Denis MacShane: Dealing with Russia – if political grandstanding doesn’t work, try economics

Denis MacShane

How to deal with Russia remains today’s most baffling foreign policy conundrum. Germany’s Angela Merkel, who speaks Russian, has kept communications channels open with Vladimir Putin, who speaks German. Boris Johnson at a German-organised summit on Libya in Berlin last month claimed there would be no normalisation of UK-Russia relations until Moscow ceased its “destabilising activities”.

It is not clear if Russian authorities bothered to take any notice of the Prime Minister given his own Brexit destabilising project, but Johnson got his cold war-era headlines in the press in London. Now France’s president Emmanuel Macron is trying his hand.

Last August Macron hosted Putin at the French president’s official seaside residence on the Riviera just ahead of the G7 summit, where Macron suggested Putin should be allowed back in to make it the G8.

The French president likes to point out that it is odd that Europe and the West had better relations with Leonid Brezhnev than the US or Europe have with current Russian leaders.

Brezhnev was a communist dictator who sent tanks to occupy Prague in 1968 to crush any challenge to the Soviet empire, put dissidents into psychiatric prisons and sent arms to any group opposing the West and its allies. Are today’s Russian politicians worse than him?

Macron told students in Krakow, Poland this month: “France is neither pro-Russian nor anti-Russian, it is pro-European, and when I look at a map we see that Russia is in Europe.”

While Johnson huffs and puffs on Russian leaders, some of the most powerful stakeholders in the British economy are getting deeper into Russia and appear to have some influence in working out a mutual agenda on climate-change policy even if the foreign policy tensions remain.

BP is the UK’s fifth-biggest firm listed on the London Stock Exchange and worth nearly £1 trillion. Rosneft, the Russian energy firm, has 30.3% in BP’s hydrocarbon production while Rosneft’s share in BP oil production stood at 41.8%. BP holds 20% of Rosneft shares.

Bob Dudley, the former BP CEO, turned round the firm’s fortunes after the disaster in the Gulf of Mexico in 2010 and has no doubt that working with the Russian firm makes sense. Over the past years Dudley has repeatedly stated the strategic nature of holding a stake in Rosneft.

However, he has been succeeded by Bernard Looney, who was chief executive in the Upstream division.

So will Looney maintain the full-on commitment of Dudley at the British energy company, which over many decades has had the most intimate links with Downing Street and the Foreign and Commonwealth Office (FCO)?

Johnson can say what he likes about Putin but as long as BP and Rosneft remain intertwined as they are today then the UK and Russia are fully connected.

Speaking about the relationship with Rosneft, Dudley said: “To me, it is a great partnership. It’s been hard-won and it’s strategic, I think it’s got enormous optionality, not only for the shareholding in Rosneft, but also the joint-venture projects we’ve worked with and are working and producing from with Rosneft.”

BP also reckons its Rosneft stake is helping draw Russia into the process of greening the global energy industry.

Rosneft’s total green investment over the past five years has exceeded 240 billion rubles (£2.9 billion) with its large-scale programme to reduce the flaring of associated petroleum gas to less than 5%.

For critics of any kind of oil or gas energy all this amounts to greenwashing. Yet the respected Carbon Disclosure Project, run by an independent non-governmental organisation which produces reports on how global capitalism is handling climate change, has assigned Rosneft a B rating, the highest among the participating Russian oil and gas companies. The rating is two levels higher than the average of participating European companies.

A major project on APG reduction has been one of Rosneft’s most important initiatives over recent years. According to Bloomberg, Rosneft is already ahead of BP in terms of combating greenhouse gas emissions and holds second place in the league table in the global oil and gas sector.

In 2019, Rosneft signed up to another global green initiative, the Methane Guiding Principles, which so far only the biggest world energy firms are backing as getting national governments and middle-rank energy firms to accept compulsory limits and regulations is slow work.

The focus on Russian foreign and military policy outings means there is little coverage or understanding of the extent to which serious economic actors in Russia in alliance with firms like BP are working on solving some of the world’s most intractable problems.

Denis MacShane is a former minister of state at the FCO and writes on European policy and politics