Russia’s Eastern Gambit

22 september 2015

Its Future Lies Not in Europe But in Asia

Salvatore Babones, Ph.D., is an Associate Professor of Sociology and Social Policy School of Social & Political Sciences at the Faculty of Arts and Social Sciences, University of Sydney.

Resume: Russia has nothing to gain and nothing to lose in Europe. By contrast, Russia has much to gain and everything to lose in Asia. Asia is dynamic and growing. But to realize its potential Russia must focus on internal development, not external posturing. And the obvious place for it to focus first is the Far East.

A resurgent Russia seems to be actively challenging the post-Soviet settlement in Europe. Just as China reversed the nineteenth-century unequal treaties that Westerners imposed on the weak and decaying Qing dynasty, Russia seeks to reverse the twentieth century unequal treaties that Westerners imposed on the vulnerable and bankrupt Yeltsin regime. Russian military engagement in Georgia and Ukraine along with provocative air and naval exercises in the Baltic Sea and Pacific Ocean have given rise to a perception both in Russia and in the West that “Russia is back.”

A dispassionate analysis of the costs and benefits to Russia of its recent interventions yields a more realistic appraisal. Russia subsidizes the independence of the two tiny breakaway regions of Abkhazia and South Ossetia at the cost of permanently soured relations with its neighbors Georgia and Azerbaijan. In Ukraine, Russia annexed 5 percent of the country while losing its predominant influence over the other 95 percent. In so doing it obliterated what remained of its credibility in Poland and the Baltic States. This can hardly be called success.

Russia’s wars in Georgia and Ukraine have been local counter-offensives in a larger geopolitical retreat. Every analyst agrees that if Russia invaded Ukraine in force it could conquer the country in short order, and every analyst agrees that NATO would not go to war for Ukraine. So why has Russia pursued limited aims in Ukraine – just as it did in Georgia?

Russia is slowly coming to terms with the fact that there is no longer any scope for Russian engagement in Europe. Europe doesn’t want Russia’s armies, doesn’t need Russian investment, and doesn’t care for Russian exports other than natural gas. Russia saved Europe from Napoleon and Hitler but Russia is no longer welcome at the European high table. For the first time in three centuries, Russia is not practically speaking a European power. Only a geographical convention that sets the border of Europe at the Ural Mountains keeps Russia in Europe at all.

With the loss of influence in Ukraine, Russia’s withdrawal from engagement in Europe is now nearly complete. Only vestigial enclaves like Transnistria and Kaliningrad remain. Russia may not like having NATO on its eastern border, but NATO is a purely defensive alliance of mostly demilitarized countries sheltering under American protection. It poses no offensive threat to Russia. Russia’s main threats – and opportunities – are to be found elsewhere. Effective engagement in Asia is much more important for the future of Russia than anything to be gained or lost in Europe.

The Ukraine fiasco

The Ukraine crisis began in November 2013 when Ukraine’s president Victor Yanukovich reversed policy on further integration with the European Union and declined to sign the association agreement that he had previously negotiated. This decision prompted massive popular protests in Kiev, a violent street conflict in which hundreds of people were killed, and an irregular transfer of power that led to the installation of a generally pro-Western regime in Kiev.

In March 2014 the Russia Federation reacted by annexing Crimea. This annexation seems to have been supported by the majority of the population of Crimea but opposed by the majority of the population of Ukraine. Unbiased numbers are not available, but the exact facts of popular opinion were in any case largely irrelevant to the actual course of events. Russia annexed Crimea in defiance of international law because the possibility of a hostile force in Sevastopol would have seriously impaired Russia’s national security.

National security is the missing ingredient from most public interpretations of the Ukraine crisis. Russia may be the preeminent military power in Eurasia, but Russia’s maritime position in Europe has always been hopeless. Though Russian navigation out of the Baltic and Black Seas into the wider world is guaranteed by international treaties, these treaties would be worthless in any serious conflict. It is a challenge for Russia merely to maintain a presence in the Baltic and Black Seas themselves.

The loss of Sevastopol – or the loss of the practical use of Sevastopol, which is in effect the same thing – would mean the further deterioration of Russia’s ability to project power in the Black Sea. Russia’s alternative Black Sea port at Novorossiysk is only a partial substitute. And so Russia annexed Crimea in 2014 to forestall the possibility that Sevastopol might someday become a NATO naval and air base. Historical ties notwithstanding, national security is the key to Russia’s involvement in Ukraine.

National security is also the key to Russia’s support for the separatist insurgency in eastern Ukraine. Like the annexation of Crimea itself, Russia’s support for separatism is clearly rational and strategic. It has limited aims and is not a prelude to Russian intervention in the rest of Ukraine or Eastern Europe more broadly. The maintenance of the separatist rebellion establishes a bargaining chip that can be used to ensure that Ukraine ultimately recognizes Russia’s position in Crimea.

The separatist bargaining chip is necessary because even though Russia controls Crimea, Ukraine controls the water supply to Crimea. This situation is inherently unstable so long as Ukraine and its Western supporters do not recognize Russia’s sovereignty over the peninsula. Realist logic suggests that Russia will withdraw its support for separatism in eastern Ukraine only as part of a deal in which Ukraine recognizes Russian sovereignty over Crimea. Right or wrong, moral or immoral, Ukrainian recognition of Russian sovereignty over Crimea is Russia’s ultimate objective in the Ukrainian conflict.

Russia’s support for the insurgency in eastern Ukraine makes sense only in this context. Contrary to popular belief in Russia, Ukraine, and the West, the war in Ukraine has not been a victory for Russian imperialism that signifies a return to the use of war as a primary means to settle conflicts in Europe. It is the final act of an unfolding fiasco for Russia that has seen it lose all influence over a major country with which it has deep historical, economic, and personal ties. The Russian-led Eurasian Economic Union looks rather thin without Ukraine.

But ironically once the legal status of Crimea is fully resolved, the “loss” of Ukraine may turn out to be a blessing in disguise for Russia, since it relieves Russia of the responsibility to support a weak, ailing economy and transfers that responsibility to the West. As Secretary of State Colin Powell said with respect to the invasion of Iraq: “You break it, you buy it.” Already the European Union is providing financial guarantees to support Ukrainian purchases of Russian natural gas. If the EU continues to subsidize the Ukrainian economy in the future, Russia may turn out to be a major long-term beneficiary.

The scattering of the Russians

Beginning with the Tsars and accelerating under the Soviet Union, millions of ethnic Russians were stationed in or exiled to the far-flung provinces of the empire. In Ukraine the ethnic fault lines between Russians and Ukrainians have always been obscured by history and marriage, but in the Baltics, Central Asia, Siberia, and the Far East, a succession of Tsarist and Soviet governments sent people to settle conquered territories, consolidate Moscow’s control, and staff the offices of the empire. As a result, millions of ethnic Russians live (and have lived for generations) outside the historical homelands of the Russian people.

The three Baltic states of Lithuania, Latvia, and Estonia have been a particular focus of concern regarding potential “Great Russian” expansionism. Unlike Ukraine, all three countries are members of NATO and the European Union. And unlike Ukraine there are no major Russian geopolitical interests at stake in the Baltic States. Aside from some minor Cold War style tit-for-tat arresting of security officers along the Russian-Estonian border, Western fears of Russian aggression have failed to materialize.

To the south, Russia has a troubled history of military involvement in the Caucasus region. Russia fought two bloody civil wars in Chechnya in the 1990s and 2000s and a brief external war with Georgia in 2008. Parallels are often drawn between Georgia and Ukraine because Russia continues to support the independence of the small breakaway republics of Abkhazia and South Ossetia. Unlike Crimea, these poor, remote regions are of no strategic importance to Russia. They are legacies of another military victory that represented a strategic defeat: the loss of Georgia (birthplace of Joseph Stalin) to the pro-Western camp.

In the post-Soviet republics of Central Asia, the ethnic Russian presence is very strong and even ethnically non-Russian people in these five countries usually speak Russian. Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan are members of the Shanghai Cooperation Organization and Kazakhstan is also a member of Russia’s Eurasian Economic Union. Like Ukraine, all five countries (including Turkmenistan) were part of the Russian Empire long before the Soviet Union came into existence in 1917 and they all have close ties to Russia.

The difference between Central Asia and Ukraine is that Ukraine is a European country on the borders of the European Union. There will be no European Economic Framework Agreement for the countries of Central Asia and there is no prospect of future NATO membership. Under severe American pressure, in 2001 Kyrgyzstan leased an airport to the United States for use by NATO forces in Afghanistan. In 2014 the lease was allowed to expire. For the countries of Central Asia (and their rulers) Russia will always be a closer neighbor than Europe or the United States.

But even in Central Asia, Russia faces a long-term threat to its economic and political influence. That threat is China. China is a sometime diplomatic and economic partner of Russia (and of course a fellow member of the Shanghai Cooperation Organization) but is certainly no ally. The Silk Road Economic Belt component of its “one belt, one road” development initiative is transparently intended to tie the countries of Central Asia more closely to underdeveloped provinces of western China.

If China does not currently pose a serious threat to Russian interests in Central Asia it is only because China has so far not been willing to spend the money required to transform the “New Silk Road” slogan into reality. Western China is very poor and thus China exerts relatively little economic gravity in Central Asia. China’s investments in Central Asia are mainly focused on through-transit and natural resource extraction, not deep economic integration. And while many Ukrainians aspire to join Europe, Central Asians hardly aspire to join China. China’s real threat to Russia lies elsewhere.

Russia’s future in Asia

China defies statistical representation. A country of 1.3 billion people, it is home to nearly one-fifth of the Earth’s population. It is home to more cities, more factories, and more of just about everything than anywhere else on the planet. Millions more people of Chinese heritage live outside of its borders. China is also the articulation point of most of the world’s manufacturing value chains. Raw materials and intermediate goods are sucked into China from all over the world; finished products come out.

One result of China’s centrality in global commodity chains is that China has become an indispensable trading partner for just about every country in the Asia-Pacific region, if not the world. The advanced manufacturing leaders of Northeast Asia – Japan, South Korea, and Taiwan – all have economies that are closely integrated with China’s. Northeast Asian economic integration is deep and complex, but the headline story is that Japan, South Korea, and Taiwan provide the designs, know-how, advanced components, and global merchandising while China does the work.

The fourth technology powerhouse in Northeast Asia is Russia, but you would hardly know it. Russian manufacturers have taken little or no advantage of their proximity to China. They have been reluctant to move production to the Far East and entirely absent from Northeast Asian supply chains. Stuck in a Eurocentric mindset, when they look abroad at all, they look West, not East. They seem completely unaware that Western firms outcompete Russian firms on both price and quality not because of any innate Western superiority but because Western firms have long since moved to China.

Russia has key industrial strengths in heavy robotics, metallurgy, military equipment, and aerospace that are otherwise underdeveloped in Asia. Russia’s new Vostochny Cosmodrome – under construction in the Amur Region of Russia’s Far East – has the potential to become the primary satellite launch site for Asian countries like South Korea that lack their own space capabilities. And Russia has a major port at Vladivostok that could serve a large regional hinterland if it were not for chronic geopolitical constraints.

But Russia alone has neither the scale nor the capacity to build full industrial clusters in any of these areas and none of these industries are integrated into Asian value chains. Quite the contrary: Russia is one of the world’s most isolated major economies. Its exports consist overwhelmingly of natural resources and its economic integration with the outside world is concentrated almost entirely in the energy industry. Russia’s total level of exports is not abnormally low for a large country but the structure of Russia’s exports is abnormally flat.

China’s much-trumpeted recent investments in Russia only reinforce Russia’s position as a monoline energy exporter. Gazprom’s big pipeline deals with China National Petroleum Corporation and Rosneft’s mooted openness to Chinese investment are all about energy. China’s Silk Road Economic Belt investments in Russia’s transportation infrastructure are designed to expand the overland route to Europe for Chinese exports; Russia is merely fly-over territory for Chinese products. Chinese investment may be welcome in a Russia hit by Western sanctions, but it is not a solution to Russia’s chronic economic weakness.

What the Russian economy needs is greater integration with the outside world. Europe has never been a willing partner for Russia. Russia has been knocking on Europe’s door since the time of Peter the Great. It has sometimes broken it down. But it has never been well-integrated into the wider European economy. Now European and American sanctions have given Russia the motive to pursue long-standing opportunities in Asia. Asia’s major economies are relatively open to collaboration. It is Russia that remains closed.

Russia’s Vladivostok Free Port initiative is a step in the right direction, in more ways than one. It is a step towards openness, and it is a step towards the East. Russia must move much further in both directions before such initiatives will yield noticeable dividends. Openness is not just the removal of barriers. Openness is much more a state of mind.

A more open Pacific Russia?

The wave of democracy that swept over Eurasia in 1989 freed Central and Eastern Europe from Soviet repression and led to the breakup of the Soviet Union itself. The Soviet Union’s former client states in Eastern and Central Europe are now members of NATO and the European Union, as are the three Baltic States. Though lives were taken, overall the dissolution of the Soviet system was remarkably peaceful. By the end of 1991 the Soviet Union was gone and American economists were advising the new Russian government.

The same wave of democracy also swept over China in 1989, leading to the military crackdown in Tiananmen Square, decades of severe repression, and the perpetuation of totalitarian communist rule. It is thus quite ironic that today most Westerners have no trouble getting visas to visit China and have relatively flexible visa terms while visiting. Taxi drivers charge the fare shown on the (regulated) meter and give exact change. Westerners visiting Tiananmen Square are waived through security lines. China is generally welcoming to Westerners. It reserves its repression for its own people.

Compare Russia’s officious treatment of visitors, rigid visa regime, and corrupt taxi drivers. If visiting China is a pleasure, visiting Russia is an ordeal. The Russian government revels in the charade that Westerners are banging down the door to enter and live in Russia. They are not. And that is a major problem for Russia’s economic development, especially in the thinly populated Far East. While China hosts at least half a million “foreign” businesspeople (plus another half a million Taiwanese), Russia’s Far East attracts mainly unskilled laborers from China and North Korea.

This contrast between Russia and China is especially stark on Russia’s Pacific coast. Moscow may have a large expat community but Vladivostok does not. A Pacific port that should be a cosmopolitan potpourri of Japanese, Korean, Chinese, and North American influences, Vladivostok is instead a provincial Russian city with a newly built memorial to Tsar Alexander II. The problem is not a lack of investment: the Russian government poured $20 billion into the region’s infrastructure in preparation for the most expensive APEC summit ever. The problem is a lack of openness.

Economic integration and economic development require economic openness. Gas pipelines and space centers can be built by government fiat; advanced industrial complexes cannot. Most economists interpret economic openness in terms of the lowering of trade and investment barriers, but decades of research have shown that trade and investment openness has little impact on economic growth. Human and institutional factors that are much more difficult to measure seem to matter much more.

Vladivostok’s Primorsky Territory and the  neighboring Khabarovsk Territory are a long way from Moscow. They are thousands of miles east of Novosibirsk, Russia’s easternmost big city. Russia can afford to experiment with openness in the Far East, confident in the knowledge that a single checkpoint on the Trans-Siberian Railway can be used to quarantine “dangerous” foreigners (and their ideas) inside the region. Experimentation always brings challenges, but the risks of not experimenting might be far greater.

The entire Russian Far East is home to just six million people. Unlike other sparsely populated areas of the world, it abuts the human and economic juggernaut that is China. A Chinese land grab in Russia may be extremely unlikely, but scenarios can be envisioned in which China does to Russia what Russia has done to Ukraine. For example, a leadership struggle in Moscow might someday lead a regional governor to declare independence. Might China step in to “restore order” in a sparsely populated wilderness where it has strategic energy interests? Such a scenario is at least as likely as a NATO invasion of Russia, and probably much more so.

The solution for Russia is to more deeply integrate itself into the emerging Asian economy, and a first step in that direction would be to allow greater openness in the Far East. It is difficult to imagine Russia joining South Korea and Japan in a security pact aimed at containing China. It is less difficult to imagine Russia opening its Far East to South Korean, Japanese, and – yes – American participation as a way to promote Russia’s integration into advanced Northeast Asian value chains. Only diversified economic development will provide the jobs and human capital Russia needs to maintain its position in Asia and its influence in the world.

Room for maneuver

Russia has nothing to gain and nothing to lose in Europe. Europe’s reliance on Russian gas is bound to diminish over time, Russian visitors are likely to face increasing scrutiny at EU borders, and European countries are becoming less friendly towards Russian investment. In any case Europe’s economies are stagnant and Europe’s populations are declining. Russia’s only major ally in Europe is Belarus, a country that is not a very attractive target for European Union or NATO expansion. In short, Russia has little room for maneuver in Europe. Playing spoiler in Europe will do little for Russia’s economy and nothing for its reputation.

By contrast, Russia has much to gain and everything to lose in Asia. Asia is dynamic and growing. It is the assembly hub of the world and will remain so for the foreseeable future. China’s growth is slowing but even if China’s economy grows by “only” six percent, it adds a Poland or a Sweden every year. New trade and investment treaties are reshaping the continent. East Asian economic integration still has a long way to run, and it is not too late for Russia to insert itself into the process. Russia should discover what everyone else already knows: Asia is the future.

To take full advantage of its future in Asia, Russia should position itself as a partner for peace in the region. It should finally put to rest the long-festering Kurile Islands dispute with Japan in a way that allows Japan to save face and realize some tangible benefit, however small. It should do everything it can to promote peaceful reunification in Korea. It should stop provoking the United States – and by extension America’s allies – with long-distance bomber flights over oceans that hold no strategic value for Russia. And it should be very careful about selling advanced weapons systems to China.

Most importantly, Russia should recognize that its main enemy is not NATO, the United States, or even China. Russia’s main enemy is itself. Russia has poisoned its relations in Europe with major confrontations over tiny strips of territory. But Russia doesn’t need new territories to govern. Russia already governs one-eighth of the world’s land area outside Antarctica. If the map of the world is ever redrawn in any substantial way, Russia is almost certain to be among the losers. Russia’s top foreign policy objective should be to prevent any future redrawing of maps.

When the Soviet Union disintegrated, Russia unburdened itself of fourteen mostly poorer, mostly dependent imperial millstones. The Soviet client states it lost in Eastern Europe may have generated greater imperial rents for Russia, but also at a high military cost. Shorn of these connections, the new Russia that emerged from the last major redrawing of the world’s maps had the potential to become much more than a militarized petro-state. It still has that potential. But to realize its potential Russia must focus on internal development, not external posturing. And the obvious place for it to focus first is the Far East.

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