Ambassador Vladimir Chizhov’s interview with TASS news agency

Submitted on Fri, 02/20/2015 - 00:00

Permanent Representative of the Russian Federation to the EU Ambassador Vladimir Chizhov’s interview with TASS news agency, 16 February 2015 

Question: Is the EU, in refusing to recognise the Donetsk People’s Republic and the Lugansk People’s Republic as full-fledged participants of the negotiations process, being guided by the logic of placing the entire responsibility for the self-defence forces’ actions on Russia?

Vladimir Chizhov: Unfortunately, this is indeed the case, and it is unfair. We support the people who live in Donbass. We believe that they have every reason not to trust the Kiev authorities. To remind you, this position was formed a year ago when the leaders of the coup d’état in Kiev declared themselves a “government of winners”. At that time the people in Donbass felt defeated and they did not like that, especially considering that at the time they were not fighting with anybody and were not at war with anybody. They saw that those who had come to power in Kiev did not represent them and completely ignored their interests. At that time, Donbass spoke only about federalisation, and there was no question of any people’s republics. This came about only when the Kiev authorities, ignoring the will of significant segments of the population and eliminating the last vestiges of mutual trust, with the law on the Russian language and other such measures, effectively mounted an offensive on Donbass, launching the so-called antiterrorist operation. That was when the people of Donbass took up arms!

It is wrong to say that they would not have done that if Russia had not supplied them with weapons. There were huge amounts of weapons there, as there had been throughout recent decades. There were several tank and other “hardware” storage depots in eastern Ukraine. There are even several tank maintenance and repair plants there, which can make one serviceable tank out of two disabled ones. And apparently, they are continuing to do this.
Question: At the recent EU summit, the member states said they did not have a blueprint for new economic sanctions.

Vladimir Chizhov: The European Commission was tasked with this. That was done at an EU Foreign Affairs Council meeting on 29 January. It was formulated rather vaguely: consider additional proposals regarding new steps. The word “sanctions” was not used there. Incidentally, European officials in general tend to avoid using the word “sanctions”. That is correct because this position is legally untenable. Only the UN Security Council can impose sanctions. Everything else is nothing but unilateral illegal restrictive measures.

Question: So, what does the adoption of new EU economic sanctions depend on?

Vladimir Chizhov: The principal factor here is a consensus in the European Council among all 28 EU member states, one way or the other, for or against. I am an outside observer, of course, but I see something of what is going on inside. They do not have a consensus one way or the other, so there are neither new sanctions nor is there the decision to lift the existing ones.

It is important to bear in mind that all sanctions were imposed for a certain term, which does not exceed one year. After that, sanctions are either extended or they expire automatically. The first round of sanctions, imposed last March, ends on 16 March. So far they have made a decision to extend them by half a year, until September, although there was a heated debate here: some countries argued that this was not enough.

However, in general, the events in Mariupol were the official reason for the extension, as well as for expanding the blacklist. This begs the question: has somebody conducted an investigation and established who was to blame for the shelling of Mariupol? My question to the EU was left unanswered. As was the question regarding the July sanctions adopted on the wave of the emotional surge over the Malaysian Boeing crash.

Nor are there any answers to questions about those guilty for the tragedies in Odessa and Mariupol last year. The same goes for the question concerning the status of snipers on Kiev’s Maidan.

Question: Do we have some dialogue format within which we can discuss these questions and talk about our concerns or objections?

Vladimir Chizhov: No, we are not conducting any dialogue on sanctions and we have no intention of doing so. This is a problem created by the EU and it is up to the EU to deal with it.

Question: We have introduced countermeasures.

Vladimir Chizhov: Protective measures in agricultural sector are not sanctions. These are measures to protect the domestic producer who has found himself discriminated following the adoption of EU financial sanctions that affected banking institutions running credit programmes for agribusiness, in particular, Rosselkhozbank.

Question: We also have introduced a counter stop-list of persons banned from entering Russia. A precedent was set when MEP Rebecca Harms was refused entry to Russia.

Vladimir Chizhov: Yes, such a list exists.

Question: Have your European colleagues tried to discuss the issue?

Vladimir Chizhov: They have. They asked us to publish our list. We said that, first, this is not provided for by our legislation, and second, we do not want to bring in additional irritants to our relations. If a person on this list requests a visa it will be explained to him or her very politely and unambiguously that there is no sense in waiting for it.

The case you have just mentioned concerned a German citizen with a diplomatic passport. We have an agreement on visa-free entry for holders of diplomatic passports. After that – because a MEP was involved – European Parliament President Martin Schulz asked me to provide him that list. I said that I was not authorised to do so, but to avoid a situation of being turned away upon arrival, I advised MEPs with diplomatic passports to get in touch with the Russian Permanent Mission to the EU in advance, and we will give them a clear-cut answer. Several people did just that and I assured them that they were free to go. Some of them went and some not yet, but no one was turned away. We discussed the issue in a purely pragmatic tone, without any emotional surges.

We have also been approached by our partners from EU institutions with proposals to discuss criteria for lifting the sanctions. That is to say, what Russia would have to do for sanctions to be lifted. We do not engage in such haggling.

Needless to say, the Russian economy is suffering as a result of sanctions, but so is the EU economy.

Let me cite remarks by the Spanish Foreign Minister who mentioned the figure of €21 billion. I do not rule out the possibility that the actual damage is a little bigger than that.

Question: To what degree are leading EU states interested in keeping or tightening the sanctions on Russia?

Vladimir Chizhov: I believe that neither large nor small countries have any interest in that, even the loudest ones that call to ratchet the sanctions up. This is a political game. By the way, European businesses are becoming increasingly vocal in this regard, and it is not just major companies that have been present on the Russian market for decades, but also small- and medium enterprises that are hit by the sanctions even harder, as well as trade unions. According to various estimates, the number of lost jobs runs into tens or even hundreds of thousands.

I believe that potential voters in EU member states are finding this situation increasingly unattractive, especially amid the bleak EU economic outlook, which is particularly bad in the sphere of employment.

Question: The sanctions hit the EU and Russia, however, the main proponent of the sanctions on Russia — the United States — has even expanded its trade with Russia in 2014. Is it a legitimate assumption to say that by fuelling controversy between the EU and Russia, the United States attempts to kill two birds with one stone — erode the economy of both Russia and the EU, which is their competitor?

Vladimir Chizhov: Exactly. The United States also seeks to build up its economic advantage during its sensitive phase of the post-crisis recovery and fill the newly formed niches on the Russian and other markets. Yes, the game on the sanctions field is beneficial for one country, which you just named. Of course, some other non-EU countries also benefit from it by gaining an unexpected access to niches on the Russian market, primarily the food market. There’s also one other country that has a chance to get a serious increase in gas supplies. However, unlike the United States, these countries are not pushing ahead with the sanctions.

The way the market economy works is that if someone leaves a market, someone else takes his place, and there is no way to reverse the situation.

Traditionally, our trade with the EU was 11 to 12 times larger than our trade with the United States. In the best years, our trade with the EU stood at €1 billion daily. I have always, including publicly, stated that it was a safety net for our relations, including political, and both sides were happy with it.

According to preliminary results for 2014, we have a 10-11 percent reduction in trade with the EU. The reason, of course, is not only sanctions, but also plummeting oil prices, with oil accounting for 36 percent of our exports (by the way, gas is only 9 percent).

Meanwhile, trade with the United States has increased, including US exports to Russia growing, according to some estimates, by almost 20 percent. Is not that proof of the United States trying to squeeze the Europeans out from the Russian market?

By the way, Europeans often lose their positions in Russia at an even faster pace than they could. This happens because many European exporters have to look back at the United States. Some of them have accounts with US banks and use US patents and parts. So, they play it safe, so as not to fall under US restrictive measures.

Question: At the EU summit European Commission President Jean-Claude Juncker named three areas in which the EU plans to step up its relations with Russia. This includes gas, negotiations on implementation of the EU-Ukraine Free Trade Agreement, and prospective cooperation between the EU and the Eurasian Economic Union. What is the situation with trilateral gas talks?

Vladimir Chizhov: The so-called “winter package” was signed on 30 October. Considerable amount of negotiating efforts and flexibility on all sides, including Russia, went into it. We agreed to sign the winter package, even though Gazprom and Naftogaz of Ukraine are suing one another in the Stockholm Arbitration Court. The winter package included the payment of the undisputed portion of the Ukrainian gas debt in the amount of $3.1 billion. Everything else will be settled in the arbitration court.

Second, we made a discount in the amount of $100 per 1,000 cubic metres by reducing our custom duty – there is a Russian Government decision to that effect.

Third, the price for prepaid winter supplies was less than the prevailing market price at the time.

The winter is coming to an end, and the winter package deal will expire on 31 March.

Traditionally, Ukrainians do the opposite of what we agree upon. They told us they would need 4 billion cubic metres of gas in November-December. In November, we did not receive a request from them. Hence, we did not make any supplies. They paid for December and received 1 billion cubic metres. Whatever it was, but they took much less gas than they had originally asked for and that Gazprom was prepared to provide. How did they survive this winter, which was fairly cold in Ukraine? They mention reverse supplies, but it is just a political or a psychological explanation because reverse supplies from Europe do not play a significant role in their economy.

In fact, the Ukrainians were taking their gas from underground gas storage facilities (UGS), and took quite a lot of it. However, it’s still February, and Europe may still come under a cold spell. The UGSs were built not for the games to be played by Naftogaz, but to cover peak demands of the EU end users, so that the storage can be replenished later. It takes two weeks for gas to go from Surgut or Novy Urengoy to Baumgarten or any other such place. Gas cannot be moved instantaneously. So, using the UGS gas is a reckless policy.

It has a logical explanation, though. Ukraine expects gas prices to fall, meaning that for them it makes sense to use expensive gas now, and buy some cheap gas later. Interestingly, the talk about unfair Groningen formula that links gas prices to the price of oil have vanished into thin air now that the oil prices have taken a hit. No one in Europe has any complaints now. According to the estimates provided by the Russian Government, the 2015 price may well be $222 versus $485 last year.

Question: What about the talks with the EU on this subject?

Vladimir Chizhov: Our most recent contact was during the visit to Moscow by Vice-President of the European Commission Maroš Šefčovič on 14 January, when he met with Arkady Dvorkovich, Alexander Novak and Alexey Miller. It was then that we achieved a principled understanding regarding the resumption of our energy dialogue that was suspended in the spring of 2014. Since then, we have not heard anything about it.

Clearly, the EU was somewhat shocked by the cancelation of the South Stream project and Alexey Miller’s warning that Russia will be able to abandon Ukrainian transit beyond 2019 by reorienting its gas supplies to Turkey and North Stream. This caused a strong emotional response, although there is nothing political about this, just business. Not to mention the fact that Ukraine's gas transit system (GTS) is beneath criticism.

Back in 2006, following the first Ukrainian gas crisis, maintaining Ukraine's GTS in working order cost €2-3 billion, whereas now we are talking about €10-12 billion. While it was paid well for gas transit, the Ukrainian side acted as usual and did not invest in the GTS renovation, repairs or maintenance. The pipes and pumps broke regularly. On top of it, the Sumy plant-made pumps dating back to the 1970s consume lots of the pumped gas just in order to be able to do their work. As a champion of energy efficiency, the EU had to insist on renovating or replacing them. But there is no money for that, because it vanished in the black hole of the Ukrainian economy.

I understand Kiev’s painful reaction, as Yatsenyuk’s government really wanted to sell this junk to Americans, and now the market value of this GTS is about to hit rock bottom.

Theoretically, the EU wants to have a variety of suppliers and multiple routes. Mr. Šefčovič says each country should have three suppliers. So, go ahead and lead by example. For instance, Algeria is a monopoly gas supplier to Portugal. That country would also like to be able to buy Russian gas, but have not seen any support from the European Commission. The issue, of course, was not about building a pipeline to Portugal, but supplying Russian gas through France under swap agreements.

As a matter of fact, I am fairly pessimistic about the mid-term prospects for the Ukrainian energy industry. 

Statements by Christine Lagarde about a new IMF loan to Ukraine that cause so much joy of the current Ukrainian authorities sound pretty ominous for the Ukrainian households that are end gas consumers. Tough unpopular reforms, for his "commitment" to which Mr. Yatsenyuk is so highly praised by the EU, are a prerequisite for getting this money. That is exactly how they put it at the EU summit.

Today, Ukrainians pay less for their gas than Russians. But this has to end even before the IMF money will become available. Switching to world gas prices will certainly push down the already low living standards of an average Ukrainian. Not to mention reforms in other areas.

Question: European Commissioner Margrethe Vestager mentioned the other day that the European Commission antitrust investigation into Gazprom’s activities is not moving forward, because she is “still studying the files”. Do you expect the European Commission resume its activities on this matter?

Vladimir Chizhov: Frankly, I do not rule out the possibility that the pace of the investigation will depend not on the content of the files and not on Ms Vestager’s speed reading abilities, but on quite different considerations that are political in nature. Even despite the fact that everyone, including former European Commissioner Joaquin Almunia and the current European Commission representatives, assure us that there are no underlying political issues in this case whatsoever. The more I hear such statements, the less convincing they sound to me.

Question: The possibility of launching direct contacts between the EU and the Eurasian Economic Union voiced at the recent EU summit came as a surprise.
Vladimir Chizhov: I am an unbiased person and never belittle EU achievements. It has travelled a long, uphill road, from complete refusal to recognise the Customs Union and the Eurasian Economic Commission (EEC), through suspicion and mistrust, to the realisation that Eurasian integration is a hard fact. Now the EU has even taken the next step, by hinting about the possibility of contacts with the EEC.

The EEC will offer this opportunity. The EEC Minister in charge of Integration Development and Macroeconomics Tatiana Valovaya will come here in the middle of March to meet with some European Commissioners. The European Commission’s preliminary reaction is positive. The business community is also actively promoting contacts. Thus, the Belgian-Luxembourg Chamber of Commerce for Russia and Belarus will organise a presentation on 25 February involving the heads of EEC departments. I believe it is time to switch from such a presentation to concrete talk.

Question: One more issue concerning the ongoing dialogue with the EU is the trilateral talks on implementation of the EU-Ukraine Free Trade Area Agreement. What are the prospects here?

Vladimir Chizhov: I have some concerns about these talks. Five months have passed since the sides decided to suspend the implementation of the trade and economic part of the EU-Ukraine Association Agreement on 12 September 2014. Ten out of the 15 months remain. The results have not been great. Time is running out and the negotiating process must be stepped up. There were some working contacts and internal inter-agency discussions, but this is all, for the time being.

There were objective reasons behind the delay: members of the European Commission changed. We started the dialogue with Karel De Gucht. He is gone, and his position is now occupied by Cecilia Malmström who is spending the lion’s share of her time on EU-US Transatlantic Trade and Investment Partnership. The government in Ukraine has also changed.

Now at these talks we will express our concerns and our vision of risks rooted in the implementation of the Association Agreement, while EU representatives will reassure us. Let’s wait and see what we arrive at. We are not talking today about fundamental modifications to the Agreement, but rather the use of the Agreement’s flexible points, for instance those on duration of transition periods. This issue falls within the competence of the EU-Ukraine Association Council. It can make such decisions without changing the Agreement.

Both the EU and Ukraine are interested in the delay, because the Ukrainian economy must be adapted to the new conditions. We consider it important to preserve our traditional cooperation and minimise the damage to our economy and our ties with Ukraine and the EU.

Question: What about preparations for Federica Mogherini’s visit to Moscow?

Vladimir Chizhov: Deputy Foreign Minister Alexey Meshkov confirmed the visit by Helga Schmidt, the Deputy Executive Secretary General for Political Affairs of the European External Action Service (EEAS), to Moscow on 2 March. She will meet him in the format of Political Director’s consultations and discuss a number of issues, including the Iranian nuclear programme and the situation in the Middle East. These consultations will pave the way for Federica Mogherini’s visit.

Sergey Lavrov met her in Munich and she reaffirmed her willingness to visit Russia. Understandably, she would like to do this on a positive wave. I think her visit will be linked with the events in Ukraine and the preparations by Political Directors. Much to the surprise of some officials in Brussels and EU capitals (as well as in Kiev), who cannot even imagine this against the background of the Ukrainian events, Russia and the EU maintain constructive cooperation on many foreign policy issues, not only the Iranian nuclear programme and the situation in the Middle East. Now Yemen is also on the agenda along with the Middle East and North Africa. Western countries have shut down their embassies there, but this will not resolve the problem. The issue of Libya is still there. To sum up, there are many things to discuss.

Question: What was the most positive in your recent contacts with EU officials?

Vladimir Chizhov: I recently conveyed an invitation from President Vladimir Putin to President of the European Council Donald Tusk and President of the European Commission Jean-Claude Juncker to take part in the commemorative events devoted to the 70th anniversary of the Victory on 9 May in Moscow.