Ending the Silent Russo-European War

There has been little mutual trust lately between the governments of Russia and the European Union. European politicians viewed Russia’s recent parliamentary and presidential elections skeptically. Diplomatic relations between Britain and the Kremlin are at a low since Alexander Litvenenko, a critic of the Russian government, was murdered – allegedly by a Russian agent – in London in 2006.

Such mistrust poses an obvious threat to trade and investment between Russia and the EU. Russia’s trade with the EU between January and August 2007 reached $173.3 billion, or 51.6% of its foreign trade turnover. More than a half of Russia’s goods are sold in Europe, and two of its top three trade partners are European: Germany, with turnover of $31.9 billion, and the Netherlands, $28.3 billion.

Similarly, European countries account for 75% of direct investment in Russia. Britain ranks first, pouring in more than $15 billion in the first half of 2007, despite the Litvinenko case and the tit-for-tat expulsion of diplomats during this period.

Nevertheless, the volume of foreign investment falls short of what Russia needs, for its economy is unbalanced. More than half of its exports are oil and gas, with the rest mainly chemicals and agricultural products. Petrodollars are Russia’s main resource for the development of an information-based society. EU countries will continue to demand energy, and Siberian deposits are far from exhausted.