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GAS Nord Stream 2 27 April, 2020 3:00 pm   
COMMENTS: Mateusz Gibała

Assenova: Russia will continue its energy policy in spite of coronavirus. Nord Stream 2 lobbying is a proof (INTERVIEW)

Russia will continue using energy for foreign policy leverage. The catastrophe coming to Kremlin will not stop it even if it means incoming revolution in Russia. The proof is continued lobbying for Nord Stream 2, which increased in fact in spite of coronavirus – said Margarita Assenova, Jamestown Foundation Senior Fellow to BiznesAlert.com.

BiznesAlert.com: How the oil price decline connected with coronavirus pandemic influenced Russia’s stability?

Margarita Assenova: Things have changed dramatically for worse. OPEC+ agreement did not make much difference in plummeting oil prices, which included even negative prices for some contracts in the U.S. At the same time, there is this narrative that Saudi Arabia and Russia are flooding market with oil. The truth is there is no demand for oil from anyone. This state might be continued for 12-18 months. We need to be very realistic. Until the vaccine for COVID-19 is found we will have generally low energy demand and low prices. I do not see people comfortable travelling, going to restaurants and hotels, so there is no prospect for quick economy recovery.

How will it affect petrostates like Russia?

Petrostates are in the worst position and especially Russia. About 40 percent of Russia’s budget is dependent on oil revenues. It was 60 percent, they managed to cut this dependency a bit, but it is still significant. If the Kremlin does not have revenues from oil it will have to cut social spending. Russia has sizeable financial reserves but it is not clear for how long they will last. When prices went below 25 dollars Russia was losing 100 mln USD per day. Now we can imagine how much they lose with oil price around 10 USD or below. Vladimir Putin promised to dramatically increase social spending. This spending plan will not be implemented. We might even see cuts in those areas. There is also growing COVID-19 epidemic in Russia. The government will need to cover needs of those industries that are important to it, such as the military complex and energy sector. Social spending is not, it will be put on the backburner.

Can they really cut social spending? How will it influence regime stability?

Oil price crisis in 2015 made Russia cut down social spending. In last years there were so many social protests all around the country: about pensions, ecology, etc. I expect this to happen even more now even as the pandemic continues. People are losing confidence in the ability of the state to solve their problems and support them in time of need.

Would Russia try to change its foreign policy?

Moscow needs friends now more than ever but how can it gain the friendship of Poland and other states with the Crimea still under occupation? I do not think they will withdraw from the Donbas or Crimea. And Russia will continue using subversive tactics and disinformation against its neighbors and the West, despite the COVID-19 pandemic. Coronavirus is the worst disaster for Russia, even in comparison with Chernobyl, Kursk, you name it. And now Russia could become a major COVID export country to Europe. It is a new epicentre, we do not know true numbers about the infected. There are not enough countermeasures taken. If travels from Europe to Russia continue or is resumed before Russia dealt with the epidemic at home, it is a real danger to the European Union. China, although it concealed the epidemic in the beginning, managed to eventually close down completely some regions to contain the infection. Moscow does not have this kind of control over Russia’s regions.

Should The West contain or engage Russia in those circumstances?

Engagement is important because it allows Western countries to know what is going on. But it is not equal to closing eyes to what Russia is doing. We need to continue seeing it as an adversary that tries to subvert the European Union and the United States, to disinform, influence Western elections and promote radical movements in the West. This is going to continue. The West needs to be very clear about the true nature of the Russian government, but still should engage to keep channels of information.

Are we paralyzed in those relations because of the pandemic?

This crisis should create bridges between nations. We should cooperate in the face of this disaster. Economically, we are all in bad position. We can cooperate in fighting the coronavirus. Although, we cannot cooperate by allowing Russia to achieve its foreign policy goals like using Nord Stream 2 to hurt Ukraine transit and endanger its security. I believe Russia will continue to pursue its foreign policy goals. The catastrophe coming to the Kremlin will not stop it, even if it means incoming revolution in Russia. The proof is the continued lobbying for Nord Stream 2, which increased in fact, in spite of the coronavirus. We say in Bulgarian, that it is easy to catch a fish in muddy waters and that is what Russia is trying to do.

Interview by Wojciech Jakóbik