NATO-Russia Return to Dialogue

NATO and Russian officials on Wednesday held their first meeting in nearly two years. Profound disagreements remain but economic pressure is forcing Russia to negotiate. Russian Minister of Economic Development Alexey Ulyukaev shared his views with Handelsblatt.
Russian Minister of Economic Development Alexey Ulyukaev.

There was no reason for euphoria after NATO allies and Russian officials ended  their first meeting in nearly two years. Even though the meeting overran by more than an hour it failed to make any progress in resolving increasingly dangerous military tensions.

NATO Secretary General Jens Stoltenberg was entirely pragmatic when he met with reporters after the more than three-hour meeting on Wednesday. "We all agree that it is in all our interest to keep political channels for political dialogue open," he said. "However, this does not mean that we are back to business as usual."

Mr. Stoltenberg noted that "NATO allies and Russia hold very different views."

The reasons for the frosty relationship are Russia's annexation of the Crimean peninsula from Ukraine, and the ensuing conflict with Ukraine, which still remains unresolved. An atmosphere of partnership and cooperation has given way to massive mistrust.

Moscow accuses NATO of trying to encircle it militarily, while the West criticizes Russia's violations of international law.

The two sides were still attacking one another immediately before the meeting of the now reactivated NATO-Russia Council. Only a few days ago, Russian fighter jets simulated an attack when they buzzed a U.S. warship cruising 70 kilometers (43 miles) from a Russian naval base and a U.S. reconnaisssance plane. That was the latest in a series of close encounters.

To balance the national budget, we would need an oil price of about $70 a barrel. We won't get that, so we have to adjust our budget. Alexey Ulyukaev, Russian Minister of Economic Development

But recognition of the need for dialogue has emerged on both sides – in the West because conflicts in Syria and tensions with Iran cannot be resolved without Russia and in Moscow because the Russian economic situation is far worse than the Kremlin admits.

Russia is in a recession. After economic output declined by 3.8 percent last year, the International Monetary Fund now expects a further decline of 0.6 percent for 2016. Analysts with private banks are even more pessimistic.

Russian Minister of Economic Development Alexey Ulyukaev is alarmed.

"We have high social obligations in our government budget, which is why we have a high budget deficit," Mr. Ulyukaev told Handelsblatt, noting that his government is trying to offset the problem with a privatization program.

"The goal is to optimize the budget, but the main objective is to reduce government spending," Mr. Ulyukaev said. "To balance the national budget, we would need an oil price of about $70 a barrel. We won't get that, so we have to adjust our budget."

However, there is massive resistance to reducing welfare spending in the run-up to a parliamentary election scheduled for this fall and the presidential elections in 2018.

Mr. Ulyukaev said he doesn't expect to see a lasting recovery in the price of oil and emphasized that long-postponed structural reforms are now urgently needed. For Russian companies, he said "the oil price isn't even that important; they need less bureaucracy, fewer inspections, better credit terms and privatization."

The sale of 19.5 percent of shares in the majority government-owned oil company Rosneft has already been initiated. But a debate has unfolded over this additional partial privatization. In response to that development, Mr. Ulyukaev said it's "never the right time" for the sale of Rosneft shares, "and now it's a shame because no one wants to give anything away."

He expects the oil price to increase from about $40 a barrel (159 liters) today to about $50. "But it won't continue to rise after that, because the key data have changed completely," Mr. Ulyukaev said. Instead of continuing to hope for high oil revenues, he said he is relying on consistent reforms.

The West's goal in reviving the NATO-Russia Council is to rebuild lost confidence in dialogue.

"This is the only way we can develop a common understanding of problems and the necessary solutions," said German Foreign Minister Frank-Walter Steinmeier, a member of the center-left Social Democratic Party.

Chancellor Angela Merkel was encouraged that with the first NATO-Russia Council in almost two years, the parties had finally shown a willingness to talk once again.

But there is also criticism. The vice-president of the European Parliament, Alexander Graf Lambsdorff, a member of Germany's pro-business Free Democratic Party, warned that the resumption of talks should not be allowed to "absolve President (Vladimir) Putin of responsibility."


Mathias Brüggmann heads Handelsblatt's foreign affairs desk. Thomas Ludwig is a Handelsblatt correspondent in Brussels. To contact the authors: [email protected] and [email protected]