Europe’s Eurasian opportunity

BERLIN—The global energy system is changing fast, fueling widespread anxiety about so-called “energy insecurity,” particularly in Europe. The problem is not that the world is running out of energy resources. On the contrary, oil scarcity is less of a concern today than ever before, owing not only to energy-efficiency initiatives, like the European Union’s nearly zero-energy buildings policy, but also to rising competition between shale producers and traditional oil exporters. Continued technological progress suggests that renewable energies—from wind and solar to, perhaps, planetary winds—may ultimately supplant fossil fuels, anyway.

Instead, the insecurity is political in origin, with short-term considerations, especially with regard to Russia, overwhelming a coherent energy—and, to some extent, foreign—policy. This shortsightedness is generating serious security risks, fueling geopolitical instability, and undermining economic growth. It is time for a new approach that leverages the interconnectedness of our energy systems, economies and strategic relationships to build a more stable, efficient, and prosperous world.

The first step is understanding how these issues are related to one another. The Kremlin’s annexation of Crimea and its support for violent separatists in eastern Ukraine prompted the United States and Europe to impose increasingly stringent economic sanctions against Russia. The ruble fell by more than 50 percent, fueling inflation and forcing Russia’s central bank to hike interest rates, impeding economic growth. The credit-rating firm Standard & Poor’s has now cut Russia’s credit rating to junk status, pushing the ruble even lower.

But, though cheaper Russian energy imports should benefit Europe, the effectiveness of Western sanctions is not entirely good news. A financial crisis in Russia, together with collapsing energy prices, would crash the Eurasian economy, with serious repercussions for EU members that depend heavily on exports to the region.

European leaders are well aware of the risks their economies face. Danish Foreign Minister Martin Lidegaard and German Foreign Minister Frank-Walter Steinmeier have warned of the potential economic and political fallout of continued sanctions, while French President François Hollande has called for their deescalation.

Such a shift will of course require a convincing commitment by Russia to last September’s Minsk Protocol, which was supposed to secure a ceasefire in Ukraine. But, despite the force with which intensifying economic hardship and diplomatic isolation are pushing the Kremlin toward cooperation, a political compromise must be handled carefully.

Specifically, if Russians believe that their leaders have buckled under pressure, they might protest, destabilizing the country in a way that would benefit neither Russia nor the West. By ensuring that the agreement aligns, to some extent, with the rhetoric of Russia’s strategic posturing, Western leaders would provide the Kremlin a minimally risky escape route from the current deadlock.

Russian President Vladimir Putin would have much to gain from such a deal, not least with regard to the Eurasian Economic Union, which was recently unveiled to little fanfare. Given Russia’s growing alienation from its remaining partners, especially Belarus and Kazakhstan, which are determined to preserve their neutrality in the conflict between Russia and Ukraine, the EEU currently seems unlikely to fulfill Putin’s ambition of serving as a credible rival to the EU. Indeed, it may not even survive.

Kazakhstan, for one, has not been shy about its reservations. Shortly after Putin declared, at last August’s Seliger Youth Forum, that “Kazakhs

never had a state of their own” before 1991 (a statement that reflected the same geopolitical chauvinism that has characterized Putin’s Ukraine policy), Kazakh President Nursultan Nazarbayev explicitly threatened to leave the project. “Astana,” he vowed, “will never be in an organization which represents a threat to the independence of Kazakhstan.”

But the EEU is first and foremost an economic grouping, a point that Nazarbayev, who first introduced the idea of a Eurasian alliance back in 1994, has always emphasized. On that front, Russia may well be an even less appealing partner nowadays.

In this context, the Central Asian republics are already hedging against Putin’s irredentist ambitions, by pursuing closer ties with the EU and China. The question remains whether divergent visions for economic cooperation in Central Asia allow for a long-term symbiosis between the Kremlin-sponsored EEU and China’s Silk Road Economic Belt strategy, which would expand trade and investment into Russia’s “near abroad.”

With China’s growing influence in the post-Soviet space enabling the Central Asian republics to embrace a so-called “multivector” foreign policy, a shift in the balance of power will benefit Russia’s former client-states by increasing their leverage for negotiation within the newly established entity. The EEU would thus have a chance to develop beyond a Russian neo-Soviet integration scheme and become a unified and dynamic economic area.

This would represent an important opportunity for the EU, which has a strong interest in a reintegrated Russia and a politically stabilized Central Asia. As Russia’s ambassador to the EU Vladimir Chizhov recently stated, ongoing sanctions need not prevent the EU and the EEU from maintaining official contact. Such an approach could advance Europe’s efforts to improve its energy security and contribute to a more stable geopolitical environment, without undermining progress toward other interregional cooperation agreements, such as the Transatlantic Trade and Investment Partnership with the United States.

By building on existing interdependencies, European leaders could help to lay the foundations for a shared legal and institutional framework that improves energy-supply administration and expands opportunities for economic exchange among EU and EEU members. For EU leaders, the time has come to think ahead. Project Syndicate

Michael Schaefer, a former German ambassador to China, is the chair of the board of directors of the BMW Foundation. Inna Veleva is project manager for Global Dialogue at the BMW Foundation.