Written by Dmitry Yevstafiev; Originally appeared at Eurasia.expert; Translated by AlexD exclusively for SouthFront
Russia’s economic growth after the crisis forced many countries thinking that Moscow will not be able to do without enormous infusion of foreign capital, to rethink their position. In the complicated relations between the EU with the US and with not the fastest pace of rapprochement with China the optimal decision for the European Union is the development of relations with Russia, but political factors complicate the implementation of this course. The post-Soviet republics of Eurasia, working with an eye to the West, are not in a hurry to increase the pace with the Russian Federation. Will Moscow grow tired of “Eurasian integration into one direction”?
Noticeable changes are occurring in the West’s representative’s estimation of relations with Russia. More and more representative of Western, primarily, European elite advocate for the “normalization” of relations with Russia and a gradual lifting of sanctions from our country. Lately Angela Merkel and Emmanuel Macron as well as other notable European politicians spoke in this vein. Thus, the president of Germany Frank-Walter Steinmeier offered to start a gradual change of sanctions against Russia in case of the realisation of the proposal of deploying peacekeepers in the Donbas.
Unexpected Economic Growth
Western leaders continue to accuse Russia in fomenting political tension. But these statements today reflect more the desire to ease the conditions of cooperation in economic matters, putting aside the political differences. The most far-sighted representatives of the Western political and economic elites began a more sober assessment of the prospects of economic and political developments with Russia.
Of course the economic growth in Russia is in its early phase and still fragile, dependent on the cycles of government orders and the consequences of sub-contracts for medium-sized businesses. But the growth is nevertheless a fact: one can argue about its pace but not about the fact itself. Russia, nevertheless, managed to avoid the significant negative social consequences of the economic downturn. In fact, Moscow did not give in to any concessions in the dialogue with the West, has strengthened its international image as an independent country, and most importantly, was able to demonstrate a higher level of investment attractiveness. And not only for “risky” investors, in contrast to the summer of 2013.
Of course in the Russian economy there are many problems, such as the potential instability in the financial sector, but it is clear that the worst-case scenarios discussed in 2014-2015, Russia managed to avoid them.
The question is what structure will the economic growth have in Russia for the period after 2018, and how this structure will affect Russia’s external economic relations. Although it is already clear that Russia’s foreign “freedom of maneuvers” will be significantly bigger than in 2013. And for Moscow’s partners, this is a serious challenge.
Many in the West were confident that they would have the deal at least with an economically weakened Russia, and at most, with Russia in which the process of Confederation was restarted. So Moscow’s ongoing steps of dismantling of “enclave capitalism” in some national republics of Russia have a long-term political significance.
Post-crisis Russia saw a country desperately in need of foreign capital inflows, and not only direct investments but also working capital used for the preservation of the financial stability. That is a country ready to go to unprecedented concessions to its partners that this capital will provide. The USA and the West in general were not the only ones to act to this logic, but also these countries that at the political level, proclaimed sympathies to Moscow, including in the East.
The European Union: “Plan B” for Russia
Now in front of Moscow’s partners stands the question of working out a “Plan B”. This is not a trivial matter, considering the depth of the distortion of reality in some Western politicians. The latter that can be appreciated, for example, after reading the article of the Deputy of the Bundestag from the Green Party, Marieluise Beck in the German newspaper Nue Zurcher Zeitung, in which she plans to fight “Russian aggression”, opening the eyes of Russian society to the “prosperity of the West” through the introduction of a visa-free regime between Russia and the EU.
Overall, however, in the EU they are beginning to understand the long term of the current trends (which is, for example, the gradual increase of growth forecasts of the Russian economy). Although the case has not yet reached the new level of awareness of the quality of this growth as a result of the reliance on the real sector and the domestic resources for investment and not external lending.
The strongest opinions about Russia’s withdrawal from the crisis and the need to find a new modus operandi with it come from Germany. Although it is this country that was the engine behind the anti-Russian sanctions in the EU and most deeply came in the anti-Russian policies and propaganda. Probably the German elites fear the “Polonization” of German policy towards Russia: uncontrolled destruction of economic ties with Russia under the influence of propaganda.
In terms of actual ideological, and in the long-term economic war with the United States and the slowdown of closer relations with China and Russia, at least in the short term becomes a real priority for the EU.
At a minimum it is essential that Europe retain an economic base for relations with Russia and the failure of the Moscow administrative measures to limit the presence of German capital in Russia (a possibility that is already being discussed at expert levels). At a maximum the EU and Germany are interested in preserving the preferential access to the Russian market of 2011 (this today is quite unlikely) and resources. The prospects for such a scenario are that the Russian leadership has also seen the lack of prospects for progress in the structure of the European elites and their attitudes towards Russia.
Crimea – Is there a Solution?
The problem is that in Europe they would like to get out of the anti-Russian “hole” but without questioning the basic foundation of Western policy towards Russia and not forcing the political leadership to “lose face”. Hence the extended formula on the situation around Crimea by the important representatives of the German elite – “a temporary solution for an indefinite period”, which leaves room for wide interpretations, and in the short-term perspectives offers significant operational flexibility. From this, the recognition of the ineffectiveness of the sanctions policy, and attempts to teach their own public opinion to believe that the current political regime in Russia is “serious and here to stay”, and they have to find common ground.
Access to credit is considered as the main instrument for managing relations with Moscow, presently in the European countries, which seems will be limited for a long time, and this factor will indeed be a serious obstacle for economic growth in Russia. For the European elites it is important to create such a situation where Moscow could overcome this restriction only under conditions of a favourable attitude on the part of the EU.
It is possible that the disproportionally exaggerated, and then unnaturally quickly hushed, scandal with the supply of turbines by Siemens for the Crimean CHP have been artificially engineered to demonstrate the importance of tacit acceptance of Russia from their side for successful further developments. It is quite possibly not the last of the “information and economic outbursts” of such type, and with the strengthening of the economic growth, their numbers may even increase.
However in the financial sphere, the EU does not appear presently as a fully independent player, capable of opposing the domination the USA in global finances. Moscow understands this very well.
And What About the Eurasian Allies?
But the question of forming relations with Russia under the new scenario is not only relevant for the EU countries. Such challenges face the countries of post-Soviet Eurasia, which also in recent years have actually slowed down the integration process. This is understandable; the countries of the EEU acted against Russia in exactly the same political and economic logic as the countries of the West and China. Indeed, the development of integration processes with the EEU was actually frozen, and was not much advanced beyond the “free trade zone” phase. As experience has shown, the political inertia of the Eurasian countries was greater than Russia’s partners of the “far” abroad countries.
There emerges a peculiar situation. The EU are trying to work out a model of relationship with Russia where the political factors are minimized. But some post-Soviet countries (possibly as result of external manipulation) are trying to continue to act on the basis of incorrect perceptions about Russia’s development prospects.
Thus, these countries may lose their competitive edges that still linger in their relationships with Russia and the preferences that they achieved in the process of “Eurasian integration”.
They should face the truth: the engine of economic growth in post-Soviet Eurasia can only be Russia (in the social sector this role could be played by Belarus and the quality control leader would be Kazakhstan).
The country will face a strange situation when key players of the global economic space (the EU, China, India, key countries of the Middle East) will have an economic rapprochement with Russia, turning political differences into a slow stream, then as the countries of New Eurasia the volitions of political stereotypes will move away from Moscow. Then Moscow will face the inevitable question that will arise about how will it be appropriate to continue to consider the integration processes within the EEU as a strategic priority.
It is obvious that in Moscow there is a certain weariness of the “Eurasian integration into one direction”, which in the new economic conditions is not so critical even from the propaganda point of view.
In this sense, the Eurasian integration is experiencing one of the most difficult stages in its development. The discussions at the highest economic and political levels on the prospects if not the “new industrialization” of Eurasia, which could effectively in political and economic terms, complement and balance the Chinese project of the zone of shared prosperity the “Great Silk Road”, at least resuscitate joint industrial projects in the framework of the EAEC, would be timely.
Dmitry Yevstafiev, Professor, NRU Higher School of Economics