Institute of World Economy and Institute of World Economy and

International RelationsInternational Relations

(IMEMO)(IMEMO)

Prof. Alexander A.DynkinProf. Alexander A.Dynkin

Russia is an important partner for the EURussia is an important partner for the EU

Russia is a growing market for goods from the EU

Growth of Russian direct investments in the EU (excluding Cyprus)

Russia doesn’t give up high share of euro in foreign-exchange reserves Russia doesn’t give up high share of euro in foreign-exchange reserves ( (moremore 40%) 40%)

Russia builds pipelines to the EU suggesting the future growth of the EU’s economyRussia builds pipelines to the EU suggesting the future growth of the EU’s economy ((though though it might switch over to other countries and home marketit might switch over to other countries and home market))

Russia still insists on speedily abolition of short-term visas to Schengen area that will Russia still insists on speedily abolition of short-term visas to Schengen area that will lead to the growth of tourism to the EU.lead to the growth of tourism to the EU. 2

3

Imports from Russia to the EU (2006-2012), million euro

Exports from the EU to Russia (2006-2012), million euro

GDPGDP, 2009 , 2009 PPP bln USD PPP bln USD GDPGDP, 2009 , 2009 current USD, blncurrent USD, bln

USA EU China Russia

IMEMO ForecastIMEMO Forecast

Source: «Strategic Global Forecast to 2030», IMEMO, 20114 4

Perception of the same facts may be optimistic or Perception of the same facts may be optimistic or pessimistic depending on what we want to pessimistic depending on what we want to

demonstrate. demonstrate. For example, the decline of Russian’s share in EU’s For example, the decline of Russian’s share in EU’s import of natural gas can be interpreted in different import of natural gas can be interpreted in different

ways.ways.

Russia loses its leadership in Russia loses its leadership in EU gas importsEU gas imports

Despite the crises Russia is Despite the crises Russia is still the leaderstill the leader

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Producer Million tones Share of total, %Saudi Arabia 547.0 13.3Russia 526.2 12.8USA 394.9 9.6China 207.5 5.0Iran 174.9 4.2Total World 4118.9 100.0

Producer Billion cubic metres Share of total, %USA 681.4 20.4Russia 592.3 17.6Iran 160.5 4.8Qatar 157.0 4.7Canada 156.5 4.6Total World 3363.9 100.0

Importer Million tonesEU 474.9USA 424.0China 271.3Japan 186.7India 177.1Total World 1927.3

Importer Billion cubic metersJapan 118.8USA 88.7Germany 86.8Italy 66.8South Korea 49.7France 45.3Total World 1033.4

Oil

Gas

Source: BP Statistical Review of World Energy 2013

World Oil and GasWorld Oil and GasProduction and ImportProduction and Import

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Core areas of cooperation Core areas of cooperation between Russia and the EUbetween Russia and the EU

Commodity trade Commodity trade

Investments in technologiesInvestments in technologies

Energy cooperationEnergy cooperation

Humanitarian contacts (tourism, science, culture, etc.)Humanitarian contacts (tourism, science, culture, etc.)

  However, there are both optimistic and pessimistic scenarios in each area

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Commodity tradeCommodity trade

Optimistic scenario:EU + Eurasian Union

Free trade agreement after Russian adaptation to WTO’s accession

Road map to the common Eurasian economic area

Pessimistic scenario:EU’s expansion in Ukraine and Belarus

Trade wars between Russia and other European countries

New non-tariff trade borders across Europe

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Detailed elaboration of WTO’s Detailed elaboration of WTO’s norms in mutual Russia-EU tradenorms in mutual Russia-EU trade

Customs administration and customs proceduresCustoms administration and customs procedures (unification of forms and rules of the authorized operators, “one window” principle for submission of papers, “one customs” principle on the border)

Sanitary and phytosanitary Sanitary and phytosanitary measures (an exchange of information, unification of forms, a mutual recognition of documents)Technical Technical regulation (joint development and acceptance of new rules and standards for products of biotechnology and some other new industries, gradual unification of operating rules and procedures)Special protective, anti-dumping and compensatory Special protective, anti-dumping and compensatory measuresmeasures (unification of procedures: regulation of consultations, initiating an anti-dumping duty investigations, granting of proofs, definition of damage, regulation of responding to anti-dumping investigations, etc.)

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Investments in Investments in technologiestechnologies

Optimistic scenario:Competitive EU-Russian global value chains

Modernization of Russian economy

Growth of efficiency and sustainability in the EU’s and Russian economies

Pessimistic scenario:Only market-seeking and resource-seeking EU’s direct investments in Russia

Investment protectionism against Russian high-tech MNEs in the EU

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Distribution of foreign assets of 20 top Russian Distribution of foreign assets of 20 top Russian non-financial transnational corporations by non-financial transnational corporations by

regions (USD billion, end of 2011)regions (USD billion, end of 2011)

R ussian Federation

42.919.3

1.6

6.3

4.4

0.8

3.7 1.1

30.9

The share of the EU is 39% (1st place). Main assets are in Italy, Germany, Bulgaria, etc.The share of the CIS is 28% (2nd place), but more than 1/3 of this volume is in Ukraine.The share of the US and Canada is 17% while the share of Sub-Sahara Africa is 6%.The share of China, Mongolia and Vietnam is 4%. 11

Russia

ChinaFrance

1989

170232152

123

3724

769

Direct investment, stock, Direct investment, stock, 2012 mln USD 2012 mln USD

Source: Bank of Russia, 2013. China Statistical Yearbook 2013.

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Current Russia-EU energy tiesCurrent Russia-EU energy ties

The EU investor Russian company Value

E.ON (Germany) OGK-4 USD 6 billion

Enel (Italy) OGK-5, Rusenergosbyt USD 5,85 billion

Fortum (Finland) TGK-10 USD 4 billion

At the same time Russian companies invest in European refineries

Russia supplies 31 percent of EU gas imports, 27 percent of crude oil imports, 24 percent of EU coal imports,30 percent of total EU uranium imports

The EU is the market for 88 percent of Russia’s oil exports,70 percent of its gas exports,50 percent of its coal exports

Gazprom (51%) Gazprom (50%) *

Wintershall (15.5%) Eni (20%)E.ON Ruhrgas (15.5%) Wintershall (15%)N. V. Nederlandse Gasunie (9%) EdF (15%)GDF Suez (9%) *interest in the offshore section

Significant investment cooperation in the energy field

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Energy cooperationEnergy cooperation

Optimistic scenario:Current achievements will produce a solid base for new fields of cooperation under EU/Russia Roadmap for Energy Cooperation until 2050 (signed in March 2013)Energy efficiency

Renewables

Remote oil and gas fields exploration

Investments in LNG-projects

Pessimistic scenario:Key challenges for cooperation will weigh down all opportunities

Different goals for the energy markets will lead to extreme politicization of energy issues by both sides

The lack of legal basis for Russian long-term investment projects

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Humanitarian contactsHumanitarian contacts

Optimistic scenario:Common Eurasian higher educational and scientific areas and Pan-Europeantouristic boom

Various cultural contacts as a base for strategic political and economic EU-Russia partnership

Pessimistic scenario:Visa regime against Russia and the growth of xenophobia in the EU

Significant decrease of the EU’s global competitiveness; Crisis of multiculturalism

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The importance of cooperation The importance of cooperation between Russian and French between Russian and French specialists in international specialists in international

relationsrelations

Scholars can produce more positive agenda of cooperation in comparison to politicians

Cooperation between scholars can overcome many stereotypes in EU-Russian relations

Joint policy reports will have more influence on EU and Russian officials

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