Russia waits in wings as critical act looms in Greek drama

Ever since the election of the Syriza-led government just over two months ago the shadow of Russia has been a looming presence in the current Greek standoff.

On his first day in office, Greek prime minister Alexis Tsipras received the Russian ambassador, his first meeting with a foreign official. A few days later the new Greek government objected to a European Union proposal threatening Russia with further sanctions at a meeting of EU foreign ministers in Brussels.

The posturing towards Moscow taps into deep-seated cultural ties between the two countries, much of it rooted in a shared Orthodox Christian heritage.

Given its communist roots, Syriza itself has obvious affiliations with Russia. Senior figures in the Greek government, including foreign minister Nikos Kotzias and defence minister Panos Kammenos, also have links to those close to Russian president Vladimir Putin.

In many ways this week’s visit to Moscow by Alexis Tsipras can be seen as the latest in a series of diplomatic overtures by the new Greek government towards Russia.

This time, however, the official visit coincided with an acute phase in the current Greek standoff, with it due to meet a €460 million debt repayment to the International Monetary Fund yesterday. Though Greece ultimately met the repayment, the country's financial situation remains highly precarious.

Reform measures This month is a critical one for Greece as it seeks to forge a way out of the current standoff with euro-

zone partners. With its government still pushing for a renegotiation of the terms of its bailout, talks are continuing between the troika of lenders – the European Commission, European Central Bank and IMF – over a fresh package of reform measures proposed by Athens.

The eurogroup of euro- zone finance ministers – ultimately the configuration that takes the decisions on programme countries – is due to gather in two weeks' time in Latvia for a scheduled meeting.

Russia is playing a key role in the Greek crisis, in a way that was not evident during the previous Greek crisis of 2010 and the second bailout negotiations in 2012. In the interim, the Ukraine crisis has erupted, radically altering the geopolitics of the region and thrusting EU-Russian relations into a diplomatic standoff not seen since the Cold War.

The Greek government is evidently exploiting current tensions between Europe and Russia. By actively courting Moscow, Tsipras and his government are invoking a potential alternative source of income should bailout negotiations fail.

Whether or not Greece is seriously considering turning to Russia for funds remains unclear – as is Russia’s willingness or ability to step in as a lender of last resort – but the government’s use of Russia as a bargaining chip is likely to prove effective in securing at least some form of leniency from euro-zone partners.

Catalyst While in many ways, the absence of a “

contagion” threat means EU lenders have less incentive to keep Greece in the euro area than during previous bailout negotiations, the threat of Russian intervention may be the catalyst needed for the troika of lenders to keep Greece in the euro at whatever cost.

Yesterday's pledge by the Russian and Greek prime ministers to "restart and revive" relations is likely to have been uncomfortable for German chancellor Angela Merkel and French president François Hollande, despite attempts to play down the significance of the visit.

Whatever the ultimate implications of the Russian- Greek relationship on bailout negotiations, its impact on the EU’s response to the Ukraine crisis is also likely to be important.

Since the decision to introduce sanctions on a graduated basis on Russia last year, Europe has struggled to maintain a united stance. With the three Baltic countries and neighbouring Poland and Finland advocating a tough line on Moscow over its annexation of Crimea, other member states such as Italy, Hungary and the Czech Republic are pushing for more leniency.

Greece’s pledge of support for Russia, cemented during this week’s visit, may add to the pressure on Brussels to review its sanctions policy, with a decision due at June’s EU summit.

With tough discussions due over the next months on both Ukraine and Greece, this Greek drama is likely to have many more acts to run.