Putin’s Russia still as baffling as ever

KREMLINOLOGY was the well-respected skill of divining what was happening inside the secretive world of Moscow rule during the cold war.

It never really went away, and any country — or enterprise — trying to do business with Russia finds it difficult and frustrating and is never sure where they stand.

But it has become worse, and the debacle with Ukraine has forced the EU to try to tackle it head-on and attempt to agree basic principles with Russia’s President Vladimir Putin.

As a result, the usual day-long, twice a year EU-Russia summit has been scaled back to just two-and-a-half hours and the agenda has been wiped clean of all the usual topics.

“There is a need to clear the air, clarify where exactly the relationship is going,” said a senior EU official. As Russia’s single biggest importer, they should have some clout, but the only issue in reality will be Ukraine and trade. The protests on Maiden Square in Kiev is in some way, the tip of the iceberg as far as the EU is concerned.

The ignition point was the decision by Ukraine, after years of progressing towards a trade agreement with the EU, to step back in November, on the eve of the expected signature, not helped by Moscow’s €11bn bailout.

It had been known the temperature among the Russian-leaning Ukraine government had been cooling, but with many of the country’s oligarchs, including Russian ones, pushing for the deal, it was thought they might sign at the Eastern Partnership summit in Lithuania’s capital, Vilnius.

The EU has concluded agreements with Georgia and Moldova but has failed to conclude with the other two members of the Eastern Partnership — Armenia and Ukraine.

The statements coming from Moscow since have infuriated the EU and had senior officials openly stating in relation to the protests and debacle in Kiev that “Russia’s intervention in the run-up to the Vilnius summit has provoked this crisis”.

Claims that an EU agreement would prevent free trade with others, including Moscow, has been described by EU officials in unusually frank language as “utter nonsense”.

Russia formed a Eurasian Customs Union with Belarus and Kazakhstan, but without working out details with their colleagues in the World Trade Organisation as they should. As a result, EU sources said, “we are still trying to work out how it will work”.

They point out that normally the aim is to lower trade barriers and tariffs between the members of a union — but in the Russian case, Kazakhstan, has had to raise its tariffs.

The EU feels it cannot just sit back and let Ukraine go without a fight — especially with the numbers protesting despite freezing conditions in Kiev, giving Brussels the moral upper hand.

Russia is mainly a petroleum economy with more than 75% of its exports to the EU in oil and gas — the EU is its single largest trading partner.

The global economic crisis has affected Russia, though not as badly as some countries. World Bank reports show petroleum wealth has been used to lift their citizens out of poverty and to fund a good education system.

But each time there is a recession, the big traditional companies survive quite well, while all the modern, high-tech and SMEs tend to collapse and disappear, says the World Bank. So when the recovery comes, modern industry is starting from scratch again.

On the other hand, the timetable towards turning the rouble into a full hard currency with a flexible exchange rate by Jan 2015 is on track, which the World Bank estimates could lead to a devaluation of between 2.4% and 7% which will affect the country’s €1.5 trillion economy.

The human rights situation has been deteriorating in Russia, especially since the contested presidential and parliamentary elections of 2011-2012.

In an unusually open move for the EU, representatives of Pussy Riot — the Russian band jailed by Putin — were received in the EU’s mission to Russia last week.

Amnesty International has urged the EU to push human rights: “The EU-Russia summit must be used to politically and publicly remind Russia of its human rights obligation, and show them that the world is watching.”

But up to now, no one has been able to grasp the slippery eel that is Putin’s Russia.