Financial Bridge

CHANTY-MANSIYSK/BERLIN (Own report) - On the eve of talks about a new cooperation treaty between the EU and Russia, Berlin is considering closer military cooperation with Moscow. In reaction to official overtures made by the Russian president, government advisors in the German capital conclude "negotiations about a European security format" would "make a lot of sense". The current negotiations on the EU Cooperation Treaty with Russia serve as a test-run, in which Berlin can directly intervene in the process - a German is chairman of the competent section in the EU Commission. This is in line with the previous exclusive cooperation between Berlin and Moscow, which has long since expanded beyond solely the energy sector, to include numerous economic sectors such as logistics for German East-Asian exports. The most recent example is a cooperation agreement reached between the largest banks of Germany and Russia, who want to profit from financing the 2014 Winter Olympics and expand their businesses into the former socialist countries of Eastern Europe. The plans are aimed at cutting out the competition with strong market positions - particularly the finance institutions from Western and Southern Europe.

A New Era

After long hesitation, the starting shot was given last week at the 21st EU-Russian Summit to begin negotiations for a new "Partnership and Cooperation Agreement." The old agreement expired last December. The new negotiations, planned to begin during the German presidency of the EU Council, were vetoed first by Poland and then by Lithuania.[1] Previous to this summit, German Foreign Minister Frank-Walter Steinmeier declared again that Germany and the EU are Russia's "natural partners" and announced a close bilateral cooperation ("German-Russian Modernization Partnership").[2] The EU summit acquiesced to Berlin's demands and adopted a declaration referring to the opening of "a new era" in the relations between Moscow and the EU.[3] On Friday, July 4, talks begin in Brussels on the concrete configuration of this agreement - assessed as strategic. Berlin will have a defining influence: Germany's Gunnar Wiegand, is chairman of the competent section of the EU Commission for relations with Russia.

Finance Model Germany

The summit meeting resulted not only in the negotiations beginning July 4, but also in an agreement on closer cooperation in the financial sector. In the domain of finances as in logistics,[4] Germany is the forerunner and main beneficiary of this rapprochement with Moscow. Just recently Berlin was able to have Thomas Mirow, state secretary in the German Finance Ministry, accepted as the new president of the European Bank for Reconstruction and Development while simultaneously receiving the assurance that this financial institution is still at the disposition of German enterprises for their eastward expansion.[5] For years German institutions have held influential positions in configuring Russia's financial system. The state-owned KfW banking group supports Moscow in its development of a promotional bank corresponding to the German model, which will, among other things, promote infrastructure projects and the development of the banking system. Even the German Federal Financial Supervisory Authority is comprehensively cooperating - as the first such institution of a western country - with its Russian counterpart.[6]

Door-Opener

Shortly preceding the EU-Russian Summit meeting, the Deutsche Bank took a key position in the Russian finance sector. At the beginning of June the former German state secretary in the Finance Ministry, Caio Koch-Weser, currently an advisor to the largest German finance institute, signed a contract with the former Russian Minister of the Economy, German Gref, currently board chairman of Sberban, the largest Russian credit company, sealing a close cooperation between these two financial institutions.[7] According to this agreement, the Deutsche Bank will play a central role in the development of the German-Russian economic relations and serve as the "financial bridge between Russia and Germany." It is also to serve as door-opener for Russian investments in the West and aid Russian companies to obtain access to the German market. This refers mainly to mediation of business contacts. Wealthy Russian investors seeking investment opportunities will be put in contact with German managers and companies, to finance their expansion plans.[8]

Billion Dollar Deal

The Deutsche Bank, which dates its entry onto the Russian market back to 1881, has massively enhanced its activities in Russia.[9] In the meantime it is the largest foreign investment bank in the country. Last year it concluded more than ten deals on the stock exchange for Russian enterprises, with a composite value of more than US $16 billion. Now the Sberbank and the Deutsche Bank have agreed to co-invest in projects worth several US $billion to finance the 2014 Winter Olympic Games in Sochi.[10] In the rivalry for the Russian market, this German finance institution can rely on exclusive connections to the government in Moscow. It provides financing for significant German-Russian energy projects and is an advisor to the expansion projects of the Gazprom energy giant.[11] Russian President Dmitry Medvedev, until recently, was chairman of the Gazprom board of directors.

Paradise Like

The Deutsche Bank and the Sberbank are especially planning their common expansion activities into the East European states situated between Germany and Russia. "With the help of the Deutsche Bank, we want to successfully penetrate international markets," explained the head of the Sberbank, German Gref, and corroborated the intentions of this state-controlled financial institution to expand westward.[12] The Sberbank is among the world's 20 largest banks and, through billions in foreign investments, seeks to be among the top 10 in the next few years. The preferred targets for expansion are the former socialist states, where the economies have a high rate of growth - for banks "a paradise like situation" according to financial experts. Countries like Russia, Kazakhstan or the Ukraine can count on a six percent annual growth rate - rates that bankers can only dream of in Western Europe's saturated markets.[13] German banks also have to catch up in Eastern Europe. When these new markets were being divided up, German banks were busy developing their positions in the former German Democratic Republic. This is why the market leader in Eastern Europe is an Italian bank, Unicredit, ahead of two Austrian institutions. Country-wide networks of branch offices or participation of German financial institutions are in but a few countries.

If Opportune

The German-Russian cooperation in the financial sector and the negotiations for a new agreement between the EU and Russia are seen in Berlin merely as tests for an even closer rapprochement. It couldn't just remain at a "Greater Europe" with the inclusion of Russia, but must also incorporate a new military alliance as an alternative to NATO or even its replacement. Berlin attentively took note that in his first foreign policy speech, the new Russian President, Medvedev constantly criticized the USA. He assessed the US role in international politics quite negatively and would like to see limits set for Washington's actions. Medvedev deliberately chose Berlin as the location for making his foreign policy bid, explain the government advisors at the German Institute for International and Security affairs (SWP) concerning his speech in the German capital.[14] Medvedev declared that the transatlantic military alliance has "outlived" itself, it can no longer provide security for Europe. As a solution, he proposed a new "collective security pact" to insure stability in the new "Greater Europe" with all European states participating.[15] The concept is "not without attraction" commented the German government advisors. "This puts an offer on the table, to which the German and European policies can react, if they find it opportune."[16]

[1] see also Umklammert
[2] Speech by Dr Frank-Walter Steinmeier, Federal Minister for Foreign Affairs, at the Department of International Relations of the Urals State University in Yekaterinburg, 13.05.2008; www.auswaertiges-amt.de. See also Natürliche Modernisierungspartner
[3] EU sucht neuen Anfang mit Russland; Welt online 27.06.2008. Gipfel in Sibirien: "Neue Qualität" zwischen EU und Russland; Handelsblatt 27.06.2008. EU-Russia Summit: The Start of a New Age; www.eu2008.si 27.06.2008. IX. Joint Statement of the EU-Russia Summit on the launch of negotiations for a new EU-Russia Agreement; www.eu2008.si
[4] see also Zum zweiten Mal
[5] see also Wegbegleiter
[6] see also Mutter aller Banken
[7] Russlands größtes Finanzinstitut kooperiert mit Deutscher Bank; Der Standard 08.06.2008
[8] Putin würdigt Deutsche Bank als Finanzbrücke zwischen beiden Staaten; RIA Novosti 20.06.2008. Deutsche Bank: Putin öffnet Ackermann die Türen; Manager Magazin 28.06.2008
[9] see also Deutsche Bank "greift an", Hilfestellung, Standbein and Seit 1881
[10] Sberbank und Deutsche Bank wollen Olympiaprojekte in Sotschi finanzieren; RIA Novosti 07.06.2008
[11] see also Insoluble
[12] Russlands größtes Finanzinstitut kooperiert mit Deutscher Bank; Der Standard 08.06.2008
[13] Großes Potenzial: Osteuropa lockt Banken mit hohem Wachstum; Handelsblatt 27.06.2008
[14] Medwedew ante Portas: Konturen der neuen russischen Außenpolitik; SWP-Aktuell 2008/A 58, Juni 2008
[15] Medwedjew in Berlin: Die Nato hat sich überlebt; Frankfurter Allgemeine Zeitung 06.06.2008. Medwedjews Großeuropa; Frankfurter Allgemeine Zeitung 09.06.2008. Medwedjew will Alternativbündnis zur Nato; Welt online 27.06.2008
[16] Medwedew ante Portas: Konturen der neuen russischen Außenpolitik; SWP-Aktuell 2008/A 58, Juni 2008. See also Unheilvoller Schatten, Kooperation und Konfrontation, NATO im Osten? "Das gibt Krieg", Bündnisprojekt and Krieg


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