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Russia and the Greek crisis
Staying on the sideline
Report - 17 July 2015
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Russia had no interest in intervening in Greece’s quarrel with its Western creditors, or in doing anything to further increase the international disorganisation that is damaging its economic interests.
By Nina Bachkatov

Contrary to what many Westerners want to believe, facts are not vindicating the Western narrative of a Russian president rejoicing in, and even contributing to, the Greek crisis.

This is obvious when one reads Moscow’s expressions of concern and determination to stay on the sideline. Of course, there were a few unavoidable gestures, such as the warm receptions given to prime minister Tsipras in Moscow on 7-9 April and at the St Petersburg Economic Forum on 19 June. There were also references to solidarity with ‘the Greek people’, to Russia’s cultural and historical closeness Greece, and to the centuries-long Greek fighting spirit, plus regular telephone calls between President Putin and prime minister Tsipras.

But Putin had the same telephone contacts with the other main actors in the Greek crisis, such as IMF director Christine Lagarde, French president François Hollande and German chancellor Angela Merkel. This was a clear signal that Russia was indirectly engaged without direct involvement.

Even the much touted suggestion of financial help to Greece, as a way to gain leverage on a EU member state, did not materialise – witness the constant insistence it had not been requested. And it was officially stated that even in the case of a Grexit, there would be no question of Russia’s lifting the food embargo because Greece out of the eurozone would still be a member of EU linked by EU sanctions.


Basic fact

The basic position is that Russia feels no duty to solve problems that others have created for themselves - while keeping an eye on the possible impact of the crisis, in Greece and in EU, on the Russian economy.

Of course, Russians have not been unhappy to see that EU, which they see as addicted to teach others how to reform themselves, exposing an incapacity to settle its own problems. And, much has been made, too, of the EU’s apparent ability to find unity only when opposing or sanctioning Russia.

The most loaded political comment in Russia has been with regard to Ukraine, reminding Kiev that European Union is not a magical key with which to solve all its problems and that ‘financial assistance and free money are seldom synonymous’. At another level, the Eurozone crisis vindicated the moves by the SCO and the BRICS at their summit at Ufa to accelerate the creation of an alternative to the Western dominated international financial market with the announcement of an investment bank and a stability fund. (Tellingly, both Ukraine and Greece were excluded of the agendas).


Preoccupation

Moscow has two preoccupations

First there is the impact of the crisis on the Russian economy due to a loss of international credibility in a key partner, i.e. the EU.

As Putin has said, ‘despite the fact that we are not an EU member, we have extensive trade and economic ties with Europe, while Europe is our number one trade and economic partner’.

Prime minister Dmitri Medvedev has put another argument : Russia wishes the European currency well, simply because Moscow keeps part of its foreign exchange reserves in euros. And foreign minister Sergei Lavrov said that Russia had no reason to pour fuel on the Greek crisis nor to ‘sit back and rub its hands, watching as Greece develops quarrels with Brussels, Paris and Berlin’.

While explaining that the global markets quickly adapted to the Greek crisis, leaving little room for further impact, some Russia analysts fear that a contagion to other EU countries will reduce the demand for Russian imports, depressing further the price of oil, with market turbulence even weighing against lifting of sanctions.

In short, Russia is not interested in the Eurozone losing one of its members, which would oblige the EU to review its inner working, thereby affecting Russia in one way or another.


Privatisation


Second, there is concern in Russia that the system of privatisation put in place by the international creditors and the EU will be entirely dominated by Western actors keen to sideline Russian investors, with allegations of corruption, lack of transparency or dominance by state companies.

If Moscow sees contracts going to China or the Gulf states, who share those characteristics with Russia, it will provide another demonstration that ‘the West is trying to weaken Russian economy’.

In any event, the Russians have signalled their ‘readiness to cooperate with Greece’. Fields of interest naturally include energy, so far without a clear plan but with an accent on cooperation in building gas transport infrastructure in Greece as part of the Turkish Stream project. But there are also infrastructure possibilities with ports and railways.


Consequences

Obviously, there have been few moments in the recent past when Russia has made it so clear that, despite their disagreements, Moscow and the EU are in the same boat in many aspects.
At the same tome, politically, the important roles played by Berlin and Paris during the crisis has showed a diminished EU and thus increased the importance for Moscow of bilateral or trilateral contacts.

In other words, Russia might well conclude that dialogue with European bureaucrats is less important than better communication with Berlin and Paris, and probably Rome.

17 July 2015
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