The Russian Challenge

The Russian Challenge
Russia’s Toolkit
The enormous investment undertaken by Russia in
commercially unjustifiable projects such as the Nordstream
pipeline underscores the importance to Russia of energy
as a tool of influence in the last decade. More recent
developments in international energy markets, and moves
to reduce European dependence, may dilute the power of
Russia’s energy lever in the long term. 205 This requires the
kind of sustained investment and political will that has been
seen in the Baltic states, where 100 per cent dependence
on Gazprom for gas supplies and prices created a sustained
vulnerability. Pipeline gas contracts provide Russia with
greater leverage than do oil supplies in the more flexible
oil market. In October 2014, Lithuania opened a liquefied
natural gas (LNG) terminal to reduce its exposure to
Russian energy pressure. 206
Economy and trade
Price and trade dependency provide further means by
which Russia can persuade or punish its neighbours.
Boycotts and embargoes on their key exports have
repeatedly been employed to inflict economic damage, often
using entirely spurious health or environmental concerns as
a pretext for banning imports of foodstuffs to Russia.
Georgian wine and mineral water, and Baltic and Belarusian
dairy products have been repeated targets for bans. But
almost 25 years after the end of the Soviet Union, wellestablished
trading relations beyond the Soviet republics
have created a range of new vulnerabilities. Despite optimism
at the time, Russia joining the World Trade Organization in
2012 did little to constrain its misuse of health regulations; 207
instead, Russia openly admits within WTO meetings that
some bans on food imports are politically motivated. 208
Russia’s August 2014 ban on imports of foodstuffs from a
range of countries was widely viewed as a perverse move
that would further punish Russians themselves to no
positive effect. But the implications for central European
states that had come to rely on the Russian market were
severe. Surplus Polish apples became a symbol of standing
up to Russia, while in the Nordic states, ‘Putin cheese’
(labelled for export to Russia) flooded supermarkets at
dumping prices as producers tried urgently to shift banned
dairy products to alternative markets. The overall effect
was to remind those countries that had come to take welldeveloped
trade links with Russia for granted that, as put by
Lithuanian President Dalia Grybauskaitė, Russia is ‘a totally
untrustworthy and unpredictable business partner’. 209
Other economic instruments routinely feature in Russian
pressure on its neighbours. Russia seeks to establish or
reassert dependencies by the creation and usage of debts,
and a related creeping control of key infrastructure. The
exact amount and type of Russian investment can be
difficult to assess because of the routine use by Russian
businesses of third countries and other jurisdictions to
channel investments, concealing their origin from normal
economic analysis. 210 As with energy disputes, much of the
scale, composition and timing of Russian foreign direct
investment used as leverage can also be accounted for by
normal commercial drivers. But the net effect in terms of
a lever that Russia can exploit is similar. 211
Purchasing influence
Russia’s ability to purchase or co-opt business and
political elites into loyal, or at least compliant, networks
is a primary tool for garnering influence. Both bribes
and business opportunities are used to recruit agents
of influence throughout target countries. This leads to
direct impacts on political processes through Trojan horse
individuals or organizations. 212 A 2008 study warned that
the UK ‘should be wary of placing reliance on EU or NATO
solidarity, or on national leaders or key figures to act in
what would appear to be their own national interests’, and
suggested, ‘it is urgent that we now look more closely at
this activity at home’. 213
205
‘Conscious uncoupling: reducing Europe’s dependence on Russian gas is possible – but it will take time, money and sustained political will’, The Economist,
5 April 2014.
206
‘Baltic leaders welcome Lithuania’s “Independence” as energy security guarantee for all region’, Baltic News Service (BNS), 27 October 2014, http://en.delfi.lt/
lithuania/energy/baltic-leaders-welcome-lithuanias-independence-as-energy-security-guarantee-for-all-region.d?id=66232218.
207
‘How Russia’s Membership in the World Trade Organization Improves Sanitary and Phytosanitary Measures and How They Are Applied in the Russian Federation’,
Office of the US Trade Representative, undated document, https://www.ustr.gov/sites/default/files/How%20Russia%20WTO%20Membership%20Improves%20
SPS%20Measures%20and%20How%20They%20are%20Applied%20in%20Russia.pdf.
208
World Trade Organization, ‘Russia contributes to sanitary-phytosanitary committee, but also attracts concerns’, 17 October 2014, http://www.wto.org/english/
news_e/news14_e/sps_15oct14_e.htm.
209
‘Eat apples to annoy Putin’, Eastern Approaches blog, The Economist, 29 August 2014, http://www.economist.com/blogs/easternapproaches/2014/08/polandand-russia.
210
Agnia Grigas, Legacies, Coercion and Soft Power: Russian Influence in the Baltic States, Chatham House Briefing Paper, August 2012.
211
Philip Hanson, ‘Russia’s Inward and Outward Foreign Direct Investment: Insights into the Economy’, Eurasian Geography and Economics, Vol. 51, No. 5, 2010, pp.
632–53. See also forthcoming article by Philip Hanson and Stephen Fortescue, ‘What Drives Russian Outward Foreign Direct Investment? Some Observations on the
Steel Industry’, Post-Communist Economies, Vol. 27, No. 3, September 2015.
212
A topic explored in detail in Janusz Bugajski, ‘Georgian Lessons: Conflicting Russian and Western Interests in the Wider Europe’, CSIS, 2010, http://csis.org/files/
publication/102110_Bugajski_GeorgianLessons.WEB.pdf.
213
Defence Academy of the United Kingdom, ‘Russia – Future Directions’.
44 | Chatham House