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Greece Uses Russia to Strengthen Its Position

6 MINS READJan 31, 2015 | 14:00 GMT
A burned EU flag hangs on the barriers in front of the Greek parliament in Athens.
(LOUISA GOULIAMAKI/AFP/Getty Images)
Summary

During its first week in office, the Greek government confronted Germany and displayed its good ties with Russia. The moves are part of Athens' strategy for upcoming negotiations with lenders over debt relief. Athens understands that the discussions will be tough because most governments and institutions in the European Union oppose a new write-down of Greek debt. As a result, Greece is trying to accumulate as many bargaining chips as possible. Moreover, keeping good ties with Russia will be key for Greece should the country be forced to leave the eurozone.

The new Greek government's first week in power was marked by symbolism. On the economic front, the Syriza-led government made several announcements to show that it would honor its campaign promises. The measures included raising the minimum wage, freezing privatizations, rehiring workers in the public sector and reducing costs for patients in public hospitals.

On the political front, the government — led by Prime Minister Alexis Tsipras — made moves that irritated Germany, confused the European Union and pleased Russia. On Jan. 26, his first day as prime minister, Tsipras did two notable things: He placed a wreath at a war memorial honoring the Greek victims of Nazi occupation, and he received the Russian ambassador before meeting any other foreign official. Tsipras also appointed the leader of the Independent Greeks — a nationalist party that wants to develop closer ties with Russia — to the position of minister of defense. Though symbolic, these actions were part of a wider strategy.

Several members of Syriza have said that Germany should pay reparations to Greece because of Nazi occupation during World War II. The party also believes there should be a conference on Greek debt, similar to the one on German debt after the war. Syriza is reviving memories of Nazism while criticizing modern-day Germany's management of the European Union — something that is not well received in Berlin. Athens' rhetoric is primarily anti-austerity, but it also has anti-German elements that are popular at home (and in many Southern European countries). Naturally, there is also a degree of anti-Greek sentiment in Germany; a brief look at German newspapers reveals strong criticism of Athens.

Dependent on Russia

The second element of Syriza's strategy is to court Russia. Athens and Moscow have strong ties, including religion, with both nations sharing the Orthodox Christian faith. Greece, like many Balkan countries, has strong historical ties with Russia because of Moscow's support against the Ottoman Empire in the 19th century. Greece and Russia still have similar views on many political issues as well, including Moscow's support of Athens in the Cypriot conflict and Athens' support of Moscow's position on Kosovo. In addition, more than a million Russian tourists visit Greece every year.

Greece has a strategic interest in keeping good ties with Russia. Greece is dependent on Russian natural gas and pricing is always a sensitive issue. Moreover, though an agreement between Athens and its EU lenders is likely, failure to reach a deal could force Greece out of the eurozone. If that happens, the drachma would likely devalue fast and stay low at least in the short term. A weak drachma would make energy imports more expensive, making friendly ties with Russia indispensible.

Greece also has an immediate need for close ties with Russia. In February 2014, Athens and Gazprom agreed on a 15 percent reduction in the price of natural gas supplied to Greece, but Greek demand fell last year because of the country's dire economic situation. Now, Greece's state-owned energy company DEPA is requesting Gazprom revise their take-or-pay agreement to avoid a charge of about 100 million euros ($113 million) for unconsumed natural gas. In the coming weeks, Athens and Gazprom will negotiate ways to solve this problem.

In addition, Greece could benefit from Russia's latest pipeline plan — the so-called Turkish Stream — that would bring Russian natural gas across Turkey to a gas hub at the Turkey-Greece border. The Turkish Stream's predecessor plan, South Stream, would have built the hub in Bulgaria, which has lobbied Russia to reconsider its plans for Turkish Stream and to build the hub in Bulgaria. As a result, Athens and Sofia could end up competing for Russia's favor.

Finally, Greece needs as much money as it can get. Syriza campaigned on a platform of public spending for which it does not have the money. Greek banks are also in an increasingly fragile position, unable to borrow from financial markets and with a 7 billion euro tranche of its bailout program depending on negotiations with the European Union and the International Monetary Fund. A loan from Russia would certainly be well received. On Jan. 29, Russian Finance Minister Anton Siluanov said Russia would consider giving financial help to Greece, should Athens request it. But Russia is facing its own financial problems, limiting any possible assistance.

Prepared For All Outcomes

The situation in Ukraine has put Greece in an uncomfortable situation because Athens is under pressure from the European Union to approve sanctions against Moscow. During its first week in power, Syriza said Athens would not automatically follow the European Union's official line on sanctions. On Jan. 27, Athens complained that an official EU statement condemning Russia for the violence in eastern Ukraine had been issued without Greece's consent. Then on Jan. 29, during a meeting of EU foreign ministers, Athens temporarily delayed an agreement to extend a list of asset freezes on Ukrainian and Russian officials until September. However, consensus was finally reached, and Greece supported extending the sanctions against Russia.

Athens is not a key player when it comes to negotiating the EU response to the events in Ukraine. Moreover, there are other countries, including Italy and Austria, which want the European Union to move with extreme caution when it comes to sanctions. Athens alone does not have enough political weight to derail a decision by the European Union, and any moves to stop or water down sanctions against Moscow would have to be spearheaded by larger countries.

Loosening sanctions against Russia is not a priority for Greece. The threat to veto sanctions should be seen as a bargaining chip at a time when Athens wants debt relief from its lenders. However, Athens' rebellious government is another source of friction in the European Union at a time when it is struggling to stay united on a long list of issues, which include determining the economic direction of the bloc and its reactions to the events in Ukraine.

France and Italy were already challenging Germany's leadership and the European Union's rules on debt and deficits. Greece is not strong enough to unilaterally challenge Germany's leadership in the European Union, but the Syriza victory is another source of concern for Berlin.

Debt negotiations between Greece and its lenders will begin soon. Though Greece will try to stay in the eurozone, a so-called Grexit cannot be completely ruled out. If Greece leaves the eurozone, it is unclear whether it would also have to leave the European Union. EU norms allow for countries to leave the bloc, but legislation is ambiguous regarding the fate of countries leaving the currency union. Should Greece be forced to leave the European Union, all bets are off and the country would have to reassess its political, economic and military alliances. This scenario is unlikely, but Athens will work to make sure it is prepared for all outcomes.

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