Speech at the Foreign Policy Institute Stockholm, 1 April 2008, Stockholm

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I gladly accepted accept the invitation to speak to you today about the European Union's relations with Russia. I am well aware that in Sweden there is both close and critical scrutiny of the partnership with Russia, which at times is difficult, but from my point of view indispensable.

I'm therefore looking forward all the more to discussing with you, following my lecture, how we in the European Union can work together to shape and advance the partnership with Russia.

Germany stands by its commitment to fostering a pan-European area of peace and stability, democracy and rule of law. Such an area will secure prosperity for Europe. In order to realize this vision, we must work closely with our eastern neighbours and with Russia. From our point of view, therefore, Russia remains an indispensable “strategic partner” for the European Union.

In this talk I would like to comment on three topics. First of all I will elaborate on the German Government's assessment of the current status of, and future prospects for, European relations with Russia. Secondly, I'd like to touch upon the European Neighbourhood Policy, which in its eastern dimension has several important aspects in common with our European policy towards Russia. And thirdly, I'd like to address our relations with Central Asia, which are also closely linked to our policy towards Russia.

Relations with Russia

But first, to Russia. Why do I speak of Russia as a “strategic partner” for the European Union? For one, back in 2003, when the Member States drew up the European Security Strategy, they agreed to ascribe to Russia the special significance that goes with this label.

But that is not the only reason why Russia is a strategic partner of the European Union; other factors are Russia's size and geopolitical position, its natural resources and abundant energy supply, as well as its political and military weight. Without good relations with Russia, we cannot possibly achieve our goal of creating a pan-European area of stability.

That is why relations with Russia are today among the most intensive that the EU maintains with non-member countries. Are they also among our most difficult relations? It must certainly be said that cooperation with Russia is not always easy.

This certainly holds true for such topics as democracy, rule of law and human rights. For example, restrictions imposed by the Russian government unfortunately made it impossible for the OSCE to monitor the Duma and Presidential elections.

We face some difficult questions in the area of security policy as well. It was with regret that we had to acknowledge the Russian moratorium on the CFE treaty. Here, as is the case with the discussion on missile defence, we must do everything possible to prevent a new spiral of mistrust.

The NATO summit in Bucharest begins tomorrow. Talks on the expansion of the Alliance were and indeed still are tense, both with Russia and within NATO itself.

In addition to this, there are a number of bilateral points of contention between individual EU Member States and Russia.

Nevertheless, I'd like to make it very clear that such problems should not allow us to lose sight of the fact that the European Union and Russia are bound by a partnership for which there is no alternative – on either side. Close cooperation with Russia is indispensable in tackling such difficult global challenges as the fight against terrorism, disarmament and arms control, international conflict resolution or environmental protection.

And Russia too is genuinely interested in working closely with the European Union: Russia needs Europe as a partner for the urgently needed modernization of its economy.

Our European partnership with Russia should therefore follow a two-pronged strategy: On the one hand, we should continue to build on the “positive agenda” with Russia, advancing our cooperation with as comprehensively an agenda as possible.

Specifically, this means it is essential that we finally succeed in providing a new legal basis for future European relations with Russia. Negotiations on a follow-up agreement to the Partnership and Cooperation Agreement with Russia must begin soon. This is an important and necessary signal to Russia's new president. Europe's relations with Russia are dependent upon the reliable framework of a comprehensive agreement.

On the other hand, this two-pronged strategy also means that we should, in a constructive dialogue, openly address controversial questions relating to Russia.

Specifically, that means speaking openly with our Russian partners about the status of civil society in Russia, about the freedom of the press, about Russia's actions towards its neighbours as well as about controversial international issues. As a partner, it is practically our obligation to do so.

The EU was therefore justified in criticizing the way Russian elections were carried out in March of this year. The elections were characterized by unequal access to administrative resources and to the media, as well as by restrictions imposed on the freedoms of assembly and opinion.

At the same time, however, we should also note the encouraging comments made by the election's winner, Dimitry Medvedjev, during his election campaign – comments regarding transparency, the free market economy, the rule of law, his critique on “legal nihilism”, as well as his appreciation of the role of civil society. We Europeans should take him at his word.

One topic which many of you have certainly anticipated, and one which I will by no means omit, is energy supply. This is an extremely important area of cooperation between the EU and Russia.

What is the current situation? Russia is and will remain the most important energy supplier for the EU. Sweden may not be affected to the same extent as other EU Member States. As an example, Russia has been Germany's largest energy supplier for 40 years. Roughly 30 percent of our oil and gas supplies come from Russia. For other EU partner countries as well, Russia is an important, perhaps even the most important, energy supplier.

And Europe's energy consumption – despite all progress made in the area of energy efficiency – will continue to rise through 2050. The additional demand cannot be met by renewable energy alone, for the simple reason that there is not enough available capacity to build new plants. Germany and other EU Member States, however, do not want to meet this demand with nuclear power.

In the medium term, then, Europe will be reliant on the supply of gas from Russia. Gas is considerably lower in emissions than coal and oil; if we want to lower our emissions – and we are in fact bound to do so through climate control objectives – we will have to meet our energy needs using Russian gas as well. There has been little progress in plans for new pipelines from other supply sources – the Nabucco Project, for example. While a decreased dependency on only one supplier would be politically desirable, we must recognize the realities of the current situation.

The supply of Russian gas is secure, not least of all because Russia continues to rely on revenues from its gas for the urgently needed modernization of its own infrastructure – including for energy efficiency measures. However, we should increasingly consider incorporating the neighbouring countries of the eastern Baltic region, which today are exclusively dependent on direct supplies from Russia, into the existing Western European system of gas supply. This would allow gas to reach EU Member States via more diverse supply routes, which would in turn increase supply security.

In light of increasing demand and decreasing production levels in the North Sea, the secure supply of the Western European gas pipeline system requires additional routes of transport. The Nord Stream pipeline is essential to meet this goal; it was with good reason that, on 6 September 2006, in a joint decision of the European Council and the European Parliament, the pipeline received the status of a “Trans-European Network-Energy” project.

The Nord Stream pipeline will not make existing systems redundant: On the contrary, Russia's gas exports to Central and Western Europe are soon expected to reach 200 billion cubic metres per year. In its output stage, the Nord Stream Pipeline will have a capacity of 55 billion cubic metres per year. It follows that this pipeline alone will not be enough to offset Russian supply levels.

It would be incorrect to say that Germany is a privileged partner of Russia regarding this issue. The project is a private-sector initiative: The two main German consortium shareholders E.ON-Ruhrgas and BASF-Wintershall are 100% private enterprises. Even Gazprom, the majority shareholder, is partially in private hands. Only the Dutch shareholder Gasunie is a state-owned enterprise.

The two major German consortium shareholders are now active throughout Europe. They honour supply obligations in the Netherlands, Belgium and in other EU countries. Therefore, the notion that Russia is principally interested in guaranteeing supply to these German companies, at the expense of other EU states, is not accurate. Both E.ON-Ruhrgas and Wintershall honour the obligations they have outside Germany.

In addition, there must be a separation between the political and the environmental considerations with regard to the pipeline. The international and European legal guidelines, especially those outlined in the Espoo Convention, are quite clear on this matter.

The construction of an offshore pipeline through the environmentally sensitive Baltic Sea presents a particular challenge. And all neighbouring Baltic states are in agreement that existing environmental protection obligations must be strictly adhered to.

I'd like to emphasize here that Germany takes these obligations extremely seriously. Both the responsible supervisory authorities in Germany and the Swedish environmental authorities impose the highest standards – a fact that the Nord Stream consortium is well aware of.

While the construction of an on-shore pipeline would probably be somewhat less expensive, the operating costs would be considerably higher, and the environmental balance during operations would clearly be negative, especially as a result of the emissions from the necessary compressor stations. The annual energy consumption of the compressor stations alone would be as high as the annual energy consumption of Estonia! Therefore, an offshore pipeline is the better alternative.

I'd also like to point out that the German supervisory authorities have worked closely with the consortium since the project's inception. So far, Germany has had positive experiences with this kind of culture of dialogue, for example in the planning of a North Sea wind park or in pipelines in the North Sea.

We'd like to give the Swedish authorities the benefit of these experiences. Transparency is the highest priority, and it is something we do not cease to demand of the consortium.

European Neighbourhood Policy

This brings me to my second topic: European Neighbourhood Policy, which in its eastern dimension has several important aspects in common with our European policy towards Russia. If we want to create a pan-European area of stability, then we must incorporate our neighbours to the east of the EU – Ukraine, Moldova, Belarus and the countries of the southern Caucasus – into our politics.

We see the European Neighbourhood Policy as an instrument to create a ring of friendly states on the borders of the EU. This Neighbourhood Policy by no means anticipates future relations between the partner countries and the EU. While it does not shut any doors, it also does not represent a preliminary stage to EU membership.

Today the European Neighbourhood Policy is already playing an important role in transforming and modernizing our neighbouring regions and those of Russia. However, the EU can and must become even more assertive and effective than it has so far been in terms of giving our partners a stronger impetus to embrace the process of reform. Not least, this will serve to counter the calls of certain ENP partners for an EU membership perspective with a substantive offer to deepen the partnership.

Crucial aspects of a strengthened ENP are trade liberalization and economic integration. An improved access of our partners to the EU internal market, especially in areas where they have comparative advantages, is one of the main incentives of the ENP. We hope to achieve such a strengthening of economic ties through a new generation of free trade agreements, which will also provide for the implementation of the EU acquis in specific areas.

I see the planned new “enhanced agreement” with Ukraine in this context. A significant component of the new agreement will be a comprehensive free trade agreement, which will encompass all areas of trade and also entail a gradual regulative approach in areas relevant to trade and investments.

Internal security is another important key priority for the eastern dimension of a strengthened neighbourhood policy: a crucial aspect from our point of view is the increased assistance towards developing capabilities and securing borders. Furthermore, we will intensify cooperation with our ENP partners in the area of migration. The EU's goal is to manage migration as effectively as possible to prevent it from becoming a destabilizing factor. The Commission has already put forward proposals to extend Europe's overall migration policy to its southern and eastern neighbours. For example, we are considering the possibility of establishing a mobility partnership with the Republic of Moldova, which would serve as a framework to implement innovative approaches to migration issues.

One of our priorities is to strengthen the European commitment to the Black Sea region as a whole. The accession of Romania and Bulgaria to the EU gave Germany the opportunity to promote corresponding initiatives at the European level. A strengthening of regional cooperation in the Black Sea region would also result in a greater integration of Russia.

In terms of content, we intend to promote cooperation regarding cross-border issues at a very practical and results-oriented level. These include such significant areas as energy, environment, transportation, migration or the fight against organized crime. It is quite evident that in these areas there is an overlap between EU interests and those of the countries of the region.

Central Asia

Finally, to a region which for the EU has gained a significant role as a “neighbour's neighbour”, and which is at the same time a neighbour of Russia's. I'm talking about Central Asia.

The five countries of this region are located on the geopolitical border between Europe and Asia. They have not only the two giants Russia and China as neighbours, but also the still instable Afghanistan.

The routes that pass through Central Asia are of strategic importance for Europe: On the one hand Central Asia is relevant from an economic and trade standpoint, in particular relating to the resources sector. On the other hand, Central Asia is also a transit area for drug smuggling and organized crime. In this context militant Islamism must also be mentioned, which threatens our security as much as that of the Central Asian states.

For Europe, therefore, close cooperation with the Central Asian countries is not one option among many, but rather an undeniable necessity.

This is why the intensification of European relations to Central Asia was a central focus of the German EU Presidency. The result of this initiative was the EU Strategy on Central Asia, which heads of state and government adopted in June 2007, and which for the first time provided the EU with political guidelines for a coherent policy regarding Central Asia.

The positive resonance which that strategy has generated among the states of the region shows that such an initiative was long overdue.

It is now the job of the Commission and Member States to work together to meet the high expectations of Central Asian countries and to breathe life into the strategy. We have decided to double the amount of European funding for cooperation with Central Asia for the period of 2007-2013 to the tune of 750 million euro. In addition, we intend to expand the political dialogue: The next meeting between the EU Troika and the Central Asian foreign ministers will take place on 9 and 10 April in Ashgabat.

An important achievement has been the establishment of cooperation in fostering rule of law, democracy and human rights in Central Asia. In our view, a human rights dialogue must not only take place with Uzbekistan, but also with the other four Central Asian countries.

Initial positive steps undertaken by Uzbekistan show that such a cooperative approach leads to results: notable are the abolishment of the death penalty and the introduction of the principle of habeas corpus earlier this year, as well as the amnesty for political prisoners and the ICRC visit to prisons. Nevertheless, there is much work to be done.

We can only establish stability and security in Europe in the long term if we work together on a practical level and develop a relationship based on mutual trust. To this end, the strategic partnership with Russia is indispensable. The European Union and its offer of a reform partnership can play an important role in fostering relations with our eastern neighbours. In the end, therefore, it will pay off to continue resolutely along the path that we Europeans have embarked upon.

And with this I would like to close – and I look forward to a lively discussion.