One difference between the Cold War and today’s confrontation between Russia and the west can be found in the weapons being used to prosecute it. While the balance of military power in central Europe still matters, it is only one dimension of a wider struggle being waged by mostly non-military means.
Different instruments – technological, economic and administrative – are being adapted and combined to find new ways of exerting pressure on the opposing side. What they often share in common is an attempt to turn the features of a more open and globalised world into sources of vulnerability that can be exploited for strategic advantage.
Computerisation and the spread of digital technologies have opened the way for advances in the field of cyber warfare that Russia has used to punish and destabilise countries that resist its policies in the post-Soviet space. The malware attack that disrupted the Ukrainian energy grid last December is thought to be one such example. Online news and social media provide Russia with new opportunities to spread disinformation and manipulate public opinion in the west.
The US government has taken a different tack, targeting the financial choke-points needed to restrict Russia’s access to international capital markets. Such strategems are only possible because today’s antagonists are interdependent to an extent that would have been unimaginable during the Cold War.
Another example has been the significant growth in the use of legal mechanisms to challenge or penalise state behaviour – a phenomenon known as ‘lawfare’. Russia has become a favourite target of this approach in recent years, initially linked to abuses of its position as a dominant energy supplier and more recently as a consequence of its aggression against Ukraine.
Again, it is Russia’s relative openness compared with the Soviet era that has made this possible. The network of bilateral investment treaties and other international agreements Russia signed in the 1990s as part of its economic and political transition contain numerous provisions giving international courts and tribunals jurisdiction in disputes settlement. Many of these instruments are now being used to call Russia to account.
The governments of the Netherlands, Australia and Malaysia may have failed to secure a UN tribunal to prosecute those responsible for downing flight MH17 thanks to a Russian veto, but the families of the victims are continuing to pursue other legal avenues, including a $330m compensation claim before the European Court of Human Rights (ECHR).
The Ukrainian state and several private companies have launched, or are preparing, numerous actions against Russia over the seizure of assets in Crimea before the ECHR, the International Court of Justice and arbitration tribunals in Stockholm and the Hague.
The case that probably stands the greatest chance of success is being pursued by Naftogas in Stockholm over the terms of its 2009 gas contract with Gazprom. Naftogaz’s main complaint – that Ukraine has been systematically over-charged – has already been substantially corroborated by a European Commission finding, based on a complaint from Lithuania, that Gazprom abused its dominant position to rig the European gas market.
Russia vigorously contests every case against it, sometimes successfully. A district court in the Netherlands recently set aside the landmark $50bn dollar damages award granted to the former owners of Yukos oil by an arbitration tribunal in The Hague in 2014. To the surprise of legal observers, the court agreed with Russia’s argument that it had never accepted provisional application of the Energy Charter Treaty on which the case was based. Yet this victory may prove to be less significant than Russia hopes. The ruling has no legal authority beyond the Netherlands and the chances of its being overturned on appeal are thought to be high.
Russia’s response to this wave of litigation has been twofold. The first part has been to threaten any country attempting to enforce a legal ruling against it. Letters sent by the Russian foreign ministry to its US and French counterparts have promised “adequate and proportionate retaliatory steps” against their interests and the interests of their citizens and businesses if Russian assets are targeted in pursuit of the Hague arbitration award. Belgium has already yielded to Russian pressure by changing its domestic law to make the enforcement of arbitration awards against Russia harder, and the French parliament is following suit.
The second part of Russia’s response has been a forceful re-assertion of its legal sovereignty. The Russian government has already renounced provisional application of the Energy Charter Treaty (the same treaty it denies applying in the first place). In December last year, President Putin went much further by signing a law allowing the Constitutional Court to declare international rulings against Russia “non-executable” if they conflict with the constitution.
An early taste of what this means in practice came shortly afterwards when Russia missed a deadline set by the Council of Europe for payment of a separate €1.9bn compensation package awarded to Yukos shareholders by the European Court of Human Rights in 2014. Russia says that payment must await a decision of its own Constitutional Court, leaving few people in any doubt about the eventual outcome.
In effect, Russia is now claiming sweeping powers of immunity from international law and a right to pick and choose which rulings to accept. This is at least consistent with Putin’s nationalist doctrine. There has long been a mismatch between his assertion of ‘sovereign democracy’ and the reality of Russia’s integration into the global economy. Legal isolationism would finally bring reality into line with rhetoric.
Yet it still isn’t clear that Putin is prepared to pay the price involved. Mandatory dispute settlement mechanisms provide business with the confidence to invest and transfer technologies across borders, two things that Russia desperately needs to modernise its economy and stave off the growing threat of stagnation. Western investors, aware of Russia’s track record of politically orchestrated corporate raiding, will view the removal of all remaining legal protections with justifiable alarm. This may ultimately prove to be more detrimental to Putin’s long-term survival than the temporary inconvenience of losing the occasional court case.
David Clark is chair of the Russia Foundation.