Victory Day network session
(Business New Europe – bne.eu – MOSCOW BLOG: Ben Aris in Moscow – May 8, 2015)
The crowds in Moscow will be out in force on May 9 to watch what is expected to be the largest ever Victory Day celebration, with the traditional parade of military hardware through Moscow’s Red Square. But in terms of geopolitics the real event will happen the day before.
The executive body of the Commonwealth of Independent States, the Council of Heads of State, meets for a session of the Supreme Eurasian Economic Council on May 8 to talk about further economic integration. In fact, all the leaders that are attending that meeting and the parade itself have rising investment and trade with Russia, while those that are staying away have mostly seen business with Russia slump in the last year.
Most of the West’s top leaders have decided to boycott what is one of the most important events in the Russian public holiday calendar. The only international dignitaries of any note that have said they will turn up are UN Secretary-General Ban Ki-moon and Unesco Director-General Irina Bokova.
On the other side, the 26 that are going to make the trip almost all have close business ties with Moscow or have been flirting with the Kremlin in the last year as everyone takes sides in Russia’s showdown with the West over Ukraine. (The number was supposed to be 27 but North Korea’s supreme leader Kim Jong-un got camera shy and cancelled at the last minute.)
The most prominent guest will be Chinese President Xi Jinping, at the head of a big delegation. Russia and China are expected to sign a raft of deals on the sidelines of the celebrations and could even agree to double the volume of gas Russia is due to send to China from 2019.
“The corresponding documents will be signed during the visit. They will relate to interaction in energy, aviation, finances, taxation and investment. The visit by Xi Jinping will give an impetus to further development of practical co-operation between Russia and China,” a Chinese diplomat told Reuters ahead of the trip, describing the deals that will be on the table.
China’s economic importance to Russia has been rapidly advancing. China became Russia’s biggest trade partner in 2014, with some $95.3bn in trade, and the intention is to raise this to $100bn, while foreign direct investment (FDI) by China into Russia soared to $7bn in 2014. Cut off from western capital markets, China has emerged as Russia’s main source of external capital.
The regular clutch of leaders from the former Soviet republics will also be on the podium, as whatever the warmth of their current relations with Moscow are – and the relations are very mixed – Russia remains too important to the regional economy for most of these smaller countries to want to risk openly offending the Kremlin. The list includes: Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan, as well as two more recent additions, Abkhazia and South Ossetia, the latter of which Russia hived off Georgia during an eight-day war in 2008.
The leaders of the BRICS (Brazil, Russia, India, China and South Africa) are also all due in Moscow too. While Washington and Brussels have sought to isolate Moscow, Russia’s fellow emerging markets have conspicuously rallied round and replaced many of the EU products that have disappeared from Russian shop shelves as a result of Moscow’s retaliatory sanctions on Western agricultural goods.
“In recognition of the considerable strengthening of our multi-faceted relations since then, we now describe our relationship aptly as a special and privileged strategic partnership,” Indian President Pranab Mukherjee told TASS in an interview ahead of the trip. India is especially interested in deals with Russia to supply nuclear energy and investments into the oil and gas sector.
Mongolian President Tsakhiagiin Elbegdorj will also be at the parade and has also brought a shopping basket with him. He was due to meet Putin on May 9 for last minute talks on a strategic partnership deal Mongolia intends to sign off on during a Shanghai Cooperation Organization (SCO) meeting in Ufa in the Urals in July.
“We have prepared a document – a medium-term programme of the development of strategic partnership. On our part, everything has been approved and now the support of the Russian side is needed. Probably, during the Ufa meeting, we’ll sign it,” the Mongolian leader said. “And during a meeting with Vladimir Putin, we’ll specify some issues related to economic and infrastructural development.”
Russia’s best friends in South America and Asia, Venezuela and Vietnam, will also be at the parade and likewise enjoy close business ties with Russia. It seems everyone has brought a deal with them they would like to discuss with Putin.
The one CIS country conspicuously absent from this list is Belarus, as President Alexander Lukashenko bailed out of attending the parade at the last minute, as he said he wanted to celebrate the holiday in his own country.
But Lukashenko is making it to the May 8 meeting, indicating that his absence from the parade is a sign that Belarus is unhappy with the way that the Eurasian Economic Union (EEU) is developing. The Russia-led trade union was set up at the start of last year, but has been dogged by complaints by its two other members Belarus and Kazakhstan, which say the “free” trade area is a lot freer for Russian goods entering their countries than it is for their goods entering the Russian market. Clearly the EEU council is unlikely to be a pro forma meeting as the three partners have some serious negotiations to complete.
Germany is playing a similar game. As one of Russia’s best friends in Europe, German Chancellor Angela Merkel was in a bind. The international cold shoulder Russia is getting has made it impossible for her to attend the parade, but aware of the offense a no-show carries, she decided to visit Moscow on May 10 as a half-way measure. “To date, there is huge controversy between Russia and us [Germany], including the issue of what is happening in Ukraine. However, it is important to me to jointly lay wreaths on the Tomb of the Unknown Soldier on May 10 with the Russian President,” Merkel said in a video blog.
Merkel’s skittishness is directly connected to Germany’s economic ties. Last year Germany and Russia had trade in goods of close to €77bn. Russia primarily supplies oil and natural gas to Germany. Germany, on the other hand, exports cars and machines to Russia, and has more than 6,000 German companies registered in Russia, which have collectively invested about €20bn in recent years. None of the other EU countries comes even remotely close to any of these numbers.
And finally, and maybe most importantly, Turkish President Recep Tayyip Erdogan also pulled out at the last minute. Moscow has been working hard to bring Turkey out of the EU’s orbit, tempting it with the new Turkstream gas pipeline and investment deals. Erdogan has been willing to play ball, if only to play Russia off against Europe and the US, but after Putin went to the Armenian capital of Yerevan to attend events marking the centenary of “Armenian genocide”, Turkey took offense and Erdogan cancelled.
Moscow was in an impossible position on this one, as it had bullied Armenia into joining the EEU and so could not miss what is Armenia’s most important ceremony to honour its dead. But as it was the Young Turks that carried out this massacre, Putin’s presence could not help but cause offence in Ankara.
The Victory Day military parade therefore underscores not only the divide between Moscow and the West, but also the lines being drawn up in the emerging markets, as well as the fragile relations between the leaders of these countries.
Europe at least would like to walk the confrontation back, but relations remain frosty. “A destabilised and isolated Russia is not in the interest of the European Union, is not for sure in the interest of the Russian people, and I believe it’s not in the interest of the Russian leadership, but it is for them to decide,” said the EU’s top diplomat, Federica Mogherini, during a visit to Beijing.