June 5, 2012 The rapid rise of the giant Asian region, which is becoming the global leader of economic growth, has only recently attracted the close attention of analysts worldwide. For Russia the rapid progress of its Eastern neighbors is of critical relevance. Of the 17.1 million square kilometers of Russia’s territory, Asia accounts for almost 14 million. It is east of the Urals that the bulk of Russia’s natural wealth is located, and it is thanks to this that Russia now holds a special place in the world economy. Moreover, Russia can serve as a natural bridge between the markets of Europe and Asia, as it has a unique transport and transit potential. Full-scale implementation of this potential and protection from strategic rivals will boost Russia’s development.
Russia plays an active role in economic relations among the Asia-Pacific countries. Over the last three years, the percentage of 11 countries of the Asia-Pacific Region (China, North Korea, South Korea, Japan, Taiwan, Hong Kong, Singapore, Thailand, Mongolia, Vietnam and India) in Russia’s foreign trade has increased to 13.4 percent (compared with 4.3 percent of the United States, Australia and Oceania). Over the next 10 to 15 years, Russia’s six major trading partners in East Asia (China, North Korea, South Korea, Japan, Taiwan, and Hong Kong) alone will account for 20 percent of Russia’s foreign trade, while the whole of the Asia-Pacific Region will account for about 30 percent. It should be noted that Russia’s exports to East Asia are much more balanced in structure than its exports to the European Union countries, although the former are less in volume.
Growing economy
The upsurge in interest in Asia is primarily due to the rapid economic growth rates in a majority of Asian countries and to China’s soaring geopolitical influence.
Rising Asia demonstrates stable economic growth, which ranges from 8.5 percent in 2005 in China (9.25 percent in 2004) to 7.5 percent in India (2004-2005) to 7.7-8.4 percent in Vietnam (2004-2005). In the medium term (15 to 20 years), the annual growth rates in China and India are expected to stand at 7-8 to 6-7 percent, respectively. Even if China’s growth rates increase insignificantly, the country’s contribution to the world’s gross domestic product will reach 10 percent by 2020-2025. This factor will place China among the world’s top three economic leaders, along with the U.S. and the European Union.
During the next 10 to 15 years, China will continue to lead economic development in the region, followed by Japan and India, and will retain its status of a “world factory,” while dominating sectors of the manufacturing industry. Meanwhile, India has a chance to excel China in textile production, car making, and in the amount of foreign investment attracted.
Most of the Asia-Pacific countries are facing problems and challenges that can slow down their development. Beijing, for example, is faced with the following pressing problems:
– an aging population;
– slow rates of urbanization;
– backwardness of the rural areas;
– underdevelopment of the services sector;
– insufficient spending on the educational system;
– inefficiency of the banking system;
– archaic corporate governance system and underdeveloped financial markets.
The demographic window of opportunity, that is, the significant manpower resources that created the prerequisites for a major economic breakthrough, is already closing in China (and will soon close in other Southeast Asian countries, as well). Beijing’s “one family, one child” policy may have unforeseen consequences in the future. In 15 to 20 years, the number of dependants will continue to grow, thus multiplying the social burden on able-bodied citizens.
China’s political transformation plays a dual role in the country. On the one hand, democratization of the political regime is one of the preconditions for switching over to a new development model, overcoming corruption, retaining positions in the global economy, and ensuring further growth. On the other hand, the political and social stability ensured by the regime is one of the main competitive advantages that China has in attracting foreign investment. China could become less attractive to Western investors due to the aggravation of social conflicts and the further regress of rural areas brought about by greater democratization.
It is highly improbable, however, that the democratic process will arrive like an avalanche. The ruling party is taking great effort to ensure the continuity of power after Hu Jintao leaves his post of General Secretary of the Central Committee of the Chinese Communist Party in 2012. Most likely, China will introduce gradual liberalization into the party, while bringing some democracy into the electoral system at the local level, and developing a limited number of nongovernmental organizations.
India, the most populous democracy in the world, is not facing the problem of a political transformation. Yet the country will have to find answers to serious challenges facing its economy. These include, most importantly, the slow development of infrastructure – railroads, highways and ports – that is impeding the process of industrialization. Another challenge is India’s insufficient involvement in globalization (various sources estimate India’s share in global trade at not more than one percent). Although some Indian regions (Bangalore, Goa) are part of the global market, the larger part of India is extremely backward.
Both China and India are facing very difficult environmental problems, and there are no signs yet that they are going to be solved in the near future. India’s further industrialization will most likely aggravate its environmental problems, as is the case with China. Presently, China’s advantages are a higher literacy level, a lower child mortality rate, and a much lower number of people living below the poverty line. Meanwhile, India has a better developed services sector than China.
Chances for economic integration
Stable economic growth in the majority of countries in the region encourages them to look for forms of association. However, essential differences between their economic, political and military potentials stand in the way of a successful Asian integration. Unlike European integration, initiated in the second half of the 1950s by countries that were more or less equal in terms of their development levels (Germany, France, Italy, Belgium, the Netherlands, and Luxembourg), consolidation in Asia can be built only by uniting the less developed countries around a single large and strong partner. This could take the shape of the North American model (the North American Free Trade Agreement, or NAFTA), where the United States is the predominant actor.
In the medium term, major countries of the Asia-Pacific Region – China, India, the U.S., Japan and South Korea – will not be ready for an alliance or integration. Yet they may develop a kind of soft integration around a big player, most likely China, which is winning the sympathies of “small friends” from among member countries of the Association of Southeast Asian Nations (ASEAN). Beijing provides its neighbors with grants and trading preferences and sells them military equipment at reduced prices (the ‘benevolent elephant’ strategy). Thus, the framework of a future integration union is being formed around China.
As for India and Japan, the former is unable to play the role of an integration center due to its economic and political conditions, while the latter views the United States as its main partner; in the future, Japan and the U.S. may establish a bilateral free-trade zone. Existing regional associations, such as the Asia-Pacific Economic Cooperation (APEC), rather serve as mechanisms for working out common values and objectives than as platforms for creating practical tools of integration.
In seven to ten years, deepening economic relations, combined with the interdependence of countries in the region, may prompt them to conclude formal free-trade agreements. However, their interaction will proceed at different levels and rates, as well as with a different degree of institutionalization. More probable are integration processes in those areas that are related to information technologies, the knowledge economy, and where national barriers are much lower. At the same time, the establishment of free-trade zones, especially where traditional industries (e.g., agriculture) are involved, will require a lengthy negotiating process.
There is very little chance that regional countries will establish political or military-political unions. Although recent developments (above all, the position of the Shanghai Cooperation Organization concerning the U.S. military presence in Central Asia) add a military-political dimension to this organization, the probability of formalizing military-political commitments within the SCO frameworks is insignificant at this time.
Political instability
The main obstacle standing in the way of political and even economic consolidation in the region is the growing rivalry between Beijing and Washington. Deliberately or not, China is the main “disturber of the peace” here, as it has been increasingly active in pushing aside the traditional leaders – the United States and Japan. Some analysts hold that China views the “small” countries, that is, member states of the Association of Southeast Asian Nations, as a natural continuation of its economy and is therefore actively developing cooperation with them.
Other countries in the region are rather objects of the policies of the two competing giants. The only exception is Russia, whose favor both China and the U.S. seek.
China has not yet clearly formulated its foreign-policy ambitions. Beijing firmly insists that Taiwan reunites with the People’s Republic of China, but makes unclear and ambiguous statements on other issues. This factor prevents China’s partners from taking a clear stand with Beijing. Russia, the U.S. and other member states of the Group of Eight and NATO do not always understand China’s intentions when it speaks of the development of a “strategic dialog.” Beijing often behaves inconsistently: on the one hand, it is aggressively buying liquidities in the United States, while on the other hand, it displays caution, if not utter diffidence, in implementing its political initiatives (for example, in increasing its role in the Shanghai Cooperation Organization or military-political presence in Central Asia).
The sheer size of China’s economic relations abroad protects its leadership from outright confrontation in the realm of foreign policy. At the same time, China needs to build up its military might and nuclear potential to enhance its authority at the regional and global levels. However, China’s neighbors may view its military buildup as a threat.
Russia and Japan rank second and third, respectively, among China’s foreign-policy priorities. Meanwhile, Chinese public opinion has an increasingly favorable view of Russia. Part of the reason is that new bilateral energy projects help to consolidate ties between the two countries. In the long term, Beijing’s Russia policy is expected to be friendly, stemming from the need to keep “peace in the North.”
As for Chinese-American relations, China’s policy of reforms, conducted since the late 1970s, was intended to achieve at least a retreat from confrontation between the two countries, if not a full rapprochement with the U.S. Presently, China continues to conduct a cautious policy toward the United States, trying to avoid any conflict, even despite Washington’s unfriendly moves. The difference between the two countries’ political systems is largely compensated for by their increasing economic interdependence, although the latter factor has its limitations.
According to public opinion polls, the U.S. is the most unpopular country among 54 percent of the Chinese. There are fears that this antagonism will keep growing as more rations of democracy are given to the Chinese population and as its economy gets stronger.
Meanwhile, Washington pursues a much more aggressive policy that is intended to “restrain” China. To this end, the United States resorts to various kinds of means, including the escalation of its military presence in East Asia and the threat of deploying an ABM system (which seems to be largely a bluff).
Another reason for the deterioration in relations between Washington and Beijing is the growing conflict between China and Japan. However, the great economic interdependence between China and Japan (between 1993 and 2004, Japan was China’s largest foreign trade partner, and now ranks third after the European Union and the U.S.) causes these two nations to search for other cooperation options. At the same time, their rivalry for access to new energy sources, for leadership in the ASEAN space, and for a place on the international scene is becoming increasingly keen. For example, China actively opposes Japan’s permanent membership on the UN Security Council, while the situation concerning Taiwan remains explosive; although the probability of an armed conflict is now estimated to be relatively low.
In the medium and long term (until 2020-2025), relations between the United States and China will, most likely, tend to deteriorate, and the deterioration will be initiated by Washington – regardless of what party wins presidential elections in the U.S.
Meanwhile, relations between Beijing and New Delhi have been gradually improving, yet still retaining elements of tensions. China opposed India’s participation in the latest East Asian summit (December 2005), while the border dispute still presents a problem. Nevertheless, there is an economic rapprochement between the two countries, and there are signs of a beginning political dialog.
The past few years have witnessed a new tendency in the Asia-Pacific countries – the growth of nationalism, which manifests itself at both the regional level and against the West. These sentiments are rather caused by deliberate actions of the authorities and do not represent a spontaneous manifestation of sentiments. However, active economic ties and growing bilateral and multilateral exchanges reduce the probability of establishing nationalism as the basis of state policy.
Contours of Russian policy
Compared to the Russian-European relationship, which is made up of a strategic partnership, regular summit meetings, efforts to create four common spaces, and numerous dialogs, the Asian vector of Russia’s policy remains insufficiently developed. Factors preventing this development include lack of political will, the traditional Eurocentrism of the Russian establishment, and the existing routes for selling the most profitable goods and commodities. Russia’s Asian policy lacks vitality, state support for the development of economic ties, and involvement in regional cooperation mechanisms and regional security organizations (except the Shanghai Cooperation Organization).
Any partial reorientation of Russia’s policy toward Asia should not be overly publicized, since loud declarations may only arouse suspicion and irritation among Russia’s traditional partners in Europe and the U.S., and even in a majority of the Asia-Pacific countries. However, Russia should form a multidimensional and multifactor policy. Considering the difficult relations among the leading countries of the region – China, India, Japan, South Korea and the U.S. – Russia should not orient itself to just one or two countries, since each of them may view the Russian Federation as a counterbalance to other countries. In working out its policy, Russia must take into account those factors that are causing concern among all partners.
Finally, Russia’s political and economic relations with Asian countries must not come into conflict with Europe, the main vector of Russia’s development and identity. The main objective of Russia’s Asian policy must be the development of Russia’s eastern regions.
The balanced and cautious participation of Siberia and Russia’s Far East in regional economic integration can play a major role. The Russian Far East already participates in integration processes oriented to China, while the Asia-Pacific countries account for 85 percent of all foreign trade of the Russian Far East, and the latter’s economic relations with neighboring countries are much more intensive as compared with the European region of Russia. Meanwhile, there are potential dangers associated with the full reorientation of the Asian part of the Russian Federation to regional economic entities, especially in the form of Chinese economic expansion into Russian territory. This threat is not related to any “aggressive plans,” but rather to the insufficient economic and social development of Russia’s Asian regions. In light of this situation, special importance is attached to a new project, Opening Up Siberia Anew, which is intended to boost the social and economic development in the region.
Russia must seek to increase its foreign trade while improving its quality at the same time. The percentage of the Asia-Pacific region in Russia’s foreign trade can be increased to 33-35 percent, which would make it comparable with the European Union. In the medium term, this can be achieved by broadening energy cooperation. The majority of Asia-Pacific countries badly need new energy sources and view Russia as a potentially reliable partner.
In this area, emphasis must be placed on the diversification of transport routes of Russian energy resources to regional consumers. This is particularly important as China, India and Japan build their defense policies on the possibility that energy supplies from sea routes will be blocked in case of an interstate conflict. Russia and the Asian countries could cooperate in building continental pipelines and developing sea infrastructures that are oriented to tanker oil export and liquefied gas transportation.
Russia should seek to expand its “intellectual export” to Asian countries that are oriented to the United States and Western Europe in promising areas, such as education. The efficient investment of revenues from energy exports could help Russia consolidate its positions in personnel training for Asia-Pacific countries, thus facilitating its emergence as a new “intellectual donor” for the region.
It would be expedient to devise a set of measures to support technologically oriented exports to Asia, especially those that do not sell well in Europe and North America. This refers, above all, to products of civil mechanical engineering and power machine-building, developed long ago in the Soviet period. Russian aircraft companies could increase sales of civil aircraft and engines, if the government provides the essential lobby support. Also, the government should support the establishment of aircraft maintenance centers for Russian airlines.
Military-technical cooperation is one of the most promising, yet at the same time most difficult, areas. Although this kind of cooperation between Russia and China remains the source of many complaints from Russia’s partners in the West, it not only brings material benefits, but is also a factor in helping to maintain the regional balance of forces. Russia should gradually proceed to a higher level of military-technical cooperation with such countries as India and China, which would involve more advanced high technologies. Both countries have made much progress in modernizing their military-industrial complexes and are now more interested in purchasing technologies than finished products.
Russia must also change the structure and quality of its imports from East and Southeast Asian countries, including China, while increasing its exports to that region. Presently, Russian imports from the majority of Southeast Asian countries comprise medium-quality goods, although these countries can sell better-quality products and at prices more acceptable to Russian consumers.
Countries of the Asia-Pacific region are rather apprehensive about Russia’s possible appearance on the regional market. Russia is traditionally viewed there as a European country and evokes interest as a source of vital energy resources and as an element of military and political balance in relations between China and the United States, between Japan and China, and between the majority of local countries and the U.S. Therefore, gaining a foothold on the regional market will require consolidating Russia’s political positions. This can be achieved by implementing formal and informal mechanisms of coordination in the Asia-Pacific countries, specifically by using local international organizations and forums (the Asia-Pacific Economic Cooperation, ASEAN, the Shanghai Cooperation Organization, and the six-partite negotiations on North Korea).
Russia would be wise to advance its political initiatives through the Shanghai Cooperation Organization where, some analysts fear, China may monopolize leadership. At the same time, it would be counterproductive to use the SCO for “checking” China. Instead, Russian representatives must take an active part in round-table conferences and other discussions that precede major interstate meetings. These activities, as well as intellectual support for the development of regional policy (preparation of scientific studies by specialized expert centers, and participation in international scientific conferences), require special state support.
The formation of Russia’s new policy toward the Asia-Pacific countries is impossible without transforming its foreign-policy thinking, which has been traditionally focused on the Euro-Atlantic space. Despite its long economic and political cooperation with China and India, Russia still views itself as an outside force in the Asia-Pacific region. Russia must stop viewing Asia as something alien. At the same time, however, Russia’s renunciation of its orientation to Europe would mean the renunciation of its genetic and cultural roots, not to mention its hopes for democratic modernization. Besides, through its contacts with Asian countries, Russia can take avail of its “Europeanness” by acting as an intermediary between the East and the West and representing the interests of all parties.
Russia must step up contacts with the elites of the Asia-Pacific countries and pool efforts with them in organizing joint forums, conferences and other political and scientific events. Steps already taken in this field, such as the participation of a Russian delegation in sessions of the Asia-Pacific Parliamentary Forum, can be viewed as a highly positive, although insufficient, experience.
Equally important is the development of people-to-people contacts. There are good prerequisites for such a relationship: the traditionally strong relations between Russia and Asia-Pacific countries, the absence of bias against Moscow, which exists in some countries of Central and Eastern Europe, and the fact that a large part of the Asia-Pacific elites received their education in the Soviet Union and Russia. Organizations of civil society can play an important role in this field, while the government could lend its support for such projects.
The discussion involved Yakov Berger, Senior Research Fellow of the Institute of Far Eastern Studies, Russian Academy of Sciences; Alexei Bogaturov, Dean of the Political Science Department, Moscow State Institute of International Relations; Alexander Lomanov, Leading Researcher of the Institute of Far Eastern Studies, Russian Academy of Sciences; Vassily Mikheyev, Corresponding Member of the Russian Academy of Sciences; Vladimir Portyakov, Deputy Director of the Institute of Far Eastern Studies, Russian Academy of Sciences; Alexander Lukin, Associate Professor of the Comparative Political Science Department, Moscow State Institute of International Relations; Victor Pavlyatenko, Head of the Center for Japanese Studies of the Institute of Far Eastern Studies, Russian Academy of Sciences; Gennady Chufrin, Deputy Director of the Institute of the International Economy and International Relations, Russian Academy of Sciences; Sergei Karaganov, Chairman of the Presidium of the Council on Foreign and Defense Policy, host of the situation analysis, and head of the scenario group; Fyodor Lukyanov, Editor-in-Chief of Russia in Global Affairs; Timofei Bordachev, Research Director of the Council on Foreign and Defense Policy; Dmitry Suslov, Deputy Research Director of the Council on Foreign and Defense Policy.
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