Russia’s New Strategy in Asia

23 september 2014

Reassuring the West, Balancing the East

Timofey Bordachev - Director of the Center for Comprehensive European and International Studies at the National Research University–Higher School of Economics, and Director of the Eurasian Program at the Valdai Club Foundation. He holds a Doctorate in Political Science.

Yevgeny Kanayev is Professor at the Faculty of World Economy and International Affairs at the National Research University–Higher School of Economics. He holds a Doctorate in History. 

Resume: For the first time in history, Russia, previously only as a military power, now has a chance to enter the Asia-Pacific region as a factor of peace. And this may make it a unique player, so much needed to balance Asia.

This article was prepared within the framework of a HSE fundamental research program for 2014.

Russia’s turn towards Asia is not an option the country can use or ignore, but a must. This turn must include an accelerated redistribution of economic and trade relations and flows, diplomatic efforts and people-to-people contacts in favor of countries in East, Southeast and South Asia. These efforts should result in Russia’s new role in the world, which would be adequate to its internal development needs and the requirements of the outside world. The most fundamental shift can be expected (and should be promoted) in the Russian public consciousness:  people must learn to chart their own course, open up to the world and, using the expression of Deng Xiaoping, the father of the Chinese economic miracle, must “free their minds” when thinking about this world.

This turn is taking place amid gradual changes in the entire paradigm of Asia’s development. Some countries (China, Malaysia) have already begun making these changes; others (the majority of ASEAN countries) are about to move from the “Asia as the world’s factory” model to the “Asia as a giant market” model. Intraregional and domestic trade is growing fast; cities are expanding, and the number of urban consumers is rising. The remnants of the colonial exploitation of productive forces in Asia are fading away. Moreover, Asian countries themselves have begun to move production to and invest in Africa and Latin America. The new type of Asian development may as well challenge the regulatory power of the West,  its monopoly right to certify the quality of goods and services, promote some innovations and suppress others.

Russia’s turn to the East and qualitative intensification of political and, later, trade and economic relations with Asian countries has already become one of the most important components of the country’s national strategy. As the center of the world economy and politics is objectively shifting to the Asia-Pacific region, there emerges a huge potential for cooperation with Asian countries in implementing Russia’s 21st-century national project – the development of Siberia and the Far East.

In the coming years, three major political factors will be critical for forming and implementing Russia’s strategy in Asia.

First, relative clarity has been achieved – for the first time since the late 1980s – about the intentions of Russia and the West, primarily the United States, and their implementation. The parties have entered a long “new Cold War.” In the next few years they will seek to “cut off tentacles” and “fill the voids” at the regional (Eurasia) and, partly, global levels. In the next five to ten years, the U.S. will continue its confrontational policy towards Russia, trying to restrain it in every possible way, no matter which party comes to power in America.

Traditionally, U.S. policies towards Russia have been a field of struggle between what can be called “the Kissinger strategy” and “the Brzezinski strategy.” The former was based on the pragmatic understanding that once the ideological basis of the East-West confrontation was gone in 1991, relations between the West and Russia started slowly, albeit not without conflict, moving towards rapprochement, both in terms of values and at the regulatory and economic levels. The latter strategy sought to put the squeeze on Russia, encircle it with U.S. allies and, ultimately, push for its disarmament and partitioning. In late 2013, the supporters of Brzezinski’s ideas prevailed and the United States began a new round of the Cold War.

This strategically wrong decision will not bring victory to  America but will weaken it instead. However, the consensus on Russia, which was formed as a reaction of the American elites to the events in Ukraine, cannot be revised in the near future. Washington will continue to provoke diplomatic and even military crises and intervene in areas of Russia’s interests. Russia needs the turn towards Asia to gain more confidence and become less vulnerable to these aggressive attacks.

Russia will hardly have a chance to significantly improve its relations with the European Union. Yet it may avoid degradation of its trade and economic ties with the EU. Europeans will continue their trade with Russia, importing its energy resources and exporting highly processed products, including armaments. At the same time, the EU will keep restricting Russia’s opportunities on the international scene and its access to the latest technologies and innovations.

Second, the strategic degradation of political and, in the future, possibly economic relations between China and the United States has become irreversible. It leads to competition in the field of international security and to the emergence of alternative and mutually exclusive integration projects, with negative consequences for peace and stability in the Asia-Pacific region.

Despite the remaining interdependence between the United States and China, achieved largely in the golden era of their relations between 1971 and 1989, and broad contacts in business, science and education, the two countries will hardly overcome their growing mutual distrust. In the medium term, the United States will tend to protect its interests in the Asia-Pacific region in a traditional way – by strengthening relations with allies and establishing new military partnerships. One likely possibility is that Vietnam will press for stronger military-political cooperation with Washington. Meanwhile, Japan has embarked on a militarization path.

China, in turn, will have to look for ways if not to break out of the strategic encirclement in the east and southeast, then at least cushion its effects. Another factor threatening regional stability is the pressure exerted by China and the U.S. on small and medium-sized Asia-Pacific countries, forcing them to choose a strategic ally. These countries will try to play on differences between the two giants, yet every new aggravation of tensions makes it increasingly difficult to avoid an escalation.

These factors will inevitably increase mutual interest between Russia and China and prompt them to seek compromise and broaden areas of trust and cooperation. This applies, above all, to Central Asia, Mongolia and North Korea. There will arise opportunities for Moscow and Beijing to restructure their relations in the fields of trade and investment.

And third, there is an objective demand for a systemic and comprehensive state policy to implement the 21st-century national project – the development of Siberia and the Russian Far East.

The present plans to develop Siberia and the Far East for the first time since these regions became part of Russia are not based on short-term considerations or subjective views of individual politicians. All government decisions and actions to significantly improve the social and economic situation in Russia’s regions east of the Urals are aimed at developing the whole of the country as a mature and versatile living organism.

The development of Siberia and the Far East will improve the quality of the whole country, not just some of its regions. This would be impossible without opening up these regions to Asia; creating new conditions, unprecedented in Russian practices, for foreign and domestic investors; increasing the level of trust in Russia’s political relations with Asian countries; and without broadening opportunities for people-to-people contacts. Also, the development of Siberia and the Far East will help preserve stability in the event of long-term confrontation with the West.

Summing up the assessment of the new strategic context, it should be emphasized that the external and internal conditions have never been so favorable for a breakthrough to make Russia a full-fledged Asia-Pacific power. For that to take place, it must act as a credible balancer in the complex geostrategic situation in the Asia-Pacific region, reduce risks and threats from overseas and tap the unique investment potential of Siberia and the Russian Far East, orienting it to Asian markets. 

THINGS DONE AND UNDONE

Over the last two years, Russia has been gradually yet consistently reorienting itself towards Asia. At the St. Petersburg International Economic Forum in June 2013, President Vladimir Putin said that Russia would be able to boost its growth only if it redirected its exports to growing Asian markets. The attitude of the Russian political and intellectual elites to the Asian vector of Russia’s foreign policy and to the development of Siberia and the Far East has begun to change.

Formerly, plans to turn towards the East were seen by many as a manifestation of authoritarian instincts of the Russian authorities, unnatural for the country’s political and cultural traditions. But now there is a common understanding that it is in the interests of the eastern regions and Russia as a whole to use the opportunities opened up by Asia’s growth. The precipitous deterioration of Russia-West relations in the early months of 2014 will undoubtedly contribute to Russia’s turn towards Asia.

The APEC Summit in Vladivostok in 2012 came as an important and symbolic step in this direction. Russia proposed an ambitious agenda aimed at accelerating Russia’s integration into many economic and political processes in the Asia-Pacific region. The summit decided in favor of trade liberalization in the region and drew up a list of 54 types of environmental goods to be sold in the region at reduced tariff rates. Russia is ready to assume the role of a key player in ensuring food security in that part of the world. Agreements were reached to develop transport and innovation cooperation, and to create a common educational and scientific space.

Some of the initiatives were further developed in 2013. For example, the next APEC summit in Bali made ??a commitment to refrain from introducing protectionist measures in trade and investment cooperation until 2016. It also developed a mechanism for trade in environmental goods (tariffs for them are planned to be reduced to 5 percent or lower by the end of 2015). The East Asia Summit in 2013 in Brunei continued the discussion of food security, started in Vladivostok, and developed a broader interpretation of cooperation in the field of innovation, proposed by Russia at APEC, with a focus on human capital development and the growth of educational exchanges.

However, the diplomatic achievements have not yet been accompanied by economic ones. The share of APEC economies in Russia’s trade reached a record high of 24.8 percent in 2013, although this growth was largely compensatory and owed to a decrease in trade with the EU, now struggling to recover from the crisis and importing fewer goods. The absolute volume of Russia’s trade with APEC nations increased by 9 percent from 2012 (23.9 percent), but this is too little to speak of a breakthrough, especially if compared with the EU’s trade with APEC (49.7 percent).

Russian exports to APEC in 2013 remained at the 2012 level. Russia’s trade with these countries has been slowly increasing, but mainly due to the growth in consumer goods imports from them. Russian manufacturers of industrial products (except defense industries) have failed to enter Asian markets; raw materials make up the bulk of Russian exports. New agreements concluded in 2013-2014 with Japan and China for the supply of Russian energy resources to these countries will further tip the balance in Russia’s trade with the Asia-Pacific region in favor of raw materials. Also, there are no pronounced positive investment trends between Russia and Asian countries. South Korea stands out among them, as it increased investments in the Russian engineering industry from $0.78 billion to $0.95 billion in 2012 alone.

There were even more snags and hitches in the implementation of the national development policy for Siberia and the Far East, which President Putin described as “a national priority for the entire 21st century.” The failure of the first stage of this policy was publicly admitted in the fall of 2013 and was followed by a government reshuffle. Young and talented Alexander Galushka took the post of Minister for the Development of the Russian Far East, and Yuri Trutnev was appointed Presidential Envoy to the Far Eastern Federal District and Deputy Prime Minister of Russia.

A new model for the development of Russia’s eastern territories was introduced in October 2013. It was finally stated that the only promising way to develop these territories was to support industries exporting to Asia-Pacific countries, and to open Siberia and the Far East to foreign investments. To spur their influx, the government is planning to organize priority development areas, where investors will be offered favorable investment, tax and administrative regimes.

In order to optimize interaction with investors, the Ministry for the Development of the Russian Far East will be based in several cities: Khabarovsk, the capital of the Far Eastern Federal District; Vladivostok, the biggest city in the district; and Moscow. The largest staff will be based in Vladivostok, yet there will be no main office among them. In order to facilitate the ministry’s work, several new agencies will be created – the Far East JSC which will establish priority development areas; the Agency for Investment Promotion and Support of Far Eastern Exports; and the Agency for the Development of Far Eastern Human Resources.

By the summer of 2014, the government had outlined future priority development areas and adopted related regulations. There are plans to move the offices of some state-owned companies to the east. RusHydro is the first on the list, and other companies may include Rosneft, Transneft and Rosgeologiya. This decision aims to bring more revenues to regional budgets. Also, it will be of great symbolic value as it will send a message to talented young people in Siberia and the Far East that they can make a career at home, without the need to go to Moscow or abroad. Some federal agencies will also be moved eastward. The Federal Fisheries Agency was the first to go. In the future, there will be de facto a third federal capital of Russia in the Far East, after Moscow and St. Petersburg. 

PRIORITIES AND ASSETS OF RUSSIAN POLITICS

Despite the aforementioned difficulties, the government has stepped up and improved its policy to ensure harmonious social and economic development of eastern Russia and build an export-oriented economy there. Russia’s Asian strategy in this context should focus on solving the following three sets of tasks.

First, enhancing trust and confidence between Russia and Asian countries at state, corporate and human levels. There will be no investment without trust, and there will be no development without investment.

Second, scaling up involvement in regional affairs and significantly improving its quality, thus meeting the “demand for Russia” which has emerged in recent years. So far, Moscow has done much less than regional players expect from it, especially small and medium-sized countries.

Third, consistently reducing political, economic, technological and financial costs resulting from the deterioration of Russia-West relations  The East can give Russia many of the technologies and resources it has been denied in the West.

To implement these three policies in a new strategic environment, Russia must give priority to practical steps in various fields.

First and foremost, the entire system of cooperation with China needs to be optimized. This requires a firmer policy to strengthen the strategic partnership with China in addressing existing and potential problems and misunderstandings concerning energy, Central Asia, and ways to tap the potential of the Shanghai Cooperation Organization. Cooperation needs to be stepped up within the framework of regional dialogue platforms and forums, such as the ASEAN Regional Forum, the ASEAN Defense Ministers’ Meeting Plus Eight, the East Asia Summit, and the Conference on Interaction and Confidence-Building Measures in Asia. By assuming a clearer position with regard to China’s  maritime concerns, Russia will help resolve mutual land concerns.

President Putin’s state visit to China marked a new era in bilateral relations. Russia has actually reoriented its energy export strategy toward the Asia-Pacific region, and this trend will only strengthen in the future. Russian gas supplies to China alone are expected to equal those to Europe in 10 to 12 years, which will take the Russian-Chinese strategic partnership to a new level and consolidate Russia’s and China’s roles in the Asia-Pacific region and the world at large.

Another promising aspect of Russian-Chinese cooperation would be fleshing out the idea of enhanced mutual ties. This is one of China’s chairmanship priorities in APEC, reflecting the aforementioned “Asia’s turn towards Asia” – the strengthening of intra-regional trade and economic ties. Russia has already begun exploring this issue at the expert level. This work will open up additional opportunities for Russian-Chinese cooperation, particularly in Southeast Asia. Since 2010, ASEAN has been implementing its “Master Plan on ASEAN Connectivity” to expand cooperation with extra-regional partners, which it views as a factor of success. The development of transport infrastructure – the main component of the connectivity strategy – fully meets Russia’s long-term interests in respect of Siberia and the Far East. Serious attention should also be given to the idea of ??a New Silk Road promoted by Beijing.

Since Japan and South Korea are forced to join the anti-Russian sanctions, steps will need to be taken to minimize negative effectives from this move. In formal and informal consultations with Japanese and South Korean partners, Russia should look for ways to safeguard bilateral relations against the U.S. “sanctions fever.” Although much depends on how Tokyo’s and Seoul’s relations develop with Washington, in their interaction with Moscow they tend to separate politics from economy.

Even though Japan – cautiously – and South Korea – verbally – have joined the anti-Russian campaign, not only did their business communities not reduce cooperation with Russia, but they have actually expanded and diversified it. To strengthen its trade and economic relations with South Korea and Japan, Russia may use institutions and mechanisms of the Customs Union and, from January 2015, of the Eurasian Union. Seoul’s “Eurasian strategy,” proposed in the fall of 2013, and China’s New Silk Road initiative may be instrumental, especially if Russia demonstrates a creative attitude.

A systemic approach is required to participation in regional integration associations and initiatives. Serious work should be done to assess the potentials of all of them in the Asia-Pacific region, with a view to using them implement the abovementioned three policies in Asia. It is necessary to specify strategic and tactical goals of Russia’s participation in multilateral forums, such as the ASEAN Regional Forum, the ASEAN Defense Ministers’ Meeting Plus Eight, the East Asia Summit, and the Expanded ASEAN Maritime Forum Plus Eight.

It is equally important to determine the expediency of concluding an agreement to establish a free trade area with ASEAN and, through it, joining the Regional Comprehensive Economic Partnership agreement from the point of view of economic and geopolitical consequences. Finally, Russia should figure out the costs and benefits of its possible accession to the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia.

Russia must further improve its diplomatic approaches to Asia and, where necessary, enhance the role of the Russia factor in settling regional conflicts and disputes. There is a potential for that in the Northeast Asia Peace and Security Mechanism – a working group set up by members of the Six Party Talks. The group can meet without North Korea participating. The need for this work is evident – security problems in Northeast Asia cannot be solved without improving the overall situation in the sub-region, strained by border and territorial disputes, Sino-U.S. disagreements over the missile defense system, the future of American alliances, etc. In these circumstances, the Northeast Asia Peace and Security Mechanism could become a forum for discussing these and other problems. This would strengthen confidence among the five leading Northeast Asian nations. Russia, as the formal chairman of the working group, will determine the agenda of these discussions.

It is particularly important for Russia to participate in the future opening up of North Korea, which requires expanding trade, economic and investment ties between Moscow and Pyongyang. The two countries plan to bring the annual volume of their mutual trade to $1 billion by 2020 from the current $80-120 million, to use the ruble in bilateral trade, establish inter-bank cooperation, and implement projects to modernize the mining, energy and civil automotive industries of North Korea.

Russia should contribute to efforts to ease tensions over the South China Sea and the freedom of navigation. This can be done by increasing oil and gas supplies to the countries claiming the disputed Paracel and Spratly Islands, and developing domestic transport corridors – the Trans-Siberian Railway and the Northern Sea Route, thereby reducing the intensity of the freight traffic in the Strait of Malacca.

Russia could suggest that the East Asia Summit states adopt a document that will regulate the behavior of the region’s countries in the Asia-Pacific seas, including the South China Sea. The document could be based on some of the provisions contained in the Soviet-U.S. 1972 Agreement on the Prevention of Incidents On and Over the High Seas.

To give the new Asian strategy more weight and substance, Russia should put forward several strategic economic initiatives:

  • creating a specialized regional platform for multilateral cooperation to ensure energy security of the Asia-Pacific region. This would be a logical follow-up to the reorientation of Russian energy exports. Another promising project is Northeast Asia Regional Electric System Ties (NEAREST), which calls for building new power engineering facilities in Siberia and the Russian Far East and exporting electricity to Asia-Pacific countries;
  • building an oil hub in the Russian Far East that would be comparable in size to Singaporean or South Korean facilities;
  • creating, together with members of the East Asia Summit, an East Asian grain reserve within the EAS framework (similar to the ASEAN-Plus-Three Emergency Rice Reserve) and, simultaneously, building an infrastructure in Siberia and the Russian Far East for grain exports to Asia-Pacific countries;
  • proposing a master plan to expand ties among EAS member countries. This issue is now actively discussed by ASEAN and APEC. The Association is a sub-regional dialogue platform with a small number of members, whereas APEC is a larger organization. Therefore, expanding ties among EAS states, which include key regional policy and security players, would be a logical and timely move in the spirit of Russia’s “indivisible security” concept;
  • building a regional system for monitoring the food situation, collecting and analyzing information. Russia could share with Asia-Pacific partners its space capabilities – GLONASS and other navigation systems, remote infrastructure monitoring technologies, etc. This task is particularly important as the Asia-Pacific region is an area of high seismic activity, and a large number of people have to be promptly supplied with food during disasters.

Implementing Russia’s new strategy in Asia will not be easy, and it will face many obstacles both inside and outside the country. However, Russia has one indisputable advantage – although it is still a great military power, the goals and tasks of its policy do not require it to join in the race for regional supremacy in Asia.

In its heyday, the Soviet Union was ready to compete for military and political domination with both China and the United States. Moscow supported communist parties and rebels, and relied on its loyal allies, with Vietnam holding the central place among them. Today, Washington and Beijing, each in its own way, seek to expand their presence in the region and increase control over decisions and actions of small and medium-sized countries in Asia.

But Russia does not need an area where it could dominate politically and militarily. For the first time in history, Russia, previously only as a military power, now has a chance to enter the Asia-Pacific region as a factor of peace. And this may make it a unique player, so much needed to balance Asia in the 21st century.

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