In the 1990s, EU members found it easy to agree on a common approach to Russia. They coalesced around a strategy of democratising and westernising a weak and indebted Russia.

That policy is now in tatters. Soaring oil and gas prices have made Russia more powerful, less co-operative, and less interested in joining the West.

Part of the confusion lies in Putin’s skillful political positioning. On the one hand, he needs to maximise his control of the economy and society in order to raise wages and pensions and to keep opponents down, while nourishing the long-tail of patronage that keeps him in power. On the other hand, Moscow’s elite — who fear that their assets may be expropriated by a future government — wants to avoid international pariah status so that they can see out their sun-set years in the safety of the West if the need arises.

By establishing fake opposition political parties, creating pseudo pressure groups and organisations, and recasting the rule of law as an instrument of political power, Putin has tightened his control in a more effective and subtle way than many autocratic regimes.

Though the EU has failed to change Russia during the Putin era, Russia has had a big impact on the EU. In the eyes of some neighbouring countries, Russia is emerging as an ideological alternative to the EU that offers a different approach to sovereignty, power, and world order. Russia is trying to build a relationship of “asymmetric interdependence” with the EU. While EU leaders believe that peace and stability is built through interdependence, Russia’s leaders are intent on creating a situation in which the EU needs Russia more than Russia needs the EU.

Although Russia’s GDP is no bigger than that of Belgium and the Netherlands combined, the Kremlin has consistently managed to get the better of the union. The central problem is that Europeans have squandered their most powerful source of leverage: unity.

At the diplomatic level, Europeans could threaten to deprive Russia of the prestige it draws from participating in G8 and EU-Russia summits. They should also aim to strengthen democracy and the rule of law in the European neighbourhood by tightening relations with countries such as Georgia and Ukraine.

Economic leverage should be applied as well. Europeans should subject Russian investments in EU markets to greater scrutiny and use competition law to launch investigations into monopolistic practices and money laundering for existing investments. At the same time, EU members could target the interests of the individuals in the Kremlin elite by scrutinising their purchases of western assets, and even ban travel to the EU for human rights abusers.

So long as the EU continues to sway between integration and containment, it will continue to appear to the Kremlin as weak and directionless. That, in turn, will merely encourage Russia to become even more assertive.

Guardian