Over the past year, following the annexation of Crimea, relations between Russia and the European Union deteriorated to the point of raising the discussion of a second Cold War. Independent Russia analyst Ezekiel Pfeifer reviews the key developments of this bilateral relationship and the recent EU efforts to come up with an adequate policy for dealing with Putin’s Russia.

 

The EU still relies heavily on Russian energy supplies—in 2012, almost one-third of all oil and gas imported to EU countries came from Russia. Photo: Vincent Mundy / Bloomberg

 

With the outbreak of fighting in eastern Ukraine last year, already chilly ties between the European Union and Russia began to freeze altogether. EU policy, which at one time focused on cooperating with Russia in select areas—economic and technical modernization, political dialogue, international security—began to be more concerned with other “C” words: containing, countering, and changing the behavior of the Kremlin. Despite hopes among some camps for a thaw, the most influential forces in Western Europe are determined to keep these ties frozen for the foreseeable future, with reactive measures taking the place of cooperative agreements.

Just 14 months ago, the EU and Russia held a summit in Brussels at which they issued a rosy progress report on joint initiatives being carried out within the framework of the so-called “Partnership for Modernization,” a name for EU-Russia relations adopted in June 2010. Since 2008, the two sides had also been in talks regarding a new agreement to replace the 1994 Partnership and Cooperation Agreement that had formed the basis for EU-Russia ties. But after Russia’s “little green men” seized Crimea a year ago, just two months after that fruitful summit in Brussels, almost all talks and joint projects were suspended. Since then, no new comprehensive policy on Russia has been adopted by the EU, which is instead relying on a “wait and see” approach, both because of widespread fear and distrust among EU members regarding Russia in light of its actions in Ukraine and because of dissension within the EU about the proper path forward.

The EU must walk a very fine line in formulating its strategy on Russia because of the diversity of priorities among member states and key non-member the United States. The Baltic nations, Poland, and the United States are the most wary of Russia’s military behavior and therefore the most eager for the Kremlin to back down in Ukraine. The powerful member states of Germany, Italy, France, and Spain all have significant economic interests tied to Russia and generally favor a more measured approach. The weaker member states of Greece, Hungary, and Cyprus see a potential political ally and financial donor in Russia and therefore favor applying less pressure.

Thus far, the cornerstone of the EU strategy for achieving its short-term goals vis-à-vis Russia has been economic sanctions. The key question is whether these sanctions are having their desired effect. They have most certainly dealt a significant economic blow to Russia: having been largely cut off from capital markets, the country will go from sluggish growth of 0.6% in 2014 to recession in 2015, and likely also in 2016, while its reserve fund will be partly drained to cover budget expenditures. The sanctions have also decreased profits for some of President Vladimir Putin’s closest associates in business and government, although many of them are so wealthy that the impact may be minimal, and it is not clear whether those individuals will apply serious pressure to Putin to shift gears.

Since the real goal of the sanctions is to change the Kremlin’s calculus with regard to its actions in Ukraine, it is very difficult to say how much of an effect they are having, because Putin’s decision-making process is notoriously opaque. He almost certainly cares about the negative effect that the sanctions are having on the Russian economy. But he could be willing to allow a great deal of economic pain to be inflicted on the country as the price of achieving his geopolitical goals. Rising inflation, which hit 16.7% in February, is already having an effect on public opinion—82% of Russians now think that inflation is one of the nation’s most pressing problems, a recent poll showed—and people’s personal finances will continue to get worse as the economy weakens. Putin cares very much about public opinion, but his propaganda machine has shown itself extremely adept at manipulating Russians’ perceptions. The state-controlled media blames the West for the crisis in Ukraine and for Russia’s economic problems. This combination of falling economic well-being for most Russians and a deluge of anti-Western, nationalist propaganda could become a highly dangerous mix both for Russia and for the West.

At the recent March 19–20 EU summit in Brussels, leaders agreed to tie the lifting of sanctions to the fulfillment of the Minsk II ceasefire agreement signed in February. This means that sanctions will almost certainly continue to be enforced until the end of 2015, by which time Ukraine is supposed to be given the chance to secure its eastern border with Russia. By linking the sanctions to this condition of a secure border, the EU is creating a real test of Russia’s eagerness to be free of the economic restrictions. According to a huge number of credible reports, Russia has been providing crucial military support to the rebels it backs in eastern Ukraine, partly by moving equipment and soldiers across that border.

Despite the agreement among EU leaders to extend the sanctions until the end of the year, there is apparently a good deal of grumbling about the policy among member states behind closed doors. There are major fissures within the EU right now over various issues, and the Kremlin is attempting to exploit those disagreements by wooing weaker countries in order to increase the chances of having the trade measures eliminated. Greece, whose continued membership in the Eurozone has become precarious of late as a result of debt problems, has made overtures to Russia, with Greek prime minister Alexis Tsipras planning a visit to Moscow on April 8. Russia agreed in February to restructure a €2.5 billion bailout loan it gave to Cyprus in 2011; in return, Cyprus said it would allow some Russian naval vessels to make stops at its ports. (Russia has also signaled that it may soon pass an exception to its Western food ban for Greek and Cypriot products.) Putin also visited Hungary in February, signing an agreement on energy supplies with Hungarian prime minister Viktor Orban.

By keeping the sanctions in place against Russia and freezing cooperation in most areas, the EU is sacrificing enormous economic and political opportunities—underlining just how concerned it is about the situation in Ukraine.

In seeking to break the EU consensus on sanctions, the Kremlin has also ramped up its propaganda efforts and courted fringe political figures in Europe. In November, the Russian government launched its Sputnik news website promoting Kremlin views in 10 European languages. The site serves as a complement to RT, Russia’s state-backed English-language TV channel and wire service that has an estimated budget of over $300 million and versions in Spanish, German, and French. In the political sphere, on March 22 pro-Kremlin party Rodina hosted a summit in St. Petersburg of far-right politicians from all over Europe.

At the March 19–20 EU summit, leaders agreed to formulate a plan to counter Russian propaganda both in EU member states and inside Russia. A formal proposal is supposed to be created by June and is meant to fight the disinformation being disseminated by outlets like Sputnik and RT, and by Russian-language outlets with audiences in the Baltic states. But EU officials recognize the challenge involved in trying to compete with the massive budgets of Russian state media, as well as the difficulty of combating propaganda not by creating counter-propaganda but by attracting audiences to more balanced reporting. Since they are only earmarking a few million euros and a few dozen policymakers for the undertaking, the EU will continue to be overwhelmingly outspent by the Kremlin.

Another area in which EU member states and the United States have been divided is military aid to Ukraine—although this dissension has not prevented some countries from giving aid unilaterally. Britain has sent military advisors to train Ukrainian soldiers, and the United States has promised to do the same, while Lithuania, one of the countries most concerned about Russian aggression, has already sent unspecified weapons to Ukraine. U.S. president Barack Obama and German chancellor Angela Merkel have resisted sending lethal weapons, fearing that it could provoke Russia, but Obama is facing increasingly strong pressure to do so—Congress recently passed a bipartisan resolution calling for such a step.

By keeping the sanctions in place against Russia and freezing cooperation in most areas, the EU is sacrificing enormous economic and political opportunities—underlining just how concerned it is about the situation in Ukraine. The EU has greatly valued Russia’s role in addressing international security issues, such as the instability in Libya, the civil war in Syria, Iran’s nuclear program, and North Korea’s political unpredictability. The two sides continue to work together on these problems, but that cooperation has been greatly hampered by the decrease in overall trust and political dialogue. Trade issues are a major challenge to tackle because of the precarious legal environment created by the sanctions. Very little progress is expected in the near term on major Russian priorities for EU relations, such as visa-free travel and the creation of a new framework for EU-Russia relations, or on EU priorities like the development of rule of law and civil society in Russia.

One area in which the two sides seem to be making limited progress is energy ties, probably because they share a vital interest in maintaining trade in that area—at least for now. The EU still relies heavily on Russian energy supplies—in 2012, almost one-third of all oil and gas imported to EU countries came from Russia. And given the problems in Russia’s economy, the Kremlin needs the income from those energy sales. But both sides are looking for alternatives and improvements in the current system. The EU, concerned about Russia using gas supplies as a political weapon, as it has in the past, is creating an energy union designed to decrease its reliance on Russia and make its energy system more self-sufficient and secure. At the recent Brussels summit, EU leaders discussed the need for more transparency in Russian energy contracts and for increased energy efficiency. The EU has also been boosting imports from the United States and Norway. Russia, in the meantime, is seeking new customers, striking a $400 billion energy deal with China in May.

So, the EU and Russia are looking increasingly away from each other because of Ukraine. But the majority of people on both sides seem ultimately to want greater engagement. EU businesses see vast opportunities in Russia; the economic and political elites and the middle class in Russia are very fond of Europe. The question is, under what conditions could greater engagement occur again? With regard to the situation in Ukraine, some experts have suggested a deal under which Russia agrees to allow Ukraine to integrate its economy more closely with that of the EU—while at the same time retaining access to Russian markets—and NATO agrees never to offer membership to Ukraine, a condition that Russia desperately wants. Decentralization of power in Ukraine would remain an issue, but the EU and Russia might be able to live with this option—although Ukraine may not agree to it. More stubborn points of contention may be human rights and political freedoms. The two sides have not seen eye-to-eye on such issues for almost all of Putin’s time in power, and the brazen killing of Russian opposition leader Boris Nemtsov emphasized just how far apart they are. Cultural exchanges and educational initiatives can have a significant effect in this area, but until a basic level of trust is reestablished, such opportunities will likely remain limited.

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