EU visits Moscow as concerns mount over crisis

Commission sources and leading experts said the main intention of the meeting will be to reach mutual understanding on how to tackle the ongoing economic crisis, which is threatening to hit emerging economies such as Russia and China even harder.

Speaking at a conference in Brussels yesterday (5 February), Thierry de Montbrial, president of IFRI, the French Institute of International Relations, warned of a doom-like scenario in which falling oil prices would cripple Russia's economy.

"The biggest danger is that we pass from one extreme to another. In mid-July 2008 previsions for prices of petrol were at $200. A few months later, we wonder if petrol prices will not return to the level of $15-20, as they were in 2000, when Mr. Putin was elected, and under the level of which Russia is estimated not able to buckle its budget," De Montbrial said.

He further explained that such "swings in thinking" are extremely detrimental, because they can paralyse much-needed investment planning in the energy sector. "The biggest danger before us if we start thinking along the following lines: since we are in a crisis, then we drop investments in the energy sector, or we postpone them for better times. But then we risk to prepare the next phase of petrol price explosion, similar to the one of the seventies, and in addition, we risk abandoning the other major problem of the beginning of the 21st century, namely climate change and CO2 reductions, that is, a concept of investment in a much wider public policy," the head of the French think tank further elaborated.

But Montbrial also warned about risks in China, which had up till now been considered relatively immune from the crisis. Such views are "extremely naïve", he said.

"We have a double risk of a particularly strong crisis in China and India. I am particularly worried for China," he said, explaining that in case of a serious economic slowdown in China, with the country politically fragile, the legitimacy of the Communist party, which up to know has been founded on the economic growth, will be challenged.

"Although some fear an overly powerful China, a overly weak China is a much bigger threat," he said.

Diplomats confirmed that the thoughts expressed by Montbrial reflected the state of mind of the EU executive, and that coordination of macroeconomic policies is seen as fundamental to facing the challenges to come.

Energy Commissioner Andris Piebalgs, who attended the event, completely dismissed the view that the last gas crisis had harmed EU-Russia relations.

"I think we should discuss how to better work against the economic crisis, how to deal with energy relations so that they could be better, more predictable. And I would say: they are not as bad as people think. We are not fighting. Yes, accidents happen. Yes, we could do better. But fundamentally, this is a Russian resource and Russian legislation regulates it. Does it give us access to the resources? Yes, it does. Does it sell to the European market? Yes, it does. Is it used for political purposes in the EU? No," Piebalgs stated.