Vincent Piket
Deputy Head of Delegation, Delegation of the European Commission to Russia
With its historic enlargement on 1 May 2004, the European Union (EU) will enter a new phase in its development. This phase has, first, an internal dimension, as the EU has recognised the need for thorough reform of its institutions and decision-making rules, so that the Union remains manageable and well-managed with more than 25 Member States. Second, a new phase will also start in terms of the EU’s role, since its growing political and economic weight has to be matched by a stronger foreign policy personality. Both issues will be decided in the framework of the upcoming Inter-governmental Conference on 27–29 October 2003 in Madrid. Third, the enlarged and enlarging EU will need to redefine its relations with its immediate neighbours. While enlargement has been one of the EU’s most successful foreign policies, it has limits. The EU cannot expand endlessly, for reasons of internal coherence and manageability and because of the constraints defined in the EU’s treaties. Hence, while the Union will remain ‘outward bound’, it will have to achieve this through means other than enlargement. In fact, membership of the EU is not always sought by neighbouring countries; Iceland, Norway and Switzerland show that other forms of integration can exist.
‘Share Everything But the Institutions’
‘Share everything but the institutions’: this was the motto Commission President Romano Prodi gave to the proposals contained in the Commission’s policy paper Wider Europe - Neighbourhood: A New Framework for Relations with EU Eastern and Southern Neighbours.
This paper, which was endorsed at a European Council meeting in Greece on 19–20 June 2003, states that the EU’s aim is to work in partnership to develop a zone of prosperity and a friendly neighbourhood – a ‘ring of friends’ – with whom the EU enjoys close, peaceful and cooperative relations. No fixed blueprint exists for the shape of the EU’s relations with its neighbours. This is dependent on the nature of mutual interests and on economic, social and political considerations; the detailed goals of the EU’s cooperation are to be laid down in a mutually-agreed Action Plan. Ultimately, the EU is offering to extend to its neighbours the ‘four freedoms’ of its internal market (in the movement of goods, people, capital and services). This clearly cannot be realised overnight, because it requires detailed talks about common objectives and practical preparatory work on legislative approximation and institutional adjustment.
An important component for the new neighbourhood policy is cross-border and sub-regional cooperation. The Commission’s view of how this could be promoted was formulated in a subsequent policy paper, published in July 2003, called ‘The New Neighbourhood Instrument’. This defines the financial mechanisms that will help to set up enhanced cooperation along the border of the enlarged EU. In fact, the New Neighbourhood programmes will be inspired by the experience of cross-border cooperation among border regions within the EU, as well as among the border regions of the current EU Member States and future members.
The focus will be on four areas of cooperation: promoting sustainable economic and social development; addressing common challenges, such as the environment, health, the fight against organised crime, ensuring efficient and secure borders and promoting local, ‘people-to-people’ actions. Programmes, which will be designed and managed by the regional and local authorities themselves, will start in 2004. During the period 2004–06, these programmes will be financed from the existing financial instruments Interreg III and Tacis; the Tacis contribution will be e75 million, of which e30m is dedicated to projects that directly involve Russia. From 2007, the Commission is considering a single financial instrument, covering both the EU and non-EU sides of the border.
Together, the political, economic and regional cooperation objectives pursued by the EU are meant to counter the reasoning that contrasts the countries on the ‘inside’ with those on the ‘outside’. The idea is to strengthen relations with old and new neighbours in the east and south, and to make sure that EU enlargement benefits not only the EU, but all the Union’s friends and neighbours. The proximity policy will be flexible in its implementation, adapting to the different level and character of the EU’s relations with each of its neighbours.
The EU’s relationship with Russia, based on the Partnership and Cooperation Agreement (PCA), is one of the most advanced the EU has with any of its neighbours addressed by the ‘Wider Europe’ Communication. Russia and the EU have made considerable progress in the bilateral Energy Dialogue and in broader consultations on a Common Economic Space. The two parties have established a firm foundation for cooperation in external and – increasingly – internal security. The results of the St Petersburg EU-Russia Summit in May 2003 reflect the special character of the strategic partnership. The decision to pursue cooperation with a view to creating, over time, four common spaces (a common economic space; a common space of freedom, security and justice; a space of cooperation in the field of external security; and a space of research and education, including cultural aspects) could become an example for developing relations with other countries neighbouring the EU.
The EU’s Enlarged Borders
The existence of borders is not the problem. It is their management that matters, and the EU is committed to cooperating with its neighbours on this. Borders have to operate efficiently. They must be transparent and secure. This is important for combating international cross-border problems, such as illegal migration and trafficking in human beings, and organised crime in general. These common challenges have become increasingly important in international cooperation, and in the EU’s relations with its neighbours in the east, including Russia. Border management is becoming increasingly important as the EU’s borders expand. The EU has provided technical assistance to upgrade and modernise border crossings, and is committed to continuing to furnish such assistance. The Russian border with Finland is a good example of how successful cooperation can be when the two sides are prepared to work together.
EU–Russia Cross-Border and Regional Cooperation
There is considerable experience of cross-border cooperation between the EU and Russia. With Finland joining the EU in 1995, a common land border of 1,300km emerged between the Union and Russia; the EU’s 2004 enlargement will increase the length of this common border to almost 2,000km. Four priorities were identified for cross-border cooperation between Finland and Russia: supporting the development of infrastructure networks (in particular, border crossings); promoting environmental protection; assisting economic development; and supporting small projects set up by regional and local authorities. One of the main projects selected for financing was the upgrading of the Salla and Svetogorsk border crossings; both opened as international crossings in 2002. Other projects have been in the area of environmental monitoring and waste management, and tourism.
Cross-border cooperation between the EU and Russia has not been limited to Tacis. Within its Northern Dimension policy, the EU has mobilised loan finance for Russia from the European Investment Bank (EIB). Total loans will amount to e100m, for environmental and energy projects in north-western Russia. The largest is a e40m EIB loan for the construction of a sludge incineration plant at the South-West Waste Water Treatment Plant in St Petersburg; the EU is making a e23m grant contribution to this project under Tacis, to complement the loan from the EIB and from the European Bank for Reconstruction and Development (EBRD). Other EIB loans are for energy and environment projects in Kaliningrad oblast.
Since 1992, the EU and Russia have also cooperated in the Council of Baltic Sea States (CBSS), as well as in the other sub-regional bodies for cooperation in the Arctic region and the Barents Sea. With the EU’s enlargement in 2004, Russia will be the only non-EU country in these platforms, leaving aside Norway and Iceland, with which the EU has a very high degree of economic and other integration through the European Economic Area (EEA). This will mean that, for the EU, the CBSS will become very closely integrated with its overall external policy for Russia.
Kaliningrad Oblast
Kaliningrad oblast will figure prominently in the EU’s Neighbourhood policy for Russia. Against the background of its troubled history, there has been a significant amount of media and political focus on Kaliningrad. Kaliningrad is part of Russia. This has been the unequivocal EU position all along. At the same time, the EU has a special interest in Kaliningrad, for two reasons: first, the EU has recognised Russia’s specific concerns about ensuring that the oblast is not ‘locked up’ once the EU has enlarged. Second, the EU has an interest in promoting economic and social convergence between Kaliningrad and the two future Member States that border it, Lithuania and Poland.
The agreement reached on Kaliningrad at the EU-Russia Summit in Brussels on 11 November 2002 mainly concerns the transit of Russian citizens to and from the oblast and mainland Russia. This was a difficult issue, but in the end ways were found to ensure that the vital interests of all the parties concerned were respected. As well as Russia’s legitimate interests, the EU was aware that any arrangements could not undermine the sovereignty of Lithuania, or carry negative implications for Lithuania’s future accession to the Schengen regime. It was also important to ensure that the EU could continue to protect its border adequately, for which the Schengen acquis was essential.
The understanding reached at the Brussels Summit has struck the right balance, providing a unique, innovative solution designed to avoid disruption to Russian citizens’ travel, while at the same time safeguarding Lithuanian sovereignty and the EU’s border security. Russian citizens travelling to and from Kaliningrad are issued with a new type of document allowing them multi-entry transit through Lithuanian territory (a Facilitated Transit Document or FTD), or with a single transit document if making a single return trip by rail (a Facilitated Rail Transit Document or FRTD). These documents are issued promptly and at low cost (e5 for the FTD) or free of charge (FRTD). Thanks to intensive work on all sides, it was possible to implement the new mechanism by the deadline of 1 July 2003.
The scheme has functioned to the full satisfaction of all parties involved.In addition to resolving the transit issue, the EU has made a firm commitment to assisting in the development of Kaliningrad. The European Commission has had an active assistance programme in the region for more than ten years. Since 1991, the EU has provided roughly e40m to projects directly aimed at Kaliningrad. A local Tacis support office assists in the implementation of these projects. In 2003, the Commission launched a Special Programme worth e25m over 2004–06 to further support the oblast’s development. This programme focuses on improving administrative capacity, promoting small and medium-sized enterprises, improving healthcare services, assisting education in adapting to the needs of the labour market and strengthening cross-border cooperation.
The Commission also lends support to Russian thinking about the creation of a special economic zone in Kaliningrad, to boost inward investment and broaden the region’s economic base. The trade-support mechanisms foreseen for the economic zone should not interfere with Russia’s future commitments as a World Trade Organisation (WTO) member.
EU Enlargement and Russia’s Economic Interests
The EU’s forthcoming enlargement will have positive effects for Russia. The EU is already the largest single market in the world. The removal of internal frontiers and the harmonisation of regulations and standards between members of the EU mean the free circulation of goods and services. Enlargement will extend these features to the new Member States, and thereby give Russian economic operators direct access to one, larger, harmonised market of 450m people. In practical terms this means that, once Russian exports comply with the safety or health-protection requirements of any of the Member States, old or new, those goods can also be sold in any of the other Member States, because the same rules apply across the EU market.
Simplification and standardisation will particularly benefit small and medium-sized enterprises, for which the costs of compliance with trade procedures are proportionately higher. Moreover, the strict application of competition policy, rules on intellectual property and company law will create a level playing field for all.
Trading with and investing in an integrated market creates the greatest and most durable macroeconomic benefits for the EU’s regional partners. Studies have invariably concluded that the effects of EU enlargement will be positive for the Russian economy. For example, the independent Brussels-based CEPS institute and the Moscow-based RECEP have estimated that the Russian economy will benefit by growth of around 2%, with gross domestic product (GDP), exports and terms of trade expanding concomitantly. This also explains why the ongoing work on the Common European Economic Space is so relevant. Another major benefit for Russia will be a substantial reduction in tariffs.
EU enlargement will simplify and enhance Russian access to the markets of current candidate countries, as well as to the EU as a whole. Enlargement will also bring accelerated economic growth in the new Member States, which will increase demand for imports. Russia is well-positioned to take advantage of this economic growth, given its geographical proximity to these expanding markets. Russian companies in the new Member States will be able to open branches in other Member States. For investors, high standards of protection will be applicable throughout the enlarged EU.
Previous EU Enlargement and Russian Economic Interests
Past EU enlargement has proceeded smoothly vis-à-vis the EU’s trading partners, including Russia. The most recent enlargement included Finland, with which Russia has traditionally enjoyed close economic relations. As a result of accession in 1995, Finland was able to benefit from the EU’s structural and regional policies, which have been taken into account in cross-border cooperation with Russia. New border-crossing posts have been set up for international as opposed to local traffic with Tacis and Interreg assistance. Trade has remained stable, with any sectoral decreases largely due to the abandonment of barter trade. Russia’s exports to Finland grew following accession until the financial crisis of 1998, but have again picked up and are now running at levels substantially higher than they were before Finland joined the EU. Russia’s trade surplus with Finland has also increased, from €263m in 1994 to €1,840m in 2001. In short, Finland’s membership of the EU has broadened an already solid relationship.
Like Finland, the majority of future Member States are traditional partners of Russia, including in trade. Russia is in fact the second partner of the ten acceding countries, behind the EU but ahead of China, Japan or the US.
Where Are the Borders Between the EU and Russia?
This will be the key question over the coming decade. The EU’s objective is clear, and it is linked to the strategic partnership that Russia and the EU already have. While borders will continue to exist between the EU and Russia, and while the question of EU membership is not on the agenda, the barriers to bilateral cooperation are evolving continuously, and some might even disappear in the longer term. The idea of creating four common spaces between the EU and Russia will become concrete. Such spaces, considered fiction only a few years ago, are now a serious policy. Realising them will underpin the strategic, global partnership between Russia and the EU, and will produce concrete benefits for the communities and companies located in the border regions.
