Russia’s military action in support of South Ossetia and the global economic crisis have created a new international situation. Moscow’s response to Georgia’s actions in South Ossetia marked a departure from its practices of the 1990s, when it had to abide by the rules of the game that were incompatible with Russia’s vital national interests. The world crisis has undermined credibility of not only the foreign-policy patterns of the West but also of its economic models. The world has turned its eyes to alternative paths for modernization and national success, followed by some countries and regions, for example, China, India and Southeast Asia (Indonesia, Malaysia). The emerging paradigm can be described as genuine multipolarity – meaning not only the plurality of political centers of power, but also the plurality of development models.

A world of true multipolarity offers new opportunities, but it is fraught with dangers. The opportunities stem from the growing realization that the globalization of the world means the globalization of problems, many of which cannot be solved now unless all powerful states and forces pool their efforts. If centers of influence fail to find common ground and work out common rules for international behavior, they risk dividing the world into hostile and competing regions and thus recreating the situation that earlier provoked the two world wars.

“THE GROUP OF TWO”

Two U.S. foreign-policy pundits, Zbigniew Brzezinski and Henry Kissinger, have recently come out with programs for solving global problems in the new situation. In fact, they have proposed to the newly elected U.S. president, Barack Obama, changing the U.S. foreign policy. The positions of the two policymakers do not fully coincide; yet they agree on one thing: a stable future of the world depends on whether or not the United States and China are able to put aside their differences and launch constructive cooperation between themselves.

Brzezinski, who served as United States National Security Advisor to President Jimmy Carter from 1977 to 1981, published an article, “The Group of Two that could change the world,” in The Financial Times on January 13, 2009, in which he called for establishing a U.S.-Chinese strategic union or, at least, very close cooperation. According to the author, rapprochement with China would help the U.S. solve many international problems facing it. Brzezinski believes that China could promote the solution to the North Korean nuclear issue and help Washington cope with the global crisis. Also, China could be a direct participant in the dialogue with Iran and a mediator in the Indo-Pakistani conflict, and even become actively involved in the Middle East settlement. Brzezinski invited China to cooperate with the U.S. in coping with climate change, in creating a larger standby UN peacekeeping force for deployment in failed states, and in consolidating the nuclear non-proliferation regime by encouraging states to adopt the zero-nuclear weapons option. In conclusion, Brzezinski proposed expanding the current Group of Eight to a G14 or G16, including China and other major states in it, and creating an informal G2 of the U.S. and China, paralleling relations between them with Europe and Japan.

Henry Kissinger, who served as National Security Advisor and as Secretary of State in the Richard Nixon administration (1969-1974) and who was the architect of the U.S. policy of opening to China in the early 1970s, responded in his article “The World Must Forge a New Order or Retreat to Chaos” in The Independent on January 20, 2009. At a time when the crisis has undermined many people’s faith in American political recipes and in the Washington project for a global economic system, Kissinger has called for more modesty in U.S. conduct. He believes this modesty will help increase American influence in the world where “every country will have to reassess its own contribution to the prevailing crisis.” At the same time, “each will be obliged to face the reality that its dilemmas can be mastered only by common action.” In this situation, the U.S. needs to “modify the righteousness that has characterized too many American attitudes, especially since the collapse of the Soviet Union. […] The result was … an insistent kind of consultation by which nations were invited to prove their fitness to enter the international system by conforming to American prescriptions.”

According to Kissinger, the new role of the United States is to “shape the common concern of most countries and all major ones regarding the economic crisis, together with a common fear of jihadist terrorism, into a strategy.” Kissinger names China as the main (and the only one mentioned in the article) object of historical compromise, relations with whom need to be taken to a new level. “What kind of global economic order arises will depend importantly on how China and America deal with each other over the next few years,” he writes. “A frustrated China may take another look at an exclusive regional Asian structure, for which the nucleus already exists in the ASEAN-plus-three concept,” while “if protectionism grows in America or if China comes to be seen as a long-term adversary,” the world could be divided into competing regional units with dangerous long-term consequences. Kissinger proposes that the new generation of leaders shape Sino-American relations “into a design for a common destiny, much as was done with trans-Atlantic relations in the postwar period.”

The two veteran policymakers build their reasoning on different logic. Kissinger follows up on his own geopolitical concepts, while Brzezinski apparently remains committed to the dominating dream of his life – creating a widest possible anti-Russian coalition. Yet, for various reasons, there is much in common in their recommendations.

First, it is the understanding that the foreign policy pursued by the previous administration failed and that it needs to be changed.

Second, it is the awareness of the growing role of alternative models, including the Chinese one. Western economists have dubbed it Beijing Consensus, by analogy with the Washington Consensus, to which it is an alternative.

And third, it is the recognition of China’s increased role in world politics, which is based on its real economic achievements and on expectations that China will be able to overcome the crisis with fewer losses than many other major economies. The latter statement rests on serious grounds.

CHINA AND THE CRISIS

Like all countries with an export-oriented economy, China has been seriously hit by the crisis. The decline in foreign demand for Chinese goods has dealt a serious blow to its economy as its uniquely high growth rate was largely due to exports, which accounted for about 40 percent of GDP. It was the essence of the economic breakthrough planned by Deng Xiaoping in the late 1970s. The plan worked properly until the end of 2008, but now it needs to be adjusted.

The crisis has affected the more developed regions of China, especially its southern coast, to which major countries of the world for decades moved their industrial production, reserving for themselves the role of service and finance centers. Millions of people from China’s inland rural areas moved to those regions in search of jobs. Now, local enterprises are closing, and people have to return to their native places, where there are no jobs and where they are not welcome. According to official figures, the number of these new unemployed has reached 11 million people, while unofficial figures estimate their number at 20 million.

The Chinese authorities are aware of the danger posed by this situation and from the very beginning of the crisis they have been working on measures to cope with it. The positive balance of trade, which China has enjoyed for many years, has enabled it to accumulate huge hard currency reserves of about U.S. $2 trillion, of which about $700 billion ($696 billion as of the end of 2008) are kept in U.S. Treasury bonds. These reserves can be used to support anti-crisis measures.

Interestingly, these funds are not decreasing, despite the decline in exports. One of the reasons is a decline in imports, which is accompanying the export slump. According to official figures, Chinese exports fell by 17.5 percent in January 2009, compared with January last year, but imports fell by as much as 43.1 percent. As a result, the trade balance ended up with a surplus of $39.1 billion.
Last autumn, the Chinese government announced that it would spend 4 trillion yuan (about 586 billion dollars) on anti-crisis measures within the next two years. These funds will be spent on the development of infrastructure, including airports, railways, subways in large cities, nuclear power plants, etc., as well as on public health, education, housing subsidies, and social benefits, in particular unemployment benefits. The government had long planned an accelerated development of the social sphere, which was neglected during the years of reforms, and the crisis has only given a boost to these plans. The increased spending on social programs, in particular on health and education, is intended to cause the Chinese to stop saving money for a rainy day and to spend more instead, thus stimulating economic growth.

China’s legislature, the National People’s Congress (NPC), approved this plan in March 2009. Addressing the Congress, the Premier of the State Council, Wen Jiabao, set the goal of maintaining the economic growth rate at 8 percent. China had long planned to slow down its growth, which was overheating the economy, but the fall from 13 percent in 2007 to 6.8 percent in the fourth quarter of 2008 was too great and could bring about social instability.

To all appearances, this plan has already begun to yield results. In January 2009, banks issued loans to the tune of $237 billion, which is 101 percent more than in the same period last year. Infrastructure projects have begun to be implemented, among them the construction of housing in Shanghai and Shaanxi Province, and railways in the province of Shandong.

Nevertheless, some economists criticized the government plan, arguing that the infrastructure was already in normal condition, so its development could not produce the desired effect. They proposed stimulating domestic demand as an alternative to foreign demand. As a result, a 10-point state program has been adopted to stimulate domestic consumption. The program provides for raising the minimum purchasing grain prices, increasing government allocations for the purchase of equipment, raising the subsistence level, raising pensions for former employees of state-owned enterprises, and other social benefits. In addition, on December 1, 2008, the government starting selling consumer electronics in rural areas at a 13-percent discount subsidized from the state budget. Following the example of some East Asian states, the administrations of some Chinese cities and provinces have begun to distribute consumer vouchers among the population (e.g., vouchers for purchases for the Chinese New Year, for travel, etc.).

While addressing social problems, Beijing does not forget about the future. The government seeks to take advantage of the fall in the prices of basic natural resources, which China lacks, to build up their strategic reserves for a new economic growth. Thus, in early February Beijing announced the construction of eight storage facilities for strategic oil reserves. Four of these repositories were built as of the end of 2008, and 100 million barrels of oil, purchased at reduced prices, have been pumped in there. China is actively working in Africa and the Middle East, from where it imports the bulk of its oil, and is making strategic investments in Russia.

China has given an estimated 25 billion dollars in loans to Russia’s Rosneft and Transneft oil companies in exchange for oil shipments. The oil will be delivered via a newly built oil pipeline that will run from the East Siberia-Pacific Ocean pipeline. Commercially, the deal, which was finally agreed during a visit by Russian Deputy Prime Minister Igor Sechin to Beijing in February 2009, is not advantageous to China. But it is intended to help fulfill two major tasks: a strategic task (providing an additional source of oil and diversifying its import) and a social task (preventing mass unemployment at oil refineries in the north-eastern city of Daqing, where a local oil field is depleting).

Apart from raw materials, China is purchasing assets of mining companies. For example, on February 12, it was announced that the state-owned Aluminum Corporation of China (Chinalco) became the largest shareholder in the Rio Tinto British-Australian mining group. Chinalco, which already owned 9 percent of Rio Tinto shares, has bought another 18 percent of its shares, as well as bonds worth $7.2 billion and shares in projects for mining copper, iron ore and aluminum, totaling $12.3 billion. This was the largest investment transaction abroad for Chinese businesses. At about the same time, China Minmetals Corp announced its plans to buy Australian mining firm OZ Minerals, the world’s second-largest zinc miner, for $1.7 billion.

If Beijing has enough money to both reduce social tensions and provide raw materials for its economic growth, China will come out of the crisis a leading world economy.

PLANS AND REAL LIFE

The announcement that U.S. Secretary of State Hillary Clinton would make one of her first foreign visits to China, along with three other Asian states – Washington’s traditional allies Japan and South Korea, as well as Indonesia, added fuel to discussions about a possible U.S.-Chinese union. Not everyone agrees with Brzezinski and Kissinger. A cold-headed analysis suggests the conclusion that, despite the undoubted growth of China’s political and economic role in the world in the future, the emergence of a U.S.-Chinese alliance is not at all a necessity.

Naturally, Beijing welcomed the recognition of its increased international importance, especially Brzezinski’s praises of the Chinese leadership’s policy of building a “harmonious world.” But it is difficult to imagine that Beijing, which conducts an independent foreign policy, would suddenly rush into the U.S. arms and would start solving Washington’s problems around the world in exchange for hollow promises.

So far, the essence of Beijing’s foreign policy has been as follows: ensuring a peaceful environment for the country, creating favorable conditions for its economic development and not interfering in international conflicts that do not directly affect its vital interests. China will undoubtedly continue to play a positive role as mediator (rather than a conduit of U.S. interests) in addressing the North Korean nuclear problem. China’s interdependence with America (the U.S. market has great influence on the Chinese economy, while much of China’s hard currency reserves has been invested in U.S. Treasuries) will make Beijing a constructive partner in overcoming the global financial crisis. Yet, it is highly unlikely that China will intervene in the Indo-Pakistani, or the more so the Arab-Israeli, conflict, particularly as an American agent or ally. Beijing will unlikely send large forces to remote troubled areas (small Chinese peacekeeping forces already operate under UN programs).

A U.S. attempt to establish a union with China would immediately draw fire from human rights activists, supporters of Taiwan’s and Tibet’s independence, and other anti-Chinese groups in the U.S. itself. Washington’s NATO partners and other allies (for example, Japan) would not approve of its too close rapprochement with Beijing, either. The U.S. would be accused of wishing to sacrifice the ideals of democracy for the sake of dividing the world with the largest authoritarian regime. The creation of NATO after World War II was aimed at containing the totalitarian Soviet Union and proliferating democracy in Europe, whereas an alliance with China suggests something quite different. Finally, geopolitically, a U.S. shift towards China would create favorable conditions for the fulfillment of a daydream of many politicians in Moscow: the separation of Europe from the U.S., its rapprochement with Russia, and the creation of a Europe from the Atlantic to the Pacific Ocean. Realistically minded policymakers in Washington are unlikely to be delighted by the prospect.

In general, the idea of a U.S.-Chinese alliance is unfeasible, but it may be useful for sounding out the Chinese position and gaining some concessions from other interested parties. For example, speculation about a U.S. rapprochement with China may serve as a lever of influence on Russia.

Nevertheless, a certain shift in Washington from the ideologization of its foreign policy to pragmatism would inevitably lead to closer cooperation with China. Circles close to the administration are actively discussing the idea of establishing a U.S.-Chinese cooperation commission, to be led by Vice President Joseph Biden and Premier Wen Jiabao (similar to the former U.S.-Russian Albert Gore-Victor Chernomyrdin commission). The two countries have agreed to broaden their bilateral strategic dialogue on economic issues and include security issues in it. They have also announced plans to start discussions on global warming. In addition, shortly before Clinton’s visit, they declared the resumption of consultations between their defense ministries, which had been suspended by China last year after the George W. Bush administration announced plans to sell large quantities of armaments to Taiwan.

Clinton expressed Washington’s interest in working together with Beijing but played down the human rights issue, saying on the eve of her visit that pressing on the human rights issue “can’t interfere with the global economic crisis, the global climate change crisis and the security crisis.”

In an interview on China’s Dragon TV, Clinton said: “We are truly going to rise or fall together. By continuing to support American treasury instruments, the Chinese are recognizing our interconnection.” Chinese Foreign Minister Yang Jiechi was more evasive on this issue, saying only that his country would seek safe, high-value and liquid investments for its foreign currency reserves. Several days later, Wen Jiabao explained that Beijing was primarily concerned about the welfare of Chinese citizens, rather than about saving the global financial system and the U.S. economy.

Speaking upon conclusion of the Chinese parliament’s session on March 13, the Chinese Premier even expressed concern about the safety of Chinese investments in the U.S. and called on the United States to “maintain their creditworthiness, keep their promise and guarantee the safety of Chinese assets.” Apparently, China fears that the U.S. dollar may collapse owing to excessive budget spending in the U.S. White House Press Secretary Robert Gibbs even had to reassure Beijing, saying that investments in the U.S. are the safest in the world.

MULTILATERAL COOPERATION

Why has the development of Russia and China resulted in Moscow no longer viewed as a privileged partner of Washington? Why was democratic Russia not offered a new trans-Atlantic partnership after the breakup of the Soviet Union, which is now actually offered to authoritarian China? And how can the emerging U.S.-Chinese rapprochement affect Russian interests?

The articles by Brzezinski and Kissinger made no mention of Russia. Whereas Brzezinski apparently did not want to speak straightforwardly about an anti-Russian nature of the proposed union, Kissinger proceeded from the real role of China in the present world. Washington, which is now seriously discussing the need for establishing cooperation on global issues with various countries, including Russia, will hardly want to build its relations with Beijing on an anti-Russian basis. China will not do it, either, as it views Russia as an important partner in many areas. Yet, this factor is no reason for complacency.

Considering the possible U.S.-Chinese rapprochement, Russia will have to act in two areas simultaneously: to actively look for points of mutual understanding with Washington and, regardless of this, develop cooperation with China, both on a bilateral and a multilateral basis. It also needs to intensify its bilateral and multilateral relations with non-Western parts of the world.

Russia now has stable political and economic contacts with states in South and East Asia, even with those that are U.S. allies (Japan and South Korea). It has built a system of bilateral exchanges with India and China and has given more emphasis to its relations with Latin American countries.

In these circumstances, Russia should focus its efforts on enhancing its role in such organizations and groups as the Shanghai Cooperation Organization, RIC (Russia-India-China), BRIC (Brazil-Russia-India-China), the ASEAN Regional Forum (ARF), the Asia-Pacific Economic Cooperation (APEC), and the six-party talks on the North Korean nuclear problem (especially in the working group on security in Northeast Asia). These organizations and groups must become an essential structural element in a world of real multipolarity.

SCO AND BRIC – ALTERNATIVES ON THE RISE

The Shanghai Cooperation Organization (SCO), officially established in 2001, has now become an influential regional structure. A conference on Afghanistan, held under its aegis in Moscow in March 2009, was attended by representatives of several international organizations. This was an indication that problems of the region cannot be effectively solved without the SCO.

The significance of the SCO for Russia is that it was the first platform for harmonizing Russian-Chinese interests and approaches, especially in Central Asia, within the frameworks of an international organization that does not include Western countries. This platform is highly important also as a basis for deeper cooperation with other non-Western actors, above all India which has observer status in the SCO. Characteristically, the first official summit of the BRIC will be held later this year after the completion of a meeting of the SCO Council of Heads of State in Russia’s Yekaterinburg.
Unlike the RIC and BRIC, the SCO is a full-fledged international organization, and it is in Russia’s interests to prevent its becoming yet another discussion forum. To this end, SCO institutions, especially the Secretariat, must be developed more actively and given more powers, so that institutional logic would let them show greater initiative.

Another way to strengthen the SCO is the development of real multilateral economic cooperation among its members, which now is actually non-existent. Such cooperation can provide a basis for the organization’s stable operation and create an alternative to foreign forces’ plans with regard to Central Asia. A SCO Energy Club could play a special role in harmonizing interests between the world’s largest energy-producing, transit and consuming countries from among SCO members and observers. The club’s establishment was declared more than two years ago, but it has never started operating.

The BRIC or BRICs is an example of an idea turned reality. The term was coined by Jim O’Neill, global economist at Goldman Sachs, to refer to the fast-growing economies of Brazil, Russia, India and China. The aggregate economic might of the four countries may soon surpass that of the West. According to the International Monetary Fund, the total share of the BRICs in world GDP has been growing fast: from 8 percent in 2000 to 12 percent in 2007. The Goldman Sachs report, entitled “Dreaming With BRICs: The Path to 2050,” said that economically the four nations complement each other very well: China and India have strong light industries, while Russia and Brazil can become the main suppliers of raw materials for them. At first, however, all these considerations were purely theoretical.

Unexpectedly for many, the four countries accepted O’Neill’s term and decided that they really had common interests and reasons to coordinate their efforts. In May 2008, Russia’s Yekaterinburg hosted the first meeting of the BRIC foreign ministers, while the first meeting of the BRIC finance ministers was held in November in Sao Paulo, Brazil. The forums discussed various international issues, including joint efforts to overcome the crisis. The top leaders of the four nations met for the first time on the margin of a G8 summit in July 2008 in Japan. And in late November, Russian President Dmitry Medvedev, while on a visit to Rio de Janeiro, for the first time announced plans to hold a BRIC summit in Russia in July 2009.

The BRICs have all chances to become the most influential of all the international associations that include Russia, as it is a center for harmonizing the interests of major non-Western centers of the multipolar world. An evolution of the BRIC structure into an alternative to the G8 would meet Russian interests (as well as the interests of India, China and other large countries not included in Western structures).

First, such a project, as distinct from a possible expansion of the G8 to a G20, would not look like the inclusion of developing countries by “seniors” in an already existing structure at their own discretion, but would be a new influential platform for discussing global development issues. Its members, which have been kept in the backyard of the G8, would be able to set the rules in the new organization independently. That would show genuine multipolarity, as well as the limited influence of the Western center; and in case a G20 is created, that would help BRIC members to join it on basically new terms.

Second, Russia – as the only state that is a member of both the G8 and the BRICs – would find itself in a uniquely advantageous position of coordinator and mediator between Western and non-Western centers of a multipolar world.

Transforming the BRICs into an alternative to the G8 requires taking the following measures, using the experience of cooperation within the RIC:

• intensifying the agenda;
• working towards the institutionalization of the BRICs and the creation of a formal mechanism for negotiations and discussions (regular meetings of the heads of state, ministers, etc.), with a view to establishing an international organization in the future;
• considering a possible expansion of the BRICs by including states that usually participate in meetings on the margins of G8 summits and that represent various parts of the world (Mexico, Egypt, Indonesia, South Africa).

The agenda of discussions should include pressing issues of today’s world: the reform of international institutions, international security issues, including energy security, and climate change. Particular importance should be attached to the search for ways to overcome the global financial crisis. In this context, discussions within the BRIC format could naturally include subjects like comparative analysis of development models in various participating states (and other non-Western models), their positive and negative aspects in light of the present crisis (for example, the Chinese export model and the Indian model which is more oriented to domestic consumption), as well as sharing experiences of anti-crisis management.

The operation of the BRICs as an emerging international structure must be provided with scientific and expert support, and Track II interaction within the BRICs must be developed. Most appropriate in this context was an initiative to establish a Public Forum in the BRICs. This forum could find it useful to use the experience of the creation of the SCO Forum.

ASEAN AND EAC – THE NEXT FRONTIER

States of East and Central Asia represented in the SCO were the first frontier in the development of Russia’s relations with the non-Western world within the framework of the multipolarity movement. The Association of Southeast Asian Nations (ASEAN) is the next frontier. Russia established relations with ASEAN more than twenty years ago, yet they have not been developing very intensively. Moscow’s passivity was coupled with fears in some ASEAN member countries with regard to Russia’s role in the area of ASEAN’s operation. Some ASEAN states still believe that Russia does not belong to their region but is a global power opposed to America, while the principle of the development of regional cooperation with no superpowers involved does not provide for active roles either from Russia or the United States. Without saying this directly, ASEAN cites Russia’s insufficient economic role in the region as a pretext for checking the establishment of partner relations with Russia.

Recent years have seen more activity on Russia’s part. It seeks to implement and broaden the accords reached at the first ASEAN-Russia summit held in December 2005 in Kuala Lumpur. The accords include a political declaration of the leaders, a comprehensive program of action for the period ending in 2015, and an intergovernmental agreement on cooperation in economy and development.

At the same time, Moscow acknowledges that the level of its economic cooperation with ASEAN countries is inadmissibly low. Three years after its signing, the intergovernmental agreement still remains ineffective. Russia’s trade with ASEAN countries stood at only 7 billion dollars in 2007, while Russia’s share in the total trade of ASEAN members was a mere 0.3 percent. Compare it with Chinese-ASEAN trade which reached 190 billion dollars in the same year. As with the SCO, the expansion of Russia’s trade and economic cooperation with ASEAN is an important strategic goal, because this is the only way to increase the region’s interest in Moscow’s active participation.

The insufficient intensity of relations between the two parties is also due to the passivity of the Association itself. Perhaps, this passivity stems from the aforementioned attitude to Russia and from fears that the level of relations with it may be higher than the level of relations with the United States, which have been deteriorating of late (for example, an ASEAN-U.S. summit has never been held). The greatest skepticism about Russia’s role in the region comes from states that have the closest ties with Washington – namely, Singapore and Indonesia. Interestingly, no one objects to Russia’s active role in the ASEAN Regional Forum (ARF), which also involves the U.S., yet the issue of Russia’s presence in the planned East Asia Community (EAC), which will not include the United States, is still in limbo – despite Moscow’s repeatedly reiterated interest in the EAC and despite the participation of the then-president Vladimir Putin in the first East Asia Summit (2005) as a guest.

The following factors can help create favorable conditions for Russia’s more active involvement in cooperation with ASEAN. The Cold War has long ended; the Soviet Union has disappeared from the map of the world, and its successor Russia poses no threat to anyone. Its resources and ambitions are much less than those of the Soviet Union, and it does not seek world domination; so there is no reason to bracket it with the United States. At the same time, Russia’s Far East is an integral part of East Asia, and Russia, unlike the U.S., is a regional power that has every legitimate reason to participate in the processes going on there. The positions of the United States and Russia in the region are different; therefore, the level of their participation in regional affairs can be different, as well.

There are also some geopolitical arguments that could be interesting to regional partners. Both Russia and the ASEAN states actively maintain constructive and friendly relations with growing and strengthening China. The consolidation of political and economic ties between Russia and ASEAN could prevent their cooperation with China from becoming overly lop-sided. Some countries, for example, Japan and South Korea, have already understood this.