Russia in Asia: Beyond Eurocentric Realpolitik

[ 148 ] asia policy Russia in Asia: Beyond Eurocentric Realpolitik Steven E. Halliwell The Russia Balance Sheet is an ambitious effort to assess Russia in 2009. Many chapters provide excellent summaries of political, economic, social, and demographic issues facing Russia. This review essay focuses on what this reviewer sees as two flaws in the volume: (1) pervasive Eurocentrism and (2) a Panglossian view of a deeply troubled economy and a concomitant minimization of the risks of destabilization. The first flaw—focusing on Russia in relation to Europe and the West—is a serious act of omission. Russia is integrating with Asia on energy supply, commercialrelations,andfinance,asignificantdevelopmentforunderstanding Russian motives and options. Anders Åslund and Andrew Kuchins, the book’s authors, give recent events of historic importance and important trends little more than cursory attention: In February 2009, Russia and Japan dedicated the Sakhalin-2 liquefied • natural gas (LNG) plant, which produces 5% of global LNG for Japan, Korea, and the United States. Although this issue is raised in chapter four, the chapter on oil and gas policy to which Edward Chow contributed,1 it is not addressed in other parts of the book. In the same month, Russia signed a $25 billion construction loan • for a twenty-year supply of 10% of China’s oil. The authors claim that Russia seeks China’s financial aid “during troughs in Russia’s relations with the West.”(p. 132) In fact, this loan recognizes Russia’s financial dependence on China and acceptance of a dedicated supplier relationship, despite a decade of fighting it. AtDavosinMarch2009,Putincalledforanewglobalreservecurrency. • China’s leaders immediately supported this idea, and momentum for it is building. Putin’s announcement had been foreshadowed for many months, as resentment about the role of the U.S. dollar grew throughout the global crisis. At a recent summit in Beijing, Putin discussed the use of the ruble • and yuan as clearing currencies for wholesale trade in consumer 1 Chapter four provides an excellent overview of Russia’s backward oil and gas policy, citing Sakhalin in the context of Russia’s policy of ejecting foreign investors from large projects and centralizing control under state-controlled companies. steven e. halliwell is co-founder of River Capital Management, a New York–based investment management firm specializing in Russia and the former Soviet Union. He can be reached at . [ 149 ] book review roundtable • the russia balance sheet goods, which employs 60,000 Chinese merchants in the Moscow region alone.2 The second flaw is more an act of commission than one of omission. The authors acknowledge that there are serious risks to Russia’s internal stability and regime continuity but gloss over those issues with an optimistic forecast for the country’s future. One of the cautionary themes woven into the analysis relates to the lack of economic and social reforms: ...Russia has made no economic or social reform worth mentioning for the past six years, as the government has focused on the distribution of oil rents rather than on improvement of policy (p. 47). Russia’s public administration has proven itself too incompetent and corrupt to undertake major projects. Unless that changes, none of the many large planned infrastructure projects will progress (p. 51). ...Russia’s manufacturing has largely failed to develop because of the adverse business climate (widespread corruption and onerous state intervention) and a lack of comparative advantage outside of the commodity sector (p. 146). Chapter four graphically describes what the government’s focus for the last six years on “distribution of oil rents” means for regime legitimacy: The bonanza in oil income allowed them [Russia’s leaders] to parcel out wealth, pay social benefits, reward friends, punish enemies, buy electoral victories, and maintain power, all without seeking political legitimacy of the sort required by broad taxation of the public in a diversified economy (p. 61). Finally, the risks to political legitimacy from shrinking economic growth and consequent popular dissatisfaction are described ominously: The current regime may therefore [if there is no economic growth] face an existential question of survival or have to develop another source of legitimacy. . . . If popular dissatisfaction grows, the ruling elites’ natural reflex will be toward more repressive measures. . . The Russian government will...