EU-Russian Relations: Future enemies? Or new friends?

Adam Ranger 3337918 HIS4397D Professor Hernan Tesler-Mabe Submitted On: April 13, 2010

Do good to your friends to keep them, to your enemies to win them - Benjamin Franklin

The world is an ever-changing place, where todays enemies are tomorrows friends, and there can be no certainty regarding the future. The ongoing negotiations and growing trade between Russia and the European Union provides a case example for how quickly geopolitical interests and foreign policy positions can change. In this paper, it will be argued that the current state of affairs between the EU and its Russian neighbour have not gone far enough to cope with tomorrows challenges, and that progress forward is to the mutual benefit of both polities. In order to compete effectively in the global economy into the 21st century, these once dire enemies must become the closest of friends. Emerging in the early years of the 21st century is a new global order, one of multipolar relations. This world is one where economic might and the power to be wielded through its use have become the arbiters of global relations. Against this background, it is to the mutual benefit of both Russia and the European Union to engage in closer economic relations and to bring their geopolitical aims into the closest synchronicity possible. In order to prove this assertion, the paper will discuss the economic and geopolitical factors of such a relationship. In terms of economics, the discussion will begin with an analysis of the costs and benefits of closer co-operation. Then specific cases of beneficial interactions will be discussed; the energy trade, co-operative projects between the polities and finally the Russian capital gap. The discussion of the geopolitical ramifications will begin by examining the Eurasian paradigm which is the

3 starting point for all of Moscows geopolitical policy. The paper will then examine the interesting aspect of this paradigm which discusses the question of Russias orientation, either East to China and Japan or West to the EU and US. What follows will be a discussion of specific geopolitical issues between the two polities: the security question, Russias European Near Abroad, and Central Asian policy. Furthermore, since the argument will be won on the basis of economics, a brief discussion of global economic trends will further reinforce the assertion made by the thesis by showing the growing strength of economic competitors. From a closer inspection of these elements, the paper will prove that the most beneficial path for both the EU and Russia is one of mutual cooperation. In order to project the costs and benefits of closer integration between the EU and Russia, a frame of reference must be established upon which assumptions can reasonably be based. The recent ascension of the CEECs into the EU provides a series of case examples of economies which were suffering from some of the same issues with which the Russian economy is currently struggling. Additionally, the ascension of the CEEC nations provides a window into the similar issues which will arise from co-operation from the EUs perspective. Based upon the experiences of these nations, it is possible to project the general trends of closer integration. It is important to note that the great size of Russia and its massive population, roughly half that of the EU, makes its outright ascension unlikely and also places limits on inferences based on the experiences of smaller nations. In the experience of the CEEC nations, several major benefits become evident during the processes leading up to and resulting from ascension. Firstly, there is a huge

4 shift towards a smaller, more efficient agricultural sector. Secondly, ascension triggered in these nations a rapid increase in GDP and consequently GDP per capita. Finally, there is a massive increase in the amount and diversity of trade in these economies. The data in table 1i exemplifies these trends, and includes the performance of the Russian economy during the same period. It is important to remember that since Russias vast energy resources skew economic data in such a way as to hide the shortcomings of the economy at large, GDP growth does not reflect the true story of economic improvement. The fact that energy accounts for 60% of export revenues for Russia makes it very vulnerable to fluctuations in the demand and prices for energy, and also covers up the underperformance of sectors accounting for the remaining 40% of export revenueii. From these graphs, it becomes obvious that certain trends occurring in the CEEC which are reflective of their march towards modern market economic models are not occurring in Russia. The most obvious element in these changes is the percentages of GDP made up by the agricultural sector and the percentage of the labour force engaged in agriculture. In the Russian context, this is a worrisome trend which seems a continuation of the repeated failures of this sector under the Communist regimes. The causes of these phenomenons in the CEEC and their failure to materialize in the Russian economy will be discussed in later elements of this paper. The benefits from the perspective of the EU are revealed by the fundamental nature of the economies of these polities, namely that Russia is a net exporter of raw materials while the EU is a net importer of these same materials. Furthermore, the EU has an extremely well-developed sector specializing in finished products. In the Russian case,
i

See Appendix A Barysch, Katinka. "EU-Russia Economic Relations." In Russia and the European Union, Oksana Antonenko and Kathryn Pinnick, 117. New York: Routledge, 2005.
ii

5 this is the sector which is lagging terribly and still bears the scars of Communist mismanagement of the broad category of industrial products known as consumer goods. As a result, these two economies need one another in a fundamental way. The composition of these economies are almost diametrically opposed, however between them a balance can be struck. The pilot element of this trade is based in the energy trade where the EU imports over 20% of its energy consumption directly from Russia.iii However, there needs to be recognition in the Kremlin that such an imbalance cannot continue and that there needs to be an opening of domestic Russian markets to EU products and services. The costs associated with integrating the Russian economy with that of the EU will primarily be borne by the EU, necessitated by their respective levels of development and abilities to mobilize capital. Once again, the case of the CEEC nations provide an insight into the nature of these costs, which while borne on the EU side will in the end be more than repaid by increasing revenues resulting from these initial investments. The primary cost associated with these movements will be the massive trade imbalance between the two polities which will favour Russia for the foreseeable future. While this may be seen as an undesirable element of co-operation from the perspective of the EU, the fact is that such an imbalance already exists. For Russia, theyre costs will largely take the form of loss of sovereignty and an increasing level of foreign ownership within their economy. The sensitivity of the Russian population to these elements must be overcome in order to further their progress

iii

European Commission. "Green Paper - Towards a European strategy for the security of energy supply." http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52000DC0769:EN:HTML (5 April 2010).

6 towards a stable, functioning and sustainable economy. In the future, these objections will likely be eliminated once the effects of these changes become evident, as the result of massive FDI injections materialize. During the interim, the Kremlin will likely face increasing pressure from the nationalistic right to assert a more independent and belligerent policy. However the increasing strength of the Putin and Medvedev led United Russia party seems to be indicating a new political culture within Russia; one in which policies will be informed by realpolitik. The energy trade forms the practical basis upon which the EU and Russia are effectively negotiating their future relations. The relationship is based upon the EUs recognition of the need for Russian energy exports, natural gas in particular, while Russia relies upon the revenue generated by this trade to fund their government and fuel their economy. Historically, this has been the only static point of agreement. From the Russian perspective, the transit fees charged by former Soviet Republics are siphoning off revenues from the Russian state. Importantly, Russia views this as a particularly offensive gesture given the extremely favourable rate which they sell natural gas and oil to these republics. The case of Ukraine is the most important when measured in terms of the re-orientation of energy sector and the political ramifications and tensions thereof. A series of crises have broken out between Russia and the Ukraine centering on the energy trade, most notably in 2006 and 2009 when Russia interrupted the flow of natural gas and oil into the Ukraine. In 2005, Russia increased the price of natural gas to the Ukraine by more than 400% ostensibly in an effort to bring prices into closer parity with average prices in the EUiv. The Russians accused the Ukrainians of stealing gas
iv

From $50/ 1,000 cubic metres to $230/ 1,000 cubic metres; EU average prices $240/ 1,000 cubic metres; "Ukraine 'Stealing Europe's Gas'." BBC, 2 January 2006. http://news.bbc.co.uk/2/hi/europe/4574630.stm (5 April 2010).

7 intended for export to the EU and using it to fuel domestic demand, a claim initially denied in Kiev but later admitted to the charges emanating from Moscow. While this row was eventually solved via a compromise, the issue has continued to simmer with various arguments mostly surrounding the amount of Ukraines gas debts and its contractual obligations regarding the amount of gas imports from Gazprom. Russia has repeatedly lessened the flow through the pipelines to gain acquiescence from the Ukraine to their demands. For the EU, this is a worrisome trend given the close relationship between Ukrainian electoral results wherein perceived pro-Western candidates are elected and Russia increasing the pressure upon Ukraine and the EUs gas supply. In the past, nearly 90% of Russian energy exportsv flowed through pipelines in the Ukraine but in recent times Russia has become engaged in the construction of new pipelines designed to circumvent the Ukraine. The EU has perceived some different issues, and holds in common the concerns regarding former Soviet republics but from a much different perspective. On the above mentioned issue with regards to the Ukraine, the EUs position has been one in which they view both parties as behaving in bad faith. The idea of Ukraine stealing supplies intended for EU markets is one which jeopardizes the future of Ukraines relationship with the EU. The EU had increased its investment in the Ukraine from 230 million in 2003 to 5.5 billion in 2006, however the EUs enthusiasm is cogent on the Ukraine reforming many of its practices and addressing rampant government corruptionvi. The
v

Gidadhubli, R.G. "Russia: Oil and Politics." Economic & Political Weekly 38, no. 21 (2003): 2028.

vi

European Commission. "EU and Ukraine Launch Free Trade Agreement Negotiations." http://europa.eu/rapid/pressReleasesAction.do? reference=IP/08/249&format=HTML&aged=0&language=EN&guiLanguage=en (5 April 2010).

8 stance of the EU on Russias role in these energy crises is one of disappointment for the heavy-handed manner in which Russia dealt with the issue. Germany, amongst others, relies heavily upon imported Russian gas which flowed through Ukrainian pipelines; so that when flow was interrupted EU supplies were drastically affected as well. The EUs primary concern with the energy trade with Russia is the reliability of supply and it is mentioned directly in their energy policy. However, this is not the sole concern of the EU with regard to energy as it relates to Russia. The EU is extremely concerned with Russian energy policy as it relates to the larger picture of EU-Russia trade relations for several reasons. Firstly, the EU sees the artificially low level of Russias domestic energy prices as constituting an unfair advantage for Russias high-energy demand industries such as steel productionvii. In these sectors the absurdly low level of domestic prices combined with the vast size of Russian concerns is leading to mounting fears of dumping into the European market by Russiaviii. Furthermore, the EU sees massive systemic issues within the Russian energy industry. The biggest issue affecting the EU-Russian relationship is the state ownership over the pipelines which supply the market, allowing the flow to be used as a political tool by the Kremlin. When combined with the high level of influence in government policies being exercised by Gazprom,ix the EU sees a dangerous convergence of interests and a lack of liberalization as unfairly favouring Russian enterprises with increases in trade resulting in a corresponding increase the advantage of Russian firms as they gain further market accessx.
vii

Barysch, Katinka. "EU-Russia Economic Relations." In Russia and the European Union, Oksana Antonenko and Kathryn Pinnick, 120. New York: Routledge, 2005 viii Ibid, p.121 ix Gazprom is the largest gas extractor in the world and was formerly owned in its entirety by the Russian government. Gidadhubli, R.G. "Russia: Oil and Politics." Economic & Political Weekly 38, no. 21 (2003): 2025. x Sergunin, Alexander. "Russian Foreign Policy Decision Making on Europe." In Russia's European Choice, Ted Hopf, p. 85. New York: Palgrave MacMillan, 2008.

9 From this perspective, the co-operation through joint projects may form the basis for a regularization of the trade patterns between the two polities as well as assuaging the fears on both sides of either side gaining an unfair advantage. The Northern European Gas Pipeline (NEGP) represents a joint venture built out of the need for compromise, as its purpose and route allow Russian natural gas to reach a terminal built in Germany and then be re-routed to supply EU marketsxi. This is a tacit acknowledgement by both sides that the differences between the Ukraine and Russia cannot be allowed to affect the energy trade which is critical for both sides. Another project underway involves the inclusion of large stretches of Russia territory within the Pan-European transportation corridorsxii. This project is one of great mutual benefit, allowing access to Russian markets for the EU business community while assisting Russia in upgrading its domestic transportation network with the goal of fostering greater growth outside of the primary materials sector. Additionally, the previous orientation of the CEEC countries towards Russia and the continuation of close business relationships between the two have provided the EU with further reasons for supporting the development of Russias transportation infrastructurexiii. Economically, the investment in Russian transportation network will provide an insight for both sides into the prospects of EU-Russian co-operation as a method for overcoming Russias most glaring economic deficiency. Russia currently experiences a massive deficit in investment despite the rapid rise prominence and the related gaining of unfathomable wealth amongst its business leaders. The problem is being caused by the
xi

Ibid, p. 85-6 Ibid, p. 86-7 xiii Pynnoniemi, Katri. "Pan-European/International Transport Corridors at the Conjuction of Geography and Politics in Russia." In Russia's European Choice, Ted Hopf, p. 124. New York: Palgrave MacMillan, 2008.
xii

10 unwillingness of Russias oligarchs to invest in Russia beyond a drive towards vertical integration in their core businesses. As a result, the vast majority of investment in Russia is focused on the energy sector which benefits from rapid and highly lucrative returns. Russias problem is that the energy sector is not the only sector in need of infusions of capital. The goods and services industries as well as the large heavy industrial complex are in major need of upgrade and investment; it is estimated that the Russian industrial sector requires $25 trillionxiv over the next 25 years to avoid large-scale contraction with additional monies being required to stimulate growth. The experiences of the CEEC nations has aptly demonstrated that closer co-operation with the EU has stimulated increased levels of FDI, Russias only option for closing this structural gap in its economy. A further incentive to promote FDI as a means to ameliorating the state of the domestic economy can also be seen through the experiences of the CEEC nations which have found that the drive to achieve profitability and emphasis upon multi-lateral trade occasioned by FDI have increased the rate of development within their economies. Russia is a land of incredible economic opportunity, however the lack of capital has prevented domestic capital markets from recognizing any but the most lucrative of opportunities. Additionally, Putin sees the West and Europe in particular as a modernisation resource indicating the preferred nature of EU-Russian relations from the Presidents perspectivexv. The Kremlin remains sensitive to issues which appear to

xiv

Dash, P.L. "Perils of Putin's Russia." Economic & Political Weekly 36, no. 4 (2001): 290.

xv

Barysch, Katinka. "EU-Russia Economic Relations." In Russia and the European Union, Oksana Antonenko and Kathryn Pinnick, p. 129. New York: Routledge, 2005.

11 promote foreign ownership, as they see such moves as intrinsically linked to the greater issue of national sovereignty. For the EU, such an investment in Russia is likely to promote a much more stable, prosperous Russia while generating substantial returns for EU-based companies which can take advantage of the still under-developed nature of the Russian economy. The EU has a vested interest in Russian stability, from energy to grand geopolitical considerations. Increasing EU-ownership levels of businesses within Russia will allow these firms to leverage the Kremlin for closer harmonization of standards and practices across borders. Having an active hand in the Kremlins policy considerations allows the EU to influence Russias orientation as well as promoting a level of mutual co-operation with will further marginalize the more extreme elements of the Russian political scene. Actively promoting EU companies investing in Russia and helping to close the capital gap within Russia will necessarily result in a change of attitudes towards the EU at all levels of Russian society. The goodwill to be gained will go a long way in the negotiations surrounding geopolitical issues and decrease the adversarial posturing of both polities regarding one another. The maintenance of good relations between Russia and the EU is a critical concern when the relationship between the predominant paradigm of geopolitical understanding within Russia and its effect of Russian actions become evident. The new Eurasianism paradigm which informs the views of Putin and Medvedev sees Russia as part of a Eurasian civilization which stands apart from Europe. In this conception, the functional element of Eurasia is its role as a bridge between Asian and European civilizations. Russias role as the core state of this civilization is, the guarantor of

12 cultural self-preservation and further development of national traditions and co-operation of Russia and its partners in the common Eurasian space.xvi The most important facet of this paradigm, from the perspective of EU-Russia relations, is that it contains no particular role for the West. While not openly hostile, it does not take for granted the West as a prime partner in the future of Russia although the idea of the United States as the Cold War other and Europe as the good Westxvii, makes clear a preference for treating with Europe. Eurasianism sees the development of economic strength as the primary means by which Russia achieve a standing necessary to fulfill its role. Cooperation is seen through the lens of a means to the end of regaining Russias standing as a leading state in the international order. The orientation of Russia, either East to China and Japan or West towards the EU and US, will largely depend upon which side provides the greatest opportunity for achieving this goal. With the growth of the Chinese economy and the continued strength of the Japanese, there is a serious possibility that the most advantageous posture may be for Russia to turn its back on Europe. The EU must do everything possible to prevent such a change in posture, since any such shift could result in disastrous consequences for energy security and the physical security of Europe. The EU possesses several major advantages in this struggle for alignment. Firstly, the current trade patterns show that the EU represents the most important trading partner for Russia accounting for 62% of the total exports.xviii Secondly, the vast majority of Russias population lives on the Western (i.e. European) side of the Urals. Finally, Russias current transportation network and infrastructure is oriented directly towards
xvi

Smith, Graham. "The Masks of Proteus: Russia, Geopolitical Shift and New Eurasianism." Transaction of the Institute of British Geographers 24, no. 4 (1999): p. 488
xvii xviii

Ibid, p.491. Gidadhubli, R.G. "Russia: Oil and Politics." Economic & Political Weekly 38, no. 21 (2003): 2030.

13 Europe as a result of historical interests within Eastern Europe. These advantages must be taken advantage of by the EU, for Russias current weakness is unlikely to persist in the long-term and the EU must be tacitly aware of the negative effects of opposition to a strong Russia. In order to solidify these advantages, the EU must engage in efforts to bring the Russian consumer base within its sphere of influence and continue efforts to encourage trade with Russia. That the Eurasian paradigm focuses on economics as a means to informing geopolitical policy, affords the EU with both an obvious advantage as well as a novel challenge. Traditionally, the EU has relied on the economic benefits of union to encourage complicity and co-operation with its policies in its relations with other nations. Russia represents a unique challenge to this method of conducting business, since it is unique in the history of the EU as being the first state which possesses the means to dismiss the urgings of Brussels and has a viable alternative to closer ties with the EU. The issues surrounding security represent an area where tangible co-operation can be achieved without the need to compromise the basic policy aims of the EU or violate the geopolitical and sovereignty concerns of Russia. The foundation of the CDSP and its status as existing outside the NATO force structure provides an interesting opportunity for limited co-operation between the two polities. Following the information of American expectations as outlined in Madeline Albrights speech known as the three Dsxix, the way was paved for the foundation of the modern incarnation of European defence policy known as the CDSP within the Treaty of Lisbon. Importantly, the CDSP makes no proviso for exclusion based on EU membership, allowing Russia to be consulted in

xix

{no duplication of what was done effectively under NATO, no decoupling from the US and NATO, and no discrimination against non-EU members such as Turkey}

14 regards to the missions and nature thereof. The general framework for roles associated with the CDSP is based upon the Petersberg tasks, which became part of the Treaty on European Union signed in Amsterdam in 1997. These outlined the roles of the CDSP as covering: humanitarian, rescue, peacekeeping, and crisis management (a.k.a. peacemaking). These issues are potentially contentious, as witnessed in the case of Georgia, however the CDSP represents the framework which creates a clearly articulated policy and the organisation by which Russia can engage the EU in constructive conversation in order to avoid conflict. From the Russian perspective, the current incarnation of the CDSP is one which represents both approval and disappointment. Russian hopes that the CDSP would result in an organization which outright displaced NATO or undermined the latters authority have not been realized due to the strong allegiances most NATO members feel towards the alliance. However, this disappointment is tempered by the fact that the CDSP has purposefully been created to include the idea of discussion from important outside actors, namely Russia. As a result, Russia has been afforded a body apart from the US dominated NATO alliance with which to conduct discussions regarding security matters. This is an extremely important element to the CDSP from a Russian perspective, as recent unilateral US actions have further heightened Russian misgivings about NATO as a peacekeeping entity. The EU benefits from this consultative role for Russia by way of several important measures. For the immediate future, co-operation with Russia in regards to combating the threats represented by organized crime, terrorism and failed states allow the EU to formulate a more comprehensive policy in each of these areas. The common

15 border with Russia and the commonality of threats being experienced by both polities necessitates co-operative policy making in order to seriously address the issuesxx. In addition, the limitation of this co-operation to issues outside the greater issues of national security of each entity act to assuage any fears of encroachment on either side, while still promoting and gaining experience in policy harmonization. The goal from the EUs perspective is, creating a common security space in parallel to a common economic space.xxi As the impetus towards creating such an environment represents a tacit acknowledgement that the relationship between the EU and Russia is likely to be built initially through programmes which are perceived to be of mutual benefit. This is an important consideration, since both sides have historically regarded each other as enemies, thus it is important to start co-operation at a level where the presence of foreign troops will not play a prominent role. This will allow for a general thawing of tension, and the co-operative nature of such missions may serve as a stimulus to a general change of perceptions. Whether these things occur or not will are inevitably be dependant upon the inclusion of Russian forces into European battle-groups and genuine common policy discussions. There is a further, longer term advantage to co-operation in the realm of security affairs, namely the ability of both entities to engage in co-operative development and procurement of new weapons systems. The growing gap between EU military capabilities and those of the US makes it increasingly unlikely that there will be any significant
xx

Sergunin, Alexander. "Russian Foreign Policy Decision Making on Europe." In Russia's European Choice, Ted Hopf, p. 69-70. New York: Palgrave MacMillan, 2008.
xxi

Rontoyanni, Clelia. "So Far, so Good? Russia and the EDSP." International Affairs 78, no. 4 (2002): 821.

16 parting on policy amongst the CDSP member states from the US upon whom they will likely remain dependant for the foreseeable futurexxii. The domestic defence industries of both the EU and Russia are amongst the world leaders, although the differences between their firms and prominent American firms resemble the differences between a local gas station and ExxonMobil. However, co-operative efforts between the two could allow for the closing of this gap given the strength of the aerospace industries in both Russia and the EU. Efforts to encourage EU procurement of Russian origin aircraft has resulted in the bidding upon CDSP contracts by Iluyshin and Antonov to provide heavy-lift capability for the battle-groupsxxiii. Despite the fact that the contract was eventually decided against the Russia submission, the very idea that such an option was seriously considered provides hope that there may be a future relationship based on co-operative development in future contracts. Set against the prospects for closer ties in the realm of geopolitics are important points of divergence which must be settled in order for the relationship to reach its maximum potential. The areas which are the most problematic and likely to be the source of friction between the two polities are in the regions which Russia refers to as the Near Abroad. The Near Abroad refers to the former Soviet Republics; however for the purposes of this paper it will be necessary to separate this term into the European Near Abroad and the Central Asian Near Abroad. The issues in the European Near Abroad represent an area where the friction between the two polities could prove to be the undoing of the drive towards a cooperative situation. The issue here revolves essentially around the fact that the EU is

xxii xxiii

Ibid, p. 816 Ibid, p. 824

17 expanding into regions which have traditionally fallen into the Russian sphere of influence. Importantly, the presence of large Russian minorities within the Baltic Republics and the perceived discrimination they are suffering have become an issue which has caused considerable friction in the EU-Russia relationship. The Kaliningrad salient has also caused considerable issues, as it has become a haven for organized crime but Russia remains sensitive towards any perceived encroachment on Russian sovereignty within the region. The continuing of talks geared towards eventual Ukrainian ascension to the EU however; represent the greatest issue threatening the continued rapprochement between the EU and Russia. The influence of Moscow in the region is on the decline, but it is important to remember the relative political power balance is still relatively even. The election of a pro-Western candidate in the Ukraine has triggered a more belligerent policy towards Russia, particularly in the important area of energy policy as discussed above. Many Russian leaders perceive the change in attitude by the Ukraine, its defiance and belligerence towards Russia as caused in part by the support of the EU. For its part, the EU has maintained a relatively hands off policy in the Ukraine however, its promotion of investment in the region is largely thought of as an exercise in soft-power. The Russian sensibilities are unlikely to change unless their country begins to see a similar level of investment, thus negating the posited theory that the EU is favouring the Ukraine at Russias expense. The realm of the Central Asian Near Abroad is quickly revealing itself as the region in which the two powers are likely to come into disagreement that could lead to the EU intervening with force. Projection of Russian power to the South forms the likely

18 direction of expression of Great Power sentiments, which may lead to a potential conflict with the interests of the EUxxiv. Once again it is instructive to sub-divide such an overgeneralization, as the Caucuses region is much more volatile than the region east of the Caspian. The recent Russian invasion of Georgia in response to Georgian attempts to control the breakaway autonomous regions of South Ossetia and Abkhazia, who wish to be annexed into Russia proper represents the likely flashpoint. For Russia, they view their actions as being in keeping with the ideas of national self-determination, as these regions have not made secret their desire to rejoin Russia. However, the EU sees this as a resurgence of Russian imperialism and a return towards Russia conducting heavy-handed policies based entirely on the concept of hard-power. The end to the latest round of violence, the brief 2008 South Ossetia War, was negotiated by the French President Nicolas Sarkozy which bodes well for Russian recognition of the need for third party input. However, in the volatile Caucuses region it is unlikely that Russia will pursue any policy which it perceives as impeding the establishment of proper security. The EU must recognize that the region is not a simple one, nor is it possible to say that Russia is acting in a needlessly belligerent manner. The region has been responsible for all major terrorist actions undertaken on Russian soil, including the recent Moscow subway bombings. Russia for its part, has adopted a policy which is reflective of its self-conception as being the core state of an independent Eurasian civilization. The conflict in the region is not being perceived as against European civilization but rather as against the civilizations of Islam and belligerent former client states. As such, it continues to act in accordance with its own policies regardless of those policies non-alignment to EU policy.
xxiv

Garnett, Sherman. "Russia's Illusary Ambitions." Foreign Affairs 76, no. 2 (1997): 69.

19 Following the Beslan hostage situation in 2004, Russia has adopted a policy of defying both US and EU policy when/where their aims dont coincide with Russias perceived interests or goalsxxv. The EU must recognize the particular sensitivity Russia has towards this region of the world, and accept that convergence on policy here is likely to be haphazard and inconsistent. The EU can hope for better co-operation with regards to the issues facing the Central Asian Republics situated to the East of the Caspian Sea. Herein, policy aims of the EU and Russia often times overlap or are mutually complementary. The EUs increasing levels of investment into the region can be seen as complementary to Russian aims of engaging this region in a co-operative economic arrangement aimed at creating a common economic space within the CIS. Additionally, EU-based investment into the energy infrastructure of the region can be seen as complementary towards the Russian goal of creating an energy cartel with the Central Asian states. Such an organization would control nearly one-third of world natural gas reserves, and would exert influence similar to OPECs control over oil prices. While such an arrangement may result in undue Russian influence over EU energy prices, Russia already exerts huge influence and the prospects for the UK, Norwegian and possibly Canadian and American participation has not been ruled out. As a result, the organization may become a tool for controlling the prices of natural gas with strong EU membership allowing these nations a reasonable level of control over this key energy resource. While the above stated reasons leave a clear impression as to the favourability of closer ties between the EU and Russia, the rationale for accelerating the pace of
xxv

Trenin, Dmitri. "Russia Leaves the West." Foreign Affairs 85, no. 4 (2006): 93.

20 integration between the two rests upon looking at global economic trendsxxvi. The rise of China, India and Brazil have brought onto the scene several new global economic powerhouses situated alongside the traditional centres of global economic power the United States, Japan, and the EU. These traditional centres are witnessing a massive explosion of economic power amongst their new found rivals and are likely to respond through the formation of trading blocs. Indeed, much of the impetus towards the creation of the EU was created by fears of American economic dominance. The fear nowadays seems increasingly generated by Chinese economic expansion and its continued disregard for trade conventionsxxvii. China has already succeeded in bringing many of the Asian rim countries into a situation of economic subservience, while closer ties to Japan cannot be ruled out in the future. America is likely to further increase reciprocity arrangements with Canada, Mexico and potentially Brazil in an attempt to prevent being displaced outright as the world economic powerhouse. Developments such as those above mentioned, will leave both the EU and Russia in awkward positions in terms of economic orientation. While such a projection likely represents a worst-case scenario of the formation of rigid trading blocs, it cannot be dismissed as the global economic crises will inevitably lead to calls for protectionism in many states. In such an environment, the ties that bond Russia and the EU will undoubtedly surpass any that separate the two. The perceived incompatibility of semiauthoritarian Russia, with its focus on hard power and sovereignty versus the EU policy of bureaucratic imperialism needs to become recognized for what it is, a anachronistic

xxvi

See Appendix B These failures are general knowledge and include issues of a non-convertible currency, copyright legislation violations, product standards, etc.
xxvii

21 idea of setting ideology above practical concernsxxviii. The need for rapidity is occasioned by the preference to be the first to present such an alignment of economic purpose, rather than scrambling to find allies at the eleventh hour. The mutual gains to be realized as a result of closer integration between these two economies could potentially lead to their emergence at the top of any such global order. Thus, enemies will turn to friends and friends to enemies ensuring that survival will be determined by prudent action and cooperative efforts rather than through animosity and actions based on historical grievances. For both polities the maturation of their political worldview and their realization of their need for one anothers aid into the future will become a matter of great import as the world moves into this new age of geopolitics. Reason will be the engine which spurs these one-time rivals towards a relationship more defined by their commonalities than their differences.

xxviii

Medvedev, Sergei. "The Stalemate in EU-Russia Relations: Between "Sovereignty" and "Europeanization"." In Russia's European Choice, Ted Hopf, p.227 . New York: Palgrave MacMillan, 2008.

22

Appendix A
1998 Country Russia Romania Czech Rep Poland Russia Romania Czech Rep Poland GDPUS$ bn 925.701 129.918 141.217 350.794 2008 1835 256.3 256.7 685.594 198.23% 197.28% 181.78% 195.44% 5.2 12.4 2.8 4.6 10.5 29.7 3.6 17.4 2.02 2.40 1.29 3.78 % increase Agr % GDP 7.2 20.2 3.3 6.3 Agr % Labour 14.5 48.9 5.6 25.6 Ratio 2.01 2.42 1.70 4.06

23

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