Publication: Eurasia Daily Monitor Volume: 2 Issue: 148

Russian foreign policy under Vladimir Putin’s presidency has been generally undetermined and often opportunistic with only one constant: strategic partnership with Germany. This country definitely occupies the central place in Putin’s worldview: those several years he spent in the KGB’s Dresden office in the mid-1980s provided formative experience for the young officer. But that “dream job” ended in disaster: the unforeseen uprising of the “disciplined” East Germans culminated in the breach of the Berlin Wall. In his nightmares, Putin still probably hears that powerful voice: “Wir sind ein volk!” (We are one people) and his fears of “color” revolutions are obviously rooted in the helplessness before those angry crowds. He hoped to exorcise that ghost by embracing Chancellor Gerhard Schroeder with all the warmth of a judo master, but now these personal efforts are close to outliving their usefulness.

Putin inherited well-developed ties: Boris Yeltsin and Helmut Kohl were good friends and still enjoy each other’s company, spending time together this summer on the shores of Lake Baikal (Newsru.com, July 28). The second Russian president, however, has managed to upgrade these ties using every bit of his special training, from fluency in German to the art of winning confidence. Schroeder has become his closest ally and indeed the major asset for presidential foreign policy. Germany has been the main driving force behind the EU efforts at engaging Russia, structured according to the new agreement signed in Moscow in May. In contrast, Berlin was rather reluctant to support the “Orange Revolution” in Kyiv last November and now gives no encouragement to Ukraine in its aspirations to join the EU. Schroeder has refused to see any signs that democratic institutions were under threat in Russia and warned his Western counterparts against offending Putin with excessive criticism. For that matter, when Poland and Lithuania expressed their disappointment at not being invited to the ceremonies marking the 750th anniversary of Koenigsberg/Kaliningrad — the Russian exclave sandwiched between their territories — Schroeder calmly confirmed that it was just fine with him (Kommersant, Le Figaro, July 4).

Following this “see-no-evil” line, Schroeder clearly moves against German public opinion, which has grown increasingly critical of Putin’s behavior in high-profile cases from senseless brutality in Chechnya to petty vindictiveness in persecuting businessman Mikhail Khodorkovsky. Seeking to silence pesky critics, the Chancellor often emphasizes the tangible benefits that his friendship with Putin secures for Germany, but the opposition now argues that the only real benefit was Moscow’s support in confronting the United States at the start of the Iraq war, a stance that helped Schroeder to win the elections in 2002 against heavy odds. The Chancellor counters by pointing to the colossal and stable export of Russian oil and natural gas to Germany, but it is rather hard to prove that the top-level friendship has in any way helped to secure these deliveries. In fact, Russia has been putting considerable political effort into expanding its share of every possible European energy market, from Turkey to Italy, so if anybody has benefited from the personal involvement of the two leaders it is probably Gazprom rather than Germany.

There are, however, other rather questionable and mostly hidden benefits that time and again cause sensationalist revelations in the German media. The latest scandal involves Kommerzbank, which is accused of laundering money and fronting the illegal operations of Telekominvest, a Russian company formed back in 1994 in St. Petersburg (Financial Times, July 26; Die Welt, July 27). Leonid Reiman, the founder of the company, is currently Russian Minister for Information Technologies and Communications, and the official who supervised its deals with foreign partners was Vladimir Putin, then deputy mayor of St. Petersburg. The revelations, quite possibly linked to Mikhail Fridman, the owner of Alfa-Group, which is involved in a protracted conflict with Telekominvest, have caused several resignations in Kommerzbank but, most probably, would have no impact whatsoever on Reiman’s position since he maintains close ties with Putin (Vedomosti, July 28).

Following how this little money connects big names may be an exciting exercise, but it could give only a hint about the movement of big German money to Russia. The dismemberment of Yukos and the appropriation of its assets by Rosneft was a very messy affair until this state-owned company received a $7.3 billion-Western credit (Polit.ru, July 28). Gazprom is said to arrange a $12 billion credit for purchasing Sibneft, so that the total accumulated external debt of Rosneft and Gazprom may reach a staggering $44 billion (Nezavisimaya gazeta, July 28). Various creditors are providing this flow of money but at the center of the “teams” Deutsche Bank, Kommerzbank, Dresdner Kleinwort Wasserstein are invariably present. With tacit encouragement of the government, these German giants are financing the concentration of major assets in the Russian economy under the control of Putin’s “team,” which is estimated to preside over a conglomerate of companies valued at $222 billion (Frankfurter Allgemeine, July 27).

The cordial ties between the leaders is thus not the summit of a complex structure of mature political relations, which are basically absent, but the cork in a bottle of stinky subsidies and dirty deals. This brew is going to be released in just a few months with Schroeder’s all but inevitable departure after a well-deserved electoral defeat. Angela Merkel, who leads the coalition of opposition parties, has shown no interest in starting her own “love affair” with Putin but has acknowledged that Russia would remain an important partner (Gazeta.ru, May 27; Lenta.ru, July 22). Some German experts warn that the Moscow-Berlin dialog could be “frozen” for several months (Nezavisimaya gazeta, July 28). During this pause such ambitious projects as the “strategic” gas pipeline under the Baltic Sea could be re-evaluated (Berliner Zeitung, July 26). The truth of the matter is that a reasonable estrangement at the top might be healthy for the relationship by removing the hidden agendas of politicized mini- and macro-funding.