Portfolio: Russia Takes Advantage of the Eurozone Crisis
Video Transcript:
Analyst Marko Papic examines how Russia is able to gain geopolitical leverage over Europe because of the eurozone's ongoing crisis.
Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, STRATFOR cannot guarantee their complete accuracy.
The economic crisis in the eurozone continues with Greece again in the focus. The key issue right now is whether Greek parliament will be able to pass the June 28 austerity measures vote. If it fails, it could lead to further panic throughout Europe. This has unsettled the markets and generally panicked investors throughout the world.
However, not everybody is overly concerned about the eurozone crisis. There are also countries that stand to win from the general lack of coherence in eurozone policy and also from fear that contagion could engulf all of Europe. The one country that we primarily focus on in this light is Russia. Russia has considerable opportunities opening up before itself because of the eurozone crisis.
First of all, Europeans are distracted and generally not unified on a number of issues but because the economic crisis has engulfed the eurozone, France, Germany, Italy, as well as the other eurozone member states, don't have the time or bandwidth to really deal with Russian resurgence in its periphery. As such, it has really left the Central and Eastern Europeans to fend for themselves.
More specific than a general lack of coherence within EU foreign policy, is the fact that Russia really does have some interesting opportunities opening up because of the crisis. The two greatest geopolitical interests are the upcoming privatizations in Greece and also the news that Russia is interested in Austrian banks. The Greek privatization effort is one of the conditions for any new bailout. The eurozone core member states, specifically Germany, want Greece to find 50 billion euros of privatization efforts in the next four to five years. As such, everything is up for sale in Greece, literally.
One of the interesting assets that Athens is looking to sell is DEPA, its natural gas company. DEPA is really important because it is part of European efforts to create the so-called Southern Corridor, a corridor of natural gas that would avoid Russian production and Russian controlled pipelines in Central and Eastern Europe. As such, Greece is very important because it finds itself at the crossroads between the Middle East and Turkey on one side and Italy and Western Europe on the other.
However, if DEPA falls to Russian hands, Gazprom has been quoted to be interested in its privatization, it would really complicate European efforts of using Greece as an alternative to Russian natural gas routes. Another appealing opportunity for the Kremlin is the rumored interest of Sberbank and VTB, Russia's two largest state-owned banks and Austria's Raiffeisen Bank and Fokus Bank.
The reason that Russia's interest in Austrian banks is something to look at is because Austrian banks control quite a number of banks in Central and Eastern Europe. When Central and Eastern European states became members of the European Union or were fast tracked on the road toward eventual EU accession, Austrian banks were really the first to rush into the market. They felt that their historical and geographical links to the region gave them an advantage over their larger and more powerful French, Italian and German counterparts.
As such, Austrian banks are very well represented in Central and Eastern Europe. Therefore, if the Kremlin was able to gain a stake in some of these Austrian banks, it would have a way to get into the financial sector of Central and Eastern European countries who are generally allergic to any Russian foray into their markets.
The bottom line is that the eurozone crisis has certainly increased the level of worry throughout Europe. However, as with any calamity, there are winners and losers and Russia stands to gain more than most, both because Europe is distracted by its own eurozone financial problems and because there are opportunities for investment that Russia can parlay into geopolitical advantage.
