Europe Analysis: Russia and Britain --- Becoming Best Friends?

Russia and Britain as good friends?

At first glance, this hardly seems possible. The political climate for Moscow and London has been frosty, hovering just above freezing, following a string of diplomatic incidents and squabbles with the recurrent themes of extradition and espionage.

Quarrels over extradition started in 2003 when Russia called for the anti-Putin tycoon Boris Berezovsky and the Chechen separatist Akhmed Zakayev to be deported. The British Government refused, granting them political asylum instead. Berezovsky created more tension between the two nations in 2006 when he alleged that he was being targeted by a Russian assassination plot. There was the biggest political storm, over the poisoning of former KGB agent Alexander Litvinenko. Meanwhile, British counter-espionage agencies were concerned about more operations and potentially more killings. In 2010 MI5 warned that Russian spying was at its highest since the Cold War, with a level of activity second only to that in the US.

Then there was matter of Russia's war with Georgia over South Ossetia in 2008. British Foreign Secretary David Miliband met with Georgian President Mikhail Saakashvili in a show of support.

So, given all this, how can there be a thaw in the frozen diplomatic relations?

The answer is simple.

Gas --- and the company BP.

There were two key shake-ups in the petroleum world in 2012. In October, BP announced that it would sell the stake in its Russian outlet TNK-BP to Rosneft, Russia’s third-largest energy company.

The agreement came from necessity. Before the deal, BP could only operate in Russia through TNK-BP. Afterwards, BP not only gained a free hand but was also $12 billion or so richer, with a 20% stake in Rosneft --- gains that made their fine by the US Congress and losses in the Gulf of Mexico look like pennies.

Then the second shake-up. BP announced in November that it hopes to extend Gazprom’s Nord Stream pipeline to reach the UK. Scheduled for completion in 2017, the extension of 600 miles --- arriving at the coast near Norfolk --- will deliver around 20% of the UK’s gas needs. Gazprom will become the second-largest supplier in UK, behind only British Gas.

But does British foreign policy match up?

Not really.

Despite what would seem to be Russia’s growing influence in British energy needs, the coalition government in London still does not show that it realises the importance. The last high-level meeting between Prime Minister Cameron and President Putin was during the Russian’s visit to the Olympic Games in the summer --- the first time Putin had been in the UK since the G8 summit at Gleneagles, Scotland in 2005. Their attention was focused overwhelmingly on Syria and kickboxing. What Putin thinks of BP’s endeavours in the Russian energy sector is still unclear; however, he did show some frustration at the negotiations over TNK-BP.

What does all this tell us? Firstly, beyond the political and corporate infighting, Russia’s gas supplies are still a lucrative source of power, not only for Russian firms but also for European ones trying to get in on the action. Secondly, Russia has extended its presence via Nord and South Stream through most of Europe, likely reaching the edges of the continent in the near-future.

Will this give the Kremlin greater influence over European affairs?

Probably not.

Currently the European powers have their hands full with fiscal deals and the Eurozone crisis. And with elections looming for leaders like Germany's Angela Merkel, there may not be much space for manoeuvre this year.

But for Britain, given the energy question looking beyond 2013 and into the rest of the decade, who is to say that Russia will not emerge as a new Best Friend?