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Russia sees the EU as a competitor for influence and control of a number of eastern states where Russia has existing power over local governments or wishes to increase her influence. Georgia and Moldova have been seeking EU membership. Georgia borders Russia and Moldova borders Ukraine. Russia has influence over Transnistria, the eastern part of Moldova, whilst the rest of the country is more pro EU. The Georgia EU application is currently stalled as the EU disapproves of recent actions by the government there.
Russia wants to rebuild her old USSR empire and as is evident, will use force where necessary to try to complete the re assembly of the territories. In contrast, the EU proceeds by negotiation. Elected governments have the difficult task of judging the degree of consent of their voters for EU accession. This makes eastern Europe politically unstable and prone to domestic strife or regional hostilities. World markets are concerned about possible escalation of regional conflict, and the impact sanctions and war damage can have on vulnerable commodities like oil and grain.
There are also disputes on the Caucasus borders. South Ossetia seeks independence from Georgia and is under Russian influence. Turkey has applied for EU membership. Armenia and Azerbaijan are negotiating a peace Treaty following disputes over territory. Armenia is exploring EU membership. However, Russia is looking for allies and opportunities to intervene in these border states, as it consolidates its hold on Belarus.
The EU is also advancing in the Balkans. Montenegro and Albania are the front runners to join. Serbia, North Macedonia, Bosnia and Herzegovina and Kosovo will take longer with more obstacles to full membership.
During an often long process to gain membership candidate countries have to align their laws with the EU and amend their constitutions to match EU legal and democratic procedures.
But in the background, many existing EU governments already face growing political opposition towards the high levels of current migration. While the EU seeks to defend its open borders policy, some member states are imposing checks and physical border controls against EU neighbours in response to increasing domestic political pressures. The recent large numbers of migrants arriving in Ceuta, an outpost of Spain, added to the alarm of other member states, demanding Spain avoids crossings to the mainland, where they would be free to travel anywhere within the EU. Germany and France are likely to seek tougher controls on migration in response to the challenge from anti migrant parties. The drift of European politics will be to the radical right, dominated by the issue of migration and based on general dissatisfaction with rising prices, the cost of living squeeze and the lack of economic growth in much of the continent. None of this bodes well for the expansion of the EU into Eastern Europe.
About the author
Lord Redwood is a well-known commentator on governments and economies, with long experience of investment markets. Trained as an analyst at Robert Flemings, he moved to N.M. Rothschilds where he became a Manager and Director of pension and charitable funds and Head of Equity Research. He was seconded to become Head of the Downing Street Policy unit before chairing a large, quoted UK industrial business. He served as an MP and a government minister.
In 2007 he set up Pan Asset with a colleague, an investment management business that pioneered active/passive funds and models in the UK. Following the sale of the business to Charles Stanley, a quoted investment manager in the City, he became their Global Chief Strategist advising on non-UK markets and economies. He also ran a demonstration fund for the FT, writing articles about it and illustrating the use that can be made of ETFs in portfolios.
John provides insights into the big investment issues of the day from the debt and spending problems of the major governments to the green and digital revolutions which have so much impact on equity markets. He is a Distinguished Fellow of All Souls College, Oxford, where he helps with their Endowment investments and gives occasional lectures on modern economics and politics.
Lord Redwood has supported the team at EPIC Markets with regular thought pieces, and with their migration to WH Ireland, will continue to add his personal views on topical matters.