Sunday, June 15, 2014

15/6/2014: Ifo on Russia: 'Make Trade to Avoid War'...

A very interesting set of points on EU/U.S. policy on Russia from the Ifo's President, Hans-Werner Sinn (Ifo Viewpoint Nr. 155, "Why We Should Give Putin a Chance" link here)

Some quotes, my comments in italics:

“The annexation of Crimea was definitely a violation of international law. …A redrawing of borders decided upon by only one party cannot be accepted in Europe. However, it must be borne in mind that the present crisis was triggered by the West. The overtures made by NATO to Georgia, Moldova and Ukraine in recent years effectively threatened to encircle Russia's Black Sea Fleet in the only ice-free port at its disposal.”

“If U.S. President Barack Obama believes that Russia is just a regional power that will have to put up with this, he is wrong…” [Even if Russia were a regional power, the region in which it co-exists with other powers is immense and directly borders three superpowers – U.S. via Pacific, EU and China. Security considerations, in Russia’s case directly link to the fact that it is literally surrounded by the Nato or Nato-related (via E.U. membership) powers on three sides. It would be exceptionally naïve, or more likely careless and callous, to assume that Nato and aligned states are not a threat to Russian security, no matter how benign the alliance is and no matter how many cooperative councils Nato has with Russia].

“…some hardliners in Washington, Brussels and Moscow obviously have their own agenda. NATO can chafe at the bit once again, and the powers-that-be in the Kremlin are not the only ones to have noticed that international conflicts are an effective way of distracting attention away from domestic problems. It is good that the German federal government is trying to exercise a moderating influence, while exercising care not to endanger the solidarity of the West's alliance.” [A logical conclusion. On both sides. Including the obvious one: Russia, but also the less discussed one: the U.S. where domestic problems for the Administration – relating to a set of policies that have effectively rendered the current Administration ineffective and necessitated ‘toughening’ by the White House of the foreign policies stance to counter rising strengths of the U.S. Republican Party. Ukraine is being de facto caught between three pressure points: (1) Russia’s growing insecurity and concerns about the geopolitical position of the country in its own neighbourhood; (2) White House’s growing weakness in domestic affairs; and (3) EU’s complete loss of raison d’etre during the Global Financial Crisis. Add to this internal collapse of the Ukrainian political and business elites and we have the current situation.]

“… we need to proceed carefully: No reasonable party can be in favour of the economic destabilization of Russia and a trade war.” [However, beyond being undesirable, such destabilisation is actually contrary to the solution needed in order to normalise the region:] “How can the cost of any further annexations be raised for Russia and the chances of finding a peaceful solution be strengthened, without doing any damage to Russia, Ukraine or the EU? The answer lies in the offer of a free trade agreement with Russia and the Ukraine as part of a new international agreement on Ukraine's future.”

[Such an agreement is neither new, nor alien idea. In fact it was proposed by President Putin himself:] “In 2010, Russian President Vladimir Putin proposed a free trade area stretching to Vladivostok from Lisbon. What happened? The EU worked on a free-trade agreement with Georgia, Moldova, Ukraine and Armenia instead. This only increased Moscow's nervousness, because it implicitly posed the threat of customs barriers for Russia.” [Again, European position of raising barriers against external partners in order to secure gains from trade to the members of the Union or the Associate Members is the problem. Russia witnessed this in the cases of 2004 EU Accession].

[Free trade is a win-win for all parties concerned.] “Free trade with a country specialized in commodities, such as Russia, that complements the West's specialization in manufacturing, promises major trade gains that would be much greater than the benefits of trade between similar economies alone. EU politicians are currently negotiating a free-trade deal with the U.S., which would bring benefits to the countries involved. But the inclusion of Russia in a free-trade agreement could turn out to be a real gold mine for all parties.”

“In the event of political stabilization, offering Russia free trade with the West would preserve peace, bring economic advantages to Europe and effectively push forward the policy of “change through rapprochement” first implemented successfully by Willy Brandt with East Germany.”

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