Russia’s economic & political clout

Russia’s economic & political clout July 31, 2014

Anne Applebaum points out that Russia has a smaller population than Nigeria or Pakistan, with an economy about the size of Italy’s.  But it has a lot of economic and political clout–possibly enough to thwart the recently-imposed sanctions for what Vladimir Putin is doing to the Ukraine and other of his neighbors–thanks to an intentional strategy of investing in politically-connected corporations.

From Anne Applebaum, Russia’s message to the E.U.: Money talks – The Washington Post:

Russia’s population of 142 million people is smaller than that of Nigeria or Pakistan, about the same as Britain and Germany combined, and its economy is about the same as Italy’s. The European Union, which contains 500 million people, sends only 7 percent of its exports to Russia. Though it sounds surprising, Germany now trades more with Poland than it does with ­Russia.

Nevertheless, Russia has political influence in Europe because of the nature of Moscow’s European business counterparts and partners: very large companies, usually connected to oil and gas, that make very large donations to political parties. Even taken altogether, 100,000 German traders and manufacturers doing business in Poland do not have the same clout as the chairman of E.ON Ruhrgas, which has deep Russian investments and investors. All of Italy’s wine and cheese exporters combined do not have the same voice in Italian politics as the chief executive of Eni, the Italian state gas company that is Russia’s biggest wholesale gas client. For that matter, the wishes of the saddened, angry Dutch victims of the Malaysia Airlines plane crash may not, in the end, matter as much to the Dutch government as the views of Royal Dutch Shell, which has major investments in Russia, although I hope this doesn’t prove to be true.

As they began to do business in Europe in the 1990s, the Russians learned very quickly about the importance of politically connected companies. As a result, they have begun to acquire shares in more of them. Rosneft, the state-owned Russian oil company — now the target of U.S. sanctions — recently bought 13 percent of the shares of Pirelli, a huge Italian tire company. The president of Rosneft, who would be refused a visa to the United States, is on Pirelli’s board. Last year, Russian President Vladimir Putin himself came to Italy to announce the creation of a special, billion-euro Russo-Italian investment fund. The result? Italy, not France, Britain or Germany, has most assiduously blocked sanctions on Russia, and Italy is Europe’s biggest supporter of Russian “interests” in Ukraine.

 

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