Country Report: Russia (May 2014)

Editorial Staff (with the assistance of Olga Puzanova)

With Russia’s attention having been primarily focused on the Ukrainian crisis in the past months, the coverage of Asia in Russian media and academic reports has been even sparser than usual. Not surprisingly, much of the writing on Asia is framed in the context of the Ukrainian crisis. Putin’s recent visit to China and the gas deal between Gazprom and CNPC, however, have sparked some debate in Russian media. Other articles reflect on the implications of the Ukrainian crisis for Russia’s engagement with Asia, mainly in the economic and security realms. Special attention is paid to Russia’s evolving relations with Japan in the aftermath of the Crimea annexation. Some articles also examine Russia’s relations with the DPRK, and its development of the Russian Far East, emphasizing the role of China in this process.

An editorial in Nezavisimaya gazeta positively assessed Putin’s visit to China, arguing that it resulted in economic and political gains for Russia. On the economic front, the signing of the long awaited gas deal was a major accomplishment. The agreed upon gas price has not been announced, but it is now known that the deal amounts to USD 400 billion. The editorial also notes that the two sides discussed the practice of one-sided sanctions frequently deployed by Western countries, alluding to China’s support for Russia in the diplomatic conflict with the West. While many experts claim that Putin’s visit symbolizes Russia’s turn towards China, the editorial argues that Russia is not giving up on multilateral politics, but is simply deepening an ongoing relationship with its biggest neighbor and partner. This relationship is rooted in their convergence on international issues and crises, as demonstrated by their tendency to veto UN Security Council resolutions jointly. Putin described the results of this visit to China as “fantastic,” and the editorial agrees with his assessment. Gazprom’s stock prices have increased since the visit, as it has strengthened its international position.

Another Nezavisimaya gazetareport argues that Putin’s visit to China has already affected regional dynamics in the Asia-Pacific, as evidenced by the United States and Japan’s strengthening alliance against China and Russia, manifested by the harsh tone used by the former at the Shangri-la Dialogue in Singapore. A Japan specialist, V.N. Pavliatenko, stressed that the attacks against China were coordinated by the two countries ahead of the summit, and served as a response to Putin’s visit to China. Although China and Russia are denying formation of an alliance, Pavliatenko argues that the two countries are actively resisting US-Japan influence in the region. He concludes that tensions are likely to increase as relations between China and Russia continue to develop, i.e., to draw closer.

Not all accounts of Putin’s visit and the gas deal with China were as positive. A number of articles portrayed the terms of the gas deal as advantageous to China, highlighting the unequal nature of this partnership. Some commentaries in Russia’s liberal media even argued that Putin has sold Russia to China, referring to the price concessions Russia made. An analysis of the deal in Gazetasuggests that its scale is moderate in comparison to China’s gas agreements with Central Asian neighbours, such as Turkmenistan. In fact, the paper claims that Chinese authorities held talks with the Turkmen president right before Putin’s visit and used his offer to their advantage in negotiating. The article concludes that while hopes for an equal partnership are unlikely to materialize, Russia is still going to be gradually shifting towards its mighty neighbour, as it does not have a sound alternative.

Even prior to Putin’s visit Russian writings had argued that Russia is shifting towards Asia, and China in particular, in light of the Ukrainian crisis. Gabuev’s report in Kommersant vlast’ argues that Russian businesses are looking towards Hong Kong and Shanghai to make up for their exclusion from Western financial centers in light of recent economic sanctions. In another piece Gabuev further argues that the Ukrainian crisis will lead to significant geopolitical shifts in Asia and in Europe. In the medium term, Asia could become the primary market for Russian goods, as well as a source of capital and technology for Russian businesses. While the international community seems to perceive working with Russia as increasingly risky, Russia has found a way to compensate for its isolation by turning towards Asia. Gabuev argues that Putin has emphasized the importance of engaging with East Asia in his two recent speeches at the Federal Assembly. At the same time, several challenges stand in the way of closer integration with Asia. First, the lack of transport infrastructure in the Russian Far East inhibits efficient export of natural resources. Even if sufficient resources were allocated in the near future, five years is still the minimum time frame for building the infrastructure, which means Russia will be late in diversifying its gas exports. Some insider sources suggest that China would be willing to lend Russia the money for the infrastructure. Gabuev still argues in favor of Russia diversifying its investments. Japan, for instance, is not only willing to invest in Russia’s Far East, but also to import more of its resources to ensure that Russia does not turn into China’s energy haven. Both Japan and South Korea, however, are now pressured by the United States not to engage with Russia. The article concludes by suggesting that the United States has an important strategic decision to make in the Asia Pacific: to either isolate Russia further and let it merge closer with China, or to allow for deeper and more wide-ranging integration in East Asia to avoid Sino-Russian collision. Either way, Gabuev seems to believe that Russia’s turn towards Asia is inevitable, serving as an important strategy for mitigating isolation in the West.

Kistanov’s article in Nezavisimaya gazeta focuses on the development of Russia-Japan-US triangular ties in light of the Ukrainian crisis. He argues that while Abe has recently attempted to use the “Russia card” in dealing with a more assertive China, Russia’s annexation of Crimea has complicated Sino-Japanese relations. Japan has been struggling to find a middle way between appeasing its key partner, the United States, and maintaining ties with its increasingly important partner in the Asia Pacific, Russia. Abe, therefore, has openly criticized Russia’s actions, while at the same time, upholding a separate relationship with Russia, mainly in the economic realm. At a parliamentary address in April, for instance, Abe openly criticized Russia’s annexation of Crimea. At the same time, the Russia-Japan investment forum still took place in Tokyo despite the Crimea events, and while Japan has joined the international sanctions regime against Russia, in reality its restrictions have remained mostly symbolic, not obstructing closer economic relations between the two countries. Kistanov also writes that the Crimea annexation has implications for Russia’s territorial dispute with Japan, with some Japanese analysts perceiving Russia’s isolation as potentially conducive to a softer stance on the dispute, while others fear it would use force to regain control of what it sees as its own territory. Kistanov concludes that Abe’s aim of resolving the territorial dispute during his term is strongly contingent on Japan’s position on Ukraine. Japan’s delicate diplomatic work of balancing between recognizing Russia’s interests in Ukraine and rejecting the infringement on Ukraine’s territorial sovereignty is to continue for some time to come.

Myasnikov’s piece in Nezavisimaya gazeta projects a positive vision of Russia-Japan relations, stemming from his analysis of Japan’s recently published “white paper” on defense policy. First, an abbreviated version of the paper was translated into Russian, hinting at Japan’s favorable attitude towards Russia. Most of the report focuses on threats from China, as well as the DPRK. Russia is given relatively little attention, with some analysis of Russia’s military modernization discussed in neutral terms in the report. Myasnikov concludes that Japan perceives Russia as an economic partner rather than as a security threat, which is conducive to future development of bilateral ties.

In contrast to this report, another article in Nezavisimaya gazeta, drawing on Russian Japan experts presents a more sceptical view on Russia-Japan relations, describing Japan’s policy towards Russia as two-sided. On the one hand, Japan has been eager to bolster closer ties with Russia, but on the other, it still joined the international sanctions regime against it following the Ukrainian crisis. Putin is scheduled to visit Japan in the fall. At the recent Economic Forum in St. Petersburg Putin was asked by the paper’s journalists whether he is ready to carry out negotiations about disputed islands with Japan. Putin remarked that he is ready, but he has been startled to find out that Japan joined the sanctions regime, which has put in doubt the feasibility of negotiations and the bilateral relationship more broadly. Japan was shaken by Putin’s comment, with top officials remarking that nothing has changed in bilateral ties. Russian experts, however, remark that regardless of whether Japan’s sanctions are formal or informal they still hurt bilateral ties. Russia will be unable to ignore the sanctions. Otherwise it would appear to be compromising its principles in attempting to get some of Japan’s investments in the Far East and Siberia. Russia, therefore, is likely to cool its relations with Japan to maintain a stronger negotiating position in the long term.

The writings on North Korea favor Russia’s more active engagement with the DPRK. A recent report in Kommersant daily discusses the latest developments on the economic front between the two nations, revealing that the Russian parliament has passed new legislation regarding the handling of the DPRK’s debt to Russia from the Soviet period. The Duma decided that USD 10 billion out of USD 11 billion will be forsaken by the Russian government, and the remaining USD 1 billion can be paid off in the next 20 years via Russia’s reinvestments into North Korea’s healthcare, education, and energy sectors. This project, titled “debt in exchange for development,” will help engage the DPRK in international projects with Russia’s railways and Gazprom.

Torkunov’s in-depth piece on the DPRK in the latest edition of Mezhdunarodnaya zhizn‘ supports Russia’s more forceful diplomatic work with Pyongyang. Admitting that Russia’s position on North Korea has been two-sided, it supports denuclearization and economic reform, but it stands against the use of force in resolving the crisis, prioritizing stability on the Korean Peninsula. He argues that Russia is in a particularly advantageous position now, as North Korea is more isolated than ever, having compromised its relations with China and sparked new tensions with South Korea and the United States. Despite frequent Western reports about the weakness of the regime, it continues to survive, and it is, therefore, only reasonable for Russia to attempt to work with it rather than to wait for its imminent collapse. In addition to being interested in Russia’s economic resources, the DPRK needs Russia to diminish its reliance on China and to help mitigate pressures from Seoul and Washington. Russia could initiate more dialogue with the DPRK, and also use its membership in the Security Council to facilitate multilateral negotiations. Russia needs to play the balancing role of attempting to provide some security guarantees to the North Korean regime, without dismissing its dangerous behavior. More active involvement would not only benefit Russia’s security in the border regions, but could also benefit the international community more broadly.

Bilateral investment between China and Russia also remains highly asymmetrical, as China invests mainly in raw energy, and Russia invests in China’s hi-tech sector. Kashina admits that China has been more successful in creating an attractive climate for foreign investment. Russia, however, appears to be learning from China’s success by establishing a new system of tax breaks on foreign investment, planning to build efficient infrastructure to lure investment projects, and considering the establishment of special economic zones in the border regions. The effectiveness of Russia’s attempts to incorporate lessons from China and to attract more investment from China is unclear.

#debt forgiveness #Gas deal #sanctions regime #Turkmenistan #Ukraine #US-Japan alliance