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Prime Minister May’s hard Brexit

Giancarlo Elia Valori

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The speech of the British Prime Minister, Theresa May, delivered on January 17 at Mansion House, foreshadows a new and more global Britain, but above all entails the end of the European Union as we know it today.

Thirty years after the speech delivered by Margaret Thatcher at Lancaster House in 1988, when the conservative Iron Lady accepted the European single market and the freedom of movement and trade within Europe, a new conservative Iron Lady states she is ready to leave the European Union and the European single market.

In the European Union, Great Britain has always experienced Germany’s marked hegemony that it has tried to control both by entering the European Union and then deciding to leave it, as it is currently doing.

Great Britain never wants hegemonic powers in its way: neither the EU nor the Franco-German Europe, nor even the possible EU of the South, with the alliance between Italy, Spain, Greece, the Balkans and Austria.

In fact, the documents of the Bank of England on the euro have always been very clear: we do not want the single currency because, as Great Britain, we are a global power and the only counterpart for the Commonwealth, and we do not accept a Mark disguised as European currency, namely the euro, which is the result of a pact – proposed by Margareth Thatcher herself – between those who did not want German reunification and Germany itself.

The core of the issue was as follows: Germany could be reunited but it had to give its currency as ransom.

At that time the Italian President of the Republic, Francesco Cossiga, was in very close contact with Margaret Thatcher, on the one hand, and Helmut Kohl on the other.

He carried out a strong and necessary mediation activity.

Hence, in his recent speech, Theresa May has made it clear that Great Britain wants back its full sovereignty on migration issues, which will be the axis of the future “engineering of nations” and the primary tool for controlling and managing the labour force, its complexion and cost. She also wants full sovereignty on customs – another essential factor in the relationship between Great Britain and the European Union.

Hence, following the traditional model of the Free Trade Agreement (FTA), May’s government will manage a series of trade agreements with the individual EU and non-EU countries. Obviously what will be missing in the Euro-British regulations will be richly offset by the new economic relations between Great Britain and its wide Commonwealth, as well as between Great Britain and Donald Trump’s United States.

Let us wonder, however, whether the United States still need the European Union – this is currently the real question.

In fact, only the US weight and clout did enable France and Germany to create the first pan-European institutions and only Great Britain did act as a strategic and economic counterbalance to ”Rhenish Europe”, the one that Charles De Gaulle defined as “the United States’ Trojan horse”.

Indeed, before the vote on Brexit, it was precisely Great Britain to strongly support the Transatlantic Trade and Investment Partnership (TTIP), which was designed as a geoeconomic alternative to the probable fragmentation and disruption of the European Union.

Hence Brexit has had a long-standing gestation and it will completely change the EU strategic and economic landscape.

It was worth recalling that it was Prime Minister Edward Heath to bring Great Britain into the European Common Market in 1973 – a choice reaffirmed by the outcome of the referendum held by Wilson two years later.

However, throughout the 1980s, the European integration process slowed down significantly and, therefore, in those years the City of London created wealth with its monetarist policies of high interest rates. This enabled the holders of UK government bonds to make excellent profit and also enabled the City to stabilize its rates without adhering to the European Exchange Rate Mechanism (ERM).

In 1986 Thatcher’s financial reforms established a close link between the City and the US financial system – a link which will obviously make Brexit even stronger.

However are the United States really interested in having a “Little Britain”, which will no longer be the trusted channel with the EU, or will they strengthen the traditional ties of the Anglosphere between Britain and the United States?

And what will be the geopolitical and financial link between one of the largest economic areas of the globe, namely he EU, and the United States, which cannot certainly afford to neglect Europe?

Certainly Donald Trump was clearly in favour of Brexit and, after taking office, he will be the first world leader to receive Theresa May at the White House on January 27th.

Moreover, it is well-known that President Trump does not like the European Union. He prefers to deal with the individual EU Member States, but this does not mean that Europe is not still decisive in the US strategic and economic framework.

Do the United States want to keep united and friendly a great commercial and political area, namely the EU, which acts as a rampart vis-à-vis the Russian Federation and the Arab and Islamic world, or do they want to deal only with its Member States, thus destroying the Union and paving the way for Chinese and Islamic capital?

We will soon see Donald trump’s proposals in this regard.

Moreover, the origin of the European Monetary Union lies exactly in its unusual and asymmetrical relationship with the United States: the slow creation of the single currency stems from the crisis of the Bretton Woods agreements, created specifically by the United States, by the strong exchange rate volatility in that phase and, above all, by the US refusal to restore a global monetary balance.

Only China and, in other respects, the Russian Federation are currently interested in redesigning, with the EU, a new international monetary and financial system which will be based on a basket of currencies at variable exchange rates in a predefined range.

Furthermore today Germany does no longer need a highly regulated economy, mediating between capital and labour, as was the case until 2000 and up to the financial crises of 2006 and 2009.

Hence Germany can further financialize its economy by lending euro to its periphery and hence maintaining extremely high trade surpluses, as currently happens, or can invest directly in the US system through the City.

The United States will always have a growing share of high-interest and short-term “toxic” assets.

Moreover, regardless of Brexit, the City’s trading and transactions with the United States and the European Union have decreased significantly.

London’s financial centre does not yet know whether to invest in the EU or elsewhere in the world, especially in China or in the BRICs and the British government’s participation in the new Asian Infrastructure Investment Bank proposed by China has created strong tensions with the United States. Said tensions will persist if the North American financial markets maintain their growth.

Another problem not to be overlooked is that neo-liberal policies, from Thatcher onwards, have deeply divided Great Britain socially and geographically.

In Great Britain the Gini coefficient, a statistical measure of social inequality, has risen from 0.26 in 1979 to the current 0.4.

The gap between the rich London and the South of the country and the increasingly poor North is particularly evident.

All this could lead to an inherent weakness of the British political system, irrespective of the party in power.

Moreover, as many commentators have noted, also Donald Trump’s election is a kind of Amexit: the US unilateral withdrawal from the post-Cold War global system, which had not been well negotiated and was based on the Russian and Chinese strategic void filled by an America which was becoming the only global power.

This is no longer the case – the United States are no longer the “indispensable nation”. With President Trump, the United States will no longer act as the world’s policeman and, in the North American decision-makers’ minds, Brexit means that the EU shall either break up or rebuild itself as a real Union.

Also NATO which, until Barack Obama’s Presidency, denied to Russia and China the right to their natural spheres of influence – often with suicidal intentions – will be a US (and British) direct instrument or an inter-European mechanism which, however, the EU Member States shall pay largely by themselves – and today’s Europe has certainly neither money nor strategic ideas.

Moreover, Theresa May’s Brexit is not yet well-defined within the British political scene: the Supreme Court’s ruling has forced the government to seek approval from Parliament before formally starting negotiations on Article 50 of the Lisbon Treaty. The Scottish National Party wants to remain in the EU and threatens to hold a second referendum on the separation between Scotland and England and it also wants to table over 50 new amendments to the law for Britain’s withdrawal from the EU according to Article 50 of the Lisbon Treaty.

The Labour Party itself wants to slow down the process of separation between Britain and the Union, although it will generally vote in favour of Brexit in Parliament.

The Tories have no majority in the House of Lords and the Bremain supporters could cause problems to Prime Minister May’s government.

Hence if – as currently everything leads us to think – President Trump manages the new relationship with Britain vigorously, the UK economy will be granted full and free access to the US financial and non-financial market, without forgetting that Prime Minister May wants better strategic and military cooperation with the United States, both for renewing the Trident missile system and for tackling the other matters relating to global intelligence.

As a result of Brexit and the consequent British full entry into the US economic and strategic sphere, the EU will be less effective also at military and intelligence levels.

Hence we will see what will happen on January 27 next, after Prime Minister May’s meeting with President Trump in Washington.

At technical and legal levels, the British Prime Minister intends to close the economic negotiations between her country and the EU Member States before the end of the procedure pursuant to Article 50 of the Lisbon Treaty, which also means she wants to avoid “cliff edge”, namely the tariff and economic cliff edge of spring 2019, the moment of real Brexit.

Not surprisingly, Prime Minister May talks about an “implementation phase” from now until 2019, before the end of negotiations with the EU on Article 50.

The political and strategic significance is very clear: Prime Minister May wants to stay on good terms with the EU area but, if Europeans want to “punish” Britain, London will become a centre for the trade, financial and political war against the European Union.

If the EU has a punitive attitude vis-à-vis the UK on Article 50, Britain will become a low-taxation and low- regulation economy; it will gradually acquire a large part of European industries and will wage a tariff and financial war against the EU and its Member States.

Not to mention the City’s finance, which will be directed against the euro area and will support any aggressive US dollar operation.

Or any aggressive operation of other countries, which will certainly come to the fore against an ever weaker Euro.

Currently the global economic trends are clear: increased uncertainty on global financial markets, which favours emerging economies and their countries of reference, such as Russia and China; reduced dependence of peripheral markets from those of the First World economies (the so-called decoupling) and the rise of China’s public debt.

Probably, the growth of public spending in the United States will add other crisis factors on the global scene, while we must not neglect the agreement between Russia and OPEC for reducing oil extraction and the related increase in oil barrel prices.

The EU may remain the old regional union of the Cold War and it will be bound to break up under the combined pressure of Brexit and Trump’s Presidency in the United States, or may become smart and hence start or extend negotiations with Israel, the non-EU Balkans’ area, South Korea and Singapore – obviously in addition to China and Russia – for a new Eurasian economic union.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

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A New Wave of Euroscepticism in the Heart of Europe?

Lisdey Espinoza Pedraza

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As we are about to enter a new decade, the European Union seems to be facing one of its worst existential crises since its conception. Euroscepticism is not something new; ever since the efforts to achieve the European integration started in the 1950s political parties that made of anti-integration their main platform started to mushroom throughout the continent. the current pandemic, lockdown measures, an economic crisis that looms seem to be exacerbating divisive trends in Europe.

Most recently, the 2008 and 2009 financial crises that brought radicalism, populism, and fringe politics to the forefront of the political agenda again, especially in southern Europe which felt the worst effects of the economic downturn: Spain, Portugal, Italy, and Greece. six years later, in 2015, the migrant crisis further deepened the already existing fractures among member states, and particularly throughout Eastern Europe, the continent witnessed can you surge in populist narratives, however this was also the case in countries that had been traditionally immune to such rhetoric such as the Scandinavian countries, and  Sweden in particular.

There is a false sense of Swedish exceptionalism for welcoming refugees. it is true that Sweden has been a generous safe haven for migrants, and they have received more refugees than many other European countries. However, one cannot assume such policy truly reflects the sentiments of the population. soon after Sweden started welcoming migrants, political parties started to turn to an ultra-nationalist, anti-immigrant rhetoric blaming massive immigration for a possible collapse of their health, social and welfare systems.

Sweden is not an isolated case, populists have had considerable media exposure and have successfully started to alter the political agenda of the European Union in recent years. they cannot and should not be taken lightly. radical political parties do have realistic chances to become mainstream alternatives and attain power in many European countries such as  France, Italy, Greece, The Netherlands, Austria, Poland, Hungary, and the UK.

Populism is particularly appealing to those that feel they do not belong in a new ever-changing reality because of its reactive nature. populism reminds voters of glorious pastthat is long gone because of the actions of those currently in power. populism thrives on the division  of “us” vs “them”, and on the need to protect national institutions and inherent values that are being eroded and attacked.

While Euroscepticism trends started to subside ask the European economies started to grow and the migrant inflow started to stabilise , there was a widely spread false sentiment of stability and the assumption that Euroscepticism would wither away. Brexit and the domestic and international chaos it caused in the UK and in Europe reinforced this perception. soon after the failure in negotiations and the never-ending extensions of the process did translate into a drop in the demands for a membership referendum in most European countries. However, the current development may as well reverse that trend  

Populist leaders across the continent have already started to use the pandemic to legitimise many of their prior ideological stances: protectionism; anti- globalization; anti-immigration policies; closure of borders; nationalism and tougher law and order policies. Italy so country that could dictate where European politics will head to in coming months or years. Italy has been hit particularly hard in this pandemic, not only by the high human cost, but also by the dark economic prospects for the country. Italy will be stricken by the worst economic contractions in Europe and its debt  is expected to rise two over 150% of their GDP. Italy is therefore set for one of the longest recoveries in Europe. with all this into account, the idea that Italy could follow the UK in its anti-European mode  is something that should not be that lightly put away.

Italy has been suffering from a wave of European anti integration sentiment since the 2008 crisis, according to a survey by the Tecné Agency, 42% of Italians are in favour of withdrawal from the EU, by December last year, only 26% of them supported the idea. This percentage could increase if Italians are not happy with post-pandemic measures and could further enflame North and South existing tensions. the pandemic has struck pre-existing weaknesses and frailties and has played on a sense of abandonment. populists in Italy are not an exception amidst this pandemic: they are returning to their very familiar core book: they are portraying themselves as the only answer to protect the people.

Italians feel they were abandoned by the rest of the European Union to fend for themselves; even now when the European Union has decided on a massive asset-purchase scheme of Eurobonds or coronabonds, the Union is blind to the fact that economies among their member states will be affected differently. these has also reinforced the belief that this measure is contrary to the solidarity principle the union is based upon. Ideally, to prevent widespread feelings of inaction a lack of solidarity, Germany and France should possibly toy with the idea of a shared debt, especially when there are already apparent cases of serious insolvency from southern member states. this can also potentially limit the support for populism across the continent.

Italy in particular he’s a worrying case, unlike the UK with Brexit, Italy is a founding member of the European Union and if they were to hold a referendum on European Union membership with the same result as the 2016 one in the UK it would be catastrophic for the European Union’s credibility and legitimacy. this is a very realistic result as the post pandemic continues to impact on the continents social, economic, and political cohesion; and especially in countries, like Italy, which have been flirting on and off with populism, and they seem to be a crisis away from becoming the next Brexit or the next debt disaster in Europe.

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Kosovo between USA and EU

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The issue of Kosovo is yet again becoming one of the hottest on the international agenda. While the US administration is set on the early (before the presidential elections in November) signing of an agreement on normalizing relations through territorial exchanges,  the European Union leadership, under pressure from Germany, is pursuing their own agenda: a settlement of political crisis in the region and prevention of a new territorial carve-up in the Balkans. These differences can well result in a buildup of tension on both coasts of the Atlantic not only regarding the Balkan but also in relation to other burning international issues.

So far, the United States is somewhat outplaying the EU on this issue. The Trump administration, after securing solidarity with Kosovo’s President Hashim Taci in his confrontation with radical Prime Minister Albin Kurti, has de facto forced the latter to resign. It is the leader of the Self-Determination Radical Movement who is strongly opposed to an agreement with Belgrade and partition of Kosovo into Serbian and Albanian parts in exchange for the lifting of Serbia’s objections to Pristina’s membership in international organizations. Considering that Serbia’s position is backed by Russia as a permanent member of the UN Security Council, there are grounds to assume that Serbia’s refusal to counteract efforts by Kosovo diplomacy will mean Kosovo’s admission to the UN as an independent state – even in the absence of a legal acknowledgment of independence on the part of Belgrade and a number of EU members (Spain Greece, Cyprus, Rumania and  Slovakia).

Understandably, the EU leadership is categorically against such a prospect as undermining the unity of the organization and fraught with new changes of the Balkan borders. Brussels has been doing its utmost to consolidate Kosovo’s political landscape and at the same time isolate the chief “negotiator” with Belgrade – President Hashim Taci. The EU Commissioner for Neighborhood and Enlargement Oliver Varhelyi said openly on May 7 that Kosovo needed a strong and stable government. Commenting on the situation following the vote of no confidence in the Albin Kurti Cabinet pronounced by the Kosovo Parliament on March 25, the Commissioner pointed out that ‘time is too valuable to be lost’: “If we do want to overcome the crisis, if we do mean to put Kosovo on the European track, we must do everything we can to come to an early solution in order to set up a sustainable government”.

Pristina should have no doubts which side Brussels is on in matters relative to Kosovo’s government and partition of Kosovo into Serbian and Albanian parts. To this end, the next day, on May 8th, spokesperson for Kosovo in European Parliament Viola von Cramon said that Germany is against changing the borders between Serbia and Kosovo. In her words, any carve-up of borders in Western Balkans requires public approval at the referendum. «A solution is not in the hands of the presidents of two countries since an agreement they sign is to be ratified by the parliaments of both countries and be acceptable for all», – she said in an interview on the Kosovo TV Channel RTK.

Simultaneously, she de facto acknowledged the presence in the EU of grave differences on a further development of relations between Belgrade and Pristina. When answering a question by a Kosovo journalist as to when we can expect liberalization of visa regime between Serbia and Kosovo, Viola von Cramon said that along with the current difficulties it looks like within the EU there is no political will to take such a decision.

Spain is among countries which refuse to acknowledge self-proclaimed independence of Kosovo and which speak against a carve-up of Balkan borders. Spanish media and public opinion have been following closely all the possible scenarios of the development of the situation in the Balkans through the prism of the country’s own problems that have to do with separatism on the part of Basques and Catalonians. However, they are fairly skeptical about EU efforts.

The Spanish El Mundo writes in this regard that «in the heat of coronavirus epidemic the heads of state and government of 27 EU members and six Balkan countries held a video conference. «It is not a summit on EU expansion», – Spain keeps repeating. For if it were different, Prime Minister Pedro Sanchez would have never agreed to take part in a high-level event, which was also attended by Kosovo’s president. This summit is designed to bring the sides concerned closer and bridge the differences. Citing Brussels’ sources El Mundo admits that the EU will not be able to offer the Balkan partners the prospect of early membership in the alliance , despite reports about the start of preliminary talks with Albania and North Macedonia. «Practically everybody came to the conclusion that the European Union would not expand for at least another ten years. What happened in 2004, when 10 countries joined the EU at a time, will not take place again. No appetite, no desire. And in the light of disagreements with Hungary and Poland in recent years, nobody wants more experiments», – El Mundo reports.

Mass media in Turkey – a country that found itself locked out of the EU – are as frank in their comments on the crisis in the EU’s Balkan policy. «The decision to start talks with Albania and North Macedonia about a full membership in the European Union means that the EU’s influence in Western Balkans will increase. However, this does not mean that the region will fully fall under the influence of the EU. For nearly 20 years the Balkans have been a buffer zone between big powers. Western Balkan countries where the US influence is strong include Kosovo, Bosnia and Herzegovina, North Macedonia», – the Turkish Anadolu Ajansı news agency.

Meanwhile, it is essential to remember that a mere idea – even if hypothetical – of granting Kosovo and other Balkan territories membership in the EU comes instrumental in confrontation with the USA. The latter can use financial and military-technical support but cannot promise membership in regional blocs or multilateral trade agreements. «The battle for influence in Western Balkans is currently in full swing. Given the circumstances, it is possible to say that the EU, which chose to start talks with Albanian and North Macedonia on full membership in the European Union, outflanked its competitors and has hit the top», – the Turkish news agency reports: «Besides, the EU considers it an advantage that countries such as Greece, Slovenia and Croatia are members of the EU, while Serbia and Montenegro continue talks on membership in the EU».

Given the situation, Russia is set on close coordination of effort with Serbian leaders and support of negotiating process in a format that makes it possible to take into account the interests of Serbs and ensures the possibility of a compromise. Simultaneously, Moscow underscores the priority of the UN mechanisms over any other formats of negotiations (including under the patronage of the EU) and the importance of taking any decisions that could be reached between Belgrade and Pristina to the UN Security Council. 

From our partner International Affairs

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A Sad Anniversary: Ten Years of the Partnership for Modernization

Dr. Andrey KORTUNOV

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One approaching anniversary seems almost entirely lost in this spring’s torrent of different celebrations and commemorative dates. Ten years ago, the “Partnership for Modernization” Russia-EU Initiative was launched. Let us recap: at the 25th Russia-EU summit in Rostov-on-Don on May 31—June 1, 2010, Russia’s President Dmitry Medvedev and President of the European Commission Jose Barroso announced that the Partnership marked a new stage and level in the cooperation between Moscow and Brussels.

Back then, the parties also outlined the priorities for their joint efforts. These included expanding opportunities for investment in the key sectors driving growth and innovations, bolstering and deepening bilateral trade and economic collaboration, and promoting small- and medium-sized enterprises. The parties noted they would prioritize the alignment of technical regulations and standards and enhanced protection of intellectual property rights. Transportation earned special mention.

Promoting a sustainable low-carbon economy and energy efficiency, and support for international talks on fighting climate change were also set as forward-looking areas for sectoral cooperation. The parties agreed to strengthen collaboration in innovation, research and development, as well as space exploration. They noted the need to ensure balanced development by addressing the regional and social consequences of economic restructuring. Additionally, the Partnership envisioned effective functioning of the judiciary and stepping up the fight against corruption, promoting people-to-people links and boosting dialogue with civil society in order to foster participation by individuals and businesses.

Russia and the European Union pinned great hopes on this initiative. On the one hand, both Moscow and Brussels clearly saw that, following the surge in the early 21st century, Russia–EU relations were stalling and becoming bogged down in endless bureaucratic approvals and they were slowed down by many disagreements within the EU itself. Russia–EU biannual summits were gradually losing substance and were becoming less and less productive. The prospects for achieving agreement on such fundamental issues as energy cooperation or a visa-free regime remained vague, while the timeline for signing a new Russia–EU framework agreement to replace the hopelessly outdated 1994 Partnership and Cooperation Agreement was moving further and further into the indeterminate future.

On the other hand, the overall political climate at the turn of the first and second decades of the 21st century favoured new initiatives in Russia-Europe relations and prompted the parties to set more ambitious goals. By 2010, the Russia–US “reset” mechanism had already been launched, Moscow’s relations with Central European states, including Poland, were gradually improving; the EU had emerged from another constitutional crisis, and the armed conflict in the South Caucasus was receding into the past. Economic ties between Russia and its western neighbours had passed through the ordeal of the global financial and economic crisis of 2008-2009 and demonstrated steady positive dynamics.

Accordingly, the parties viewed the Partnership for Modernization agreement as summing up a certain intermediate stage in Russia–EU relations and creating an additional positive impetus for endowing these relations with new dynamics. Both Moscow and Brussels had reasons to be optimistic about the future: the second decade of the 21st century promised momentous new achievements, new political and economic breakthroughs in both the West and the East of Europe.

Lost Illusions

Nowadays, the 10th anniversary of the Partnership for Modernization is unlikely to attract much attention either in Russia or in the European Union. European leaders will not arrive at a new Russia–EU summit. Experts, entrepreneurs and journalists will not flock to crowded international conferences and forums marking the anniversary. The participants in the Rostov-on-Don summit will not be looking back and reminiscing to the younger generation about the preparations, discussions, and signing of the historic Partnership announcement. The coronavirus pandemic that has stopped all air travel in a petrified Europe and imposed a strict moratorium on public events is not the only reason for this. The thing is, the Partnership is no longer worth mentioning in either the West or East.

Jose Barroso, Former President of the European Commission, has been working for the USA’s Goldman Sachs for a long time; his move to the private sector was scandalous and prompted a special investigation by the European Union. Dmitry Medvedev left the office of Russian President less than two years after the Partnership was launched and, since January 2020, following his appointment as Deputy Chair of Russia’s Security Council, he is no longer involved in matters of international economic cooperation. Today, neither of these men apparently sees the Partnership for Modernization as one of their principal political achievements. Quite possibly, many of those who worked in some way on preparing the Partnership today feel a little bit awkward: how naïve and gullible we were ten years ago if we could discuss such a document in earnest!

It is hard to believe today that, just ten years ago, such in-depth cooperation between Brussels and Moscow could have been discussed as a practical matter. It is equally hard to believe that, in November 2010, the President of Russia attended the Russia–EU summit in Lisbon and discussed the practical prospects for partnership relations between Moscow and NATO based on delineating areas of responsibility for maintaining global security.

History has amended the plans of the Rostov-on-Don summit’s participants as it saw fit. The second decade of the 21st century was a time of trial for both Russia and the EU. Both parties are emerging from this decade with a heavy burden of new and unforeseen problems; acutely exacerbated bilateral relations make this burden all the heavier. Neither the East nor the West of Europe is any longer suffused with the cheerful historical optimism of ten years ago.

Given the radically new circumstances, is it worth remembering the events of ten years ago? Apparently it is, at least to understand what went wrong, why great expectations gave way to bitter disappointments, why, instead of an upswing, everything that had been achieved collapsed. These recollections are necessary at least for us to be able to assess the prospect for Russia-EU interactions in the third decade of the 21st century realistically.

Some believe (especially in Europe, but there are also some proponents in Russia) that, as regards implementing the Partnership for Modernization, everything went well between Moscow and Brussels up until the events in Crimea and Donbass in the spring and summer of 2014. Had there been no 2014 crisis, we would have been reaping the rich harvest of a decade of a mutually advantageous partnership and would have been building tremendous plans for the future.

The tragic events of 2014 did, indeed, draw a bold line under a long stretch of Russia–EU relations, as well as nullifying the Partnership’s prospects. Yet it would be a mistake to reduce all the problems to a single, if extremely acute, crisis. Had everything been going well with the Partnership (and the plans envisioned a new framework agreement following hard on the heels of the Partnership), the 2014 crisis is unlikely to have taken place. The parties would have had enough common sense and specific economic stimuli not to cross the line that separated us from a rapid and irreversible exacerbation of relations. And, if the line was, indeed, irreversibly crossed (be it in January, March or July 2014), this would have meant that, by 2014, the parties already had no particular expectations concerning the Partnership for Modernization achieving its full fruition or some positive breakthroughs taking place in bilateral relations in general. In other words, the four years of joint work within the Partnership’s framework did not perform their role of a deterrent that, under other circumstances, the parties might have hoped for.

The Partnership’s Ambiguity: Contents and Mechanisms

Did the Partnership concept contain some initial flaws, drawbacks or ambiguities that prevented its fully-fledged implementation? Today, looking back at it with the benefit of decade-long hindsight, we have to answer that question positively. From the very outset, the concept had inbuilt contradictions inherent in both the very term “modernization” and in the priority mechanisms chosen for implementing the concept.

Let us begin with the contents. When coordinating the Partnership’s concept and when implementing it, Russia invariably stressed its technological and innovative dimension. President Dmitry Medvedev repeatedly emphasized that the concept applied primarily to deepening cooperation in high tech spheres. These have always been among the most difficult and sensitive for international cooperation in general and between Russia and the West in particular. Implementing the idea of Russia and the EU’s mutual “interpenetration” into each other’s high-tech economic sectors can be likened to the most difficult open-heart surgery, which could only be performed by a top-notch professional. Even with both parties having the political will for it, it was virtually inevitable that they would run into many difficulties in the way of the Russia-EU “modernization alliance’s” functioning.

The EU focused most on Russia’s social and political modernization, on bringing Russia’s institutions and practices up to the European level. The “Partnership for Modernization” was frequently seen as some analogue of the EU’s Eastern Partnership programme for Central European states, which mostly emphasized the humanitarian and legal aspects. Naturally, the EU would act as the mentor and Russia was assigned the role of obedient student. That also required Brussels to act with the utmost delicacy and caution (brain surgery?), which, sadly, it did not. Suffice it to recall here the activities of the EU­–Russia Civil Society Forum: Brussels officials assumed the unilateral right to determine who in Russia had the right to represent this civil society and who did not. Since Russia, unlike Central European states, was not aiming to join the European Union, such a pointedly and obtrusively paternalistic attitude on the part of the EU could not but annoy Moscow.

These contradictions in defining “modernization” probably were not irreconcilable and could have been settled somehow. Moscow could have acknowledged that technological modernization is closely linked to social modernization, while it is impossible to attract European investment and technologies without improving state governance, reforming the judiciary, protecting intellectual property and the rights of investors. Brussels could have remembered that the EU had always been rather flexible in applying the principle of “political conditionality” (the requirements that the EU’s partners respect democracy, human rights and the rule of law) and could have used the experience of the EU’s relations with, for instance, China. Brussels could have entertained a broader definition of “civil society” leaders in Russia, adding some politically neutral organizations working on environmental issues, education, socially-orientated business, etc. to politically-engaged NPOs. Unfortunately, both parties preferred to insist on their own interpretations of the Partnership’s priorities, thereby provoking a negative response from their counterpart.

The parties’ different approaches were manifested in their ideas concerning the forward-looking mechanisms for implementing the Partnership. Europe would have liked to emphasize “bottom-up” modernization, meaning modernization originating in the private sector, expert networks and civil society and moving toward major economic projects and sectoral cooperation. Russia, on the contrary, prioritized “top-down” modernization, that is, modernization originating with the government and ministries and moving toward individual enterprises. Moscow had always pinned its principal hopes on sectoral dialogue as the principal mechanism for implementing the Partnership. That is, the parties’ ideas concerning the cooperation drivers were quite different from the outset.

Let us add to the mix such a complicating factor as significant structural differences in the economies in the West and the East of Europe: Moscow had always pinned its principal expectations concerning the Partnership’s implementation on big business, while Brussels invariably emphasized the EU prioritization of development of cooperation at the small- and medium-sized business level. Consequently, Russia calling for the partners in Brussels to launch the development of specific large-scale infrastructure projects and create socially significant manufacturing enterprises did not prompt a particularly enthusiastic response on the part of EU officials.

On the other hand, the EU negotiators never missed an opportunity to say that Russia’s modernization could not be efficient and comprehensive if it did not extend to the so-called “strategic sectors” protected from foreign competition by their special legal and political status and not having real stimuli for technological re-equipment and introduction of up-to-date corporate governance. It is easy to imagine the response these statements must have prompted among influential top managers of Russia’s state corporations!

Under different circumstances, a mutually acceptable balance between these two approaches could probably have been found. Unfortunately, when it came to Russia, the traditional “agency-based” practice of structuring such projects was in the way: the efforts of government officials were rarely supplemented by the requisite mobilization of the expert community. The activities of the Institute of Contemporary Development (INSOR) were an exception as INSOR came to be an important venue for collaboration between officials and independent experts. As for the European Union, it was incapable of implementing the Partnership in the “top-down” format simply because the relevant agencies in Brussels were institutionally weak: the given departments of the European Commission, headed by their Directors General, could only loosely be seen as direct counterparts of Russian ministries and agencies headed by federal ministers.

It appears, however, that the fatal blow to implementation of the Partnership was delivered by something other than the differences outlined above. Such an initiative could have been implemented only if it had been constantly kept in sight by the parties’ top leadership unconditionally prioritizing it. In the meantime, over the years since the Partnership was signed, Russia was gradually moving away from the innovative development strategy, at least in the shape and form formulated during Dmitry Medvedev’s Presidency. Jose Barroso’s team, in turn, rapidly lost interest in the Partnership following Vladimir Putin’s return to the Kremlin and switched its attention to other projects on the eastern frontiers of the European Union.

The Virtue of Necessity

We cannot go back to the year 2010. Even if, by some miracle, the conflict within and around Ukraine were to be solved promptly, on mutually acceptable grounds, the contradictions inherent in the Partnership for Modernization would not go away. Additionally, ten years on, the concept has definitely become obsolete. Our world is now different, the relations between its major actors are structured differently, the dominant ideas of the main challenges and threats faced by individual states and by humanity as a whole have changed radically.

Yet it is too early to write off the Partnership for Modernization. Its relevance might increase precisely because the past ten years have proven to be such a trial for both Brussels and Moscow. Although the European Quarter in Brussels and the Kremlin in Moscow still sound triumphant fanfares, the off-key notes in that cheerful music can be heard with increasing clarity. Little is now left of the former triumphant sentiments of both the European and Russian elites and of the European and Russian societies. The European Union faced an unprecedented migration crisis, experienced a sharp upswing in the popularity right-wing populists and Euro-sceptics, went through a painful divorce from the UK and found itself on the receiving end of the USA’s previously unthinkable hostility.

Russia had to face a variety of economic sanctions, withstand the devaluation of its currency and a drop in the population’s real incomes, and acknowledge the essential loss of its energy superpower status. Both parties are among the countries and regions particularly affected by the coronavirus pandemic. Although, over the last ten years, both the European Union and Russia have demonstrated an impressive ability to weather shocks, it must be acknowledged today they have far fewer objective grounds than ten years ago for confidence in a sunny future. Recognizing one’s weakness and vulnerability and realizing one’s common interests with a partner—surely this is a combination that produces readiness to compromise?

Europe found itself squeezed between the US, which still dominates the world and looks on Europe with ever diminishing favour, and China, which is gradually gaining power. Naturally, expanding cooperation with Moscow will not resolve all of Europe’s problems, but it might turn out to be an instrument for buttressing the EU’s current standing in global politics and the global economy and, as such, it clearly should not be neglected.

Having lost a significant chunk of its natural resource rent, Russia is being forced to seek a new socio-economic development model, and it will have to do so under extremely unfavourable external circumstances. Where will it be looking for this model? Perhaps China, India or Singapore? Even given all their advantages, it is doubtful that Asian modernization models would suit the predominantly European society that Russia was in 2010, is in 2020, and will remain in 2030, irrespective of what the many proponents of “Eurasian identity” would like to convince us of.

Is this not an incentive to start working on Partnership for Modernization 2.0? Sceptics are likely to ask: what about the unresolved problems in the east of Ukraine? What about the continuing divergence between the Russian and European political development tracks? What about the unconditional priority both Brussels and Moscow accord their own domestic issues? These questions are reasonable and fair. Yet we will never be able to answer them if we remain unable at least to pencil in a general outline of the desired common future. An attractive image of a desired future should, among other things, become a powerful stimulus for overcoming the negative legacy of the past decade, for resolving the specific issues that stand in the way of a new rapprochement between Russia and the EU.

We would very much hope that the anniversary of the Partnership for Modernization will become not only a reason to mourn the failed hopes of the past decade but also an incentive to think about the opportunities offered by the next ten years.

From our partner RIAC

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