Strategic Asia 2006-07: Trade, Interdependence, and Security

Russia’s Economic Role in Asia:Toward Deeper Integration

executive summary This chapter examines Russia’s role in Asia, including to what extent Russia is turning eastward from Europe in its foreign economic and political strategies and what forces are driving Russia’s actions. main argument: • Europe is Russia’s principal trade partner. Looking ahead, however, Moscow desires to develop deeper economic ties with Asia, in part because of political differences with its European partners. • Key to Russia’s new Asia strategy is the building of an export pipeline for Siberian oil. With a growing global energy shortage, Russia’s Siberian energy resources have a ready market in China, Japan, and South Korea. Further development of Russia’s economic integration with Asia will, however, be a long and costly process. policy implications: • With Sakhalin and Siberian oil and gas coming on-stream, Russia’s economic presence in Asia will substantially increase. This development should lower U.S. anxiety over energy security in China and Japan. • Moscow seems uninclined to link economic interests tightly with strategic goals. Japanese hopes that increased trade will lead to resolution of the Northern Territories question, therefore, may be misplaced. • Though chances of sharing in the fruits of this Siberian oil boom are high, U.S. oil companies will need patience, a long-term perspective, and a willingness to play by Russia’s rules of the game. • With high oil prices and strong economic growth, Moscow will not be taking risks nor embarking on radical policy changes. The U.S. should not take too seriously scare scenarios such as the specter of a close RussianChinese alliance. The U.S. is a key partner for both Russia and China, and neither country wants to damage its relations with Washington. Russia Peter Rutland is Professor of Government at Wesleyan University. He can be reached at . The author would like to thank Derrin Culp, Vladimir Kontorovich, and Shinichiro Tabata for assistance with this paper. Russia’s Economic Role in Asia: Toward Deeper Integration Peter Rutland Russia is unique in being a country with a presence both in Asia and Europe. Less than eight million Russians, a mere 5% of the population, live in the Russian Far East (RFE)—yet Russia occupies one-fifth of the Asian landmass and holds immense mineral wealth. The country’s energy resources are the key to Russia’s economic and strategic role in Asia. Russia sees both threats and opportunities in Asia. Similarly, Western commentary tends to emphasize two extremes. On one side is the vision of a bonanza of Russian resources flooding into energy-starved East Asian markets. On the other side are alarming scenarios—such as the thinly populated RFE being swamped by migrants from China to the south or a Russo-Chinese alliance challenging the United States for global hegemony. None of these extreme scenarios are likely to come to pass—certainly not within the next five years. The Russian leadership, under no pressure to take any drastic and risky decisions, is most likely to follow a policy of cautious continuity in Russia’s relations with Asia in the immediate future. Rising world oil prices have helped fuel a seven-year economic boom in Russia, during which GDP has grown by more than 50%. As the world’s leading natural gas supplier and second largest oil exporter, Moscow is confident that Russia’s favorable economic situation will persist into the foreseeable future. As noted by the respected analyst Dmitri Trenin, “The Russian leadership is certain that Russia’s energy resources make Russia 174 • Strategic Asia 2006–07 truly ‘irreplaceable’ in the global economy, and consequently in world politics.”1 This situation gives President Vladimir Putin the luxury of carefully weighing all foreign policy options. In contrast, Russia in 2006 is definitely feeling embattled politically. The Russian leadership saw the wave of “color revolutions” that swept through Georgia, Ukraine, and Kyrgyzstan between 2003 and 2005 as part of a deliberate U.S. strategy to loosen Moscow’s influence over the “near abroad.” This impression was reinforced when the United States set up military bases in Kyrgyzstan and Uzbekistan to pursue the war in Afghanistan.2 At the same time Russia has been berated by the United States and European Union (EU) for the Kremlin’s retreat from democracy and “extortion” of higher gas prices from Ukraine (by cutting deliveries on January 2, 2006). Russia is told by U.S. think-tanks that the country is headed in the “wrong...