Article by Russian Foreign Minister Sergey Lavrov “State of the Union Russia–EU: Prospects for Partnership in the Changing World” in Journal of Common Market Studies

Submitted on Tue, 08/13/2013 - 22:00

It gives me great pleasure to address the readers of such an influential publication as the JCMS Annual Review and share my views regarding relations between the two biggest players in Europe – the Russian Federation and the European Union. The importance of this subject should not be underestimated because the future of our common continent in the 21st century will primarily depend on the EU and Russia – and their interaction.

European history cannot be imagined without Russia, just as the history of Russia cannot be imagined apart from Europe. For centuries, Russia has been involved in shaping European reality in its political, economic and cultural dimensions. Yet the debate of how close Russia and its west European partners can be and to what degree Russia is a European country has also been going on for centuries. This debate was somewhat put aside during the cold war, when the European continent was essentially divided into spheres of influence by the two superpowers. But in recent years, when Europeans have agreed to leave behind the era of the bloodiest and most devastating wars in the history of mankind and when the walls of irreconcilable ideological confrontation have been torn down, we have an unprecedented opportunity to fulfil the dream of a united Europe.

There is definitely a huge potential for partnership between Russia and the EU. After all, our countries have about 650 million people living on the territory of more than 21 million square kilometres. There are many things that bring us together: the complementarity and interdependence of our economies, the objective indivisibility of European security, extensive human contacts and common cultural roots. The fact that European culture in the broad sense spans the area to the Pacific coast is definitely Russia's historic achievement.

We have accomplished a lot in the past two decades. Russia and the EU have agreed to establish four ‘common spaces’ and prepared road maps to implement them. Trade between Russia and the EU exceeds US$400 billion, which is commensurate with the EU's trade with the United States or China. Total EU investment in the Russian economy exceeds US$260 billion, and Russian investment into the EU countries amounts to US$75 billion. Last August, Russia joined the World Trade Organization (WTO), and now that we have the same trading rules our interaction should intensify and expand.

In 2010, we launched the Partnership for Modernization initiative, where we jointly implement innovative, research and technological projects. In the future, we may see production and technology alliances in areas like the energy industry, aircraft manufacturing, shipbuilding, the automotive industry, medicine and the pharmaceutical industry. This will certainly make these industries and our economies in general more competitive and help them adapt to new challenges in the globalizing world.

We have a number of sectorial dialogues where we work to harmonize our technical regulations and remove barriers for trade. We focus on creating better conditions for mutual investment and interaction between small and medium-sized businesses. We are pleased that most of the EU countries have shown interest in this concrete synergetic work and signed bilateral agreements with Russia on partnership for modernization.

Energy resources are Russia's top exports. We top the list of the EU's major energy suppliers. Russia provides the EU with a third of its oil and natural gas and almost a quarter of its coal and petrochemicals. The EU simply does not have another partner that can guarantee secure deliveries in such amounts. Even at the time of the cold war, our country strictly fulfilled all its obligations. Today, we are much better positioned to guarantee a reliable gas supply to European consumers in the decades to come. Last year, the Nord Stream pipeline that connects the gas grids of Germany and other EU countries with Russia's integrated gas transport network became fully operational. Construction of the South Stream is under way as well.

There are numerous indications that we need each other – and not just on earth, but in space as well. On 14 March 2013, the Russian Federal Space Agency (Roscosmos) and the European Space Agency (ESA) signed a co-operation agreement in Paris to work in partnership on the ExoMars programme for the robotic exploration of Mars, Jupiter and the Moon in 2016–18.

However, the fundamental questions regarding the extent and the prospects of the Russia–EU relationship remain. The new version of Russia's Foreign Policy Concept, approved by President Vladimir Putin on 12 February, sets the strategic goal of creating a common economic and human space from the Atlantic to the Pacific. In this context, I would like to quote something European Commission President José Manuel Barroso said at the conference on Russia–EU partnership that took place in Moscow in March:

I think it is important, even when we take concrete decisions be it in daily life, in politics or business, to have a long-term vision. The long term vision is a common economic and human space from Lisbon to Vladivostok with free travel of people, free exchange of goods and services, very close overall cooperation. (Barroso, 2013)
So, can we say that in developing their bilateral partnership Russia and the EU share the same, clearly visualized goal? Obviously, it would be premature to say that today. The strategic goals of Russia–EU relations have not yet become reality affecting daily affairs. To borrow an expression used by José Manuel Barroso, the situation will only change if Russia–EU interaction goes from a ‘partnership of necessity’ to a ‘partnership of choice’. And this means that our relationship needs strategic trust as a strong foundation.

We can only achieve a fundamentally new, higher level of partnership if we regard each other as equal partners, respect each other and take into account each other's interests. I have to say that we see some inertia in the way the EU treats its relations with Russia. This is due to the Union's general tradition of developing ties with neighbouring countries only if they approach EU standards and follow EU policies. In fact, it seems that recently our European partners have even somewhat abandoned our common understanding regarding the consistent development of Russia–EU co-operation. For instance, Russia is seriously concerned about the EU's steps to implement the Third Energy Package, which it portrays as a measure to improve antitrust regulations. Of course, we do not question the EU's right to regulate its markets, but we expect it to abide by its international legal obligations. In the situation with the Third Energy Package, which is retroactive and affects the investments that Russian companies had made in EU countries before this document was adopted, our partners violated Article 34 of the current Russia–EU partnership and co-operation agreement as well as bilateral investment promotion and protection agreements between Russia and EU Member States.

The Third Energy Package has already created problems for practical co-operation. Certain EU countries are now less appealing to Russian businesses, and systemic risks are higher. In some cases, we see de facto expropriation of Russian companies' assets. We never expected to face this kind of situation in the EU. Such preposterous decisions may erode trust and damage the foundations of our partnership. Therefore, we hope the EU responds positively to Russia's proposals for amending the situation, which we presented to the European Commission at the Russia–EU summit in Brussels on 20–21 December 2012. We suggest signing a special agreement that would minimize the negative effect the Third Energy Package will have on our energy co-operation. Also, we hope that the joint road map for Russia–EU energy co-operation until 2050 signed on 22 March 2013 in Moscow will further stimulate energy co-operation.

We are also concerned because of the antitrust investigation the European Commission launched last year against Gazprom – a company that makes a significant contribution to energy security on the European continent. One of the accusations is that Gazprom allegedly ‘imposed unfair prices on its customers by linking the price of gas to oil prices’. But this formula (which, incidentally, was first introduced by the Dutch) has never been questioned before and is used by other companies supplying natural gas to Europe as well. If sanctions are introduced against Gazprom, it will be difficult for the company to work on the markets where it faces open discrimination.

In this situation, we observe with interest current discussions in the EU about the distribution of powers between Brussels and Member States. As far as we understand, the Lisbon Treaty has catalogued different categories of powers within the EU, but has not provided explicit answers for all the questions. Some in the EU think that it should never get involved in matters which can be better taken care of at a local or national level, and the EU will obviously have to clarify these matters in the medium term.

In addition to the negative effect this problem has on energy co-operation where Brussels seeks to impose the principles of the Third Energy Package on all Member States, it also affects the issue of visa facilitation between Russia and EU Member States.

EU rules in no way negate the principle of subsidiarity and proportionality in relation to other countries. In fact, the Treaty on European Union says that in areas which do not fall within its exclusive competence the EU shall act only if Member States cannot achieve their objectives at a national level. Perhaps our partners should follow this wise principle more often? Most of the areas where we co-operate, including transport, energy, trans-European networks and issues of freedom, security and justice, are not within the EU's exclusive competence. We know from experience that attempts to restrain EU Member States in their relations with Russia often only hamper our strategic partnership, whereas agreements that we initially make with individual countries may then be successfully implemented at the EU level.

Our co-operation has long outgrown the limits of the 1994 partnership and co-operation agreement. Yet, while working on a new framework agreement, we face attempts by Brussels to take advantage of the talks in order to get further economic benefits in addition to the terms on which Russia joined the WTO. There should be no illusions: Russia will never accept a lopsided agreement. In general, we regard it as a framework, strategic agreement that would outline key areas for developing our co-operation, set goals for the future and define ways to achieve them.

We are disappointed with insufficient progress towards visa-free travel for short-term visits between Russia and the EU. The visa regime has long been an anachronism in our relations. From the technical point of view, Russia and EU Member States have been ready to waive visas for each other. This issue is symbolic; it exemplifies all the differences between Russia and the EU. It is ironic that our western partners, who were so adamant about freedom of movement when negotiating the Helsinki Final Act, are now reluctant to create conditions for free human communication on the European continent.

Of course, when considering future relations between Russia and the EU, we should consider the rapidly changing global context. It often seems that these considerations are not always taken into account sufficiently – and this while the world is undergoing transformation. The global balance of power is shifting, and a new, polycentric system of international relations is emerging, where Europe will no longer play a central role. International affairs are becoming more complex and less predictable as destabilizing tendencies aggravate. Concepts and views that used to seem unquestionable are undergoing radical change. Developed nations no longer drive global growth; the factor of civilizational identity is becoming more prominent; the plurality of development models is becoming evident. Changes are taking place at all levels and in all areas. As many experts observe, for example, the crisis made the dichotomy between Europe's north and south more evident, whereas the traditional division into west and east is less prominent now. Under these circumstances, clinging to obsolete concepts from the past era would inevitably result in big mistakes. With the current fluid situation, one should not take the traditional system of international alliances for granted. It is obvious that history will make us reconsider our views on a lot of things.

The global economic situation, affected by financial difficulties in some leading economies, requires responsible and consolidated action. Nobody can avoid the effect of global economic processes, and no country or a group of countries – no matter how big or powerful they are – can handle today's challenges on their own. The International Monetary Fund (IMF) predicts global gross domestic product (GDP) growth at 3.3 per cent in 2013 and 4.0 per cent in 2014. At the same time, the eurozone is expected to shrink by 0.3 per cent this year and grow by 1.1 per cent in 2014. Russia's growth last year of 3.4 per cent was above all of the other G8 countries. I only mention these figures to encourage our European colleagues to take into account the situation on the ground.

We genuinely hope our European partners emerge from the period of stagnation as soon as possible. We believe they will find appropriate solutions. This is why we still keep about 40 per cent of our foreign exchange reserves in euros. And this is not just well-wishing – Russia regularly participates in working out collective decisions in the IMF in order to support distressed European economies. We take part in multilateral efforts to overcome the consequences of the global financial and economic crisis. As the current chair in the G20, Russia has proposed an agenda that seeks to achieve sustainable, well-balanced growth in the global economy and create new jobs. We put emphasis on stimulating investment and making regulation more transparent and efficient. We think the primary objective for the G20 is to strengthen global governance institutions, create new effective instruments for removing existing disparities and for stimulating growth in all the parts of the world, and to ensure close co-ordination of economic policies.

At the same time, it is clear that there is no magic solution for Europe or for any other part of the world. The situation requires serious and long-term effort which may employ unconventional approaches, such as adjusting one's model of economic development and generally rebuilding trust in the economic regulation system.

Also, Russia–EU relations should certainly take into account the new reality that emerges as Commonwealth of Independent States (CIS) nations progress towards closer Eurasian integration. Russia, Kazakhstan and Belarus have established the Customs Union (CU) and the Common Economic Space (CES) with a market of 165 million consumers. It is based on universal integration principles consistent with the WTO standards and is harmonized in terms of macroeconomic policies, competition rules, technical regulations, transport, natural monopolies' tariffs, and agricultural and industrial subsidies. Last year, the Eurasian Economic Commission – a permanent organ for these two formats – was established. It oversees matters of customs tariffs and technical regulations, trade regimes with third countries, competition, macroeconomic and energy policies, and some other issues. Gradually, it will assume responsibility for other matters as well.

It took 40 years for the European Coal and Steel Community to evolve into the full-fledged European Union. The CU and the CES are developing much faster, in part because we take into account the EU's experience as the most successful integration project so far. We will do our best to further develop and improve Eurasian integration mechanisms and produce the regulatory framework for the CU and the CES. Our integration is already yielding specific, practical results, as illustrated by GDP growth and trade statistics. In 2012, trade between the CU member states grew by 8.7 per cent; in 2011, it grew by 33.9 per cent. The establishment of the CU and the CES helped improve the investment climate in the three countries, created more favourable conditions for doing business including small and medium-sized businesses, and created new jobs. The number of people in the CU and CES countries registered as unemployed by the end of 2012 was 16.8 per cent lower than in 2011, with the unemployment rate at 5.2 per cent. I think many of our European partners can only wish they had these kind of figures.

There is no intention on our part, nor could there be, to restore the Russian Empire or the Soviet Union in any shape or form. That would be naïve and impossible. Yet close integration based on different values, with a new political and economic foundation, is certainly what our times call for. It reflects objective trends of this globalization era, including the increasing role of regional alliances. This is not our invention. We just follow current trends based on pragmatism and common sense. It is only natural to take advantage of economic, infrastructural, logistic and transport connections we inherited from the time when our countries were all parts of the same state.

The new union will be open for interested countries to join. We expect it to become a hub effectively connecting Europe and the Asia-Pacific. Of course, the parameters of Eurasian integration are for participating nations to determine, just as it is up to the EU Member States to decide how the EU should develop. But I strongly believe that further Eurasian integration, in formats that are complementary and compatible with the processes under way in the EU, meets our common interests.

With the CU and the CES as the foundation, we expect to establish the Eurasian Economic Union (EEU) by 1 January 2015. The purpose of the Union is to make maximum use of mutually beneficial economic ties among the CIS nations. This project is our priority. We expect the EEU to become a unification model that will shape the future not only of our three countries, but also that of other post-Soviet nations.

As far as we can see, the EU understands that Eurasian integration is an objective reality and would like to work out mechanisms for interacting through EU institutions, primarily the European Commission, going from the level of experts, where this interaction actually works, to a higher level. We can only welcome this approach. In this context, it would be appropriate to quote former French minister and MEP Rachida Dati:

Don't wave the red rag of a new cold war, a bloc against a bloc. We must work for a union of unions, an alliance of the European Union and the Eurasian Union. Naturally, this cannot happen overnight. But we must have the courage to set such a long-term goal in developing relations with Russia and its Eurasian partners. (Dati, 2013)

Generally speaking, there can be no doubt that defining additional opportunities for economic growth based on a new, high-technology foundation with maximum co-operation between Russia and the EU could become one of the most promising areas where we can work together in the years to come. At the same time, we clearly cannot take Russia–EU ties to a fundamentally new level in one leap. We can only develop our bilateral partnership gradually, step by step. Here are a few areas which we think we could start with. First, we can develop energy co-operation, leading in the future to a single European energy complex. Russia is ready to advance in this direction on the basis of transparency, without politicizing energy co-operation. We hope that common sense and wisdom, which have always been typical of the statesmen who initiated European integration, will eventually prevail. Second, a new Russia–EU framework agreement, which would outline key areas of our future interaction and ways of achieving common objectives, should be signed at an early date. Third, the signing of an agreement to waive visas for short-term trips would be a serious confirmation of the strategic nature of the Russia–EU partnership and make a real contribution to removing the dividing lines that still remain on the European continent. Fourth, we should develop co-operation in foreign policy and security. To ensure common and indivisible security in the Euro-Atlantic region, all the parties that play a major role in these matters in Europe and neighbouring regions should actively participate in this work. If there is political will, we may find a formula that would allow us to increase our co-operation in foreign policy and security without jeopardizing the EU's autonomy as regards decision-making in the common security and defence policy (CSDP) or Russia's sovereignty as a country that is not seeking membership of the EU. The need for this is obvious. One may simply take a look at what is happening south of Europe, in the Middle East and North Africa. We think that differences in our approaches to settling this region's problems, including the crisis in Syria, are exaggerated, while opportunities for joint action for the purpose of improving stability and finding political solutions to conflicts remain underestimated.

We stand for co-operation as equal partners in crisis management. We are convinced that the Seville modalities for Russia's participation in EU crisis management operations/missions as the only possible form of our interaction should be replaced with co-operation based on equality, which befits strategic partnership between Russia and the EU. If the EU signs an agreement based on equality, that would be a sign of mutual respect, as is appropriate for strategic partners. At the same time, the EU would have no obligation to participate in crisis management operations conducted by Russia, and Russia, similarly, would have no obligation to participate in operations conducted by the EU. The parties will decide whether they want to co-operate under the agreement on a case-by-case basis, considering the circumstances in each particular case.

As a confidence-building measure, we think it would be important for Russia and the EU to boost their military co-operation. The military-to-military working group established on the EU's initiative in 2010 became an organic part of the Russia–EU dialogue, assuming responsibility for a number of matters: exchanging assessments on the current situation and possible developments in crisis-hit regions, using Russia and EU's peacekeeping potentials, fighting piracy.

Russia will continue pursuing a dual-track approach, simultaneously developing partnership with the EU and its Member States. However, to make this progress stable and uninterrupted, we need common understanding of our joint mission, which is to secure an appropriate role for Europe in the world and to increase its contribution to international stability and global development.

I believe that today we need to be creative rather than cling to predetermined views. The idea of synergy and combining our potentials rather than trying to distance ourselves from each other on the common European continent is what we need in this era of globalization, as the world becomes increasingly interdependent. Incidentally, such an approach would deliver the countries which the EU describes as ‘common neighbourhood’ from having to choose between the eastern and western directions of developing co-operation.

I think that a careful study of the prospects and outlooks for establishing a common Russia–EU space is a subject that deserves close attention from Russian and EU experts. Analysis that would substantiate the viability of Russia's and the EU's joint efforts in economic and other fields could make an important contribution to the process of forming a strategic bilateral alliance.

Together, we can achieve a lot – politically, economically and in addressing key international problems. There are many things on the Russia–EU agenda. What results and how soon we will be able to achieve them will depend on the degree of our openness for interaction, for working together in order to produce compromise solutions that take into account both parties' interests.

Sergey Lavrov "State of the Union Russia–EU: Prospects for Partnership in the Changing World"