European Union and economic consequences of the Russian – American rivalry

Europe’s economy is vulnerable to ripple effects from the crisis in Russia and Ukraine.

As the European Union, the U.S. and Canada look to take coordinated action to pressure Russia to back off its annexation of Crimea, economists at Morgan Stanley and Deutsche Bank AG released reports yesterday analyzing the potential for fallout on Europe’s economy should the crisis spread.

The impact could be transmitted through finance if Russia grabs assets or if the creditworthiness of its assets declines, said Gilles Moec and Marco Stringa, London-based economists at Deutsche Bank. Among other channels, world trade may be roiled by a drop in Russian imports or if Russia holds back exports of its energy.

“On all these counts, the European Union would come firmly first among those affected,” said Moec and Stringa.

Using data from the Bank for International Settlements, Deutsche Bank noted French banks are the most exposed, with $51 billion in claims over Russia in the third quarter of last year. As a share of total bank assets, Austria has the highest ratio at 1.4 percent, followed by the Netherlands and Italy.

The share of euro-area foreign direct investment assets held in Russia were 3 percent of the total in 2012, according to Morgan Stanley economist Olivier Bizimana in London.

If trade took a hit, then euro-area merchandise exports to Russia might fall from the 2.5 percent of total shipments in 2013, said Bizimana. Germany is the most exposed: about 3.3 percent of its exports head east.

On energy, Germany gets one-fifth of its coal and a quarter of its oil from Russia, while Finland gets 100 percent of its natural gas and more than two-thirds of its oil from there, said Moec and Stringa.

“In order for European growth to be materially impacted, an extreme scenario would need to unfold with a deep recession in Russia — similar to what was seen at the time of the Ruble crisis in 1998 — and large spillover to the eastern part of the European Union,” said the Deutsche Bank economists. A more likely risk would arise if uncertainty spread in Europe when emerging markets are already wobbling, they said.

An economic downturn in Russia would also shave the foreign affiliate sales of euro-area companies, which on average generate 1.5 percent of their revenue from the Russian market, said Bizimana. France’s Danone and Adidas AG of Germany are among the most exposed.

Europe also has “little room” in fiscal and monetary policies to respond if there were a downturn in external demand, said Bizimana.

Right to self-determination as highest guarantor of respect human rights or a way for undermining state sovereignty – Case study: Kosovo’s self-proclaimed independence

When I spoke at the EES Discussion in June, 2008, about whether there was a “Kosovo precedent,” I had no reason to believe that these issues would soon come to a head in South Ossetia. Having written a legal assessment of the separatist crisis in Moldova, my attention was focused more on the western Black Sea littoral than on the eastern. The essay reprinted here reflects the main points that I made at that June meeting. It considers the legal issues implicated by Kosovo’s declaration of independence and the subsequent recognition by various states of Kosovo as an independent country. It also tries to set out the differences between political and legal precedent and how we may frame arguments about what Kosovo means in terms of these two different uses “precedent.” In a few places I have included some short updates to reflect recent events.


What is precedent?

The February 17, 2008 declaration by the Parliament of Kosovo stating “Kosovo to be an independent and sovereign state” received a mixed reaction from other countries. While the US, the UK, France, Germany, and certain other EU member states, as well as a host of other countries, formally recognized Kosovo as a new state, others, such Russia, Romania, Moldova, and Cyprus (and of course Serbia), argued that Kosovo’s secession and/or the recognition of that secession would be a breach of international law. The majority of states have positions someplace in between these two poles. As of this writing, approximately 46 states have recognized Kosovo’s independence.

One issue that seemed to influence states was whether Kosovo’s declaration, and its subsequent recognition by many influential states, would be some kind of “precedent” that would effect the resolution of other separatist disputes, in essence ratifying the claims of separatists. In the years prior to the 2008 declaration, other separatists leaders, such as Transnistria’s Igor Smirnov, have essentially argued that “if Kosovo gets independence, then so should we.” Are they correct?

To assess this question, it is important to first note that when international lawyers and international relations theorists speak of precedent, they use the term in slightly different ways. Whereas political scientists usually use it to refer to a past event that could be politically persuasive or may be used in diplomatic dialogue, lawyers have a stricter understanding of the word and use it when a past event states a rule of law that is to be applied in the current case. As a technical matter, in international law as opposed to domestic law, precedent is not binding. For example, a previous decision of the International Court of Justice in a case between states A and B does not define the legal rule that must be applied in a later case between states C and D. There is, however, a very strong assumption that like cases are to be treated alike. And so, while as a formal matter the precedent is not legally binding, as a practical matter international lawyers will try to maintain a coherent and consistent set of rules across similar cases.

The question, then, is whether Kosovo’s declaration and subsequent recognition is the type of event that international lawyers would choose to follow as an example of the elucidation of a legal rule for a particular type of case, or whether it was aberrant and should be instead viewed as a breach of international law. In the case of Kosovo, we need to look first at UN Security Council Resolution 1244 (1999), which provided a framework for approaching the stabilization of Kosovo. Besides this resolution, we need to consider the rules and norms of international law concerning self-determination and secession.


UN Resolution 1244

Serbia and Russia, referring to Resolution 1244’s preambular language “[r]eaffirming the commitment of all Member States to the sovereignty and territorial integrity of the Federal Republic of Yugoslavia .…”, have argued that Resolution 1244 does not allow the secession of Kosovo without the agreement of Serbia. By contrast, the EU has taken the position that Resolution 1244 is not a bar to Kosovo’s independence as, in its view, the resolution does not define the outcome of final status talks.

On balance, it appears that Resolution 1244 neither promotes nor prevents Kosovo’s secession. Although operative paragraph 1 of Resolution 1244 states that a political solution shall be based on the principles of the annexes, those annexes are silent as to the governmental form of the final status of Kosovo. The annexes only state that, pending a final settlement, an “interim political framework” shall afford substantial self-governance for Kosovo and take into account the territorial integrity of the Federal Republic of Yugoslavia. Moreover, the references to the territorial integrity of Serbia are only in the preambular language and not in the operational language. The document is therefore silent as to what form the final status of Kosovo takes. Much of the debate thus grapples with the broader issues of self-determination and secession under international law.


The law of self-determination and the problem of secession

Perhaps the single most contested issue concerning self-determination is determining what is meant by the self-determination of peoples. At various points in international legal history, the term “people” has been used to signify citizens of a nation-state, the inhabitants in a specific territory being decolonized by a foreign power, or an ethnic group.

A group of experts was convened by the National Assembly of Quebec to provide advice concerning the legal issues implicated by a hypothetical secession of Quebec (the “Quebec Commission”). In its Report of the Group of Experts Concerning  the Territorial Integrity of Québec in the Event of the Attainment of Sovereignty, the Quebec Commission explained (in Section 3.07) that the right to self-determination is context-dependent and that different types of peoples lead to different applications of the right to self-determination:


the very fact that the right to self-determination, in the sense of “independence,” has been recognized solely in “colonial” peoples is an indication that this right takes on or can take on different meanings for other categories of peoples.


So long as a state provides a minority group the ability to speak their language, practice their culture in a meaningful way, and effectively participate in the political community, then that group is said to have “internal self-determination.” Secession, or “external self-determination,” is generally disfavored in diplomatic practice. In the opinion re Secession of Quebec, the Supreme Court of Canada found (at paragraph 123) that “[a] right to external self-determination (which in this case potentially takes the form of the assertion of a right to unilateral secession) arises only in the most extreme cases and, even then, under carefully defined circumstances…” (Emphasis added.)

Since the birth of the United Nations, diplomats and jurists have emphasized that a right of self-determination was not a general right of secession. Allowing secession as a remedy would have clashed with a cornerstone of the UN, which is to protect the territorial integrity of states. However, one also cannot say that international law makes secession illegal. If anything, international law is largely silent regarding secession. Attempted secessions are, first and foremost, assessed under domestic law. However, a secessionist dispute may implicate international law under specific circumstances including, among others, (a) when a new entity seeks recognition as a sovereign state (in which case there are rules for recognition or non-recognition) and (b) if there is a threat to international peace and security (which would thus likely become an issue for the UN Security Council). Thus, the law of self-determination can be summarized as follows:


¨   Self-determination for colonized peopled allows for the ability to separate the colony from the colonial state so that the colony may gain independence and become a sovereign state;


¨  For a state as a whole, self-determination means the right to be free from external interference in pursuit of its political, economic and social goals;


¨  For communities that are not colonies and are within existing states, self-determination means “internal self-determination,” the pursuit of minority rights within the existing state; and,


¨  Some argue that in non-colonial cases, self-determination may also allow for secession under “extreme cases” and “carefully defined circumstances” (to use the terms of the Canadian Supreme Court from the Secession of Quebec opinion).


Whether self-determination gives a remedy of secession outside the colonial context is, in the words of Professor Malcolm Shaw, “the subject of much debate.” Jurists who interpret the law of self-determination in this way generally contend that any attempt to claim secession as a remedy must at least show that:


(a) the secessionists are a “people” (in a sense recognized by the international community);

(b)  the state from which they are seceding seriously violates their human rights; and,

(c)  there are no other effective remedies under either domestic law or international law.


I will consider Kosovo under this framework and subsequently turn to the question of recognition.


Application to Kosovo’s declaration

The first hurdle is to assess whether the Kosovar Albanians are a “people” for the purposes of the right of self-determination. As explained above, there is little agreement as to what the definition of people even includes. One may argue that the Kosovars are a people, inasmuch as they are of the same ethnicity, perceive of themselves as a group, and have inhabited Kosovo for centuries. Others may respond that they are an Albanian ethnic enclave, rather than a nation unto themselves. In the debate over the declaration and subsequent recognition of Kosovo, the “peoplehood” aspect of the claim has been discussed the least.

Assuming, for the sake of argument, that one finds that the Kosovars are a people, one must then assess whether they can credibly fear the recurrence of serious human rights violations if they stay integrated with Serbia. The International Committee of Jurists who arbitrated the status of the Aaland Islands in 1920-21 found that there was no right to secede absent “a manifest and continued abuse of sovereign power to the detriment of a section of population.” Here, there is at least a credible argument that the Serbs were responsible for serious human rights abuses against the Kosovars. Resolution 1244 noted that there was a “grave humanitarian situation” and a “threat to international peace and security.” Indeed, it was mass human rights abuses that led to NATO’s 1999 intervention. It should also be noted, however, that human rights abuses have been reported to have been committed by Kosovar Albanians as well. To the extent that the international community considers it relevant whether human rights abuses are ongoing, as opposed to historic, the situation in Kosovo is ambiguous. In relation to this question, one may argue that the ongoing international presence in Kosovo is legally relevant as it is evidence of the international community’s determination that the situation in Kosovo was and is highly volatile and that it cannot be solved completely via domestic political structures. However, the response is that Serbia has evolved since 1999, and that Kosovars should have no fear of renewed violence.

Finally, assuming the first two tests have been satisfied, one would have to be confident that secession is the only realistic solution to the problems. On the one hand, the political situation prior to the declaration of independence was bleak. As of December 2007, the two sides could not seem to resolve their differences and the political negotiations were declared a failure by the mediators. Given Kosovar expectations, it is unlikely that anything short of military intervention could have kept Kosovo within Serbia. On the other hand, it could be argued that the real bar to a negotiated solution was intransigence on the part of the Kosovars and their supporters: the political situation was bleak because it was made so by one side.

In short, an argument claiming a Kosovar right to secede has numerous hurdles to pass. Perhaps the tallest one is the belief by many international lawyers that, outside of decolonization, there is no right to secession. Secession may exist as a fact, but it cannot be claimed as a right or remedy. Issues of legality would then focus on recognition, to be considered below.

If one does assess Kosovar claims based on the model that external self-determination may be allowed in extreme cases, there are still various difficulties—ranging from how one defines “people” to whether secession really is the only realistic solution. That being said, the facts of Kosovo’s case are more persuasive than those of other separatist groups, such as the Transnistrians in Moldova. This sense that Kosovo has at least a better case than most other separatist groups is reflected by the debates over whether or not to recognize Kosovo’s declaration.


The law and politics of recognizing Kosovo’s declaration

Daniel Thurer has argued that in difficult situations such as these, the issue of legality often shifts from the question of the legality of secession, to the question of the legality of the recognition of secession—a subtly different, but nonetheless different, question. The general understanding is that recognition itself is not a formal requirement of statehood. Rather, recognition merely accepts (or “declares”) the factual occurrence of the establishment of a new state. Nonetheless, no state is required to recognize an entity claiming statehood.

To the contrary, a good argument may be made that states should not recognize a new state if such recognition would perpetuate a breach of international law. In the words of the influential treatise Oppenheim’s International Law (Ninth): “Recognition may also be withheld where a new situation originates in an act which is contrary to general international law.”

State practice evinces that, absent a clear indication of illegality, in matters of state recognition there is considerable deference to the political prerogatives of outside states to decide whether or not to recognize an aspirant state. This does not, in and of itself, make Kosovo’s secession legal. But, it does give a window as to how acceptable a particular secession is to other states and, possibly, whether they view that recognizing the secession would perpetuate an illegality.

Russia and Serbia argue that, inasmuch as Serbia did not consent to an alteration of its borders, there can be no legal recognition. Absent any qualification, that analysis is inaccurate. Changing the boundaries of a sovereign state (Serbia) in and of itself would not make Kosovar independence illegal because, as discussed above, the international community has come to accept secession as a fact under certain circumstances. As a comparative matter, the international community has been relatively enthusiastic for Kosovar independence compared to other secessions. Although some have argued that Kosovo’s declaration is a failure for having garnered “only” 46 recognitions (as of this writing), this is actually quite successful compared to attempted secessions such as those of the Turkish Republic of Northern Cyprus, Transnistria, Abkhazia, South Ossetia and Nagorno-Karabakh. Those secessionist entities have held territory anywhere from 15 to 30 or more years and, at best, have one or two states that recognize them. The secessionists may hold territory, but they are political pariahs. (It will be particularly interesting to see what happens in terms of recognizing South Ossetia.) And there are the various secessions, such as Katanga and Biafra, which collapsed quickly due in part to the absence of foreign recognition. In this light, Kosovo is closer to the “successful” secessions of Bangladesh and Eritrea.


Is Kosovo unique? Implications for other secessionist claims

Does the example of Kosovo set a legal precedent for the other separatist conflicts, such as those in Abkhazia, South Ossetia, Nagorno-Karabakh and Transnistria? Or, as the US and UK have argued, is Kosovo sui generis and of no precedential value?

It can be argued that Kosovo is different from other secessionist claims because Kosovo has been under international administration due to the fact that the international community considered the situation to be volatile. While secessions are primarily an issue of domestic law, Resolution 1244 internationalized the problem and moved Kosovo from being solely under Serbian sovereignty into a grey zone of international administration. Although this area of international law is not sharply defined, reintegrating such a territory is different from assessing a claim by a separatist group that, on its own, is seeking to overturn the authority of the pre-existing state and unilaterally secede. This, however, is a controversial position.

That being said, one should note that as of this writing, neither the United States nor other major recognizing states have used the argument that Kosovo is owed sovereignty as a legal right. In short, it is too early to tell whether, as a matter of law, the events in Kosovo will lead to a shift in legal interpretation.

Regardless, Kosovo’s declaration, and its recognition by dozens of states, has already started to play a role in the evolving political rhetoric of parties involved in secessionist conflicts. So, while there is no Kosovo “precedent” in international law (as of yet), there is now, based on the reactions of other secessionist entities, as well as Russia, a Kosovo argument in international diplomacy. Even before the August fighting, Kosovo’s declaration had seemingly redoubled claims by Abkhazia and South Ossetia for independence from Georgia. Soon after Kosovo’s declaration, Russia ended its adherence to a 12-year-old economic embargo of Abkhazia, although Russia stated that its policy shift was not a reaction to the declaration.

Much of Russia’s political rhetoric during the August fighting had echoes of Kosovo. Yet, the echoes were not from the declaration and recognition of Kosovo but from the political language related to NATO’s 1999 campaign (with its references to ethnic cleansing). It has been careful, however, not to state that Kosovo’s declaration itself was legal and provided legal precedent for South Ossetian secession. Legal precedents have a way of being applied in places where you least expect them and the last thing Russia wants is to empower Chechen separatists.

Some Russian politicians have stated that the situation in South Ossetia is unique. This would make it the second “unique” secessionist crisis in six months. Despite the declarations and best intentions, simply saying something is “unique” may not be enough to prevent a shift in state practice. For example, a good argument could be made that while recognizing Kosovo would be consistent with international law, recognizing South Ossetia would not be. Thus, as a matter of law, one is not a precedent for the other. However, in the end, we need to keep in mind that sometimes the most effective law in politically-charged situations may be the law of unintended consequences. Political precedent is not the same as legal precedent.


Author: Christopher J. Borgen


Christopher J. Borgen is Associate Professor at St. John’s University School of Law in New York City. He spoke at an EES Noon Discussion on June 13, 2008. The following is a summary of his presentation. A slightly different version of this essay originally appeared in International Legal Materials, a publication of the American Society of International Law. Please see Christopher J. Borgen, “Introductory Note to Kosovo’s Declaration of Independence,” 47 ILM 461 (2008) for the original version, including citations to references. Meeting Report 350.