Country Report: Russia (May 2018)

Editorial Staff (with the assistance of Olga Puzanova)

In the spring of 2018, Russians reacted to the drama over North Korea as they questioned their country’s place in Northeast Asia and the Indo-Pacific region. Two figures loomed large in their writings: Donald Trump, representing a US government whose motives could never be trusted; and Kim Jong-un, ready to cut a deal with diplomacy left in doubt mainly because of the ideological bent of US foreign policy. Moon Jae-in also draws praise for his diplomacy with Kim, and Xi Jinping continues to escape serious criticism or doubts about the value of Sino-Russian ties. Yet, new circumstances are acknowledged to pose problems for Russian foreign policy. In light of a changing Chinese economic model, how can Russia again catch the Chinese wind in its sails? Now that the SCO has expanded, how can Russia overcome new barriers in this body? In the fast-moving diplomacy over the Korean Peninsula, how should Russia position itself?  What should be done in response to the Quad, in which India appears to defy Russian plans to build an integrative region with a northern tilt by looking southward with cooperation from Japan, Australia, and the United States? In fast-shifting Sino-US relations with the possibility of a trade war, what should Russia do? The questions raised are often oblique and the answers fall short of addressing the realities of the new conditions, but there is a mixture of defensiveness and awareness of major transformations at work to which Russia must not be oblivious.

Sino-Russian Relations

Iurii Tavrovskii in Nezavisimaya Gazeta on April 9 said that today’s assault by the West on bㅐth Russia and China reminds one of the Opium War. Commentaries on the policies of the West in relation to Russia and China increasingly use the word “war”— “cold” for Russia, “trade” for China. Looking back, the Crimean War against Russia and the Opium War against China took place almost simultaneously, and they are remarkably similar to today’s efforts at interfering in the development of the two countries-civilizations. A trade war led to a hot war with China. Now a trade imbalance has reemerged, and the United States is moving warships more into the South China Sea. At the same time, the Crimean Sea has reemerged as the point where the West is assailing Russia, as it pursues a total cold war. Different now is coordination of the two targets and their confidence in their own forces, readers are informed.

On April 25 in RIA Novosti Sergei Karaganov was quoted as calling for creating a joint Russo-Chinese economic system to counter pressure from the Western one. If they are in the clutches of the existing system, they are stymied, he told the Valdai gathering in Shanghai. Because neither state will become part of the pro-Western sphere, their movement will be impaired. The two states are naturally complementary economically and politically, agreeing on the same principles that are offered to world society.

Timofei Bordachev on May 2 in gazeta.ru regards Russia and China together as a growing nightmare for the United States, referencing the April 25-26 Valdai meeting in Shanghai. He starts from the premise that Russia and the United States by virtue of the size of their nuclear arsenals are the main adversaries for each other and unavoidable competitors, including in the realm of ideas. China, in turn, anticipates, sooner or later, that it will be so strong that victory over America can occur with the need for direct conflict, but Chinese experts are starting to respond to Trump with a different outlook, much as Americans are losing confidence in their hypothesis about China’s political transformation. The idea that the United States would not start to press China because the two economies are so intertwined is fading in China. In the case of Sino-Russian ties, Americans were wrong to predict conflict as China advanced, as if China would duplicate the US approach of regime change in support of anti-Russian forces. Meanwhile, China has been aroused by hostile US actions, lately by being designated an official opponent and being targeted with a trade war, while it has liquidated the Deng Xiaoping system. The article links China’s rise to the radicalization of US policies under Trump, causing more egoistic and aggressive policies. To US alarm, China has begun to offer third countries an alternative, freeing them from dependence on the United States. It threatens US control over the world economy—an important basis of US power. Some states use ties to Russia, China, and the United States to increase their autonomy. China’s growing economic influence poses no problem for Russia. Russia does not gain from control over markets and trade routes, as the United States does, but from selling energy, agricultural products, and arms. Now the new US policies drive China closer, but China and Russia need to improve their ties.

Investors on both sides still read about the other in English-language newspapers. Their information markets are largely closed to each other. In China, 20 times more Russian books are issued than Chinese books in Russia, where few are interested in Chinese literature. Yet, oddly Russians are more sympathetic to the United States and countries of Europe, which try to pressure Russia with sanctions. Negatively impacting bilateral relations are the barriers to entry for firms in each other’s market. Given the new strategic context of relations with Washington, Moscow and Beijing have no choice but to sustain the autonomy of their foreign policies—the article takes for granted results from ever closer relations between the two states.

On May 10 Igor Makarov in Mezhdunarodnaya Zhizn’ wrote about the Chinese wind behind the sails of the Russian economy. Recalling China’s dramatic rise in the early 21st century through integration into the world economy as the world’s factory, along with massive investment in industry and infrastructure, he asserts that countries that could hitch themselves to China’s rise succeeded. Russia tried, but was late, beginning its turn to the East in foreign policy only in 2011-12 and missing a lot of the benefits available. In the 2010s China’s tectonic rise shifted from rapid growth to structural reform, offering new opportunities but reducing growth in demand for natural resources and requiring adjustments in exports to China. Again, Russia has been in danger of responding slowly.

All the conditions exist for Russia to change the traditional model of its relations with China. The 2014 devaluation of the ruble increased the competitiveness of Russian goods and services as well as its attractiveness for tourism, the Western sanctions on Russia forced companies to look to China more, and the risk of a trade war between China and the United States led Chinese to look for suppliers elsewhere. Russia has a lot of potential for China, but, Makarov observes, Russian trade policy must become more proactive. In place of negotiations at the highest level with lofty memoranda, routine work in support of small and mid-sized firms is needed. Further, new methods are needed for supplying credit and insurance for exports, new marketing channels should be established, and joint industrial parks on Chinese as well as Russian territory are desired. Tariff and non-tariff barriers for entry into the Chinese market must be reduced. Finally, a full free trade zone between China and the EEU should be considered, given the reduced validity with each year of the objection that the Russian market will be saturated with Chinese goods. In 2012 Putin called for catching the Chinese wind, and much has been done, but as the direction of the wind has shifted, the Russian economy must go much further in its response.

Regnum.ru on April 27 asserted that Russia-China relations help advance global stability and give the world an example of equal, mutually beneficial relations, which are based on mutual respect. One example given is their cooperation in dealing with the Korean Peninsula, as they proposed a dual freeze. Now progress on the peninsula is seen as following the roadmap they proposed, and readers are assured that China and Russia will intensify their coordination on this issue. Reporting on an article in Xinhua, this piece stresses harmony in foreign policy without any hint of disparate interests and discord over selected policies. The Korean issue is boosting harmony.

SCO Expansion and the Eurasian Project

On May 14 Andrei Kortunov discussed the SCO in RSMD in anticipation of a June 9-10 gathering in Qingdao including not just the traditional six members but also India and Pakistan. With this expansion, there is much rose-colored hype about the significance of this vast population and territory becoming a building block of a new international order. Crediting the successes since 2001 in the SCO and in expanding to eight members, Kortunov warns that now is not the best time for triumphalism. The SCO has yet to become a mature international institution, and it has risked that promise with this expansion without specific tasks and concrete objectives.

Kortunov recalls divisions from the outset in the SCO, which deepened, as seen in the response to Russia declaring in 2008 that Abkhazia and South Ossetia are independent and in the 2014 response to the annexation of Crimea, given the concern over separatism as one of the “three evils” the SCO has been fighting. In the case of clashes between Uzbekistan, Tadzhikistan, and Kyrgyzstan, some SCO states saw political extremism or even terrorism, while others saw legal struggles of ethnic minorities for their rights. As for complex, territorial issues between China and Central Asian states, bilateral talks rather than the SCO were decisive. The article regrets that the SCO could not make a real contribution to resolving the Afghan issue.

Turning to geopolitics, Kortunov warns that it would be an exaggeration to assert that there is a unified strategy on security. Attention has centered on bilateral relations, rather than on some “non-Western” approach to the world order. In economics, he notes that China has tried to put the accent on forcing a free trade zone and deep economic integration, which others are not prepared even to discuss, fearing being left as little more than a supplier to China. For Russia there is fear that the SCO would both displace the EEU as the main instrument of Eurasian integration and deprive Russia of the central role in this process. Only Kazakhstan backed this FTA idea, leaving China no option but to stress the BRI and acquiesce to no recent mention in SCO documents of an FTA. The SCO serves as a cover for bilateral and trilateral economic projects, camouflaging the economic dominance of China in the region but not altering it.

The 2015 Ufa declaration on the SCO in 2025 has been superseded by the expansion. If new members had been added from communist and post-communist states, the balance of forces in the SCO would hardly be changed. However, the entrance of India and Pakistan poses problems of a principally different order, radically shifting the geographic, demographic, strategic, and political balance, and bringing their bilateral strains to the table. This poses nightmarish problems beyond anything the SCO has seen. (The official languages of the SCO were Russian and Chinese, not English.) To this, he adds, Sino-Indian tensions will be in play. Thus, it will be significantly harder to find common ground on important strategic political, and economic problems. Kortunov alerts the readers that, with Iran and Afghanistan on the doorsteps of the organization, there will be more diverse interests and ambitions.

The opinion exists that Eurasia suffers from an institutional deficit in both development and security and any additional institutions should be welcome, with the SCO precisely the base for building similar to Europe in the 1970s. It is true, Kortunov argues, that Eurasia has yet to find itself as an autonomous region, given the fact that its different parts were in different geopolitical and civilizational configurations not long ago; however, he warns that there remain many lines of competition shaping the area, and it is not easy to foresee the SCO having a big chance of winning out. For instance, BRICS already has a bank, but the SCO does not. There is also parallelism between the CSTO and the SCO, but the former has the edge, even more so with India and Pakistan in the picture, and bilateralism is even more likely. Thus, Kortunov is skeptical of the SCO’s prospects, but he still sees in its weakness hope for addressing issues that otherwise would lead to conflict, proposing that new members be added to further the legitimation of the organization and fulfill a supplementary role in overall integration.

In RCMD on May 14 Georgy Toloraya wrote of the Eurasian project as a step toward a new system of global governance. He has in mind not Eurasian cooperation or identity but the challenge of concrete problems of economic proximity. For Russians, this is not integration, but cooperation of regions, ranging from connectivity to politically drawing closer. If China, India, and Russia can reach consensus over a joint strategy, a new world order is within reach with the BRICS playing an exceptional role. Toloraya says that Russia’s Greater Eurasia project and China’s BRI complement each other. So far, the alternative Japan-Indian Indo-Pacific project is not a competitive construct. Behind the Chinese project are more resources and political will. The Russian project is broader but amorphous, but important since the “new globalization” should not be an exclusive Chinese monopoly. To date, internationalization of economic ties in Eurasia has only been part of the process of globalization, led by the West under its rules and in accord with its interests since the alternative Soviet project failed. Toloraya argues that China and Russia, drawing on South, Central, and West Asia, are in a position to propose a new model of globalization. It is left unclear if India is the main target, Iran is unmentioned but likely a target, and East Asia is curiously omitted from this bold appeal for a new regional order.

Diplomacy over North Korea

Gevorg Mirzoian in RSMD on April 3 wrote optimistically about North-South relations, but much less so about US-DPRK relations. He stressed the high probability of agreement on reopening the Kaeseong industrial complex, reviving cultural exchanges, and reducing tension, and praised also the Kim-Xi summit for its agreement on reducing tensions in the face of the mounting US threat to use military force now that Pompeo and Bolton are Trump’s key go-betweens. The most advantageous outcome for the United States, argues Mirzoplan, is a North Korea that cannot deliver a blow to US territory but continue to regularly threaten South Korea and Japan with WMD, including nuclear weapons, as was the situation in the 2000s, i.e., a controlled threat offering a variety of bonuses to Washington—continuation of US bases, the chance to locate new weapons in the region, including missile defenses put there on the pretext of a North Korean threat. Naturally, all of this was aimed at China, as was Obama’s TPP intended not to boost free trade but to contain China. The problem now is such a “controlled threat” is no longer possible due to Kim’s long-range rockets. Kim is introducing market reforms and displaying his modern and westernized behavior, and he is ready to reject aggressive rhetoric with South Korea. This leaves Washington with two options; to bomb or to sit down for serious talks, despite the fact it has not made the strategic choice for them.

In his meeting with Xi, Kim took advantage of rising Sino-US tension to normalize relations with China and appears to have unofficially reduced sanctions, demonstrating his love of peace. This will reduce Trump’s leverage in the summit with Kim. The hardline talk of Pompeo and Bolton will reverberate in increased tensions between Seoul and Washington. Beijing neither desires war, which would force it to defend the DPRK or abandon it, nor diplomacy that reduces Kim’s dependence on China, preferring that all talks go through it. As for Moscow, it wishes success for both summits and reduced tensions, which would lead to a reduced US military presence in the region. It would also open the door to projects across the peninsula, welcomed in Seoul for lowering their cost for gas (beyond that of US shale gas too), and lead to improved transport to North Korea instead of often trading through China, stimulating the economy of the Russian Far East and a trans-continental railway reaching from East Asia to the European market. This is an optimistic assessment of the ongoing diplomacy despite the dark US shadow looming ahead.

On March 26 in Kommersant, Mikhail Korostnikov discussed Kim Jong-un’s visit to China and the planned visit of the North Korean foreign minister to Russia, presumably to restore diplomacy amid a growing threat of US attack as Trump was appointing officials desiring to do just that, especially John Bolton. Rather than the changes over the prior month being the focus, the late March decisions by Trump seen as raising the danger of a US attack are depicted as driving Kim to diplomacy, beginning with China. Korostnikov further explains the shift in Sino-DPRK relations to the newly passed US law on travel to Taiwan and the plan to impose tariffs on many Chinese exports to the United States in the vein of a trade war. This is leading China to reconsider its sanctions on North Korea. In this new diplomacy, North Korea has not forgotten Russia, planning the first meeting of foreign ministers since August 2017 in Southeast Asia, as Russia voted in favor of sanctions, evicted workers, closed bank ties, and sharply curtailed trade with North Korea. Now Pyongyang is trying to create the right climate for negotiations with the United States, arousing relevant countries to pressure Washington not to impose any preconditions on the talks. Mention is made of coordination between Moscow and Washington on the DPRK, such as in the fall of 2017 when Moscow was used for an exchange of messages. In a late March meeting in Pyongyang a Russian delegation discussed economic ties, including a pontoon bridge across the Tumen River. At present, Russians can reach the DPRK only by railroad, which traverses the border 3-4 times a day.

On May 11 in russiancouncil.ru, Kim’s second visit to China—this time to Dalian on May 8—drew attention from Vita Slivak. The visits sent a signal to Washington that Kim would not be sitting alone at the scheduled June 12 summit with Trump and that China’s influence in dealing with the North Korean crisis and in Pyongyang itself is colossal. Despite Trump’s view that the shift in relations with North Korea is a success of his “maximum pressure” policies, it is premature to evaluate his success. The article asserts that the odds are very high that the summit will fail or conclude without any substantive results. It points to the joint declaration of Xi and Kim for a gradual, synchronized resolution of the problem of denuclearization—a sharp contrast to what John Bolton says is the US position. On the very day that the Dalian summit occurred, the US side exited from the Iran agreement, raising the stakes for the Singapore summit and for taking a hardline position. Now Kim with Beijing’s support will find it easier to promise nothing more than a moratorium on nuclear test without offering a long-term guarantee. After all, Washington stuck to its Iran deal for only 2 ½ years. According to Slivak, the fact that there was no support for the US unilateral move on Iran weakens the US negotiating position toward North Korea. When Trump and Xi spoke after the Dalian summit, one side reported on the importance of keeping the pressure on the North until it decisively abandons its nuclear program, while the other asserted the necessity of a “step-by-step” resolution. Russians were well aware of the gap.

Sino-Indian Relations

In RSMD, Dmitrii Narkevskii on May 4 heralded the importance of the Xi-Modi summit on April 27-28, which was little noticed amid the hoopla over North Korea and Iran. This is huge for Russia, he observes, which is eager for the contradictions in that relationship, which had deepened economically, politically, and militarily over the prior year, only to be reduced. In the spring of 2017, India boycotted the BRI summit with its inclusion of a transport route through Pakistan-controlled Kashmir and its effort to draw India’s neighbors into China’s planned corridors. The Maldives political crisis, in which China was active, was another blow to India, as was the rental of a Sri Lankan port to China, which could turn into a Chinese naval base along with one in the Maldives. China’s active role in Bangladesh and Myanmar as well as participation in talks over Afghanistan raises fears of a blockade of India by its main geopolitical opponent. Finally, in the fall standoff in Bhutan, where armed conflict was narrowly averted, tensions came to a head.

India sought to demonstrate to China both its ability to forge international transport corridors and to display military and political ambitions. It showed China the alternative of an India-Iran-Afghanistan triangle, a north-south corridor with Russia and northern Europe, and naval exercises with Japan and the United States as well as military cooperation with Vietnam. Talk grew louder of an anti-China bloc with Australia, Japan, and India under the US aegis. The Sino-Indo split was not limited to territorial pretensions and economic projects. India seeks from China recognition of terrorist groups active in Kashmir on the territory of Pakistan. India and China are competitors in Afghanistan, a region strategically important to both. Nuclear weapons are another source of dispute. There were many obstacles to improving relations.

On the promising side is bilateral trade, which reached $84 billion in 2017, although India is concerned about a deficit of $52 billion even if it cannot do without more economic ties with China. India seeks exports of drugs, but the Chinese market is closed. India strives for agricultural exports, which a US trade war with China could facilitate. Meanwhile, Trump is eying the US trade imbalance with India of more than $20 billion, seeking an end to tariffs on motorcycles among other demands. India is also badly hit by Trump’s war on H-1B visas, putting it on China’s side in defense of globalization and WTO rules in world trade.

The article suggests that the SCO can serve as a platform for new Sino-Indian dialogue, for which Modi and Xi will meet again in Qingdao in June. If Modi can capitalize on progress with China, it will help in domestic elections. For Russia normalization of Indo-Chinese relations should be an important goal, to breathe new life into Russia’s turn to the East, about which much less has been heard of late. Russia is trying to broaden energy cooperation and is holding onto positions on nuclear reactor exports against powerful competitors. Its ties with China are advancing well, but with India, which is gradually leaning toward the United States, relations are somewhat different. Washington is taking advantage of the Sino-Indian tensions, and Russia cannot offer India economic cooperation—new technology, new markets—on the desired scale. US arms sales are rising. Political, economic, and cultural ties with India are attenuating in comparison to India’s ties to Russia’s rivals. Yet, India does not join anti-Russian sanctions or yield to Western pressure. If one adds to the conclusion that exclusive orientation by Moscow to Beijing is not in India’s interest, but if that happens when Indo-Chinese contradictions are escalating, trust in Moscow could be badly hurt, while Western states would be eager to take Russia’s place with India. BRICS and SCO are Russian priorities, and India is a potential partner in the EEU. So then why is Russia ignoring the Modi visit to Xi? In the absence of real friends in the West, it is important for Russia to have even neutral partners in the East, the article concludes.

Indo-Pacific Region

In carnegie.ru on March 22 Anton Tsvetov wrote about the Indo-Pacific front as a new region and its impact on Russia. This mega-region arose just when Russia was pursuing its eastern strategy together with the EEU partners and coopting China’s BRI with its Greater Eurasia initiative. The new idea leans to the south, known as the “free and open Indo-Pacific” strategy, while Russia’s theme leans to the north. How might this alter Russia’s strategy, asks Tsvetov.

If the idea, raised under Abe a decade ago, was not aimed at containment of China, it was at least seen as a counterweight. Abe revived the idea of the Quad when he returned to office. As China’s military rise has proceeded, there was talk of balancing it, taking shape at the end of 2017 and the beginning of 2018. As Abe took the lead, Australia strove to balance its economic dependence on China with regional rules of the game, India reached a deciding point to join in the maneuvering over the western Pacific, and Trump, after being criticized for having no Asia strategy, embraced this idea. Now this idea can have a real impact on the dynamics of the region. It signals that China is not the only rising power in the Indo-Pacific; as US officials have argued, India needs to play that role, too.

The Quad will be built not on values but on interests and will have a flexible structure. It will be buttressed by a circle of regional partners, including Vietnam. No mention is made of the fact that Russia’s Asian policy has singled out Vietnam as well as India as key partners. ASEAN’s centrality in security would be weakened. Security is not the only objective; cooperation on infrastructure as an alternative to BRI is sought, too. Yet, the article acknowledges there are not yet concrete features of the Quad, and no high-level meeting has occurred. Four admirals met, but without a common understanding. Still, it may be inevitable that further meetings lie ahead with the prospect that Australia will be added to the trilateral Malabar exercises as India’s position becomes less cautious.

For Russia this means that the sea will become the main arena of competition in greater Asia, refocusing the attention of the United States and China to the Indian Ocean and giving Russia more freedom in the central part of Eurasia. That Russia is not a key player in this competition could be an advantage since Russia does not have the spare resources for this competition. However, a fresh blow to a multilateral system of security in Asia is bad news for Russia, as Russia wanted ASEAN to be strong and no system of “smart containment” of China to develop, and it could be marginalized. Concern is shown for India’s role in the Quad damaging its ties to Russia, but hope is also expressed for Japan playing a stronger role and lifting its strategic autonomy as an opening for Russia. China’s negative reaction could lead it to “operations of influence” to boost its position. The pull to the south in Asia counters Russia’s effort to pull countries to the north, leaving Russia without clarity on its role in the future region. The article concludes with a prediction that the Indo-Pacific process is inevitable in including India and that Russia must exert its diplomatic prowess to defend a multilateral system of security, which it is not prepared to do.

Sino-US Relations

An article by Alexander Gabuev and Sergei Polovinets in carnegie.ru on April 17 discussed Sino-US relations as a trade war appeared imminent. They indicate that both sides would lose. Russia suffers from sanctions, but it has almost no economic leverage on the United States and China does not view it as a big ally on trade and would proceed on its own. The US pretensions versus China are not just economic; they include visits to Taiwan. The authors see the United States and the West acting ideologically in foreign policy to China, driven by democratization, while China talks of a “community of common destiny,” but without concrete ideas. It is following the path any great power would take in using force and economic pressure and establishing military bases. It is naïve to believe that China would be a peace-living panda that would resolve territorial disputes with neighbors through peaceful diplomacy—without economic pressure. Its sanctions against South Korea are proof, as are its struggle for influence in the Himalayas in India and its offers of credit under tough conditions to countries in the Indian Ocean. This is the way China operates in Central Asia, too. Yet, the two authors conclude that China is not driven by ideology, which is a stabilizing factor.

 

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