Welcoming Russia to Asia?

July 29, 2011

About this time next year the Russian tall ship Nadezhda will sail grandly into Hong Kong as part of a 300-day tour of the Asia Pacific Economic Cooperation (APEC) economies. The voyage is intended to tell the world that Russia is keenly engaged in Asia. It coincides with a year of Russian chairmanship of APEC which begins in four months time. It is perhaps not an accident that Nadezhda, in English, means “hope”.

Because for sure, Russia’s engagement with Asia remains more “hope” than substance for most of the region’s economies. Nowhere is this better illustrated than in the 68bn cubic metre Siberian gas deal that China and Russia have now been negotiating inconclusively for several years. Russia and China had been expected to sign an agreement on this in June during Hu Jintao’s visit to Moscow, but even now, haggling over the price of gas continues to hold up a deal.

Russia’s tenuous claim to be part of Asia is based on its east Siberian seaboard with the Pacific, an infamously neglected part of Russia for many centuries. As Russia’s leaders based 9,300km away in Moscow have traditionally looked west to Europe and the US for their economic, cultural and military ambitions, so the Primorye district (Primorye means “maritime”) centred on the chill and austere port of Vladisvostok has staked a lonely claim as part of Asia. It is the eastern terminus of the Trans-Siberian Railway and a big fishing port, but the excitement ends there.

But if you could see the hectic development now underway in Vladivostok in preparation for the APEC Leaders Meeting due to be held there in September next year, you could be forgiven for believing all is about to change.

A massive US$500 million bridge from Vladivostok to Russkiy Island, where the APEC meetings will be held, is now close to completion. Highways and miles of new city roads have been constructed. A new rail link to the newly-modernised Artem airport and on to Ussuriisk is being built. Dozens of hotels are going up, along with conference centres, sports and concert complexes, a medical centre and even an Oceanarium. One development area is being reserved for gambling. Moscow is spending something like US$5 billion to make Vladivostok ready to welcome Asia’s leaders. Perhaps at last Russia – so often symbolised by an eagle with two heads – one facing east and one facing west – is about to rebalance its traditional bias to Europe and the west.

If the current sorry state of the European and American economies provide any guide, then a shift in focus towards Asia and the Russian Far East would make a lot of sense. Europe accounts for over 50% of Russia’s trade, but China just 10% in spite of a 3,600 kilometer land border, and China’s urgent need for the natural and mineral resources that abound in Siberia. Add all of the other APEC economies together (including the US), and Russia’s eastward trade accounts for barely more than 20% of its total trade. True, this trade has been growing strongly in recent years (up by 36% a year in the five years to 2008 before the global financial crisis stalled growth) but this is not noticeably out of line with overall trade growth, and seems at least partly linked with strongly-rising oil and gas prices.

And if Russia has tended to neglect Asia, the reverse is even more true. Today, barely 1% of Asia’s exports go to Russia. It is an economy that for most of Asia has been out of sight and out of mind. Many APEC leaders groan at the prospect of having to shuttle back and forth on the long journey to Moscow over the coming year for the hundreds of APEC meetings that will be hosted there.

And what is true for APEC as a whole is surely true for China’s leaders too. China’s long border with Russia has often been a source of deep tension, inhibiting free cross border trade - and many Chinese still choke on the 1860 Treaty of Beijing in which Russia wrested control of Vladivostok and Primorye from the faltering Qing emperor. One highly-respected international correspondent cruelly but perhaps accurately summed up China’s current views: “China scorns Russia as a declining nation, unable to produce anything useful except oil and gas, and slowly but surely drinking itself to death.”

Can a year of APEC chairmanship change all this? If the stalemate over the Siberian gas deal is any guide, then no one should get hopes up too soon. But the logic of stronger links is clear, and we have witnessed this in Hong Kong with recent high level visits and keen interest among Russian companies to list in Hong Kong. It would surely be a waste for Moscow not to exploit to the full the regional diplomatic leadership that APEC leadership provides. If the transformation now underway in Vladivostok can charm APEC’s leaders in September next year, then we may be at the beginning of a major new development both for Russia and for Asia. But for now, all we have is the tall ship Nadezhda – hope.


* The translated Chinese version was published in Ming Pao on July 29, 2011.

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