Country Report: Russia (November 2014)

Russian articles on Russia’s “turn to the East” are full of confidence, concentrate on the big picture, and constantly repeat assumptions hardened over the previous half-year. Rather than reflect on Russia’s isolation, they insist that the West is isolated in the international community. Instead of identifying difficulties in the acceptance of Russia into East Asia, they emphasize failures in US pressure tactics to win support in Asia for sanctions. China appears in the most favorable light. The US allies Japan and South Korea draw notice more for defying efforts by Washington and being determined to sustain promising ties to Russia rather than for criticizing or applying sanctions against Russia. Every indication is that Russia’s success in the East is commensurate compensation for losses suffered as a result of sanctions by the West.

Striking exceptions to the above pattern are two articles by Aleksandr Gabuev. In contrast with those charged with developing a strategy for the region, led by Sergey Karaganov, who have minimized the risks of embracing China wholeheartedly, he warns that Russia lacks expertise to know what it is doing, is digging itself into a more vulnerable position, and is failing to recognize what is essential for a strategy. Gabuev presents his ideas as the misgivings of Russian business and the criticisms of Russian academia and government coming from many circles. Just as the facade of a monolithic Soviet view on Asia and China was cracking in the late Brezhnev era, it is proving difficult to defend in the turbulent conditions of change since March 2014.


An article in the October issue of Mezhdunarodnaia zhizn’, entitled “BRICS: Already Not Only a Summit,” depicts this new organization as poised to transform the world order, since all five of its rising powers are outside the Western military and political system and its economic unions and are outspoken on the global political scene. Rather than treating this new grouping as another talk shop, the article imbues it with the promise of transforming changing the international political order. Acknowledging that each of the countries has close economic ties with China but not with others in the grouping, the article falls short of discussing the centrality of China in the horizontal linkages that are beginning. Insisting that these countries have lots of common interests and economic complementarity as developing states, it assumes that new banking/financial structures can grow independent of the West.

Apart from vague hopes for an integration process that will parallel that of the European Union with its long incubation period, the article only suggests forging ties to link parliaments, which, after three to five years, could lead to a center like Brussels. Its three substantive themes all lack any support. First is recognition that only three states—China, India, and Russia—are in proximity, but no indication is given that they have agreed on large projects or other actions indicative of the troika Moscow has long sought. Second, arguments that the five are jointly responding to “color revolutions” and outside efforts to impose values, leading to ideological coordination, fail to explain what ideas bind the group together. Finally, recognition that many Russian officials are not taking BRICS seriously coupled with warnings of gaps in financing its plans suggest that this group is a flimsy reed on which to build Russia’s new order. Assertions that Russia’s ties to BRICS have been strengthened, as evidenced by the fact that none of the members voted for UN sanctions over Crimea or provided an unanimous vote to retract Putin’s invitation to November’s G20 meetings despite Australia’s attempts, are based on wishful thinking.

A new paradigm of international relations

Another article in the same journal by Aleksandr Orlov is more explicit in detailing why Russia is breaking with the West and seeking a new paradigm of international relations centered elsewhere in the world. The quarter century from the late 1980s is treated as a time of more baseless illusions and exaggerated expectations in Russia than in the West. Orlov argues that in the new geopolitical map of the world there will be no partnership paradigm with the West. After all, it was guilty of such affronts as the arrogance of thinking only it speaks the truth, propaganda that leaves a fog of deception, expansionist behavior at the expense of the security interests of Russia, and provocations that led to the uncontrolled spread of conflict. Having ignored the Sochi Olympics after Russia had gone to great expense to make them a success and then dragged Ukraine into its global schemes, the West is destroying, step by step, everything it achieved over two decades. Steeping its claims in values that are only a pretext for interference in order to establish a US-centered world after being emboldened by the fall of the Soviet Union to believe it could proceed unchecked, the United States must recognize that after the situation in Ukraine is stabilized—however that occurs—there will be no return to its notion of the status quo. To think that the sanctions on Russia will now follow the West’s plans is naive.

The period of the past two decades will be seen as a disaster for the United States, Orlov concludes. It could have reached an accommodation with Russia, but instead treated it with disdain. The Baltic States should have been a bridge, but they served to pour oil onto the fire. The same argument applies to US policy in Asia, where it is also threatening China. Humiliated by Western pressure in its zone of influence, as Russia has been, it too will refuse cooperation when the West is looking for help in dealing with problems such as wars. Orlov’s account of a world similar to Europe 100 years ago, which could be plunged into a big war, treats the spread of NATO and the European Union as anti-Russian provocations—part of a broader set of destabilizing actions.

Russians present a picture of a world where countries are obsessed with power, are driven by economic goals as a means to increase their power, and use values either to rally their citizens behind the pursuit of power or to deceive others about the real purpose of actions focused on expanding their power. The Cold War is reconceived as a struggle for power in which differences in values or ideology had no meaning. The post-Cold War to Russia’s awakening in 2014 is seen as a period characterized by naiveté in Russia and expansionism—military, economic, and civilizational—by the United States with support from its allies. Russia failed to grasp the essence of this era and to defend its own strategic space, leaving it as a bear confined to its cage until Putin set it on a course to restore its status as a great power, appreciative that China supports this endeavor, understanding and sympathizing with Russia’s task.

Given that the West is demonized in recent Russian writings, the East appears only virtuous, although it is not described in any detail. It is not anti-Russian, expansion-oriented, hypocritical in its use of values, or driven by ideology. Clearly, there is no room for democracy and human rights in such arguments. Whether the focus is on North Korea, Syria or China, the objects of improved relations are discussed only as participants in ongoing geopolitical maneuvering, bereft of value judgments. US allies appear as pawns of the United States or as courageous for defying their ally. This simplistic way of evaluating other countries harks back to the publications of the Brezhnev era. Insisting that Russia is responding as a realist state obscures national identity.

Russia versus the United States in East Asia

Vladimir Petrovskii in the October issue of Mezhdunarodnaia zhizn’ argued that the United States has been striving to extend efforts to isolate Russia from East Asia. This was evident when an official toured the region insisting that countries must impose sanctions following the propaganda hysterics about the downing of the Malaysian airliner. While the closest US allies could not refuse the state on which they depend, e.g., in September, Japan imposed a fourth packet of sanctions targeting the financial sector, the US effort was overall a failure, as other states resisted and even Japan made clear that its sanctions, which were the softest in the G7, were not intended to spoil its hopes for improved relations with Russia. Japanese officials explained that they reluctantly had to comply because they depend on the United States for security, and, when meeting with Putin at APEC, Abe kept this personal tie alive. Japan’s sanctions were also explained as due to the public knowing little about the history of Ukraine and Crimea. Circumstances such as US pressure and ignorance led to this qualified exception from Asia’s prevalent pattern of welcoming Russia’s “turn to the East.”

Petrovskii reports that South Korea’s ambassador to Russia has indicated that his country is not prepared to follow the US or EU examples, which was followed by a foreign ministry spokesperson explaining that there is no talk of any sanctions. The article is disingenuous in its presentation of South Korean reasoning. Rather than point to the fear of what Russia would do with North Korea in retaliation, it argues that there is a high level of mutual trust in dealing with the North. The only hint of repercussions is in a comment that Moscow and Seoul agree on a wide spectrum of international questions, as if South Korean thinking diverges sharply from that of the United States, and South Korea would not want to damage the existing accord.

In recalling Putin’s summit with Park in Seoul in November 2013 and the agreement on a no-visa regime for short-term visits, leading to a spurt in business tourism from the Korean side, the article suggests that this strategic partnership is considerably stronger than it really is, i.e., nobody should be surprised at South Korea’s defiance of its ally. Russia’s priority is for large-scale projects in East Siberia and the Russian Far East, leading to the export of energy to the South and to high-value production, including shipbuilding, automobile manufacturing, agricultural cooperation, and high-tech partnerships, such as in space. Yet, the article makes it clear that regional security is also high on Russia’s agenda, seeking support for its call for a multilateral security mechanism and for restoration of the Six-Party Talks to this end. The article indicates that Russia seeks triangular cooperation on transportation and energy projects in North Korea, serving to link a trans-Korean railroad to the Trans-Siberian railway. The impression is that Moscow expects Seoul to agree to its agenda without noting reasons for doubt or the realities of Russia’s weak position.

Southeast Asia is also described by Petrovskii as defying US calls for sanctions, e.g., Singapore, which is close to the West. In reality, responses there are based on opposition to the escalation of the crisis over Ukraine, including rhetoric about it, and the attitude that sanctions are not based on the norms of international law or on UN Security Council action. No mention is made of Russia’s conduct, as if it has nothing to do with how countries are reacting. An impression is left that all that matters to states in this region is to increase trade with Russia, which is seemingly evidenced by their agreement in August to proposals that they expand agricultural exports to fill the gap left by Russia’s countersanctions against the West. Soon such trade will have risen by 30 to 40 percent and then by 100 percent, readers are told. Even Malaysia, which might have been expected to take an anti-Russian stance after the July 17 tragedy, was quick to cool on sanctions and stayed on the sidelines. This article suggests that Russia’s relations with various states of Southeast Asia are normal, while the West is increasingly isolated due to its pressure tactics and its inability to find states that are willing to join in sanctions.

Russian sources see the inability of the West to rally countries behind sanctions as proof that Russia is getting the better of the United States in the worldwide battle over Ukraine. Not only is this evidence that the West’s insistence that it is acting from high moral principles is falling on deaf ears, but it is a sign that the liberal world order is crumbling as countries recognize that narrow and expansionist national interests are camouflaged as values. The overthrow of a pro-Russian president in an effort to sweep Ukraine into the Western orbit through the European Union and NATO is no longer tolerated by Russia or by other powers simply defending their interests. India is a case in point, seen as skeptical of Western claims to applying values in international affairs and to any use of sanctions on their behalf. Russia’s loss of empire is a source of humiliation that the BRICS states share in common with many of the formerly colonized member-states of the G20, Petrovskii argues, in an odd pairing of those who built the empires and those who were subject to them. The upshot of the argument is that the collapse of the Soviet Union began a long process, which has reached the breaking point now in Ukraine, bringing an era to an end. Now with the start of a new era, borders are again in flux, countries are pursuing a new balance of power, and relations with the West will be abnormal until a new world order is established.

Sino-Russian Relations

While some in Russia have been talking of a 1950s style political-military alliance between Russia and China, it is understood that both countries are not ready to subordinate their national interests and sovereignty to the degree necessary. Should China somehow be willing to face the backlash from the United States and its allies, what China would demand in order to declare that sort of alliance goes beyond what the leaders of Russia would countenance. More than talk of an alliance, recent discussion has centered on overlapping regionalism. This means linking the Silk Road Economic Belt and the Eurasian Economic Union, which is seen as having both geoeconomic and geopolitical significance on a regional and global scale. Sino-Russian regionalism depends also on China’s support for Putin’s new plans for Eastern Siberia and the Russian Far East. This has an energy component, which has advanced greatly in 2014. It also has a transportation component, as Russia seeks to modernize both the Trans-Siberian and the Baikal-Amur mainline (BAM) railroads, two of Russia’s megaprojects that require huge investments in infrastructure. No less a Russian priority is investment that will translate into the growth of manufacturing in the Far East and Eastern Siberia for markets in Asia. This poses a problem, since China has been intent on boosting its own industrial leviathan, not in helping another state export to China.

Russians and Chinese are challenged to take each other’s interests into account. In Ukraine and Central Asia, this has been put to a test. Prior to the Russian move into Crimea, China had agreed with the Ukrainian government to develop the peninsula, building a large deep-water port and making it the terminus in the Silk Road plan with a total investment of 3 billion dollars, eventually rising to 7 billion dollars. According to a Russian article, Russia has agreed to China proceeding with the plans for Crimea. This becomes one link between the Silk Road Economic Belt and Russia’s economy. Indeed, Central Asia becomes a corridor leading into South Asia and Southwest Asia, as China invests 40 billion dollars—much of it in infrastructure—into a Silk Road Fund, in accordance with its announcement at the APEC summit. Thus, what potentially could have been sharp competition between China and Russia’s initiatives for regionalism has, since Putin’s visit to China in May, become an overlapping arrangement, for which Russia expresses appreciation that China is taking its interests into account.

Sino-Russian relations are being reinterpreted in the most positive light, looking back at how they have worked together to build mutual understanding and resolve challenging issues since the 1990s. As an example, Vitalii Vorob’ev in the September issue of Mezhdunarodnaia zhizn’ reviewed how the border agreement was reached in 2004, praising far-sighted leaders, rising mutual understanding, and focusing on the future. Purposefully ignoring problems that have arisen, Vorob’ev conveys an atmosphere conducive to step-by-step compromise. With historical tensions well behind the two countries, the obvious conclusion is that they have achieved a level of trust more than sufficient to resolve any new issues that might arise. Linkages to the Russian Far East from Northeast China, such as the biggest railroad bridge yet, are mentioned with optimism, even as a new inter-governmental commission on investment coordination deals with the thorny problem of lack of investment from China in Russian industry, which contrasts with the massive funds going to energy.
Such overwhelmingly positive presentations of Sino-Russian relations predominate, in contrast to November articles by Gabuev on business risks and lack of expertise.

Risks in doing business with China

Aleksandr Gabuev in Rossiia v global’noi politike discusses how Russian businesses are viewing risks of doing business with China. He notes that big business and top managers of state firms see growing dependency on China as posing risks, leading them to insist on joint involvement with the state. Beginning in April, businessmen and officials have been echoing the mantra that developing partnerships with states in Asia, notably with powerful China, is the answer to EU and US sanctions. A leading role is played by Gennadii Timchenko, Russia’s sixth wealthiest individual and a person on the March 20 US sanctions list, who on April 29 became co-chair of the Russo-Chinese business council. In the course of his May visit to China, Putin told Russian oligarchs that Timchenko was now the main figure with China. In August, Timchenko made a show of shifting from Visa and Master Card to China’s UnionPay in a display of de-dollarization and support for closer financial ties with China, a position not shared by all businessmen and high officials, which Gabuev makes clear in an analysis questioning grounds for optimism.

Some see doubts as a legacy of the 1990s when trade was largely confined to the military-industrial complex, chaotic cross-border dealings, and efforts by Chinese to acquire natural resources in the Russian Far East and Siberia. Relations were only regularized under Putin, especially political ties and a “soft alliance” in international relations. Yet, Gabuev sees much more trouble in bilateral economic relations, even as trade climbed rapidly. Among the economic problems were: ending the presence of Chinese business in the Russian Far East and Siberia; freezing the plans for joint infrastructure projects in Primorskii krai; gradually reducing the scale of military-technological cooperation; and not allowing Chinese to supply the resources and labor in megaprojects to serve the APEC summit in Vladivostok. Over those years, Moscow was seriously concerned about China’s intentions in Asiatic Russia. Russia wanted to supply technology, not just natural resources, and was concerned about unsanctioned copying of Russian technology, especially weapons. Apart from the 2004 Rosneft contract to supply oil, a 6 billion dollar prepayment that was used to purchase the shares of Yukos, there were few large agreements, and trade hovered below 60 billion dollars. Only in the throes of the global financial crisis did conditions start to change in 2009. Facing a liquidity crisis, Russian companies turned to China. The biggest deal was when Rosneft and Transneft secured 25 billion dollars from the Bank of China, pledging to supply 15 million tons of oil a year through the new pipeline. China surpassed Germany as the top trade partner, topping 89 billion dollars in 2013.

Despite growth in trade, many informal barriers to investment had survived. Until recently, Chinese did not succeed in acquiring a stake in any large gas field. Russia feared that Chinese companies through dumping would quickly gain control of its internal markets; therefore, bureaucratic barriers were put in place. The presence of Chinese financial institutions in Russia was restricted more severely than banks from the West. Even structures formally established for Chinese investment were severely limited. This approach began to change in 2013 with CNPC’s stake in Yamal SPG and Rosneft’s agreement to multi-billion dollar advances from CNPC and Sinopec. The new approach is explained by the falling rate of growth in Russia and concern that long-term commitments made in order for Putin to secure the loyalty of voters would be difficult to realize. The final transition occurred only in the spring of 2014. When Russia looked for a counterweight, China naturally loomed as its great savior. In Putin’s May visit 40 agreements were signed, and Li Keqiang’s October visit led to 38 more. High-placed officials acknowledge that from April informal restrictions on the expansion of Chinese capital were essentially lifted. Compensating for sanctions, Russia is buying more consumer goods, seeking more investments and bank credits, and relying more on financial platforms and technologies, which raise new risks.

Another concern is lack of expertise on China in government, business, and the non-government sector, notes Gabuev. Companies have relied on Chinese translators, not cultivating a cohort of experts, and they are only now trying to catch up without well-informed top managers. This leads to missing opportunities, as happened when Gazprom in the 2000s failed to time its entry well into China’s gas market. In terms of hiring, companies have faced the dilemma of economists with poor knowledge of Chinese or sinologists with little economic training. Russian companies are handicapped in facing Chinese expertise. Unlike the expertise available to international companies, including tapping into outside consulting groups, Russia lacks such expertise, and its joint councils with China, according to businessmen, are similarly deficient.

Compounding problems of incompetent advising is duplication and complex bureaucratic interplay, involving three vice-premiers and a newly established organ for priority investment projects sought by Putin in September, which only confuses companies on how to proceed and requires active government involvement. Russian business and officials dealing with bilateral relations have no control over policies toward Ukraine or complexities of Russian bureaucracy. Their best hope is Moscow’s need for a long-term strategy toward China and other East Asian states based on facts and realistic forecasts for the region, not on prejudices and interests in separate internal games. Can Russia still pretend to play a larger role than that of a raw material supplier for growing Asian economies, given that Russian natural resources in its current trade structures with China and the European Union are merely fuel for foreign machines?

Chinese studies in Russia

A November 11 article in Kommersant exposed the sorry state of Chinese studies in Russia, failing to provide the knowledge appropriate for the “turn to Asia.” Without straying into the treacherous terrain of evaluating the quality of analysis of writings on international relations and China’s domestic conditions, Gabuev points clearly to a “graveyard” of education, science, and expert guidance for policymaking on this country. Russia is allowing a rich tradition of Chinese studies—more than 300 years old and recognized in the 1980s as a world center in this field—to atrophy, he notes.

The article lists leaders of Russia from the time of Peter the Great who had fostered Chinese studies, treating this as a state undertaking, as it was in the Soviet era. Even with various problems, massive resources were invested in the study of the PRC, specialists systematically covered all periods and a very wide range of problems, and leaders considered that they had to understand China due to its importance for the Soviet Union. Writers were not just sitting back and criticizing China’s leftist tendencies. Normalization of relations brought some positive results, e.g., language improvement opportunities, studying and living in China, de-ideologization so that scholars did not have to play it safe, skirting sensitive topics and burying themselves in the classics, and working with Western colleagues employing advanced methods of the social sciences. Despite these improvements, what remained from the Russian school of Chinese studies was allowed to fall apart, as Russia’s turn to Asia gathered momentum and required deeper knowledge of regional partners, especially China. There was little money for the field, turning young people away and retaining only pensioners with nowhere to go and insane lovers of the field on whom no system can be built. The few older specialists left find no students with whom to work.

Gabuev pinpoints many dysfunctional elements in the government, business, and academic fields of Chinese studies. On one side, the Ministry of Foreign Affairs sees itself as the only source of Chinese expertise. The First Asian Department employs a contingent of specialists in the Beijing Embassy, and four consulates across China, who can concentrate on China and East Asia without worrying about frequent rotations to other regions, as is characteristic of the State Department. However, Gabuev suggests that many get lost in details, lacking the systematic thinking earlier associated with the International Department of the Central Committee. He reports that the business community is not impressed with the competence of the ministry on China. There is insufficient diversity of opinions, even in comparison to Chinese diplomats working on Russia. Long technical careers do not lead to working with a broad range of sources. Young people leave the ministry due to low pay when they are working in Moscow, although pay rises several times when living abroad. Moreover, the status of the ministry is low, and it does not have great influence on policy, apart from the influence of Ambassador Andrei Denisov.

Questioning the presence and quality of China specialists in other official organs, Gabuev casts doubt on the training of specialists and their use in employment. In the ministries of finance and energy, where ties to China might be expected to be strong, there are no specialists. Evgenii Popov at the Ministry of Economic Development is an exception. Experts work at the Kremlin to prepare Putin’s visits to China, but their focus is narrow. Gabuev charges that business and government lack interest in graduates of higher education, who, in turn, complain that their training leaves them with no practical learning. Without requests to write reports for officials, with the noted exception of a report in 2007 on energy, experts feel unconnected to official policies. Sergei Goncharov, the representative of Rosneft, and Sergei Tsyplakov, who represents Sberbank, are recognized as experts, while Gazprom China personnel from the special services appear as narrowly focused in pursuit of limited tasks. The lack of jobs in business is explained by the fact that a few gargantuan companies in energy monopolize trade with China. Meanwhile, Chinese companies hire Chinese who specialize on Russia to fill jobs, far outdoing efforts in Russia to use experts.

Gabuev’s article goes into detail on the problems of education and employment. The study of Chinese language, especially oral skills, has spread to more than 160 universities—20 percent of the total—, but the level is very low. The quality of education has deteriorated, with few courses on energy, finance, and law—priorities that the government is seeking. In the Soviet era, experts with the most authority covered politics and international relations. Now economics is in the foreground. There has been a segmentation of experts with closed circles having little horizontal or even vertical mobility. Children of those in the field may find positions through what is traditional nepotism in Russia, while others cannot find a job, leading many of the most gifted to go abroad—lately to Israel. The article avoids discussion of problems resulting from being isolated from international scholarship or lacking adequate preparation for bilateral relations in various spheres. This strong indictment of the field of Chinese studies centers on lack of funding and loss of professionalism. It confines comparisons to the late Soviet era with calls for reviving central hiring and financing at a level that would enable the field to revive after living off the declining remnants of a more educationally and scientifically successful era in Russia’s past.

Russo-Japanese relations

An October Mezhdunarodnaia zhizn’ article by Iurii Raikov held out high hopes for a breakthrough despite the Ukraine crisis due to Japan’s fear of China, low confidence in the United States, eagerness to preempt resources in Siberia and the Russian Far East in competition with China and South Korea, and overlapping regional interests with Russia. Insisting that Russia’s interest in Japan is not based on concerns about China, apart from not wanting to be excessively dependent on it, Raikov views Abe as energetically pursuing Putin since his first months back as prime minister. He put priority on this relationship, stressed economic ties, took unprecedented interest in security dialogue, and wrote a note to the United Nations that cleared the way for Russia to establish control over maritime areas in the Okhotsk Sea, resulting in its recognition by international society as an inland waterway for Russia, which then recognized Japan’s status as an observer in the Arctic Council before China gained that status. Raikov traces momentum for a breakthrough in bilateral relations over twenty years, which has kept being interrupted by those who see only the trees but not the forest. This time, he expects a better result despite US pressure over Ukraine. More on this article is in this issue’s Special Forum article on Russia’s turn to Asia.