An interview by Mikhail Zygar
Head of the European Commission [1] in Russia Marc Franco tells Kommersant [2] about the problems that hold Russia and the European Union [3] back on their paths toward each other.
Kommersant [4]: What are the main points of intersection of the economies of Russia and the European Union [5]?
Franco: The EU is Russia's main economic partner. Fifty percent of Russian exports go to Europe and a third of direct foreign investment in Russia comes from it. That is not just investment in the area of energy, but in all forms of industry. Russia is the EU's fourth largest economic partner and its main energy supplier. We receive about 40 percent of our gas and 20 percent of our oil from Russia. The level of foreign investment is lower than it could be though, especially if you compare it with our cooperation with other growing economies.
Kommersant: What is the cause for that?
Franco: If we sort out the reasons why investment isn't growing or is growing slowly, the probable answer, I would say, is that Russia has a reputation abroad that it deserves. There is a big difference between how those who work here and those who know about Russia only secondhand evaluate the country. Those who have business in Russia, of course, will complain about the bureaucracy, the complicated procedures, the corruption. But isn't the only place where those problems exist. All businessmen admit that it is possible to do business in Russia. Russia isn't hostile to investment. On the contrary, it welcomes foreign investment. Thos who do not work in Russia will stress the corruption, bureaucracy and bad reputation. Many of the events that have taken place in Russia recently have no helped its image. The example that everyone is talking about is YUKOS [6]. The way it looked in court reflected very badly on Russia.
Kommersant: How can Russia improve its image?
Franco: Look. Businessmen are not afraid of taxes. They are not afraid of clear laws and rules. They always adapted to them and adapted their business strategies. But entrepreneurs always fear instability, lack of clarity, changeable laws and rules of the game. They are also afraid when the courts are not independent. They don't want to play in a game where the rules are always changing. First of all, Russia needs to improve its legislation to correspond to world practice. A lot has been done to make the legislative system favorable to business. But it is no less important that the laws work, that they not only exist on paper, but are enforced. Legislation in Russia remains in part only theory. That has to be corrected through administrative reform, reform of the court system, training of bureaucrats. The weakness of the financial sector and financial instruments has to be noted too. The state should build up the legislative system so that it could attract foreign banks to the country.
Finally, one more issue that causes concern is the political image of Russia. The perception of Russia in the West is based on more than just the YUKOS case and Khodorkovsky's trial. The general tendencies of development in society and the political system are important as well. For example, the law on noncommercial organizations was perceived in the West as an attempt to limit the freedom of civic society. All of the limitations foreseen in it are considered negative and can be interpreted as deviation from democratic principles.
Kommersant: How are the road maps being carried out? What are the successes and failures?
Franco: The road maps were only signed in May. Although a lot has happened since then, development could be going faster. Dialog has begun in many of the areas mentioned in the text. The energy dialog is underway, the transport dialog is beginning, the rest will follow.
Kommersant: The energy dialog is the main part of relations between Russia and the EU. But the North European Gas Pipeline has become a source of conflict within the EU. Germany is delighted with it, but Poland and the Baltic countries are in horror. What will that lead to?
Franco: The North European Gas Pipeline is a joint project by private companies, not governments. It includes Gazprom [7], BASF and E.ON [8], and not the governments of Russia and Germany. On the other hand, it is global and important for all Europe. The governments of both Russia and Germany welcomed it. The European Commission [9] welcomes it as well as a positive factor for the diversification of energy suppliers in Europe. It is a new model of economic cooperation between Russia and Europe as a whole. Several member states reacted very sensitively to that agreement. Their negative attitude has various economic and ecological causes. Nonetheless, the new pipeline across the bottom of the sea is important from the general European point of view. There are many god things about it and the interested parties are not only Russia ad Germany, but Great Britain, The Netherlands and Belgium as well. Everyone welcomes the signing of the contract and is expressing confidence that the companies will observe ecological requirements. I think that, in the end, a solution that will satisfy everyone may be found.
Kommersant: The pipeline issue has again raised the question of unity within the EU. To what extent is the foreign policy of the EU unified, or is it just the set of separate policies of member states?
Franco: The EU is a highly original combination of the national policies of 25 countries. It is not an empire that wants to rule Europe or the world. It is unity in diversity. We do not want to establish uniformity everywhere. I understand that this is hard to understand from the Russian point of view. That's because it's a very complex model – to work together, in common, yet remain completely different countries.
The EU is a very flexible organization that combines various forms of government. Some areas are subject to common competence, other are decided jointly, and finally some issues are within the oversight of member states themselves. That is clear written into the draft of the European constitution. It is completely unimportant whether it was passed or not. The points dividing the spheres of responsibility were never disputed. All political functions are performed separately and are exclusively within the sphere of responsibility of national governments. Education and culture are also the competence of national governments. Trade, agriculture and financial policy as it applies to the euro zone are regulated by EU bodies. Issues of economic cooperation, ecology, financial regulation and banking activities are common responsibility.
Kommersant: What issues about WTO [10] admission remain unsettled between Russian and the EU?
Franco: For admission to the WTO, Russia should conclude and fulfill bilateral agreements with its main partners. Most of the controversial moments with the EU were elucidated last year. In May 2004, Minister of Economic Development and Trade German Gref and EU Trade commissioner at that time Pascal Lamy signed a bilateral document. So now Russia mainly has to conciliate controversies with WTO member states like the United States and Canada. There are also a number of points of legislation that Russia should supplement, including those on property rights and access to the banking services market. The next step is the obligations Russia has already taken on, that is, the agreements, including those with the EU, that have been signed but not implemented. There are bilateral problems with the pharmaceuticals industry and the import of alcoholic beverages. Finally, the best known problem, payment for flights over Siberia. There is a general understanding that that problem has to be solved. Airlines' operations in Siberia should have an economic basis and should be more transparent. No one in Russia argues with that. The differences are only for the time for implementing measures: Moscow wants a wider timeframe.
In general, negotiations on the WTO are a significant process. That includes protecting rights to intellectual property. Agreement has already been reached that Russia will take measures. But again there is the difference between reaching an agreement and implementing it. In general, I think Russia will be admitted to the WTO next year.
Kommersant: Not that long ago, the main problem between Russia and the EU was Kaliningrad. Is that in the past now?
Franco: That problem arose not from the expansion of the EU, but from the breakup of the USSR in 1991, when Kaliningrad became an enclave. Yes, the issue of transit of people has been settled. People travel from Kaliningrad to the rest of Russia and back with simplified transit documents allowing for the crossing of the Polish and Lithuanian borders and obtainable with the tickets. One more problem is that there is no consulate in Kaliningrad of a country that belongs to the Schengen zone. That is, if a resident of Kaliningrad wants to go, for example, to Germany, he has to receive or his visa in Moscow or St. Petersburg. That problem will be solved next year too. Two consulates will be opening, those of Germany and Sweden, and they will be able to issue Schengen visas and to represent the interests of other countries and give out visas for them. When Lithuania and Poland join the Schengen zone, their consulates will be able to grant Schengen visas.
Kommersant: How realistic is a visa-free regime?
Franco: We are now working a simplified regime. It will be easier for those who travel for work – businessmen, journalists, scientist, athletes – to receive long-term visas. As for a visa-less regime, it would be necessary for Russia and the EU to trust each other's passports for negotiations to begin. The EU countries have to be sure of the authenticity of the documents that Russians use for travel, and Russia should trust European passports. New passports with biometric data are being introduced on both sides and that should reduce the risk of the use of false documents. In addition, it is very important that contacts and cooperation be established between the law enforcement structures of Russia and the EU. In the Schengen zone, the police exchange information about criminals. Since there is no internal border control, the police of various countries have to work together to be able to identify criminals.
Finally, there is one more principle moment – the agreement on the readmission that includes the return of illegal immigrants to the territory of the country they came from. It says in the agreement that, during the transitional period, three years from the moment of ratification, Russia will receive illegal immigrants who are Russian citizens. That's normal, it's worldwide practice. At the end of the transition period, Russia should take back all of the illegal immigrants who entered the EU through Russian territory. In that time, Russia should make similar agreements on readmission and extradition with other countries. Then, in three years, at the end of the transitional period, readmission will enter its final stage and Russia will begin to take all illegal immigrants automatically that had come through its territory.
Kommersant: Migration has been one of Europe's most pressing problems lately. The EU countries will most likely tighten up migration legislation. How will that be reflected din Russia?
Franco: Migration is a problem not only in the EU, but probably of al countries of the continent. We should admit that we worked badly on that problem before. It is the main challenge to politics in the coming years and a lot will have to be done to regulate it. There is no magic solution. It will have to be developed so that it doesn't go the way it did 40 or 50 years ago. Because the immigrants couldn't integrate. On one hand, the immigrants themselves don't want to integrate. On the other hand, society has to want them to integrate. Otherwise, the situation will be even more explosive.
Kommersant: The last question. Philosophically, is Russia part of Europe?
Franco: Of course Russia is a part of Europe. It is undeniable. When I hear of the differences between Russia and Europe, I want ask, what Europe? Sweden or Portugal? Greece or Finland? Within Europe, the differences are greater than between Russia and Europe. We are geographically, historically and culturally indivisible. Name even one element in Russia that is absent from Europe. Just don't say vodka.
Deep disagreement remains between Russia and the European Union, especially concerning the Iranian atomic program and Chechnya. However, Russia and the EU remain pragmatic: Europe needs Russian energy resources and Russia needs investment. Therefore, it has to be admitted that there is a stable bloc of mutual interests.
Russia has shown great interest in more active rapprochement to Europe. After the events of September 11, 2001, President Putin [13] has turned to the West. Unfortunately, there is no center in Europe that can develop a strategy for cooperation with Russia. It is the consequence of an absence of a unified foreign policy position. That relieves the Kremlin [14] of bilateral relations.
The union between the European Union and Russia is based on the advancement of interests and values shared by both sides. The EU was pleased to accept the obligations Mr. Putin took on himself to develop democracy and civic society and the obligations Russia took on on European values. The EU has obliged itself to look broadly and positively on cooperation with Europe's more significant neighbors. As Otto von Bismarck said, “The secret of politics is to make a good agreement with Russia.”
Germany should facilitate the development of a unified European Union policy in elation to Russia. In the end, everyone in the EU wants Russia to be stable and democracy to flourish there. If European governments coordinate their efforts, they will have greater possibilities to influence Russia. But it should make it clear at the same time that integration into European structures depends on how much Russian policy will correspond to European values.