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Prepared: 14:14 on 10 October 2008
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Prepared: 14:14 on 10 October 2008
Lord Truscott: My Lords, I declare my relevant energy and other interests, as stated in the Lords’ Register of Interests and recorded by the Advisory Committee on Business Appointments. I also declare an interest because I have a Russian wife, and as Vladimir Putin’s biographer.
Incidentally, as Putin’s biographer, I was never one of those who believed that the former president would quietly ride off into the sunset. Instead, what we now have is a political tandem, with Prime Minister Vladimir Putin firmly in the front seat and President Dmitry Medvedev holding up the rear.
Perhaps I may say at the outset how proud I am of the committee’s work in producing the report before your Lordships’ House, under the able chairmanship of the noble Lord, Lord Roper, from whom we have just heard. Our committee received excellent support from the Clerk and her staff, the committee specialist and our special adviser, Sir Roderick Braithwaite.
Since we wrote the report, the global credit crunch has gathered pace, and we have witnessed the brief Russian/Georgian war over South Ossetia and Abkhazia. Even so, I agree with the noble Lord, Lord Roper, that the findings and conclusions of our report remain sound and are a valuable addition to the debate about current and future relations between the EU and Russia. We wrote in the report that:
“The current difficulties in the relationship should not weaken the EU's determination to build a long-term partnership with Russia, based on dialogue, trust and common interests”.
We noted that the changes needed to transform Russia are likely to,
“take decades if not generations”.
We said the EU needed a,
“hard-headed and unsentimental approach”,
as the noble Lord, Lord Roper said, so the Russians see it in their own interests to work productively with the EU. The EU is Russia’s major trading partner, the UK is its single biggest investor, and we share interests in the United Nations, the G8 and over major issues such as tackling terrorism, nuclear proliferation, the Middle East peace process, Afghanistan, and Iran’s nuclear ambitions.
The EU accounts for 81 per cent of Russia’s pipeline gas exports and 60 per cent of its oil exports. As supplier and consumer, we are locked in a close mutual embrace. As the noble Lord, Lord Roper, said, production shortfalls and the falling price of oil, now under 85 dollars a barrel—incidentally, at under 70 dollars a barrel the Russian federal budget will be in difficulty—present a major threat, as do the production shortfalls themselves, to Russia’s ability to meet its international and domestic commitments.
As a former energy Minister, I have a particular interest in energy matters, and I believe that the noble Lord, Lord Crickhowell, will expand on this theme in his speech. Despite the Government’s response to our report, I still believe that we were right in the committee in arguing that pressing Russia for ratification of the energy charter treaty is a waste of time. Far better to my mind would be to incorporate the principles of the ECT and the transit protocol in a new, legally binding, partnership and co-operation agreement. Most effective of all, would be to develop a common EU energy policy, a liberalised competitive energy market and Europe-wide energy grids.
Since the conflict in Georgia, some have argued that Russia should be thrown out of the G8, its WTO membership should be blocked, and the EU should abandon negotiation of a new partnership and co-operation agreement between Brussels and Moscow. These were not the conclusions of our report, and I do not see a reason to change them. Engaging Russia is a far better policy than isolation or containment. It was appropriate for the EU to suspend talks on a new PCA until the Russians withdrew their armed forces from Georgia proper, but now they appear to have done so, negotiations should be resumed. I should be interested to hear the Minister’s view on that. Whether or not we like it, and many do not, South Ossetia and Abkhazia will not be returned to Georgian control sometime soon. I hope the EU can eventually broker a meaningful settlement of the dispute.
I will not speculate on who provoked whom, and whether they were backed or opposed by the state department or the Pentagon, but I will vouchsafe that miscalculations were made on all sides. The Georgians seemed to expect an easy victory; the Russians totally underestimated the economic cost of conflict in our interdependent world.
The result for Moscow was an outflow of $56 billion and the precipitation of the collapse of the Russian stock exchange, although other factors were at work here. Watching Russian TV on the family dacha outside St Petersburg as the crisis unfolded, it was revealing for me to see an oligarch on Russian television publicly begging the state president to provide liquidity to domestic industry as foreign capital took flight.
Georgia was Russia’s Suez. The war cost Russia more than the lives of its servicemen and reputational damage abroad; it was starting to suck the economy dry. Moscow should rethink its strategy of international relations as a zero sum game, which to my mind is reminiscent of 1970s superpower politics. The world has since moved on.
For all the Russians’ talk of genocide in Georgia, the real ghost in the room was Kosovo. Moscow’s argument was that if Kosovo could have its independence, why not South Ossetia and Abkhazia, and will the Crimea be far behind, with the growing dispute over the Russian lease of the Black Sea fleet base of Sevastopol? The Crimea is historically and ethnically part of Russia, and was gifted by the Ukrainian Soviet President Khrushchev to the Ukrainian SSR in the 1950s as a present. Of course, it did not matter in those days because it was the USSR which counted, not the supposedly autonomous Soviet socialist republics. Well, it certainly matters now.
In my view we are not witnessing a new cold war, as the noble Lord, Lord Roper, said, rather the evolution of a “Russia First” strategy, which re-emerged after the 1995 Duma elections and is characterised by a uniquely Russian approach to political and economic development which appropriates certain western skills and values while avoiding wholesale copying of western models of democracy and market economy. The result is a hybrid version of both and a re-assertion of Russian claims in perceived areas of historical and traditional interest, ranging from the Balkans to Russia’s “near abroad”. What is new is not the strategy, but Russia’s confidence—some would say arrogance—and new relative wealth to give it momentum and muscle. The EU has to come to terms with this new assertive Russia without losing its own policy coherence, and to my mind pragmatic engagement is the best approach.