18 The most notorious example is the series of intermediary companies that were set up tohandle gas sales to Ukraine. Given that Gazprom-controlled gas was shipped to Ukrainevia Gazprom-owned pipelines, the need for intermediary companies making hundreds ofmillions of dollars yearly made no economic sense. Nevertheless, it provided Moscow withlevers to influence the gas industry in Ukraine.19 Anders Åslund, “Gazprom’s Risky Strategy”, European Energy Review, June 2008.20 Robert E. Ebel, The Geopolitics of Russian Energy: Looking Back, Looking Forward,Washington DC: CSIS, 2009, 33-36; Vladimir Socor, “Gazprom Hit by Gas Shortfall”,Eurasia Daily Monitor, 16 July 2008.32
  32. 32. The New Eastern Europeinvestments amounting to tens of billions of dollars in eitherthe Yamal peninsula or the arctic subsea Shtokman field. Thecurrent political outlook does not bode well for Russiaʼsinvestment climate. As Moscow seeks to develop its fieldsalone or with the use of Western firms as sub-contractorsrather than partners, the development of the countryʼsenormous resources is likely to be marred by long delaysand mismanagement.Even optimistic forecasts predict a growing Russian gasdeficit. The urgency of these figures may have beenalleviated somewhat by temporary decreases in Europeandemand resulting from the global economic downturn, butthat does not change the broader picture. Gazpromʼsleadership has now found that its best strategy is to importCentral Asian gas through the existing Soviet-eratransmission system rather than to invest in its own fields.Indeed, Russiaʼs energy strategy states how long-termavailability of Central Asian energy is essential to “preserveRussiaʼs northern gas fields for the next generation, avoidboosting investment in their development, and decrease thepressure on the markets presenting strategic interest forRussia itself.”21 In other words, Russia has opted to importCentral Asian gas to re-export it to Europe.This presents Europe with a dilemma and a choice. Thedilemma is that Russia – and Gapzrom – is inherently aproblematic source of supply. Indeed, the wisdom of relyingon a company such as Gazprom for the lionʼs share ofEuropeʼs supply of natural gas in the foreseeable future ishighly questionable. The choice, in turn, derives from therealization that Europe will be consuming substantialamounts of Caspian gas – however, it can choose to import21 “Energy Strategy of the Russian Federation for the Period Until 2020,” August 28, 2003, p. 53. 33
  33. 33. The New Eastern Europethis gas through a monopolistic intermediary - Gazprom - orthrough direct agreements with the producers themselvesthrough direct transportation lines. It is now necessary for usto take a closer look at these producers.4.3 The Promise of Caspian Natural Gas SuppliersThe countries of the Caspian sea region provide analternative source of natural gas imports for Europe. Theenergy-producing states of the Caspian basin – Azerbaijan,Kazakhstan and Turkmenistan – have large untappedpotential for production of both oil and natural gas.Azerbaijan is mainly an oil-producing country, and oil from itsAzeri, Chirag and Guneshli fields forms the backbone of thequantities traveling to the West through the BTC pipeline.Azerbaijanʼs reserves are in the region of 7 billion barrels,amounting to the twentieth-largest reserves in the world.22Azerbaijan also possesses a large gas deposit called ShahDeniz, which was discovered in 1999. This was a discoverythat contributed greatly to making the BTC pipeline feasibledue to the economies of scale in building two parallelpipelines, with the South Caucasus gas pipeline extending toErzurum. Azerbaijanʼs gas reserves are currently estimatedat around two trillion cubic meters.23 In addition to this,substantial deposits under the Caspian seabed remainuntouched due to disputes. The Serdar/Kyapaz field,disputed by both Azerbaijan and Turkmenistan, is estimatedto contain 4 billion barrels of oil equivalent (bboe), mainly22 Jonathan Elkind, “Economic Implications of the Baku-Tbilisi-Ceyhan Pipeline”, in S.Frederick Starr and Svante E. Cornell, eds., The Baku-Tbilisi-Ceyhan Pipeline: Oil Windowto the West, Washington: CACI & SRSP, 2005, p. 45.23 Note? Was 1 million, Aliyev and statoil then said 2 sometime in 2008?34
  34. 34. The New Eastern Europeconsisting of natural gas and condensate. TheAraz/Sharq/Alov field, disputed by both Azerbaijan and Iran,is thought to be of comparable size. As a whole, Azerbaijan islikely to develop a production capacity of perhaps 50 bcm inthe medium term. Of these, domestic consumption andGeorgian needs are likely to make up for 10-15 bcm.Available export volumes can therefore be expected to be inthe 30 bcm range.24Kazakhstan is a considerable oil producer, likely to develop aproduction of over two million barrels per day over the nextfew decades. The much-delayed supergiant Kashagan field,as well as other fields such as Tengiz and Karachaganak, alsogenerate substantial amounts of associated gas. Reservesare estimated at 1.8 tcm for land-based fields and 3.3 tcm forseabed fields.25 Kazakhstanʼs main problem is a lack oftransportation infrastructure which would allow it to make useof this associated gas. In fact, the country flares aconsiderable amount of gas that it lacks the infrastructure toexport or consume. Karachaganak gas is sold to Russia, whilepipeline projects connecting Kazakhstan to China have beendeveloped. The Tengiz and Kashagan fields, lying to theextreme west of the country, are nevertheless unlikely to beexported to China. Kazakhstan produced ca 30 bcm in 2007,a figure expected to rise threefold by 2020.26 As domesticconsumption is projected to remain under 20 bcm,Kazakhstan will have considerable export capacities. Althoughdue account should be taken of the likelihood that much of thegas from Kashagan will be re-injected into the oilfield, it is24 Robert Cutler, “Turkey Risks Gas Bypass”, Asia Times, 20 March 2009.25 Amina Jalilova, “Golubaya Mechta dlia Kitaya” [Blue Dream for China], NovoyePokoleniye, February 11, 2005, [] cited in ArielCohen, Kazakhstan: the road to Independence, Washington: Central Asia-CaucasusInstitute & Silk Road Studies Program, 2008.26 “Kazakhstan Gas Production”, APS Review Gas Market Trends, 28 July 2008. 35
  35. 35. The New Eastern Europenevertheless obvious that Kazakhstan will be a substantialproducer of gas consumed in Europe. Its export capacities tothe West in a ten-year period could exceed 30 bcm.Turkmenistan is the gas kingdom of the region. While it wasknown to have large deposits of natural gas, the countryʼserratic late president, Saparmurad Niyazov, refused to allowan independent audit of the reserves until his death in 2006.But in mid-October 2008, the British consultancy companyGaffney, Cline & Associates (GCA) released the first results ofan audit of Turkmenistanʼs gas reserves, which confirmed thatthe South Yoloten-Osman deposits, situated in the south-eastof the country, are alone estimated to contain at least 4 trillioncubic meters of gas but could contain up to 14 trillion cubicmeters. Even the preliminary findings guaranteed more “thansufficient gas to fulfill Turkmenistans existing contractcommitments.”27 It is therefore highly likely that Turkmenistancould retain and even increase exports to Russia, whilesimultaneously meeting commitments with China, Iran, andthe European market. A logical division between fields alonggeographical lines also exists, where Russian and Chineseinvestors appear to compete mainly for fields in EasternTurkmenistan, and Europeʼs interest primarily revolvesaround onshore and offshore fields in Turkmenistanʼs west,for example Serdar/Kyapaz. Turkmenistan committed in 2008to selling 10bcm of gas to Europe, in addition to possible newfields.28 Turkmenistan alone produced 90 bcm per year in thelate Soviet era. The opening up of the country to the worldsince 2006 has begun to bring in foreign investors that couldhelp Turkmenistan return to, and exceed, Soviet-era27 Asia Times, October 17, 2008.28 Renata Goldirova, ”Turkmenistan to Cut EU Dependence on Russian Gas”, EU Observer,14 April 2008.36
  36. 36. The New Eastern Europeproduction levels.29 With a small population of five million,Turkmenistanʼs domestic consumption is not an obstacle toexport. So far, however, China has moved much moreaggressively than Europe to emerge as the most likelybenefactor of Turkmen gas reserves.The energy producers of the Caspian region therefore have asubstantial gas export potential. Indeed, with the rightinvestments and European political support, Caspian gasproduced for European markets could easily exceed 100bcm. That is not far from Gazpromʼs entire current exports toEurope, at about 140 bcm. Meanwhile, their domesticmarkets are considerably smaller, whereas Russiaʼs exportcapacity stands to be affected significantly by ups or downsin domestic consumption. But how much of the natural gasavailable in the three Caspian states will flow directly toEurope? This clearly depends on how much is appropriatedby China and Russia, which in turn depends on how seriousEurope will be in moving in to compete for these reserves.4.4 The Caspian corridor: Europe’s ChoiceThe gas-producing states of the Caspian have long madetheir interest in western export routes clear. Azerbaijan hasbeen the most effective in acting upon this commitment,taking significant political risk to contribute to the building ofthe twin export pipelines. Kazakhstan and Turkmenistanhave done the same given their more significant constraints.This in itself is remarkable, given the increasing political riskthese governments are taking to do so. The Russian29 See Jan Sir and Slavomir Horak, Dismantling Totalitarianism? Turkmenistan underBerdimuhamedow, Washington/Stockholm: Central Asia Caucasus Institute & Silk RoadStudies Program Joint Center Silk Road Paper, March 2009. 37
  37. 37. The New Eastern Europegovernment has made its displeasure about such exportroutes increasingly obvious. Plans for direct pipelines linkingthe Caspian to Europe have thus developed over the pastdecade, chief among which is the Nabucco pipeline, whichwould connect the Austrian hub of Baumgarten to EasternTurkey, where it could be fed with both Caspian and MiddleEastern gas. But as discussed below, European support forthe Nabucco project has, unfortunately, been lackluster.5 Russia’s ResurgenceRussiaʼs resurgence on the international scene has had astrong focus on re-establishing Moscowʼs primary influencein the former Soviet sphere. Since September 1, 2008 –significantly, just after invading Georgia– Moscow hasexplicitly demanded a zone of ʻprivileged interestsʼ there.Policies to that effect have, however, existed for much longer.After all, it was Boris Yeltsin who warned in 1994 of a ʻcoldpeaceʼ should, the Clinton administration keep pushing forthe expansion of NATO to East-Central Europe. In the NewEastern Europe, Russia has consistently viewed Americanand NATO influence with great suspicion, while it initially didnot appear as concerned with the EUʼs presence in thesecountries. Nevertheless, this gradually changed duringVladimir Putinʼs second presidential term. Moscow has nowgone so far as to term the EU Eastern Partnership anattempt at creating a ʻsphere of influenceʼ in its ownbackyard.30 Ahto Lobjakas, “Eastern Partnership - The EUs Accidental Sphere Of Influence”,30RFE/RL, 7 May 2009.38
  38. 38. The New Eastern EuropeIn practice, Russian policies during the Putin era have comeincreasingly into open conflict with fundamental Europeaninterests in the region, whether it be in terms of governance,security, or energy. In fact, these three categories arestrongly intertwined – from Moscowʼs zero-sum perspective,European influence in the field of governance, energy andsecurity in the region all contribute towards denying Russiaʼsdomination over the region, something that it in turnperceives as a threat to its own security.5.1 GovernanceThe driving force behind Russiaʼs antagonistic policiestowards the EU in the New Eastern Europe is as much basedon ideology as it is on realpolitik. This aspect is central, butoften overlooked. In fact, Russian foreign policy has becomeprogressively more antagonistic with its increasinglyauthoritarian domestic trajectory. This is no merecoincidence. Indeed, the consolidation in the Kremlin of anauthoritarian regime asserting control over Russiaʼseconomic wealth led Russian policies to voice increasingobjections to Western support for democratization, either inRussia itself or in its neighborhood. Moscow states openlythat western-style democracy is not suitable for Russia orother former Soviet states, and that its own authoritariansystem – described under the euphemisms ʻsovereigndemocracyʼ and ʻvertical powerʼ – is the most appropriatemodel for political development.Russian policies did not initially target the EU directly, as theKremlin did not view it as a threat to its own system ofgovernment or to its interests. That changed, however, withthe ʻcolor revolutionsʼ in Georgia and Ukraine, whichinadvertently added an ideological dimension to the Russian 39
  39. 39. The New Eastern Europechallenge to European interests in the region. This wasbased on considerations of both regime security andgeopolitics. While Moscow saw the emergence of pro-Western and democratic governments in its neighborhood asa danger to its regional influence, it also viewed the processof diffusion or contagion of democratic upheavals across thepost-Soviet space with great alarm, fearing that the trendcould spread to Russia and endanger its own position inpower. The EU, by virtue of its support for democraticgovernment, came to be seen increasingly as an adversaryby the Kremlin. In particular, the Ukrainian ʻOrangeRevolutionʼ marked a turning point for two reasons: firstly,because the Orange Revolution made the Georgianrevolution a year earlier appear part of a broader trend ratherthan an isolated event; and secondly, because the EUbecame more deeply involved in the crisis than Moscow hadexpected, openly expressing its disagreement on the issueand having a decisive impact on the outcome of the crisis.As political scientist Thomas Ambrosio has observed,Moscow formulated a five-pronged strategy to counteract thespread of democracy in its neighborhood. This involved aplan to “insulate, redefine, bolster, subvert and coordinate” itsefforts31 The term ʻinsulateʼ refers to the domestic dimension,and to the Kremlinʼs attempt to prevent f a democraticupheaval at home through a variety of mainly repressivemeasures. ʻRedefineʼ refers to its rhetorical attempts todefend its own system by inventing terminology such asʻsovereign democracyʼ, and by questioning the Westʼsdemocratic credentials. The next two terms, ʻbolsterʼ andʻsubvertʼ, refer to Russian policy in the New Eastern Europe:ʻBolster,ʼ according to Ambrosio, refers to the Kremlinʼs31 Thomas Ambrosio, Authoritarian Backlash: Russian Resistance to Democratization in theFormer Soviet Union, Burlington, VT: Ashgate, 2009.40
  40. 40. The New Eastern Europeattempts to support authoritarian governments in countriessuch as Belarus,while ʻsubvertʼ refers to the Kremlinʼssystematic attempts to undermine democracy and security inUkraine and Georgia, in order to discredit the democraticexperiment of these countries to their own citizens and theirneighbours. Finally, the term ʻcoordinateʼ refers to theKremlinʼs efforts to synchronize policies with other non-democratic regimes, in order to counterbalance the Westʼssupport for democracy.Against this background, Russian efforts to undermine thesecurity and statehood of democratizing countries in theregion, to bolster authoritarian regimes, and to continue todominate energy transport routes should all be seen asinterrelated, and closely linked to the emphasis placed byRussia on preventing the emergence of democratic andsovereign states willing to integrate with the rest of Europeon its borders.5.2 SecurityMoscowʼs policy in the New Eastern Europe is based on theassumption that the ability to influence, and ideally control,the states of the former Soviet Union is vital to Russiaʼssecurity interests. Thus, Russia considers the region a “zoneof special interest”, in which it claims a right to directlyinfluence domestic developments and foreign policyformulation. The right to exert such influence is viewed asexclusively Russian, and it therefore considers theinvolvement of the U.S., and to a lesser extent the EU, aswell as independent and Western-oriented foreign policies onthe part of the regional states, as directly contradictingRussian interests. Efforts to extend the influence of NATO inthe region, as well as the “color revolutions” in Georgia and 41
  41. 41. The New Eastern EuropeUkraine, are viewed in Moscow as attempts on the part of theU.S. to gain a foothold in Russiaʼs own backyard, and toreduce Russiaʼs influence over its neighbours, and thereforeas threats to Russian security interests. This perception hasonly grown stronger over the past decade, and now seems tobe somewhat of a general belief in Russia, in spite of well-meaning and genuine Western beliefs that Western supportfor democratic and stable societies is in the long term inRussiaʼs interest as well. This may be true in objective terms,but to the current Russian leadership, such states are viewedas threats to a view of national security that is increasinglyindistinguishable from regime security.In order to maintain its influence over its “near abroad”,Russia makes use of a range of mechanisms inherited fromthe Soviet Union to reward positive behavior or punishundesirable actions on the part of neighbouring states.However, Moscow makes much more use of sticks thancarrots. While rewards include privileged export deals orsubsidized energy prices, punishments are many. Theyinclude economic sanctions and embargos, manipulation ofthe price and supply of energy, intervention in domesticpolitics and unresolved conflicts, subversive activities,military provocations, and ultimately, as in Georgia, the useof full-scale military force.32In relation to unresolved conflicts, Russia long pursued aninterventionist policy that accelerated rapidly from 2005onward. This included illegally granting Russian citizenship toinhabitants of Abkhazia and South Ossetia, as well asTransnistria and Crimea. This served to legitimize Russian32 See Hedenskog and Larsson, Russian Leverage on the CIS and the Baltic States, for acomprehensive analysis of Russia’s application of political levers in its near abroad.42
  42. 42. The New Eastern Europeinterests and engagement in the conflict regions. In the warwith Georgia, defense of Russian ʻcitizensʼ in South Ossetiaserved as Moscowʼs main pretext for invasion. Militarypresence in neighbouring states, such as military bases inArmenia, the Russian Black Sea Fleet in Sevastopol,ʻpeacekeepingʼ contingents in Transnistria and formerly inGeorgia, which have now been turned into permanentmilitary bases, are also used in a similarly strategic way.A key factor underpinning Russiaʼs utilization of unresolvedconflicts as leverage has been the control it has had overthe negotiation processes in all conflicts – in the cases ofAbkhazia, South Ossetia and Transnistria. This hasprevented any form of internationalization of theseprocesses. An additional and often overlooked instrumenthas been the increasingly direct Russian control overgoverning structures in the de facto governments ofsecessionist entities, especially in South Ossetia, Abkhaziaand Transnistria. Large parts of these governments from2005 onward consisted of Russian security servicespersonnel, directly seconded from Moscow in violation ofinternational law. These territories, far from operatingindependently, effectively became Russian vassals.Russiaʼs policies within the former Soviet space have beenboth destabilizing and counterproductive. Moscow may havesuccessfully managed to reinforce its ties with states withwhich it already had a positive relationship, such as Armeniaand Tajikistan, and to coerce Moldova. Yet Russian bullyinghas alienated even its erstwhile closest ally, Belarus.Moreover, Moscow has failed to reverse the orientation awayfrom Russia of some states in its sphere of influence,especially Georgia and Ukraine, but also Azerbaijan. In fact,the repeated application of negative pressure by Russia hasprovided an even firmer reason for most regional 43
  43. 43. The New Eastern Europegovernments to believe that their national security concernsare best protected through orientation away from Russia andtoward Western integration. In sum, the current Russianleadership appears able to exert influence only throughcoercion. This is hardly a reliable strategy in the long term.5.3 EnergyEnergy has been the Kremlinʼs main tool in its plan to regainRussiaʼs position as a great power. Dominance over theEuropean gas market has been part and parcel of Moscowʼseffort to improve its negotiating position vis-à-vis the EU. Thisambition has taken numerous shapes. One example hasbeen Moscowʼs attempts to coordinate policy with other gasproducers, leading to fears of the creation of a ʻGas OPECʼ.33Moscow has even sought to position itself in other majorsuppliers to Europe, such as Algeria, to gain leverage.Another example is Gazpromʼs efforts to acquire downstreamassets in Europe, while curtailing Europeʼs abilities to investupstream in Russian production.34Moscowʼs overarching goal has been to dominate the supplyof gas to Europe, and gaining control of supplies comingfrom the former Soviet Unionʼs producers has been a keyelement of this. This policy has been partly dictated bynecessity, as Gazpromʼs own shortfall in production requiresit to control Central Asian gas to fulfill its supply33 Vladimir Socor, “Gazprom, the Prospects of a Gas Cartel, and Europe’s Energy Security”,in Svante E. Cornell and Niklas Nilsson, eds., Europe’s Energy Security: Gazprom’sDominance and Caspian Supply Alternatives, Washington and Stockholm: Central Asia-Caucasus Institute & Silk Road Studies Program, 2007, pp. 71-84; Ariel Cohen, “Gas OPEC:A Stealthy Cartel Emerges”, Heritage Foundation Webmemo no. 1423, 12 April 2007;.34 Igor Torbakov, “Europe Rejects Gazprom’s Ultimatum”, Eurasia Daily Monitor,20 April 2006.44
  44. 44. The New Eastern Europerequirements. However, the main motive is political. On theone hand, Moscow seeks to ensure its position vis-à-visEurope, which would be weakened if Caspian supplierscould export gas independently to Europe. On the other,Moscow knows that independent export capacities wouldstrengthen the political independence of these states,providing an additional impetus to its determination todominate export routes.Moscow has been pursuing this goal through a combinationof tactics. Firstly, it has sought to gobble up the Caspian gasresources by mixing carrots and sticks: by promisingincreasingly high prices to Azerbaijan, Kazakhstan andTurkmenistan for their gas, while also seeking to intimidatethese countries into withdrawing from western export routes.Secondly, Gazprom and the Kremlin have sought to spreaddisinformation in Europe regarding the gas reserves andproduction capacities of the Caspian producers, in order toconvince potential consumers that there is not enough gas inthe region. Thirdly, and most importantly, the Kremlin hassought aggressively to build pipelines that would directlyconnect Russia to friendly EU countries, bypassing transitcountries in the New Eastern Europe as well as the Balticstates and Poland, and pre-empting direct pipeline projectsfrom the Caspian such as the Nabucco project.Two separate projects have played key roles in this regard:the “Nord Stream” and “South Stream” projects. Nord Streamis designed to link Russiaʼs Baltic shoreline near St.Petersburg with the German coast, while the South Streamproject aspires to connect Russiaʼs Black Sea coast withBulgaria. There are two problems with these projects however.The first is their exorbitant cost. Even official Russianestimates put the price tag for South Stream at $20 billion, 45
  45. 45. The New Eastern Europeand for Nord Stream at $10 billion.35 In both cases, the pricetags are several times higher than the cost for land-basedpipelines through Eastern Europe. The second problem is thatthere appears to be no designated fields to supply gas to thepipelines. The designated field for Nord Stream, Yuzhno-Russkoye, is not sufficient to fill even one of the projectʼs twoscheduled parallel pipes, and the potential resources of theShtokman field could only feed the pipeline a decade fromnow at the earliest.36 Similarly for South Stream, there is nodedicated field. The project would only make financial sense iflarge volumes of gas presently transited from Russia throughUkraine to Europe would be diverted, and if additional CentralAsian gas supplies would be included.As such, both projects serve to increase Moscowʼs leverageover production and transit countries in the New EasternEurope and Central Asia. Here the term “bypass” isappropriate, since Moscow and its European partners –chiefly Germany and Italy – are going out of their way andspending billions of additional dollars to avoid these states.For example, South Streamʼs costs are about 50 percenthigher than the EU-supported Nabucco project, estimated tocost $12 billion. Moscowʼs policies aggressively seek toprevent the stated objective of the EUʼs energy policy frombeing realised: diversification of supply.37 This fulfills anumber of functions, not least of which is preventing the EUfrom gaining influence in the region, something whichMoscow considers to be against its best interests.35 Vladimir Socor, “Kremlin Revisits Cost for Expensive South Stream Project”, Eurasia DailyMonitor, 30 July 2008: “Russia Says It May Abandon Nord Stream Pipeline”, Eurasia DailyMonitor, 20 November 2008.36 Vladimir Socor, “Nord Stream Pipeline Still Short of Resources”, Eurasia Daily Monitor, 12November 2009.37 Robert Larsson, Nord Stream, Sweden, and Baltic Sea Security, Stockholm: SwedishDefense Research Institute, March 2007. (
  46. 46. The New Eastern Europe6 America’s Retreat?For most of the post-cold war era, Europe and America havepursued similar, complementary policies in the New EasternEurope. The leading role was invariably played by the UnitedStates, given its greater ability to act strategically, its strongercohesion, and, compared to a Europe that is only belatedlydeveloping an ability to act cohesively on foreign and securitypolicy, its considerable resources.Indeed, looking back at the major Western achievements inthe region, most have been driven by Washington. This wascertainly the case for the Caucasian energy corridor, as theClinton administration played a decisive role in bringing theBTC project to fruition. Likewise, the development of securityrelations between the West and the region in the 2000s wasvery much a result of the American interest in the regionfollowing September 11, 2001. Only with the events of 2004-2005 in the Ukraine, and later the launch of the EasternPartnership, has Europe assumed a greater role in theregion. This took place at a time of gradual decrease inAmerican attention to the region. While the first two yearsafter September 11 seemed to lead to greater Americanengagement, the Iraq war changed that. The occupation ofIraq and the unforeseen difficulties the U.S. experiencedthere, in particular until 2007, diverted huge amounts ofresources and attention away from other areas of the world,not least Eastern Europe. When the situation in Iraqstabilized, the situation in Afghanistan worsened, and thecontroversy over Iranʼs nuclear program heated up. The U.S.election cycle also kicked in. The Bush administrationʼsfailure to either prevent the Russian invasion of Georgia or torespond adequately once it happened exemplifies this trend.Indeed, it was the EU, under the French presidency, that 47
  47. 47. The New Eastern Europestepped up to the challenge of negotiating a cease-fireagreement. The agreement was deeply flawed, but the U.S.,significantly, was absent from it.Since the advent of the Obama administration, there is nosign that renewed interest in Eastern Europe will beforthcoming. Indeed, several factors seem to point in thisdirection. One is the sense in the U.S. that Europe is anissue that was handled during the 1990s, and which is nowmore or less resolved. A second is the renewed priority inWashington to “reset” relations with Russia, which hasensured that the U.S. does not aggressively pursue itsinterests in the New Eastern Europe. The Obamaadministration did act in the summer of 2009 to warnMoscow against new provocations with Georgia, indicatingthat Americaʼs low profile in the region would depend onRussia refraining from aggressive moves of its own. It isnevertheless clear that the priority accorded to the region inWashington is comparably low. This in turn may also berelated to another important factor: the elite in the U.S.,including the President himself, has increasingly fewerconnections with Europe and cannot be assumed to take aninterest in European affairs. As Timothy Garton Ash hasobserved, not only is Obama young enough not to have beenshaped by the Cold War (in which Europe was the majorfocal point), he is also “the personification of a trend thatanalysts have identified in the abstract: a demographic shift,since the mid-1960s, toward Americans of non-Europeanorigin, weakening cultural and historical transatlantic ties.” 38As Ash concludes, building a strong and united Europe issimply not among Americaʼs priorities. Basically, Europe isincreasingly on its own. Timothy Garton Ash, “The Most European of U.S. Presidents is also the Least”, Globe and38Mail, 7 October 2009.48
  48. 48. The New Eastern EuropeObamaʼs handling of the missile defense issue in East-Central Europe is symptomatic of this new reality. To be fair, itshould be said that the Obama administration had been madea hostage to the mistakes of its predecessor and its westernEuropean allies. The Bush administrations error was to seekto kill two birds with one stone: to build up defenses against afuture Iranian missile threat, while simultaneously soothingthe growing security concerns of Central and EasternEuropean states. The problem was that these securityconcerns had to do with Russia and not with Iranian missiles,something the Bush administration knew full well but neveropenly admitted. However, the Obama administration is notwithout fault. In the summer of 2009, two dozen leadingpoliticians and thinkers from the region sent Obama an openletter, stressing their concerns about the diminished Americancommitment to Eastern Europe.39 Had the administrationtaken these concerns seriously, it would have acted in a waythat calmed rather than exacerbated the regions growingsense of insecurity. But it chose not to do so, instead allowingconcerns over its allegiances to mount.This does not mean that America will be irrelevant in the NewEastern Europe. It simply means that Europe can no longercount on America to take a leading role in realizing policyobjectives that Brussels and Washington share; it may findthat it will only be able to draw America constructively into theaffairs of the region by getting its act together and steppingup to the challenge of formulating and implementing policiesto advance its interests in the region.39 See “An Open Letter to the Obama Administration from Central and Eastern Europe”,Gazeta Wyborcza, 15 July 2009, by Valdas Adamkus, Martin Butora, Emil Constantinescu,Pavol Demes, Lubos Dobrovsky, Matyas Eorsi, Istvan Gyarmati, Vaclav Havel, RastislavKacer, Sandra Kalniete, Karel Schwarzenberg, Michal Kovac, Ivan Krastev, AlexanderKwasniewski, Mart Laar, Kadri Liik, Janos Martonyi, Janusz Onyszkiewicz, Adam Rotfeld,Vaira Vike-Freiberga, Alexandr Vondra, and Lech Walesa. 49
  49. 49. The New Eastern Europe7 The EU’s ChallengeIn spite of the EUʼs obvious interests in the New EasternEurope, the EU has yet to develop appropriate tools tofurther its interests and to exert a positive influence in theregion. This reality stands in stark contrast to the EUʼspotential influence, given its political and economicsignificance to the regionʼs states and its attraction to theirpopulations. It also contrasts with the influence the EUwielded in East-Central Europe in the 1990s. In fact, it isdifficult to escape the conclusion that the EU is far fromreaching its objectives in its most immediate neighbourhood.That is not to say that the EU has remained passive. In fact,the EU has launched a number of initiatives and instrumentsto develop a presence in the New Eastern Europe. TheEuropean Neighborhood Policy is the most prominentexample of this. Launched in 2003, the initiative provided aninstitutionalized structure for the EUʼs interaction with itseastern and southern neighbours. Nevertheless, the EUʼsengagement with the region remained half-hearted. While theWider Europe initiative that preceded the ENP included overa dozen states in the Mediterranean, it only included threestates in the eastern neighborhood: Belarus, Moldova andUkraine. Although the three South Caucasian states – unlikeany Mediterranean partners – were already members of theCouncil of Europe, they were left out of the initiative, only tobe included in 2004. The EU also created the office ofSpecial Representatives, including one to the SouthCaucasus and one to Moldova. However, the mandate andstaffing of these officials has remained relatively limited. InMoldova, the EU did succeed in establishing a BorderAssistance Mission on the border between Ukraine andTransnistria, with substantial positive consequences.50
  50. 50. The New Eastern EuropeYet when the EU worked to develop the ENP in 2007, itspolicies failed to consider the importance of a balancebetween the southern and eastern neighbours. Instead, theEU institutionalized the southern dimension first by upgradingthe Barcelona Process in the creation of the Union for theMediterranean in July 2008. At that time, no similar structurewas considered for the eastern neighbours. Only in spring2008 did Poland and Sweden launch the idea of an EasternPartnership initiative, which was not embraced by themajority of members until the Russian invasion of Georgiaillustrated the vacuum in the New Eastern Europe. Even thenit remained underfunded, being granted a budget of only€600 million for the first three years, and it is unclear howmuch of that was new funds compared to already committedmonies.In any case, the EUʼs efforts have so far failed to keep pacewith the rapid transformation of its eastern neighbourhood.The main sins are those of omission: the EU has failed totake into consideration the cost of inaction in the region.Especially at a time when Russia has reasserted itselfforcefully with profound consequences for the New EasternEurope, the EU has been unable to realize its potential. Onereason, clearly, lies in the general difficulties surrounding thebuilding of the Common Foreign and Security Policy.Nevertheless, that does not explain the dwindling attentionbeing paid to the eastern neighbours compared toMediterranean or other external policy issues. Instead, thereasons appear to lie in internal divisions within the EU onthe very desirability and contents of policies toward theEastern neighbours. Whereas there are in principle noopponents to greater engagement with the south, anyeastern initiatives have met with resistance from somemembers, primarily as a result of concerns relating to Russia. 51
  51. 51. The New Eastern EuropeYet it is clear that deference to Russia is not a replacementfor a policy.French and German policies, in particular, have causedalarm. In the French case, the reticence appears to bemainly a result of concerns that the Eastern Partnershipwould deflect attention from the French priority, the Union forthe Mediterranean. Franceʼs business deals with Moscow,especially the controversial sale of the Mistral assault shipsto Russia, nevertheless indicate that other factors may be atplay. German policies are even more worrisome, becausethey appear to be the result of the increasingly closerelations between Berlin and Moscow. Until late 2009, thedominance over German foreign policy by the German SocialDemocratic Party was a key element of the problem. GerhardSchröder, Germanys former Chancellor turned Gazpromexecutive, epitomizes the character of the SPDʼs relationshipto Moscow. Although Schröder left office in 2005 after anelectoral defeat and immediately took up a job withGazpromʼs Nord Stream consortium, his loyal deputy, Frank-Walter Steinmeier, remained at the helm of German foreignpolicy until 2009. And during this period, on issue after issue,Berlins policies aligned more closely with Moscow than withits NATO and EU allies. To take just one example, in March2009 Berlin vetoed the allocation of EU funds to the Nabuccopipeline project, the major prospective alternative supplier ofnatural gas to Europe not controlled by Russia. Germanysmove paid no attention to the projects status as an officialpriority of the EU Commission, and only Romanias threat toveto the entire EU funding package restored funds to theNabucco project. Germany also led opposition in NATO togranting even an action plan for Georgian and Ukrainianmembership, and spearheaded Europes meek reaction toRussias invasion of Georgia. It remains to be seen whether52
  52. 52. The New Eastern Europethe new right-of-center coalition in Germany will introduceany changes in German foreign policy.The Lisbon treaty, ratified in 2009, will only generate verygradual changes to the mode of operation of the EuropeanUnion. Moreover, the appointments of unknown politicians tothe two new top jobs in the EU reinforced the notion thatmember states will only delegate influence over EU foreignand security policy gradually and reluctantly. Major changesin the EUʼs internal mechanisms and how they relate to theEastern neighborhood are therefore unlikely.But the Eastern Partnership shows that even when memberstates disagree on Russian policy, they can launch positiveand potentially transformative instruments in what the EUdefines as its common neighbourhood with Russia. Theproblem, of course, is that so far the Eastern Partnershiplacks two aspects that made previous EU programstransformative in East-Central Europe: the financial strengthto have a truly transformative role, and the carrot ofmembership to speed up reluctant reform. Indeed, to take theexample of deep free trade agreements, states like Georgiaand Ukraine are in a bind. If they carry out the necessaryreforms, they risk losing their attractiveness to foreigninvestment to liberal, less regulated economies. However,they do not know for sure what positive implications for theirEuropean integration, in terms of economics and security, willflow from completing these reforms. In an environment wherepro-European and democratic policies have a price tagattached to them, the question is whether or not theincentives will be enough to push the states of the NewEastern Europe in the right direction. 53