Global Policy Orientation

By now it should be clear where Europe, or Germany rather, stands in regards to its dealings with Russia and what side it will likely take should it have to decisively choose between it and the West.

BERLIN/MOSCOW (Own report) – In the debate over a possible expansion of EU sanctions against Russia, the German chancellor is suggesting a possible continuation of cooperation with Moscow. “In the intermediate and long term,” Merkel explained, “the close partnership with Russia should be continued.” She sees “no necessity” in a policy of “isolating” Russia, patterned on the cold war’s “containment” policy. Merkel was reacting to the persisting anxiety in leading German business circles, that sanctions against Russia could seriously dampen their expansion opportunities. This is not only an anxiety shared by gas companies, but also by top corporations in other branches with significant commercial and production sites in Russia. On the eve of the Russian president’s visit to China, observers are warning that if the EU and the USA impose boycott measures, Moscow could forge also stronger ties to Beijing, thereby tangibly strengthening China. Hard-core transatlantic circles are up in arms over the prospect that cooperation with Moscow could be continued – pleading for the creation of a global front of NATO countries and their allies against Russia and China.

Number One Growth Market

From the outset, influential German business circles have been arguing against an expansion of EU sanctions against Russia. This is not only because of lucrative natural gas business interests and the long-term growth in the significance of Russian sales markets for the export-oriented German industries.[1] Over the past few years, a sizable number of companies have also established important commercial and production sites in Russia. For example, Russia is third in the outlet portfolios of the Metro Group, with the eighth largest sales volume in Germany – preceded by Italy and Poland and far in advance before Spain and France. Volkswagen, Germany’s largest corporation in sales volume, wants to open a factory in Russia’s Kaluga next year, and plans a logistical center in the vicinity of Moscow. By the end of 2018, VW plans to have invested 1.2 billion Euros in Russia. Already now, more than 300,000 cars per year are being sold. According to VW, this is clearly “Europe’s number one growth market.”[2] This will all be jeopardized, if EU sanctions are expanded.

No More Misgivings

Currently, the German business community is particularly worried about the fact that, just prior to the St. Petersburg Forum, President Putin will be visiting China, to intensify relations between Moscow and Beijing. This particularly concerns the export of raw materials, which accounts for more than 50% of the Russian state budget. Until now, the prominent natural gas branch has been primarily oriented toward exports by pipeline to the EU. The construction of gas pipelines from Russia to the Peoples Republic of China, whose need for natural gas is steadily growing, has long been considered a supplementary alternative. This project, which has been in negotiation since the 1990s, has progressed no further than a non-binding declaration of intentions. Officially, the main obstacle is a lack of agreement on the price. However, observers point to more profound differences. Moscow has always regarded Beijing as a “natural partner” in the struggle against the hegemony of NATO countries, but, with China’s rapid rise in power, Beijing is also being seen as a rival, according to a study by London’s Center for European Reform (CER).[5] As a matter of fact, in spite of recurring western aggressions, the West could always rely on Moscow’s ties to Beijing not becoming so strong, that Russia would be at the mercy of Chinese preponderance. The West, with its announcement of sanctions, has now intensified pressure to an extent, where Moscow, in spite of misgivings, could draw closer to Beijing, according to commentators on the eve of Putin’s China visit.[6]

Ready for Economic War

This will be a cooperation pertaining particularly to the field of raw materials. For example, over the next few days, an accord on the construction of a Russian gas pipeline to northeastern China and extensive gas deliveries will be signed. Gazprom will pledge to pump 38 billion cubic meters (bcm) of natural gas to the People’s Republic of China for 30 years, beginning in 2018. Talks on the construction of a second pipeline have already started. “China could develop into one of the largest markets for Russian natural gas and cover up to one-third of its gas needs with supplies from Russia,” predict German experts. “This would nearly compensate for the loss of the European market.”[7] Moscow would possibly be in a position to take on a long-term economic war with the West – at the expense of not only giant German gas companies, such as E.ON and Wintershall (BASF), but other segments of German industry currently making lucrative profits in Russia, as well.

Full article: Global Policy Orientation (German Foreign Policy)

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