Russia's sanctions against Estonia regarded as mostly for show

By bne IntelliNews May 4, 2007

Nicholas Watson in Prague -

The escalating row between Estonia and Russia over the fate of a Soviet-era statue in Tallinn this week took on an energy dimension, as most European spats with Moscow do these days, as state-owned Russian Railways suddenly halted oil deliveries to Estonian ports. Hitherto improving cross-border trade is also set to suffer, though this is unlikely to have much affect on the economy as a whole.

Russia's stopping of oil and coal deliveries to Estonia, ostensibly because of "maintenance work," follows a time-honoured pattern. Over the past few years, Russia has cut off oil and gas to Ukraine, Belarus, Georgia, Latvia and Lithuania for one reason or another.

This time it was because of a decision by the Estonian authorities to move this statue of a Red Army soldier from the centre of Tallinn to a military cemetery on the outskirts, which sparked violent protest by ethnic Russians who regard the monument as an important tribute to the many Red Army soldiers who died fighting the Nazis. Many Estonians see it as a reminder of Stalinism.

The initial decision to move the statue was probably badly handled by the Estonian government, but the Russians' fierce reaction to it has shocked many independent observers.

Estonian Prime Minister Andrus Ansip initially proposed the idea of moving the statue earlier this year to burnish his anti-communist credentials in the March parliamentary elections. When the authorities got round to dismantling and moving the statue last weekend, they were quickly confronted with hundreds of protestors, who fought with the riot police. One protestor died in the fighting.

The Russian government, politicians and media were quick to condemn Estonia for what it believes was a heavy-handed response. The language has been inflammatory. Russian Minister of Foreign Affairs Sergei Lavrov was quoted by Russian media as saying that Estonia was behaving "disgustingly;" the Duma's International Affairs Committee chairman, Konstantin Kosachev, accused Estonia of "barbarism" and "lying."

As well as the strong words, some Russian politicians resorted to repeating what have since turned out to be false rumours. There were claims the solid bronze statue at the heart of the row was cut into several pieces when it was moved from central Tallinn. However, during a fact-finding mission in Tallinn, a delegation of Russian parliamentarians inspected the statue and found no signs of this.

In Moscow, the Estonian embassy has been under siege continuously since April 27 by about 200 activists of the Kremlin-sponsored youth organizations Nashi and Molodaya Gvardiya, as well as the youth branch of the United Russia party. These demonstrators have been openly filmed ripping down the Estonian flag, daubing pain on the embassy walls and throwing stones at the buildings while the police look on.

In an interview with AP, Marina Kaljurand, the Estonian ambassador to Russia, said the intimidating protests appeared to be highly organized, with the protestors provided with kitchens, toilets, music, electricity and buses. The Foreign Ministry said security would be tightened after some protestors broke into a press room at the embassy and jostled the ambassador, but it added: "Passions have been brought to the boil. The blame for that rests entirely with the Estonian side."

More murky are claims by Estonia that the Russian authorities have been engaged in cyber attacks against government IT networks. According to Justice Minister Rein Lang and Foreign Affairs Minister Urmas Paet, the cyber attacks on April 29 and 30 were traced to IP addresses in Moscow owned by the Russian presidential administration and government.

The Kremlin has also moved on the international front, calling on the EU, NATO and Council of Europe to censure Estonia over "pro-fascist" tendencies and "discrimination" of local Russians.

So far, the EU and the US have stood behind Estonia, urging Russia to comply with its international obligations under the Vienna Convention on diplomatic relations and protect the staff and premises of the Estonia mission in Moscow. Sweden also protested to Russia after its ambassador, Johan Molander, was attacked as he left the Estonian embassy in Moscow.

Whipped up

Is the Russian reaction solely about the statue?

It's hard to ascribe all the antipathy to Estonia's stance as emanating from Kremlin stooges. Even in Russia's more boisterous and less slavishly pro-Kremlin media on the Internet, feelings run high that Estonia has insulted the memory of those who died fighting Nazism.

Yet the whipping up of public sentiment clearly serves other purposes.

"If it was just about the statue, how should we put the recent dismantling of the WWII memorials in Russia's Stavropol and Chimky to this concept?" asks a source at Estonia's Foreign Ministry, who declined to be named. "It has been obvious that it's not just about the statue, but is being used as a domestic policy tool for on the one hand to guide the attention away from domestic policy matters and on the other for some Russian politicians to try to gain points before the parliamentary elections at the end of this year."

Analysts say the issue is also being used by the Kremlin for its well worn policy of trying to divide and then isolate countries in Europe – a strategy that has proved successful especially when using energy as a lever. Germany jumped into bed with Gazprom to build the Nord Stream gas pipeline under the Baltic Sea over the strenuous objections of Poland and the Baltic states.

However, playing the energy card against Estonia is unlikely to have much effect.

Reuters reported an unnamed industry source as saying on Friday that Russia will cut oil product exports via Estonia by 2m tonnes in the next two months, while raising exports via the Russian Baltic port of St Petersburg. Russia ships around 25m tonnes of Russian fuel oil, gas oil and petrol through Estonian ports mostly to northern Europe per year. PM Ansip told the newswire that Estonia could cover its own electricity needs without the need for Russian coal and gas.

Mooted economic sanctions by Russia would almost certainly harm the burgeoning cross-border trade between the two countries, but they would in the end probably hurt Russia more than Estonia, which since the 1990s has gradually oriented its trade toward the West. Barely one tenth of Estonia's export trade goes to Russia at present.

Estonia's trade with Russia got a fillip once the Baltic country joined the EU. When the Partnership and Cooperation Agreement between the EU and Russia came into play on June 1, 2004, the problem of so-called "double tariffs," whereby Russia charged twice the usual duties on goods coming in from Estonia, was suddenly a thing of the past.

Mario Lambing, an expert from Estonia's Ministry of Economic Affairs and Communications, told bne that in 2005 exports to Russia rose by 50%. Russia is Estonia's fourth largest export partner and in 2005 it sent €400m worth of its goods eastward, everything from machinery, equipment and foodstuffs to textiles and auto seat belts. Estonia is also becoming a gateway for goods in transit from the rest of the EU to the Russian market. But as Estonia's prime minister pointed out on Thursday, any Russian boycott of Estonian goods would be "doomed to fail" because many products originating in the Baltic country have an EU label.

"The debate on economic sanctions is not only deja vu, but more irrelevant than ever," says Vladimir Socor, a fellow at the rightwing think-tank Jamestown Foundation in Washington.

Indeed, any actions by the rating agencies on Estonia would be prompted by the risk of overheating of the economy rather than any economic sanctions stemming from Russia. Standard & Poor's said in a report on April 18 that a serious danger exists that Estonia's sovereign rating will be lowered.

The expected lack of effectiveness of any sanctions is probably why the calls by ministers such as First Deputy Prime Minister Sergei Ivanov for economic sanctions have been less strident than, say, they were for sanctions against Georgia, many of which are still in place.

Analysts say the Russian overreaction to Estonia's decision to move the monument could also backfire by giving the US proposed deployment of defence-missile stations in Central Europe, which is bitterly opposed by Moscow, some belated support from other European nations.

"Following an ongoing dispute with Poland over meat imports, the affair brings another more troublesome dimension to the EU's attempts to negotiate a new Partnership and Co-operation Agreement with Russia, with smaller member-states appealing to the bloc for solidarity in both cases," says Mandy Kirby, an analyst at Global Insight.

The idea that the protests might backfire over the missile issue assumes of course that the Russians haven't planned for exactly that to happen, though for what ultimate purpose one can only guess at present.

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