The bitter fight that has been raging between the European Union and Greece has now extended for five long months. With the referendum on July 6th it may all be mercifully put to an end.
With strong indications that the public will resoundingly reject another bailout and the crippling austerity that comes with it, Greece will finally be free of the hated ‘institutions’ that, as they repeatedly claimed, paralyzed their economy. However, the path that leads to a once again stable and prosperous economy is likely not to be found quickly. When the vote finally arrives, Greece will most likely revert to the drachma and default, wherein the economy will enter yet another depression. As of now, the EU appears to be washing its hands of Greece. Fascinatingly, Russia may be the only country that has the immense means and political savvy to navigate this break-up to the benefit of Greece and to its own global positioning interests and national security priorities beyond the Caspian.
This was never a two-sided fight. Greece and the EU stared down at each other while forgetting that Russia was patiently waiting on the periphery. The EU adamantly stated that austerity would eventually work, while Greece equally weighed in against the ‘indecency’ that such economic measures were forcing on the Greek people. So much focus has been on rhetoric and horribly complex political posturing inside of the 28-country EU, it quietly missed the fact that Russia could emerge the only real winner, leaving the EU to struggle with the consequences of basically being rejected by a fallen EU member that chose an alternative path.
Russia and Western European powers are in the midst of a tumultuous relationship at the moment diplomatically and it’s difficult to argue that Russia isn’t coming away with the upper hand. Vladimir Putin has shrugged off sanctions, recession, and drastic inflation, all while increasing personal popularity and national territory. He likewise out-flanked the more-hawkish Western voices in Syria by utilizing Russian soft power, coordinating a chemical weapons disarmament. With a meager 18% debt-to-GDP ratio, Russia has the financial depth and flexibility to do as they please. Lending a helping hand to Greece would be a simple first step to begin prying Greece away from the EU and into a welcoming Russian sphere of influence.
Greece has recently been torn between Russia, an ‘Orthodox brother nation,’ and it’s EU counterparts. The economy was exploding with prosperity before the global recession of 2007-2008 and this newfound wealth was largely facilitated by its close relationship to the EU and inclusion in the Euro currency. Conversely, Greece has historical, cultural, and religious connection with Russia. In addition, tourism and diaspora between the two countries is quite high. Thus, with six years of economic downturn and multiple recessions following the initial depression, Greek positive sentiment toward the EU has plummeted to roughly 25%. Meanwhile, two-thirds of Greeks have a favorable view of Russia, a unique antithesis with much of the EU.
Russia’s relationship with the current Greek political hierarchy began on strong footing, as Prime Minister Alexis Tsipras attempted to block sanctions against Russia just days into office. After sanctions were imposed with the United States’ urging, Greece reportedly told Russia that they were able to reduce their intensity. This may be the strongest leverage that Greece can offer Russia: while still being a member of the EU, even without its currency, Greece can use its vote to sway sanctions. While a difficult task for Greece to diametrically oppose the wishes of stronger Western powers, one dissenting vote to new sanctions significantly weakens impending ones. Previously, the EU warned of isolationism if Greece bowed to Russia with respect to sanctions and warned not to challenge the EU position. In the wake of default this threat will prove hollow, while isolation from the EU may drive Greece further to the side of Russia. The Greek government would be walking a dangerous tightrope between Russia and the EU, but with little options for an immediately stable economic future they may gamble.
In addition to challenging sanctions, Greece has also fought against the position held by the EU in regard to Russian natural gas. EU members are attempting to move away from reliance on Russian gas and the Gazprom empire. In April, Greece signed on for inclusion in the Turkish Stream gas line project (although that project has yet to begin). Many anticipated that this was a ploy to bluff Europe into accepting easier loan terms, but deciphering what was political brinksmanship and genuine agreements may prove difficult: Russia is going to accept the contract either way.
The EU is stuck between offering Greece the demanded debt write down and further bailouts or gambling with the standard line of austerity and possible ‘moral hazard.’ This was certainly a fight the creditors never wanted to face, with the political implications singularly negative and no positive outcomes readily imaginable. The EU outcome that would have subdued Russian influence would have been to keep the status quo. When it became clear that the Syriza party had no interest in doing so, the EU could only keep pressing Greece until it broke. Unfortunately, the break may certainly occur, but may consequently create a new alliance the EU never anticipated: an Orthodox alliance that renders EU influence in the Adriatic severely compromised.
Greece has until July 20th to decide whether to accept bailout funds or simply fall out of the Euro. The latter move will show the rest of the EU that membership is not a strictly one-way road and any prospective members may be hesitant in accepting membership. Highlighting the weakness of European partnerships and rigidity of monetary control would represent a large prize to Russia, always interested in embarrassing Western powers when it has opportunity to do so, given what it considers to be like behavior from the US and EU.
Make no mistake: the EU is giving every opportunity to Russia to advance in the economic vacuum that will be left behind as default sweeps through the markets of Greece. For six months it has let the confidence in the Euro, and the EU itself, be shaken through vicious back-and-forth political rhetoric. While the concessions that Greece demanded were far more than the EU felt allowable, Greeks understandably balked at even more austerity. With Russia actively participating in Greece’s alternative plans, the EU needs to be legitimately concerned about watching Russia slowly embrace Greece away from Western Europe and more towards its Orthodox brother and the more East-leaning shift it is trying to create in the Caspian and beyond to China. If Greece rebounds as a result of Russian influence, it will give pause to other newer and potential EU members facing similarly severe austerity measures. The EU can still salvage this situation, but it will take drastic compromise since Greek voters appear resolved to accept a Euro exit. With severe austerity the question simply becomes, “how can a state effectively govern when it has little decisions over its budget?” Greece seems to be saying it cannot and therefore is seeking alternative answers to this European economic stick. It proclaims to want economic dignity back. And Russia just might be the country holding the dignity carrot.