Russia's worries

The latest expansion of the European Union worries Russia as it can affect its economic interests and virtually isolate it from the Baltic region and Eastern Europe.

in Moscow

HARDLY a month after the North Atlantic Treaty Organisation's (NATO) expansion into the Baltic states on March 30, Russia had an even bigger cause for worry: the European Union's (E.U.) expansion into the Baltics and Eastern Europe on May 1 with the absorption of eight former communist states. It is ironical that the idea of a united "European homeland" first originated in Russia during the period of perestroika, carefully crafted by Soviet President Mikhail Gorbachev. Today, even as a united Europe does seem to be emerging, Russia has been left out in the cold. There has been considerable consternation in Russia about the latest E.U. expansion and experts are divided on the extent of economic losses for Russia that it is going to result in. However, on the strategic front they fear that a "paper wall" may be coming up in Europe: the reference is to the 2,400 km border that has now emerged between Russia and Europe.

Predictably, tension has built up between Brussels and Moscow over the past few months. As a reaction to the E.U.'s expansion plan, Moscow laid down as early as February "14 conditions" as vital to the extension of the Partnership and Cooperation Agreement (PCA) to the 10 states. (The PCA is the cornerstone of the relations between the E.U. and Russia.) Of these, at least 12 related to economic concerns and 2 were political. Intensive negotiations between diplomats and government officials representing the two sides went on for weeks preceding the E.U. expansion. Russia's concerns, both economic and political, were discussed at length. An agreement was reached on April 27 in Luxembourg and Russia toned down its stand on the PCA and agreed to extend it in return for certain concessions from the E.U. An E.U.-Russia joint statement said that the two sides would work towards creating "opportunities to further strengthen their strategic partnership offered by the enlargement of the E.U.".

A major worry in Moscow is that the expansion will affect Russia's economic interests. German Gref, Minister of Economic Development and Trade, recently suggested that the E.U. expansion could cost Russia $150 million in lost trade. Many observers put the cost at $600 million. Some experts believe that the move will make a minimal impact on Russia and will even benefit it economically in the long run. Others feel that with the development, Russia is isolated from Europe strategically and this can have a negative bearing on its relations with Eastern Europe and the Baltic states. Yuri Bortko, Director of the Centre of Integration European Studies at the Russian Academy of Sciences, told the RIA Novosti news agency that he had "mixed feelings" about the Luxembourg agreement. He said: "On the one hand, the E.U. made certain concessions at the last possible moment, though it could have done so before. On the other, the joint statement includes promises to take into account Russia's concerns over the near doubling of E.U. membership. Promises are good, but what will they come to?"

However, the Luxembourg deal seems to have fetched Russia substantial economic concessions from the E.U. For one, the average tariff on Russian imports to the 10 new member-states is expected to fall from 9 to 4 per cent. The E.U. has assured Russia that its existing exports to the new member-states will be preserved, so that trade in the region is not affected. Further, Russia's quota of steel exports to the E.U. is expected to increase by some 480,000 tonnes; its current exports to the new E.U. member-states total less than 200,000 tonnes. The E.U. has also assured Russia that customs duty on aluminium will be raised only at a gradual pace, over a period of three years until it reaches 6 per cent by 2007. Thus Russian traders are given enough time to acclimatise their business to changes brought about by the expansion. The E.U. has also agreed in principle to Russia maintaining its existing contracts on delivering nuclear fuel to plants in four of the new member-states. In addition, it has agreed to waive the noise regulations for the transit of Russian jets to Budapest and Vilnius and given them permission to continue their service in this belt. Lastly, the E.U. accepted Russian demands for an increase in the country's grain export quota to more than the 2003 level. Thus, at least on the economic front it seems that the Russian losses owing to the expansion will be minimal.

A major political issue that has been causing tension between the E.U. and Russia for some time concerns the Kaliningrad enclave. Kaliningrad is Russia's western-most extension and is geographically cut off from the mainland. The enclave was originally known as Konigsberg and was the capital of East Prussia. It was ceded to the Soviet Union after the Second World War under the Potsdam Agreement and was renamed after the Soviet statesman Mikhail Kalinin. Bordered by Poland and Lithuania, today it is an isolated swath of Russian territory encircled by E.U. states. Kaliningrad is infamous for its underdevelopment and crime, especially smuggling, and is a source of considerable concern for the E.U. For some time, Russia has had problems with the E.U. about Kaliningrad's growing isolation and the overland transit of Russian trains to the enclave through E.U. territory. Anatoliy Khramchikhin, head of the analytical department at the Institute of Military and Political Analysis, said that the E.U. expansion "could bring about a massive economic crisis in Russia's western-most region". However, the E.U. seems to have yielded somewhat to Russia and allowed cargo transit between the Russian mainland and the enclave. The E.U. has also agreed to continue to work to ease visa restrictions for Russians travelling between Moscow and Kaliningrad. Also being allowed is the passage of sealed high-speed Russian trains through Lithuania to Kaliningrad. Analysts have welcomed this as a major political agreement between the two sides.

However, the issue that created the maximum tension between the two sides concerned Russian demands for the protection of minority rights within the new E.U. states, especially the rights of Russians settled in Estonia and Latvia. Russia raised the issue of their alleged ill-treatment with the E.U. and made the protection of their rights almost critical for the extension of the PCA. However, the deadlock was broken in Luxembourg with a relatively watered-down joint statement which ambiguously referred to an E.U. pledge to encourage the "social integration" of ethnic minorities into the new member-states. The statement made no mention of the situation in Estonia and Latvia and said that "the E.U. and the Russian Federation welcome E.U. membership as a firm guarantee for the protection of human rights and the protection of persons belonging to minorities". Analysts feel that on this issue Russia only managed to extract a weak assurance from the E.U. and this very assurance could result in the Chechnya issue being raised by the West.

On the whole, the E.U. expansion has upset Moscow a lot more than the NATO expansion. Further, Russia had considerable economic interaction with the eight former Soviet states that have now been absorbed into the E.U. Thus, Moscow's apprehension on account of the economic fallout of the May 1 expansion has to be taken seriously. Currently, it does look as though any economic reverses that Russia may have had to face owing to the move have been contained. The E.U. remains Russia's largest trading partner.

Nevertheless, Moscow's fears have merely been tempered down and not dispelled. The reality remains that Russia today faces an ironical situation: it is getting isolated in its own traditional playground, the Baltics and Eastern Europe. Effectively, Russia is facing the prospects of a pro-active E.U. and NATO touching its borders and calling the shots in Eastern Europe and the Baltics. Moscow no longer harbours the hope of joining the E.U. Its long-term reaction to the recharting of Europe's borders is what remains to be seen.