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For most of Europe, the sharp decline in oil prices since the summer has been an economic boon, lowering costs for everyone from energy-intensive manufacturers to run-of-the-mill consumers. But the one place in Europe where the free-fall has been no boon at all has been the Kremlin treasury, where oil and gas sales account for more than half of revenues. Already, Russian officials have announced a 10 per cent cut in spending for this year’s budget, and have toyed with the possibility of aggressively hedging against future losses. Now comes word that President Vladimir Putin may be putting pressure on seven of Russia’s largest state-owned companies – including energy giant Rosneft and airline Aeroflot – to at least partially privatise as a way to raise funds.

In the past, Mr Putin has resisted such a move, particularly when a falling rouble would mean fire-sale prices for prized Russian assets – and the risk of losing government control of strategic companies. But in recent weeks, with prices briefly dipping below $30 per barrel, a wide swath of the developing world has begun to plea for help – from Azerbaijan, where International Monetary Fund and World Bank officials recently flew to weigh a $4bn bailout, to Nigeria, which has asked for $3.5bn in emergency loans. According to the FT’s Moscow bureau chief Kathrin Hille, the chief executives of the seven companies were summoned to the Kremlin yesterday for a meeting where Mr Putin discussed privatisation plans with his economic advisors. That’s a pretty significant hint of his thinking.

Any sign Moscow is beginning to panic about falling oil prices would undoubtedly have knock-on effects in its relationship with the EU, where the two sides are in the middle of a two-year on-again, off-again geopolitical tussle over energy, triggered by Russia’s backing for separatists in Ukraine. Some close to state-controlled Gazprom have speculated plummeting energy prices could spur Mr Putin to sue for peace with EU competition authorities, who have accused the gas group of abusing its dominance in the sector. A quiet settlement could be just the thing for an industry already under siege.

Signs of rapprochement from Europe have thus far been sporadic. In the wake of the November 13 terrorist attack in Paris, there was a French-led diplomatic effort to thaw relations in order to find common cause in Syria. But other parts of the EU have put up more resistance, particularly in the area of energy diplomacy. Italy recently joined a growing chorus of central and eastern European countries to call on Germany to halt a planned pipeline deal with Gazprom. And next week the European Commission will put out a new proposal requiring Brussels to vet all gas deals between member states and Russia. Foreign policy pundits have been divided over whether cheap oil will make Russia a more conciliatory partner for Europe, or lead it to succumb to its darker nationalist impulses. Mr Putin’s move on state-owned companies means the reckoning could come soon.

What we’re reading

The Pentagon will seek $3.4bn for military spending in Europe next year, more than quadrupling its current budget of $789m, in what the New York Times reports is part of a plan to “substantially increase” troop rotations in central and eastern Europe. Although Nato has resisted new permanent bases in the former Warsaw Bloc countries that are now in the Atlantic alliance, the increase in heavy weaponry and armoured vehicles in the region would allow the US to maintain “heel to toe” rotations on Nato’s eastern flank, meaning a brigade-sized force – about 3,000 troops with accompanying equipment – would constantly be on the ground in the region. Although officials quoted in the Times story acknowledged the move was meant to send a signal to Russia, they also argued it reflected concerns about instability in the alliance’s southeast, where the ongoing wars in Iraq and Syria have spread turmoil.

After Christine Lagarde officially announced she would stand for re-election as head of the IMF amidst last month’s glitz and glamour of Davos, it appeared nothing could stop her. Britain, Germany and her home country of France all formally endorsed her, and the IMF’s biggest shareholder, the US, also signalled its support. But there is still one thing that could trip her up: the ongoing French corruption case involving businessman Bernard Tapie. In December, she was ordered to stand trial for her role in a disputed €400m payment made to Mr Tapie by the French government while she was finance minister. For an insight into the man, our Paris bureau chief Anne-Sylvaine Chassany has a colourful interview with Mr Tapie, in which he rushes to Ms Lagarde’s defence. “I’m the opposite of a crook!” he tells Anne-Sylvanie. “She won’t be convicted. I can tell you that.”

As Winston Churchill once famously said, this may not be the end – or even the beginning of the end – but perhaps the end of the beginning. Donald Tusk, the European Council president who has led the EU’s talks with Downing Street for a renegotiated relationship with Brussels, tweeted last night that he will present a detailed proposal for a “new settlement” with Britain around noon today. “Good progress last 24 hours but still outstanding issues,” he wrote.

The plan is expected to have two “emergency brakes” – one allowing David Cameron, the UK prime minister, to halt benefit payments to EU migrant workers if Britain’s social services become overwhelmed, and the other to escalate deliberations if non-euro countries believe their rights are being trampled by the 17 countries inside the eurozone. Overnight, British officials were also touting what a Downing Street source called “an explicit agreement” from Mr Tusk to include a “red card” plan that would give national parliaments the power to block EU legislation if 55 per cent of them acted in concert.

The European Commission is due today to agree a new proposal aimed at combating terrorist financing, an initiative pushed hard by Paris in the wake of the November 13 terror attacks. According to a draft of the proposal our Jim Brundsen got his hands on, the plan includes many of the measures demanded by Paris, including new powers to prevent jihadis from using high-tech tools like Bitcoin and e-payment cards to move funds without an electronic signature. But it also contains a very low-tech proposal as well: re-examining whether the eurozone should scrap the €500 note. Although most shops won’t accept it, it accounts for about one-third of all euros in circulation by value, leading to the widespread belief it is used for illicit purposes.

The parade of recently-rehabilitated international leaders continues in Paris. Last week it was Iran’s Hassan Rouhani. Yesterday, Cuba’s Raul Castro enjoyed an audience with President François Hollande. Not everyone was pleased with the first visit of a Cuban leader in two decades, however. The left-leaning French daily Libération was particularly pointed, arguing Mr Hollande should not ignore the “countless attacks” the Castro regime has made against journalists. Le Monde notes that, like the Iranian outreach, the French efforts appear to be part of a rather cynical strategy to improve French business in the region. But it also notes a historical irony: when Castro’s brother Fidel arrived in Paris on an unofficial visit in 1995, a kiss from then-First Lady Danielle Mitterand on the steps of Elysée Palace was considered something of an embarrassment. Raul’s visit was accorded all the pomp and circumstance of a normal visiting head of state.

What could become another long slog in Athens has finally begun – again. Negotiators for the “troika” of bailout monitors yesterday started talks with Greek officials about closing the first review of the country’s €86bn bailout. The Wall Street Journal reports that Alexis Tsipras, the Greek prime minister, urged a “positive and timely” conclusion of the review. But few eurozone officials think that’s in the offing, especially since so much needs to be completed before the review wraps. Not only is there the issue of pension reforms – where the European Commission feels Athens is moving in the right direction, while the IMF doesn’t – but the highly-charged issue of debt relief will be part of the review, too. As will the issue of whether the IMF will actually participate in the third bailout. The Greek analytical website Macropolis notes that this all begins amidst growing social tension in Athens, with attacks on the home of a leading Syriza politician and an opposition party headquarters. So this could get ugly – again.

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