Germany’s Russia policy: Bolder towards Moscow?

At first glance the current German debate over its Russia policy seems to be a reaction to growing authoritarian tendencies under Vladimir Putin. But there is more to it: a changing conception of German foreign policy, the trade-off between values and interests, and the question whether one could be combined with the other?

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The one-sided approach of Berlin’s Russia policy ignores essential questions concerning Germany’s eastern neighbours. The fight is too often about who is right and not often enough about the interests Germany and Europe have in the region, much less about the effect Germany can have on pushing change in Russia.

Excessive demands on German foreign policy during the euro crisis and foreign calls for German leadership are reflected in the Russia debate as well. Germany played an important role in the eastward enlargement of the EU and has always been a driver of Europe’s Russia policies – but Berlin is no longer living up to this leadership claim.

The reasons for the diminished success of Germany’s Russia policies in recent years have been frequently analysed. The limitations of the pursued concept of “partnership for modernisation” are apparent in how differently the two sides define the partnership. While Germany desires a political and social transformation towards democracy and rule of law alongside economic cooperation, Russia's leadership is only interested in technological exchange and regulated economic modernisation.

Two Sides of the Same Coin

It is, no doubt, appropriate for the “Committee on Eastern European Economic Relations” (Ost-Ausschuss der Deutschen Wirtschaft, an organisation of leading German businsess associations with an interest in Eastern Europe) to demand that German firms take part in projects relating to modernisation and infrastructure development. That is in the best interest of the German economy. But the political and legal environment in Russia remains problematic and cannot easily be reformed through joint business ventures. And while political support allows some large German companies to do good business in Russia, middle-sized firms struggle in the face of corruption, excessive bureaucracy, and a lack of skilled labor.

But value – and interest – driven policies are two sides of the same coin. There cannot be sustainable economic growth without transparency, rule of law, and a market free of government intervention. An interest-driven German foreign policy has to foster principles like the rule of law, transparency and open and fair investment competition, while, at the same time, divesting from businesses that encourage corruption.

As long as the client’s interest does not change, Russia’s oil and gas export-based economic framework will not change, and corruption and intransparency will prevent the flow of sufficient investment in education, science, and modern infrastructure. This is something a modernisation partnership should also tackle.

Out of the Backroom

Exports are the key to German economic development and therefore require political support. Russia is the most important source of raw materials and an increasingly important destination for German exports. At the same time, political shortcomings limit Russia’s growth potential, as well as the opportunities for German investors. Here is where economic and political interests and value-driven foreign policy have to go hand in hand.

Russia is under pressure to modernise its energy sector and to reduce its reliance on raw material exports, creating new opportunities for sustainable German investment in other sectors of the Russian economy.

The inflexibility of Gazprom and the lack of competition in the Russian energy market leads to pricing conflicts with German energy firms. The expansion of renewables in the EU and increased global supply of gas due to the fracking revolution have altered the world energy market, also diminishing Russia’s role as an energy exporter.

Therefore it is Russia which is far more dependent on economic and energy relations with its most important markets: EU member states. Sixty percent of Gazprom’s exports go to the EU, making this exchange vital to Russia’s budget stability.

Bolstered by our more diversified economies, Germany and the EU can develop a more nuanced approach towards Russia. The story of one-sided energy dependency is a myth, but that does not mean Germany should be arrogant or condescending. Germany's own process of democratisation after 1945 took decades and heavily relied on help from outside. Those who claim that Russia is different and needs to be dealt with accordingly should take a closer look at German history.

On behalf of its own core interests in principles like democracy, tolerance, transparency, and market economy, Germany should stand strong in the face of “difficult states” like Russia. Obliging compromises and backroom diplomacy are not the way to deal with authoritarian regimes. Instead, clear value – and interest-driven policies are required that include constructive criticism, transparency, and equitable dialogues with elites and society on the whole.

Finding New Counterparts

It is time to replace Germany's elite-dominated Russia policy with a more balanced approach. Certainly we need to keep in touch with decision-makers in Moscow, but we also need to build closer ties with civil society groups. Russian and post-Soviet elites have no interest in democratisation or socio-political modernisation of their country. Their interests are essentially driven by economic advantages, which makes corruption systemic rather than exceptional.

The Kremlin secures its power by manipulating elections, as well as demonising its enemies, and using vague and aggressive rhetoric. Germany needs to rethink its target audience for modernisation efforts in Russia. It was not the policymakers from Putin’s regime that took to the streets in 2011 and in the run-up to the 2012 elections – it was the growing urban middle class.

Berlin should also look more closely at small and middle-sized entrepreneurs who have limited chances of success under the current system. They are part of the regional elite, but are not co-opted by the system and would like to see living conditions improve. Organised civil society is also part of this group, and they are engaged not just politically, but would also like to shape debates on environment or education.

The split between Russian society and the elite is deep. Frustration caused by the government’s failure to act during the fires of summer 2010, to accelerate privatisation, and to properly finance education are feeding the protest readiness of the population. The same goes for the lack of modernisation of public infrastructure. Putin has promised progress on this since 2000, but due to systemic corruption only incremental improvements have been made.

The populace has little faith in policy makers, and trust in government institutions remains shaky. But the transition process in Russian society and the failure of top-down modernisation efforts under President Dmitry Medvedev should be reason for more concern for Russia, not less.

Creating New Formats for Dialogue

German foreign policy should create new formats for dialogue with Russian society, as well as foster exchange among government policy makers, economic representatives, and civil figures. A Russification of German formats, like at the yearly Petersburg Dialogue conference, designed to encourage communication between civil societies in both countries, is counterproductive. Formats that focus on the elite and ignore the progressive segment of Russian society also provide little promise, as they serve only to legitimise the authoritarian elite and damage the credibility of German politics.

At the same time there is a need for fora that incorporates influential, if problematic, groups from the Russian political scene, such as nationalistic and patriotic camps. These groups play an important role in Russian society. As the example of the Arab Spring has shown, one-sided dialogues with elites and the small, Western-oriented segment of the population cannot compensate the lack of contact with an important part of society – conservative and religious groups.

To formulate a Russia policy, Berlin will have to make space at the table for socially and politically relevant groups who do not necessarily hold Western beliefs. But Germany should try just as hard to expand its contacts with the progressive, economically liberal faction of the Russian political establishment – the part of the elite that has lost its access to the innermost power circles. These figures could still play an important role in the modernisation of Russia.

If there is to be a political transition in Russia and a more pronounced opening, the catalyst cannot come form the marginalised, radically liberal opposition. Instead, it would have to come from the elite and be supported by the growing Russian middle class – a middle class made up not only of artists, intellectuals, and career oppositionists, but also of civil servants who have participated in the economic upswing of the last 13 years. This group does not want radical political change; they want to be taken seriously.

A key element for a social and economic exchange with Russia is visa liberalisation, culminating in the elimination of visa requirements. Economists continue to harp on the importance of the elimination of visa requirements in intensifying economic exchange. It is just as important to allow wider segments of the Russian population to travel to the EU and to improve study and work opportunities in the EU for young, well-educated Russians.

One thing is certain: Political change in Russia can only come from within and will require wide societal support. Social exchanges with Russia on all levels will be fundamental for such a transition. Germany and the EU have an interest in acting as a model in this process. During its modernisation, Russia is looking toward the EU and not toward Asia, despite some claims to the contrary.

The Need for Berlin

Germany’s Russia policy cannot be formulated without being embedded in European structures. However, Europe’s foreign and security policies have been weakened further in the wake of institutional crisis. It is exactly for this reason that Berlin is once again called upon to tackle the reform of Eastern neighborhood policies.

The limited interest and engagement of current German policy in Eastern Europe weakens the EU’s influence. It is equally important to work with Poland, Finland, and Sweden to push policy progess in the region. That must include an approach towards regional conflicts, as well as towards the potential free trade agreement with Ukraine, and a new set of Russia policies. Countries like Poland cannot be left to deal with Russia on their own. Germany has not taken advantage of the opportunities provided by Poland’s constructive approach towards Russia.

Remaining Trustworthy

Vital to the EU’s credibility is the implementation of European legal and moral norms in its dealings with Russia. The European Commission has already led by example by pushing for more competition and transparency across the European energy market, as well as by opening an antitrust case against Gazprom. Gazprom should be able to do business on the European energy market just like companies from Norway and Qatar, but it needs to do so in accordance with European legal principles.

It is not just Europe's credibility that depends on these principles being upheld despite efforts from Russian politicians or European lobbyists to circumvent them. The modernisation of Russia is also at stake. If European transparency, competition, and rule of law is ensured, critics of Russian investment in the EU will be silenced. Simultaneously it would mean that Russian businesses adhere to these principles in Russia as well.

Anyone who doubts that Russia can develop into a democracy needs to reexamine their understanding of democracy – but the transition may well take some time, as it did in Germany.

Despite of all the political stagnation and authoritarian tendencies of the Russian leadership since Putin’s reelection, the protests of the past year have shown that Russian society is, in fact, interested in greater political participation. This process cannot be stopped in the medium term, and it should be actively fostered by German policy. The proper instruments for a modernised German Russia policy are in place – they just need to be utilized.

The article first appeared in DGAP's IPJournal