Germany, Europe, and Russia

European unity is indivisible. When one nation is intimidated or ostracized, all are not free. Every aspect of our shared culture, if not the last century of shared suffering, confirms that for us.

So a prime objective of the European Union is to promote stability and security through a dynamic structure of economic and political inter-dependence in which all nations have a vested interest. But such a structure is lacking today between the EU and Russia, to the detriment of all the countries that lie between them. Thus it is vitally important that Germany has made this a central issue for its EU presidency, which is just beginning.

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With high prices for crude oil and natural gas bloating its coffers, Russia is once again aggressively confronting the small and still relatively weak states that fled the eroding Soviet empire 15 years ago. Given the residual economic and institutional ties born of the Soviet era, Russia’s external influence in this region remains enormous. But Russia is also now extending its grasp of energy markets beyond those of its immediate neighbors.

Europe’s relationship with Russia is too important for it to be developed in an ad hoc fashion through bilateral arrangements. Today is Europe’s moment of maximum flexibility; as dependence on Russian energy supplies grows, the EU’s leverage weakens. So Europe’s strategy cannot be to take the historically well-trodden path of least resistance.

Unfortunately, in the aftermath of the Cold War, it has often been assumed that Russia’s hostile intentions have disappeared, and foreign policy toward Russia has been conducted as if traditional diplomatic considerations no longer apply. But, of course, they do apply. Encouraging economic and political reform are important objectives, but they can never serve as a substitute for a serious effort to contain Russia’s deep-seated expansionism.

To be sure, Russia has legitimate security interests in what has been called its “near abroad.” But Europe’s stability and commitment to economic growth across the continent require that these interests be satisfied without economic pressure or unilateral intervention.

A viable Russia policy for Europe must recognize Europe’s growing dependence on Russian energy resources. To proceed otherwise would discount the most important question: the reliability of Russia as an energy supplier.

Despite controlling the world’s largest gas reserves, Russia’s state-owned monopoly Gazprom is not producing enough for an economy growing at 6% a year. Gazprom’s three largest fields, which account for three-quarters of its output, are in decline. This domestic shortage means that Gazprom is unable to increase supply to Europe, at least in the short term, unless it can buy gas at below-market rates from its Eastern European and Central Asian neighbors and in turn sell it to its European customers at market prices. At the same time, Russia wants to cater to other markets, notably along its eastern frontier.

The problem is not a lack of reserves, but Gazprom’s investment strategy. In recent years, the company has spent vigorously on everything but developing its reserves. It has built or is building pipelines to Turkey and Germany, taken over an oil company, and sought footholds in European distribution markets. Instead of investing in discovering oil, Gazprom has become the biggest media group in Russia. All this is done in the name of creating and supporting a national energy champion which also serves as a foreign policy arm of the Kremlin.

Meanwhile, with investment in Gazprom’s core activity – production – steadily declining, a crisis is looming, one that requires the stewardship and steady hand of the EU. Gazprom’s ambitions for gaining control of pipeline and energy transport infrastructure must be slowed, which requires allowing independent producers to prosper. Indeed, independent producers already account for 20% of domestic gas sales in Russia. To boost their output and allow them direct access to European markets will require market-based incentives.

Europe can help by insisting that Russia participate in the European Energy Charter, which calls for Gazprom to grant its production competitors access to Russian pipelines, and for all disputes to be settled by international arbitration. European competition policy, which successfully brought giant companies like Microsoft into line to promote competition, could help to turn Gazprom into a normal competitor, too.

Europe’s leaders should engage in frank discussions about where European and Russian interests converge or differ, and these discussions should include regional neighbors that are both producer and transit nations, like my own country, Ukraine. Moscow will understand a policy based on mutual respect for each other’s interests better than simple appeals to goodwill and friendship.

Russia should be welcome in institutions and agreements that foster cooperation, with reciprocal rights and responsibilities. Russian reform will be impeded, not nurtured, by turning a blind eye to political and economic aggression. The hard-fought independence of the former Soviet republics must not be tacitly traded away in acquiescence to Russia’s desire for regional hegemony.

Russia’s leaders are entitled to the world’s understanding as they struggle to overcome generations of Soviet misrule. But they are not entitled to the sphere of influence that Russian tsars and commissars coveted for 300 years. If Russia is to be a serious partner for Europe, it must be ready to accept the obligations of stability along with the benefits. If Europe is to ensure its prosperity and energy security, it must demand nothing less.