10.02.2007
East Asia and Russia’s Development Strategy
№1 2007 January/March



East Asia positions itself as a
region that is rapidly developing economically and non-uniform
politically. Despite the rapid economic growth of the East Asian
countries, together with their increased role in global politics,
Russia has not yet provided convincing proof of its ability to use
its geographical position in the region for its national
development. Moscow often disregards geopolitical changes occurring
in that part of the world and perceives the dynamics of the
situation in East Asia only through the prism of its rivalry with
the U.S. Also, Russia’s economic strategy fails to take into
account the great economic progress in the region.

Irrespective of Moscow’s reaction,
East Asia’s dynamic and intricate development will objectively have
an increasing influence on the development of Russia. This will
affect, first of all, its East Siberian and Far Eastern regions,
causing us not only to adapt to challenges and opportunities coming
from East Asia, but also to look for mechanisms to influence the
region in a way advantageous to Russia. The most important task in
this context is working out a Big Asian Strategy that would link
internal objectives and development mechanisms with the East Asian
factor.

The main factor of political and
economic change in the region is China. The growth of China’s
economic might and, therefore, political influence causes leaders
to change their traditional view of “the Chinese factor” and adapt
to its new global and regional positioning. China’s integration
into East Asian political and economic processes, as well as the
way it is perceived by regional actors, has not been smooth. This
reflects the difficult and contradictory nature of the deep
transformations taking place in East Asia, where the rivalry for
national leadership and competitive advantages is intertwined with
ideology and the practice of multilateral cooperation.

It was the dynamism of the Chinese
economy and policy that was responsible for increasing Russia’s
interest in East Asia, as well as changing the structure of its
ties with the region. Over the last decade, China has become
Russia’s main trading partner in the region, leaving behind Japan
and South Korea. In the next five years, China stands a good chance
to become also the largest investor in the Russian
economy.

EAST ASIA: STATE,
TENDENCIES
AND
PROBLEMS

In 2001-2006, average annual GDP
growth rates in individual countries differed essentially: from
1.5-2.0 percent in Japan to 9.5-10 percent in China. China also
featured the highest growth rates in foreign trade – about 30
percent a year. The aggregate East Asian GDP stands at 75-80
percent of the GDP of the United States and the European Union.
Three countries of Northeast Asia – Japan, China and South Korea –
account for more than 90 percent of the regional economy. Japan,
which has been developing slower economically than China, still
remains the regional leader in absolute economic terms and through
its influence on the global economy. Japan’s GDP (about 5 trillion
dollars), which is approximately 45 percent of the U.S. GDP, is
more than double that of China. Yet China is ahead of Japan in the
volume of foreign trade (1.6 trillion dollars in 2006).

From a military and political
standpoint, East Asia is divided into different unions. The U.S.
maintains special relations with Japan and South Korea; ASEAN is
another political and economic structure; other countries also play
unique roles in the region: China, for example, is a member of the
Shanghai Cooperation Organization (SCO) beyond the geopolitical
borders of East Asia; North Korea (formally a member of a
military-political union with China); and Mongolia, which is an
observer at the SCO. The 2000s have seen growth in defense spending
in East Asia to 1 percent of the GDP in Japan and 2.5 percent in
China. The North Korean economy is 70 to 80 percent oriented to
meet its defense needs. Japan leads the region in absolute volumes
of defense spending, which is now 10 to 15 percent ahead of
China.

Stability tendencies will
prevail over destabilization tendencies
in the political
situation in East Asia. Due to specific interests of interaction in
the economy, the energy sector, and in efforts to counter terrorism
and atypical threats (natural cataclysms, bird flu, etc.), old
rivalries between the main actors in the region will not develop
into direct military-political conflicts. The main factor holding
back a possible deterioration of political relations between China
and the U.S., and China and Japan will be greater economic
interdependence between these counterparts – under any scenario of
the aggravation of the situation.

East Asia is developing an
increasing need to pool together the economic resources of Japan,
China, South Korea and the ASEAN countries. For the first time in
history the liberalization and marketization of the Chinese economy
may create prerequisites for regional integrative
co-development.
However, some things stand in the way of
the parties’ rapprochement, including the persisting imbalance
between military-political forces, the perception of China by the
U.S. and Japan as a politically “alien” actor, although they still
view it as an economically “friendly” market “partner-rival,” and
last but not least, the preservation by the Chinese Communist Party
of its monopoly on power. 

The main threats and challenges to
security in East Asia are:

  • the North Korean nuclear
    problem;
  • territorial disputes involving
    Japan, Russia, South Korea, China, and several ASEAN countries in
    the South China Sea;
  • Chinese-Japanese and Korean-Japanese disagreements over
    matters of history, including visits by Japanese leaders to the
    Yasukuni Shinto Shrine;
  • the Taiwan
    question;
  • energy
    security of Northeast Asia;
  • new and
    non-conventional threats, including terrorism, piracy, ecological
    and natural disasters, epidemics, etc.

Along with
destabilization factors, there are the following factors of
stabilization of the political situation in East Asia:

  •  the
    six-partite talks concerning North Korea in Beijing;
  •  the
    search for ways for multilateral regional mutual support in energy
    matters;
  •  cooperation in combating new and atypical
    threats;
  •  multilateral economic formats now emerging in East Asia: the
    Asia-Pacific Economic Cooperation, “ASEAN Economic Community,”
    “ASEAN Plus Three (Japan, China and South Korea),” “ASEAN Plus
    China,” “ASEAN Plus Japan,” “ASEAN Plus South Korea,” the ASEAN
    Regional Forum (ARF), and the East Asian Community (EAC) set up in
    late 2005, which includes the members of “ASEAN Plus Three,”
    Australia, New Zealand, India, and Russia as an
    observer.
      

China plays the role of a regional
“disturber of the peace” as it seeks to strengthen its political
influence on the basis of its growing economic might, its important
and sometimes even leading role on world markets, and the active
expansion of its capital abroad, which began in the
mid-2000s.

India, entering the geo-economic
and geopolitical space of East Asia, is becoming a new factor in
the changing situation in the region. India seeks to expand the
horizons of its domination in the Indian Ocean by joining the
processes underway in Southeast Asia and, later, in the whole of
East Asia. To date, the influence of the Indian factor has not been
great. India seeks to consolidate its regional positions by
normalizing relations with potential opponents, namely Pakistan and
China, and establishing a new relationship with the U.S.

EVOLUTION OF THE REGION BY
2017

In the next 10 years, East Asia
will continue to build a new integration model that is different
from that in the EU. The East Asian model focuses not so much on
the reduction of customs duties and the creation of a free trade
zone (although the region will continue its efforts toward
stage-by-stage tariff liberalization within the frameworks of the
APEC, ASEAN and ASEAN Plus Three by 2010-2020), as on integration
in more open sectors of the knowledge economy, compared with the
traditional economy, and on financial interaction in order to
prevent a recurrence of the Asian financial crisis of 1997-1998. In
2017, East Asia will still be no closer to the creation of a common
currency despite the increased discussions on this issue. However,
it will increase interaction between national central banks within
the framework of swap agreements in case of a currency and
financial crisis and will broaden the sphere of application of the
Asian Currency Unit (ACU) – a currency basket, i.e., a weighted
index of East Asian currencies – within the framework of the Asian
Development Bank.

In the security field, emphasis
will be made not on the dismantling of the present
military-political structure in East Asia, based on the
American-Japanese and American-South Korean military-political
unions. Nor will the emphasis be on the creation of any
“counterbalances” involving China. Rather, emphasis will be placed,
first, on the formation of new multilateral regional security
structures, which could stem from the six-partite talks on the
North Korean nuclear problem. Secondly, it will be based on
interaction in combating new and atypical security
threats.

Unresolved territorial problems
and historical issues will have less influence on relations between
East Asian neighbors than they do today. In a more distant future,
they will be resolved in a “natural” way through the joint
development of disputed territories and regional
integration.

The increased role of new and
atypical security threats in national strategies will gradually
modify the United States’ military unions with Japan and South
Korea, making them more open to cooperation with other countries in
the region, including China and Russia.

Chinese-U.S. relations will be
characterized, on the one hand, by greater economic interdependence
of American and Chinese capital, and on the other hand, by
increased mutual concern: Washington is concerned by the
non-transparent growth of China’s military might, while Beijing is
concerned over the proliferation of the “Chinese threat” theories.
In both China and the U.S. there will be competing voices over
these issues: some will strive to intensify mutual suspiciousness,
while others will seek to ease them, each according to their own
corporate interests. However, the role that economics, new threats,
poverty, natural disasters, etc. play will have a positive
influence on Chinese-U.S. relations. By 2017, these relations will
most likely be characterized by a higher degree of interaction and
lesser hostility than today.

Chinese-Japanese relations will
develop according to a similar scenario, but with some
peculiarities. China and Japan will not fully change their negative
perception of each other due to their different interpretations of
history. Nevertheless, the coming to power in 2012 of the “fifth
generation of Chinese leaders,” many of whom have received their
educations in the West, and the rejuvenation of Japan’s political
elite thanks in large part to politicians of the postwar
generation, can greatly reduce the atmosphere of historical
hostility by the beginning of the 2020s in favor of interaction in
implementing mutual interests. In the interest of cooperation there
will evolve the creation of a tripartite U.S.-Japan-China format to
discuss matters of regional security and development.

If no progress is made at the
negotiations on the global liberalization of trade, this factor
will stimulate economic regionalism, including in the ASEAN and
ASEAN Plus Three formats.

China will become increasingly
closer to the West as it deepens its market reforms and integrates
into the global economic, informational and political space. The
following factors will promote these changes:

  • growth of interdependence of
    Chinese and international business interests;
  •  
  • changes in the composition of
    China’s political elite, due in large part to politicians who have
    received their education in the West, rather than in the former
    Soviet Union (the Jiang Zeming generation) or in China (the Hu
    Jintao generation);
  •  
  • democratization of Chinese
    society on the basis of a broader rule of law and a socio-economic
    “strategy of non-destabilizing inequality” (“harmonic
    society”);
  •  
  • cooperation with the
    international community in combating terrorism, WMD proliferation,
    and new and non-traditional threats.

China will retain high economic
growth rates at 9-9.5 percent, making the East Asian region the
fastest developing in the world. By 2017, China’s GDP will reach
the present GDP level of Japan. This forecast is based on the
growth of domestic demand, which started around 2005 due to the
urbanization of more than 700 million Chinese peasants and a rapid
growth of the middle class. This tendency has revoked the
description of China as a “world factory,” which was correct in
previous years when the Chinese economy was developing largely on
the basis of export-oriented production. Now China can rather be
described as something like a “vortex of consistent
demand.”

At the same time, China will face
threats and risks that, under certain conditions, may bring about a
deep crisis and a total downward revision of the forecasts.
Domestic and external economic factors are more likely to provoke a
deep crisis than external political factors. In the short term, the
social, financial and energy sectors are the most vulnerable
spheres. Other vulnerable areas include the Taiwan question (in the
medium term) and ecological concerns (in the long term).

In the next decade, the Chinese
Communist Party will preserve its monopoly on power. However,
external and internal factors will force the CCP to conduct a
political reform in the country. In particular, the West – in its
competitive struggle against China on the global markets – will
exploit the fact that the CCP enjoys a political monopoly. The
internal factors include: the already mentioned growth of the
middle class, as well as a class of Chinese bourgeoisie, which want
their political interests to be taken into account as well; the
decline of the CCP’s authority among young people; the merger of
the partocracy and the oligarchy, which requires a broader
structure than the CCP for harmonizing political and economic
interests between different groups; and the deepening of social
stratification.

Relations between Beijing and
Taipei will preserve a status quo, although occasionally their
relations will be marked by political disturbances, together with
intensified efforts on Beijing’s part to integrate Taiwan into the
rapidly growing Chinese economy.

Simultaneously, several factors
will serve to increase international tensions. The growth of
defense spending by China – with a view to acquiring the status of
a global superpower – will provoke countermeasures by Japan and the
Japanese-U.S. military union. Other countries in East Asia will
increase their defense spending as well. Although the “status”
nature of the new stage in the arms race will not lead directly to
military conflicts, it will increase rivalries and threaten
cooperation in international relations in East Asia.

The Korean problem will remain
unresolved, continuing to be a slow-developing conflict with
occasional disturbances caused by North Korea’s provocations by
means of missile tests, flare-ups in the Demilitarized Zone, rumors
about nuclear test preparations, etc. However, the possibility of a
war on the Korean Peninsula is unlikely. Technologically, North
Korea will not be able to develop nuclear weapons and long-range
missiles of its own, and will continue resorting to tactics of
nuclear bluff and blackmail to ensure the survival of the present
political regime. The demise of North Korean leader Kim Jong Il may
entail radical changes in the country, although not
necessarily.

The India factor will have a
gradually increasing effect on East Asia; however, by 2017, India,
even having consolidated its positions in South Asia, will
nevertheless be unable to compete with traditional leaders either
in Southeast or Central Asia. Therefore, it will not be able to
play the role of a counterweight to Chinese and Japanese influence
in the East Asian economic and political space.

India, relying on its growing
influence in South Asia, will try to use the EAC mechanisms to gain
access to East Asia. These efforts will run up against stiff
opposition from China, which will be one of the reasons why the EAC
will remain a rather amorphous political organization.

India’s attempts to consolidate
its positions in East Asia will complicate the configuration of its
relations of cooperation and competition with China. At the same
time, India and China will seek to avoid military clashes over
unresolved territorial and political problems (Pakistan, Kashmir,
Tibet). The two countries will develop mutual trade, cross-border
cooperation and interaction in the energy sphere. At the same time,
competition and opposition between them will increase as
well.

The main spheres of Indian-Chinese
rivalry will be:

  • relations with the United States.
    India will seek closer relations with the U.S., compared with
    China, playing on two factors: “Indian democracy” as a
    counterweight to “Chinese socialism,” and the help that India can
    give to the U.S. in “restraining” China;
  • global
    sources of financing the economy. India will try to attract
    financial flows now going to China from the world financial centers
    (including from Japan);
  • influence
    on neighbors. India will retain its monopoly on the control of the
    situation in the Indian Ocean, while simultaneously attempting to
    enter the zone of Chinese influence in Southeast Asia;
  • energy and
    the “new economy.” India will seek to oust China from international
    energy and high-tech markets where it is more advantageous to India
    than interaction with China;
  • military
    cooperation with Russia. For India it is important to become a
    preferential partner of Russia in the military-technological field.
    At the same time, India will use to its advantage Russian-American
    and Russian-European competition on the South Asian arms
    market.

In the tripartite
Russia-India-China format, India will make emphasis on the
development of bilateral ties. India can use both bilateral and
multilateral relations in the “triangle” for applying political
pressure on the U.S. in the case of disturbances in Indian-U.S.
relations.

India will emphasize bilateral
relations also in its policy toward the SCO, seeking to gain
competitive advantages on the Central Asian hydrocarbon market.
India does not view China and the Central Asian member countries of
the SCO as “truly democratic” and will preserve its status of
observer in the organization to monitor the level of energy
cooperation in Central Asia, as well as China’s
behavior.

China’s rapid economic growth, its
transformation into a regional leader in East Asia, and the
possibility of a Chinese-American rapprochement will increase the
“competitive spirit” and “motivation for rivalry” in India’s
policy, bringing about fluctuating changes in India’s
behavior.

The future prospects of the
Shanghai Cooperation Organization depend on the organization’s
readiness to adjust its development strategy. It remains an open
question whether the SCO can shift the emphasis in its efforts on
ensuring social and political stability in Central Asia on the
basis of economic growth and the development of democratic
institutions and civil society, despite the importance of the
struggle against terrorism and other new threats and despite the
usefulness of military cooperation. If it fails to do so, by 2017
its activity may grow increasingly vague and uncertain, which will
weaken its regional political potential and will cause Russia and
China to implement their interests in Central Asia outside the SCO
frameworks: Russia will seek to strengthen the Collective Security
Treaty Organization and the Eurasian Economic Community (EurAsEC),
while China will seek dialog with NATO.

This, in turn, will increase the
military-political imbalance in Central Asia, caused by the absence
of a clear-cut division of labor between the SCO, including China,
and the CSTO Plus EurAsEC, which actually comprises all the SCO
member countries, except for China. A persisting imbalance in
Central Asia, where the U.S., Japan and India have displayed their
interest in establishing their own dialogs with countries in the
region without the participation of Russia and China, may turn
Central Asia into a zone of rivalry – as opposed to interaction –
between the large countries. Such developments will not meet the
interests of ensuring Central Asian security through mechanisms of
cooperation and co-development.

THE RUSSIA
FACTOR: 
RISKS AND
OPPORTUNITIES

Despite
Russia’s geo-economic position as a bridge between the European and
East Asian integration zones, this afctor does not play a decisive
role in setting its national development priorities. Its economic
strategy lacks “spatial economic thinking” that would enable it to
see the problems of the depressive regions in Eastern Siberia and
the Russian Far East in a supra-national, geo-economic context,
rather than within the narrow framework of state borders. Also
lacking is a “two-vector” development model that would allow for
the orientation of the Russian economy, extended in space, toward
parallel integrative interaction with the European Union and East
Asia.

 

By 2017,
these shortcomings in Russia’s vision of its place in the East
Asian region may result in missed economic gains, not to mention
political troubles. As China consolidates its economic and
political positions in the region, East Asia’s political and
economic interest in Russia will tend to
decline.
  

On the other hand, as Russia
becomes a major actor in global energy supplies, China, Japan,
India and South Korea will display a growing interest in energy
resources, energy assets and energy cooperation with Russia. The
ASEAN countries will seek to use Russia’s energy and, consequently,
political influence as a counterweight to the influence of the
U.S., China and Japan in Southeast Asia.

The interest in Russia as a
transport space between Europe and East Asia will depend on
Russia’s policy in developing its transport infrastructure, above
all in Eastern Siberia and the Russian Far East.

The interest in Russia as a
partner in the knowledge economy will continue to be selective and
will depend on Russia’s policy in the realms of research and
technology. It also depends on its ability to revive Russian
science, which from about 1990 until the turn of the century was
severely hit by a “brain drain” and conceptual losses.

The interest in Russia as a
possible recreational zone for East Asia’s growing and increasingly
rich population remains hypothetical and will depend on Russia’s
actions and on whether it is ready to view itself as a global
recreational area.

The main risks for Russia in East
Asia in the next decade will be as follows:

  • as China integrates into the
    global and regional economy, Russia may find itself farther from
    the West – most importantly, the U.S. and Japan – than China. This
    factor will reduce Russia’s competitive advantages and weaken its
    political positions;
  • Russia may
    end up outside the integration processes in East Asia, involving
    Japan, China and South Korea;
  • Russia may
    yield to the political temptation to play on Chinese-U.S. and
    Chinese-Japanese differences, seeking tactical gains but
    overlooking strategic prospects;
  • Russia
    still runs the risk of missing the opportunity to use the
    six-partite talks on the North Korean nuclear problem for joining
    multilateral mechanisms of security and cooperation in Southeast
    Asia, which are emerging on the basis of these
    discussions;
  • Russia may
    continue misinterpreting the main threats from East Asia as
    concerns the prospects of a demographic or economic “invasion” of
    its East Siberian and Far Eastern regions. At the same time, it
    fails to notice that the main tendencies in East Asia’s development
    sharply minimize such threats, putting into the foreground the
    threat of missed benefits because of Russia’s nonparticipation in
    regional integration processes.

The main opportunities for Russia
in East Asia include:

  • it is importent for Russia to use
    the long-term interest displayed by other countries in its energy
    sector to create an East Asian hydrocarbon market on the basis of
    Russian energy resources;
  • it is vital for Russia to develop
    a new integration model for its parallel co-development with the
    European Union, the U.S. and Northeast Asia as a locomotive for the
    entire East Asian economy;
  • it is
    important for Russia to continue participating and increasing its
    activity and initiative in economic and political formats in East
    Asia;
    Russia must continue
    deepening national market-oriented and democratic transformations
    and large-scale cooperation in East Asia with the U.S., Japan and
    China, while taking the initiative to find and use areas where the
    interests of all these nations coincide in order not to fall behind
    China in terms of relations with the U.S. and Japan. In this
    context, it is important for Russia to build permanent strategic
    dialogs with the U.S., Japan and China on East Asian issues and
    thus to prevent the formation of a tripartite
    American-Japanese-Chinese regional partnership without
    Russia.