Russian Asia mega-project

by Andrey Borodaevskiy

Unprejudiced analysis brings us to the conclusion that Russia does not have many choices concerning its immediate economic future. Let us hope that Soviet-style “autarky” is out of the question.

Cooperation with the European Union provokes much attention, but as long as the ill-designed concept and, in many ways, suspicious practices of “sovereign democracy” remain at the core of Russia’s social and political order, not much can be expected to happen in the “western” direction. It seems that the most promising and, so far, quite realistic perspective may be connected with the “eastern” direction and the idea of a truly multinational mega-project aimed at the recolonization of Siberia and the Russian Far East. Such a large-scale long-term venture should be collectively realized under Moscow’s aegis by people from several neighboring and even far-away countries.

Considering such a paramount development scheme, we have to try to evaluate eventual approaches to it, both in Russia and in other countries which may get involved.

The United States traditionally keeps a jealous eye on Russia because of its alleged infatuation with Europe. Its goal is to “draw” Europe closer to itself via the Atlantic, and Russia via the Pacific (which secures an easy way to its richest Eastern regions). It would also like to neutralize China’s advantage as Russian Asia’s closest and mightiest neighbor. Thus the eventual wide multinational character of the proposed mega-project suits U.S. needs quite well.

While participating in an international public forum in Yaroslavl in September, former U.S. National Security Adviser Zbigniew Brzezinski unequivocally stressed the point that global stability can be secured only by large-scale cooperation, not by imperial dominance. He gave his blessing to the Russian idea of building an underwater tunnel beneath the Bering Strait — a project which could serve both Russia (as a big move in enhancing its far-eastern transport infrastructure) and the U.S. (which would get a cheap new transit corridor “Eurasia-America”). According to some evaluations, such a big-scale facility could service 3 to 5 percent of the world cargo tonnage. However, it hardly will be of any use to China, which has a direct connection with the U.S. via traditional trans-Pacific waterways.

On that occasion, Brzezinski unexpectedly advanced a staggering proposal — to create “a new community from Vancouver to Vladivostok.” It is not such a new idea, per se, but previously it had always been understood that the path from Vancouver (symbolizing the North American West Coast) to Vladivostok (standing for Russian Asia) would run across the vast stretches of Eurasia, including the area of the European Union, thus girdling almost the whole globe.

However, the Brzezinski statement was made in such a context that it could be perceived as one with a new meaning — namely, that the two cities would be connected, so to speak, point-blank such as via the North Pacific (obviously with the Bering Strait tunnel in mind).

In other words, the new transport artery would serve, first of all, economic “twinning” among the U.S., Canada and Russia without special consideration of European or Chinese interests.

The Arctic regions, with their eventual natural riches and transportation potential, have been attracting attention in Russia and in North America. The prevailing mood is: Dangerous confrontations around sovereignty issues concerning continental shelves can be avoided, while neighborly cooperation is a desirable and practical future. Development of various Arctic reserves, especially those of oil and gas, promise high returns but demand big investment in industrial infrastructure.

In particular, the pride of the former Soviets — the Northern Sea Way — should be revived and equipped with new vessels, port and warehousing facilities, with railroads leading south, with modern airports, etc. As for the Trans-Siberian railway system connecting Vladivostok and Khabarovsk with European Russia, it is waiting for full remodeling and the expansion of its logistics potential with the aim of creating a “land bridge” and attracting cargo from Pacific vessels.

Each country which could eventually participate in the mega-project based on sound geoeconomic considerations would surely find its own motivation.

For example, South Korea is in bad need of natural gas and has repeatedly expressed its readiness to get this energy resource from Russia — even if the pipeline went through the precarious territory of North Korea. It rightly sees in such an exotic cooperation scheme a stabilizing factor in the not very reliable geopolitical situation within East Asia.

Since January, China has gotten Russian oil via the so-called East Siberia- Pacific system. The long-term contracts provide for the delivery of 15 million tons of oil annually during the coming 20 years. This is only an example of more than 200 similar long-term contracts. Regretfully, practically all of them have a rather lopsided character from the structural point of view.

The trend is quite obvious; Russian Asia has become a raw materials base and a growing market for booming northern China manufacturing, a precarious fact which is clearly mirrored in the structure of bilateral trade. Meanwhile, labor migration grows and is lopsided as well.

In this connection we may note that some high-level Russian officials participating in a meeting of the Association of Southeast Asian Nations on the level of trade ministers invited companies from these countries “to enter the Russian market, establish a good footing there and produce foodstuffs for their own consumption.” Can it not be a sign that Russia would like to widen the circle of participants in international cooperation in its eastern regions in order to counterbalance the Chinese presence, which already threatens to become overwhelming?

On the other hand, some influential members of the Russian elite advocate an even stronger orientation with regard to China and its development potential.

For one, famous “oligarch” Oleg Deripaska proposes to declare Siberia and the Far East the country’s main development area and to orient the new industrial cluster toward China, its needs and its rapidly growing market.

Accordingly, the state should grant tax relief to local companies, help in developing industrial and transport infrastructure, create a special development fund for the Far East and the Baikal region, give over to it all the newly discovered raw-material deposits and charge it with a wide search for eventual investors.

“The horse goes where its head is turned to. If Moscow’s head is turned toward Europe we will not be able to move in the Asian direction,” Deripaska said in a Baikal public forum this year.

To find a healthy conciliation between geopolitical and geoeconomic approaches is a difficult but very promising task. Success in a venture as bold as the eventual Russian Asia mega-project will enable a country to design an attractive business environment and give to its creation the necessary political and economic priority.

The new modus vivendi must look attractive enough for Russia’s own people, for its private businesses, and for partners from various countries and world regions. Otherwise, it simply will not work.

If and when the proposed development mega-project for Russian Asia starts taking shape, it seems that, initially, its major driving force must be Russia’s state in collaboration with big business (or this important role should be played by the newfangled Eurasian Economic Union if it becomes a reality).

Target programs in Siberia and the Far East neglected during the global crisis should be revived and expanded, with budget financing enhanced. Big business should be heavily taxed but, at the same time, stimulated to massively invest in the Eastern regions. The influx of migrants must be assisted and the newcomers relieved, at least temporarily, of the tax burden (another recipe from Deripaska).

Foreign investors and eventual migrants must receive a clear and unequivocal invitation to join the development effort. In that case, there will be pretty good grounds to expect that various foreign players will follow suit — state-owned and private investors from China, leading U.S. corporations, some farsighted European companies, venture capital firms from South Korea, India, Brazil, etc.

Japan could and should be a major player in this paramount development game as well. However, there are many factors and special circumstances which might influence its attitude and corresponding government and private decisions. Thus the issues of Japan’s eventual participation call for special analysis.

Russian professor Andrey Borodaevskiy (annabo36@mail.ru), a specialist on world economy and international economic relations, is coauthor of the monograph “Russia in the Diversity of Civilizations.”