Articles by Alexander Smotrov on the GC Blog and GC analysis
RUSSIA & CIS: Following a lunch event, Practice Lead for Russia, CIS and CEE, Alexander Smotrov and Nicu Popescu, Director of the Wider Europe Programme at the European Council on Foreign Relations, discuss recent elections in Europe and Ukraine, and their potential impacts on EU-Russia relations.
Last week marked the fifth anniversary of the Russian annexation of Crimea from Ukraine (referred to as “accession” in Russia itself). President Putin descended on to Crimean soil to mark the date by opening new power stations while Moscow staged a three-day street festival to remember the Crimean “homecoming”. However, the public mood both in Crimea and in Moscow is notably different than five years ago. So, what is the ultimate price paid for this geopolitical gamble and who might have benefitted from it?
Romania’s presidency of the EU Council - formally launching this week - has already received a dose of high-profile scepticism both in Brussels and Bucharest. Politicians ranging from president Juncker to president Iohannis expressed doubts about Romania’s preparedness for its first ever stint at the helm of the EU, 12 years after its accession. In fairness, it will not be a routine rotation as the next six months will signify a turbulent and eventful period for the European Union.
The long-anticipated constitutional referendum in Macedonia on Sunday has been watched carefully both in Brussels and in Moscow. The seemingly convoluted question in ballot papers – "Do you support EU and NATO membership by accepting the agreement between Macedonia and Greece?" – in fact provided an unequivocal direction for 1.8 million voters in the Balkan nation. The resulting 91% vote in favour of the proposal by the pro-EU government led by social democrat Zoran Zaev looked very good on paper but turned out to be a Pyrrhic victory.
A distinctive feature of President Juncker’s “political” European Commission was a single set of collective top-down priorities, rather than a stitching together of the agendas of individual commissioners. In 2014, this meant a focus on economic reforms to restore growth lost during the 2008 financial crisis: a digital single market, a capital markets union and an investment plan for Europe. Events inevitably challenged this strategy — an unprecedented refugee crisis, Brexit, the emergence of new security threats — but it proved more resilient than many expected at the outset of the “last chance” Commission.
Just under a month following his first attendance before the European Council, Poland’s new Prime Minister, Mateusz Morawiecki, has piqued Brussels’ interest in his young premiership with a major cabinet reshuffle. The move targets the most hard-line, nationalist ministers with portfolios core to the EU’s agenda: defence, foreign affairs, digital and the environment. The timing of this announcement – just before Morawiecki's meeting with Commission President Jean-Claude Juncker and vice-president Frans Timmermans – has been labelled by some as a canny attempt to appease Brussels. Should the reshuffle be interpreted in such a binary way?
Vladimir Putin’s announcement to run for his fourth, and probably final, presidential term is no surprise. Thus far, all the polls indicate he will romp home on 18 March next year. Indeed, polling day has been moved to mark the anniversary of the Russian annexation of Crimea to reinforce the significance of Putin’s proudest achievement in his third term in office.
The parliamentary elections in Czech Republic last weekend produced an unsettling but not unexpected result. The moderate populist ANO party won nearly 30% of the vote, but fell far short of a majority in the parliament. Other anti-establishment parties – the Freedom and Direct Democracy party (SPD) and the Pirates Party – have significantly strengthened their positions. Support for the traditional parties, including Social Democrats who led the previous government for four years, dropped to single digits. Only Eurosceptic Civic Democratic Party (ODS) managed to regain some of its centre-right ground lost in the previous elections.
Migration has drawn the most serious division line between the ‘old’ and ‘new’ EU member states in a decade. This week’s European Commission infringement decision against Poland, Hungary and Czech Republic for their refusal to pledge to accept refugees is just another strong indication of that.
When you mention EU states competing to win a prestigious and powerful European regulatory agency from Britain after Brexit, most people would probably think of the European Banking Authority. But the European Medicines Agency (EMA) is also up for grabs, and the most intriguing bidder is Bucharest.
The EU-Ukraine summit in Brussels on Thursday just ended on an unusual note - and not just because Donald Tusk delivered some of his closing remarks in Ukrainian. He also officially said that the EU now bears the entire responsibility for successful completion of the visa facilitation process and the Association Agreement implementation impeded by the results of the Dutch referendum earlier this year. This was quite a concession. So why make it?
Russia woke up this morning to news unprecedented in its modern history – a serving minister has been arrested for an alleged $2 million cash bribe over the 50% privatisation of Bashneft oil company by the powerful Rosneft. An operation led by the Investigative Committee and the Federal Security Service reminded some of infamous high-profile night-time arrests in the 1930s.
This week the Americans elected a new president who is portrayed by some as an agent of change for US-Russian relations and a potential advocate of large US businesses operating in Russia. Donald Trump was quickly congratulated by President Putin, who publicly sought to restore severed links with Washington. What happened within the next 36 hours to two large US tech companies working in Russia could be a pure coincidence however, it sends a clear warning signal to American businesses.
The pro-Kremlin United Russia party secured a supermajority of 76% of the seats in the State Duma elections earlier this week. The result reflected changes to the boundaries (merging rural and urban areas), voting system (combining single constituency and lists) and indeed the season (from mid-winter to early autumn). These changes led to a rock solid position for United Russia deputies in the parliament, a reduced turnout and no repeat of the street protests that gave Vladimir Putin his closest brush with mortality in the winter of 2011.
The long-anticipated privatisation of the 19.5% government-owned stake in Russia’s largest oil company, Rosneft has finally started to take shape with the government expected to reveal their offer to investors in the next two weeks. With BP owning 19.75% of Rosneft, making them the largest single private shareholder, this process will be watched as closely in St James’s Square as in Red Square.
Just before the Russian State Duma was dissolved for the September elections, it voted for the controversial amendments to the counter-terrorism legislation dubbed the ‘Big Brother Law’. The new amendments signed by President Vladimir Putin yesterday could completely change the country’s mobile industry landscape and seriously affect Russia’s preparations for the 2018 FIFA World Cup.
When the guests of the St Petersburg International Economic Forum (SPIEF) land at Pulkovo airport the first thing they see are the huge advertising posters of the US-sanctioned Bank Rossiya alongside with numerous adverts of familiar Western brands – from Total and Mercedes to Coca Cola and Pepsi. Indeed this year’s ‘Russian Davos’ was largely a question of talk business, think sanctions.
Russia is now more isolated than at any time since Mikhail Gorbachev became General Secretary of the Communist Party of the Soviet Union in 1985. This is a consequence of President Vladimir Putin’s response to the Maidan revolution in Ukraine. The western sanctions and Russian counter-measures pose more than just a set of legal questions for trade lawyers to understand. Russia is attempting to reduce its exposure to the west. This means protecting and supporting home-grown Russian enterprises. It also means prioritising trade and investment relationships to the east and south. For western businesses with operations or trading partners in Russia this poses a new set of questions about the merits of doing business there. This Global Counsel Insight note explains the current trends, the risks that these pose and the implications for business.
Last Wednesday Ukraine reached a major political milestone in its relations with the EU when the Ukrainian government gave the green light to the signing of an Association Agreement between the two in Vilnius in November this year. After ten years of hesitation, Ukraine is choosing between two distinct and probably incompatible economic and geo- political alignments. Moreover, by rejecting Vladimir Putin’s Eurasian Economic Union in favour of closer economic integration with the EU, Kiev is making a choice that is likely to provoke Russian resentment and retaliation. This is far from a definitive statement of Ukraine’s European orientation: public attitudes are still ambivalent and Moscow remains a constant source of pressure. But it is a significant geopolitical setback for Vladimir Putin’s regional agenda. What he does next will matter for business.
Later this week Moscow will go to the polls to choose a new mayor in an election for control of a city that is both the centre of the Russian political economy and not quite like anywhere else in Russian politics. The Russian President, Vladimir Putin, appointed the current mayor, Sergei Sobyanin, and he released from jail his chief critic - charismatic lawyer and anti-corruption blogger, Alexey Navalny. The fact that Putin has chosen to stage a showdown between a long-time critic and a long-time Kremlin loyalist may be further evidence of his power to pull all the strings in Russia, but it is also a serious concession to Muscovites’ expectations of a different kind of politics in Russia. It may be a sign of things to come.
This week Elvira Nabiullina will formally become next governor of the Bank of Russia. Nabiullina is an interesting, and largely unexpected, candidate for the job. She is a low-key Putin loyalist who has also developed a reputation as a moderniser, a liberal and a private advocate of a Russian ‘normalisation strategy’ – piloting Russia into the WTO in 2012. She is likely to bring the same instincts to the Bank of Russia, on both monetary policy and in the new responsibilities of the Bank of Russia for financial regulation. But managing Russian politics, and a dramatically beefed up institutional remit will test her undoubted skills.