Turkey after the start of negotiations with the European Union - foreign relations and the domestic situation, Part II. OSW Report, July 2008

The Centre for Eastern Studies has decided to embark on the project entitled 'Turkey after the start of negotiations with the European Union - foreign relations and the domestic situation' for two major reasons: the start of the accession negotiations between Ankara and the European Union in October 2005, and the significant part which Turkey plays in western Eurasia (the Caucasus, the countries in the basins of the Black and Caspian Seas, the Middle East and the Balkans) which We wish to present our readers our second report discussing Turkey's relations with Central Asia, the Caucasus and Russia, the aspect of Turkish foreign policy regarding the Black Sea, and the role of Turkey as a transit country for oil and gas from the Middle East and the Caspian regions. The evaluation of Turkey's standpoint and potential regarding the aforementioned issues is especially important, considering the tensions existing in Turkey's relations with the EU and the USA, as well as the West's increasing engagement in the Caucasus, Central Asia and Black Sea regions. In this process, Ankara may play the role of a significant ally for the West. However, it may just as readily play the role of its rival, who could co-operate with other countries and may seriously frustrate the implementation of the EU and US' goals. The Report was developed between autumn 2006 and autumn 2007, over which time the project participants searched for publicly available documents in Poland, Turkey, EU countries and the USA, and went on five research trips to Central Asia, Russia, Turkey and Caucasus, where they met local analysts, officials and researchers.

The Russian economy under Putin: Growth factors and impediments to economic development. OSW Study 20/2005

After a dramatic economic decline after the collapse of the Soviet Union and the financial breakdown of 1998, the Russian economy has begun to emerge from its deep crisis. The years 1999-2004 were a period of dynamic development in all sectors of Russian economy, and saw a rapid growth in GDP of over 7 per cent per year. Russia owed the excellent macroeconomic results of that period to a combination of favourable factors. The key factors were: high hydrocarbon prices on the global markets; an increase in Russia's international competitiveness thanks to the "rouble devaluation effect" (following the 1998 financial crash); and the market reforms carried out within that period. In 2004, despite very high oil and gas prices on world markets, a slowdown of the GDP growth took place. Even though the economy is still developing fairly rapidly, we are able to say that Russia is exhausting those traditional mechanisms (apart from oil and gas prices) which have hitherto stimulated GDP growth. Moreover, there are no new mechanisms which could replace the old ones. In the longer term, these unsolved structural problems may seriously impede Russia's economic growth.

Promises and hurdles in EU-Kazakhstan energy cooperation. EUCAM Commentary No. 20, November 2011

Kazakhstan’s Prime Minister, Karim Massimov, once referred to energy cooperation as the ‘core’ of relations between his country and the European Union (EU). Indeed, there is great mutual interest in this area. Six percent of the EU’s crude oil imports and 16 percent of its uranium imports come from Kazakhstan. And around 80 percent of the latter’s oil exports go towards Europe. For Kazakhstani producers, access to European lucrative and reliable markets is of utmost importance. Over the last several years, the thrust of Kazakhstan’s foreign policy was aimed at increasing the capacity of the Caspian Pipeline Consortium (CPC) that pumps Kazakhstani oil to Europe. Moreover, Kazmunaigaz’s (KMG) – the national oil and gas company – major external investment was in the Romanian oil company Rompetrol.

The Price of Oil and Soviet/Russian Aggressiveness. CEPS Commentary, 16 January 2015

A decade-long period of a steadily rising oil prices (and that of other raw materials) has given Russia a feeling of strength, bordering on invulnerability, which has made the country more assertive, and ready to use any opportunity to deploy its military power. Based on his analysis of Russian behaviour over the past 50 years, Daniel Gros finds that the abrupt reversal of this trend since the summer of 2014 portends a much less aggressive Russian stance as long as the price of oil remains at present levels.

Transatlantic Conflict and Cooperation Concerning Trade Issues. Jean Monnet/Robert Schuman Paper Series Vol. 14 No. 13, July 2014

From the Introduction. Transatlantic relations have undergone significant changes within the past twenty-five years. During the Cold War era, the United States and Western Europe were bound together by a perceived common threat from the Soviet Union. Consequently, economic issues commanded less attention than security issues. After the Cold War ended, economic issues were thought to be the glue that would hold the transatlantic relationship together. Much attention was given for several years to fostering economic cooperation through the development of intergovernmental initiatives. After the terrorist incidents of September 11, 2001 in the United States, and the subsequent wars in Iraq and Afghanistan, security issues again came to the forefront of the relationship. However, in contrast to the earlier era that was mainly characterized by close cooperation, disagreements between the United States and major countries of Western Europe about how to deal with the terrorist threat created severe strains in the relationship. By 2003, the third year of the George W Bush administration, transatlantic political relations had reached perhaps their lowest point since World War II. They have gradually improved since then, but with a significant setback from Wikileaks revelations, and even more serious strains resulting from the revelations by Edward Snowden concerning United States surveillance activities. Security issues have come to the forefront also in connection with regional unrest in the Middle East, EU nations’ dependence on Russian oil and gas, and Russian intrusions into Ukraine.

The prospects for the EU-Ukraine free trade agreement. OSW Commentary No. 94, 2012-10-15

The European Union and Ukraine initialled the Deep and Comprehensive Free Trade Area Agreement (DCFTA) on 19 July 2012. The scope of the agreement which the EU and Ukraine reached following their negotiations is much more extensive than that of a typical free trade agreement. It envisages not only the lifting of tariff and extra-tariff barriers but also, more importantly, Kyiv adopting EU legal solutions and standards in this area. Whether the agreement will be signed and implemented is still an open question and depends on the existing political conditions. On the one hand, the repression imposed by the government in Kyiv on its political opponents (including the detention of the former prime minister, Yulia Tymoshenko) has provoked criticism from the EU, which refuses to sign the agreement if the government in Kyiv continues to violate democratic principles. The manner in which Ukraine’s parliamentary elections are conducted this October will be the key test. On the other hand, Russia is increasingly active in its efforts to involve Ukraine in the integration projects it has initiated (the Customs Union and the Eurasian Economic Community). It should be noted that Moscow has effective instruments to exert its will, such as the dependence of the Ukrainian economy on supplies of Russian oil and gas and on exports to the Russian market. Besides, Moscow also has political instruments at its disposal. It is impossible to participate in integration projects both with the EU and with Russia. Therefore, Kyiv will have to make a strategic decision and choose the direction of its economic integration. Unless Ukraine takes concrete action to implement its agreements with the EU, primarily including the free trade agreement, its economic dependence on Russia will grow, and it will be more likely to join the Russian integration projects.

Renewables: The great uncertainty of the EU energy strategy. Egmont Paper No. 71, November 2014

Summary. For more than two decades, the development of renewable energy sources (RES) has been an important aim of EU energy policy. It accelerated with the adoption of a 1997 White Paper and the setting a decade later of a 20% renewable energy target, to be reached by 2020. The EU counts on renewable energy for multiple purposes: to diversify its energy supply; to increase its security of supply; and to create new industries, jobs, economic growth and export opportunities, while at the same time reducing greenhouse gas (GHG) emissions. Many expectations rest on its development. Fossil fuels have been critical to the development of industrial nations, including EU Member States, which are now deeply reliant upon coal, oil and gas for nearly every aspect of their existence. Faced with some hard truths, however, the Member States have begun to shelve fossil fuel. These hard truths are as follows: firstly, fossil fuels are a finite resource, sometimes difficult to extract. This means that, at some point, fossil fuels are going to be more difficult to access in Europe or too expensive to use.1 The problem is that you cannot just stop using fossil fuels when they become too expensive; the existing infrastructure is profoundly reliant on fossil fuels. It is thus almost normal that a fierce resistance to change exists. Secondly, fossil fuels contribute to climate change. They emit GHG, which contribute greatly to climate change. As a consequence, their use needs to be drastically reduced. Thirdly, Member States are currently suffering a decline in their own fossil fuel production. This increases their dependence on increasingly costly fossil fuel imports from increasingly unstable countries. This problem is compounded by global developments: the growing share of emerging economies in global energy demand (in particular China and India but also the Middle East) and the development of unconventional oil and gas production in the United States. All these elements endanger the competitiveness of Member States’ economies and their security of supply. Therefore, new indigenous sources of energy and a diversification of energy suppliers and routes to convey energy need to be found. To solve all these challenges, in 2008 the EU put in place a strategy based on three objectives: sustainability (reduction of GHG), competitiveness and security of supply. The adoption of a renewable energy policy was considered essential for reaching these three strategic objectives. The adoption of the 20% renewable energy target has undeniably had a positive effect in the EU on the growth in renewables, with the result that renewable energy sources are steadily increasing their presence in the EU energy mix. They are now, it can be said, an integral part of the EU energy system. However, the necessity of reaching this 20% renewable energy target in 2020, combined with other circumstances, has also engendered in many Member States a certain number of difficulties, creating uncertainties for investors and postponing benefits for consumers. The electricity sector is the clearest example of this downside. Subsidies have become extremely abundant and vary from one Member State to another, compromising both fair competition and single market. Networks encountered many difficulties to develop and adapt. With technological progress these subsidies have also become quite excessive. The growing impact of renewable electricity fluctuations has made some traditional power plants unprofitable and created disincentives for new investments. The EU does clearly need to reassess its strategy. If it repeats the 2008 measures it will risk to provoke increased instability and costs.

Prime Minister Fico’s Russian card. OSW COMMENTARY NUMBER NUMBER 175/01.07.2015

Since the beginning of the Ukrainian-Russian conflict, the position of Slovakia’s left-wing government towards Russia has been ambiguous. Bratislava has accepted the EU sanctions targeting Russia and the plan for strengthening NATO’s eastern flank. At the same time, however, Prime Minister Robert Fico’s government has maintained close political relations with the Kremlin. It has called for the intensification of Slovak-Russian economic relations and has repeatedly criticised the sanctions, speaking in tandem with Russian propaganda in so doing. Slovakia’s Prime Minister is hoping that by playing the role of one of the leaders in the EU and NATO who are most willing to cooperate with Russia, he will gain economic benefits and win votes in next spring’s upcoming parliamentary elections. Despite numerous pro-Russian gestures, Slovakia has been limiting the number of areas in which Moscow could exert pressure on Bratislava. As it strives to become independent of Russia, Slovakia has ensured possible alternative fuel supplies for itself. Moreover, it has been gradually replacing Russian-made military equipment with equipment made in the West. The Slovak government does intend to develop the country’s cooperation with Russia, including in strategic areas involving supplies and transit of oil and gas, as well as supplies of nuclear fuel. Nevertheless, it has been making efforts to gain easy access to an alternative source of supplies in each of these areas. Beset by crises, Russia has ever fewer economic cooperation opportunities to offer Slovakia, and Slovak businesses operating on the Russian market have to take into account the growing risk of insolvency of local contractors. To a great extent, therefore, Slovak-Russian relations have been reduced to rhetorical statements confirming the desire for closer cooperation, and to visions of joint projects accompanied by an ever shorter list of feasible cooperation initiatives.

The consequences for Russia of the nuclear deal with Iran. OSW COMMENTARY NUMBER 177/03.08.2015

The five permanent members of the UN Security Council (the USA, the United Kingdom, China, France and Russia) plus Germany and the European Union signed a deal with Iran on 14 July in Vienna (a Plan of Action with five appendices, henceforth referred to as the Vienna Agreement). Under this agreement, Iran undertook to restrict its nuclear programme and to bring it under international scrutiny for 15 years in exchange for a gradual lifting of international sanctions (both those imposed between 2006 and 2010 by the UN Security Council and the unilateral US and EU sanctions). Even though Russia has officially reacted positively to this deal, the consequences it will have are rather ambiguous from Moscow’s point of view. Iran looks set to become stronger and will possibly normalise its relations with the West, and especially the United States. This, in political terms, is a disadvantage for Russia. The Kremlin’s ability to use its policy towards Iran as a bargaining chip in contacts with Washington will be reduced significantly. In turn, the benefits will include improving the perception of Russia in the West and the opening up of new opportunities for the geopolitical game in the region, both with Iran and its opponents in the Arab world. Similarly, in economic terms, the possible lifting of sanctions will offer Russia new opportunities to achieve immediate benefits owing to co-operation in the nuclear and military-technical areas. In the short term, the lifting of sanctions will not pose any threat to Russia’s position on the global energy markets. However, in the long term, the end of Iran’s international isolation may bring negative consequences for Russia, such as the dominant position of Western and/or Chinese companies in the Iranian upstream sector, rising exports of Iranian oil and gas to EU and Asian markets (which are essential for Russia) and the downward pressure on oil and gas prices.