Country Report: Russia (September 2018)

Editorial Staff (with the assistance of Olga Puzanova)

More than bilateral relations, the big picture interested Russian writers as the summer drew to a close. The prevalent assumption was that the West is in rapid decline and a new world order of some kind is just over the horizon. The positive forces for that include Putin’s assertive foreign policy, China’s rise and close relationship with Russia, and North Korea’s demands for how to resolve the problems on the Korean Peninsula. The notion that Russia is now in a favorable position in Asia was supported by satisfaction that countries are stepping up diplomacy with it because of their uncertain US ties and Russia’s promise for their national interests. Yet, there was palpable concern about how to capitalize on the new opportunities: double down on close ties to China, develop a more autonomous project for Russia’s ascent in Asia, seize the chance offered by North Korea, or search for some other path. Little notice was given to the old idea that Russia could revive ties with the West and become a balancer in East-West or Sino-US ties. Many accepted the conclusion that the world is entering a new cold war with Russia firmly on China’s side, fully capable of managing Western sanctions and gaining acceptance in the East.

Coverage of China is abbreviated below owing to the decision to include a separate article on the Russian debate about China in the Open Forum of this issue. Coverage of Japan is scant, given pessimism about any agreement ahead although Abe is not criticized as he continues to pursue Putin. Rather than discrete bilateral relations apart from those with China, broader frameworks predominate. The exception evident in the writings on China covered separately is the narrow focus taken by those raising concerns about expectations not being met in China-Russia ties.

The Korean Peninsula

Aleksandr Zhebin on September 16 in Nezavisimaya Gazeta previewed the September 18 third meeting of Kim Jong-un and Moon Jae-in. Family reunions, sports cooperation, the opening of a joint office in Kaesong, and even military contacts have already developed. Nonetheless, Zhebin is doubtful, blaming the South for closing off projects in 2008 and warning that there has been no real progress on denuclearization in the two previous summits and between Kim and Trump, despite the initial euphoria. An argument is proceeding over which of two problems should be resolved first: denuclearization as the United States demands or synchronized movement on all tracks, which the North would accept. This is relevant to inter-Korean relations since Seoul must always look over its shoulder at its ally, which is obstructing their relations. In one case, the so-called UN command in Korea refused to let a train with a joint group of North and South specialists conduct an inspection of the railroad line between Seoul and Sinuiju, despite Moon’s August 15 designation of linking the railway one of the main parts of his plan for a united Korean economic community. Another case saw a delay in opening the Kaesong office in August until the North Koreans assured the visiting South Korean officials in early September of their commitment to denuclearization. Zhebin calls Seoul’s dependence on the United States unfortunate, charging that only through change in the existing UN sanctions resolutions can the harsh measures be relaxed, but Washington refuses to permit this. This refusal complicates trade, investment, and cultural, humanitarian, and sports exchanges, as do the one-sided sanctions of the United States, Japan, the EU, and South Korea. Opponents of normalization of relations with Pyongyang (who, according to Zhebin, call for making denuclearization a condition) are present in the National Assembly and remain very influential in the academic community, from which many top officials have been chosen. Calling the Asan Institute rightist and influential, Zhebin says it seeks only one goal in this summit: to get Kim Jong-un to state North Korea’s return to the nuclear non-proliferation treaty, leaving the rest secondary. He also blames Seoul for increasing its military budget by a record amount through the past decade—a bad signal to Pyongyang—while saying nothing about what the latter has done to reduce its military build-up. All of the burden is put on Seoul’s side to meet Pyongyang’s demands in this publication.

On July 10 Oleg Kur’ianov wrote in Rossiiskaya Gazeta on the battle for the future of North Korea between China and South Korea, each eager to restore ties for both economic gain and geopolitical aims. Their interests often do not correspond as they seek to shape the path of North Korea’s development, and Pyongyang seeks to exploit their competition. Having won the right to inspect North Korea’s railways, including to China’s border (which may allow gathering very strategic information), and to study conditions on two roadways, the South seemed to have the edge. However, the North proceeded to make secret plans with China, where Xi Jinping has allegedly offered to build an entirely different highway from Sinuiju to Kaesong and develop four special economic zones in Pyongyang, Wonsan, Sinuiju, and Rajin. Within days, China resumed work on a border bridge by Tumen, which had begun two years earlier. The article describes a game of trying to get Beijing and Seoul to bid on the same objectives, which soon will turn into the “battle for North Korea,” involving railways, roads, economic zones, and factories. As for obstacles, some in South Korea do not want to pay the enormous money required to develop the North, and sanctions stand in the way. Russia, the article adds, could develop its current project of the Khasan-Rajin link with both Seoul and Beijing, avoiding their competition, and also seek help from both on electricity lines and other projects. This piece appears to welcome competition as giving Russia an opening.

On September 20 in Kommersant’, coverage of the Korean summit was positive, but it noted that nothing was said about denuclearization, while concluding that Kim Jong-un’s main aim is to expose the unsustainability of US maximum pressure. Thus, the summit was only of symbolic significance, Mikhail Korostikov writes. For Russia the plan to connect the railways in the North and South into one network by year’s end has promise, given that Russia already has built a link from Khasan to Rajin, where in 2014 Russian coal began to be sent to ports in Asia and hopes were in place to move South Korean goods to Europe through this route. But the summit plan is just a psychological operation aimed at Americans, giving an impression of progress on disarmament as the North seeks to create an atmosphere to deprive the hardliners in the United States of their arguments.

The prevailing message in writings about North Korea is that the obstacle to the resolution of the crisis over nuclear weapons is the United States and its pressure on South Korea, limiting what the Moon administration can accomplish. The problem is framed in Cold War terms as a hegemon unwilling to give space to an ally to work out a pragmatic outcome because of its ulterior motives. Russia and China are on the same side, while Russia has agency with its ties to both Pyongyang and Seoul, plans for economic integration positive for both, and important diplomatic role. The denuclearization issue is almost an afterthought, automatically to be settled as a process unfolds.

Southeast Asia

In Mezhdunarodnaya Zhizn’ Aleksei Sinitsyn wrote about the integration of Russia with ASEAN, insisting that Russia is actively engaged in integration in the Asia-Pacific region, pointing to both political and economic ties. ASEAN is said to welcome it for a balance of forces, which is linked to Russia’s political interest in reducing the US military presence. Yet, only 1.9 percent of Russia’s exports go to the ASEAN states, falling in value to just $5.5 billion in 2016, including to the two largest markets, Singapore and Vietnam. The article claims significant local interest in Russia’s high-tech achievements, while also calling for measures to make ASEAN personnel aware of them. More serious is discussion of interest in arms exports. Concern is raised about insufficient information in the region about business in Russia, the difficulty of finding niches for Russian companies in a highly competitive region, and local producers squeezing out Russia goods, such as fertilizer. To counter that, the author calls for free trade zones, such as the one the EEU has created with Vietnam. Note is taken of an ever more severe political climate, at the base of which is the neo-liberal model of globalization imposed by the United States. While the article is upbeat about more dialogue, the overall tone is pessimistic with scant evidence of real progress in ties to ASEAN amid dire warnings about regional troubles. This falls short of a forthright account of Southeast Asian attitudes toward power balancing and Sino-Russian relations.

BRICS

Evgenii Astakhov in Mezhdunarodnaya Zhizn’ discusses the fact that BRICS stays together despite its diversity. Insisting that a unipolar model cannot manage global governance and is gradually exhausting its resources and exposing the dollar as serving only the interests of the United States, he asserts that the demand is growing for forging a new world order based on what he calls democratic international economic relations—an alternative the BRICS offers. Yet, he points to skepticism in Russia’s political and economic elite as well as academic circles, noting the diversity within BRICS in economic development, foreign policy orientation, cultural and civilizational identity, religion, and mentality. They doubt its potential as an alternative project for world order or for threatening relations with the West. As the United States has begun to take BRICS seriously, it has worked, above all on India and Brazil to weaken their interest, focusing on the potential for a deepening conflict between India with China and Pakistan and trying to weaken its military cooperation with Russia. Astakhov charges that pro-Western voices inside Russia see BRICS as countries lagging behind the West, treating even Russia as a nation with a lower civilizational status, and adding that these states will require a long time to become economically competitive, as they lack the weight to pretend to an autonomous international course.

Along with these rightist critiques, there are leftist ones that BRICS is not now up to the task; its most influential members quarrel between themselves, and there are no strategic objectives. Yet, the author proceeds to make the affirmative case for BRICS as a union of developing countries advancing a new approach, as a response to a world economic system in serious crisis, as a force for all countries to defend their sovereignty and civilizational identity, and as a necessary format of dialogue, which, as the SCO, can be valued for excluding the United States. One favorable circumstance is sanctions on China that make it ready to reduce use of the dollar as it reduces its dependence on the United States. Talk is shifting to “BRICS plus,” drawing other states into joint projects. As for individual cases, Brazil is cutting back its commitment and has political uncertainty that matters, India is drawing closer to the United States despite being closer to China and Russia on many international problems, and China is cautious while using BRICS to penetrate markets, even as Trump is shattering its illusions about economic cooperation. The article suggests that Russia is the most energetic participant in BRICS with the most ambitious agenda but is forced to take small steps and avoid touching on specific interests of the other states. It is the “intellectual catalyst” for the development of BRICS; however, China, above all, responds without much enthusiasm, recognizing that there are no financial resources behind the aspiring ideas.

This expose of BRICS, while repeating the positive arguments for it, is far-reaching. Claims for the success of BRICS have been critical to Russian thinking for a number of years, but rarely have readers been told that Brazil and India are not fully committed, and China is lukewarm. If this cornerstone of a new world order is a Russian pipedream, what else must readers be asking?

Asiatic Russia

In Rossiya v Global’noi Politike on September 13 Igor’ Makarov asked about the future of the Far East and Siberia, calling on Russia to adjust to changes in the place of natural resources in the global economy. He calls the area the priority development for Russia in the 21st century and the potential motor for the Russian economy, but he warns that it is not meeting expectations, given the shifting socio-economic model of China and the changing character of globalization and of technology. The region’s future depends on an innovative resource economy, a combination of natural riches and quality human capital as well as closeness to Asian markets. But realizing its potential depends on informed policies, an open region to the outside world, and maximum flexibility in socio-demographic development across a wide space. Russia’s turn to the East is widely seen as beginning with Putin’s pre-election appeals in 2012. Catching the “Chinese wind” was not something new; other countries had been doing so for many years, and Russia remains way behind. What makes Russia distinctive is the linkage to plans for internal transformation of its Asian areas; as long as they remain a periphery, the turn to Asia cannot succeed. For the past five years, attention has focused on the Russian Far East, leading to its growth rate exceeding that of the average in the country and speeding its exit from crisis, but not accelerating its growth or improving living standards, as people have continued to leave the area.

Makarov writes of unprecedentedly warm relations with the leading countries of East Asia that contribute to memoranda but not to investments. Locals are reacting to Moscow’s initiatives with skepticism, expecting that after 7-8 years the new attention shown to their region will prove just as inconsequential as earlier programs, while federal officials blame the localities. A recent shift in rhetoric from “turn to the East” to “Greater Eurasia” redirects attention to Siberia, where the people also doubt the center’s appreciations for their area’s potential. Other countries have been adjusting to new conditions, China is losing some of its advantages, and Russia no longer can count on extracted energy to spur its economy. Yet, China is gradually turning to the west and seeks integration through the BRI, other natural resources (fresh water, lumber, fish, arable land) in which Asia is lacking are newly important, Russia’s labor force is cheap due to the devalued ruble and slow growth, and zones for innovative use of natural resources could be established. In this critique of what Russia has done, the author still finds promise in its current potential.  

The author faults Russia for inexplicably ignoring the trend to integrate high technology into the resource sector, such as genetically modified crops and robots to replace a work force. Warning that Russia is slow to react to the structural transformation of China, as it was slow in using the gains from its rapidly developing economy, Makarov argues that this favors Siberia over the Russian Far East, since it is closer to the new centers of economic activity. He points to projects under discussion, such as the “Power of Siberia-2” that could deliver natural gas, as well as foods drawing on Russian agriculture and fishing, ecotourism, and the relocation of energy-intensive Chinese industries viewed in China as dirty. In addition, the southern Primorskii krai could take Japanese and Korean components and rework them for the Chinese market, as Southeast Asia now does, given the proximity and superior high-quality human capital in Russia, it is asserted.

While Moscow is laying the groundwork for accelerated development, outside interest is dulled by the small population (6.2 million) and undeveloped infrastructure. If Russian companies need to look for markets abroad, Russia’s markets must also be opened in place of the current attitude to protect national production, which means resolving ministerial in-fighting that now stands in the way. This poses a challenge for the EEU, too, which only participates in FTAs with Vietnam and possibly Singapore and India. Makarov bemoans the impact of the tariff barriers in China, Japan, and South Korea, while arguing that Russia is shut out of production networks due to its tariff barriers that make components going back and forth across borders problematic. He says Russia’s elite is afraid of liberalized international trade, especially with China despite its promise as most attractive for Russian business. As a result, the EEU had failed to agree to reduce trade barriers, but the risks are reduced with weak ruble and China transferring production abroad. In place of memoranda on intentions, it is much more important to conduct routine work in support of small and medium enterprise exports and to improve mechanisms of credit and insurance for exports. In May Putin took a step in this direction with his order on the development of non-resource exports, but removing administrative barriers remains a challenge. With openness will come a widening of differences among Russian administrative areas—the government should offer some help to the losers as at present and should accept greater mobility and concentration of the labor force, as other states do, rather than the very low mobility now occurring. In short, the article charges that Russia’s model of economic development is at a dead end and appeals for more openness, notably to China. As others proclaim Russia’s successes in its turn to the East, Makarov addresses its shortcomings and pleas for economic reforms that have long been sought.

Leonid Blakher on September 13 in Rossiya v Global’noi Politike asked about the turn to the East or the Eurasian project, questioning the assumption that Russia must join some global project, whether in the 1990s the US-led path of “all civilized nations” by totally abandoning the legacy of the USSR, or in the 2010s, turning to the East through transforming the Russian Far East as an instrument of integration. Yet, many components of the turn to the East remained in embryo and residents elsewhere in Russia felt diminished and even those in the Far East felt out of the loop as opportunism spread. The essence of this was also to join a global project—in this case leaving the bulk of Russia on the sidelines as just a narrow circle of thinkers speculated on Pacific Russia. Lately, as rising pressure from the West drove Russia into opposition, talk has shifted to joining what, in essence, is the Chinese BRI project. Yet, Russia can work out its own variant of Eurasian integration, taking advantage of a vacuum in Northeast Asia as the United States changes policy and all players intensify relations with Russia for their own interests. The Soviet legacy keeps Russian influence high in Mongolia and Central Asia, where China is to be kept at a distance and both migrant labor and the Russian diaspora keep ties close. An opening exists—demographically, culturally, and economically—for Russia to increase its influence. This is an appeal to push back against China’s growing clout inside Russia and nearby, which morphs into talk of the Northern Sea Route as the source of resources to fuel Russia-centered integration.

Blakher distinguishes different far easts in Russia, while warning of problems in the regional project. There is the southern flank with all of the big cities, 70 percent of the population, and a record of economic integration with Northeast China and the Korean Peninsula, although it was artificially separated from its neighbors from the 1930s and made into a fortress after the end of the Cold War when border trade prevailed without big investments in infrastructure, especially in the second far east to the north where resources are more abundant. A third far east is the northern part of the Pacific coast, where maritime bioresources abound but there is no way to market them. Given the imbalance in transit, whereby trains heading back to central Russia are not full, ports and icebreakers need to be prioritized. The vast expenses needed can be found, readers are told, if a project is formulated and understood. The key is turning to Asian countries to develop the north as the northern sea route develops and to concentrate on Asian markets such as South Korea, Japan, and the ASEAN states with Vladivostok as the lead gateway. Northeast China would welcome linking with the Trans-Siberian railway through Khabarovsk rather than going through Kazakhstan. To proceed along these lines, the author calls for intensifying contacts with Asian nations and recognizing Asia not through phobias about migration, but as Russia returning home to where it belongs.

Eastern Economic Forum

On September 10 Andrei Chernov in Izvestia lauded the investments headed Russia’s way through the EEF, heralding Putin’s June visit to China for a breakthrough in how financing operates in bilateral relations backed by 65 billion yuan and linked to BRI. A list of 70 projects is designated for joint financing, including the Northern Sea Route. Also noted are a railway bridge in Amur, the airport in Khabarovsk, as well as more transport projects ahead. China is keen on linkages to Europe, most of which pass through Russia, which are alleged to give Russia more exports, workplaces, and taxes, even as world trade declines due to protectionism with an impact on Russia’s economy (though trade with China will partially compensate for that). Russia benefits both from the BRI and the Sino-US trade war. Sanctions and cheaper ruble helped to boost Sino-Russian trade by 27 percent in 2017 to $86 billion. Putin announced plans to boost exports of non-natural resources by 2024, and China is the main target, with $7.3 billion exported in the first half of 2018. Confidence is expressed in banking to speed exports eastward. This article doubles down on China’s economic ties to Russia, showcasing the Sino-Russian ties at the EEF.

On September 11 in Izvestia Galina Volynets anticipated the distinguished guests and trillions in contracts from the EEF. Praise is offered to Abe for regularly visiting Russia, including the St. Petersburg economic forum as well as the Vladivostok one, which has led to a jump in bilateral trade of 14 percent in 2017 and another 20 percent in the first half of 2018. Along with Xi Jinping, the heads of the biggest Chinese companies under central direction are attending, cementing a leap in economic relations already visible in 2018, including in investment in the Russian Far East, the article reported. Citing the building of a bridge between Blagoveshchensk and Heihe (without noting that it had been delayed over 20 years by Russia) and indicating that the Russian side intends to raise the question of a railroad bridge to complement it, Volynets praised the prospects for trade with China in Amur oblast. It also noted $4 billion in trade between Sakhalin oblast and Japan without mentioning that energy exports predominate. Putin has lauded what had been accomplished in the Russian Far East since it was prioritized in 2013, but the article briefly raised concern about the continued outflow of people. It proceeded to list other Russian regions with their want lists and planned signings with foreign partners at the EEF along with various Russian companies. Almost all is smooth sailing if one relies on this upbeat account. On September 11 RIA Novosti also greeted the opening of the fourth EEF, noting the seven bilateral business dialogues and highlighting lots of events with no concerns raised.

The coverage of the EEF showcased boosterism, as in previous years, with few hints of the real concerns weighing heavily in the background: little confidence that the diplomacy over North Korea will turn out well due to skepticism about the United States; disappointment that Abe will not just abandon Japan’s longstanding position on a peace treaty without any suggestion of what should be offered to reach a compromise; the emptiness of boasts about Greater Eurasia and BRICS as Russia’s ties to India and ASEAN have not evolved as promised; and the discrepancy between assertions of equal Sino-Russian relations and worry about the balance shifting heavily to the Chinese side and the dearth of benefits to the Russian Far East and Russian industry from ties.

On September 12, RIA Novosti asked why Japan is rejecting Putin’s proposal of peace. Pretending that Putin has agreed to something new—rather than this is the old Russian line in its rawest form—the article notes that the Kurile Islands peaked in the 1980s at 30,000 residents and now there is a program to build lots of housing, schools, and factories there, but the target is 2025. Khrushchev was willing to transfer two islands if Japan chose neutrality, readers are told, but under US pressure, it resisted. Yet, later in the article, the fact that Russia has long proposed a peace treaty without preconditions and that agreeing to that would be suicide for Abe is noted. Mention is made of Abe’s enthusiasm for better relations with Russia and of initiatives useful for Russia’s economy, but it is revealed that cooperation on some areas has been halted by Russian bureaucracy. Despite talk of joint projects on the Southern Kuriles, nothing has succeeded, the article asserts, since Japan insists on extraterritoriality and putting in place a Trojan horse that would improve local conditions and lead people to seek transfer of sovereignty. Ambassador Panov is quoted as saying that signing a treaty first would improve ties and then the territorial issue could be addressed, as happened with China. Yet, he says nothing about Abe’s efforts to improve ties since 2012, implying that different types of steps are required, which may lead some to think that the old demand for neutrality is still on Russian minds.

 

#BRI #BRICS #EEF #Khasan-Rajin railway #Power of Siberia-2 #Russian Far East #Southern Kuriles