Isolated Greece pivots east to Russia, China and Iran. But will it work?

By Mehreen Khan 06 April 2015

Alexis Tsipras is making overtures towards Greece's eastern powers as Europe tightens its stranglehold

Photo: Copyright (c) 2015 Rex Features.

Greece's bail-out drama is threatening to take a geostrategic turn to the east.

A mere three weeks after his maiden trip to Berlin, Prime Minister Alexis Tsipras is on the road again, this time heading for Greece's eastern hegemon.

On Wednesday, the 40-year-old premier will sit down for his first official meeting with Russian counterpart President Vladimir Putin at the Kremlin.

The timing is not fortuitous.

Originally pencilled in for May, Mr Tsipras pushed forward his trip to fall the day before the government faces a crunch €450m repayment to the International Monetary Fund and as the two Orthodox nations prepare to mark Easter.

Following repeated EU rebuffs over its reforms-for-cash rescue programme, the Leftist government has intensified its flirtation with a triumvirate of pariah states - Russia, China, and Iran.

But what does Mr Tsipras really hope to achieve?

The Russia question

Fears of a Leftist alliance with Putin's Russia first emerged after Syriza's landslide election win in late January. The nascent government moved to quickly condemn economic sanctions placed on Moscow.

In a nod to their long-standing historical ties, the Moscow trip was announced as Greeks marked the anniversary of their foundational War of Independence, when Tsar Alexander I allied with the Mediterranean state to throw off four centuries of Ottoman rule.

The dalliance with Kremlin has since intensified, as Greece's creditor show no signs of lessening the squeeze on the country.

Ahead of his visit, a defiant Mr Tsipras revived calls for the EU to halt sanctions and open up diplomatic channels with the Kremlin. In a hint at Greece's simmering tensions with Brussels, the Syriza leader attacked economic warfare as a "dead-end policy".

Alexis Tsipras has told his inner circle that if pushed by the EMU creditor powers, he would tell them 'to do their worst'

But Greco-Russian relations extend beyond just a shared reproach for European diktats.

Greece's reliance on Russian energy makes Moscow is its largest trading partner, with bilateral trade amounting to nearly $10bn a year.

Syriza's fire-brand energy minister was in Moscow in March, meeting chiefs of state-backed Gazprom and inviting Russian companies to take part in the exploration for oil and gas off the country's eastern coast.

"We decided to expand our energy relations for the well-being of our region and Europe,” said Panayiotis Lafazanis, the popular figurehead of Syriza's Left Platform. “A large and promising new chapter in Greek-Russian relations is opening up.”

The courtship is playing well with Mr Tsipras's ragtag coalition of socialists, Marxists, and the nationalist right-wing Independent Greeks, many of whom have grown exasperated at Europe's seeming determination to push the country to financial breaking point.

Yet, for all the talk of a Russian 'Plan B', Mr Tsipras is not realistically heading cap in hand to the Kremlin.

"There's no doubt the Russians could provide small amounts of financial support, but they're not in a position to give the kind of money Greece needs to stay in the Eurozone," says Simon Tilford, deputy director of the Centre for European Reform. "The amounts involved are far beyond the scope of Moscow, whose economy is not much bigger than the Netherlands."

The Kremlin's financial firepower has been hugely diminished. As western-backed sanctions bite and with global energy prices falling to new normal, the Russian economy is expected to contract by 3.8pc this year according to the World Bank - it's worst recession for six years.

Even if Moscow intends to draw Greece into its sphere of influence, its own financial turmoil means it now lacks the wherewithal.

Conscious of the precarious economic plights of both nations, Europe's Franco-German axis have already dismissed the Tsipras's visit as a "sideshow".

“We were also in Moscow and we’re still members of the European Union and stand unified,” was Chancellor Merkel's curt response when asked about the trip during a press conference with Francois Hollande last week.

But the political signalling of the visit may be enough to harden sympathetic European ears to Greek pleas.

"Russia is almost guaranteed to antagonise and make it harder for those who want the Germans to be more conciliatory towards Greece," adds Mr Tilford. "The strategy is counter-productive to brokering a deal and doesn't offer up any serious alternative sources of money for Athens."

Courting the Chinese

A Chinese charm offensive is better placed.

Greece has long courted Beijing's investment in its dilapidated infrastructure. In 2009, China's state-backed firm Cosco took control of a third of the country's largest port, Piraeus.

Although at the time a hugely unpopular decision, China's presence is now universally lauded as a welcome addition in an otherwise botched series of privatisations carried out by previous Greek administrations.

The kleptocratic sell-offs of the country's airports and power grids has led the new government to review previously unjust deals, as the Left Platform coalesce around their opposition to fire sales of the country's strategic assets.

Tellingly, Syriza's deputy prime minister and foreign minister travelled to Beijing last month, inviting Cosco to bid for control of the two-thirds of Piraeus that remains under state control.

The reassurance seemed to pay off. With Athens scrambling to find buyers of its short-term debt, Beijing swooped in with a €100m investment in two T-bill auctions as a token of goodwill.

And even Iran...

With Greece's cash flow problem deteriorating with every passing day, rumours of Athens' overtures towards the unlikeliest of sources have the sprung up. The latest comes form the country's former prime minister, Antonis Samaras.

Mr Samaras has accused the current incumbent of “sending his cousin to Iran to ask the Tehran government to buy Greek bonds”.

“When you are in Europe and ask Chinese, Iranians, Russians to finance your deficit, don’t you send a signal to the rest of Europe that you are not really a serious pro-European?," was the refrain of the leader of the much diminished New Democracy party.

The rumours remain unsubstantiated for now. An official Greek visit to Tehran is not yet in the pipeline, but the search for foreign bondholders is likely to continue. The European Central Bank has banned domestic banks from increasing their holdings of government debt - a stance that pushed Athens to seek out alternative willing investors.

With the clock ticking on its cash crunch, both sides will be hoping for a denouement to the saga before Mr Tsipras returns to Moscow in May. The Greek premier will be marking Russian Victory Day - a celebration of the capitulation of Nazi Germany to the Soviet Union in the Second World War.

Isolated Greece pivots east to Russia, China and Iran. But will it work? - Telegraph