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Russia’s Foreign Policy in Northeast Asia

Mikhail A. MolchanovAssociate ProfessorDepartment of Political ScienceSt. Thomas University, Fredericton, CanadaVisiting Scholar, Waseda University, Tokyo, Japanmolchan@stu.ca

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Grand narratives

Utopian globalism: GorbachevPrimitive westernism: Yeltsin-KozyrevEurasianism: Primakov (1995-99)Pragmatism: Putin INationalism/Eurasianism : Putin IIBack to pragmatism and global engagement?

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Key Priorities

Sovereignty and territorial integrityReclaiming the status of a global power Multilateralism/multipolarity (UN, UNSC)Economic development International and regional stabilityActive neighborhood policies

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Regional priorities

Integration in the framework of the CISDeveloping ties with the EUContaining NATO’s growthReviving the Russia-US dialogue The Asia-Pacific integration (APEC, ARF, SCO)Strategic partnerships with China and India

Source: Goskomstat RF 5

Russia’s trade with North-East Asia

02000400060008000

10000120001400016000

Exports (US $ mln, actual prices)

China Japan Korea

02000400060008000

100001200014000

Imports (US $ mln, actual prices)

China Japan Korea

Source: Federal Customs Service, RF 6

Structure of foreign trade (%)

2002 2003 2005 2006 2007

0

20

40

60

80

100

Others

CIS

USA

Japan

Korea

China

EU

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Trends in Russia’s foreign trade (%)

1

10

100EU

China

Korea

Japan

USA

CIS

Others

EU 36.8 36.1 52.1 54.3 51.4

China 6 6.1 6 6.5 7.3

Korea 1.4 1.4 1.9 2.2 2.7

Japan 1.8 2.3 2.8 2.8 3.6

USA 4.6 3.7 3.2 3.4 3.2

CIS 16.9 17.8 15.2 14.7 14.9

Others 32.5 32.6 18.8 16.1 16.9

2002 2003 2005 2006 2007

2007 WDI; IMF; Reuters; CIA; countries

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Largest reserves holdings

Economy

US$ bln

2004 2005 2006 2007 2008 Import coverage (2005)

China 622.9 831.4 1,068,5 1,527 1,680 14 months

Japan 844.7 846.9 895.0 973.4 1,020 16 months

Russia 126.3 182.3 304.0 476.4 494.5 11 months

India 131.6 137.8 192.0 275.3 288.3 12 months

Taiwan 247.7 260.3 266.2 270.1 272.8 14 months

Korea 199.2 210.6 238.8 262.2 262.4 8 months

Singapore 112.2 115.8 136.3 162.9 167.6 5 months

Hong Kong 123.6 124.3 133.2 150.4 159.9 4 months

Germany 97.2 101.7 111.6 136.2 153.0 1 month

USA 190.5 188.3 54.9 70.6 73.5 1 month

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Main security concerns

Expansion of NATO: Georgia, UkraineU.S. Ballistic Missile Defense (BMD) in EuropeChinese demographic and economic expansion in RFE (unvoiced)Political Islam, terrorism and separatismNuclear proliferationGlobal economic vulnerabilities

Source: SIPRI database 10

Russian defense expenditure

In constant (2005) US$ mln

0

50000

100000

150000

200000

250000

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Russia

USSR

In constant (2005) US$ mln

13600

1910023600 26100

34700

10000

100000

1000000

1998 2000 2002 2004 2006

Russia

China

Japan

USA

ROK

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Regional policy drivers Bilateral Multilateral

China’s growthBalancing or bandwagoning?

US & NATO expansionBalancing/engaging

Unrealized potential in relations with Japan

Separating politics from economics

The two KoreasThe trade/security nexus

UN/UNSCN Korea; Six-party talks Japan’s bid for UNSC

G7/G8Hokkaido Toyako summitRussia’s 2006 presidency

SCO / CSTOAPEC / WTOASEAN /ARFACD, EAS, others

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Russo-Korean relations: PoliticsKey concern – security

Denuclearization of the peninsula: the “Ukraine model”Equal relationship with both KoreasConflict prevention (security cost)Stability at the bordersNuclear non-proliferation in NE Asia: Japan, ROK, Taiwan

Geopolitics and the balance of powerReaffirming Russia’s relevance in NEAChecking the US hegemonic ambitionsSoft-balancing China together with the SouthEstablishing spheres of influence in the North

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Russo-Korean relations: Economy

Korea as Russia’s gate to NE AsiaThe “Europe-Korea” railway link (TSR/TKR)Unified energy system for continental NEAGas/oil trade, E&D (Sakhalin/Kamchatka)

A bridgehead to Asia PacificA market for high value-added exports A partner in the development of RFE

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Relations with Japan: Key areas

“Creative partnership”Trade/investment/technologyLaw enforcement, defense and securityCultural and interpersonal exchangePolitical dialogue, international cooperation, peace treaty

Problem issuesJapan’s “territorial claims”Insufficient level of trade & investments

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Relations with Japan: Economy Strengths Weaknesses

Trade grows 30-40% a year

Reached $19 bln in 2007Industry leaders started taking interest in Russia

Automotive: Toyota (2005), Nissan-Suzuki-Isuzu (2006-07)Banks: Tokyo-Mitsubishi UFJ, Mizuho, Mitsui Sumitomo (2005-2006)

Program of development of the Far East and Trans-Baikal region up to 2013Russian sovereign funds look to invest in Japan

Investment < 2% totalcumulative $2960.4 mlndirect $292.8 mln

Sakhalin II: A traumatic experience for JapanThe East Siberia-Pacific Ocean Oil Pipeline: A prolonged debate

Skovorodino (China) firstBy rail to Kozmino Bay (Japan) second

Japanese SME in Russia suffer from regulatory burden and corruption

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China: “a relationship of trust”Drivers:

First, Russia’s fear, then – admirationSame vision of key global issuesEconomic incentives on both sidesResisting American hegemonismGeopolitical positioning in the world and vis-à-vis each other

Super-task: emulating China’s successPresent goals: security, stability, regime preservation, rebuilding of the state, economic revivalInstruments: trade, political and military cooperation, strategic uses of state-led regionalism in Eurasia

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Trade and investmentTrade: 2006 - $28.7 bln; 2007 - $40.3 bln, 41-48% growth/yearGoal – US$ 60+ bln by 2010Interregional ties: 70 out of 89 Russian provinces have direct contacts with their Chinese counterparts. Good outlook for the future - $5.2bln in trade contracts in 03-10/2007, incl. $500mln to Russia’s machine building industryOil – 10 mln ton exported in 2007 (10% of Chinese demand, 4th place in the Chinese market after Saudi Arabia, Angola, and IranGas – an agreement to export 30-38 bln m3/a Chinese investments in Russia ($5bln pledged) – capital construction, pulp mills, agriculture. Potentially - port renovation & infrastructure projects (Vladivostok-2012, Sochi-2014). By Nov 2007: $1.6 bln in accumulated bilateral investment (Russia’s inward>90%). The goal is $12bln by 2020.

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Political and military aspectsTreaty of Good-Neighborliness, Friendship, and Cooperation (2001)

Arts. 7-9 on security-related cooperationThe Outline on Implementing the Treaty (2005-2008)

Borders no longer an issue (Oct. 2004)But Chinese demographic and economic pressure remains: 108 mln in 3 NE provinces vs 27 mln in all of Siberia/RFE

Joint military exercises became routineRussia’s arms have modernized PLA

Chinese purchases saved Russian military-industrial complexNew tensions over co-production, licensing

Putin: military cooperation "will continue” (03/2007)

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Shanghai Cooperation Organization

Neither the “Chinese” nor the “Russian” toolinterdependence, complementary interests

– Central Asians not easy to push around• From confidence building measures to a

multifunctional regional club in 5 years• A new “geopolitical axis” or “we did not plan it

that way”?• Prospects for the future: “deepening before

widening”– The Iran controversy– India vs Pakistan– Diverging attitudes toward the West

VTsIOM, March 2007 national poll N=1600, p<3.4%

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Public opinion and foreign policy• What is Russia?

– A part of Europe, their 21st century destinies will be closely intertwined – 38%

– Not quite European, but a unique Eurasian civilization; in the future, its interests will be shifting to the East – 45%

• Russia’s rise and strengthening– Is a threat to the European nations, which do not want

this to happen – 49%– Answers the interests of the European nations, since

Europe is our common home – 34%• Positive (negative) associations (%):

– Europe: 77 (11), CIS: 59 (21), EU: 56 (18), Asia: 56 (24), the UN: 55 (21), the West: 52 (31), WTO: 49 (19), America: 34 (50), NATO: 19 (57)

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Conclusion• Is there a Russian strategy for Asia?

– Yes: Putin’s plan, Medvedev’s career– No: inconsistencies, lack of planning

• Eurasian regionalism – the main avenue for Russia’s great power revival– SCO remains the key– CIS – Medvedev’s first priority– RFE – “we need to develop, finally, the

system of state policies toward the Far East” (Medvedev, 07/02/2008)