Examination of Witnesses (Questions 135
- 139)
THURSDAY 25 OCTOBER 2007
Sir Roderic Lyne and Mr Charles Grant
Q135 Chairman:
Sir Roderic and Mr Grant, we are very pleased to see you this
morning. As you know, we are undertaking this inquiry on the European
Union and Russia and we have read writing from both of you which
is relevant and important for it. Before we start with our questions,
Sir Roderic, you have an opening statement you would like to make?
Sir Roderic Lyne: Yes I have and I have also
just today submitted some written evidence so I will not repeat
everything that is in that. My argument is that the Russian Federation
has changed enormously in the last 20 years and is still changing.
I think there is a better than evens chance that 20 years from
now Russia will have a modernising and more diversified economy,
making better use of that country's very rich human capital; that
it will be developing more effective institutions of governance;
and that it will be drawing closer to the European Union, partly
impelled by the rise of China and instability in the Middle East.
I also think there is a better than evens chance that 40 or 50
years from now Russia will have developed its own form of democracy,
which will be, I am sure, different from the forms that we see
in this country or other parts of Europe. None of this is to discount
the significant possibility of less attractive scenarios. I believe
that the European Union and NATO need to frame a long-term vision
of the continent of Europe which is designed to include and not
exclude Russia—I leave entirely aside the question of membership—and
a vision which will attract Russia, (which is, after all, Europe's
most populous nation), towards a closer and more harmonious and
more civilised relationship. That is the long term. In the short
term, Europe faces a different task. For the past four years Russia
and the West have been diverging. I do not agree with those who
argue that we are now in a confrontation across the board with
Russia, although a lot of political comment and indeed media comment
would suggest otherwise, but there is unquestionably an atmosphere
of mistrust, anger, and animosity, and this could turn into a
confrontation under the pressure of events, a confrontation which
I firmly believe neither Russia nor the West as a whole actually
wants or intends. I think that we are now in a negative cycle
in a long process of transition. I think this is a cycle which
will very probably last for at least another five years and quite
possibly 10 or 15, and so I believe that the European Union needs
to calibrate its approach to the circumstances which currently
exist in Russia. The previous objective of building—to quote
from European Union documents—"a genuine strategic
partnership founded on common interests and shared values"
is clearly inoperable for the time being. It should not be binned
because as a long-term aspiration it is commendable, but it should
be shelved until circumstances change. I think that we should
firmly reject ideas of neo-containment which are popular in some
quarters, particularly on the other side of the Atlantic. We should
firmly reject any approaches which are designed to isolate Russia.
I think we need in the European Union to develop a shared analysis
of what is going on there and a much better understanding of this
within the EU. The process of debate and analysis within the Europe
is weak and fragmented. Founded on that shared analysis, I think
that the EU urgently needs stronger policy co-ordination and a
common approach towards Russia which has been singularly lacking
over the past five or so years. I have set out in my written evidence
certain principles that I think should be the foundation of that
common approach, and in terms of practical enactment, this should
be a policy of what I call "neo-engagement" in which
we seek partnership and co-operation on specific strategic issues,
where this is possible, we support the further development of
trade and investment, and to the greatest extent possible we should
try to sustain the flow of information and educational and cultural
exchanges and every form of human contact, and we should try to
invest in the next generation. Given that I have submitted other
points in written evidence, perhaps I should leave it at that,
my Lord Chairman.
Q136 Chairman:
Thank very much indeed, Sir Roderic. Mr Grant, do you have any
comments on what Sir Roderic has said or do you broadly follow
his approach?
Mr Grant: I do not disagree with anything he
said. I guess that, broadly speaking, there are two theories,
in the US at least, about what we should try and do about Russia.
One of which is to try and engage, find a way of dealing with
it and the other way is just to isolate it and surround it and
contain it, and most people in Europe go for the former, as indeed
Rod Lyne does, and I am very much with those who think we have
to try and find a way of engaging Russia however difficult it
may be.
Chairman: Thank you. Lord Lea?
Q137 Lord Lea of Crondall:
I would like to ask Charles a point because we perhaps bowled
a googly to his colleague Katinka, with whom he should have been
appearing last week, in asking whether we have got a clear list
of where the Russians and the EU have to lock hands together where
the EU has competence. The word "negotiation" is used
in our question, and clearly sometimes you are negotiating in
a multi-lateral forum, the best example being the WTO, and yet
there are many issues where the EU does have competence and we
have to do bilaterals and so on. Do you think it would be useful
analytically to be clear what the list is of where we have to
do things together because the EU has competence and where, secondly,
the EU per se and the Russians have some standing, like the Quartet
in the Middle East, et cetera? Are we clear where the competences
are at the moment before we speculate on some fantasy about the
future of the world and would you see a forward creep of competences
rather than some strategic, big piece of architecture?
Mr Grant: I will go through in a moment some
of the areas where I think we should try and work with the Russians,
but in most of these areas you cannot simply say the EU has competence
or the Member States have some competence, because in most things
that the EU does the EU has some competence and Member State have
some. Trade is an exception where really the Member States do
not have any competence at all. In most of the things that we
may be talking about in the next few minutes, competence is divided.
Let me mention three areas on which I think the EU should focus
in its relationship with Russia. My starting point for this is
I think we have to be realists in dealing with the Russians. As
Rod said, the old idea that Russia was a big Poland which would
gradually move to Western liberal democracy as it became richer
is now seen as rather silly in European government circles. Apparently
Bernard Kouchner, the French Foreign Minister, said at a recent
meeting of foreign ministers: "face a" la réalité
il faut être réaliste"—faced with the
reality of the way Russia is changing, we have to be very realistic—and
in my view that realism should lead to co-operation in three areas.
One of them of course is the energy field where the Russians and
Europeans do have a lot of shared interests and we both have concerns.
They are concerned that the liberalisation of the European energy
market may make it difficult for them to strike long-term supply
contracts with European energy companies. They are concerned that
they may not be able to buy downstream distribution networks if
the Commission's plans for liberalisation go too far. We are of
course concerned that they might one day just cut off supplies,
but the real concern we have is not so much that; it is rather
they will not have enough gas to give us. Most projections show
that demand for gas from Europe, from Russia itself, and maybe
other places, is going to outstrip supply in a few years' time,
so we have concerns. I think it is quite clear to me, given that
we have a mutual interest in having a fairly productive and fruitful
relationship on energy, particularly gas, that we probably can
strike bargains and do deals and do compromises. The second area
is integrating Russia into the international financial system,
which is of course happening hugely. Russian companies are raising
money on the London Stock Exchange. A lot of Russian companies,
and now sovereign funds, have spare funds which they wish to invest
in Europe and America, and they are concerned, they say, about
protectionism in the EU and us excluding them. We are concerned
of course about whether these sovereign funds and other investors
are transparent and operate independently of politicians and so
on. Each has its concerns but again it is in the self-interest
of Russia to allow its multi-national companies to become truly
multi-national in the sense that we would mean, outside Russia.
It is in our interests to help integrate Russia into the global
financial system because that means Russia is probably an easier
country to deal with. The third area and the most difficult area—it
is a more political area—is the common neighbourhood that
we share with Russia, but I think we have very clear mutual interests
and that Russia and ourselves should welcome the fact that if
Moldova, the Ukraine, Belarus and the Caucuses republics become
prosperous, stable and democratic that is actually good for both
of us. Not everybody in Russia will see it that way because the
Russians tend to see this as the geo-political "Great Game"
and they tend to assume that any democratic force in our common
neighbourhood is automatically going to be a pro-Western force
that will do its best to undermine Russian interests. There is
a risk that this may become a self-fulfilling prophecy. To conclude
my answer, in all these areas, David—oil and gas, financial
integration and what we do about our common neighbourhood—competence
is divided between the Member States and the EU, so it would be
wrong to see it simply as an EU competence or a Member State competence.
Q138 Lord Hannay of Chiswick:
Would it not be the case, in your view, that there is in fact
a division which is slightly different from the division between
Community competence and Member State competence which is more
important, and that is the division between matters that are dealt
with between businesses and individuals and matters that are dealt
with governmentally? Amongst the latter of course there is the
subdivision between Community competence and Member State competence,
but would you not feel that that is an important distinction,
because in the areas which are covered by the private sector such
as trade and investment (and you said trade was a Community matter
and of course it is trade policy that is a Community matter not
trade; trade is conducted by European companies and that in the
area which is in the private sector, as it were) and cultural
links and educational links and so on, it is in Europe's interest
to have the least possible regulation, the least possible governmental
involvement because that just cuts across what our long-term objectives
are, and that then puts a little bit better into proportion the
discussion about which bits of the governmental activity are handled
by Europe as whole, the Union, and which bits by the Member States?
Mr Grant: Yes I agree that when it comes to
cultural and educational links, you do not really need very much
at government level or EU government level for these links to
happen. I guess in one of the areas that I mentioned, in energy,
it is very much both; a lot of the energy links are what the oil
and gas companies do in Russia and in the EU, but also they are
operating within a framework of rules set by the EU which obviously
influences and limits what the companies can do. Equally, on the
question of financial links, if the EU or some EU governments
do decide to limit investments by sovereign funds then obviously
that is a constraint on what the private sector operators can
do.
Q139 Chairman:
Before I call Lord Anderson, Sir Roderic, is there anything you
would like to add to what Mr Grant has just been saying?
Sir Roderic Lyne: I think the common neighbourhood
point is very important but this is not confined to the European
Union. I think it is extremely important that we also think of
NATO in this context. One of the most active questions within
the broad East/West dispute over this neighbourhood is whether
or not countries like Georgia and the Ukraine are going to enter
NATO. I do not think you can divorce that from the question of
the EU's relationship with the Russian Federation and the other
post-Soviet States. The Russians certainly look at these two things
as part and parcel of the same problem from their point of view,
which is one of Western encroachment into what they have traditionally
regarded as part of their zone of influence, and indeed in the
case of Ukraine as part of the Russian heartland. Only the other
day Putin was reminding the Russian public that 17 million people
whom he classified as Russians lived in Ukraine. That is about
one-third of the population. I think that figure is broadly accurate.
This is extremely delicate territory and I can see no way in which
we are going to reach an accommodation easily with the Russians
over this because, as history shows, when empires break up—whether
you say Turkey and Armenia or you say the United Kingdom and the
Republic of Ireland or France and Algeria or 50 other examples—it
takes a very, very long time for emotions to subside. We have
got to frame policies here that respect the rights of those countries,
that defend our legitimate interests in them and their rights
very robustly, but which at the same time do not lend themselves
to misrepresentation in Russia in a way that will make the situation
in Europe more dangerous or that will allow new dividing lines
to spring up.
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