Netherlands Despairs of Justice for Dead as Russia Trade Takes Precedence
Comment of the Day

July 25 2014

Commentary by David Fuller

Netherlands Despairs of Justice for Dead as Russia Trade Takes Precedence

Here is part of the conclusion from this informative article by Bloomberg:

The commercial ties that bind the Netherlands and Russia go back to the days of Tsar Peter the Great, who spent part of 1697 learning shipbuilding while living in Zaandam. Two years later, the Russians set up a diplomatic mission in The Hague.

Today, Russia is the Netherlands’ seventh-biggest trading partner and a critical investment destination for Anglo-Dutch multinationals such as Shell and Unilever. In 2013, both countries celebrated their bilateral ties in a yearlong series of promotional events. At the Sochi Winter Olympics, Putin shared a beer with King Willem-Alexander of the Netherlands at the Holland Heineken House.

Russia’s biggest oil, gas, mining and retail companies -- including some run by billionaires close to Putin -- have moved tens of billions in corporate assets to the Netherlands or have used financial institutions in Amsterdam to route profits to low-tax, offshore financial centers like Bermuda and the British Virgin Islands.

The Netherlands, along with Cyprus and the British Virgin Islands, is a major transit point for the “round-tripping” of Russian investment money, according to a report last year by a UN agency. Under that technique, Russian money comes into the Netherlands, is moved out to low-tax offshore financial centers and then sent back to Russia, offering legal protection against expropriation or arbitrary acts by government.

“The Netherlands as a country will be juggling the fact that on the one hand it may want to hurt Russia in some way,” said Gerard Meussen, a tax law professor atRadboud University in Nijmegen. “On the other hand, we value our position as a country with an attractive tax climate. We are still merchants.”

Winding back Russian commercial ties would be particularly painful now. The Dutch economy has experienced three recessions since the 2007 financial crisis. In 2012, it earned about one-third of its income from trade, according to the Netherlands Enterprise Agency. The Dutch port of Rotterdam is an important transport point for Russian energy exports to the rest of the world.

The Netherlands also has to pay heed to the EU’s broader policy response. That means taking into account Germany and France, which have different economic interests at stake. Instructing Dutch banks to withhold financing from Russian companies would have little meaning if other regional banks stepped into the gap.

“In practical terms, it’s almost impossible to do something outside of the EU,” said Louise van Schaik, a senior research fellow at the Clingendael Institute, a Dutch diplomatic think tank. “There is a lot of anger and calls for revenge, but that may not be a sound long-term strategy.”

Nor is ignoring Russia’s assertiveness and instability in the Ukraine, said Jaap de Hoop Scheffer, a retired Dutch politician and former secretary general of NATO. In an interview with Het Financieele Dagblad, he called on Europe to stop slashing its defense budgets. The current international situation is “without a doubt the most serious crisis since the Cold War and I don’t dare to predict how this will end,” he said.

David Fuller's view

We can call this realpolitik.  There is an unscrupulous, dangerous and militarily powerful leader within the larger European family.  The Dutch, along with citizens of other EU countries will have to put up with him.  So will East European states which have more to worry about, especially if they are overly dependent on Russia for energy.  Much of the EU will remain largely underarmed, for better or worse.

President Obama is unlikely to undertake the EU’s briefly discussed tough sanctions on Europe’s behalf.  Why should he?  Russia poses little military threat to the USA, a country which is considerably stronger and also once more virtually energy independent.  However, it may still implement some moderate sanctions against Russia, if only to remind Putin that he is vulnerable.    

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