The crisis in Ukraine could force Russia’s hand in expanding its trade and economic relationships with the nations of East Asia. That could be good news for Russia’s Far East.

Russian Minister of Foreign Affairs Sergei Lavrov, left, and China's Foreign Minister Wang Yi during the signing of joint documents in Beijing. Photo: RIA Novosti

Two factors are accelerating the development of Russia’s expanded relationships with East Asian countries: the sanctions already levied by the U.S. and EU against Russia and Europe’s efforts to reduce its dependence on the supply of energy resources from Russia. If anything, the crisis in Ukraine is helping to facilitate Russia’s pivot to Asia as a major foreign policy initiative.

In the current geopolitical environment, Russia’s move toward the East is likely to gain momentum. As a result, a balanced evaluation of the direction that this development of cooperation can take and the risks that will unavoidably arise in this regard is needed.

Challenges for Russia in East Asia

The macro-region of East Asia, which is currently being shaped as a single political, security and economic space, is undergoing a structural transformation. Along with the countries of Northeast and Southeast Asia it includes major Asian states such as India  – as well Australia and New Zealand. Moreover, both Russia and the U.S. have increasingly been involved and thus perceived as an integral part of the expanded region.

The formation of a polycentric regional order in East Asia increases Russia’s ability to participate in the region as one of the centers of power. Against this background the acceleration of Russia’s Asia pivot is an extremely important measure intended to connect Moscow with the actively developing regional economic integration that Russia has heretofore been practically absent from.

Despite participating in all of the East Asian organizations and forums (APEC, ASEAN Regional Forum, Asia-Europe Meeting (ASEM), East Asia Summit, and others), Russia yet remains aloof from regional projects on free trade zones.

Two major currently negotiated projects in the region include the Regional Comprehensive Economic Partnership as ASEAN + 6 (the ASEAN countries plus China, Japan, the Republic of Korea, India, Australia, and New Zealand) and the Trans-Pacific Partnership, which is being formed under the aegis of the U.S. 

Along with the signatory countries (Brunei, Chile, New Zealand and Singapore), the U.S., Australia, Peru, Vietnam, Malaysia, Mexico, Canada, and Japan are engaged in the negotiation process.

The signing of free trade agreements, initially with selected countries of the region (for example, with Vietnam, where negotiations are currently underway), and later, with regional integration organizations, is capable of giving momentum to Russia’s turn to the East. In a best-case scenario, this could facilitate the development of Russia’s regions of Siberia and the Far East, one of the main objectives in Russia’s East Asia policy.

At the same time, the growing geopolitical rivalry between the leading powers in the region, the U.S. and China, brings potential challenges in the case of a one-sided association with one of the powerhouses.

In light of pivot to Asia-Pacific taken by the administration of U.S President Barack Obama, America appears to be giving a high priority to the region in the nation’s foreign policy. America would like to preserve its leadership in the region, especially given China’s efforts to reshape the regional order in accordance with its interests as a leading power.

Against this background the interests of small and middle powers in the region as well as Russia and India are best taken into account if they decide not to make a clear choice in favor of one or the other side in the confrontation between the U.S. and China.

Choosing one side will inevitably aggravate the polarization of the region and, as a result, bringing about a destabilization that could undermine the dynamics of regional economic development.

In such circumstances, increased rivalry among the great powers (namely, the U.S., China, Russia, Japan and India) along with  the necessity of a military build-up, could make the development of Russia’s regions of Siberia and the Far East with the assistance of regional partners more complicated and far less promising.

East Asia divided in its support for Russia

Different reactions of the regional countries to the situation in Crimea also points out to the divided state of the East Asia region. A number of U.S. allies imposed various sanctions against Russia in connection with the Crimean issue.

Following the U.S., Australia published a list of twelve citizens, eight of whom are Russian, against whom visa and finance sanctions were imposed. In addition, Australian officials canceled a number of visits to Russia, including that of the finance minister.

New Zealand suspended negotiations on the signing of Free trade agreement with the Customs union (which includes Russia, Kazakhstan and Belarus) that had been in progress since 2012. Japan froze negotiations concerning the easing of a visa regime, the signing of an agreement for investment cooperation and the prevention of dangerous military activities in space.

Following the second round of U.S. sanctions, Japan on April 29 imposed visa bans on 23 Russian citizens including governmental officials.

"We need to call on Russia to restrain itself and act responsibly," said Japan’s Foreign Minister Fumio Kishida.

He also postponed his visit to Russia. However, the given sanctions are less severe than those imposed by the US, EU and Canada. And, in the case of Japan and New Zealand, there has only been a suspension of talks - they haven’t been terminated.

During the introduction of the sanctions, Japan’s Chief Cabinet Secretary, Yoshihide Suga, noted that they should not hinder the development of cultural and economic exchange between the two countries. Taking into account the successful development of relations after Japan’s Prime Minister Shinzo Abe came to power, he stated that Japan wants to “contribute to the problem’s solution” in this way.

Russian Foreign Minister Sergei Lavrov, right, and Japan's National Security Advisor Shotaro Yachi at their March meeting to discuss the situation in Ukraine. Photo: RIA Novosti 

Other U.S. allies chose not to impose sanctions against Russia, which demonstrates significant interest in the development of cooperation with Russia. For example, the leadership of South Korea, disregarding U.S. pressure, decided not to take tough measures against Russia.

Other East Asian countries, primarily China and India, both enjoying strategic partnership with Russia, did not support sanctions and made no announcements condemning Russia’s actions at the official level, although they did not express their support either.

China’s position is very representative in this regard. Chinese officials stated that China does not intend to take any sides in the conflict and advocates the political solution of the situation through the mediation of international organizations.

Despite widespread criticisms of the U.S. and EU actions in the Chinese media, Beijing abstained from casting its vote in the UN Security Council urging not to recognize the referendum in Crimea. As for the second round of sanctions, China expressed its disagreement with one-way sanctions against Russia. China’s Ambassador to Russia Li Hui stated that such sanctions make no contribution to the settlement of the Ukrainian crisis.

China’s neutral position in the conflict while showing respect for Russia’s stance allows it to steer away from the conflict and thereby strengthen its position in the region. Essentially, China is taking into account that the actions of the U.S. are focused not on the Asia-Pacific but on a different area of the world.

The China factor

Russia’s leadership considers it a priority to develop economic relations with China more so than with any other country of East Asia.

This is determined, to a large extent, by convergent interests in joint projects in energy cooperation: the already functioning Eastern Siberia-Pacific Ocean oil pipeline, which was built with the help of Chinese credit secured by a twenty-year supply of oil at a fixed price, and the construction of a gas pipeline to China, an agreement on which is likely to be signed during Vladimir Putin’s visit to China in May, following a decade of anything but simple talks on the issue.

In this way, Russia will be able to significantly diversify the countries it supplies hydrocarbons to, making it a very attractive course in light of the ever-increasing demand for energy resources in East Asia. It is also a reasonable insurance policy in case Europe reduces its demand for Russian energy.

China is also the Russian Federation’s main trading partner in the region (with a trade turnover of $89 billion in 2012) and the major source of investments in the economy of the Russia’s Far East. In addition, Russia and China share a vision of a polycentric world and regional order which is also important in bilateral cooperation. Moreover, the intertwinement of the economies of the Russia’s Far East and the Northeast part of China may give significant momentum to the proclaimed strategic partnership between the two countries.

As Russia needs the participation of foreign capital for the development of Siberia and the Russia’s Far East, in particular for the creation of so-called territories of advanced development (export-oriented zones with preferential conditions for conducting business, recently proposed by Ministry for Development of Russian Far East), it is difficult to overestimate the importance of Chinese investment.

In April of this year, the China Development Bank announced the investment of $5 billion in development projects in the Russia’s Far East, including in the creation of territories of advanced development (TADs), and the financing of infrastructure development and the implementation of long-term economic projects.

At the same time, the currently imbalanced structure of Russian-Chinese trade, where Russian exports chiefly consist of energy, raw materials, and fishery and forestry products but Chinese exports consist – to a significant degree  - of equipment and manufactured goods, leaves open the question of whether the development of such relations can contribute to the innovative development and modernization of Russia.

China and Beyond: Russia’s options in its East Asia policy

The structure of trade between Russia and the majority of the countries in East Asia takes a similar form, with the exception of most ASEAN countries and India. The main challenge for Russia in its bid to develop relations with East Asian states lies in the risk of  becoming a raw materials appendage for East Asia, and in this case industrialized China could leave it stranded “on the other side of the barricade” from the leading countries of the world including China itself.

For example, the development of cooperation in the energy sphere will only help Russia in its development insofar as received profits are invested into the country’s innovative development. Finding such forms of cooperation will promote the development of high-tech industry on Russian territory is an important task for Russian-Chinese cooperation in this regard.

Thus, Russia’s one-sided orientation to China in its East Asian policy offers possibilities as well as significant challenges for the independent character of the country’s position in the region.

China’s cautious foreign policy stance concerning the Ukrainian crisis demonstrates that, in the context of its strategic partner relations with Russia, China is not interested in expressing explicit support of Russia’s actions when in risk of conflict with the West and is trying to avoid confrontations in its relations with both Russia and the U.S.

Notwithstanding the competitive character of relations tied to the struggle for leadership in East Asia, it is not beneficial for China to worsen its relations with the U.S. over international issues not ranked among the country’s “key interests”.

The U.S. and China have been carrying on a U.S.-China Strategic and Economic Dialogue since 2009. This underscores the countries’ significance to each other, the interdependence of their economies, and the status of U.S.-Chinese relations as the most important bilateral relations in the world. It is important for Russia to understand that China's support in such issues may be very limited.

In fact, Beijing may choose to express its support to Russia only via an absence of support of the actions of the West.

At the same time, it is obvious that the accelerated development of Siberia and the Russia’s Far East is impossible without the development of relations in the economic, political, and security spheres with key countries in the region, including the U.S. Moreover, it is not possible without active participation in regional organizations and economic integration.

In this context, the most balanced course appears to be one aimed at developing relationships of equal depth not only with China, but also with the other countries of East Asia such as Japan, India, the Korean peninsula's states and the ASEAN countries. And this will facilitate Russia’s entry into the region as an independent player.

Meanwhile, Russia must conduct a balanced policy in relation not only to East Asia, but also in the course of its foreign policy as a whole. Turning to the East must occur in concurrence with the preservation of an equally progressive dynamism in Russia’s relations with Europe.