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Understanding the EU-Russia Partnership for Modernization

CIIS Time: Aug 3, 2011 Writer: Xu Longdi Editor: 姜志达

Xu Longdi

Assistant Research Fellow and Ph. D at CIIS

 

The geopolitical landscape on Eurasia is undergoing new changes. On the one hand, NATO introduced a new strategic concept in November 2010 and made new planning for European security; on the other hand, Russia has recently come up with a number of new proposals on European security in pursuit of strengthening its position in European security. In the meantime, inside the EU and Russia, the main actors on the European continent, fresh changes emerge: the EU’s Lisbon Treaty has come into force, and Russia puts forward the objectives of transforming its development model, reducing its dependence upon oil and natural gas, and modernizing the country.

The EU pillar is gaining an increasingly prominent position in West-Russia relations. The EU is Russia’s largest trading part- ner, with oil and natural gas taking a great part in Russia’s exports to Europe. Russia is the EU’s third largest trading partner. It was the EU’s second largest export market in 2008. Moreover, as an important strategic partner, Russia is also the only country holding summit meetings twice every year with the EU. At the 25th EU-Russia Summit in May 2010, the two sides officially launched the Partnership for Modernization programinjecting new impetus into the EU-Russia relations and provides a window of opportunity for deepening their bilateral ties.

 

I. EU-Russia Partnership for Modernization: Its Birth and Content

 

For today’s Russia, modernization is of urgent and strategic nece- ssity rather than an abstract concept. In other words, Russia has to change its export-oriented development model, which relies on such recourses as oil and natural gas, in order to modernize its economy. In the meanwhile, the EU intends to play a role in Russia’s modernization cause and develop a sound relationship with it. It is not accidental for the launching of the Partnership for Modernization, for whose emergence and existence there are foundations in both Russia and the EU.

 Birth of the Partnership for Modernization

 As early as in 2000, then Russian President Vladimir Putin proposed the idea of modernization. However, Russia faced other more pressing challenges at the time, which made the moderni- zation program run aground. After coming to power, President Dmitry Medvedev put forth similar ideas and viewed it a necessity for Russia to realize modernization. Compared with 10 years ago, the situation has greatly improved in Russia and there is a broad consensus that the country cannot remain dependent upon oil and gas for its future development.

In recent years, the oil- and gas-based economy boomed the Russian economy for a time, and its national strength increased. However, the global financial and economic crisis that began in 2008 hit Russia severely: It suffered not only from a drying up of much-needed foreign capital but also from the near collapse of oil prices. In 2009, Russia’s GDP fell by 8% while foreign direct investment decreased near to a half. Moreover, its budget surplus turned into a gaping deficit and its sovereign reserve funds shrank dramatically. Many economists inside and outside Russia hold that Russia must change its mode of development, reform its economic structure, promote economic diversification, and re- duce its reliance upon oil, gas, and other basic commodities.

Russian President Dmitry Medvedev launched several rounds of sharp criticism about the situation of his country in 2009, which includes the over-dependence on oil and gas exports, the ubiquitous corruption, the stifling bureaucracy, the oligarchs making a quick buck without building sustainable business. President Medvedev maintained that the solution was modern- ization, liberalization, the rule of law and more personal freedom. Since September 2009, Mr. Medvedev has delivered several important speeches. In particular, in his article Go Russia! issued on September 9, 2009, he called on the Russian people to be dedicated to innovation and severely criticized the age-old malpractices of energy-dependent economy, bureaucratic cor- rupttion, and paternalism, sounding the political horn of achi- eving comprehensive modernization.

On January 1, 2010, Medvedev defined the basic direction for Russia’s anti-crisis measures. As Chinese scholar Cheng Wei said, On the whole, Russia now raises the question of enforcing a brand-new modernization. Around 800 businessmen, politi- cians, experts and analysts attended the annual Krasnoyarsk Economic Forum on February 11 to 12, 2010 in Tomsk, which was called by President Medvedev to address the issue of modernization. At the Forum, Medvedev proposed to establish a research and development center and suggested that the business circles and government engage in close cooperation in pursuing modernization. Moreover, the secret report by the Russian Foreign Ministry in February 2010 and Medvedev’s speeches at Stanford University during his visit to the United States in June 2010 and at the meeting with Russian ambassadors and permanent representatives in international organizations in July 2010 demonstrate together Russia’s resolve for modernization.

In the meanwhile, the EU officials have also been talking about the possibilities of an EU-Russia partnership for modernization since 2008. As Katinka Barysch from the Center for European Reform writes, though they have not gone into detail, the basic idea seems to be that the EU would assist Russia in its reform efforts by providing capital, technology, and training. The implicit assumption is that a more modern Russia would be more Western-oriented, open, and easier to deal with. Correspondingly, during the 24th EU-Russia summit held in Stockholm in Nov- ember 2009, European Commission President Barroso and Russian President Medvedev jointly proposed the vision of establishing an EU-Russia modernization partnership to bring new life into the stalled and intense EU-Russia relations.

The 25th EU-Russia Summit, held at Rostov-on-Don in Russia on May 31 — June 1, 2010, issued the Joint Statement on the Partnership for Modernization, through which the two sides officially launched the Partnership for Modernization. At the Summit, the European Commission President Jose Manuel Barroso pointed out that “we conceived this common vision with President Medvedev at our last Summit in Stockholm. Today, we give it concrete priorities….The Strategic Partnership between Russia and the EU has again proven its value. Today, we have taken our relationship an important step further: We have launched our Partnership for Modernization.” “This summit has been held in a defining time both for the EU and Russia,” said Herman Van Rompuy, President of the European Council.  “President Medvedev’s ambition to base Russia’s modernization in the 21st century on democratic values, by building a modern diversified and dynamic economy, and by encouraging the active involvement of civil society, is a significant development for Russia. We want to be Russia’s partner in modernization.” Mr. Van Rompuy concluded, “Russia is a real strategic partner to the EU. With you we have a most intensive and dynamic dialogue. With Russia we do not need a ‘reset’. We want a ‘fast forward.’”

Content of the Partnership for Modernization

At the beginning of the EU-Russia Joint Statement, it states that the launching of the Partnership for Modernization conforms to the mutual interests of their citizens, because in a world in which peoples and economies are ever more closely connected and interdependent, modernizing our economies and societies becomes ever more important and necessary. Moreover, the Joint Statement stresses, “The EU and Russia have a common interest in enhancing bilateral trade and investment oppor- tunities and in facilitating and liberalizing trade in the global economy as well as strengthening and developing com- petition, including through Russia’s early WTO accession.

The Joint Statement also defines the nature of the Partnership for Modernization, and endows it with a categorized position in the overall EU-Russia relations, that is, it will serve as a flexible framework for promoting reform, enhancing growth and raising competitiveness, and will build on results achieved so far in the context of the four European Union-Russia Common Spaces, complementing partnerships between European Union Member States and the Russian Federation.

Priority areas of the Partnership for Modernization listed in the Joint Statement include: 1) expanding opportunities for invest- ment in key sectors driving growth and innovation, enhancing and deepening bilateral trade and economic relations, and promoting small and medium sized enterprises; 2) promoting alignment of technical regulations and standards, as well as a high level of enforcement of intellectual property rights; 3) improving transport; 4) promoting a sustainable low-carbon economy and energy efficiency, as well as international nego- tiations on fighting climate change; 5) enhancing co-operation in innovation, research and development, and space; 6) ensuring balanced development by addressing the regional and social consequences of economic restructuring; 7) ensuring the effective functioning of the judiciary and strengthening the fight against corruption; 8) promoting people-to-people links; and 9) enhan- cing dialogue with civil society to foster participation of indivi- duals and business. The Joint Statement does not stop here and states that this list of areas for cooperation is not exhaustive, other areas can be added as appropriate, and the EU and Russia will encourage implementation of specific projects within the framework of the Partnership for Modernization.

Finally, the Joint Statement also specifies the implementation of the Partnership for Modernization and instructs the coordinators of both sides to develop a working plan. The above- mentioned content in the Partnership for Modernization are in line with the existent EU-Russia cooperation and in many ways a deepening of the current four common spaces, i.e., the common economic space, the common space of freedom, security and justice, the common space of external security, and the common space of research and education. It could be concluded that the Partnership for Modernization is not only a continuation of the existing framework for EU-Russia cooperation, but also indicates a new direction for the development of future EU-Russia relations.

Beyond the points contained in the Joint Statement, the EU and Russia did not reach agreements over other issues. For instance, the EU asked to gain access to Russia’s oil and natural gas sectors, but it got no response from Russia. Though Russia repeatedly demonstrates that it needs foreign investment, it demands foreign investors get permits for investment within 42 strategic sectors. Moreover, it needs the review of the Russian government when the share of an investment in oil and natural gas is over 10%. In the meantime, Russia asked for visa-free travel between the two sides as soon as possible, but did not get response from the EU. With regard to this, Sergei Aleksashenko from the Carnegie Endowment comments, “The Rostov summit proved the two sides do not share a common agenda on economic cooperation, nor are they willing to do what it would take to bring about a substantive change in the situation. In brief, while the Partnership for Modernization was launched, it has some defects.

 

II. EU-Russia Partnership for Modernization: Its Dynamics and Characteristics

 

1. Dynamics of the Partnership for Modernization

Objectively speaking, the proposal and launching of the EU-Russia Partnership for Modernization are not only in line with the interests of both sides, but also conform to the changes in the current international situation. The Partnership for Moderniza- tion stems from the following reasons or strategic considerations.

First, both the EU and Russia are facing a brand-new situation. When the EU and Russia put forward the idea of Partnership for Modernization at their Stockholm Summit in November 2009, the Lisbon Treaty had not yet entered into force. However, when it was officially launched at the their Rostov Summit, the Lisbon Treaty had come into force and the new EU institutional frame- work has also run into operation in a gradual manner, with both Van Rompuy, the permanent President of the European Council, and Catherine Ashton, the High Representative of the European Union for Foreign Affairs and Security Policy, being products of the Lisbon Treaty. To some extent, the production and operation of the new EU institutional framework has injected new ideas and vigor into the external relations of the EU. For instance, the 25th Summit which launched the EU-Russia Partnership for Modernization was headed by Van Rompuy.

Russia is also facing a new situation. As noted above, the modernization program is becoming an important agenda in Russia’s political life. Though its implementation might encoun- ter numerous constraints, the modernization strategy proposed by President Medvedev reflects the new thinking of the Russian leadership in the context of dramatic international changes. At the 25th EU-Russia Summit, Van Rompuy pointed out that Russia is also at the crossroads. Your modernization initiative, your choice to base Russia’s modernization in the 21st century on democratic values and building a modern economy implies a significant development and an opportunity for Russia itself and for renewed momentum to many areas of our relationship.

Second, the EU and Russia’s interests in economic cooperation are in need of continuation and expansion. The content of the Joint Statement reveal that the EU-Russia Partnership for Modernization focuses on economic and development coopera- tion. As a matter of fact, the EU and Russia had signed the Partnership and Cooperation Agreement (PCA) as early as in June 1994, which entered into force on December 1, 1997, provided an institutional framework for the development of EU-Russia relations, and became the legal basis for their bilateral trade and investment relations. At the St. Petersburg Summit in May 2003, the EU and Russia agreed to reinforce their coopera- tion with a view to create four common spaces within the framework of PCA, which constitutes the focus of the current EU-Russian cooperation. Specifically, the Common Economic Space aimed at increasing opportunities for economic operators and building a more open and integrated market between the EU and Russia. At their Moscow Summit on May 10, 2005, the EU and Russia adopted the Road Map on the Common Economic Space and agreed to develop relevant policy instruments so as to put the four common spaces into practice. The Road Map specified the objectives and actions needed, and also set up a set of dialogue mechanisms on trade-related issues.

At the Khanty-Mansyisk Summit in June 2008, the EU and Russia started negotiations on a new agreement with the aim to update and replace PCA and provide for a new contractual framework for EU-Russia relations in the years to come. Nine rounds of relevant negotiations were conducted from July 2008 to May 2010. The new agreement will provide a comprehensive framework for EU-Russia relations and cover provisions with substantive significance and legally binding force in all areas including political dialogue, economic cooperation, research, education and culture, as well as trade, investment and energy. In fact, the new agreement will provide both a comprehensive framework for EU-Russia bilateral relations, and stable, predict- table and balanced rules for their bilateral trade and investment relations.

Both the EU and Russia suffered from heavy losses as a result of the current international financial and economic crisis. Despite their differences over many issues, both sides recognized the need to continue and expand their common interests in economic cooperation. At the 25th EU-Russia Summit, Jose Manuel Barroso pointed out that looking at geopolitical and geoeco- nomics of the 21st century, it seems crystal clear that the European Union and Russia must be side by side, in a very close partnership. To be honest, the Partnership for Modernization will bring economic benefits to both sides.

Third, the perennial issues in the EU-Russia relations are in need of new approaches. In December 2003, the EU issued its first European Security Strategy (ESS), which highlighted that we should continue to work for closer relations with Russia, [which is] a major factor in our security and prosperity. Respect for common values will reinforce progress towards a strategic partnership. As it is stated in A Strategy for EU Foreign Policy published by the EU Institute for Security Studies in June 2010 that the EU-Russia strategic partnership would help to foster peace, stability and prosperity in Europe. During the past few years, the real development of the EU-Russia relations did not bring the two sides closer to a strategic partnership. On the contrary, along with the start of negotiations on the new EU-Russia agreement, the outbreak of the Russian-Georgian war in August 2008, and the occurrence of gas crisis between Russia and Ukraine at the beginning of 2009, various problems have emerged between the EU and Russia, which severely strained their relationship and damaged their mutual trust. It was re- emphasized in the Report on the Implementation of the Euro- pean Security Strategy of December 2008 that our relations with Russia have deteriorated over the conflict in Georgia. The EU expects Russia to honor its commitments in a way that will restore the necessary confidence. In addition, in recent years, the West is levying more and more criticisms over Russia’s political reform process, particularly over the authoritarianism in Russia’s politics.

Even so, the EU is still hoping to find a mechanism to create enough trust, interdependence and common ground with Russia so that the two sides could engage in mutually beneficial cooperation across all areas. Talks reappeared in the European Union about the plans for a modernization partnership. As a matter of fact, Frank-Walter Steinmeier, German former foreign minister, used the term frequently as early as in 2007-08 and stated that Germany would offer help for Russian reforms in such areas as healthcare, science and public administration. Moreover, many Germany’s industrialists welcomed the idea as they have considerable stakes in the Russian economy. Mr. Steinmeier’s visit to Russia in May 2008 intended to focus on cooperation with Russia in its modernization endeavor, during which he also listed possible areas for cooperation within the framework of Germany- Russia Partnership for Modernization. In addition, France would never be left far behind when it comes to developing bilateral relations with Russia, and it launched its own modernization partnership with Russia in November 2009, according to which the two sides reached agreements on cooperation in energy and automobile industries. Russian Prime Minister Vladimir Putin viewed it a breakthrough at the 14th session of the French- Russian commission for bilateral cooperation on November 27, 2009. In brief, the Partnership for Modernization offers a new approach to the perennial problems between the EU and Russia.

2. Features of the Partnership for Modernization

The EU-Russia Partnership for Modernization has the following characteristics: Firstly, it is launched in a short period of time. It takes only a little more than half a year from its being proposed to its formal launching, which indicates that the EU and Russia have much consensus in this respect and that it is in line with both sides’ interests to enhance mutual relationship.

Secondly, its content for cooperation is pragmatic-oriented. The Partnership for Modernization covers mainly EU-Russia coopera- tion in economic areas, whose content is rather pragmatic. It not only continues and supplements but also deepens their coopera- tion in the framework of PCA and the four Common Spaces. Pragmatism is often used to describe the spirit of the 25th EU-Russia Summit.

Thirdly, values assume merely a secondary position. The EU has always attached importance to exporting its values in its foreign relations. As a result, values diplomacy constitutes an important feature of the so-called European approach to foreign affairs. However, despite such values as democracy and the rule of law are mentioned in the Joint Statement on the Partnership for Modernization, they occupy merely a secondary rather than prominent position, thus reducing much unnecessary trouble for their practical cooperation.

 

III. EU-Russia Partnership for Modernization: Its Cons- traints

 

The Partnership for Modernization is a new progress in the EU-Russia relations. It conforms to the long-term interests of both sides, and lays a foundation for the future development of their relations. Despite of its rapid launchingit will face many difficulties and constraints in its implementation. Just as Mr. Alexander Voloshin, Norilsk Nickel’s chairman, said at a REP Roundtable discussion at the Chatham House on March 5, 2010 ,“The discussion about modernization which is taking place in the media and expert circles is very positive. However, there has so far been a gap between rhetoric and action. It is much easier to speak about these issues than act on them.

1. The EU and Russia have different perceptions on modernization.

Although both the EU and Russia are talking about moderni- zation, and they have also officially launched the Partnership for Modernization, there are some differences in their understanding on the concept of modernization as well as on the path to modernization. It is difficult for their ideational differences to disappear within a short time, which would exert unfavorable impact upon the future development of their Partnership for Modernization.

Concept of modernization

Cheng Wei, a Chinese expert on Russian studies, pointed out,   Russia is now discussing what the new modernization means, but has not yet come to a conclusion. Some Russian scholars define it as ‘a de-Stalinized modernization’— a modernization different from the traditional one. But, as for how new it is, there are still disagreements. Vladislav Inozemtsev maintained in What Does Russia Think, a report published by European Council of Foreign Relations in September 2009, that there is little understanding of what modernization actually requires in Russia, where modernization is often confused with developing a high-tech knowledge economy rather than improving the manu- facturing industry. He also pointed out that even President Medvedev believes that modernization would come from aero- space projects, nuclear power plants and super-computers, but such projects are unfeasible without a developed industrial complex and an educated workforce to staff these high-tech industries. Andrew Wood, former British ambassador to Russia, also pointed out that 70% of the participants at the above- mentioned Krasnoyarsk Economic Forum said they did not know what the authorities meant by modernization, while 50% said they were not prepared to sacrifice themselves for moderni- zation’s sake. Dmitri Trenin of the Carnegie Moscow Centre simply says that modernization for some Russian officials means Russia using its resources to buy assets in Europe, and Europe supplying Russia with technology.

Europeans’ perceptions of modernization reflect more of their own values. For example, Jose Manuel Barroso said at the press conference of the 25th EU-Russia summit that truly modern economies are those that are open and shape the global rules of the game, not the ones that practice protectionism. Former German Foreign Minister Frank-Walter Steinmeier held that Russia’s tasks of modernization would include renewing infra- structure, investment, and creation of a just society. The EU also hopes that modernization could connect its values and norms with that of Russia. However, Vladimir Chizhov, Russia’s am- bassador to the EU, wonders what European values really are. The answer he offers is respect for human dignity in a multi- confessional, multicultural society. He asserts that Russia has operated such a society for 1,000 years and that Russia might have things to learn from the EU, but he rejects any idea that the EU equals Europe.

Path to modernization

In recent years, Russian government has played a leading role in the process of its economic development, the pace of its liberal reforms has slowed down, and the authoritarian trend in its domestic politics has strengthened, all of which incurred re- peated criticisms from the West. Modernization is a strategic goal for national development of the Russian Federation, in which the Russian government would no doubt play a big role. As far as the issue of the path to modernization is concerned, there would inevitably be differences between Russia and the West.

Some Western scholars point out that Russia’s concept of modernization is state-led and focuses on certain programs. For instance, it would fund the establishment of an institute of nanotechnology, its state-owned banks would provide loans to certain areas in a selective manner, and it has built a brand-new innovation city outside Moscow. In fact, these constitute the cornerstone of the innovative economy put forth by President Medvedev. However, the West maintains that this approach is ineffective, because in today’s changing global economy, an innovative economy needs open market, venture capital, free- thinking entrepreneurs, courts dealing with rapid bankruptcy, and firm protection of intellectual property rights.

As is pointed out by Anatoly Chubais, CEO of Rosnano, that 70% of the investment in research and development in Russia is provided by the state while private sectors’ interest in research and development is low. Philip Hanson holds that in some cases a top-down approach can have worked (e.g. the Soviet era) in specific scientific areas (e.g. the development of nuclear tech- nology or ICBMs). As a matter of fact, the United States adopted a similar state-led strategy in these areas. However, the third wave of military development, including that of IT and smart weapons technology, was not the product of a top-down government-led approach, but a spin-off from civilian research. It will have great difficulty in achieving modernization if the Russian government wants to rely on a top-down state-led approach to development. During his visit to Russia in May 2008, Mr. Steinmeier also stressed that modernization could not be borne by the state alone and that Russia needs a vibrant civil society and entrepre- neurship.

There are perceptional differences on the concept of modernization not only between the EU and Russia but also within Russia per se. In particular, the EU and Russia’s differ- ences on the path to modernization are even sharper, with the West emphasizing more the role of market and private sector while Russia attaching greater importance to the positive role of the state in its economic development. Indeed, this is related to a deeper issue of development model to which there is probably no ready-made answer. The current international financial and economic crisis makes the Western development model be questioned and its attractiveness be weakened. Thus, it is more difficult for the EU to impose its development model on Russia. The EU Institute for Security Studies holds in its report A Strategy for EU Foreign Policy that the EU should actively pursue the Partnership for Modernization. Disagreements over the concept of modernization should be addressed in an open dialogue aiming at a conceptual rapprochement in the medium and long term.

2. EU-Russia Partnership for Modernization is low in level.

The EU-Russia Joint Statement on the Partnership for Modernization points out that the EU and Russia are long- standing strategic partners in a changing multi-polar world and are committed to working together to address common challenges with a balanced and result-oriented approach, based on democracy and the rule of law, both at the national and international level. The new EU-Russia Agreement, which is currently under negotiation, will also provide the basis for achieving these objectives. Under these circumstances, the Partnership for Modernization will serve as a flexible framework for promoting reform, enhancing growth and raising competi- tiveness, and will build on results achieved so far in the context of the four EU-Russia Common Spaces, complementing partner- ships between EU member states and the Russian Federation. The sectoral dialogues will be a key implementation instrument for the Partnership for Modernization.

Thus, it could be seen that the Partnerships for Modernization is a program for implementing the EU-Russia common economic space and for realizing the pragmatic cooperation in economy and trade between the two sides within the existing framework of PCA. Strategically, it is a program of third order. Put it concretely, the PCA is still the first order and the common economic space is the second order, while the Partnership for Modernization falls into the third order. In short, the Partnership for Modernization aims at promoting EU-Russia cooperation under the framework of four Common Spaces, so its status or level seems to be low and it might have merely limited role in promoting the overall level and quality of their bilateral relationship. In this regard, its low status may be unfavorable to the implementation of Russia’s modernization program as well as the development of the EU- Russia Partnership for Modernization per se.

3. EU-Russia divergence in the field of security would exert negative impacts upon their Partnership for Modernization.

Besides their economic relations, another important pillar of the EU-Russia relations is their security relations. If the econo- mic and trade relations are viewed as the basis of the EU-Russia relations, their security relations then constitute the core. As a result of its weakness in the earlier years after the end of the Cold War, Russia had to restrain its anger over several rounds of NATO and EU expansion, but its positions on security issues have become tougher along with its development in recent years.

NATO embraced a new Strategic Concept in November 2010, making new arrangements for the future of NATO and the European security. In the meanwhile, Russia has also put forth a series of proposals on rebuilding the Euro-Atlantic security architecture after President Medvedev took office. Of course, Russia has some practical considerations in its proposals on building new security architecture, as Fyodor Lukyanov said in What Does Russia Think. At the end of presidency of Putin, the level of mutual trust between Russia and key Western countries was very low, while the potential of such organizations as the NATO-Russia Council established during the 1990s had also exhausted. So, the absence of an effective framework for dialogue hindered the implementation of the ideas that could have led to some strategic breakthroughs between the two sides. For example, Putin proposed to exchange strategic assets, especially in the energy field, between Russia and the EU. But, such revolutionary visions resulted in estrangement rather than mitigation. In brief, the lack of military-political security frame- work makes more economic interactions impossible. While Russia’s proposals have not gained support among most of the EU countries, the two sides could not shun away from the security issues. If the EU and Russia could not properly handle their security relations, their economic and trade relations will also be greatly constrained.

Inadequate political and strategic mutual trust lies at the heart of the EU-Russia security relations, while the Georgian War and the gas crises in Ukraine and Belarus make it even worse. As the EU and Russia’s security concerns touch upon their vital interests, their disagreements in this regard would impede the development of the Partnership for Modernization, bring it even to stagnation in some cases, and have the danger of making the partnership meaningless. If the two sides fail to reach basic political and strategic mutual trust, those conflicts, whether left over from the past or newly emerging, would exert their effects upon the EU-Russia relations as well as the implementation and development of the Partnership for Modernization.

4. Russia’s domestic factors matter.

Russia’s domestic political and economic development is not only the fundamental goal of its modernization program, but also the focus of the EU-Russia Partnership for Modernization. Russia enjoys rich natural and human resources which lays a foundation for its long-term development. However, Russia faces a variety of domestic problems which set obstacles to its modernization plans and the EU-Russia Partnership for Moderni- zation and make many people even be skeptical of its modern- ization program.

First, Russia’s public organizations do not perform well. In the article Why Russia is not South Korea in 2010, Russian economists Sergei Guriev and Ekaterina Zhuravskaya compares the quality of Russia’s present national institutions and legal system with that of South Korea, and views that they are not on the same level at all, which means that Russia’s chances of catching up with the most developed countries remain slim. Correspondingly, Sergei Karaganov holds that while the rhetoric about innovative development is encouraging, demodernization in the Russian economy will continue and rampant corruption will make economic modernization an illusionary objective. It can be said that consolidating the political base for national development is the utmost important task for Russia’s modern- ization program.

Second, Russia relies heavily on natural resources exports. Ricardo Hausmann’s theory of product space demonstrates that economic progress stems from product up-gradation. Specifically, the more closely related with the product lines, the easier it is for countries to make progress. However, Russia’s products in the hydrocarbon sector are still a long way from those of a high-tech and innovative economy. So, Russia should first of all strive to improve its position on the value chain by making use of imported technology and knowledge, because the basic requirement for realizing its modernization objectives is to change its economic development model.

Third, the basis and support of Russia’s scientific research and education are inadequate. Recently, a group of senior Russian scientists asserted in an open letter that Russia’s scientific and academic conditions are disastrous. They pointed out that Russia has only four out of the world’s top 500 universities, while China and India have 10 and 11 respectively. In the field of patent application, Russia’s share of the world total is 0.14%, while that of India is 0.48%, and China 0.90%. Technological innovation and talents are vital for a new round of competition in deve- lopment. If Russia could not take a leading role or have unique advantages in technological innovation and personnel training, it would have to face the inevitable result of being left behind in the upcoming competition.

Fourth, relations between state and society in Russia are imbalanced. The implications of modernization for Russia have gone beyond the purely economic area and touch upon the state health, i.e., how to build a healthy modern (ized) state in Russia. However, the relations between state and society in Russia still need to be clarified, and various problems and weaknesses be overcome. In short, just as Andrew Wood, former British am- bassador to Russia, has stressed that From the longer-term prospective, if Russia did not take fundamental change, the pro- spects of extricating itself from the development mode of relying heavily on resources and the backward development situation were slim.

 

IV. Partnership for Modernization: Its Effects

 

Given the above-mentioned difficulties, there are differences over the prospects of the EU-Russia Partnership for Modernization. In particular, the Europeans seem not to be optimistic about it. For example, some people think the Partnership for Modernization can not succeed as the EU’s efforts in the past to persuade Russia to carry out reforms exerted little or no influence on Russia. In my opinion, the Partnership for Modernization will have manifold impacts on future EU-Russia relations.

In the context of great changes in the current world situation, the birth of the Partnership for Modernization has its own inherent logic: it reflects the wishes and interests of both the EU and Russia, and will have a positive impact upon their future relations. On the one hand, the international financial and economic crisis has a severe influence on the EU, whose eco- nomic recovery and development in the future is inseparable from a good relationship with Russia. Although the two sides have disagreements on such issues as oil and natural gas and the EU is also working to achieve the diversification of its energy supplies, the EU still needs to strengthen cooperation with Russia in order to accomplish its Europe 2020 goals.

On the other hand, after a period of development and explora- tion, Russia gradually realizes that energy exports alone are insufficient to support its sustainable development, and that it needs to advance the quality of its economic development and improve its economic structure. Although the EU is severely hit by the financial crisis, its strength remains strong and it has the capital and technology that Russia needs in the modernization program. For Russia, to have a sound relationship with the EU is conducive not only to its economic development but also to resolving the security problems between them.

As the EU and Russia still do not have adequate political and strategic mutual trust, the Partnership for Modernization offers them a chance of cooperation by starting from the economic field. Their concrete economic cooperation programs as well as their mutual contacts and communications could reduce their suspi- cion against each other, enhance mutual trust, and promote the development of a comprehensive relationship. From the EU’s point of view, it is also consistent with its so-called European approach to foreign policy. The EU Institute for Security Studies in its report A Strategy for EU Foreign Policy holds that coopera- tion on modernization should be a third pillar of the Union’s policy towards Russia. If the two sides view their Partnership for Modernization from a strategic perspective and take concrete and practical measures, it will be conducive to improving their mutual trust and building future pan-European security architecture.

 

                                    ( Source: China International Studies,March/April 2011 )