This article is part of our special report EU-Ukraine Relations.
Since Vladimir Putin’s return to the Kremlin in 2012, the EU's relationship with Russia has become increasingly strained. But both sides should realise the necessity of strategic economic cooperation, starting from the regional level, Denis Maksimov writes.
Denis Maksimov is an independent strategic consultant and expert on EU-Russia relations.
The incentives for enhanced economic partnership of the European Union and Russia have never been stronger.
Despite all criticism, the political climate in Russia seems to be slowly entering an early spring. The “Valdai Club” forum of 2013 – a “Russian Davos” – for the first time in its history brought together both traditional headliners and proponents of the official Kremlin and so-called “non-systemic” opposition together. Experts say that this is an attempt from Putin to prevent further marginalisation of the political spectrum. He sends a clear message to the leaders of the opposition and invites them to stand for a municipal or regional office. However limited this offer might seem, it is regardless an attempt to establish a civilized dialogue between the groups of the elite.
In the meanwhile, the foreign policy strategists of Mr Putin have orchestrated one of the best moves of his international career. The solution for Syria’s chemical weapons presented the Russian president in the role of global peacemaker. His article in The New York Times has valid nods towards the arrogance and ignorance of the US foreign policy, and it also makes a statement about the necessity of resolving disputes of this kind in the framework of international institutions, such as the UN.
The European Union is still the most important economic partner for Russia and the biggest consumer of the Russian main export goods – oil and gas. The EU remains the main source of industrial and consumer goods as well as the technology. Russian resources and unsaturated consumer market are vital for the European companies. Despite this, the legal framework of the bilateral relations as well as the path towards common market and the ultimate goal – the free trade area (FTA) – remain in a limbo.
The EU is about to sign an FTA agreement with the United States, and a similar document with Russia would have a real potential to boost the economic output of the EU. The economies of Russia and the EU are more interconnected than any other. The complementarity of the EU and the Russian economies is an asset very undervalued by both parties.
Merkel’s pragmatism could be of a great help in strengthening the EU-Russia cooperation after she is be done with forming the coalition at home. The modest “Mutti” will have the important and challenging task of uniting the forces of the European federalists against the rising nationalism and demagogue. The elites of Europe should support her in her vision via providing practical advice on concrete mechanisms for an enhanced cooperation with the natural partners of Europe (such as Russia) – rather than presenting empty critiques and endless existential debates. On the philosophical side it is quite clear that Russia and the EU are parts of one civilisation with common values.
Cooperation on the regional level (between the regions of the European Union members and Russia) has a great, but yet to be discovered potential. There are some traditional, well written articles about the contradictions between the EU and Russia on the political level. However, the economic ties on a smaller scale, involving SMEs, could strive and flourish.
Many of the Russian regions have the economic potential and consumer market appetites that are significantly more attractive for the EU business. The margins there are still on a high level, hitting as much as 15-20% with moderate political risks in comparison to other developing economies. The European businesses have to be aware of that and not to miss the opportunities which otherwise might be taken by competitors from the other regions of the world.
Russian regions should be encouraged to make bold moves in Brussels in the field of FDI (foreign direct investment) attraction and PPP (private public partnership). They need to build their positive image in Brussels and in Europe in general. This would serve to inform potential EU investors and partners about the interesting opportunities to conduct business in Russia actively and systemically.
The Marxist perspective teaches that development of the “Basis” (infrastructure: economy) defines the “Uberbau” (superstructure: politics, culture). A closer cooperation with the EU would have a positive effect on the sustainability of the economic development. It will improve trade, investment flows, advanced services and products in the Russian regions. An improved and intensified economic cooperation should have an influence on the rule of law and even morals. On the other end, the EU companies desperately need new open prospective markets and consumers who are ready to buy.
If everybody wins, what are we waiting for?