Implementation of the Four Common Spaces - Economic Space

Studie 22-12-2008

Executive summary This briefing argues the case that EU-Russian interdependence is at such a high level that an institutional framework beyond the current PCA is needed. The rift in the EU over how to proceed vis-à-vis Russia is mirrored in the varying levels of energy dependence of EU member states on Russia, and this lack of a single, cohesive policy regarding Moscow has kept the EU from identifying and effectively pursuing its interests in its relations with a Russia that – to its own detriment, ultimately – prefers dealing with member states on a bilateral level. It is particularly clear in the wake of the recent crisis in Georgia that in order for Russia to become – or be made into – a credible economic partner for the EU as a whole, changes will have to be made on a number of fronts. This paper discusses the factors inhibiting further progress in EU-Russian economic and trade relations – from state protectionism in strategic markets and corruption/cronyism in Russian businesses and institutions, to historical considerations and the impact of third parties (Washington). As this briefing shows, most of the progress achieved to date in discrete policy areas has resulted from developments in the marketplace and underwriting from EU financing instruments (TACIS, ENPI funds), whereas a lack of financial cooperation and political will on the part of Russia – particularly where cross-border cooperation is concerned – has effectively stymied significant progress in policy results. To overcome these obstacles to deeper EU-Russian economic relations, Brussels needs to encourage Russia’s incorporation into multilateral financial structures (WTO membership) and convince Moscow to allow further integration of EU and Russian institutions (banks, justice, business practices, etc.) through direct EU monitoring of Russian practices and progress in given areas. As an economic superpower, the EU has a vested interest in bringing Russia closer to the western f