Russia’s Mixed Prospects in Regional Integration in East Asia 1

28 July 2012
Tsuneo Akaha

Tsuneo Akaha, Professor of International Policy Studies and Director of the Center for East Asian Studies, Monterey Institute of International Studies, Monterey, California, U.S.A. Professor Akaha is also a member of the International Advisory Board of the School of Regional and International Stuides, Far Eastern Federal University

Does Moscow have an effective strategy for developing the Russian Far East and turning it into a “bridge to East Asia”? Does Moscow have a realistic strategy for taking advantage of its East Asian neighbors’ economic dynamism, expanding bilateral relations in the region, and becoming part of the burgeoning multilateral cooperation and integration in the region? Let us explore these questions.

Russia’s Unbalanced Profile in East Asia

Russia’s population of 138 million persons is the third largest among East Asian countries, after China (1,343 million) and the US (314 million), and ahead of Japan (127 million). However, demographic trends in Russia indicate Russian society’s declining vitality. Its population declined by an estimated 0.48 percent in 2008, compared with an estimated 0.89% and 0.48% growth, respectively, in the US and in China.

Russia’s GDP in purchasing power parity (PPP) terms in 2011 stood at $2.38 trillion, far smaller than the United States’ $15.04 trillion, China’s $11.29 trillion, and Japan’s $4.34 trillion. Russia’s GDP per capita was $16,700 in 2011 and compared favorably with China’s $8,400, but lagged far behind the United States’ $48,100, Japan’s $34,300, and South Korea’s $31,700.

On the other hand, Russia remains a formidable military power, with its defense expenditure, at $64,123 million, the third largest in the region, following the United States ($689,591 million) and China ($129,272 million), and exceeding Japan’s $54,529 million and South Korea’s $28,280 million.

Economically, Russia has a small presence in East Asia. In 2005, its trade in Northeast Asia, the most dynamic subregion of East Asia, barely amounted to 2 percent of the entire intraregional trade. In contrast, China (excluding Hong Kong), Japan, the US, and South Korea represented 33 percent, 26 percent, 12 percent, and 12 percent, respectively, of total trade within Northeast Asia. Russia’s trade with its Northeast Asian neighbors, including the US, constituted around 12 percent of its worldwide trade. For China, Japan, and South Korea, their trade within the region represented, respectively, 60 percent, 62 percent, and 55 percent of their global trade. In short, intraregional trade is far more important to other countries than to Russia and other regional trade partners are far more important to each other than is Russia.

With its shrinking population, lackluster economic performance and lagging economic engagement with its East Asian neighbors, yet substantial military capacity, Russia faces mixed prospects for its role in regional integration in East Asia.

Russia’s potential role in regional trade is substantial, particularly in the energy sector. Russia holds huge reserves of oil and natural gas. In 2006, Russia had the 8th largest proven oil reserves in the world. Russia’s proven natural gas reserves were the largest in the world. If successfully developed, these resources can boost Russia’s economic profile to unprecedented levels.

The Role of the Russian Far East

The Russian Far East represents both real and potential opportunities as well as liabilities for Russia’s engagement and integration with East Asia. The most obvious advantage the Russian Far East enjoys is its abundant natural resources. Second, the Far East’s geographical proximity to the resource-hungry East Asian nations offers Russian exporters an advantage over exporters in distant locations. Third, East Asian nations high savings and capital accumulation might be exploited for the benefit of the badly needed industrial modernization and infrastructure development in the Russian Far East. Fourth, as with investment capital, the vast array of quality technologies available in East Asia can also help enhance industrial modernization in the Russian Far East. Fifth, the Russian Far East stands to benefit from a well-managed import of cheap Chinese labor, particularly in the labor-short sectors of agriculture, construction, and services.

The largest disadvantage of the Russian Far East is its small and declining population, which saps its social and economic vitality. Second, Moscow’s view of the Far Eastern Territories almost exclusively as a supplier of raw materials and a fortress to be protected against foreign threats leads to the neglect of the development of the civilian economy of the region on its own merit. Third, heavy emphasis on natural resource extraction in the region is associated with the deterioration of its natural environment and the health of its population. Fourth, the scarce indigenous capital in the region renders it dependent on “subsidies” from Moscow and investment from foreign sources. However, sustained large-scale foreign investment in the Russian Far East is unlikely without Moscow’s unequivocal commitment to the economic development and modernization of the region. Fifth, the interests and priorities of Moscow and the Far East are not always in sync with each other. For example, the strategic partnership between Moscow and Beijing has not been translated into a stable relationship between the Russian Far East and China’s northeastern provinces.

Russia and Regional Integration in East Asia

Russia has been expanding its participation in multilateral cooperation frameworks in East Asia since the 1990s. In Northeast Asia, Russia has been a participant in the Six Party Talks over the North Korean nuclear problem. However, Moscow’s influence is limited. In the face of North Korea’s nuclear and missile development and military provocations, Moscow has coordinated its position with Beijing, consistently opposing sanctions against Pyongyang. Russia is the chair of the task force under the Six Party framework to discuss multilateral security architecture beyond the Six Party Talks, but North Korea quit the multilateral talks in 2009 and no progress has been seen on the establishment of a longer-term security framework in Northeast Asia.

Russia’s multilateral diplomacy in Southeast Asia has lagged behind that of other major regional powers like China and Japan. This is largely due to Russia’s limited economic involvement in the region and also because of Moscow’s loss of sustained interest in the region in the aftermath of the Cold War. During the Cold War, Russia viewed Southeast Asia as a theater of ideological rivalry with Beijing and was deeply engaged in the region, particularly through its support of Vietnam. The end of the Cold War and the Sino-Russian rapprochement ended Russia’s active engagement in this part of Asia. It took nearly a decade before Moscow began to undertake diplomatic efforts to regain its regional influence. Russia joined the ASEAN Regional Forum (ARF) in 1994; became an ASEAN dialogue partner in 1996; and signed the Treaty on Amity and Cooperation in 2004. Since 2005 Moscow has been holding annual summit meetings with ASEAN. In October 2010, Russia joined the ASEAN Defense Ministers’ meeting for the first time, along with China, the US, Japan, South Korea, India, Australia, and New Zealand. Also in October 2010 Russia, together with Australia and New Zealand, took part in the Asia-Europe Meeting (ASEM). Most recently, in November 2011, Russia and the US joined the East Asia Summit (EAS) for the first time.

How about APEC and Russia’s role in it? Since Russia joined APEC in 1998, the multilateral forum has been playing a diminishing role in regional and global trade liberalization. Following the failure of global trade negotiations within the framework of the World Trade Organization (WTO), there have been visible trends toward bilateral and minilateral free trade agreements (FTAs). Furthermore, the major trading powers in East Asia do not see Russia as a particularly attractive partner for bilateral FTAs or EPAs (economic partnership agreements).

Can Russia change these trends? Given the nation’s limited economic ties to East Asia and its latecomer status in the WTO, prospects are rather limited. Moreover, the Putin administration’s interest in further tightening its control over the domestic economy will clash with the WTO’s mandate for its members to liberalize their trade policies.

Conclusion

In conclusion, if Russia is to deepen its economic ties with its Asian neighbors, it needs to engage more actively in the growing multilateralism in the region, demonstrate a firm commitment to the development of the Russian Far East as a “bridge to East Asia,” and undertake major modernization efforts in the domestic economy.

The upcoming APEC Summit in Vladivostok will be significant not so much for what Russia will contribute to the multilateral dialogue as for what its hosting of the summit will do for the economy of the Russian Far East. As APEC Chair in 2012, Russia hopes to “promote the domestic economy [sic] organic integration into the system of economic ties in the Asia Pacific Region (APR) in the interests of modernization- and innovation-driven economic development, primarily in Siberia and the Russian Far East.” 2

Energy resources offer Russia the most promising avenue toward closer economic relations with the East Asian neighbors, but it remains to be seen how the development of energy resources can be integrated functionally with the market forces that are driving the regional integration in East Asia. Moscow will be tempted to use it as an instrument of diplomacy in bilateral relations. However, the major energy importers in the region – China, Japan and South Korea – are operating in the global energy market. Therefore, Moscow needs to define its energy policy in global market terms. Is Moscow fit for the task?

1 This is based on the author’s article, “A Distant Neighbor: Russia’s Search to Find Its Place in East Asia”, Global Asia, June 2012.

2APEC-2012 Priorities”, (accessed June 10, 2012).