THE STATE OF THE EUROPEAN UNION

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THE STATE OF THE EUROPEAN UNION
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defence budget. In comparison, exports to
China represented a mere 6.9% of its total ex-
port trade in 2013. The EU is also Russia’s most
important foreign investor. It is estimated that
75% of the direct foreign investment stocks in
Russia come from EU Member States. In 2012,
outward FDI stocks from European countries to
Russia reached a level of 19 billion euros7. In the
light of these numbers, it would not be feasible
for Russia to contemplate a rupture with the EU
any time soon –a fact that the EU should keep
in mind and have no qualms about using as a
bargaining chip should Moscow resort to any
direct or indirect form of coercion.
Although trade with Russia is not as crucial
to the EU as trade with the EU is to Russia, the
Federation is nevertheless an important trading
partner. In 2013, it was the EU’s second largest
trading partner in terms of imports (206.1 bil-
lion euros in trade that represented 12.3% of
total EU imports) and its fourth largest partner
in terms of exports, receiving 119.8 billion euros
in goods from the EU Member States that made
up 6.9% of total EU exports. It is worth pointing
out that 77.7% of Russia’s exports to the EU fall
into the category of mineral fuels and deriva-
tives. The Union’s dependence on Russian pe-
troleum and gas is a serious issue: 33.7% of the
crude oil and 32% of the natural gas imported
by the EU in 2012 came from Russia 8. Although
the percentage of mineral fuels imported by EU
countries from Russia is steadily declining and a
concerted effort is beingmade to diversify Europe’s
energy sources, given that the reserves of Norway,
its second largest supplier, are diminishing and
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Libya and Nigeria, two of its other important sup-
pliers, are becoming increasingly unstable, it is cur-
rently impossible for the EU to wean itself com-
pletely off Russian energy supplies. Nevertheless,
while Putin may be tempted to use energy as a
political weapon as he did with Ukraine in 2006
and 2009, the fact is that Russia is under more
pressures to sell than Europe is to buy.
Russia is looking to the East in an attempt to
diversify its foreign trade. In 2014 it signed a 323
billion euro, thirty-year gas supply contract with
China for which pipeline construction is already
underway. It has also entered into an agreement
to build 12 nuclear reactors over the next two
decades in India, a country with which it has
signed a number of defence supply contracts.
Nevertheless, Russia cannot do without the EU
for any extended period of time. Despite their
differences, their interdependence obliges them
to seek some kind of working understanding.
The legal linchpin of relations between the
EU and Russia is a Partnership and Cooperation
Agreement that covers a wide range of policy
areas including political dialogue, trade, finance
and culture. This accord established a new tradi-
tion of organising twice-yearly summit meetings
between Russian and EU heads of state or gov-
ernment as well as a Permanent Partnership
Council that facilitates interaction at the minis-
terial level. This ten-year agreement entered
into force in December 1997. Since it expired in
December 2007, it has been renewed annually
pending the negotiation of a new agreement, a
process that has been repeatedly hindered by a
variety of diplomatic obstacles and suspended
since the outbreak of the Ukrainian crisis. At the
EU-Russia summit held in Saint Petersburg in
May 2003, both countries agreed to set up four
“common spaces” to facilitate deeper mutual
cooperation: A Common Economic Space; A
Common Space on Freedom, Security and