by Wolfgang Münchau
April 5, 2015
As the range of options for Greece appears to dwindle by the day, is it time for Athens to consider a strategic alliance with Russia as part of some plan B? We may find out this Wednesday when Alexis Tsipras is due to visit President Vladimir Putin of Russia. Greece’s prime minister might be tempted to default on all its foreign creditors and bondholders, exit the eurozone and get Moscow to provide some short-term funding to prevent a collapse of the banking system. In exchange, Mr Tsipras could offer to veto the extension of EU sanctions against Russia. Athens could also boycott the trans-Adriatic pipeline, through which the EU hopes to tap Caspian gas bypassing Russian territory. The longest section of the pipeline, over 500km, would run through Greek territory.
If only it was so simple. For all the speculation about the logic of such a deal, I remain profoundly sceptical for a number of reasons.
The first is that Mr Putin would probably not be able to bankroll Greece to any serious extent. The Russian economy is in bad shape. According to the latest Russia report by the World Bank it will decline by 3.8 per cent this year, mainly due to the fall in oil and gas prices. The sanctions did not have much of an impact initially. But they have effectively killed off investment, which in turn will lower future growth. The fall in energy prices has also made the sanctions more potent.
Russia is, of course, not about to run out of money, but its foreign exchange reserves are falling noticeably. The less headroom it has, the more vulnerable it will be to western sanctions or any further economic shocks.