The EU needs a 'carrot and stick' policy for handling Russia

Giles Merritt looks at a longer-term ‘Marshall Plan’ strategy the EU should envisage for its post-Putin relations with Moscow.

When Ursula von der Leyen steps down from her second term at the European Commission, it’s far from certain that Vladimir Putin or Xi Jinping will still be in power. Whatever the circumstances and timing of their departures, they’ll leave behind volatile political vacuums. The point is, of course, that the European Union must focus more than ever on its own strategic and geopolitical interests.

Although there are thousands of imaginable global scenarios for the 2030s, Europe’s needs and the threats it will face are clear enough. The EU’s population is ageing fast and will begin to shrink in size, putting its global role at risk. On the other hand, its economic muscle and collective security are powerful magnets for further enlargement, perhaps to 35 member states.

Longer-term thinking raises uncomfortable questions about the EU’s relations with Russia, China and even the United States. In Russia’s case, the EU must start to combine its policies in response to Putin’s invasion of Ukraine with far-sighted reflection on a post-Putin relationship. Brussels must brandish an increasingly large stick while also dangling a sweeter carrot.

China’s place in the forefront of the 21st century’s international economy is unstoppable. The EU’s interest will be to sidestep the US-led drift towards confrontation with China while rebalancing Europe’s dependence on transatlantic trade and investment in favour of emerging giants in Asia, Latin America and Africa.

Russia’s outlook is starkly darker. The EU’s concern will be to avoid the instabilities of a Russia bankrupted by war. European policymakers will need to emulate the thinking behind America’s post-war Marshall Plan for the reconstruction of countries that included Nazi Germany. It won’t be easy to design initiatives for a Russia that decries the EU as its enemy, but it’s nevertheless essential.

Hard though it is when emotions are so raw, the EU must recognise that a flailing, poverty-stricken and bankrupted Russian neighbour presents even greater risks than today’s enmity. Ensuring Russia’s future prosperity, and convincing public opinion there that the EU has no malign intentions towards it, are strategic goals.

Two distinct policy areas have to dominate European thinking on Russia. There is the immediate strengthening of sanctions disciplines and military capabilities, and in parallel, there’s the post-Putin reintegration of ‘weaponised’ Russian agriculture and industry.

The flouting of EU sanctions is scandalous, and calls for punitive measures by Brussels and the member governments. Russia’s armed forces could be hamstrung by a rigorous enforcement of agreed export bans on micro-electronic components for their weaponry. The culprits aren’t Russia’s booming defence companies, but their thousands of Western suppliers. The same goes for European corporations that continue to buy Russian oil and natural gas either openly or clandestinely.

The EU must do more to convince the Kremlin it means business and will not falter in its support for Ukraine. It is a task made no easier by the unexpected flourishing of Russia’s wartime economy. This year will see a three per cent rise in GDP that Europeans can only envy, with higher wages for many fuelling popular support for the war.

But this growth spurt can’t last, and the higher the economy goes, the harder it’s likely to fall. As well as runaway defence spending, Putin’s government is splurging on social benefits and infrastructure projects, funding it all with the financial surpluses painfully accumulated during 15 years of austerity policies. The Russian war chest will be exhausted by 2028.

At that point, Russia must face the grim realities of its demographic crisis. Its population has shrunk by three million since 2022 because of the mass exodus of younger people, as well as war deaths, and that’s only the start. Low fertility and shortening lifespans mean Russia’s present population of 144 million will, in a best-case scenario, be down to 120 million by mid-century, with some forecasts suggesting only 104 million. The average age of Russians is already 40, and the accelerating shrinkage of the working age population is condemning the country to severe long-term decline.

This is no cause for rejoicing amongst Russia’s adversaries. They will never want to rely so heavily on Russia for energy, but its huge agricultural sector remains key to feeding a hungry world and to the stability of global commodity markets. Improving Russian crop yields in the face of climate change will be an international priority. While nobody should expect the EU to suddenly produce a post-war blueprint for aiding Russia’s recovery, it isn’t too soon to start thinking about it.

The views expressed in this Frankly Speaking op-ed reflect those of the author and not of Friends of Europe.