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Is Russia Giving Up on America and the EU?

Vladimir Putin at the plenary session of the St Petersburg International Economic Forum
Vladimir Putin at the plenary session of the St Petersburg International Economic Forum

Is Russia giving up on America and the EU? News from St. Petersburg, and the St. Petersburg International Economic Forum (SPIEF) last week echoed European fears. Meanwhile, a potential Rosneft China-India privatization deal cements the notion Mr. Putin may soon give up totally on the westerners. With negative trust issues now in place, it would seem there is now no turning back the clock on a competitive Eurasian remedy. The only question that remains is; "How many European nations will abandon a sinking EU sanctions ship?" 

With the the European Union Council all set to decide on renewed Russia sanctions, SIEP began with Italy and other nations shunning Brussels and Washington, to head to St. Petersburg. The "strategic partnership" that "never was" (referring to the EU-Russia potential) became a motif early on in the forum, as did the dynamic shift to China and India by Mr. Putin. On Friday the panel discussion "Re-Globalization: Tectonic Shifts in the Geo-Economic Landscape" cemented what most economic experts already know, that a Eurasian Partnership is well underway in cometition with American led initiatives. Making the roadmap more clear, Andrey Kostin, President and Chairman of the Management Board of VTB Bank, offered this at the session: 

“We will no longer be able to trust the global system because it is too susceptible to geopolitical risks. We have to create an alternative, and that leads to processes that are the opposite of globalization."

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At the center of the new Eurasian economic alliance are Russia's exports and China/India investments. With energy at the forefront, observers also noted the discussions of Friday's ‘If Not Oil, Then What? Russia’s Place in the New Global Trade Structure’ roundtable debate. At the crux of this discussion, the need for Russia producing more value added products, and alleviating import/export red tape were at the top of the list where future non-energy growth is concerned. Only 16,000 Russian companies currently export products, which obviously indicates a huge potential for growth. Still, Russia's energy might cannot be left out of all equations. An agreement to sell as much as 19.5% of Rosneft to China and India interests is seen as yet another counterbalance to the EU sanctions mess. With BP holding an equal stake in Rosneft from the 2013 deals, Mr. Putin is clearly seeking an offset and other positives. Rosneft shares have been strong this year, even despite critically oil prices and the ruble's woes. The stock has gains almost 50% since January, according to Bloomberg. As of this morning, the stock is up another 3.66% fluctuating above 332.50. 

Finally, just last month Mr. Putin was in Astana, Kazakstan with other EEU leaders at a Supreme Eurasian Economic Council meeting. The key topic of discussion there was furthering ways of integrating/creating a single market structure. Moving forward to this week, it is significant that Russia and Kazakstan have joined now in offering the EU an economic lifeline out from underneath American led economic structures. So, as vehemently as Mr. Putin ramps up Russia's involvement in the EEU, he still seems to hold out some hope of European cooperation. Kazakhstan's President Nursultan Nazarbaev echoed Putin's sentiments: 

"Disintegration and economic isolation don't solve any of the internal problems, that's just self-delusion."

Even though there seemed to be some hope of reconciliation based on European Commission President Jean-Claude Juncker taking with Mr. Putin, no substantial news came of their discussion. In fact, Juncker defended the EU's position according to some reports, which only served to stifle any hopefulness. The Russian president took the opportunity to point out the obvlous: 

“Following the recent meetings with the business representatives from Germany and France, the European business wants and is ready to cooperate with our country. Politicians should listen to business. Politicians should demonstrate how wise, far-seeing and flexible they are.”

The takeaway on SPIEF is that the EEU is going ahead full steam. As for the EU, it also seems clear that some nations will break away from that union if hard headed geo-policy continues. France and German business, the massive negative effect of counter sanctions on some EU nations, and the global economic negatives in the current climate, will surely deman a balancing. The SCO summit in Tashkent coming up June 23-24 will be highlighted by Pakistani and India membership. With most experts predicting Iran joining new Eurasia movement as well, Europeans worried about this polar split are justified. In the end, the simple math of people dependent marketing weighs heavily here. 5 billion people just speak louder than 2 billion.