Russia Looks East To Asia Pacific – Analysis


By Andrew Hammond

While much of Russia’s national focus remains on Ukraine, and the wider European area, President Vladimir Putin maintains big economic and political ambitions for the Asia-Pacific region, too.

The latest sign of this will come next month when Vladivostok hosts the Eastern Economic Forum from Sept. 10-13. This major business forum, which last year attracted participants from almost 70 nations, is perhaps Russia’s key annual international platform for strengthening ties with the Asia Pacific region. The largest foreign delegations at the 2022 event were from China, India and Myanmar.

Since the start of the war in Ukraine, Russia’s economic ties with Europe and much of the wider industrialized West have been significantly reduced, and so Putin has high hopes that he can reorient the economy more toward high-growth emerging markets. These include a number in the vast Asia Pacific landscape, and Russia is already, for example, part of the Asia Pacific Economic Cooperation group, the 21 members of which also include Brunei, China, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Certainly, not all Asia Pacific nations are on cordial diplomatic terms with Russia. Since the invasion of Ukraine, attitudes have hardened in Japan and Australia, for instance. This was evident in the results of a survey by Pew, published in July, that found more than 90 percent of those polled in those two countries had a negative view of Russia.

The picture is different in other parts of the region, however. India, for example, was the only country of the 24 international powers surveyed by Pew in which a majority (57 percent) of people had a favorable opinion of Russia. In Indonesia more people (42 percent) had a favorable opinion than an unfavorable one (32 percent).

But it is very much China, which was not included in the Pew survey, that is key to Russia’s plans in the Asia Pacific region, with the partnership between the two deepening under the leaderships of Putin and President Xi Jinping. Prior to the war in Ukraine, the latter described bilateral ties with Moscow as “the highest-level, most profound and strategically most significant relationship between major countries in the world.”

Plans for cooperative projects include a new method for interbank transfers and a joint credit agency designed to create a shared financial and economic infrastructure, which would allow Beijing and Moscow to function independently of Western-dominated financial institutions.

Both nations are also among the leaders in efforts to create financial forums that could serve as alternatives to the World Bank and the International Monetary Fund, including the New Development Bank, which will finance infrastructure and other projects in BRICS states. BRICS is a grouping of the emerging economies of Brazil, Russia, India, China and South Africa, which this week invited Saudi Arabia and five other countries to join.

Moreover, Russia and China have signed a $400 billion natural gas supply deal that includes an approximately 2,000-mile gas pipeline from eastern Siberia to northeastern China. They have also agreed to construct a second major gas pipeline connecting western Siberia to China’s Xinjiang Province.

Since the start of the war in Ukraine, Russia has also enhanced its relationship with India. Relations between Putin and Prime Minister Narendra Modi are cordial and, as the Pew data highlights, the Indian people have a relatively favorable view of Russia.

Moscow and New Delhi have set a target of $30 billion in bilateral trade by the end of 2025, with diversification away from traditional sectors such as energy and minerals to others such as cybersecurity, agriculture and pharmaceuticals. The decision by Indian authorities to extend a $1 billion line of credit to businesses interested in investing in Russia’s far east will no doubt help boost bilateral trade.

Putin is eagerly embracing these and other initiatives to help shore up his regime, economically and politically, as Europe and the wider West cut economic ties with Moscow. Though weakened by June’s Wagner mutiny, he remains determined to stand for reelection next year and could still plausibly remain in power into the 2030s.

As he works to expand ties between Moscow and the Asia Pacific region, he is well aware that Europe and the wider West will continue to cut back on economic relations with Russia. According to a recent analysis by the Kyiv School of Economics, a significant number of 1,871 European-owned entities that were active in Russia before the war are no longer operating in the country.

Moreover, analysis from the Yale University School of Management suggests that more than 1,000 companies have voluntarily curtailed operations in Russia to some degree beyond the bare minimum legally required by Western sanctions.

Among those firms that have not already cut business ties completely by withdrawing fully or severing ties with Russia, many are reducing their footprints there by suspending operations while keeping options for a return open, scaling back some business operations while continuing others, and/or buying time by postponing planned investments while continuing substantive business.

Moving forward, it seems likely this trend will only continue in the face of growing sanctions, including 11 separate EU packages of restrictive measures. In addition, a significant number of Western companies are suffering significant losses among their operations in Russia, including asset impairments, foreign exchange-related charges, and other one-off expenses as a result of the sale, closure or reduction of Russian businesses.

One reason that there is likely to be a continuing outflow of Western businesses from Russia is the increasingly complex operating environment there. Moscow is increasingly impatient, nationalistic, and still reeling from what it considers to be illegal Western sanctions and expropriation of Russian assets overseas.

Taken overall, and with Russia’s relations with the West in what appears to be a permanent state of deep freeze under Putin, Moscow is therefore likely to continue to put ever-greater emphasis on the Asia Pacific region. While not all nations there are on cordial terms with Putin, he will double down on key states such as China and India, where Russia is still viewed relatively favorably.

Arab News

Arab News is Saudi Arabia's first English-language newspaper. It was founded in 1975 by Hisham and Mohammed Ali Hafiz. Today, it is one of 29 publications produced by Saudi Research & Publishing Company (SRPC), a subsidiary of Saudi Research & Marketing Group (SRMG).

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