Eurosceptics eagerly await the break-up of the Eurozone. But it's not that simple — and it would devastate Russia
Many eurosceptics believe — and with good reason — that the collapse of the eurozone would free the continent from Washington's grip, allowing European states to pursue economic and political relationships that actually serve their own national interests. What a novel concept, right?
This is all well and good — in theory. But if the eurzone broke apart tomorrow, Russia's economy would almost certainly evaporate.
The reasons for this are numerous, but Bloomberg has very thoughtfully compiled the most difficult-to-dismiss figures illustrating Russia's current dependence on the euro.
For starters, Russia holds close to 40 percent of its foreign currency reserves in euros, and Putin has stated on the record that his country is “not interested in the collapse of the euro zone.”
Imagine if 40 percent of Russia's foreign currency reserves became worthless overnight.
Worse still, imagine all the Russians who keep euro accounts as a way to protect themselves from the ever-fluctuating value of the ruble.
Here's the reality: Russia is in no way, shape or form prepared for a eurozone collapse. It would be catastrophic for Moscow.
It doesn't matter how much gold Russia manages to hoard. There's just no way right now that Russia could survive the economic earthquake that would result from a eurozone break-up.
Taking all this into account, it seems strange that the western media claims that Russia is backing Marine Le Pen’s bid in France's upcoming presidential elections. As Bloomberg puts it, "Le Pen’s promise to take France out of the euro zone — which could break up the European single currency — might well devastate Russia’s economy and financial stability."
It's hard to argue with that logic.
And let's not forget that long before Russia was pushed out of the "European community", Putin was promoting the idea of a Russia-EU free trade zone stretching from "Lisbon to Vladivostok".
Russia's rapidly increasing economic cooperation and integration with Asia will not shield Moscow from the fallout of a failed eurozone. At least not right now.
Here are some figures compiled by Bloomberg which really drive this point home:
Russia has also invested tens of billions of euros in Europe in sectors ranging from telecommunications to energy and services.
The 28-member European Union remains by far Russia’s largest commercial partner despite a contraction in trade in recent years after the longest Russian recession in two decades and sanctions imposed because of the Ukraine conflict. Russia’s exports to the euro zone ($91 billion) are almost four times what it sells to China and nearly 11 times the amount of Russian imports in the U.S.
Russia relies on the 19-nation euro zone for 70 percent of foreign direct investment, led by inflows from Cyprus, Luxembourg and Netherlands, which are a conduit for Russian money.
This post first appeared on Russia Insider
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