European Union – Russia: a two-level relationship
21 mars 2019 /
This article has originally been published by EU-Logos Athena on the 6th of February 2019.
The Council of the European Union can impose autonomous sanctions for fighting against terrorism and the proliferation of mass destruction weapons, supporting human rights, democracy, the rule of law and good governance. This is done in compliance with the foreign and security policy, as set out in Article 11 of the Treaty on European Union (TEU) . Indeed, according to the article 29 of the EU Treaty, the Council adopts a CFSP decision (Common Foreign Security Policy) which must be approved unanimously. Based on the Council’s CFSP decision, the High Representative and the Commission present a joint proposal for a Council regulation. This proposal is examined by the RELEX group (Working Party of Foreign Relations Counsellors) and transmitted to Coreper and the Council for adoption. As a general legal act, the regulation is binding on any person or entity within the EU. Following the illegal annexation of Crimea by Russia, the European Union (EU) adopted restrictive measures. However, while Member States agreed to adopt sanctions, they maintained and even improved bilateral economic relations with Russia. In this article, first of all, the nature of the relations between the EU and Russia and the introduction of restrictive measures will be shown. Then, the relationships that Italy, France and Germany will continue to have with Russia will be highlighted. Finally, the opinion of the experts will underline that there are actually two parallel lines, one followed by the EU and the other by member states. That undermines the effectiveness of sanctions.
Until the outbreak of the crisis in Ukraine, the EU and Russia developed a “strategic partnership” that covered issues related to trade, the economy, energy, climate change, research, education, culture and security, including the fight against terrorism, nuclear non-proliferation and the resolution of the conflict in the Middle East. At the political level, the current legal basis for EU-Russia relations is the Partnership Cooperation Agreement (PCA) which came into force in 1997, initially for 10 years. Since 2007 it has been renewed every year. The PCA is complemented by agreements in the political, commercial, scientific, environmental and energy fields. In 2012 Russia joined the World Trade Organization further expanding opportunities for economic relations with the EU and other foreign partners. The EU is Russia’s main commercial partner, while Russia is the EU’s fourth largest trading partner. In the field of energy, in 2000, the EU and Russia launched the EU-Russia Energy Dialogue which focused on the oil and natural gas sector, energy efficiency, EU interconnection cooperation and electricity grids of Russia, trade and the safe use of nuclear materials. In March 2014, following the illegal annexation of Crimea by Russia, the EU imposed restrictive measures, including targeted economic measures, against Russia. In turn, Russia imposed restrictions on imports of agricultural products and food from the EU. However, Russia remains an important partner and strategic actor for the EU.
Following the referendum and illegal annexation of Crimea (February-March 2014), the EU imposed several types of restrictive measures:
· diplomatic measures,
· individual restrictive measures (blocking of activities and travel restrictions),
· restrictions on economic relations with Crimea and Sevastopol (tourism, investment, technology export),
· economic sanctions (exports, imports, access to markets),
· restrictions on economic cooperation.
Since March to July 2014, EU leaders condemned Russia’s actions in Ukraine and decided to start elaborating individual restrictive measures (freezing assets and bans to enter the EU), suspending bilateral talks with the Russian Federation. Therefore, the EU decided to introduce a first round of measures against 21 persons responsible for actions that threatened the territorial integrity of Ukraine and 12 names are added to the list of people from Russia and Crimea who are banned from entry into the EU and to which assets are frozen. On 16th July 2014, the EU adopted a series of economic sanctions which limited access to EU markets to the five largest Russian financial institutions, to three defense and energy companies, while imposing a ban of export and import on the arms trade. Furthermore, Russian access had been reduced to certain technologies and services that could have been used for oil production and exploration. During 2015, the Council frozen 150 people and 37 entities assets, banning from entering EU territory. The following year, the EU added six members of the Russian Federation Duma elected in the Autonomous Republic of Crimea and the city of Sevastopol, annexed illegally, to the list of persons subject to restrictive measures in relation to the actions compromising the territorial integrity, sovereignty and independence of Ukraine, and extended economic sanctions aimed at specific sectors of the Russian economy until 31 January 2017. Throughout 2017 and 2018, the EU extended sanctions every six months against Russia, adding six entities involved in the construction of the bridge over the Kerch Strait between Russia and the Crimean Peninsula.
The sanctions imposed by the EU on Russia and vice versa have had an impact on the markets. In 2013, Russia is the EU’s fourth largest trading partner and the EU was Russia’s main trading partner. As a result of the sanctions, but also because of other external factors that have weakened the Russian economy, EU exports to Russia decreased by 20.7% per year between 2013 and 2016. Denmark (-28.9%) and Austria (-27.9%) recorded the largest declines in exports to Russia in that period. The biggest EU economies (Germany, France and Italy) faced the highest export losses in absolute terms. In 2013, over 40% of the total exports of Lithuania, Latvia and Estonia were delivered to Russia, but after the sanctions the export quotas of these countries decreased considerably.
2. Italy, Germany and France among the best partners of Russia
In August 2014, Russia banned imports of certain agri-food particularly from the United States, the EU, Canada, Australia and Norway (later extended to Albania, Montenegro, Iceland, Liechtenstein and Ukraine). It is important to stress that EU sanctions concern only a very small group of products, which have a smaller share of EU total exports to Russia. The Russian embargo seems more substantial both for the EU (because Russia is the second most important market for agri-food products), and for Russia itself because the EU is the main supplier of agri-food products. However, in an increasingly globalized and interconnected world, maintaining political and economic exchanges seem essential. Indeed, despite sanctions, member states continued to have open relations with Russia, concluding bilateral agreements.
Italy, for instance, has always had a strong dialogue with Moscow. For Italy, Russia remains an important partner despite the events in Ukraine. The two countries maintained flourishing economic and energy relations, converging their interests on important dossiers such as security in crisis areas, especially in North Africa. According to the Ministry of Economic Development, in 2018, Italy was the sixth supplier country of Russia and the data give reason to those who say that the sanctions have been very harmful for the Italian enterprises. After 2013, Italian exports to Russia decreased by three billion euros per year. In 2017, however, there was a turning point: Italian exports to Russia recorded a +19.3% and investments increased from 27 to 36 billion euros. This positive trend is due to the fact that, having to adapt to the system of sanctions, many Italian companies begun to export to countries like Serbia or Belarus, which then sell their products to Russia; other enterprises produced directly in Russia, taking advantage of tax breaks to support local industries. Furthermore, in 2016, during the St. Petersburg Forum, Italy signed agreements worth over one billion euros with Russia, and in 2017 the cooperation in the field of electricity resulted in agreements between Enel and Rosseti on innovative solutions for high-tech power networks. In 2018, important agreements were concluded in the energy sector, wind energy infrastructures (between Eni and the Stavropol region), research (between Eni and the Russian railways, between Rosneft and the Policlinico di Torino) and technological development. Moreover, in September 2018, during the first official visit of the Prime Minister Giuseppe Conte in Moscow, 13 agreements have been signed for an estimated value of about 1.5 billion euros.
Germany did not approve the annexation of Crimea and adopted the restrictive measures against Russia. From the beginning, Chancellor Angela Merkel wanted to counteract the Moscow politic in Ukraine. The renewed coalition between the Christian Democratic Union (CDU), the Christian Social Union (CSU) and the Social Democratic Party (SPD) reaffirmed Germany’s priority for transatlantic relations and European integration. Meanwhile, the most influential parties outside the coalition – the Free Democratic Party, the Left and the Alternative for Germany – tried to offer an alternative to the traditional conception of relations with Moscow. However, the situation in Germany is quite difficult due to the Nord Stream 2 pipeline. The Nord Stream 2 will be the longest offshore gas pipeline in the world and will transport natural gas (methane), along 1,230 kilometers, from the Baltic coast of Russia to Greifswald, in Germany, not far from the outlet of Nord Stream 1. Once there the pipeline will be connected to the distribution network of the EU. It will then pass through the Baltic Sea in the territorial waters of Russia, Finland, Sweden, Denmark and Germany. During the St. Petersburg International Economic Forum, in June 2015, three European energy companies – E.ON (German), OMV (Austrian) and Royal Dutch Shell (Anglo-Dutch) – reached an agreement with the largest Russian energy company Gazprom to build the pipeline. EU’s eastern countries always opposed the construction of the pipeline because according to them, it was a Russia’s tactics to punish Ukraine, where gas pipelines were first used to supply gas in the EU. This German-Russian collaboration not only affects Ukraine, but also promotes financial affairs to the Kremlin. The Nord Stream 2 would help Moscow consolidate its position as the main supplier of gas in Europe (41% of the gas imported into Europe already comes from Russia). In 2017, German companies exported goods worth € 25.8 billion to Russia, more than in 2016, but still far from the pre-sanctions peak. Germany is starting a gradual abandonment of nuclear power, and now officially supports the construction of this gas pipeline, which is essential to sustaining its energy needs.
In France, the annexation of Crimea had a very strong political impact. However, the authorities maintain a very regular dialogue with Russia, especially for the resolution of the crisis in Ukraine. In the last years, in accordance with the sanctions imposed by the EU, France has also significantly increased its commercial trade with Russia. At the end of 2017, Russia imported $ 9.6 billion of goods from France: 33.77% of this amount was allocated to the acquisition of industrial chemicals, including fertilizers, dyes, plastics, perfumes and cosmetics. During the same period, France imported Russian goods for $ 5.8 billion: 84.56% was fossil fuels, oil and distillates. In addition, France bought vehicles and equipment (3.52%), metals and metal products (3.18%), wood and cellulose products (1.43%) from Russia. In May 2018, 50 agreements and contracts were signed during the visit of the French President Emmanuel Macron to Moscow. The most important is the announcement by Total of an investment of two billion euros for a 10% stake in a new gigantic project of liquefied natural gas in the Russian Arctic. The French company could also, according to Vladimir Putin, be the sixth company to participate in the Russian project of the Nord Stream 2 gas pipeline. In December 2018, Bruno Le Maire, French Minister for Economic Affairs and Finance, received in Paris Maxime Orechkine, Minister of Economic Development of the Russian Federation, at the session of the Economic, Financial and Industrial and Commercial Council (CEFIC). During the CEFIC meeting, the main areas of Franco-Russian bilateral economic relations were discussed and several cooperation agreements were signed between the two governments, but also between the companies. Ministers signed several declarations of intent containing 30 concrete projects to strengthen economic relations.
3. The opinion of the experts
The scientific community poses several questions concerning the relationship between the EU and Russia, trying to understand if nowadays the latter represents a real threat. Judy Dempsey, researcher and editor at the think tank Carnegie Europe, in her column “Strategic Europe” gave voice to several researchers and analysts of European foreign policy, showing that the scientific, political and academic world has divergent opinions. According to Federiga Bindi (Johns Hopkins University), Anna Maria Kellner (Friedrich Ebert Foundation), Stefan Meister (Robert Bosch Center), Gianni Riotta (Council on Foreign Relations) and Stephen Szabo (American Institute for Contemporary German Studies) Russia is not the main threat of the EU. They underlined that the main threats of Europe are immigration from the south and the lack of economic growth. Thus, Europe’s greatest threat is Europe itself, increasingly vulnerable to any attack. The Western liberal world is experiencing a fundamental crisis, not because of Russia, but for its incapacity and sluggishness to adapt to a changing environment, in the context of digitization, globalization and social changes. They stressed that Russia is fighting for its own security and for maintaining its status. Through its policy in Georgia and Ukraine Moscow wanted to stop the further enlargement of NATO in the east and, at the same time, through its intervention in Syria, it regained its prestige in the international arena. However, this vision is not shared by Ian Bond (Center for European Reform), Fraser Cameron (EU-Asia Center), Andrew Michta (George C. Marshall European Center for Security Studies), Jonas Parello-Plesner (Hudson Institute) and Pierre Vimont (Carnegie Europe) who claim that Russia still poses a threat in both the military and cyber arena. According to them, Russian President Vladimir Putin aims to weaken Western democracies, and the annexation of Crimea showed that he doesn’t respect the international order. They underlined that Russia has systematically tried to undermine European values and sow distrust even within NATO. Russia’s geo-strategic assertiveness continues to grow and its expanding military capabilities pose a threat to the security of NATO and Europe. To ensure its security, the EU must find sufficient political will to spend resources on real defense capabilities within NATO.
At the same time experts wonder if the EU is pursuing a coherent policy towards Russia and if sanctions are therefore an important means of deterrence. Also, in this case the scientific community remains divided. The most skeptical stress that the policies of the member states and their geographical position affect EU policies. For central and eastern Europeans, the memory of the Soviet Union as a power able to impose external and internal policy decisions is not so far, but Western Europe has another vision. As seen above, analyzing the bilateral agreements, in the eyes of Russia, the EU is divided between national mercantile interests and historical politics. Countries such as Poland and the Baltic States, are opposed to those with stronger interests and historical affinities that link them to Russia, such as Italy or Greece. The countries between these two extremes, including France and Germany, have difficulty in developing policies at European level that can all agree. However, some experts stress European efforts in developing a coherent approach. Thanks to Germany and Donald Tusk’s commitment, all member states have maintained sanctions following the annexation of Crimea. Although with different commitment from member states sanctions are supported. Furthermore, the coordinated removal of Russian diplomatic staff from many EU countries in response to the Skripal poisonings shows that Europe can pursue a punitive policy against Moscow in response to hostile actions by the Kremlin. Actually, Moscow does not consider the EU either as a serious and reliable partner or a unified actor. Russia tends to look at Germany, France, United Kingdom and Italy when it comes to discussing international issues, because the EU is perceived as an instrument of American interests.
Dmitry Danilov, Head of the Department for European Security Studies at the Institute of Europe, in his essay “EU-Russia: making up for security cooperation shortfall” stresses that the EU considers Russia as a strategic challenge and threatens to its security order. For the author, the restoration of a systemic dialogue between Russia and the EU should become a high priority issue. Nowadays, there is not a common political approach regarding future relations with Russia. The European Council blocked the structured political dialogue with Moscow. However, the EU member states are supporting an approach based both on deterrence and on dialogue with Russia within NATO. Furthermore, each member state carries forward its own foreign policy more or less favorable to cooperation with Russia. It must be recognized that a good part of EU states considers Russia to be an inevitable partner and this obviously has an impact on EU policy that fails to find a coherent, strategic and incisive approach.
Manufacturing products represent the most important group of products that EU exports in Russia with a share of 54.3%, followed by mineral and chemical products (18.8%). EU exports of agri-food products to Russia amount to 9.7% of total trade flows and this percentage has decreased by 2.2 % in the period 2013-2016. Similarly, even the importance of manufactured goods, although only partially covered by sanctions, decreased significantly by 3.8 %, while the share of exports of mining and chemical products grew significantly by more than 5 % in the same period. The negative consequences of the ban on imports into the Russian domestic market (which led to shortages and increases in food prices, etc.) forced the Russian authorities to explore opportunities for new business partners. In order to mitigate the decline in supply following the trade embargo, the prohibited agri-food products had to come from non-sanctioning countries, for example from Eurasian Economic Union countries. Following intense trade relations with South America in previous years, meat imports would probably have been replaced by deliveries from these countries and several companies in Brazil approved to export to Russia. According to World Food Moscow, imports from Pakistan, Serbia, Egypt and South America, particularly from Chile, Argentina and Brazil, increased significantly since the implementation of the embargo.
This shows that even if the EU wanted to react against the annexation of Crimea by imposing sanctions, observing the results and percentages these did not have a significant economic impact. In addition, both the EU and Russia found loopholes to circumvent them. On the one hand, as highlighted above, the three strongest economic powers of the EU continued bilateral political, economic and financial relations by investing in new projects and increasing their turnover especially since 2017. On the other hand, Russia found new markets strengthening new alliances, especially with the great Chinese power. Moreover, after five years, the Kremlin continues to consider Crimea as Russian territory. The EU has been able to maintain sanctions over time, but at the same time its member states, each in proportion to their economies and their historical relations with Russia, continued bilateral relations that made sanctions as a purely symbolic tool. The EU has also been split following the “Skripal case”. On 4th March 2018, Sergei Skripal (former Russian military intelligence officer and British spy) and his daughter Yulia Skripal were poisoned in Salisbury, England, with a Novitchok nerve agent. In 1990, Sergei Skripal was an officer of the General Intelligence Directorate of the Russian General Staff and worked as an agent for the British Secret Intelligence Service. He was arrested in Moscow in December 2004. In 2006 he was convicted of high treason and sentenced to 13 years. In 2010, after the Illegal Affair case, which led to an exchange of prisoners between the United States and Russia, he moved to the United Kingdom and obtained British nationality. After the poisoning, the British government accused Russia of attempted murder and announced diplomatic sanctions, such as the expulsion of many diplomats. The United States, NATO, Canada and Australia expelled Russian diplomats. Even though the EU condemned the attack on British soil, not all states wanted to launch a political and solidarity message in London. Indeed, Austria, Slovakia, Slovenia, Greece, Bulgaria and Portugal did not expel any Russian diplomat.
The message seems clear: both at political and economic level, the EU and its member states are sometimes on two parallel lines. Relations with Russia were yet another proof of the lack of harmonization between European objectives and national interests. When the member states act in the Council of the EU they continue to follow a “coherent” line because, although with different interests, all states agree to renew sanctions on Russia. At the same time, a each state, especially those analyzed, developed bilateral cooperation policies based on their historical relation with Russia.
Maria Elena Argano
For further information:
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