The March 26 Brussels meeting between Russian and EU trade representatives German Gref and Pascal Lamy should most likely be considered in light of the document that the Russian foreign ministry handed over to its European partners in mid-January. It was a 14-point list of Russia's concerns. The diplomatic subtext was an invitation to the EU to discuss problems and unclear issues with Russia, but with the implication that if the former refused to consider them or brushed them away at the talks, then political relations would be unlikely to remain as cloudless as before.
Of course, nobody wanted to refuse to take part in the dialogue. However, this is not enough to stop Moscow worrying about its accession to the WTO and EU enlargement. The latter two issues feature on Gref's and Lamy's agenda.
Only five weeks are left before the EU admits ten newcomers on May 1. However, Russia still does not know whether or not this expansion will bring it economic benefits or, conversely, cause only losses. This issue is more significant for Russia than for any other country, because not only will remote Cyprus become part of the EU, but also the Baltic and Eastern European countries. The latter have been Russia's traditional trade partners since Soviet times and the era of the CMEA (Council for Mutual Economic Assistance). Ties with them have never been severed; they were somewhat weakened in the early 1990s but have been improving ever since. Russia's confusion is clear: the economic effect of enlargement can hardly be accurately calculated in either Moscow or even Brussels. Russia's main negotiator with the WTO, Deputy Economic Minister Maksim Medvedkov, is more inclined to believe that EU enlargement will bring more profits than losses to Russia. However, he is cautious in his forecasts.
In the past twelve years, Russia's foreign policy has learnt to be flexible and take into consideration the opinion and interests of its partners, in practice, and not only on words. It no longer issues any ultimatums and prefers to clarify its concerns. The Europeans have no intention of giving up talks with Russia either. Russia's main concerns are connected with agriculture. Europe provides its agricultural producers with generous subsidies. Added to the favourable natural conditions in the west of the continent, this is the main reason for Russian foodstuff's non-competitiveness, as compared to Europe's, on the domestic food market. From May 1, agricultural subsidies will be allocated to the newcomers - they will get 4.72 billion euros over the next three years. The effect is obvious: presently non-competitive agricultural products from the Baltic states and Poland will soon become fairly competitive and cause problems for Russian producers.
But this is not all. Some veterinary regulations to be introduced in the new EU members will bar Russian dairy and meat products from their markets. Moreover, the EU does not intend to change import quotas for Russian grain, and starting from May 1 the restriction of 1.5 million tonnes will be in force for all the 25 EU members, rather than the current 15 members.
Russia has other foreign economic concerns, in particular the EU's quotas for Russian nuclear fuel and metals. There are also serious disagreements with the European partners at negotiations on Russia's WTO accession. Moscow categorically refuses to immediately raise domestic natural gas prises to the European level, as Brussels demands, threatening to deny Russia access to the WTO. There has been no movement to a solution to this problem in the past few years, and one is unlikely to be found soon.
However, agriculture today is the most acute issue.
It is no secret that the EU has been pursuing a strategy of paying for Russian energy supplies with food deliveries. Russian consumers do not lose anything in this case. On the contrary, local shops are full of European delicacies, while oil and gas flow into Europe, causing no shortages in Russia for obvious natural reasons.
However, this primitive scheme of exchanging raw materials for food does not only hamper the development of Russia's agriculture but also leads to a serious imbalance in the Russian economy as a whole. The economic growth that Moscow is so proud of is largely down to energy supplies to Europe. However, if Russia decides to further develop this line, it will doom itself to lagging behind the West in agricultural, industrial and intellectual development. Neither ordinary Russians nor their leadership want this to happen. All the while, European experts innocently criticise Moscow for its oil-based economy as if the EU had nothing to do with it.
Will Brussels heed Russia's concerns? Perhaps, the Gref-Lamy negotiations are only the beginning of a direct and sensible dialogue, which has so far failed to materialise. Another two Russia-EU summits are due this year. The first one is scheduled for April 21, i.e. nine days before the EU's official enlargement. There is still time for a compromise.
