war on the rocks

Russia, Greece, and the EU: A Putin-shaped Shark in the Mediterranean?

July 16, 2015

The protracted question of Greece’s financial affairs continues to be of intense interest to Europe and the wider international community. Greece’s negotiations with the troika — the European Commission, the International Monetary Fund, and the European Central Bank — around a new bailout and structural reforms were extremely fraught. If Lithuanian President Dalia Grybauskaite’s “it is every time mañana outburst against Greek failure to produce proposals could conceivably be described as the light relief, the more sobering scene-setting came the next day when it was announced by European Commission President Jean-Claude Juncker that detailed plans for “post-Grexit” humanitarian aid for Greece had already been made.

The stakes will remain high and the hurdles substantial. Whatever the formal outcome of the Brussels negotiation, there remains intense parliamentary and popular opposition in Greece, which could cause the deal and its implementation to falter or derail, be it in the next few days or in the months and years to come. Even Eurozone members cannot be described as unanimous on the best approach for Greece. Europe will suffer political and economic fallout whichever way the decision finally tips.

Meanwhile, Moscow watches. Russia is aggressive and re-assertive, militarily engaged inside Ukraine, and struggling with its own battle over sanctions with the EU. It has much to gain strategically by weakening the EU, within which there is already much Euro-skepticism amongst political parties across Europe. Russia will be looking to test the weaker links of the Eurozone and will benefit from fashioning a more favorable and influential relationship with Greece.

With a team of its Russia analysts, Wikistrat — the world’s first crowdsourced consultancy — took a look at the apparent drawing together of Russia and Greece in this context. It looked at what strategic interest Russia has in Greece and whether a bailout — or similar “strings attached” financial support — might be something the Russians could plausibly offer to Greece. It pulled together its findings in a report “Russia-Greece Relations: Playing a Game of Flirtation.” These ideas are summarized here.

The Tsipras government has made use of brinkmanship as a tactic in its approach to dealing with the EU. This approach has seen it publicly cast around in the direction of Russia, with whom it has strong historic, economic, cultural, and religious ties. Russia was the first to congratulate Mr. Tsipras when he led his Syriza party to victory in the Greek election in January, and the new Greek government was very quick to return the compliment with a formal visit to Moscow. The Greek government appeared uncomfortable at being part of the EU’s anti-Russian economic sanctions even though it held the line during the sanctions extension last month.

Although there are clearly economic risks to Russia that arise from the European crisis, Russia is deriving particular benefits from Greece’s troubles. The recent Moscow–Athens dialogue has boosted Russia’s soft power and made headlines around the world. A Gazprom pipeline and distribution hub should be functioning in Greece by 2020. The Greeks may well be offered a full place on the BRICS team.  On the eve of the first anniversary of the shooting down of Malaysian Airlines flight MH17 over eastern Ukraine, Mr. Putin will likely be praying that the world’s media will remain absorbed with the compelling but complex Athens versus Brussels drama.

Russia’s ultimate geostrategic desire is to strengthen its own foothold in Europe and see a more fragmented European Union. A key goal is to gain allies (the more beholden and malleable the better) within European institutions. These would be strategic assets: The EU is a key factor in setting the tone for the West’s policy towards Russia regarding its involvement in the Ukrainian conflict and its occupation of Crimea.

The probability of Russia formally bailing out Greece to any significant degree is virtually nil. Russia is facing a difficult financial crisis of its own; it has low foreign cash reserves and Western sanctions are targeting its banking sector. Moscow would rather look to buy up Greek state-owned assets when they are privatized, thereby acquiring a more tangible stake in its economy. Instead of a bailout, Moscow may look to get the New Development Bank more engaged — China could be a very useful partner here — by promoting the move as one that would increase the institution’s prestige.

Greece and Russia’s game of flirtation has served both sides when dealing with the EU.  It allows both governments to make tactical gains at minimal cost or risk.  Greece gets to pressure the EU with the threat of moving closer to Moscow, calculating (perhaps inaccurately) that this could facilitate a favorable conclusion to debt restructuring negotiations. Russia gets to capitalize on existing intra-European friction, eroding European resolve against wider Russian assertiveness. Mr. Putin would dearly love to punch a few holes in the EU anti-Russia sanctions regime.

But it is not all the politics of gesture. The $2 billion gas deal between Greece and Russia is a win for both. This will help bypass Ukraine and ensure smooth gas delivery to the Balkans, Hungary, Italy, and Austria. Construction of a pipeline will bring jobs and transit fees into the Greek economy.

And the issue is bigger than a bailout. The Balkans will remain within the Russian sphere of interest. Putin’s larger game involves dissipating EU unity, perhaps by nibbling at the edges (a gas pipeline here, a military deal there) or planning a future sudden lunge. He will continue to scan for opportunities amongst the vulnerable.

Russia’s goal is not altruistic. Greece would do well to remember this and ponder the reliability of Russian promises, the implications of drifting into a closer Russian orbit, and the future impact on its relationship with the EU. Russia has much to gain from improving ties with Greece and exploiting an EU crisis that is serving to both distract Europe in the short term and undermine Europe’s political and economic capability in the longer term. Mr. Putin would jump at the chance to draw a disgruntled and vulnerable Greece closer to his embrace, whether within or outside of the European Union. A messy and rancorous “Grexit” — remembering Juncker’s darker warnings of humanitarian aid preparations — might offer better opportunities for Russia to engineer a favorable patron-client relationship than a Greece brought into line and largely following an EU restructuring and repayment plan. But the political volatility and uncertainty within Greece at the moment may well see a natural pause for regrouping and reflection in the Russo-Greek relationship. The dust and smoke must necessarily clear to allow the chess pieces to become visible once again. However, regardless of the outcome of the next few weeks, some deep-set North-South fractures have appeared in Europe. They will be there for exploration and pressure for many years, if not decades.

For the next few weeks, however, does Mr. Putin actually need to do much of anything? Sufficient it may be merely to sit back in his summer dacha and watch the EU pull itself apart for his pleasure, making tactical moves when opportunities present themselves, and waiting to pick up a few tasty (and much cheaper) morsels further downstream.

 

Mr. Tim Foxley MBE. Senior analyst at Wikistrat and independent political/military analyst. Worked with the U.K. Foreign and Commonwealth Office and the Stockholm International Peace Research Institute. Also worked for the U.K. Ministry of Defence for more than 15 years covering issues in Afghanistan, Eastern Europe, the Balkans and Russia.

 

Photo credit: www.kremlin.ru