Quiet revolution away from the spotlight

Date: 14/05/1998

The EU's relationship with Russia is often difficult and frosty. But the two European behemoths are learning to co-operate. By Mark Turner and Chris Johnstone report

COMPETING with a blaze of G8 publicity, this week's biannual EU-Russia summit in Birmingham will more than likely pass almost unnoticed.

As if to underline its relative insignificance, the tripartite meeting between Russian President Boris Yeltsin, UK Prime Minister Tony Blair and European Commission President Jacques Santer is set to last well under an hour - scarcely enough time for three speeches, according to officials.

But it would be a mistake to dismiss the relationship between the European continent's two pre-eminent powers as an administrative nicety.

Although Moscow's foreign policy remains strongly focused on individual EU member states, the Great Bear is becoming increasingly interested in the burgeoning superpower on its doorstep.

"Moscow more and more considers the EU as a separate entity," says Russia's Deputy Ambassador to the Union Viacheslav Stefankine. "It coincides with our vision of a multi-polar world. We are very much interested in the Union's possibilities."

Political observers may dispute such statements. They could, for example, point to the utter contempt with which former Prime Minister Viktor Chernomyrdin and his cortège treated the European Commission during his last visit to Brussels, or the fact that new Prime Minister Sergei Kiriyenko had probably never heard of the Union even a year ago.

They might also cite the endless struggles over day-to-day trade issues faced by EU officials, who often complain that they are not even sure who they should speak to.

Even when Russia has apparently embraced the Union - for example at the tripartite meeting between Yeltsin, German Chancellor Helmut Kohl and French President Jacques Chirac in March - Moscow has been more interested in challenging American pre-eminence than offering genuine support to the Union, say critics.

But political posturing and bureaucratic inefficiency aside, a quiet revolution is taking place following last December's entry into force, after almost six years' delay, of an ambitious EU-Russia Partnership and Cooperation Agreement.

Although the centrepiece, a commitment to negotiate a free trade agreement, is unlikely to materialise this year (and certainly not before Russia makes more progress towards World Trade Organisation membership), an ambitious work programme covering scores of trade issues is already under way.

Brussels officials say that a recent deal ending EU quotas on Russian textiles, in return for the abolition of import quotas on European carpets, is a good example of improving cooperation. Similarly, the Union's decision to remove Russia from its list of non-market economies has been well received.

Experts from both sides recently planned out a far-ranging map for talks on aligning investment laws, accounting standards, environmental regulations and intellectual property rules, and expect to conduct a first progress review by the end of the year.

While few miracles are expected, especially given the wide-scale confusion after Russia's recent political shake-up, the fact that a viable forum has been created to address the numerous obstacles facing European trade with Russia cannot be discounted.

And while recent EU rhetoric has tended to focus on boosting trade with Asia or Latin America, its commercial relationship with Russia is enormously important.

In 1997, the EU exported 27 billion ecu worth of goods to the country: almost double the figure of ten years ago and dwarfing sales to China of 13 billion ecu. Although Russia's economy has only just begun to grow, with a 0.4% increase in gross domestic product last year, the country could in theory offer some golden opportunities for EU investors if nurtured and given well-targeted support.

However, no one would deny that Russia still faces a myriad of problems: not least rampant and, by all accounts, growing criminal activity. A recent report by World Bank expert Gregory Kisunko on economic crime in the country painted a bleak picture of an environment where laundering money is not much more difficult than opening a legitimate bank account and graft rules supreme.

Efforts to change matters have not been helped by the scores of top-ranking officials who have benefited enormously from the morass of fraud and obscurity surrounding Russian transition.

When Gazprom was privatised in 1992, for example, self-interested authorities valued it at just under 270 million ecu. Western analysts have since estimated its real market value at the time as closer to 230 billion ecu.

"Clearly, some in the leadership are interested in maintaining uncertainty and delaying the introduction of clear rules that could dramatically reduce their profits," says Kisunko.

At the other end of the scale, junior and mid-level judges earn around 145 ecu a month, less than half of what a secretary receives in the private sector, and public wages are in serious arrears. No anti-corruption effort is likely to succeed under such stark economic conditions. It is also questionable to what degree the central government could exert any control over Russia's further reaches even if it wanted to.

Throughout vast swathes of the country, the edicts of Moscow's leaders mean little while provincial barons play medieval power games.

It was revealing that following his first-round defeat by Alexander Lebed in the race for the governorship of the Siberian region Krasnoyarsk, the pro-Kremlin incumbent Valery Zubov threatened to stop paying taxes to the federal budget if Moscow did not take steps to prevent Lebed winning the run-off vote next Sunday (17 May).

But EU officials stress these factors show precisely why it is so important for the Union to take a genuine interest in its giant neighbour. They also insist that the apparent willingness, among many Russian politicians, to listen to EU demands should not be underestimated.

European Parliament President José María Gil-Robles must have been pleasantly surprised last month when he was invited to speak to the Russian Duma and was wooed by a large number of politicians from all parties, including the young new Prime Minister Sergei Kiriyenko.

No doubt many of those shaking Gil-Robles' hand were motivated by healthy self-promotion, rather than any idealistic enthusiasm for the Parliament as such, but even that should not be undervalued.

In a country still effectively governed by an emperor, elected politicians and potential challengers to the hegemony should be given every encouragement to build their power base, say Russian analysts.

Otherwise, they warn, the country may face a dangerous anti-western backlash in the not too distant future.

"The Communists' inability to transform themselves into a social democratic party supportive of the market and democracy may pave the way for a more right-wing, authoritarian opposition loyal to neither open markets nor liberal democracy," says Michael McFaul, assistant professor of political science at Stanford University.

"Although absent today, Russia's emerging opposition has the potential to be genuinely menacing to Russian reform and western interests in the future."

Also, effective implementation of market reforms will ultimately rest in the hand of local big men, so it is very much in the Union's interest to foster links at regional and sub-regional level.

While EU-Russia relations will probably be characterised for some time to come by niggling trade disputes over issues like phytosanitary controls on eggs, alcohol import restriction, land transport obstacles and trans-Siberian overflight charges, analysts warn that it would be foolish to ignore the big strategic picture.

Russia's recent efforts to play international power-broker may look slightly ridiculous to a victorious West, but its capacity to make waves is still considerable.

Moscow's decision to sell Greek Cyprus Russian S-300 anti-aircraft missiles, or its latest threats of economic sanctions on Latvia, prove just how close to EU interests its tendrils extend.

Equally, the sudden arrival of a European super-currency on Russia's borders and the Union's certain expansion to eastern Europe are developments which Moscow cannot afford to ignore.

Like it or hate it, the two shambling monoliths of Europe are inextricably linked, and will find it increasingly necessary to keep relations cordial. Although few will pay much attention to it, the EU-Russia summit may yet turn out to be this week's most important event.

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