UPF forum "Practical Steps towards Eurasian-European Cooperation & Mutual Prosperity", Estonia, 2013-12-14

1. The Future of EU-Russia
Relations

2. Russia’s ‘Eternal Questions’


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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 postSoviet space and at what price?

3. 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

4. The Partnership of Modernization (PoM)
Main goal and objectives of the Partnership
“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”
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
Russian Federation






standard alignment (economy,
bureaucracy, policy etc.)
develop internal sectors
increase commitment in
international institutions
increase trade
attract western investments
improve commitment with border
countries

5. Implementation of the PoM
Possibilities of implementation in the four spheres
Technology









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.
Policy and
governance
Economy









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)
Research and
education





high level research
centers
new modern
universities in
strategic areas
cooperation with EU
universities
shared research
projects with EU
attract EU experts

6. 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)


7. The structural impediment

No mega-incentive of Russian membership of the EU



EU political machinery not suited for dealing with nonacceding “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?

8. Modern circumstances



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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

9. 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
9

10. Commodity trade
Optimistic scenario:
EU + Eurasian
Union
Free trade
agreement after
Russian
adaptation to
WTO’s accession
Для правки структуры
Pessimistic scenario:
щелкните мышью
EU’s expansion in
− Второй уровень
Ukraine and
структуры
Belarus


Третий уровень
структуры
Trade wars between
− Четвёртый
Russia and other
уровень
European countries
структуры

Пятый
10
уровень

11. 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
Для правки структуры
щелкните мышью
Pessimistic scenario:
− Второй уровень
Only market-seeking and
структуры
resource-seeking EU’s direct
investments in Russia

Третий уровень
структуры
Investment protectionism
− Четвёртый
against Russian high-tech
уровень
MNEs in the EU
структуры

Пятый
11
уровень

12. Direct investment, stock,
2012 mln USD
Russia
1989
123
17023
France
2152
3724
China
769
Source: Bank of Russia, 2013. China Statistical Yearbook 2013.
12

13. Current Russia-EU energy ties
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%)
E.ON Ruhrgas (15.5%)
N. V. Nederlandse Gasunie (9%)
GDF Suez (9%)
Eni (20%)
Wintershall (15%)
EdF (15%)
*interest in the offshore section
Significant investment cooperation in the energy field
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
13

14. 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
Для правки структуры
Pessimistic scenario:
щелкните мышью
Key challenges for
cooperation will weigh
− Второй уровень
down all opportunities
структуры
Different goals for the
Третий уровень lead
energy markets will
to extreme
структурыpoliticization
of energy issues by both
− Четвёртый
sides

уровень
The lack of legal basis for
структуры
Russian long-term

Пятый
investment projects
14
уровень

15. Humanitarian contacts
Для правки структуры
Pessimistic scenario:
щелкните мышью

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
Visa regime against
− Второй уровень
Russia and the growth
структуры
of xenophobia in the EU

Третий уровень
структуры
Significant Четвёртый the
− decrease of
EU’s global
уровень
competitiveness; Crisis
структуры
of multiculturalism

Пятый
15
уровень

16. 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).

17. Threats
(what can ruin further cooperation)

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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

18. Ways to future

EU’s view
Basis 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

19. Ways to future

Creation of Alliance of Europe in order to
oppose 2 existing poles:
Ukraine
USA
=
Russia
=
Alliance of
Europe
Turkey
Kazakhstan
China

20. Russian scenarios

R1: Authoritarian modernization


R2: Liberal modernization


Model: South Korea in the 1960s-1980s
Model: East Central Europe in the 1990s
R3: Bureaucratic capitalism

Model: Mexico, Indonesia

21. EU scenarios

E1: Global actor


E2: Common Market Plus

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Political Union (French concept)
Economic Union Plus (British concept)
E3: Fortress Europe

Isolationist view

22. EU-Russia scenario matrix
Russia
Liberal
Modernization
Authoritarian
Modernization
Bureaucratic
Capitalism
Global Actor
Partnership
Zastoi
Zastoi
Common
Market +
Partnership
Zastoi
Zastoi
Fortress
Europe
Cold Peace
Cold Peace
Cold Peace
Europe

23. Facilitating EU-Russia
Partnership

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A liberal modernization scenario in Russia
A global vision for the EU
A special role for the bilateral relations

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Traditional partnerships (Germany, France)
Improving ties with the Baltic States
Externalities to the EU-Russia relations

A drop in the oil prices?

24. Negative trends prevail?

Perpetuation of the current system in Russia

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This system is tolerated by the West, due to


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
Reproduced in the 2011-12 election cycle
Russia’s territory / position/ geopolitics of size
Oil/resources / geopolitics of energy
Security/ geopolitics of terrorism
Uncertainty in Europe


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Euro-pessimism, future of enlargement uncertain
Russia not on top of the priority list
No instruments, no leverage, no cohesion in EU’s Russiapolicy

25. Thank You for Attention!