EU-RUSSIA: RECESSION IN RELATIONS

The International Monetary Fund will present an updated forecast for 2016 in London on 20 January. It has become known that the forecast projects a 1-per-cent economic decline for Russia, which is 0.4 per cent worse than previous expectations. The World Bank and Russia's Ministry of Economic Development have publicized roughly similar figures. A debate about changes in those forecasts has been going in Russia to the utmost since the beginning of the year, which will result in a significant adjustment of the annual budget. An updated version of the budget will be passed by the end of January.

It should be acknowledged that the World Bank has also downgraded the performance of the global economy. This year, growth will be 2.9 per cent, which is 0.4 per cent less than previously estimated. However, the recession does not threaten the global market - something that cannot be said about the situation in Russia which has been experiencing an economic decline for a third consecutive year. In addition to low oil prices, another reason for this are economic sanctions imposed by the United States and its allies, including the European Union.

The EU, which unites 28 countries, is Russia's largest economic partner and has been such even under the pressure of the sanctions. A total of 75 per cent of all foreign investment in Russia comes from EU countries. In 2015, 46 to 48 per cent of Russia's foreign trade (including 70 per cent of all energy) was with the EU. In turn, Russia is the EU's third most important economic partner - after the United States and China. A total of 10 per cent of Europe's imports come from Russia. In particular, 30 per cent of oil imports and 41 per cent of gas come from Russia.

Russia's trade with European countries in 2015 was worth 230bn dollars, which is 38 per cent less than in 2014 and almost 50 per cent less than in 2013 (417bn dollars). At the same time, Russia-EU trade in kind increased by 3m t. These figures were presented at the Geydar Forum in Moscow, which ended last Friday.

Losses caused by the sanctions were publicized as well. According to Russian First Deputy Minister of Economic Development Aleksey Likhachev, in 2015 Europe lost 50bn while Russia lost 25bn dollars (1.5 per cent of GDP).

Special attention was paid at the forum to the relationship with Euro-pe. Russian Prime Minister Dmitriy Medvedev said that his country is very interested in reconciliation with Europe. He said that reciprocal sanctions are against common sense.

The Russian prime minister's call for normalization relations was echoed by European Commission Vice-President Kristalina Georgieva. She concluded her speech with the phrase "Let's work together!".

Both sides wish for a speedy warming of relations, but they have different visions of the actual reason for the cooling. "To come to mutual trust, we need to find a common answer to the question regarding Ukraine. It is our common neighbour, we reached the Minsk agreements, the full implementation of which will help us begin to normalize relations between the EU and Russia," head of the EU Delegation to Russia Vygau-das Usackas said at the forum.

The EU ambassador to the Ru-ssian Federation recalled that Europe and Russia once had had a joint ambitious goal to create common economic and humanitarian space from Kam-chatka to Lisbon. But even back then there were disagreements, which both Moscow and Brussels tried not to notice. They began to manifest themselves "before the annexation of Crimea and the destabilization of the situation in Ukraine". The latest developments destroyed the actual foundation of the relationship. The road from Vladivostok to Lisbon lies through Kiev, and there is no way it can be bypassed, he concluded.

Incidentally, during the debate, Usackas's opponents repeatedly cited his recent interview to RIA Novosti, which generated a strong reaction in Russia. In the interview, the EU ambassador, in particular, suggested that there was no going back to the previous relationship with Russia. He said that "the outright aggression by Russia against Ukraine hit trust severely. There will probably no longer be the kind of landmark meetings that biannual Russia-EU summits, held prior two the crisis in our relationship, were. And that is also a consequence of those steps that Russia took contrary to principles and common vision and common rules which, we believed, Russia shared as well. A major blow was dealt to our relationship".

The EU permanent representative to Russia suggested adding to the statement Prime Minister Medvedev made at the Geydar Forum - that to establish good relations with the EU "we have the reserve, the desire and the will" - the need for a common vision and mutual trust. He advised that the first step toward this would be to abandon the Soviet habit of looking for a hidden meaning in everything - something that was done during a debate on the emerging concept of the European Energy Union, which is ostensibly directed against Russia. "I would like us to stop reading between the lines, just as we stopped reading the newspaper Pravda," the diplomat said. "Let's also not look for reasons to think and act Orwell style - 'all are equal, but some are more equal than others'. The European Energy Union, he said, is being created not against Russia or any other country but to enable European consumers to choose lower prices and to give them confidence in uninterrupted supply.

Also raised at the forum was the issue of the non-development of relations between the European Union and the Eurasian Economic Union. Asked by R+ whether this was due to the fact that the EU links the establishment of those contacts with the normalization of dialogue between Russia and Ukraine, the EU ambassador said that the EU is closely monitoring how the EAEU will contribute to promotion of free trade. It is already alarming that Russia has unilaterally decided to suspend the CIS [Commonwealth of Independent States] Free Trade Zone Agreement with regard to Ukraine, which is contrary to the regulations of this organization. Russian experts agreed with Usackas about the lack of mutual trust. There is no more trust toward Europe either. This manifests itself in the fact that Russian businesses have over the past year increased demand for insurance of export risks, mainly political risks.

First Deputy Minister of Eco-nomic Development Aleksey Likha-chev reacted very emotionally to the European diplomat's metaphor that the road to Lisbon lies through Kiev. "If we look at the Russian-European relationship through Kiev's perspective," he said, "we had better finish this conversation right now. Because that is a distorted picture. It has nothing to do with the Russian-European relationship or real interests." The Russian official explained that Kiev deliberately negates all attempts by Moscow to reach a consensus on a host of economic problems.

Aleksey Likhachev said that there are EU countries, where there is awareness at government level of the futility of "the war of sanctions" that obviously harms the national interests of those countries, which has made it possible to continue the dialogue in the format of intergovernmental commissions. "In 2015, there were seven meetings of intergovernmental commissions held with Hungary, Greece, Ireland, Spain, Cyprus, Slovakia and Slovenia. We look forward to holding soon full-format sessions of the intergovernmental commissions with France, Italy, Austria and the Belgi-um-Luxembourg Economic Union," he said.

Pressure from Russian and European businesses on politicians may force them to more actively search for grounds for the lifting of sanctions. Discontent with the restrictive measures is on the rise on both sides. Some European economists are forecasting that the first weakening of the sanctions regime will come as soon as in the middle of this year.

But still, as both sides admit, that will be a new reality, a new modus operandi between the interdependent Russia and the European Union, whose positions, albeit, are not completely the same.