Russia (EUC Report)

HL Deb 16 May 2003 vol 648 cc437-78

11.5 a.m.

Lord Jopling

rose to move, That this House takes note of the Report of the European Union Committee on EU-Russia Relations (3rd Report, FIL Paper 29).

The noble Lord said: My Lords, the sub-committee began to consider EU-Russia relations in March last year. It completed its study in December and published the report in January. It is unfortunate that there has been such a long gap between publication and debate. However, that is another matter.

At the beginning of my speech I wish to pay tribute to Dr Haslam of Cambridge University. He was the committee's specialist adviser and was a huge help with his experience of these matters. I want to put on record the committee's gratitude to David Batt who was the Clerk to the Committee until October of last year. In particular, I express the committee's gratitude to Audrey Nelson who took over from him. She had no previous experience of Parliament and admirably picked up that role at the stage of the inquiry when the committee was writing its report. It is particularly grateful to her.

The committee was very impressed by the huge progress made in recent years in Russia. After all, it is only 15 years ago that Russia was a command economy under the dead hand of communism. Today it is all too easy to brush Russia aside as being a nation in a post-communist rut; to draw attention to the inefficiency, the corruption, the maladministration, the poor banking system, the horrific environmental problems and the rotting military potential. Those issues are part of the scene. They are generally recognised within Russia, especially by President Putin himself.

I give as an example the way in which President Putin railed against many of these things when he addressed the Duma a year ago. He drew attention to adopted laws often being contradictory to each other; he talked about business tycoons finding it much more reliable to buy state officials rather than rely on the law courts; and he referred to the cumbersome, clumsy and ineffective state apparatus.

President Putin has made remarkable progress. I believe that we must begin by recognising and saluting that. But he still has a major uphill task ahead. That presents a major challenge to the European Union. Russia will no longer be a distant European state. The European Union will share much longer borders with Russia after its expansion next year. So it is essential that the European Union reconsiders how it can live with Russia, not as in the past as a potential menace—which it no longer is—but as a major player moving fast to join the community of nations as a powerful partner in the developed world.

A great deal of progress has been made. We have seen signs of much warmer relations—until recently of course—with the United States. In particular, that follows Russia's expressions of solidarity with the United States post 9/11. A side effect of that, which the committee noted, was that because of Russian solidarity with the US there was a distinct falling-off of criticism of Russia with regard to the Chechnya crisis.

Another area in which there has been much progress is that Russia now enjoys much closer relations with NATO. The Council of 20, which was set up a year ago, has brought Russia much closer within NATO. Russia is included in decision-making without having either full membership or a vote in these matters. Again progress has been made with regard to the TACIS programme in which 2.5 billion euros have been allocated to the end of this current year.

So what should the European Union be doing to help Russia to continue the positive progress of recent years? I shall briefly suggest seven areas. First, the committee believes that there is the need to strengthen current arrangements. Many are out of date, especially the Partnership and Co-operation Agreement (PCA). We believe that is no longer relevant as it was designed for the early post-communist days. I hope that matter will be discussed at the Russian-EU summit in St Petersburg at the end of this month and that the Minister will tell us about that summit. The European Voice of 30th April stated: A blueprint for radically changing the ways the EU handles relations with Russia has been developed by the European Commission". It would be extremely helpful if the Minister in responding could tell us about that.

Secondly, the committee believes that the institutional framework of the European Union itself needs to be altered. The committee found there was no proper co-ordination with Russia between the Council and the Commission. In their response, the Government say that that will be reviewed next year. With respect, that is not good enough; the matter should be tackled at once.

We also felt strongly that there ought to be a single office in Brussels to co-ordinate all matters relevant to Russia. In the Government's response, they say that that is already done by DG Relex. With great respect, the committee knew that and found it inadequate. I am surprised that the Government are satisfied with the co-ordination role of DG Relex, which really needs to be dealt with.

Thirdly, we believe that the EU should do what it can to help Russia to achieve its ambition to join the World Trade Organisation. Although we see no reason to weaken the rules to allow Russia in, we must accept the fact that, given the state of affairs in Russia. the date of accession is probably a long way ahead. However, when Russia achieves that, we agree with the Government's view that that will greatly facilitate the development of EU-Russian trade.

Fourthly, we believe that the EU should do everything that it can to help to relieve Russia's environmental problems. Whether they arise from rotting military equipment or from inefficient chemical, nuclear or power facilities, those problems affect the entire European and neighbouring communities and they must be dealt with as a matter of urgency. In passing, I may say that years ago I was the Minister who had to deal with the Chernobyl crisis, in which large parts of the United Kingdom, including my constituency in the Lake District, were affected. I see my old friend, the noble Lord, Lord Campbell-Savours, sitting in his place. I seem to recall that his constituency was also affected by that fall-out. So those are urgent matters.

Fifthly, the committee felt that there is an urgent need to encourage closer links by establishing with Russia agreements recognising that it is today a major energy supplier to the European Union. There is scope to try to arrange long-term understandings for the supply of energy. With the tension, terrorism and potential instability in the Middle East, that case is an easy one to make.

The Government's response tells us that they believe that that is likely to be a matter for the energy companies themselves. Of course we agree with that, but given the realities of Russia and the remaining power of central control there, I believe, and I think that the Committee would agree, that the Government have a role alongside the energy companies to try to make agreement to ensure long-term supplies of energy.

Sixthly, we believe that opportunities arise to create better understanding through educational exchanges. Russia has been moving from a command, centralised economy to a modern state. Close EU-Russia relations could be encouraged by schemes to bring more Russian officials to the European Union to study public administration. In their response, the Government refer to the trans-European mobility scheme for university studies. We are aware of that, but we believe that there is scope for a large extension of educational opportunities to show officialdom in Russia how we do things here, with all the warts attached.

The seventh and last area to which I shall refer is the thorny problem of Kaliningrad. That problem needs to be solved. There is an enclave on the Baltic Sea that is detached from the larger part of Russia. There is a great deal of resentment in Kaliningrad about their citizens' need to move to and from the two parts of Russia, and being forced to have visas and passports to do so.

We read recently that the EU-Russia Co-operation Council is reported in April to have agreed a gradual transition to visa-free public travel, so that Russians could travel freely to and within the European Union by 2007. That is an important matter, and I hope that in her reply, the Minister will tell us exactly what is meant by that reported agreement. Where does that leave the Schengen rules? Commissioner Patten has on many occasions been extremely firm on that issue and has made clear that the Schengen rules cannot be relaxed with regard to the Kaliningrad situation. Will that be discussed at the end of the month at the EU-Russian summit?

Much has happened since we completed our report in December. President Putin has shown that he has a mind of his own. He has fallen out of step with those who were previously perceived to be his close friends and allies. With regard to President Bush, he sided with France and Germany over Iraq. With regard to Mr Blair, he has been prepared to humiliate him publicly, or "openly ridiculed" him as the Independent yesterday described it. Yesterday's Independent also described Russia as being militarily weak, but as having a well-developed sense of its own national dignity. And I ask why not. Therefore, the lesson must be that President Putin and the Russian administration should not be taken for granted.

We are told that the EU is starting to talk of a wider Europe. It is beginning to talk of what its relations should be with the nations on the periphery of the larger European Union that will be established next year. Some like Mr Prodi, we read, cannot see Russia as a member of the European Union in the future, but others, like Mr Berlusconi, have been saying the opposite. It is important that we know what the Government's attitude is to the plans that are being devised in Brussels for creating an association with what is described as wider Europe. The sub-committee of which I have the honour of being chairman will discuss that when we take evidence from the Minister on 12th June. It is an important matter.

In conclusion, we cannot ignore Russia. It is essential that we should do what we can to encourage its development and to draw it into a closer and more purposeful understanding with the states of the European Union. A good deal of progress has been made; for example, the work of the Quartet in trying to deal with the Israel-Palestine situation. Above all, we should work as hard as we can to avoid a sort of Paris-Berlin-Moscow axis, which is in danger of being set up and which would split the European Union permanently and seriously. At a time when the United States is sadly turning more and more away from a multilateral approach to foreign affairs—I have expressed my views about that in the past—it is vital that the European Union tries to expand its multilateral approach to world affairs. I beg to move.

Moved, That this House takes note of the Report of the European Union Committee on EU-Russia Relations (3rd Report, HL Paper 29).—(Lord Jopling.)

11.23 a.m.

Lord Harrison

My Lords, I am very proud to have a Prime Minister who from time to time puts himself in difficult diplomatic positions in order to further international peace.

Seventeen years ago, I stood alone in the Fulda Gap—that part of a divided Germany through which it was said the Russian tanks would pour in the event of the Cold War turning hot. Contemplating then the divided communities of Europe found on each side of the border fence, it would have been rash of one to suppose that a few years later Germany and then Europe itself would begin to reunite within NATO and within the European Union.

Nevertheless, the abiding impression that I retain of our Select Committee's 2002 visit to Moscow to peer into the present state of EU-Russia relations is that there still remains a kind of Fulda Gap of the imagination between our two communities, between the power blocs of Russia and the European Union. We have failed to capitalise as fully as we might on the real opportunities that now present themselves, opportunities which, in some ways, have become more, not less, attractive in the aftermath of the war in Iraq. As so often in international relations, instability provides opportunities as well as threats.

I am pleased that today we have the opportunity to debate our report, which was so cogently presented by our chairman the noble Lord, Lord Jopling. That Russia has been relatively lukewarm to the European Union in the past decade is perplexing. It may be that she has preferred to keep to bilateral approaches with old friends and old enemies, rather than use the newer institutions in Brussels. It is also evident that she has made the courting of the United States of America a priority over that of Europe and the European Union. Perhaps old superpower habits live on long after the power has gone. Whatever the case may be, Russia's efforts with America have little to show for them, but that should he the signal for the European Union to redouble its efforts to revive dormant ties with the emerging Russia. After all, post Iraq, Russia will be reassessing her strategic interests and alliances. We should ensure that Europe is her first port of call.

Incidentally, it is a measure of how much current Russian thinking has evolved from Soviet attitudes that in the past the fostering of EU-Russia ties would have been interpreted in Washington as mischief-making in Moscow. No one blinks at it today. Similarly, the acquiescence of Russia in the process of former Soviet states and satellites coming into NATO and the European Union should be recognised and applauded. Only this week, Lithuania voted overwhelmingly in favour of joining the European Union, but has anyone thought to acknowledge Moscow's forbearance?

The time is ripe for a closer EU and British engagement with Russia. Here are some of the areas in which we should seize the day: first, in business and trade. Some 57 per cent of Russia's external trade is conducted with the continent of Europe. That compares favourably with the 6 per cent plied with the US and the slender 1.6 per cent with Japan. However, our business and trade ties with our geographical neighbour could and should be considerably strengthened, and there are signs that the pace is quickening.

Our sub-committee was heartened by the evidence of Mr Hugh Humphreys. His auto-industry software business, Delcam, has been trading in Russia for some years, not only supporting Russians with well paid jobs and prosperity on the ground, but also providing profits for British firms in Birmingham. Mr Humphreys offered graphic descriptions of the hazards of doing business in Russia, which included on occasions a return to the pre-capitalist world of barter. On one occasion, Delcam had to accept payment in kind. It took the form of 20,000 bottles of vodka and battalions of bulldozers. in the absence of hard cash.

We learnt, too, from Mr Humphreys of the real opportunities for joint ventures, especially where entrepreneurs were willing to penetrate the vast Russia that lies beyond and outside the major cities of St Petersburg and Moscow. The European Union and its entrepreneurs have a dynamic role to play in promoting a friendlier business environment of secure contracts, courts to enforce them, reliable accounting and auditing systems and a proper banking system. Equally impressive in helping to reach those goals was Mr Humphreys' promotion of exchange visits for Russian employees to Delcam's Birmingham plants, which the chairman of the sub-committee, the noble Lord, Lord Jopling, mentioned.

The second area is energy supply. Here, the opportunities for closer ties are plentiful. There are some pipelines of promise, especially as for the European Union, Russia offers an alternative source to the volatile Middle East as a source of oil. Can we and the European Union go further than that and use oil transactions to facilitate other common goals? For instance, I remember how, in our conversations in Moscow with leading politicians and business people, my noble friend Lord Williams of Elvel suggested that the euro might be an effective alternative to the dollar for transactions involving Russian oil. With a strengthening euro, that must be an attractive option. For us, Russian oil denominated in euros, rather than in dollars, would strengthen the single currency's international credibility.

Apropos of the euro, I add that one of our interlocutors in Moscow was Mr Vladimir Ryzhkov, chairman of the 20-strong Russia in Europe group in the Duma and author of the pamphlet The Rouble, the Dollar and the Euro. His passion for the euro and for Europe was all the more surprising given his Siberian origins, but what struck me and gave me pause for thought was his assertion that pro-European sentiment and tradition extended way beyond the Urals. We should make fast friends of those in Russia who truly see Europe as what Gorbachev once called our common home.

Thirdly, there is Kaliningrad. The reality of our common home is illustrated by the situation of Kaliningrad, a Russian exclave within the boundaries of the European Union. Our ability to find solutions to that tricky problem augurs well for our resolving other sensitive issues related to common borders and shared interests in countries formerly wholly within the Soviet sphere of influence.

Fourthly, whatever view is taken of Chechnya, we have a common cause in the suppression of terrorism and in frustrating organised crime related to prostitution, drugs and money laundering. The noble Lord, Lord Hannay of Chiswick, will be only too aware of the dubious links that certain Russian entrepreneurs maintain with the island of Cyprus. We met one such leading air tour operator, and I am not sure that all the traffic was touristic.

Tourism is another potentially fruitful field of engagement. During our visit to the Moscow think tank IMEMO—the Institute of World Economy and International Relations—I was disappointed that our Russian interlocutors were so lukewarm on the potential for the beneficial expansion of tourism. Russia is a country of unparalleled diversity and natural beauty. I wonder whether British and European expertise might be mobilised here to our mutual benefit.

To respond to some of the challenges that I have outlined, our report on EU-Russia relations proposes three modest steps. Those steps will animate a friendship based on geographical, historical, cultural, literary, economic and social ties that are deep and are deepening. I also warmly support the proposal for a major two-way programme of educational assistance and the updating and re-jigging of existing EU-Russia agreements. Thirdly, the establishment of a single office in the European Commission to co-ordinate all matters Russian is wise and practical. It must be adequately staffed, especially in the middle ranks, where most of the nitty-gritty of re-fashioning our relationships must be done.

I commend the report and plead with my noble friend the Minister—a doughty European—not to allow Britain and the EU to miss such an opportunity. We have much to learn from the Russians and they from us.

11.34 a.m.

Lord Hooson

My Lords, as I was not a member of the sub-committee, the first thing that I must do is congratulate the noble Lord, Lord Jopling, and his fellow members of the sub-committee on producing a valuable report on an important subject that is likely to grow in importance, as the years go by. The foundations that we lay down in the next decade will be of vital importance to the future well-being and security of the whole of Europe and Russia. The over-riding problem of our day, when we consider the threat of terrorism and the seeds of hatred that have been sown around the world, is how to win the hearts and minds of the younger generation. It is as important to win them in Russia as anywhere else.

I do not have any great knowledge of Russia, although I have a cousin who is a great authority on Russian geography and has taught in Berkeley for many years. I remember going on a private trip round Russia with an American friend in Brezhnev's day. We had an amazing amount of freedom. I joined up with my American friend in Leningrad, as it was then called. That evening, I went to a meeting arranged by the Americans, at which there were representatives of the State Department in Washington, who were visiting Russia, and their counterparts in the Russian foreign ministry. We had a jovial evening, as one can imagine, but there was also a great deal of serious discussion too. I remember, in those days of the Iron Curtain, that the young American and Russian diplomats of the future were dividing the world between them. As the only European there, apart from the Russians, I piped up and asked them to tell me what would happen to Europe. The Americans said, "We'll look after you", and the Russians said that, of course, they would do the same. That was it. Things have moved on greatly since then.

One of the problems in dealing with people who have been brought up in a formerly communist country—not the intellectuals, but the average businessman, the average person—is the cast of mind or mode of thought. They are unaccustomed to taking initiatives, and they look over their shoulder all the time at the figure that, they think, might be behind them. We must be patient in building up a different approach in an ex-communist country. That applies to Russia and to the eastern European candidates for entry to the European Union. We all remember what an enormous problem it was to bring eastern Germany into a united Germany. The cast of mind was different. There was any amount of capital pumped in from western Germany, but it was difficult to invest effectively. It all takes time.

It was of great interest to read the evidence presented to the committee. That evidence is very valuable, and I was particularly interested in the views expressed on potential military relations between the European Union, Russia and the United States by Dr Perry, the former Secretary of Defence, and by General Shalikashvili—I apologise if I have mispronounced his name—a former chairman of the US Joint Chiefs of Staff. It is very interesting. I shall quote General Shalikashvili: Let me first of all start because I think it is very important at the beginning to say that America has long supported and even urged an increase in European military capabilities. Not just military capabilities but also the mechanism to employ the military themselves. The European Security and Defence Policy is something that in fact has been urged upon Europe for quite some time, sometimes under very different terms when we talk about burden sharing and whatnot. It is clear that there are also a lot of voices in the United States that have some concern with certain Europeans who view the European Security and Defence Policy as a tool to lessen America's influence in European and transatlantic security issues". He goes on to say that, by and large, he takes the first view of that.

It is worth remembering, when there is so much criticism today because of any differences we may have had with our European partners, that the main aim of strengthening European defence capability is to build the missing pillar of the Atlantic alliance. There is the North American pillar and the European pillar, which remains very dubiously constructed. Russia's position on the eastern flank of the European Union is vital in the longer term. Having quoted from the former US Secretary of Defence and the former head of the Armed Forces in the United States, I must say that their views may have been modified by the present holders of those posts.

One of the great problems in Russia at present is the breakdown of the educational system; not only what is taught in the schools, but the available structure. The European Union would do well to look at the matter. Recently, for reasons unclear to me, there has been a dramatic decrease in the population of Russia. We in this country and throughout Europe should seek to improve the overall education of young people in Russia, pointing out how they can use their talents and encouraging interchange with our countries. For example, the BBC World Service, through its Russian services, is very well respected there.

But our country could do more. Many of the complaints that I have heard from different parts of the world are that Western culture is often exported in the form of the cheapest films that hard up countries can purchase for cheap and easy presentation in cinemas. They represent Western civilisation as depraved and unsavoury, to say the least. Does this country or Europe do enough to counteract that impression? Do we have enough cultural or student exchanges with Russia, which, over the next decade, will change to accommodate itself with Western business and other techniques? It will have a great task in shaking off some of the leftovers of communist culture.

I can well understand President Putin's point, and we know that there was a great deal of money-laundering in Europe and in our own country as a result of the misuse of the proceeds from the sale of what were formerly nationalised industries in Russia. So capitalism got off to a bad start.

A report such as that which we are discussing today, particularly the evidence given by experts to the committee, is a very valuable step towards establishing a much better relationship with Russia. It is of crucial interest to the whole of western Europe in its relationship with Russia.

11.45 a.m.

Baroness Park of Monmouth

My Lords, I begin by saying how much I enjoy and value my membership of European Sub-Committee C. I pay tribute to the splendid way in which we are served by our clerks and advisers, and to a range of excellent witnesses. We have been very fortunate.

Our report addresses a vast subject, but I shall concentrate on two things. The first is our attempt to define Russia's policy towards the EU after the seminal events of 9/11, and, on the other hand, what the EU could and should be doing so far as concerns Russia in the immediate future, particularly given the change in Russia's direction brought about by the Iraq crisis. Secondly, I shall spend some time on Russia's environmental problems and what should be done about them.

President Putin's own definition of Russia's foreign policy at his address to the Federal Assembly in April 2002—after 9/11 and Afghanistan, but before the debate on Iraq—was that it would be, purely pragmatic, based on our possibilities and national interests—military-strategic, economic and political ones". Russia, he said, would, continue vigorous work with the EU aimed at forming a single economic space". He said that the major objective would be, to ensure strategic stability in the world". His aim was also to take part in, devising a new security system, maintaining permanent dialogue with the United States and working to change the quality of our relations with NATO". Most of his speech was, perhaps rightly, devoted to the immense task faced by Russia internally, including Chechnya.

The word "pragmatic" leaves everything open. Thus, Russia may well focus primarily on its relations with the superpower—the US. But it will still not be averse to easing the US out of Europe by responding to recent French and German overtures in their anti-US mode by playing the EU off against NATO—since NATO is what keeps the US in Europe—and by drawing closer to the EU in its CFSP and ESDP manifestations. That has been developing since before the Nice Treaty. The wise move by NATO in April 2002 to meet the Russians to set up the NATO-Russia Council and arrange working groups should have helped to make Russia feel loved and wanted. But we must accept the fact that, as one of our ministerial witnesses put it, the old agenda is still lurking—not even lurking sometimes—in the shadows". Our report has approached the EU-Russia relationship both from the EU's and Russia's point of view. Initially, relations with Russia, other than the practical issues covered by the Partnership and Cooperation Agreement, were not a major factor in EU foreign policy. However, in the common strategy initiated in 1999, a move was made to discuss policy on stability and security and, integrating Russia into a common European economic and social space". The EU, led by Javier Solana, developed and deepened the relationship through a series of summit meetings, which still continue. Russia, for her part, with many major internal challenges to meet, and probably a preoccupation with the US and NATO as a threat, regarded the EU for some time, apart from some general economic interest, as a useful milch cow rather than a major challenge.

We are now, however, entering a critical phase. Enlargement will bring common frontiers and a need for Russia to move outwards into Europe. It could also bring a useful influence to bear on EU-Russia strategic relations, precisely because the new members—former Soviet satellites—so long as they feel safe thanks to their NATO membership, should be able to make valuable contributions to EU-Russia relations because they understand Russia. Conversely, Russia may feel that it continues to have some influence in, and understanding of, those countries. Their transatlantic orientation may also help to protect NATO from a move from the French—still very Gaullist in their attitude to Russia and the US respectively—to attempt to supplant NATO by a European security and defence policy benefiting by Russian heavy lift.

It would not succeed but it could be the straw that breaks the American camel's back and opens the way for a US withdrawal from Europe. Our report states: Although it will be to Europe's advantage to promote links that lock Russia into a stable European security system, it will be no less important to avoid any dissonance between NATO's links with Russia and Russia's association with the CFSP. The greatest possible co-ordination will need to be maintained by the EU". The new entrants are clear, as we should be, that we need both the EU and NATO. They are not mutually exclusive. Meanwhile, what has emerged about President Putin's present position over Iraq—especially given Mr Primakov's long and close association with President Saddam and with Syria, the evidence of Russian arms sales to Iraq, despite the UN embargo and, of course, the major oil debt—should remind us that Russia has not changed much and we should be wary of supposing that a personal relationship with Putin, admirable though it is, is a reliable basis for policy and not open to manipulation. However, Russia's part in the quartet is potentially more benign.

Meanwhile, I suggest that through the EU we should begin to extract some real action from the Russians on the increasingly dangerous environmental hazards that, 14 years after the Berlin Wall came down, still exist in Russia despite the fact that the US, the EU and a number of individual EU members have all given considerable sums of money to get something done. One of our witnesses commented. in the context of the PCA, that it was, necessary to cajole the Russians to meet their obligations". Clearly, they still follow the good old communist tactic of treating all negotiations as a way to get, not give.

The Russians still have 44 tons of chemical weapons alone which have not been disposed of and which are having terrible effects on human beings and on the environment in general. Russia signed the Chemical Weapons Convention to destroy all chemical weapons by 2007, but has not done so, claiming lack of funding.

The EU gave Russia 11 million euros from 1997–99 alone under the TACIS programme. The US has given 900 million dollars. The UK and Germany have also given considerable sums. Yet the Russians continue to say that they cannot meet the deadline until 2012. Indeed, their Commission on Chemical Disarmament has said that if this date were not accepted, Russia would withdraw from the convention. We recently offered a further £12 million for the destruction of these chemical weapons. So far, the Russians have built some good roads around the complexes where the weapons are stored, but the toxic materials remain.

The Russians also continued to manufacture for some time biological weapons, presumably for sale—a fact that we learnt only through a defector. In the nuclear field, only 21 per cent of weapons-usable, fissionable materials have been disposed of after all these years. As the Committee reported, the Russians are dragging their feet about signing up to the legal framework necessary to allow nuclear clean-up programmes to proceed. Meanwhile, the Ministry of Atomic Energy, (Minatom), whose facilities contain most of the material of proliferation interest, has been working with Iran on nuclear matters. The Committee found that disturbing.

There are also the rusting nuclear submarines and nuclear power stations, any one of which could be another Chernobyl. The British Government alone is providing £70 million over 10 years under the plutonium disposition programme to dispose of 34 million tons of surplus Russian weapons grade plutonium. Some of that money comes from a British contribution of £84 million for the years 2001–04 for projects relating to the nuclear legacy in the former Soviet Union. We are doing all this and yet anyone within Russia with a concern for environmental matters who reports on this dangerous area, with all its hazards to human life, is liable to be imprisoned, as a brave Russian naval officer was a year or two ago.

I believe strongly that we shall not succeed in bringing Russia, with all its human promise, into Europe in any real way until we can force it to be more transparent and, in this instance, to use the money that it has received over 8 years now to help preserve the environment. It will never take us seriously on great issues if we are not seen to hold it to account on such practical and pragmatic issues as this. The same could also be said of Chechnya, but that is a subject for another day.

Finally, I want to add from my own experience of the many brave, honourable and decent Russians, that what I have said about the continuing Russian institutional proclivity for driving wedges and for its incorrigibly conspiratorial outlook and instinctive distrust of the West, does not mean that I do not believe, as I think the Committee does, that there has been a major change for the better in Russian society.

We heard with particular interest from a witness, named by the noble Lord, Lord Harrison—Mr Humphreys—who has built up a thriving and useful software business in Russia, in the provinces, working everywhere in partnership with Russians, training Russians here and in the universities. Outside Moscow, with all its prevailing climate of bribery and corruption, ordinary people are building new lives, free of the dead hand of communism.

Mr Humphreys' enterprise has been a very practical example of sensible private enterprise rather than state control. We have been working through the Know How programme, and the EU through TACIS, and other schemes are working with them, too. Indeed, we are very alive to the issue of education. President Putin was talking about just such practical issues—the way to a decent life—in his speech. Russia's borders are open now. It is for us to hold successive Russian governments to freedom of speech. We cannot be so arrogant, however, as to lay down our terms for good governance in an ancient and proud country. The imagination boggles at the idea of Russia ever having to wrestle with the acquis. But we can set some standards for those who wish to be our friends and partners.

I think that the message of our report is that there arc major changes going on in that vast and great country. It behoves us to do everything practical that we can to help them to develop the nationhood that is their right. I strongly believe that there are great prospects for the EU to give many, many people who were once behind an iron curtain the chance to live properly. However, in doing that, we must not forget when we are dealing with the institutions and with Russia as an institutional government, that they have an agenda which is not always in our interests. We need to be aware of it and ready to counter it.

11.57 a.m.

The Lord Bishop of Sheffield

My Lords, I begin by offering my thanks to all the staff and attendants here for helping me in my very early days. When I walked into this building I was afflicted by an attack of what I think is called "navigational dyslexia", a fancy way of saying "no sense of direction". Therefore, I am particularly grateful to staff and attendants. I am grateful, too, to Members of this House for the warmth of their welcome, far warmer than many a parish church I have been in.

I welcome the report and thank the noble Lord, Lord Jopling, for introducing it. This being my first effort at speaking in the House, I draw attention to just one sentence within the report. Paragraph 94 states: The transformation of Russia will ultimately be completed primarily from within, from below as much as from above, and through a change in outlook as well as of institutions". This year, two great anniversaries are being celebrated in Russia. The first we have all heard about—the300th anniversary of the founding of St Petersburg. There are great festivities and an EU summit at the end of this month to celebrate the occasion. But we must remind ourselves of what St Petersburg represents to the vast majority of the Russian people. It was founded by Peter the Great—opening windows to the West—followed by Catherine the Great and many others, who have looked to the West and taken with them a minority. But the majority of the Russian people have been very suspicious of everything that St Petersburg stands for. They were certainly very suspicious of those who were leading them in that direction. We need to remember that. This westernisation is not all that popular in a great swathe of that great country. There is deep suspicion.

The movement never took the people with it, a people who had had no experience of what we call the Renaissance, no experience of what we call the Reformation and no experience of what we call the Enlightenment—with all the advantages brought by those developments, as well as all the disadvantages. So that is the first anniversary I wanted to discuss: 300 years of St Petersburg.

But the Russian people are celebrating another centenary—and, it must be said, with far greater enthusiasm. It is one that has received no publicity at all in the western world. I refer to the centenary of the canonisation of St Seraphim of Sarov, of whom I am sure all noble Lords are well aware. The fact that we are not aware is indicative of how little we know about Russia. To Russia, St Seraphim of Sarov is far more than St Francis of Assisi ever was to the western world. He is almost the most popular person in history. A monk who lived in the forests of Sarov and who died only in 1850, he represented and continues to represent for the Russian people the very soul of Russia. He encapsulates the Russian spirit.

All I want to say is this: in all relationships between the European Union and Russia, we have much to learn and much to gain from looking at and listening to the Russian spirit. I believe that barriers will be broken down, suspicions quelled and trust established if there is humility in our approach. Only then can there be true dialogue. The EU has much to share, economically, socially, politically, and so forth, but I wonder if we shall be listened to if we do not acknowledge equally our need to learn from Russia; to listen and to learn.

It was Catherine the Great, I believe, who said that the secret of leadership is to shout praise and whisper criticism. Taking that approach towards the people of Russia will ensure far more progress than thinking that we have everything to offer and nothing to receive.

12.2 p.m.

Lord Inge

My Lords, it gives me great pleasure to congratulate the right reverend Prelate on his excellent maiden speech. I did not know that he would finish his remarks quite so soon, because I have been caught writing down the right reverend Prelate's wonderful quotation, to the effect that you must shout praise and listen quietly. That is not quite the quote, but perhaps I may ask for it after the debate. As someone who loves and lives in Yorkshire, it gives me an added pleasure to welcome a Yorkshire Bishop to the House. Perhaps I may also say how glad I am that Sheffield won last night.

Like other members of the sub-committee, I should like to say how much I enjoyed being a member of it. The study was not only very enjoyable to take part in, but was full of interest. The noble Lord, Lord Jopling, has already outlined the key recommendations from the committee, but 1 wish to repeat one comment he made, to the effect that much has changed since the report was published at the end of last year. Not the least of those changes has been the war in Iraq and the serious and perhaps potentially long-lasting disagreements between ourselves on the one hand and France and Germany on the other, as well as with Russia. Furthermore, disagreements have arisen between what has become known as "old" and "new" Europe. They are bound to have implications for the EU/Russian relationship. What those are is not yet clear, but they will certainly have further implications for this country.

Although I shall speak in the main about defence and security issues, I should like to make some brief general comments. There was recognition in the West of the enormous challenges—economic, political, environmental and social—facing Russia when the Soviet Union collapsed, and along with it the failure of communism as an ideology. But like other noble Lords, I am not sure that we have really given credit to Russia for what it has already achieved politically and economically. In some ways, the Russian people have made remarkable progress.

Russia may no longer be a superpower, but it will remain a very important country. Its oil and gas industries, for example, are of increasing strategic importance. It still retains a large arsenal of extremely capable nuclear weapons and it borders countries which are, to say the least, unstable. Therefore Russia will continue to be a major player on the world scene, a country difficult to ignore and, indeed, we would be stupid to do so. At times I sense that it will be an awkward player and we would be unwise to think that it will never again in the future pose a threat. It is a country which needs to be treated with greater respect than some of our commentators have tended to demonstrate. Russia is a proud country and we should neither patronise nor underestimate her, both as an ally and as a country which, at times, will create difficulties and cause tensions.

Of course I recognise that following the events of l1th September and the attack on the Twin Towers, Mr Putin firmly allied Russia with the West and, in particular, with America in the war against terrorism. But equally, as we have seen in Chechnya and following the terrorist incident in the Moscow theatre, the Russian response to such threats is rather more ruthless and very different from our own approach.

Let me say a few words about defence and security issues. Other speakers have pointed out that we heard compelling evidence from a number of witnesses about devastating cuts in the Russian capability made over the past 10 years or so. Much of the equipment is very dated, badly maintained and lacking spare parts, while, to be frank, training standards are abysmal. A previous British ambassador to Moscow described the Russian Army as brutal and incompetent. Certainly morale is low. However, I do not believe that it would take all that long for limited but significant elements of the Russian armed forces to be brought to a reasonable standard of competence, despite the difficulties with regard to equipment and training. I do not speak here of any form of military threat, I refer to forces that we may wish to consider using in peacekeeping operations. Certainly the airborne and other specialist units should not be written off too hastily. The nuclear forces and the submarine service have been given a higher priority than others.

In addition, I sense that the Russian élite has a better understanding of the reality of military operations and what that means than have some European countries. Over the past decade, NATO has developed increasingly strong links with Russia. Indeed, some would argue that those links have become too strong, and certainly they were given increased impetus after 9/11. There remains in some Russian military and security circles a suspicion of NATO, but that suspicion has been greatly reduced. I warmly welcome that development. However, despite what some senior Russian officials said to the committee about European security and defence policy having a promising future, we need to recognise that it is NATO which allows the Russians to have a direct, strategic security link with the United States of America. It seems to me, therefore, that we face a dilemma. Despite the suspicions still harboured by some Russians, NATO is the security alliance with which Russia wishes to deal. As I have said, it has seen its position within NATO considerably enhanced since 9/11. Yet some European countries wish to push the European security and defence policy at the expense of NATO. However, we need to recognise that the countries of Eastern Europe which will be joining NATO over the next few years are much more interested in that organisation, not least because of its Article 5 guarantee, than they are in some rather woolly European stand-alone command structure with only a limited military capability to call on. Therefore the members of the EU need to think through the implications of this in their relationship with Russia.

I know that the Government are well aware of the dilemma, but I seek a reassurance that there is no intention of undermining the Russian link to NATO by offering it some kind of association with the structures being set up under the ESDP.

Let me conclude by saying that the geo-strategic position with Russia has greatly improved and I feel much encouraged by that progress. But I do not believe that we should look at this relationship through rose-tinted spectacles. I wish to stress how important it is for the EU to recognise its vital role in developing that relationship.

12.10 p.m.

Lord Hunt of Chesterton

My Lords, I should like to focus on the issue of environmental protection in the Russian Federation, noted by the Select Committee on the European Union in its excellent report. It stated that much more emphasis should be placed on this issue in future.

The dreadful state of the environment in some areas has been emphasised in the report and in the debate. Furthermore, the State Committee on Environmental Protection no longer exists. However, the Russian Government, while changing its arrangements, is taking the environment and sustainable development more seriously. On a visit to Russia I met Vladimir Grachev, the chairman of the Environment Committee of the Duma. I could see that considerable progress was being made in collaboration with the international community and the private sector. A number of important environmental initiatives are being undertaken.

The situation in the Arctic is critical for a number of reasons. The region has enormous natural resources and is a key for the economic prosperity of Russia, especially in terms of oil and gas. The recently announced multi-million pound investments of British Petroleum and Shell are testimony to that. The sensitive effects this will have on the global climate and on the survival of many species in the Arctic region means that what the Russian Federation accomplishes, or fails to accomplish, in the Arctic will impact on the rest of the world.

Environmental degradation in the Arctic has been considerable, especially because of the nuclear legacy of the USSR. Handling this difficult legacy would impose too heavy a burden on any economy. That is why many partners have rallied to help.

An important initiative is the trilateral Arctic Military Environmental Co-operation (AMEC), involving Russia, the USA and Norway, which the UK has now joined. It has been influential in making safer the Russian system for the storage of nuclear waste and the transfer of nuclear fuel from submarines to railcars at Murmansk.

Parliamentarians have been particularly active on environmental issues through Globe, the global legislators, which is chaired in the UK by Joan Ruddock and in the Congress by Congressman Greenwood. It has helped the Russian Parliament to raise the profile of environmental issues. In the United States, Congressman Curt Weldon's document, USA-Russia Partnership: A New Time, A New Beginning, which was endorsed by 160 Members of Congress, made a big impact.

In the UK, following a visit by our former Foreign Secretary, Robin Cook, a multi-year programme of more than £50 million should commence shortly, focusing on nuclear issues and the decommissioning of submarines. This important bilateral programme will be co-ordinated by the DTI and the Foreign Office. It is important that this programme should be integrated with wider EU initiatives, as has been mentioned.

While there is some interest in the UK becoming engaged, there seems to be a lack of overall coordination and stimulation by any one department in Whitehall. As a result the private sector has commented that it may lose considerable commercial opportunities which may present themselves through working with the Russian Federation. I have been considerably impressed by US and Canadian officials, who have explained their countries' involvement in terms of the eventual commercial pay-off and the environmental benefits in the shorter-term to the whole Arctic region and its global consequences.

Europe and the UK could similarly look to their own interests while contributing to the sustainability of Arctic regions through multilateral projects. That point was made rather forcefully by Patience Wheatcroft in today's edition of The Times, who stated that when the Americans put their money in they also want to get their money out. She commented that that attitude is not so widely held in the UK.

Despite the fact that we are spending considerable amounts of money in the UK and that there are many EU programmes in the Arctic area—for example, the Natural Environmental Research Council is spending close to £10 million per year on Arctic research—it is not well connected to Arctic policy and diplomacy. The UK has observer status in the Arctic Council and could raise its profile beyond the present level.

When I visited Russia recently, the Academy of Sciences made the point that the scientific links between the UK and Europe were not as strong as they should be. I believe that it is still not at a particularly high level.

One of the encouraging developments in the relationship between Europe and Russia is the role of non-governmental organisations. Major bodies such as the World Wildlife Fund and the International Union for Conservation of Nature have been active for many years, frequently acting in partnership with the private sector. In Russia, one should single out the critically important work of the Russian Association of the Indigenous Peoples of the North, RAIPON, in view of the need both to utilise indigenous knowledge in assisting in the protection of the Arctic and in safeguarding their unique way of life.

It has been exciting to work with Russian colleagues through the catalytic role of an international nongovernmental organisation, ACOPS—I declare an interest as chairman—which has been working with the full co-operation of the Russian Federation.

Addressing this environmental degradation will involve ultimately a huge economic investment. This is why the World Bank is becoming involved and this non-governmental organisation is working with ft. It is very encouraging that major corporations in the UK, working together with Russian corporations, are now connecting private sector involvement in environmental issues.

The Prime Minister of the Russian Federation, Mr Kasyanov, has thrown his full weight behind these projects and announced in November last year the convening of partnership conferences in which the EU and the UK will be active partners.

Following his election as President, Mr Putin has transferred powers for overall co-ordination on all matters, including environmental, in the Arctic to the powerful Ministry of Economic Development and Trade. This Ministry has made enormous strides in the recent past, in close collaboration with the Ministry of Natural Resources, the Academy of Sciences and the Ministry of Finance. These institutions established last month a Council on Sustainable Development which will examine all projects, foreign and Russian-assisted, dealing with the twirl issues of environmental protection and sustainable development.

At a more personal level, I appreciate the affection expressed in the debate for Russia and its remarkable people. I commend the maiden speech of the Bishop of Sheffield. As Lord Snow said so vividly when I heard him speak when I was a schoolboy, Russia can teach us great lessons about culture and science—as he put it, any Russian physicist could write an essay about Natasha in War and Peace—but he felt that the same was not true in England. I hope that the debate will push forward in future greater exchanges. mutual respect and collaboration.

12.17 p.m.

Lord Hannay of Chiswick

My Lords, there is a tendency in this period immediately following the war in Iraq and the EU's sharp division over it to dismiss as irrelevant or simply unrealistic any discussion of the further development of a common foreign and security policy for Europe and of the European Union's external relations. But a reading of this report, and a little thought about the challenges that all Europeans face in developing their relations with Russia, will show how short-sighted and self-defeating such an attitude would be.

None of the European countries has the need for, or the capacity to develop, a completely separate national foreign policy towards the new Russia. Many of us share the same interests in matters of trade policy, investment, the environment, human rights and security. All of us are more likely to secure those interests if we work together than if we allow Russia to play us off against each other, as it will surely do if we cannot get our act together.

One point we need to take fully on board—it was not much emphasised in the report—is that the European Union's relationship with Russia is one of the most obvious areas of EU policy that will be fundamentally changed by the enlargement of the Union, which will formally take place in May 2004 but which, in practice, is already upon us as the acceding countries join in all EU deliberations from now onwards following the signature of their treaties. We should have no illusions. The new member states from central and eastern Europe, who have only recently escaped from the Soviet empire or from its tutelage, will regard relations with Russia as central to the whole of common foreign and security policy so far as they are concerned. They will expect, quite rightly, to have a major say in defining those relations. What they want may not always be what we want, but I hope we will always take their views seriously and not just brush them aside as inexperienced new boys, as some in the European Union did over Iraq.

It would be good if Britain could begin, without more ado, to discuss with the new member states what shape and content they would like to give to the European Union's future relationship with Russia and to consider carefully what we can do to accommodate their priorities within our own.

Developing policies towards Russia in a consistent and coherent way will, let us face it, not be entirely straightforward. Hitherto, the European Union's efforts have swung rather uneasily between piecemeal ad hoc-ery, finding a fix for Kaliningrad, dealing with individual trade problems, and, at the other extreme, drawing up documents of such broad-brush and breathtaking generality as to be quite unusable in any practical circumstances that may arise.

Nor will the Russians themselves make it entirely easy for us. They are still living through a period of post-imperial twilight and find it difficult to come to terms with the fact that the United States is not necessarily their most natural and most equal partner. Their coming to terms with reality is not much helped by a somewhat self-serving American tendency to pander to this nostalgia. If we are to make progress towards developing an overall set of policies towards Russia, the European Union will have to make much of the running, and it will need to steel itself against disappointments.

A recent example of several of the points I have just made emerged when the Prime Minister visited President Putin and was not given a very helpful response on how to handle post-war Iraq. Comparing that with the response given to Secretary of State Powell shows what I mean about the way in which both the United States and Russia tend to nurture each other's illusions on this point.

I must confess that I am a little less convinced than are the authors of this report and the Government in their response that we should be focusing most closely on the institutional framework of EU-Russian relations and the various nuts and bolts of the partnership and co-operation agreement. I still remember those dreadful, stultifying joint commissions which the Soviet Union and its satellites used as a kind of straitjacket for bilateral relations, smothering them in bureaucracy and jargon. We surely do not want to follow that pattern in developing our relations with a Russia which is gradually breaking away from that old-speak approach and adopting a more pluralistic, free-market one. Institutional links there will need to be, but let us keep them light and not allow them to constrain a burgeoning of contacts and co-operation at business and non-governmental levels.

Getting Russia into the World Trade Organisation is clearly a crucial part of any EU policy. This is not a matter of doing the Russians a favour but of doing ourselves one. If I understand rightly, one of the biggest constraints on our trade with and investment in Russia is the weakness of the rule of law and the absence of a proper framework for corporate activity and of fiscal arrangements that are transparent and non-discriminatory. All that will be a lot easier to remedy in the context of a Russia that has joined the World Trade Organisation, bringing with it many benefits for Russia, than it will be just by bilateral nagging and chivvying. This is a lesson we have surely learnt from the case of China and its accession to the World Trade Organisation.

Should we be thinking, in the very long term, of Russia as a potential member of the European Union or, for that matter, of NATO? I doubt whether that is either realistic or desirable. I doubt whether membership of the Union will come to fit Russia's self-image in the foreseeable future. But I do not think we should rule it out either. Drawing the limits of the Union in some definitive way has always seemed to me to have more drawbacks than advantages. And we must never forget that whether Russia is or is not an imaginable member of the Union, it is most certainly a European country. I greatly welcomed what the right reverend Prelate the Bishop of Sheffield said in his maiden speech. That country is linked to us by history, culture and civilisation, facts obscured only temporarily by 70 years of totalitarian dictatorship and a failed ambition to achieve, or at least to share, world domination.

In conclusion, I suggest that a revitalisation and a reshaping of the EU-Russia relationship should be a major objective of the new enlarged European Union of 25, and that this should be a priority piece of the common foreign and security policy jigsaw which we should be assembling in the years ahead.

12.25 p.m.

Lord Williamson of Horton

My Lords, at a time when the Select Committee on the European Union, through its Sub-Committee C, is actively engaged in the preparation of a report on European Union-United States relations, and when relations with the USA are in high—perhaps excessively high—profile, it is also important to give attention to and to develop the Union's relationship with Russia, a great partner nation, and, as a result of European Union enlargement, an even closer neighbour. But this is not just a question of balance—it is, rather, because of the mutual benefit of good European Union-Russia relations, because of the wide range of issues where we have or may in the future have common interests and because of the great potential of the relationship.

The report of the Select Committee was prepared by Sub-Committee C, whose remit covers principally foreign affairs. That is why Part 2 of the report deals with Russia's place in the European Union's foreign policy and Part 3 with the European Union's place in Russian foreign policy. But the report goes a little way beyond issues of foreign policy in dealing with some of the recent changes in Russia, particularly in relation to the economy and the common challenges.

The key point I would like to stress is that foreign policy is only a part of European Union-Russia relations and that a wide range of issues make up that relationship. Evident examples are trade and investment—and not just in primary commodities—financial services, the sciences, our shared environment, transport links, energy and culture, particularly, as others have mentioned, in the year of the tercentenary of St Petersburg, when many Britons will visit that lovely city. I shall come back to some of these matters which are, in my view, the substance of a growing relationship with Russia, particularly the economy, investment and energy supplies.

However, I would like to deal first with the institutional framework, which is widely covered in the report and currently applies to European Union-Russia relations. The report sets out in Box 2 a useful short summary of the four main elements of the relationship at the structural level: the Partnership and Co-operation Agreement—the PCA—of 1994; the European Union's Common Strategy of 1999; the ongoing TACIS programme of aid and assistance to Russia which provided about 2.4 billion euros of EU assistance for over 500 projects up to 2001 and continues in 2002 and 2003; and various sectoral agreements.

Although the PCA arid the common strategy cover much of the ground, the Select Committee considered that the structure would benefit from some renovation, reflecting the growing importance of our relations with Russia in coming years. More specifically, the PCA has the advantage of calling for activities and dialogue in a number of important areas, such as those to which I referred earlier. It is good that the range of subjects is wide but, in evidence to the committee, some witnesses felt that some further coordination on the Union's side would be helpful. That is why the committee suggested a "Russia Office" which would act as a co-ordinator and raise the profile of the dialogue if it was headed, as it should be, by an official of a sufficiently high level.

The Government, in their response, were not over-impressed with this idea. As the noble Lord, Lord Jopling, stated, they considered that DG Relex in the Commission fulfils the function of co-ordinating all matters relevant to Russia. But we shall have to see, as our relations with Russia develop, as I believe they will, whether this is satisfactory, as evidently some issues are the responsibility of the Council and others of the Commission. I hope that at least the Government will bear in mind the motivation behind the Committee's recommendation.

On a possible review and improvement in the common strategy, the Government are more open, indicating that the Council is considering how the common strategy might be made more operational and concise. That would be worthwhile in itself and should, of course, take account of Russian views. It could also serve the purpose of breathing more life into common strategies. They are only just about alive in my view. The Minister will recall that the Select Committee in an earlier report was critical of the common strategy for relations with Mediterranean countries. I believe that in that case the criticism was widely shared.

The effectiveness of the structure for the EU's dialogue with Russia for the identification of common ground and common interests and for the resolution of disagreements is related to the big changes which have taken place in Russia and in central and eastern Europe in recent years, and which in my view are still not sufficiently recognised here. In Russia itself the decision of President Putin to play a full role in cooperation with other countries in the fight against terrorism—as he demonstrated by his decisions in relation to Al'Qaeda and Afghanistan—was an important step in itself and a really significant development of Russian foreign policy overall. I take this opportunity to offer my sympathies to the Russian people on the terrorist attack in Chechnya in recent days which left 54 dead and over 80 injured and another terrorist attack there on Wednesday which killed 30 people. So the fight against terrorism is certainly a common interest.

President Putin has also given increased attention to the performance of the economy and on the removal of blockages which in the longer term would slow up its progress. As has been quoted today, his speech to the Duma on 18th April 2002 was a powerful statement of that position, summarised in my view by his phrase, We have to fight for our place under the economic sun". On the principle that all ships rise with the tide, I believe that the other elements of the European Union's relationship with Russia will be strengthened by the mutual interest in investment and trade as that grows. Domestic investment in Russia has risen strongly and there is progress towards important issues such as compulsory international accounting standards from next year and the raising of capital requirements which should benefit inward investment. We should recall that in 2001 the Russian economy grew by more than 5 per cent and that there was a 50 billion dollar trade surplus, a record budget surplus and debt repayments. Many countries would like to have that record at the present time. There has been a fall in capital flight. Some part of what is often described as capital flight may be external investment which could be fully justified economically.

More generally on trade, the role of the European Union and its member states is vitally important as we are Russia's biggest trading partner, with over one-third of the total trade. After enlargement, that share will be substantially increased as Poland in particular is also an important trading partner while the United States and Japan have only a very small share of Russia's external trade. Although the future no doubt lies in an increased diversification of Russian production and the further difficult adaptation of the giant old industries, for some time to come primary products such as metals and timber and particularly oil and gas will dominate the Russian economy both in exports and in the stock market. The report of the Select Committee looks for a more active role in seeking to lock in Russia as a major supplier of oil and gas over the next two decades given the uncertainties in the Middle East.

The Government in their reply agree that the EU/ Russia energy dialogue will play an essential role in creating energy security for the European Union in future years. That statement is very welcome. Russia has the world's largest gas reserves and already supplies 25 per cent of Europe's gas. Its gas production and export will probably increase very substantially—it is estimated by 50 per cent by 2020. It is the second biggest exporter of oil in the world and it supplies 15 per cent of Europe's oil. Those figures amply demonstrate its importance for security of supply.

Although the Government have not followed all the recommendations of the Select Committee's report, I think that the report and this debate have served a purpose in drawing attention to the importance of the political and economic issues at stake in an effective relationship between the European Union and Russia.

12.35 p.m.

Lord Williams of Elvel

My Lords, as a member of Sub-Committee C of the European Union Committee, I join our chairman, the noble Lord, Lord Jopling, in regretting the delay that has taken place between publication of our report and the debate in your Lordships' House. Between those two events, of course, there has been a major event, notably, the war in Iraq. That has upset a lot of preconceived notions we might have had at the time we were worrying about what to say in the report.

Nevertheless, we have to go back to the principles. I was sorry to hear that the noble Lord, Lord Hannay, thought that we had not paid much attention to enlargement. The first sentence of the introduction of the report says that the main reason we produced the report was enlargement of the European Union which would shift the geographical balance to the east. That is the first and most important point we made in the introduction.

There is also the question of internal change. Obviously we spent a little time on that. It is very difficult to put this in a long-term context although I know that the noble Lord, Lord Jopling, tried to do that. I should like to put it in the context of the end of the Cold War. It is very difficult to change two regimes—an economic regime and a political regime—at the same time. I think history shows that you can change an economic regime or you can change a political regime, but doing both at the same time is enormously difficult. That is what has happened in Russia. As Zhou Enlai famously remarked when he was asked what the effect of the French Revolution was, "It is too early to tell". I think that it is too early to tell what the effect of the end of the Cold War is finally going to be and how Russia will find its place in the world. But I certainly agree with the right reverend Prelate the Bishop of Sheffield, who made a very distinguished maiden speech, that we really have to worry and take great care about the sensitivities of people who thought they were in a superpower and find themselves in what looks like an economic dwarf. The sensitivities are very real.

Like the noble Baroness, Lady Park, I much enjoyed my membership of the sub-committee and, indeed, the whole inquiry. There were one or two things that I found particularly interesting. First, to put it in perspective, there were very few people whom we met in Moscow who really knew about Russian foreign policy. It was very surprising that even those members of the Duma we met inherited all sorts of prejudices that came out of the former Soviet Union. It was equally surprising that one member of the Duma we met who represented western Siberia really had no idea what people in western Siberia thought about the foreign policy of Russia. But one can understand that people in western Siberia probably do not think anything about the foreign policy of Russia. On inquiry we came down to about 2,000 people at best, be it in government, be it in think tanks, either in Moscow or St Petersburg, who really had an input into Russian foreign policy. So let us not think that it is driven by focus groups or constituents. It is driven by a small minority of people sitting in Moscow and St Petersburg and that can easily change.

One of the other things that occurred to me was that underlying all the progress that has been made in Russia, both political and economic, was the thought—I think that the noble Baroness, Lady Park, referred to that—that it may be a little bit fragile. Things can change lithe Putin experiment goes wrong. There is still a large communist element in the Duma, for instance, and we do not know where that will go. As the noble Lord, Lord Hannay, said, with enlargement the Poles will have very strong views about what should happen in the EU towards Russia. We then have the problem of Kaliningrad which enlargement will bring about. All those problems have to he handled with very great diffidence and tact. On 13th January, the magazine Time stated that, even in a world where Russia and the USA wage a joint battle against terrorism, cold war suspicions die hard". That is a truth well worth bearing in mind.

The next matter that worried me was the EU's approach to the Russian question. We heard a lot about the common European economic space, and tried to find out what on earth was meant by that. There was good deal of verbiage about it, but when we came down to practicalities no one—no ambassador from the EU or anyone else—could tell us precisely what it meant. We are not entirely clear what "wider Europe" means; we need much more definition of that.

In our report, we are quite clear that the EU should be reasonably modest, however. We should not imagine that anything that the EU does will create fundamental and dramatic change in Russia as it stands at the moment. What can the EU profitably and reasonably do? The World Trade Organisation, which President Putin has had an almost totemic wish to join, has been mentioned.

When we interrogated people about the WTO in Moscow, however, I am afraid to say that we found that a lot of them did not have the faintest idea what joining would actually mean for Russia. It was all very well their saying, "We want to join the WTO. Will you help us to do it?", but we had to say, "Yes, but do you know what that means to some of your large industries, which will have to adopt accounting and legal practices familiar to us in the western world, but not at all familiar to you in Russia? What will big businesses say politically when they find that they are disadvantaged by joining the WTO?". There is a big question mark about that.

Also, we must recognise that Russia is not an integral part of Europe. I do not believe that there is any question of Russia joining the European Union. There are nine timezones. Fly across Siberia and, for a hundred miles, there is no one there. Vladivostok has a population of' largely Asiatic descent. We cannot admit such a country, however well intentioned, into a union. That would be like putting the proverbial elephant into a row-boat. The problem with which we have to deal, which we described in the report, is simply one of what we can do to encourage what is already happening, and also encourage modest development in the future, at least economically.

Noble Lords probably take it as read that no democracy can flourish without a successful middle class. It was one of the triumphs of Germany after the Second World War that the Mittelstand, the middle class, successfully reasserted itself, to the point where there was backing for democracy and for the system as it was. There was no move towards revolution. In Russia at the moment, something between 7 per cent and 10 per cent of the population can be considered to belong to the middle class. That is a very small fraction. There are millions of people still virtually in a peasant role. In thinking about what happens in Russia, one must try to develop that Mittelstand, with its small businesses. My noble friend Lord Harrison mentioned Delcam, which is very impressive. but there have to be thousands of Delcams before we can say that Russia is secure for democracy and a proper partner for the European Union.

At the moment, Russia is running an enormous balance of payments surplus thanks to sales of oil and gas. Manufacturing exports are not going at all well. Somehow, that balance has to be redirected towards job-creating manufacturing industries. My noble friend also said that I had mentioned the possibility of the euro becoming the method of exchange for sales of oil and gas in Russia, but that requires a rather specific and sophisticated financial environment.

Again, when we were in Moscow, we were talking about hedging the euro, and I came to the conclusion that a lot of people did not understand what that meant. If the euro is to become the reserve currency of Russia, which probably in the long run is to be desired, there has to be much greater sophistication in the Russian Central Bank, the Russian banking system and the Russian accountancy profession.

I echo what was said by the right reverend Prelate the Bishop of Sheffield; I have come back to where I started. The noble and gallant Lord, Lord Inge, was unable, alas, to recollect—we cannot have everything in life—the quotation used by the right reverend Prelate, which was "Shout praise and whisper criticism". I believe that that is the right way for the EU to approach Russia.

12.45 p.m.

The Lord Bishop of Portsmouth

My Lords, the report before us is a welcome and rigorous examination of many aspects of Russian social and economic life. I am glad to echo noble Lords' appreciation of its scope and depth; I am even happy to do so in a debate that has seen the maiden speech of my friend the right reverend Prelate the Bishop of Sheffield, an old Manchester colleague. I shall, like him, be brief, and I should like to address four areas.

The first is Kaliningrad, which is, of course, a problem of Soviet policy's own making. That problem is the result of Stalin's determination, vividly recounted on a blow-by-blow basis by Anthony Beevor in his book Berlin, to wipe any trace of German East Prussia from the face of the earth, Königsberg as a German city and all. I once crossed the Memel bridge from the Lithuanian side in the fond hope of getting into Tilsit, but without a visa it was impossible. That was a personal experience of Kaliningrad's problematic context.

I am glad that attention is being paid to that strange outpost of what is now Russia, and I hope that Lithuanian and Belarussian sensibilities, as well as Russian needs, will be heeded in future arrangements over travel, as highlighted by the noble Lord, Lord Jopling. Kaliningrad is a symptom of historic developments that go right back to the Germanic-Nordic encounter with the Baltic area, which in the past produced conflict, but then many centuries of considerable and mutually enriching coexistence, followed by the forcible resettlement in Third Reich policy or annihilation by Soviet policy. One really wonders what the long-term future of Kaliningrad is going to be, unless it is to develop as a window to the West.

That brings me to my second point—common values—to which the report also refers. It is no coincidence that President Putin is a citizen of St Petersburg, which was founded to look westwards. I am grateful to the right reverend Prelate the Bishop of Sheffield for his wise and reflective words about the symbolic, almost spiritual but not uncontroverted position of St Petersburg in relation to the former Russian empire, the former Soviet bloc, when it was renamed, and now in the more modest but still politically significant Russian Federation, with the old name restored.

Shared values do not result from PhD theses or even the odd newspaper article, but from different levels of encounter, shared education, travel, trade agreements and many other kinds of networks and partnerships. The leading article in yesterday's Independent, to which the noble Lord, Lord Jopling, referred, indeed warns us that Putin-led Russia is a serious player on the international scene. However, shared values at the international level need one more ingredient for longterm stability, and that is a sense of identity in nationhood.

Russia has a very strong sense of ethnicity, with a rich language in which it is considerably easier to create new words than it is in English. Perhaps that is as well for us, but not for them. Ethnicity also involves other groups, such as the Karelians in the west of Russia and the Chuvash in the east. Russian sense of nationhood has had a series of severe jolts in the 20th century, however. First came enforceable expansion and then enforceable contraction. I know that I am referring to intangibles, but intangibles feed attitudes far more than we often realise.

That brings me to my third point; the vital area of human rights. On Wednesday, the noble Viscount, Lord Waverley, tabled a Question on Kazakhstan that attracted a higher proportion of interest than was perhaps anticipated. That may have been because it was the second Question, the first having been eaten up in less than two minutes. The poor Deputy Leader of the House had to struggle—she did very well. The problems of Kazakhstan over censorship, oil scandals and religious freedom are fortunately not in the same league as Russia's and I am clear that we must not expect all our international partners in whatever area to be exactly the same as ourselves. However, human rights is an issue that can never be pressed too hard, however subtly, even in the face of a country with a history about as different from ours as can be imagined, as the right reverend Prelate mentioned.

That brings me to my final point; the role of religion and religious freedom. Perhaps I may illustrate that from my own experience. Because of my Danish ancestry, I have been involved in the Anglo/Nordic theological dialogue, formally and informally, for some time. After perestroika, our Lutheran partners in Denmark, Norway, Sweden, Iceland and Finland were joined by Estonia and Latvia as well as the Lutheran minority in the west of Lithuania. All were thoroughly indigenous, ethnically self-confident and themselves bringing both the scars of, and the inscrutability that results from, dealing constantly with Soviet domination. We met for the first time in 1981 in Gotland, and it was a profoundly moving experience to listen to them. I have visited all those Baltic nations and I have been impressed by their vigour. Our Anglo/ Nordic and now Baltic relations are moving further east like EU interests; a kind of Drang Nach Osten, but of an ecclesiastical and theological kind rather than driven by the Prussian knights.

Knocking at our door now are the 500 or so German Lutheran congregations in Russia, led by their archbishop, Dr Georg Kretschmar, an increasingly Russian-speaking community which has emerged from conditions that, because of their ethnic German origin, make the treatment of the Russian Orthodox Church by the Soviet government seem straightforward by comparison. I am looking forward to visiting St Petersburg in the summer after our Anglo/Nordic Baltic theological conference in Riga when we shall be planning our next meeting in 2005 in Finland under the theme of "East meets West".

As the noble Lord, Lord Williams of Elvel, pointed out, when you meet these people you realise that their survival from Soviet repression does not mean that they automatically look sympathetically to the West. Cold War attitudes take a long time to die. How religious minorities are treated and how religious majorities behave in such circumstances is crucial. It is about the formation of community in ancient and modern societies and it is my fondest hope that the international networks open to all the Churches—Orthodox, Roman Catholic, Anglican and Lutheran—as well as the other faith communities, can together build up common values to sharpen perspectives on human rights and help along some of the processes highlighted in this excellent report.

Russia deserves the kind of critical engagement on a step-by-step basis that is being put before us, with the cautions registered by the noble Lord, Lord Hannay, on the one hand, and the enthusiasm for a cultured roundedness voiced by the noble Lord, Lord Hunt, on the other. Like many noble Lords, I am grateful for the opportunity afforded by the debate to look more closely at the issues that such developments must properly entail.

12.54 p.m.

Lord Wallace of Saltaire

My Lords, I join others in welcoming this extremely good report. I greatly value the creation of Sub-Committee C as a major contribution to the scrutiny role which this House provides for European Union issues.

Reports from the European Union Committee are read in all sorts of odd places and they are noted around the world. I arrived in Moscow last Saturday night and went out to dinner. There the German Ambassador to Russia said loudly to the assembled company, "The House of Lords has just published an excellent report on EU-Russia relations. You should all read it". So I am in the process of sending to my Russian hosts a number of extra copies of the report. Indeed, the Moscow journal, Russia in Global Affairs, has expressed interest in publishing extracts, if it is allowed, for its Russian readers.

There is evident need for scrutiny of the developing common foreign and security policy and its messy overlap with EU external relations—and even messier overlap with the slowly developing European security and defence policy. The European Parliament does not scrutinise it effectively, nor do most other national parliaments pay much attention to it. The weakness of debates across the EU holds back the development of a more coherent approach to common and foreign policy. Therefore, there is a practical case, noted by the report, for more effective co-ordination of national foreign policies if only national governments and leaders can get their acts together.

I welcome the report's proposal for a single office in Brussels. The failure of the Commission and Council, as it operates on behalf of the EU and national foreign ministries often operating "vanity" foreign policies—the Prime Minister likes to be seen alongside other world leaders—is one of the many weaknesses of the EU. After all, one of the proposals of the current EU convention is that we bridge the gap between the Council Secretariat in foreign policy and the European Commission by establishing a combined post which will in effect be an EU foreign minister.

I welcome that useful practical proposal and compare it with the ill-informed hysteria which has suddenly hit the Right-wing press in Britain, after months of ignoring the convention altogether, suddenly discovering that this is finally the great threat to British sovereignty. I am told by friends that we are seeing a response by the Murdoch press, the Daily Mail and others, to a Conservative-led campaign which is intended to boost the leader of the Conservative Party after the local elections. The presence of the political correspondent of the Sun at the last meeting of the Joint Standing Committee on the Convention—at least to hear the speech of David Heathcote-Amery and leave immediately afterwards—demonstrates the extent to which such ill-informed politics badly biases the domestic debate on European co-operation in Britain.

Therefore, the Lords' contribution to a more informed public debate in this area is vital. This is a worthwhile report which notes that Russia is an important partner of the European Union; that with the forthcoming enlargement the EU will account for half of Russia's external trade; and that if Russia is successful in developing a more effective manufacturing sector and tourist industry, the EU is ultimately likely to be responsible for more like two-thirds of Russia's external trade. We are its developed neighbour and it is still a flawed partner. Russia is not yet a full democracy. Some 10 politicians have been shot in the past two years. One, the leader of the Russian Liberal Party—no connection—was shot only last week. There is no effective constitutional opposition either in the Duma or the forthcoming presidential elections.

On Tuesday I found myself having lunch with a leading member of Yabloko discussing what it saw as its role in the forthcoming elections and he seemed curiously uninterested in winning a larger percentage of votes than last time. When I joined a minor party, I wished it eventually to gain more than 6 or 7 per cent of the votes and after the local elections I was happy to read in the national press comments that the Liberal Democrats had gained "only" 30 per cent of the vote. Yabloko seems to believe that gaining 7 or 8 per cent of the vote would be a tremendous success and it should not aim higher.

The control of the media in Russia is also extremely flawed, but then some of us are not entirely happy about the control of the media within Britain. It is not yet a market economy. The financial press has remarked again on the concentration of control in the stock market returning to dominance by the oligarchs, all obstacles to the development of effective small companies in Russia, which the economy desperately needs. There is over-dependence on oil and a failure so far to develop a manufacturing sector. That is visible as soon as one arrives in Moscow with the dominance of foreign cars on the streets. No one wants to buy a Russian car, unlike in Poland, the Czech Republic and Hungary, where indigenous car production is well underway.

Capital flight is still an immense problem. The noble Lord, Lord Harrison, referred to Cyprus. According to statistics, in 2001 the country which accounted for the largest percentage of overseas foreign direct investment in Russia was Cyprus. That tells us a great deal about capital flight and the peculiarities still of the Russian economy. It is not yet an effective or, certainly, non-corrupt administration. The police have immense problems; so does the army.

There is a deep ambivalence in the Russian elite towards the West as a whole and the EU in particular. Several noble Lords have referred to the nostalgia for the Cold War and for superpower status. It was clear from a conference I attended on Monday and Tuesday that there is a deep impatience with the European Union and its focus on detail. The noble Lord, Lord Hannay, remembered the Russians smothering the West in bureaucracy and jargon. The Russians think that the European Union now returns the compliment.

However, it is the job of the European Union to insist that detail matters—conditionality—are important. You cannot, for example, join the World Trade Organisation unless you have stable laws about how markets are run, how property is developed, and auditing processes for companies which are relatively transparent. Those are all things which as yet have not been fully achieved within Russia. Investment will flow from the West only when conditions are welcoming.

The noble Baroness, Lady Park, referred to the need to cajole the Russians in their obligations. We have to continue to do that. For that reason I am not sure that I entirely accept the quotation that criticism from the West should only be whispered. Some criticism needs to be repeated again and again. I refer to the inadequacies of the Russian legal structure and the Russian administrative structure and the extent to which the economy is still dominated by bribery and oligarchy.

However, attitudes to the United Kingdom seem to be relatively reasonable. We are not the most important partner for Russia within the EU. Clearly, that is Germany. Poland will follow after that. The Nordic countries will be of greater importance when that happens. We should also avoid nostalgia for lost great power status in the way in which we behave towards Russia and some others.

We see a gradual emergence of civil society in Russia, which is much too slow. I was immensely enthused at the conference I attended on Monday. There was a real diversity of opinion on Russian foreign policy. When I went to the foreign Ministry the next day I was amused that a number of Foreign Office officials were clearly worried about that. That is what a gradually developing civil society is about. The noble Lord, Lord Williams of Elvel, rightly said that we do not yet have an independent middle class of sufficient weight. That can emerge only when we have autonomous public institutions, a real small company sector and an economy which is working on a relatively open and stable basis.

There is still clear resistance to integration with the West. I remember people in the Royal College of Defence Studies saying that Chinese generals who had been to the RCDS go back to China and are promoted to valuable positions. Russians who attend the RCDS tend to get posted to north-east Siberia on their return. When George Robertson was Minister for Defence he made a very active effort to persuade the Russian Army to send us large numbers of people for conferences for training and it was deeply and strongly resisted.

There are many problems with getting exchanges fully underway. I encourage the Government to think in terms of British policy about how mutual exchanges should be developed in which British students and British officials are sent to Russia to train and teach, as well as Russians being invited here. Many of us may need to push for an expansion in the Foreign Office budget for precisely those kind of exchanges, with a number of countries sending westerners to teach in their universities, and other such measures which are immensely valuable in helping them to see the world differently.

We see noted in the report a slow development of the approach of the European Union to Russia; the energy charter and the whole development of justice and home affairs dealing with trans-national crime which, sadly, is a feature from the Kazakh border to the western border. The report did not spend much time on the development of what is called "the northern dimension", concerned with pollution in the Baltic. I think I am right in saying that the two single largest sources of pollution in the Baltic are Kaliningrad and its sewage works and St Petersburg and its sewage works. Those are not unimportant questions to the Nordic members of the European Union.

We have the problem that to the Russians the European Union looks like a multi-headed monster. During the last Swedish presidency I went to a conference in Moscow on EU/Russian relations and watched as the Swedish Foreign Minister, followed by the High Representative of the Common and Foreign Security Policy, followed by the Commissioner for External Relations, with the ambassadors of all the member states behind them said what they thought EU relations with Russia should be about. I sat there thinking that if I were a Russian I would think that pretty incoherent and I would rather hear it from one person. Therefore, I welcome the proposal for greater coherence.

Briefly, how should we see the future pattern of relations? Many noble Lords have said that we need to avoid rivalry between the United States and the EU in their relations with Russia and between NATO and the EU. Clearly, we do. Sometimes, both the French and the Americans are concerned to promote rivalry and do not always co-ordinate. However, two or three days ago the NATO-Russia Council met for the first time in Moscow. Apparently, it was a very successful meeting. That is the direction in which we should all be going. We should be pursuing close association not eventual full membership, if any of us want the European Union to continue to operate. One of the most important priorities after enlargement should be to develop a coherent policy to our near neighbourhood and to put some meaning into the term "a wider Europe" and a European Union foreign policy towards those neighbours.

1.7 p.m.

Baroness Rawlings

My Lords, I too should like to thank the noble Lord, Lord Jopling, and the subcommittee members for their work on this important report, which I read with great interest having lead the observer team from the United Kingdom to the first Duma elections. I congratulate them on an outstanding job. These reports from your Lordships' committees are of the highest quality and much respected world-wide. The report before the House today has provoked a fascinating debate, which from my point of view was well worth waiting for.

I should like also to add my congratulations to the right reverend Prelate the Bishop of Sheffield on his maiden speech. It was not only thoughtful but thought provoking. I commend him too for his brevity, the depth of his historical knowledge and thank him for enlightening us on the importance of St Seraphim of Zarov. We look forward to hearing from the right reverend Prelate often in your Lordships' House in the future. I remember Sheffield with warm feelings when contesting the seat in 1983. It was twinned then with Donetsk, another mining town in the former Soviet Union.

As other noble Lords have said, with the European Union expanding and subsequent changes to the geographical and also political landscapes, it is indeed timely that we are having this debate as stressed by the noble Lord, Lord Williams of Elvel, in his forceful speech. As we have heard, the geographical shift in itself could bring about potential political repercussion, such as the issue of border control between an enlarged European Union and the Russian Federation. That, combined with other issues covered by the report, emphasises why it is so important that we review European Union/Russian relations.

In the short time available to me today I shall concentrate on just three of many issues: first, cooperation in fighting the threat of global terror and organised crime; secondly, trade between the European Union and Russia; and, thirdly, NATO.

I turn first to the issue of combating terrorism and organised crime, as mentioned by the noble Lords, Lord Harrison and Lord Wallace of Saltaire. I am sure that noble Lords on all sides will agree that, following the tragic events that unfolded in Saudi Arabia earlier this week, the need for continued vigilance and cooperation in the fight against terror still very much exists. We therefore welcome the report's recognition of the need for co-ordinated action in this fight.

We particularly welcome the stance taken by President Putin, in the face of internal opposition, in aligning Russia with the West in the aftermath of September l1th. That led ultimately to the joint action plan on the fight against terrorism agreed in November 2002 at the EU/Russia summit. Indeed, commitments to exchange information on terrorism issues, plans to work together in combating the financing of terrorism and increases in judicial co-operation on terrorism and organised crime offences are all crucial in effectively combating this global threat. In addition, firm action to tackle corruption and organised crime is crucial to establishing the stability that will lead to the growth of the Russian economy and thus the potential for further trade between the Russian Federation and the European Union.

The second point to which I turn is the relationship in terms of trade, as mentioned by the noble Lord, Lord Williamson of Horton. As the potential for further trade opportunities increases, with the consequent potential for growth in the Russian economy, so the need for aid should diminish. We would particularly welcome the movement of the Russian Federation towards the establishment of a fully-fledged market economy. Russia's accession to the World Trade Organisation will be key to establishing a market economy for the country and to reintegrating its economy into the world economy, as emphasised by the noble Lord, Lord Hannay.

The Foreign Secretary has stated that the Government believe that the, EU should support the goal of Russian membership of the WTO". We too support this ambition as it would greatly assist in the development of a Russian trade relationship with the EU. However, we also agree with the report that while this is indeed a noble goal. in reality "membership is still some way off".

We welcome the view expressed by the committee that now is the time to examine ways of hastening the process of institutional reform in Russia. I support my noble friend Lord Jopling and the noble Lord, Lord Harrison, in their suggestion for a single office for Russia in Brussels. I remember that we had one when I was in the European Parliament as Member for Essex, which was my constituency. The office was started by my noble friend Lord Hanningfield and was a tremendous success.

The position of the European Union, as outlined in the report, is that domestic reform in the Russian Federation must progress and change further before trade can take place unhindered. I agree with the noble Lord, Lord Williams, about the great difficulties ahead. But it is difficult to do too rapidly. We learnt from the example of the pre-Russian revolutionary thinkers, Lavrov and Tchakov, with their two opposing views that if progress is pushed too fast Russia will end up with the same regimes as before, but with a different name. Tragically, we saw what happened.

We also agree with the committee's assertion that regulatory convergence will be essential for progress towards a genuinely free trade area, as in the proposed common European economic space.

If Russia is first to accede to the WTO, and ultimately move towards membership of the CEES, the need for progress in the areas I have outlined will be of paramount importance. I therefore ask the Minister whether any bilateral action is being pursued by Her Majesty's Government to support this process and what, if any, action is being taken by the European Union towards the same end. I also ask the Minister what progress she believes the Russian Federation has made to date towards accession to the WTO.

Thirdly, I turn to the relationship between Russia and NATO, as mentioned by my noble friend Lord Jopling and which was so interestingly covered by my noble friend Lady Park of Monmouth. The report acknowledges the expansion of NATO into central eastern Europe. Many of those countries which will accede to the European Union in 2004 are either already members of NATO or participating in the Membership Action Plan (MAP) for joining NATO. Indeed, the Czech Republic, Hungary and Poland have all been members of NATO since 1999.

While the report notes the potential impact this expansion will have on EU/Russian relations, it also recognises the tentative progress that has been made. We agree with the committee that further reform of the Russian military will be a factor in Russia's further involvement with NATO. We also acknowledge the progress that has been made in this area to date, including the concept of Russia/NATO peacekeeping as outlined by NATO Secretary-General, the noble Lord, Lord Robertson, in September 2002. Indeed, there has already been some movement on this, with a Russian contingent to the NATO forces in Kosovo.

However, we must be realistic in our expectations. As the report acknowledges, it will take many years and huge expenditure before the Russian armed forces are able to play a significant role alongside NATO". It does not rule out the potential for further co-operation.

It is also important that we give attention to the proposed European security and defence policy. As this proposal progresses, we shall need to consider the potential impact it will have on the current interrelationships between the EU, NATO and Russia in relation to security and defence. But I would agree wholeheartedly with the noble and gallant Lord, Lord Inge, that first and foremost the NATO/Russia relationship should be supported.

In winding up, as I have outlined in relation to co-operation on the issue of global terrorism, there has indeed been progress in the relationship that exists between the European Union and Russia, but, as the report points out, there is more to be done in furthering this relationship. I noted with interest the recommendation of the report that better mutual understanding would benefit the progression of the relationship.

Education, which is of concern to the noble Lord, Lord Hooson, and many noble Lords, is crucial to an improved understanding. We on this side of the House welcome the bilateral action supported by the Government in this area: first, through the British Council in its provision of language teaching; secondly, through the Internet access to areas in Russia which have previously not experienced such resources; and, thirdly, through the Tempus programme which has allowed Russian students the opportunity to study in the European Union and vice versa.

The report adds that the potential for exchanges arid visits by officials and political figures will help deepen the mutual understanding that benefits the joint relationship. I am sure that noble Lords on all sides of the House will therefore welcome the planned visit of the Russian President, Vladimir Putin, to the United Kingdom in June. I ask the Minister to outline—either now, if possible, or at a later date—what topics the Government intend to have on the agenda for discussion. Perhaps, as suggested by my noble friend Lady Park of Monmouth, that should include the problems of the environment.

That visit will provide the possibility for further dialogue on the evolving relationship between the two countries, as well as an opportunity to discuss the wider EU-Russian relationship and its future direction. We on this side of the House hope that the talks will further enhance the positive relationship that has developed between our two countries. I certainly look forward to hearing the Minister's response.

1.20 p.m.

Baroness Crawley

My Lords, your Lordships have taken part in an extremely wide-ranging and stimulating debate. Many insightful contributions have been made, as several noble Lords noted. I, too, am especially delighted to welcome the right reverend Prelate the Bishop of Sheffield, whose contribution was most amusing, powerful and persuasive. We look forward to hearing from him on many future occasions.

I thank the noble Lord, Lord Jopling, for introducing this most thorough and interesting report, and the members of the European Union Committee for their excellent work. As always, the noble Lord has brought his customary analytical clarity to the breadth of issues that make up EU-Russian relations. He is right: Russia faces a major, uphill task in development which, in turn, presents a major task for the EU. I hope to deal with the seven points raised by the noble Lord, Lord Jopling, during my speech. If those points are not covered with the precision that I know the noble Lord usually requires, I shall write to him.

Russia's relations with the West have always been of great interest to the Government. Under President Putin's presidency, on which the noble Lord, Lord Jopling, commented, Moscow has shown genuine openness in its approach to NATO and the EU, as the noble Baroness. Lady Rawlings, also said. Equally, Europe has been far-sighted in pursuing a strategic partnership with Russia.

In the EU, serious and far-reaching thought is being given to developing the relationship and giving it the greater strategic vision for which the report calls. I assure noble Lords that the Government are actively pursuing that agenda within the EU, as the report recommends. Our objective is to give the relationship greater coherence and strategic direction.

The committee's report is a timely contribution to the debate. As noble Lords have said, on the 31st of this month St Petersburg will play host to a special EU-Russia summit. For the first time, the 10 new accession countries will attend. The noble Lord, Lord Jopling, asked about the blueprint at St Petersburg. That is perhaps not the word I would choose, but the EU is taking seriously the need to streamline and make more effective the structure of relations.

We shall be presenting ideas for extending the concept of an EU-Russia common space, extending beyond the current economic space to justice, home affairs and internal security on the one hand, and political and security co-operation on the other. We shall also elaborate co-operation in education and culture. That may permit some of the sort of exchanges referred to in the report but, of course, we need to consider what Russia wants and what funding might be available.

As well as proposing the development of new common spaces, the EU wants to make the cooperation council more flexible and able to meet in different formats. We hope that that will mean that specialist Ministers can get on with developing close co-operation in those key specialist areas.

Relations with Russia are accorded a high priority by the European Union. The EU holds more meetings on a wider range of subjects with Russia than with almost any other partner. As my noble friend Lord Williams of Elvel said in his strong speech, EU enlargement makes EU-Russia relations even more important as the EU's borders with Russia extend and it brings in new member states with a close interest in Russia.

The EU has imaginative and ambitious ideas about how it can ensure that the relationship grows closer still across three over-arching areas of co-operation: our common economic goals; our shared internal security agenda; and our political co-operation. As my noble friend Lord Harrison said in a most reflective contribution, the time is right for a closer EU engagement with Russia. I am glad that he mentioned my former constituency of Birmingham in the context of joint business ventures.

The EU and Russia share the goals of increasing their trade and boosting economic growth. Russia's continued strong economic growth is encouraging. The Russian Government need to maintain the momentum. They need to press on with reform of Russia's natural resources monopolies and develop further reform of the banking sector. Red tape must be reduced, corruption tackled and administrative barriers to business growth removed. Russia must be integrated further into the world economy by joining the World Trade Organisation.

As noble Lords will know, the UK is well placed in the Russian market. On completion of BP's multibillion dollar joint venture, announced in February, the UK will become the largest single investor in Russia.

The EU and Russia have agreed to build a common economic space. Ultimately, that space should provide the framework for greater economic integration and a complete free trade zone. As the committee's report reflects, that is a daunting task that will take many years to achieve, but it is an exciting, visionary project that has the Government's full backing.

In the short term, as the noble Lord, Lord Hannay, and the noble Baroness, Lady Rawlings, said, Russian accession to the WTO remains the top priority in EU-Russia economic relations. Implementation of the common economic space can start only once Russia has joined the WTO. Russian WTO membership will strengthen the significant economic reforms already undertaken in Russia.

Russia's terms of entry must support her economic development, but Russia has more work to do to before she is ready to take on the obligations of membership. The noble Baroness, Lady Rawlings, asked what progress Russia has made to date on entry to the WTO. I shall answer her in greater detail in writing, but suffice it for the moment to say that a great deal must he done to prepare her entry.

As well as political support for the process, the EU continues to provide practical assistance to Russia to help her prepare for WTO membership. In the meantime, the EU already provides Russia with favourable terms of access for its exports to the EU. EU enlargement will bring the EU's share of Russian imports to more than 50 per cent. The growth that enlargement generates in new member states should strengthen the EU-Russia economic relationship still further.

I shall touch briefly on energy relations. The report strongly recommends that the EU should look widely for its energy sources, including to Russia for oil. The Government very much agree. Diversity of supply source is a key to ensuring security of supply. But oil from Russia must be sourced in a market-based way. Oil is internationally traded. There are a wide range of oil suppliers besides Russia and the Middle East. The Government agree that Russia should adjust its artificially low domestic energy prices. The EU is pressing for Russian industrial users to pay market prices for energy as part of the terms of Russia's WTO accession.

The Government fully support the aim of enhanced EU co-operation with Russia on internal security issues. The UK shares the EU's priority of combating illegal immigration, including people trafficking, by working with our Russian partners to improve border security and to assist law enforcement agencies in tackling such crime. We want to see prompt and full implementation of the EU/Russia Action Plan on Combating Organised Crime. We are keen for progress to be made on an EU/Russia readmission agreement.

The EU's political co-operation with Russia is a further area of expanding joint work. The EU and Russia are working to prevent and suppress terrorist financing, including freezing terrorist funds. The noble Lord, Lord Hooson, in a thoughtful speech, spoke of the need to confront terrorism through the younger generation. I could not agree more. We agree with the noble and gallant Lord, Lord Inge, that all counter-terrorism must adhere strictly to respect for the rule of law. The noble Baroness, Lady Rawlings, also spoke powerfully on the issue of terrorism.

The EU and Russia are also committed to improving intelligence co-operation post-September 11th. However, given the sensitivity of the issue, the Government's view is that closer co-operation can best be achieved at present by enhancing existing bilateral relationships. In its conclusions, the report presses the EU to continue its work with Russia to tackle the threat posed by the nuclear and chemical legacy of the former Soviet Union. The EU has its own programme on non-proliferation and disarmament. Projects include support to build a chemical weapons destruction facility at Gornyy in Russia.

The Government believe that the United Nations Framework Convention on Climate Change and the Kyoto Protocol are crucial steps to tackling climate change. Securing Russian ratification of Kyoto is a key objective. The EU regularly underlines the importance of early Russian ratification. Like my noble friend Lord Hunt of Chesterton and the noble Baroness, Lady Park, we believe that Russia stands to benefit economically, particularly in the energy sector, as well as environmentally, from ratification. We believe that it is in Russia's own interest.

The dialogue between the European Union and Russia on European security is developing well. Topics that would have been inconceivable only a few years ago have become established agenda items at recent summits. A troika from the EU Political and Security Committee now holds monthly meetings with the Russian ambassador to the EU. Russia has appointed a representative to the EU military staff. The EU's High Representative and the Russian Foreign Minister hold regular consultations on international developments and crisis management issues.

The EU's relations with Russia go beyond dialogue. Russia has pledged to send five police officers to the EU's first ESDP operation, the EU police mission in Bosnia. The EU has agreed to invite Russia as an observer to its first crisis management exercises. The noble and gallant Lord, Lord Inge, is right. We should take seriously Russia's military contribution in the future. As the noble Baroness, Lady Park, reminded us in her elegant contribution, as did the noble and gallant Lord, Lord Inge, it is important that Russia's relationship to the European security and defence policy remains in balance with the EU's security interaction with other third countries. The UK's main security dialogue with Russia will continue to be through NATO.

Your Lordships' report looks at assistance to Russia. The EU is the largest donor of such assistance. This year, 94 million euros of technical assistance is being provided in support of institutional, legal and administrative reform and for justice and home affairs, environment and nuclear safety programmes. The EU's Russia programme is now managed from an office in Moscow which has greatly increased its effectiveness and impact in Russia. Russia has welcomed EU efforts to make assistance more responsive to the Russian Government's own reform priorities.

We agree that there is scope in deploying our assistance even more effectively. The Department for International Development is working with the EU to increase member states' scrutiny of EU assistance programmes in Russia as part of the wider objective of improving the effectiveness of all EU assistance.

One of the strengths of EU assistance to Russia is that projects are chosen following consultation with the Russian Government. Assistance is most effective with Russian buy-in. So while the Government share the committee's view that increased awareness within Russia is important, we would be reluctant to divert EU funding from projects already agreed with the Russian Government. We will study seriously the committee's recommendation on this matter.

The EU supports the reform and restructuring of Russia's education system through the Tempus programme. The priorities assigned to Tempus are jointly determined by Russia and the EU, and include the contribution of higher education to the strengthening of democracy and citizenship. The noble Lord, Lord Hooson, mentioned education exchanges, as did other noble Lords. Tempus also provides grants for Russian students to study in EU higher education institutions. Some 30 million euros have been allocated to programmes in Russia from 2004 to 2006.

At the inception of the committee's enquiry, the question of transit for Russian citizens across the enlarged EU to access the Russian Baltic Sea region of Kaliningrad was high on the EU/Russia agenda. That issue has now been largely resolved to the satisfaction of all parties. The right reverend Prelate the Bishop of Portsmouth rightly called for greater co-operation with Kaliningrad. The EU is also co-operating in other areas on Kaliningrad including economic development, energy, environmental and health issues. To date the EU has committed 40 million euros in assistance to Kaliningrad. The noble Lord, Lord Jopling, referred to visas and the Schengen regime. He is right. The EU is not yet ready to give Russians visa-free access to the EU. However, the arrangements now in place for Kaliningrad will ensure that Russians can move with the minimum hindrance and cost between Kaliningrad and the rest of Russia without disrupting the Schengen acquis.

I turn to the issue of human rights. The conflict in Chechnya remains a source of serious concern for the EU. Chechnya has not featured in recent joint communiqués from EU-Russia summits because it has not been possible to agree joint language with the Russians. That does not mean that Chechnya has slipped down the agenda; on the contrary, it is a sign that the EU is not prepared to pull its punches on the issue. The EU has tabled resolutions on Chechnya at the past four sessions of the UN Commission on Human Rights.

The noble Lord, Lord Wallace, raised the issue of press freedom. Constraints on freedom of the media, particularly in Russia's regions, and the closure of Russian television stations are issues of concern for us.

As is so evident from today's debate, EU/Russia relations span an increasingly large area of substantive co-operation. The noble Lord, Lord Jopling, the noble and gallant Lord, Lord Inge, and the noble Baroness, Lady Park of Monmouth, referred to the Iraq situation. We believe that the effects of the Iraq campaign have not significantly impacted on EU/ Russia relations. Member states and Russia alike are committed to deepening co-operation and are focusing on the tasks at hand to achieve that.

I should like to touch on the structure of EU/Russia relations. The committee's report comments that the EU/Russia Partnership and Co-operation Agreement has become outdated. It is always wise to listen to noble Lords—especially to the strictures of the noble Lord, Lord Hannay, on piecemeal advocacy. The Government believe that the agreement provides a flexible framework for relations. It needs constant renovation, as the noble Lord, Lord Williamson, said, rather than reinvention. It allows new forms of co-operation to he developed without laborious renegotiation of its terms. The agreement has accommodated significant changes to the relationship, such as the establishment of the high-level group tasked with designing the common economic space. The Government believe that the agreement should remain the foundation upon which the EU and Russia should build relations for the medium term.

Many noble Lords discussed the report's recommendation of a new Russia office in the EU. The committee's report further recommends that the EU should establish a single office to deal with relations with Russia. In his learned contribution, the noble Lord, Lord Williamson of Horton, called on the Government to take seriously the motivation of the committee's call for a single office. We take it seriously. However, we regard that role as being played by the office in the Commission headed by the external relations commissioner, Christopher Patten. It performs a co-ordinating role on the EU side, for example, in preparing for EU-Russia meetings. It has an excellent working relationship with Dr Javier Solana, the EU's High Representative. However, the Government agree that there is a need for improved coherence in the EU's approach to Russia, and the UK is pressing for that.

If I have missed questions because of time, I shall ensure that noble Lords receive answers in writing. I conclude with a comment from the report, which correctly states that the development of relations with Russia must be based on realistic expectations about the pace of change within Russia. In some spheres, that means that progress is painstaking. We must proceed at a speed that builds on the reforms Russia is implementing. But we are ambitious and have set ourselves strategic, long-term objectives for cooperation. We want to develop the shared values prompted by the right reverend Prelate the Bishop of Portsmouth in his very well structured speech. As my right honourable friend Jack Straw wrote to the noble Lord. Lord Jopling, on 13th March, the Government support the thrust of the committee's findings, and the report represents a thorough and illuminating analysis of the issues at hand. I can only agree wholeheartedly with my right honourable friend and thank all noble Lords who participated in this excellent debate.

1.43 p.m.

Lord Jopling

My Lords, I am sure that I speak for the entire sub-committee in saying how grateful we are for the kind words about our report, not least from the three Front Benches. We are particularly grateful to all noble Lords who have come to speak in the debate today, not least the Minister, who went to much trouble to cover many of the points raised. Much expertise on the issue has been put into speeches by noble Lords throughout the House. That is what we have come to expect from your Lordships' House.

I wish to single out the maiden speech of the right reverend Prelate the Bishop of Sheffield. The noble and gallant Lord, Lord Inge, had the pleasure of being the first to congratulate him and did so from the point of view of having very long and distinguished connections with Yorkshire. As a Yorkshireman, I add to those congratulations. I do not know whether the right reverend Prelate has ever heard the remarks of a former highly distinguished Member of your Lordships' House, Lord Halifax. After he had been Foreign Secretary, he became British Ambassador to Washington during the war. When the war was over, he addressed an American audience and said that he hoped they would all take the opportunity to visit Europe and England again. But he added one piece of advice, saying that if you go to England, you should never ask anyone whether they come from Yorkshire, because, if they do, they will tell you within the first 10 minutes, and, if they do not, it is very bad manners to draw attention to their disadvantages in life.

The words of the right reverend Prelate that we should shout praise and whisper criticism will ring in our minds for a long time. I do not want to break the conventions of the House, but I must say that I had some sympathy with the noble Lord, Lord Wallace of Saltaire, who questioned whether it was always right only to whisper criticisms. Another who might have had some sympathy with the noble Lord, Lord Wallace, was my noble friend Lady Park, whose criticisms were some decibels higher than a whisper—but that is what we have come to expect from her.

This has been a fine debate. It has gone extremely well. The reception of our committee's report is very gratifying to us all.

On Question, Motion agreed to.