Monday, 7 November 2011
EU DEBT CRISIS AND RUSSIA
On 7 November 2011, IMF Managing Director Christine Lagarde scheduled a meeting with Russian President Dmitry Medvedev to discuss the EU debt crisis and Russia's contribution to help during what appears a decade-long problem, after both Italy and France announced massive austerity measures. Some time ago I wrote a piece entitled "Should Russia and Israel Become NATO and EU Members?", suggesting that it would be in the best interest of both Russia and Europe if the former joined the EU and NATO. While it seems that Russia may contribute an additional $10 billion, of the half a trillion dollars in gold and foreign exchange reserves Russia enjoys, to help with the EU crisis.
The question is why should Russia help the EU now when the EU along with the US was doing everything it could to undermine Russia by using its various neighbors, former Communist countries and current republics that were part of the USSR, from the fall of the Communist bloc to the present. The IMF is in a very difficult position, for it hardly has sufficient funds to cover the EU debt crisis that is rapidly spreading throughout the continent. Without the cooperation of China Russia and other surplus countries, the IMF is no position to play the world's monetary policeman, and austerity measures globally will fail as a result of funding shortages.
That the $10 billion Russia is set to invest in IMF bonds was actually pledged since 2009, so Russia is keeping its distance unless the EU is willing to make tangible political, economic and military concessions. Will the EU make concessions to Moscow in order to attract at least ten times the amount that Russia is currently pledging? Russia currently has set aside $100 billion as 'rainy day fund', but it has reserves five times that amount that can be utilized for EU stabilization via IMF. My guess is that the EU will make concessions to Russia and to China, but not before the crisis reaches dangerous levels both economically and politically.