Country Report: Russia (January 2016)

Editorial Staff (with the assistance of Olga Puzanova)

The message in Russian media of late 2015 was pessimism about economic ties to China, but reluctance to blame the Chinese. Little is said about Russia’s relations in East Asia apart from China. Debate continues on the “turn to the East,” some seeing it as ongoing and inevitable, and others calling it an economic failure now ended.

 

Relations with China

On November 24 in lenta.ru, Ivan Zuenko cast doubt on the notion Chinese will seize Siberia, calling it one of the main myths about China. He insists that there has never been any basis for it—the “yellow peril—,” despite its durability. Explaining that Putin has described relations with Russia’s only “big neighbor” as going through the best period in history, he finds it puzzling that many Russians are fearful of China. On the one hand, the idea rests on the xenophobia, characteristic of contemporary Russian society. On the other, alarmism toward China unites traditional nationalists and the most radical, pro-West liberals. He notes commentaries, such as “Putin sells Siberia to the Chinese,” about agreements between Russia and China, which were aimed at the development of depressed and little populated regions of the country through cooperation with the world’s second economy. The fact that these territories are far from the capital and the information vacuum that exists from one part of Russia to another is an excellent environment for the cultivation of an alarmist mythology, readers are told. Guests from European Russia are very surprised when they cannot find on the streets of the cities of the Far East not only “millions of Chinese” but even “Chinatowns.” They do not exist, but few Russians visit the Russian Far East and see this with their own eyes. Even regional officials during an interview can suddenly declare that they have heard about “secret Chinese villages” in distant parts of the region. Deriding Zhirinovskii’s LDPR (Liberal Democratic Party of Russia) hostility to renting farmland to Chinese companies, Zuenko says the myth of the “yellow peril” has long been out of date.

 

Images of the “yellow peril” arose at the turn of the twentieth century when Russia was expanding to the east. The article insists that the lands entering into Russia were not part of China, but belonged to the Manchurian Qing Empire, which was occupying China as well as Tibet and Mongolia. Historically, Chinese lands, readers are told, rarely extended beyond the Great Wall and, even more, could not extend into Siberia or what Russians call the Far East. Only with the fall of the Qing did the concept of the “Chinese nation” embrace all ethnic groups earlier within the state. Japan’s occupying forces in Manchuria had revived the Manchurian nation, but Soviet troops put an end to that, and the People’s Republic of China (PRC) arose, to a great extent, due to the actions of the Soviet Union, the article argues. It fails to note, however, how far removed this thinking is from what is written in China about history or ethnicity.

 

Officially, no territorial pretensions regarding the “lost territories” have been raised by the PRC toward the USSR or Russia. Even Mao when relations were poor asked only that Russia acknowledge “unequal treaties” not that they be reexamined, and the final demarcation of borders in 2008 removed this issue. If pretensions exist, they are at the level of stereotypes, roughly on the same level as some Russians on the Internet demand to go to Berlin or to wash their shoes in the Indian Ocean, says Zuenko, refusing to take such ideas seriously. But, he also says one should not forget that some in China consider our land theirs. He regrets that Russia has not exposed the baselessness of such pretensions enough; therefore, even Russians often repeat them, arousing fear that Chinese colonization of Siberia has already begun.

 

The roots of this stereotype lie in the 1990s when migration of Chinese for work in Russia developed quickly, giving rise to images of Chinese (who came from border, rural areas) as noisy, disorderly, uneducated traders and unskilled labor. At a time of divided Russian administrations, uncontrolled migration of people with a completely different culture aroused incomprehension and alarm, emotions that remain today. Russian society, as before, knows nothing about Chinese and, as a consequence, is fearful of them despite studies that showed the Chinese diaspora was small with Moscow having the largest number. The absence of trust in society for authority and the expert community leads to not taking calm evaluations seriously or, in the worse case, viewing them as betrayal of the national interest. Official statistics are viewed as not reflecting reality. This holds for views of the number of Chinese, even as strict controls over foreigners have been imposed by the Russian government (including forbidding retail trade and closing a number of large markets), leading to an outflow of migrants. Moreover, China changed, reducing motivation to migrate as living standards rose—the average city dweller now is clothed better than Russians, has a better telephone, eats better, earns more, and spends more, say Russian observers who have spent a long time in China. Even for Chinese from poor border provinces travel to Russia is not a sign of success. Internal migration is much more appealing, far more than the hypothesized 500,000 Chinese migrants in Russia. In China, the image of Russia that persists is not safe—one can be beaten, deceived, and, in practically any contact with authority, have money extorted. In crossing to Russia, it is necessary to pay a middleman a vast sum.

 

In the past two years the financial pull of work in Russia has sharply diminished. In 2014, the income of a Chinese seasonal laborer in the Jewish Autonomous Region was RUB 25,000 a month—equal to CNY 5,000 or the wage of a provincial official—, but now it is CNY 2,500 or the wage of a waitress. An acquaintance, the owner of a small Chinese restaurant in a bedroom community of Vladivostok, complains that he has been working a year at a loss. Despite a decade in Russia, the man retains a “suitcase outlook,” living by the principle “earn money and return home.” After the ruble declined by a factor of two against the yuan, “earning” is not working, and, as many other “Russian Chinese,” he is waiting for “New Years” and if the situation does not change, he will close his business and return to China. Zuenko paints this grim picture.

 

China is now not exporting millions of workers, but millions in investments, readers are reminded. It is interested in investments in mining in Russia not from altruism to help a neighboring country, but for profit and access to natural resources. This has nothing in common with demographic expansion. Indeed, the stereotype of surplus labor is out of date. The largest cohort is in its 40s, of the 1970s just before the limits on births. In 20 years, China will have a surplus of pensioners and a labor shortage. Unemployment is small; in Heilongjiang, from which most seasonal labor to Russia originates, the rate is 2.2 percent. With this range of evidence, Zuenko makes the case that the “yellow peril” fear is baseless.

 

China can be helpful in finance and technology, and Russia is not in a position to refuse its help since there is no one else, and almost all regions east of Baikal are dependent on central assistance. In hundreds of populated points, jobs depend on administrative budgets, and the population is losing its motivation to live on the land. The program for resettlement of Russians to eastern regions is not working. The socio-economic development of Russia’s east will not occur without Chinese capital. It is very complicated to attract it while believing Chinese will seize Siberia. “Yellow peril” thinking is advantageous only for the West. Yet, local officials must be attentive to public opinion and hysterical publications. At the level of leaders of the two countries, relations are at their apex, but in practice there is stagnation of ties at the regional level and not one example of a large-scale, cross-border project. China will always pursue its interests, and Russia should too. Its interest now is to make maximum effectiveness in pragmatically using for its own wellbeing the power of China’s economy, not succumbing to medieval fears before a dissimilar neighbor and infantile desires to close as fast as possible all the locks to an iron door.

 

On December 26 in SvobodnaiaPressa, Andrei Ivanov described Sino-Russian relations in 2015 as “friendship without trade,” as the two could only find mutual understanding in the sphere of geopolitics. After sanctions were imposed against Russia, almost the only partner on a global scale left is China. When hopes for the removal of sanctions disappeared without a trace, relations with China acquired a strategic character. In the geopolitical sphere, complete mutual understanding was observed, as seen in the May 9 parade in Moscow when Putin and Xi were together the whole time. The Chinese press called the return of Crimea to Russia a just act and did not permit criticism of the foreign policy of Moscow. When Crimea due to the actions of Ukrainian radicals was threatened with going dark, Beijing sent the necessary equipment and did not pay attention to the dissatisfaction in the West. On the Syrian crisis, the two sides reached a mutual understanding too. Yet, for any cooperation there should be a firm economic foundation. Moscow and Beijing signed a series of important agreements on the supply of oil and gas to China as well as technical cooperation; however, in practice, many projects, such as construction of the high-speed Moscow-Kazan’ railroad, remain frozen. Annual trade fell in 2015 from USD 100 billion to USD 70 billion, and the structure of Russia’s foreign trade did not change. Xinhua even posted a critical article on the state of the Russian economy right after the visit to Beijing of Dmitrii Medvedev, Ivanov reports ruefully.

 

Looking back at the year, the article concludes that due to Russia’s turn to the East, relations with China automatically acquired a significantly greater value, quoting Aleksei Maslov, praising shared understanding on questions of the struggle against terrorism and the necessity of a multipolar world and a big “plus” from the new contracts signed. Yet, Maslov finds that economic cooperation has actually fallen, not only with the drop in trade but also from unrealized dreams. Russia overestimated the desire of China to take part in Russian import substitution. China looks at Russia as a territory for infrastructure investment, oil and gas projects, but it does not seek rebirth of Russia’s industry. Favoring Chinese production going to Russia has its “plusses” and “minuses,” readers are told—plusses for the Russian Far East that will stimulate development, as in construction of a bridge across the Amur and of an oil processing plant in Berezovka, while facilitating Vladivostok becoming part of a free economic zone and transforming Irkutsk into a transport node with special status. The territorial focus of China is concentrated in these areas, the article suggests.
As for the “minuses,” Ivanov starts with failure to interest China in reconstruction of the Trans-Siberian Railway. The capacity of the line today is many times less than China desires; therefore, it is opening alternate routes for transporting its goods, especially through Kazakhstan, Georgia, and Azerbaijan into Turkey. One more “minus” is that promised investments to Russia from China are 10 times greater than what is really going forward. Yet, this is not due to a change in bilateral relations, just to changes in the world economy, Ivanov adds, noting that Russia suffers from weak expert review of the projects, as many Chinese initiatives are treated as if they have been resolved even as China views them as only topics for further discussion.

 

Russia should stop expecting Chinese investment for development of its own export-oriented sectors. It should produce goods that China needs, which will have markets there, e.g., petrochemicals, processed agricultural products, finished products from wood and metal. Ivanov adds that considering the large number of Chinese tourists in Russia, Russia should develop its tourist infrastructure, not leaving this to the Chinese, as is happening now, but taking Chinese interests into account and keeping the whole profit in Russian coffers. He notes that Russia did not succeed in fulfilling many contracts in 2015 because many of its companies were new to the Chinese market and lacked expertise. Only now is Russia learning to do business with China. Yet, the great achievement of the year, citing Andrei Ostrovskii, is that China remains Russia’s main geopolitical partner, as seen in Xi’s presence on May 9 and Putin’s on September 3 as well as many measures at the United Nations, Shanghai Cooperation Organization (SCO), and BRICS. Ivanov insists that the two are conducting foreign policy along the same lines and regard each other as allies in the fight against American imperialism and hegemonism. The geopolitical side is so positive that the economic trouble means little for relations.

 

Ivanov attributes the economic problems to the sharp drop in the value of the ruble and the world price of oil, while asserting that it remains unclear how cooperation will develop within the rubric of China’s “One Belt, One Road.” Regretting the lack of investment in 2015—USD 8 billion—and the lack of development in border regions due to the dearth of infrastructure—ports, border crossings, railroads and highways, bridges—, he mentions a recent trip to China, where construction of the bridge linking Blagoveshensk to Heihe was the issue. Ivanov expressed hope that the bridge would be completed, but observed that the prior project was not, as the Chinese side built 16 pylons and the Russian side could not find the money for the 3-4 it promised. In December, about 30 agreements resulted from Medvedev’s visit, but follow-up to the “Force of Siberia” gas pipeline or the joining of the Eurasian Economic Union (EEU) with the “New Silk Road” was missing. It is apparent that contracts are insufficiently vetted at the first stage and then offices with few specialists on China handle them poorly, he concludes.

 

At the last minute, Russia decided to participate in the Asian Infrastructure Investment Bank (AIIB) and in the Silk Road Economic Belt without resolving questions that lingered. Those who made the decisions did not know China and could not always put together the parameters of the Russian and Chinese economies. In 2015, China’s average wage has surpassed Russia’s, taking into account the falling value of the ruble, contrary to expectations. Even so, citing Alexander Lukin, he finds relations with China developing in a stable manner, given China’s position on the question of international pressure against Russia, constant support for the territorial integrity of any state, and assurance that it understands that Russia’s actions due to the Ukrainian crisis were provoked by the West. Russia’s trade with other countries has fallen too—China is not blamed—, and when the economic situation in Russia improves, cooperation will improve.

 

Andrei Ivanov again wrote about China’s treatment of Russia in SvobodnaiaPressa, on January 5, offering a prognosis for 2016. He noted that after it became clear that relations with the West were ruined for a long time to come, Russian turned to the East and saw China as the main partner, given its rapid development and large population as well as its big appetite for energy resources, of which Russia has a lot, and given its role as a permanent member of the Security Council and importance in supporting Russia in the face of any attempts by the United States and Europe to harm its interests. Its participation in the SCO and BRICS offered hope for building a multipolar world. Moreover, China never interferes in the internal affairs of other states and does not fear criticism over human rights. Putin and Xi met to acclaim in 2015, but Ivanov states with regret not all went so well: trade fell by a third, the new Silk Road already started bypassing Russia, and many projects approved by the two sides remained only on paper. Looking to 2016, Ivanov turned to specialists on China for answers, citing their responses in the remainder of his article.

 

Aleksei Maslov responded that we should expect absolutely pragmatic relations, stable political and economic cooperation in place of rosy slogans. Russia should be oriented to stimulating production through its own credit, insisting on strict quality standards, and supplying goods to China, while pressing Russian regions near China to cooperate with China actively, unlike at present, implying that their lack of experience in working with China is at fault and that the Russian Far East has only been accustomed to transit transport from China, not from Russia to China. He also calls for a more active approach to Mongolia and Southeast Asian states and getting states to compete for the Russian market, but he warns that the AIIB and BRICS bank are long-term projects to be realized in 2017-2018, not 2016. Maslov expects a maximally friendly bilateral atmosphere with more pragmatism even if economic cooperation cools as the model of trade over the past 15 years centered on energy is fully exhausted. The transition to a new model, e.g., in high technology, will take at least to 2017, he concludes, raising hope without any evidence and carefully not blaming China.

 

Maslov doubts that China, given its own concept of moving forward, would agree to a joint strategy of development, even if approaches of the two on various problems often are similar. This means a common program still can be realized on matters such as a multipolar world, the rising role of the yuan, and the structure of the world economy. As seen in the Silk Road concept, China simply proposes to join projects together, not to work out some kind of new concept. Maslov adds that in 2015, China quietly kept its neutrality, not offering any support to Russian policies in East Asia and Ukraine, while it stuck to the opinion that it pursues its own strategic interests, which, as is very normal, do not always coincide with those of other countries.

 

Turning to Andrei Ostrovskii for political relations in 2016, Maslov reports that they will strengthen; but for this to proceed more successfully, economic ties should also be developed. Yet, Ostrovskii says that this depends on mutual interest, not trade alone, but through a transition to mutual investments. Such projects exist, he adds, as in the Amur region special territory for oil refining and gas processing, most of which would go to China, leaving 20 percent for Russia. If skeptics warn that Russia will be working for China, they should remember that in the Russian Far East there are only 6 million persons. At the same time, oil processing to be built in Xinjiang could give Russia access to new technology, which exists in Daqing. An agreement would allow 20 Russians to work in the plant. They should be taught Chinese and study the relevant technology. Ostrovskii stressed that much depends on finding specialists after 25 years of neglect, as some grew old and few young people were entering the field, and quickly funding the study of China. Without them, including their knowledge of China’s economy, all projects will stay on paper. He finds the same problem on the Chinese side, where the Russian market has not beckoned in comparison to the great interest in studying North American, Europe, and Asia.

 

The article proceeds to showcase China’s view that Japanese and US activities in the Pacific pose a great threat, especially Japan’s shift in the use of its own armed forces. It follows that China will befriend Russia due to Japan’s threat. Another theme is the possibility of an ideological bond beyond the geopolitical one between Russia and China to be jointly developed in the academies of science of the two sides. Ostrovskii regrets that such ties were interrupted after reform of the Russian academy in 2013, leaving only contacts between separate institutes. Ivanov concludes that bilateral cooperation will remain purely tactical on concrete problems, lacking a strategic character in pursuit of a global agenda. Regrets over the limited nature of the relationship cannot be missed in such articles, but blame is not placed on China.

 

In Kommersant’ on December 4, Alexander Gabuev’s ideas about the “rules of the game” for how business should operate were discussed. Referring to Putin’s talk before the Federal Assembly, the article asked how should Russia respond to the formation of Trans-Pacific Partnership (TPP), which after ratification will jumpstart trade among its members and, it is asserted, will force others, including Russia and China to join in a bloc.

 

Russian officials long did not believe in the possibility of the establishment of TPP, and, only after the signing of the agreement began to think how not to remain on the sidelines from integration processes in the Asia-Pacific region. Answers echoed the words of Putin, but Gabuev found them inadequate. Putin proposed together with colleagues in the EEU to begin consultations with members of the SCO and ASEAN, and also with governments allied with the SCO, about the formation of an economic partnership. That is, Russia will not think about entering TPP or joining in the alternative Chinese project, but will put forward its own megaproject. Yet, omitted is talk of removing tariff barriers, normally the custom in free-trade agreement (FTAs), while proceeding to unified technological standards and rules of trade. The questions raised exceed the answers provided, Gabuev says, beginning with how much interest partners will have in this—given the diversity of China, the ten members of ASEAN, India, and Pakistan. Also, in light of the failure of talks in the World Trade Organization (WTO) over twenty years, how will this actually go forward? Finally, given the minimal role of “production of the next technological generation” in Russia’s exports, what is the credibility of this?

 

Turn to the East

Sergei Karaganov on his personal site analyzed the history of the idea about Russia’s “turn to the East” on December 29. This was originally an introduction to his book on this theme, which also appears on his personal website and which Olga Puzanova is reviewing for The Asan Forum. He argued that this idea has now been almost fully realized, but people wonder how deep and successful it will be and whether it will proceed given Russia’s traditional way of doing things to the maximum, and will it mean a civilizational departure from a 1000-year European spiritual-cultural orientation. In the 1990s and early 2000s, Russia’s specialists on the East were the only ones arguing for this turn. Karaganov insists that they remained a powerful intellectual force, having suffered fewer losses than Russia’s other internationalists. Yet, even today, he charges, they lack much political influence, having concentrated not on needed study of politics and economics, but on culture and language. Their biggest problem was the dominant elite opinion in Russia that everything good in Russia came from the West, and Russia should keep trying to join it, and all of its problems would be solved. Karaganov points to the nineteenth century as Russia’s peak European orientation, while Asia was viewed with scorn. But Asia is rising and the European Union, after expanding, is in its twilight, having lost its traditional values and fallen into crisis. Russia’s new bourgeoisie rose through ties to the West, and the economic part of the ruling elite was dominated by Westernizers. Moreover, among those in favor of a turn east were communists, who lionized the Chinese model, and Eurasianists, who despised everything about the West, giving new energy and legitimacy to the Westernizers. Out-of-date, ephemeral images of the East and West distorted debate at a time a battle was under way over Russia’s post-Soviet identity. As an interim response, Russians turned to defense and sovereignty as their national ideas—not bad for a time, but dangerous in the long run for the defense of Russia’s uniqueness.

 

What changed things was an awakening, including by Karaganov, to Asia’s rapid economic growth, and a gathering of experts to consider how to use this rise, while finding a path for the development of Siberia and the Russian Far East. In the early 2000s, their proposals were rejected by the vast majority of the elite, who only saw salvation in drawing closer to the West. Russia’s intellectual tradition held it back, and the struggle continues, but, over the past six years, Karaganov asserts, the idea spread that due to changes in global markets Siberia and the Russian Far East now have strong competitive advantages with Asian markets in mind, such as in the new data center in Irkutsk region, where cold storage of information is a plus. Reminding others that Asians have cheaper and more abundant labor, he rejects the usual ideas for industrializing Asiatic Russia, but he explains that the ideas of his group have now become part of a growing push for turning eastward. Opponents charged that these ideas were “anti-Europe,” anti-modernization,” and anti-democratic.” In response, it was suggested that if Peter I were alive today, he would build his capital on the Pacific. Finally, the decision was taken to transfer some offices to the Far East, even if it has yet to be realized. The group came to the conclusion that Asians are turning from a model “Asia for the world” to one of “Asia for Asia,” pointing to the Asian market with both economic and geopolitical effects. As China turned to the West, leading to the Silk Road Economic Belt, the case for new transportation arteries grew stronger. The movement of goods from the Pacific Ocean to Europe and back is becoming outdated, as the Arctic route and routes linking Siberia and the Russian Far East vertically to China and, potentially, to Iran, India, and Pakistan come into view. The formation of “Central Eurasia” is now seen as likely and desirable, based on joining together the European Economic Community (EEC) and the Silk Road Economic Belt.

 

Such ideas were reflected in May 2015 in the agreements between Putin and Xi, but Karaganov complains of bureaucratic indecision, local passivity, and the division in administrative responsibility between Siberia and the Russian Far East. Despite the priority Putin has given to the region as the main Russian project of the twenty-first century, it seems as if that will be delayed until the second half of the century. Russia needs an active regional policy to set the agenda, to shape the structure of a new center of the world. Claiming to base his findings on the accumulation and study of a mass of data and to be striving for a “Greater Eurasian Community,” built around the expanded SCO, Karaganov concludes that this is not just an economic policy but has geopolitical and civilizational features too, given the new contradictions with the West. Yet, he foresees Russia serving as a bridge between Europe and Asia. Missing from this rosy picture is an objective look at Russia’s conditions, the changes in the global economy, and the realities of Asian geopolitics. Failure in late 2015 to take into account rapidly changing conditions is a tell-tell indication of this.

 

More negative on the results of Russia’s “turn to the East”—the 2015 theme for the foreign policy of Russia—was Mikhail Korostikov in Kommersant’ of December 25. Explaining the failure, he points to a lack of: qualified personnel, ability to work in eastern markets, and new, large-scale projects able to interest Asian business. The central place in this “turn” is occupied by China, despite the more than 30 percent decline in trade with it due to the ruble’s cheapening and the restructuring of its economy. Downplaying the significance of this, the article stresses that Russia and China repeatedly have demonstrated their commitment to developing long-term economic ties while displaying similar views on today’s world order. Signs of this advancing relationship are the decision to link the Silk Road Economic Belt and the EEU, a new level of military ties, and the first foreign sales of the S-400 air-defense system and the Su-35 airplanes to China. On December 17, it was announced that Sinopec Group had acquired a 10-percent stake in SIBUR—NOVATEK attracted 700 million Euros from the Silk Road Fund for a 9.9 percent stake in Yamal, the LNG gas project. Oleg Deripaska had also agreed with a Chinese company to establish in the Irkutsk region a data processing center, where Chinese companies would store information, using Huawei equipment and electricity supplied from hydroelectric stations in Siberia. Yet, the article concludes that 2015 was a year when illusions in relations with China were dispelled. Close political cooperation did not lead to more Chinese concessions in business talks. Taking advantage of the fact that Russia’s access had been closed to a variety of Western technology, China raised the prices by a factor of three to four to the GLONASS system. Construction of a bridge across the Lena and the gas line “Force of Siberia-2” encountered serious problems. Viktor Tarusin, who directs the Russia-ASEAN working council, noted that Chinese banks having a heavy American presence asked Russian clients within 30 days to withdraw their funds under threat they would be frozen. Russia withdrew from a project to build a Komsomol’sk-na-Amur plant to assemble China’s MA-600 planes, now seen as a direct competitor of Russia’s IL-114. Such examples are indicative of a much rougher year for bilateral economic ties than many have noted.

 

The “turn to the East” involved other countries besides China, the article notes. It says that Japan’s sanctions were, in practice, mostly symbolic, and at the end of December news spread that Putin would still be visiting Japan. In September at the Eastern Economic Forum in Vladivostok, Iurii Trutnev found that Japanese were more active than Chinese, e.g., a Japanese company reached an agreement with Rosneft’. The Asiatic partner found for Russia’s national credit card system is JCB, not a Chinese firm. Notice is paid also to contradictory relations with countries in Southeast Asia. On the one hand, the process is under way with the EEU to set up FTAs with Vietnam and Singapore. On the other, Russia’s president did not attend the East Asia Summit (EAS) and, for the first time since 2002, skipped the Asia-Pacific Economic Cooperation (APEC) summit. On December 3, compensating for this, Russia proposed an economic partnership encompassing the EEC of the SCO with Southeast Asia. The article explains that the majority of surveyed businessmen, politicians, and experts on the “turn to the East” were very critical, complaining of lack of expertise and knowledge. This repeated refrain could be seen by some readers as a way to deflect the focus from systematic troubles in establishing a market economy based on law, which is modernized to incorporate the best international standards, but that is, of course, not discussed in the article.

 

On the Carnegie.ru site on December 29, Gabuev wrote of a “turn to nowhere.” Hopes that Asian ties would compensate for lost EU and US ties were not realized. Western sanctions work in the East too, and little can be expected from Russia’s projects in Asia. Gabuev concluded that the Kremlin has lost interest in the region, and business does not mind. Arguing that excitement about the “turn” rose to a high pitch with Putin’s “triumphal” visit to Shanghai in May 2014, Gabuev recalled memoranda on an “unbreakable friendship” and Gazprom’s Alexei Miller’s delight in a USD 400 billion contract. Although Miller is known as a master of exaggeration, his reaction was in keeping with the sentiments in Moscow, as expectations rose for Shanghai, Hong Kong, and Singapore to replace London, New York, and Frankfurt for Russian companies. Respected figures vied for a chance to a head a committee or working group with China or even other Asian countries. Yet, indicators of trade changed the mood—figures for Japan, South Korea, and ASEAN to October were even worst than those with China. (The drop in EU trade was a little more, leading to a slight shift toward Asia.) The fall came from lower prices on Russia’s exports and reduced capacity of Russian companies to purchase imports. In the first half of 2015, investments from China were only USD 330 million—below the pace of USD 794 million in 2014. No Russian companies traded on Asian markets in 2015, little credit was obtained (for companies not subject to sanctions), and the big four Chinese banks observed the sanctions (despite China’s criticism of them). Gabuev concludes that strategic partnership did not trump commercial logic. Only two political banks of development and the Silk Road Fund signed agreements, but Russians spoke of “theft” by them and conditions making it more costly and complicated than just evading the EU sanctions to get the money. In Hong Kong and Singapore, managers asserted that for Russians to receive funds, “Russia” should no longer be on the pages of The Financial Times.

 

Additional complications were created by internal problems in China—the slowing of its economy and the summer stock market slide that deeply frightened officials and bankers in Moscow without directly touching Russia’s interests, and even more the anti-corruption campaign in its third year now reaching the financial sector and private companies, which delays decision making and leads to inaction. Japan with its symbolic sanctions against Russia, and South Korea, which has not introduced any sanctions, have also not been keen to invest in Russia—not even in the TOR (territory of cross-border development) and free port of Vladivostok. Attempts to play on the contradictions of Tokyo and Seoul with Beijing and frighten them about losing projects in the Russian Far East to China have failed, even if especially in Tokyo such concerns exist over the coming 10-15 years. Asian businesses and governments are waiting, given the lack of priority in the Russia elite over the past 15 years for such plans as well as the fall in prices, the existence of sanctions, the absence of infrastructure, and the lack of expertise on the East and local elite networks. Worst of all, Moscow in 2015 made unnecessary mistakes. If we agree that the personal participation of Russia’s leader is extremely important for the success of the “turn,” then this resource was not well utilized in the first Eastern summit in Vladivostok, when Putin at the last moment cancelled his meeting with big businessmen of the region and, after a short speech, spent his time in the company of the actor Steven Seagal, as guests expressed their disappointment to Russian officials. Then, Putin skipped the EAS and APEC summits. (It is known that he is bored by multilateral formats and goes to them to hold bilateral meetings.) It appears, that Putin succumbed to the elite’s sentiments, which by fall had decided that the “turn” is not important. Gabuev observes that disregard for the EAS, which Putin has not attended after Russia’s entry in 2011, is derided in ASEAN states, and missing APEC was taken as final proof that Russia’s “turn ” is not to all of Asia, but just to be the younger partner of China. He credits the team of Igor Shuvalov with successes, e.g., entry into the AIIB and overcoming bureaucratic opposition, noting mini-victories, such as eliminating the ban on importing Russian grain into the PRC and the idea of an FTA between the EEU and Vietnam—even if such agreements are just the first steps without any guarantee of success without the activity of business. It is small and middle companies that draw the most praise for trying to turn to Asia, as in filling Chinese supermarket shelves with “Alenka” chocolates.

 

A November 3 article in Kommersant’ by Korostikov reported that China viewed the China-Japan-Korea summit as a victory over the United States since it means Asians are solving the problems of Asia without outside interference, attributing China’s decision to reduce tensions with Japan to the intensification of its clash with the United States in the region. The same paper on November 2 wrote about how at the Sochi Olympics Xi Jinping sought Putin’s help in preparing for the Winter Olympics, which, after China was awarded the games, has turned hockey into a symbol of new cooperation. This is Xi’s winter sport favorite, and Putin plays the game, readers are reminded, along with mention of the Continental hockey league’s interest in expanding into China.

#Chinese diaspora #Geopolitics #National identity #Regionalism #Yellow Peril