Europe and Russia: Four Scenarios for the New Cycle

Four years after the outbreak of the Ukrainian crisis the EU — Russia relations remain in a poor state. With “no business as usual” approach on both sides, many bilateral mechanisms of cooperation are blocked or abandoned. Ambitious projects of the previous period aimed at creating multiple “common spaces” between EU and Russia and moving toward a “Greater Europe” are put on hold, if not completely abandoned. The information war between Moscow and Brussels is in full swing. A number of European governments directly accuse the Kremlin of a subversive interference into their domestic political affairs by supporting euro-skepticism, populism and separatism.

Today both the European Union and Russia appear to be moving targets, with many uncertainties about their respective development trajectories. The challenge for EU is to overcome multiple crises it confronts today — repercussions of Brexit, the rise of right populism, he decay of public trust in European institutions, deep divisions over sensitive matters of migrations, continuous troubles in the Eurozone, and so on. It would not be an over exaggeration to argue that Europe has to reinvent itself to play a significant and legitimate role in the emerging world, which is likely to be less and less Europe-centered in the observable future. Above all, Europe has to be united, strong and coherent; whether all EU member states are fully committed to these goals in 2018 and beyond remains to be seen.

Russia’s challenges are no less formidable. First, it has to shift to a new economic development model. The old one that emerged in early 2000s is essentially a resource based, state controlled rent seeking model; it has definitely depleted its potential and looks antiquated, if not completely dysfunctional today. Second, Russia has to strengthen its institutions. Today, the institutional skeleton of the country looks inadmissibly weak and inefficient; without a stronger institutional foundation, it will be increasingly difficult to maintain social and political stability in the country. Third, Moscow will have to address in a serous way multiple foreign policy problems accumulated since the beginning of the century — from almost completely ruined relations with the West to bitter disputes with many of its post-Soviet neighbors. Out of these three challenges the need for economic reforms looks the least controversial and least politically sensitive today; however, even moderate structural changes in the Russian economy are saturated with many political risks and uncertainties for the Kremlin.

“No Man’s Land” (weak Europe, no reforms in Russia). Under this scenario neither the European Union, nor Russia is able to rise to the occasion and to address their respective challenges in a serious way. EU remains fragmented, torn apart by multifaceted crises, unable to pursue a consistent development strategy or a coherent European policy. Russia avoids any substantive economic reforms counting on global oil prices going up, on a slow recovery of the national economy and on the traditional resilience of the Russian population. EU and Russia’s interests in each other are limited and they gradually diminish further.

This scenario results in a “balance of mutual weakness”.

“New Cold War” (strong Europe, no reforms in Russia). This scenario implies a steady change of balance between the two sides in favor of Europe. 2018 or 2019 becomes the turning point in the European development; the German-French backbone of the European Union survives Brexit and helps other European nations to overcome current disagreements, to defeat populists, to resolve burning Eurozone problems, etc. The European Union pursues its goal of achieving the ‘strategic autonomy’ from the United States. The European economies become more innovative, vibrant and competitive. Russia follows the path outlined in the first scenario.

This scenario is likely to result in a stronger European pressure on Russia.

“Eurasian Melting Pot” (weak Europe, reforms in Russia). This is a scenario opposite to the previous one. Europe remains weak, fragmented and indecisive, while Russia demonstrates an ability to reinvent itself, above all, in the economic domain. The quality of governance goes up, the level of corruption and abuse of power by state goes down, the country finally gets independent judiciary, most importantly — a fully independent and respectful court system. The structure of the Russian economy changes in the direction of innovative, high value added sectors, small and medium size enterprises increase significantly their share in the gross national product. Political reforms are lagging behind economic transformation, but civil society is booming and the political system slowly, but steadily evolves in the direction of stronger institutions and more pluralism.

In this case, the balance of powers inevitably shifts in Russia’s favor.

“Two legged Greater Europe” (strong Europe, reforms in Russia”). Finally, what do we see in the fourth quadrant, with both the European Union and Russia demonstrating equal capacity to address their problems and to find solutions to difficult questions without further hesitations and procrastinations? What is likely to happen if Brussels and Moscow get stronger at the same time? Conventional wisdom suggests that if two international actors increase their capacities simultaneously, if their aspirations and ambitions grow in parallel with the other side, the clash between them is practically unavoidable. However, this assumption is true for closed systems with limited resources available. This is not the case with the contemporary international system.

One can imagine a stronger European Union and a reformed Russia (together with other members of the Eurasian Economic Union) constituting two interdependent pillars of Greater Europe.

Four years after the outbreak of the Ukrainian crisis the EU — Russia relations remain in a poor state. With “no business as usual” approach on both sides, many bilateral mechanisms of cooperation are blocked or abandoned. Ambitious projects of the previous period aimed at creating multiple “common spaces” between EU and Russia and moving toward a “Greater Europe” are put on hold, if not completely abandoned. The information war between Moscow and Brussels is in full swing. A number of European governments directly accuse the Kremlin of a subversive interference into their domestic political affairs by supporting euro-skepticism, populism and separatism.

Russia’s Foreign Policy: Looking Towards 2018

At the same time, this relationship, with all the setbacks and mutual disappointments notwithstanding, has demonstrated a lot of resilience. After experiencing a sharp decline, the EU — Russia trade has bounced back. EU is still by far the largest single economic partner for Russia, accounting or more than two fifths of the overall county’s trade. Russia continues to apply for and to receive more Schengen visas than any other county of the world. EU remains the main point of destination for Russian students seeking education abroad. Cross-border cooperation clearly survived the “no business as usual” pattern. In sum, it seems that the European-Russian divergence since 2014 has not yet reached the point of no return and nothing is already predetermined for years and decades to come.

Today both the European Union and Russia appear to be moving targets, with many uncertainties about their respective development trajectories. The challenge for EU is to overcome multiple crises it confronts today — repercussions of Brexit, the rise of right populism, he decay of public trust in European institutions, deep divisions over sensitive matters of migrations, continuous troubles in the Eurozone, and so on. It would not be an over exaggeration to argue that Europe has to reinvent itself to play a significant and legitimate role in the emerging world, which is likely to be less and less Europe-centered in the observable future. Above all, Europe has to be united, strong and coherent; whether all EU member states are fully committed to these goals in 2018 and beyond remains to be seen.

Russia’s challenges are no less formidable. First, it has to shift to a new economic development model. The old one that emerged in early 2000s is essentially a resource based, state controlled rent seeking model; it has definitely depleted its potential and looks antiquated, if not completely dysfunctional today. Second, Russia has to strengthen its institutions. Today, the institutional skeleton of the country looks inadmissibly weak and inefficient; without a stronger institutional foundation, it will be increasingly difficult to maintain social and political stability in the country. Third, Moscow will have to address in a serous way multiple foreign policy problems accumulated since the beginning of the century — from almost completely ruined relations with the West to bitter disputes with many of its post-Soviet neighbors. Out of these three challenges the need for economic reforms looks the least controversial and least politically sensitive today; however, even moderate structural changes in the Russian economy are saturated with many political risks and uncertainties for the Kremlin.

Where do all there independent variables get us, once we start thinking about the future of the EU — Russian relations? Let us limit ourselves to the new six-year political cycle in Russia (2018–2024), though this cycle does not necessarily coincide with much more controversial and less definable political cycles in Europe. Let us also reduce the future trajectories of Europe and Russia to just one dimension for each of the actors. For Europe, it will be an axis with a very weak, fragmented and incoherent EU on the one end, and a very strong, coherent and well-managed EU on the other end. For Russia, it will be an axis stretching from a rent seeking, state-controlled, and mostly self-reliant model (no reforms) and a more innovative, less state-controlled, foreign markets focused model (radical reforms). Using these two axes as horizontal and vertical, we end up with a matrix containing four quadrants; each of them stands for a scenario of the future EU — Russia relationship. Each of the scenarios has its logic, its driving forces, its limitations and its likely implications for both sides.

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“No Man’s Land” (weak Europe, no reforms in Russia). Under this scenario neither the European Union, nor Russia is able to rise to the occasion and to address their respective challenges in a serious way. EU remains fragmented, torn apart by multifaceted crises, unable to pursue a consistent development strategy or a coherent European policy. Russia avoids any substantive economic reforms counting on global oil prices going up, on a slow recovery of the national economy and on the traditional resilience of the Russian population. EU and Russia’s interests in each other are limited and they gradually diminish further.

This scenario results in a “balance of mutual weakness”. Both sides avoid far-reaching initiatives, considering status quo to be not an ideal, but generally acceptable option. Russia tries to undermine incrementally the EU sanctions, but the European Union sticks to sanctions as one of the few remaining symbols of the European integrity. Ukraine is a mess with a low intensity conflict continuing in Donbass and with major European counties demonstrating little appetite for a new “Marshall Plan” to assist Kyiv, while Russia tries to isolate itself from the unstable and hostile neighbor. EU has no visible role to play in the European security; NATO remains the only game in town. Russia relies more and more on China; the asymmetry of this relationship grows over time. More generally, international influence and statue of both the European Union and Russia go down.

“New Cold War” (strong Europe, no reforms in Russia). This scenario implies a steady change of balance between the two sides in favor of Europe. 2018 or 2019 becomes the turning point in the European development; the German-French backbone of the European Union survives Brexit and helps other European nations to overcome current disagreements, to defeat populists, to resolve burning Eurozone problems, etc. The European Union pursues its goal of achieving the ‘strategic autonomy’ from the United States. The European economies become more innovative, vibrant and competitive. Russia follows the path outlined in the first scenario.

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This scenario is likely to result in a stronger European pressure on Russia. The policy of containment develops into the policy of rollback. Ukraine, firmly backed by EU becomes a success story, and the option of the EU membership for Ukraine is back on the o the table. Moreover, practically all the nations ‘in between’ gravitate to the European Union and away from Russia. The ‘Russian world’ shrinks to the borders of the Russian Federation. Moscow gets more and more concerned about the European influence on the Russian population and attempts to pull down a new Iron curtain across Europe. Domestically, the Kremlin positions Russia as a besieged fortress and tries to prevent political changes inside the country by promoting nationalistic, anti-Western movements and parties. On a larger scale, the European Union becomes a major provider of global commons, while Moscow is widely accused of being a ‘global spoiler’.

“Eurasian Melting Pot” (weak Europe, reforms in Russia). This is a scenario opposite to the previous one. Europe remains weak, fragmented and indecisive, while Russia demonstrates an ability to reinvent itself, above all, in the economic domain. The quality of governance goes up, the level of corruption and abuse of power by state goes down, the country finally gets independent judiciary, most importantly — a fully independent and respectful court system. The structure of the Russian economy changes in the direction of innovative, high value added sectors, small and medium size enterprises increase significantly their share in the gross national product. Political reforms are lagging behind economic transformation, but civil society is booming and the political system slowly, but steadily evolves in the direction of stronger institutions and more pluralism.

In this case, the balance of powers inevitably shifts in Russia’s favor. The new Russia’s economic model looks more attractive to its neighbors, while continuous crises in the European Union discourage even the most consistent champions of the European project within Russia and within the countries along its borders. Moscow manages to stabilize its uneasy relations with Ukraine, consolidates the Eurasian Economic Union, and makes full use of the disagreements and conflicts within the European Union. However, since Europe is in the process of a long-term decay, Moscow continues to pursue its pivot to Asia as a more promising direction of economic and political expansion. Instead of a common European space stretching from Lisbon to Vladivostok Russia aims at a common Eurasian space stretching from Shanghai to St. Petersburg. The Eurasian advance to the West incrementally absorbs bits and pieces of Europe in various forms (e.g. the One Belt, One Road project). Russia’s international influence is on rise, the influence of the European Union is on decline.

“Two legged Greater Europe” (strong Europe, reforms in Russia”). Finally, what do we see in the fourth quadrant, with both the European Union and Russia demonstrating equal capacity to address their problems and to find solutions to difficult questions without further hesitations and procrastinations? What is likely to happen if Brussels and Moscow get stronger at the same time? Conventional wisdom suggests that if two international actors increase their capacities simultaneously, if their aspirations and ambitions grow in parallel with the other side, the clash between them is practically unavoidable. However, this assumption is true for closed systems with limited resources available. This is not the case with the contemporary international system.

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One can imagine a stronger European Union and a reformed Russia (together with other members of the Eurasian Economic Union) constituting two interdependent pillars of Greater Europe. These two entities continues to be asymmetrical in many ways for a long time, but any visible progress in structural economic reforms in Russia is likely to make these asymmetries less significant and less disturbing for EU. Moscow states its fundamental interest in a stronger EU, Brussels recognizes EAEU as a strategic partner. In the end of the day, relations between EU and EAEU become similar to that between EU and ASEAN. However, given the geographical proximity, cultural closeness and common history, EU and EAEU together go beyond cooperation between two integration projects; their consorted efforts help to complete an ambitious task of uniting and cultivating vast spaces of Europe and North Eurasia. Ukraine becomes a natural bridge lining EU and EAEU; Kyiv might still entertain the idea of joining EU at some point in future, but for a long anticipated transition period, it can benefit from its special position within the emerging European architecture. Even under the best circumstances, this ‘two legged Greater Europe” is not going to emerge by 2024. However, a slow but steady movement in this direction changes dramatically the atmospherics between Moscow and Brussels. The combined political and economic weight of EU and Russia in the international system increases dramatically.

Trying to predict the likely future of the EU — Russia relations, one should keep in mind that this relationship has always been and will continue to be influenced by many external factors. For the European Union the most important factor is arguably the dynamics of the transatlantic alliance with the United States. If this alliance survives the Trump administration without major complications and crises, the incentives for the European Union to work towards a more active and less US-dependent pattern of the European foreign and defense policies will be lower. If Trump is a symptom of a long-term readjustment of the US role in international relations, European politicians will face a compelling need to advance EU as a global player separate from Washington. This shift will create both new opportunities and new challenges for the EU relations with Russia.

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For Moscow, the single most important external factor will be its relations with Beijing and, in a more general sense, the future of China itself. Will China continue its seemingly endless economic rise, or will we see it slowing down? How stable the Chinse political system is going to be a couple of years from now? Have the Russian-Chinese relations reached their climax or will the two countries move to an even closer political, military and economic partnership? It would be tempting to argue that a booming and vibrant China as the Russian strategic partner makes Europe less important for Russia by offering Moscow a viable alternative. However, if China enters a new stage in its economic and political development, it might need Russia less than it does now and the asymmetries in this relationship might significantly increase. Thus, a stronger China might generate more incentives for Moscow to look for new opportunities in Brussels.

In a more general sense, relations between the European Union will depend on the evolution of the international system at large or, more precisely, on the future of the liberal world order. If the world is indeed entering an extended period of instability and conflicts, if nationalism, populism and protectionism continue to gain momentum across the globe, if international institutions are increasingly marginalized and international law is getting immaterial, the relations between Brussels and Moscow are likely to follow the general trend. If the global liberal order overcomes the current crisis, international institutions are successfully reformed and reenergized, if globalization is back with vengeance, the European Union and Russia will be pushed to a closer cooperation with each other in various fields. Of course, there might be a number of ‘black swans’ affecting this relationship — from a global natural disaster to a new generation of international terrorism.

The odds are that the choice between the four above-mentioned scenarios will not be clear and finite. More likely, each of the sides will try to combine elements of various scenarios to serve its immediate interests. The inertia of the previous period will have a profound impact of any strategy that Brussels and Moscow can consider. However, some important decisions on both sides should take place soon enough, maybe, already in 2018–2019.