East Asia and Russia’s Development Strategy

10 february 2007

Resume: Although Russia has stepped up its military and political presence in East Asia, it has not yet gained the required levers of influence in the region. It fails to take into account the geopolitical changes there, while it views the changing situation in a simplified, outdated way: through the prism of its rivalry with the United States.

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;
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  • 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);
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  • democratization of Chinese society on the basis of a broader rule of law and a socio-economic “strategy of non-destabilizing inequality” (“harmonic society”);
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  • 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. 

Last updated 10 february 2007, 15:44

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