Introduction

Despite its economic strength and military might, the European Union has begun to behave as if it were subordinate to an increasingly assertive Russia. This dramatic change in the power relationship is rooted in the EU's disunity and self-doubt - but both can be fixed, according to the authors of the first-ever 'Power Audit' on bilateral EU-Russia relations, conducted with the participation of national experts from 27 EU member states.

Overview

The EU's failure to agree on a common Russia policy has allowed the Kremlin to increase its leverage over the EU, through signing bilateral energy deals, playing the Kosovo card, asserting itself in the common neighbourhood, and dragging its feet on preventing nuclear proliferation. During the Putin years, Moscow had bilateral disputes with 11 EU countries, including the Litvinenko affair with the UK, the Polish meat ban, and trade disputes with the Netherlands.

This ECFR report says that EU governments are torn between two dominant approaches to Russia. One side sees Russia as a threat that needs to be managed with 'soft-containment', the other sees the country a potential partner that can be transformed through 'creeping integration' into the European system.

Within those, the authors identify five distinct categories of countries. Greece and Cyprus are referred to as 'trojan horses' whose governments often defend positions close to Russian interests, and who have been willing to veto common EU positions. The study reveals little-known facts such as Cyprus being the biggest official 'investor' in Russia, due to the amount of Russian capital which is saved there. Germany, France, Italy and Spain are described as "strategic partners" - whose governments have built special bilateral relationships with Russia, which has sometimes cut against the grain of common EU objectives in areas such as energy and the EU Neighbourhood Policy.

Ten countries - Austria, Belgium, Bulgaria, Finland, Hungary, Luxembourg, Malta, Slovakia, Slovenia and Portugal - are labelled as 'friendly pragmatists' whose governments have a less close but still significant relationship with Russia, in which business interests come first. Their policy tends to follow pragmatic business interests, opting for a path of least resistance in political disputes. In Bulgaria, for instance, the government has strong economic links with the Russian company Lukoil, which generated more than 5% of Bulgaria's GDP and around 25% of its tax revenues in 2003.

The report identifies nine further countries - the Czech Republic, Denmark, Estonia, Ireland, Latvia, the Netherlands, Sweden, Romania and the United Kingdom - as 'frosty pragmatists'. While keeping business interests high on the agenda, the governments of these countries have not refrained from criticising Russia's human rights record and failings on democracy.

Finally, Poland and Lithuania are described as 'new Cold-warriors' who have developed an overtly hostile relationship with Moscow and are willing to use the veto to block EU negotiations with Russia.

The authors of the report argue that the five groups of the EU need to unite around a common approach - one that reflects the EU's long-term strategic interests. To reverse the 'asymmetric interdependence' that is currently in Russia's favour, the authors recommend that the European Union:

Pushes for the implementation of all international agreements and standards Russia has committed itself to, in order to further promote the rule of law;

Makes Russia's participation in G8 summits conditional on its commitment to the spirit and the letter of common agreements, with the threat of organizing more low-level meetings within the G7 format should Russia be uncooperative;

Introduces the policy of 'principled bilateralism' where EU governments are expected to use bilateral links to serve common EU goals and introduce an early warning system to inform of impending energy deals or bilateral disputes;

Makes the EU Neighbourhood Policy more efficient to encourage participating countries to respect the rule of law and draw them further into the EU's orbit;

Gives the European Commission political backing to use competition policy to investigate energy deals; and authorise it to pre-approve major energy deals;

Provides assistance to Turkey, Ukraine and Moldova in implementing the EU's energy acquis communautaire.

The European Council on Foreign Relations does not take collective positions. This paper, like all publications of the European Council on Foreign Relations, represents only the views of its authors.