The Limits of Rational Choice

16 november 2008

Timofey Bordachev - Director of the Center for Comprehensive European and International Studies at the National Research University–Higher School of Economics, and Director of the Eurasian Program at the Valdai Club Foundation. He holds a Doctorate in Political Science.

Resume: History is really only made by big deals. It is only a “big deal” – energy in exchange for full-scale common institutions – that can make relations between Russia and Europe stable for a long time.

The unification of Russia with the rest of Europe is a condition for the structural stability of Eurasia that has been unheard of since the time of the Reformation and the appearance of Russia in the European political arena.

The establishment of a system of sovereign states in the territory stretching from the Atlantic Ocean to the Volga and beyond to the Pacific Ocean in the 16th-17th centuries laid the groundwork for a succession of political conflicts and wars interlaced with periods of peace.

The last such period began in 1945 and helped create an association which was personified in the European Union. Yet it notably lacks Russia, which is as an important European policy player as Germany and France are.

An attempt to fashion a strategic stability zone from the Atlantic Ocean to Vladivostok was made in the last few years of the Soviet Union and in the first years of the existence of the new Russia. It misfired, due to many reasons, not the least of which was Russia’s inability to act as an independent sovereign state and formulate its own national interests.

The speculations regarding the possibility of Russia uniting with the part of Europe which is now the European Union ended in 1994. At that time, Moscow and the EU signed the Agreement on Partnership and Cooperation, and the European states approved of NATO’s eastward expansion by allowing former members of the Warsaw Pact to join the alliance. Instead of rapid rapprochement, quite feasible in the opinion of such politicians as Francois Mitterrand, Ruud Lubbers, and Mikheil Gorbachev, Russia and Europe decided to live behind dividing lines.

The high conflict potential of this situation has become increasingly obvious as the vestiges of the Iron Curtain erode further, as countries develop economic and cultural ties and as their national interests increasingly clash. It is important that one of the partners (Europe) has had these interests in the state of constant coordination, while the other (Russia) only began to formulate its interests in the first half of the current decade.

As a result, Russia and the EU have been trying to find a magic formula for stable relations for more than 15 years. The necessary elements are the highest meeting of national interests and equal advantages for the partners. Moscow and European countries have come to understand that stable relations will facilitate their development, international competitiveness, and resistance to modern challenges and threats.

The latter has particular urgency in a world that is rapidly changing. Due to objective factors, the role of the Old World in world politics and the economy has been diminishing, as the poles of economic might have shifted toward the Asia-Pacific region (which may similarly affect military-political setups).

The process appears inevitable to many in the United States, India and China, but it will take many years, and possibly decades, of instability. The main sign of the already shaped multipolar world, or, to put it simply, of the global disorder is the continuing growth of global uncertainties. This creates the background for the desire of each participant in the international system to build up its military might.

A rational choice in conditions of global disorder is not openness and orientation toward multi-party regimes, but building strong walls, setting up areas of influence behind them, and making periodic forays into “enemy territory.” All this has become part and parcel of both European and Russian politics in recent years.

POLITICS OF RATIONAL CHOICE

Such behavior, quite natural for any sovereign state, succeeds or fails depending on the availability of additional opportunities. For the 27 EU member-states, these opportunities are provided through the collective “stick and carrot” in the agent of the European Commission. That is why the European Union, though it remains a rather loose alliance, has been increasingly assertive in the international arena – within the scope of affordable instruments, such as making former Soviet republics its economic satellites and limiting the influence and interests of its non-integrating neighbor – Russia.

Consequently, the striving by European “grandees” to achieve mutual understanding with Russia on key economic and strategic issues has had little success so far. Such attempts on the part of Paris or Berlin have encountered a tough response from Moscow to Brussels’s actions, even though these actions are motivated by the current economic and political interests of Germany, France and their EU allies, as the Kosovo example shows.

From a rational point of view, the Russian-European dialogue should be broader than Moscow-Brussels relations. However, it is impossible to circumvent the European Commission in practice: functioning at the pan-European level, it can achieve what even the largest countries – the co-owners of the United Europe – have been unable to accomplish on their own. These are the countries that have a majority stake in Western politics and that are pulling the strings to control the moves of the notorious Brussels bureaucracy.

Calls for peace combined with active “hostilities” are a full-fledged feature of the Russian policy, too, especially in sectors where Russia still has the competitive advantage: power generation, large international security agencies and in the territory of the former Soviet Union. Logically, it would be expedient for Moscow now to exploit these fields by putting competitive pressure on Europe.
The means that make Europe stronger include the use of international organizations and arrangements to secure a bilateral regime with key players. At present, the EU is trying to launch independent (from the United States) relations with China and India. Other partners, such as Ukraine or countries in the southern Mediterranean, are offered free trade zones.

In the zone of direct Russian interests – former Soviet republics – the rational choice dictates that Europe work consistently on expanding its influence. But practical implementation of this goal is limited by Russian interests and opportunities, which entails acute conflicts with Moscow. For its part, Russia has no one to lean on in the former Soviet territory, the United Nations or, as a future possibility, in the World Trade Organization. Therefore, some observers are rightly puzzled by the emphasis that Russian foreign policy puts on the importance of multilateral mechanisms.

However, the logic of rational choice challenges the need for Russia to draw up a new agreement with the European Union. According to the classic principles of foreign policy and international relations, countries whose opportunities and potential are on the rise are not interested in international treaties. Commitments taken within the framework of agreements fix the balance of forces at the moment of signing. As long as Russia grows economically and politically, any treaty with the EU will be disadvantageous. Yet Moscow is unable to transfer to the system of ad hoc relations with the EU – the mutual dependence is too great.

MUTUAL DEPENDENCE AND STRATEGIC LONELINESS

Mutual dependence is the most important element in forming conditions for rational choices in relations between Russia and the European Union. According to the classic definition by Robert Keohane and Joseph Nye, a breakup in such relations leads to unacceptable damage for one or both partners.

The axiom of Russian-European interdependence remains – for the civilized part of the elites – the biggest straw to hold on to in order not to slip into confrontation, but there is also room for negative trends. Mutual dependence is what it is – dependence that puts limits on sovereign rights and opportunities, which a person or a state would seek to get rid of in one way or another.

The main factor to decrease dependence is the availability of an alternative; namely, the ability to attract other players, whose collective action would ensure the promotion of national interests of a certain state. And here Europe and Russia are not faring too well.

Sober-minded Europeans are right in saying that Moscow’s major problem is its strategic loneliness. A lack of real support on the part of formal allies over independence for Abkhazia and South Ossetia in August-September 2008 was yet another indication of a kind of vacuum around Moscow.

Russia has no reliable and constant allies. If one is to believe opinion polls, China and Third World countries have a quite positive opinion of Russia. But this fact by itself is not the reason for creating a union or a system of alliances in which Moscow would play the leading role, or at least would be on par with another leader, as happened in relations between France and Germany in the early 1960s.

Economic and political cooperation in the territory of the former Soviet Union has certain prospects, perhaps, within the framework of the popular idea to boost the Eurasian Economic Community. However, Russia and a number of CIS countries have conflicting interests in energy: Moscow is not ready to set certain regimes on a soft military-financial leash. In addition, it has to overcome the resistance of third countries, regardless of how infinitesimal their presence in Russian backwaters is. So Moscow, by using its CIS influence, can improve its position at talks with really promising partners rather than forge long-term alliances.

A lack of allies also means an exponential increase in competitive pressure in the economic sector and problems with access to technologies. It is not just a matter of “catching up” by purchasing the newest technologies from the West or the East. In the modern world, a country aspiring toward innovative development should not only have the financial opportunities, but also the political resources for setting up technological centers on its territory to act as the integrator of large international projects. As a vital requirement, one needs reliable allies among those who have the power to block the establishment of such centers.

Europe, from the point of view of alliances and allies, is in a far better position.

First, the very fact of the existence of the European Union and NATO vindicates their claims that they have reliable allies.

Second, Europe remains one of the most capacious and stable consumer markets, while the European way of life, with its legal protection of its citizens and welfare policies, is a coveted goal for many, including Russians. Europe’s lifestyle deserves to be put among the priorities in Russian economic and social modernization.

But Europe as a market, or Europe as a place where its citizens do not regard the police as the most dangerous group of civil servants is one thing; and Europe as a reliable political partner and sometimes protector is another. Emerging from the shadow of U.S. protectorship, the Old World has to stick to the tough rules of political and economic competition.

So the question of Europe’s potential would be relevant: How attractive is it politically and militarily beyond the still unabsorbed fragments of the Soviet Union and the Balkans? The Euro-Mediterranean conference on July 13, 2008 in Paris showed that Europe is encountering more and more problems with its own attractiveness.

Of course, all the invitees from Maghreb and Levant arrived in Paris, except for Libya’s Muammar Kaddafi and King Mohammed VI of Morocco. But first, in a surprise move for Europe, they made a proposal to their northern neighbors not to invite Israel and, second, to conduct the dialogue in the EU-Arab League format. To avoid complications, France dramatically reduced the number of EU agencies participating in the event, making the forum an inter-state meeting, not mentioning the fact that the human rights issue, traditional for the EU foreign policy, was taken off the agenda of the Mediterranean Union.

It is unclear what price Europe should (and has to) pay for the luxury of being surrounded by satellite states. As such countries as Georgia, Serbia or Ukraine develop, the EU will have to choose between their actual upkeep – and the cost may depend on the political and financial appetites of local elites – and accession of this “troika” to the European Union, which will wrap up the history of European federalism.

If we look beyond the immediate European perspective, Europe’s political relations have not been smooth not only with China and India (which tend to prefer a realistic and forceful way of thinking and acting), but even with the “visa free” countries of Latin America. Awkward attempts to combine moderate protectionism and stronger borders with an expansion of political influence sometimes result in ironic twists. For example, the lifting of sanctions against Cuba, lobbied by Spain and the European Commission, coincided with a statement by Mercosur leaders, who called a June decision by the EU Council on migration “uncivilized legalized barbarism.”

The U.S. is making Europe face the need to adopt increasingly complex decisions, as well. As the failed hegemon loses its absolute superiority, it is making increasingly sharp moves for the sake of keeping control over key countries and regions. In response, Europe is trying to become more and more prominent in the role of a “soft” but real alternative to the United States in crises in the Middle East and in former Soviet territory.

Meanwhile, we are seeing the further disintegration of the fragments of the phenomenon which idealistic scientists of the disarmament era termed “the international community” – an integral body of advanced states that succeeded during their evolution in overcoming competitive motives of behavior. Some Russian experts believe that Russia should have joined their ranks.

The stabilization role played by the U.S. in European policy is decreasing so noticeably that even the most politically ethical Western capitals can no longer ignore it. Washington has shifted its focus toward East and Southeast Asia. The need to “tame” China may push Washington to the most revolutionary geostrategic initiatives.

The so-called ‘Broader Middle East’ has been an important direction ever since 2001 and a source of a direct threat to the United States. Russia and Europe apparently rank third in terms of significance, if not further down the list. The intellectual resources of the U.S. elite were redistributed accordingly, which is shown by the limited number of enthusiasts involved in the discussion about U.S.-EU relations, not to mention U.S.-Russia relations.

Having stopped being a stabilizing factor in Europe, Washington is beginning (purposefully or otherwise) to act destructively. Such pivotal decisions as the fielding of missile defense facilities in the Czech Republic and Poland could have any motives behind them except for the strengthening of political stability in Europe. The same applies to the persistent promotion of the project to enlarge NATO to include Ukraine. If implemented, it will dismantle not only the European defense identity, but also create a constant hotbed of tensions between Russia and the European Union.

Judging by statements from the U.S. presidential hopefuls, there are no indications that peace in Eurasia will become any more stable in the next few years. Europe does not seem to have the foreign policy and defense opportunities to play a game of its own in this situation. One cannot even see any prerequisites that would lend coherence to this game.

The task of working out an effective European policy, including the EU’s ability to be a responsible partner of Russia, encounters an insurmountable obstacle – the need to look for compromise solutions for 27 participants in the process, with many EU members deliberately resisting a rapprochement with Moscow. The need to maintain a semblance of European solidarity and unity of the alliance, fashioned at one point by Europeans to suit their needs, forces even Paris and Berlin to look for averaged solutions. As French President Nicolas Sarkozy has already felt, the European political milieu today, unlike the times when integration was flourishing in the 1950s or the 1980s, does not contribute to the promotion of revolutionary ideas.

CONDITIONS FOR A BIG DEAL

Meanwhile, history is really only made by big ideas and big deals. It is only a “big deal” – energy in exchange for full-scale common institutions – that can make relations between Russia and Europe stable for a long time. It is only the establishment of a new Community, functioning according to its own laws, addressing problems common to all participants, governed by its own bureaucracy and lobbied by its own lobbyists, that would ensure political and economic rapprochement.

Any other form of relations would leave the main political problem unsolved, namely, a lack of trust and a negative mutual perception. This problem exacerbates the competition between Russia and Europe, contributes to their instrumental use by outside forces and, ultimately, prevents the strengthening of security in the common space.

In light of historical experience, the following conditions are necessary to make such a deal a success:

- The partners must have the ability to make comparable material contributions to the common cause;

- There have to be common transborder challenges for the participants in the transaction; meeting these challenges would be the project’s objective. The awareness of such challenges will determine a rational choice in favor of unification and will shape the political will of the parties;

- There must be public support, above all on the part of economic players. It is only the extended participation of interested non-government players that can help Russia and Europe to remove, or at least smooth out, the essential differences between their political, social and administrative cultures.

Despite the generally accepted explanation for European integration as a gradual process based on regular technical rapprochement, this process was based on a “big deal,” i.e., a decision by the founding nations to place the main levers of governance over major war resources – coal and steel – under the partial control of a supranational body. According to Europe architect Jean Monnet, this body should be in direct contact with enterprises.

Today, oil and gas are the main resources that ensure national security. Russia is rich in oil and gas, and simply by virtue of its geographical position, is the least vulnerable source of resources for major threats to international security. Sovereignty over this natural wealth is worth a lot.

Unlike the six-nation European Coal and Steel Community, where each member state could make an equal contribution, today’s Europe actually has nothing to contribute. With rare exceptions, European Union countries have no oil or gas reserves that could be jointly managed by common Russian-EU institutions. Neither has it military resources that could secure it protection from potential threats from the South and – theoretically – from the East.  But this does not mean that Russia should treat Europe with arrogance. A functional union with it would be very useful.

First, the European Union can contribute to the common cause its mechanism of collective protection for its interests on the global market and the political levers for using it.

Second, the investment and technological possibilities of European companies are still optimal for Russia.

And third, Europe can offer stable economy management systems, including systems for managing energy companies, although these are not considered perfect by liberal economists. All these resources could compensate for Russia’s “losses” from its renunciation of a monopoly and become a major contribution to political and social stability from the Atlantic to Vladivostok. But would possible compensation be enough for each of the partners?

ARTICLE OF BARGAIN

Let us be frank: any compensation would seem inadequate to those – both in Russia and the EU – who hope to get the most as freebies. And the question here is when will the partners realize that in economic relations freeloading just won’t work? And even if it does, the resultant format of relations turns then into a minefield of hidden grievances and political instability.

One should also not forget that the fundamentals of the relationship format that bring the maximum benefits to only one of the partners can be brutally revised when the political regime of the other partner changes. Developments in Latin America and some Middle Eastern countries are convincing proof of that.

In this regard, the disposition toward “zero-sum games,” consistently displayed by Russia and the European Union in the last few years, will not be effective in the long term, although it may seem rational and beneficial from the point of view of the current political struggle.

Staking on building up one’s relative advantages in any case is based on mutual suspicion. Here the problem of perceptions comes into the foreground. The solution of this problem, albeit imperfect, can be found in Europe’s recent history. After all, there are people who remember perfectly well that Western Europe used to be a no less chaotic space for competition than the world beyond the European Union today.  

It is generally believed – and it is difficult to contest this statement – that the problem of confidence is a major obstacle to stable relations between Russia and Europe. Russia and the EU are now in a state of the classical prisoner’s dilemma. According to public opinion polls, a majority of EU citizens fear the development of truly reciprocal economic integration with Russia.

The reason for such a perception is apparently not only in Russia’s current policy and it is definitely not in the empiric knowledge of European elites and citizens. Fears about the political use of foreign investment are not based on the experience of some past crisis. Russia does not have such an experience, either, although, according to public opinion polls, a majority of Russians believe that Europe’s only goal is to seize Russian resources. What is the main reason then?

Such a perception is based on a deep-rooted view of the historical alienness of the partner. This view may be softer or stronger, depending on a country’s national experience of relations. But in each case this perception is based on mutual phobias, which can only be eradicated by jointly addressing problems over decades.

However, it is still an open question whether the parties need to change their perception of each other before they build a “common energy home.” And does this form of unification require the harmonization of values and legislation?

The answer to this question requires an unbiased look at relations between the six founding nations 50 years ago. Despite the cultural closeness of these successors to Charlemagne’s empire, the centuries of wars and confrontation, which followed the breakup of his state, cultivated in Western Europeans a strong feeling of apprehension and mistrust toward each other. Even today, cultural differences between Northern and Southern Europe, as well as between former sovereigns and vassals, have not entirely vanished. The foreign policies of a majority of European countries, including Russia, toward each other are marked by a noticeable tint of arrogance. It was only the tragedy of World War II that shook, to some degree, this arrogance for Western Europeans.

NEW RATIONAL CHOICE

A big deal – a strategic union between Russia and the rest of Europe – is possible only if the parties try to achieve a common goal or find answers to challenges equally important for both partners. The main challenge is the need for a serious revamping of relations between the state and business.

Meeting this challenge is crucial for solving the problems – usually attributed to globalization – that face Europe and Russia today. They include, above all, the competitiveness of goods on the domestic and foreign markets, the legitimacy of the state and its sovereignty, the scale and forms of state interference in the economy for increasing innovation competitiveness, and public and national security.

Independent attempts by Russia and European countries to meet these challenges are already becoming a major obstacle to their rapprochement. The growth of state interference in private sector activities and paternalistic tendencies in Russia, as well as the strengthening of intergovernmental forms of cooperation in the European Union, objectively prevent a search for a common language in the political and technical domains.

For example, apprehensions of the state in Russia and Europe, caused by the need to meet public demand for the regulation of massive foreign investment, have already affected bilateral relations. Even inside Europe, this new field of activity for bureaucrats brings about absurd situations when, for example, a bill on the regulation of investment in Germany has almost blocked the free movement of capital within the EU. The administrative apparatuses were not ready to fulfill their tasks under new conditions. Hence the recent statements by Russian and European policymakers that obviously violate the principles of a free market economy.

In a situation where the world is dangerous in a different way every new day, society tends to support the most risky measures of protection against unfair competition, while the state is torn between liberalization and support for national champions. Foreign partners are viewed either as potential predators or potential prey. Meanwhile, society does not fully realize that its partners face the same challenges and must fulfill tasks that are similar in content, if not in scope.

The rise of sovereignty – a political phenomenon that a decade ago was advocated only by the most desperate antiglobalists – has now become a historical fact. History teaches us that a country’s sovereignty drive weakens after a painful defeat at home or in its foreign policy – as was the case with Western Europe from 1945-1957 or Russia from 1991-2000.

It is already obvious that the consequences of sovereign decisions dictated solely by political considerations can not only delay for an indefinite time rapprochement between Russia and Europe, but also undermine the foundation of European integration. Meanwhile, this integration serves as an example for the whole world of peaceful and mutually advantageous solutions to political and economic problems. Do we really need to wait for more serious consequences?

Therefore, the activities of common Russian-EU institutions, should they be established, must aim at improving mechanisms of state governance over the economy, bring this governance in line with the requirements of the modern world, and ensure the implementation of the state’s main function – namely, the protection of the individual’s rights inside society and the elimination of external threats.

These efforts must be started with the energy sector, which supplies electricity and heat to voters’ homes and whose uninterrupted functioning is vital to the population. Importantly, energy prices and the availability of energy is now the only issue that really interests voters and political quarters in Russia and the EU.

It is not accidental that this problem has been in the focus lately of heated debates within the framework of the political and economic dialogue between the two parties. This is why the main challenge and threat to good-neighborly relations between Russia and Europe must be made their strategic target, which the majority of observers say the parties lack.

CONFIDENCE-BUILDING MEASURES

The scope of challenges faced by the modern world is so great and diverse that both Russia and the EU objectively need support from a special moderator. There is no such moderator at present. Furthermore, there is no international legal instrument that would guarantee mutually accepted rules of the game in the energy sphere. The Energy Charter, once designed for this purpose, can no longer be viewed as a legal foundation of the energy community.

The European Commission, EU main executive body which used to function as “an honest broker,” has lost a significant part of its capabilities to act efficiently in the last years. The crisis faced by the EU in 2005-2007 forced Brussels to simultaneously strengthen its own image and protect the diverse interests of EU member-states.

Despite the aforementioned difficulties, the European Commission performs – more or less successfully – the functions of a moderator at the EU level. And it is very important for Moscow whether EU countries can delegate controlled powers to Brussels to represent their interests in a new joint EU-Russian institution.

In Russia-EU relations, the task of building a common energy market would be addressed more effectively if the bulk of joint efforts were made via an agency that would be as independent as possible from national governments – for example, a Standing Energy Commission. Interaction with Russian and EU companies must be a major aspect of this commission’s work.

There is a factor that can unite public and private interests in building long-term and stable relations between Russia and Europe. This factor is the broadest possible involvement of businesses and agencies representing their interests in a common environment.

The infrastructure for representing private interests, taken separately in Russia and the EU, is already well-developed, although even in Europe it largely influences the national positions of EU members. The representation of interests at the pan-European level plays a somewhat auxiliary role, despite the efforts of business associations and European agencies which view the associations as an alternative source of information and expertise. It will take some time before European lobbyism acquires the quality and effectiveness of national lobbyism. As regards Russian-EU relations, representatives of private and public interests have a very long way to go yet toward each other.

It is strategically important to readjust the system and the philosophy of state regulation of the economy. This task will be much simpler to implement if the dialogue and practical daily interaction between businesses and the state are ensured at the international legislative level. This level must guarantee the rights and obligations of the participants in the public-private dialogue within the framework of a joint Russian-EU project. This dialogue will inevitably change the quality of the public-private partnership and increase mutual understanding at the transborder level, including such major aspects as public opinion and mutual perception.

Naturally, when starting to “gather stones” even on their own continent, Russia and Europe must be sure that they will not be attacked by those who still want to throw stones. Already now, traditional allies (who are new to Russia) are trying to weaken both partners and impair their mutual relations.

One should not expect changes in the positions of the United States and China. The foreign-policy behavior of these players is predictable as they attempt to consolidate their power, irrespective of the predicted consequences for other participants in international relations. It is not likely that Russia and Europe will receive help from them – except, perhaps, as an incentive to improve their own competitiveness. Close coordination between Russia and the EU and their joint energy policy can be a major instrument here.

As we can see, the main obstacles to a breakthrough in Russian-EU relations are, at the same time, opportunities. In a recent conversation with the head of the Russian office of a German political foundation, I proposed exchanging solutions concerning swapping full-scale access for European companies to Russian energy resources for Russia’s full-scale membership in the European Union. My own solution is obvious to those who have read this article. My vis-?-vis thought about it for a long time and then suggested having another beer and discussing the issue in more detail. OK, let’s discuss it. But let’s not take too long.

Last updated 16 november 2008, 17:16

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