Page 77 - bne_May 2021_20210501

bne May 2021
Opinion 77
cured meats and consumer electronics to Russians with one hand, but political leaders slap Russia down with sanctions in the other. Russian Foreign Minister Sergei Lavrov explicitly rejected this dual approach in his now famous joint press conference with the European Union's top diplomat Josep Borrell in February, where he laid out new rules of the game. Russia will no long accept “economically damaging” sanctions and is prepared to break off diplomatic relations if any more are imposed. At the same time, Lavrov said the Kremlin
is happy to sit down to discuss arms control and climate change co-operation, provided the US is prepared to sign a commitment to mutually refrain from interfering in each other's domestic affairs.
Common ground
The Russian troop movements around Ukraine have brought relations to a new low, but ironically today is also one of the best opportunities to strike a new deal with Russia in years, as for once there is a lot of common ground between the two sides.
Arms controls: Putin’s response to rising tensions since his famous Munich Security Conference in 2007 has been to sacri- fice the prosperity won in the noughties boom years to re-equip the military and to build up a fiscal fortress to make Russia immune to sanctions. That came at the price of low growth and stagnating real incomes that are causing political problems on the domestic front as dissent at home is clearly rising.
The Ministry of Finance has basically been running an austerity budget since 2012 and that has hobbled economic development. The Kremlin would love to loosen the purse strings and leverage up the economy, which could lead to an economic boom, but won't do so while it feels threatened by the US.
The US also seems to have taken a new tack. Despite all the tough man “pay the price” rhetoric, US President Joe Biden has actually only done two things with Russia since taking office: mirrored the EU by imposing token sanctions on only nine officials in connection with the poisoning of Navalny; and rapidly signing off on a new START III missile deal in January.
Given that US has withdrawn from one Cold War arms treaty after another this is a major change of policy for Washington. Moreover, Biden has made it clear that he wants to continue the arms control talks and prevent a new arms race developing.
The Russian side ratified the deal within 24 hours of it being inked and the foreign ministry immediately suggested that Washington and Moscow start work on putting the INS missile treaty back in place.
Common market: Putin’s long-term foreign policy goal is to create a common market “from Lisbon to Vladivostok” –
a mantra that he has repeated many times over the years.
Although the current tensions are driving Moscow into Beijing’s arms, Putin sees Russia’s future as a partner of
Europe, not China. Russia is a large country but in the coming decades it will be dwarfed by China, the US and the EU. It has to join a block if it is to remain relevant. I asked the former First Deputy Prime Minister Arkady Dvorkovich if Russia intended to throw in its lot with China during an interview a few years ago. “No, we are a European country and our future is with Europe,” he replied.
The Kremlin is as worried about China’s rise as Washington. But in the face of the relentless US aggression, which China also suffers from, Moscow has turned to Beijing, with whom it is presenting an increasingly united front against Washington. It's a temporary arrangement, but it will last several more years.
Putin’s solution has been to set up the Eurasia Economic Union (EEU), which is modelled on the EU, and in the long term could do a supra-national trade deal with the EU to create the Lisbon-to-Vladivostok single market.
Climate change: The world is not going to solve the climate crisis without Russia’s help and willing participation. Russia ratified the Paris Accord in 2019 and after a slow beginning the pace of doing something about emissions has picked up rapidly since the start of this year.
A spate of environmental disasters and the growing awareness that Russia’s permafrost is melting and will cause tens of billions of dollars worth of damage is pushing the issue up
the Kremlin’s agenda. Analysts reportedly in the last week are warning that new cost of carbon fines could wipe out earnings for all of Russia’s utilities entirely if the worst-case scenario for such fines is imposed.
A new EU Green Deal in place that is supposed to make Europe carbon neutral by 2050. It comes with new taxes and duties on carbon-intensive imports, which is obviously much of what Russia sells. The details are all still up in the air,
but as mutually important markets there are a lot of negotiations ahead.
The US will also have to engage with Russia as Biden has put the climate high on his agenda, and as Russia is a global top five emitter of CO2 no comprehensive plan can leave it out.
Russian draft security deal
A new European security deal is not a "pie in the sky" idea. The Russians want it and they have already prepared a comprehensive draft deal they hope will appeal to Brussels.
In 2008, Putin ordered the foreign ministry to draw up a proposal, which was supposed to enshrine in international law the "principle of security, a legal obligation, under which no state or international organisation in the Euro-Atlantic area could strengthen their security at the expense of other countries and organisations.” Copies were sent to everyone, foreign leaders, Nato, the OSCE, who simply threw it in the bin without comment.
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