Greek Prime Minister Alexis Tsipras’ first call outside the Hellenic Republic after the July 5 bailout referendum was to Russian President Vladimir Putin. He was looking for money. Just 1 billion euros—a meager sum in comparison with Greece’s total debt — from Russia in the form of short-term bonds or investments in future construction projects would have doubled the liquidity in the Greek banks. According to Louka Katseli, the head of the Greek National Bank, at the time of the referendum, the country’s banks contained only 1 billion euros, while Greeks had 120 billion euros in bank deposits.

Tsipras’ call to the Kremlin was an attempt to show the Europeans that he had not exhausted all his options, and that he could turn elsewhere for financing. Even if Putin had only promised to invest in future Greek construction projects, it would have strengthened Greece’s bargaining power at negotiations with the Europeans. Tsipras made a similar point at the St.Petersburg Economic Forum in June, saying that Greece was “unafraid of sailing in large seas, in new seas, in order to reach new and more secure ports.” 

Alexander Baunov
Baunov is a senior fellow at the Carnegie Endowment for International Peace and an editor in chief.
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The BRICS could offer such a port: Russia’s Deputy Finance Minister Sergey Storchak suggested in May that Greece might want to consider BRICS membership; that Athens’ salvation might lie in the new BRICS Development Bank, which Moscow has touted as an alternative to the IMF. Assistance to Greece was even a topic of discussion at the recent BRICS summit in Ufa, though the five member states ultimately offered Athens no relief

Putin could have helped Greece for ideological reasons: Greece’s pro-Russian government is smack dab in the middle of the Western world, and an EU and NATO member state. Who could be a better ally for Russia? But Moscow gave Athens nothing.

So why didn’t Putin throw Greece a lifeline? Because Putin understands democracy: Syriza was not in power six months ago, and thanks to free and fair elections, might be out of power six months from now. Putin promised former President Viktor Yanukovych’s Ukraine — where elections were demonstrably less free — $15 billion. The Kremlin eventually doled out $3 billion, and is still trying to get its money back.

Indeed, Putin prefers not to give money to democratic countries unless he can get something tangible in return—like blocking EU sanctions, which Greece is incapable of doing. Russia only cares about a few specific things that Greece can offer. Russia would like to participate in privatizing DEPA (Greece’s monopolistic state natural gas corporation) and buy the gas transportation system in order to sell gas directly to consumers throughout the country rather than at its borders. Unfortunately for the Kremlin, the EU’s “Third Energy” package won’t allow it.

Russia could also build a strategic pipeline through Greece, like the South Stream or the old Burgas – Alexandroupolis pipelines. But the Bulgarians won’t allow it as long as the Turkish Stream project is on the table. Russian Railways (RZD) has expressed interest in the money-losing Greek Hellenic Railways Organization (OSE). RZD President Vladimir Yakunin wants to invest in OSE in part because of Russia and Greece’s shared Orthodox tradition, though acquiring OSE would also have practical implications: when the Chinese privatize the port of Piraeus and offload the goods shipped through the Suez Canal, Russia would then distribute them throughout Europe by rail.

Alternatively, Russia could buy a Greek oil refinery or another natural state monopoly, although these assets are hard to come by. Of course, the Europeans aren’t thrilled about the prospect of Russia buying a state monopoly in an EU member state. And the Greeks are wary of this proposition as well: state-run companies in Greece are massive public employment social projects, and the Russians have a history of refusing to subsidize surplus labor. The Greeks feared Russian owners in the 1990s and still do; they have always attempted to sell the Russians their shares without management privileges: a “you invest – we manage” kind of deal that the Russians have refused to accept. Putin hasn’t even relaxed the counter-sanctions on Greek vegetables and fish. Russia grants no exceptions for promises of loyalty; only actions matter.

Putin could certainly spare a couple of billion dollars, even in these hard times. In 2008, when Iceland was going bankrupt, Russia contemplated giving Reykjavik $5 billion in aid; in 2013, during the Cyprus crisis, rumors of a $2.5-billion aid package circulated. However, Russians kept their money in Cypriot banks, while they have no deposits with the Greeks. A few billion dollars from the Russians wouldn’t help the Greeks reopen their banks; Athens would just keep doling out 60 euros a day to its depositors for a few more weeks, thus prolonging the agony.

The situation would be different if Greece had left the Eurozone with all its debts written off. Then, Russian loans could have been used to strengthen a new currency, making it cheaper and more profitable for Russia to acquire and develop Greek assets. Then, a multi-billion dollar loan might make sense for Moscow.

Greece as “Europe’s Venezuela”

After answering Tsipras’ call, Putin phoned IMF chief Christine Lagarde. He put in a good word for Greece, asking the Europeans to support Athens in any way possible. It is likely that Barack Obama asked Lagarde to do the same thing: there is no indication that Greece was ever a point of contention between Russia and the U.S.— despite Greece’s position on the Ukrainian crisis, its leaders’ anti-Western rhetoric, and Tsipras’ friendship with Putin. 

In spite of his Marxist leanings, and the time he spent protesting in front of the American Embassy in college, Tsipras has tried to maintain a strong relationship with the U.S. from the outset of his premiership, traveling to Washington immediately after winning election. The Greek Prime Minister called Obama on July 9 to talk about the referendum results and to inform him of new proposals that he would take to Greece’s European creditors. In June, Obama talked to the major creditors and asked them to be flexible. The American media hasn’t been overly critical of Tsipras; he isn’t a villain in the U.S. the way he is to many on the Continent. In fact, major American newspapers published a number of critical articles on Merkel after the referendum accusing her of jeopardizing European unity.

Some have argued that the Americans want the euro to collapse so that the dollar becomes the only reserve currency in the world. But Obama doesn’t want the EU or Eurozone to collapse — after all, it is a central part of the Western project that the U.S. has spearheaded for more than half a century. The U.S. doesn’t want Greece to become “Europe’s Venezuela.” Western failure to resolve a relatively small crisis wouldn’t send a positive message to the post-Soviet states that aspire to join the Euro-Atlantic community.

Still, Obama won’t go as far as to dismantle the informal “leadership under leadership” paradigm, according to which the U.S. leads the Western world, and Germany leads Europe. Obama would have been happy for Greece to stay in the Eurozone at Germany’s expense, but understands that because the Europeans will ultimately pay for Athens, they shoulder greater responsibility.

Russia Wins Either Way

One might expect Russia to delight at Grexit and the breakdown of the Eurozone. But it hasn’t really. Of course, Russia has benefitted politically from the Greek crisis: if the West is unable to bring order and prosperity to the relatively affluent Hellenic Republic, which has existed within Europe for 35 years, how can it promise to single-handedly bring order and prosperity to Ukraine, a much larger, poorer, and more chaotic nation?

Russian diplomats are always trying to exploit rifts and fissures in European unity, and to seize upon a weakness when they see one. Russia would prefer to have Greece as a friend within the EU so that it can use Athens as a lobbying and communication channel.

From Russia’s perspective, there are pros and cons to Greece’s leaving and staying in the Eurozone. If it leaves, Moscow gets an inexpensive country where even small investments could pay off big, and rigid European regulations are relaxed. Besides, the economic collapse would soon be followed by debt forgiveness and, likely, growth; no one will let Greece to turn into Zimbabwe, that’s for sure.

If it stays, Russia will maintain its activities there, albeit with greater restrictions. It will benefit from working under the well-regulated legal framework of the Economic and Monetary Union, and collect revenue in a global reserve currency immediately. Moscow definitely doesn’t want or need the collapse of the Eurozone and the European economy: Russia still receives the better part of its export revenue from the EU. 

Anyone who was expecting a last-minute Russian move to bail out Greece and undermine Europe’s negotiations with Athens was badly disappointed. Russia, like many other countries, is terrified of the disruption that Grexit might cause, but is happy to use the crisis to draw attention to the EU’s shortcomings. Indeed, the conflict in the Greek drama was ultimately inter-European, not one between Russia and the EU.

  • Alexander Baunov