by Geoff Dyer
June 21, 2015
from FT Website

Alexis Tsipras, left, and Vladimir Putin
 

Throughout the prolonged showdown between Greece and its creditors, the Obama administration has largely sat on the sidelines, issuing the occasional warning about the potential economic impact of a default.

But with Greece now on the verge of bankruptcy, the US is also beginning to worry about the political fallout from a deeper crisis and the potential for Russia to gain increased influence over a NATO member.

As Washington tries to maintain a united western front in support of sanctions on Russia over Ukraine, a Greek default could provide Moscow an opportunity to sow new divisions among America's European allies.

"You can easily see how geopolitically this would be a gift to Russia," says Sebastian Mallaby at the Council on Foreign Relations.

 

"You do not want Europe to have to deal with a Greece that is a member of NATO but which all of a sudden hates the west and is cosying up to Russia."

Greece was regarded as a frontline state against the advance of Soviet-backed communism during the cold war.

Its EU accession in 1981 is one factor that cemented its identity as a western democracy, something that was deepened 20 years later with the adoption of the euro.

For some months, the administration of President Barack Obama has been quietly urging Germany and other EU members to try to find a way to resolve the stand-off with Greece.

While economic considerations have been at the forefront, diplomats say the EU's position on Ukraine has also been part of the conversation.

The visit by Greek prime minister Alexis Tsipras to St Petersburg late last week served as a reminder of the current Greek government's political ties to President Vladimir Putin's Russia and showed its willingness to look towards Moscow at moments when the dispute with international creditors is at its most intense.

The Russia trip also prompted new speculation that Moscow might be willing to lend substantial financial assistance to Athens, although this prospect is played down by analysts in Washington given the scale of the economic problems Greece would likely face if it were to default.

"It is not as if Russia has a lot of money to throw around," says Thomas Wright at the Brookings Institution in Washington. "Russia is not a huge potential export market, it is not a new economic option that did not exist for the Greeks before the crisis."

Instead, the worry is that the prolonged economic instability that could result from a default would deepen the political hostility towards the rest of Europe among the Greek electorate, opening an opportunity for Russia to boost its sway in the country.

Throughout the Ukraine crisis, Moscow has been working to weaken support in the EU for sanctions, which require unanimous backing from the bloc's 28 members.

It has pushed to encourage pro-Russian political sentiment in Hungary and southeastern Europe, partly through its energy diplomacy.

Angela Merkel, the German chancellor, last year warned about Russia's designs in the region. Her worry about the geopolitical ramifications of a Grexit is one consideration that separates her from Wolfgang Schäuble, her hard-line finance minister.

Obama administration officials insist the EU remains committed to the sanctions on Russia over Ukraine.

"We still believe that Europe remains united against Russia and what they're doing," says John Kirby, state department spokesman, when asked about the potential impact of a Greek default.

"I think coming out of the G7 you saw a lot of unity in Europe for continued sanctions against Russia and th possibility for increased sanctions to further isolate Russia."

Julianne Smith, a former Obama administration official now at the Center for a New American Security, says the showdown over Greece plays into a broader Washington concern about the effectiveness of the EU at a time when the UK is also planning a referendum about its own membership.

"Washington is worried about both the Grexit and Brexit situations," she says.

 

"Both situations are a distraction at a time when we need Europe to show a lot of leadership."

Instead, the result of the succession of crises is,

"likely to provoke a period of navel-gazing" among Europe's leaders.