MOSCOW BLOG: Is Brexit a victory for Putin?

MOSCOW BLOG: Is Brexit a victory for Putin?
Vladimir Putin chairs a meeting on defence procurement in May 2016.
By Ben Aris in Moscow June 27, 2016

Is Brexit a victory for Russian President Vladimir Putin? Several commentators have claimed it is, but the Kremlin itself has said little and offered a mixed message.

With Brexit, Vladimir Putin is rid of his strongest EU opponent,” respected eastern Europe specialist Steve LeVine wrote in Quartz on June 25.

“Ever since Moscow faced its first EU sanctions after annexing Crimea in 2014, Russian President Vladimir Putin has faced one all-but-immovable object on the continent - the United Kingdom. For 27 months, as Putin has attempted to erode European unity and get at least some of the sanctions lifted, UK prime minister David Cameron has been his always impossible opponent, helping to cajole the rest of the EU’s 27 members to stay in line on the sanctions,” LeVine wrote.

While it is true that the UK has been pro-sanctions, this has been more a function of its “special relationship” with Washington than due to its commitment or involvement with Russia.

Of all the countries in Europe, Britain has been one of the least involved in Russia over the last two decades. The UK government likes to boast that Britain is “the biggest European investor into Russia”, but that is almost entirely due to BP investment into Russian state-owned oil major Rosneft – which ironically is on the sanctions list, but still generating hefty profits from the work with the British company.

BP reported an 80% drop in profits in the first quarter of this year and said it could cut its capital spending target to $17bn in 2016 from $17bn-19bn earlier after oil prices slumped. But that follows on from the surprise jump in profits in 2015 after the company made $450mn more than expected from its just under 20% stake in Rosneft in the fourth quarter of 2014 – a good six months after Russia’s annexation of Crimea. It seems that Britain is committed to punishing Russia, except where the profits of its leading companies are concerned.

Elsewhere, British companies have been slow entering the booming Russian retail market. The UK has an estimated 400 companies registered in Russia, less than the 500-600 that France and Italy have and way behind the 6,500 that Germany has, but even these are operating at a low level. Leading UK retailer Marks & Spencer’s entered the Russian market during the crisis years, but so far it has a mere 20 stores all housed in someone else’s posh Moscow shopping malls. French retailers Auchan and Leroy Merlin are building their own hypermarkets all over the country and the German chains Obi, Media Markt and Metro, to name only the biggest, established wide-reaching chains in virtually every significant city in the country years ago. And that is just retail; German companies are represented in most sectors of the economy.

Take away BP and Britain is a bit player in the Russian economy. Its most significant impact on Russia is as a second home for its rich and a school for their children.

Absent from the fray

On the diplomatic front, the UK has played almost no role in the Ukraine events of the past three years. Britain was conspicuous by its absence on Maidan Square in central Kyiv during the anti-government protests that started in 2013 and it was not a member of any of the diplomatic missions that attempted to negotiate with the opposition in the depths of the crisis. Those were led by Germany, France and Poland.

The UK was so uninvolved in the Minsk II negotiations that while German Chancellor Angela Merkel was in the Belarusian capital with French President Francois Hollande, the British Embassy in Moscow learned of the results of the talks only by reading the German mission’s press release the next day, according to bne IntelliNews sources. Britain, by dint of its loyalty to the US, has been in the keep-sanctions camp, but it has not participated in any significant way to shaping a resolution. The main impact of taking the UK out of EU will be to weaken US influence in Europe where the resolve to keep sanctions in place is crumbling.

This point was not lost on the Russians. As a former US ambassador to Russia, Michael McFaul, noted in an opinion piece in the Washington Post on June 25,  Boris Titov, Russia’s ombudsman for business who is hardly a militant nationalist by Russian standards, made the argument most clearly when he cheered on Facebook, “UK out!!! In my opinion, the most important long-term consequence of all this is that the exit will take Europe away from the Anglo-Saxons, that is, from the USA. This is not the independence of Britain from Europe, but the independence of Europe from the USA.”

Certainly the Kremlin will see the exit of Britain from the EU as helping its campaign to have sanctions softened at least. Moscow Mayor Sergei Sobyanin also commented on social media after the result, saying: “Without Great Britain in the EU, no one will so zealously defend the sanctions against us”.

Ukraine's loss

Brexit is less of a victory for Putin and more of a defeat for Ukraine and to a lesser extent the other five candidate countries queuing up for EU membership, almost all of which are in southeastern Europe.

As McFaul points out, Ukraine’s case is weakened. The country is not united on EU values let alone EU membership (which in any case has never formally been offered) and the fact that a core member of the EU is leaving undermines the case for new members joining. The UK’s decision to go will lead to more people in Ukraine asking why they should join a club that other countries are leaving?

More insidiously, Brexit undermines the goals of Article 49 of the Treaty of Lisbon, the article that deals with countries that want to join. The EU is supposed to be about aspiring to laudable values like democracy, equality, tolerance, human rights and freedom of speech, but the main reason for the exit seems to be money: “We will be better off without Europe”, was the rallying cry of the “Leave” camp as well as fear-mongering over an influx of immigrants to the UK from Europe.

That short-term “I’m all right Jack” mercantilism stands in stark contrast to the higher moral values that membership of the EU is supposed to stand for. The point of living in a society is a commitment to helping the less able, but the idea of Brexit is founded on entirely selfish principles with a strong tint of nationalism mixed in. The Germans understand this and have stepped up by taking in over a million migrants. Last year the UK took in 38,878 asylum seekers of all kinds (including dependents), a quarter of those that arrived in Sweden and Hungary alone and a tenth of the 431,000 that arrived in Germany. Britain is committed to the EU’s principles – but not very.

McFaul is right that one of the biggest losers in Brexit is the US, as Washington will see the position of its key ally in Europe weakened. The UK will still sit at the top table in EU affairs, but it will lose its vote and its veto if Brexit happens. Any weakening of the united EU-US front against Russia is a victory for Putin.

“Inevitable collapse”

But maybe the most destructive element of Brexit is the complicated, up to two-year negotiations that must start once the UK invokes Article 50, which formally starts the leaving process. Finding a new status for the UK will become the major foreign policy issue at a time when clearly Brussels needs to concentrate on reforming itself and presenting a united front against Russia’s aggression and machinations inside the bloc. The irony here is Putin probably doesn’t want this. Europe remains Russia’s biggest trading partner and also the source of most of the real investment into its economy. It is in Russia’s interests to see a prosperous and well-run Europe, not one that is falling apart at the seems, a point the Kremlin has repeated several times in the last days.

George Soros said in an opinion piece that Brexit makes the collapse of the EU “practically inevitable”, which while making Russia’s European politics easier to manage, would hurt the union economically and that is something the Kremlin doesn’t want; Putin has said repeatedly that he wants to create a Greater Europe, and more recently a Greater Eurasia, as he needs a large European trade block to counter China’s growing influence. 

“Now the catastrophic scenario that many feared has materialized, making the disintegration of the EU practically irreversible,” Soros said. “Britain eventually may or may not be relatively better off than other countries by leaving the EU, but its economy and people stand to suffer significantly in the short to medium term.”

Finally, while Europe embroils itself in a needless crisis, Russia is continuing its work of rallying the emerging markets to its cause of a multipolar world, a goal that has suddenly been made a lot easier by the debacle on the Continent.

Putin arrived in Beijing on the day before the Brexit vote for a pow wow with Chinese President Xi Jinping, who declared Russia and China would be “friends forever”. Russia and China sealed a raft of deals, strengthening economic ties while pledging to preserve the strategic balance of power among nations.

The interests of Russia and China are increasingly aligned as Beijing continues to expand its New Silk Road project, which will probably turn out to be the defining geopolitical event of this decade, rather than Moscow’s fight with the West. And it is significant that on his way to China Putin stopped in Uzbekistan for a session of the Shanghai Cooperation Organization (SCO), which he is trying to build up as a Eurasian counterweight to Nato. India and Pakistan are due to be admitted to the SCO at the next summit in Kazakhstan in 2017. And with India, China and Russia aligned in one security organisation, the SCO will take a significant step up in importance.