Russian interference in the affairs of other nations is extensively documented. From disinformation campaigns and armed invasion, Russia has shown itself to be adept – and ruthless – in the pursuit of its goals.
But alongside the headline-grabbing stories about fake news, assassinations and annexations, the Kremlin has orchestrated a more subtle campaign to co-opt the institutions of the West by stealth.
Exploiting weak governance, opaque financial systems and democratic deficits, the Kremlin has sought to increase its influence, weaken its enemies and consolidate the wealth of its elite. And in doing so, has corroded democracy.
This multi-faceted campaign represents an attempted state capture of Western societies by the Kremlin and its proxies – or, to put it another way, the oligarchization of Europe.
While this is Kremlin’s overall agenda, the methods used vary significantly from country to country. In some cases, it’s through an effective takeover of the corporate services sector to facilitate money laundering and corruption. In others, it’s through support of anti-Western political groups or by spreading disinformation. Usually, several techniques are used simultaneously, in a co-ordinated attempt to destabilise.
As this post, based on a new study by the Center for the Study for Democracy outlines, one of the major forms of influence in Greece has been through Russia’s significant leverage over the country’s energy sector.
This attempt has been only partially successful, thanks in part to the powerful counterweight of EU regulation. But Greece remains vulnerable to Russian soft power, a strategic weakness that has implications for the whole continent.
At first sight, Greece seems at low risk of state capture compared to many other countries in South-Eastern Europe. The value of direct Russian investment in the country is less than half that of Bulgaria, Serbia or Montenegro, despite Greece having a larger GDP than all those countries combined.
Russia has almost no presence in the Greek financial and banking sector, in contrast to other countries in the region, notably Cyprus. And as a percentage of its GDP, exports of Greek goods to Russia are among the lowest in Eastern Europe. Although Russia is a medium-sized trading partner for Greece, Russia’s total economic footprint is relatively small.
There are long-established cultural ties with Russia: Count Kapodistrias, the first Prime Minister of independent Greece, was a former Russian foreign minister and both countries share Orthodox religious traditions. However, since the defeat of the communists in the Greek Civil War (1946-1949), Greek governments have tended to look westward for security and economic development. Greece joined NATO in 1952 and became a member of the EU in 1981.
Closer analysis, reveals significant Russian influence in strategically important sectors of the economy, including seaports, real estate, the airline industry and tourism. Indirectly there are 32 major Greek companies either owned by Russian citizens or heavily dependent on business ties with Russia. And for some of these owners, it’s not just about business.
One of Greece’s biggest football teams, POAK FC, is owned by Ivan Savvidis, an oligarch born in Soviet Georgia with Pontic Greek heritage. A former member of the Russian parliament for Putin’s United Russia party, Savvidis’ other investments in Greece include hotels, water bottling facilities and the port in Thessaloniki.
In 2018, American agencies claimed Savvidis attempted to undermine the Prespa Agreement between Greece and North Macedonia (formerly FYOM). The issue of the country’s name has long been a source of disagreement and tension between the two countries, delaying the former Yugoslav republic from joining NATO and becoming a candidate for EU membership. Ratification of the Agreement was dependent on the name change being endorsed in a referendum: Savvidis was found to have bribed politicians in the former Yugoslav republic and bankrolled violent opposition protests in the capital Skopje.
Given Greece’s pro-Western alliances and long-standing EU membership, the influence of oligarchs and businesses aligned to the Kremlin might not seem to be a systemic risk. But in one important area of the economy Russian leverage has been, and remains, highly significant: the energy sector.
65% of Greek imports of natural gas come directly from Russia, double the figure for Europe as a whole. Oil and gas account for more than 80% of Russian imports to Greece. Energy imports have led to a persistent trade deficit with Russia, averaging 2% of GDP over the last decade.
Weak governance by Greece is partly responsible for the dominance of Russia in their gas sector. For decades, the Greek state-owned Public Gas Corporation SA (DEPA) had a monopoly on the import of natural gas, and Greece was tied into a long-term and unfavourable supply agreement with Russia dating back to the Sovietera. The initial agreement forced Greece to buy gas and prevented them from exporting any excess to other countries, locking in Russian dominance.
While successive Greek governments over three decades tried to renegotiate, the Russian energy giant Gazprom either refused or offered damaging stipulations. Only when DEPA threatened international arbitration in 2013 over excessively high prices were they able to negotiate a discount.
In recent years, the Greek gas market has been liberalised in accordance with EU directives, but even in a more competitive environment, Russian dominance remains.
The now privatised DEPA is locked into a long-term supply contract with Gazprom, and still remains the dominant wholesale supplier, representing 90.4% of the market in 2016. Its major rival, Prometheus Gas SA, is a joint venture between Gazprom and Dimitris Copelouzos, an entrepreneur with strong links to the Kremlin and business interests in Russia, particularly in infrastructure. The Greek gas sector is not as competitive as it might first appear.
In 2013, Gazprom even attempted to take over the whole gas supply chain, when it put in a €900 million bid to buy DEPA and a majority stake in the Hellenic Gas Transmission System Operator SA (DESFA). If successful, the bid would have given the company full control over the Greek gas market. The Greek government actively supported the bid, hoping it would result in cost savings and lower gas prices. However, EU rules demand a strict separation of ownership between supply and transmission, and Gazprom pulled out of the tendering process at the last moment.
Another Russian company, Sintez, did make it through to the final stage of the tender, with a €1.9 million bid, the highest on the table. However, the group scaled down its ambition, dropping its interest in DEPA and focusing solely on DESFA – possibly due to strained relations between Putin and Sintez’s owner, the oligarch Leonid Lebedev.
Gazprom has also exercised leverage over Greece in terms of the routing of the TurkStream gas pipeline, which bypasses Ukraine in order to channel gas from Russia via Turkey to South-East Europe. Continuing the pipeline through Greece had the potential to create jobs, attract investment and secure hundreds of millions
of Euros in transit fees.
The project allowed the Kremlin to attempt to play off Greece against Bulgaria, a rival destination for the pipeline, and use this leverage to consolidate its dominance. For example, the Greek government was encouraged to allow Russian companies to tender for hydrocarbon exploration off Crete and in the Ionian Sea – potentially strengthening the Kremlin’s grip on the energy market even further.
In July 2019, it was announced that Greece had lost out to Bulgaria, a decision that was announced shortly after Greek elections in which the left-wing SYRIZA government lost to Nea Demokratia, likely to be far less receptive to Russian overtures.
The answer to energy dependence on Russia lies in promoting diversification projects, whether through renewables or by procuring gas from non-Russian sources. In line with EU initiatives, Greece has facilitated investments in solar, wind, biomass and geothermal projects. It’s also participated in projects like the EU’s Southern Gas Corridor, which aims to procure gas from the Caspian region and the Middle East.
The development of a major floating storage unit in Alexandroupolis, could be a huge step forward in energy diversification, allowing regional access to the global gas market. But wherever energy is concerned, it seems Russia is never far away.
The Alexandroupolis storage project is being developed by the Copelouzos Group, which, as we have seen, has strong links to both Gazprom and business interests within Russia. There’s a risk that the Kremlin could use commercial pressure on the group in the future, which could delay diversification and undermine the region’s
energy security. It’s a strategy Russia has eagerly followed elsewhere.
Imports of Russian gas to Europe have continued to surge recently, partly due to a rapid fall in production at some of Europe’s biggest gas fields. And the fuel is likely to become of even greater strategic importance over the coming years, as EU countries diversify away from coal and oil in order to meet ambitious decarbonisation commitments. Natural gas is a key component of the continent’s energy transition.
To reduce Russian leverage over Greece – and the whole of Europe – the enhancement of energy security and the robust screening of foreign investment need to be top of the policy agenda. We live in unstable times, both economically and politically. If we allow Putin’s Russia to take over key strategic assets and control the continent’s energy supplies, this instability will only increase.