SPECIAL REPORT
WITOLD ZYGULSKI
NEWS EDITOR, WARSAW VOICE
European politicians are now proudly saying that they played a vital role in ending the Caucasian crisis, but in my opinion it ended on Moscow’s terms. Russian troops have done what they were ordered to do, the Georgian army was totally helpless. The fate of Abkhazia and South Ossetia seems to be certain — they will become formally ‘independent’ parts of Russia and will not be returned to Georgia in any foreseeable future. Moscow has achieved its goal, sending warning messages to Ukraine on the way. The EU clearly cannot develop any kind of common political position towards Russia; some countries are too dependent on mutual business relations.
EU summit called to discuss the Russian invasion in early September. “Today the word ‘sanctions’ is not on the agenda. Today the word is ‘dialogue’.” Fillon’s stance is widely supported by banks, oil companies, utilities and other corporate interests in Europe. Medvedev and his predecessor, Vladimir Putin, have gained global economic power since Russia became the world’s number two producer of crude oil, second only to Saudi Arabia. Windfall revenues in the past few years have led to extensive European investment in the country and to a rapid expansion of Russian trade with the EU in products and services, as well as in energy. To these EU doves, talk of a Russian stranglehold on European energy supplies is counterproductive. Russia received a nasty financial shock in September when its benchmark RTS stock
NATO’S REACTION Nato has taken a strong stance against the Russian invasion of Georgia and its military occupation of the two separatist enclaves, Abkhazia and South Ossetia. In mid-September, Nato secretarygeneral Jaap de Hoop Scheffer strongly criticised the agreement reached with Russia by French president, and current president of the EU, Nicolas Sarkozy, regarding the withdrawal of troops from Georgia. The six-point pact calls for a withdrawal of Russian military forces to their positions prior to the conflict in return for a resumption of talks with Russia on a new partnership with the EU. A supplemental agreement also called for the withdrawal of troops from Georgian territory outside Abkhazia and South Ossetia within 10 days of the deployment of EU monitors in early October. De Hoop Scheffer said the deal was “difficult to swallow” and “not acceptable” because it ceded too much ground, according to media reports in London. Russia’s foreign minister, Sergei Lavrov, announced in September that Moscow intended to station 7,600 troops in the two enclaves, twice as many as before, a move seen as confirming Russia’s intention to create a military base on what was, before 8 August, Georgian territory.
market index fell nearly 60% since its peak in May. As the British historian Niall Ferguson observed, at least “when Hitler invaded neighbouring countries, he had capital controls in place.” Compounded by the wider turmoil of the credit crunch, the fall also burnt some Western investors, a reminder that European financial interests in Russia are much more extensive than they were even a decade ago. Sweden’s foreign minister, Carl Bildt, tried to calm the situation, telling an international energy conference in Slovenia in early September that Russian influence should “not be overestimated.” He added “Don’t forget…the EU in terms of population is 3-1/2 times as big. Our economy is 15 times the Russian economy. Our defence spending is 10 times [higher]. We need to have a proper perspective on the relationship.” Because Sweden is due to take over the EU Presidency in January, Bildt’s comments are seen as reflecting future EU policies as well as its present concerns.
De Hoop Scheffer’s criticism put paid to hopes in some quarters, notably Germany, France and Italy, as well as congressional leadership in Washington, that Nato would resume its six-year programme of military cooperation with Moscow. In Brussels, the US Ambassador to Nato, Kurt Volker, confirmed in early September that, unlike with Georgia, or with Ukraine, another non-member that fears Russian military action against it, Nato would come to the military defence of Latvia, Lithuania and Estonia. The three Baltic states, he noted, are full members and signatories of Article 5, which guarantees the defence of any Nato ally threatened with aggression. De Hoop Scheffer has also promised that “the process of Nato enlargement will continue,” a move that will be welcomed by EU members such as the Czech Republic and Poland, which have been cooperating with the US and Nato on new weapons and missile deployments in their countries. De Hoop Scheffer said the process would be carried out “with due caution,” but with the “clear purpose” of helping to create a stable, undivided Europe. While Nato was not in the business of “punishing Russia,” it would not accept Russia’s implicit demand that Nato had to choose between an alliance with Moscow or one with Tbilisi.
“Yes, the EU is dependent on Russia for gas imports,” Robert Mabro, honorary president of the Oxford Institute for Energy Studies and Emeritus Fellow at Oxford University told CNBC European Business. “In the short run there is no alternative. All the talk by [Gordon] Brown and others that we have to reduce our dependence is wishful thinking.”
RUSSIA MAY HAVE BEEN WAITING FOR AN EXCUSE TO RAISE DOUBTS ABOUT THE ENERGY CORRIDOR’S SECURITY ALEX FORBES
But, Mabro notes: “Russia is equally dependent on the EU [for its energy markets].” The EU, he feels, “should engage in constructive diplomacy,” not confrontation. “They are mutually dependent.” Meanwhile, Mabro observes, there may be a much simpler answer to the dilemma of diversifying Europe’s energy supplies. If NOVEMBER 2008 I CNBC EUROPEAN BUSINESS 49
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