The indispensable partner in the east

Russia’s leaders have a spring in their step. High prices for oil and gas have provided a windfall for the state budget and Russia’s prominence on the world stage has not been greater since the end of the Cold War.

The crises in North Korea, Iran and Iraq and the faltering Middle East peace process have enhanced Russia’s power and accentuated the importance of its veto at the United Nations Security Council.

So when EU leaders meet their Russian counterparts on 24 November for one of their twice-yearly summits, they will be engaging with a country that is flexing its political and economic muscles with renewed vigour. But as Russia seeks to exploit its energy riches to achieve political goals, the EU will be asking how sustainable the Russian economy is and whether Russia can succeed in its attempts to reassert control over its non-EU neighbours.

When Russian President Vladimir Putin attended the EU summit in Lahti on 20 October, 13 leaders of EU countries spoke about energy - testimony that Russia is an indispensable energy partner for the EU. The rating agency Standard & Poor’s reported recently that in 2005 60% of EU gas imports were supplied by one company, Gazprom.

But the voices of those 13 EU leaders might also be taken as evidence of the long-held differences between EU member states about policy on energy and on Russia.

Already Germany’s efforts to rework the EU’s neighbourhood policy, to establish a policy on central Asia and create a new deal with Russia have run into criticism from other EU states which are suspicious of Berlin’s close ties with Moscow.

The EU and Russia are about to launch formal negotiations on a new strategic agreement that is likely to focus heavily on how the two sides can work better in the energy field. But in Brussels a growing number of observers are concerned that the strength and reliability of Russia as an energy and political partner may be a mirage.

Gazprom’s total reserves, earmarked for the EU, China and the rest of the world, will last 30 years, according to some estimates. But critics say the firm has not done enough to explore new reserves, which may take decades to come onstream.

One Dutch MEP recently said: "They have been building all these pipelines but we don’t know that after 2015 they will have anything to put in them."

At the same time, there are concerns that Russia has failed to diversify its economy sufficiently to deal with a drop in prices.

Russia still has a gross domestic product equivalent to that of the Netherlands, a marker that China passed more than a decade ago.

One EU diplomat recently said: "They are modernising the economy, but the boost that they are getting from gas prices is not being used as much as it should. It is lining pockets."

These concerns are not confined to Brussels. Commenting on the decline in the number of Russian speakers around the world, Kirill Razlogov, director of the Russian Institute for Cultural Research, expressed concern about the general direction of Russian influence since the fall of the Soviet Union.

"As the geo-political importance of Russia degenerated to being little more than a big supplier of raw materials for other countries’ growing high-tech economies, so did the demand for knowing Russian," he said.

In an attempt to avoid the looming demographic crunch that will come from Russia’s rapidly ageing population, Putin has pledged €190 million to bring Russian speakers abroad back home.

A senior figure on Kiev’s political scene expressed an increasingly common view that the Kremlin has overcompensated for this weakness by acting tough in Russia’s neighbourhood, most recently towards its smallest non-EU neighbour, Georgia. "They are trying to create a precedent," he said, "a warning for others."

Russia’s leaders have a spring in their step. High prices for oil and gas have provided a windfall for the state budget and Russia’s prominence on the world stage has not been greater since the end of the Cold War.