Ben Aris in Moscow -
The situation in the heart of Europe looks pretty bleak at the moment. A shaky ceasefire deal is supposed to take effect on February 15, but many of the substantive elements of a deal that would allow all sides to walk back from a bloody war in Ukraine were missing from the final text.
Is Europe doomed to a new Cold War or at least a Great Game II, as some have suggested? Actually the prospects for a productive and peaceful partnership between Russia and the EU are pretty good – at least in the long-term – if Russian President Vladimir Putin has any success in fulfilling his vision of creating a "Greater Europe" that stretches from Lisbon to Vladivostok.
Putin has said over and over again that, "Europe is Russia's natural partner," starting with the now infamous speech he gave at the Munich Security Council speech in 2007. Destabilising Ukraine and starting a proxy war with the Western powers seems a pretty odd way of cosying up to the rest of the world. But as Putin also said in his Munich speech, he wants this partnership to be on equal terms and for the West to respect Russia's interests. Clearly from the Kremlin's perspective this didn’t happen in the "bilateral" free trade deal between the EU and Ukraine that Russia was, by definition, excluded from. Hence the war.
But at the heart of Russia's long-term foreign policy is the creation of a "Greater Europe". This phrase has not got much attention in the press, but the Kremlin has been repeating it constantly for many years. And German Chancellor Angela Merkel has clearly woken up to it. "The Russians repeat this ["Greater Europe"] phrase repeatedly and Merkel has started introducing it into her speeches, for example she mentioned it in her speech at Davos earlier this year," says a western diplomat who didn’t want to be named. "I think she is just playing lip service to it as part of her strategy to soften up Russia in the current negotiations, but it is clearly important to Putin."
Russia's desire to move closer to Europe is not as crazy as it sounds. In the short term Putin is concerned with getting the West to respect what he sees as Russia's interests in Europe and he has decided to draw a line in the sand over Ukraine. At the same time Russia has been allying itself with other emerging markets that share his desire to create a "multipolar" world where the leading economies share global responsibility, rather than the current "unipolar" system where the US is in charge – another Russian foreign policy meme.
And this plan is progressing. The current showdown has been described as a "new Cold War" or maybe better as "the Great Game II" where Russia is in conflict with the West. But as bne IntelliNews and others have argued Russia is not totally isolated, but has continued to build up its ties with the other emerging markets, particularly the so-called BRICS and especially China.
Moreover, Western Europe is far from united in its condemnation of Russia; only this week Bulgarian conservative parliamentarians started collecting signatures for a motion to withdraw from Nato. Putin was in Turkey in January and a new “Turk Stream” gas pipeline is in the works that will supply southern Europe, while on February 9 he was being feted in Egypt, Russia's latest new best friend in the Mediterranean basin. Putin has a lot of work to fulfil his dream of a “Greater Europe”, but long term Russia remains extremely wary of China, which is not and never has been its natural partner. "The Russians don’t trust the Chinese, and while economically it makes sense to tie up with them now, eventually they will become rivals," the diplomatic source says.
Beware the dragon
Looking at the map below you can understand Russia's concern. Beijing is far away and has little impact on life in Brussels, but Russia shares a 4,380km border with China, which became the biggest economy in the world in 2014 in purchasing power parity terms. As Harvard economist Niall Ferguson and author Ian Morris have both argued, the West's dominance has been a historical aberration caused by the benefits of the industrial revolution. But that is wearing off now thanks to the end of the socialist experiment and the spread of technology. The world is reverting to what it was a thousand years ago when GDP was simply a function of how many people a country had. In these terms Russia is set to be easily the most important country in Europe, as it has half as many people again as Germany. The trouble is, as far as Putin is concerned, China will have once again by far the biggest and most powerful economy on the planet.
The former head of the World Bank James Wolfensohn once told bne IntelliNews at a conference in Moscow: "In 2050 China will make up about a quarter of global GDP with India just behind, but Russia will account for 5% at best." Currently Russia accounts for 2.6% of global GDP despite being the eighth largest economy on the planet. PwC predicts China's share will peak at 20%, while the EU's share will fall from the current 33% to 25% in 2050 in its report this week.
To hammer the point home, PwC released a report on February 10 entitled "PwC's World in 2050", which leads with, "The decline of the west: China, India to replace the US, EU on the world arena by 2050”. "The global economic power shift away from the established advanced economies in North America, Western Europe and Japan will continue over the next 35 years. China has already overtaken the US in 2014 to become the largest economy in purchasing power parity (PPP) terms. In market exchange rate (MER) terms, we project China to overtake the US in 2028 despite its projected growth slowdown," the report said.
And that is why Putin so desperately wants to create an economic bloc that stretches from Lisbon to Vladivostok. Together, a “Greater Europe” of Russia and the EU will push its collective GDP up into the teens and be large enough to challenge China. On its own, Russia will be little more than a raw materials appendage.
Even in the midst of the current brouhaha, the Kremlin is still pushing this agenda. In a little reported story on February 12, Russian Foreign Minister Sergei Lavrov called on the West to start serious discussions on a Euro-Atlantic security pact – an idea floated in Berlin by Dmitry Medvedev as the first thing he did after taking over as president in 2008.
Today this project seems inconceivable, or even ridiculous. However, Putin has time on his side. He will walk the 2018 elections and probably retire (or at least step down as president) in 2024: if a week is a long time in politics, then a decade is a geological age. Set that against the four-year election cycle in Europe and the US, which seems to be in perennial election mode; the 2016 presidential race is already informally underway. The downside of the democratic system is that typically few politicians in the West think further ahead than the next election campaign.
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