Perspectives on EU-Russia Relations

Debra Johnson, Paul Robinson, Debra Johnson, Paul Robinson

• Publisher: Taylor & Francis
• Year: 2004
• eBook ISBN: 9781134299140
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

This book explains how the internal dynamics of transition have influenced the relationship between Russia and the EU. Taking an holistic approach, the authors present a balanced analysis exploring EU, Russian and US perspectives on the Russian-EU relationship and examine a range of political, economic, business and security issues including the Northern dimension of Russian-EU relations, the Chechen situation, Russian domestic economic policy, trade, the business environment, energy and EU technical assistance. They also address such questions as: * Will bilateral relations be achieved with a Western or Russian model?* Who is the main driver of Russian-EU relations?* Is Russia converging with the EU in terms of business, culture, legal environment and systems?* Does the Russian-EU link provide a new model for EU external relations?

1
Editors' introduction

Debra Johnson and Paul Robinson

EU-Russia relations and their importance

In February 2004, foreign ministers of the member-states of the European Union (EU) issued a warning that the Union was considering trade sanctions against the Russian Federation, and also thinking of blocking Russia's application for membership of the World Trade Organisation (WTO). At issue was Russia's insistence that its pre-existing bilateral trade agreements with Central and Eastern European states should continue in force after those states joined the Union. The latter, in response, is insisting that once countries join the EU, Russia's trade relations with them fall under the terms of the EU-Russia Partnership and Cooperation Agreement (PCA), so that Russia must deal with them as it would deal with any other Union member. This dispute, alongside other developments, has brought EU-Russia relations to a new position of prominence.

Despite their importance for both parties, relations between the EU and Russia had not attracted much public attention prior to this. Declarations from EU-Russia summits have occasionally penetrated into the mass media, but beyond that there is little evidence that either the public, opinion formers, or politicians have until now considered the issue one of first importance. The new prominence of the issue thus represents a significant change. In the circumstances, therefore, this book is appearing at a particularly appropriate time. The enlargement of the EU extends its border with the Russian Federation (in the Baltic states in particular) and, in the case of the Kaliningrad Region, will result in the complete enclosure of one part of Russia by EU territory. It is necessary, as a result, to take a new and deeper look at the whole issue of EU-Russia relations.

This book not only appears at a time when the relationship is acquiring a new significance, but also when it is, according to a document issued by the European Commission in February 2004, ‘under increasing strain, with divergence between EU and Russian positions on a number of issues’ (European Commission 2004: 2). European External Affairs Commissioner, Chris Patten, reinforced this point in a speech on 26 February 2004, in which he noted that ‘we have to accept that the results of five years of increasingly intensive cooperation are not as positive as we expected’ (Patten 2004). How this situation has arisen is one of the themes addressed in many of the chapters in this book. As shall be seen, both parties must share some of the responsibility for lack of progress.

Initially after the break-up of the Soviet Union and the shattering of the long-held assumptions of the Cold War era, Western and European concerns regarding Russia focused around security. Traditional ‘hard’ security matters such as the war in Chechnya continue to attract public attention. ‘Soft’ security issues, such as those connected with environmental pollution, have also played an increasingly important role in the relationship between the two sides. On the whole, European states have dealt with these matters either on a bilateral basis or through other institutions, such as the North Atlantic Treaty Organisation (NATO), the Organisation for Security and Cooperation in Europe (OSCE), the Barents Euro-Arctic Council and so on, and not through the EU. In recent years, economic issues have become more important, and have come to play an ever more dominant role in the EU-Russian relationship. The ‘economisation’ of Russia’s external relations has created room for the EU to step in as a partner of its Eastern neighbour. The slow development of the Common Foreign and Security Policy (CFSP) has also gradually, although incompletely, given the Union the tools it needs to carry out the job.

Because of these changes, we have chosen to broaden the focus of the book away from security issues to a wider, more holistic approach. Chapters by Derek Averre and Hanna Smith address security concerns, but form only a small part of the whole. Anne Haglund’s chapter on the Northern Dimension is concerned with an initiative that incorporates a wide range of soft security issues and seeks to intensify economic links with parts of Russia at least. Chapters by Katinka Barysch and Elena Klitsounova look at the EU-Russia relationship from the perspective of the EU and Russia respectively, whereas the chapter by Graham Timmins examines the relationship between an EU member-state (Germany) and Russia. Subsequent chapters look at specific aspects of relations between the EU and Russia, including Alan Jones and Graham Fallon on economic and trading relations; Marianne Afanassieva on issues of Russia’s business and investment environment; Debra Johnson on the energy ties between the EU and Russia and Kevin McCann on the EU’s programmes of technical assistance to Russia.

The future of EU-Russian relations is unclear. Different chapters in this book provide somewhat different interpretations of how the relationship is currently shaping up. In Chapter 2, Katinka Barysch is rather pessimistic about the future, stating that relations ‘could be heading for a crisis’. By contrast, in Chapter 3 Elena Klitsounova, while noting that in the past Russia has not taken the EU very seriously, also notes that growing network connections between the two sides are pulling them inexorably closer together. However, in Chapter 4, Graham Timmins, through his examination of German-Russian links, argues that the evolution of EU-Russian links is complicated by the claims of several member-states that they have a special relationship with Russia, thereby giving Russia scope to apply leverage in different places and ways.

Whatever the current situation, it seems clear that the relationship can only grow in importance. There are a number of reasons for this. Some are connected with changes in the international political environment. The collapse of the Soviet Union and the Soviet bloc meant the end of the bipolar world, but it was far from apparent what would replace this—a unipolar world dominated by the United States, or a multipolar world. As the recent second Gulf War demonstrates, the jury is still out. The European Union itself was split between the pro-Atlanticists, including the UK, Spain and several of the acceding countries, and others, led by France and Germany, advocating an alternative to the US hegemon. Russia remains an important world player with its seat on the UN Security Council and its nuclear arsenal. However, it has lost its superpower status and has been casting around for a new role. Notwithstanding the disagreement over the Iraq War, Russia under President Putin has sought good relations with the US. However, for Russia a multipolar world is the preferred option, and the EU is the most natural partner for Russia in an alternative pole to the US.

The economic interests of both parties are also increasing the mutual importance of this bilateral relationship. This is particularly the case with energy, which is discussed more fully in Chapter 10. The EU’s overall dependence on energy imports is increasing, especially in relation to gas. Given the difficulties of gas transportation, Russia is by far the most promising source of gas imports for the EU. Russia itself needs a market for its gas to justify the construction of the expensive transportation infrastructure: geographical proximity and demand make Western Europe the most promising market for it. Russia also needs foreign investment and sales to generate the capital, and resources to enable it to diversify its economic base away from its over-reliance on natural resources.

Energy is the most high-profile and pressing example of Russia’s need for greater engagement with Europe. However, greater trade and investment generally is also needed to support Russia’s economic restructuring process. Foreign direct investment (FDI), in particular, is required to foster more competitive industry, but in Russia’s case it has been extremely slow in forthcoming. Indeed, the European Bank for Reconstruction and Development (EBRD) has estimated that cumulative net FDI inflows into Russia between 1989 and 2002 totalled $7 billion: this compares to $120 billion for the Central and Eastern European and Baltic region as a whole, and $38.5 billion and $37 billion in the cases of Poland and the Czech Republic respectively (EBRD 2003). FDI can originate in many countries but the EU is one of the more potentially fruitful sources of it for Russia, and the creation of a stable and transparent legal framework for this must be one of the priorities of the EU-Russian relationship in the medium term. Marianne Afanassieva’s chapter discusses the challenges of investing in Russia, highlighting the continuing institutional legacies from Soviet days that render the tasks facing potential investors even more problematic.

Russia's relationship with Europe since the end of the Cold War

Tackling the problems mentioned above will be a difficult task. In doing so, Russia and the EU will build on a series of agreements reached by the two sides during the 1990s. Formal relations between them are, however, relatively new, and a lot still needs to be done to develop a satisfactory structure for future progress.

Until nearly the end of its existence, the Soviet Union adopted a comprehensive approach to the West and tended not to differentiate between or deal with individual Western nations apart from the US. Therefore, Europe’s relationship with the Soviet Union was largely determined by Cold War rhetoric, with the tone set by the state of play between Washington and Moscow. Any diplomatic contacts between Western European countries and the Soviet Union tended to be on a bilateral basis. As far as Moscow was concerned, the European Community’s role was limited to trade policy. Similarly, relations with the Soviet Union, and then Russia, had a relatively low priority for the European Union: NATO and individual European countries were the focus of eastward links during the Cold War years—a position that did not immediately end with the collapse of the Soviet system. Moreover, during the Cold War the European Community itself was a very different organisation to today. In the 1970s and first half of the 1980s, its achievements were limited and the Community struggled to push its integration project forward. It was the launch of the Single European Market in the mid-1980s which revived the momentum of European integration, leading to today’s expanded European Union with its much broader range of competences and more extensive formal links with third countries.

The unravelling of the Soviet empire and its links with its Central and Eastern European satellites thrust new considerations to the forefront of Russia’s external relations. In the initial stages of the new era, it was the reshaping of the security situation, particularly Central and Eastern Europe’s engagement with and, in some cases, integration into NATO, that preoccupied Russia. However, as Russia’s economic reform became more urgent, the economisation of Russia’s external relations also grew more pressing. Russia was seeking to transform its economy into a market-led economy, and needed to reach out beyond its conventional trading partners, especially as the closed circle of Comecon (Council for Mutual Economic Cooperation) links had collapsed. Indeed, embracing market principles also meant embracing globalisation, a process that began gingerly with Russia’s first diplomatic engagement with the European Union.

For its part, during the 1990s the European Union was concerned with its own internal development, particularly the ongoing implementation of the single market, the relatively straightforward 1995 enlargement, and the build up to and launch of the single currency. The break up of the Soviet system did not galvanise the EU into a rethinking of its relations with Russia. After all, the EU was not a security organisation, and it was security issues that represented the immediate post-Soviet preoccupation. For the EU, the initial and primary impact of the end of the Cold War was the recasting of its links with its Central and Eastern European neighbours. At first, this took the form of negotiation of Europe agreements with each country. After this phase was over, applications for EU membership rolled in thick and fast, and preparations for the accession of these countries increasingly preoccupied Brussels. The May 2004 EU enlargement moved the borders of the EU further eastwards and has given EU-Russian relations a higher priority.

These developments have led to a gradual integration of Russia into key political groupings in Europe, such as the OSCE. In 2002, agreement establishing the NATO-Russia Council was reached: this agreement superseded the NATO-Russia Founding Act of 1997, which itself followed on from Russia’s signature of the NATO Partnership for Peace Initiative in 1994. Russia is also becoming engaged in bodies like the G-7, which consequently became G-8 for many purposes, and is negotiating to join the WTO, an organisation which assumes the existence of a liberal market economy. Although these initiatives do not represent direct engagement between the EU and Russia on specifically EU-Russian matters, they do bring both parties together in alternative fora where they discuss common issues, and the process of WTO accession negotiations itself offers the prospect of transformation of key trade aspects of EU-Russian relations, as Jones and Fallon argue in Chapter 8.

The current formal framework

The formal legal basis of Russia’s relationship with the EU itself is the Partnership and Cooperation Agreement (PCA), which was agreed in Corfu in 1994, and which came into effect in 1997. The declared objectives of the PCA include:

1 The provision of ‘an appropriate framework for the gradual integration between Russia and a wider area of cooperation in Europe’.

2 The creation of ‘the necessary conditions for the future establishment of a free trade area between the Community and Russia covering substantially all trade in goods between them, as well as conditions for bringing about freedom of establishment of companies, of cross-border trade in services and of capital movements’ (European Council 1997).

Although the first objective is fairly general in that it does not define exactly what aspects of the EU-Russian relationship should be integrated nor exactly how wide the area of cooperation should be, the second objective is more specific and, as a result, potentially more ambitious. Not only does it refer to the establishment of a free trade area (that is, the removal of tariffs on trade between both parties), it also refers to free movement of capital and liberalisation of services trade.

More specifically, the PCA makes a commitment that both parties will extend Most Favoured Nation (MFN) treatment to the other independently of WTO membership. It also makes provision for the principles of national treatment and freedom of transit (the latter raises questions in relation to Kaliningrad and to Russia’s reluctance to sign the Energy Charter Treaty). The PCA also foresees freedom of establishment, with some exception for various transport modes, and free movement of capital (with Russia still able to apply restrictions for outward direct investment by Russian residents). The most telling and ambitious provision for enhancing integration and interdependence between the two PCA signatories is Article 56 which states that:

The Parties recognise that an important condition for strengthening the economic links between Russia and the Community is the approximation of legislation. Russia shall endeavour to ensure that its legislation will be gradually made compatible with that of the Community.

(European Council, 1997: Art. 56)

The list of laws at which this approximation would be aimed is extensive and includes company law, banking law, company accounts and taxes, protection of workers at the workplace, financial services, rules on competition, public procurement, protection of health and life of humans, animals and plants, the environment, consumer protection, indirect taxation, customs law, technical rules and standards, nuclear laws and regulations, transport. A literal interpretation of this objective brings up a vision of a Common European Economic Space (CEES). The PCA also alludes to Russia’s infrastructure problems, speaking about the ‘modernisation of energy infrastructure including interconnection of gas supply and electricity networks’, and the strengthening of the transport and telecommunications infrastructures. Such initiatives are crucial: if the CEES ever comes into being, then inadequacies in the physical infrastructure connecting Russia and the EU would inhibit the realisation of the potential benefits of such arrangements.

The PCA was also responsible for setting up the institutional arrangements that manage the EU-Russian relationship. These include two summits each year involving the heads of government of Russia, EU member-states (and latterly the acceding states), the President of the European Commission, and the Secretary-General/High Representative for the Common Foreign and Security Policy (CFSP); annual cooperation councils at a ministerial level and cooperation committees of senior officials that meet on an ad hoc basis. Nine sub-committees deal with technical level issues at a working level. A joint parliamentary committee provides a regular forum for members of the European Parliament and the Duma to discuss current issues.

The PCA remains at the heart of the EU-Russia relationship but in 1999, in line with the CFSP provisions of the Amsterdam Treaty, the European Council adopted a Common Strategy on Russia (European Council 1999). The strategy sets out the EU’s vision that ‘a stable, democratic and prosperous Russia, firmly anchored in a united Europe free of new dividing lines is essential to lasting peace on the continent’. Achievement of this vision requires an ‘open and pluralistic democracy in Russia, governed by the rule of law and underpinning a pro...

Table of contents

• Cover
• Half Title
• Europe and the nation state
• Full Title
• Copyright
• Contents
• List of figures
• List of tables
• List of contributors
• Abbreviations
• 1 Editors' introduction
• PART I Perspectives on EU-Russian relations
• PART II EU-Russian relations in context
• PART III Case studies
• Index