ludek niedermeyer

Niedermeyer: EU must seek alternatives to Russia

in EU News

Czech MEP says the union should start looking elsewhere for better trading partners

Prague, Sept. 9 (ČTK) — Russia is a bad trade partner as its present leaders are incapable of offering trade relations based on confidence and observance of rules, which is why the European Union must seek alternatives, Luděk Niedermayer, MEP for the Czech conservative TOP 09, writes in Hospodářské noviny (HN) today.

The world has dramatically changed in the past months when a state border, previously guaranteed by international treaties, was violated, and a regular war burst out in eastern Ukraine, Niedermayer, former Czech National Bank vice-governor, writes.

The West’s effort to make Russia respect laws without a military confrontation is based on economic sanctions. From the beginning, the sanctions have mainly targeted people close to Russian President Vladimir Putin and selected Russian companies, in a way to minimize their impact on “nonstrategic” trade, Niedermayer writes.

At the same time, a debate in Western countries is under way “whether we can afford this in economic terms,” he says.

Western exporters, whose projects failed over the EU’s anti-Russian sanctions and Moscow’s counter-sanctions, have protested against the measure. This also applies to companies in the Czech Republic, where the direct exports to Russia amount to 120 billion Kč annually plus billions more in Czech supplies to foreign exporters, Niedermayer writes.

However, the exports to Russia make up a mere 7 percent of the EU’s overall exports, while Russia, for its part, exports more than 50 percent of its goods to the EU. In bilateral trade, Russia enjoys a sales surplus that reached 86 billion euros last year. In view of this, the Kremlin should fear the trade’s collapse more than Brussels, Niedermayer writes.

The bilateral trade structure also matters, however. Four-fifths of Russian exports are oil, gas and energy raw materials, while the EU sells mainly machines and transport means to Russia. The fear that Europe could lose its export market and mainly that it could be cut off from the necessary sources of energy is an argument used by the “sanction skeptics” in the EU, Niedermayer writes.

However, regardless of the sanctions’ impact, a country that does not respect treaties and ignores states’ sovereignty cannot be a promising trade partner, he continues, alluding to Russia.

The risks of such trade are and will remain high, also because many Russian firms are connected with the state, and the Kremlin “influences” domestic businesses “more than what is desirable,” Niedermayer says.

That is why the EU’s trade with Russia cannot be expected to flourish, he adds.

One of the ways to replace the Russian market is, besides the better economic growth, the EU’s more active approach to the elimination of international trade barriers, Niedermayer continues.

In a situation where the relevant WTO negotiations stagnate, an attractive chance surprisingly rests in enhancing the trade between the world’s main economies, the EU and the United States. However, the planned EU-U.S. free trade TTIP agreement faces problems and, most recently, also political attacks, Niedermayer writes.

The question of how to cope with a possible cut in Russian energy raw materials supply is more difficult. The EU countries’ dependence on them ranges from zero to 100 percent. In gas imports, 25 percent of the EU is dependent on Russia, Niedermayer writes.

The EU is interested in “pure” natural gas that it does not have and wants to buy from Russia and Libya. Such gas, however, either may be unavailable (Libya) or its political price may be too high (Russia). That is why the EU must seek alternatives, Niedermayer writes.

The EU must enhance both the pan-European product pipelines and storage capacities. A help in the form of imported “cheap” U.S. gas can play a role as well, he says.

The dozens of billions of euros the EU has earmarked for such investments are sufficient, and the projects must be treated preferentially, he writes.

Energy saving must be resolutely promoted mainly in the countries with energy-intensive production, including the Czech Republic, Niedermayer writes.

The question is also whether natural gas’s prominent role in the energy industry should be reassessed and the share of electric power increased, Niedermayer writes.

Voices can be expected to suggest that the EU-Russia trade should be quickly resumed after the armed conflict in Ukraine ends. It would be a mistake, however, Niedermayer emphasizes.

The present Kremlin has shown that under the current leadership, Russia is incapable of being a good and stable trade partner, as partnership is based on confidence and observance of rules, Niedermayer writes.

In addition, the strength of Russia’s economy can be expected to decline, which is unfavorable to trade, he says.

Instead of cherishing “abstract fears” of what the EU-Russia trade war may cause, the EU must quickly seek alternatives of how to secure its members’ stability and prosperity, Niedermayer writes.

Instruments to achieve the goal do exist, but the EU must not hesitate, and it must start acting immediately to prevent troubles that would be worse than “a mere” decline in its trade with Russia, he concludes.

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