Tuesday, March 31, 2015

Russia looks beyond China to avoid a shaky Asian pivot

This eastward drive has been in the making for quite a while. In the second half of the 2000s, Moscow began taking steps to develop the long-neglected Russian Far East, expand economic cooperation with East Asia, and diversify away from economically stagnant Europe.

At the time, Moscow’s pursuit of closer ties with Asia seemed somewhat half-hearted and did not produce substantial results.

It was not until the arrival of the Ukraine crisis and subsequent Western sanctions that Russia’s relations with Asia became critical. China was the most obvious option to turn to, especially considering that Beijing remained neutral regarding Russia’s actions in Crimea and Ukraine.

Putin’s visits to China in May and November 2014, as well as multiple high-level meetings during the past year, underscore the growing closeness between the two great powers. They concluded a host of agreements in — among other fields — the energy, finance, and high-tech sectors. The strengthened ties between Moscow and Beijing were epitomised by a 30-year, US$400 billion deal to supply natural gas from eastern Russia to northeast China. At the same time, China’s imports of Russian oil skyrocketed by 36 per cent in 2014.

The central banks of the two countries signed a currency swap agreement worth RMB150 billion (US$25 billion), enabling Russia to draw on renminbi in case of need. And as leading Western agencies — such as Moody’s, Standard & Poor’s and Fitch — downgraded Russia’s credit rating to junk or near-junk level, Chinese credit rating agency Dagong Global gave Russia’s Gazprom the highest AAA rating, enabling the Russian energy giant to place shares in Hong Kong.

In October 2014, while meeting with Chinese Premier Li Keqiang, Russia’s President Vladimir Putin declared that Russia and China were ‘natural partners and natural allies’.

There are areas in Asia where Russia and China have competing interests; particularly Central Asia where China’s growing economic presence has long worried Russia. But even here, Moscow and Beijing recently agreed to coordinate their flagship economic initiatives, the Russian-led Eurasian Union and China’s Silk Road Economic Belt.

Russia has been traditionally wary of the Chinese presence in its far east. Yet Moscow has now lifted tacit restrictions on Chinese investments and begun to actively court Chinese capital. In a landmark move in 2014, the Russian government agreed to sell Chinese companies minority stakes in the country’s most lucrative oil field and the world’s third biggest copper field, both located in Eastern Siberia. Moscow is even willing to let Chinese investors into its holy of holies: a controlling ownership of Russia’s major strategic oil and gas fields.

Despite its seeming enthusiasm for intimacy with Beijing, Moscow is aware of the costs and risks of embracing China too closely. If Russia is seeking to diversify its Asian partnerships then Japan might be an ideal choice. Prime Minister Shinzo Abe appears eager to improve relations with the northern neighbour, having met with Putin seven times during 2013 and 2014.

But Tokyo’s alliance with Washington places restrictions on how far it can advance in its rapprochement with Russia. Under American pressure, Japan introduced sanctions and indefinitely postponed a visit by Putin to Tokyo. If Russia’s relations with the West remain poor, Abe will hardly risk hosting Putin in 2015.

Unlike Japan, South Korea has refused to sanction Russia over Ukraine. The dialogue between Moscow and Seoul seems to be in a pretty good shape, with Russia occupying an important place in President Park Geun-Hye’s flagship ‘Eurasian initiative’.

Yet it is the other Korean state, the DPRK, that has lately seen the most remarkable progress in its relations with Russia. A flurry of high-level exchanges between Moscow and Pyongyang will culminate with Kim Jong-un’s visit to Russia in May — his first trip abroad as head of state. After both being ostracised by the West, Russia and the DPRK now share an increased affinity. Increased support for North Korea may also serve as additional leverage for Moscow in the dealings with the West, Tokyo and Seoul.

In Southeast Asia, apart from its long-time friend Vietnam, Moscow looks to Singapore, which it sees not only as a potential investor and gateway into the Asia Pacific for Russian businesses, but also as a mentor on many modernisation issues.

In South Asia, Russia has scored a diplomatic success, securing the simultaneous admission of India and Pakistan into the Shanghai Cooperation Organization, in spite of a reluctant China. Meanwhile Moscow has managed to substantially improve its traditionally problematic relations with Islamabad, while remaining a close partner of Delhi.

Two main questions remain concerning Russia’s ongoing eastern pivot. First, will Moscow’s newfound interest in Asia prove durable when and if Russia somehow succeeds in normalising relations with the West? Second, will Russia’s Asian pivot engage not only China but with Asia more broadly? There is a mismatch between Moscow’s diplomatic activism towards other Asian countries and economic deliverables. Unless this changes, Russia faces the unenviable prospect of becoming just China’s raw material periphery.

Artyom Lukin is Associate Professor at the Far Eastern Federal University, Vladivostok.


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