By Christopher Weafer
The need to bring Russia on board as a climate partner could help thaw icy EU–Russia relations.
After seven years of sanctions and accusations of malign activities by all sides, political relations between Russia and both the US and the EU are at their worst since the mid-1980s. But there are signs, in Moscow and Washington as well as in some EU capitals, of confrontation fatigue. It appears there is an emerging effort to try and draw a line under the deterioration and, at least, establish some form of predictability in the relationships. Climate action may offer a sliver of common ground, it represents a rare issue that the US has said it will work on with Russia.
We could get a clearer picture of whether that is a realistic prospect or wishful thinking this month when, over the course of six days, there will be four summits directly or indirectly involving Russia, which started with the G7 in Cornwall on 12 June and ended with the Biden–Putin meeting in Geneva on 16 June.
Earlier this year, President Biden, and his key foreign policy advisors, were very consistent and clear in their view that their greater priorities would be China and the repair of trans-Atlantic relations. Russia was almost side-lined as irrelevant. That has changed, but the relationship with Russia is still only at the top of the second-tier priority list. It isn’t considered a first-tier priority.
For Moscow, that probably suits equally well. Russia considers itself to be in a much stronger position today than in 2014 when the US imposed sanctions over its involvement in Crimea. Financially that is certainly the case, as the country has the world’s fifth-largest financial reserves and the sixth-lowest national debt, at under 20% of GDP. The economy is recovering from a relatively modest 3% decline last year and the Federal Budget is back in surplus. That surplus is largely thanks to the need to deal with sanctions. The price of oil at which the Russian state budget is in balance is less than US$50 per barrel this year. To achieve the same in 2013, Russia needed oil to be at US$115. Public support for President Putin is strong and on the current trajectory he would comfortably be re-elected in March 2024, should he wish to stand again. The threat of large-scale opposition protests never materialized and the country’s military has showcased the results of a decade of spending and upgrades on the Ukraine border in recent months.
Looking for pragmatic relationships
Russia’s relationship with Europe has been in decline for at least a decade but the country makes a clear distinction between the EU and individual states that are part of the EU. Moscow has now set its sights on building pragmatic relations with some of the more powerful EU countries on a bilateral basis. A good current example is the NordStream 2 gas pipeline, which will expand the economic and trade relationship with Germany. The Turkish Stream 2 pipeline, which is snaking up the Balkans, almost unnoticed, should improve the relationship with several other EU members. During his address to this year’s St Petersburg Economic Forum, President Putin said that Russia would like to engage more with European states to advance projects of mutual interest. He did not mention Brussels.
The other reason why Moscow is more confident is because it has successfully refined its geopolitical priorities. After briefly talking about a so-called Asia-pivot in 2014-15, the strategy now is one of diversification in relations, both trade and political. China is the country’s largest trade partner, and that will expand significantly in the next three to five years because of projects already agreed in the energy and transport sectors. Moscow–Beijing political ties have strengthened. The OPEC+ agreement has greatly helped improve relations with Saudi Arabia and other Gulf Arab states. Trade and joint investment deals with Japan and India have also grown and are set to increase.
Nobody expects any specific agreements to be made at the Geneva summit, but it should clarify the areas of mutual interest and the reasons why President Biden asked for the meeting. Chief amongst them is climate management. This is a huge legacy priority for President Biden and one that requires Russia’s involvement because of its size, environmental diversity and geography. It is also one of the key areas of concern for France, the UK (where the next climate summit will be held in November) and for Germany, where the Green Party is expected to play a significant role in the next government.
Climate issues are rising in importance for Moscow
Russia has been slow to move on climate action, as it is a hydrocarbon superpower and oil and gas play a significant role in the economy. Thus, there is a powerful lobby intrinsically opposed to – or at least suspicious of – radical measures to move quickly on climate change action. The government must steer a careful course. The emerging response seems to be that there is no one-size-fits-all policy in climate action, but rather many ways to move towards net zero. President Putin devoted fully one quarter of his 45-minute keynote speech at St Petersburg Economic Forum in early June to climate change. His main theme was that the problem presents huge, international challenges, which cannot be tackled by countries acting individually. He has instructed the Russian government to develop and deliver a whole host of measures in the arena of climate change action, with a detailed plan to be published by October this year. Part of this plan will be to make greater use of so-called green bonds, which will be issued to fund specific climate change and renewable energy projects. These also have the advantage of not being subject to Western sanctions as they will be issued by the project managers and not directly by government ministries.
For Moscow, a particularly contentious issue is the EU’s proposed carbon tax on goods imported from countries that do not meet the emission limits set under the Paris Agreement. These limits are at the core of the EU’s Green deal. As it stands, Russia faces the possibility of an annual tariff cost of between $10 billion and $50 billion. Moscow argues that it has already cut emissions by over 30% from the 1990 measurement, and the fact this reduction is the result of the elimination of a lot of old Soviet industry is inconsequential. It also argues that the share of renewable energy in its total energy mix is over 25% because of hydro and nuclear power.
Moscow is also arguing that Russian natural gas, which Putin emphasised at the St Petersburg Economic Forum, is much cleaner and cheaper than US LNG (liquid natural gas) which is mostly produced by fracking. This is a message, along with the position that gas should be considered a transition fuel, he hopes will resonate with the powerful environmental groups in Europe. Especially with the German Green Party, which appears set to have a role in government after the September parliamentary election. A big part of Russia’s messaging to the EU and the US will focus on the contribution of Russia’s vast forests and wetlands in absorbing CO2 – the first steps in the initiative to highlight the role of the forest lies in much more detailed measurement of the absorption effect, and work in this arena has started. Many Russian experts argue that, on a net aggregate basis, these factors mean Russia is already one of the lowest carbon emitters on the planet.
The use of solar and wind generation in Russia is, so far, minuscule. But the government has announced new targets for the development of these types of renewables, anticipating a rise in usage from around 1% in the generation mix in 2021 to 4-5% over the next few years. The World Bank has pointed out that Russia could become a world leader in wind power, with its vast tracts of land and suitable “wind corridors” in areas of northern Russia. Moreover, several regions in the south of the country are very suitable for solar generation. Developments in the southern Republic of Kalmykia are especially encouraging.
The government has published a road map for the development of hydrogen and is drafting initiatives to accelerate the production of green hydrogen. However, a lot of attention is also being paid to the further development of blue hydrogen, produced by the steam reforming of methane, abundant in Russia, and the use of carbon capture and storage. Currently, blue hydrogen is much cheaper to produce than the green variety and this cost difference is likely to persist for several years or even decades. The Russians see significant competitive advantage in developing hydrogen from various sources.
Russia’s critics have often dismissed the country as no more than a large gas station, although one that was necessary for the global economy. As the age of hydrocarbons now enters the twilight stage, the hope of those critics that Russia would also fade in importance is not going to be realised. Russia has a major role to play in green energy, climate management and carbon reduction. That is a competitive advantage the Kremlin will try to use skilfully as it repositions and consolidates Russia’s seat at the top table of global politics in the coming decades.
First published in China Dialogue.