Valdai Club

The outgoing year, 2018, was in many respects a momentous and auspicious year for Russia’s politics in Asia and Eurasia. The fact that Eurasian economic integration went live and is no longer a question of realization, but of how to make it more effective, is the most important achievement in Eurasian affairs. The EAEU Customs Code entered into force, and an agreement was signed between the EAEU and China in May 2018, which is the EAEU’s first agreement with a partner that big. With regard to Asia, it appears that it ceased to be an exotic niche of Russia’s foreign policy in 2018 and shifted toward its center. Of course, due to security threats, rocky relations with the United States and Europe still remain its top priority, but the positive portion of the agenda has shifted to Asia.

In November, President Putin paid a successful visit to Singapore during which he took part in the Russia-ASEAN summit, a meeting of the East Asia Summit - for the first time in its history - and held a series of bilateral meetings with the leaders of the countries of the region. The fact that these meetings took place in Singapore was also important because they increased Russia's presence in Southeast Asia’s political and information space, where it has so far been not too visible. Also, these meetings and talks are important for maintaining the existing system of multilateral cooperation and institutions in the region, some of which, like ASEAN, are now facing challenges posed by the policies conducted by major out-of-region players. Meanwhile, the United States is relying on a split and competition to promote its exclusive national interests.

The ASEAN meeting in New Guinea, the participants of which failed to agree on a final joint statement, was in contrast with these successful, especially in terms of political symbolism, meetings. This was due to the conflicting positions adopted by China and the United States, whose representatives even started a discussion. Overall, Russia is strengthening and expanding its presence in Asia and regional affairs against a background of incrementally mounting disagreements between China and the United States. After Donald Trump assumed office, many in China believed, and were open about it, that Trump was a better option for Beijing than Hillary Clinton. It was surmised that it was possible to “strike a deal” with Trump, and that he had no plans to exert political pressure on China. Things turned out differently in reality.

Despite the warm welcome that the US president accorded to Xi Jinping at his residence in April 2017, Washington’s ensuing moves in 2018 were less than friendly, especially for high-tech companies, which are of paramount importance to the Chinese economy and to China achieving its strategic development goals. It appears that the United States believes that if China consistently comes under pressure it will give in, surrender and try to maintain economic interdependence with the United States, which is important for China’s economic growth. The United States forgets the fact that the Soviet Union was China’s most important partner in the late 1950s, which did not prevent Mao Zedong from severing all ties with it in order to achieve foreign policy independence.

In practical terms, in the spring of 2018, a blow was dealt to ZTE, China’s second largest telecom company, which was prohibited from supplying all types of products to the US market or buying US-made parts. The company suspended its operations and resumed them only after it paid a massive fine and replaced some of its senior executives who were accused of violating sanctions against Iran and the DPRK. In December 2018, an attack was unleashed against Huawei, the Chinese economy’s flagship company. The company’s CFO, and daughter of the founder, Meng Wanzhou, was arrested in Canada. She is also accused of violating sanctions against Iran, and now Washington is waiting for China’s response.

The rest of the world, including Russia, will take China’s reaction as an indicator of Chinese foreign policy resilience. It’s no secret that amidst the war in the financial sector that the United States is waging against Russia, Chinese companies and banks were in no hurry to create mechanisms to bypass these "sanctions." Often, they refused to work with Russian clients, which contrasts with the highest level of political relations between the countries and the mutual trust of their leaders.

President Xi’s participation in a plenary session of the Eastern Economic Forum and a Chinese contingent taking part in major exercises with the Russian army in September 2018 came as a symbol of the high-quality political relations between the two countries. Overall, China remains Russia's largest and strategically most significant partner in Asia, although its priority is to strengthen relations with as many countries in the region as possible. In this regard, the above irreversible exacerbation of the face-off between China and the United States could be both a boon and a bane for Russia’s foreign policy.

On the one hand, this conflict makes small and medium players want to see Russia more actively participating in Asian affairs. Their desire needs to be converted into more energetic economic cooperation and the promotion of multilateral interaction formats that are of interest to Russia, such as the Greater Eurasian Partnership which is an umbrella format for many existing initiatives. On the other hand, Russia’s activity in Asia could lead Russia to a place where it will not always succeed in maintaining a position that would suit all regional players. Now, the uniqueness of Russia’s position lies in the fact that there is not a single state in Asia with which it has bad political relations. This is the most important asset of Russia’s national foreign policy, which must be preserved.

Russia’s relations with South Korea and the problems associated with the Korean Peninsula in general represent a separate matter which is important because peace in Asia is a prerequisite for Russia's ability to implement its plans for developing its Far Eastern regions. For its “pivot to the East” to be successful, Russia needs international cooperation, predictability and investment. Instability in Northeast Asia means these three components will be unavailable. On the contrary, stability is an important argument in favor of Russian and foreign investors flocking to the Russian Far East.

Political relations between Moscow and Seoul are almost cloudless, especially with the current administration. The presence of ​​an American military contingent in the Republic of Korea does not hold these relations back. Russia is an important prospective partner in the event that relations between North and South further stabilize. Despite the fact that the US and Japanese positions remain insufficiently flexible for quick progress, President Moon wants to make sure that the reconciliation process is largely irreversible by the end of his term. Russia is an important potential supplier of resources for developing the economy of the northern part of the peninsula and a consumer of labor from the DPRK.

More attempts were made in the outgoing year to break new ground in Russia-Japan relations. Everyone remembers President Putin’s bold proposal made at the Eastern Economic Forum to conclude a peace treaty between the countries this year without preliminary conditions. Initially, Japan was perplexed, but in November Moscow and Tokyo returned to discussing their territorial issue and even appointed special representatives for this job. If the problem can be resolved in one way or another, Russia will have no grounds for tensions with any country in Asia. However, it is necessary to work at this now to ensure that Russian-Japanese relations remain immune to negative regional and global developments.

Eurasian integration finally became a reality of regional development in 2018. Most importantly, after the 2014–2016 recession. trade among the participating countries was growing rapidly, which is traditionally the most important indicator of integration success. This is nothing short of a miracle for an integration association in which the two largest in terms of per capita GDP members (Russia and Kazakhstan) are major exporters of energy resources. All the more so as most of the EAEU countries are WTO members, which prevents them from curtailing their trade with third countries in favor of the EAEU members. During the first three quarters of 2018, domestic trade in the EAEU was growing by almost 12%. In 2018, the Union’s GDP was growing insignificantly at 1.8% on average. Armenia was leading with 7.5% and Kyrgyzstan 4.6% primarily due to an increase in industrial manufacturing, which was almost inexistent in these countries for many years following the collapse of the Soviet Union, at an average of 12%.

People in the EAEU countries are already benefiting from integration, although they do not always realize it. Statistically, on average, about 64% of the population of the participating countries support integration which is a very high number for similar international organizations. The single EAEU Customs Code ratified by the member countries after long negotiations in 2017, became operational. Finally, at the administrative and technical levels, it enshrined the emergence of the world's largest and longest common customs space stretching from China’s borders to the eastern borders of the European Union. Now, transcontinental China - the EAEU - Europe trade will receive an additional impetus.

Trade is growing by itself as well. In 2017, rail transit in containers went from 136,000 to 242,700 containers, up 78.4%. In 2015, no one even wanted to hear that land transportation across Eurasia could ever reach volumes comparable to the sea transport across the Pacific Ocean or Indian Ocean. In May 2018, an agreement between the Eurasian Economic Union and the People's Republic of China was signed in Astana. This agreement is far from perfect. However, it created the most important thing: a legal framework for future relations. Like Russia, China is an important country in Greater Eurasia.

Summing up 2018, it could be said that a line was drawn under many of Russia’s foreign policy and foreign economic initiatives in Asia and Eurasia. A fairly strong base has been created, and Russia’s presence in this mega-region is a new normalcy for other states in the region. Now, it is important not to get distracted and use this foundation to build solid long-term multilateral interaction. Also, Russia needs to step up its interaction with its partners in order to reduce the ramifications of strategic deterioration in its relations with the United States and, more importantly, Europe. If Russia's policy stays in line with the most important global trend, which includes the global agenda shifting toward Asia - it can remain an important factor in achieving its national strategic development goals.