- What are your impressions of the recent EU-Russian joint ministerial held in Moscow?
-This was a regular meeting, being the fifth in that form. The previous one took place two years ago in Brussels but number of participants is growing: this time as many as 15 Commissioners went to Moscow, and a similar number of Russian ministers, headed by Barroso and Medvedev took part. The meeting also saw Barroso meet President Putin.
So I see this as an indication of increased interest in this format of communication. It is taking place in parallel with summits with the EU, but has much less to do with political issues and more with economy and bilateral ties, with the aim of promoting sectoral cooperation in various fields.
It was a good meeting. This does not mean the two sides agreed on everything. That would have been unnatural, because in the multi-faceted, all-encompassing relationship that Russia has with the EU the appearance of different views is inevitable. But what is important is that we manage to address those differences jointly, and resolve them through negotiation.
- What impressions do you have on the bailout?
- It so happens that I have been dealing with the Cyprus problem for decades now, but what I find strange is that the notion of what the Cyprus problem is has changed completely. The last Cypriot presidential election was the first one set against the backdrop not of the traditional ‘Cyprus problem’, but the economy.
So the situation was rather dramatic during the Moscow meeting last week.
When the Cyprus minister of finance Michalis Sarris came to Russia the questions raised on the Russian side were on the modalities and the substance of the “troika” decision.
You could say that we Russians have more sensitivity on issues like this, because my country has lived through painful periods of its own history, when assets were confiscated and people lost their savings.
I am not only talking about events described as a default, such took place in 1998, or the 1917 Bolshevik Revolution, which stripped a great many people of any money or assets that they had, but other measures, such as one during 1990, when all of a sudden large denomination bank notes were subject to change and you could only change a certain amount at a one-to-one ratio. Whatever you had above that value was exchangeable at one-to-three, so that explains the sensitive approach Russia adopts towards these measures.
Cyprus is a friendly country. We have had excellent relations and will certainly continue that. There is a substantial number of Russians residing on the island, but there is – I think – a big misperception in the Western media when all those people are portrayed as oligarchs.
The oligarchs do not live there, they may keep there money there, but those Russians resident there are either representatives of SMEs or retirees, people looking for a warmer climate, which is natural. The climate will be there regardless of what the Eurogroup decides!
- Is Russia likely to engage further in a bailout of Cyrus?
- At the request of Cyprus, Russia granted the country a loan of €2.5 billion in 2011 and there is an ongoing discussion on the repayment of that loan in the context of the Troika bailout. So Russia is ready and willing to participate in discussions over the future recovery of the economy of Cyprus. We have made our position clear: that whatever we do will not be carried out in competition with the EU – Cyprus is a member of the EU and that is a fact of life – but we will work in coordination with the European Commission, the IMF and the government of Cyprus.
- Do you draw any broader conclusions from the Cyprus bailout?
- Taking a broader view of what has happened, Cyprus had indeed an oversized financial sector. That did not come as a bolt from the blue, because it was the result of deliberate policies by successive governments to make Cyprus an international financial centre, and that policy was successful. Cyprus became an international financial centre. And it was not exclusively geared towards the Russian market because there were lots of deposits from investors elsewhere such as the UK, and there was a great deal of exposure to the Greek banks. I understand an investigation has been launched into the policies of the banking management in various banks but we will see how that develops.
- Is any future assistance from Russia likely to be limited to the repayment terms of the Russian loan?
- I would not like to predict that.
- Prime Minister Dmitry Medvedev appeared quite unsettled by the depositor haircut, which he described as a “looting”
- The Eurogroup actually admitted that their ‘Plan A’ had been a blunder, since the EU Council had taken a decision that deposits up to €100,000 should be safe. So the first option had to be rectified. Now there is ‘Plan B’, which leaves depositors up to €100,000 with investments intact, but the “haircut” for larger deposits is tantamount to ‘scalping’.
- Are you concerned by how many wealthy Russians are affected?
- Some affected are rich Russians, some Brits, some Cypriots. But maybe not all are so wealthy. If someone intended to buy a house, it would be more than €100,000.
There is another element to this decision: capital controls. I have to assess this against the EU’s lofty words about values. The haircut is hardly consistent with sanctity of private property. Whereas capital controls – limiting money that can be spent on anything, including even education, or transferred abroad – these are not compatible with the freedom of movement of capital, a basic EU principle.
All this makes the point of a union based on values rather bleak, with due respect to the complexity of the situation of course.
- What repercussions are likely?
- Looking at the situation from a financial point of view, I am afraid that the attractiveness of Cyprus as a financial centre, and its reputation, will be undoubtedly damaged. How that will influence decisions of Russians who enjoyed the Cypriot banking sector remains to be seen. The problem of an oversized banking sector will be minimized or disappear by itself. From a country-to-country point of view I do not see any repercussions. Will Turkey become more active and use the relative weakness of Nicosia? I do not want to speculate. In terms of solution of the Cyprus problem as we used to know it for decades, I do not see things getting easier.
- Do you believe the crisis might affect the existing Western relationships in the Middle East?
- Traditionally we have always seen a more prominent role of the UK rather than the US in Cyprus. Due to pre-1960 history, trade links, Cypriot diaspora in the UK, etc. Britain has also two sovereign military bases on the island. They have peculiar status, as they are UK territory. In the Cold War days Cyprus was often described as an unsinkable aircraft carrier.
- The financial crisis bears some similarities with the oil shock in the 1970s, which the Soviets sought to use to destabilise the Western currency system?
- Actually in the 1970s it was the West that used oil prices as a tool to destabilize the USSR and its economy. Today what we see is not an oil crisis. It is something different: the logical outcome of mismanagement of the financial sector, with lots of pyramids and balloons bursting, happening against the tectonic shift in the global economy with Asian economies rapidly growing and the so-called industrialised west lagging behind, and being in recession actually.
- How fragile do you assess Middle East to be broadly?
- It is fragile certainly, after what used to be called the Arab spring. Well, we saw it coming and were deeply concerned about the aftereffects. As a result we were not euphoric over these developments. Perhaps we had a more realistic view of the developments and the political forces involved in those. We saw the regimes needed to change or would be changed. How that happened is another story, what is happening today and what will happen tomorrow is again a different story.
Even in those countries of the region where the transitions happened bloodlessly we do not see a convincing story of stabilisation.
The situation in the Arab world taken as a whole is also different. Whatever one might have thought of Hosni Mubarak and his government, Egypt has traditionally played the role as an anchor and stabilising force for the other Arab countries. Now this is hardly visible with respect to its government, and this has led to a situation when some small countries with thick wallets punch above their weight in the region.
The balance of power within the Arab world has changed, and recent decisions taken by the Arab league as a result of this change are not contributing to settlement in Syria.
-What did you make of the recent Franco-British move at the EU summit in Brussels to lift the arms embargo?
-It is something that I really can not understand. I do not understand the logic of London and Paris: that supplying arms to one part of the conflict will help to end the violence. That sounds like distorted logic to me.
Secondly, in practical terms they wish to supply arms to the opposition. But to which part of the opposition? Perhaps they have in mind some reliable elements, or moderates, but it is not the business of moderates to fight anyway. Everyone sees that the Syrian opposition is fragmented, that they are united by one single political goal, which is ousting Assad.
If Assad goes they will immediately start fighting each other using those very weapons the French and the British intend to supply, and which others are already supplying. I again refer to the decision of the Arab league to open the floodgates to arms supply to the Syrian opposition.
So how France and the UK intend to monitor where those weapons go and make sure that they won’t find their way to the most robust and able part of the opposition which is an organisation – Al-Nusra – which the US government has put on the terrorist list, and rightly so?
This brings back to memory the recent conflicts in Libya and Mali. The same weapons that were supplied to the forces which ousted Gaddafi are now used in Mali against French forces.
Thirdly, I think a decision so serious as lifting an arms embargo should be taken not on a shorter-term view, but in full consideration of the longer perspective of what happens after that. And finally, let me refer to a document of the EU written in 1998, called the Code of Conduct on Arms Exports. This document, created by the EU itself, stipulates that arms should not be supplied to zones of conflict or to countries where human rights are violated. How that fits with the intentions of Britain and France I do not know.
As far as I understand that this initiative by two very important and influential EU member states has left them in the minority so far, and that there were other countries that were speaking against it. All of which gives me some ground to conclude that reason still prevails within the EU!
- How is the relationship between the EU and the Eurasian Economic Union?
- We have always viewed EU enlargement as a natural process, as a regional dimension of globalisation, which makes it totally different from NATO enlargement, the latter being an attempt to address security challenges of the 21st century with the means – both strategic and materiel – of the mid 20th century, created for different purposes and in different times.
Russia has never spoken against EU enlargement and we have always studied and assessed the experience gained by the EU in the process of enlargement. We had some concerns with the effect of accession on our bilateral relations with newly adopted EU states, and we are currently looking for example at whether all our existing bilateral agreements with Croatia are consistent with the EU acquis.
Having said that, we expect the EU to be equally receptive and tolerant of parallel integration processes such as Eurasian integration, which – I can assure you – goes along the same lines as EU integration did years ago. We are also ensuring that Eurasian integration complies fully with WTO rules.
- If Turkey chose not to join the EU, could it become a privileged Eurasian member?
- Turkey is a different issue of course. I do not want to prejudge what the outcome of its own EU membership discussions would be. I know that there are different European views expressed publicly, and even more perhaps not publicly, and that there are different views in Turkey itself, all of which makes its EU candidacy different from those of the Balkan states, but that remains to be seen.
I do not see the Turkey choosing between the EU and Russia. It is a self-standing country, flexing its muscles in the region, so Turkey does not need to be supported by anyone in that quest. Its role is evolving.
- How does the new regime in Beijing bode for China Russia relations?
- Xi Jinping came to Moscow on his first foreign trip, a week after he was elected to the post of President. It was not his first trip to Moscow. He had visited Russia in his previous capacity and was relatively known there. We have very good relations, of course we watch how China is developing its economy, we find some of it quite interesting. We have a different situation, and there are many areas where our economies are mutually compatible. Political cooperation between Russia and China is developing both along a bilateral track and within regional and international bodies, starting from the UN Security Council and also in BRICS, the Shanghai Co-operation Organization regional cooperation and others.
- Do you think that Ukraine is slipping away from EU influence? How are Russia Ukraine relations?
- We are connected by millions upon zillions of ties: historic, cultural, industrial – because our industries were parts of one and the same industry – other areas of the economy, and of course people-to-people, family ties. In many cases it is quite difficult to discern who is ethnically Russian and who is Ukrainian, because of millions of mixed marriages that have taken place over many generations. So when Western commentators speak of ‘Russian-speaking eastern Ukraine’, that sounds ridiculous, because the whole of Ukraine is Russian speaking, in parallel with Ukrainian, and there are Russians who speak Ukrainian in Russia.
We had a period of difficult relations when former president Yuschchenko was in power in Kiev. His policy was to curb cooperation with Russia. We had real difficulties then, but this is now behind us. The Ukrainian people have seen that these policies were not leading them anywhere. Today, as we speak the Ukrainian foreign minister [Leonid Kozhara] is visiting Moscow as Chairman-in-Office of the Organisation for security and cooperation in Europe.
As far as Ukraine’s relations with the EU are concerned. I am against attempts to portray Ukraine as shuttling between Brussels and Moscow, as being a country at a crossroads and having to choose and decide who to follow.
They are going the Ukrainian way. Of course when they see and compare the two [EU and Russia] both may seem attractive. There is however one vital difference: the EU has never promised – and in my view will never promise – full membership of the EU to Ukraine. Whereas the Eurasian economic union is from the outset offering full membership to the Ukraine. But it is up to Ukraine to decide, we are not dragging anyone into the Eurasian Economic Union.
I think one of the lessons that we learned from European integration is that focusing too much on enlargement at the expense of deepening the integration may backfire at some point.
Source: EurActiv.com
