Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelertoing Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Germany and Russia Move Closer

Politics / GeoPolitics Jun 22, 2010 - 12:10 PM GMT

By: STRATFOR

Politics

Best Financial Markets Analysis ArticleGerman Foreign Minister Guido Westerwelle will brief French and Polish officials on a joint proposal for Russian-European “cooperation on security,” according to a statement from Westerwelle’s spokesman on Monday. The proposal emerged out of talks between German Chancellor Angela Merkel and Russian President Dmitri Medvedev earlier in June and is based on a draft Russia drew up in 2008. Russian Foreign Minister Sergei Lavrov will be present at the meeting. Peschke said, “We want to further elaborate and discuss it within the triangle [i.e., France, Germany and Poland] in the presence of the Russian foreign minister.”


On the surface, the proposal developed by Merkel and Medvedev appears primarily structural. It raises security discussions about specific trouble spots to the ministerial level rather than the ambassadorial level, with a committee being formed consisting of EU foreign policy chief Catherine Ashton and Russia’s foreign minister.

All of this seems rather mild until we consider three things. First, proposals for deepening the relationship between Russia and the European Union have been on the table for several years without much progress. Second, the Germans have taken this initiative at a time when German foreign policy is in a state of flux. And third, the decision to take this deal to France and Poland indicates that the Germans are extremely sensitive to the geopolitical issues involved, which are significant and complex.

Reconsidering Basic Strategy
The economic crisis in Europe has caused the Germans, among others, to reconsider their basic strategy. Ever since World War II, the Germans have pursued two national imperatives. The first was to maintain close relations with the French — along with the rest of Europe — to eliminate the threat of war. Germany had fought three wars with France since 1870, and its primary goal was not fighting another one. Its second goal was prosperity. Germany’s memory of the Great Depression plus its desire to avoid militarism made it obsessed with economic development and creating a society focused on prosperity. It saw the creation of an integrated economic structure in Europe as achieving both ends, tying Germany into an unbreakable relationship with France and at the same time creating a trading bloc that would ensure prosperity.

Events since the financial crisis of 2008 have shaken German confidence in the European Union as an instrument of prosperity, however. Until 2008, Europe had undergone an extraordinary period of prosperity, in which West Germany could simultaneously integrate with East Germany and maintain its long-term economic growth. The European Union appeared to be a miraculous machine that automatically generated prosperity and political stability alongside it.

After 2008, this perception changed, and the sense of insecurity accelerated with the current crisis in Greece and among the Mediterranean members of the European Union. The Germans found themselves underwriting what they regarded as Greek profligacy to protect the euro and the European economy. This not only generated significant opposition among the German public, it raised questions in the German government. The purpose of the European Union was to ensure German prosperity. If the future of Europe was Germany shoring up Europe — in other words, transferring wealth from Germany to Europe — then the rationale for European integration became problematic.

The Germans were certainly not prepared to abandon European integration, which had given Germany 65 years of peace. At the same time, the Germans were prepared to consider adjustments to the framework in which Europe was operating, particular from an economic standpoint. A Europe in which German prosperity is at risk from the budgeting practices of Greece needed adjustment.

The Pull of Russia
In looking at their real economic interests, the Germans were inevitably drawn to their relationship with Russia. Russia supplies Germany with nearly 40 percent of the natural gas Germany uses. Without Russian energy, Germany’s economy is in trouble. At the same time, Russia needs technology and expertise to develop its economy away from being simply an exporter of primary commodities. Moreover, the Germans already have thousands of enterprises that have invested in Russia. Finally, in the long run, Germany’s population is declining below the level needed to maintain its economy. It does not want to increase immigration into Germany because of fears of social instability. Russia’s population is also falling, but it still has surplus population relative to its economic needs and will continue to have one for quite a while. German investment in Russia allows Germany to get the labor it needs without resorting to immigration by moving production facilities east to Russia.

The Germans have been developing economic relations with Russia since before the Soviet collapse, but the Greek crisis forced them to reconsider their relationship with Russia. If the European Union was becoming a trap in which Germany was going to consistently subsidize the rest of Europe, and a self-contained economy is impossible, then another strategy would be needed. This consisted of two parts. The first was insisting on a restructuring of the European Union to protect Germany from the domestic policies of other countries. Second, if Europe was heading toward a long period of stagnation, then Germany, heavily dependent on exports and needing labor, needed to find an additional partner — if not a new one.

At the same time, a German-Russian alignment is a security issue as well as an economic issue. Between 1871 and 1941 there was a three-player game in continental Europe — France, Germany and Russia. The three shifted alliances with each other, with each shift increasing the chance of war. In 1871, Prussia was allied with Russia when it attacked France. In 1914, The French and Russians were allied against Germany. In 1940, Germany was allied with Russia when it attacked France. The three-player game played itself out in various ways with a constant outcome: war.

The last thing Berlin wants is to return to that dynamic. Instead, its hope is to integrate Russia into the European security system, or at least give it a sufficient stake in the European economic system that Russia does not seek to challenge the European security system. This immediately affects French relations with Russia. For Paris, partnership with Germany is the foundation of France’s security policy and economy. If Germany moves into a close security and economic relationship with Russia, France must calculate the effect this will have on France. There has never been a time when a tripartite alliance of France, Germany and Russia has worked because it has always left France as the junior partner. Therefore, it is vital for the Germans to present this not as a three-way relationship but as the inclusion of Russia into Europe, and to focus on security measures rather than economic measures. Nevertheless, the Germans have to be enormously careful in managing their relationship with France.

Even more delicate is the question of Poland. Poland is caught between Russia and Germany. Its history has been that of division between these two countries or conquest by one. This is a burning issue in the Polish psyche. A closer relationship between Germany and Russia inevitably will generate primordial fears of disaster in Poland.

Therefore, Wednesday’s meeting with the so-called triangular group is essential. Both the French and the Poles, and the Poles with great intensity, must understand what is happening. The issue is partly the extent to which this affects German commitments to the European Union, and the other part — crucial to Poland —is what this does to Germany’s NATO commitments.

The NATO Angle
It is noteworthy the Russians emphasized that what is happening poses no threat to NATO. Russia is trying to calm not only Poland, but also the United States. The problem, however, is this: If Germany and Europe have a security relationship that requires prior consultation and cooperation, then Russia inevitably has a hand in NATO. If the Russians oppose a NATO action, Germany and other European states will be faced with a choice between Russia and NATO.

To put it more bluntly, if Germany enters into a cooperative security arrangement with Russia (forgetting the rest of Europe for the moment), then how does it handle its relationship with the United States when the Russians and Americans are at loggerheads in countries like Georgia? The Germans and Russians both view the United States as constantly and inconveniently pressuring them both to take risks in areas where they feel they have no interest. NATO may not be functional in any real sense, but U.S. pressure is ever-present. The Germans and Russians acting together would be in a better position to deflect this pressure than standing alone.

Intriguingly, part of the German-Russian talks relate to a specific security matter — the issue of Moldova and Transdniestria. Moldova is a region between Romania and Ukraine (which adjoins Russia and has re-entered the Russian sphere of influence) that at various times has been part of both. It became independent after the collapse of communism, but Moldova’s eastern region, Transdniestria, broke away from Moldova under Russian sponsorship. Following a change in government in 2009, Moldova sees itself as pro-Western while Transdniestria is pro-Russian. The Russians have supported Transdniestria’s status as a breakaway area (and have troops stationed there), while Moldova has insisted on its return.

The memorandum between Merkel and Medvedev specifically pointed to the impact a joint security relationship might have on this dispute. The kind of solution that may be considered is unclear, but if the issue goes forward, the outcome will give the first indication of what a German-Russian security relationship will look like. The Poles will be particularly interested, as any effort in Moldova will automatically impact both Romania and Ukraine — two states key to determining Russian strength in the region. Whatever way the solution tilts will define the power relationship among the three.

It should be remembered that the Germans are proposing a Russian security relationship with Europe, not a Russian security relationship with Germany alone. At the same time, it should be remembered that it is the Germans taking the initiative to open the talks by unilaterally negotiating with the Russians and taking their agreements to other European countries. It is also important to note that they have not taken this to all the European countries but to France and Poland first — with French President Nicolas Sarkozy voicing his initial approval on June 19 — and equally important, that they have not publicly brought it to the United States. Nor is it clear what the Germans might do if the French and Poles reject the relationship, which is not inconceivable.

The Germans do not want to lose the European concept. At the same time, they are trying to redefine it more to their advantage. From the German point of view, bringing Russia into the relationship would help achieve this. But the Germans still have to explain what their relationship is with the rest of Europe, particularly their financial obligation to troubled economies in the eurozone. They also have to define their relationship to NATO, and more important, to the United States.

Like any country, Germany can have many things, but it can’t have everything. The idea that it will meld the European Union, NATO and Russia into one system of relationships without alienating at least some of their partners — some intensely — is naive. The Germans are not naive. They know that the Poles will be terrified and the French uneasy. The southern Europeans will feel increasingly abandoned as Germany focuses on the North European Plain. And the United States, watching Germany and Russia draw closer, will be seeing an alliance of enormous weight developing that might threaten its global interests.

With this proposal, the Germans are looking to change the game significantly. They are moving slowly and with plenty of room for retreat, but they are moving. It will be interesting to hear what the Poles and French say on Wednesday. Their public support should not be taken for anything more than not wanting to alienate the Germans or Russians until they have talked to the Americans. It will also be interesting to see what the Obama administration has to say about this.

By George Friedman

This analysis was just a fraction of what our Members enjoy, Click Here to start your Free Membership Trial Today! "This report is republished with permission of STRATFOR"

© Copyright 2010 Stratfor. All rights reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis.

STRATFOR Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules