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Colin Chapman: As Europe struggles to recover growth and solve its mounting debt crisis with new talk of a common budget for the eurozone and economic contracts with Brussels for all eurozone members, Russia sits on the sidelines, looking for opportunities to expand its influence. This week, Moscow's foreign and defense ministers have been in Paris, and the first deputy prime minister for economics in Berlin.
Welcome to Agenda, I'm Colin Chapman talking today with George Friedman. George, I know Russia has problems of its own, but to what extent is it able and willing to benefit from the ongoing and unsolved disarray in Europe?
George Friedman: The Russians really don't know quite what to make of it or quite what to do with it. In the same sense as Europeans are dependent on Russian energy, the Russians are dependent on the revenue that generates and they must maintain their relationship with Germany. There are opportunities geopolitically for the Russians if the European Union fragments. There are some countries that might find it very useful to have a closer relationship with Russia that's able to provide them with cash, in many cases, and perhaps energy technology and others. The Greeks historically had some close ties with the Russians.
But really what we're seeing is much more important than that, I mean, there are three parts to the international system (major parts, I should say). The United States, which is doing relatively well compared to everyone. Europe, which is in the process of re-emergent nationalism, where each nation is going after its own interests. China, which is obviously in trouble and whose growth has declined and so on. And Russia also has problems and has to sort itself out between the Chinese and the Europeans, and that's a difficult thing to do, especially when you really don't know what the Europeans are going to do.
So the Russian solution is to do very little. The Russian plan is to simply sit back, watch what happens, don't engage in any way that you can be blamed for precipitating the decline (they tried that with saving some banks, that wasn't a very good idea). The Russians are going to do something now that we're not used to the Russians doing: both holding together fairly well and, at the same time, being as benign as possible — not becoming a factor, not drawing attention to themselves.
In one sense, that's because history is going their way. The disintegration of Europe really relieves pressure on their western borders and possibly secures themselves for a while. I mean, when we look at the Russian position it's not bad, and therefore I think what really they're going to do is try very hard to be as inconspicuous as possible geopolitically and try to make as much money as possible.
Colin: I'll come back to economics in a moment, but there are or have been significant bilateral meetings this week. Russia's foreign and defense ministers have been in Paris talking, apparently, about NATO.
George: Well any NATO itself is a shadow of its former existence. It is a very fragmented entity because Europe is fragmented. It's further fragmented because the Americans are part of that and they're alienated. There are tensions within NATO between France and Germany, between other countries, and most importantly NATO has very little military capability.
The Russians are interested in talking to the French, as they're talking to everyone and they conduct fairly active diplomacy. I'm not sure that too much should be read into the meeting in France. But certainly, you know, thinking about the future of NATO (with or without Russia) is very difficult because it's no longer clear what NATO is or what it's supposed to be doing. I think the Russians, as part of what I said before, are going to be very careful, very cautious, conduct a very friendly diplomacy, and will happily have conversations with whoever wants to talk to them. I don't know that this is very significant, and I certainly doubt very much that whatever Hollande has to say about NATO has much significance for the future of NATO. But I mean there's been much talk about Russia one day joining NATO. The fact there's a great deal talk doesn't mean it's either going to happen or is a good idea, but I would not take these talks all that seriously.
Colin: And perhaps most significantly, First Deputy Prime Minister Igor Shuvalov is in Berlin talking about economic links with Germany, and Russia has a big interest in seeing the eurozone succeed because 40 percent of its reserves are in euros.
George: Well, the Russians can move their reserves out of euros if they want. The Germans have a tremendous interest in having the eurozone exist because it facilitates their exports within Europe and they are highly dependent on exports around the world and also to Europe.
The German-Russian relationship is far more interesting than the French-Russian relationship, because that really has some substance. From the German point of view, they are dependent on Russian exports but it is also the case that as Europe fragments (if it does), it needs other relationships that are important. And ever since 1871 when a unified Germany appeared, Germany had to have a relationship with either France or Russia, because when Russia and France got together it turned pretty bad.
And the Germans are interested in their relationship with Russia, not only for geopolitical reasons, but as a place where they can invest, a place where there is labor that they can move their factories to while their own population declines — remember, even if Russia's population is declining, it still has surplus labor. So there are many substantial things for them to be talking about. None of them are going to reach fruition any time soon, beyond the level that it's currently at. But as Europe weakens, if it finally disintegrates, if we finally see its institutions no longer functioning, if tensions between France and Germany advance substantially beyond this point, I think you are going to see a German-Russian relationship.
Colin: George, what do you think of the planned Eurasia economic union, which Mr. Shuvalov talked about in an interview with Euronews and which he says will be launched in 2015, linking the Russian economy with both Asia and Europe, with both Belarus and Kazakhstan only partners?
George: Well, there was a reason there was a Russian empire. There was a reason why there was a Soviet Union. It was because these different pieces, not particularly able to compete with Western Europe or other parts of the world, did fit together into a weak but sustainable economic zone. And therefore there's a reason why it might re-emerge now.
There are many particular reasons why the Russians are interested in this, aligning energy exports between Kazakhstan and Russia. Belarus is obviously interested in it because it doesn't have anywhere else to go and Russia owns a great deal of the Belarusian economy. But really, I mean, you've got a zone that finds it very difficult to compete and do business outside of the former Soviet Union, and clinging together into some sort of Eurasian entity makes a great deal of sense.
It always has to be remembered that you don't have empires lasting as long as the Russian Empire did and the Soviet Union (what it morphed into) did without a substantial underlying reason. And what's re-emerging is the reason for that, and I think it's a very serious undertaking; I'm not sure it will be particularly strong, it'll be particularly capable, but it is already there. In some ways that sphere of influence, that economic zone, already exists.
Colin: Of course, there are also some big issues between Russia and the European Union, and we don't have time to go into all of them now, but one of the biggest is the investigation Brussels is pushing into the pricing of Gazprom, which President Vladimir Putin has effectively blocked with a decree forbidding Gazprom to cooperate.
George: The Europeans need Russian gas. If Russian gas doesn't flow, the Europeans are in deep trouble. It's very interesting that they have decided to investigate someone they're wholly dependent on. But the Russians are not going to be very interested in the investigation, they are not going to permit it. The Europeans are in no position to enforce anything and they can't risk retaliation from the Russians.
Colin: Thanks, George. You've been watching Agenda, with Stratfor founder George Friedman. Thanks for being with us. See you next time.