The Kremlin’s Web in Eastern and Central Europe

Russia’s economic footprint bottoms at an impressive 12% in Hungary and Slovakia and peaks at an astronomical 27% in Bulgaria, with considerable clout in Latvia, as well. How can they escape, and why don’t they?

Perhaps one of the most iconic Russian idioms, a favorite in Brighton Beach households and Odessa street corners, reads “кто ищет, тот всегда найдет.” It’s an inspirational message with a Soviet twist that tells you that whatever you go looking for, you’ll find, whether good or bad.

It’s a saying that can easily make its way into an Economist cartoon, satirizing Vladimir Putin’s conquests in Crimea, but, at the same time, is scarily indicative of the Kremlin’s current foreign and economic policy efforts. Thrown out of hegemony during the transition to a market economy, Russia is looking for a way back in, and with its currency struggling and a lack of diversity of resources (read, only two: oil and gas), state-owned businesses have increasingly acted as Trojan Horses into the economies of neighboring countries, marring the already grey area between business and politics.

A Quantifiable Presence

Armed with the impressive diplomatic and economic reach of its Organization for International Economic Cooperation, as well as the vast piles of money oligarchs can afford to throw into the Kremlin pipeline for state benefits, Russia is doing all it can to deeply entrench itself in a mostly unmonitored and unregulated Central and Eastern Europe, aided often by local governments’ willingness to turn a blind eye in return for a nice check [1]. To back that up with some numbers, we find that, as per a joint CSIS and CSD strategic research study, Russia’s economic footprint bottoms at an impressive 12% in Hungary and Slovakia and peaks at a astronomical 27% in Bulgaria, with considerable clout in Latvia, as well [2]. Big Vlad’s political network overlaps neatly with his economic expansion plans, utilizing pro-Russia governmental actors in Central European countries to point away from the European nexus and back towards the Russian one. Putin is out looking for power, and, currently, he’s finding it.

Helping Hands

Putin’s fight, as we know it, is ambitiously twofold: to undermine European liberal-democracy and increase Moscow’s economic footprint in neighboring countries. He achieves the former through the latter, and the latter through Russia-based corporations, particularly Gazprom and Rosneft, and their subsidiaries/allies. The key to Russia’s success here is that, for the most part, its efforts to economically “re-imperialize” have been greeted with rich, open arms. Whether in Serbia, Latvia, or Bulgaria, Putin has been able to find influential pro-Russian pockets/agents that push his agenda and bushwhack a trail for him to follow into the heart of the respective country’s economy. In Serbia, this is Dusan Batajovic, deputy leader of the nation’s pro-Russia party, as well as the CEO of Srbijagas, a prominent oil company in the region, who helps ensure that the Serbian government remains fairly undiverse in its gas supply, letting Russian or Russian-allied multinationals monopolize the market. In Latvia, Juris Savickis is of interest – a former KGB officer who is friendly with Putin to this day and the CEO of Itera Latvija (subsidiary of Russian-based Itera), he advocates strongly against Latvian economic liberalization, citing higher prices and lack of substantial change in the aftermath. Savickis is currently being considered by Putin to chair the board of Gazprom [2]. These “friends abroad” help smooth Russian reentry, but also, in many cases, effectively hide the true nature of Russian direct investment through shell companies, offshore accounts, and the simple fact that it’s the country itself that, at the end of the day, makes the calls, not the Kremlin [3]. We’re not talking about a blatant violation of sovereignty, because the EU, the UN, and the US would be all over that and we’d go back to the classical Russian “age of sanctions”. Instead, it’s a far more subtle involvement that dodges the radar of supranational watchdogs, yet accomplishes much more than a sirens-blaring guns-blazing Russia is potentially capable of.

The Kremlin’s Web

On a more macro political note, one can posit, with some conviction, that the recent rise of populism in some European countries could very well be attributed to the Kremlin’s economic foothold in many of these countries, as elected officials vote a certain way for gas and oil prices to be leveled, a key factor in re-election [1]. For this, we look to the recent re-election of Hungarian Prime Minister Viktor Orban. As an eminent pro-Russia pro-Putin voice, Orban was rewarded with a convenient drop in gas prices just before the Hungarian election took place, allowing him to successfully run a campaign on a future of low gas prices and economic fortitude [4]. Conversely, this relationship could go the other way, with Rosneft hiking up oil prices to pressure dependent sovereigns to act in Russia’s best interest. Right now, there seems to be nothing to change the nature of this relationship: Russia found what it was looking for and is satisfied.

The Near Future of Emerging Capitalist Markets Today

The unfortunate but necessarily heeded takeaway from all this is that emerging and weak capitalist markets simply cannot seem to exist independently and freely in our globalized world today. The upside to this is that it necessitates global cooperation and investment, infusing a nascent economic landscape with the capital necessary to form its backbone and begin to carve out its own diplomatic, economic, and political partnerships. However, the tightly intertwined downside is that, too often, this initial investment turns sour and transforms into a modern form of colonialism/imperialism, wherein a larger economic hegemon siphons the economic capital out of a country while keeping it active and dynamic on the global market. This has long been the case with past American involvement in Central America (banana republics and such) [5] and now, as we discussed, see it again with Russia and Central/Eastern Europe.

Pivoting to Economic Freedom

To not end on such a dispiriting note, I’d be remiss if I didn’t offer an alternative to the sovereigns currently under the Russian umbrella. To that end, I’ll refer to the notion of the “pivot state” that Ian Bremmer [6] describes in his book, “Every Nation for Itself”, twisting it a little to better fit the scenario these countries find themselves in. The central idea behind the notion of a “pivot state” is that a country has the option to “pivot” towards a variety of other countries in search of trade deals, diplomatic alliances, and other such collaborative efforts without endangering whatever deals/alliances/etc. it currently has. Bremmer [7] uses the case studies of Turkey and the African continent as successful pivot states/regions, noting that the former benefits from both membership in NATO and strong influence in the Middle East, while the latter has weaned itself off of IMF and World Bank adjustment loans and instead opened itself up to foreign direct investment, particularly from China. In a similar vein, countries currently under the Russian shadow should seek pivot positions of their own, most likely moving towards Europe and away from lingering Russian domination. While this is undoubtedly easier said than done, slow diversification coupled with austere anti-corruption measures will rid Russia of its “insiders” in the countries involved and make it more difficult to sow its seeds of soft power [3].  However, until Bulgaria, until Serbia, until Latvia are able to find and exercise these pivot positions, Putin and his motleycrew of oligarchs will continue to ride the oil and natural gas wave, from country to country, all the way to the bank.

[1] Vladimirov, M. & Stefanov, R., 2016. The Kremlin’s Economic Grip on Europe. Foreign Policy. Available at: The Kremlin’s Economic Grip on Europe [Accessed January 23, 2019].

[2] Conley, H.A., 2016. The Kremlin Playbook. The Kremlin Playbook: Understanding Russian Influence in Central and Eastern Europe. Available at: [Accessed January 23, 2019].

[3] OCCRP, 2017. The Russian Laundromat Exposed. OCCRP. Available at: [Accessed January 23, 2019].

[4] Dunai, M., 2014. Hungary’s ruling Fidesz party plans more energy price cuts -paper K. Maxwell, ed. Reuters. Available at: [Accessed January 23, 2019].

[5] Jones, G. & Bucheli, M., 2005. The Octopus and the Generals: The United Fruit Company in Guatemala. The HBS Case Method – MBA – Harvard Business School. Available at: [Accessed January 23, 2019].

[6] Bremmer, I., 2013. Every nation for itself: winners and losers in a G-Zero world, London: Portfolio.

[7] Bremmer, I., 2012. The Future Belongs to the Flexible. The Wall Street Journal. Available at: [Accessed January 23, 2019].

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