Is Greece’s default beneficial to Russia?


June 29, 2015

Is Greece’s default beneficial to Russia?

By Anton Zheleznyak

Translated from Russian by J.Hawk

In view of the recent worrisome developments and media announcements that Greece will stop the repayment of its IMF credits as of June 30, it’s a good time to think what effect would Greece’s default have on Russia.

Of course, a default is always a bad thing, but given the extremely harsh globalization and debt burden, the default would enable Greece to free itself of Europe’s credit burden and influence and permit Russia obtain a new ally in southern Europe…

1) Only two months ago Putin said that Russia would participate in the privatization of Greece’s assets:

“Concerning Russian companies’ possible participation in the privatization of certain Greek industries or infrastructure. If Greece carries out privatization of its economy, we are ready to participate and hope that Russian firms will be able to participate on the same terms as others,” Putin said at a joint press conference with Greece’s PM Aleksis Tsipras.

It means Russia’s strengthening its presence in Greece’s industrial and energy sectors.

2) Undermining US interests is always a plus.

Washington hopes that Greece, in throes of a debt crisis, will remain a Eurozone member, said White House press secretary Josh Earnest. “EU members ought to decide whether Greece will remain its part…but it is something that’s in our interest,” said Earnest.
He also said that Barak Obama discussed the situation in Greece with Hollande. In his words, the two leaders emphasized the importance of Greece carrying out reforms.

No matter what, Greece’s exit would push it toward active cooperation with Russia which is already a bad thing from the point of view of our Atlantic “colleagues.”

3) The default will reduce the cost of real estate and trips to Greece.

Greece’s possible default and “grexit” may be beneficial to Russian tourists.But if the EU adopts strict conditions, it may finish off the country’s tourism, believe Russian travel firms.

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What is more:

Realtors who specialize in selling Greek real estate to Russian clients were able to make money off both countries’ economic problems. The devaluation of the ruble combined with the expected Greek default and “grexit” increased Russian demand for Greek real estate, according to realtors surveyed by RBK. In their assessment, the demand on expensive housing in Athens suburbs and on the Halkidiki peninsula increased by 30-50%.

4) Greece and Russia will strengthen their energy cooperation

Russian Foreign Ministry announced a phone conversation between Lavrov and Kodzias on June 29, upon the Greek side’s request. “Both parties expressed interest in building gas transit infrastructure on Greece’s territory as part of the Turkish Stream project.”

These negotiations are taking place in the context of the understandings reached by Putin and Tsipras at the St. Petersburg Economic Forum:

“The meeting between Putin and Tsipras included discussions concerning energy matters, in particular the routes for transporting Russian gas through the Turkish Stream pipeline,” Peskov summed up the two leaders’ meeting.

1) The default would be extremely beneficial to Russia due to the access to privatization market.
2) Procuring Greek assets will strengthen Russia’s position on Greece’s market.
3) Greece will be praying for the “Turkish Stream” because it will be useful not only for us but also for Greece by bringing in big investments.
4) The drop in prices will attract Russian business capital and tourists.
5) One should not forget that the Kremlin is also promising to lift the food embargo at some future point, which will stimulate further development of the bilateral relationship.

Therefore the approaching default has not only minuses but also several pluses for both Greece and Russia. We may acquire a dependable partner in southern Europe and once again demonstrate the resilience of our political position.

P.S. Right now Greece is experiencing a massive demonstration in support of the government and against the creditors’ harsh demands.

J.Hawk’s Comment: There are other dimensions of the potential Greek default. One of them might be the triggering of a major economic crisis that would have global consequences–there would be no winners in this scenario, only countries more or less damaged by it. However, that’s a relatively low-probability scenario. It would also damage, possibly irreparably, the image and reputation of not only European institutions but the EU as a whole, resulting in greater friction among member states and less unity on most issues, including Ukraine.

Whether that’s a positive development is another question. A while ago I translated another article dealing with Russia’s Greece strategy which posited that Russia doesn’t want a major EU crisis because that would strengthen the US hand in Europe, as individual member states would run under the US wing for protection. Whether the US actually wants to assume that kind of responsibility is, of course, debatable.

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