Eastern EU Turns Back on Brussels, Re-Engages with Russia; Eurasia, China Lie Beyond

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Op/Ed By Chris Devonshire-Ellis

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Several member nations of the European Union are increasingly defying Brussels by pursuing increased trade and cooperation with Russia. With Poland, Hungary, and the Czech Republic all at odds with Brussels over sovereignty and ultimate governance concerns, all are looking to Moscow to boost trade ties last enjoyed during the Soviet era.

Hungary, with their new populist Prime Minister Viktor Orban has been highly critical of Brussels interfering with what Budapest sees as internal matters outside of Brussels’ scope of influence. This included the controversy over awarding of infrastructure contracts to non-EU funded projects that Brussels insisted on monitoring. Budapest also refused to adopt the EU policy concerning immigration, with Brussels placing sanctions upon Budapest in retaliation. Things have become so fractured that there have been calls to throw Hungary out of the EU while Orban has threatened to sue.

Such moves have only served to fuel suspicions concerning the EU acting more as a federal state than a trade body, with Budapest consequently moving closer to Moscow. That has seen Hungarian Ambassador to Moscow Norbert Konkoly speak with the Russian Federation Council and state: “Hungary is interested in strengthening trade and economic cooperation with Russia,” adding that Budapest aims at boosting “export, investment indicators, as well as transfer of technologies.” Russian-Hungarian trade turnover is running at about US$7 billion per annum.

It is a similar story with the Czech Republic, also frustrated with Brussels over what it too increasingly sees as interference in its internal affairs. Although not a member of the Eurozone, it is a member of the EU. Yet, it too has been falling out with Brussels, recently over its decision to have a nuclear power plant built by Russia, missing an EU directive over arms control and Brussels instigating censorship upon the Czech Prime Minister. Not surprisingly, the Czech response has also been to re-examine trade ties with Moscow. Jiri Havlicek, the Czech Minister of Industry and Trade met with Russian trade officials in Yekerterinburg with an aim to specifically divest and develop trade from the EU and into new markets. About 80 percent of Czech trade is with the EU, yet Havlicek aims to re-target the Russian market. “Our goal is to diversify our foreign trade, and from this point of view, Russia is one of the main trading partners, besides the EU.” he said. “After the sanctions crisis, we see that our trade with Russia is developing very well. In comparison with 2017, it grew by more than 30 percent.”

Poland is also battling with Brussels, again over immigration policies and perceived interference with internal affairs such as control of Poland’s judiciary. There has been talk of “Polexit” and an increasing awareness that Brussels really does not understand the sensitivities and dynamics of Eastern Europe and its Soviet background as opposed to the US-influenced Western Europe.

The mood is spreading. Italy, too, is becoming alarmed at Brussels’ attitudes towards Moscow, and has threatened to veto any further expansion of sanctions.

The move away from Brussels and towards Moscow is likely to become more pronounced during this year. While the EU looks on at what is happening with the UK over Brexit, Brussels has been producing most of the rhetoric. Yet, individually, some EU members are extremely concerned: both at what is increasingly being seen as a fight over real sovereignty and secondly, over the financial impact the UK’s exit will have on fiscal budgets. Brussels has already stated that any shortfall left by the UK leaving will have to be made up by other member states. That coincides with Donald Trump’s assertion that EU members must also pay more for NATO protection.

There are elections too, expected to steer the EU towards a less coherent era of policy making and one more likely to expose divisions between East and Western Europe. While the current noise over Brexit may well be shrill and loud, the real issue facing the EU is not the United Kingdom; it is repairing the relationships it has been antagonizing in Eastern Europe. A resurgence of trade interest and cooperation with Moscow is almost certain to occur during 2019 and 2020. It will depend upon far more understanding and skillful politicking from Brussels to prevent that happening. Otherwise, individual cases examining the options of leaving the European Union and joining the Eurasian Economic Union and a rebooting of Eastern Europe to look towards Eurasia for a common future will only begin to rapidly increase. The allure of China, as well as old relationships within Russia, could well prove more attractive than the EU’s increasingly expensive federal governance.

About Us

Russia Briefing is produced by Dezan Shira & Associates. The firm advises international businesses on investing, setting up businesses and administering them throughout the Eurasian region, including Russia, China, India & ASEAN, and maintains offices and partners in each of these countries and regions. For assistance with investing in Russia, or for Russian businesses wishing to invest in Asia, please contact Maria Kotova at maria.kotova@dezshira.com or visit us at www.dezshira.com.

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