The transition to consolidate the presence of Russian exporters in the countries of the East, the creation of a redistribution process not only in Russia (this task has been going on for a long time and does not depend on anyone but ourselves), but also in sales markets, own hubs and logistics centres serve as a basis for long-term competitiveness, writes Anastasia Likhacheva.
From the point of view of our eastern partners, the main aspect of Russia’s Pivot to the East 2.0 is that it provides a testing ground for solutions and projects for a new type of international cooperation: less vulnerable to sanctions or any unilateral decisions, and tailored to the fundamental and long-term interests of the participants. This ambition is quite understandable – there is not yet a single country in the world with an economy comparable in scale and structure that has fallen under such large-scale sanctions. Russian pioneering in this case is not only a serious challenge, but also a potential asset.
However, this can only become an asset with the consistent construction of new infrastructure and the creation of cooperation networks. Therefore, the operational priority is a minimal independent infrastructure for interaction, and the strategic international priority of Russia’s pivot to the East 2.0 is the most extensive and diverse network of connections with the East. The quality of this policy will not just serve as an indicator inside Russia – it will be a natural barometer of how the entire international economic system is changing.
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The Eastern Economic Forum (EEF) ended, as did the parade of comments of varying degrees of enthusiasm or, on the contrary, scepticism. But the pivot to the East continues. Moreover, none of the commentators can question its significance. This gap between parade and exhibition formats and the new routine of international life in Russia has entailed a serious change since last year. Even at the previous EEF in Vladivostok, on the sidelines it was discussed that the sooner cooperation between Russia and Asia dispenses with the standards of traditional PR, with reports on X signed agreements worth XXX billion, ribbons being cut and the struggle for the positive coverage of such news, the better the chance for productive and sustainable work becomes with Asia and in Asia.
A framework of super-large export projects and multi-billion dollar joint ventures in the energy sector has already been created. The sanctions and the subsequent revision of the system of priorities for the foreign economic activity of the Russian Federation closed the question of the need to convince Russia’s counterparts of the attractiveness and prospects of eastern markets, technologies and partners. Russia is a significant trading partner and a welcome element of regional food and energy security systems, not only for politicians, but also for business circles in Asia.
Step 1
What to do at this stage is a very substantive and specific question. It is nice to report about increased trade turnover, but it is not enough, taking into account the combination of the potentials of Russia and Asia.
We need a system of minimum sufficient infrastructure for bilateral interaction with priority foreign partners, or a second circuit economy. The second circuit – because the first, global one, is either already under sanctions in Russia, or is too valuable for our eastern partners to risk it. Such a second-circuit economy includes target banks, insurance companies, new trade hubs and routes, and chains of intermediaries invulnerable to Western sanctions.
Therefore, the transition to consolidate the presence of Russian exporters in the countries of the East, the creation of a redistribution process not only in Russia (this task has been going on for a long time and does not depend on anyone but ourselves), but also in sales markets, own hubs and logistics centres serve as a basis for long-term competitiveness. The Russian approach that there is no investment except domestic, and any investment abroad is capital flight, is irrelevant for modern Asia. All significant countries in the region directly postulate in their national strategies: “if you want to cooperate, localise and create jobs.” Not just us. Therefore, supporting and protecting such projects is an important first step to work with Asia seriously and for a long time.
Step 2
In the future, self-limitation by such a system means choosing the path of an “enlarged Iran,” so the next stage is necessary. It involves investments in multilateral international solutions and subsystems, and the development of a multilateral architecture. The mechanisms of new partnerships can “win” over their Western analogues due to three parameters:
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Diversified rather than monopolistic control over the system;
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Direct redistribution of intermediary income;
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Involvement of new regions and mid-level companies in Asian countries in international economic relations.
In the context of industry, this is the expansion of the service sector: financing, insurance, logistics, standardisation and certification. Here an insidious paradox awaits us. It is easier to negotiate in a bilateral format, but it is more profitable and sustainable to use a multilateral format. So far, even the creation of new two-way channels and tools requires enormous efforts from regulators, managers, and entrepreneurs. But no matter how mocking this may sound – many of these people have been working literally 24/7 for the last year and a half, but this is still not enough.
The optimal platform for new “grids” is BRICS, especially after its expansion. Russia’s BRICS presidency next year presents a number of opportunities for the Pivot 2.0 policy. It is already clear that new countries are joining BRICS precisely to pursue strategic goals, and not for short-term lending – this is not yet easy, and the association does not yet have the tools to replace the IMF (the BRICS Development Bank is an alternative to the World Bank). The global platform can assist in the piloting of new solutions in the field of development and fair international cooperation; Russia has been pushed to pursue this path, not only by economic rationality, but also by the more than 10,000 sanctions restrictions which have been imposed.
Taking into account the laws of economic geography, such decisions are a direct product of the Pivot 2.0 policy. It is within the framework of this policy that solutions for a new type of international cooperation will be formed and tested – less unified, more flexible, very dynamic, and built on a balance of interests. For entrepreneurs, this means, of course, not only “new markets and opportunities”; these entail additional transaction costs, especially at the first stages, resulting in a new learning curve for both business leaders and ordinary employees. This is, de facto, mastering a minimum course in Applied Eastern Studies – at least at the level of what questions to ask and to whom to address them.
This is what will distinguish the Russian Pivot 2.0 from previous approaches to increasing trade and economic ties with Asia, which over the past 50 years have been tested more or less successfully by both large and small countries. This is a testing ground for a new type of project, less vulnerable to sanctions and any unilateral decisions, and tailored to the fundamental interests of partners.
The good news about this versatility and innovation comes from the circus arts: tightrope walking requires much more effort to maintain balance than a tight net. It is difficult to move along it so gracefully, but it is almost impossible to fall.
