Russia and the EU: competition in a time of crisis?

Russia continues its policy of acting as a strong player on the international stage, whereas the European Union has opted for saving its energies in order to solve domestic problems. In economic terms this makes for an interesting strategic clash, writes Vadim Kononenko.

Investment has become a particularly risky line of business during the global financial crisis, but not for Russia. In the past few months, Russia has been pouring billions of dollars into the economies of countries including Iceland, and the Baltic countries, Ukraine and Kyrgyzstan. Most of Russia’s investment projects are targeted at the Central Asia and the western part of the former Soviet Union, the region where Russia has strong political and security interests.

Russia’s investment spree has elicited a wary response from the West. The Western attitude is a mixture of serious concern and some sort of acknowledgement of Russia’s activism. On one hand, the EU, the US and others are worried about Russian resurgence, a trend that started before the economic crisis and culminated in the war with Georgia in August 2008. On the other hand, anyone who knows a bit about Russia’s history would not be surprised by Russia’s preoccupation with the region as it is regarded by the leadership and the general public as Russia’s legitimate sphere of interest.

The question that is ultimately crucial for Europe’s policy-makers is whether Russia’s attempts to project its political and economic influence in the former Soviet Union are compatible with the EU’s integration projects. The EU projects, such as the European Neighbourhood Policy and the nascent Eastern Partnership, are directed at the same countries. Are the EU and Russia competing for influence and resources of the region and are bound to collide? Is it possible for them to avoid collision while remaining competitors?

In reality, Russia’s behavior is shaped by both domestic and external factors. It is being influenced by the strong belief widespread in the Russian society that the country should be a dominant player in the region. The crisis has not changed this view, on the contrary, the present situation is seen as an opportunity to enhance Russia’s influence by taking advantage of the economically impoverished neighbours. Also the other big players – the EU, US are preoccupied with pressing economic problems at home.

Yet Russia’s capacity to conduct a resurgent foreign policy has become limited by the impact of the crisis on the country’s economy, both in terms of plummeting oil prices and increased public expenses. Like any other state, Russia has to balance its foreign policy and domestic agendas. If in the short run the Kremlin places priorities outside Russia’s borders, this could prove to be a strategic mistake in the long run, given that it will take years to recover from the financial crash of 2008.

More importantly, compared to the EU’s Eastern partnership Russia does not have a coherent regional outreach project of its own. Interestingly, the EU, which is often criticised for its cumbersome way to attain at common strategies, has managed to come up with some strategy, whereas Russia has only very general declarations and many different projects and moves towards the region. Lacking a comprehensive strategy, the Kremlin will find it hard to garner regional support. Russia will have to continue dealing with its neighbors on a case-by-case basis, which requires a lot of political and economic horse trading.

Finally, China has emerged as another regional competitor, which unlike the West has not been affected to the same extent by the economic recession. Unlike Russia, China does not have the image of an anti-Western, non-cooperative, zero-sum player. Finding ways to accommodate China’s increasing interests in the region, and not sinking into another geopolitical rivalry with a better equipped counterpart will be a difficult task for Russia.

Russia seems to have made its choice in favour of continuing its existing strategy of projecting an image as a strong player, albeit one that still lacks a coherent strategy. The EU for its part has launched a new strategy for the region, but has opted for saving its energies in order to solve domestic problems. Let’s see who turns out to be more competitive as the game continues to unfold.