Moscow’s new naval partner?

Financial Times (UK) Wednesday, March 21, 2012

By Ian Bremmer *

Why is Russia so adamant in defence of Bashar al-Assad? Much to the consternation of US and European officials, Moscow has blocked efforts within the UN Security Council to further isolate the Syrian regime. Russian foreign minister Sergei Lavrov says his government feels burnt by the way Nato used a UN resolution to bomb Libya last year. That is not credible. Mr Lavrov knows precisely how the language of a UN Security Council resolution is crafted – and how it can be interpreted.

No, Moscow protects Mr Assad because it needs his government right where it is. Syria is Russia’s most reliable Middle Eastern partner. In fact, Mr Assad, like his father before him, buys most of Syria’s military hardware from Moscow – taking on considerable debt in the process. Russia forgave about 75 per cent of those obligations in 2006 in exchange for use of Syria’s naval bases at Latakia and Tartus. For Russia, access to a Mediterranean port is of great strategic value: it has invested heavily in both sites, using Latakia as a submarine base, and hopes to add the space and capacity to use Tartus for missile cruisers. The Russians apparently fear that losing Mr Assad could mean losing these valuable Mediterranean ports.

Are they right? We’re likely to find out. Mr Assad has so far survived the increasingly violent challenge to his rule. Defections from his army have been limited. Syria’s business elite has yet to abandon him. But as his regime becomes more isolated, Russian protection and a willingness to use any means to hang on to power are unlikely to be enough. Mr Assad’s days are probably numbered, and Syria’s next government may be less favourably disposed to Moscow. So where can Russia turn to maintain a Mediterranean naval base? How about Greece? As you may have heard, Greece desperately needs a reliable long-term source of revenue. Its citizens are wondering how they can return to economic growth while embracing the austerity prescribed in Brussels and Berlin. Outsiders are wondering what Greece has to sell.

But as western investors retreat, state-owned Russian and Chinese companies have gone bargain-hunting. Cosco, China’s state-owned shipping company, has already won a 35-year concession to operate the Greek port of Piraeus. Russia’s Gazprom is reportedly eyeing the privatisation of Greek gas company Depa and grid operator Desfa.

A 30- or 50-year deal that provides Russia’s navy with basing rights at Piraeus might one day make sense for both sides. Over time, the deal could bring Greece’s cash-starved government as much as $200bn.

It is impossible for Lucas Papademos and his technocratic government to cut such a deal, in part because Greece’s Nato allies would strongly object. But a future Greek coalition led by the New Democracy party, under enormous populist pressure to raise money and to resist demands from Berlin and Brussels, is another matter.

The implications are worth considering. Uncompetitive Greece may have more financial flexibility (and leverage) than its European negotiating partners yet recognise. And if some combination of Greek resentment and European demands were one day to force Greece out of the EU, Nato could be in for a fresh round of hostility between Greece and Turkey. In fact, if EU and Nato membership were meant in part to create new bonds between these traditional antagonists, a Greek exit might throw that trend into reverse.

Greece has every reason to stay in the EU and European institutions have plenty of leverage: Greece just received about €170bn from the EU and International Monetary Fund and more help is possible. The European Central Bank has provided about €130bn to support Greek banks. The EU and IMF will hold about two-thirds of Greece’s debt. Nato membership provides other benefits. These are a few of the reasons why Greece is unlikely to leave the EU soon.

But over time, the effects of austerity on Greece’s economy, and the resulting resentment towards Germany and European institutions, could change the terms of debate – inside Greece and across Europe. That’s why the rest of Europe should take note. Greece has no parachute today. But over time, it might have more options than we think.

* The writer is president of Eurasia Group, a political risk consultancy