Country Report: Russia (September 2015)

On August 23 in Rossiiskaia Gazeta, Foreign Minister Sergei Lavrov wrote about the significance of the seventieth anniversary of war’s end for relations with China. Linking the struggle against Naziism and Japanese militarism, he spoke proudly of the precedent of mobilizing all forces in each of these nations. He praised the Soviet Union too as the only state that came to China’s aid in the aftermath of Japan’s 1931 and 1937 aggression and as the liberator of Northeast China as well as Korea after Japan had refused to capitulate. No mention is made of communist connections, complications from the Guomindang leading the fight versus Japan, and the substantial role of the United States. This one-sided history omits the Sino-Soviet split era when clashing views were being aired of how ties had unfolded in the 1930s-1940s. Instead, the theme is joint opposition to falsifications of the war, which defame both nations (as if national identity rests on this source of pride) and rattle the foundation of the contemporary world order (as if views of history are manifest in military threats to the fruits of victory—by the United States and Japan). Joint military exercises were heralded by Lavrov as of great significance in responding to recent US aggression of various kinds over many years. Lavrov also attaches great significance to the 2015 upgrading in bilateral relations, leaving no doubt that Russia is putting all of its hopes on China, while failing even as late as the end of August to acknowledge how little benefit it was actually getting at a time China was hurting economically and seeking a quieter diplomatic environment. This desperate effort to ride China’s coattails over both history and the future came amid signs of new sober thinking.

Despite signs of increased trouble for Russia, authors also stuck to the optimistic script. Sergei Karaganov on August 24 in Rossiia v global’noi politike wrote about Eurasia as the way out from the European crisis. Arguing that Europe needs Russia as a cultural anchor and a source of realism in the face of Europe’s illusions, he contrasts the postwar world, which is gone, with the threat of strategic degradation facing Europe today—a repeat of military and political divisions into opposing blocs accompanied by escalation of the conflict around Ukraine against the background of the end of the 500-year domination by Europe on the global arena. After a brief unipolar moment, an era of nationalistic states means the return of old geopolitics, which Karaganov calls “deglobalization” or another type of globalization. The World Trade Organization (WTO) is at a dead-end, the world is collapsing into blocs struggling with each other over non-tariff barriers, and the West is resorting to “economics as a weapon of mass destruction,” altering the rules with sanctions because it was losing. The United States is causing zones of instability and crisis—on the eastern perimeter of China, in the Arab east, and in Ukraine, Karaganov insists, and both parts of Europe are now searching for a new spiritual and geopolitical identity. Russia is in the lead as it moves from exclusive European culture toward Eurasianism. He sees new macro-blocs for the twenty-first century; one around the United States with Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP); and the other led by China, but not under its hegemony, including Russia, India, Kazakhstan, Iran, and other states. The latter received a big boost in May 2015 with the Sino-Russian agreement to link the Eurasian Economic Union (EEU) to the Silk Road Economic Belt, Karaganov argues, adding that hope is not lost for Russia also to become the link between the “greater” Eurasia and “little” Europe projects for economic integration. He implies that Russia has found its place, and Europe, being in a weaker position, needs to finds its place. The source of trouble is that the West decided to widen its sphere of influence and control, excluding Russia, limiting its markets, rejecting its “buffer of security” (which it had secured through the previous centuries), and often trying to impose post-European values. This is not so much a Ukrainian crisis as an all-European crisis, he concludes, doubling down on the narrative of Russia winning.

Having been late in its economic turn to the East, Russia is accelerating it as a result of the crisis in relations with the West and extending it to political and possibly also social and civilizational ties, Karaganov adds, arguing that Asia no longer represents backwardness, Europe with slower development and abandonment of its principles has lost its magnetism. For Karaganov, Europe needs Russia as a cultural anchor:

Noting that another bloc will form in Latin America, escaping from US hegemony, Karaganov concentrates on the Eurasian bloc, including South Korea and Pakistan and, ahead, Israel and Turkey too, while ASEAN is split between the US and Chinese led blocs, and Japan, for now, is with the United States. This framework gives Russia a formative role, leading the European Economic Community (EEC) and joining with China in its May manifesto as well as strengthening the Shanghai Cooperation Organization (SCO) and plans for currency and transport infrastructure. The idea is that after cooperation widens between the EEC and China’s Silk Road, only then can the European Commission and EEC find common ground. This call for a new world order is based on an exaggerated notion of China’s capacity to draw much of Asia behind it with no regard for divisions within Asia, on Russia’s ability to follow in China’s wake with no regard for conditions that disqualify Russia, and on utter disregard for the continued appeal of the United States and of the West in comparison to China. There is no notice given to recently worsening conditions for China as well as for Russia.

Governor of Zabaikal’skii krai, Konstantin Il’kovskii, on August 25 in Rossiia v global’noi politike wrote about how to prepare cadres for Eurasian infrastructure in light of the May summit agreement on uniting the Russian and Chinese Eurasian projects. He mentions that some calculate that China’s economic belt initiative will take about 30 years to realize, which China is preparing to finance, and involves as many as seven belts: transport, energy, trade, information, science and technology, agriculture, and tourism. They will lead, he adds, to a massive free trade zone from the northwestern provinces of China through Central Asia to Central and Eastern Europe. Intended to solve internal problems in China and accelerate development of its western region as production and logistics are transferred there from coastal regions, this has resulted in sub-regional plans within the overall belt. Specifically, Il’kovskii mentions an early 2015 plan of Harbin, joining Heilongjiang to Mongolia and Russia, involving establishing a “northern belt of openness” along the borders. Serving these objectives will be scientific and educational clusters in four Chinese provinces—also Jilin, Inner Mongolia, and Xinjiang. In response, the governor calls for Russian Chinese studies to meet the challenge beyond existing centers focusing on political and military expertise, which he reports fall behind the United States by 300 times and the European Union by 120 times in training experts. He criticizes fragmentation of various types in Chinese studies and also various problems of expertise in the Foreign Ministry (narrow specialization, formalized analysis, gaps in competence, a narrow circle of sources of information, and exodus of young cadres); in intelligence and security (a generational gap, outdated expertise due to denying the analysts a chance to leave Russia, limitation due to the characteristics of the operatives); in big business (due to the absence of analytical centers and the narrowness of expertise); and in education (due to a deficit in research and teaching staff with specializations such as energy, finance, and law, and to the low level of teaching Chinese). Noting that the People’s Republic of China (PRC) is paying a lot of attention to the development of China experts in every sector of the government in order for a positive image of the PRC to form, he reports that the absence of a program to develop Chinese studies in Russia is seen by it as a barrier to cooperation. Uniting the EEU and Silk Road Economic Belt will build a firm foundation for “transferring” culture and technology, requiring “sinology” in Russia and in Central Asia, the governor adds. A big factor will be the movement of labor for large infrastructure projects, each of which demands hundreds of thousands of workers. It is clear that China is expected to provide technology, infrastructure, and finance, but, left vague, masses of labor too. Il’kovskii’s concern is that Russia be able to provide technical experts prepared to work with these China’s resources in order, presumably, not to be altogether marginalized. Since Moscow and Saint Petersburg mainly train political, diplomatic, and military specialists, he appeals for Irkutsk in the Zabaikal’ region and Vladivostok in Primor’e, already centers of Chinese studies and of exchanges with Chinese institutions, to be designated centers of Chinese studies of a new type. Thus, he links local empowerment to problems in the field of Chinese studies and prospects for a far-reaching upsurge in Sino-Russian relations.

In Mezhdunarodnaia zhizn’, September 5, Vladimir Petrovskii wrote about the dilemma of integration in the Asia-Pacific in today’s geo-economic and geopolitical context. Arguing that integration is on the threshold of deep, qualitative changes, as seen in the November 2014 APEC meeting in Beijing, where a free trade agreement (FTA) of the Asia-Pacific was showcased to build on Regional Comprehensive Economic Partnership (RCEP) and TPP, Petrovskii insists that, given China’s state protectionism for many sectors and preoccupation with growth and jobs, it would not find TPP acceptable, while it also suspects that the real aim is to establish a trade bloc to exclude China from the integrationist process in Asia. In turn, Putin has expressed concern of a divide harmful to the WTO and, presumably, to Russia’s interests. The article asks if Russia should form its own group with the EEU or try to join one of the two taking shape, while calling for sober evaluation of its own capabilities. Adding that Washington is driven by geopolitical and geo-economic goals that cannot help but arouse concern in Beijing, he quotes Chinese sources that view TPP as an economic weapon against their country and contrasts China’s official position in favor of any liberalization of trade with its actual strategy, recommending that Moscow consider a similar strategy. One move is to strengthen ties outside the region, including BRICS and the Silk Road Economic Belt. Another is to proceed with an FTA of China, Japan, and South Korea. A third is to prepare at a convenient time to join in talks for TPP, while, fourth developing export enterprises capable of competing, and, fifth, acting in accord with changes in the world to be competitive. Russia, Petrovskii acknowledges, is not able to copy China, as reflected in tariff and non-tariff barriers that prevent it from entering TPP talks. Rather than TPP, Russia is seeking talks with RCEP and to link the socio-economic development of Eastern Siberia and the Russian Far East as well as the EEU to the institutions of development being launched by China, such as the Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund. In contrast to international agencies in which the United States essentially has a veto, China has promised not to have one in the AIIB, he adds. The article concludes that Russia cannot stand aloof from the integrating forces and praises what it is doing with optimism about its prospects. Yet, it completely omits any discussion of what Russia’s economy has to offer and how the recent sharp drop in commodity prices complicates Russia’s path forward. This reflects the confusion over how to proceed.

The tone is list optimistic in some other recent articles, acknowledging troubles. In Rossiia v global’noi politike of August 24, Viktor Larin warned that Russia should not lose its direction in its geopolitical coordinates toward the East. Geographically and politically, he finds the concept of the “East” of Russia’s leaders muddled. For one and a half decades already, Russia has sought a combination of integration with the Asia-Pacific region, turning to the East, and socio-economic development of the Russian Far East and Zabaikal’, he observes. Yet, he finds that the results have been minimal. Difficulties result not only from clashing interests and many problems in bilateral relations, but also from the system of geopolitical coordinates being used. Larin prefers to focus on the Northern Pacific. He criticizes the absence of ideology for the latest reincarnation of the term “turn to the East.” Is the East a geographical or civilizational concept? Is this the Far East? Which eastern religions are indicated? How is the West contrasted with it? Larin further wonders what to make of the uncomfortable atmosphere for political integration with the mix of China, North Korea, Vietnam, and India, with which bilateral relations are being intensified, given the tensions among them. Optimists equate “turn to the East” with Russia’s refocus on the Asia-Pacific region; others see a fundamental change in Russia’s relations with its Asian partners or a more active Russian role, while still others equate the term with Russia’s China policy. Yet, Larin points to skeptics who see little more than political rhetoric that is not backed by serious interest, while Asians who still recall the colonialist policies of Russia in Manchuria and the Soviet Union’s export of revolution and communism to Asia have been left with psychological, ideological barriers to accepting Russia, which leaves it with no option but to be a junior partner of China, which poses a serious psychological barrier for the Kremlin. In the midst of rising talk of “Asia for the Asians,” notably Xi Jinping’s remarks, few think that Russia is included. Focusing more narrowly on Northeast Asia, Larin reminds readers that after 25 years of talk of forming a regional community, contradictions have deepened. Factors of disintegration prevail over those of integration, amid an unprecedented rise in nationalism as the integrative force of China’s economic rise is trumped by mutual suspicions, distrust, and historical contradictions and a sense of being offended. As China’s growth slows, Japan’s population ages, and prospects for North Korea look grim (with today’s cooperation in dealing with it unlikely to last), the regional outlook grows more complicated. Peripheral areas such as the Russian Far East, North Korea, and parts of Japan far from the national center, i.e., what were once seen as the building blocs of Northeast Asian regionalism, are now not receiving special attention. Larin concludes that Moscow is thinking more about the Asia-Pacific region, not Northeast Asia, as if Russia can somehow find a place in this broad abstraction and as if it really understands what “integration” requires.

Larin prefers “Northern Pacific” inclusive of Canada as the focus of Russian concern: 1) seeing real prospects for the United States, China, and Russia forging together a security framework; 2) striving together to manage the eastern Arctic; and 3) turning the focus of Russo-US relations from Europe to the Pacific. Larin does not raise the notion of Russia finding a new balance between China and the United States, but he concludes that Russia must strengthen its position in the Pacific and that the current approaches of Russia and the United States must change. No doubt, as a Vladivostok resident, he is reflecting the longstanding concerns there over dependence on China. This appears to be an indirect effort to question today’s one-sided reliance on China.

In Vedemosti of September 6, Alexander Gabuev analyzed the slowdown in China’s economy, which others in Russia had been reluctant to acknowledge. Indeed, he notes that many in the Russian elite had rested their hopes on China for a miracle rescue from the consequences of its quarrels with the West. They counted on its demand for Siberian natural resources, its provision of capital in place of the West, and its know-how to make a smooth transition from the interruption in technology. He notes, however, that from June China’s stocks have dropped USD 4.5 trillion, which he discounts as a source of trouble or social unrest, even as he points to signs of serious economic trouble, such as the fall in exports and especially the high level of debt. For Russia, the fall in oil imports matters, notes Gabuev, as he also warns about recent signs of leadership divisions in China, concluding that Russia needs to boost its expertise on China (casting doubt on what other Russians are writing as they idolize China for purposes of Russian foreign policy and produce emotional swings in views of China and other major world players). Gabuev also warns that the turn to the East should not be exclusively to China, implying that it has been and pointing specifically to building infrastructure for exporting resources. Finally, Gabuev calls for turning to the global economy, not just to the East, observing that even Chinese companies dealing with Russia have to take the sanctions into account. He concludes that no successful turn to Asia in conditions of confrontation with the West will occur, noting a parallel with Iran, which confronted the West, as a lesson for Russia.

Another way of thinking about problems in Sino-Russian relations is to question China’s reliability as a partner, warning that it may cut a deal with the United States. In Mezhdunarodnaia zhizn’ on September 5, Ivan Sanfranchuk traced the evolution of US policies toward the role of China in Central Asia, dismissing Sino-US cooperation as temporary and China’s avoidance of a direct confrontation on the world stage as a matter of China biding its time to build up its military capacity and to gain access to resources despite the fact that the United States is following a course of containment or “strategic encirclement of China.” In 2009, Obama sought to change course to a G2 with China, but later Xi Jinping followed earlier leadership in rejecting such a course, even if Chinese experts continued to debate elements of it. Sanfranchuk sees US strategic encirclement as incomplete due to the presence of Pakistan and Central Asia. It is the latter that he finds puzzling, especially given the absence of a response to Xi’s Silk Road Economic Belt, which Chinese explain not only as an economic project, but also as breaking the US encirclement. He points to discussions in Washington in late 2013, where, despite alarmist voices, the majority took a “restrained positive” view of Xi’s economic belt, leading in 2014 to more positive assessments that China could play a constructive role through investments and infrastructure. He sees this as an abrupt shift from a decade of warning about the threat of China’s influence in Central Asia and the SCO as a Chinese organization. Washington again is expressing an interest in Central Asia, not in opposition to China, but with acceptance of China’s economic belt as fully complementary with US policy in the region. At the same time, Washington is sharply critical of Russia’s role in Central Asia. Citing remarks by Tony Blinken and others, Sanfranchuk notes US interest in cooperation with China in Central Asia and Afghanistan, leading to consultations that both sides keep secret. He adds that China insists that the Silk Road Economic Belt does not contradict US interests in Central Asia, and he finds that in the region US diplomats are, at least, more restrained in relations with China—a sign that declared and real US policies are in conflict. Still, he finds an evolution in US officials and experts in viewing China in Central Asia. One possibility is that Washington is making the most of a weak hand, accepting what it cannot prevent, but he prefers another explanation for the place and time of this US approach, linking it to growing Chinese interest in a G2, and to US interest in trying this out in Central Asia and Afghanistan: 1) US failure in uniting Central Asia with Europe through the Caucasus leads it to seek a continued role, and Russia’s regional integration projects reject such a role, which leaves China’s; 2) US expectations for increasing contradictions between Russia and China over Central Asia, which could give it a role as arbitrator or defender of countries in the region; 3) Washington prefers to direct China’s activity away from maritime rivalry and deep within the continent; and 4) It sees China bearing a heavy burden there, becoming trapped by crises there. Sanfranchuk warns that this partnership could later have serious consequences for the region, as Washington gets respect for its interests and supports Beijing’s ambitious projects in Eurasia. Yet, he also concludes that various variants are possible, as Washington keeps trying to win Beijing’s support, and Beijing, confident it has broken encirclement presses for US agreement for its own ambitions in Central Asia. He concludes that this may be the start of the “Big 2” as China reorients to the depths of Eurasia from the Asia-Pacific region. This analysis suggests that China cannot be trusted because it may make a deal omitting Russia.

Dmitrii Travin in the September 10 Vedemosti weighed risks to Russia from a regime change in China, arguing, in light of economic troubles, that China’s future is not as rosy as it seemed not long ago. There will not be an unending rise. China will face many social problems, which, Travin warns, will give a serious headache to Russia. He calls Russia a power of no more than regional significance despite its impressive nuclear arms and ambitions, which is leading to what reminds him of a relationship between horseman and horse, with China occupying the higher position. Supposing that the Kremlin, as opposed to the broad masses, does not have the illusion that Russia can dominate Asia, he warns that it is taking Russia to the East anyway, discarding its European identity for maneuvering between East and West, but should America and the European Union fear losing Russia and make an attractive geopolitical offer, Russia could return to the West. Travin asks what happens if China is shaken in a world economic crisis, sharply reducing demand for its goods and leaving millions without jobs, with the possibility of forming a very new political regime, as happened when European countries made the transition away from authoritarianism. Doubting that China is heading toward democracy, Travin postulates a new authoritarian regime seeking a new ideology in place of old communist demagogy and turning nationalism not only against the United States, but, closer to home, against Russia with its very appealing natural resources and insufficient force, since this is not a matter of nuclear war. It would be necessary, he warns, to supply resources for peanuts. Some may see this view as exaggerated, but Travin observes, seven years ago when seminars began to raise the issue of an “eastern drift,” it was difficult to imagine how fast Russia would separate from the West after 2014. The possibility of turning back is much reduced, and he concludes that in another seven years there will be no way back at all.

While there have been diverse analyses expressing distrust in China, the principal outlook remains positive—its economy and social and political stability are not in doubt, its hostility to the West is unchanging, and its reliability for Russia is assured.
In Vedemosti on September 10, Vasilii Kashin assessed where Sino-Russian relations stand, concluding that everything in China will be normal and Russia will be able to rely on China as cooperation continues to strengthen. In contrast to Gabuev’s article, Kashin is optimistic about China’s need for Russia rather than the West and its path forward economically. After acknowledging a new wave of skeptical commentaries about both the impact of China’s economic troubles and the failure to sign what was expected to be a large gas contract during Putin’s visit to Beijing, as well as charges that the fall in gas prices and the devaluation of the ruble have left the Sino-Russian partnership as little more than empty political rhetoric, Kashin disagrees. While in the first half of the year trade with China fell 30 percent, he points out that Russia’s trade with the European Union dropped 38 percent, leaving Russia even more dependent on China. Indeed, in June it was exporting 33 percent more gas in volume to China than a year earlier, as infrastructure continues to be built; as global prices stabilize, a rise in exports will be rapidly noticeable, and as two new bridges linking the two states come into operation, non-energy exports should also increase sharply, adds Kashin. The delay in signing the contract of the “Force of Siberia-2” gas pipeline he explains is that, after all, the first gas pipeline is not scheduled to go into operation until 2021, and one can hardly extrapolate today’s prices to that date or the even later completion date presumed for the second pipeline. As far as one can tell, all the corresponding decisions have been taken at the political level, but as is normal, negotiations can continue for years. Instead of dwelling on this natural delay, we should be noticing the readiness to discuss a third gas pipeline from Sakhalin. Kashin mentions also that as a result of the sanctions industrial cooperation with China will grow, as seen in the underground cable to Crimea for energy, which is stronger than what Russia can produce. He assesses the decision to link the Silk Road Economic Belt and EEU as important for avoiding the threat of destructive competition in Central Asia, but he recognizes with apparent concern that China’s belt is not just transportation but also a political and strategic project, including cultural interpenetration. He warns that since transit by land will remain more expensive than by water, the real goal is to tie Eurasia to China as well as a back-up corridor to the Middle East in case of any disruption to the Malacca Straits or Suez Canal. Kashin notes that Russia can benefit from such projects because it needs infrastructure to export natural resources to the east, but it should calculate the risks of overdependence on one market. Kashin regrets the recent downturn in relations with Japan, seeing that as another market.

As for the slowdown in China’s economy, Kashin says it was expected, and it will not be so painful since the working age population already started to decline from 2012, and growth is no longer a political imperative. Yet, he insists that China will keep growing and needing resources, and Russia’s prospects will remain positive. A few concerns sprinkled into the article scarcely cloud Kashin’s overall rosy prognosis.