Dialogue  July-September  2008, Volume 10  No. 1

Reemergence of Russia Implications for South East Asia

  Prof. R.G. Giadadgubli*

 During the last 5-6 years under the leadership of the former president Vladimir Putin Russia has reemerged as a major player in international affairs. Russia is under the presidency of Dmitri Medvedev who is handpicked by Putin even as Putin has taken the charge of prime minister since June 2008. Hence in the context of Russia ’s relations with the Asia-Pacific region in general and South East Asia in particular it may be worthwhile to enquire into the following—What are the factors that have contributed to Russia ’s reemergence? What is the state of relations between Russia and the West and what are their implications for the South East Asian countries? What are Russia ’s key interests and priorities in South East Asia and what are the likely priorities of Russia under the new team of Medvedev and Putin?

    There are a variety of factors that seem to have contributed to the reemergence of Russia . Firstly, unlike the crisis conditions that prevailed during the 1990’s, under the presidency of Vladimir Putin, Russia has attained substantial political strength and stability. Specifically during the second term of presidency of Putin , Russia followed several policy measures which have led to—

(a)   centralization of  political power which has effectively enhanced the powers of the president, and

(b)  weakening of  the role of the political parties, including the Communist party, which offered strong opposition to the former president Boris Yeltsin.

      Hence with the concentration of power with the Kremlin, Putin was able to pursue an assertive policy both in domestic sphere and also in Russia ’s foreign policy issues. Some western analysts opined that Putin’s policies were aggressive in nature and content. But Russian analysts opine that Putin pursued an assertive foreign policy to serve Russia ’s national interest. Policies pursued by Putin increased his popularity at home as a strong leader. This is also reflected in Russia’s ‘Near Abroad’ policy in which Russia has close relations with the some states such as the Central Asian States, Belarus, Armenia    with which there is no conflict of interest. But with few other states such as Georgia, Ukraine etc. Russia has occasional differences on specific issues and relations are not always cordial.

     Secondly, Russia has become economically strong. The country has been able to maintain relatively high GDP growth rates during the last few years. It was about 8.1 percent in 2007, breaking all records during the last two decades. Russian economy is booming and as opined by western analysts Russia is back in the headlines. Russia has  budget surplus of 6 percent in 2007 and the state treasury is overflowing with money. Ruble has become a strong currency and has appreciated against dollar. Per capita income has nearly doubled in the last 5 years exceeding $ 900 at present and hence Russians would like to hold rubles and not dollars. The Russian government has been paying off international debts in advance. This has become possible due to mainly two factors—namely huge hard currency earnings by export of oil, natural gas and export of defense equipments. Being one of the major producers and exporters of oil and natural gas in the world, Russia has immensely benefited by the rising international market price for oil from less than $ 40 per barrel in 2004 to about $ 130 per barrel at present. With this inflow of petrodollars, Russian policy makers are able to reassert in domestic economic issues as also in their dealings abroad. The Russian state sector companies and Russian energy giants such as Gazprom, Rosneft have been able to invest in the energy sector to acquire assets such as oil fields and pipelines. Russia has followed a policy of ‘Resource Nationalism’ to reduce the share of foreign companies such as British Petroleum in joint ventures in Russia . Equally important and significant is the fact that Russian companies have increased their share in companies abroad including Armenia , Belarus , Bulgaria , Kazakhstan , Turkmenistan , Uzbekistan , Algeria , Venezuela etc. Under Vladimir Putin’s presidency the role of Russia ’s state sector has increased, which is contrary to privatization policy pursued by Boris Yeltsin. Moreover, the Russian state, energy giants and the new class of Russian Oligarchs have been working in tandem to achieve the objective to make Russia ‘Energy Super-power’ in the world. According to some western analysts Gazprom is often described in media commentary as a lever of Russian foreign policy, which is an indication of commercial considerations in Russia ’s foreign policy. Russia has also been a major exporter of ferrous and non-ferrous metals in the global market.

     Thirdly, Russia under Putin’s presidency emphasized on increasing the production of arms and military equipments and modernization of defense sector. This is evident from the fact that while Russia’s defense expenditure had gone down by 50 percent between 1992-97, it shot up from Ruble 95 billion in 2002 to 344 billion Rubles in 2003 and this trend has continued. The Russian leaders realized the economic benefits of defense exports, because at a time when the rest of the economy was facing constraints of growth, defense sector emerged as the major source of export earnings. Hence in 2003 Putin approved the new military technical policy for rearmament plan emphasizing R and D of new generation of weapon systems. Thus Russia ’s ROSOBORONEXPORT became an active state organization selling arms in various countries including China , India and South East Asian countries. Asian countries including China, India etc. purchase more than 90 percent of Russia’s $ 5 billion arms exports annually  Thus Russia has reemerged as a major exporter of arms in the global market by exporting to a large number of countries including China, India and many other countries in Asia, Africa and Latin America.    

     Fourthly, Russia has been actively associated and working in several regional organizations with the former Soviet republics, present Commonwealth of Independent States—Collective Security Treaty Organization, Eurasian Economic Community and so on. Similarly, Russia has been active in regional organizations such as the Shanghai Co-operation Organization, APEC, ASEAN which has enabled the Russian leaders to collectively promote its policy initiatives to counter the policies of the West.

Russia —West- Growing Conflict of Interests

    There are ups and downs in Russia ’s relations with the West after the Soviet break-up. At present Russia ’s relations with the West are witnessing a downward phase. This is evident from the mutual accusations and verbal wars between the two. For instance, the US vice president Dick Cheney considered Russia as an undependable country and Vladimir Putin as an autocratic leader. In response to that in July 2007 Russia’s first deputy prime-minister Sergei Ivanov shot back saying that West was creating a ‘New Berlin Wall’. Russia ’s foreign minister Sergei Lavrov accused the West of adopting virtually ‘New Cold War’ policy towards Russia . Hence there are different views and perceptions about Russia ’s relations with the West. According to one view as articulated by the Russian daily paper Vremya Novostei ‘ Europe created as many problems for Russia as opportunities it offers’. The Russian president Medvedev has reiterated Putin’s policies towards the West.

     Russia is unhappy with the Eastward expansion of NATO which is making efforts to draw Ukraine and Georgia into its military alliance. For Russia it is a security threat. Russia ’s relations with the European Union are often affected even as the EU is the largest partner of Russia for trade and economic relations. There is a view that on certain political issues Germany is more sympathetic towards Russia and hence EU considers that Russia was trying to bring about division among the EU members. At the same time Russia ’s relations are strained with the Baltic States, Poland which have joined the EU after the Soviet break-up. Russia ’s agreements with Iran to build a nuclear power plant at Bushehr and supplying nuclear equipments to Iran has created great resentment in the West. Linked to this Iranian issue is the US proposal to set up a ‘Missile-Defense Shield’ in Europe by installing 10 anti-missile interceptors in Poland and a radar unit in the Czech Republic . In retaliation Russia has threatened to put anti-missile units in Kaliningrad in the Baltic region targeting Europe . The Russian president Dmitri Mevedev has strongly reiterated and supported Putin’s policies and measures initiated on this issue.  Russia ’s problems with the West may not have direct bearing for Asian countries and ASEAN in particular. However, Russian policy makers might be more inclined to turn towards the East to promote its own political and economic interests. 

Russia- South East Asian Countries- Political Relations

   Russia has multi-vectored interest in the Asia-Pacific region—geopolitical, political, economic and so on. Russia ’s concept of balance of power, which is fundamental to Moscow ’s view of the World, has been reflected in Russia ’s Foreign Policy Concept of July 2000 and in subsequent policies and political decisions. It is determined by the geopolitical interest of Russia as one of the largest Eurasian power and hence Russia has tried to assert its position against the Western powers in the region.  This evident from Putin’s objective, who wanted Russia to reemerge as a major power in the world, whose position was affected in the 1990’s when Russia faced major problems both at home and abroad.

     Secondly, it is important to note that there is recognition on the part of the Russian policy makers about the growing strategic importance of Asia-Pacific and ASEAN countries in the world. Hence Russia ’s ‘Look East’ policy has been intended to promote its national interest. Thus to fulfill its own political objectives there has been significant intensification in the foreign policy of Russia towards Asia-Pacific region, and measures were undertaken in the recent years for getting full membership of the APEC and ASEAN. Thus Russia ’s key interest is to increase space and place for its role in this region.

     Thirdly, Moscow firmly believes in close co-operation with the South East Asian countries for mutual benefit and there has been a strong perception among the Russian policy makers about the reciprocal response of these countries towards Russia .  It is also argued that there is commonality of views among Russia and ASEAN countries to maintain political stability and build a multi-polar world order. Hence ASEAN-Russia political and security cooperation is expected to strengthen given the convergence in interest in ensuring a peaceful region to pursue economic development and to combat the menace of terrorism and trans-national crimes.                                                         To achieve Russia ’s foreign policy goals, Vladimir Putin pursued active political diplomacy with regard to these countries which is evident from several visits during his presidency of Russia for 8 years since 2000 to May 2008. For instance, Putin’s visit to Hanoi in March 2001 was the first official visit to Vietnam by a Russian head of a State in 50 years and hence has great historic significance not only for Russia’s relations with Vietnam but for the South East Asian region as well. Russia pursued a positive external policy under Putin trying to strike a balance between the East and West. Russia will continue its active political diplomacy in the region with the new President of Russia Dmitry Medvedev and Vladimir Putin as the Prime Minister of the country.

    The Russian leaders have made regular visits at high levels to reiterate Russia ’s policy priority towards the South East Asian countries. The former Russian President Vladimir Putin’s attendance of the Association of Southeast Asian Nations summit in December 2005 in Malaysia had been described as further evidence that Moscow preferred closer interaction with Asia over integration with the West because of shared values. Hence at political level Russia is confident about active cooperation with the Asia-Pacific and ASEAN countries bilaterally and within international associations including the UN, ASEAN Regional Forum (ARF). Asia-Pacific Economic Cooperation. This has helped the partnership to become an influential factor in regional politics. This is reflected on the emphasis that Russia has paid for the establishment of a mechanism for regional cooperation between the ASEAN Regional Forum (ARF) and Shanghai Co-operation Organization (SCO) for effectively tackling issues concerning security and terrorism. The establishment of a mechanism for cooperation between the ARF and the SCO, has in practice already proved its effectiveness and relevance in the job of reinforcing security and combating terrorism in Central Asia .

Russia –ASEAN Economic Relations

   Russia ’s ‘Look East’ policy is guided by strong economic considerations. Russia ’s increased interest in promoting economic ties with the ASEAN countries is guided by the region’s enormous economic potentialities. Asia accounts for about half of the population in the world and about one-fifth of global trade. It is, therefore, pragmatic on the part of the Russian policy makers to be a major player in the Asia Pacific and South East Asian region.  Neo-liberals argue that three elements have transformed Russia into a predominantly regional player in the Asia-Pacific region. Firstly, the changing character of Russia ’s Far Eastern regions and their relationship with the wider region of Asia . The second element is a genuine commitment to strengthening relations with major Asian powers including those in the Asia-Pacific region. The third element is the ‘Economic Factor’—the contention being that economic instruments are often more effective than traditional political and military means in projecting influence. Hence Russia ’s keen interest to increase trade and economic ties with the countries in this region.                      Trade and economic factors have also contributed to Russia ’s interest in Southeast Asia , which were rekindled mainly after Putin took over the presidency in 2000. There was recognition of the importance of South East Asian region for Russia ’s economic development. This was also part of Russia ’s ‘Look East’ policy. For the economic development of Siberia and the Russian Far East, Russia wants closer integration with Asian countries and regional institutions including the ASEAN. It is opined by analysts that Russia got support from the South East Asian countries including Malaysia . It is also important to note that Russia emerged as a major exporter of defense equipments to many ASEAN countries including Vietnam , Malaysia , Indonesia , Thailand .                        Russia ’s aggregate trade turnover with the ASEAN, which was not significant in 2002, has almost doubled in the past six years. But this is only one-third of the potential of trade and technological cooperation. This is why besides trying to increase trade relations, Russia has been looking for new spheres of co-operation with the ASEAN partners. With significant economic growth during the last few years, Russia wants to shift the focus to co-operation in the hi-tech areas and in services sector. An important development in this regard was that in December 2005 foreign ministers from Russia and the 10-member Association of Southeast Asian Nations signed an economic and development cooperation agreement setting out programs to deepen ties over the coming decade. Bilateral agreements are also signed by Russia with the South East Asian countries from time to time. Moreover, Vladimir Putin’s regular interaction with several leaders from South East Asian countries has helped to bolster ties and to strengthen trade and economic ties. For instance, the ASEAN-Russia Joint Cooperation Committee (ARJCC), oversees bilateral economic, trade and research-technical cooperation, consisting of representatives of official bodies and of business and scientific communities. This Foundation has stepped up its efforts in the past few years, when the Asian vector of Russia ’s foreign policy gained in strength.                                                                    Moreover, bilateral cooperation between Russia and South East Asian countries has also assumed great economic significance. For instance, the Russian authorities have bilateral cooperation with Malaysia to promote interaction in the areas of small and medium enterprises, science and technology, energy, minerals, transport, finance, agriculture, technical cooperation, tourism, information and communication technologies, environment protection and disaster management. Russia has also signed agreements to hold exhibitions from time to time. Thus Russian High-Tech Exhibitions held in Kuala Lumpur and Bangkok were a success. Similarly, Russian research laboratories have also received contracts from Singapore for doing research and design projects, including in dual-purpose goods.                                                                         It is important to note that Russia — Malaysia economic ties have covered many important sectors. This is evident from the joint project in which Malaysia was to invest $25 million in three years to produce leokain and bitomycin, antibiotics for the treatment of wounds and burns. Malaysia is also beginning a project of the Russian company Tana aimed at establishing a network of tele-medical video monitoring centers for helping patients with grave infectious diseases, tuberculosis, AIDS, and malaria.                                                                                                   Besides promoting trade there are other economic issues which are of interest for Russia in the South East Asian region. For instance, according to Russian Think Tank, Russia could emulate many things from the experience of South East Asian countries— methods of attracting foreign investment; the establishment of special economic zones and free trade zones; support to small and medium-sized businesses; and the creation of a common regional currency, the Asian Currency Unit (ACU). This is because Russian policymakers are aware that during the last about 20 years Singapore has helped China , Indonesia etc to build SEZ. In order to learn from this experiment in 2006 the governments of Russia and Singapore signed a memorandum of understanding on cooperation in establishing special economic zones.  Similarly, Russia wants to make use of Singapore ’s unique experience of attracting foreign investment and investing substantial funds abroad. This is because Singapore accounts for 39 percent of total investment in Asia , and has invested over $60 million in the Russian economy. There is an important aspect that Russian policy makers need to emulate from Singapore , which is a country with low investment risks, and hence it attracted investment of about $5.35 billion in 2006.

Russia-ASEAN Energy Co-operation

     For Russia energy is an important sphere of promising cooperation with the Asia-Pacific and ASEAN countries. According to modest forecasts based on projected rates of economic and demographic growth, global energy consumption will increase by 20 percent in 20 years and it will double by the middle of the century. This will increase Russia ’s role as energy provider. Russia would like to play an important role in the growing energy market of the Asian countries. As stated by the Russian energy minister Viktor Khristenko in 2007 only 3 percent of Russia ’s energy exports went to Asia . By 2020 Russia proposes to export 30 percent of its energy exports to Asian countries. This statement assumes importance considering the fact that Russia is a member of the Asia-Pacific Economic Cooperation organization and at that bloc’s one of the summit Moscow’s primary focus was how it could meet Asia’s demand for energy to fuel the region’s economic development.

     The Russian energy giant Gazprom has calculated that Russia, which has the world’s largest energy reserves, will supply some 110 billion cubic meters of gas to Southeast Asian countries by 2020, with the share of liquefied natural gas (LNG) growing considerably. Russia has signed a memorandum on strategic cooperation with PTT, Thailand ’s oil and gas corporation. Gazprom is negotiating with Malaysia ’s Petronas on participation in the construction of a gas pipeline across ASEAN and of gas supply infrastructure in the member countries. With close co-operation in the energy sector, recently Malaysia ’s Petronas took part in the initial public offering of Russian state-run oil company Rosneft, buying $1.1 billion worth of its shares, which was more than British Petroleum or China ’s CNPC investment in it.                                               Apart from exporting oil and natural gas, Russia would like to export machinery and equipments for power plants in South East Asia . For instance, Russia ’s Silovye Mashiny the producer of power machines and equipments, is rapidly strengthening its foothold in the region. The demand for its equipment has grown considerably owing to the construction and modernization of thermal and hydropower plants in Thailand , Vietnam , Laos and Cambodia . Russian energy companies are seeking cooperation with the Asia-Pacific and ASEAN countries in energy related sector for mutual benefit. For instance, Russian electricity monopoly RAO UES was also actively looking for partners and investors in Southeast Asian countries. It was also discussing with Malaysia for the financing of new electricity assets in Russia , hoping that Malaysian partners will invest about $2 billion in the Russian power generation sector.

Nuclear energy

    Russia is one of the leading countries in the world in producing nuclear energy. It has several years of experience in nuclear technologies, including in designing and using fast neutron reactors. The average prime cost of electricity produced by Russian nuclear power plants is $0.014 per kWh. According to Russian scientists, Russia is one of the world’s leaders in the production of small nuclear power units, and hence its achievements could also be used in other countries. Several regional countries, notably Indonesia , Malaysia , Thailand and Vietnam , have announced their intention to develop a nuclear sector in their power industries. It may be mentioned that Russian experts are modernizing the Da Lat Nuclear Research Reactor and assembling            equipment for the Hanoi gamma-ray unit. Nuclear contracts are being negotiated with other countries. In particular, Indonesia has proposed to acquire a Russian-made floating nuclear power plant, an exclusive product of Russian engineers.                                                                             Russia is interested in regional projects and hence mutuality of interests between Russia and the ASEAN countries provides a reliable foundation for the architecture of future relations between Russia and the ASEAN. But according to some analysts even as South-East Asia is an old stamping ground for the Kremlin, Russia is late in returning to the scene. Many of these countries have close ties with the Western countries and also with China . Hence situation is not very easy for Russia to make great success in the region.                                                         On its part Russia is interested in the South East Asian region to secure support for its entry into the World Trade organization. Hence as argued by some analysts, Russia ’s intention to increase engagement with the South East Asian countries is no different from its other foreign policy goals. The Kremlin authorities are engaged in negotiations with several countries to enter the World Trade Organization.

Export of Defense Equipments

     As stated above Russia renewed its interest in promoting defense production and exports primarily under Putin’s presidency and it will be continued under Medvedev. Hence Russia has a major stake in the Asian region which includes many South East and Asia-Pacific countries. Visits of several  Russian leaders including that of Vladimir Putin, former Prime Minister Mikhail Kasyanov and others to the South East Asian countries since 2000 were intended to promote strategic partnership with these countries and also to export defense equipments. These efforts have yielded positive results —Lomo-Corp’ delivered 50 portable SA-18 surface-to-air missiles to Vietnam under $ 64 million contract, Maynamar took delivery of dozens of MiG-29 fighter jets, Malaysian air force purchased a squadron of general purpose fighter planes  and Sukhoi S-30K fighter planes  from  Russia  and so on. In addition, Russia is supplying modern aircraft and helicopters to the region and establishing technical maintenance centers in Malaysia and Indonesia , which meant it was not selling only military equipment. Similarly, to effectively deal with the destructive force of forest fires in tropical regions, many Asia-Pacific countries  have been attracted to acquire Russian-made ‘Be-firefighting-amphibious’ aircrafts. Russia ’s keen interest in South East Asia was evident when the former president Putin visited Indonesia and signed an arms deal with that country. It important to note that he was the first Russian leader who visited Jakarta since Nikita Khrushev visited way back in 1960. Hence Putin certainly wanted to renew and revive old political and economic ties with Indonesia . Russia is also supplying KAMAZ trucks and many other civilian goods to the region. In the opinion of some defense experts this was one of the main reasons for Russia pushing its permanent membership in these Asian regional organizations.

Conclusion

      In conclusion it may be stated that Russia has reemerged as a major global power.  Under the former presidency of Vladimir Putin, Russia has become politically strong with concentration of power in the Kremlin. Russia has become affluent and prosperous thanks to the export of oil and natural gas and export of defense equipments. There is growing assertiveness of Russia both at home and abroad. There are strong indications that there will be continuity of these policies under the leadership of new President of Russia Dmitri Medvedev and Prime Minister Vladimir Putin. 

    Russia is facing a downward phase in its relations with the West. This is due to a variety of reasons. From Russia’s perspective NATO’s Eastward expansion policy; differences and misunderstandings with the EU; conflict over Russia’s supply of nuclear equipment for power plant to Iran leading to proposal of the West to set up Missile Shield have affected Russia’s relations between the West.

   This has indirectly intensified Russia ’s ‘Look East’ policy with emphasis on relations with the ASEAN countries. Russia wants to reassert its policy of balance of power with the West so far as the Asia-Pacific and the ASEAN countries are concerned. Russia claims to promote co-operation with the ASEAN for mutual benefit in political, security and economic spheres. To achieve these objectives in the next decade or so Russia would like to enhance its role in the South-East Asian region both through regional co-operation as well as bilaterally with individual countries. With emphasis on increase in production and modernization of defense sector, Russia would increase its exports of arms and equipments. Russia seems to strengthen ties in the defense sector not only by increasing export of defense equipments but also in new forms of cooperation such as establishing technical maintenance centers in Malaysia and Indonesia and so on.

      Considering the fact that the share of Russia ’s trade is not significant at present, Russia might take several measures to increase trade with these countries. Russia has potentiality to export more oil and natural gas to some of the South East Asian countries. Russia ’s energy giants such as Gazprom, Rosneft might become more active in the energy sector of the Asia-Pacific region in the next decade through investment in joint ventures and in acquiring assets in energy related fields in the South East Asian countries to promote its objective to enhance its role as a energy super-power in the world. 

       Moreover, Russia is likely to actively seek cooperation with ASEAN countries in high-tech areas; banking and investment areas; development of service sector; creation of SEZ and so on in which some of them have developed considerable experience and expertise. Russia might also be interested in the participation of qualified and skilled work force from the South East Asian countries in the economic development of Russia ’s Eastern regions such as Eastern Siberia and the Far East . This may help reducing the proportion of Chinese work force in Russia . While there will be no return to cold war era, Russia would make all efforts to reestablish its position as equal partner with the United States in the world affairs. With extensive natural resources, world class technical expertise and sustained high economic growth during the last few years, Russia  has potentiality to enhance its power and position in the world including in the South East Asian region.