Mr. Putin Makes an Audacious Offer

Commentary No. 295, Dec. 15, 2010

Prime Minister Vladimir Putin of Russia visited Germany in the end of November. Before arriving there, he published an op-ed in the German newspaper, Süddeutsche Zeitung, which commented on this interview under the headline, “Putin hugs Europe.”

The contents of the op-ed were quite remarkable. Putin said that the lesson to be drawn from the severest economic crisis of the world economy in eight decades was the need for Russia to work more closely with the European Union. “We propose the creation of a harmonious economic community stretching from Lisbon to Vladivostok.” He said that “in the future, we could even consider a free trade zone or even more advanced forms of integration.” He suggested that such a continental market would be worth trillions of Euros.

Putin suggested that the EU and Russia needed to work closer together in the fields of industry and energy. He said that they should consider “what we can do to enable a new wave of industrialization on the European continent.” He mentioned such fields as shipbuilding, the airplane and automobile industries, environmental technologies, pharmaceuticals, nuclear energy, and logistics. He called for common undertakings by European and Russian entrepreneurs.

In the field of energy supplies, Putin called for “active exchanges.” It was necessary, he said, to work together at “all phases of the technological value creation chain – from the uncovering of demand for energy resources up to the delivery to the consumer.” Thereupon, Russia and the EU can move forward to the elimination of visas which would manifest “not the end but the beginning of a true integration of Russia and the EU.”

When Putin arrived in Germany he got a warm reception from some leading German bankers and industrialists. He spoke to them as his “friends,” and in return the CEO of Siemens said, “We are at home in Russia.” He said that “Russia was a clear example of how the emerging nations are giving an impulse to growth in the world economy.”

Putin continued his “charm offensive” with the German economic elite. He suggested they stood together on currency questions. “We need a new multipolarity in the currency system. We must break the excessive dollar monopoly.” He spoke of the example of the Roman Empire, whose policies led to a 500-year-long economic stagnation. He then gave a strong endorsement to the euro, which he called an important balance to the dollar in the world economy. He suggested the possibility of trade being denominated in rubles and Euros, and not in dollars.

Chancellor Angela Merkel’s response to these proposals was cautious but not negative. Germany’s Foreign Minister, Guido Weterwelle, said that Putin’s proposals show “how close we are in terms of our strategic goals.” The strongest endorsement came from some of Germany’s leading economic managers. Press response in Germany was mixed.

In France, Le Monde noted: “This appeal to economic opening by someone more noted for his nationalist character than his commitment to ideas of free trade is truly innovative. This is all the more the case since the development of industrial cooperation between the two sides has been repeatedly held back for political reasons.”

It should be observed that Putin was not offering a deal to the “West” but rather to “Europe.” It seems a quite specific attempt to encourage a strengthening of ties with Europe at the expense of the United States. While this is not entirely new in terms of Russia’s geopolitical stance, it has up to now not been stated so publicly and so boldly. It should be noted too that Putin has given a strong endorsement to the euro at a time when the euro is in need of some political reinforcement. Note too that Putin is not talking of remaining merely or even principally an energy-exporter to Europe. Putin is talking of a new wave of industrialization in which Russia will participate fully.

This open diplomacy by Putin should probably worry U.S. leaders more than the modest revelations of Wikileaks.