While Greece spent
Easter weekend (not Orthodox Easter that is)assuring the IMF (the "institution", not the critical
third member of the Troika that shall not be named) that the €450
million payment due to Christine Lagarde's "institution"
will be made despite Greece officially (rather than just
unofficially) running out of money and being forced to prioritize
repaying its creditors over paying wages and pensions, its Prime
Minister is currently evaluating what the Plan B will be when he
visits Vladimir Putin tomorrow, one day ahead of the double Greek
deadlines of IMF payment and cash running out.
As FT
reports, "when Alexis Tsipras visits Vladimir Putin’s
Kremlin on Wednesday there is a chance the Greek premier’s eastern
manoeuvre will immediately bear fruit: kiwis, peaches and
strawberries to be precise. Athens
is hopeful that Moscow will lift a retaliatory ban on Greek soft
fruits to demonstrate the abiding strength of Russo-Greek relations,
just as both leaders feel a diplomatic chill with Europe over the
Ukraine crisis and Athens’ bailout saga respectively."
Of course, every Greek
request for a concession "quid" will be met with a
proportional Russian quo, and it is this that worries European
diplomats - namely will the Putin-Tsipras gladhanding amount to
something more significant than fruit trade. "The
big fear, in the words of one suspicious senior official, is a
“Trojan horse” plot, where Russia extends billions in rescue
loans in exchange for a Greek veto on sanctions — a move that would
kill western unity over Ukraine."
No such shock
is expected this week. But as Athens nears the brink of insolvency
there is growing alarm that Mr Tsipras’s radical left government
might turn to Moscow in desperation. It would set off the biggest
panic over Greece’s strategic alignment since the 1947 US Marshall
Plan, initiated to save the country from communist fighters that Mr
Tsipras’ Syriza party lionise to this day.
Others are hoping that
Tsipras visit is merely a, well, Trojan
horse strawman,
meant to instill fear in Europe that Russia can spread its tentacles
to a country which is still a member of the Eurozone, and is merely a
"ploy in bailout talks with Germany and the eurozone. In spite
of historic cultural ties and Syriza’s Soviet romanticism, analysts
think Greece is too tied to the west – through EU and Nato
membership – and too deep in debt for sanctions-damaged Russia to
buy it off as a reliable ally."
“The Greeks
are using Russia as a way to piss off Berlin, to frighten them.
Tsipras wants to show he has other options,” said Theocharis
Grigoriadis, a Greece-Russia relations expert at the Free University
of Berlin.
“But
he has no intention of making Greece a Russian satellite. The
Russians know that. The Germans know that. It is pure theatre, a
Greek game, and I’m afraid it looks like a poodle trying to scare a
lion.”
And that is 100%
wrong, because every decision has a bid and an ask. And all it would
take for Russia to expand its "satellite" nations by one
more is to offer enough promises and gifts to a nation that has been
on the verge of social and economic collapse of the past 5 years.
Such as a discount to
all important energy prices and, even better, a replacement loan -
one which comes with less "austere" conditions than
anything Greece could get out of Europe. Which, according to Russian
Kommersant as reported by Reuters, is precisely the carrot that
Russia will dangle before the Greek PM. From
Reuters:
Russia
may offer Greece a discount on gas deliveries and new loans when
Greek Prime Minister Alexis Tsipras visits Moscow this week, the
Kommersant business daily reported on Tuesday, citing one source in
the Russian government.
A Kremlin
spokesman said last week that Russian President Vladimir Putin and
Tsipras planned to discuss economic ties and EU sanctions on Moscow
when they meet for talks, which Kommersant said would take place on
Thursday.
"We
are ready to consider the issue of a gas price discount for Greece,"
the
newspaper said quoting an unnamed Russian government source.
Russia's
state-controlled producer Gazprom declined to comment. The Energy
Ministry also declined to comment.
The source
said that in exchange for the discount and some unspecified loans,
Russia would want access to Greek assets. The source did not name any
specific assets.
In recent
weeks, the gas price charged by Gazprom has fallen, tracking lower
oil prices. Gazprom said it wanted to acquire DEPA in 2013 but
dropped its bid after failing to receive enough guarantees over
DEPA's financial position.
So that is the Russian
offer. The all important question remains: what will Russia request
in return for these key concessions and will Greece be willing to
accept it. Then again, running out of cash may just be impetus Greece
needs to open up negotiating avenues which until recently it had said
it would never cross as long as it is part of the Eurozone.
Greek
prime minister to sign accords with Russia, including gas price
discount and possible loans in return for Greek assets, that would
alarm EU credдtors
And RT -
Here
is what you need to know about Putin's meeting with Tsipras
Greek
Prime Minister Alexis Tsipras will meet Russian President Vladimir
Putin on Wednesday. Greece could ask Moscow to bankroll a bailout,
Gazprom could agree to a gas discount, or the two sides could talk
about how to sidestep EU sanctions.
The
new 40-year-old leader of one of the world’s most indebted
countries with meet with Putin on Wednesday, just one day before the
country is due to repay €463.1 million to the International
Monetary Fund. The Greek Prime Minister arrives in Moscow on Tuesday.
Is
Russia going to bail out Greece?
Rumors
have been abuzz that Athens and Moscow are plotting a secret bailout
ever since the idea was first floated
by Russian Finance Minister Anton Siluanov days after the Syriza
party won the elections in January. Russian daily Kommersant reported
that Moscow is ready to offer indirect financial help, citing an
unnamed government source.
“We
are ready to consider the issue of allowing Greece a gas discount:
under the contract, the gas price is linked to the oil price that has
gone significantly lower in recent months,”
as Kommersant
cites a Russian government source.
“We
are also ready to discuss the possibility of allowing Greece new
loans. But in turn we are interested here in reciprocal moves, in
particular in terms of Russia getting certain assets from Greece,”
the source added, without specifying the sort of assets he was
talking about.
Greek
Finance Minister Yanis Varoufakis has said that his country “will
never ask for financial assistance from Moscow,”
in an interview
with Zeit online in early February.
Wait, does Russia have the money for this?
Yes
and No.
Government
officials have hinted that Russia’s help, if provided, would be
indirect.
Most
economists around the world are more positive about the Russian
economy, but everybody agrees it will contract this year between 4
and 3 percent. Most recently S&P improved its economic outlook
for Russia, saying it’ll return to growth in 2016 and add 1.9
percent.
In
the first quarter of 2015, the economy expanded 0.4 percent, and the
Russian ruble, which lost nearly 50 percent in 2014, is now the best
performing currency of the year.
Though
Russia ‘s economy isn’t as strong as it was two years ago, and
growth is near zero, it still has a lot saved up for a rainy day -
$356,365billion in currency reserves as of April and over $150
billion split between the country’s oil reserve funds, the National
Reserve Fund and National Welfare Fund. If the Russian economy goes
nose first into a recession, these funds are expected to keep the
financial situation stable for 2-3 years.
Russia
provides financial aid and loans to most former Soviet countries. In
March, the Kremlin prolonged a $2 billion loan to Belarus, and in
February agreed on a $270 million loan to Armenia. In 2013, just
before Ukraine began its pivot towards Europe, Russia gave Kiev a $3
billion Eurobond loan.
The
question isn’t if Moscow has the money but if it wants to get a
‘political dividend’ by getting another ally and sink money into
Greece, which has already sucked up €240 billion in EU debt and
hasn’t posted GDP growth in six years.
What
about a gas discount for Greece?
Gas
has become an important issue in economic relations between Russia
and Greece, after President Putin announced the new Turkish Stream
pipeline that will travel to the Turkish-Greek border. Both Russia
and Greece are interested in the project but Athens’ stance largely
depends on the gas price Russia will offer.
On
March 30, Greek Energy Minister Panagiotis Lafazanis met with Russian
counterpart Aleksandr Novak as well as Gazprom head Aleksey Miller in
Moscow to discuss a gas discount for Greece as well as the
‘take-or-pay’ clause, which requires Athens to buy gas it doesn’t
use.
Under
the current contract, Greece’s state gas company DEPA buys gas at
$300 per 1,000 cubic meters. In 2014, DEPA was able to secure a 15
percent discount from Gazprom. Greece may be able to secure a further
discount or renegotiate the ‘take-or-pay’ part of the contract if
Athens offers Russian companies oil assets or rights to explore oil
and gas deposits in the Ionian Sea.
In
2013, Gazprom made a €900 million bid to buy a controlling stake in
DEPA, but backed out of negotiations at the last minute, citing
concerns over the company’s financial stability. Gazprom currently
controls almost 70 percent of the Greek gas market.
During
the talks, Lafazanis also discussed the prospect of Greece joining
the Turkish Stream pipeline project, which will have the potential to
deliver 47 billion cubic meters of gas to Europe via Turkey. Gazprom
said the onshore
route
will pass through the Black Sea and reach the Turkish port of
Kiyikoy, and then travel to the Turkish-Greek border near the town of
Ipsila.
Can
Moscow lift sanctions on Greece?
Russia’s
agriculture counter-sanctions against the EU do not expire until
August 2015, a year after they were enacted as a counter measure to
protect Russia’s economy.
Greece
has been hit especially hard by Moscow’s food
ban,
as more than 40 percent of Greek exports to Russia are agricultural
products. In 2013, more than €178 million in fruits and conserves
were exported to Russia, according to Greece’ fruit exports
association, Incofruit-Hellas.
Russian
Minister of Agriculture Nikolai Fyodorov has said food sanctions
against Greece would be lifted
in the event that Athens leaves the EU. While Greece is a part of the
EU, it cannot sign any trade agreements with Russia.
As
an EU member, Greece has the power to veto further sanctions against
Russia. Alexis Tsipras has openly said that sanctions against Russia
are a “road
to nowhere”.
Other Moscow-friendly states include countries with very close
economic ties to Russia- such as Hungary, Slovakia, Italy, and the
Czech Republic.
Russia
is Greece’s biggest trading partner, with net trade in 2013 nearly
$12.5 billion (€9.3 billion), more than Greece and Germany in the
same year. Russia is the biggest source of imports for Greece,
accounting for 11 percent in 2013.
Once
Russia’s food market is again open, Greece, along with Turkey and
Cyprus, will be the first to re-enter, according to Sergey Dankvert,
head of Russia’s food inspector, Rossвlkhoznadzor,
After
the trip, what’s next for Greece?
While
Tsipras is still in Moscow, Greece is expected to make a €463.1
million payment on IMF loans. By the end of May, another €768
million is due.
If
Varoufakis goes back on his statement and Greece does default on its
loans from EU creditors, leave
the eurozone and shared currency, and then ask Moscow for a few
billion to get by - the situation would shock almost everyone and
spark chaos across financial markets since Greece has repeatedly said
it intends to pay off its massive €324 billion debt.
The
reason the EU came to Athens’ rescue with two bailouts totaling
€240 billion was to protect the euro currency, which is shared by
18 countries including Greece.
So
far, Athens has signaled it wants to keep borrowing from the EU, but
just under different terms. If for some reason Greece decides to
default on its IMF debt, it would be the first developed country to
ever do so.
The
Greek economy hasn’t expanded since 2008 and has rapidly come to a
grinding halt under stringent EU conditions.
Greece
was given
a four month extension on its bailout plan from its lenders, and the
next step will be decided after Athens can convince EU ministers they
are serious about economic reform. However, ministers from Greece
have said they do not intend to default on any financial obligations
to their lenders.
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