Russias Far East: New Dynamics in Asia Pacific and Beyond 9781626374218

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Russia’s Far East

Russia’s Far East New Dynamics in Asia Pacific and Beyond Rensselaer Lee Artyom Lukin

b o u l d e r l o n d o n

Published in the United States of America in 2016 by Lynne Rienner Publishers, Inc. 1800 30th Street, Boulder, Colorado 80301 www.rienner.com and in the United Kingdom by Lynne Rienner Publishers, Inc. 3 Henrietta Street, Covent Garden, London WC2E 8LU © 2016 by Lynne Rienner Publishers, Inc. All rights reserved Library of Congress Cataloging-in-Publication Data Lee, Rensselaer W., 1937– , author. | Lukin, Artyom, author. Russia’s Far East : new dynamics in Asia Pacific and beyond / by Rensselaer Lee and Artyom Lukin. Includes bibliographical references and index. ISBN 9781626373891 (hc : alk. paper) Russian Far East (Russia)—Politics and government. | Geopolitics— Russia (Federation)—Russian Far East. | Russia (Federation)—Foreign relations—China. | China—Foreign relations—Russia (Federation) LCC DK771.D3 L44 2015 | DDC 947.086—dc23 2015021294 British Cataloguing in Publication Data A Cataloguing in Publication record for this book is available from the British Library.

Printed and bound in the United States of America The paper used in this publication meets the requirements of the American National Standard for Permanence of Paper for Printed Library Materials Z39.48-1992. 5

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Contents

List of Tables and Figures Preface

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1 Setting the Stage

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2 What Is the Russian Far East?

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3 History of the Russian Far East

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5 Moscow’s Game Plan for the Russian Far East

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4 A Region of Troubles

6 Russia’s Changing Perceptions of China

7 A Russian-Chinese Alliance: Chimera or Emerging Reality?

8 Is Russia Moving into China’s Economic Orbit?

9 A Symbiotic Relationship: Russia’s Far East and China’s Northeast

10 Beijing Sets Its Sights on the Russian Far East 11 Russia and the United States in Asia Pacific: Is Collaboration Possible? 12 What Next for the Russian Far East? Selected Bibliography Index About the Book

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137 153 179 203 237 259 265 276

Tables and Figures

Tables 2.1 2.2 2.3 2.4 4.1 4.2 5.1 8.1 8.2

Structure of Russia’s and the RFE’s GRP by Value-added Economic Activity, 2011 RFE Provincial Profiles RFE Provinces’ Foreign Relations Votes for United Russia Per Capita Income and the Price of a Fixed Basket of Consumer Goods and Services by Region, May 2013 Population of Russia and the RFE, 1990–2014 Resources for the Socioeconomic Development of the Far East and the Baikal Region Federal Program Russia’s Total Trade with China, the European Union, the United States, Japan, and South Korea Composition of Russian-Chinese Trade, 2005 and 2013

13 15 17 20 53 56 86 139 140

Figures 2.1 4.1

Map of the RFE’s Main Trade Partners by Region, 2013 Indexes of Russian and RFE Population, GRP, and Fixed Capital Investments, 2000–2013 10.1 Map of Energy Routes in the RFE

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Preface

scholar, has been written in a period of extreme tension in the countries’ bilateral relations. The ongoing Ukraine conflict and associated Western sanctions are reshaping the international system in fundamental ways, pushing Russia closer to China and increasing the likelihood that the countries will align their policies on global and regional Asian issues. The sanctions did not cause Russia’s pivot to China, which is a reflection of geographical market shifts, but they have surely accelerated it quantitatively and qualitatively by narrowing Russia’s partnership options. We see the Middle Kingdom as the big winner in all this, gaining preferential access to a wide swath of the Russian economy, especially in its resource-rich Asiatic domains, as the West largely excludes itself from investing in and developing this vital region. This, in turn, would reinforce China’s strategic position in Asia at the expense of its neighbors, including Russia itself. Right now, the Russia-China partnership is riding high while RussianUS relations are in the doldrums. The recent image of a Chinese honor guard marching in Moscow’s Victory Day (May 9) parade and of Vladimir Putin and Xi Jinping sitting side by side on the review podium should dispel any doubts on this score. Public opinion polls in the two countries reflect this new state of affairs. According to a January 2015 Levada Center poll, 81 percent of Russians hold an unfavorable view of the United States compared to 41 percent a year earlier. Similarly, Putin has become widely popular in China, enjoying a popularity rating of 92 percent according to a survey by the Chinese online news service In Touch Today. There is little talk today of a “China threat”—even if such a danger objectively exists. Russians tend to see China as an economic and financial lifeline or at least as a hedge against further disruption of ties with the West. THIS BOOK, A COLLABORATION BETWEEN A US AND A RUSSIAN

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PREFACE

Still, behind all the hype, suspicion of China figures at least as much in Moscow’s security calculations as does distrust of the West. Moscow is uncomfortable with China’s tightening embrace—this is obvious to observers of Russian-Chinese relations—and seeks a balance of ties with foreign economic partners. A reset of US-Russian relations may not happen any time soon—the sides remain far apart on Ukraine and some other issues, and the sanctions regime seems deeply embedded in US-Russian policy. Yet, the present state of affairs threatens to damage the global economy (starting most likely with the eurozone countries), and cannot persist indefinitely. Therefore, Russia and the United States should find ways to advance their mutual relations, even if they can’t immediately establish pre-Ukraine levels of cooperation. In doing so, they should look to regions of the world where their interests are least conflicting and most compatible. Probably the western Pacific and the Arctic best fit this category. Here, the Russian Far East—a valuable and strategically vital space of Northeast Asia— could be a focal point of a reenergized Russian-US relationship, provided other areas of contention can be managed. Moscow surely must understand the political costs of overreliance on China for developing its east, while Washington should recognize that even indirect Chinese control of the Russian Far East’s obvious strategic assets could undercut its security posture and alliance partnerships in Asia Pacific. Moscow and Washington need to align their security thinking on these questions while waiting for a more propitious time to explore cooperative strategies. * * *

This book has been a difficult but rewarding project, and a stellar example of Russian-US cooperation under trying international circumstances. We express our deepest gratitude to all those individuals whose efforts and support made the project possible. On the US side, our special thanks go to Alan Luxenberg and the Foreign Policy Research Institute (FPRI) for their sponsorship of the project; to Colly Burgwin of FPRI for his masterful handling of the essential financial logistics; and to Maia Otarashvili, also at FPRI, for her painstaking editorial work on the manuscript. Much credit is also due to John Simeone, a consultant for this book project and for World Wildlife Fund, without whose assiduous assemblage of Russian sources and datasets the book would not have been possible. Derek Norberg and the Russian American Pacific Partnership were valuable resources for the project. We also benefited from the insights and intellectual support of several experienced observers of the Russian Far East, including Judith Thornton at the University of Washington, Elizabeth Wishnick at Columbia University, and Doug Barry, formerly of the International Business

PREFACE

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Center at the University of Alaska. Others who helped with the project were Erik Berglof and Aleksander Plekhanov of the European Bank of Reconstruction and Development, an important investment player in the Russian Far East. Finally, thanks go to members of the Shanghai Academy of Social Sciences for their (sometimes brutally) frank assessments of the Russian Far East’s investment conditions and development prospects. On the Russian side, we want to acknowledge several scholars whose guidance, depth of knowledge, and research skills proved invaluable in the preparation of the study. These include especially Leonid Kozlov and Tamara Troyakova; Kirill Kolesnichenko, Anton Kireev, and Ivan Zuenko at the Far Eastern Federal University; Aleksander Sukharenko, an independent researcher on crime and law enforcement issues; and Sergey Ivanov and Natalia Ryzhova at the Far Eastern Branch of the Russian Academy of Sciences. We also thank the Russian officials and experts interviewed in the Far East and Moscow during the course of the project. The value of their cooperation cannot be overestimated.

1 Setting the Stage

resource-rich territory and a volatile arena of intersecting great-power interests. In the book, we provide a broad-brush treatment of the RFE’s historical antecedents, internal economic and political dynamics, and importance as a development priority for Moscow. We evaluate the RFE’s growing geopolitical significance in the light of changing strategic realities in Asia Pacific, especially China’s growing regional influence and clout. We also give considerable attention to the nature and extent of the region’s external entanglements (which differ significantly by subregion) within and outside Asia. Finally, our discussion necessarily focuses on recent changes in the international environment—the Ukraine crisis, US-led Western sanctions, and accelerating Russian-Chinese rapprochement, among others—that impact on the RFE’s development trajectory and the broader security balance in East and Northeast Asia. We contend that, from an Asia Pacific perspective, Russia and the United States have more interests in common than they do in the European theater and that the RFE could be one of the building blocks of a revitalized relationship, if other areas of contention can be deescalated or at least managed. The RFE is a special part of Russia. It is the largest of Russia’s eight administrative federal districts comprising about 36 percent of the national territory—equivalent to two-thirds the size of the United States. 1 It boasts extensive hydrocarbon and mineral endowments as well as large empty spaces of arable and uncontaminated land, huge reserves of clean water, and biological resources in the forests and seas—assets in short supply among the RFE’s Asian neighbors. It fronts on the North Pacific and Arctic Oceans—theaters of intersecting great-power interests and rivalries. At the same time, in important respects, the RFE is a weak and underdeveloped backwater. This huge territory accounts for just 4 percent of Russia’s gross THIS BOOK IS ABOUT THE RUSSIAN FAR EAST (RFE), A VAST AND

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regional product (GRP) and about 4 percent of its population. Despite massive state investments in the Vladimir Putin era, its growth has barely kept pace with that of the Russian Federation as a whole and the region continues to lose population. Moreover, the RFE’s isolation from European Russia and its proximity to dynamic and ambitious Asian states accentuate its vulnerability to the interplay of outside forces. Ever since the Soviet collapse, the RFE has risked becoming more a part of the East Asian periphery than the Russian periphery,2 signifying the innate precariousness of Moscow’s real sovereignty over the region.3 The main modern-day challenge to Moscow’s domains in Asia comes from China—at once Russia’s benefactor and its bane—a theme that necessarily receives considerable prominence in this book. In recent years, Moscow has come to recognize the geopolitical significance and vulnerabilities of its Far Eastern territories and has made development of the region and the adjoining Trans-Baikal provinces, in Putin’s words, “our national priority for the entire twenty-first century.”4 By doing so, Russia has hoped to alleviate pressures for regional autonomy (especially insistent in the early post-Soviet years) and also to establish its credentials as a power in Asia Pacific and on the global stage. As of 2013, state investments of some 3.2 trillion rubles (slightly less than $100 billion) were planned for the RFE-Baikal region in the period from 2013 to 2025. Yet such plans were drawn up on the basis of oil prices (Brent) hovering around $110 a barrel, as opposed to around $55 in early 2015, and on a degree of access to Western investment and credit markets that narrowed significantly in the wake of the Ukraine imbroglio. The RFE’s development prospects thus seem increasingly uncertain, as the Russian economy sputters and the crisis in the West shows few signs of easing. The upshot is that Russia—now ostracized by the West and facing an ongoing financial crisis—is seeking a more intimate relationship with its giant Asian neighbor, China, to develop its vast eastern territories. Some clarification is necessary here: for some time, Russia has been seeking cooperation with East Asia, including China, to diversify away from relatively stagnant European markets. China, by virtue of its overall geopolitical weight, will always be a significant player in eastern Russia, as it is in East Asia generally. But US and allied determination to punish and isolate Moscow over Ukraine left China, which remained aloof from the conflict, as the most obvious option to turn to, and greatly accelerated and expanded the Kremlin’s courtship of Beijing. Putin’s 2014 visits to Shanghai in May and Beijing in November, Xi Jinping’s visit to Moscow in May 2015, as well as other multiple high-level meetings, underscored the growing closeness between the two great powers. They have concluded a host of agreements, more than 100 over the past two years, substantially expanding and deepening bilateral cooperation in key sectors such as energy, mining,

Setting the Stage

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finance, transportation, and high technology. Epitomizing the new shape of things was the signing of a gigantic thirty-year $400 billion deal to supply natural gas to China from fields in Eastern Siberia and the RFE. As the new economic relationship progresses, hints are emerging of possible strategic collaboration—China’s benevolent neutrality in the Ukraine conflict, Russian-Chinese talks to create an Asian collective security system to balance US influence, and efforts to coordinate their flagship economic activities in Central Asia. These include the Russian-led Eurasian Economic Union of Russia, Belarus, Kazakhstan, and Armenia and China’s more comprehensive Silk Road Economic Belt, a so-called new Eurasian land bridge, linking China, Russia, Central Asia, and Europe in an integrated trade-development framework.5 Quite clearly, a Russian-Chinese entente of some sort is in the making, but for now the main axis of this is economic—though a full-blown political-military alliance could develop if Russian-Western hostility persists and deepens. Such considerations seem to carry little weight in Washington these days. All eyes are focused on a seemingly futile attempt to change Russian behavior in Ukraine and Eastern Europe. Meanwhile, the Ukraine crisis and the US-led response to it are hurting long-term US security interests in East and Northeast Asia. With Russia-West relations at a post–Cold War low, and a crippling sanctions regime in place, China could become the leading outside force in Russia’s valuable eastern territories and a principal arbiter of regional development policy. Already China perceives the RFE and its northeast provinces as a single economic integration for development purposes. A strong and controlling Chinese presence in Russia’s East would certainly subordinate Russian policy in East Asia to China’s core interests and alter the overall power balance in East Asia to China’s advantage—or so we argue in the book. Of course, there are countervailing factors— Russian-Chinese mutual suspicions remain high (though anti-US feeling is higher) and China’s accumulated investment in the RFE still lags well behind that of Western powers, reflecting that Russia has preferred Western partners for major resource extraction projects. Russia is mindful of the costs and risks of bonding intensively with China, and would welcome the chance to diversify its economic partnership. Yet the more Russia is squeezed by the West, and the more intense the hostility becomes between the United States and Russia, the less such factors may matter. China, by virtue of its size, wealth, and location, will always be a significant player in eastern Russian as in the rest of East Asia. Yet the RussianChinese entente, in all of its present ramifications, is not necessarily a natural end state of Asia Pacific power arrangements. Indeed, from a US strategic perspective, very different arrangements might be envisaged. By almost all objective measures, it is China rather than Russia that is poised to be a peer competitor and main geopolitical challenge to the United

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States. Certainly, this is the case in East Asia and the western Pacific where core US historical and security interests are at stake. Current US-Russian policy in the West redounds to China’s advantage in the East (admittedly an unintended blunder), thus endangering these interests and advancing China’s designs for strategic primacy or hegemony in East Asia. Russia, for its part, faces the prospect of marginalization as an Asia Pacific power and the loss of its Eurasian identity from its newfound intimacy with Beijing, even while officially touting the benefits of the deepening ties. This suggests that Moscow and Washington need to grasp the geopolitical picture in its entirety, including their mutual interest in balancing China’s growing geopolitical clout. Rather that pushing Russia further into China’s embrace, the West should cultivate Moscow as an independent pole in the Asian power equilibrium, a crucial partner in balancing any drive by a third power to establish regional hegemony. Recognizing their common security concerns in Asia, the two sides should develop ways to moderate their disagreements over post-Soviet space and move toward a less contentious relationship overall.6 We pursue these various observations, reflections, and lines of argument in the chapters that follow. In Chapter 2, we establish the RFE’s core identity as an integral space with common political, economic, and demographic characteristics. We also evaluate the RFE’s resource base, geopolitical significance, and development prospects while profiling the diverse socioeconomic endowments, political preferences, and external entanglements of the individual provinces. In Chapter 3, we describe the difficult historical legacy of tsarist and Soviet rule, covering the period from the mid−sixteenth century to the end of Boris Yeltsin’s administration in postcommunist Russia. Landmark periods and events affecting the RFE receive attention, including Russia’s early colonization of Siberia, the border treaties with the Qing dynasty, the Bolshevik revolution and the civil war, the Joseph Stalin era, the Sino-Soviet conflict of the late 1960s, and the final collapse of the USSR. In Chapter 4, we document the catastrophic consequences of the Soviet Union’s disintegration for the well-being and stability of the RFE. The retreat of the state, the near collapse of industrial production (much of it military related), the exodus of population, and the emergence of separatist tendencies receive attention there. We also describe a critical legacy of this period—the reorientation of the RFE’s economy away from European Russia and toward the Asia Pacific. Additionally, we summarize the main development and quality-of-life challenges faced by the RFE, which are a legacy of official neglect and a product of structural constraints such as geography and climate. In Chapter 5, we examine the evolution of Moscow’s game plan for modernizing the RFE during the administration of Putin and Dmitry Medvedev. We discuss the main drivers of Moscow’s newly found interest in the RFE such as fears of national irrel-

Setting the Stage

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evance (or even disintegration) and the search for great-power identity. We analyze internal thrusts of policy, including the emphasis on building infrastructure, a deliberate tilt toward Asia Pacific economies and markets, and the creation of special administrative and tax regimes for the RFE. Various controversies surrounding the policy (especially over the issues of regional autonomy) also receive emphasis. The rest of the chapters deal in various ways with great-power relations as they affect the RFE. China receives primary emphasis, reflecting that country’s central significance for the RFE’s future development and for Asia’s power balance generally. In Chapter 6, we trace the evolution of the Russian-Chinese strategic partnership from Yeltsin to Putin as well as the changing threat perceptions of China and the West (especially during Putin’s third term). We also describe ongoing debates on China within Russia’s political and intellectual establishment, outlining the positions of Sinophiles, Sinophobes, great power nationalists, and other opinion groups. In Chapter 7, we speculate on the likelihood of a full-fledged Russian-Chinese alliance and sketch out the possible contours and geopolitical implications of such an alliance. At the same time—and to balance the argument—we identify potential rifts in the Russian-Chinese relationship that could work to undermine it in the future. In Chapter 8, we document the eastward reorientation of Russia’s economic policy—a shift that has been years in the making, but accelerating since the onset of the Ukraine crisis. In Chapters 9 and 10, we analyze the apparently increasing convergence of Chinese and Russian interests and policies in the Russian Far East, and explore the possibility that the Middle Kingdom could become the preponderant outside player in that vital region. The remaining two chapters deal mainly with issues of US and Western strategy toward the RFE. In Chapter 11, we detail the long-standing special relationship of the United States with the RFE, including its underlying strategic justification; explore issues and trends in the economic relationship, including the falloff in US commercial interest in the RFE in recent years; and describe current US policy (really the lack of a policy) toward the RFE and eastern Russia generally. In the conclusion, Chapter 12, we sum up the findings in this book and raise significant policy questions: What are the odds that China could come to dominate the RFE, at least indirectly? What would be the effect on the Asian security balance? Are the United States and its Pacific allies, especially Japan and South Korea, capable of responding to this challenge, and if so how? Might the RFE be one of the building blocks of a revitalized US-Russian relationship—one based on common security concerns and a shared Pacific space? Is it possible to multilateralize the development of the RFE and to forge common understandings among participant powers on regional economic and security issues?

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Notes 1. Crimea became the ninth federal district on March 21, 2014. Official statistical information on Russia’s federal districts will include Crimea beginning in 2016 (reporting on statistics from 2014) and thus for the purposes of comparison and analysis, this book references Russia's eight federal districts, excluding Crimea. 2. Bobo Lo, Axis of Convenience: Moscow, Beijing, and the New Geopolitics (Washington, DC: Brookings Institution, 2008), 62. 3. The RFE is often considered together with the adjacent Baikal region, which is made up of three eastern Siberian provinces: Irkutsk Oblast, the Republic of Buryatia, and Zabaikal (Trans-Baikal) Krai. The RFE and Baikal regions together comprise eastern Russia, a macroregion occupying 45 percent of Russia’s territory but only 7.8 percent of its total population. 4. Vladimir Putin, “Presidential Address to the Federal Assembly,” December 12, 2013, Moscow, www.eng.Kremlin.ru/transcripts/6402. 5. Shannon Tiezzi, “China’s Silk Road in Europe: Not just Hungary,” The Diplomat, June 9, 2015, www.thediplomat.com/2015/06/chinas-silk-road-in-europe -not-just-hungary/. Russia promised to link its new Eurasian Economic Union with China’s Silk Road Belt during Xi Jinping’s visit to Moscow in May 2015. 6. Robert Legvold writes that Moscow and Washington should study the lessons of the Cold War, when the two sides “developed a variety of mechanisms for reducing tensions and containing risks” and “embraced the wisdom of engaging rather than isolating the other.” Robert Legvold, “Managing the New Cold War: What Moscow and Washington Can Learn from the Last One,” Foreign Affairs 93, no. 4 (July−August 2014), www.foreignaffairs.com/articles/united-states/2014-06 -16/managing-new-cold-war.

2 What Is the Russian Far East?

troubled region, encompasses the nine provinces or subjects of the federation that make up the Far Eastern Federal District (Dalnevostochny federalny okrug), one of eight such administrative districts that comprise the Russian state. The provinces of the RFE (with their designations of oblast, autonomous oblast, autonomous okrug, krai, and republic) are the Amur Oblast, Chukotka Autonomous Okrug, Jewish Autonomous Oblast (JAO), Kamchatka Krai, Khabarovsk Krai, Magadan Oblast, Primorsky Krai Sakha Republic (Yakutia), and Sakhalin Oblast. The Far Eastern Federal District is the largest federal district with 6.2 million square kilometers, which is equivalent to 36 percent of the Russian territory, two-thirds the size of the United States, and two-thirds of the region generally defined as Northeast Asia.1 It also has the federation’s smallest population, about 6.2 million inhabitants. For economic planning purposes, the Russian government now lumps the RFE into a designated macroregion of twelve subjects, including the adjoining three Trans-Baikal provinces (Buryatia, Irkutsk, and Zabaikal Krai), which taken together comprises 45.5 percent of Russia’s territory and 7.5 percent of its population. Although it includes some discussion of Transbaikaliya, this book focuses mainly on the RFE. The RFE enjoys special status as Russia’s gateway to the Pacific and, as we argue, plays an important role in the geopolitics of Northeast Asia, a region that it dominates territorially but not economically. Isolated from Russia’s industrial heartland, the RFE currently ranks as a weak and underdeveloped backwater. It holds roughly 4 percent of Russia’s population, with the lowest population density—just one person per square kilometer—among Russia’s eight administrative regions. The RFE’s gross regional product ($83 billion in 2012) similarly equates to barely over 4 percent of Russia’s total economy, the second smallest in the federation THE RUSSIAN FAR EAST, A UNIQUELY ENDOWED BUT PERENNIALLY

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after North Caucasus, though its area is thirty-six times larger. The RFE ranks as Russia’s most economically depressed territory. Reinforcing the region’s general backwardness is an ongoing demographic crisis: it has lost almost 23 percent of its population since 1990 and, as of 2014, the drain continues. Factors driving depopulation include an exceptionally harsh winter climate in northern areas, a low average life expectancy (the lowest among Russia’s regions), a high cost of basic necessities (the highest among the regions), rampant crime (the highest homicide rate in the nation), a high official poverty rate (involving almost a quarter of the inhabitants), and a lack of social infrastructure such as roads, housing, schools, and hospitals.2 Though it projects an image of economic decrepitude and vulnerability, the RFE is in fact a valuable and strategically desirable expanse of territory. To begin, it holds an abundance of natural resources that its industrialized Asian neighbors seriously lack. Consider, for example, the region’s wealth of mineral endowments: oil, natural gas, coal, and all major metals (including rare earth metals and uranium). The full extent of the region’s underground assets has yet to be calculated, but available numbers tell an impressive story. The RFE produces 100 percent of Russia’s diamonds, 99 percent of its tin, 70 percent of its tungsten, 64 percent of its silver, and 59 percent of its gold. Russia’s largest coal and fifth-largest hydrocarbon reserves are located in the RFE.3 Sakha and Sakhalin together account for a little over 4 percent of national oil output (a share that is certain to increase substantially due to major new fields coming on stream) and, as of this writing, Sakhalin produces 100 percent of Russia’s—and 5 percent of the world’s— liquefied natural gas (LNG).4 Sakha’s massive Chayanda field, with reserves of 1.45 trillion cubic meters of natural gas, is being developed as part of a recent energy deal with China.5 Timber and seafood are other signature natural resources—the region accounts for one-fourth of Russia’s standing timber inventory that supplies around a quarter of Russia’s forest products exports to China, Russia’s largest forest products export market, and five-sixths of the country’s reported fish catch.6 Importantly, the RFE together with the Trans-Baikal provinces also includes several million hectares of relatively unspoiled and cultivable land, concentrated in the mostly southern reaches (the Amur, Ussuri, and Argun River basins) where the climate is comparatively mild. Land, like energy and minerals, is likely to play a major role in East Asian geopolitics and economic relations. Most notably, it could provide a lifeline for hardpressed farmers in China’s northeast, where the population density is nearly fifty times that of the RFE border provinces and where urbanization and industrial contamination have rendered much of the land virtually unusable. What Russian planners call the RFE’s “most powerful raw material base” is supplemented by a long Pacific coastline (25,000 km), a promising

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role as a transit territory, and proximity to the lucrative markets of Asia Pacific—now considered the main engine of growth of the global economy.7 The region’s main logistical assets include twenty-eight of Russia’s sixty-four seaports, accounting for about 23 percent of its maritime freight turnover as well as the Trans-Siberian and Baikal-Amur Railways that terminate at the Pacific ports of Vladivostok and Vanino, respectively. Currently, these facilities are decrepit and unable to meet the RFE’s internal transport needs, not to mention the demands of Russia’s expanding Pacific trade presence, but renovation and modernization of port-side infrastructure and port-rail connections seem to be under way.8 Right now Trans-Siberian is said to function at about half of its theoretical capacity of 120 million tons per year, and combined port capacity of the RFE handles only 0.6 percent of the container traffic circulating through Asia Pacific. Port and rail modernization are therefore important targets of Moscow’s game plan for the RFE and constitute its primary budgetary emphasis.9 Also importantly, the RFE adjoins the Arctic Ocean—potentially an important theater of geopolitical competition—and controls the eastern part of the Northern Sea Route (NSR). The economic significance of the NSR for East-West commerce remains to be demonstrated—in 2013, only seventy-one ships carrying 1.36 million tons of cargo used the route—but traffic could increase exponentially over the next fifteen years. According to some projections, the volume of freight transiting the NSR could reach 120 million tons in 2030, driven by oil and gas development along the Arctic Shelf.10 The evident gap between the varied potential of Russia’s Far East and its dire socioeconomic situation command attention from the Russian leadership. President Vladimir Putin promises that developing the region and the neighboring Trans-Baikal provinces will be “our national priority for the entire 21st century.”11 Putin era policies marked a significant departure from the traditional posture of selective inattention and even outright neglect by the central government. As one observer notes, “For Russia historically, the RFE represents a remote outpost of empire rather than a dynamic and growing region.”12 Moscow provided aid and subsidies, but its spending priorities focused narrowly on resource extraction and military requirements instead of expanding basic infrastructure. In the aftermath of the Soviet collapse, the central government sharply cut the flow of resources to the RFE; as a result, the economy tanked, provoking serious unrest and even talk of separation from the federation. Amid such concerns, Moscow’s policy toward the RFE shifted from neglect to prioritization. Beginning in late 2006, the state began to invest massive resources toward the socioeconomic development of the RFE and Trans-Baikal provinces. Ambitious targets were set for GRP growth, job creation, and renovation and expansion of infrastructure. The new strategy also emphasized and strengthened eco-

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nomic ties with Russia’s Asian neighbors in an effort to exploit their rapidly expanding markets (especially for raw materials) and to attract Asian investment capital. Viewed in overall planning terms, the central thrust of Russia’s modernizing strategy for the RFE is the exploitation of its vast raw material base and the conversion of the region, especially its southern reaches, into a modern and efficient hub for exchanges with Asia Pacific. Russia also has hopes of introducing high-tech and innovative industries into the RFE, but its primary emphasis is on natural resources. As a policy document notes: Obviously, in the near future the region cannot compete with countries of the APR [Asia Pacific region] in machine-building, information-communications technology and other branches. Therefore, the positioning of the RFEBaikal must be realized via the extraction and processing of raw materials and the use of the region’s transportation capabilities.13

As mentioned above, the strategy tilts sharply toward Asia. This reflects a geopolitical impulse to establish what Russia deems its rightful place as a credible power in Asia Pacific and on the global stage, an aspiration that Russia also hopes to achieve through its strategic partnership with China. But the primary driver is economic—to ride on Asia’s prosperity. As of 2012, Russia accounted for an unimpressive $207 billion sliver of the Asia-Pacific Economic Cooperation (APEC) bloc’s $16 trillion regional trade—only 1.2 percent.14 This share will not change much in the near term. On the other hand, Moscow’s pivot toward Asia has radically altered Russia’s own trade patterns. In recent years, major Asia Pacific countries—China, Japan, and Korea—account for a rapidly growing percentage of Russia’s foreign trade turnover: 35 percent in 2013 compared to 13 percent in 2000,15 a trend that seems likely to continue (see the discussion in Chapter 8). Russia’s game plan for developing the RFE, especially the orientation toward Asia, harbors risks and has spawned controversy. The pivotal issue for many is whether Russia can integrate more closely with the Asia Pacific market and still retain real sovereignty over its eastern provinces. This concern was alluded to in a comment by Russia’s presidential representative to the Far East in an October 2013 interview. Responding to a question about whether the region will become less connected to Moscow than to countries such as Japan and China, the official responded: [Russia] is one country with one set of laws, one constitution, one president, that is to say, one territory. But this doesn’t mean that economic ties should be exclusively with European Russia. Shipping the RFE’s goods to faraway Moscow, Kaluga or Bryansk seems frankly strange when around us there are huge developing countries in great need of our production.16

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Certainly, becoming more connected to Japan and China does not mean that the RFE will disengage from the Russia Federation politically. But Russia’s Asian neighbors could increasingly define the contours and direction of the RFE’s development, effectively subordinating the region to their economic interests and preferences. A particular challenge is the looming presence of China, which shares a long border (3,600 km) with the RFE, and with which Russia is engaged in a deepening strategic partnership. China’s comparative geopolitical weight—its northeast provinces hold eleven times the GRP and seventeen times the population of the RFE—as well as its needs for raw materials, uncontaminated land, and space in general will shape the RFE’s future in various ways, though not necessarily to Russia’s advantage. China is now the RFE’s (and Russia’s) largest trading partner; its largest foreign leaseholder of farmland; and an important supplier of labor in timber processing, construction, and retail services (see Figure 2.1). China seems well positioned to exploit Russia’s evident economic weakness in Asia and the seemingly inexorable decline in the RFE’s resident population. Figure 2.1 Map of the RFE’s Main Trade Partners by Region, 2013

Source: Courtesy of Wilmar Van Ommeren, Utrecht University.

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Russia’s Far East

Unity in Diversity Russia’s easternmost provinces have much in common. They cohere in a single administrative unit and occupy a common geographical space in Northeast Asia. The overwhelming majority of the population in all provinces except Sakha is ethnic Russian. Climactically, much of the RFE receives status of a “far north” region, where residents receive salary supplements and early retirement benefits. The RFE is seriously backward by most measures of economic and social development and, with the exception of Sakhalin, depends on federal subsidies to support regional budgets. Every one of the provinces continues to lose population, despite some economic advances in the new millennium. By and large, the RFE’s production profile and trade pattern are like those of an underdeveloped country, as they are based largely on extraction and primary processing of raw materials. According to 2011 figures from Goskomstat, the share of extractive industries in RFE’s GRP account for more than five times that of manufacturing and seven times that of agriculture and forestry—27.1 percent compared to 5.2 percent and 3.8 percent, respectively—and resource extraction is the dominant economic activity in five of the region’s provinces (see Table 2.1). Similarly, two-thirds of the RFE-Baikal’s exports in 2012 consisted of raw materials, in order of importance: hydrocarbons, precious stones and metals, fish and other marine life, and timber and forest products. Machinery and equipment comprised only 4 percent. Conversely, 81 percent of imports consisted of manufactures: machinery and equipment (50 percent) and products of the food, light, and chemical industries (31 percent). Moreover, most foreign investment in the macroregion flows to raw material extraction, primarily petroleum, thus accentuating its status as a primary resource supplier.17 For the four-year period 2009 to 2012, foreign investment in extractive industries averaged 89 percent while investment in the manufacturing sector averaged less than 3 percent. The percentages shifted in 2013—to 65 percent and 18 percent, respectively—but whether this break in the pattern will be sustainable remains to be seen. Because the provinces in the RFE share many aspects, the region as a whole is often treated as an integral unit by Western researchers. Yet a comprehensive study of the Far East should also address the individual provinces, which vary significantly in area, climate, population, wealth, resources, and production (Table 2.2). For example, the Sakha Republic, deemed the largest self-governing unit in the world, is almost as large as the rest of the RFE provinces combined. In terms of climate, the RFE experiences severe winters, but the provinces display widely varying winter temperatures that range from −8 degrees Celsius in Sakhalin to a frigid −31 degrees in Sakha. Chukotka, Russia’s most remote province, has the lowest

Table 2.1 Structure of Russia’s and the RFE’s GRP by Value-added Economic Activity, 2011 (percentage)

Total (%)

Agriculture, hunting, and forestry Fishing and fish industry Extractive industries (mining/quarying) Processing/manufacturing Production and distribution of electricity, gas, and water Construction Wholesale and retail trade Hotels and restaurants Transport and communications Financial activities Real estate, renting, and business activities Public administration and defense Education Health and social services Other community, social, and personal services

Russian Federation (total of all provinces) 100

4.7 0.2 11.4 18.0

4.4 6.9 19.5 1.0 10.0 0.6 10.6 4.7 2.9 3.7 1.4

Russian Far East Total 100

3.8 2.4 27.1 5.2

4.0 13.0 10.0 0.8 12.2 0.2 5.9 7.2 3.2 4.0 1.0

Amur Oblast 100

7.1 0.0 15.8 3.8

6.2 15.5 10.0 0.8 20.3 0.2 3.9 7.4 3.7 4.4 0.9

Jewish Autonomous Oblast 100

12.4 0.0 0.4 5.0

4.5 27.6 9.0 0.9 10.2 0.1 5.0 12.8 3.8 6.6 1.7

Kamchatka Krai 100

3.5 17.4 4.0 8.4

7.2 6.9 10.3 1.1 6.0 0.4 4.6 15.7 5.3 7.7 1.5 continues

Table 2.1 continued

Agriculture, hunting, and forestry Fishing and fish industry Extractive industries (mining/quarying) Processing/manufacturing Production and distribution of electricity, gas, and water Construction Wholesale and retail trade Hotels and restaurants Transport and communications Financial activities Real estate, renting, and business activities Public administration and defense Education Health and social services Other community, social, and personal services

Magadan Oblast

Primorsky Krai

Sakha Republic (Yakutia)

Sakhalin Oblast

Khabarovsk Krai

Chukotka Autonomous Okrug

8.5 7.5 11.1 1.0 9.1 0.1 5.1 14.6 4.1 5.7 1.2

3.8 20.3 15.7 0.8 19.2 0.2 7.7 7.2 2.7 3.9 0.8

3.9 10.3 7.1 0.8 9.4 0.2 4.7 5.9 4.3 3.9 1.3

1.2 8.9 5.2 0.6 4.2 0.1 4.8 3.9 1.4 2.1 0.5

4.9 12.5 13.2 0.8 17.1 0.5 9.0 9.0 4.4 4.9 1.1

10.7 9.0 6.1 0.6 4.5 0.2 1.5 11.5 3.9 5.5 1.2

2.0 3.5 24.1 2.4

4.4 4.0 1.2 8.1

2.6 0.0 43.7 1.9

1.0 1.9 60.9 3.3

6.9 1.3 5.4 9.0

1.6 1.3 41.8 0.6

Source: “Otraslevaya struktura valovoy dobavlennoy stoimosti sub"yektov Rossiyskoy Federatsii v 2011 g.” Russian Federal Statistics Service/Goskomstat (GKS)/ Rosstat, Moscow, March 17, 2014, http://www.gks.ru/free_doc/new_site/vvp/otr-stru11.xls. Note: GRP is gross regional product.

Table 2.2 RFE Provincial Profiles

Russian Federation

Far East Federal Region Amur Oblast

Jewish Autonomous Oblast

Area (thousands, km2)

Total Population (2014)

17,098.2

143,666,931

361.9

811,274

6,169.3

6,226,640

36.3

170,377

462.5

150,312

Kamchatka Oblast

464.3

Primorsky Krai

164.7

1,938,516

87.1

491,027

Magadan Oblast

Sakha Republic (Yakutia) Sakhalin Oblast

Khabarovsk Krai

Chukotka Autonomous Okrug

3,083.5

787.6 721.5

319,864

954,803

1,339,912 50,555

Ethnic Groups (Top 2, %)

Russian (77.7), Tatar (3.7) Russian (78.9), Yakut (7.5) Russian (94.3), Ukrainian (2.0) Russian (92.7), Ukrainian (2.8) Russian (85.9), Ukrainian (3.9) Russian (84.1), Ukrainian (6.5) Russian (92.5), Ukrainian (2.8) Yakut (49.9), Russian (37.8) Russian (86.5), Korean (5.3) Russian (91.8), Ukrainian (2.1) Russian (52.5), Chukchi (26.7)

2011 Average Temperature in January (degrees Celcius) –9

Average Per Capita Monthly Income (2012, US$) 711.51

–28

781.49

–22

560.11

–24

–13

662.49

971.45

–24

1,128.63

–32

878.12

–17

2012 GRP Millions of US$, Nominala 1,919,906 83,325 7,221 1,310 3,918 2,372

657.26

17,126

–9

1,032.48

19,798

–22

1,476.74

–22

Source: See Chapter 2, note 2. Note: a. Total for Russian Federation as a whole is gross domestic product (GDP) not gross regional product (GRP).

791.47

16,676

13,396 1,507

16

Russia’s Far East

population density in Russia, 0.07 people per square kilometer, about oneseventh that of the neighboring US state of Alaska (about 0.48 per square kilometer). Wealth in the RFE is highly concentrated: four provinces—Primorsky, Khabarovsk, Sakha, and Sakhalin—account for roughly three-quarters of the region’s GRP. Per capita GRP in energy-rich Sakhalin, the highest in the region, is more than four times that in Amur and almost six times the level in the JAO. Rather surprisingly, Chukotka ranks second after Sakhalin in terms of per capita GRP and first in monthly income. That is because Chukotka has lost most of its population since the Soviet demise—only 51,000 people lived there in 2014 compared to 162,000 in 1990—and also because of a surge in the okrug’s gold output since the middle of the past decade. Thanks to serendipitous discoveries of new deposits and a favorable investment climate, Chukotka has vaulted into the company of Russia’s top gold producers, ranking sixth in 2012. Salaries in the gold mines push up the province’s overall income average.18 The provinces also can be differentiated in terms of their resources and production profiles. Sakha accounts for all of the RFE’s diamond production; Sakhalin and Sakha, in that order of importance, for 100 percent of its crude oil; and Sakhalin for all of the RFE’s LNG production. In recent years (2010–2012), Amur, Chukotka, and Sakha have produced two-thirds of the region’s gold; Primorsky and Khabarovsk have produced slightly more than 70 percent of the region’s timber; and Kamchatka alone has caught 70 percent of the region’s fish and marine products.19 Agriculture is concentrated in the Amur River basin provinces of Amur, the JAO, Khabarovsk, and Primorsky. Primorsky and Khabarovsk count as the RFE’s most industrialized provinces: for example, Khabarovsk produces civil airliners and jet fighters at its Komsomolsk-on-Amur Sukhoi plant as well as civilian and naval vessels in two Khabarovsk shipyards. Primorsky makes military helicopters and light aircraft and some other defense-related hardware. The province also maintains assembly lines for Japanese and Korean cars in Vladivostok (producing unprofitably for the European Russian market); a Hyundai-built electrical machinery plant in the same city; and a major shipbuilding-repair complex, Zvezda, in Bolshoi Kamen, just east of Vladivostok. The machine-building sector accounts for only 4 to 5 percent of the RFE’s exports (2011–2012), though a portion of its output clearly is allocated to various defense and civilian customers in Russia.20 The provinces also display important variations in their entanglements with the outside world. As Table 2.3 shows, the lion’s share of foreign investment in the RFE-Baikal macroregion, some 82 percent in 2011–2013, flowed to just two provinces, Sakhalin and Sakha. Over the period, almost 70 percent of the inflow originated not from Asia, but from a handful of European Union (EU) countries. However, in 2013 the eurozone’s share fell

Table 2.3 RFE Provinces’ Foreign Relations Total Foreign Trade (millions of US$)

Far East Federal Region Amur Oblast Jewish Autonomous Oblast Kamchatka Oblast Magadan Oblast

Primorsky Krai Sakha Republic (Yakutia) Sakhalin Oblast Khabarovsk Krai Chukotka Autonomous Okrug

Source: See Chapter 2, note 2.

2012 Turnover 36,385,980 1,127,864 61,317 805,612 375,576

8,711,457 4,757,511 17,733,316 2,604,269 209,057

2013 Turnover 40,215,155 912,765 102,077 708,403 758,703

11,951,503 4,891,836 18,204,274 2,424,868 260,727

% Change 110.52 80.93 166.47 87.93 202.01

137.19 102.82 102.66 93.11 124.72

2012 Main Foreign Trade Partner (%)

Rep. of Korea (28.2) China (90.3) China (98.7) Rep. of Korea (41.7) United Kingdom (21.7) China (50.5) Belgium (46.4) Rep. of Korea (41.1) China (42.9) United States (33.0)

2013 Main Foreign Trade Partner (%)

China (28.1) China (86.7) China (82.3) Rep. of Korea (50.9) Rep. of Korea (24.4) China (52.2) Belgium (52.8) Japan (47.1) China (46.4) China (30.7)

Combined 2011–2013 Foreign Investment Inflows (millions of US$) 30,902 490 8 3

297

2,162 4,605 20,632 449 329

18

Russia’s Far East

to 43 percent while Asia’s share, represented mostly by Japan and India, rose to 41 percent, a trend likely to continue in 2014. China is a small investment player, accounting for about 1.4 percent of the inflow in 2011– 2013. Nearly all Chinese investment, about 85 percent, was concentrated in the RFE border provinces and in Zabaikal Krai. Also significant are the differences in trade and other patterns, shown in Table 2.3. All four provinces that adjoin the Chinese border consistently conduct the largest share of their external trade with China. So too does Chukotka, which is the farthest away from China geographically. Over the period 2012–2013, the five nonborder provinces, by contrast, exhibited a range of main partners—Belgium, South Korea, Japan, the United States, and the United Kingdom. Trade dependence on China reached extraordinary levels in landlocked Amur Oblast and the JAO, amounting to 87 percent and 82 percent, respectively, in 2013. In terms of ratios to GRP, Primorsky ranked highest in the region—fully 25 percent of its economy was tied to trade with the China in 2012 (a figure itself understated, if one considers the large volume of gray trade or outright smuggling between Primorsky and Heilongjiang province). Of further interest are extensive leases of border farmland—at least 600,000 hectares, according to a recent estimate21—by Chinese agricultural interests, both individual peasants and large agribusinesses. Farmers, mostly from China’s northeast, grow grain, soybeans, and vegetables and raise pigs on these lands, for the internal market and for export back to China. The Chinese are also actively involved in the forest sector in the border provinces, somewhat to Russia’s detriment. As a World Wildlife Fund report observes, “Small, fly-by-night sawmills and log yards operated by Chinese citizens play a key role in the trade of illegal timber in the Russian Far East.”22 Yet while economic integration is well advanced along the Russian-Chinese border, the five northern provinces seem relatively more engaged with Russia’s other partners in Asia and Europe. Indeed, Chinese commentators sometimes express distaste for Russia’s Far North as an investment destination, citing the lack of basic infrastructure, frigid temperatures, high project start-up costs, and the relative availability of raw materials from Central Asia, Africa, and elsewhere.23 Finally, the RFE’s relations with the center show variation both within the region and over time. Such relations have a rich and turbulent history—the tumultuous years of the 1990s and the colorful players involved are discussed subsequently—but commentary here focuses mainly on post-2000 trends. In general, the RFE’s great distance from western Russia, its industrial heartland, represents a continuing challenge to its economic viability as a region and to its sense of connectedness to Moscow. Moscow has responded with generous financial assistance. Traditionally, the response has involved annual support payments—all RFE provinces except Sakhalin receive federal budget subsidies, totaling $3.3 billion in 2013. Far more

What Is the Russian Far East?

19

important have been state-driven programs to uplift the economy and infrastructure of the backward eastern provinces. From 2000 to 2012, capital investment in the RFE increased more than eighteenfold, compared to twelvefold in the federation—and in 2012, the RFE received the highest per capita investment in fixed capital of any Russian region. Clearly, Moscow is anxious to build support in this remote and inhospitable region and to bring it into a closer economic relationship with the rest of Russia.24 While all provinces benefited, more than three-quarters (77 percent) of the measured investment in 2012 went to four provinces: Primorsky, Sakha, Sakhalin, and Khabarovsk. Coincidentally, these are the richest and most populous provinces. The four also combine the RFE’s main transport-logistical assets (in Primorsky and Khabarovsk) and its main repositories of natural resources (Sakhalin and Sakha)—in effect, they represent the power core of the RFE and encapsulate its development hopes. It is noteworthy that Sakha and Sakhalin received by far the highest per capita investment of any RFE province in 2012. Moreover, in 2013 Sakha alone accounted for almost half of the $3.3 billion in federal transfers to the budgets of the individual RFE provinces. Undoubtedly, such preferential treatment reflects the national government’s emphasis on resource (especially energy) development and, in Sakha’s case, its republic status and Yakut ethnic plurality.25 Politically, center-region relations have tended to turn on issues of regional autonomy, control over mineral resources, and federal tax policy. Relations with China are also an issue—some provincial governors are less than enthusiastic about the Kremlin’s current strategic embrace of Beijing—though such concerns have been muted in recent years. The most recent major explosion of provincial hostility occurred in late 2008 in the form of a series of demonstrations in Vladivostok, and echoed in other RFE cities, that challenged an increase in import duties on used Japanese cars— an attempt by Moscow to protect the national automobile industry. The protests turned ugly and eventually were suppressed by elite police troops dispatched to Vladivostok from Moscow. The incident was not just about car tariffs, but also economic freedom and regional self-determination generally.26 However, no protests of this magnitude have occurred since then, though relations with the center are characterized by hard bargaining and demands for increased financial autonomy. One measure (admittedly imperfect and time bound) of the general health of the center-region relationship is the strength of support for the ruling party—United Russia (UR) since 2000, as Table 2.4 shows. Support has been consistently lower than the all-Russian average in the past four national elections, and has varied across provinces. For example, Primorsky’s and Khabarovsk’s far-below-average percentage of votes for UR in the 2011 Duma elections is notable: 38.1 and 33.1, respectively. These provinces’ percentage vote for UR always ranks below the RFE average.

Table 2.4 Votes for United Russia (percentage)

Nationwide average RFE average RFE difference compared to nationwide

Amur Oblast Jewish Autonomous Oblast Kamchatka Oblast Magadan Oblast Primorsky Krai Sakha Republic (Yakutia) Sakhalin Oblast Khabarovsk Krai Chukotka Autonomous Okrug Moscow Oblast Moscow City St. Petersburg City Krasnodar Krai

2007 State Duma Elections 64.3 62.1 + 2.1

69.8 48.8 63.7 55.3 55.7 64.0 63.0 60.7 78.1 59.8 54.2 50.3 61.9

2008 Presidential Elections (Dmitry Medvedev) 71.2 67.1 + 4.1

63.6 67.4 69.4 63.1 63.8 67.8 63.5 64.1 81.4 70.5 71.5 72.3 75.3

2011 State Duma Elections 49.3 45.6 + 3.7

43.5 48.1 45.3 41.0 33.1 49.2 41.9 38.1 70.3 32.8 46.6 35.1 56.2

2012 Presidential Elections (Vladimir Putin) 63.6 61.4 + 2.2

62.9 61.6 59.8 56.3 57.3 69.5 56.3 56.2 72.6 56.9 47.0 58.8 63.7

Source: Centre for the Study of Public Policy, University of Strathclyde, and the Levada Center, Moscow, March 2, 2015, http://www.russiavotes.org/.

What Is the Russian Far East?

21

Compare, on the other hand, population-tiny Chukotka, where pro−United Russia percentages have ranged from 70 percent to above 80 percent in the past four elections. Chukotka likes the UR because the government allows it some special rights not granted elsewhere—including a special investment regime to encourage investors to exploit the province’s valuable deposits of precious metals. Chukotka also benefited from the enlightened administration of the previous oligarch governor, Roman Abramovich, who allegedly donated $2 billion of his personal fortune to rebuild the capital city of Anadyr and, in general, improved the livelihood of the province’s inhabitants. The significance of these voting patterns can be debated. The RFE has always been a difficult region for Moscow to administer, and distance, as the common saying goes, dilutes power. Khabarovsk and Primorsky share a tradition of independent-minded governors and a cosmopolitan outlook befitting their littoral locations and their importance as transport and trading hubs. Looking more closely at the internal politics of the provinces, it can be seen that the UR holds an absolute majority of seats in every regional parliament, except the Amur Oblast where it still outnumbers opposition Communists and Liberal Democrats by more than a two-to-one margin. Such observations hardly begin to capture the complexity of centerregion relations, but they do not suggest a pattern of instability or grounds for separation. Of course, these conclusions must be considered tentative: recent momentous changes in Russia’s economic situation could well undercut support for the UR and Putin in the RFE and elsewhere in Russia. Or they might have the opposite result. In any case, future national and regional elections will tell the story. Notes 1. The definition includes Japan, North Korea, South Korea, the RFE, Mongolia, and northeast China. 2. The authors compiled national- and province-level data by utilizing the following set of Russian national statistics databases that cover socioeconomic, demographic, environmental, industrial activity, investments, and trade statistic indicators. Unless otherwise cited, the sources for data referenced throughout this book come from these extensive databases. Russian Federal Statistics Service/Goskomstat (GKS)/Rosstat, http://www.gks.ru/; Russian Federation Single Inter-Agency Information-Statistical System—EMISS Database, http://www.fedstat.ru; Russian Federal Customs, http://customs.ru/; Far East Federal Customs, http://dvtu .customs.ru/. Statistics provided by the Interregional Association for the Far East and Zabaikalye, http://assoc.khv.gov.ru/; Statistics database of the Central Bank of the Russian Federation, http://www.cbr.ru/statistics/. 3. “Russia Far East and Irkutsk,” Mining Journal, February 22, 2012, www.mining-journal.com/_data/assets/supplement-file/attachment/0005

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Russia’s Far East

/324617/RussiaFar East.pdf. See also Union of Gold Industrialists of Russia, “Dobycha I Proizvodstvo Zolota v Rossii v 2012 g,” February 18, 2013. (Free registration required for access.) http://www.goldminingunion.ru/news/view /880/pred varitelnyie_itogi_dobyichi_i_proizvodstva_zolota_v_rossiyskoy_federatsii_v _2012_godu.htm. 4. US Energy Information Administration, “Russia,” March 12, 2014, www.eia.gov/countries/cab.cfm?fips=rs. 5. “Gazprom to Start Supplying Chayanda Gas to China in 2019,” Interfax, May 23, 2014, www.interfax.com/.newsinf.asp?id=507971. 6. John Simeone, Researcher with the World Wildlife Fund personal communication with Rensselaer Lee, June 17, 2014. 7. Government of Russia, “Federal’naya Tselevaya Programma: Ekonomicheskoye I Sotsial’noye Razvitiye Dal’nego Vostoka I Zabaikalskoge Regiona na Period do 2018” (Moscow: Government of Russia, 2013), www.government .ru/docs/8957, p. 7. 8. Ibid. 9. Ibid. See also Oleg Onoprienko, “P & I Review—Russian Far East” (Vladivostok: CIS Panel Services, 2013), 5–6, http://goo.gl/RUuhYF. 10. Kathrin Keil, “Evaluation of the Arctic Shipping Season 2013” (St. Johnsbury, VT: Arctic Institute, Center for Circumpolar Studies, January 13, 2014), www.thearcticinstitute.org/2014/01/evaluation-of-arctic-shipping-season.html. 11. President of Russia, “Presidential Address to the Federal Assembly,” Kremlin, December 12, 2013, www.kremlin.ru/news/6402. 12. Natasha Kuhrt, “The Russian Far East in Russia’s Asia Policy—Dual Integration or Dual Periphery,” Europe-Asia Studies 64, no. 2 (2012): 475. 13. Government of Russia, “Ekonomicheskoge I Sotsial’noye Razvitiye Dal’nego Vostoka I Zabaikalskove Regiona na Period do 2018.” 14. “US Upstaged by Russia in Asia-Pacific,” Russia Direct, October 4, 2013, www.russia-direct.org/content/us-upstaged-russia-asia-paxific. See also Anton Barbashin, “A Pacific Vision for Russia and the US,” The Diplomat, December 6, 2013, http://thediplomat.com/2013/12/a-pacific-vision-for-russia-and-the-us/; and Kuhrt, “The Russian Far East in Russia’s Asia Policy,” 473. 15. UN Comtrade database, http://comtrade.un.org/data. See also the discussion in Chapter 8, especially Table 8.1. 16. Presidential Representative to the Far East Federal Okrug Yury Trutnev responds to questions of journalists, October 24, 2013, Komsomolsk on Amur, www.dfo.gov.ru/reg_news_print_php?id=3712. 17. Interregional Association for the Far East and Zabaikalye, “Inostrannye Investitsii v 2013, 2012, 2011, 2010”, http://assoc.khv.gov.ru/regions/foreign -economic-activities/investment. 18. Union of Gold Industrialists of Russia, “Dobycha I Proizvodstvo Zolota v Rossii v 2012 g,” February 18, 2013, http://www.goldminingunion.ru/news /view/880/predvaritelnyie_itogi_dobyichi_i_proizvodstva_zolota_v_rossiyskoy _federatsii _v_2012_godu.htm. 19. See Note 2. In particular, Russian Federation Federal Statistics Service, Forest Industry Statistics 2013, www.fedstat.ru/indicator/data.do?id=378488refer rerType=08referrerid=946988; “Ulov Ryby I Dobycha Moreproductov 1990–2006,” Geografia, no. 4 (2009), www.geo.1september.ru/view_article.php?id=200900420; and Union of Gold Industrialists of Russia, “Dobycha I Proizvodstvo Zolota v Rossii v 2012 g.”

What Is the Russian Far East?

23

20. See, for example, “Sokhoi Plant in Komsomolsk Produced 12,000 Aircraft during Its Lifetime,” Russia Beyond the Headlines, August 11, 2012, http://rbth.com /articles/2012/08/11/sukhoi_plant_in_komsomolsk_produced_12000_aircraft_dur ing_its_lifeti_17273.html; Isabel Gorst, “Japanesse Car Factory for Vladivostok,” Financial Times, September 6, 2012, http://blogs.ft.com/beyond-brics/2012/09 /06/russia-japanese-car-factory-for-vladivostok/; and V.V Mikliuchevsky, “Investment Potential of Primorsky Region,” paper presented at the 18th meeting of the Russian-American Pacific Partnership (RAPP), Vladivostok, September 17–18, 2013. 21. David Stanway, “Insight: For China’s Farmers, a Rare Welcome in Russia’s Far East,” Reuters, December 22, 2013, www.reuters.com/article/2013/12/22/us -china-russia-agriculture-insight-idUSBRE9BL00X20131222. 22. D. Y. Smirnov, ed., “Illegal Logging in the Far East: Global Demand and Taiga Destruction” (Vladivostok: World Wildlife Fund, 2013), 22. 23. Authors’ interviews with researchers at Shanghai Academy of Social Sciences, China, April 25–26, 2014. 24. See Note 2. See also, Viktor Rudko-Selivanov, “Razvitie Delnevo Vostoka I koordinatakh gosudarstvennoiy programi,” Money and Credit, no. 10 (2013), www .cbr.ru/publ/MoneyAndCredit/SODER10-2013.pdf, pp. 16–18. 25. See Note 2. On subsidies, see Viktor Rudko-Selivanov, “Razvitie Delnevo Vostoka I koordinatakh gosudarstvennoiy programi. In per capita terms, Kamchatka received the largest federal subsidy in the Far East and in Russia in 2013—about $2,900. 26. “Violence Erupts at Latest Vladivostok Demonstration,” Wikileak: AMConsul Vladivostok, December 23, 2008, www.wikileaks.org/cable/2008/12 /08VLADI VOSTOK139.html.

3 History of the Russian Far East

MANY OF THE RUSSIAN FAR EAST’S CURRENT TROUBLES AND VULnerabilities find roots and echoes in its turbulent past, including the experi-

ence of colonization, the ebbs and flows of state power, and the inexorable pull of the Asian periphery. Its history, in turn, has also been shaped by immutable factors such as distance from Moscow, an exceptionally harsh climate, and on the positive side by extensive resource endowments. Until recently, the RFE was not seen by Moscow as a serious development prospect (it was treated more as a colony). Consequently, it emerged from Soviet rule mired in backwardness and with a confused sense of identity— a tough legacy for Russia’s current crop of leaders. Moscow currently touts the region’s development promise—for good economic and strategic reasons—but clearing away the rubble of the past and forging an entirely new relationship with this troubled region and managing relations with its powerful neighbors will be a formidable undertaking. Russian Colonization of Siberia It was Russia’s eastward expansion, of course, that brought the RFE into being. Indeed, the genesis of colonization goes back hundreds of years. Having thrown off the Tatar-Mongol yoke and after solving the problem of national unification by the sixteenth century, the young Russian nation began active expansion eastward. During the reign of Ivan the Terrible (1533–1584), Russia annexed the lands of Low and Middle Povolzhie, which had previously belonged to the Khanate of Kazan and to the Astrakhan Khanate, thus opening a direct access to Ural and Siberia. In the sixteenth and seventeenth centuries, the colonization of Siberia and the Far East was mainly financed by major entrepreneurs who organized expe25

26

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ditions of paramilitary companies of Cossacks attracted by hunting for valuable furs.1 In what may be seen as an early example of public-private partnership, the Cossacks proclaimed political sovereignty of the Moscow tsar over the new territories and erected new forts and fortified settlements (ostrogs). In the late sixteenth century, the Cossack forces led by Yermak defeated the Khanate of Sibir and the Russians launched a rapid advance into the east. Russian explorers took only a half-century to brave the Siberian lands and reach the Pacific Ocean. In 1639, the Russians reached the shores of the Sea of Okhotsk using Yakutsk as a base. By the early eighteenth century, Russia had gained control of Kolyma and Kamchatka and a few islands in the Pacific, followed by Alaska and the Aleutians in the second half of the eighteenth century. But Chukotka, where Russians met fierce resistance from the indigenous Chukchi, was annexed only in the late eighteenth century. In addition to the northeast direction of the Russian colonization, the Amur River basin became another attraction for Russian explorers. By the late seventeenth century, the Russians had established a network of ostrogs and administrative and tribute collection centers there as well as centers of commerce, industry, and the Orthodox faith. The Cossack forces were joined by professional military and research expeditions. In the late seventeenth century, the Russian colonization efforts first faced a strong competitor—the Qing empire. In accordance with the Treaty of Nerchinsk (1689), which was favorable for China, Russia was forced to leave the Amur River basin and direct its expansion into the northeast. Russia was only able to come back to the basin a century and a half later when China’s gradual decay and weakening became apparent. Another reason to step up Far Eastern policy was Saint Petersburg’s concern that the Amur basin could become the target of British penetration, as Britain was Russia’s main geopolitical opponent at the time and had its own imperial ambitions in the North Pacific. In 1849, an expedition headed by Gennady Nevelskoy explored the waters and shores of Sakhalin and the Amur River mouth. Nikolay Muravyov, governor general of East Siberia, considered it his primary goal to annex the Amur River region and the Primorsky (Ussuri) region to Russia, so he took active steps to settle the Amur River’s left bank area. In 1858 Muravyov and Chinese representatives led by Prince I-Shan signed the Treaty of Aigun, according to which Russia acquired the left bank of the Amur River, China controlled the right bank up to the Ussuri River outlet, and the two countries had joint control over the Ussuri region. In accordance with the Beijing Convention of 1860, Russia finally annexed the Ussuri region. Russia used adroit diplomacy, backed by superior military force, to get the Qing empire to sign the treaties that surrendered huge swathes of land to tsar’s empire. In making the territorial deal, Russia took

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advantage of China’s desperate circumstances. The Qing empire was at war with Britain and France, who occupied Beijing in October 1860. The twenty-eight-year-old Russian envoy, Nikolai Ignatiev, offered to mediate an Anglo-French withdrawal in exchange for a territorial adjustment in the northeast, which Manchu leaders accepted.2 John Stephan is correct to point out that “Russia absorbed the Priamur and the Primorye [Primorsky] by a combination of encroachment, diplomacy, and luck.”3 At the same time, the Russian government gave up on further exploration of Alaska and sold its North American territories to the United States. One reason for the sale was the perceived need to concentrate scarce financial resources on the settlement of the more geopolitically important Amur basin area. The same reasoning had prompted persistent efforts by Russia to establish relations with Japan, which culminated in an 1855 frontier agreement with Japan, the Treaty of Shimoda, that assigned the South Kurils to Japan and agreed that Sakhalin would be shared by the two countries. Only in 1875 was a more precise treaty signed in Saint Petersburg, according to which the entire Sakhalin was recognized as a Russian domain and all of the Kuril Islands were transferred to Japan. In 1884–1888, Russia and Korea established the border along the Tumen River. At the time of Russian colonization, the Aboriginal tribes of Siberia and the Far East had diverse, though primitive, social and economic traditions. The Chukchi, the most organized and warlike ethnic group, built their society based on the principles of military democracy. But the majority of indigenous ethnic groups had primitive communal or tribal societies. The tribes of the Pacific coast were mostly engaged in hunting for sea mammals, fishing, gathering, and nomadic reindeer herding. The tribes that settled the Lena River basin were also involved in cattle breeding. The Tungus-Manchu tribes in the Amur River basin were sedentary, engaged in cattle breeding and agriculture.4 A sparse Aboriginal population, lack of state organization, constant interethnic and intertribal conflicts, and diverse ethnolinguistic structures were factors that facilitated a fast establishment of Russian control over Siberia and the Far East. The Russian settlers were more organized, were more technologically equipped, and carried firearms. Interactions of the Russians with the indigenous population took various forms, with ambiguous consequences. Local tribes who refused to obey and pay tribute were forced into submission. In some instances, the Russians took hostages, resorted to violence and killing, and tried to collect more tribute than decreed by the government. Like the majority of European colonizers of their time, the Russian pioneers of Siberia were not the most educated and cultured representatives of their country and they led a life full of danger.

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However, in general, the Russian settlers were able to find accommodation with the local tribes since they were more preferable to them than the Mongols and the Manchu. The tsarist administration encouraged positive attitudes toward the Aboriginal population. There were almost no women among the Russian pioneers and so the rate of ethnic intermarriages was high. The Russians introduced new tools and techniques of hunting, agriculture, and cattle breeding, which were borrowed by the local population. Cultural blending was intensive. On the one hand, the Russian Orthodox Church actively baptized and educated the Aboriginal tribes. On the other hand, Russian settlers who lived in isolation from their motherland eventually borrowed local agricultural techniques and sometimes even shamanist practices.5 The problem of ensuring food supplies was the major issue for Russian pioneers in Siberia and the Far East. Initially, grain and flour were delivered from Central Russia, which was an expensive and time-consuming task. The lands in the Amur River basin that could be cultivated were lost as a result of the Treaty of Nerchinsk. It was not until the late eighteenth century that the Trans-Baikal region became self-sufficient in food production for its internal needs. In northern regions, the Russian settlers had to rely on local foods, which were often unpleasant to their taste. To solve the food issue, the central government encouraged and subsidized peasants to follow the Cossacks. The first settlers chose the lands themselves; later, self-acquisition of land became quite common in Siberia. In the eighteenth century, the government began to force state-owned peasants to move to Siberia. However, unlike in the rest of Russia, there was no serfdom or feudal land ownership in Siberia and the Far East. The construction of roads started in Siberia at the turn of the eighteenth century. Until then, rivers and sea routes were the only transport corridors. River routes used branches of major south-north rivers—Ob, Yenesei, and Lena—that flowed approximately west to east. In the 1730s, construction began on the so-called Siberian Route (Sibirskiy Trakt), which extended from Moscow through Yekaterinburg, Tobolsk, Tomsk, and Irkutsk and eventually ended up at Nerchinsk, the site of the 1689 treaty, that is located in modern-day Zabaikal Krai. The route was expensive to maintain, generally in poor condition, and ill-suited to swift overland transport. Before the Trans-Siberian Railway was constructed, cargo was typically shipped from Moscow to Vladivostok by river and animal-drawn transport and took about eleven months on the average to get there. Initially, Russian settlers in the Far East were engaged mainly in hunting for sables, beaver, and other furred animals. The Russian government also collected furs from the Aboriginal peoples as tribute and customs duties. For a long time, furs were Russia’s main export to Europe and Asia. Mining also played a major role in the local economy. Russia had long

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needed silver, and the tsarist administration encouraged the Siberian authorities to explore new deposits of precious metals. In 1687, the first silver was smelt near Nerchinsk in the Trans-Baikal region. Peter the Great accelerated the development of metallurgy and production of metal goods. Numerous commercial, military, and research expeditions into the Northern Pacific stimulated the shipbuilding industry in Yakutsk, Okhotsk, and Petropavlovsk. The trade between the Russians and local tribes relied mainly on barter exchange. Russian goods were exchanged for furs, mammoth bones, and walrus tusks. In the late seventeenth century, over a hundred kinds of goods were imported to the Trans-Baikal region and the Far East; the majority of them were manufactured in the European part of Russia. In the eighteenth century, the government tried to regulate the trading operations by developing commercial and industrial companies and arranging regular fairs. In accordance with the Treaty of Kyakhta of 1727, a center of foreign trade was established in the Trans-Baikal settlement of Kyakhta on the border with Mongolia, which was part of the Chinese empire at the time. In 1775, foreign trade operations with China accounted for 8.3 percent of the total foreign trade volume in Russia, bringing between 20 percent and 38 percent of customs revenues. Furs constituted the majority of Russian exports to China.6 The long distance from Moscow and low population density resulted in a relatively high level of independence for the Russian administration in Siberia. To govern the newly acquired territories in the east, a special department was organized based on geographical rather than functional mandate: in 1637, Sibirsky Prikaz (Department of Siberian Affairs) was established in Moscow as a part of Russia’s central government. Local governors (voyevodas) appointed by Sibirsky Prikaz were given a great amount of power: administrative, judicial, police, financial, taxation, military, and, if necessary, diplomatic. Higher authorities appointed all officials, and local self-government was almost nonexistent. Indigenous nobility were involved in governing the Aboriginal peoples based on their own traditional rights. The Siberian Guberniya (province) was established during the reign of Peter the Great, with Yakutsk being the administrative center for the Pacific coast. In 1731, the Okhotsk maritime administration was separated from the Yakutsk Uyezd (district). Catherine the Great disbanded Sibirsky Prikaz and established Yakutsky and Okhotsky Uyezds as parts of the Irkutsk Guberniya. In 1803–1804, Kamchatsk Oblast was established and, in 1812, Okhotsk was submitted to Kamchatka. Alaska’s status was somewhat special in that it was governed by a semiprivate Russian-American Company, partly modeled on the Western colonial enterprises like East India Company. By the nineteenth century, the so-called Siberian Committee was operating as a part of the Cabinet of Ministers.

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From the Treaty of Aigun to the Civil War In 1850–1870, the borders of Russia in the Far East were stabilized, taking a shape that has remained mostly intact to present, and the government started a more organized and balanced development of the region. The Treaty of Aigun and the Beijing Convention triggered economic development of the region and shifted the authorities’ focus from the northeast territories to the southern part of the RFE. The region was actively settled by the migrants from the European part of Russia; some came voluntarily but others were settled in a compulsory way. Soldiers, sailors, Cossacks, and peasants were forced to migrate as a part of the mandatory military recruitment procedure. In 1869, the Island of Sakhalin became a territory of imprisonment and exile—Russia’s Australia, and many prisoners stayed there permanently after their release. (In the Soviet era, the more northerly provinces of Chukotka and Magadan became the main Far Eastern centers of exile and imprisonment.) Acute shortage of lands in the European part of Russia caused many peasants to migrate to the RFE. The number of peasant migrants grew tenfold after the Odessa-Vladivostok sea route was launched in 1880 and even more after the completion of the Trans-Siberian Railway in 1903. The migrants were granted large pieces of land, their expenses for transportation and living arrangements were covered, and they were exempt from taxes. Accelerated colonization of the RFE was intended to boost the economic development of the region as well as prevent immigration from the neighboring Asian countries and potential territorial claims from their side. Immigration to Russian Far Eastern cities was boosted by contracting of industrial workers and settling of retired soldiers. However, lack of human resources, especially of high-qualified labor in industry and public administration, remained a pressing problem. After the 1905 revolution, the government considered migration to the RFE as an important measure to relieve social tension in Central Russia, which suffered from agrarian overpopulation. The reformist prime minister Pyotr Stolypin initiated the Committee for the Russian Far East Colonization. Land surveying; construction of schools, roads, and hospitals; and other benefits attracted migrants, but World War I stopped the mass inflow of peasant migrants into the RFE. The peasants settled mostly in the Amur and Primorsky regions. Vast available tracts of arable land contributed to a higher share of wealthy and middle-income peasants in the RFE than in Russia in general. A favorable climate as well as the railway construction resulted in the establishment of commercial farming in the region. Major agricultural companies used advanced equipment, had stable connections with the food industry, and worked for public contracts to provide for the needs of the army and fleet.

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Asian immigrants constituted the majority of the foreigners in the region and made up a sizable portion of the total population. For example, in 1890 ethnic Russians accounted for only 42 percent of Primorsky’s civilian population.7 Andrey Korf, the first governor general of Amur (1884– 1893), defined the legal status of Korean and Chinese immigrants, their land ownership, and registration. He also beefed up security in the nearborder areas and established a degree of control over the Chinese communities in the cities. Construction of railways in the RFE required additional human resources, necessitating the hiring of Chinese and Korean laborers who were also indispensable in other vital sectors of the economy, including agriculture. However, the increased number of Asian immigrants aroused xenophobic fears of “Yellow Peril” among the authorities and Russian residents that sometimes erupted in violence, especially against the Chinese. The worst incident took place in Blagoveshchensk in July 1900 during the Boxer Rebellion when, in response to sporadic bombardment of the city from the Chinese side of the Amur River the local Russian authorities ordered all Chinese deported to Manchuria. Cossacks rounded up 3,500 men, women, and children and drove them into the river. Only 100 reached the Manchurian bank alive.8 Negative attitudes toward Asian immigrants were heightened by the unexpected defeat of Russia in the RussoJapanese war, which revealed the weaknesses of Russian positions in the region. In 1910, a law was adopted to prohibit hiring Chinese people to work for public contracts. As a result, the share of foreigners in the RFE’s population declined before World War I.9 In the late nineteenth century, before the Trans-Siberian Railway was constructed, the main way of communication between Central Russia and the Far East was by sea. The sea route between Odessa and Vladivostok (around Africa) took a year and five months. After the Suez Canal was opened, the length of the trip was reduced to forty-five days. Shortage of oceangoing vessels required the Russian government to charter many foreign ships. Four vessels were purchased abroad for voluntary donations and the Volunteer Fleet (Dobroflot) was created. Since 1880, its steamships navigated between the Black Sea ports and the RFE. However, the development of sea and river transport failed to fully satisfy the needs of the regional economy. The Russian sea fleet developed slowly, and coastal shipping was handled mainly by foreigners. In 1893–1903, the Far Eastern policy of Russia was strongly influenced by Sergey Witte, the minister of finance and an ambitious reformer. His program of expanding and strengthening the position of Russia in the Far East called for construction of the Trans-Siberian Railway. The launch of this railway offered great prospects for Russian and foreign investment into the exploration of mineral deposits in Siberia. Additionally, the TransSiberian Railway promised profits to Russian landowners by providing

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access to the international market for Siberian wheat. Construction of the railway allowed increased peasant migration inflow into Siberia and the RFE. The line’s strategic value was no less important. It made it possible for Russia to urgently move its land troops to the RFE in case of a military conflict. In fact, Saint Petersburg made up its mind to build a railroad to Vladivostok in the wake of the Anglo-Russian clash over Afghanistan in 1885, when there arose a real danger of the British navy attacking Russia’s Far Eastern territories. The territories were almost defenseless because, without a rail link, it was nearly impossible to transport troops there.10 Since Russia lacked domestic financial resources to undertake such a grand project, the construction of the Trans-Siberian Railway was facilitated by the influx of French capital into Russia.11 In 1895, the railway reached Chita. At that point, the government had to decide whether to continue the line to Vladivostok via the Russian territory along the Chinese border or to direct it through Manchuria, which was much shorter. The second option was supported by Witte since construction of the China Eastern Railway allowed the exploitation of northern Manchuria and the strengthening of Russian influence in China. The treaty between Russia and China was signed and, in 1901, the first train ran along the China Eastern Railway.12 In 1897, a railway connected Khabarovsk and Vladivostok; its construction led to new commercial and industrial enterprises and settlements. Construction of the transport system in the region allowed mining industries to develop and export their products to the foreign markets. The TransSiberian main line was finally completed in 1916 with the completion of the railway bridge over the Amur River. After the Treaty of Aigun was signed, the public sector developed rapidly in the economy of the RFE. State-owned enterprises provided for the needs of the army and fleet (coal mines, highways and railways, production of construction materials and major construction works, ship and rollingstock repair, production of ammunition, etc.). Private entrepreneurs focused on trading, metals mining, fishing, hunting for furs, and timbering. Industrialization and urbanization in the RFE occurred much faster than elsewhere in Russia. Local peasants were wealthier than in other regions of the country; however, the labor and living conditions of workers in the cities were unfavorable. The tensions in urban areas were aggravated by the predominance of the male population. During the first Russian Revolution of 1905–1907, the riots were quite active in the RFE. Charity could not compensate for the drastic social polarization created by a high concentration of capital. Economic development of the RFE stumbled against the insufficiency of domestic capital in Russia. Attracting foreign investment became a priority for state policy in the region. Establishment of free-trade zones triggered the inflow of foreign entrepreneurs into the region. A zone of free

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trade was first officially established in Kamchatka in 1828, and in Nikolayevsk in 1856; however, it was the Treaty of Aigun that spurred the development of cross-border trade. The free-trade zone was created along the land border between China and Russia as well as in Mongolia, which was under the control of China. In 1862, Vladivostok became another important free port in the RFE. However, the government considered free-port zones to be a desperate and temporary measure. With the strengthening of Russian presence in the Far East, Russian entrepreneurs were urging the government to implement protectionist measures. The central government was inconsistent: more than once free-port zones were closed and then reopened, thus impeding the development of local business.13 Administrative territorial division of the RFE also underwent frequent changes: in 1856 the Primorsky region was established, followed by the Amur region in 1858. In 1871, the administrative center of Primorsky and the headquarters of the Siberian Fleet were moved from Nikolayevsk to Vladivostok. In 1884, the Amur Governorate General was established, with the administrative center in Khabarovsk. It included the Trans-Baikal, Amur, and Primorsky regions, and the Island of Sakhalin. In 1909, Kamchatka and Sakhalin were separated from the Primorsky region into independent administrative units. In the latter part of the nineteenth century, Russia built and rapidly developed colonization outposts in the south of the Far East: Blagoveshchensk, Khabarovsk, Nikolayevsk, Vladivostok, and Nikolsk. At the same time, the cities in the northeast were quickly falling into decay. Yakutsk became the extreme point of economic development in the north of the RFE. The highly militarized social life and economy postponed implementation of territorial self-governance, which was introduced in the RFE much later than in the rest of Russia and in a more simplified form, with the Yakutsk region being the only territory headed by a civilian governor. The governor general appointed by the tsar was by far the most powerful figure in the RFE. Military and civil authority were concentrated in the hands of the governor general, who also performed important foreign policy and diplomatic tasks. That said, the position of governor generals within the imperial state hierarchy was not clearly delineated and their financial prerogatives were limited. Usually the powers of a particular governor general were determined by their personal qualities and connections in Saint Petersburg rather than legal regulations. The lack of clear rules and procedures and the role of personal factors made the governance of the RFE, as well as some other Russian provinces, somewhat confused.14 It is ironic that, today, not much has changed. In 1903, the Viceroyalty (Namestnichestvo) headed by Admiral Evgeny Alekseyev15 was created to manage the internal and external affairs of the RFE. The Viceroyalty had jurisdiction over not only the RFE, but also Rus-

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sia’s possessions in Chinese Manchuria. Significantly, the Viceroyalty was headquartered in Port Arthur (Lushun), a strategic naval port located within the Guandong territory in southern Manchuria, which Russia leased from the Qing empire in 1898.16 It reported directly to the newly established Special Committee for Far Eastern Affairs, which was chaired by Tsar Nicholas II himself. The high status of the Viceroyalty and the special committee was attributable mainly to geostrategic imperatives: at the turn of the twentieth century, the Asia Pacific direction became, albeit for a short time, the top priority for Russian foreign policy. Nicholas II and his government were trying to make Russia the dominant state in Northeast Asia. In conversations with his aides, Nicholas II talked of his plans to annex Manchuria and Korea.17 Saint Petersburg’s preoccupation with expansion into Chinese Manchuria diverted attention, and funding, from the RFE. Rail traffic on the China Eastern Railway flowed through Dalny rather than Vladivostok while Harbin surpassed both Khabarovsk and Vladivostok as a transport hub and commercial center. Although Far Eastern commitments claimed a third of the empire’s state budget in 1903, little of that went into the Russian Amur and Primorsky.18 Even worse, imperialistic ambitions led to the war with Japan (1904–1905), in which Russia found itself diplomatically isolated and suffered a humiliating defeat. Russia had to cede the southern half of Sakhalin to Japan, lost its possessions in southern Manchuria, and acknowledged a Japanese protectorate over Korea. After the defeat by Japan, Russia’s priorities again turned to Europe. Since the China Eastern Railway in Manchuria could no longer be considered entirely secure, a consequence of the Russo-Japanese war was the decision of Russian government to build the Amur line of the TransSiberian Railway that would run exclusively within Russian territory. In 1916, with the completion of a bridge across Amur near Khabaravosk, the Amur line became operational. The loss of Port Arthur and Dalny also made Vladivostok Russia’s only major naval base and commercial port in the Pacific, substantially raising its importance. To defend the city from sea and land assaults, an extensive complex of state-of-the-art fortifications and artillery batteries was constructed at a huge cost. The Vladivostok Fortress is considered to be among the world’s strongest naval citadels built in the early decades of the twentieth century. It is now one of the city’s main tourist attractions. During the February Revolution of 1917, which led to the tsar’s abdication and the abolishment of monarchy, the Far East was simultaneously governed by the Soviets formed by social democratic parties and the committees that represented liberal bourgeois circles. Moderate socialists gained the majority of votes at elections to the local public authorities. A deepening political and economic crisis engulfed all of Russia, with the

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RFE being no exception. The Bolshevik-led October Revolution in Petrograd was accepted controversially in the RFE and resulted in more chaos, creating a de facto vacuum of power. In February 1918, the Supreme War Council of the Entente Powers decided to have the Japanese army occupy Vladivostok, Harbin, and the China Eastern Railway. Later, the United States, Great Britain, France, and Italy sent troops to the RFE, but their troops were not as numerous as the Japanese force, which ranged from 55,000 to 120,000 soldiers.19 Japan planned to create a buffer state controlled by Tokyo in the Far East and Eastern Siberia. In 1918, the conflict of antagonistic political forces grew into the Russian Civil War, which was conducted in the RFE and Trans-Baikal region mainly along the Trans-Siberian Railway. Ineffective and misguided policies of the anticommunist White movement and especially of its leader, Admiral Alexander Kolchak,20 as well as the movement’s lack of a clear political focus, eventually brought critical segments of the population into the camp of the Bolsheviks. After Kolchak was defeated in 1920, the Entente’s forces withdrew; however, Japanese troops remained in the territory of the RFE. To prevent a military conflict with Japan, the Bolsheviks created a buffer, de jure independent state of the Far Eastern Republic, with the capital in Chita. The Constitution of the Republic, which was under de facto control of Moscow, proclaimed a multiparty political life and diverse economic ways. The anti-Bolshevik forces, supported by Japanese troops, were able to maintain a hold only in the Primorsky region. In October 1922, the Bolsheviks fought their way into Vladivostok and made the White movement forces and the Japanese army abandon the city. The remaining White forces resisted in the northeast until 1923 before being completely crushed by the Soviets. The Japanese did not leave northern Sakhalin until 1925. That is why the civil war lasted much longer in the RFE than in the rest of Russia. The Stalin Era: From the Civil War to World War II The civil war in Russia disrupted social and economic development of the RFE: natural resources were devastated and industrial enterprises, farms, and infrastructural facilities were destroyed. Mining of gold was at only 10 percent of prewar volumes, 5 percent of the population had been killed, and 5 percent of the people had emigrated. The society suffered from fear, political apathy, and distrust of authorities.21 Much of the population possessed firearms, and violent crime was rampant. In 1926, the Far Eastern region (Dalnevostochny Krai) was established to replace the Amur Governate General, with Khabarovsk as its administrative center. In 1938, the Far Eastern Region was divided into Primorsky

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Krai and Khabarovsk Krai. After World War II, Sakhalin Oblast and Magadan Oblast (which included Chukotka Okrug) became separate administrative units. The administrative division of the territory was completed in 1956 when Kamchatka Oblast (including Koryak Autonomous Okrug) was established. In the 1920s, private and foreign capital played a great role in the economy of the RFE since, compared to most of the other regions in Russia, the area was subject to less nationalization. Two-thirds of the local trade was controlled by foreign companies, with China accounting for 59 percent. In 1923, 58 percent of industrial enterprises belonged to foreigners, and those enterprises produced half of the region’s gross industrial output.22 Concessional policy played a special role in the economic development of the RFE.23 The Soviet government used the region as a testing ground for this policy since investment resources were lacking. By attracting foreign investments, the Soviet government also intended to improve its relations with the United States and Japan. The Far Eastern Concessional Committee was conferred with the authority to conclude deals with foreign entrepreneurs. As a result, twenty-four contracts with businesses from Great Britain, Norway, the United States, Japan, and other countries were signed, primarily in mining of gold, polymetallic ores, and oil, as well as in timbering and fishing. After Soviet power became stronger so that the Soviets could resort to a policy of accelerated industrialization, foreign concessions, along with other private sector activities, were rolled back and eventually eliminated. Japanese fishing companies were the last to leave the Soviet Far East.24 The USSR authorities were not unanimous about plans for economic development in the Far East. Many officials believed that government investments had to be concentrated in traditional industrial areas of the country rather than diverting scarce resources to the Far Eastern region. However, after fierce debates, the opinion prevailed that economic development of the Soviet Far East had to be accelerated to make the region independent of imported goods. Priority was first given to the export-oriented industries (mining of coal and gold, timbering, and fishing) since the country desperately needed foreign currency. In the 1930s, Moscow set a goal of transforming the Far East into the Soviet Union’s citadel in the Pacific. The army and navy buildup in the Far East required steel, fuel, clothes, and food; to satisfy those needs locally rather than bringing them from Central Russia, new industries were created from scratch such as steelmaking, shipbuilding, aircraft building, and oil refineries. Over a hundred major enterprises were opened in the region, and transport and power-generating facilities were constructed. The fishing industry got new trawlers and fish-freezing vessels, which made it possible to start active deep-sea fishing that included hunting for whales. As a result,

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the economy of the Far East became predominantly industrial. However, economic profitability was not much of a consideration; instead, the economy was targeted at the military needs in case of war. New industrial centers like Komsomolsk-on-Amur were built in uninhabited and often inhospitable areas at the cost of huge human and financial costs. During the period of industrial militarization (1930–1940), the model of government patronage over the Far East was restored: the resources for development were supplied by the central authorities, with transport, salaries, and power expenses covered by the government. The USSR invested 6 percent of its total capital investment into the RFE economy while the region’s gross industrial product went up sixfold.25 In 1925, the government tried to revive the migration processes and established the Far Eastern Migration Department, which was supposed to promote the settlement of the region. But during 1926–1937, only 120,000 people (discharged soldiers, peasants, and workers) migrated to the Far East, which was not nearly enough for the regional economy. The inflow of Korean, Chinese, and Japanese immigrants increased at first, but then stopped as Moscow began to insulate the Far East from its neighboring Asian countries. War scare in the Soviet Far East in the late 1930s sealed the fate of ethnic Koreans and Chinese, who were seen by the Kremlin as a fifth column for Japanese empire that controlled Korea and Manchuria. About 20,000 Chinese were deported to Xinjiang while 172,000 ethnic Koreans, most of whom held Soviet citizenship, were forcibly resettled to Soviet Central Asia.26 Since the 1930s, Joseph Stalin’s purges and mass persecutions became the major source of supplying labor force for the RFE. Vladivostok served as the principal transit hub for prisoners, who were brought there by railway and then transported in ships to hard labor camps in the north of the Far East, mostly in the Kolyma (Magadan) region. According to the present-day estimates, in 1951 the number of prisoners in the Far Eastern branch of the Dalstroy gulags was about 300,000 people, mostly brought from the European regions of the USSR. After World War II, 170,000 Japanese prisoners of war were also put to hard labor in the Far East and Siberia.27 The Stalinist purges and repressions in the Far East were especially severe due to its nearborder location and the perceived necessity to maintain strict security in the face of external threats, particularly from Japan. War and Its Aftermath World War II caused the economy of the Far East to convert to producing military goods. Development of the region was determined completely by the needs of the national war effort. Despite a severe shortage of consumer

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goods, living conditions in the Far East were somewhat better than in the European part of the USSR. All industries worked for the needs of the army and fleet, and delivered their products to the center of Russia. The port of Vladivostok was the major destination for Lend-Lease goods from the United States. The Far East was the only major supplier of fish and fish products in the USSR. New plants, mines, bridges, and roads were quickly constructed, and extensive geological exploration was conducted that allowed for an increase in the industrial output by many times.28 Some of the military facilities built during the war are still in operation. The Japanese-Soviet Non-Aggression Pact of April 1941 allowed redeployment of some of the armed forces from the Far East to the German front. Japanese neutrality also more or less facilitated implementation of US Lend-Lease assistance to the USSR. From late 1941, the RFE became a vital conduit for US military supplies destined for the Soviet war effort. US Liberty-type ships under Soviet registry and manned by Soviet crews reached RFE ports via various routes, “maneuvering between JapaneseSoviet neutrality and US-Japanese belligerency,” as John Stephan notes.29 Cargoes included such goods as ammunition, aviation fuel, food, rolling stock, and trucks. Soviet pilots flew equipment and spare parts to the RFE from Alaska.30 Also, in a less well-known aspect of Lend-Lease, Soviet aviators flew some 8,000 newly manufactured US warplanes from Fairbanks, Alaska, via RFE airfields to Krasnoyarsk and onward to the fighting front.31 Cracks in the Stalinist totalitarian facade allowed thousands of Soviet military personnel to sojourn in Alaska and the Aleutians during the war. 32 In general, Lend-Lease exposed residents of eastern Russia to the US lifestyle and consumer goods to a degree unparalleled in the rest of the country and left a residue of goodwill toward the United States that persisted for years. In early 1945, as the war was winding down, the Soviet Union turned its back on the neutrality pact with the Japanese. At Yalta, in February of that year, the Soviets agreed to enter the war against Japan on the side of the Allies within two or three months of Germany’s surrender. Among the conditions were that southern Sakhalin and the Kuril Islands be handed over to the USSR. With the end of hostilities, the Soviet state’s attention turned to reconstruction. The Far East escaped physical destruction by the war, but the population suffered grievously from malnutrition, disease, lack of housing, and other problems. Help was not forthcoming. Lend-Lease assistance, which had provided some sustenance to the region, ended with Japan’s surrender in 1945, as did that relative honeymoon period in Soviet-US relations. Meanwhile, Moscow’s attention and priorities shifted to rebuilding the war-ravaged European parts of the Soviet empire. Public investment in the RFE slowed down, the RFE’s development rate also decelerated (resulting in crippling shortages, e.g.), and the volume of coal mining was so low

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that the region had to bring coal from Siberia. Motorization of timbering was minimal; horses had to be used to drag the harvested logs to local sawmills. Insufficient human resources and equipment resulted in the decline of agriculture. Cultivated areas as well as the number of farmers and equipment went down. It was not until 1950 that the prewar level of production was finally exceeded.33 From Khrushchev to Gorbachev After the death of Stalin in 1953, Nikita Khrushchev launched policies aimed at limited political and economic liberalization. Khrushchev gave the Far East more administrative autonomy than it had enjoyed at any time since the 1920s. Although Khrushchev’s main regional priority was the development of the virgin lands of Western Siberia and Kazakhstan, he became the first Russian head of state to visit the Far East, in 1954 and again in 1959,34 famously proclaiming that Vladivostok would become “a second San Francisco.”35 Leonid Brezhnev rolled back Khrushchev’s decentralizing reforms, but Moscow pursued the idea of turning the RFE into a major exporter of raw materials to Asia Pacific countries. Japan became the primary trade and investment partner for the Far East. In the late 1960s, the USSR and Japan began to implement large-scale projects of economic cooperation aimed at exploring and developing the primary resources of Siberia and the Soviet Far East. The Soviet-Japan Forest Resource Development Project was launched in the Far East, which was implemented on the basis of three agreements from 1969 to 1986. Two other large Japanese-funded projects in eastern Russia were the Pulp and Wood-Chip Project and South Yakutia Coking Coal Project. These commercial agreements involved Japanese loans and purchases by the Soviet side of various kinds of Japanese machinery for the development or relevant resources that could then be exported to Japan.36 In 1970, to develop and modernize the RFE ports and ensure the fast-developing trade between the two countries, Russia and Japan signed one more accord on economic cooperation that provided for deliveries of equipment and machines from Japan to construct the seaport of Vostochny near Nakhodka,37 which remains the RFE’s biggest port. Though Moscow managed to establish a degree of cooperation with Tokyo in the Far East, relations between the USSR and China sharply deteriorated in the 1960s over such issues as de-Stalinization, communist orthodoxy, leadership of the world’s communist bloc, and delineation of the SinoSoviet border. The result was a rapid increase in military forces and logistics in the Far East. The simmering border issue became public when China demanded that the USSR recognize the nineteenth-century treaties between

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the Qing dynasty and tsarist Russia as unequal—imposed coercively at the time on a weaker China. In July 1964, Mao Tse-tung famously remarked to a visiting delegation of the Japanese Socialist Party, “About a hundred years ago, the area to the east of [Lake Baikal] and since then, Vladivostok, Kamchatka, and other areas have been Soviet territory. We have not yet presented our account for this list.”38 Five years later, in March 1969, armed clashes broke out over a minuscule island (Damansky or Zhenbao) on the Ussuri River, the culmination of earlier incidents, with heavy casualties on both sides. The conflict was more or less papered over later in the year. Yet the incident cast a permanent shadow over the Sino-Soviet relationship, and the memory of it continues to haunt Russian-Chinese relations to this day. The USSR economy’s extensive development pattern required new natural resources, with the Soviet Far East being developed as a resource base. In 1967, the Central Committee of the Communist Party and the Council of Ministers adopted a resolution on the development of the Soviet Far East. It called for the accelerated development of nonferrous metallurgy, fisheries, timbering, the pulp and paper industry, exploration of oil and gas, the chemical industry, the consumer industry, food manufacturing, and defense machine building and repair. Geological exploration was extensively funded, and major attention was paid to power generation. For a few years, the RFE developed rapidly; however, by 1975, the development rates became slower than in other regions of Russia due to the depletion of cheap sources of raw materials and slow introduction of new methods and technologies.39 As often happened in the USSR, long-term, large-scale industrial and infrastructural projects like the Baikal-Amur Railway were impeded by insufficient investment and turned into never-ending projects. Even though the Soviet economy under Brezhnev began to display signs of stagnation and a looming crisis, there were some success stories in the Far East. For example, the Vladivostok-based Far Eastern Shipping Company became the largest freight carrier in the Pacific while containers passing through the ports of Nakhodka and Vostochny accounted for 15 percent of all shipments between Japan and Europe in 1980.40 The Soviet government tried to make the region more appealing for residents and new settlers. The visit of Khrushchev to Vladivostok in 1959 boosted development of the region and of Vladivostok in particular. Many housing and major infrastructural facilities were constructed and the city almost doubled in size.41 After World War II, a wide network of educational institutions, cultural facilities, hospitals, and recreational centers was established. In 1959, in addition to numerous industry-oriented research institutes, major research institutes of the USSR Academy of Sciences started to develop in the Far East. They were mostly involved in exploring, describing, and extensive research of natural processes and phenomena in the Soviet Far East and the Pacific.

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Major public investment ensured a rapid growth in industrial facilities. At the same time real income and housing conditions of the population, as well as the social infrastructure and availability of consumer goods, were lower in comparison with many other regions of the USSR. After elimination of Stalin’s gulags, the long-existing shortage of labor resources in the RFE was made up for mainly by natural population growth. Migration policy was inefficient despite the introduction of a special multiplying factor for regional salaries.42 Only the salaries in the mining industry exceeded the minimum subsistence level. After working hard and earning money, many migrants from Central Russia tried to return to their homelands. The negative trends accelerated in the latter part of the 1970s, when the Soviet economy suffered a total shortage of investments. The majority of the income from oil exports was spent on imported foods and the arms race. In the 1970s, the USSR started a large-scale naval buildup in the Far East, aiming to turn its Pacific Fleet into a formidable force able to operate both in the coastal waters and on the high seas. The army and fleet were the major consumers of capital construction, agriculture, consumer goods, and other industries of the Far East.43 By the early 1980s, it was apparent that major reforms were urgently needed to save the Soviet economy from imminent decline. The new Soviet leader Mikhail Gorbachev launched perestroika (an extensive program of political and economic reforms), which also included an Asia Pacific dimension. In his Vladivostok speech in July 1986, Gorbachev announced Moscow’s desire to expand political and economic links with Asia Pacific countries, most of which had frosty relations with the USSR. This was followed by a series of further diplomatic overtures that resulted in rapid improvement of relations with China and South Korea. In 1987, the Central Committee of the Communist Party adopted the Long-term Government Program of Complex Industrial Development of the Far Eastern Economic Region, Buryatia, and Chita Oblast until the year 2000. The program involved creating an efficient economy relying on the major resource, research and industrial base, developed social infrastructure, and specialization of labor. In the long term, the Far East was supposed to become self-sufficient based on its internal resources, rather than relying on Moscow’s largesse. However, the possibilities of centralized influence on the Far Eastern economy by means of public funds were exhausted, and implementation of this policy could not stem the negative trends. Though government investments into the region’s economy doubled briefly, the 1987 program coincided with the collapse of the Soviet political and economic model and was not realized. 44 In 1990, the Far Eastern economy began to decline for the first time. Industrial decline in all regional branches was aggravated by the disintegration of industrial and technological ties within the Soviet economy.

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After the Soviet Union’s collapse, the resource-based structure of the RFE economy became an advantage for a short time since it allowed a refocus onto Asia Pacific commodity markets. However, general economic challenges in Russia inevitably led to the decline of the RFE. During the presidency of Boris Yeltsin (1991–1999), the RFE experienced one of the most dramatic periods in its history: it lost 20 percent of its population and many sectors of its economy while concern grew over whether it would remain part of Russia. Vladimir Putin, who succeeded Yeltsin in 2000, managed to improve the situation considerably, but many of the RFE’s perennial problems remain unresolved. Conclusion

More than 350 years of the history of the RFE reveal the persistence of many of the same challenges and policy questions. Should the region’s development rely primarily on private enterprise or be driven by the state? Are special legal and regulatory regimes, separate from the rest of the country, needed to efficiently govern the region? Should special policies be pursued to attract more people to settle in the RFE—and exactly what policies? Does it make sense to invest enormous sums of public funds into the RFE’s infrastructure projects, even though they may never pay off commercially? (At the time of its planning and construction, the Trans-Siberian Railway was criticized by many as the most egregious waste of state money.) Should the RFE be a cosmopolitan and open area, allowed to engage in free economic and social interaction with its Asia Pacific neighbors? Or should the region be maintained as Russia’s eastern bastion with external contacts kept to a minimum and under strict control of the central government? These are the dilemmas that are likely to continue to define the RFE for many years to come. Notes

1. One of the most famous private sponsors of Cossack ventures into Ural and Siberia was the Stroganov family, who made their fortune by producing and selling salt. 2. John J. Stephan, The Russian Far East: A History (Stanford: Stanford University Press, 1994), 49. 3. Ibid., 47. 4. Svetlana Dudaryonok and Felix Azhimov, eds., Istoriya Dalnego Vostoka [History of the Russian Far East] (Vladivostok: FEFU, 2013), 47–52. 5. Ibid., 52–53. 6. Ibid., 35–36.

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7. Ivan Bezrukov, Dal’niy Vostok na Puti k Rynku Truda [The Russian Far East’s Evolving Labor Market] (Vladivostok: VSUES, 1999), http://abc.vvsu.ru /Books/m_fareast2ml/page0002.asp. 8. Stephan, The Russian Far East, 60. 9. Dudaryonok and Azhimov, Istoriya Dalnego Vostoka, 142–143. 10. A. Laktionov, ed., Istoriya Diplomatii [History of Diplomacy] (Moscow: Ast, 2005), 674. 11. In the early 1890s, Russia forged close strategic ties with France to counter the rising Imperial Germany. This provided Russia access to French loans. 12. Regular operation of the Trans-Siberian Railway did not start until 1903. 13. The free-port (porto-franco) regime in the RFE, under which goods could be imported and exported free of customs duties, was finally abolished in 1909. 14. The Governance of the Russian Far East [in Russian], chap. 2 (Khabarovsk: Pacific State University, 2001), http://old09403.khstu.ru/studentsbooks/region /regucheb/material_k_exz/gl2.htm. 15. Endowed with gross incompetence, Alekseyev was rumored to be the illegitimate son of Tsar Alexander II and, thus, uncle of the incumbent tsar Nicholas II. 16. Guandong territory comprised 1,300 square miles at the tip of Liadong Peninsula and, apart from Port Arthur, included a commercial port of Dalian (named Dalny by Russians). 17. “Recollections of the Minister of War A. Kuropatkin” [in Russian], Vlast’, November 25, 2013, 55. 18. Stephan, The Russian Far East, 60. 19. Alexey Bogaturov, ed., Sistemnaya Istoriya Mezhdunarodnyh Otnosheniy [Systemic History of International Relations], vol. 1 (Moscow: Mosckovsky Rabochy, 2000), 138–139. 20. Alexander Kolchak, who was first based in the Western Siberian city of Omsk and then retreated to the Eastern Siberian city of Irkutsk, proclaimed himself to be Russia’s “Supreme Executive.” 21. Dudaryonok and Azhimov, Istoriya Dalnego Vostoka, 182. 22. Ibid., 185. 23. Concessions were commercial enterprises based on foreign investments (full or partial), which operated in the Soviet Union between 1920 and the mid-1930s. The Bolshevik government wanted to attract foreign investment into the areas for industries that could not be developed by the Soviet Union due to lack of funds and expertise. The concessions were somewhat similar to modern production-sharing agreements signed in the 1990s by the Russian government and foreign companies to develop the oil and gas resources of Sakhalin. 24. Japanese fishing concessions in Kamchatka operated until 1945. 25. Pavel Minakir, ed., Economic Policy: Regional Dimension [in Russian] (Vladivostok: Dalnauka, 2001), 42–43. 26. Elena Chernolutskaya, “Forced Migration in the Soviet Far East in the 1920–1950s: Synopsis of the Thesis for the Doctoral Degree in History” (Vladivostok: Institute of History, Far Eastern Branch of Russian Academy of Sciences, 2012), 35–36. 27. Dudaryonok and Azhimov, Istoriya Dalnego Vostoka, 215. 28. Galina Tkacheva, “Defense Potential of the USSR Far East During the Great Patriotic War (1941–1945): Synopsis of the Thesis for the Doctoral Degree in History” (Vladivostok:Institute of History, Far Eastern Branch of Russian Academy of Sciences, 2012,), 24–23.

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29. Tokyo acquiesced in this traffic, but frowned on it. Its navy sank nine LendLease vessels between 1941 and 1945. See Stephan, The Russian Far East, 238– 239. 30. Sue Davis, The Russian Far East: The Last Frontier (New York: Routledge, 2003), 18. 31. Craig Lang, “Warplanes for Siberia” (Ferndale, WA: Bravo Flight 369 Foundation, 2014), 1–2. 32. Stephan, The Russian Far East, 239. 33. Dudaryonok and Azhimov, Istoriya Dalnego Vostoka, 229–232. 34. Stephan, The Russian Far East, 263. 35. Nikita Khrushchev went to Vladivostok fresh from his US tour, which included a trip to California where the Soviet leader was impressed with San Francisco. 36. Shinichiro Tabata, “The Booming Russo-Japanese Economic Relations: Causes and Prospects,” Eurasian Geography and Economics 53, no. 4 (2012): 422−441. 37. The Russian Far East’s International Relations [in Russian] (Khabarovsk: Pacific State University, 2001), chap. 10, http://old09403.khstu.ru/studentsbooks /region/regucheb/material_k_exz/gl10.htm. 38. See Michael Gerson, “The Sino-Soviet Border Conflict” (Alexander, VA: Center for Naval Analyses, 2010), 13. This is the best study of the border conflict to date. 39. Minakir, Economic Policy, 48. 40. Stephan, The Russian Far East, 266. 41. Sergey Vlasov, “Vladivostok in the Years of Krushchev’s Thaw Period” [in Russian], Oikumena [Regional Studies Journal], no. 3 (2010): 48–55. 42. This meant that workers in the Far East were entitled by law to a premium added to their wages and salaries. However, the higher Far Eastern prices often eliminated the benefits of more generous pay. 43. Kirill Kolesnichenko, “Military Factor in Development of the Russian Far East: The Case of Primorsky Krai” [in Russian], Oikumena [Regional Studies Journal], no. 3 (2010): 116–125. 44. Minakir, Economic Policy, 51–52.

4 A Region of Troubles

RFE’s uniqueness: its geopolitical setting, its fast economic promise, and its problematic historical legacy. This chapter, as its title suggests, deals largely with the RFE’s liability from a development perspective as well as potential threats to its stability. We begin with a discussion of the tumultuous post-Soviet years, noting especially the crisis of political authority— “Moscow’s ostentatious disregard for the region,” as one writer puts it 1— and wrenching economic readjustments of the period. We emphasize factors that impede development such as poor quality of life (the worst in Russia, by most indicators), decrepit or nonexistent infrastructure, and a continuously hemorrhaging population. Finally, we address difficult questions of Far Eastern identity as well as internal and external pressures that could eventually erode Moscow’s real sovereignty over the region. We begin with a discussion of the retreat of the state. The period of the early 1990s, when the Soviet system agonized and finally collapsed, was a time of high expectations for the Far East. To be sure, not all Far Easterners were happy with the demise of communist rule and many were shocked by the sudden implosion of the Soviet Union, but overall the mood was positive. The people were hopeful that the market economy, which replaced the stifling controls of the old command system, would work miracles and bring prompt prosperity to everyone. Much of the talk centered on the inherent advantages of the Far East such as its wealth of natural resources and proximity to the booming Asia Pacific markets that should almost inevitably make it a rich and dynamic place. Foreigners—businesspeople, academics, journalists, diplomats, tourists—flocked to the hitherto forbidden region, raising hopes that soon the Far East would become a part of the emerging Asia Pacific economic community. THE PRECEDING CHAPTERS HAVE FOCUSED ON ASPECTS OF THE

45

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Even before the collapse of the Soviet Union, liberal economic blueprints for the Far East started to emerge. Most of them were focused on Primorsky, a territory that had the best infrastructure and the most convenient access to Asia Pacific neighbors. In October 1990, the UN Industrial Development Organization (UNIDO) drew up a plan to create a free economic zone in the south of Primorsky.2 In 1991–1993, building on the UNIDO document, the new postcommunist regional government of Primorsky led by the young liberal economist Vladimir Kuznetsov designed the “Greater Vladivostok” blueprint, which aimed at turning Vladivostok and its environs into a high-rate growth area. It was envisaged that Greater Vladivostok would become a gateway connecting Asia Pacific with the Far East and the rest of Russia. Foreign investors were to play a crucial role in realizing this vision.3 Another blueprint was related to Primorsky’s second city, Nakhodka, which boasted the largest commercial port facilities in the Far East. Nakhodka authorities came up with the idea of establishing a free economic area in the city, which received approval from the regional and federal government. However, by far the most ambitious plan was the Tumen River Area Development Programme, which was later renamed the Greater Tumen Initiative (GTI). It envisioned a second Hong Kong—in effect, a free-trade zone and transportation hub—in the area where the Tumen River emptied into the Sea of Japan and where the Russian, Chinese, and North Korean borders came together. It was believed that development of port, road, and rail facilities in the zone would stimulate development of southern Primorsky and China’s northeast and, in general, enhance prospects for regional political cooperation.4 None of these grand projects were ever realized. Instead of enjoying an economic boom, the Far East plunged into disorder and distress not seen since the years of the Russian Civil War. Indeed, the crisis that struck the Russian Far East was even deeper and more prolonged than in much of the rest of post-Soviet Russia. In 1999, the RFE’s GRP stood at 42 percent of its 1990 level.5 The most important single cause of the dramatic decline was the retreat and near-bankruptcy of the Russian state, which had previously generated the bulk of the demand for the Far East’s resources, products, and services while heavily subsidizing the region’s economy and infrastructure. The general crisis of the Russian economy led to a drastic fall in the demand for the Far East’s raw materials. Many of the RFE’s industries and enterprises proved to be unable to compete with foreign products now that Russia was able to trade freely with the outside world. The military, which has always been a major factor of the Far East’s economy and one of the biggest job providers, was forced to survive on a bare minimum. Dozens of military bases and garrison towns were closed down in the region. Meanwhile, after an initial spike in their interest in the RFE, foreign investors were in no hurry to commit substantial money. Perhaps rightly so,

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they perceived too many risks. For one thing, the region was rapidly becoming a lawless place. The collapse of the Soviet system and communist rule destroyed the old governing apparatus while the new state institutions were extremely weak and could barely provide law and order. The local bureaucracy and courts sometimes proved unable or unwilling to protect foreign investors from expropriation by their Russian partners. Crime rates soared, with organized crime (mafias) becoming a parallel power structure in many places of the RFE. Mafias often were more influential than official government bodies and sometimes even merged with them. The economic crisis crippled basic industries, including the energy and utilities sector. A harbinger came in the winter of 1991 when, due to a power plant equipment breakdown, half of the city of Khabarovsk was left without heating and electricity in freezing temperatures for two months. Blackouts, accompanied with cutoffs in water and heating, became habitual for many Far Eastern cities and towns in the 1990s. The period of the 1990s was almost literally the dark age for many Far Easterners. The economic and social situation was especially acute in monocities, the towns and townships built in the Soviet era that were dependent on a single employer. Some of these company towns serviced military facilities and defense enterprises. Others relied on the mining industry. With the facilities and enterprises mothballed or drastically cutting down production, employees were either laid off or went without pay for many months so they were reduced to living on subsistence levels. (Indeed, entire towns, lacking economic purpose and essential services, simply disappeared from the map during this period.) The city of Bolshoi Kamen in Primorsky—hometown of one of the authors (Artyom Lukin)—exemplified the effects of the crisis. Bolshoi Kamen was a virtual monocity, dependent on a shipyard servicing and repairing the Russian Pacific Fleet’s nuclear submarines. The stateowned shipyard continued to function but the federal government, its main customer, was not able to fund it or even pay for the completed orders, which led the workers to strike and, on several occasions, block the TransSiberian Railway to demand back pay. No one starved, but many families had to survive on basic foods like bread and potatoes. The 2000s: Uncertain Recovery with Mixed Results The disorder in the RFE contrasted so starkly with the dynamism and prosperity of most of its neighbors that some Western authors singled it out as the “sick man of Asia” and a “region at risk.”6 However, by the late 1990s, the RFE’s economy finally reached its nadir and a recovery began. The recovery was helped by several factors. First, Russia’s entire economy began to grow briskly, fueled by rising commodity prices. Second, the

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RFE’s commodity exports were particularly driven by high demand from China and other Asia Pacific markets. Third, the center was now able to raise the level of financial assistance to the subsidy-dependent Far Eastern territories and, beginning in 2007, Moscow launched a host of state-funded programs aimed at boosting development in the RFE. Fourth, under Vladimir Putin, the Russian armed forces also began to recover, albeit nowhere nearly to the scale of the Soviet era. This meant more revenue and jobs for the traditionally military-dependent RFE. In statistical terms, the recovery achieved a certain measure of success. By 2012, the RFE’s economy stood at $83 billion, more than eight times the level of 2000. GRP growth rates for the individual provinces varied from 400 percent (Magadan) to 1,500 percent (Sakhalin). Comparisons also can be drawn to the precrisis level of 1991. By 2011, the RFE’s industrial output, including the extractive industries, surpassed the 1991 level by 7 percent whereas the Russian average index still lagged behind the 1991 benchmark by 12 percent.7 Sakhalin by far performed the best, with its industrial production index reaching 241 percent of the 1991 level, while the Jewish Autonomous Region emerged as the most deindustrialized (38 percent). As for agriculture, the RFE did worse than the country as a whole, with 76 percent of the 1991 level (compared with 87 percent for the Russian average). The RFE and Baikal region currently produces only 42 percent of the food that it needs. Since 1990, the area of cultivated arable land in the region has dropped by 2.3 times, with the rest remaining idle.8 In recent years, the RFE has grown faster than the national economy. In 2007–2012, the region’s annual growth rate was 4.6 percent on average, which is approximately 2 percent higher than the Russian average. This was largely because the RFE did not suffer as much from the 2009 global financial crisis that hit the Russian economy, with the national GDP falling by 7.6 percent. By contrast, that same year, the RFE economy grew 1.5 percent.9 The robust performance of the RFE could be explained by the strong demand for natural resources from China and other Asian markets as well as by the large state-funded projects like upgrading Vladivostok’s facilities for the 2012 APEC summit. Notwithstanding some positive results, the current economic condition of the RFE is far from sustainable. For one thing, among all federal districts, the Far Eastern Federal District has the highest share of loss-making businesses. A survey of the financial situation of business enterprises throughout Russia found that, as of the first quarter of 2013, the RFE had the highest percentages of unprofitable enterprises of any region—45.3 percent, followed by the North Caucasus with 39.5 percent, compared to an all-Russian average of 36.5 percent.10 Even staple industries such as forestry and wood processing seemed to be functioning underwater. A survey of the 173 forest sector enterprises in Khabarovsk Krai found that all

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were operating at a loss.11 Of course, factors such as costs of inputs and market demand affect profitability, but so do issues of governance—administrative corruption, bureaucracy, and taxes. All of this adds up to a highrisk business climate as investors try to calculate the odds of making money in the RFE. All of the RFE provinces, except Sakhalin, heavily depend on federal subsidies. For example, in 2013 Kamchatka Krai received 99,700 rubles of subsidies per capita, Magadan Oblast 55,100 rubles, and Sakha Republic 56,000 rubles. This beats Russia’s provinces of the North Caucasus, for example, which are often notoriously accused of living off federal money, with Dagestan given by Moscow just 15,300 rubles in subsidies per capita and Chechnya 32,000 rubles.12 Furthermore, the RFE remains the most economically depressed of Russia’s regions, despite important development initiatives launched after 2000. Other concerns relate to the RFE’s abysmally low quality of life and the related inexorable drain of population from the region—issues taken up later in this chapter. Reliance on Trade with Asia Pacific The external sector is vital to the RFE’s economic survival and growth. Since the collapse of the Soviet Union, the most dramatic change to the RFE’s economy has been its reorientation away from the domestic market toward external customers. In the early 1990s, the region sold 75 percent of its output on the national market whereas only 6 percent was sent abroad; today, the national market stands at just 21 percent whereas the lion’s share of the RFE’s trade is with foreign countries.13 The steady demand from Russia’s Asian neighbors made it easier for the RFE to survive both the troubled times of the 1990s and the global financial crisis of 2008–2009.14 In 2012, the RFE-Baikal macroregion reported $38.3 billion of foreign trade, compared to $6.8 billion a decade earlier, with exports exceeding imports by more than a two to one margin. The RFE alone accounted for approximately 95 percent of the trade ($36.3 billion). The region maintained business links with 145 countries, but Asia Pacific accounted for the bulk of the trade (84 percent).15 Since the early 1990s, the RFE’s top three trade partners have been China, South Korea, and Japan. In 2012, their shares in the RFE and Trans-Baikal external trade stood, respectively, at 29 percent, 27 percent, and 22 percent—that is, almost 80 percent to East Asia. The European Union,16 the United States, and India accounted for, respectively, 9.6 percent, 2.0 percent, and 2.0 percent. (In 2013, for the RFE alone, the main partners were, respectively, China at 28 percent, Japan at 27 percent, and South Korea at 24 percent; China was the main partner for five of the nine RFE provinces.)17

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The RFE and Trans-Baikal’s main export items in that year were oil and oil products (40 percent of the total exports); diamonds and precious metals such as gold, silver, and platinum (14 percent), fish and other seafood (8 percent); machinery and equipment (4 percent); timber and wood products (4 percent); and metals (3 percent). Whereas the RFE and Trans-Baikal provinces export mostly natural resources, their imports are predominantly food, machinery, and processed goods—a pattern largely replicated in the federation as a whole. The main imported items are machinery and equipment (50 percent); food (25 percent); clothes, footwear, and other consumer goods of light industry (11 percent); chemical products (8 percent); and metals (8 percent).18 Although eastern Russia enjoys substantial trade relations, especially with Asia Pacific markets, foreign investment in these provinces is minimal. In 2013, the RFE received just $6.7 billion in foreign investment of an RFE-Baikal total of $7.0 billion, a precipitous drop from $13.6 billion in 2012. By comparison, the RFE’s foreign trade totaled $40.2 billion in that year, six times as much. (In 2012, the ratio of trade to foreign investment was a somewhat healthier 2.6 to 1.) Only about 38 percent of this qualified as foreign direct investment (FDI) as opposed to portfolio investment or loans to companies, 19 some 43 percent of the 2013 total related to Sakhalin oil and gas projects.20 The top sources of foreign capital inflows were Japan (35 percent) and Austria (15 percent). This pattern changed somewhat from 2012, when Sakhalin received 78 percent of the inflow and the top investors were the Netherlands (62 percent) and Cyprus (10 percent). The share of extractive industries in investment was much lower in 2013 (67 percent compared to 92 percent the previous year). Possibly this presaged a shift toward greater value added in production, but it also could have been a single-year statistical anomaly—the average share of extractive-related investment in the previous five years was 89 percent and the lowest year (2008) was 81 percent. 21 Russian authorities may welcome the shift, such as it is, but they can hardly be overjoyed about the almost 50 percent decline in investment from the previous year, a trend that continued in 2014 because of Russia’s deteriorating relations with the West. Russia may be improving its standing in business climate rankings somewhat,22 but the RFE remains a daunting place to do business. Indeed, in a 2014 National Rating of the Investment Climate of the Subjects of the Russian Federation, a survey of twenty-one selected provinces, Khabarovsk and Sakha received the second-lowest rating (4) and Primorsky the lowest (5).23 In addition to customary Russian woes such as red tape, inefficient bureaucracies, corruption, and nontransparent and frequently changing regulations, the eastern provinces present their own formidable obstacles such as harsh climate conditions, lack of infrastructure, high costs of labor,

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energy, and other basic inputs as well as a narrow consumer market of just over 6 million people. Even senior Far Eastern officials recognize that the region still is not a welcoming place for investors. Per capita FDI stood at just $41 in Primorsky and $88 in Khabarovsk Krai.24 Even the region’s extractive industries, albeit comparatively more attractive to foreign investors, do not offer exclusive products (perhaps except for diamonds) and can be replaced on Asia Pacific markets with raw materials from other countries. For example, New Zealand and Canada recently increased their shipments of timber to China, Japan, and South Korea whereas the RFE’s share shrank considerably.25 Not only foreign investors, but also Russian private entrepreneurs, shy away from setting up business in the RFE. The largest share of RFE-bound investments comes either directly from the state treasury or from the government-owned or government-controlled corporations like Gazprom, Rosneft, Transneft, and Russian Railways.26 In both public and private conversations, domestic and foreign businesspeople present a litany of complaints about the investment climate in eastern Russia.27 Regional governments have made efforts to improve business environment. For instance, Primorsky’s governor, Vladimir Miklushevsky, pledged to reduce administrative barriers for businesses and make it easier for them to connect to the power grid and other necessary infrastructure. Emulating Kaluga Oblast, a province in European Russia widely held up nationally as a success story with regard to attracting business investors, Miklushevsky ordered the establishment of an investment promotion agency and a regional development corporation to facilitate the entry of new businesses.28 Also, regional legislation was introduced that provides tax benefits to major domestic and international investors who create “jobs with high productivity” in Primorsky Krai. 29 As of this writing, it is too early to tell whether these measures will have any noticeable effect in attracting private investments. Quality of Life: Worse than Almost Anywhere in Russia The RFE is a land of extremes that poses many development challenges for Moscow, if by development one means creating a welcoming environment for residents, attracting investment, promoting job growth, and in general maximizing regional economic potential. Perhaps foremost among these challenges is the RFE’s harsh climate. The RFE has the coldest average January temperature (−27.8 degrees Celsius) of any region in Russia.30 Climate ripples across all areas of life and work: transport options are limited and expensive, while resource extraction becomes the predominant activity, especially in the northern reaches. Some 70 percent of the RFE is per-

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mafrost, so commercial agriculture is limited to warmer river valleys and border regions in the south. A second major challenge is the lack of basic infrastructure—especially transportation systems. Russian planners have calculated that the density (length per unit of area) of rail lines and hard surface roads in the macroregion stands, respectively, at 38 percent and 18 percent of the allRussian average. Existing railroads, such as the Trans-Siberian and the Baikal-Amur Railways, function at a fraction of their theoretical capacity. Because of poor rail-to-port connections and obsolete facilities, Russia’s Pacific ports can handle less than 1 percent of East Asia’s maritime container traffic. Many of the RFE’s airfields make do with dirt runways and even lack signal lights. Another systemic constraint on development relates to electric power generation. Excluding Irkutsk (endowed with Soviet-era hydropower plants), the macroregion generates only 6 percent of Russia’s total.31 The RFE ranks last in the generation and transmission of electricity, and much of this is produced by inefficient local power sources. Overall, the existing system is far from meeting the requirements of electricityintensive mining and processing industries.32 A third and related determinant is the high cost of living. As former minister of Far East development Victor Ishayev puts it, “Here everything is more expensive. The circumstances of the functioning economy are more complicated. The cost of goods is higher here than in central Russia.”33 One of the great anomalies of life in the RFE is that per capita income, at 26,480 rubles (about $880) per month, is the highest of any region in Russia (18 percent above the all-Russian average), but the average cost of a basket of necessities (goods and services) is 30 percent above the federation’s average (2011 figures); hence, real incomes range at least 12 percent below the country’s average (see Table 4.1). Moreover, high costs push many residents into penury—almost 25 percent of the region’s residents are believed to live below what Russia defines as the poverty line. Poor transport and energy infrastructure, state inattention to social needs, and, again, climate are often cited as reasons. Harsh climate, lack of infrastructure, and the high cost of living all combine to lower life expectancy, which at sixty-seven years old is the lowest among Russia’s regions, and more than three years below the allRussian average. This disturbing statistic reflects a variety of social factors such as poverty and crime rates.34 Overall, the Far East has traditionally been considered one of Russia’s least comfortable regions for living. The well-being of Far Easterners may have risen since the tsar and Soviet times but, in relative terms, it lags behind most other Russian provinces, let alone the metropolitan areas of Moscow and Saint Petersburg. Although the Far Eastern wages and salaries are somewhat higher than the national average, the prices in the

Table 4.1 Per Capita Income and the Price of a Fixed Basket of Consumer Goods and Services by Region, May 2013 Per Capita Income

Russian Federation Central Northwest Southern North Caucasus Volga Ural Siberian Far East

In Rubles 22,359 27,744 24,107 18,291 15,804 20,051 26,432 18,528 26,480

Index (%) to Russia’s Average 100 124 108 82 71 90 118 83 118

Cost of a Consumer Basket

In Rubles 10,334 11,516 10,618 9,544 9,242 9,301 10,535 9,700 13,438

Index (%) to Russia’s Average 100 111 103 92 89 90 102 94 130

Source: Victor Rudko-Selivanov, “Razvitie Delnego Vostoka v koordinatakh gosudarstvennoy programmy,” Money and Credit, no. 10 (2013), www.cbr.ru/publ /MoneyAndCredit/SODER10-2013.pdf.

54

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RFE are significantly higher, which puts real incomes of the Far Easterners below the Russian average (Table 4.1). A recent study by a Vladivostok researcher compared the RFE and the seven other federal districts on eight quality of life indicators: housing conditions, income level and distribution, life expectancy, infant mortality, migration attractiveness, public safety (crime), access to services, and level of unemployment. The RFE ranked last on all indicators except unemployment and access to services. On a composite quality of life index, the RFE occupied the penultimate position, surpassing only the perennially unstable and downtrodden North Caucasus region.35 One of the few perks of life in the RFE is its relatively clean and, in many places pristine, natural environment. This is due to its sparse population and low level of industrial activity, particularly after the dramatic postSoviet deindustrialization of the 1990s when entire factories closed down, with many of them standing no chance to be revived. That may have deprived thousands of people of their jobs, but also did a good service to the environment by getting rid of heavy industrial polluters. Many Far Easterners enjoy going to the taiga (the Far Eastern wild forests) as well as swimming, sailing, and fishing in the sea. This stands in sharp contrast to the neighboring Asian countries, with their urban congestion and often extreme pollution,36 creating an opportunity for the RFE to attract ecotourists. That said, the RFE has its share of environmental issues.37 Particularly troubling is the clash between development of the oil and gas industry and preservation of the marine environment, especially in the northern areas of the RFE where extreme weather conditions lead to heightened risks of spills and other incidents.38 The Far East Exodus Just as the rest of contemporary Russia, the RFE has suffered from a depopulation crisis, which began in the early 1990s. Among the country’s regions, the Far East has been most badly hit. Its population decline began in 1991, when Far Eastern residents began to leave for European Russia en masse. In 1993, this migration outflow was exacerbated by the dramatic drop in birth rates and simultaneous rise in death rates, as the entire nation entered what the demographers called the “Russian cross” pattern—deaths consistently outnumbering births.39 Since 1991, as a result of the outward migration and birth-death negative imbalance, the Russian Far East has lost about 20 percent of its population. In 1991 the population stood at over 8 million people, in 2002 it fell to 6.4 million, and in 2010 to 6.3 million. President Dmitry Medvedev, visiting the region in July 2010, identified the falling population as “the most alarming, the most dangerous trend.”40

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55

Indeed, the region teeters on the brink of demographic insolvency; it lost 22.6 percent of its population between 1990 and 2014 through natural decline (a higher death rate than birth rate) and, mostly, out-migration. By comparison, the reduction in the Russian Federation as a whole over the period was 2.7 percent, and it actually has turned up half a percent since 2010. Every province suffered losses, though those in Magadan and Chukotka (61 percent and 69 percent, respectively) were especially severe (see Table 4.2). Most of the outflow occurred between 1990 and 2000, reflecting the RFE’s economic tribulations in the early post-Soviet years. Out-migration and labor shortages, in turn, reverberated through the entire regional economy, which lost almost 60 percent of its value from 1990 to 1999.41 The rate of population decline dropped sharply after 2000, coinciding with Putin’s accession to the presidency, and between 2010 and 2014 amounted to just 1.5 percent. A massive increase in fixed capital investment and in GRP between 2000 and 2012 helped stabilize the population, but has yet to generate a turnaround (see Figure 4.1). In the opinion of many observers, the number of residents (6.2 million) is simply too small to sustain economic development in that vast region. In recent years, Russia’s population seems to have stabilized, witnessing some growth in birth rates and a drop in death rates. 42 This is a result of government-funded pronatalist policies and baby boomers born in the 1980s entering the prime childbearing age. However, the RFE’s population continues to shrink, largely due to the outward migration. Over the period of 2008 through 2012, 177,000 residents packed up and left the RFE and Trans-Baikal region for good.43 Not surprisingly, most of the departures were from the northern regions, particularly Magadan Oblast and the Sakha Republic, from which 3.7 percent and 2.6 percent, respectively, of their population out-migrated between 2010 and 2012.44 The southern territories also continue to suffer from negative net migration, although on a much smaller scale. Most of the outgoing Far Easterners resettled in European Russia, but some emigrated to foreign, mostly Western, countries. The exodus from the Far East was, to a large extent, predetermined by the Soviet legacy. During the Joseph Stalin era, millions of people (many of them prisoners) were sent to the northern areas of Siberia and the Far East whereas, in the later years of the Soviet Union, the government used material incentives to get people to settle and work in the north. The resulting geographic distribution of production and human settlement was unsound from a market economy perspective.45 When settling people and building cities in the inhospitable permafrost lands of the north and even Far North, Soviet leaders were guided by a strategic rather than economic rationale. Having strained relations with much of the rest of the world, the Soviet Union could not rely on international markets for vital commodities needed

Table 4.2 Population of Russia and the RFE, 1990–2014

Russian Federation

Far East Federal Region Amur Oblast

Jewish Autonomous Oblast Kamchatka Oblast

Magadan Oblast

1990

2000

2005

2010

2014

147,665,081

146,890,128

143,801,046

142,833,502

143,666,931

1,055,337

935,607

874,018

834,905

811,274

8,044,797 218,330 476,911

390,276

6,913,279 195,135

6,537,601

185,763

6,319,776

177,500

6,226,640

170,377

319,864

-32.9 -15.6

201,974

173,937

159,002

150,312

2,028,377

1,965,178

1,938,516

Sakhalin Oblast

713,981

569,234

529,813

501,279

491,027

Chukotka Autonomous Okrug

1,619,663

162,135

-22.0

323,165

2,141,025

Khabarovsk Krai

-23.1

343,908

2,296,684

1,111,480

-2.7

-22.6

372,308

Primorsky Krai

Sakha Republic (Yakutia)

% Change Since 1990

962,507

1,473,876

61,613

953,170

1,396,800

51,815

958,338

1,349,230

51,179

-61.5

954,803

-14.1

1,339,912

-17.3

50,555

-31.2 -68.8

Sources: Russian Federal Statistics Service/Goskomstat (GKS)/Rosstat, Moscow, www.gks.ru; and Russian Federation Federal Statistics Service, Moscow, 2015, www.fedstat.ru.

A Region of Troubles

57

Figure 4.1 Indexes of Russian and RFE Population, GRP, and Fixed Capital Investments, 2000–2013 1,900!! 1,900 P Population opulation (RF ttotal)! otal)! 1,700 1,700!!

P opulation (RF E onl y)! Population (RFE only)!

1,500 1,500!!

otal) ! GRP G RP P (RF ttotal)

1,300!! 1,300

stment (RF ttotal)! otal)! F ixed Ca pital Inve Fixed Capital Investment

Index Index RF 2000 = 100! 100!

y)! E onl GRP G RP P (RF (RFE only)!

1,100 1,100!!

F Fixed ixed Ca Capital pital Investment Investment (RFE (RFE only)! only)!

900 900!! 700 700!! 500 500!! 300 300!! 100 100!! -100!! -100

2000!! 2001 2000 2001!! 2002 2002!! 2003 2003!! 2004 2004!! 2005 2005!! 2006 2006!! 2007 2007!! 2008 2008!! 2009 2009!! 2010 2010!!

201 2011! 1!

2012 2012!! 2013 2013!!

Sources: GKS Rosstat, www.gks.ru/bgd/reg/b12_13/IssWWW.exe/Stg/d5/24-09.htm, www.gks/ru/wps/connect/rosstat_main/rosstat/ru/statistics/enterprise/investment/nonfinancial/#, and http://cbsd.gks.ru/#.

by its growing industries. It might have been cheaper to buy tin from Southeast Asia and copper from South America, but Moscow needed guaranteed supplies and that could be achieved only by developing the domestic resources, much of them found only in the vast northern and Arctic zones of Siberia and the Far East. The northern areas were also heavily militarized so as to defend the region in the face of the standoff with the United States and its allies, and those military installations not only required troops but also a lot of civilian personnel. This kind of strategic rationale mostly ceased to exist after the USSR’s disintegration when the new Russia no longer had resources to support large settlements in the north. Since the 1990s, Moscow has been quietly encouraging the relocation of people from the north, with senior officials making occasional statements that the Soviet-era pattern of settlement is not viable. Then-minister for regional development, Igor Slyunyaev, even went as far as to claim that the only economically sustainable option for settlement in the RFE is in its southern areas along the border with China.46 Thus, it might be expected that the settlement pattern in the RFE will increasingly resemble that of Canada, with

58

Russia’s Far East

almost all of the population living in the southernmost strip of land along the border.47 Another characteristic feature of the Far Eastern exodus has been that most of those who have left are young and middle-aged, highly educated, highly skilled, and entrepreneurial. They left because the Far East cannot offer them as many opportunities for self-fulfillment as they might expect elsewhere. They also wanted a higher quality of life than the RFE, in its current condition, can provide. The government has tried to reverse the RFE’s dramatic depopulation through programs for “resettlement of compatriots,” which aim to facilitate the relocation of ethnic Russians from abroad and place them in the less-populated areas of Russia in need of labor. The efforts have had little success so far, with less than 10 percent of 154,000 repatriates agreeing to move to the RFE.48 The RFE’s poor demographics have broader security implications for Russia. The region already relies heavily on migrant labor—especially in fields such as construction, trade, forestry, and agriculture. Most of the migrants now come from Central Asia, rather than from East Asia. The former Soviet Union republics of Uzbekistan, Kyrgyzstan, and Tajikistan have, over recent years, become the largest demographic donors for the region. The three Central Asian states retain some historical, cultural, and language bonds with Russia. These poor countries with extremely high unemployment have an abundant supply of young people who look to Russia as an attractive destination. They mostly flock to urban areas, including relatively affluent cities in the RFE like Vladivostok and Khabarovsk where they are mostly employed in low-skilled and dirty jobs. Today one can already see many more Central Asians than Chinese on the streets of Vladivostok. According to some estimates, their total number in Primorsky Krai has already exceeded the number of Chinese migrants and may stand at about 100,000.49 In recent years, the number of marriages between Russian women and male migrants from Central Asia has been steadily increasing in the Far East whereas marriages between Russians and Chinese are virtually absent.50 According to regional immigration officials, among foreign migrants, it is the guest workers from Uzbekistan who give the most trouble with regard to law and order.51 Concerns with the Central Asian influx appear to largely supplant fears previously associated with the Chinese migration. Even though collective fears seem to have been quelled with respect to Chinese migrants in the RFE, a demographic challenge continues to come from China and is highlighted by the 3,600-kilometer border that China shares with the RFE. Across that border, some 66 million Chinese in Jilin and Heilongjiang provinces confront 4 million Russians in Amur, the Jewish Autonomous Oblast, Khabarovsk, and Primorsky. Even more striking is the imbalance in population density, 102 people per square kilometer on the

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Chinese side versus 3 per square kilometer on the Russian side. Some analysts project a slowing of Chinese migration into Russia, based on expectations of more rapid economic growth in northeast China, and concomitant wage increases and better employment prospects there.52 Yet interruptions in China’s dynamic growth could change this calculus. Also, in northeast China pressing challenges of urbanization, industrialization, and environmental degradation have significantly reduced the land-to-population ratio. As a result, many Chinese farmers and agriculturalists are heading north to Russia in search of available land and food security. Unless Russians or other Slavs decide to repopulate the RFE in significant numbers, the region’s ethnic composition may come to favor Asians in future decades. But to some this is the lesser of two evils. As a leading Russian economist notes, There are no sacred empty places, so what will happen with depopulation? The Far East will continue on, and someone will occupy the freed-up space. It’s fully possible that Chinese business will come (sometimes in controlled fashion, sometimes not), and bring in Chinese workers. . . . But this isn’t the main threat; rather the threat is the degradation of the Far East itself as a result of extreme economic stagnation.53

The Rise and Fall of Federalism In the early 1990s, the Far Eastern oblasts and krais, along with their counterparts in the rest of Russia, ceased to be merely administrative territorial units, seeing their political and legal status upgraded to that of federal subjects or members of the post-Soviet Russian Federation. Moscow had neither much appetite nor resources to strictly control what was happening in Russia’s regions. This was epitomized by Boris Yeltsin’s famous call to provincial authorities: “Take as much sovereignty as you can swallow.”54 This drastically increased the extent of powers wielded by provincial authorities. At no other time in the RFE’s history—perhaps with the exception of the short-lived Far Eastern Republic in 1920–1922—did its provinces enjoy such a degree of decision-making autonomy from Moscow. The federalism was buttressed by other features of electoral democracy such as direct popular elections of governors, mayors, regional legislatures, and municipal councils as well as vibrant mass media. This led to dynamic, and often turbulent, political processes in the RFE during the 1990s, featuring the complex interplay, and clashes, of various interest groups and personalities. In many cases, such dynamics resulted in the emergence of regional barons—charismatic and powerful provincial leaders like Evgeny Nazdratenko of Primorsky and Ishayev of Khabarovsky Krai. They enjoyed

60

Russia’s Far East

wide popular and elite support in their home regions while maintaining a high-profile presence at the national level that allowed them to deal with Moscow as peers rather than as subordinates. The exuberance of the new Russian federalism was short-lived. When Putin came to power in 2000, the autocratic and centralizing instincts of the Russian state reemerged in force. The discourse of federalism was replaced with talk about the need to rein in and bring into line provincial leaders who had “swallowed too much sovereignty.” In 2003, gubernatorial elections were abolished and governors started to be appointed by the Russian president.55 In 2000, the country was divided into seven “federal districts” headed by “presidential envoys,” whose chief mission was to keep an eye on regional authorities.56 General Konstantin Pulikovskiy, a hero of the recent Chechnya war, was appointed as the first envoy to the Far Eastern Federal District and immediately went on the offensive against the Far Eastern governors who, over the previous decade, had become used to a relative independence. By 2005, regional autonomy was basically finished off in the Russian Far East as well as in most other Russian krais, oblasts, and ethnic republics. Since that time, the Russian Federation has been a federal state constitutionally rather than in reality. The contemporary Russia is de facto a centralized and unitary state, with true regional autonomy as an exception rather than a rule. The metamorphosis of Far Eastern politics since the 1990s is vividly exemplified by the succession of leaders in Primorsky Krai. The first postcommunist governor of Primorsky was Kuznetsov, who was elected by the regional legislature and then reappointed by Yeltsin. Holder of a PhD in international economics and previously a researcher at an academic thinktank, Kuznetsov was a paragon of liberalism in political and economic spheres. However, he lacked a power base within the regional political and business elite and decided to resign in 1993 after being offered a diplomatic career by the Kremlin. Kuznetsov was succeeded by Nazdratenko, a member of the Russian parliament and founder of a silver mining cooperative from the Primorsky city of Dalnegorsk. Unlike a suave and sophisticated Kuznetsov, Nazdratenko was a roughneck who preferred confrontational-style politics. Being a superb populist, Nazdratenko easily won gubernatorial elections in 1995 and 1999. His popularity stemmed partly from his posturing as the main defender of Primorsky’s interests vis-à-vis Moscow. In particular, Nazdratenko demanded that the federal government should give Primorsky Krai more subsidies, because, as he argued, Primorsky had performed a number of important strategic functions for the whole country. One of the major manifestations of Nazdratenko’s recalcitrance was his open opposition to, and obstruction of, the Russia-China border agreement under which

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61

some minor borderline adjustments were made in favor of the Chinese side, which affected the Primorsky territory. Nazdratenko also earned a reputation for guarding Primorsky Krai against the penetration by outside business interests, both foreign and from Moscow, while trying to keep control of the most lucrative sectors in the region in the hands of his cronies and associates. Not surprisingly, in 2001, Nazdratenko became one of the first regional leaders forced to resign.57 The gubernatorial election in June 2001 was won by Sergey Darkin, a Vladivostok businessman with a murky reputation. Whereas Nazdratenko acted as a regional baron running his own fiefdom, Darkin had to face a different environment with Moscow no longer tolerant of any serious manifestations of provincial “freedoms.” He proved adept at political wheeling and dealing, both in the region itself and with Moscow. Darkin never publicly opposed the center and went out of his way to emphasize personal loyalty to Putin. Unlike his predecessor, Darkin did not try to block the expansion into Primorsky of powerful Moscow business groups, many of them well connected to the Kremlin. Instead, the governor entered into mutually profitable agreements with them. He managed to survive as governor for almost eleven years, being forced to resign in March 2012 when Moscow evidently was no longer willing to tolerate the level of corruption in Primorsky, which was high even by Russian standards. Miklushevsky, the rector of Far Eastern Federal University and formerly a deputy Russian minister of education, was chosen by the Kremlin as the new governor and continues to hold this position as of this writing. There is a major difference between Miklushevsky and his predecessors. Kuznetsov, Nazdratenko, and Darkin were all locals who made their careers in Primorsky and were selected as leaders primarily through the regional political process. By contrast, Miklushevsky is a newcomer to Primorsky, selected and sent there by Moscow, meaning that his loyalty is first and foremost to the Kremlin. Albeit talking a liberal discourse and perhaps truly having liberal inclinations, Miklushevsky has to play by the rules of Putin’s Russian autocracy. As matters stand, the regional governments’ authority to shape economic and fiscal regimes within their territories is quite restricted. There are limits to what they can do by themselves if, for example, they decide to make their regions substantially more open and attractive to foreign investors. High centralization is also evident in the main industries of the RFE’s economy, like mining, fishing, and ports, whose ownership has been increasingly concentrated in the hands of Russian oligarchic capital, often closely affiliated with the Kremlin. The political weight of governors and their ability to advance a regional agenda are, to a large extent, determined by their connections and lobbying potential with Moscow’s top bureaucracy.

62

Russia’s Far East

The RFE provinces may not have much leeway in their decisionmaking, but the regional bureaucracies have flourished and proliferated various agencies, offices, and officials. Sakhalin is a case in point. The executive branch is represented by the governor, who is aided by vice governors. The governor is simultaneously the chairman of the regional government, which includes fifteen ministries (led by ministers) and eleven agencies as well as several inspectorate offices, one commission, and one directorate. One should also add to that the governor’s staff consisting of eight departments and two directorates.58 The panoply of vice governors, ministers, and other senior officials serve less than 500,000 residents of the current population of Sakhalin. To be sure, this does not include multiple federal agencies, which are also amply represented on the island. The RFE’s political life is made more interesting by the long-standing conflict between the regions’ chief executives and the mayors of the respective regions’ capital cities. Unlike in much of the rest of Russia, where mayors are appointed and thus controlled by governors, the RFE provinces have retained mayoral elections. This gives the mayors a degree of political independence. Because the capital city is always the largest and wealthiest city of a province, who and how rules it is of great significance for the region in question. The mayoral post can be a launchpad for seeking the governor’s office, making the mayor and the incumbent governor natural rivals. This is exacerbated by the perennial struggle over who gets chief control over the revenue generated in the main city. The governor versus mayor rivalries were at their peak in the late 1990s, with the Nazdratenko versus Victor Cherepkov (the mayor of Vladivostok) feud reaching especially epic proportions. Albeit less public and less visible now, the tensions between governors and mayors are still present, particularly in Primorsky, Khabarovsky Krai, Sakhalin, and Kamchatka.59 The voting patterns in the RFE mostly conform to national trends, meaning that most Far Easterners give support to Putin and the ruling United Russia party. This stands in contrast to the 1990s and the early 2000s when the RFE displayed protest voting, often voting against the party of power and for opposition parties like the Communist Party of the Russian Federation (KPRF) and the Liberal-Democratic Party of Russia (LDPR), which was led by the nationalist Vladimir Zhirinovsky. However, some pockets of opposition sentiment remain, especially in large Far Eastern cities like Vladivostok and Khabarovsk where United Russia received considerably fewer votes than the Russian average during the Duma (parliamentary) elections in December 2011 and Putin received less than 50 percent of the vote in the presidential election of March 2012. Vladivostok was ranked as the most opposition-minded city in Russia, based on the results of national elections held between 2000 and 2012. 60

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63

Crime and Corruption: Russia’s “Wild East”? The RFE has perennially had one of the highest crime rates in Russia. In 2012, the level of crime in the region was 27 percent above Russia’s average.61 The problem has historical roots since the Far East, along with Siberia, has traditionally been a place where convicts were sent for hard labor or exile. For example, the island of Sakhalin was turned by the tsarist government into Russia’s Australia of sorts, famously described by Anton Chekhov in one of his novels.62 While many inmates kept in the Soviet-era gulag camps in the Far East were victims of political persecution, others were not so innocent. Although gulags are no more, there remains a high concentration of penitentiary facilities in the RFE. Towns are built around prison camps where half the population works for the penitentiary system and the other half comprises inmates or former inmates. The collapse of the Soviet Union was accompanied by the dramatic surge in crime all over Russia, with the Far Eastern cities of Vladivostok and Komsomolsk-on-Amur quickly becoming the country’s eastern criminal capitals. The acknowledged leader of the RFE underworld during much of the 1990s was Evgeny Vasin (nicknamed “Jam”), a Komsomolsk-based gangster who appeared to enjoy the protection of the provincial authorities in Khabarovsk until his death in 2001. What was most noteworthy about Vasin was the relationship he allegedly forged with Chinese Triad organizations—an alliance designed initially to fend off powerful Moscow gangs (especially Solntsevo and Izmailovo) that were scheming to establish a foothold in the region. The relationship appeared to flourish, giving rise to the specter of a separate Far East criminal identity, which paralleled then ongoing discussions of regional autonomy or succession in the political upper world. Today, much organized crime in the RFE seems to involve joint ventures of Russian and Chinese syndicates, especially in cross-border smuggling activities.63 By the late 1990s, organized crime grew so powerful and wealthy that gangsters began to seek to convert their clout into political power. In 2001, Darkin, an obscure owner of a fishing business, won the election for governor of Primorsky Krai. There were rumors about his close connections to the underworld, with some news media alleging that the new governor was a Vladivostok organized crime leader known under the alias Seryoga Shepelyavy (translated into English as “Sergei the Lisping”) due to his speaking defect. Moreover, organized crime spawned unprecedented violence. In the 1990s and early 2000s, Vladivostok rarely saw a week without a criminal leader or a businessperson being shot or blown up. High-profile killings related to turf wars also happened outside the region. In 2002, the Magadan governor, Valentin Tsvetkov, was gunned down in broad daylight in the center of Moscow.

64

Russia’s Far East

In 2004, one of Darkin’s close associates, Vladimir Nikolayev, was elected mayor of Vladivostok. Some press reports insisted that, before taking the mayoral office, Nikolayev had been one of the most audacious and brutal gang leaders in Vladivostok. In 2008, Nikolayev was charged with abuse of office and convicted but, when released on probation, he fled the country and reportedly settled in Thailand. Darkin’s political longevity until 2012 was often attributed to his generous sharing of the “profits” with certain decision-makers in Moscow. There were rumors about the “suitcases of cash” that Darkin regularly brought to the capital to pay for “protection.”64 Although the criminal situation has improved since the 1990s, many of the Far East’s important sectors remain under the heavy influence of mafias that often are linked to corrupt officials. Industries with the highest levels of irregularities are fishing, logging, gold, and diamond mining.65 State revenue losses attributable to illegal and unregulated plundering of Far Eastern natural resources amount to 300 billion rubles (roughly $8.5 billion) annually.66 When the customs statistics of Russian fishing exports are compared with those of the Northeast Asian countries that buy the RFE’s fish, the annual gap in the reported trade value stands at $1.6 billion, meaning that almost half the trade is conducted under the counter.67 Even priority projects, which are under the constant watch of the Kremlin, are not immune to brazen siphoning off of public funds. Due to their multibillion-dollar price tags, they become prime targets for corrupt officials and their accomplices in the business community. In the fall of 2012, soon after the APEC summit in Vladivostok, a deputy minister for regional development responsible for the construction of the summit facilities was arrested on charges of large-scale financial fraud.68 In another case, the management of a major state-owned defense shipyard in Primorsky was accused of engineering fraudulent schemes, pocketing some 1 billion rubles ($29 million) meant for the repair of warships and nuclear submarines.69 According to prosecutors, embezzlement and other abuses by Far Eastern defense industry contractors are common, often resulting in failures to timely deliver government defense orders. 70 In the most highprofile corruption case, the governor of Sakhalin, Alexander Khoroshavin, was arrested in March 2015 (and later sacked by Putin) on charges of bribery, becoming the first Russian governor to be detained while in office.71 Another cause of the heightened level of criminality in the RFE is its geographic position, bordering Northeast Asian countries and serving as a transit route between Russia and Asia Pacific countries, which makes for the formation of transnational crime networks often based on migrant ethnic communities. Law enforcement analysts single out East Asian communities (Chinese, North Korean, and Vietnamese) as forming criminal networks characterized by higher levels of organization, more cohesion, and

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less visibility compared to other ethnic crime groups such as Central Asians or migrants from the South Caucasus. Crimes committed within East Asian communities in the RFE, as a rule, are not reported to the Russian law enforcement authorities. Additionally, Chinese groups are seen by some as working hand in hand with the Chinese state. As a Vladivostok authority notes, “A number of indirect indicators show the Chinese criminal organizations on the territory of the Russian Federation operate under the control of Chinese special services and other state organizations.”72 Such organizations may well serve the dictates of Beijing (e.g., as they do in Hong Kong), but on an episodic basis (i.e., their main business is crime not espionage or other antistate activity).73 Is There a Far Eastern Identity? One of the more controversial questions regarding the RFE is whether there exists a distinctive Far Eastern identity. By contrast, there is no doubt that Siberia has its own identity. The last national census of 2010 registered a record number of ethnically Russian Siberia residents who identified their nationality as “Siberian.”74 This may not be surprising given that the mass settlement of Siberia by Russians began in the seventeenth century. As for the Far East, it was not until the late nineteenth century that the Russians started to settle the area in large numbers. Yet it is possible to speak of some indications of the Far Eastern regional identity, which makes the local people distinct from the rest of Russia. Some scholars even believe that the Far Easterners, just like the Siberians, can be regarded as a subethnic group within the larger Russian nationality.75 The consciousness of regional identity is uneven across the RFE. It is more pronounced in Primorsky, Khabarovsk Krai, Amur Oblast, Magadan Oblast, Kamchatka, and the Jewish Autonomous Oblast, where people tend to identify themselves as Far Easterners in addition to seeing themselves as citizens of the Russian state. But the Far Eastern identity is weak in the Sakha Republic and Chukotka. In the Sakha Republic, it is suppressed, or overshadowed, by the ethnic identity of the indigenous Sakha (Yakut) people. The Chukotka Autonomous District is characterized by an island mentality, having tenuous economic and transportation links to the rest of the RFE as well as being an officially ethnic-based entity. Sakhalin lies somewhere in the middle, with its residents seeming uncertain whether to view themselves as islanders or Far Easterners in the first place.76 What are the qualities of the regional identity that set the Far Easterners apart from other Russians? They usually include more self-reliance, pragmatic individualism,77 entrepreneurship,78 and skepticism of the government. According to the Khabarovsk-based sociologist Leonid Blyakher,

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the core Far Eastern society has traditionally shunned the government, preferring to build interpersonal business networks that have generated an economy more sustainable and efficient than any industrial projects initiated and funded by Moscow in the RFE; thus, the less government interference in the RFE, the better.79 It is during periods of state retreat or retrenchment that the Far Eastern identity begins to grow in strength. There were two such periods in the RFE’s history. One is related to the short-lived Far Eastern Republic of 1920–1922, a quasi-state created by Bolsheviks as a diplomatic buffer between the communist Russia and Japan. Although it was never designed to achieve an actual independence for the RFE, some of its local enthusiasts took the idea of Far Eastern autonomy seriously, which irritated Moscow.80 The memory of the Far Eastern Republic resurfaced in the 1990s when the Russian body politic was again in a state of near collapse. Some public activists called for a self-governing Far East and reinstating the Far Eastern Republic, but this never entered the mainstream. The Far Eastern identity found its expression in business rather than in politics. When in the 1990s Moscow virtually abandoned the RFE, this led to a surge in regional entrepreneurship aided by a liberal foreign trade regime allowed by the Russian government at the time. Along with the cross-border commerce with China, second-hand vehicles imported from Japan became the main symbol of the RFE’s mass enterprise. Thanks to the influx of high-quality and relatively cheap Japanese cars, the RFE quickly became one of the most motorized areas in Russia, with Vladivostok ranking as the top city in the nation in terms of cars per 1,000 residents. In 2005, Russia topped the list of world importers of used Japanese cars. Vladivostok became a “Far Eastern Detroit,” with up to 100,000 people in the city and in the region self-employed in the thriving business of dealing with cars—importing them from Japanese ports, reselling them to the customers in the Far East and other regions, and upgrading and servicing them.81 However, in 2008, to provide protectionist support for the struggling Russian car manufacturing industry, the government slapped prohibitive tariffs on most types of imported automobiles, significantly reducing the imports of vehicles from Japan. The government actions triggered mass protests in the RFE, which culminated in December 2008 when the protesters convened a rally outside the Primorsky regional government building in Vladivostok, then drove their cars around the city and blocked the main city artery.82 The central authorities would not back down and refused to reverse the decision on the new levies. Instead, they swiftly airlifted to Vladivostok a special riot police unit from Moscow to quell the unrest.83 This was a case in point of how regional and national economic interests may diverge. While many people in the Far East viewed imported

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Japanese cars as a profitable and vital business, Moscow considered the inflow of highly competitive automobiles as a serious threat to the domestic car-making industry, which provided jobs to millions in European Russia’s industrial cities like Tolyatti, the location of Avtovaz, the largest national automaker. When the government had to choose between the economic interests of a remote region and the survival of densely populated industrial areas in Russia’s core, the choice actually had been predetermined. A Specter of Far Eastern Separatism How stable is Moscow’s control over its Far Eastern provinces? During the 1990s and early 2000s, the Far Easterners became used to their newfound trade liberties, so the Putin government’s tightening of the customs regime in the late 2000s was viewed by many with bitter resentment and triggered the discourse of “Moscow treating us as second-rank citizens.”84 Yet the resentment with Moscow has never turned into anything remotely resembling an organized political movement for autonomy, let alone Far Eastern independence. Ever since the Far East emerged as a more or less distinct entity within Russia, a specter of Far Eastern separatism has periodically been invoked in Moscow. In the 1930s, the Kremlin suspected that the Far Eastern leadership was involved in separatist plots and collusion with the Japanese, which led to almost total extermination of the region’s communist and army leadership. In 1938, to exorcise the specter of separatism, Stalin carved up the Far Eastern region into Khabarovsky Krai and Primorsky Krai while dividing the Far Eastern command into three separate armies.85 Today, some Moscow-based analysts continue to question the loyalty of the Far Easterners to Moscow. As one of them puts it: “A sizable part of the RFE’s population is related to Moscow only through the shared cultural and historical heritage. They have difficulty comprehending why they should pay their taxes to the federal Center, which is thousands of kilometers away.”86 It is true that more Far Easterners are sympathetic with the idea of their region breaking off from Russia compared to the average national level of support for separatism: 16 percent of Far Easterners are in favor of self-governance for their region versus the average 8 percent in other territories of Russia.87 That said, Far Eastern separatism currently remains a matter of speculation rather than a real thing. Most experts that we interviewed in the RFE do not see any likelihood of the RFE seeking to secede from Russia.88 According to sociological research, most Far Easterners strongly identify themselves as Russian citizens in the first place, with regional and local identity trailing considerably behind.89 After all, the RFE is not the North Caucasus, where a strong ethno-religious basis exists for separatist impulses.

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That the majority of the Far Eastern population is comprised of ethnic Russians, with many having recent or nonexistent roots in the region, certainly discourages separatist sentiments. One exception is the Sakha Republic, where 49 percent of the residents are ethnic Yakuts, with Russians being the second-largest group (37 percent). This creates a possible breeding ground for ethnically based autonomism and, in the extreme, full-blown separatism, even though Sakha is the most heavily subsidized of the RFE’s subjects and, like the rest of the region, is heavily dependent on the federal government for development funds.90 A future surge in autonomist or separatist sentiments cannot be completely ruled out even in the Russian-populated territories of the Far East, particularly if the nation descends into a severe political and economic crisis like the one it experienced in the aftermath of the breakup of the Soviet Union in the 1990s. Finally, we do not exclude the possibility that the impetus for separation or distancing from the rest of Russia could come from without as well as from within. As we have shown, the RFE economy already is deeply intertwined with China’s in various ways, and China itself perceives eastern Russia and northeast China as a “single economic integration zone” for development purposes, as Chinese vice president Li Yuanchao recently put it.91 Given the economic and demographic imbalance along the border, integration almost certainly would occur on terms dictated by China. Indeed economic integration already is well advanced in landlocked southern provinces such as Amur, the JAO, and Zabaikal Krai. Here, as one Russian observer notes, “Economic and cultural ties with Chinese border provinces are, for citizens of these regions, an important factor of growth and a powerful engine of social development—a kind of Chinese gateway for these regions to the world.”92 To be sure, China’s ties with nonborder regions are weaker. For example, Sakhalin—home to US, Japanese, and eurozone oil companies and consistently the number one recipient of foreign investment in the RFE—would qualify as a Western sphere of influence. Yet China’s voracious need for energy and raw materials may predispose it to extend its reach to the northern provinces—indeed, there is evidence that this is already happening. The West’s post-Ukraine disengagement from Russia, including eastern Russia, and Russia’s own economic weakness will likely further this tendency. Notes

1. Bobo Lo, Axis of Convenience: Moscow, Beijing, and the New Geopolitics (Washington, DC: Brookings Institution, 2008), 58. 2. Victor Larin, “Primorye v proektakh regionalnogo sotrudnichestva: potentsial i perspektivi” (Vladivostok: Far Eastern Branch of Russian Academy of Sciences, 1998), www.fegi.ru/PRIMORYE/HISTORY/project.htm.

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3. “Project ‘Big Vladivostok,’ Concept of Economic Development of the Southern Zone of Primorye,” Zolotoy Rog, no. 11 (1992): 14. 4. The project actually involved five countries: China, North Korea, and Russia, and two countries outside the zone: South Korea and Mongolia. An additional important player was the UN Development Programme. The architects hoped that the project would be a blueprint for future economic integration of Northeast Asia as a whole. 5. Nadezhda Mikheeva, “Social and Economic Differentiation in the Russian Far East,” in Russia’s Far East: A Region at Risk, ed. Judith Thornton and Charles Ziegler (Seattle: National Bureau of Asian Research in association with University of Washington Press, 2002), 91. 6. Rajan Menon, “The Sick Man of Asia: Russia’s Endangered Far East,” The National Interest (Fall 2003): 93–105; See also Judith Thornton and Charles Ziegler, eds., Russia’s Far East: A Region at Risk (Seattle: National Bureau of Asian Research in association with University of Washington Press, 2002). 7. Government of Russia, “Federal’naya Tselevaya Programma: Ekonomicheskoye I Sotsial’noye Razvitiye Dal’nego Vostoka I Zabaikal’skogo Regiona na Period do 2018” (Moscow: Government of Russia, 2013), 7, http://fcp.economy.gov .ru/cgi-bin/cis/fcp.cgi/Fcp/ViewFcp/View/2013/136/ 8. Government of Russia, “Federal’naya Tselevaya Programma: Ekonomicheskoye I Sotsial’noye Razvitiye Dal’nego Vostoka I Zabaikal’skogo Regiona na Period do 2018” (Moscow: Government of Russia, 2013), 8, http://fcp.economy.gov .ru/cgi-bin/cis/fcp.cgi/Fcp/ViewFcp/View/2013/136/. See also Chapter 2, note 2. 9. Viktor Rudko-Selivanov, “Razvitie Delnego Vostoka v koordinatakh gosudarstvennoy programmy,” Money and Credit, no. 10 (2013): 14, www.cbr.ru/publ /MoneyAndCredit/SODER10-2013.pdf. 10. Ibid., 16. 11. “Vsye Promyshlennye Predpryatiya v 2012 Byli Nerentabylnye,” LesOnline, March 14, 2014, www.lesonline.ru/n/3BE5C. 12. “Far, Far East” [editorial], Vedomosti, February 7, 2014, www.vedomosti .ru. 13. Victor Ishayev, “The RFE Development Strategy in a Changing World” (in Russian) presentation at the International Symposium, Khabarovsk, May 2003, www.khabkrai.ru; Victor Ishayev, “Far East Growth Depends Largely on the Development of the Russian Economy Overall” (in Russian), November 29, 2012, http://amurmedia.ru/news/khabkrai/29.11.2012/242452/ot-rosta-dalnego-vostoka -vo-mnogom-zavisit-razvitie-vsey-rossiyskoy-ekonomiki.html. 14. Ishayev, “Far East Growth Depends Largely on the Development of the Russian Economy Overall.” 15. The statistics on RFE and Baikal foreign trade are provided by the Khabarovsk-based Interregional Association for the Far East and Zabaikalye, http://assoc.khv.gov.ru/; and the Far East Federal Customs Service, http://dvtu .customs.ru/. 16. Among the EU countries, Belgium is the RFE’s leading partner, accounting for 6 percent of its trade turnover, as Belgium is the main importer of diamonds from Sakha. 17. See Chapter 2, note 2. 18. Ibid. 19. Interregional Association Far East and Zabaikalye, “Inostrannye Investitsii v 2012, 2011, 2010,” http://assoc.khv.gov.ru/regions/foreign-economic-activities /investment. 20. “S inostrantsami vse tak zhe,” Kommersant, October 7, 2011.

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21. Interregional Association Far East and Zabaikalye, “Inostrannye Investitsii v 2012, 2011, 2010.” 22. According to the Bloomberg best for doing business rankings, in 2013 Russia moved from the 56th to 44th place, which it shared with Oman. “Best Countries for Business 2014,” January, 22, 2014, www.bloomberg.com/slideshow/2014-01 -21/best-countries-for-business-2014.html. The World Bank “Doing Business” report also acknowledged Russia’s progress in improving conditions for business, with Russia going up in the 2013 rankings by 22 positions, from 124th to the 92nd place, between Barbados and Serbia and even ahead of China. See “Doing Business priznali dalyekim ot praktiki,” Kommersant, October 30, 2013, http://kommersant .ru /doc/2331503. 23. “Natsional’ny Reiting Sostoyaniya Investitsionnogo Klimata Subyektov Rossiiskoi Federatsii,” May 2014, 7, https://asi.ru/upload_docs/Rating2014.pdf. 24. “Levintal: inostrannykh investitsii na Dalnem Vostoke net, davaite ob etom chestno govorit,” AmurPress, February 5, 2013, http://amurpress.ru/index.php ?option=com_content&view=article&id=14221:2013-02-05-07-08-49&catid =35:2011-04-17-17-20-12&Itemid=70. 25. “ATR ne interesen primorskii les,” July 24, 2013, www.konkurent.ru /list.php?id=4357. 26. “Levintal: inostrannykh investitsii na dalnem vostoke net, davaite ob etom chestno govorit.” 27. See, for example, interview with Sergey Vlasov, CEO of the Vostochny Express Bank, January 27, 2014, www.eastrussia.ru/people/190/; and interview with Sunil Gandhi, Indian entrepreneur involved in jewelry business in the RFE, April 22, 2013, http://primamedia.ru/news/asia/22.04.2013/271690/u-investitsionnogo -klimata-v-rossii-net-nikakoy-privlekatelnosti-sunil-gandi.html. 28. Interview with Vladimir Miklushevsky, Kommersant, December 16, 2013, http://kommersant.ru/doc/2359228. 29. “Nalogovye l’goty dadut dopolnitel’nyii stimul dlia investorov Primorya— Galust Akhoyan,” PrimaMedia, January 9, 2014, http://primamedia.ru/news/show .php?id=327706&printmode=1. 30. See Chapter 2, note 2; and Government of Russia, “Sotsial’no-Ekonomicheskoye Razvitiye Dal’nego Vostoka I Zabaikalskogo Regiona: do 2025.” 31. Government of Russia, “Ekonomicheskoye I Sotsial’noye Razvitiye Dal’nego Vostoka I Zabaikolskoge Regiona na Period do 2018.” 32. Government of Russia, “Sotsial’no-Ekonomicheskoye Razvitiye Dal’nego Vostoka I Zabaikalskogo Regiona do2025” (Moscow: Government of Russia, April 15, 2014 ), 34, http://minvostokrazvitia.ru/upload/iblock/6ed/gp34.pdf. 33. “Ishayev: Dal’nemu Vostoky Nuzhny L’goty ot Gosudarstva,” RIA Novosti, May 21, 2013, http://ria.ru/interview/20130521/938377136.html. 34. See Chapter 2, note 2; and Government of Russia, “Sotsial’no-Ekonomicheskoye Razvitiye Dal’nego Vostoka I Zabaikalskogo Regiona do2025.” 35. Olga Andreeva, “Uroven kachestva zhizni nasaleniya v Primorskom krae,” Oikumena [Regional Studies Journal], no. 4 (2013): 48−55, www.ojkum.ru/arc/lib /2013_04_06.pdf. 36. Yana Blinovskaya, head of Environmental Studies Department, Maritime State University, interviewed by Artyom Lukin, Vladivostok, February 20, 2014. 37. Artyom Lukin, “Environmental Security of the Russian Far East: Domestic, Transnational and Regional Dimensions,” Ritsumeikan Journal of Asia-Pacific Studies 26 (December 2009): 99–109.

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38. Blinovskaya interview. 39. Timothy Heleniak, “Russia’s Demographic Decline Continues,” Population Reference Bureau, June 2002, http://www.prb.org/Publications/Articles/2002 /RussiasDemographicDeclineContinues.aspx. 40. Dmitry Medvedev, “Transcript of the Meeting on the Social and Economic Development of the Russian Far East and Cooperation with the Asia-Pacific Countries, July 2, 2010,” http://kremlin.ru/transcripts/8234. 41. Nadezhda Mikheeva, “Social and Economic Differentiation in the Russian Far East,” 81. 42. “Rojdaemost vpervye prevysila smertnost v istorii Rossyi,” January 31, 2014, Newsru.com, http://newsru.com/russia/31jan2014/growth.html. 43. Government of Russia, “Ekonomicheskoye I Sotsial’noye Razvitiye Dal’nego Vostoka I Zabaikolskoge Regiona na Period do 2018,” 9. 44. Rudko-Selivanov, “Razvitie Delnego Vostoka v koordinatakh gosudarstvennoy programmy,” 17−18. 45. Fiona Hill and Clifford Gaddy, The Siberian Curse: How Communist Planners Left Russia Out in the Cold (Washington, DC: Brookings Institution, 2003). 46. Evgeny Sidorov, “Goskompanii Soshlyut na Dal’nii Vosdok,” Zolotoy Rog, February 11, 2014. 47. Ibid. 48. Polina Nikolskaya, “My nikogo ne zastavlyaem vozvrashchatsya,” Kommersant-Vlast’, February 3, 2014, http://www.kommersant.ru/doc/2394915. 49. Sergey Pushkaryov, chairman of the Advisory Council of the Federal Migration Authority in Primorsky Krai, interviewed by Artyom Lukin, Vladivostok, July 29, 2010. 50. Ibid. 51. Interview with Maxim Beloborodov, head of Primorsky Krai Directorate of Federal Migration Service, Rossiyskaya Gazeta, October 17, 2013, www.rg.ru/2013 /10/17/reg-dfo/migranty.html. 52. Interview with Yuri Avdeev, director of the Asia-Pacific Institute of Migration Processes, PrimaMedia, December 30, 2012, http://primamedia.ru/news /economics/30.12.2012/249046/investitsionnaya-privlekatelnost-primorya-budet -prirastat-naukoy-i-kulturoy.html. 53. Larisa Ivanenko, “Orientir na Aziyu,” interview with Yevsei Gurvich, East Russia, March 24, 2014, http://eastrussia.ru/region/3/471/. 54. Boris Yeltsin, quoted in “Berite stol’ko suvereniteta skol’ko mozhete proglotit’,” Obeschaniya.ru, August 6, 1990, http://www.obeschania.ru/documents /promises/berite-stolko-suvereniteta-skolko-smozhete-proglotit. 55. In 2012, popular elections of governors were reintroduced, but with strings attached so as to enable the Kremlin to effectively control the election campaigns and their outcomes. 56. In 2010, the eighth North Caucasus district was established. 57. Reportedly, he made the decision to step down after he received a phone call from Vladimir Putin. 58. The website of the government of Sakhalin Oblast is www.admsakhalin.ru. 59. Pyotr Khanas, Vladivostok-based political scientist and sociologist, director of the Far Eastern Consulting Center, interviewed by Artyom Lukin, Vladivostok, February 2014. 60. “Index of Opposition in Major Cities in Russia,” Kommersant, March 12, 2012, www.kommersant.ru/doc/1889330.

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61. Aleksandr Sukharenko, “Kriminal’naya situatsia na Dal’nem Vostoke v zerkale statistiki,” Oikumena [Regional Studies Journal], no. 3 (2013): 113, www .ojkum.ru/arc/2013_03/2013_03_15.html. 62. Anton Chekhov, Sakhalin Island, various editions. 63. See, especially, Vitaly Nomokonov, ed., “Sovremennye Vyzovy Prestupnosti I Protivodeistviye Im” (Vladivostok: Dalnevost, 2012), 86−94. 64. Unlike Vladimir Nikolayev, Sergey Darkin did not face criminal prosecution after he was removed from the governor’s office. Instead, he was appointed a deputy minister for regional development in the Russian government. 65. “The Minister for the RFE Development V. Ishayev’s Responses to the Russian State Duma Deputies’ Questions on the Threats to National Security in the RFE,” Oikumena [Regional Studies Journal], no. 3 (2013): 132, www.ojkum.ru/arc /2013_03/2013_03_18.html. 66. “Glava Minvostokrazvitiya rasskazal deputatam ob ‘uvorovyvanii’ bioresursov i poprosil obnulit nalogi i sbory,” Newsru.com, June 14, 2013, http:// newsru.com/finance/14jun2013/ishaev.html. 67. Ibid. 68. “Byvshemu zamglavy Minregiona pred’yavleno obvinenie v moshennichestve,” Kommersant, November 15, 2012, www.kommersant.ru/doc-y/2067580. 69. “Ushcherb ot moshennichestva pri remonte voennykh korabley na zavode ‘Zvezda’ vyros do milliarda,” Newsru.com, February 6, 2014, http://newsru.com /russia/06feb2014/zvezda.html. 70. “Khishcheniya na oboronnykh predpriyatiyakh Primor’ya stali obychnym delom—prokuror,” PrimaMedia, January 28, 2014, http://primamedia.ru/news /show.php?id=332309&printmode=1. 71. “Sakhalin Governor Khoroshavin Officially Charged with Bribery,” Sputnik, March 13, 2015, http://sputniknews.com/russia/20150313/1019440333.html. 72. Ilya Nikitenko, “Prestupnost inostrantsev: sostoyanie i problemy bor’by s nei (na primere aziatskoy chasti Rossii),” Oikumena [Regional Studies Journal], no. 3 (2013): 119, http://www.ojkum.ru/arc/2013_03/2013_03_16.html. 73. Nomokonov, “Sovremennye Vyzovy Prestupnosti I Protivodeistviye Im,” 100. 74. See, for example, Vladimir Antipin, “Grazhdanin Sibiri,” Russkyi Reportyor, February 22, 2011, http://rusrep.ru/article/2011/02/22/sibir. See also, Alla Anisimova and Olga Echevskaya, “Sibirskaya identichnost kak politicheskoe vyskazyvanie,” Pro et Contra, May−July 2012, 62–75. 75. Anatoly Kuznetsov, professor, School of Regional and International Studies, Far Eastern Federal University, interviewed by Artyom Lukin, Vladivostok, February 5, 2014. 76. Khanas interview. 77. Galina Ermak, “Sotsial’no-mirovozzrencheskie ustanovki zhitelei kraya: identifikatsii,” in Sotsial’naya sfera Primorya: sostoyanie i otsenka zhiteliami kraya, ed. Elena Vasilyeva (Vladivostok: Far Eastern State University Press, 2008), 130–131. 78. It is estimated that Primorsky has twice as many people eager to run their own businesses than on average in Russia. See interview with Vladimir Miklushevsky, Kommersant, December 16, 2013, http://kommersant.ru/doc/2359228. 79. Leonid Blyakher, “Dal’nii Vostok nakanyne ‘postvertikal’nogo’ perioda,” Gefter, December 18, 2013, http://gefter.ru/archive/10872. 80. John J. Stephan, The Russian Far East: A History (Stanford: Stanford University Press, 1994), 200.

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81. For a superb treatment of the Japanese imported car business in the RFE and its impact on the regional identity, see Vasily Avchenko, Pravyy Rul’ [The RightHand Steering Wheel] [in Russian] (Moscow: Ad Marginem, 2012). 82. There are different estimates as to how many people took part in the Vladivostok protests. Official figures put the number at no more than 200 while some of the protesters alleged there were 10,000. However, it was undoubtedly the largest popular protest in the post-communist Russian Far East. 83. Since then, no large-scale protests have been reported in Vladivostok. While there were mass anti-Putin rallies in Moscow in the winter of 2011–2012, few people took to the streets in Vladivostok and other Far Eastern cities. 84. Vasily Avchenko, Pravyy Rul’ [The Right-Hand Steering Wheel] [in Russian] (Moscow: Ad Marginem, 2012). 85. Stephan, The Russian Far East, 216. 86. Valeri Engel, “Imperiya-natsional’noe gosudarstvo Ili dozhivyot li Rossiya do 2014 goda?” Mir i politika, no. 10., October 2012, 30, www.intelros.ru/read room/mir-i-politika/mp-10-2012/16842-imperiya-nacionalnoe-gosudarstvo-ili -dozhivet-li-rossiya-do-2014-g.html. 87. The survey was conducted by the Levada Center in November 2013. “Naselenie priderzhivaetsya tsel’nykh vzglyadov,” November 28, 2013, www.levada.ru /28-11-2013/naselenie-priderzhivaetsya-tselnykh-vzglyadov. Concerning the share of separatism sympathizers, the Far East was only second to Siberia, where 22 percent of respondents supported autonomy for their region. 88. More than thirty experts from academia, business, mass-media, and government in Vladivostok, Khabarovsk, Blagoveshchensk, Birobidzhan, YuzhnoSakhalinsk, and Magadan, interviewed by the authors, October 2013–June 2014. 89. Galina Ermak, “Sotsial’no-mirovozzrencheskie ustanovki zhitelei kraya: identifikatsii,” 114. 90. Apart from Yakut nationalism, government reports also point to the rise in “nationalistic ideology among indigenous small peoples of the North” like Chukchi or Koryak. See “The Minister for the RFE Development V. Ishayev’s Responses to the Russian State Duma Deputies’ Questions on the Threats to National Security in the RFE,” 131. 91. Chinese vice-president Li Yuanchao, quoted in “Russkiye Vlasti gotovyat Dal’ny Vostok dlya zaseleniya kitaitsami,” 812-Online, July 7, 2014, www .online812.ru/2014/07/07/019/. See also Gilbert Rozman, The Sino-Russian Challenge to the World Order (Washington, DC: Woodrow Wilson Center Press, 2014), 237. 92. Timofei Bordachev and Oleg Barabanov, “Siberia and the Far East as a Path to Russian Globalization,” Valdai Discussion Club, January 23, 2013, www.valdai -club.com/economy53980.html.

5 Moscow’s Game Plan for the Russian Far East

Russia’s great-power identity, a key platform of Vladimir Putin’s platform for renewal, and assess current plans for modernizing the RFE and stemming the outflow of population. Moscow’s original game plan for the Far East was driven largely by geopolitics—a perceived need for better political control and ambitions to establish Russia’s legitimacy in Asia Pacific. However, the immense scale of the modernization task extends far beyond the capabilities of the Russian state; thus, Russia needs to supplement its own investments with help from abroad. The need for foreign help has increased with events, such as Western sanctions, plummeting oil prices, and decelerating growth, that have brought about a situation that could compromise Russian great-power identity. This will be discussed in Chapters 9 and 10 of the book. Here, the emphasis will be on explaining Moscow’s underlying rationale for modernization, as well as the main thrusts of development strategy, and the implications of this strategy for the RFE’s future relations with Moscow and with its Asian periphery. What place does the RFE occupy in Moscow’s system of priorities? A view shared by some Russians and foreigners is that the RFE and perhaps also Siberia are de facto internal colonies of Russia.1 This implies that the Far Eastern and Siberian territories are somewhat less valuable or less significant than the nation’s core provinces west of the Urals. That is, the argument goes, why they are treated as little more than resource appendages and strategic bulwarks, which can in principle be abandoned or dispensed with if necessary. This perception is likely wrong. Although the Far East and Siberia became Russian relatively late in the nation’s history, they have been no less significant than all the other territories under Russian sovereignty. Modern Russia is a quintessential Westphalian state whose identity is firmly rooted in the notion of territoriality. The pride in possessing huge IN THIS CHAPTER, WE STRESS THE IMPORTANCE OF THE RFE FOR

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areas, indeed being the largest nation in terms of landmass, is a crucial component of Russia’s national psyche.2 From this perspective at least, loss of the Far East, which accounts for one-third of Russia’s landmass, gives it access to the Pacific, and makes Russia a uniquely transcontinental power, would be unthinkable for Moscow.3 For all the trappings of federalism, Russia is very much a highly centralized empire. But it is a special empire—one in which metropolitan and historically core areas are treated more or less the same way as remote peripheral territories. Thus, Kaluga Oblast, which is a two-hour drive from Moscow, is no more privileged than Khabarovsk Krai. Indeed, the Far Eastern territories often get more attention, and with it more perks, from the central government—precisely because their remoteness, along with the presence of strong and rising powers in their neighborhood, evokes fears that the state can lose control over them. Russian rulers have traditionally cared more about the greatness and strength of the state than the well-being of its citizens. Decisionmaking has almost always been hierarchical and top down. In this decisionmaking, Russian regions have little say, even in matters that directly concern them. In this respect, Primorsky Krai is no different from, for example, Smolensk Oblast. Ironically, for the Russian Far East, such an autocratic and centralized political system may have some benefits. If Russia were a true democracy, the 6 million Far Easterners would have little electoral influence with the Kremlin while many of the voters in densely populated western Russia might balk at the idea of redistributing large chunks of public funds for the development of faraway eastern territories at the expense of their own regions. Since the Russian autocratic government does not have to care about electoral politics, it can spend money on the projects that it deems necessary for the strategic interests of the state such as consolidating control over the geopolitically important Far East. Although Saint Petersburg and Moscow have never disregarded the Far East, and have always kept an eye on it, this attention has been quite uneven. There were periods when the government attached high priority to the region, allocating a great deal of money for its development, while at other times it treated the region like any other average Russian territory. Those ebbs and flows have mostly been in response to geopolitical considerations. As Victor Larin observes, “The government became actively involved in the region when foreign powers increased their activity in close proximity to Russia’s borders, which was perceived as a threat to the country’s territorial integrity.”4 Larin identifies four such periods: 1854–1861, 1896–1903, 1931–1939, and 1966–1975. The first two were attempts to secure Russia’s eastern borders through territorial expansion while the last two were efforts to uplift and consolidate the nation’s acquired territories.5 Yet the RFE was viewed mainly as a military outpost and resource extrac-

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tion site and did not become the target of serious development efforts until relatively recently. A similar cyclical pattern is characteristic of the center’s policies in regulating the degree of openness of the Far East to the outside world. Over the history of the Russian Far East, two alternating and opposing patterns have shaped its interactions with the neighboring countries of Asia Pacific. The first pattern involves relative freedom in foreign trade and migration flows as was the case in the late nineteenth and early twentieth century, the 1920s, and, most recently, the 1990s. The second refers to restricted external links and tightened state controls, although the tightness of those controls may vary from nearly total, as in the Soviet period of the 1930s through the 1980s, to selective restrictions as currently. The logic behind the alternation of these opposing patterns has stemmed from such variables as the international environment, the domestic economy, and the general state of Russia’s political system. In the post-Soviet era, market dynamics and imperatives of modernization have dictated a relatively high degree of openness, especially to Asian economies. Putin’s Era: The Far East Becomes a Priority Again During the chaos of the 1990s, Moscow almost completely neglected the Far East and left the region to its own devices. However, beginning with Putin’s first term, from the early 2000s onward, the central government began to reassert its influence. Putin came to power vowing to restore Russia’s stature as a great power. This, first and foremost, meant regaining firm control over those territories whose links to Russia seemed to have become dangerously tenuous during the 1990s. Having quelled separatist insurgency in Chechnya and Dagestan, Moscow turned its gaze toward the Far East. Although never exhibiting strong secessionist sentiments, the region was a matter of deep concern because of the degradation of its economic and social situation against the background of the swift rise of China. Almost as soon as he assumed the presidential office in July 2000, Putin spoke of the threat to the existence of the Far East “as an inseparable part of Russia.”6 In November of the same year, Putin presided over the Security Council of the Russian Federation to discuss ensuring national security in the Far East. In his remarks at the meeting, the president highlighted the main perils facing the Far East such as “serious demographic, infrastructural, migration, and environmental problems . . . economic imbalances and social tensions.”7 In December 2006, at another meeting of the Security Council, Putin described the situation in the RFE as posing “a grave threat to our political and economic positions in Asia and the Pacific, and . . . to the national security of Russia as a whole.”8

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By 2006 Moscow not only had the political will but also, thanks to the country’s economic boom, enough funds in the state’s coffers to undertake substantial measures aimed at boosting the development of the Far East. The economic and infrastructural backwardness of the region was considered its key vulnerability. In December 2007, the Russian government approved a program for economic and social development of the Far East and Trans-Baikal region, committing to invest more than 1 trillion rubles (approximately $30 billion) over six years, an unprecedented sum for the region.9 The money was spent on constructing and modernizing transportation, energy, and other infrastructure as well as launching new industrial production. In the years 2011–2012 combined, investment in fixed capital per capita in the RFE was roughly 324,000 rubles ($9,969), almost twice that of the Russian Federation (165,000 rubles, or $5,077). In December 2009, the Russian government approved The Strategy for the Social and Economic Development of the Far East and the Baikal Region for the Period Till 2025,10 a voluminous policy document prepared by experts and government officials. The strategy emphasized that boosting the development of the RFE should be viewed as a national priority, and that the RFE should not only be the supplier of raw materials, but also should develop the capacity to process its natural riches with high value added. Furthermore, the strategy directed the RFE to realize its potential as a natural transit route between Asia and Europe. Another crucial task was to deal with the ongoing depopulation by encouraging people to stay in the RFE rather than migrate to other places. To achieve that, living standards must be substantially improved. In particular, the region should reach and sustain growth rates higher than Russia’s average. The state was to play the preeminent role in transforming the RFE. The document made it clear that only the state and government-owned corporations had the necessary resources to secure the development of the RFE. In addition to lavishing funds on the Far East, the center resolved to toughen regulation of the region’s external links. This new policy included a number of measures: strengthened control over foreign trade, especially in the exports of the region’s main staples such as fish and timber; restrictions on certain imports from neighboring countries such as a crackdown on shuttle trade with China conducted by individual petty merchants and the imposition of prohibitive tariffs on imported, mostly Japanese, cars; and tougher regulation of imported, mostly Chinese, foreign labor. By the end of the decade, the danger of losing the Far East seemed to have receded. Moscow was again in firm control of the region. Politically, the regional leaders were all Kremlin appointees and completely loyal to Putin. Economically, the majority of the region’s most valuable assets were owned either by state-run corporations or by businesspeople close to the Kremlin. However, the center did not remove the RFE from the top of

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its agenda. If anything, Moscow’s attention to the region only increased. Securitization, which had previously driven the Kremlin’s Far Eastern agenda, gave way to geoeconomic considerations. The Russian leadership began to realize that the shift of economic, and with it perhaps political, power from West to East was happening inexorably. If Russia was to stay relevant as a significant pole in the emerging world order, it had to begin its Eastern pivot. This entailed attaching ever more priority to the RFE. The reality of Asia’s rise dawned on Moscow in the wake of the global financial crisis of 2008–2009, when Russia’s GDP fell 9 percent while China’s grew almost the same rate. 11 The crisis over Ukraine and the Crimea, leading to dramatic deterioration of relations with the West, further induced the Kremlin to seek closer ties with Asia in which the RFE was to play an indispensable role. In December 2013, addressing Russia’s parliament, Putin spoke of the nation’s “reorientation toward the Pacific Ocean” and declared the development of Siberia and the Far East “national priority for the entire 21st century.”12 Economic interests and the logic of comparative advantage, of course, are not the sole drivers of Russia’s development policies in its eastern provinces. Consider the RFE’s strategic location, which is far from Russia’s centers of power but geographically proximate to dynamic and ambitious Asian powers in Northeast Asia that are motivated by varying strategic and economic concerns. Both defensive considerations and national ambition drive policy: Putin in 2006 declared the isolation and general backwardness of the RFE as “threats to our economic and political position in Asia and to our national security without exception.”13 A widespread belief was that Russia had no alternative—that “if we don’t develop the far east, others will” in Victor Ishayev’s words.14 Ishayev’s main fear is China, whose leadership he accused in 2003 of actively “drafting and implementing a plan to absorb the Siberian and Far Eastern territories.”15 Yet Moscow’s policy also is driven by a national desire to realize what Russia deems as its rightful place in Asia Pacific and on the global stage. A 2007 government planning document observed, with delicate understatement, that “the presence of Russia in the Asia-Pacific does not correspond to the role our country aspires to play in the global economic and political system.”16 Megaprojects in the Russian Far East When Moscow started its Eastern pivot, its main strategy for the Far East was to launch an array of major infrastructural and industrial projects designed to strongly boost the economy of the region. This, of course, relates closely to Moscow’s resource development and export agenda. It also serves the political objectives of increasing the connectedness of

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regions and their access to Asia Pacific region. The core emphasis is on massive state investments in transport and energy infrastructure. Megaprojects in these sectors, however, are financed largely from the state budget or by state-run companies like Gazprom or Transneft. Next, we briefly review some of the major projects in the Far East. The APEC Summit and Renovation of Vladivostok

Much of the government’s efforts and funding was focused on Primorsky Krai and its capital city of Vladivostok, the venue for the Asia-Pacific Economic Cooperation summit in 2012. The government adopted a special program under the title of Vladivostok City as a Hub for International Cooperation in the Asia-Pacific Region. What was once a mysterious closed city in Soviet times, it now occupies center stage in Moscow’s economic game plan to exploit the fast-growing markets of the East. When, at the APEC leaders’ meeting in Sydney in September 2007, Putin announced the decision to host APEC 2012 in Vladivostok, many in Russia and abroad expressed bewilderment and questioned the wisdom of choosing a Far Eastern city, with almost nonexistent infrastructure, over Moscow or Saint Petersburg for hosting a high-profile international event. Explaining the decision, Putin and other top Russian leaders emphasized that it was aimed at giving extra impetus to the Far East as well as showcasing the region to the international community. Moscow did not abandon or suspend the preparations for APEC in Vladivostok even when the global financial crisis of 2008–2009 hit Russia’s economy hard. The government reaffirmed its commitment to invest billions of dollars in the Far East, and large-scale construction continued apace.17 The most visible projects included, among others, the construction of a large state-of-the-art university campus designed to double as the APEC summit venue, three large sea bridges, hotels, and new highways as well as an upgrade of the Vladivostok airport’s facilities. No doubt a big event for the RFE, the Vladivostok APEC summit was held in September 2012. It went quite smoothly and was hailed as a success but despite the high hopes, it did not quite become a game changer. For one thing, the APEC-related projects were tainted with corruption. An indication of the scale of graft is that a deputy federal minister for regional development, who oversaw the APEC construction in Vladivostok, was detained on corruption-related charges soon after the summit. The summit did not result in any noticeable increase in private investment, either Russian or foreign, in the RFE. The government and state-controlled corporations continued to account for the largest share of the funding for new major projects in the RFE. Despite all of the showcasing efforts, the RFE did not become particularly attractive to private investors.18

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Energy

In 2012 the Eastern Siberia–Pacific Ocean pipeline, connecting Eastern Siberia with an oil port near Nakhodka, was completed. Its spur line, from Skovorodino to Chinese Daqing, had gone into operation in 2010. A gas pipeline that linked Vladivostok with Sakhalin’s natural gas fields was also built. The Sakhalin-Vladivostok pipeline was one element of the mammoth Eastern Gas Program that has been implemented by Gazprom since 2007. The program aims to tap the RFE’s gas fields and create a network of pipelines to supply domestic and foreign consumers. Electricity generation, which has been a perennial problem for the region, also received a strong boost from completion of the Bureya hydroelectric power plant in Amur Oblast. Thanks to the cheap hydropower of the Bureya River, the southern regions of the RFE now enjoy a sufficient supply of electricity and can export the surplus to China. The construction of the Ust-Srednekan hydropower plant in Magadan Oblast has resumed, with the plant scheduled to go into operation by 2017.19 Additionally, the government invested a lot of money in the upgrade of the RFE’s electricity grid. Transport

In 2010 the 2,165-kilometer Chita-Khabarovsk highway was essentially completed, providing for the first time a reliable automobile link between the Far East and the rest of the country. Putin himself tested the new route, driving a bright yellow Lada Kalina sports car almost the total length of it. A little later, the Yakutsk-Magadan highway came into operation. In 2013, the Amur-Yakut Railway was completed, linking Yakutsk, the capital of the Sakha Republic, with the national railway network. In 2013, the government and the state-owned Russian Railways announced plans for largescale expansion of the Trans-Siberian and Baikal-Amur Railways. Over the next few years, Moscow intends to invest 562 billion rubles (roughly $17 billion) to substantially enhance the capacity of the two railways, with significantly more funding planned over the long term.20 In 2009, the government started subsidizing passenger air travel on the most popular routes connecting Far Eastern cities with Moscow, Saint Petersburg, and Sochi. Under the scheme, travelers under the age of twentythree and over the age of sixty are entitled to air tickets at half their regular price. In the 1990s and early 2000s, the high cost of travel from the Far East, along with low average incomes, had made it impossible for many residents of the region to make trips to the western part of the country. Many Far Easterners, especially among the youth, had never visited their national capital, but had regularly traveled to nearby China, Japan, and

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South Korea. Thus, the subsidized air fares were designed partly to overcome the isolation of the Far East from the rest of the country and to reinforce the Russian identity of the region’s population. The scheme has been highly successful, leading to a substantial increase in passenger air traffic between the RFE and the western part of Russia. The government also attached priority to developing intraregional air service in the RFE.21 Industrial Production

In 2010, an automobile assembly factory came online in Vladivostok. Owned by Sollers, a private company with close Kremlin connections, this plant assembles Korean and Japanese brands using imported parts. The launch of car manufacturing in the Far East, where cars had never been made before, was made possible by customs duty exemptions on imported parts and government-subsidized rail shipment rates enabling Sollers to sell the cars in western Russia. A consortium of the state-owned companies of Rosneft, Gazprom, and the United Shipbuilding Corporation started work on the construction of a large shipyard near Vladivostok to make tankers and other vessels for the Russian offshore oil and gas industry. Another big industrial project was the launch of production of Sukhoy SuperJet passenger liners at the aviation plant in Komsomolsk. High Technology and Science

One of Moscow’s major objectives for the Far East is to turn it into a place where high-tech and knowledge sectors will flourish. With this in mind, Putin ordered the establishment of Far Eastern Federal University into which four local higher education institutions were merged. With a state-ofthe-art campus having been built for it on Russky Island, just off Vladivostok, the university was tasked to become a world-class center of academic and scientific excellence.22 Another high-tech endeavor, the construction of a large space launch facility, Cosmodrome Vostochny, was begun in Amur Oblast in 2012. Reorientation to Asia Pacific Region A significant thrust of the development model mentioned earlier is the aggressive reorientation of the RFE economy toward the Asian market. This partly reflects facts on the ground (e.g., dependency of the border provinces on trade with China), but also the perception that Asia represents the future for the world and Russian economies. And the perception is not unfounded. Asia Pacific region grew almost nine times as fast as the European Union

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between 2008 and 2012. The combined GDP of Russia’s Asian neighbors— China, South Korea, and Japan—grew fifteen times as fast. Visions of surging exports of oil, gas, coal, metals, grain, wood, and even high-tech products to Asia Pacific region and of increased Asian commerce along the Trans-Siberian and Baikal-Amur Railways have captured the Russian imagination. Right now Asia-Pacific integration is “in its infancy,” with Russia accounting for only a $206.8 billion sliver of APEC’s $16 billion trade turnover in 2012 and with slightly more of the RFE’s small ($7 billion in 2013) foreign investment inflow coming from eurozone countries (though the Asian share is increasing). 23 This could change dramatically if Russia succeeds in transforming the RFE, especially its southern reaches, into a modern and efficient hub for external commerce, and in reforming its notoriously unruly environment for business investment. The downside risk for Russia is that over time the RFE’s development path may increasingly be determined by the interests and preferences of neighboring countries, especially China, and less by decisions made in Moscow. Yet this seems a risk that many Russian leaders seem prepared to take. Moreover, the massive state investments and the explicit linkage of the RFE’s future to Asia Pacific region were accompanied by far-reaching institutional changes. A noteworthy change was the creation of a new Ministry of Far East Development, headquartered first in Khabarovsk and later split into three sections—a Khabarovsk, Moscow, and Vladivostok—with the largest staff assigned to Vladivostok.24 A second noteworthy change, reflected in leadership statements and planning documents, is a new emphasis on improving the investment climate to attract new business to the region. To this end, the government intends to “adjust federal tax policies to the geographic characteristics of the Far East.”25 A law enacted in September 2013 sharply reduced federal income taxes and mineral extraction taxes for enterprises within the twelve provinces of the macroregion.26 In December, Putin called for the creation of special economic zones for “non-extractive industries.”27 Now renamed “territories of advanced development,” these areas would feature tax and customs privileges as well as favored access to transportation and electricity. The concept is to attract some innovative and high-tech investment—recent calls to convert Vladivostok’s “Russky Island” into a second “Silicon Valley” are one example of such thinking. 28 These zones clearly are viewed as platforms for expanding Russia’s participation in the lucrative Asia Pacific market. As the new minister for development of the Far East, Alexander Galushka, explained at a meeting of the Government Commission on the Socioeconomic Development of the Far East in October 2013, “The market of the Far East is very small—just 5 percent of Russia’s GDP. The market in the European part of Russia is large, one of the world’s largest, but it is far away. It’s irrational economically to set up production in the Far East to serve that market.” By compar-

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ison, he said the Asia-Pacific region has a combined GDP of $50 trillion and imports $6 billion worth of goods a year. If RFE exports could capture just 2 percent of that market, “this would at least double its GRP and perhaps increase it much more.”29 The Far Eastern Viceroyalty? To put the resources and efforts spent on the RFE to the best use, the Kremlin began to look for a special model of running the region. In early 2012, a plan was floated to set up a giant state corporation for the development of the Far East and Eastern Siberia. The company, expected to be headquartered in Vladivostok, would oversee major projects in the RFE and report directly to the Russian president. It was rumored that the idea belonged to one of Putin’s close aides, Sergey Shoigu, who also wanted to head the new entity.30 The company was to be granted a special legal status, as well as tax exemptions, and was expected to consolidate the most valuable government-owned assets, mostly in resource extraction industries, in the Far East and Eastern Siberia.31 This idea led some to draw comparisons with the notorious East India Company and suggest that the Far Eastern development corporation would underscore the RFE’s status as an exploited semicolonial periphery.32 The idea to create the Far Eastern megacompany generated controversy not only in public opinion but also within the Russian government itself and, ultimately, it was shelved. Instead, in May 2012, the federal Ministry for the Development of the Far East was established to coordinate and monitor federal programs for the RFE. Ishayev, the former Khabarovsk Krai governor, was named minister for development of the Far East, the position being added to his preexisting title as the plenipotentiary presidential representative to the Far Eastern Federal District.33 Ishayev had long advocated the need for massive government investments in the Far East to promote its industrialization and social infrastructure. However, in November 2012, President Putin publicly criticized the new ministry as being ineffective. In early 2013 Ishayev proposed, and received Prime Minister Dmitry Medvedev’s approval of, a long-term program for the development of the RFE until the year 2025, with the costs totaling over 10 trillion rubles (roughly $300 billion), of which the government would have provided 3.8 trillion rubles ($115 billion). Most of the government’s total was earmarked for twelve functional subprograms with the goal to the development of the macroregion.34 Of this, almost two-thirds was devoted to infrastructure—50.2 percent to transportation and 13.7 percent to energy. Table 5.1 shows the amounts and percentages of funds devoted to each major development subprogram. A notable aspect of the

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plan was the relatively low percentage devoted to improving the comfort level of the population―a debatable choice, perhaps, given the imperative need to stem population outflows and attract new residents. The rest of the costs in the 2025 program should have come from unspecified private sources―an extremely tall order, given the RFE’s thus far lackluster performance in attracting private investment, both domestic and foreign. This caused another public reprimand from Putin.35 As an indication that Moscow was not happy with the management of the RFE, in August 2013 Vladimir Putin replaced Ishayev with Yuri Trutnev as the point man in charge of the federal policies toward the region. Unlike Ishayev, who was never close to Putin and had difficulty dealing with the upper echelons of Moscow bureaucracy, Trutnev was a Kremlin insider. He had previously served as minister for environment and natural resources and later as a presidential aide. It was also significant that Putin created a new position within the federal government, that of the deputy prime minister responsible for the RFE, which Trutnev assumed.36 This was one more sign that Moscow considered the RFE a top priority among other Russian regions. Before, only the troubled North Caucasus had been assigned a deputy prime ministerial position.37 Moreover, in September 2013 the governmental Commission for Social and Economic Development of the Far East was set up, with Prime Minister Dmitry Medvedev himself leading the body.38 Sending Putin’s trusted man to the Far East and giving him vice prime ministerial prerogatives was, in effect, the return to Russia’s tried practice of appointing namestniki (viceroys, vice regents)—high-ranking officials invested with expansive prerogatives and enjoying direct access to the head of state—to run problematic and strategically important provinces.39 Trutnev’s appointment coincided with, and perhaps was additionally motivated by, financial difficulties that Russia began to face. The economic boom of the twenty-first century’s first decade was over: Moscow could no longer afford to shower money on the RFE’s developmental projects. In January 2014, a senior government official recognized “extreme financial constraints” adversely affecting the previously adopted plans for the Far East.40 In the environment of austerity, Trutnev’s mission was to devise mechanisms for the Far Eastern development that would not put a heavy burden on the state’s treasury. Trutnev’s team came up with the idea of creating “territories of advanced development”—special economic zones where private investors, both Russian and foreign, would enjoy a wide range of substantial benefits—from tax and customs exemptions to easy access to the electricity grid.41 These zones were to host enterprises whose production would be intended mainly for Asia Pacific markets. In announcing the idea, the government officials pledged that territories of advanced development would enjoy special regulatory regimes that could put them on par with the best

Table 5.1 Resources for the Socioeconomic Development of the Far East and the Baikal Region Federal Program Subprogram

1: Improving the efficiency of the economy in the Far East and the Baikal region 2: Development of the mineral complex in the Far East and the Baikal region 3: Development of the timber industry in the Far East and the Baikal region 4: Development of the fishing industry in the Far East and the Baikal region 5: Development of the agro-industrial complex in the Far East and the Baikal region 6: Development of transport infrastructure in the Far East and the Baikal region 7: Development of the energy infrastructure in the Far East and the Baikal region 8: Enhancement of living conditions for the population in the Far East and the Baikal region 9: Ensuring environmental safety and environmental protection in the Far East and the Baikal region 10: Scientific and staffing support for all aspects of the federal program 11: Development of tourism in the Far East and the Baikal region 12: Ensuring the implementation of all aspects of the full federal program Total

Billion Rubles 102.58 81.02 17.11 44.04 28.05 1,620.09 441.85 555.54 237.50 64.41 29.25 7.58

3,229.03

% of Total 3.2 2.5 0.5 1.4 0.9 50.2 13.7 17.2 7.4 2.0 0.9 0.2

100.0

Source: Government of Russia, “Sotsial’no-Ekonomicheskoye Razvitiye Dal’nego Vostoka I Zabaikalskogo Regiona: 2014 to 2025,” Moscow, April 15, 2014, http:// minvostokrazvitia.ru/upload/iblock/6ed/gp34.pdf.

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legal-administrative practices in Asia, such as those in Singapore or Hong Kong. The government would also facilitate the creation of necessary infrastructure, such as rail links and electricity supply, for such zones.42 The idea received the Kremlin’s approval and made its way into Putin’s annual address to Russia’s parliament.43 To facilitate private investment in the eastern territories, a federal law was passed, coming into force in January 2014, which provides tax breaks and reduced tax rates for investors in major projects in the Far East and Trans-Baikal region.44 Trutnev ambitiously aims to double the Far East’s GRP by 2024. More than that, the Far East should become the testing ground for new economic and regulatory models that could be duplicated in the rest of Russia.45 In December 2014, a law on territories of advanced development, drafted by Trutnev’s team, was passed, allowing the Far Eastern regions to set up special economic zones that enjoy extensive tax, customs, and regulatory benefits, as well as government funding for the construction of essential infrastructure. In July 2015, Putin signed another law, declaring Vladivostok and the southern seaboard of Primorsky a “free port”—in essence an enlarged special economic zone that, in addition to tax, customs, and regulatory exemptions, will offer a visa-on-arrival procedure for foreign visitors for stays of up to eight days—a revolutionary move for Russia where the entry visa regime has traditionally been notoriously difficult. Alternative Visions for the RFE The future of the Far East has been a subject of a lively debate not only within the government, but also among the community of Russian academics and experts. Some of the latter’s ideas arguably have already had some impact on Moscow’s decisionmaking regarding the region while other proposals possibly might be picked up in the future. Thus, it is worth taking a brief look at the visions that represent a variety of approaches—from liberal to technocratic and futuristic—reflecting different strands of Russia’s sociopolitical discourse. The Valdai Discussion Club Reports

In July 2012 and February 2014, a group of prominent liberal-leaning scholars affiliated with the Valdai Discussion Club think-tank and led by Sergey Karaganov, authored two reports: Toward the Great Ocean, or the New Globalization of Russia and Toward the Great Ocean-2, or Russia’s Breakthrough to Asia.46 The reports called for Russia to reorient its economic ties toward the booming Asia and the Pacific, placing a high priority on the development of Russia’s Asian regions—Siberia and the RFE.

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The authors of the reports criticize previous government-approved strategies for the RFE because, in their view, “They do not take into account the opportunities and limitations imposed by the outside world” and are too state-centric, meaning they cannot be effective in a modern-day Russia characterized by corrupt and incompetent bureaucracy.47 These documents propose launching Project Siberia as the most important contemporary national undertaking. The project would focus on making the maximum use of eastern Russia’s comparative advantages, particularly the abundance of basic natural resources such as water, arable land, timber, and energy. Rather than attempting new industrialization, as proposed in some government policy documents, Siberia and the RFE should become large-scale producers of primary resource-intensive products such as wheat, meat, fodder, pulp and paper, and even beer, which are in ever increasing demand from the voracious Asian markets.48 “The area and geographical position of Siberia,” the Valdai Club experts stress, are becoming more important “now that geopolitics is rapidly returning to international relations and natural factors have an increasing influence on the world economy.”49 The report emphasizes that Russia needs to open up to the emerging Asia via its Siberian and Far Eastern regions. Those regions should be entirely open for economic cooperation with their Asian neighbors. Russia needs to attract as much foreign investment as possible for Siberia and the RFE. China, of course, will be a key player. However, to avoid excessive reliance on Beijing, the report emphasizes that the investments should also be sought from the United States, Japan, South Korea, the Association of Southeast Asian Nations (ASEAN), and the European Union while protecting Russian sovereignty over the eastern territories. The authors of the report even suggest establishing a new Russian capital (in addition to Moscow) on the Pacific coast. The Pacific capital, possibly located in the vicinity of Vladivostok, would highlight Russia’s commitment to the development of its Asian territories.50 The Pro-Western Liberal Perspective

Vladislav Inozemtsev, an economist and one of Russia’s foremost liberal thinkers, together with Valery Zubov, Russian Duma deputy and former governor of Krasnoyarsk Krai, describe Siberia (in which they include the RFE) as Russia’s internal colony, which has always been exploited and whose huge potential has never been fully realized because of Moscow’s oppressive policies.51 Russia should become a true federation and let Siberia develop freely. This above all means freedom of private enterprise and creation of welcoming climate for investors—Russian and foreign. As Inozemtsev argues, Siberia should not be ruled from Moscow as a depen-

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dent territory: “There is no need to boost Siberia by Moscow’s efforts—just don’t interfere, and let Siberia rise on its own.”52 The central government’s policies tend to prioritize gigantic and extremely costly projects, such as the construction of a tunnel connecting the mainland to Sakhalin Island or rejuvenation of the Arctic cities, which most likely would be an enormous waste of resources due to their dubious value and ineffective management. What is needed is to grant more autonomy to Siberian provinces so that they can make their own decisions about their development priorities. Rather than stripping Siberia of the huge tax revenues generated by natural wealth, Moscow should leave more taxes in the region where local authorities would be better positioned to make the best use of them. If allowed free development, Siberia can become the main source or rejuvenation and modernization for the rest of Russia.53 Inozemtsev and Zubov are convinced that Siberia—and Russia— should integrate with the Pacific rather than Asia. To the east of Russia lie the advanced nations of Japan, the United States, and Canada. It is with them that Russia should enter into solid partnerships in the first place, not with China. And it is with them that Russia should unite to establish the “North Pacific alliance.”54 Military Modernization

A military scenario may be increasingly likely if Russia drifts into isolationist and besieged mode, feeling encircled by adversarial forces—from the West and East. According to Ivan Timofeev of the Russian International Affairs Council, it is possible that “a military component will become a top priority and a driving force of Russia’s policy in the Far East. . . . The military sphere will be a priority both in terms of modernization of the Far East, as well as Russia’s diplomacy” in Asia Pacific.55 To promote a market modernization and Asia Pacific integration of the Far East, Russia will need to thoroughly change its institutions of governance, which is unlikely to happen. However, the existing institutional structure—state centric and top down—is well suited to execute military modernization and perhaps some large infrastructure and energy projects. This kind of modernization will, in particular, build up Pacific Fleet and ground forces capabilities as well as expand defense production in the region. In a sense, this would be a replay of the patterns experienced by the Far East under Joseph Stalin and Leonid Brezhnev, when the region was turned into a fortified camp in response to the perceived threats from Japan in the 1930s and China in the 1970s. The defensive modernization could foreclose any chances for Russia to integrate with Asia Pacific, but it should give it military clout necessary to ensure security of its Far East and remain a strategic player in Northeast Asia.

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There are already signs that the government contemplates at least some elements of the militarization scenario. Vice Premier Dmitry Rogozin, who is in charge of Russian defense industries, has announced plans to massively invest in military manufacturing, particularly of missiles and aircraft, in eastern Russia.56 The Technofuturistic Vision

Pyotr Shschedrovitsky, Russia’s prominent public intellectual and an adviser to the head of the state-owned Rosatom Corporation, outlines a futuristic plan for the Far East. He argues that the RFE’s apparent weaknesses, above all its extremely low population density and lack of infrastructure, can stimulate introducing innovative solutions. The RFE should become a giant testing ground of new technologies like robotics, renewable energy sources, and smart power grids. According to Shschedrovitsky, the RFE can be the start of “the third industrial revolution” in Russia. To achieve this, special conditions need to be established in the region, including legal regimes, education, and culture, as well as encouragement of foreign investment.57 What Is Next for the RFE? Since 2007, the RFE has been elevated to the top of the Kremlin’s agenda. This has manifested in many ways—from the amount of public funds spent on the Far Eastern megaprojects58 to the frequency of visits by top leaders to the region.59 It is has been said that “the Far East is Putin’s personal project.”60 However, the new RFE initiatives have proved somewhat controversial. One concern is the insufficient attention to the “social” part of socioeconomic development in Moscow’s planning. Putin, for example, has stated that “all of our plans in the economic sphere have one main goal. To create an attractive comfortable environment in trans-Baikal territory and the Far East so that people will want to settle down here.”61 Yet the relatively small investment planned for comfortable living, which would include housing, communal services, health, and education, seems to belie this assertion. Moscow, it might be argued, needs to keep a closer eye on population numbers in a region threatened with demographic insolvency. Another potential fault is related to the business objectives of the model. Russia wants to create special economic zones in the RFE to make internationally competitive products. But can Russia really compete in this regard with its neighbors, especially a low-cost producer like China? China is currently setting up a large Border Economic Cooperation Zone in Suifenhe, across the border from Primorsky, which, according to a

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recent visitor, “will use a massive inflow of human, financial, and natural resources to export goods, which include a range of high-tech goods as well as furniture and clothing manufactures.” 62 From a Chinese perspective, Russian plans seem quixotic. As Chinese-Russian specialists interviewed in Shanghai observed, “If Russia is looking to produce similar goods to what is currently being produced, or planned to be produced, in Chinese zones, then these Russian goods will most likely not be competitive in the global market with goods from China.”63 This evaluation may seem overly pessimistic, but it points to Russia’s broader problems of trying to move away from a resource-based economy. China—now Russia’s most important trade partner—is generally sympathetic to Russia’s efforts to move up the value-added chain from raw or semiprocessed materials. Yet current terms of trade stoke fears of an eventual loss of real sovereignty in the words of one Moscow observer, in that Russia could “turn into a resource appendage of China, first as a warehouse of resources and then economically and politically.”64 Finally, Russia’s present economic circumstances cast some doubt on its ability to fulfill its ambitious development objectives for the Far East. The Far Eastern policy has brought visible positive results but, as yet, it has failed to achieve its main goal—to put the RFE on a sustained and dynamic development trajectory. By 2013 the growth of the RFE’s economy fizzled out, along with Russia’s GDP, and the prospects look uncertain (GDP growth declined from 7 percent to 6 percent in Putin’s first term, to 3.4 percent in 2012 and 1.3 percent in 2013).65 Partly because of the Ukraine crisis, Moscow suddenly had new priorities to take care of such as absorbing Crimea and funding pro-Russian groups in eastern Ukraine. Additionally, crisis-related factors, such as massive capital flight and reduced investment inflows plus a more than 40 percent drop in the price of oil in the latter half of 2014, have severely depressed the economy, which grew just 0.6 percent in 2014 and is expected to contract 3.8 percent in 2015 according to estimates by the World Bank.66 This will require some difficult choices for the Kremlin’s planners. According to Russian news reports, the costs of absorbing the newly annexed Crimea forced Moscow to shelve the long-awaited construction of a 3.1-kilometer bridge across the Lena River to Yakutsk (designed to link Yakutsk city to the Amur-Yakutsk Railway). Whether other such casualties will follow remains to be seen.67 Amidst financial uncertainty, Moscow has to rely on less costly ways to accelerate the RFE development, which was one of the primary reasons that Trutnev was named as Putin’s point man on Far Eastern affairs and given expansive powers. Trutnev and his team talk about the RFE becoming competitive with Hong Kong, Japan, South Korea, and Singapore. They speak of high-tech projects like establishing a Russian version of Silicon Valley on Russky Island in Vladivostok.68 The Kremlin seems ready to

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introduce ultraliberal regulatory regimes in the Far East, at least within the confines of the planned territories of advanced development, to attract Russian and international investors. However, the big question is whether it is possible to radically change the situation in the RFE without first fundamentally altering Russia’s entrenched ways and institutions of governance. At least three inherent features of the modern Russian state seriously hamper efforts for the RFE economic development. First, contemporary Russia contains significant elements of neofeudalism in its social, political, and economic life. This, in particular, means that loyalty is valued higher than efficiency, reducing the general level of competence and professionalism of bureaucracy. Corruption is often tolerated as long as officials are seen as loyal. Neofeudalism contributes to monopolization of the economy and limits competition, as the state privileges government-owned corporations and companies whose owners are closely associated with the ruling elite or are themselves part of that elite. Under the neofeudal system, there is little place for smart governance and meritocracy. In this regard, the RFE is no different from the rest of Russia.69 Second, although constitutionally a federal state, Russia’s governance is centralized, with the Kremlin making all of the major decisions at both national and regional levels. This is more pronounced in the Far East: being identified as a national priority by the center, it de facto came under direct rule from Moscow. Regional and local authorities and communities have little roles to play in determining the course of the development of their territories. Thus, some of the projects designed to develop the RFE bring few, if any, benefits to the hosting territories and their residents.70 Third, for all the talk of attracting investors, Russia remains ambivalent about opening up the riches of the RFE to outside investment participation. This is exacerbated by the fear that, due to the region’s remoteness from Moscow and its proximity to dynamic and powerful Asia Pacific countries, liberalization of external interactions may lead to the loss of effective sovereignty over the area. So far, the Russian government has been cautious about allowing foreigners into strategic sectors of the RFE’s economy. If they are allowed to participate in a major project, they are usually required to have a Russian partner as an equal or majority stakeholder. Nevertheless, Russian attitudes seem to be changing. Isolated and pressured by the West, Russia seems prepared to grant China privileged access to the vast resources of its eastern domains, including the prospect of majority stakes in its most prized economic assets, potentially enhancing China’s real influence in the development of these valuable lands. The next chapters (Chapter 6 through 10) mark a break from the previous discussion, which focused mainly on the RFE’s internal economic and political dynamics, its development prospects and challenges, and its place in the scheme of Russian national priorities. Central questions that we

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address include how geopolitical forces and great-power interactions are likely to shape the RFE’s future as well as how the RFE’s development trajectory might affect the overall power equilibrium in East and Northeast Asia. Of particular significance here are recent qualitative changes in the Russian-Chinese relationship. The new Moscow-Beijing axis builds on a long-standing strategic partnership based on common opposition to US hegemony in world affairs. But because of new strategic realities (mainly fallout from the Ukraine crisis and intensified US-China rivalry in the western Pacific) this opposition has become more focused and purposeful. The deepening partnership has important implications in the economic realm, including, of course, for Russia’s eastern territories, where modernization imperatives could come to reflect Beijing’s core industrial requirements as much as Moscow’s own preferences. With these considerations in mind, we devote significant attention to the evolving Russian-Chinese relationship— the main drivers and contours of the new entente, its international significance, and how it is likely to develop over time. In Chapters 6 and 7, we discuss Moscow’s priorities in seeking closer ties to Beijing and consider how the relationship is influenced by Russia’s disagreements with the West over Ukraine and other matters. We also explain how the partnership fits with China’s foreign policy calculations, especially Beijing’s growing geopolitical ambitions in East Asia and beyond. In Chapter 6 we describe various opinions on China among Russian scholars and officials while in Chapter 7 we consider the arguments for a Russian-Chinese alliance and what it might mean for US interests and the power balance in Asia Pacific. Notes 1. See discussion in Chapter 3. The colonial mentality was most apparent in Tsarist and Soviet times but has persisted somewhat since then. As Judith Thornton observes, “the legacies of Siberia’s top-down control persist today . . . regional actors still view federal authorities as remote colonial masters seeking to extract the last ounce of rent from the region’s resource wealth.” Judith Thornton, “Institutional Change and Economic Development in Siberia and the Russian Far East,” Working Paper no. UWEC-2011-15, Department of Economics, University of Washington, 4, www.econ.washington.edu/user/thornj/37_Economic_Development_Siberia_11.pdf. 2. Ivan Timofeyev, Director of Programs, Russian International Affairs Council, interviewed by Artyom Lukin, February 24, 2014, Moscow. 3. After Russia sold its only true colony (Alaska) to the United States, the Russian government never seriously contemplated abandoning any part of the Far East. 4. Victor Larin, “External Threat as a Driving Force for Exploring and Developing the Russian Pacific Region” (Moscow: Moscow Carnegie Center, May 2013), 1, http://carnegieendowment.org/2013/05/30/external-threat-as-driving-force -forexploring-and-developing-russian-pacific-region. 5. Ibid., 5.

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6. Vladimir Putin, “Introductory Remarks at a Meeting on the Prospects of the Development of the Far East and Trans-Baikal Region,” Blagoveshchensk, July 21, 2000, http://en.kremlin.ru/events/president/transcripts/21494. 7. Vladimir Putin, “Opening Remarks at a Meeting of the Security Council on National Security in the Far East,” Moscow, November 27, 2002, http://en.kremlin .ru/events/president/transcripts/21791. 8. Vladimir Putin, “Opening Remarks at the Security Council Meeting,” Moscow, December 20, 2006, http://archive.kremlin.ru/eng/speeches/2006/12/20 /1910_type82912type82913_115717.shtml. 9. Pavel Minakir and Olga Prokapalo, “Programmy i strategii razvitiya rossiyskogo Dal’nego Vostoka” [The Programs and Strategies for Development of the Russian Far East], Problemy Dal’nego Vostoka [Far Eastern Affairs], no. 5 (September–October 2011): 98. 10. Government of Russia, “Sotsial’no-Ekonomicheskoye Razvitiye Dal’nego Vostoka I Zabaikalskogo Regiona do 2025” (Moscow: Government of Russia, April 15, 2014), http://minvostokrazvitia.ru/upload/iblock/6ed/gp34.pdf. 11. Alexander Gabuev, “Doroga k Dal’nemu,” Kommersant, February 24, 2014, http://kommersant.ru/doc/2411279. 12. Vladimir Putin, “Presidential Address to the Federal Assembly,” Moscow, December 12, 2013, http://eng.kremlin.ru/transcripts/6402. 13. “Isolation of Far East a Threat to National Security-Putin,” Sputnik News/RIA Novosti, December 20, 2006, http://sputniknews.com/russia/20061220 /57396954.html. 14. Victor Ishayev, “Stolypin I Vostok Rossii,” Tikhookeanskaya Zvesda, April 14, 2012, www.dfo.gov.ru/index.php?id=44&oid=2624. 15. Victor Ishayev, “The RFE Development Strategy in a Changing World,” paper presented at the International Symposium, Khabarovsk, May 2003, www .khabkrai.ru. 16. Government of Russia, “Federal’naya Tselevaya Programma: Ekonomicheskoye I Sotsial’noye Razvitiye Dal’nego Vostoka I Zabaikalya do 2013” (Moscow: Government of Russia, 2007), 60, www.fms.gov.ru/upload/iblock/f29/postanovle nie_480.pdf. 17. At the beginning of 2009, some government officials suggested that, to save money, the venue for the APEC summit should be moved from Vladivostok to Saint Petersburg where all the necessary facilities for hosting major international events were already in place. However, the proposals were rejected by Russia’s top leadership. 18. “Levintal: inostrannykh investitsiy na Dal’nem Vostoke net, davayte ob etom chestno govorit,” Amur Press, February 5, 2013, http://amurpress.ru/index .php?option=com_content&view=article&id=14221:2013-02-05-07-08-49 &catid=35:2011-04-17-17-20-12&Itemid=70. 19. The construction of the Bureaya and Ust-Srednekan hydropower plants was started during the time of the Soviet Union, but halted in the 1990s. 20. “Russian Government to Spend up to $46.7 Billion on Revamping Siberian Railways,” Siberian Times, July 4, 2014, http://siberiantimes.com/business /investment/news/russian-government-to-spend-up-to-467-billion-on-revamping -siberian-railways/. 21. Nadezhda Vorontsova, “Razvitie transportnoy infrastruktury global’naya zadacha Dal’nevostochnogo regiona,” Dal’nevostochnyii Kapital, September 5, 2012, http://www.zrpress.ru/markets/dalnij-vostok_05.09.2012_56065_razvitie -transportnoj-infrastruktury—globalnaja-zadacha-dalnevostochnogo-regiona.html.

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22. The English language website of the Far Eastern University is www.dvfu .ru/en/web/fefu/. 23. Interregional Association for the Far East and Zabaikalye, “Inostrannye Investitsii v 2012, 2011, 2010,” http://assoc.khv.gov.ru/regions/foreign-economic -activities/investment. See also “US Upstaged by Russia in Asia-Pacific,” Russia Direct, October 4, 2013, www.russia-direct.org/content/us-upstaged-russia-asia -paxific; see also Anton Barbashin, “A Pacific Vision for Russia and the US,” The Diplomat, December 6, 2013, http://thediplomat.com/2013/12/a-pacific-vision-for -russia-and-the-us/; and Natasha Kuhrt, “The Russian Far East in Russia’s Asia Policy—Dual Integration or Dual Periphery,” Europe-Asia Studies 64, no. 2 (2012): 473. 24. “Samoye Krupnoye Podrazdeleniye Minvostokrazvitiya Razmestyat vo Vladivostoke,” Deita, February 21, 2014, www.deita.ru/news/politics/21.02 .2014465397-krupney. 25. Timofei Bordachev and Oleg Barabanov, “Siberia and the Far East as a Path to Russian Globalization” (Moscow: Valdai Discussion Club, January 23, 2013), www.valdaiclub.com/economy/53980.html. 26. Ernst and Young, “Russia Enacts Federal Law Providing Tax Incentives for Far-East Region,” Global Tax Alert, October 24, 2013, www.ey.com/GL/en /Services/Tax/International-Tax/Alert—Russia-enacts-Federal-Law-providing-tax -incentives-for-far-east-region. 27. Putin, “Presidential Address to the Federal Assembly.” 28. “Silicon Valley on Ice: Russia Wants to Turn Far East Island into a Research Hub,” Russia Today, January 29, 2014, www.rt.com/business/vladivostok/-silicon -valley-island-350. 29. Aleksandr Galushka, “Meeting of the Government Commission on the Socioeconomic Development of the Far East,” Government of Russia, Khabarobsk, October 24, 2013, www.government.ru/en/news/7718. 30. In November 2012, Sergey Shoigu was appointed minister of defense. 31. Kirill Mel’nikov, Alexandr Gudkov, and Alexandr Panchenko, “Vsy vlast’ v Sibiri” [All the Power in Siberia], Kommersant, April 20, 2012, http://kommersant .ru/doc/1919404. 32. Alexey Usov, “Zhiteli Sibiri i Dal’nevo Vostoka mechtaiut yekhat’ is Rossii,” Newsland, Moscow, July 13, 2012, http://newsland.com/news/detail/id /995388/. 33. Victor Ishayev became the second cabinet-level member of the Russian government to be responsible for a particular region, with the first one being the vice premier Alexander Khloponin in charge of the North Caucasus, which should send a message that Moscow prioritizes these two regions. 34. Government of Russia, “Sotsial’no-Ekonomicheskoye Razvitiye Dal’nego Vostoka I Zabaikalskogo Regiona do 2025,” 5–7. See also “Amur-Baikal Mainline Set to Open by End of 2013,” Global Railways, August 16, 2013, www.globalrail ways.com/2013/08/16/amur-yakutsk-main; and “Putin’s Lada Kalina Sport,” RIA Novosti, September 2, 2010, en.ria.ru/photolents/20100902/160437000_2.html. 35. “Programma po razvityiu Dal’nevo Vostoka ‘yavno ne obespechna’ finansirovaniem—Putin,” PrimaMedia, Moscow, May 7, 2013, http://primamedia.ru /news/politics/07.05.2013/274807/programma-po-razvitiyu-dalnego-vostoka-yavno -ne-obespechena-finansir.html. 36. Yuri Trutnev received two offices at the same time: plenipotentiary presidential representative in the RFE and deputy prime minister responsible for the RFE affairs. The ministry for the RFE development was kept in place, with Aleksandr Galushka appointed as the minister who would report to Trutnev.

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37. After the annexation of Crimea in March 2014, a similar arrangement was introduced for governing the newly acquired territory: presidential envoy to Crimea, Ministry for Crimean Affairs, and federal vice premier in charge of Crimea. Thus, the North Caucasus, Far East, and Crimea are the only three Russian regions with a special structure of federal governance, underlining their significance for Moscow. 38. “Medvedev vozglavil pravitelstvennuiy komisiu po Dalnemu Vostoku,” Prime Business News Agency, September 3, 2013, www.1prime.ru/Politics /20130903/766025637.html. 39. Artyom Lukin, “The Far Eastern Viceroyalty,” Russian International Affairs Council, Moscow, February, 28, 2014, http://russiancouncil.ru/blogs/dvfu/?id _4=1007. 40. Interview with Minister of Regional Development Igor Slyunyaev, Rossiyskaya Gazeta, January 15, 2014, http://pda.rg.ru/2014/01/15/trillion.html. 41. Moscow already tried to create a special economic zone in the RFE. It was set up at the port of Sovetskaya Gavan in 2009, but it has failed to attract investors. 42. “Set’ eksportnykh territoriy operezhayushchego razvitiya budet sozdana na Dal’nom Vostoke,” Kommersant (Moscow), November 6, 2013, http://kommersant .ru/doc/2336451. 43. Putin, “Presidential Address to the Federal Assembly.” 44. President of Russia, “Podpisan zakon, napravlennyy na razvitie regional’nykh investitsionnykh proektov,” Moscow, September 30, 2013, http://kremlin .ru/acts/19317. 45. Interview with Yuri Trutnev, February 17, 2014, www.kommersant .ru/doc/2410187. 46. Sergey Karagonov, Oleg Barabanov, and Timofei Bordachev, Toward the Great Ocean, or the New Globalization of Russia, Valdai Discussion Club analytical report (Moscow: Valdai Discussion Club, July 2012), http://vid-1.rian.ru/ig/valdai /Toward_great_ocean_eng.pdf; and Sergey Karaganov, Victor Larin, Igor Makarov, et al., Toward the Great Ocean-2, or Russia’s Breakthrough to Asia, Valdai Discussion Club report (Moscow: Valdai Discussion Club, February 2014), http://vid -1.rian.ru/ig/valdai/Twd_Great_Ocean_2_Eng.pdf. 47. Karagonov, Barabanov, and Bordachev, Toward the Great Ocean, or the New Globalization of Russia, 5–9. 48. One of the more interesting ideas is for Siberia and the Russian Far East to host international data centers, which consume a lot of energy. 49. Karaganov, Larin, and Makarov, Toward the Great Ocean-2, or Russia’s Breakthrough to Asia, 6. 50. Karagonov, Barabanov, and Bordachev, Toward the Great Ocean, or the New Globalization of Russia, 5–9, 34–49, 67–70. 51. Vladislav Inozemtsev, “Sibir ne nado ‘podnimat’ resheniami iz Moskvy,” [Siberia Does Not Need to Be Boosted by Decisions from Moscow], Russian International Affairs Council (Moscow, February, 15, 2013), http://russiancouncil .ru/inner/?id_4=1450. 52. Ibid. 53. Ibid. 54. Valeri Zubov and Vladislav Inozemtsev, “Sibir’ Novyi povorot,” February 5, 2014, Vedomosti, www.vedomosti.ru/opinion/news/22319151/novyj-povorot. See also Valeri Zubov and Vladislav Inozemtsev, Sibirskoe Blagoslovenie (Moscow: Argamak-Media, 2013), http://zubow.ru/media/book/2014/02/05/file/VMZubov -SibirskoeBlagoslovenie.pdf.

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55. Ivan Timofeev, “Modernization of the Russian Far East: ‘Fortress Russia’ Scenario?” Russian International Affairs Council (Moscow), November 21, 2013, http://russiancouncil.ru/en/inner/?id_4=2724#top. 56. “Rossiya vlozhit 500 mlrd yevro v voennyy sektor do 2020 goda soobshchil Rogozin,” September 3, 2013 Newsru (Moscow), http://newsru.com/russia/03sep 2013/rogozin .html. 57. Pyotr Shschedrovitsky, “U Rossii na Dal’nem Vostoke odin proekt-vykhod v Aziyu,” Itar-Tass (Moscow), November 12, 2013, www.itar-tass.com/opinions /1865. 58. Data available from the Ministry of Economic Development show that the RFE is the biggest recipient of the federal funds allocated for the development of Russia’s regions. “Analiz federal’nykh tselevykh program,” in Departament gosudarstvennykh tselevykh program i kapital’nykh vlozhenii Minekonomrazvitiya Rossii, 2010–2013 Federal’nye Tselevye Programmy Rossii (Moscow), http:// fcp.economy.gov.ru/cgi-bin/cis/fcp.cgi/Fcp/Graphics/pub_dynamic_fcp_priorities/. 59. The Far East seems to be one of the Russian regions most frequently visited by the president and prime minister. In an unprecedented gesture, Vladimir Putin spent the night of December 31, 2013, in Khabarovsk with his New Year presidential address broadcast from there. Also, the Far Eastern Federal University campus in Vladivostok seems to have become Putin’s unofficial residence in the east. He spent several days there in September 2012 in connection with the APEC summit, visited Vladivostok and the university in August−September 2013, and spent three nights on the campus in November 2014. 60. Rostislav Turovskyi, “Vneshnee upravlenie,” East Russia (Moscow), April 16, 2014, www.eastrussia.ru/region/5/619/. 61. President of Russia, “Vladimir Putin chaired a State Council Presidium meeting on developing the Far East and the Trans-Baikal Territory,” State Council Presidium meeting, November 29, 2012, Novo-Ogaryovo, Moscow Region, http://en.special.kremlin.ru/events/state-council/16990. 62. John Simeone, “Reflections on a Short Visit to Suifenhe, Feb. 19 to 22, 2014,” unpublished report, February 2014. 63. Members of the Shanghai Academy of Social Sciences, interviewed by the first author, Shanghai, April 25 and 28, 2014. 64. Sergei Karaganov, “Russia’s Asian Strategy,” Russia in Global Affairs, July 2012, http://eng.globalaffairs.ru/pubcol/Russias-Asian-Strategy-15254. 65. See Chapter 2, note 2. 66. World Bank, “Stalling Economic Growth in Emerging Europe and Central Asia,” April 1, 2015, www.worldbank.org/en/news/press-release/2015/04/17. 67. Alexander Panin, “Crimea Sucks Funds from Infrastructure Mega-Projects in Russia’s Regions,” Moscow Times, March 13, 2014, www.themoscowtimes.com /article/500075.html. 68. See, for example, “Far East Chief Proposes ‘Silicon Island’ off Vladivostok,” Rusbase, January 30, 2014, http://rusbase.com/news/author/benhopkins /silicon-island/. 69. This is not to say that the Russian state is incompetent and inefficient. In fact, there are amazing pockets of prowess. For instance, the catastrophic 2013 flooding in the Amur River basin caused no deaths on the Russian side due to the well-organized emergency and relief operations. But in the neighboring areas of China, the death toll topped 100. 70. Turovskiy, “Vneshnee upravlenie.”

6 Russia’s Changing Perceptions of China

the Sino-Russian relationship experienced a brief period of uncertainty. The newly democratic Moscow was eager to join the West, to which it looked as the political and economic model. Russia’s president Boris Yeltsin and his foreign minister Andrey Kozyrev were more than willing to act in lockstep with the United States, Western Europe, and the Western-led institutions. Understandably, this caused great concern in Beijing where the collapse of the Soviet Union was viewed as a serious blow to communist ideology with potentially adversarial consequences for the Chinese Communist Party’s rule. Beijing also feared that, with Russia joining the Western liberal camp, China’s isolation in the wake of the Tiananmen Square events would become more complete. The geopolitical triangle of Washington-BeijingMoscow, which China had so skillfully exploited since the early 1970s, threatened to reconfigure in such a radical way as to leave Beijing out in the cold facing the triumphant West. This would doom China to pariah status in the international community. To the Chinese leaders’ relief, these fears never materialized. The new Kremlin inhabitants had no intention of antagonizing or alienating China, even for the sake of proving Russia’s newfound democratic credentials. After a short time, Yeltsin continued Mikhail Gorbachev’s course aimed at improving relations with Beijing.1 In December 1992 Yeltsin visited Beijing, with Jiang Zemin reciprocating in September 1994. By contrast, Yeltsin’s maiden visit to Tokyo had been scheduled to take place ahead of the China trip, in September 1992, but it was abruptly canceled by the Russian side because of the Kremlin’s unwillingness to make concessions on the South Kuril Islands dispute, which the Japanese saw as the main item on the bilateral agenda. It was an early indication that China, not Japan, was going to be Russia’s main friend in Asia. IN THE IMMEDIATE AFTERMATH OF THE SOVIET UNION BREAKUP,

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The mid-1990s marked a watershed in Russia’s foreign policy. Russia began to feel bitter disappointment, and even anger, with the West, and perceived itself being treated as a defeated adversary that could at best be a junior partner in the Western-dominated order. The list of major Russian grievances included eastern enlargement by the North Atlantic Treaty Organization (NATO), lack of economic aid from the West, and refusal by the West to grant Moscow its rightful place in the international system. Disenchantment with the West induced Moscow to seek closer ties with China which, in turn, was happy to embrace Russia. This was manifested in Yeltsin’s visit to China in April 1996, during which the two sides stated their intention to develop “relations of an equal trustworthy partnership aimed at strategic partnership in the 21st century.”2 Yeltsin declared that there were no more controversial questions between Russia and China and, from that time onward, the strategic partnership became official policy for the two countries.3 In April 1997 in Moscow, Yeltsin and Jiang Zemin signed the Declaration on a Multipolar World and Formation of a New International Order (hereafter 1997 Declaration), 4 which stated their common vision in clear opposition to the US-centered hegemony. Another reason for Russia’s shift toward China was the desire to obtain economic benefits by expanding trade with its fast-growing economy. Whereas in the early 1990s China’s economic weight was limited and the West appeared the only viable option for trade and investment, by the second half of the 1990s the rise of China and its potential was beyond doubt. As the British researcher Thomas Wilkins points out, Russian-Chinese rapprochement pioneered a novel form of alignment in world politics—a strategic one that was somewhat more institutionalized and broader based than a coalition, but less formal and involved than an alliance. First, a strategic partnership like that between Russia and China is organized around a general security purpose (e.g., in the case of Sino-Russian alignment, championship of a multipolar world) rather than a specific task (e.g., deterring a hostile state). Second, strategic partnerships are primarily goaldriven rather than threat-driven arrangements. Third, they tend to be informal and entail low commitment costs. Fourth, economic exchange is one of the key drivers of a strategic partnership alongside security concerns.5 The Strategic Partnership Under Putin Vladimir Putin, who succeeded Yeltsin in 2000, continued to emphasize good relations with China. In June 2001 the Shanghai Cooperation Organization (SCO) was launched, in which Beijing and Moscow have played the role of co-leaders for its establishment and further functioning. It built on the Shanghai Five (Russia, China, Kazakhstan, Kyrgyzstan, and Tajikistan) 6

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and added Uzbekistan as a sixth member. The SCO quickly became one of Eurasia’s most important regional arrangements and has served as another major channel of Sino-Russian collaboration. In July 2001, Putin and Jiang Zemin signed the Treaty of Good Neighborly Friendship and Cooperation, which became the legal foundation for a Sino-Russian strategic partnership. Inter alia, the parties affirmed their respect for joint borders and mutual support for their territorial integrity and national sovereignty. Beijing and Moscow declared that they did not have any territorial claims between themselves, vowing to turn the shared border into the “border of eternal peace and friendship.” The treaty pronounced that it was not “aimed at any third country” and its wording was careful to avoid any phrases that could be interpreted as anti−United States.7 Unlike the 1997 Declaration, the document did not even mention the multipolar world concept. This change in tone, as compared to the late 1990s, was partly attributable to Putin’s desire for closer relations with the West. In his early years in office, Putin definitely saw the United States and Western Europe as Russia’s top partners. This became especially apparent after September 11, 2001. While Putin was the first foreign leader to call George W. Bush and offer the United States all necessary help, he did not speak with Jiang Zemin until a full week later. As Alexander Lukin points out, “Russian contacts with China remained at the pre−September 11 level against the background of a radical intensification of Moscow’s relations with the United States, NATO, and Western Europe.”8 This caused apprehension in China over Russia’s possible shift in favor of the West. Chinese experts saw the Putin government as having lost enthusiasm about advocating multipolarity for fear of offending the United States. Chinese security analysts were particularly alarmed by Moscow’s decision to allow Central Asian countries to grant the United States access to their territory and airspace to wage war in Afghanistan. The Chinese also took notice of Russia’s increasing tolerance of NATO’s eastward expansion.9 Moscow’s somewhat reduced eagerness for engagement with Beijing was also evident in the economic sphere. In 2002 when a major stateowned company, Slavneft, was put up for privatization, the Russian government publicly refused to sell it to China National Petroleum Corporation, although the Chinese oil giant offered the highest bid.10 Another highprofile controversy involved the projected oil pipeline from Eastern Siberia to China. An agreement between Russia and China to build a pipeline from Russian Angarsk to Daqing in northeastern China was reached in 2001. But just a few months later, Moscow began negotiating with Tokyo for an alternative route to Nakhodka on the Pacific coast, targeting Japan and the United States, rather than China, as main consumers of the Eastern Siberian oil. Not surprisingly, those about-faces by Moscow caused much consternation in Beijing.

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This cooling in the relationship did not preclude Russia and China from signing, in 2004, an agreement that formally completed the long process of border settlement between the two countries. The agreement decided the ownership of several remaining islands and islets on the Amur River that had been left undetermined by the 1991 border treaty. By the mid-2000s, the Sino-Russian relationship began to pick up steam again. This was largely due to visible degradation of relations between Russia and the West. Moscow felt that its goodwill and concessions were not reciprocated by Washington. The George W. Bush administration would not recognize Russia as an equal partner and continued what the Kremlin perceived as a brazen encroachment on Russia’s sphere of vital interests in its near abroad. The Putin government was especially alarmed by the color revolutions that took place in Georgia, Ukraine, and Kyrgyzstan, viewing them as engineered by the US State Department. By then Russia, buttressed by strong economic performance on the back of high hydrocarbon prices, had enough confidence to stand up to the West. Putin’s Munich speech in February 2007 was a stark warning that Moscow was prepared to pick up the fight. This necessitated a new closeness with Beijing. One of the initial signs of the stronger Russia-China partnership was the SCO’s collective decision in July 2005 to call on the United States to withdraw its military bases from Central Asia. In a curious reversal of roles from the early 2000s, Russia began to act increasingly anti−United States while China was quite cautious, reluctant to support the combative drive of Putin’s Munich speech. China made it clear that it was not ready to side with Russia in its tensions with the United States, so as not to jeopardize Beijing’s all-important relations with Washington. The Chinese leadership under Hu Jintao was also somewhat uncomfortable with Moscow’s recalcitrant rhetoric and actions since they obviously did not fit with Beijing’s concept of the “harmonious world.” 11 This stance was manifest in the wake of the August 2008 war that Russia waged against Georgia. Beijing conspicuously declined to approve of Moscow’s actions and did not recognize the independence of Russian-backed South Ossetia and Abkhazia.12 A temporary decline in the political dimension of the Sino-Russian partnership led some observers to conclude that, after having passed its peak in around 2005, the relationship would be experiencing “growing distrust and complexity.”13 However, by 2012, Russian and Chinese views on the core issues of international politics began to converge again. Russia’s anti-Western posture remained more or less unchanged, so the main change occurred in China’s foreign policies. The 2008–2009 recession that wreaked havoc on the West seemed to have given Beijing confidence that the balance of power was inexorably moving in its favor. This coincided with a leadership transition in China. The cautious and uncharismatic Hu Jintao was suc-

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ceeded with the much tougher and seemingly more nationalistic Xi Jinping, whose foreign policy bore discernible features of great-power offensive realism.14 China’s growing geopolitical ambitions, particularly in East Asia, were clearly at odds with what the United States stood for. Russia and China now almost equally shared their hostility toward the United States, turning their strategic partnership into a quasi-alliance. The Sino-Russian reinvigorated entente amply displayed itself in February 2012 when the two countries blocked the Western-backed vote on Syria in the UN Security Council. The Ukraine crisis, which started to develop in the fall of 2013, further consolidated the Moscow-Beijing axis. China’s response to the developments around Ukraine was telling. Since the crisis began to unfold, the Chinese media tended to blame Western meddling for what was happening there. Discussing the crisis with Putin, China’s president Xi Jinping remarked, somewhat enigmatically, that “the situation in Ukraine, which seems to be accidental, has the elements of the inevitable.”15 There was no sign whatsoever of Beijing’s condemnation of the Kremlin’s moves in Crimea and eastern Ukraine. China’s official press commentary was sympathetic toward Moscow, stressing that Putin’s determination to protect the interests of Russia and Russian-speaking citizens was “quite understandable.”16 Many of China’s “netizens” blogging on websites, such as Weibo (a Chinese version of Twitter), displayed admiration for Putin’s defiance of the West. Beijing’s abstention at the UN Security Council vote on Crimea in March 2014 could hardly be interpreted as opposition to Russia. In fact, Beijing made it quite clear that it disapproved of using the UN stage to pressure Russia, with China’s foreign ministry commenting that the Security Council’s vote on the draft resolution prepared by the United States “will only lead to confrontation among all parties, which will further complicate the situation.”17 More important, China ruled out any possibility that it might join political and economic sanctions against Russia. In terms of international diplomacy, such a stance by China could be interpreted as nothing other than benevolent neutrality toward the Kremlin.18 Putin’s visit to Shanghai in May 2014, where Russia and China concluded a gas megadeal and a host of other cooperative agreements, underscored the growing closeness between the two powers—despite, or perhaps because of, the Ukraine crisis. Russia’s Threat Perception: Between the Occident and the Orient There has always been a lot of speculation that Sino-Russian entente is not durable and that Russia may eventually have to abandon China and tilt

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toward the West.19 As Russia increasingly feels the threat from a rising China, this kind of argument goes, it will have no choice but to move closer to the United States, the European Union, or both. It is certainly true that Russia’s governing elites and ordinary people are wary of China. During the past two centuries, Russia was more advanced and powerful as compared to China, which encouraged Russians to think of the Middle Kingdom somewhat condescendingly. That traditional perception is now being painfully reassessed. Russian leaders are steeped in balance-of-power politics. They strongly believe in the maxim that what really matters in the international arena is capabilities rather than intentions. From this perspective, some form of entente with the United States and the EU to ensure against the growing Chinese power could make sense. Besides, many would argue that Russia, for all its Asiatic elements, historically and culturally leans more toward Europe and the West.20 The main problem with such arguments, however, is that the US-led West is seen by Moscow as a bigger, and more immediate, threat than China. There are four principal reasons for that. First, the West is widely perceived as seeking to transform Russia in its own image, so that Russia would lose its core identity. Efforts by the United States and EU to export democracy and liberal values are viewed as aggressive moves designed to undermine the ideational and institutional foundations of Russia’s statehood. By contrast, Moscow highly appreciates China’s principle of noninterference in other countries’ affairs and its tolerance of diverse models of political and socio-economic development. Second, since the 1990s, Moscow has been worried about the West’s penetration of Russia’s near abroad, the territory of the former Soviet Union that the Kremlin deems its sphere of influence. The tensions spiked under the George W. Bush administration, culminating in the 2008 brief war between Russia and Georgia, a US ally. Under the administration of Barack Obama, Washington somewhat reduced its involvement in the postSoviet space. Nevertheless, the Kremlin remains deeply suspicious of US intentions in Russia’s backyard. For example, Moscow was deeply offended by Hillary Clinton’s remarks that the United States would try to prevent the Russian-led reintegration of the post-Soviet space.21 The Ukraine crisis served only to underscore the depth of divisions between Russia and the West over the future of the post-Soviet countries. China also has been increasing its engagement with the former Soviet republics, especially in Central Asia. Yet it has been careful not to provoke Russian ire. China’s links to post-Soviet states has mainly been economic, not challenging Russia’s residual political hegemony. As opposed to the US-sponsored color revolutions, Beijing has never acted against the postSoviet ruling regimes with close ties to the Kremlin or tried to establish military presence in the former Soviet Union. To be sure, Moscow is not

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particularly happy about Beijing’s growing economic leverage over Central Asian republics, but is willing to put up with it as long as China respects Russian strategic interests in this area. Third, the military strategy of the United States is a more serious concern to Russia than to China. In particular, NATO’s missile defense program causes grave apprehensions in Moscow. There is a strong opinion within the national strategic establishment that, once completed, the missile shield will be able to negate Russia’s nuclear deterrent. On the contrary, China’s current military posture is assessed as less of a security risk to Russia, because Beijing’s defense modernization and deployments are principally aimed at the Taiwan Strait, South China Sea, and the western Pacific. Fourth, foreign policy rhetoric and diplomatic style matter a lot in shaping Moscow’s threat perceptions. The United States is not shy talking about its being the sole superpower and its determination to lead the world, which evokes irritation in Russia. Meanwhile, China endorses the idea of a diverse and multipolar world wholly backed by Moscow. Furthermore, actions and words by high-profile US politicians and diplomats often contribute to the United States’ image as a country adversarial to Russia. For example, Mitt Romney, Republican candidate for president of the United States in 2012, repeatedly labeled Russia as the United States’ top “geopolitical foe.”22 Michael McFaul, former US ambassador in Moscow, had a record of controversial gestures that infuriated the Kremlin such as meeting with opposition leaders or publicly alleging that Moscow paid “bribes” to Central Asian leaders.23 It is simply impossible to imagine Chinese top politicians and diplomats behaving in that way. On the contrary, Beijing appears “hypersensitive” to Russian sensibilities.24 Historical aspects of the relationship also should not be overlooked. Sino-Russian relations are often portrayed as troubled, conflict prone, and fraught with mutual suspicion. There is some truth in this, but one should also be aware of the more positive legacy in the historical ties. The two massive states’ special relationship goes back to the Treaty of Nerchinsk in 1689, which established a border between Russia and China. At that time, the treaty was unique in that the Qing treated Russians as equals rather than subjects or a tributary state.25 And in 1715, the Chinese imperial government permitted Moscow to establish a Russian Orthodox mission in Beijing, which assumed the role of a de facto embassy and the only foreign mission of its kind in China for more than a century.26 Significantly, China and Russia have never fought a major war with each other. Of course, military incidents such as border clashes have occurred (as in the late 1960s), but they have never reached the scale of all-out and protracted warfare. Indeed, considering the long border, relations have been relatively harmonious over the centuries compared to Russia’s conflict-ridden borders on the west.27

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It is interesting to trace how, in post-Soviet Russia, the perception of the China threat fluctuated depending on the state of relations with the West. In the 1990s and early 2000s, when there remained a possibility for Russia being integrated with the West, Russian political leaders and senior officials made statements that explicitly or implicitly referred to the China threat. For instance, in 1995 the minister of construction, Yefim Basin, warned in a press interview that the Chinese and Koreans were poised to invade demographically the Russian Far East, turning it into “a sovereign republic of narrow eyes.”28 In 1996, he was echoed by the defense minister, Pavel Grachev, who alerted the public that Chinese were trying to conquer the RFE through peaceful means.29 In 2000, in Blagoveshchensk Putin talked of the menacing possibility that “even the indigenous Russian population in a few decades will speak mainly Japanese, Chinese, and Korean.”30 A decade later, the tone of the country’s leadership had changed decidedly. In September 2010, Putin rejected any notion of a China threat: Foreign experts keep telling us about the threat from China. We are not worried at all. . . . There is the huge Far East, Eastern Siberia, an underpopulated territory. And there is powerful China, over a billion people. We should be afraid. We are not afraid. . . . There is no threat on the side of China. . . . We have coexisted with China for a thousand years. We had difficult moments, and at times better relations, but we know each other very well and we have got used to respecting each other. . . . China does not have to populate the Far East and Eastern Siberia to get what it needs: natural resources. . . . We have just finished the construction of an oil pipeline. We are ready to build two gas pipelines. We will be supplying coal to them. . . . China does not want to worsen relations with us to solve its current goals.31

The consensus in the Kremlin is that, in the foreseeable future, China will not pose a threat to Russia. This point was summarized by General (ret.) Leonid Reshetnikov, who heads the Russian Institute for Strategic Studies, a think-tank under the Russian president: We are closely following the situation in China. Of course, this is a big country, where different factions exist, including expansionist ones. But we are confident that China is interested in good relations with Russia. China’s main rival is the United States, not Russia. Therefore China needs a wellprotected and quiet rear area. For the next 30–40 years Russia is unlikely to face any threat from China. Beijing is doing its best to avoid whatever might cause Russia’s irritation and negative reaction. A serious conflict between Russia and China is possible only if grave mistakes are made by us or by the Chinese, or else if the American agents do a good job in China. The Western countries are keen to set Russia and China against each other. They keep forcing on us this China threat notion. Yet we will never buy that.32

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Russia’s Gamut of Views on China With regard to China, five broad groups can be discerned among Russia’s political and intellectual elite: great-power nationalists, moderate liberals, Westernizers, Sinophiles, and Sinophobes. Great-Power Nationalists

The great-power nationalists are currently the dominating faction, which includes Putin and most of Russia’s top politicians as well as a significant portion of the community of experts. Their views have already been partially discussed in the preceding section on Moscow’s threat perceptions. In a nutshell, this group sees the West as the single biggest challenge to Russia’s continued existence as a great world power as well as Russia’s civilizational and cultural identity. Although feeling little affinity with China and not trusting it fully, the great-power nationalists have become convinced that the benefits of aligning with China far outweigh possible downsides and risks, particularly considering Beijing’s and Moscow’s long-term shared interest in standing up to the US-led West. One of the most eloquent proponents of this stance in Russia’s foreign policy punditry is Yuri Tavrovsky, chief editor of the Diplomat magazine published by Russia’s Foreign Ministry. According to Tavrovsky, the West’s “onslaught on Russian living space” leaves Moscow no choice but to move closer to Beijing.33 He calls for upgrading the Russian-Chinese collaboration to the level of a fully institutionalized political-military alliance.34 Tavrovsky is echoed by another prominent expert, deputy director of the Institute for Far Eastern Studies of the Russian Academy of Sciences, Vladimir Portyakov: “At present any unprejudiced person is much better aware than before that today and tomorrow Russia faces a much bigger, more dangerous and more real threat from the West than a hypothetical threat from a rising China in the day after tomorrow.”35 Portyakov predicts that the 2001 Russia-China treaty on good-neighbor relations, friendship and cooperation, which is set to expire in 2021, not only be extended but will be transformed into a de facto, or even de jure, alliance.36 Moderate Liberals

The moderate liberals include those in the country’s elite who strongly believe that Russia should be a great power but, at the same time, see Russia as belonging to European civilization. While acknowledging the economic rationale for expanding cooperation with China, the moderate liberals would prefer Russia to be in a close political partnership, if not alliance, with the West, provided this is the partnership of equals. This group is rep-

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resented by some liberal-leaning top officials such as former president and current prime minister Dmitry Medvedev, current deputy prime minister Arkady Dvorkovich, and former finance minister Alexei Kudrin. Although the influence of this faction in the political class is quite limited, it is much more pronounced in the intellectual community, which is represented among others by Sergey Karaganov, dean of the School of World Economics and World Politics at the National Research University–Higher School of Economics; Dmitry Trenin, director of the Carnegie Moscow Center; and Alexander Dynkin, director of the Institute of World Economics and International Relations. Before the Ukraine crisis, China was portrayed as a serious challenge and even a threat to Russia. For example, in 2012 the liberal authors of a government-commissioned policy document referred to China as the main economic threat to Russia. 37 Karaganov wrote of the danger that “Russia east of the Urals and later the whole country will turn into an appendage of China―first as a warehouse of resources, and then economically and politically.”38 However, the Ukraine events of 2013–2014 led to dramatic reassessment in the attitudes among the moderate liberals, with most of them conceding that, under the circumstances, Russia’s drift toward China is both inevitable and makes strategic sense. According to Karaganov, Russia and China multiply their geopolitical weights by supporting each other. 39 Trenin summarized such sentiments in May 2014: Faced with US-led geopolitical pressure in Eastern Europe and East Asia, Russia and China are likely to cooperate even more closely. . . . What might be expected . . . is an energy, investment and industrial-technological partnership between China and Russia which will reshape and rebalance Eurasia, whose center of gravity will now move from Moscow to Beijing. Such an outcome would certainly benefit China, but it will give Russia a chance to withstand US geopolitical pressure, compensate for the EU’s coming energy reorientation, develop Siberia and the Far East, and link itself to the AsiaPacific region.40

Westernizers

The Westernizers believe that Russia, for all its cultural and historical deviations, belongs to the Western civilization and should strive to integrate itself with the West politically and economically. Most of this group are in implacable opposition to Putin’s domestic and foreign policies. High-profile representatives of this faction include liberal opposition politicians and intellectuals such as Garry Kasparov, Boris Nemtsov,41 Mikhail Kasyanov, Vladimir Milov, and Vladislav Inozemtsev. At present, the Westernizers are more or less a marginalized group in Russian politics,

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having little, if any, influence on the decisionmaking in the nation’s internal and external affairs. They see Russia’s turn to China as a grave mistake that will further distance Russia from Europe and the West, making it an “Asiatic” country with all the bad connotations that go with this term. Moreover, they see China as Russia’s main external threat and warn that an alliance with Beijing will be unequal for Moscow, essentially a vassalage relationship. In a similar vein, economic interaction with China only will doom Russia to be China’s raw resources appendage and deal a final blow to Russian manufacturing.42 They assert that, in cultural terms, China is absolutely alien and unknowable to Russia.43 Unlike in the case of the moderate liberals, the Ukraine crisis did not result in the Westernizers’ reappraisal of Russia’s strategic priorities, but made them more pessimistic as to the country’s long-term future. Accordingly, they argue that Russia’s pivot to China “has deep sources, and the West should be prepared to wait a long time before Russia turns back to Europe. Indeed, Russia will need to become as underdeveloped as it was before the reforms of Peter the Great before it changes its path. Only then will Russia once again be willing to change its stance toward Europe and the West.”44 Sinophiles

Sinophiles comprise a relatively small circle, mostly made up of academics and intellectuals engaged in China studies who believe that Russia must have a close relationship with China not only because of the need to counterbalance the adversarial West, but also due to broader and more fundamental shared interests and values. The most visible figure in the Sinophile camp is Mikhail Titarenko, director of the Institute of Far Eastern Studies of the Russian Academy of Sciences and chairman of the Russian Society for Friendship with China. According to Titarenko, it is vital for Russia to maintain good relations with China: The development of good-neighborly relations, friendship and cooperation with our great neighbor is in accordance with the fundamental interests of our country’s security, creating preconditions for the most favorable external environment for peaceful development, ensuring territorial integrity, preservation of sovereignty and stability of the Russian state.45

A longtime student of ancient Chinese philosophy (he studied in Beijing and Shanghai in the late 1950s and early 1960s), Titarenko has nothing but praise for Beijing’s external and internal policies, viewing them as Beijing’s pursuit of Confucian-style harmony for the country and the entire world order. Titarenko and other Sinophiles dismiss any notions of a China threat as

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a ruse by the “neoliberal eurocentrists” who seek to drive a wedge between Moscow and Beijing. They promote the concept of “co-development” of Russia and China, emphasizing the two countries’ complementary economic interests and needs. China is viewed as indispensable for the development of Siberia and the RFE.46 Titarenko and many other Sinophiles profess Eurasianism, seeing Russia as a unique multiethnic nation that has developed for centuries as an organic fusion of cultures and values of different peoples and tribes of the Eurasian landmass. Whereas the Sinophiles contrast Russian Eurasianism with “eurocentrism” and “aggressive Westernization,” they stress its similarities with Chinese Confucian ideals.47 There are even suggestions of an arrangement that sounds nothing less than a Russian-Chinese condominium over Eurasia: Russia-China Eurasian partnership is a complex, evolving process of the “political development” of the Eurasian space by the two states. . . . At present Russia and China are not only strategic partners in the Eurasian space . . . but also key actors in reinforcing stability, security and sustainable development in various regional projects―from Northeast and Central Asia to the Middle East and the Caspian region. The model of the harmonious world set forth by the Chinese leadership at the 17th CCP [Chinese Communist Party] congress assumes a Eurasian dimension, benefiting all the nations and states who favor an equal, multipolar and just world.48

Sinophobes

Similar to the Westernizers, this group harbors antipathy toward China. Yet there is a significant distinction between the two factions. The Westernizers’ dislike of China is based primarily on their conviction that Russia should belong to the West and Europe. China is seen as a formidable force that is Asianizing Russia and pulling it away from Europe. By contrast, the Sinophobes are often great-power nationalists who trust neither the West nor China, but see Beijing, rather than Washington, as presenting the biggest external threat to Russia. At present, this is a fringe group found mostly in academia among some China specialists and policy experts. There may well be some Sinophobes in the political establishment but, while in office, they choose to not go public with their anti-China views. A prominent recent exception is the Far Eastern political heavyweight Victor Ishayev who, during his time in government as Khabarovsk Krai governor (1991−2009) and later presidential representative for the RFE (2009−2013), was not shy about making statements that carried a discernible anti-China streak. Yuri Luzhkov, who during his time as the mayor of Moscow (1992−2010) was one of Russia’s most influential politicians, also expressed extreme wariness of China―but not before he left his high

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office. In his recent articles, Luzhkov calls China “treacherous Yellow Dragon,” points to the risk of an increasingly chauvinistic China claiming Russia’s eastern lands, and warns against a political and economic alliance with Beijing.49 This group believes that Russia’s national interests are hardly compatible with China’s, so the clash may be coming. The more extreme elements among the Sinophobes are convinced that China presents an imminent military danger to Russia, even to the point of interpreting the People’s Liberation Army’s war games in northeastern China as the rehearsal for invasion of the RFE.50 They denounce Russian arms sales to China as arming a “potential enemy.”51 The Sinophobes have no doubt that China desires, at an opportune moment, to annex Russian territories east of Lake Baikal, which it deems as temporarily lost to Russia under the unequal nineteenthcentury border treaties. They warn that the current strategic partnership between Moscow and Beijing may end as suddenly and abruptly as the Soviet-Chinese friendship of the 1950s turned into utter hostility within a few years. The more moderate among the China-wary experts, albeit pointing out the rapid growth in Chinese nationalism and noticing indications of Beijing’s emerging claims to rule the world order, believe that Russia and China can coexist. However, they warn that “Russia and China are moving apart from each other, becoming emotionally and ideologically alien” and the future of the bilateral relationship will be characterized by “very tough mutual attitudes on both sides, with possible conflicts both at the individual and societal levels.”52 Is There a Chinese Lobby in Russia? There doubtless is a trend toward a pro-China shift in the attitudes of Russian elite. Not only the great-power nationalists, but also many moderate liberals, see entente with Beijing as inevitable and necessary in the situation where Russia finds itself locked in a battle against the West. Despite the Ukraine crisis, the Westernizers and the Sinophobes continue to see China, not the West, as the main geopolitical threat to Russia, but they are marginalized groups with limited ability to shape public discourse and less so political decisions. It is, however, significant that there are no credible indications as yet of the presence of a pro-China lobby in Russia. The Sinophiles like Titarenko do exist, but they cannot be regarded as a real lobby because they mainly consist of academics and do not wield much insider influence on the Kremlin’s policies. If a China lobby is to emerge, it has to include high-ranking politicians, officials, and business tycoons. This lobby is

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most likely to form not as a result of the Russian elite’s increased affection for China―cultural gaps between the two nations are going to stay as wide as ever―but rather due to closer political and, especially, business links. As Russian top bureaucrats and oligarchs, fleeing Western sanctions, consider transferring their bank accounts and business stakes from London and New York to Hong Kong and Shanghai, they will see their interests increasingly tied to China. This is certain to have at least some impact on political decisionmaking. Another question is whether Beijing is making conscious efforts to cultivate a China lobby in Russia. It seems that so far China’s steps in that direction have mostly been confined to the realm of Russian academia. Beijing has not attempted to establish its support base inside the Russian political system, being aware that such efforts would ignite the Kremlin’s suspicions and cause a negative response. This may begin to gradually change as Moscow becomes more accommodating with Beijing and as Russian upper classes find their fortunes and assets increasingly deposited with the Chinacentric economic order. Notes 1. That said, there were moments in the early 1990s when the Kremlin’s chaotic decisionmaking put Russian-Chinese relations at risk. The most serious incident happened in 1992 when one of Boris Yeltsin’s trusted aides persuaded him to sign a decree allowing the opening of Taiwan’s de facto embassy in Moscow, which was almost tantamount to recognizing Taipei. The scandalous decision was quickly reversed after protests from China backed by Russia’s Ministry of Foreign Affairs. 2. Alexander Lukin, “The Russian Approach to China Under Gorbachev, Yeltsin, and Putin,” in Russian Strategic Thought Toward Asia, ed. Gilbert Rosman, Kazuhioko Togo, and Joseph Ferguson (New York: Palgrave Macmillan, 2006), 148. 3. Ibid. 4. “Declaration on a Multipolar World and Formation of a New International Order,” Zakony Rossii, April 23, 1997, www.lawrussia.ru/texts/legal_743/doc743 a830x878.htm. 5. Thomas Wilkins, “Russo-Chinese Strategic Partnership: A New Form of Security Cooperation?” Contemporary Security Policy 29, no. 2 (August 2008): 358–383. 6. The Shanghai Five group was formed in 1996 during Yeltsin’s visit to China. 7. “The Treaty of Good Neighborly Friendship and Cooperation Between the Russian Federation and Chinese People’s Republic,” July 17, 2001, www.rg.ru /2009/03/20/russia-kitai-dok.html. 8. Lukin, “The Russian Approach to China Under Gorbachev, Yeltsin, and Putin,” 160. 9. Rex Li, A Rising China and Security in East Asia (New York: Routledge, 2009), 160. 10. Ivan Danilov, “Itogi Privatizatsii Slavnefti,” IvanDanilov.ru, December 10, 2002, www.ivandanilov.ru/w20.shtm.

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11. Vladimir Portyakov, “O nekotorykh aspektakh sovershenstvovaniya rossiysko-kitayskogo strategicheskogo partnerstva,” Problemy Dal’nego Vostoka, no. 5 (2007): 24. 12. Beijing’s reluctance to support Russia in its conflict with Georgia over Abkhazia and South Ossetia was also due to the concern over a precedent their secession might create for Tibet and Xinjiang. 13. Shinji Hyodo, “Russia’s Security Policy Towards East Asia,” in Russia and East Asia: Informal and Gradual Integration, ed. Tsuneo Akaha and Anna Vassilieva (New York: Routledge, 2014), 44–53. 14. Paul Eckert, “Analysis: Tensions with Allies Rise, but U.S. Sees Improved China Ties,” Reuters, November 3, 2014, www.reuters.com/article/2013/11/03/us -usa-china-xi-analysis-idUSBRE9A205B20131103. See also Baohui Zhang and Xi Jinping, “‘Pragmatic’ Offensive Realism and China’s Rise,” Global Asia (Summer 2014), www.globalasia.org/. 15. “Xi, Putin Discuss China-Russia ties, Ukraine Crisis on Phone,” Xihuanet, March 4, 2014, http://news.xinhuanet.com/english/china/2014-03/05/c_133160618.htm. 16. Lu Yu, “Commentary: West Should Work with, Not Against, Russia in Handling Ukraine Crisis,” People’s Daily Online, March 3, 2014, http://english.people daily.com.cn/90777/8552726.html. 17. “Foreign Minister Wang Yi Attends 2014 National Meeting of Directors General of Local Foreign Affairs Offices and Reports on International Situation and Diplomatic Work,” Ministry of Foreign Affairs of the People’s Republic of China, July 8, 2014, www.fmprc.gov.cn/eng/xwfw/s2510/t1137754.shtml. 18. One reason behind China’s understanding of Russia’s actions in Ukraine was the Chinese leadership’s deep unease with the fact that a Western-inspired movement was able to topple the government in Kiev. This is a concern that Beijing fully shares with Moscow. The umbrella revolution in Hong Kong in the fall of 2014, seen in Beijing as fomented by the West, only served to corroborate and exacerbate those fears among the Chinese leaders. 19. See, for example, John Mearsheimer, “The Gathering Storm: China’s Challenge to US Power in Asia,” Chinese Journal of International Politics 3, no. 4 (2010): 381–396, http://mearsheimer.uchicago.edu/pdfs/A0056.pdf. 20. Interestingly, Samuel Huntington argues that Russia’s collaboration with the West should be encouraged because, unlike Islamic and Confucian countries, Russian Orthodox civilization has at least some affinities with the Western civilization. See Samuel Huntington, “The Clash of Civilizations?” Foreign Affairs 72, no. 3 (Summer 1993). 21. Charles Clover, “Clinton Vows to Thwart New Soviet Union,” Financial Times, December 6, 2012, www.ft.com/cms/s/0/a5b15b14-3fcf-11e2-9f71-00144 feabdc0.html#ixzz2fKcf7DkF. 22. Richard A Oppel Jr., “Romney’s Adversarial View of Russia Stirs Debate,” New York Times, May 11, 2012, www.nytimes.com/2012/05/12/us/politics/romneys -view-of-russia-sparks-debate.html?pagewanted=1&_r=3. 23. Fred Weir, “Ambassador McFaul, Driver of US-Russia ‘Reset,’ Becomes His Own Obstacle,” Christian Science Monitor, May 30, 2012, www.csmonitor.com /World/Europe/2012/0530/Ambassador-McFaul-driver-of-US-Russia-reset -becomes-his-own-obstacle. 24. Gilbert Rozman, The Sino-Russian Challenge to the World Order (Washington, DC: Woodrow Wilson Center Press, 2014), 27. 25. Warren I. Cohen, East Asia at the Center (New York: Columbia University Press, 2000), 218.

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26. Henry Kissinger, On China (New York: Penguin Press, 2011), 51. 27. The division between Eastern and Western Christianity may have contributed to Russia’s insecurity in the West. On the other hand, the absence of entrenched institutional religion in China was a stabilizing factor in Russia’s relations with the East. See Alicija Curanovic, “Why Don’t Russians Fear the Chinese? The Chinese Factor in the Self-Identification of Russia,” Journal of Nationalism and Ethnicity 40, no. 2 (2012): 221−239. 28. Lukin, “The Russian Approach to China Under Gorbachev, Yeltsin, and Putin,” 147. 29. Ibid. 30. Vladimir Putin, quoted in Obraz Kitaya v Rossii i vneshnyaya politika Rossii v kontse ХХ―nachale ХХI veka, May 23, 2008, http://russian.china.org.cn /international/archive/china-russian/txt/2008-05/23/content_15421980.htm. 31. “Highlights: Russia’s Putin on 2012, China, Ukraine,” Reuters, September 7, 2010, http://uk.reuters.com/article/2010/09/07/russia-putin-quotes-idUKLDE6 860DP20100907. 32. Remarks by Leonid Reshetnikov, director, Russian Institute of Strategic Studies (a think-tank under the Russian president), Roundtable at Far Eastern Federal University, Vladivostok, February 2014 (Artyom Lukin’s personal notes). 33. Yuri Tavrovsky, “Zapad tolkaet Rossiyu na Vostok,” Nezavisimaya Gazeta, October 23, 2013, www.ng.ru/ideas/2013-10-23/5_geopolitics.html; Yuri Tavrovsky, “Tret’e dykhanie dlya Sibiri i Dal’nego Vostoka,” Razvitie i Economika, March 2013, http://devec.ru/almanah/5/1302-jurij-tavrovskij-trete-dyhanie-dlja-sibiri-i-dal nego-vostoka.html. 34. Yuri Tavrovsky, “Moskva-Pekin: novaya strategicheskaya os?” Russia in Global Affairs, October 23, 2013, www.globalaffairs.ru/global-processes/Moskva Pekin—novaya-strategicheskaya-os-16458. 35. Vladimir Portyakov, “Vozvyshenie Kitaya chto dal’she?” Russia in Global Affairs, July 2, 2014, www.globalaffairs.ru/number/Vozvyshenie-Kitaya-chto-dal she-16775. 36. Ibid. 37. “Strategya-2020: Kitay glavnaya ugroza dlya Rossii,” Interfax, March 15, 2012, www.interfax.ru/business/235971. 38. Sergei Karaganov, “Russia’s Asian Strategy,” Russia in Global Affairs, July 2, 2011, http://eng.globalaffairs.ru/pubcol/Russias-Asian-Strategy-15254. 39. Sergey Karaganov, “Im ochen’ khotelos’ uteret’ nos naglym russkim,” Russian International Affairs Council, May 30, 2014, http://russiancouncil.ru/inner /?id_4=3787#top. 40. Dmitri Trenin, “Russia and China: The Russian Liberals’ Revenge” (Moscow: Carnegie Moscow Center, May 19, 2014), http://carnegie.ru/eurasia outlook/?fa=55631. 41. Boris Nemtsov was assassinated in February 2015. 42. Ekaterina Kuznetsova Vladislav Inozemtsev, “Russia’s Pacific Destiny,” The American Interest, October 10, 2013, www.the-american-interest.com/articles/2013 /10/10/russias-pacific-destiny/. 43. Alfred Kokh, Russian opposition figure and prominent member of the Russian government in the 1990s, Facebook post, June 2, 2014, www.facebook.com /permalink.php?story_fbid=791978667502527&id=100000712037223. 44. Vladislav Inozemtsev, “Russia Pivoted East Centuries Ago,” Moscow Times, May 27, 2014, www.themoscowtimes.com/opinion/article/russia-pivoted-east -centuries-ago/500990.html.

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45. Mikhail Titarenko, “Rossiya i Kitay: strategicheskoe partnerstvo i vyzovy vremeni” (Moscow: Forum, 2014), 8. 46. Boris Kuzyk and Mikhail Titarenko, “Kitay-Rossya 2050: strategiya sorazvitiya” (Moscow: Institut Ekonomicheskikh Strategiy, 2006). 47. Mikhail Titarenko, “Evraziystvo kak paradigma sosushchestvovaniya i rastsveta mnogoobraziya kul’tur i tsivilizatsiy,” Dialog Kul’tur v Usloviyakh Globalizatsii [Proceedings of the 11th International Likhachov Scientific Conference, Saint Petersburg, 12–13 May 2011], www.lihachev.ru/pic/site/files/lihcht/Sbor_full /2011_1_rus.pdf. 48. Sergey Luzyanin, Rossiya i Kitay v Yevrazii (Moscow: Forum, 2009), 263, 266. 49. Yuri Luzhkov, “Zholty drakon zagrebayet zhar raspri Evropy i Rossii,” Argumenty Nedeli, January 22, 2015, http://argumenti.ru/politics/n471/386662, and February 12, 2015, http://argumenti.ru/politics/n474/388673. 50. Vitaly Tsygichko, “Kitay dlya Rossii tovarishch ili gospodin?” Indeks Bezopasnosti, no. 2 (2007), www.pircenter.org/media/content/files/0/13413061090.pdf. 51. Alexandre Khramshchikhin, “Druzhba po-pekinski,” Nezavisimoye Voennoye Obozreniye, May 16, 2014, http://nvo.ng.ru/realty/2014-05-16/1_china.html. 52. Yuri Galenovich, “Vzglyad na Rossiyu iz Kitaya” (Moscow: Vremya, 2010), http://libes.ru/202362.html#TOC_idm211352.

7 A Russian-Chinese Alliance: Chimera or Emerging Reality?

Russian-Chinese strategic partnership has received varying assessments. Until recently, prior to the Ukrainian crisis in 2014, the dominant view has been that it is “an inherently limited partnership,” or “an axis of convenience,” which is unbalanced and troubled due to cultural barriers and the two countries’ significantly divergent interests are likely to diverge even more in the future.1 Any idea of upgrading the partnership to the level of alliance has been rejected as unrealistic.2 Yet early on, there was also a dissenting view that saw RussianChinese collaboration as something much more durable and having great potential for further development. In 2001, Ariel Cohen characterizes it as an “emerging alliance” that would require careful monitoring, predicting that “the degree to which the Sino-Russian alliance may become anti-Western in future depends on how deeply the two Eurasian powers feel that the United States threatens their interests.”3 In his 2008 article, Tom Wilkins concludes that the Moscow-Beijing partnership is “a highly efficacious vehicle for coordinating Russo-Chinese-SCO security policy. Those who doubt its capacities and durability may be in for a shock as it increasingly exercises dominance in Central Asia and begins to wield powerful influence on the global stage.”4 It seems that the latter view, emphasizing the potency of RussianChinese collaboration, is borne out by the developments in recent years: since 2012, there has been a steady increase in the depth and scope of the bilateral relationship. Of course, it would not be accurate to describe the Russian-Chinese strategic partnership as an alliance yet, but the relationship is certainly growing stronger. One indication is the frequency of summitlevel meetings. For example, in 2013 alone, Vladimir Putin and Xi Jinping met five times,5 and in 2014 they had as many as six meetings in bilateral SINCE ITS INCEPTION IN THE SECOND HALF OF THE 1990s, THE

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and multilateral settings.6 It was highly symbolic that Xi Jinping’s maiden visit abroad as China’s head of state was to Moscow in March 2013. Indeed, the Russian-Chinese partnership, as it stands today, looks more solid and efficient than some of Washington’s treaty alliances such as the US-Thailand alliance. What are, then, the main drivers of Russian-Chinese entente? First and foremost, it is predicated on shared hostility toward US hegemony in world politics. Viewing themselves as great powers, both Moscow and Beijing are loath to the idea of a systemic hegemon that dictates and adjudicates global rules, particularly considering that Russia remembers itself as having been a superpower while China preserves the memories of the Middle Kingdom’s glory. From the balance-of-power perspective, it is only natural that two lesser poles should join forces against the preponderant player. Going down to the regional level of geopolitics, US hegemony prevents Russia and China from enjoying dominance in what they regard as their rightful domains. For Russia, this is the post-Soviet space; for China, East Asia. Finally, there is an issue of identity. Both Moscow and Beijing see the US-led West as the primary threat to their nations’ civilizational selves as well as to the legitimacy of their political regimes. Gilbert Rozman makes a compelling case that what drives China and Russia close together is the national identity containing significant elements of the shared communist legacy. Despite lack of cultural affinity and trust, the Russian-Chinese identity gap is likely to remain much narrower and less obtrusive than the two nations’ respective gaps with the United States. For both states, the post–Cold War era is best characterized as a struggle between two civilizations: theirs and the West. The fervent anti-US sentiments cement their partnership.7 Alexander Lukin also takes a values-based approach to understanding Russia-China-West triangular dynamics, though at a different angle. He argues that Russia is growing increasingly averse and resistant to Western “secular liberalism” and “moral relativism,” aligning itself with non-Western countries, like China, that stand for “absolute values coupled with authoritarianism.”8 Why Russia Needs China As noted earlier, since around 2012 the Russian-Chinese partnership began to grow noticeably stronger, raising the question of whether we may be seeing the birth of a full-blown alliance. The main reason for their reinforced ties is that Russia and China have entered what is likely to be a prolonged period of heightened rivalry with the United States and its allies. Putin’s comeback for a third term in 2012 signified the end of the attempted, and failed, reset with the United States. Russia’s relations with

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the West deteriorated to the point where many started to speak of a Cold War 2.0. Annexing Crimea and intervening in Ukraine, Putin crossed the Rubicon. Unwilling to sacrifice what it sees as its vital interests in Ukraine and elsewhere in the post-Soviet space, Moscow began to brace itself for an extended confrontation with the West. In this battle, where main weapons employed by the West are economic sanctions, China’s support for Russia will be crucial. Unlike the superpower Soviet Union that was capable of confronting the West on its own, contemporary Russia needs allies and China is by far the most important, especially in the economic realm. In the course of the Ukraine crisis, signs began to emerge that Moscow was reconsidering the level of its partnership with Beijing. Although before the crisis an alliance with China was completely out of question, in 2014 it became a possibility. There was no better indication of that than Putin’s own statements. In October 2011, in an interview with major Russian TV channels, Putin dubbed China as one of Russia’s “very serious partners” and dismissed any notion of a “China threat.” But at the same time, he ruled out Russian involvement in the “struggle” between China and the United States, essentially proclaiming Moscow’s strategic equidistance between the two most powerful actors.9 In April 2014, Putin’s evaluation of the strategic partnership with China was palpably different: the sense of deliberate neutrality was gone. During his televised talk show—a highly scripted event with prearranged questions from the audience—he was asked if it was possible to formalize the Russian-Chinese partnership “as a military and political union.” After extolling the excellent state of the bilateral relations, Putin responded to that question in neither the affirmative nor the negative, which most probably was a subtle way of signaling that Moscow at the least did not exclude entering into a more alliance-like relationship with China.10 A few months later, meeting with Chinese premier Li Keqiang, Putin stated that Russia and China were “natural partners and natural allies,” using the word “ally” that Moscow had shunned previously with respect to Beijing.11 Similar changes in attitude were visible in Russia’s expert community. According to surveys of foreign policy experts conducted by the Russian Institute for Strategic Studies, in 2011 the majority of respondents believed that Russia should take a stance of neutrality in Asia Pacific, but in 2013 most experts favored closer strategic ties with China and saw Beijing as Russia’s main partner in the region.12 Why China Needs Russia Beijing demonstrated an almost symmetrical desire for dramatically raising the level of bilateral strategic collaboration. By 2012–2013, there was little doubt that China’s paramount external policy goal was to establish its own

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version of the Monroe Doctrine in East Asia, which inevitably resulted in rising tensions with the United States. Regarding East Asia as its natural sphere of influence, resurgent China sees the United States as the only true force able to hamper its geopolitical aspirations.13 China seems more and more willing to do away with Deng Xiaoping’s maxims of cautious foreign policy and up the ante in its competition with the United States over the primacy in East Asia and the western Pacific. However, even if China becomes, as widely predicted, the number one economy by around 2030 and manages to significantly reduce or perhaps altogether eliminate the military gap with the United States, this will not be enough to mount a viable challenge to US hegemony. That is because China would have to confront not only the United States alone but the US-led Asia Pacific bloc counting, among others, Japan, Canada, Australia, and perhaps India. Thus, China needs at least one major-power ally. Beijing currently has just one formal ally—North Korea—while Pakistan can be viewed as something of a de facto ally, at least vis-à-vis India. Although valuable to China, these countries can hardly be regarded as big strategic assets. China lacks a dependable ally of a truly great-power standing, and the only candidate is Russia. Its northern neighbor’s strategic depth, huge natural resources, military power, and pockets of scientific and technological prowess all could be a significant force multiplier for China. If US-Russian rivalry goes from its currently more or less subdued mode to an open clash, Russia would find itself in a pivotal position.14 Even short of an alliance, good relations with Russia give China many strategic benefits. First and foremost, it provides Beijing with “a stable strategic rear area.”15 With Moscow as a close friend, China can be confident about the security of its northern borders and can count on an unimpeded access to Russia’s natural resources. Thus, Beijing becomes much less vulnerable to naval blockades that the United States and its maritime allies would be certain to use against China in case of a serious confrontation. In a US blockade of China, Russia will be the most important “swing state” and “could tip the balance of a blockade in favor of either China or the United States.”16 Unlike outspoken Russian leaders, Chinese top decisionmakers almost never give substantive public comments on issues of foreign policy. Sentiments in China’s expert community and the media can be a kind of surrogate indicator. In recent years, calls have risen among Chinese scholars to upgrade the partnership with Russia to a full-scale alliance,17 and some news outlets have posited that Beijing and Moscow are “allies” without an alliance treaty.18 Even more significantly, China’s first blue book on national security, commissioned by the government and written by scholars of the China Institutes of Contemporary International Relations, states that China should consider forming an “alliance with Russia.”19 It is interesting

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that, commenting on the document, one of its principal authors, Feng Zhongping, notes that the idea of an alliance had been suggested by Putin20 when, in fact, Putin had never publicly called for an alliance with China. There can be different explanations for this discrepancy. It might be due to mere linguistics—different translations and interpretations of the term “alliance” in Russian and Chinese. Another possible explanation is that Moscow did make a proposal for alliance to the Chinese at some closeddoor discussions. Finally, this move by the authors of the blue book could be designed as a deliberate message to Russia that China is ready for much closer political-military links. Putin and Xi Jinping: Two of a Kind? The personalities of the Russian and Chinese leaders, Putin and Xi Jinping, are going to be a major factor in deciding the fate of a Russian-Chinese alignment. Each is an autocratic chief executive who has concentrated in his hands almost exclusive powers to make foreign policy decisions. In the case of Russia, there has never been much doubt that it is Putin who personally makes principal decisions on foreign policy and national security. In China, until recently strategic decisionmaking had been done by the party-state collective leadership. But now Xi Jinping appears to be running the country’s diplomatic and security policies on his own, with the Politburo’s Standing Committee playing only a small role.21 Although Putin and Xi Jinping seem to get along quite well and some experts point to “a clear personal affinity” between them,22 it is difficult to say for sure that the two have personal sympathy for each other. In fact, they do not need to have good human chemistry between themselves—as long as they understand each other geopolitically. And it seems that Xi Jinping and Putin understand one another perfectly well because they share the flair for hardball realpolitik in international affairs, coupled with a conservative and nationalistic authoritarianism in domestic affairs. Both leaders attach high priority to military force and the security apparatus as tools of defending national interests abroad and maintaining what they see as legitimate order at home. Rozman writes of “striking parallels in the ways in which presidents Xi Jinping and Vladimir Putin envision the resurgence of their countries domestically and internationally.”23 Another strong conviction shared by the two is that the West poses the main obstacle to grand projects of “Sinocentrism” and “Russocentrism.”24 Thus, Putin and Xi Jinping are drawn together as natural allies against the US-led West. In this contest, matched against contemporary Western leaders with zero charisma and underwhelming foreign policy performance, the Putin–Xi Jinping duo is going to be a

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formidable force. It is significant that Putin and Xi Jinping are here to stay for a long time: Putin is likely to seek, and win, reelection in 2018 while Xi Jinping will not resign until 2022 and in fact may continue to serve as China’s paramount leader beyond 2022.25 The Contours of a Russian-Chinese Alliance The Russian-Chinese alliance is deemed by many to be impossible due to cultural and civilizational gaps, lack of trust, and the absence of broadbased shared interests between the two nations. Yet there have been historical cases of effective alliances whose participants had neither a sociocultural affinity nor a wide-ranging commonality of interests. One example is the Franco-Ottoman alliance established in 1536 between the king of France and the Turkish sultan, which was the first alliance between a Christian nation and non-Christian empire. Enduring for more than two and a half centuries, the main reason for its longevity was that France and Turkey had the same adversary—the Habsburg empire. A more recent case is the US-Chinese strategic alignment of the 1970s and 1980s, which was sustained by the shared animosity toward the Soviet Union. China and Russia see their crucial national interests as mutually nonexclusive at the least. As Dmitry Trenin observes, the Russia-China bond “is solid, for it is based on fundamental national interests regarding the world order as both the Russian and Chinese governments would prefer to see it.”26 Moscow is not inimical to China’s rise as a great power since this creates for Russia economic and political alternatives other than the West. For its part, China sees its security interests as generally compatible with those of Russia.27 This convergence of basic interests constitutes the foundation for a strategic partnership. The existence of a common foe—the United States— may be transforming the partnership into an entente or perhaps an alliance.28 Characterizations of the Russian-Chinese relationship as a “de facto alliance” are increasingly being used by Russia’s leading foreign policy experts.29 A report jointly written by Russian and Chinese scholars sees “elements of a military-political alliance,” albeit not legally binding, emerging between the two countries.30 The report argues that, “if need be, the ties can be converted into an alliance relationship without long preparations.”31 Whether this ongoing conversion from partnership to alliance is actually completed will depend mainly on the intensity of US-Russian and USChinese disagreements. Both Beijing and Moscow appear to proceed from the assumption that their antagonism with Washington will not dissipate any time soon. If an alliance-type relationship between China and Russia eventually arises, how might it look? Its general patterns can already be discerned.

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This is hardly going to be an alliance of the classical style designed for the joint use of military force against other states for defensive or offensive purposes.32 The case against a Russian-Chinese military alliance is simple: neither side actually needs it, at least not now. Russia and China are nuclear-armed powers with formidable conventional armies, which makes them more than capable of independently guaranteeing their national sovereignty and, when necessary, projecting power in their perceived zones of influence. Thus, the strategic value of the alliance will lie primarily in economic and diplomatic dimensions. Since a hot war between contemporary great powers is becoming more and more problematic due to the enormous destructive force of nuclear warheads and other modern arms, warfare is migrating into the domain of trade and finance as well as new “spaces” such as cyberspace. In the twenty-first century, economic sanctions, embargos, and black lists are becoming weapons of choice in the conflicts between major powers. This is what Russia, penalized by the West, has amply experienced in the Ukraine crisis. And this is what China may face, if and when it clashes with the United States. Thus, mutual economic support becomes crucial for Moscow and Beijing. As noted earlier, the bond with China will give Russia a considerable degree of economic independence from the sanctions-prone West while China will enjoy secure access to Russia’s vast reserves of natural resources so that its voracious economy can continue functioning even in the case of a US-imposed naval blockade. In terms of diplomacy, Moscow and Beijing will provide each other support in the geographic areas that they deem their legitimate spheres of influence. Moscow will recognize East Asia as China’s domain, but will do so in exchange for Beijing’s support of Russian privileged interests in Eastern Europe and the post-Soviet space.33 In fact, Russia appears to have already tacitly acknowledged the primacy of Chinese interests in East Asia. One of Russia’s leading experts on East Asia, Georgy Toloraya, laments that Russia shows passivity in Asia Pacific affairs for fear that its more independent and proactive stance might anger China. In particular, Russia has “almost accepted Chinese domination in Korean affairs.”34 The Conference on Interaction and Confidence-Building Measures in Asia (CICA) summit, held in Shanghai in May 2014, underscored Russia’s growing, albeit still tacit, acceptance of China’s leading role in East Asian security. Xi Jinping’s statements at the summit were unusually blunt and specific, attacking the US-led alliances in Asia Pacific as “the outdated thinking of Cold War” and proclaiming that “security problems in Asia should be solved by Asians themselves.”35 This led many observers to suggest that China may now be ready to abandon Deng Xiaoping’s “lie low” strategy and seek the dominant role in constructing Asia’s new security framework in which the United States should play only a limited part, if any at all.36

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In comparison to Xi Jinping’s energetic rhetoric, Putin’s speech at CICA was bland, offering Moscow’s standard boilerplate on the need for “a new security architecture” in Asia Pacific “that guarantees equal interaction and a genuine balance of power and harmony of interests” and is based on the “concept of indivisible security.”37 The Ukraine crisis has made Russia more preoccupied with defending its interests in Eastern Europe and reduced its ability to pursue whatever geopolitical ambitions it might have in East Asia. The more Russia gets bogged down in Ukraine and other postSoviet rivalries, the more it needs China and the more it defers to Chinese interests in Asia. Moreover, the Ukraine crisis diverts US attention from East Asia and eases US pressure on China, giving Beijing a freer hand in the region.38 Thus, from a cynical realpolitik perspective, it makes sense for China to tacitly encourage Russia to stand its ground in the conflict with the West. Central Asia will be another crucial area of Russian-Chinese diplomatic cooperation. Whereas China seems ready to recognize former Soviet states in Eastern Europe and South Caucasus as Russia’s area of dominance, the post-Soviet republics of Central Asia are likely to emerge as a condominium of Moscow and Beijing. To be sure, the Kremlin has certain misgivings about China’s Silk Road schemes targeting Central Asia, which it sees as competing with Moscow’s own cherished project of the Eurasian Economic Union.39 That may be the reason why it took so long for Russia to join the China-initiated Asian Infrastructure Investment Bank (AIIB) designed to finance Beijing’s Silk Road projects: Russia was not among the twenty-two countries participating in the initial launch of the AIIB in October 2014 and applied to join the multilateral bank only in late March 2015. Moscow has few viable options to counter Chinese economic expansion into Central Asia. In fact, the Kremlin may have already decided that, rather than resisting Chinese economic penetration of Central Asia, it would make more sense to find ways to reconcile Russia’s Eurasian Economic Union with China’s Silk Road, even if it could eventually result in Russia being absorbed into a kind of China-centric economic space. During the Putin−Xi Jinping summit in Shanghai in May 2014, the two sides for the first time expressed their willingness to coordinate Russian integration initiatives in Central Asia with China’s Silk Road Economic Belt.40 In another move to allay Moscow’s fears regarding the potential competition from the Silk Road project, at the Shanghai Cooperation Organization summit in Dushanbe in September 2014 Xi Jinping proposed to Putin that the Trans-Siberian and Baikal-Amur Railways be included within the perimeter of China’s megaproject.41 Should their entente consolidate further, Moscow and Beijing will have Central Asia, as well as Mongolia,42 to themselves. This will effectively shut out all external powers from the heart of Eurasia.

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The ongoing Russian-Chinese integration of the Eurasian continent from Saint Petersburg to Shanghai, with Beijing acting as the more powerful member of the relationship, “will lead to a Eurasia more closely interlinked than at any time in modern history.”43 What might ultimately emerge from a Russian-Chinese rapprochement is a Eurasian league, which, in controlling a continental heartland, would be reminiscent of the World War I Central Powers (Mittelmächte) alliance.44 It might also resemble Karl Haushofer’s notion of the anti-Western “continental bloc” of Germany, the Soviet Union, and Japan.45 In the first decades of the twenty-first century, a Russian-Chinese entente could assume the form of a bilateral alliance or a multilateral pact, possibly based on the SCO framework.46 Potential Rifts in the Russian-Chinese Axis Even in its current seemingly excellent state, which is consistently described by Moscow and Beijing as being at “the highest point in the centuries of the history of the bilateral ties,”47 the Russian-Chinese relationship displays a number of potential rifts that may or may not grow into serious discord in the future. Competition over Central Asia

One of the most evident, and crucial, fault lines between Russia and China lies in Central Asia. Much of the region, admittedly, still lies within Moscow’s geopolitical sphere of influence. There are a number of reasons why Central Asia is deemed so important by Russian leaders. First, the area is rich in valuable mineral resources, particularly oil, natural gas, coal, and uranium. Second, three of the Central Asian states— Kazakhstan, Kyrgyzstan, and Uzbekistan—have sizable ethnic Russian minorities. Although the number of ethnic Russians in the region has significantly declined since the breakup of the Soviet Union, Central Asia remains home to some 5 million Russians.48 Third, Russia maintains strategic and military installations in Central Asia, the most significant one being a space launch facility at Baikonur in Kazakhstan. 49 Fourth, control over Central Asia makes it much easier for Russia to project influence farther south into South Asia and the Middle East. Fifth, Moscow needs to take care of Central Asia because the area is deemed a source of major risks and threats. In particular, Moscow is concerned about the trafficking of Afghan heroin via Central Asia, with Russia being a major end consumer of the narcotics. Radical Islamism that may potentially spread to Russia through and from Central Asia is another major worry. Finally, and importantly, as Alexander Cooley asserts, “Moscow has sought regional

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primacy in Central Asia as a marker of the great power status that it considers central to its foreign policy identity.”50 In short, Russia views Central Asia as a strategic asset and a source of threats. That is why Moscow is eager to safeguard and strengthen its positions in this region, Russia’s so-called southern underbelly. Russia has been the principal force in Central Asia since the late nineteenth century. However, other powers are now vigorously engaging the Central Asian states—recreating, in a sense, the famous nineteenth-century Great Game. Among these contenders, China is the most powerful player. China is interested in Central Asia for economic and security reasons. Economically, it needs Central Asia as a proximate supplier of hydrocarbons and other raw materials as well as its position as the shortest transit route to Europe. Strategically, China wants a Central Asia that would pose no risks to its national security. An unstable Central Asia or one dominated by an adversarial power would be a nightmare for Beijing, especially given the region’s shared borders with Xinjiang, China’s restive province populated by Turkic Muslims who are closely related to Central Asian peoples. Beijing has been “the most nuanced and skilled of the great . . . powers in its regional diplomacy” toward Central Asia.51 Inter alia, China struck major energy deals there under which it rapidly constructed an oil pipeline from Kazakhstan and a gas pipeline from Turkmenistan. It also became the main provider of loans to Central Asian countries. Although Chinese officials have gone out of their way to publicly acknowledge Russia’s regional primacy, Beijing’s economic initiatives have undercut Moscow’s monopolies over a number of Central Asia’s important sectors.52 Another potential concern for Moscow is China’s grand vision of the Silk Road Economic Belt—a vast economic corridor designed to connect China with Europe via Central Asia and the Middle East.53 Russia was conspicuously absent from the Silk Road map, when it was first unveiled by Beijing,54 and Russian spurs of the route were added only later.55 Russian strategists are worried that China’s trade and financial expansionism in Central Asia could hamper the creation of the Moscow-led Eurasian Economic Union,56 which is one of Putin’s top political priorities. The Arctic

The polar seas of the Arctic may become a new contentious area between Russia and China. China has been increasingly active in the Arctic, seeking to ensure access to the area’s vast mineral resources and lines of communication.57 As the world’s largest energy consumer, China has a major interest in oil and gas development in the polar regions; moreover, the polar navigation routes across Russia’s northern periphery cut distance and travel time between China and Europe by as much as 40 percent.

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In May 2013, Beijing became a permanent observer in the Arctic Council, though membership in that body remains elusive. China’s dubbing of itself a “near-Arctic state” and its push for a say in Arctic governance are beginning to cause some apprehension in Russia.58 Moscow considers the Arctic, especially the sectors adjacent to the Russian polar coast, as its economic and military domain and it is sensitive about any other states claiming a right to participate in Arctic affairs. Although a relatively minor irritant in Russian-Chinese relations at the moment, disagreements over the Arctic may grow in the future if China continues to expand its activities in the area and to insist that “the Arctic belongs to all people around the world.”59 An observer from the Shanghai Academy of Social Sciences predicted in 2013 that “Russia is moving to possess the Arctic Ocean” and “will launch fierce competition with China in the Arctic.”60 Asia’s Power Balance

Both Russia and China see themselves as Asian powers. Herein lies a potential clash: Russia wants to be an independent and influential player in Asia Pacific balance of power while China apparently seeks to be the dominant state in East Asia and perhaps all of Asia. As noted previously, some Russian analysts and even officials are concerned about the prospect of Russia being driven out of Asian politics by China. Beijing would definitely prefer to see Russia merely as a European power that is not involved in any meaningful way in the Asian regional security. Younkyoo Kim and Stephen Blank may not have been far from the truth in arguing that “Russia is trying to juggle two contradictory things simultaneously: bandwagon with China on the global and anti-America agenda and attempt to pull off a balancing act to constrain China at the regional level.”61 At least, this was the case prior to the Ukraine crisis. After the Ukraine crisis started to develop, Russia has been preoccupied with the Western direction, with the consequence that its ability to influence Asian affairs has significantly diminished. Perhaps more important, as a tacit condition for receiving China’s de facto backing in the standoff with the West, Russia appears to have agreed not to do anything that might run counter to Beijing’s “core interests” in Asia Pacific.62 This situation may prove difficult to handle in the long run, for Russia is very much wedded to the notion of its being an Asian power as well as a European one. The friction may turn especially acute if China presses Russia to abandon or downgrade some of the Asian relationships that Moscow deems of major value—in particular, with India, Vietnam, and Japan. India and Vietnam are Russia’s longtime strategic friends while Japan is viewed as a major potential partner economically and geopolitically—as a counterweight to China. It is telling that, in covering Beijing’s

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territorial disputes with Hanoi, Delhi, and Tokyo, many of the Russian news media have tended to be somewhat more sympathetic of the Vietnamese, the Indians, and the Japanese, implicitly suggesting that China is the bully. How would the Kremlin respond if, for example, during a future flare-up of China’s territorial disputes with Vietnam—Russia’s main strategic partner in Southeast Asia—Beijing would demand that Russia reconsider its neutrality and show unequivocal support for Chinese claims?63 The Border Issue

The border disputes were a long-running problem in Russian-Chinese relations, peaking in the 1969 armed conflicts between China and the USSR. Thanks to a series of bilateral agreements concluded in the 1990s and 2000s, the issue was formally closed. The final demarcation document was signed in July 2008, whereby the three disputed Amur islands were, in a compromise, divided roughly half and half. However, there persists a nagging apprehension in Russia that Chinese territorial claims may be reopened at some point in the future. Russian experts on China point out that the Russian-Chinese treaties of the second half of the nineteenth century, which determined the basic borderline between the two countries, are seen by many Chinese as unequal treaties forced on the weak Qing empire by tsarist Russia. It is also significant that this notion is being instilled through state education institutions, including school textbooks and historical maps. Thus, from the Chinese perspective, the current border with Russia may be considered as formally legal, but unjust and illegitimate. Many Chinese seem to be convinced that Russia plundered the Qing empire of huge chunks of Chinese lands in Siberia and the Far East. Some scholars draw similarities between Hong Kong and the RFE; after all, both territories were acquired by imperialistic powers through “unfair and unequal treaties.” In the 1980s Beijing forced London to return not only the leased New Territories, but also Hong Kong Island and Kowloon, which, according to the 1842 and 1860 treaties, had been ceded to Britain in perpetuity. There is a possibility that in the future China might attempt to treat the RFE in the same way as British Hong Kong.64 Even some Chinese academics do not rule out that the border question with Russia may be revisited, albeit not under the current generation.65 The possible reopening of the border issue may be facilitated by the fact that, in stark contrast to Western legalistic culture, China does not have much piety for agreements of law. As Lee Kuan Yew observes, “The Chinese have not accepted . . . that when you sign an agreement, it’s final.”66 More than a few Russian security specialists have voiced concern about the potential risk of renewed border conflict with China. In his 2011 book, prominent military expert Vladimir Karyakin wrote that “one cannot

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exclude (in the long-term perspective) that China may present territorial claims to Russia which will result in the growth of the military threat to Russia.”67 Another scholar suggests a scenario when China, taking advantage of a chaos in Russia caused by a severe domestic crisis, swiftly moves to occupy and annex the RFE.68 Some Russian observers draw attention to a high concentration of China’s ground forces in the country’s north—close to Russia’s eastern borders.69 Lack of Mutual Understanding at the Societal Level

Public opinion surveys have consistently shown that Russia and China see one another in a most positive light. According to Western surveys, Russia is the most positively viewed major power in China (48 percent favorable vs. 38 percent unfavorable)70 while 63 percent of Russians hold a favorable opinion of China.71 The Levada Center, Russia’s most respected pollster, found that in May 2014 77 percent of Russians had a favorable opinion of China while only 8 percent had an unfavorable opinion. Just a year earlier in March 2013, the favorable/unfavorable attitude split at 62 percent/25 percent.72 The Ukraine crisis estranged Russian public opinion from the West, but led to a remarkable rise in the approval rating of China.73 In the same survey, 40 percent of the respondents named China as “the closest friend” of Russia, which was second only to Belarus (51 percent). For comparison, in 2011 China ranked as low as fifth (18 percent)—behind Belarus, Kazakhstan, Ukraine, and Germany.74 Chinese public opinion of Russia is, to a large degree, linked to the figure of Putin who along with Barack Obama is the only recognizable foreign leader among the ordinary Chinese citizens. However, Putin’s popularity is much higher than that of the US president.75 Mutually favorable perceptions among the Russians and the Chinese should be interpreted with considerable qualifications. The positive image of China in Russia, as well as of Russia in China, to a great extent is attributable to manipulated coverage by the state-controlled media and government-sponsored activities such as cultural festivals. Russia and China are connected largely through official intergovernmental exchanges while at the societal, or grassroots, level the links remain relatively weak. The reality is that most Russians and Chinese know and understand little about the other country. It may be true that “the biggest risk in Russo-Chinese relationship is the lack of mutual understanding or, indeed, misunderstanding.”76 The Russians may be at loggerheads with the West, but they are immeasurably more familiar with the realities of the EU and the United States than with those of their near-ally China. Even though 3 million Russian visitors travel annually to China, they mostly get to see the touristy sites of the Middle

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Kingdom rather than its true inner self.77 On the Chinese side, the young generations look to US culture and learn English, with many of them seeing Russia as an economically weak and isolated country increasingly dependent on China.78 In Russia, the problem of lacking mutual knowledge is made worse by the inadequate supply of China experts. There are only around fifty active researchers of China in Russian academic institutions, and their average age is growing. Within government and business, the pool of professional expertise on China is also scarce. As an example, during the 2012 bilateral naval exercises, China provided 200 young military interpreters with an excellent command of Russian while the Russian side had only 3 interpreters.79 How Likely Is a Rupture?

Thus far, Moscow and Beijing have done an exceptionally good job of handling, and downplaying, any disagreements they may have. Nevertheless, the continuation of close friendship into the decades ahead cannot be guaranteed, mainly because the relationship is still short on critical ingredients—trust and mutual affinity. This finds expression in lingering phobias and grudges. In Russia, there are fears that China may harbor designs on the RFE, that Beijing seeks to turn Russia into a raw materials appendage and a junior partner, and that the Moscow-led Eurasian Economic Union integration project may be thwarted by China drawing the former Soviet republics into its economic and political orbit. In China, under the surface of generally pro-Moscow sentiments, certain anti-Russian undercurrents can be found, which are mostly associated with interpretations of history deemed the “century of humiliation,” a period between 1839 and 1949 when China was subjected to intervention and imperialism by foreign powers. Tsarist Russia is regarded by some Chinese intellectuals as the most rapacious of the imperialist predators that preyed on China at that time, which has yet to atone for its transgressions and give China back what it unfairly appropriated. There is a phrase circulating in China, attributed to Deng Xiaoping, which says that “Japan did China the biggest damage, while Russia was the biggest plunderer.”80 Many liberal-minded Chinese blame Russia for exporting communism to China in the 1920s.81 As long as there are autocratic anti-Western regimes in power in Moscow and Beijing, which have a high stake in geopolitical collaboration, anti-Chinese and anti-Russian sentiments respectively will be held in check. Yet it is an open question of what will happen to bilateral relations when and if there is a regime change in either country or both. What happens, for example, if post-Putin Russia mends fences with the West and begins to politically distance itself from China? The precedent of the disas-

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trous Sino-Soviet split of the late 1950s and 1960s serves as a stark warning of how abruptly and dramatically the relationship between the two giant neighbors can go down. While Russia and China have developed a common strategic outlook on important international issues, the principal value of their emerging entente, such as it is, lies in its far-reaching geo-economic dimensions. In Chapter 8, we deal with Russian-Chinese economic relations, with considerable emphasis on energy, finance, and infrastructure sectors, and explore how this relationship might evolve as Russia pivots further away from Europe and toward Asia in the wake of the Ukraine crisis. In Chapters 9 and 10, we focus more specifically on Russian-Chinese trade and investment ties in the RFE region, highlighting the new interest in the RFE on Beijing’s part in just the past two years—a trend that could signal a new stage in the relationship between the powers. In Chapter 10, we raise the possibility that Moscow’s troubles with the West and courtship of China might allow the Middle Kingdom to acquire a controlling stake in development of the RFE and other parts of eastern Russia. Notes 1. Bobo Lo, Axis of Convenience: Moscow, Beijing, and the New Geopolitics (Washington, DC: Brookings Institution, 2008). See also Stephen Kotkin, “The Unbalanced Triangle,” Foreign Affairs 88, no. 5 (September−October 2009): 130– 138, www.foreignaffairs.com/reviews/review-essay/unbalanced-triangle. 2. See, for example, Natasha Kuhrt, “Russia and China: Strategic Partnership or Asymmetrical Dependence?” in Russia and East Asia: Informal and Gradual Integration, ed. Tsuneo Akaha and Anna Vassilieva (New York: Routledge, 2014), 91–107. 3. Ariel Cohen, “The Russia-China Friendship and Cooperation Treaty: A Strategic Shift in Eurasia?” Heritage Foundation, July 18, 2001, www.heritage.org /research/reports/2001/07/the-russia-china-friendship-and-cooperation-treaty. 4. Thomas Wilkins, “Russo-Chinese Strategic Partnership: A New Form of Security Cooperation?” Contemporary Security Policy 29, no. 2 (August 2008): 378. 5. The bilateral summit in Moscow; the Brazil, Russia, India, China, and South Africa (BRICS) summit in Durban; the Group of 20 (G-20) summit in Saint Petersburg; the Shanghai Cooperation Organization summit in Bishkek, Kyrgyzstan; and the Asia-Pacific Economic Cooperation meeting in Bali. 6. The 2014 meetings were: Xi Jinping’s visit to Russia for the Sochi Winter Olympics; Vladimir Putin’s visit to Shanghai for a CICA summit and a bilateral Russia-China summit; and Putin’s visit to Beijing for an APEC summit as well as talks at the BRICS summit in Fortaleze, Brazil; the SCO summit in Dushanbe, Tajikistan; and the G-20 summit in Brisbane. 7. Gilbert Rozman, The Sino-Russian Challenge to the World Order (Washington, DC: Woodrow Wilson Center Press, 2014). 8. Alexander Lukin, “Eurasian Integration and the Clash of Values,” Survival 56, no. 3 (2014): 43−60.

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9. Vladimir Putin’s full quote is: “However attractive mineral resources of Eastern Siberia and the Far East could be in a contemporary world, the main struggle is not about them. The main battle is for the world primacy, and in this we are not going to contend with China. In this, China has other rivals. So let them deal with one another.” See “Interv’yu Predsedatelya Pravitel’stva Rossiyskoy Federatsii V.V. Putina,” website of the prime minister of the Russian Federation, October 17, 2011, http://premier.gov.ru/events/news/16755. 10. Vladimir Putin said: Speaking of our relations with China, they are progressing very successfully in terms of trust and collaboration, which are unprecedented. . . . Generally, I think that the bloc mentality is a thing of the past. NATO was established as a counterbalance to the Soviet Union and to the Soviet Union’s policy in Eastern Europe. The Warsaw Pact was signed in response. The Soviet Union ceased to exist, but NATO remains. We are told it is changing and becoming more of a political organization. But Article 5 is still in effect, which is an article on mutual military support. Who does NATO act against? Why is it expanding toward our borders? Are there plans to establish new blocs? I don’t know; we haven’t thought about this. But it is absolutely clear that we will be expanding collaboration with China. Our trade with the United States is 27.5 [billion], but trade with China is 87 billion, and it is growing. And experts will agree that China is gradually becoming the number one economic power. The question is when it will happen: in 15, 20, or 25 years. But everybody understands that it is inevitable. . . . Therefore, we will certainly continue to develop relations with China. We have never had such trust-based relations in the military industry. We began holding joint drills at sea and on land, in both China and the Russian Federation. This gives us reason to assume that Russian-Chinese relations will be a significant factor in global policy and will substantially influence modern international relations.

See Vladimir Putin, “Direct Line with Vladimir Putin,” website of president of Russia, April 17, 2014, http://eng.kremlin.ru/news/7034. 11. “Putin Confirms Plans to Meet Chinese President During APEC Summit in Beijing,” Sputnik, October 14, 2014, http://sputniknews.com/politics/20141014 /194060827.html. 12. Konstantin Kokarev, Elena Suponina, Boris Volkhonsky, eds., AziatskoTixookeanskoe Sotrudnichestvo i Mesto Rossii v Regional’nom Razvitii (Moscow: Russian Institute for Strategic Studies, 2014), 131–138. 13. Wang Yizhou, “Opportunities and Challenges for China’s New Leaders in Building Mutual Trust with the World,” Global Asia 8, no. 3 (Fall 2013): 34. 14. Edward Luttwak, The Rise of China vs. the Logic of Strategy (Cambridge, MA: Belknap Press of Harvard University Press, 2012), 141–142. 15. Aaron L. Friedberg, A Contest for Supremacy: China, America, and the Struggle for Mastery in Asia (New York: W. W. Norton, 2012). 16. Sean Mirski, “Stranglehold: The Context, Conduct and Consequences of an American Naval Blockade of China,” Journal of Strategic Studies 36, no. 3 (2013): 10–11, http://dx.doi.org/10.1080/01402390.2012.743885. 17. For Chinese views arguing in favor of the alliance with Russia, see, for example, Yan Xuetong, “The Weakening of the Unipolar Configuration,” in China 3.0, ed. Mark Leonard (London: European Council on Foreign Relations, November 2012), 112–119, http://ecfr.eu/page/-/ECFR66_CHINA_30_final.pdf. See also “US Actions Make China-Russia Alliance Appealing,” Global Times, January 20,

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2012, http://english.peopledaily.com.cn/90780/7710844.html; and Dai Xu, “Kitayu i Rossii sledueyet sozdat’ Evraziyskiy Alyans,” People’s Daily (Russian-language edition), January 30, 2012, http://russian.people.com.cn/95181/7714612.html. 18. Mu Chunshan, “Why Doesn’t Russia Support China in the South China Sea?” The Diplomat, June 21, 2014, http://thediplomat.com/2014/06/why-doesnt -russia-support-china-in-the-south-china-sea/. 19. “Terrorism Surging in China: Blue Paper,” Beijing News, May 7, 2014, www.bjd.com.cn/10beijingnews/focus/201405/07/t20140507_6769522.html. 20. Ibid. 21. Jane Perlez, “Chinese Leader’s One-Man Show Complicates Diplomacy,” New York Times, July 8, 2014, www.nytimes.com/2014/07/09/world/asia/china-us -xi-jinpeng-washington-kerry-lew.html?ref=asia&_r=0. 22. Dmitri Trenin, From Greater Europe to Greater Asia: The Sino-Russian Entente (Moscow: Carnegie Moscow Center, April 2015), 10. 23. Rozman, The Sino-Russian Challenge to the World Order, 1. 24. Terms used by Rozman in ibid. 25. Willy Lam, “Xi Jinping Forever,” Foreign Policy (April 1, 2015), http:// foreignpolicy.com/2015/04/01/xi-jinping-forever-china-president-term-limits/. 26. Dmitri Trenin, Russia and the Rise of Asia (Moscow: Carnegie Moscow Center, November 2013), 6. 27. Rex Li, A Rising China and Security in East Asia (New York: Routledge, 2009). 28. Trenin, From Greater Europe to Greater Asia. 29. See, for example, Sergey Karaganov, “Mezhdunarodny krizis: izbezhat’ Afghanistana-2,” Vedomosti, July 28, 2014, www.vedomosti.ru/opinion/news /29501801/izbezhat-afganistana-2. 30. Igor Ivanov, ed., “Rossiysko-kitayskiy dialog: model’ 2015” (Moscow: Russian International Affairs Council, 2015), 6. 31. Ibid., 8. 32. A political-military alliance between Russia and China is highly unlikely in the short to medium term, but cannot be ruled out ten to twenty years from now, provided the security situation in Eurasia continues to deteriorate. 33. Even before the Ukraine crisis, in 2008 a Russian senior Foreign Ministry official admitted that China wanted Russia to keep a low profile in Asia Pacific as a precondition for China not interfering with Russian interests in Central Asia. See Alexander Lukin, ed., Rossiya i mnogostoronnie struktury v ATR (Moscow: MGIMO, 2009), 21. 34. Georgy Toloraya, “Krizisnoe status-kvo na Koreyskom poluostrove i zadachi Rossii,” in Konstantin Kokarev, Elena Suponina, Boris Volkhonsky, eds., Aziatsko-Tixookeanskoe Sotrudnichestvo i Mesto Rossii v Regional’nom Razvitii (Moscow: Russian Institute for Strategic Studies, 2014), 104. 35. “China Focus: China’s Xi Proposes Security Concept for Asia,” Xinhua, May 21, 2014, http://news.xinhuanet.com/english/china/2014-05/21/c_133351210 .htm. 36. Gaku Shimada, “China Wants to Set Agenda for Asian Security,” Nikkei Asian Review, May 22, 2014, http://asia.nikkei.com/Politics-Economy/International -Relations/China-wants-to-set-agenda-for-Asian-security. See also Shannon Tiezzi, “At CICA, Xi Calls for New Regional Security Architecture,” The Diplomat, May 22, 2014, http://thediplomat.com/2014/05/at-cica-xi-calls-for-new-regional-security -architecture/. 37. Vladimir Putin, “Speech at the Conference on Interaction and Confidence

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Building Measures in Asia summit,” Shanghai, website of the president of Russia, May 21, 2014, http://eng.kremlin.ru/news/7208. 38. A Chinese general who was a former military attaché in Moscow is reported as saying that, thanks to the Ukraine crisis, “China will get at least a 10-year respite in its global contest with America.” See Vasily Kashin, “Vtoroy mir: Rossiya nachala protsess uskorennogo sblizdeniya s Kitayem,” Vedomosti, May 22, 2014, www.vedomosti.ru/newspaper/article/683781/rossiya-nachala-process-uskorennogo -sblizheniya-s-kitaem. 39. Alexander Gabuev, “Russia’s Uneasy Economic Alliance with China Just Got Less Easy,” Russia Direct, November 12, 2014, www.russia-direct.org/apec -2014-russias-uneasy-economic-alliance-china-just-got-less-easy. See also Alina Terekhova, “Moscow Distances Itself from China’s New Silk Road Project,” Nezavisimaya Gazeta, January 20, 2015, www.ng.ru/economics/2015-01-20/4_china .html. 40. Terekhova, “Moscow Distances Itself from China’s New Silk Road Project.” 41. Gabuev, “Russia’s Uneasy Economic Alliance with China Just Got Less Easy.” 42. In August and September 2014 Xi Jinping and Putin almost simultaneously visited Mongolia, and in September 2014 the leaders of China, Russia, and Mongolia held their first trilateral summit. The three countries also set up regular consultations at the vice ministerial level and started preparing blueprints for trilateral cooperation. The institutionalization of Chinese-Russian-Mongolian links could imply a form of bilateral protectorate by Beijing and Moscow over Ulan Bator whose freedom to pursue undesirable strategic relations with the West will be considerably constrained. 43. Dmitri Trenin, From Greater Europe to Greater Asia, 3. 44. The Central Powers were one of the warring coalitions in World War I. The two main participants of the Central Powers alliance, Germany and AustriaHungary, were strategically located in the middle of Europe. 45. The leading Nazi geopolitician, Karl Haushofer, put this idea forward in 1940. The continental bloc concept is almost forgotten in the West, but is well known and increasingly popular within Russia’s strategic community. 46. Some scholars already see the SCO as a “Eurasian defense alliance” led by China and Russia. Joseph The-Hei Lee, “Not So Peaceful: China’s Rise and Geopolitics in Asia,” in Globalization, Development and Security in Asia, vol. 1: Foreign Policy and Security in an Asian Century: Threats, Strategies and Policy Choices, ed. Benny Teh Cheng Guan (Singapore: World Scientific, 2014), 16. 47. Vladimir Putin’s interview with the Chinese major news media, website of the president of Russia, May 19, 2014, www.kremlin.ru/news/21031. 48. Alexander Shustov, “Vernutsya li russkiye v Rossiyu,” Stoletiye, April 10, 2013, http://www.stoletie.ru/rossiya_i_mir/vernutsa_li_russkije_v_rossiju_970.htm. 49. Russia also has military bases in Kyrgyzstan and Tajikistan. 50. Alexander Cooley, Great Games, Local Rules: The New Great Power Contest in Central Asia (New York: Oxford University Press, 2012), 51. 51. Ibid., 74. 52. Ibid. 53. “Xi Suggests China, C. Asia Build Silk Road Economic Belt,” Xinhua, September 7, 2014, http://news.xinhuanet.com/english/china/2013-09/07/c_132700695 .htm. 54. Shannon Tiezzi, “China’s ‘New Silk Road’ Vision Revealed,” The Diplomat, May 9, 2014, http://thediplomat.com/2014/05/chinas-new-silk-road-vision-revealed/.

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55. See the New Silk Road map (as of April 2015), Xinhua, www.xinhuanet .com/world/newsilkway/index.htm. 56. Tatyana Guzenkova and Mikhail Karpov, eds., Strany SNG i Baltii v Global’noy Politike Kitaya (Moscow: Russian Institute for Strategic Studies, 2013). 57. “China’s strategic Arctic interests,” International Institute for Strategic Studies, March 6, 2014, www.iiss.org/en/publications/strategic%20comments/sections /2014-a6f5/china—39-s-strategic-arctic-interests-05d5. 58. “Kitay vidit v Arktike ser’yoznoe energeticheskoe podspor’e dlya natsional’noy ekonomiki, v Rossii bespokoyatsya,” Newsru.com, June 18, 2014, www.newsru.com/world/18jun2014/arcticchinafr.html. 59. “Enter Asia: The Arctic Heats Up,” World Affairs (March−April 2014), www.worldaffairsjournal.org/article/enter-asia-arctic-heats. 60. Li Lifan, “China’s ‘Arctic Dream,’” Oil Magazine, March 31, 2013, 30−33, www.abo.net/en_IT/flip-tabloid/oil_21_en/index.html#/30/. Li Lifan reports that a Chinese expedition ship, Coastal-517, was detained by Russia on suspicion of carrying a sonic location system and instruments for continental shelf exploration. 61. Younkyoo Kim and Stephen Blank, “Rethinking Russo-Chinese Relations in Asia: Beyond Russia’s Chinese Dilemma,” China: An International Journal 11, no. 3 (December 2013): 136–148. 62. According to some Chinese analysts, Russia’s lack of any official stance on the East China and South China Sea disputes reflects “tacit agreements and mutual understanding in the China-Russia relationship” and is “proof of an increasingly deep partnership.” See Mu Chunshan, “Why Doesn’t Russia Support China in the South China Sea?” The Diplomat, June 21, 2014, http://thediplomat.com/2014/06 /why-doesnt-russia-support-china-in-the-south-china-sea/. 63. Anton Tsvetov, “Vietnam’s Balancing Act: Can Russia Adapt to Change?” Russia Beyond the Headlines, April 10, 2015, http://rbth.com/blogs/2015/04/10 /vietnams_balancing_act_can_russia_adapt_to_change_45121.html. 64. Chinese Hong Kong−based scholar, interviewed by Artyom Lukin, Vladivostok, March 29, 2013. 65. In a private conversation with Artyom Lukin, July 10, 2014, a Chinese Beijing-based academic said that “in the future anything may happen, and we just cannot know how the next generations in China will treat the border issue.” 66. Lee Kuan Yew, One Man’s View of the World (Singapore: Straits Time Press, 2013), 19. 67. Vladimir Karyakin, Voennaya Politika i Strategiya SShA v Geopoliticheskoy Dinamike Sovremennogo Mira (Moscow: Granitsa, 2011), 224–225. 68. Leading foreign policy analyst, interviewed by Artyom Lukin, Moscow, February 25 2014. 69. Alexei Arbatov, “Tikhookeanskaya strategicheskaya panorama,” in Razoruzhenie i Bezopasnost’ 2013−2014, eds. Alexei Arbatov and Natalia Bubnova (Moscow: IMEMO, 2014), 190. 70. Pew Research Center, “China and the World,” October 16, 2012, www.pew global.org/2012/10/16/chapter-2-china-and-the-world/. 71. German Marshall Fund of the United States, “Transatlantic Trends: Key Findings 2012,” September 2012, http://trends.gmfus.org/transatlantic-trends/. 72. Levada Center, “Russians’ Attitudes Toward Other Countries,” May 2014, www.levada.ru/05-06-2014/otnoshenie-rossiyan-k-drugim-stranam. 73. Levada Center, “Russians’ Attitudes Toward Other Countries,” May 2014, www.levada.ru/05-06-2014/otnoshenie-rossiyan-k-drugim-stranam. 74. Ibid.

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75. Larisa Smirnova, “Rossiya—Kitay: 20 predlozheniy dlya ekonomicheskogo, nauchnogo i gumanitarnogo partnerstva,” Russian International Affairs Council, May 20, 2014, http://russiancouncil.ru/inner/?id_4=3720#1. 76. Ibid. 77. Evgeny Gontmakher, “Osobyi put’ v Kitay,” Moskovsky Komsomolets, June 18, 2014, www.mk.ru/politics/2014/06/17/osobyy-put-v-kitay.html. 78. Smirnova, “Rossiya—Kitay: 20 predlozheniy dlya ekonomicheskogo, nauchnogo i gumanitarnogo partnerstva.” 79. Aleksandr Gabuev, “Kitayskaya negramota,” Kommersant, November 26, 2012, http://kommersant.ru/doc/2073821. 80. Yuri Tavrovsky, “Tret’e dykhanie dlya Sibiri i Dal’nego Vostoka,” Razvitiye i Ekonomika, March 2013, http://devec.ru/almanah/5/1302-jurij-tavrovskij-trete -dyhanie-dlja-sibiri-i-dalnego-vostoka.html. 81. These accusations are partly justified since the Russian Bolsheviks played a major role in creating the Chinese Communist Party.

8 Is Russia Moving into China’s Economic Orbit?

trend reflects a long-term economic strategy of reducing Russia’s dependency on Western (especially Western European) markets, and aligning more closely with the fast-growing economies of Asia Pacific region. The fallout from recent events in Ukraine, including sharply reduced Western investment, massive capital flight ($85 billion in the first three quarters of 2014), and a catastrophic drop in the value of the ruble will further reinforce the tilt toward China as a market for Russian energy and as a source of long-term financing for investment projects. Yet Russia’s economic reorientation toward Asia and China has been under way for some time, driven as much by market factors as by international political conditions.1 The fundamental reasoning of the strategy is that the center of gravity of the global economy is shifting toward Asia and, therefore, Russia should capture this dynamic to maximize its growth potential. The logic seems impeccable on the face of it; for instance, Asia Pacific region grew almost nine times as fast as the EU between 2008 and 2012, and the combined GRP of Russia’s Northeast Asian neighbors grew fifteen times as fast. The implications for Russia were underscored by Russia’s minister of Far East development in a 2012 interview: RUSSIA HAS BEEN MOVING CLOSER TO CHINA ECONOMICALLY. THIS

Russia historically has oriented itself toward the western vector of development, and that once made sense. Today the European Union is the least dynamically growing region in the world, with growth rates of one to two percent. Russia wants to vault into the ranks of the 20 most advanced nations, and to do this it must associate itself with actively developing states—that means China, India, the BRICs, and the APR [Asia Pacific region].2

President Vladimir Putin made a similar pitch in a major foreign policy article at the end of 2012, but focused especially on China and the signifi137

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cance of China’s rise. He referred to the “colossal potential for business cooperation—a chance to add the Chinese winds to the sails of our economy.” Putin seemed to qualify these remarks by emphasizing that Russia is “an inalienable and organic part” of “Greater Europe”—a common space stretching from the Atlantic to the Pacific—and hence justifying a Russian economic rebalancing toward a “New Asia.”3 It is too early to speak of Russia’s decisive turn to the East—Russia’s foreign economic relations remain tied to Europe. For example, as of 2014, Europe accounted for more than half of its foreign trade and upward of 75 percent of the cumulative foreign investment in the country. 4 (Some of this, admittedly, can be considered round-tripping via Cyprus, a favored offshore tax haven for Russian business.) In the long-term perspective, the EU will retain its role as Russia’s main economic partner,5 which is dictated by the nation’s economic and demographic core lying west of the Urals. It is telling that so far none of the Russian oligarchs has conducted significant business with China. An exception may be Alisher Usmanov, who bought minority stakes in Chinese information technology (IT) companies.6 That said, Russia’s diversification strategy has achieved a measure of success, especially in trade and energy relations, though the future prospects of the strategy remain somewhat murky. Trade figures tell much of the story (see Table 8.1). Between 2000 and 2013, Russia’s trade with the United States and Europe grew, respectively, 388 percent and 520 percent. But with Asia Pacific states, the increases were much more dramatic: Japan, 996 percent; China, 1,434 percent; and South Korea, 1,890 percent. In 2000 China accounted for 4 percent of Russia’s total foreign trade, but as of 2013 almost 11 percent. By the end of 2009, China had become Russia’s largest single trading partner. In 2013, the total volume of trade with China ($88.7 billion) was roughly equivalent to that of other main Pacific Rim states (the United States, Japan, and South Korea) combined ($86.8 billion). Because of underregistered gray-market trade and outright smuggling that flourish in cross-border interactions between Russia and China, the actual value of trade may be much larger. However, the expanding commercial ties with China—while impressive on the surface—display asymmetries that harbor some dangers for Russia. For example, as of 2014, Russia was only China’s ninth-largest trading partner and comprised a little over 2 percent of its international trade. With a total bilateral trade volume of $95 billion in 2014, Russia was behind Malaysia ($102 billion) and ahead of Brazil ($87 billion) in the top ten trading partners of China. Commercially, Russia needs China a lot more than China needs Russia, or so it seems.7 Furthermore, the composition of trade is extremely unbalanced. In 2013 a full 85 percent of acknowledged Russian exports consisted of raw materials, 71 percent were energy products, and the rest were metal ores, wood, and fish. But about two-thirds of Russian imports from China con-

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Table 8.1 Russia’s Total Trade with China, the European Union, the United States, Japan, and South Korea (in US$) Russia–European Union Russia-China Russia-Japan Russia–United States Russian–South Korea Russia’s total global trade

2000

79,581,680,659 6,196,571,463 3,336,167,692 7,351,419,822 1,330,895,854 136,972,840,264

2005

210,507,720,555 20,312,327,763 9,573,791,001 10,939,191,424 6,364,446,622 340,158,912,654

2013

433,176,507,493 88,798,506,185 33,228,007,563 27,894,767,174 25,172,506,369 842,211,013,838

Source: United Nations Statistics Division: Trade Statistics Branch. UN Comtrade database, 2015, http:// comtrade.un.org/data.

sisted of manufactured goods such as machinery, electronic items, clothing, and toys. The relationship has become more skewed with time: in 2005 the energy share of Russian exports to China was just 29 percent and 7 percent still consisted of machinery, while in 2013 sales of Russian equipment dropped to nearly zero. Russia also exports weapons systems to China—the value of such transfers is not officially disclosed—and China is the secondlargest recipient after India, but this does not change the fundamental nature of the commercial relationship (see Table 8.2).8 This trade pattern is not peculiar to China, of course—Russia is primarily a raw materials supplier on the global economic stage and it cannot compete in most areas of manufacturing. Nevertheless, it remains a point of friction between the two countries. Russia wants a higher deep processing and innovative component in its export mix, but China has little interest in seeing Russia move up the value-added chain. From China’s perspective, Russia’s outsized resource sector “is a long-term problem of its own, and China is not responsible for this problem,” so the friction over this will persist even as trade expands.9 A second area of Russian-Chinese economic cooperation relates to the countries’ foreign investment inflows. Different definitions of what constitutes “investment,” different national datasets, and inflows via third countries such as Cyprus, the British Virgin Islands, or Hong Kong complicate the picture. But in general investment relations have been weakly developed in value terms—“a trifle compared to investment from the rest of the world,” as one Moscow economist describes China’s stake in Russia.10 Likewise, Russia’s Central Bank reported that in 2013 inflows of investment from China accounted for just $594 million, less than 1 percent of total inflows into Russia. This is despite the fact that in 2009 a Russian-Chinese bilateral investment pact entered into force,11 and in 2012 the Russia-China Investment Fund was established.12 The modest volume of Chinese FDI in Russia has had much to do with Moscow’s reluctance to allow China’s companies into the most lucrative

Table 8.2 Composition of Russian-Chinese Trade, 2005 and 2013 2005 Exports

2005 Total Export Value to China

2005 Imports

Electrical machinery and equipment and parts thereof Machinery and mechanical appliances and parts thereof Footwear, gaiters, and the like and parts of such articles Toys, games, and sports requisites and parts and accessories Plastics and articles thereof Articles of iron or steel Furniture, bedding, mattresses, cushions, etc. Articles of apparel and clothing accessories, not knitted Vehicles other than railway or tramway rolling stock Other/residual

% of Total Exports to China

4,390,638,178 1,520,024,792 1,473,976,216 884,993,808 489,170,620 456,230,357 360,388,330 348,174,978 217,899,899 1,074,961,315

39.1 13.6 13.1 7.9 4.4 4.1 3.2 3.1 1.9 9.6

11,216,458,493

Mineral fuels, mineral oils, and products of their distillation Iron and steel Wood and articles of wood and wood charcoal Fertilizers Organic chemicals Machinery and mechanical appliances and parts thereof Electrical machinery and equipment and parts thereof Pulp of wood or of other fibrous cellulose material Ores, slag, and ash Other/residual

2005 Total Import Value from China

Trade Value (US$)

100.0

Trade Value (US$)

% of Total Imports from China

1,862,275,327 1,427,943,092 393,691,273 268,789,920 263,870,240 164,852,161 155,000,911 151,238,685 144,854,472 2,420,404,280

25.7 19.7 5.4 3.7 3.6 2.3 2.1 2.1 2.0 33.4

7,252,920,361

100.0

2013 Exports

2013 Total Export Value to China

Mineral fuels, mineral oils, and products of their distillation; bituminous substances; mineral waxes Wood and articles of wood and wood charcoal Ores, slag, and ash Nuclear reactors, boilers, machinery, and mechanical appliances, and parts thereof Fish and crustaceans, molluscs and other aquatic invertebrates Fertilizers Pulp of wood or of other fibrous cellulosic material, recovered (waste and scrap) paper or paperboard Organic chemicals Aircraft, spacecraft, and parts thereof Other/residual 2013 Imports

2013 Total Import Value from China

Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles Nuclear reactors, boilers, machinery and mechanical appliances, and parts thereof Footwear, gaiters, and the like and parts of such articles Vehicles other than railway or tramway rolling-stock, and parts and accessories Articles of apparel and clothing accessories, not knitted Plastics and articles thereof Articles of apparel and clothing accessories, knitted Toys, games, and sports requisites and parts and accessories Articles of iron or steel Other/residual

Trade Value (US$)

35,625,419,978 25,177,824,014 2,230,903,606 1,824,588,674 1,140,944,115 1,014,524,587 963,761,631 602,059,199 546,323,976 445,314,769 1,679,175,407 Trade Value (US$)

53,173,086,208 12,617,274,139 11,398,024,169 2,829,047,059 2,380,884,816 1,998,589,723 1,800,390,939 1,788,535,796 1,788,496,180 1,782,822,487 14,789,020,900

Source: United Nations Statistics Division: Trade Statistics Branch, UN Comtrade database, 2015, http://comtrade.un.org/data.

% of Total Exports to China 100.0 70.7 6.3 5.1 3.2 2.8 2.7 1.7 1.5 1.2 4.7 % of Total Imports from China 100.0

23.7 21.4 5.3 4.5 3.8 3.4 3.4 3.4 3.4 27.8

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and strategic sectors of the national economy, particularly oil and gas, mining, car manufacturing, and infrastructure. This is a major reason why, until recently, China’s investment in Russia generally comprised small underthe-radar businesses and trading companies, sawmills, food service operations, and the like—and few large ones such as the Pearl Real Estate Complex in Saint Petersburg, the Greenwood Business Center in Moscow, a production plant for automobile glass in Kaluga Oblast, and brick and cement plants in Sakhalin. To promote and coordinate cooperation in various economic fields, as early as 1997 Russia and China agreed to hold annual meetings at the prime ministerial level. In the same agreement an intergovernmental commission was established, led by Russian and Chinese deputy prime ministers, with the purpose of preparing the agenda for the regular meetings of heads of governments.13 In 2012, a separate bilateral commission on energy cooperation was set up headed by respective deputy prime ministers. There is also a vice prime ministerial commission on cultural and educational collaboration. This adds up to the most extensive intergovernmental dialogue mechanism that Russia maintains with any major country. Russia’s Economic Pivot Toward China Accelerated Russia’s diversification strategy has long implied a greater measure of integration of the Russian and Chinese economies. The strategy was driven largely by economic factors—China’s relatively rapid growth (7.7 percent per year) and its huge foreign exchange reserves ($3.95 trillion) as well as the obvious complementarity of the two countries’ economies. In fact, one can speculate that, even without Russia’s turbulent relations with the West including the events leading up to the Shanghai summit in May 2014, economic trends might have followed their current course. Yet Moscow’s deteriorating political relations with the United States and the EU, culminating in the Ukraine crisis of 2013–2014, have almost certainly accelerated the eastward, mainly Sinocentric, drift of Russian economic policy. Shortly after the Crimea annexation in the spring of 2014, Russian government experts identified the nation’s three principal economic weaknesses that could be targeted by the West: critical dependence on European energy market; dependence on Western capital; and reliance on Westernmade technologies, particularly offshore drilling, LNG plants, and telecommunications. The experts concluded that if the West imposed economic penalties, Russia would have no other alternative than to move closer to China, the only major economic force outside of the US-dominated order.14 China moved accordingly. For the first three quarters of 2014, Chinese investment in Russia was $1.2 billion, compared to $594 million in all of 2013, apparently reflecting the retreat of foreign investors from Russia.

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Moscow wasted no time in executing its new strategy of economic reliance on China, and China reciprocated. The leaders’ 2014 visits, Putin to Shanghai in May and Beijing in November and Premier Li Keqiang to Moscow in October, resulted in 101 signed agreements that concentrated mainly on energy, finance, infrastructure, and technology. Energy

A Russian-Chinese energy alliance began to take shape long before the Ukraine crisis. In 2009, the two countries cut a multibillion-dollar deal involving Russia’s leading state-owned oil companies Rosneft and Transneft and China National Petroleum Corporation (CNPC). In 2013, CNPC bought a 20 percent stake in Russian Novatek’s $20 billion Yamal LNG project in the Arctic, pledging to purchase at least 3 million tons a year of LNG from the project when it comes online.15 However, at that time Russia still saw Europe as its main customer and partner in oil and gas and used China mainly as a bargaining chip in negotiations with Europeans over pricing and other conditions. During a visit to Beijing in 2006, Putin announced plans to construct two gas pipelines to China—one from Western Siberia through the Altai Mountains and another from Eastern Siberia— to be completed by 2012. However, after European customers signed new contracts with Gazprom, the plan was quietly dropped.16 According to one Chinese official, “Relations with us had no real value for the Russians. They used us only as a threat to the EU. Europe—that is what they really cared about.”17 The Ukraine crisis, on the one hand, has reinforced Europe’s incentives to reduce its energy (mainly gas) dependence on Russia and, on the other hand, has led Moscow to radically reassess its export strategies in favor of the Eastern markets. This was manifest in Russia’s 2014 agreements with China on two gas pipelines (from Eastern Siberia to northeastern China and from Western Siberia to northwestern China18) with a total export volume of 68 billion cubic meters, accompanied by Gazprom’s cancellation of the South Stream pipeline project, which was to bring 63 billion cubic meters of gas via the Black Sea to southeastern Europe. Western sanctions, Russia’s perception of the EU’s hostile regulation, Europe’s plans to find alternative sources of energy, and the sluggish outlook for European gas demand all have finally spurred Moscow to abandon its long-standing policy to nurture a strategic energy partnership with Europe and turn instead to China. China could become Russia’s single-largest gas customer, even though sales to Europe are likely to remain the greatest source of revenue for Gazprom for the foreseeable future.19 Apart from the gas deals, Russian-Chinese oil trade got a big boost. In the first seven months of 2014, Russia’s oil exports to Asia (above all China) jumped to record highs. Whereas around a fifth of Russia’s oil

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exports went to Asia in 2012, this share grew to over 30 percent in 2014, reaching more than 1.2 million barrels per day. At the same time, Russian oil exports to Europe fell from a peak of 3.72 million barrels per day in May 2012 to less than 3 million barrels per day in July 2014.20 As for China, its imports of Russian oil skyrocketed by 36 percent in 2014, displacing Organization of Petroleum Exporting Countries (OPEC) sources such as Saudi Arabia.21 What Putin dubbed the “strategic energy alliance” between Russia and China22 would significantly shift the balance of hydrocarbon flows eastward, encapsulating and epitomizing Russia’s trade diversification strategy. The percentage of Russian oil exports to China compared to Europe (3.95 million bpd in 2012) could rise from about 6 percent to 26 percent or 30 percent. In the case of natural gas, the rise would be even more dramatic, from almost zero23 to 24 percent, assuming gas exports to Europe and Turkey of 162.7 billion cubic meters in 2013.24 By 2024 Russia intends to sell China at least 100 billion cubic meters of natural gas, which will be commensurate with Russia’s deliveries to the EU.25 In the short term, China will not be coequal to Europe as an energy consumer, or in trade and investment for that matter, but the huge scale of the energy deals could in the long run affect the quality and content of Russian-European relations in unpredictable ways. Energy projects between Russia and China are analyzed in more detail in Chapter 10. Finance and Investment

Perhaps no less significant than the expanding oil and gas trade is the increase in reliance of Russian private and state-owned businesses on Chinese financial institutions. This trend may have been some years in the making, but the Western sanctions in the wake of Ukraine gave it a dramatic boost. In one of the most important developments in this respect, Russia and China began to take steps to significantly expand the use of national currencies in bilateral transactions. Gazprom announced that it was ready to accept payments in yuan under its contracts with China while Putin’s chief of staff Sergey Ivanov said that Russia and China would gradually move toward conducting their two-way trade in their national currencies instead of in US dollars, albeit he made a qualifying remark that it was not going to happen overnight.26 In September 2014, Deputy Finance Minister Alexey Moiseev announced that Russia and China aim to shift up to 50 percent of their trade to national currencies.27 In November 2014, Putin revealed that China wanted to pay for oil from the major Vankor field in Eastern Siberia (in which China was supposed to acquire a minority stake) in renminbi, which Rosneft would later use for buying Chinese drilling equipment.28 There is an economic logic to this: deals in national currencies can lead to

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benefits of up to 5−7 percent for buyers of Chinese products by avoiding currency conversion and hedging against foreign exchange risk.29 Russian companies also seek to protect themselves from the impact of sanctions by denominating more of their foreign transactions in non-Western currencies, particularly the renminbi.30 Reflecting the rising demand for Chinese currency, the volume of trade in yuan rose eightfold at the Moscow Exchange, reaching 48 billion yuan. 31 However, as Alexander Gabuev points out, the nonconvertibility of yuan remains a major barrier. It is telling that Russian companies that transferred part of their cash from dollars and euros after rumors that their accounts in Western countries could be blocked as part of a next round of sanctions bought convertible Hong Kong dollars (pegged to the US dollar) rather than renminbi,32 even though the Hong Kong’s jurisdiction is not considered completely safe for Russian firms and individuals due to the substantial leverage that the US Treasury wields over the city’s financial system. Moves by Visa and MasterCard to cut off service to the sanctioned Russian banks infuriated Moscow and made it begin to plan for Russia’s indigenous payment system. Due to the lack of expertise and resources, this project will likely be implemented with the help of China’s UnionPay—the only major electronic payment system outside of the West and Japan. In July 2014, UnionPay announced that it would distribute 2 million credit cards in Russia within the next three years, which will constitute “a good basis for the next massive emission.”33 One of Putin’s blacklisted oligarch cronies, Gennady Timchenko, announced to the media that he had replaced his personal Visa and MasterCard credit cards with UnionPay.34 Chinese bankers made it clear that they would be happy to offer services to Russian customers spurned by Western financial institutions.35 Chinese banks seem poised to expand their operations inside Russia. In spring of 2014, statistics showed considerable growth in assets of Chinese state-owned banks’ subsidiaries in Russia 36 while the assets of Western subsidiaries declined.37 In the stock market, restrictions on financial dealings with Moscow will drive Russian companies from London, which has long been their favorite place to raise capital, to Hong Kong and Shanghai.38 In another move toward tightened financial collaboration, Moscow and Beijing intend to set up a joint rating agency as an alternative to the US-dominated “big three” of Moody’s, Fitch, and Standard & Poor’s.39 The establishment, in 2014, of China-led multilateral financial institutions—the BRICS New Development Bank and the Asian Infrastructure Investment Bank, both of which Russia joined as a member—will also strengthen Russian-Chinese financial bonds as well as challenge the US-led global economic order. As Andrew Small points out, the Ukraine crisis and Russia’s drifting into China’s financial orbit may have profound long-term consequences for

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the global economic architecture: “The sanctions on Russia provide additional geopolitical impetus to China’s moving further forward with a process that is likely to see the renminbi (RMB) become a major reserve currency, a take-off in RMB-denominated bonds, and a Chinese banking sector that grabs an ever larger share of international business.”40 He is echoed by Gabuev who argues that, for Beijing, “Russia’s decoupling from Western financial markets provides a chance to strike deals on Chinese terms and also to turn Russia into a testing ground needed for opening up its own financial system.”41 Toward the end of 2014, indications appeared that China was prepared to provide at least some support to the Russian financial system, which was facing a meltdown because of the drop in oil prices and diminished access to Western capital markets. In October 2014, the countries signed a currency swap agreement worth 150 billion yuan ($25 billion), allowing Russia to draw on Chinese yuan in case of need. In December 2014, Foreign Minister Wang Yi announced that China was willing to help Russia, if needed.42 In February 2015 as leading Western agencies, such as Moody’s, Standard and Poor’s, and Fitch, downgraded Russia’s ratings to junk or near-junk level, the Chinese credit rating agency Dagong Global gave Russia’s Gazprom the highest AAA rating, which would enable the Russian energy giant to place shares in Hong Kong.43 An obvious question concerns what political and economic strings Beijing will attach to any financial assistance it might extend to a struggling Russia. Will the price tag include privileged access for Chinese companies to Russia’s natural resources, support of Chinese geopolitical objectives in East Asia, or transfer of Russia’s most advanced military technologies? The need to seek Beijing’s backing amidst the tightening Western sanctions already pushed Moscow to undertake something that it had been reluctant to do prior to the Ukraine crisis—allow Chinese companies access to Russia’s most prized mineral deposits, particularly in Eastern Siberia and the Far East. Previously, there had been a de facto, though tacit, taboo on the Chinese acquiring major stakes in energy, mining, and other strategic enterprises. For instance, in 2008 Russian tycoon Usmanov failed to get the Kremlin’s permission to sell the Udokan copper field, the world’s third largest, to Chinese investors.44 Yet in May 2014, during Putin’s visit to Shanghai, an agreement was reached according to which China’s Hopu Investments would receive a 10 percent stake in Udokan and provide the entire funding for the copper field’s development.45 According to senior Russian officials, “The attitude toward Chinese investors has completely changed and all possible projects are now open to them.”46 Reflecting this sudden change of mood, the government announced that it would revise the legislation that banned foreign state-owned companies from acquiring stakes of over 25 percent in major deposits of oil, gas,

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gold, platinum, nickel, and copper. The lifting of the restrictions was designed to make it possible for Asian, especially Chinese, state-controlled companies and sovereign wealth funds to invest in Russia’s extraction sector.47 Moscow is even willing to let the Chinese into its holy of holies, which is the controlling ownership of strategic hydrocarbon deposits. In February 2015, the deputy prime minister Arkady Dvorkovich announced in the Siberian city of Krasnoyarsk that Chinese investors were welcome to buy majority stakes in Russia’s major oil and gas fields.48 As an outcome of Putin’s visit to Shanghai in 2014, Beijing and Moscow set up a high-level intergovernmental committee specifically dedicated to promoting bilateral investment cooperation, headed by Russia’s first deputy prime minister Igor Shuvalov and China’s first-ranked vice premier Zhang Gaoli.49 Infrastructure

For a long time, Russian authorities restricted participation of Chinese firms in large infrastructure projects due to concerns that include undesirable competition for Russian construction companies, some of which are owned by people with close ties to the Kremlin, and a possible influx of Chinese workers. However, this informal ban was lifted in 2014.50 One of the first major projects could be the participation of China Railway Construction Corporation (CRCC) in the construction of the 770kilometer-long high-speed railway—Russia’s first—from Moscow to Kazan. CRCC is willing to provide 300 billion rubles in direct investment and loans in exchange for a 50 percent stake in the prospective railway whose completion is expected by 2020. The Moscow-Kazan railway project is designed to be part of the Eurasian high-speed transport corridor, a preliminary agreement on which was reached by the Russian and Chinese governments in November 2014.51 CRCC and the Moscow city government are also discussing the construction, with Chinese funding, of a new subway line in the Russian capital for $2 billion. In another landmark move, Moscow agreed to allow Chinese business into one of Russia’s most lucrative industries—housing construction— which had previously been an almost exclusive preserve for well-connected Russian companies. In May 2014, the government announced that it was going to invite big construction corporations from China to take part in a massive program of state-subsidized housing.52 Technology

The same shift in attitude was also visible in the high-tech area where Russia had previously been cautious in deepening collaboration with the Chinese over concerns that they might steal and replicate Russian core tech-

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nologies. In May 2014, Russia’s United Airspace Corporation and China’s Commercial Aircraft Corporation agreed to jointly develop and manufacture a long-range passenger airliner that would be able to compete with Boeing and Airbus—a project hailed as the biggest and most ambitious to date in Russian-Chinese technological cooperation.53 Another project under negotiations was the joint development of a super-heavy helicopter.54 Russia also expressed its willingness to jointly work with China in developing a wide range of space technologies, such as spacecraft and their components, as well as collaborate on improving satellite navigation systems.55 Furthermore, Russia and China plan to jointly develop floating nuclear power plants.56 Facing Western restrictions on technological cooperation and sales of sophisticated equipment, some in Moscow pin hopes on Chinese expertise and know-how to fill the gaps in some of the industries dependent on foreign-made components and technologies such as shipbuilding. 57 In particular, Chinese manufacturers of oil-drilling equipment can emerge as major beneficiaries of Western sanctions slapped on the Russian energy industry,58 although it remains to be seen if, and when, China could reach US performance standards such as drilling seven miles under the ocean floor as ExxonMobil has been able to do in Sakhalin. One area of special interest to Russia is telecommunications equipment. Discussions on shifting Russian IT networks from US-produced to Chinese-manufactured equipment began in 2013 after Edward Snowden’s revelations about the extent of surveillance activities by the US National Security Agency.59 As a Russian official puts it, “We may be replacing American bugs with Chinese bugs, but at least the Chinese are our partners.”60 In October and November 2014, Russia’s biggest state-owned banks, Sberbank and VTB, signed agreements with the Chinese IT giant Huawei to install its equipment.61 Arms Trade

Although not reflected in the official trade flows data, arms transfers have long been one of the most important areas of Russian-Chinese strategic collaboration. From the early 1990s to 2004, Moscow sold Beijing large volumes of various weapons systems, supplying cash-strapped Russia with dollars and helping its military-industrial complex to survive. However, in the second half of the 2000s, Russian arms exports to China dwindled. China prioritized indigenous production of weapons while worries about its unauthorized reverse-engineering and copying of Russian designs made Moscow reluctant to sell its most prized weapons systems. Another, not publicly voiced but palpable, concern in Russia was as one insider analyst puts it, “China is virtually the only large buyer of our weapons that could

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potentially use them against us.”62 Yet in 2013–2014, amidst the general strengthening of Russian-Chinese ties, weapons transfers experienced a new renaissance.63 Russia agreed to export to China a number of its most advanced systems, including Su-35 fighters, Lada-class diesel submarines, and S-400 air defense systems. Moscow appeared to have shed much of its previous hesitancy in dealing with Beijing, with few areas (e.g., nuclear and ballistic missile technologies) remaining off-limits to Chinese buyers. Although Russia’s economic pivot to China has affected the entire nation and is a whole-of-government approach, its effects will be the most significant in the eastern part of the country. The RFE and Eastern Siberia are the regions of Russia that interest China the most—economically and strategically. Notes 1. Chris Wright, “$40 Million Gas Deal Shows Russia Looking to China to Replace Western Money,” Forbes, May 22, 2014, www.forbes.com/sites/chriswright /2014/05/22. 2. Victor Ishayev, “Stolypin i Vostok Rossii,” Tikhookeanskaya Gazeta, April 14, 2012, www.dfo.gov.ru/index.php?id=44&oid=2624. 3. Vladimir Putin, “Russia and the Changing World,” RIA Novosti, February 2, 2012, www.valdaiclub.com/politics/19300/html. 4. Sara Miller Liana, “Sanctions on Russia: Why a Lot More than Europe’s Energy Is at Stake,” Christian Science Monitor, March 20, 2014, www.csmonitor .com/World/Europe//2014/03/20Sanctions. 5. Interview with Gazprombank’s first vice president Ekaterina Trofimova, Kommersant, May 19, 2014, http://kommersant.ru/Doc/2469481. 6. Vladimir Lukashev, “Bilet v ‘Bol’shoi Kitai,’” East Russia, May 5, 2014, www.eastrussia.ru/opinion/281/912/. 7. Data compiled by the authors from United Nations, Statistics Division: Trade Statistics Branch, UN Comtrade database, 2015, http://comtrade.un.org/data. 8. Ibid. 9. Zhao Huasheng, “Does China’s Rise Threaten Russia?” China Institute of International Studies (Beijing), no. 39 (April 16, 2013), http://www.ciis.org.cn /english/2013-04/26/content_5908664.htm. 10. Akexey Eryomenko, “Russia’s Pivot to China Won’t Reshape Russia’s Economy,” Moscow Times, May 21, 2014, www.themoscowtimes.com/article/500636 .html. 11. “The Agreement Between the Government of the Russian Federation and the Government of the People’s Republic of China on Promotion and Mutual Protection of Investments” Beijing, November 9, 2006, KonsultantPlyus database, http://base .consultant.ru/cons/cgi/online.cgi?req=doc;base=INT;n=37520. 12. The Russia-China Investment Fund was formed by two governmentcontrolled investment vehicles—the Russian Direct Investment Fund and China Investment Corporation—receiving $2 billion in commitments from each in equal shares. See “About the Fund,” Russia-China Investment Fund, www.rcif.com/about -more.htm.

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13. The commission’s activities have expanded over time and now include eleven bilateral subcommittees on: trade, energy, nuclear energy, science and technology, transport, telecommunications and information technology, space, finance, environment, civil aviation and civil aircraft building, and customs. 14. Alexander Gabuev, A “Soft Alliance”? Russia-China After the Ukraine Crisis (London: European Council on Foreign Relations, February 2015), 3. 15. “CNPC Buys Stake in Novatek’s Yamal LNG Project in Russian Arctic,” Bloomberg, September 5, 2013, www.bloomberg.com/news/articles/2013-09-05 /cnpc-buys-stake-in-novatek-s-yamal-lng-project-in-russian-arctic. 16. Gabuev, A “Soft Alliance”? 3. 17. A Chinese official, quoted in Ibid. 18. It is significant that the Altai pipeline from Western Siberia, a preliminary accord on which was reached in November 2014, will rely on the same fields that currently feed Europe. 19. James Henderson, “Russia’s Changing Gas Relationship with Europe,” Russian Analytical Digest, no. 163, February 24, 2015, 2–6. 20. Eric Yep, “More Russian Oil Flows East as Relations with West Sour,” Wall Street Journal, August 14, 2014, http://online.wsj.com/articles/russian-oil-flows -east-as-relations-with-west-sour-1408020141. 21. “Russia, OPEC Jostle to Meet China Oil Demand,” Wall Street Journal, January 23, 2015, www.wsj.com/articles/russia-opec-jostle-to-meet-china-oil-demand -1421987738. 22. Vladimir Putin, interview with the Chinese major news media, May 19, 2014, www.kremlin.ru/news/21031. 23. Currently Russia sells China only 1 billion cubic meters in the form of LNG from Sakhalin. 24. US Energy Information Administration, Russia, March 14, 2014, www.eia.gov/www.eia.gov/countries/cab.cfm?fips=rs. See also “Gazprom Has Good Export Prospects for 2014,” ITAR-TASS, June 27, 2014, www.en_itar-tass .com/company7380097. 25. Yuri Barsukov, “Gazovoye Razoruzheniye,” Kommersant, December 26, 2014, www.kommersant.ru/docs/2641028. 26. “Sergey Ivanov: Rossiya i Kitaii mogut pereiti na vzaimoraschety v natsional’nykh valyutakh, no ne srazu,” Newsru.com, July 10, 2014, http://newsru.com /finance/10jul2014/cnrumoneteryisss.html. 27. “Russia, China May Execute Half of Their Trade in Yuans and Roubles,” TASS, September 9, 2015, http://tass.ru/en/economy/748762. 28. President of Russia, interviewed by TASS, November 14, 2014, http:// en.kremlin.ru/events/president/news/47009. 29. Gabuev, A “Soft Alliance”? 5. 30. Yves Smith, “Russian Companies Plan to Denominate More Trade in Renminbi,” EconoMonitor, June 9, 2014, www.economonitor.com/blog/2014/06/russian -companies-plan-to-denominate-more-trade-in-renminbi/. See also Jack Farchy and Kathrin Hille, “Russian Companies Prepare to Pay for Trade in Renminbi,” Financial Times, June 8, 2014, www.ft.com/intl/cms/s/0/9f686816-ed51-11e3-abf3-00144 feabdc0.html. 31. “Moskovskaya Birzha Nachala Torgi F’yuchersom na Valyutnuyu Paru ‘yuan-rubl,’” TASS, March 17, 2015, http://tass.ru/ekonomika/1833469. 32. Gabuev, A “Soft Alliance”? 5. 33. “Kitayskaya platezhnaya sistema khochet vypustit’ v Rossii mln kart v blizhayshie 3 goda,” Newsru.com, July 17, 2014, http://newsru.com/finance /17jul2014/rucnunionpay.html.

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34. “Milliarder Timchenko iz-za sanktsiy smenil Visa i MasterCard na nalichnye i karty kitayskoy UnionPay,” Newsru.com, August 1, 2014, http://newsru.com /finance/01aug2014/timchenkounionpay.html. 35. George Chen, “Chinese Banks Eye Russian Deals as US Sanctions Sour Relations,” South China Morning Post, May 5, 2014, www.scmp.com/business /banking-finance/article/1504581/chinese-banks-eye-russian-deals-us-sanctions -bite. 36. As of 2014, four Chinese state-owned banks operated in Russia: Agricultural Bank of China, Bank of China, China Construction Bank, and Industrial and Commercial Bank of China. 37. “Kitaiskie banki nachali rossiyskuyu ekspansiyu,” Izvestia, May 28, 2014, http://izvestia.ru/news/571528. 38. Aleksandr Gabuev, “Privlechenie na Vostoke,” Kommersant, March 31, 2014, http://kommersant.ru/doc/2438495. 39. “Rossiya i Kitay sozdadut sovmestnoe reytingovoe agentstvo v piku ‘bol’shoy troike,’” Newsru.com, June 3, 2014, http://newsru.com/finance /03jun2014/nefitch.html. 40. Andrew Small, “Ukraine, Russia and the China Option,” Europe Policy Paper No. 2, 2014 (German Marshall Fund of the United States), 15–16, http://www.gmfus.org/publications/ukraine-russia-and-china-option. 41. Gabuev, A “Soft Alliance”? 6. 42. “Russia May Seek China Help to Deal with Crisis,” South China Morning Post, December 18, 2014, www.scmp.com/business/banking-finance/article /1664567/russia-may-seek-china-help-deal-crisis. See also “Beijing Is Ready to Help Russia’s Rattled Economy, Chinese Foreign Minister Says,” South China Morning Post, December 22, 2014, www.scmp.com/news/china/article/1667633 /beijing-ready-help-russias-rattled-economy-chinese-foreign-minister-says. 43. Jerin Mathew, “China’s Dagong Undermines Western Sanction s on Russia, Rates Gazprom’s Debt at Top AAA,” International Business Times, February 2, 2015, www.ibtimes.co.uk/chinas-dagong-undermines-western-sanctions-russia-rates -gazproms-debt-top-aaa-1486216. 44. Yuliya Latynina, “Kak zastrelit’sya iz gazovoy truby,” May 21, 2014, Novaya Gazeta, www.novayagazeta.ru/columns/63679.html. 45. Mari Mesropyan, “Kitayskaya Hopu poluchit 10% v Udokane,” Vedomosti, May 23, 2014, www.vedomosti.ru/companies/news/26927041/kitajskaya. 46. Yuriy Barsukov, Kirill Mel’nikov, and Anatoliy Dzhumaylo, “Ot gosudarstva gosudarstvu,” Kommersant, July 17, 2014, www.kommersant.ru/doc/2526785. 47. Ibid. 48. Andy Tully, “Russia Considers Letting Chinese Buy Controlling Stakes In Energy Fields,” March 2, 2015, http://oilprice.com/Latest-Energy-News/World -News/Russia-Considers-Letting-Chinese-Buy-Controlling-Stakes-In-Energy -Fields.html. 49. “Rossiysko-kitayskaya mezhpravitelstvennaya komissiya obsudila 32 investitsyonnyh proekta” (Moscow: Ministry of Economic Development, September 9, 2014), http://economy.gov.ru/minec/press/news/090920141810. 50. Gabuev, A “Soft Alliance”? 6. 51. “Moskva—Kazan po-kitayski: dyoshevo i bystro,” Polit.ru, March 30, 2015, http://polit.ru/article/2015/03/30/speed_kazan/. 52. “Kitayskaya CRCC podpisyvaet s Minstroem soglashenie o stroitel’stve zhil’ya v Rossii,” RBC Daily, June 25, 2014, www.rbcdaily.ru/market/56294999 1779342. 53. Aleksandr Labykin, “Samyy krupnyy proekt Rossii i Kitaya,” May 20, 2014,

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Expert, http://expert.ru/2014/05/20/rossijsko-kitajskij-lajner-potesnit-boeing-i-air bus/. 54. “Rossiysko-kitayskiy proekt po vypusku samoletov i vertoletov otsenivaetsya v $7-8 mlrd,” AVI, June 6, 2014, www.helicopter.su/pressa/novosti/2014 /06/06/rossijsko_kitajskij_proekt_po_vyipusku_samoletov_i_vertoletov_oczeni vaetsya_v_$7_8_mlrd/. 55. “Rossiya vybrala Kitay v soyuzniki po pokoreniyu Luny i Marsa, ob‘yavil Rogozin,” Newsru.com, June 30, 2014, http://newsru.com/russia/30jun2014/mars .html. 56. Maxx Chatsko, “Russia and China Are Planning Something Big—and It Floats,” Fool.com, August 16, 2014, www.fool.com/investing/general/2014/08/16 /russia-and-china-are-planning-something-big-and-it.aspx. 57. Aleksei Krivoruchek, “Dlya Minpromtorga podgotovili programmu importozameshcheniya sudovykh materialov i komplektuyushchikh,” Izvestiya, May 30, 2014, http://izvestia.ru/news/571667. 58. Eric Yep, “More Russian Oil Flows East as Relations with West Sour,” Wall Street Journal, August 14, 2014, http://online.wsj.com/articles/russian-oil-flows -east-as-relations-with-west-sour-1408020141. 59. Gabuev, A “Soft Alliance”? 6−7. 60. A Russian official, quoted in Alexander Gabuev, A “Soft Alliance”? RussiaChina after the Ukraine Crisis (London: European Council on Foreign Relations, February 2015), 7. 61. “VTB budet zakupat’ servera i sistemy svyazi u Huawei,” CNews, November, 11, 2014, www.cnews.ru/news/top/index.shtml?2014/11/10/589543. 62. Mikhail Kropotkin, “Vektory voenno-tekhnicheskogo sotrudnichestva,” VVP, April 2013, www.vvprf.ru/archive/clause786.html. 63. “Voennoe i voenno-tekhnicheskoe sotrudnichestvo Rossii i Kitaya,” RIA Novosti, May 20, 2014, http://ria.ru/spravka/20140520/1008416110.html#ixzz 37AiQMrNM. See also Robert Farley, “Five Ways Russia Could Help China’s Military Become Even Deadlier,” The National Interest, August 2, 2014, http://nation alinterest.org/feature/five-ways-russia-could-help-chinas-military-become-even -11000.

9 A Symbiotic Relationship: Russia’s Far East and China’s Northeast

torically depended on trade and other forms of economic exchange with China, particularly China’s northeastern provinces of Manchuria. Ever since the Russians began colonization of the Amur River basin and other southern parts of the Far East in the 1850s, China has played an indispensable role in the region’s economic vitality, providing essential goods and a labor force.1 This pivotal role of China for the RFE was facilitated by the open border regime that existed on the Russian-Chinese Far Eastern frontier from the 1850s to the late 1920s.2 Even when authorities attempted to restrict the cross-border flows of goods and people, they continued almost unabated in the form of smuggling. The period of relative openness ended with the advent of the Soviet totalitarian state. By the 1930s, the border was effectively sealed off, putting an end to Far Eastern-Chinese symbiosis. However, the communist isolationism turned out to be just an interlude before another era of openness to China began. In the 1980s, economic exchanges between the Soviet Far East and China resumed. Amidst general liberalization of Soviet politics and economy under Mikhail Gorbachev, Moscow began to relax the border regime in the Far East, particularly with the view of encouraging trade with China. In June 1988, the two governments concluded an agreement on the development of trade and economic relations between their border provinces and enterprises. Following in July of the same year was an agreement on movement of people across the border. Even before these intergovernmental agreements were signed, the regional administrations in the Far East began to discuss with their Chinese counterparts memorandums on transborder exchanges.3 One more reason for Moscow to encourage the Far East’s border trade with China was to give the eastern provinces an external source of income that could compensate them for the dwindling of subsiTHE RUSSIAN FAR EAST, ESPECIALLY ITS SOUTHERN AREAS, HAS HIS-

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dies from the center, whose financial resources were increasingly strained due to the rapidly deteriorating financial situation in the country. The collapse of the Soviet Union and the demise of the centrally administered socialist economy by December 1991 ushered in almost full liberalization of the economic relations between the RFE and China. In November 1991, Russian president Boris Yeltsin signed a decree that did away with the state monopoly on foreign trade and permitted all companies and individuals to engage in external economic activities.4 In March 1992, Russia and China established a most-favored regime in their trade relations, which further lifted remaining restrictions on economic contacts. By 1993, the migration regime for cross-border travel was also liberalized to a great extent, resulting in a de facto visa-free movement between the border areas of the RFE and northeastern China. Thus, in less than five years, from 1988 to 1993, the border between the Far East and China was transformed from an impenetrable wall into a wide-open gate, reminiscent in its extreme porosity of the previous century. According to official data, the volume of trade between the RFE and China grew from $520 million in 1989 to about $1.2 billion in 1993. 5 Yet the real amount of the RFE’s commerce with China was significantly higher. At the time, most of the transactions were in the form of barter, which enabled the traders to downgrade the true costs of goods and thus minimize customs duties. It is estimated that, in the first half of the 1990s, barter trade made up over 90 percent of the RFE’s exports to China and around 70 percent of the imports from China.6 A sizable portion of the border trade was not registered because it was conducted as the so-called shuttle trade7—the practice when individual petty merchants buy consumer items in northeastern China and bring them into the RFE for commercial resale while, to avoid customs duties, declaring the goods as meant for their personal needs. In the 1990s, the volume of shuttle commerce in RFE-China trade was at least as large as the official trade registered by customs. In the 1990s, the RFE’s trade with China grew at a rate two to three times higher than that with other countries. As early as 1992, China accounted for 27.35 percent of the RFE’s exports and 47.5 percent of the region’s imports. By 1993, the share of trade with China reached some 48 percent for Khabarovsk and Primorsky Krais while it was as high as 92 percent for Amur Oblast and 95 percent for the JAO.8 After a huge boom in the late 1980s and early 1990s, the RFE-China commercial interaction witnessed a slump in 1994–1995, with the volume of trade dropping by 4.7 times in 1994 compared to 1993. In 1994, in northeastern China 80 percent of firms that focused on border trade with Russia went into the red while 30 percent closed down their business with the RFE.9 Even though in 1997 the trade began to rise again, in 2000 it remained lower than in 1993 ($11.25 billion vs. $11.88 billion).10

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There were several reasons for such a dramatic fall. The Russian market was already more than saturated with cheap, but often low-quality, Chinese goods and Russia began to import many consumer goods from other countries such as Turkey. The Chinese government introduced macroeconomic policy changes that temporarily reduced demand for Russian raw materials and machinery11 and enacted new regulations for businesses engaged in import-export activities so as to make foreign trade less chaotic and more civilized.12 On its part, the Russian government resorted to even stricter measures. Alarmed by the tide of uncontrolled Chinese migration and commerce, Moscow and regional authorities embarked on more restrictive policies, moving away from the previous laissez-faire policies. In 1993–1994 migration regulations for the Chinese were significantly stiffened, leading to a sharp fall in the number of Chinese nationals crossing into the RFE. For example, the number of Chinese arriving in Amur Oblast in 1994 was 3.6 times less than the previous year.13 Moscow also clamped down on the excesses of border trade, with measures such as prohibiting the barter export of raw materials, raising duties on barter imports, and restricting the mass shuttle commerce. However, the low institutional capacity, as well as pervasive corruption, of Russian government agencies involved in administering the border significantly reduced the intended effect of these restrictions. According to some scholars, the level of porosity of the RFE-China border remained high, with much of the two-way commerce shifting into the illegal and gray areas.14 Even by conservative estimates, in the late 1990s the amount of the shuttle trade imports from China to the RFE stood at $500 million to $600 million, which was two to two and a half times more than the registered imports passing through the customs.15 Contraband from China was rampant, and on the Russian side timber, fish, and metals topped the items exported into China evading customs and border controls. Throughout the 1990s, the relatively transparent border with China was a lifeline for many residents in the RFE who lost jobs or went unpaid in the wake of the collapse of the Soviet-era industries. Former blue-collar workers, clerks, and engineers from defense factories and other mothballed giants of the socialist industries turned into shuttle merchants. Every city and town in the Far East now had a market where people could buy lowquality but affordable clothes, footwear, and other consumer items from China. The general patterns of the cross-border interaction that took shape in the 1990s continued into the new millennium, though with some modifications. As part of its overall thrust to consolidate state control over domestic and external affairs, Putin’s government introduced neomercantilistic border regulations, which also affected RFE-China relations. The measures further limited the scope for individual and small firm shuttle trade. The trade with China began to concentrate in the hands of big players, many of

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which had connections with top echelons of government bureaucracy. Customs statistics show that the trade flows between China and the RFE have increasingly been routed via Moscow, Saint Petersburg, and other regions in European Russia where major companies are headquartered.16 This trend of supplanting the RFE entrepreneurs out of the most profitable sectors of business with China has continued into the 2010s. For example, in 2014 the Far Eastern Meat Association publicly complained that the federal government was taking measures to bar Far Eastern companies from importing meat from China so that the lucrative trade could go to Moscow’s and Saint Petersburg’s companies.17 In 2007, Moscow also announced higher export duties on unprocessed timber, trying to encourage the processing of wood inside Russia instead of just shipping round wood to China and other foreign destinations. In the same year, the Russian government banned foreign nationals from trading in retail markets, which delivered a blow to the Far Eastern consumer markets where most of the vendors often were Chinese.18 Specifically with regard to the RFE-China trade, the authorities imposed a number of nontariff barriers to stem the imports of Chinese goods, especially foodstuffs.19 In another move, the center reasserted its control over border crossings with China. In the 1990s, many of these crossings were privatized, with their facilities being owned by regional business interests. This often led to the emergence of semiprivate gateways on the RFE-China border—ideal conduits for smuggling activities. In 2007, Putin created the special Border Facilities’ Management Agency (Rosgranitsa), which was to take over the border infrastructure. This lowered the leverage that local authorities and entrepreneurs had over the border commerce. In the same vein, Moscow blocked Chinese-initiated business projects that were aimed at creating special transborder trade and economic complexes between northeastern China and the RFE. In 1998 and 1999, the Russian and Chinese governments signed two agreements on expanding cross-border economic links, which called for the establishment of jointly owned and operated commercial compounds straddling the border. The complexes were to host industrial enterprises, trade centers, shops, entertainment facilities, and hotels. Entrance into the complexes was supposed to be visa-free for both Russians and Chinese. Three zones were originally designated for implementation: Zabaialkalsk-Manzhouli, BlagoveshchenskHeihe, and Pogranichny/Grodekovo-Suifenhe. The latter project advanced the furthest. On the Chinese side, it was sponsored by Heilongjiang and Suifenhe authorities as well as the private Shanghai-based Shimao Corporation. On the Russian side, it was actively promoted by one of Primorsky’s richest and most powerful oligarchs, Gennady Lysak, who had close connections to the then governor Sergey Darkin. By 2007 some facilities of the complex had been built on each side of the border, with the Chinese invest-

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ing the bulk of the money.20 However, by that time Moscow seemed to have second thoughts. A privately owned trade and economic complex with a novisa regime would definitely run counter to the more centralized border policies that the Putin government pursued. There also were concerns that the zone would become another conduit for the unregulated flow of Chinese goods and labor force into the RFE. The federal government’s failure to reaffirm the special regulations for the project—which were stipulated in the 1998 and 1999 border cooperation agreements—essentially killed the Suifenhe-Pogranichny complex. Another indication of Moscow’s unwillingness to open wide the border with China was Russia’s failure to proceed with the construction of a bridge across the Amur River that would connect Russian Blagoveshchensk and Chinese Heihe, even though in 1995 the Russian and Chinese governments signed an accord on building a transboundary link across the river between the “twin cities.”21 Despite the steps by Moscow to impose stricter controls on particular transborder flows, such as shuttle trade and Chinese migration, overall RFE-China commerce expanded quite briskly after 2000. In 2006, its volume topped $4 billion.22 In 2010, it reached $5.5 billion.23 In 2013, the RFE-China commerce stood at $11.2 billion, accounting for 27.8 percent of the RFE’s registered foreign trade.24 China received 19.4 percent of the RFE’s exports and provided the region with almost half (47.1 percent) of its imports.25 The structure of trade has remained more or less the same since the early 1990s. The RFE’s main exports to China are mainly unprocessed commodities, above all timber, fish, oil, and coal.26 At the same time, China sells to the RFE a wide, and growing, variety of goods. In the 1990s, what China sold to the RFE mostly consisted of low-end products—foodstuffs (vegetables, fruits, meat) and cheap consumer goods (clothes, footwear, home utensils, TVs, audio players, etc.). In the decade 2000–2010, the share of sophisticated machinery and equipment began to grow rapidly. From 2000 to 2008, the volume of industrial machinery that China supplied to the RFE grew by fifty-five times. Since 2009, machinery, such as cell network servers, buses, and bulldozers, became the top item in China’s exports to the RFE.27 The Chinese enthusiasm to trade with the RFE so far has not been matched by a readiness to invest in the region. Chinese direct investment in the RFE has hovered at around 1 percent of the total foreign investments, ranking at the bottom of the list of investing countries.28 In reality, the sum of the Chinese investments in the RFE may be somewhat higher than the formal statistics show. The Chinese entrepreneurs are known to hold undeclared stakes in some private RFE’s companies, whose official owners are Russian citizens.29 Also, some Chinese investment may be channeled through offshore tax havens such as the Bahamas and the British Virgin

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Islands. Yet even if we take these gray investments into account, they will not change the general picture much, at least as of now. Most of the Chinese money in the RFE went into multiple but smallscale and low-tech enterprises in the retail and wholesale trade, Chinese cuisine eateries, and logging.30 Thus, the investments largely served to maintain and facilitate the established patterns of the RFE-China economic relationship—raw materials in exchange for manufactures. As of 2014, there was no single case of a major industrial production facility, let alone high-tech production, built in the RFE with Chinese money. Of course, the Chinese experts are right to point out that the RFE cannot boast of a welcoming and liberal investment climate as a reason for the absence of China’s FDI.31 However, almost all researchers of the RFE-China economic relations stress that, quite apart from Russia’s imperfect regulations, the Chinese have no appetite to finance the manufacturing and industrial production in the RFE since that would mean creating direct competition with the existing and planned enterprises in northeastern China. As Pavel Minakir points out, China’s strategy in the RFE “is not to invest in resource processing and mining, but rather acquire the right to exploit natural resources and import them for processing in China.”32 Another reason for the lack of Chinese investment is the small size of the RFE’s market of just 6 million people and its poor physical infrastructure. When the Chinese do invest in setting up manufacturing production in Russia, they choose to do so in its European part, which offers a big consumer market, a larger and better-trained workforce, and better transport and energy infrastructure. As an example, China’s major automaker, Great Wall Motors, rejected the option of Primorsky’s Ussuriysk and instead decided to build its off-road expresses assembly plant in Tula Oblast, close to Moscow.33 In this, the Chinese are following the patterns of large South Korean and Japanese manufacturing projects in Russia, which tend to eschew the RFE in favor of the more populated western part of the country. Dongbei in the Lead Historically, the RFE’s interactions with China have focused heavily on Dongbei (its northeastern provinces). Also known as Manchuria, Dongbei consists of the provinces of Heilongjiang, Jilin, and Liaoning. It also encompasses five eastern prefectures of the autonomous region of Inner Mongolia, although their economic weight is negligible. Northeast China is a vast area of 2 million square miles populated by 134 million people (10 percent of China’s total population),34 with Liaoning being the most populous. The northeast is a major industrial base and was one of the first to

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industrialize in China. This was thanks to the Japanese who, during the period of the puppet state Manchukuo in the 1930–1940s, established facilities to provide for the Imperial Army’s needs. After World War II, the Soviets made a big contribution to Manchuria’s economic development, assisting in building plants and factories there.35 By the late 1970s, the northeastern provinces ranked among the nation’s most economically advanced regions. However, as China began its liberalizing reforms, the northeast fell significantly behind eastern and southern maritime provinces, increasingly becoming one of the nation’s backwaters. The concentration there of state-owned enterprises of heavy industry and the military-industrial sector—many of them obsolete, uncompetitive, and dependent on government subsidies— became the main liability. To reinvigorate the region, in 2003 Beijing adopted the Northeast Area Revitalization Plan. The core of the program is to upgrade the region’s traditional heavy industry while creating new hightech industries. Since the second half of the 1980s, when relations between the Soviet Union and China normalized, Beijing saw cross-border cooperation as a crucial source of growth for the northeast and gave the northeastern provinces considerable leeway in establishing commercial links with the RFE and Eastern Siberia. This was in line with China’s general policy of expanding its border areas’ economic exchanges with neighbors. For example, the province of Yunnan was encouraged to concentrate on economic relations with Vietnam and Burma while Xinjiang focused on the Central Asian republics of Tajikistan, Kyrgyzstan, and Kazakhstan. Thanks to gradual decentralization of economic decisionmaking, by the late 1980s China’s provincial and local bureaucracies were able “to take an active part in initiating, facilitating and managing cross-border economic activity through administrative control, international economic projects and public business.”36 In 1991, Heilongjiang authorities decided to shift from simple expansion of border trade to the development of an outward-oriented economy focused on the RFE. In 1992, the Chinese government adopted decrees on tax and other benefits for enterprises involved in border trade as well as a number of documents on the “economic openness belt.”37 To a large extent, the central authorities delegated China’s economic policy toward the RFE to the northeastern provinces, particularly Heilongjiang. In the late 1990s, the policy of border openness was reemphasized within China’s overall strategy of outward economic expansion. The export-driven development of the northeast, targeting Russia and the RFE, was attached even higher importance. That said, the northeastern provinces are not equally interested in cooperation with the RFE. Of the three, Heilongjiang attaches by far the top priority to the RFE, which is explained by its having the longest bor-

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der with Russia and its history of having been closely connected to its northern neighbor. In particular, the capital of Heilongjiang, Harbin, was established by the Russians as the main hub of the China Eastern Railway and for a long time served as Russia’s main base in Manchuria. Russia is by far Heilongjiang’s biggest trading partner, accounting for over half of the province’s foreign trade, whose total value reached $37.8 billion in 2012. The northeastern provinces, especially Heilongjiang, act as commercial middlemen between the industrialized eastern part of China and Russia.38 In fact, this intermediary function has increased significantly over the years. The share of goods of local origin in Heilongjiang’s total exports declined from 50 percent in the 1990s to 36 percent in 2003 and 20 percent in the early 2010s.39 There are several border entry ports for the RFE-China trade in northeast China, of which the city of Suifenhe is the most important. The story of Suifenhe is remarkable, as it vividly illustrates the evolution of the relationship between the northeast China and the RFE. Suifenhe, which sits right on the border with Primorsky, first rose to prominence in the early twentieth century when the China Eastern Railway began to operate. With a railway station built near the village of Suifenhe, the place became the focal point for the RFE-Manchuria border commerce. In the early 1990s, Suifenhe’s commercial glory had a comeback in force, as trade with the RFE skyrocketed. Authorities in Beijing and Harbin provided generous administrative, tax, and customs benefits and exemptions to Suifenhe to assist in its commercial activities with Russia. In particular, in 2009 Suifenhe was made a duty-free zone—one of six such zones in China and the only one in Dongbei.40 In 2013, the circulation of the Russian ruble, alongside the renminbi, was allowed in Suifenhe to make it easier for Russian visitors to shop.41 Transformed from a sleepy village into a booming modern city,42 Suifenhe now serves as a wholesale market for Chinese goods destined for Russia. It provides retail shopping and entertainment for hundreds of thousands of Russian Far Easterners, mostly residents of Primorsky, who visit the city annually. Recently, it even began to offer medical services to the Russians, with a high-tech clinic that opened in the city.43 Suifenhe has hundreds of timber mills that process the roundwood logs imported from across the border. While some of finished furniture and flooring is sold within the Chinese domestic market, a substantial part of what is manufactured in Suifenhe is shipped to the United States and the EU.44 In stark contrast to the glitzy prosperity of Suifenhe, its Russian counterpart on the other side of the border—the town of Pogranichny—has remained a backwater that has seen little development since the opening of the border in the early 1990s.

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Exporting labor is another rationale for the northeastern Chinese in their dealings with the RFE. Despite the overall slowdown in the rate of population growth, rural areas of Dongbei remain characterized by high unemployment. According to some estimates, the redundant workforce in northeastern China stands at around 10 million.45 Sending at least some of these people to the RFE as workers, farmers, and traders somewhat lowers the unemployment pressure and provides an extra source of income for northeastern China since Chinese labor migrants remit back home most of the money earned in the RFE. Finally, the northeastern Chinese are interested in the RFE, as it can provide them with shorter and more convenient routes to their major overseas markets as well as to southern China.46 As already mentioned, the landlocked province of Jilin is tantalizingly close to the Sea of Japan, being separated from it by only a narrow strip of southern Primorsky. That is why Jilin’s authorities, with the backing of Beijing, have for a long time pitched economic projects that could give them access to the sea. The grandest of these undertakings has been the Greater Tumen Initiative (originally known as the Tumen River Area Development Programme). The project was initiated in 1991 with some support from the UN Development Programme. The geographical coverage of the GTI includes the three northeastern provinces (Jilin, Liaoning, and Heilongjiang) and Inner Mongolia of China, the Rajin-Sonbong Economic and Trade Zone of North Korea, the eastern provinces of Mongolia, the eastern port cities of the South Korea, and Primorsky Krai of Russia. The core decisionmaking institution of the GTI is the Consultative Commission composed of government representatives from all five GTI member countries.47 The GTI secretariat is based in Beijing, indicating that it is now mostly a China-sponsored initiative. The GTI was created to pursue the objective of unlocking a potential of the Tumen River area,48 where the borders of China, Russia, and Korea meet, by constructing an international port and a commercial hub there. However, its ambitions of creating a “second Hong Kong” on the Tumen River have largely been unfulfilled and the organization itself is now dormant. The principal reason for this lackluster performance is the perception among some members (particularly Russia and North Korea) that most of the benefits would go to China and that the entire arrangement would be dominated by China. Even more importantly, Russia and North Korea are worried about possible loss of sovereign control over their territories that are to be covered by the GTI integration scheme. Russia’s concern is also that the Tumen project could rival, and undercut, the Trans-Siberian Railway and its terminal ports in Vladivostok and Nakhodka.49 Having failed with the GTI project, Jilin’s business interests have sought to acquire a stake in Russia’s Zarubino port 50 and have also shown interest in the nearby ports of Posiet and Slavyanka.51 A rail link between

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Makhalino in the south of Primorsky and Jilin’s Hunchun near the Russian border was put into operation in 2013, which should facilitate shipments to and from northeastern China transiting via the RFE’s ports. The province of Heilongjiang is mainly interested in developing the Suifenhe Transport Corridor, which runs from the Vladivostok, Nakhodka, and Vostochny ports through Suifenhe to Harbin. This corridor can also be extended to Manzhouli in Inner Mongolia and Russian Zabaikalsk, linking up with the Trans-Siberian Railway at Chita. The corridor, if properly upgraded, will provide the landlocked Heilongjiang and Inner Mongolia with rapid access to the sea using Primorsky’s ports.52 Heilongjiang, which has a 3,000-kilometer border with Russia, plays the lead role in China’s transborder interactions with the RFE. In the 1980s, Deng Xiaoping reportedly conferred on Heilongjiang a semiofficial mandate to be the main conduit in China’s commercial relations with the Soviet Union and Eastern Europe. Today, the province accounts for around 25 percent of China’s trade with Russia and one-third of Russian-Chinese investment flows.53 Apart from Beijing, Harbin is the largest center of Russian studies in China. Some Heilongjiang municipalities even have their quasiofficial representative offices in the RFE; for example, in Vladivostok, there are business offices of the cities of Mudanjiang and Suifenhe. Since 1990, the Heilongjiang government has sponsored the annual Harbin International Trade Fair, which has focused mainly on Russia and the RFE and has been visited by official and business delegations from the RFE. In June 2014, the fair was upgraded to the Sino-Russian Expo and attended by Russian deputy prime minister Dmitry Rogozin along with the RFE governors. According to the veteran observer and practitioner of RFE-China relations and chairman of Primorsky’s Legislative Assembly Viktor Gorchakov, since around 2005 Heilongjiang, with the backing of central authorities, embarked on the “open border” strategy toward the neighboring areas of Russia, providing special treatment to businesses involved in cross-border transactions with the RFE. In particular, Chinese entrepreneurs who set up shop in the border areas of Russia are granted access to long-term lowinterest credit from the government coffers. Also, tax benefits are provided to companies that do business with Russia’s border areas. The Chinese who go to work to the RFE border areas are issued their passports in an expedited manner and with no fees. The secondary school graduates from Chinese border cities and towns are granted state-funded loans to go to study in the RFE’s universities.54 Access to cheap credit and inexpensive labor gives Heilongjiang’s companies that operate in the RFE obvious advantages. However, this has not translated into any substantial investment projects so far. Most of the transborder commercial undertakings run by the Heilongjiang Chinese in

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the RFE are small- and medium-sized schemes seeking short-term profits. The ventures advertised as big ticket projects often turn out to be fakes. The case in point is the Kangji Trade and Economic Cooperation Zone in Primorsky’s Ussuriysk, which was started in 2007 by businesses from Heilongjiang and Zhejiang. It was to be one of six zones established by China in developing countries—the others were Zambia, Mauritius, Thailand, Pakistan, and Cambodia. More than sixty large- and mediumsized domestic and overseas companies specializing in a variety of manufacturing and processing industries, including shoes, apparel, timber, household appliances, and automobiles and components, were expected to set up offices and plants in the zone and export their products to Japan, South Korea, the United States, and Southeast Asia. 55 According to the website of the Kangji International Investment Company, the zone hosts as many as 20 enterprises—“14 shoe factories, two garment factories, three wood-processing and furniture factories, and one color printing shop.” The total amount of investment should have reached 2 billion yuan.56 In March 2010 Xi Jinping, then vice chairman of China, was briefed on the zone’s shiny prospects during a visit to Russia. But the reality turned out quite different. As of this writing, the Kangji zone barely operates.57 The only visible impact from its activities seems to have been vocal complaints from the Russian-owned Ussuriysk’s cardboard factory whose business is being undercut by Kangji—the Chinese make cheap cardboard boxes from the semifinished components imported from China.58 The case of Kangji is typical of how the reality of economic cooperation with the RFE is often misrepresented, and sometimes outright falsified, by Heilongjiang’s authorities and businesses. As Vladivostok-based China analyst Sergey Ivanov writes, the hyped-up discourse of the expanding cross-border collaboration is “used by the local bureaucracy as an instrument to increase its significance within the framework of China’s economic policy, and . . . to access the distribution of preferences and economic capital meted out by the central government.”59 In actuality, Dongbei has had only limited success in penetrating the RFE’s economy. Despite Heilongjiang’s efforts at promoting the open border strategy, the Chinese presence in the RFE had stopped growing and more or less stabilized by the end of the first decade of the new millennium. There were no increases in investment, no significant projects with Chinese participation on RFE soil, and the number of Chinese migrants remained more or less the same. The RFE-China trade has continued to grow, but the share of China in the RFE trade has not changed much since the 1990s. This stagnation was inevitable, for several reasons. First, being China’s economic periphery, Heilongjiang has always lacked its own capital.60 It did not have enough financial resources to undertake any major expansion into the RFE. It had to rely on capital from

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Hong Kong and other affluent maritime provinces whose priorities were elsewhere in the world and had little appetite for doing major business with Russia and the RFE. Almost all Chinese companies operating in the RFE have been small- and medium-sized firms from the northeast with limited wherewithal. Second, until recently Beijing did not show much interest in the RFE. As noted earlier, the central government did encourage Dongbei’s dealings with Russia’s adjacent territories by means of some administrative and tax preferences, but this was merely part of the national Go Out policy—with emphasis on the neighboring countries. Within this policy framework, the RFE was not considered a priority relative to other border areas like Southeast Asia or Central Asia. In fact, most indications were that the RFE was of marginal importance to Beijing.61 Third, the RFE itself—with its population of barely 6 million people, most of them with moderate incomes, and lackluster economic growth—is not exactly a magnet for foreign export-oriented businesses. Its narrow consumer market already became saturated with the existing Chinese presence by the late years of the decade 2000–2010. In other words, by that time there was little left that Chinese traders, investors, and migrants could do in the RFE to gain reasonable profits.62 Fourth, as discussed earlier, Moscow put up extra barriers to inhibit some categories of economic exchanges with China that were deemed harmful to the national economy and of potential risk to national security. The barriers mainly included restrictions on imports of Chinese goods and labor as well as discrimination against Chinese investments in the strategic sectors such as oil and gas fields or ports. These probably were among the reasons why Russia and China failed to implement the much-publicized program for cooperation between the regions of the RFE and Eastern Siberia and northeast China.63 The document was prepared by the two governments and promulgated with great fanfare by then Russian president Dmitry Medvedev and China’s president Hu Jintao in September 2009.64 The idea was to coordinate, and cooperate in, the development of the two neighboring regions with complementary factors of production. The program included 104 investment projects on Russian territory (with the estimated value of $47.9 billion) and 111 projects in China ($9.87 billion).65 The projects encompassed all of the twelve provinces in the macroregion on the Russian side and the three northeastern Chinese provinces plus Inner Mongolia. Most of the Russian projects were in resource extraction, mainly mining and logging, while the Chinese-proposed projects were related to processing and manufacturing, including in the high-tech sectors. Not surprisingly, the document was criticized by many Russian analysts as tilted unambiguously toward Chinese industrial requirements, and as a template

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for turning the RFE into a commodity appendage for northeast China.66 There also was some controversy within the Russian government, with the Ministry for the Development of the Far East, under Victor Ishayev at the time, refusing to act on the program and calling it misconceived.67 It turned out that neither side was ready to move forward with the agreed program. As of the first half of 2014, out of 104 projects on the Russian list, 24 had entered the implementation stage and only 8 of them had Chinese participation. Out of the Chinese list of 111 projects, 42 were being realized, with only 1 having a Russian investor.68 The Chinese were deterred mainly by the high costs involved in developing maiden resource extraction projects in the harsh conditions of Eastern Siberia and the RFE, with little if any transportation and energy infrastructure available.69 Northeast China lacked the required capital while Beijing was not ready to commit centralized financial resources. Another obstacle was the reluctance of the Russians to accept the conditions that China often attaches to large-scale investments—most importantly, using Chinese labor, materials, and equipment. Chinese observers at the Shanghai Academy of Social Sciences offer an additional explanation for the program’s failure: the list of projects was worked out at the top level (Hu Jintao and Medvedev) “without enough local consultation and without giving local authorities enough of a stake to want the projects to succeed.”70 Deceitful Statistics, or Is There More than Meets the Eye to RFE-China Trade? According to official records of the Russian customs agency, China is not the top trading partner for the RFE. In 2014, China ranked only third (with 26.1 percent of the RFE’s foreign trade). It was Japan that accounted for the largest share of the RFE’s foreign trade (26.3 percent), closely followed by South Korea (26.2 percent).71 However, the real picture may be different.72 First, the statistical data of Russian customs does not allow us to assess the real shares of different regions in the international trade of Russia. Multiregional companies—large firms that have headquarters in Moscow and branches in various Russian regions—often report their foreign trade operations to any statistical agencies where they have branches as well as declare goods at any authorized customs agency, not necessarily in the region where their products are actually produced and exported from. For instance, consider an energy company, which has a headquarters in Moscow and a branch in Blagoveshchensk (Amur Oblast) where it produces electricity at its power plants and exports it to China. The electricity sold to China can be declared via customs in either Blagoveshchensk or Moscow. In the latter case, the electricity exports would not be registered in the foreign

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trade statistics of the Russian Far East. The same refers to the exports of timber, ore, and any other goods and items. The national statistical data shows that the share of South Korea and Japan in Russia’s total external trade turnover is approximately one-third of the share of China.73 This allows us to conclude that the rank of China in foreign trade of the RFE possibly should not be lower than the rank of China for Russia as a whole and, hence, it should be at least somewhat higher than the rank of South Korea or Japan. Second, the large proportion of Russian-Chinese trade is informal, not being accounted for by customs and other government agencies and, consequently, not being reflected in Russian statistical data. For example, shuttle trade is unobserved by the Russian statistical entities while people’s trade is more or less observed by the Chinese statistics, leading to discrepancy between the reports of Russian and Chinese customs. Although the efforts of Russian authorities led to a drastic decline in the share of informal Russian-Chinese turnover after 2008, it is still quite high. For example, in 2013 the discrepancy between Russian imports from China (according to Russian data) and Chinese exports to Russia (according to Chinese data) was at least 7 percent of Russian imports (or $3.7 billion). Moreover, the informal turnover between border regions is traditionally higher than the total informal turnover between two countries. Because all Russian regions bordering China are located in the RFE and Eastern Siberia, their actual volume of commerce with China should also be considerably higher than officially reported by Russian customs agencies. In addition to the longtime phenomenon of people’s trade or shuttle trade,74 a new phenomenon (cross-border electronic commerce via Taobao and other Chinese e-commerce websites) is now occurring. Taobao trade flows from Russia into China are difficult to trace by customs and they are hardly registered by either Russian or Chinese statistics. Finally, not only imports from China to Russia but also some exports from Russia to China are not well reported by Russian authorities. For instance, timber, wood, fish and oil, and liquid and mineral fuel are among goods that are often exported with violations of the customs legislation. If the many gray areas in statistical reporting and cross-border transactions are taken into account, China will emerge as the top trading partner for the RFE―ahead of South Korea and Japan.75 Is There a Chinese Fifth Column in the RFE? It has become something of conventional wisdom that the RFE is going to be taken over by China demographically. The logic behind this sounds quite compelling: “Siberia is as resource-rich and people-poor as China is the

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opposite.”76 In the mass media and scholarly publications, one can find statements suggesting that there are already millions of Chinese lurking in the RFE. However, the reality on the ground is quite different. According to assessments by credible Moscow-based demographers and sociologists, the overall number of Chinese in Russia has been around 400,000–600,000 people. Between 30 percent and 50 percent of them (200,000–300,000) are dispersed over the vastness of the RFE and Eastern Siberia. It is remarkable that the single-biggest concentration of Chinese migrants in the country is found not in the Far East, but in Moscow (28.7 percent of the Chinese population in Russia).77 Largely concurring with the above estimates, analysts in the Far East do not perceive any signs of Chinese demographic invasion. They put the maximum possible number of Chinese who are simultaneously present in the RFE at any given moment in recent years at 300,000— or about 5 percent of the RFE’s total population. These include all categories of Chinese nationals who happen to be in the RFE both with long-term and short-term stays: seasonal laborers, traders, business travelers, tourists, students, and so forth.78 Among them, only 10 percent or slightly more reside in the RFE on a permanent basis. It seems that the number of Chinese in the RFE has remained relatively stable since the late 2000s.79 Few Chinese are in the RFE as illegal migrants. This problem did exist in the chaotic 1990s. But in the early 2000s, due to the introduction of an automated system for immigrant registration on the eastern border, control over transborder human movements was strengthened considerably and opportunities for Chinese to stay illegally in Russia decreased.80 True enough, there is a glaring gap between the RFE’s sparseness and the teeming population of China and its northeastern provinces. This, however, does not necessarily mean that Chinese will be attracted by Russia’s demographic vacuum to fill it up. Analogies from physics rarely work properly when applied to society. It is certainly correct that Russia, and its eastern areas, are facing long-term demographic decline. But so is China, which will soon face the shortage of a young workforce. China’s population of fifteen- to twenty-four-year-olds has already peaked and will continue to shrink over the next decade.81 In particular, as Mark Adomanis points out, the population of the Chinese provinces bordering Russia, precisely the areas expected to export people to the RFE, is already stagnant. They have aged far more rapidly than China as a whole and, if current trends continue, within the next several years the Chinese population on the Russian border could even start to shrink.82 In addition, China’s economic boom is resulting in increases in domestic wages, which are becoming more competitive with the wages that Chinese guest workers can get in Russia.83 Hence, potential Chinese migrants

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will have more incentives to stay at home rather than venturing into a cold, alien, and often unwelcoming Russia.84 Even from a historical perspective, it is evident that the Chinese have never been much attracted to the Far Eastern and Siberian lands as a place for living. After all, China has neighbored these areas for millennia, but has never attempted to colonize and settle them. In fact, massive Chinese migration into the Far East started only after Russians came there in the late nineteenth century, creating economic opportunities for Chinese laborers and traders. This largely holds today. Individual Chinese would seek to migrate to the RFE en masse only if they saw opportunities to make more money there as well as obtain a higher standard of living. In this, the RFE in its present condition can hardly compete with China’s big cities or overseas destinations like the United States, Australia, and Western Europe. One sign of Chinese lack of interest in settling the RFE is the absence of Chinatowns in the far eastern cities. In a similar vein, the RFE does not yet have anything close to a Chinese diaspora, understood as a relatively cohesive and organized ethnic minority community.85 Most Chinese who stay in the RFE do not have families with them, seeing their work in Russia as a sojourn to make some money and return home.86 Tellingly, there are few cases of Chinese applying for Russian citizenship or marrying Russians.87 There is no such a thing in the RFE as an ethnic Chinese political lobby that would act either in the open or covertly.88 And there is not a single Chinese in the RFE occupying a position of any significance in a local or regional government. The lack of organized Chinese interests in the RFE can partly be explained by the low education and income levels of most of the Chinese migrants who are predominantly former peasants from Heilongjiang’s villages.89 That being said, an increase in Chinese demographic presence in the RFE cannot be ruled out. The most likely scenario for this to happen in the near future is related to a possible launch of major resource extraction and infrastructure projects funded by China’s state-controlled corporations. In such a case, Beijing will almost certainly attach a condition of hiring Chinese workers and bringing them into Russia. It seems that Moscow would agree to that and end its long-standing reluctance to admit massive labor migration from China. Perhaps as an indication of this, in July 2014 the Russian government announced that prioritized projects in the RFE would be able to employ foreign workers beyond the existing system of strict quotas.90 Contrary to sensationalist media reports of “Chinese Triads in Vladivostok taking over the reins of organized crime from Russian groups,”91 the level of Chinese crime in the RFE has been relatively insignificant. According to official statistics, Chinese committed 288 crimes in the RFE in 2013, which is just 0.2 percent of the total number of crimes reported in

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the region.92 Law enforcement experts do not see Chinese criminal activities in the RFE as a major threat to national security and do not perceive any large-scale penetration of the RFE by Chinese mafia.93 The RFE’s underworld, including in the high-end and organized crime sectors, is dominated by Russians themselves. Typical offenses committed by Chinese in the RFE are violations of environmental laws such as poaching, buying and smuggling of animal parts and illegally cut timber, and illegal financial operations.94 Allure and Peril: How the RFE Views China Ever since the opening of borders in the early 1990s, the attitudes of the RFE residents toward China have been highly ambivalent. On the one hand, it has been perceived as an economic opportunity. On the other hand, it has been seen as a major geopolitical threat. The results of the public opinion polls conducted among the region’s inhabitants amply demonstrate this.95 At present, China is definitely not the most liked country in the RFE. According to a 2010 survey of Far Easterners, Japan is number one (with 41 percent of the votes), followed by Australia (34 percent). Only 16 percent of the respondents said they liked China most. However, this was a considerable improvement compared to 1995, when as few as 4 percent of people in the RFE showed a favorable attitude toward China. There has been a steady rise in China’s popularity, with 6 percent liking China in 2002 and 9 percent in 2008.96 A similar trend can be identified in how the Far Easterners rank countries to which the top priority should be given in developing relations. Throughout the 1990s and early 2000s, Japan was seen as the most important country with which to have cooperation. This changed in 2008, when Japan was overtaken by China as the priority partner with 50 percent favorability compared to 46 percent for Japan. In 2010 53 percent favored China as the priority country, followed by Japan at 52 percent.97 What are the reasons behind the growth of China’s favorability rankings in the Far East? The success story of China’s economic development has definitely been the main driver of the RFE’s shifts in attitude toward its giant neighbor. For a quarter century, the Far Easterners have observed up close China’s transformation from a poor and backward country into an economic superpower. This could not help but inspire admiration. For many Far Easterners, the newly affluent China came to be associated with the ultimate consumer paradise. This demonstration effect is especially powerful since most Far Easterners have visited China, but have never been to any other foreign country.98 For them, in many ways, China began to displace the West as the benchmark of successful development. Of course, Western appeal was

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always supposed to be about more than just material prosperity. Democracy and human rights are regarded as part and parcel of it. However, most Russians today, including people in the RFE, tend to prioritize material consumption while being relatively indifferent on liberal intangibles. Contemporary China provides the ideal model for this purely consumerist orientation. An indication of the rising attraction of China’s living standards has been the move of some Far Easterners, mostly retirees, into China for permanent residence because there they can obtain cheaper housing, goods, and services. In some places in China’s northeast, such as Heihe and Hunchun, small communities of Russian migrants have emerged.99 Another reason for the rise in China’s appeal has been Beijing’s efforts to promote the nation’s soft power worldwide. In the RFE, as elsewhere in Russia, the results of this promotion campaign have been somewhat mixed—due to both the relative lack of sophistication of China’s public relations techniques and the wide differences between the two civilizations that find it difficult to communicate with each other. The attraction of Chinese culture has remained quite limited. Most Far Easterners have vague notions about the Chinese arts and literature and do not show much interest in them. In this respect, the dominance of Western culture remains unrivaled. Yet in education, China has scored some successes. Chinese is the second-most-popular foreign language in the RFE. Three Confucius Institutes are now open in the RFE—in Vladivostok, Komsomolsk-on-Amur, and Blagoveshchensk—which are funded by the Chinese government and provide mass courses of Chinese language and culture. More and more young people from the RFE are going to China to study, with many of them supported by generous scholarships from the Chinese government.100 The number of Russian students in China has already become large enough that universities in the RFE are worrying about this outflow that reduces their own enrollment base. The perception of China as the most significant partner for cooperation, as well as its gradually rising popularity, have uneasily coexisted with the entrenched notion of China as the greatest external security risk to the RFE. In 2010, 64 percent of Far Easterners acknowledged the existence of the Chinese threat, leaving behind the American threat (48 percent) and Japanese threat (40 percent).101 Conscious and semiconscious fears abound that a rising China could at some point attempt to lay its hands on the Far East. In 2013, about 61 percent of Primorsky’s residents believed that China harbored territorial claims on the RFE.102 Many, especially among the more educated Far Easterners, are aware that some Chinese maps show the RFE as China’s territory that Russia seized from the Qing empire. Those, who have longer memories, remember that many places on the map of the Far East, especially in Primorsky, bore Chinese and Manchu names until they received Russian names in the early 1970s.103

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Apart from the existential fear that the RFE may be reclaimed from a weakened Russia by a newly powerful China, there are other issues that negatively affect China’s image in the RFE. These range from China’s allegedly predatory exploitation of the RFE’s environment to the fact that most migrants hail from poor rural areas and, thus, do not represent the best ways of Chinese civilization. Low quality and safety standards of some Chinese goods also tarnish the gleaming image of China as a consumer paradise. Chinese foodstuffs and produce, albeit much cheaper than analogous Russian products, have earned an especially bad reputation. China is also seen as a source of ecological threat. Environmental crises inside China affect the RFE in many ways, with pollution from China contaminating transboundary rivers and lakes and dust storms from the erosion of Chinese soil invading the RFE with increasing frequency.104 Memories are vivid of a major leak of an extremely toxic chemical into the Amur River that was caused by the explosion at a petrochemical plant in Jilin in November 2005. The accident nearly led to a shutdown of water supplies to Khabarovsk, which receives its drinking water from the Amur.105 The attitude on China among the RFE’s political elite is perhaps even more ambivalent than that of the general populace. There are few, if any, China sympathizers among high-ranking officials in the Far East. Most of them seem to recognize the inevitability of China as the leading economic partner for the RFE, but they may not necessarily like it. Ishayev, until recently the region’s longest-serving and most respected politician, was the biggest China skeptic.106 He repeatedly made public statements that could be interpreted only as implying the existence of a Chinese threat. For instance, speaking at the Duma in 2013, he demanded more money for development in the RFE, arguing that otherwise the Far East would in fact be “handed over to China.”107 Other influential regional leaders have sometimes made statements and gestures that may not fit well with the official discourse of Chinese-Russian friendship. The governor of Amur Oblast, Oleg Kozhemyako, launched a high-profile campaign to expel Chinese tenants and laborers from the region’s agriculture and forestry.108 In March 2014, Primorsky Krai governor Vladimir Miklushevsky took part in the widely publicized commemoration of the battle of Damansky Island, glorifying the Soviet soldiers who died there fighting the Chinese in 1969.109 In July 2014 while visiting a rural district in Primorsky, Miklushevsky instructed the local authorities to be “more watchful with our Chinese partners” when leasing the lands for farming, as “the experience has been negative rather than positive.”110 It is also telling that it took Miklushevsky more than two years after taking office as governor in March 2012 to make his first official trip to China (in July 2014 for the Harbin Sino-Russian Expo), although he had found time to travel to other East Asian countries.

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1. Chinese migrants concentrated in the RFE’s urban areas, performing mostly low-skilled manual and dirty jobs. For instance, in 1906, Chinese laborers and their families comprised 39 percent of the population of Vladivostok. See Lyudmila Ponkratova, Andrey Zabiyako, and Roman Kobyzov, Russians and Chinese: The Process of Ethno-Migration in the Russian Far East [in Russian] (Blagoveshchensk: Amur State University Press, 2009), 39. 2. Anton Kireev, Dal’nevostochnaya granitsa Rossii: tendentsii formirovania i funktsyonirovania (seredina 19-nachalo 20 veka) (Vladivostok: Far Eastern Federal University Press, 2011), 411. 3. Viktor Larin, V teni prosnuvshegosya drakona (Vladivostok: Dal’nauka, 2006), 25–31. 4. Beijing abolished the state monopoly on foreign trade three and a half years earlier, in May 1988. 5. Larin, V teni prosnuvshegosya drakona, 342. 6. “Raspisanie na zavtrashniy den’,” Dal’nevostochnyy Kapital, no. 10 (2010), http://dvkapital.ru/regionnow/rf_15.10.2010_3540_raspisanie-na-zavtrashnij-den .html. 7. “Shuttle Trade” (OECD), February, 4, 2004, http://stats.oecd.org/glossary /detail.asp?ID=2459. 8. Ibid. 9. Maria Aleksandrova, “20 let rossiysko-kitayskogo regional’nogo sotrudnichestva,” Perspectivy, March 6, 2009, www.perspektivy.info/print.php?ID=36118. 10. Ibid. 11. In the early 1990s, machinery was one of Russia’s main export items to China. 12. Aleksandrova, “20 let rossiysko-kitayskogo regional’nogo sotrudnichestva.” 13. Ponkratova, Zabiyako, and Kobyzov, Russians and Chinese, 58. 14. Kireev, Dal’nevostochnaya granitsa Rossii, 372. 15. Larin, V teni prosnuvshegosya drakona, 344, 364. 16. Natalya Ryzhova, Ekonomicheskaya integratsiya prigranichnykh regionov (Khabarovsk: Economic Research Institute of the Far Eastern Branch of Russian Academy of Sciences, 2013). 17. “Moskovskoe bizneslobbi mozhet zakhvatit’ myasnoy rynok Primor’ya— predprinimateli,” PrimaMedia.ru, September 3, 2014, http://primamedia.ru/news /show.php?id=383679&printmode=1. 18. The government decree banning foreigners from retail trade was issued in the wake of an incident in the town of Condopoga in Russia’s northwestern region of Karelia. In September 2006, mass riots took place in the town, which were provoked by a conflict between the local Russians and the migrants from the Caucasus and Central Asia who were mostly engaged in the trade business. The decree was meant to defuse the tensions that often surrounded retail markets dominated by nonRussians, particularly in the European part of Russia. Thus, the move was not specifically anti-Chinese. 19. Viktor Gorchakov, “Strategiya razvitiya prigranichnykh otnosheniy Rossii i Kitaya: vzglyad iz regiona,” in Vzaimodeystvie Rossii i Kitaya v global’nom i regional’nom kontekste, ed. Anna Khamatova, Valery Dikarev, Alexander Kozhevnikov, and Artyom Lukin (Vladivostok: Far Eastern University Press, 2008), 139. 20. Yuri Avdeev, “PTEK v Primor’e—novaya ideya razvitiya,” Zolotoy Rog, November, 29, 2011, www.zrpress.ru/politics/primorje_29.11.2011_49338_ptek-v -primorje-novaja-ideja-razvitija.html.

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21. Andrey Ostrovsky, “Rossiya-Kitay: Svet i teni ekonomicheskogo sotrudnichestva na Dal’nem Vostoke,” ChinaPRO, January 21, 2011, www.chinapro.ru /blogs/6/5684/. 22. Natalya Ryzhova, “Prigranichnaya torgovlaia i integratsia. Kitaiskiy i rossiiskiy podhody,” Higher School of Economics (Moscow, March 30, 2010), https://www.hse .ru/data/2010/03/30/1217477181/%D0%A0%D1%8B%D0%B6%D0%BE%D0%B2 %D0%B0%20%D0%B4%D0%BE%D0%BA%D0%BB%D0%B0%D0%B4%20%D 0%92%D0%A8%D0%AD.doc. 23. “Tovarooborot mezhdu Dal’nim Vostokom i KNR v 2010 godu vyros pochti na $1 mlrd,” RIA Novosti, January 14, 2011, http://dv.ria.ru/economy/20110114 /81963981.html. 24. The true volume of RFE-China transboundary commerce may be much higher, as explained below. 25. Interview with Alexander Galushka, minister for the RFE development, Sino-Rus, August 31, 2014, http://sino-rus.org/dalnyvostok. 26. In the 1990s the RFE used to sell some Russian-made machinery, such as trucks or tractors, to China, but this stopped in the early 2000s when China launched its own production. 27. “Raspisanie na zavtrashniy den’,” Dal’nevostochnyy Kapital, October 15, 2010, http://dvkapital.ru/regionnow/rf_15.10.2010_3540_raspisanie-na-zavtrashnij -den.html. 28. Galushka interview. 29. For example, there are Chinese among the owners of a major construction company in Vladivostok, although the company prefers not to advertise this fact. Sergey Ivanov, China expert, interviewed by Artyom Lukin, Vladivostok, February 2, 2014. 30. “Raspisanie na zavtrashniy den’.” 31. Guan Guihai, “Negativnye factory torgovo-ekonomicheskogo sotrudnichestva mezhdu Rossiey i Kitayem i puti ih ustraneniya,” in Vzaimodeystvie Rossii i Kitaya v global’nom i regional’nom kontekste, ed. Anna Khamatova, Valery Dikarev, Alexander Kozhevnikov, and Artyom Lukin (Vladivostok: Far Eastern University Press, 2008), 195. See also Li Chuansun, “Analiz tendentsiy razvitiya torgovli i ekonomicheskogo sotrudnichestva mezhdu provintsyey Heilongjiang i Rossiey,” in Vzaimodeystvie Rossii i Kitaya v global’nom i regional’nom kontekste, ed. Anna Khamatova, Valery Dikarev, Alexander Kozhevnikov, and Artyom Lukin (Vladivostok: Far Eastern University Press, 2008), 155. 32. Pavel Minakir, ed., Economic Policy: Regional Dimension [in Russian] (Vladivostok: Dalnauka, 2001), 77. 33. “Kitayskaya Great Wall nachala stroitel’stvo zavoda po proizvodstvu vnedorozhnikov v Tul’skoy oblasti,” Newsru.com, August 25, 2014, http://auto.newsru .com/article/25aug2014/great_wall_tula. 34. “Integrated Transport Infrastructure and Cross-Border Facilitation Study for the Trans-GTR Transport Corridors” (Beijing: Greater Tumen Initiative, 2013), 7, www.tumenprogramme.org/UploadFiles/2014-03/GTI%20Corridors%20 Study%20Regional%20Summary%20Report_2014_web.pdf. 35. In the 1950s, over 150 industrial plants and factories were built in China with Soviet financial and technological assistance, one-third of them in Manchuria. 36. Sergei Ivanov, “Economic and Symbolic Capital at the Border of Globalizing China: The Case of Heilongjiang Province,” in Borders and Trans-Border Processes in Eurasia, ed. Sergei Sevastyanov, Paul Richardson, and Anton Kireev (Vladivostok: Dalnauka, 2013), 188.

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37. Alexandrova, “20 let rossiysko-kitayskogo regional’nogo sotrudnichestva.” 38. Maria Alexandrova, research fellow with the Institute for Far Eastern Studies, Russian Academy of Sciences, interviewed by Artyom Lukin, Moscow, February 25, 2014. See also Sergei Ivanov, “Usloviia formirovaniia i osobennosti prostranstvennoi organizatsii vneshneekonomicheskoi deyatelnosti na Severo-Vostoke Kitaia,” Bulletin of the Far Eastern Branch of the Russian Academy of Sciences, no. 4 (2012): 141–142. 39. Ivanov, “Economic and Symbolic Capital at the Border of Globalizing China,” 194. 40. “V besposhlinnoy zone Suyfenkhe zaregistrirovany 9 perventsev,” Newsvl.ru, May 7, 2010, www.newsvl.ru/biznes/2010/05/07/zona_kitaj/. 41. “Rubl’ pereshel kitayskuyu granitsu,” Kommersant, December 9, 2013, http://kommersant.ru/doc/2364128. 42. John Simeone, “Reflections on a Short Visit to Suifenhe,” personal communication with the authors, February 19, 2014. 43. “Medkompleks predlagayushchiy vysokotekhnologichnuyu pomoshch’ v chetyre-pyat’ raz deshevle, chem v Koree i Singapure otkrylsya v Suyfenhe,” PrimaMedia.ru, March 24, 2014, http://primamedia.ru/news/show.php?id=344843 &printmode=1. 44. Simeone, “Reflections on a Short Visit to Suifenhe.” 45. Kireev, Dal’nevostochnaya granitsa Rossii. 46. The main route that currently connects China’s northeast with foreign markets and the wealthy provinces of southern China is via the port of Dalian. However, the railway network that links up the northeastern provinces with Dalian is overloaded and, therefore, presents a serious bottleneck. 47. In 2009, North Korea terminated its membership in the GTI. 48. The Russian name for the river is Tumannaya. 49. Svetlana Suslina, “The Russian Position and Policies on the Tuman River Area Development Programme (TRADP),” in Russian National Strategy and ROKRussian Strategic Partnership in the 21st Century, ed. Jung-Ho Bae and Alexander Fedorovsky (Seoul: Korea Institute for National Unification, 2010), 189. 50. Jilin’s initial proposal was that Zarubino and the adjacent Russian territory be leased to China for forty-nine years. This was, understandably, rejected by Russia. Sergey Luzianin, “Rossiysko-kitayskoye strategicheskoye partnerstvo,” in Vzaimodeystvie Rossii i Kitaya v global’nom i regional’nom kontekste, ed. Anna Khamatova, Valery Dikarev, Alexander Kozhevnikov, and Artyom Lukin (Vladivostok: Far Eastern University Press, 2008), 175. 51. Andrey Gubin, “Kurs na Vostok,” Konkurent, May 12, 2014, http:// konkurent.ru/ekonomika/165-kurs-na-vostok.html. 52. “Integrated Transport Infrastructure and Cross-Border Facilitation Study for the Trans-GTR Transport Corridors,” 8. 53. “Kitayskaya provintsiya Heyluntszyan planiruet rasshiryat’ vsestoronnie svyazi s regionami Rossii—gubernator,” Interfax, May 18, 2014, www.interfax.ru /world/376677. 54. Viktor Gorchakov, “Strategiya razvitiya prigranichnykh otnosheniy Rossii i Kitaya: vzglyad iz regiona,” 142. 55. “Chinese-Funded Economic Zone Debuts in Russia,” China.com, July 13, 2007, http://english.china.com/zh_cn/business/development_areas/11021619/2007 0713/14218855.htm. 56. Gubin, “Kurs na Vostok.” 57. Ibid. 58. “Preferentsii kitayskomu biznesu grozyat zakrytiem predpriyatiyam Pri-

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mor’ya,” PrimaMedia.ru, July 16, 2013, http://primamedia.ru/news/show.php?id =289399&printmode=1. 59. Ivanov, “Economic and Symbolic Capital at the Border of Globalizing China,” 198. 60. Alexandrova interview. 61. China scholar at Amur State University, interviewed by Artyom Lukin, Blagoveshchensk, November 15, 2013. 62. Victor Larin, “KNR glazami dal’nevostochnika,” Mezhdunarodnye Protsessy 8, no. 1 (January–April 2010): 124–130. 63. “Programma sotrudnichestva mezhdu regionami Dal’nego Vostoka i Vostochnoy Sibiri Rossiyskoy Federatsii i Severovostoka Kitayskoy Narodnoy Respubliki na period 2009−2018 gody,” Politicheskoye Obrazovaniye, July 18, 2010, www.lawinrussia.ru/kabinet-yurista/zakoni-i-normativnie-akti/2010-07 -18/programma-sotrudnichestva-mezhdu-regionami-dalnego-vostoka-i-vostochnoy -sib. 64. The program was essentially a nonbinding Memorandum of Understanding (MoU) that contained a caveat that the projects listed in the document would be implemented by Russian and Chinese participants “on the basis of market demand” and “under the condition of agreement on technical, economic, financial and other parameters of cooperation.” 65. Dmitry Izotov, “Programma regional’nogo sotrudnichestva mezhdu Vostokom Rossii i Severo-Vostokom Kitaya nastoyashchee i budushchee,” Prostranstvennaya ekonomika, no. 2 (2014): 149–176. 66. Maria Alexandrova, “Programma sotrudnichestva smezhnykh territoriy Rossii i Kitaya: istoriya, fakty, puti osushchestvleniya” (Moscow: Institute for Far Eastern Studies, 2010), www.ifes-ras.ru/online-library/book/6-papers/12 -AlexandrovaRegionalny15. 67. Alexander Gabuev, “Vzyat’ syr’em,” Kommersant, March 18, 2013, http://kommersant.ru/doc/2143819. 68. Dmitry Izotov, “Programma regional’nogo sotrudnichestva mezhdu Vostokom Rossii i Severo-Vostokom Kitaya: nastoyashchee i budushchee,” Prostranstvennaya ekonomika, no. 2 (2014): 149−176. 69. Ibid. 70. Academics at Shanghai Academy of Social Sciences, interviewed by Rensselaer Lee, Shanghai, April 25, 2014. 71. Federal Customs Service, “Overview of the Far Eastern Federal District’s Foreign Trade in 2014” [in Russian] (Vladivostok: Far Eastern Directorate of the Federal Customs Service, February 2015), http://dvtu.customs.ru/index.php?option =com_content&view=article&id=16235:-2014-&catid=63:stat-vnesh-torg -cat&Itemid=90. 72. This section is based on Natalya Ryzhova, research fellow with the Institute for Economic Research, Far Eastern Branch of the Russian Academy of Sciences, interviewed by Artyom Lukin, Vladivostok, February 15, 2015. 73. See foreign trade statistics, Russian Federal Customs Service, “Tamozhennaya statistika vneshney torgovli,” http://stat.customs.ru/apex/f?p=201:1:1086641 63094865::NO. 74. See, for example, Natalya Ryzhova, “Informal Economy of Translocations: The Case of the Twin City of Blagoveshensk-Heihe,” Inner Asia 10, no. 2 (2008): 323−351. See also Tobias Holzlehner, “Shadow Networks: Border Economies, Informal Markets, and Organized Crime in Vladivostok and the Russian Far East” (Doctoral dissertation, University of Alaska Fairbanks, 2006). 75. This is not to say that the RFE does not engage in informal cross-border

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commerce with Japan or Korea. It does. However, the amount of unreported trade with these two neighbors is much smaller than in the case of China. 76. Frank Jacobs, “Why China Will Reclaim Siberia,” New York Times, July 4, 2014, www.nytimes.com/roomfordebate/2014/07/03/where-do-borders-need-to-be -redrawn/why-china-will-reclaim-siberia. 77. Zhanna Zaionchkovskaya, Nikita Mkrtchian, and Elena Tyuryukanova, “Russia’s Immigration Challenges,” in Russia and East Asia: Informal and Gradual Integration, ed. Tsuneo Akaha and Anna Vassilieva (New York: Routledge, 2014), 225–226. 78. The assessments provided by Russian experts correlate with Chinese assessments. A leading Chinese foreign policy journal, Shijie jingji yu zhengzhi, no. 20 (2009): 58–60, put the number of Chinese in the RFE at 200,000. Cited in Yuri Galenovich, “V Kremle nuzhno sozdat’ otdel no Kitayu,” MezhdunarodnyePprotsessy, no. 1 (2010): 118. 79. A Vladivostok-based China expert, interviewed by Artyom Lukin, Vladivostok, August 20, 2014. 80. Zaionchkovskaya, Mkrtchian, and Tyuryukanova, “Russia’s Immigration Challenges,” 226. 81. Edward Wong, “China’s Export Economy Begins Turning Inward,” New York Times, June 25, 2010, A6. 82. Mark Adomanis, “The Chinese ‘Invasion’ of Siberia Is a Myth,” Forbes, May 27, 2014, www.forbes.com/sites/markadomanis/2014/05/27/the-chinese -invasion-of-siberia-is-a-myth/print/. 83. “Kitayskiye Rabochiye Bol’she Ne Khotyat Yehat’ v Primorye za ‘Dlinnym Rublyom’” [Chinese Workers No Longer Want to Come to Primorye for High Wages], PrimaMedia, January 20, 2013, http://primamedia.ru/news/asia /20.01.2013/251987/kitayskie-rabochie-bolshe-ne-hotyat-ehat-v-primore-za-dlin nim-rublem-quo.html. 84. As an example, a few years ago Chinese workers were brought in to construct the facilities for the 2012 APEC summit in Vladivostok. However, they soon demanded to be returned to China because they heard that wages in northeast China’s construction industry had gone up and become higher than what they were being paid in Russia. 85. Some Far Eastern researchers believe that there is already an incipient Chinese diaspora in the RFE, although it would take at least ten more years for it to grow into a full-fledged ethnic minority community. See Anton Kireev, “Sushchestvuet li na Dal’nem Vostoke Rossii kitayskaya diaspora?” Oikumena [Regional Studies Journal], no. 4 (2013): 28–47. 86. This has been confirmed by official statistics. In 2013, just seventeen Chinese citizens applied for permanent residence in the RFE. “Report of the Federal Migration Service on the Migration Situation in the Far Eastern Federal District in 2013” (Khabarovsk: Federal Migration Service, January 2014). 87. Viktor Larin, “KNR glazami dal’nevostochnika,” Mezhdunarodnye Protsessy 8, no. 1 (January–April 2010): 128. 88. Experts from academia, government, business, and mass-media in Vladivostok, Khabarovsk, Birobidzhan, Yuzhno-Sakhalinsk, and Blagoveshchensk, interviewed by the authors, November 2013–June 2014. 89. Interview with Xue Hueiling, publisher of a Russian-Chinese commercial newspaper in Vladivostok, Deita.ru, April 26, 2007, www.deita.ru/news/raznoe /26.04.2007/84380-kitajtsy-s-rossijskogo-dalnego-vostoka-nikuda-ne-ujdut-schitaetredaktor-gazety-vostochnyj-most-s-khuejlin/.

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90. Elena Egorova, “Pravitel’stvo zaselit Dal’niy Vostok kitaitsami i predstaviteliami goskorporatsiy,” Moskovsky Komsomolets, July 3, 2014, www.mk.ru /print/article/1051763/. 91. Bertil Lintner, “Triads Tighten Grip on Russia’s Far East,” Asia Pacific Media Services Limited, http://www.asiapacificms.com/articles/russia_triads/. (The article first appeared in Jane’s Intelligence Review, September 2003.) 92. “Report of the Federal Migration Service on the Migration Situation in the Far Eastern Federal District in 2013.” 93. Independent law enforcement expert, interviewed by Artyom Lukin, Vladivostok, June 30, 2014. 94. One of the major issues associated with the Chinese in the RFE is their wide use of an underground banking system, including in transborder transactions. This, however, is a situation characteristic of Chinese communities in many parts of the world. 95. Unless stated otherwise, the polls were conducted by researchers at the Institute of History, Ethnography and Archaeology of the Far Eastern Branch of the Russian Academy of Sciences among the residents of Primorsky, Khabarovsk Krai, Amur Oblast, and the JAO. 96. Victor Larin and Lylia Larina, Okruzhayushchiy mir glazami dal’nevostochnikov (Vladivostok: Dalnauka, 2011), 98. 97. Ibid., 106–109. 98. According to a 2008 poll, 56 percent of the residents of Primorsky, Khabarovsk Krai, Amur Oblast, and the JAO had traveled to China at least once; 32 percent visited there more than three times. Larin and Larina, Okruzhayushchiy mir glazami dal’nevostochnikov, 45. According to a 2013 survey of the residents of Primorsky, 38 percent had never visited China in the preceding ten years whereas the number of respondents who had visited China three to five times over the preceding ten years rose from 4 percent in 2000 to 7 percent in 2005 and 20 percent in 2013. See Mikhail Alexseev, “Parting with Asian Balkans: Perceptions of Chinese Migration in the Russian Far East, 2000–2013,” PONARS Eurasia, April 2014, www.ponarseurasia.com/memo/parting-asian-balkans-perceptions-chinese -migration-russian-far-east-2000-2013. 99. Ivan Zuenko, “Zachem rossiyane pereezzhayut v kitayskuyu glubinku?” Deita.ru, March 11, 2013, http://deita.ru/analytics/dalnij-vostok_11.03.2013 _832700_zachem-rossijane-pereezzhajut-v-kitajskuju-glubinku.html. 100. For example, in the Sakha Republic the number of scholarships offered by the Chinese government to support students who study in China is already much higher than the number of those wishing to apply for them. Education expert, interviewed by Artyom Lukin, Yakutsk, June 10, 2014. 101. Larin and Larina, Okruzhayushchiy mir glazami dal’nevostochnikov, 78. 102. Alexseev, “Parting with Asian Balkans.” 103. The renaming was done in 1972, amidst the height of Sino-Soviet tensions, to counter potential Chinese claims to the Far Eastern lands. For example, the towns of Suchan, Iman, and Tetyuhe in Primorsky were renamed, respectively, Partizansk, Dalnerechensk, and Dalnegorsk. 104. Environmental experts assess China’s harmful impact on the RFE as “significant and rising.” Environmental scientist, interviewed by Artyom Lukin, Vladivostok, February 18, 2014. 105. Sergei Blagov, “Russia Concerned by China’s Chemical Pollution,” Jamestown Foundation, September, 18, 2006, www.jamestown.org/single/?tx_tt news%5Btt_news%5D=32047&no_cache=1#.VB0bk9-9ouc.

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106. Victor Ishayev’s dismissal from the positions of presidential envoy and minister for the Far East in August 2013 did not seem related to his stance on China, but rather was caused by domestic reasons. 107. “Ministr Rossiyskoy Federatsii po razvitiyu Dal’nego Vostoka― polnomochnyy predstavitel’ Prezidenta RF v DFO Viktor Ishaev prizval deputatov Gosudarstvennoy Dumy RF podderzhat’ gosudarstvennuyu programmu razvitiya Dal’nego Vostoka i Baykal’skogo regiona do 2025 goda i priniat’ sootvetstvuiushiy zakon o razvitii Dal’nego Vostoka,” website of the presidential representative to the Russian Far East, June 17, 2013, www.dfo.gov.ru/index.php?id=11&oid=3466. 108. “Grazhdanam KNR zapretyat zarabatyvat’ na amurskikh lesah,” LesOnline, November 14, 2013, www.lesonline.ru/n/3A64B. 109. “Bolee 2 tysyach chelovek prinyali uchastie v torzhestvennom mitinge v Primor’e,” PrimaMedia, March 15, 2014, http://primamedia.ru/news/show.php?id =342921&printmode=1. 110. “Vladimir Miklushevskiy provyol vyezdnoe zasedanie v Shkotovskom rayone,” OTV, July 9, 2014, www.otvprim.ru/blog/16/13041.

10 Beijing Sets Its Sights on the Russian Far East

nese central government had shown little interest in the RFE. Links with the RFE were vital only for Heilongjiang, being of peripheral concern for other provinces as well as the central government.1 Beijing largely outsourced the economic policy toward the RFE to Harbin, and whatever Chinese presence there was in the RFE was mostly of Heilongjiang’s origin. However, by 2013–2014, the situation began to change, with China’s top leadership paying visibly more attention to eastern Russia. Most importantly, Beijing and Moscow signed a series of major oil and gas deals centered on Eastern Siberia and the RFE as the main supply base. The longdelayed construction of a bridge across the Amur River—the first one connecting Russia and China—finally began, largely funded with Chinese money. China’s state-owned banks began to extend billion-dollar credit lines for the RFE-related projects. Moreover, China’s top officials were making statements that attached much higher priority to the RFE than seemed to be the case before. In April 2014, Vice Premier Wang Yang visited Vladivostok and noted the “attractiveness” of the RFE for China’s businesspeople.2 The truly revealing moment, however, came when Chinese vice president Li Yuanchao attended Saint Petersburg’s Economic Forum in May 2014. In his address to the forum, Li Yuanchao spoke at length about the prospects for Russian-Chinese economic collaboration, stressing the role of the RFE: AS DISCUSSED IN THE PREVIOUS CHAPTER, UNTIL RECENTLY THE CHI-

Russia possesses a vast territory, while China has the most industrious people in the world. If we are able to combine these factors, we will significantly boost our development. Russia has a lot of land and few people, in China it is just the opposite. . . . We intend to integrate as one whole the program of the RFE development and the strategy for rejuvenating of northeast China. Thus we will contribute to the linking up of labor, material and financial re-

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Russia’s Far East sources of the two regions, making these two regions into a big market with efficient distribution of resources, capital and technologies, and gradually, in the future, into a new economic bloc in East Asia. Gentlemen, I have been engaged in managing economy for many years. Both at the time of my work at the provincial level and now as I work in the center, I have always paid serious attention to the economic development of our territories, our regions. . . . If we are successful in connecting northeast China with the RFE, if we are successful in joining these points together, we will create a single economic integration zone.3

Never before had a high-ranking Chinese official spoken about the RFE with such enthusiasm. One reason for the remarkable change of heart was no doubt Moscow’s newfound willingness to allow the Chinese into sectors of the RFE’s and Eastern Siberia’s economy that were previously considered a no-go zone for China, especially hydrocarbons. That said, China has its own potent motives for eyeing the RFE— motives that have to do with strategic considerations rather than pure economics. China’s dependence on imports of primary products continues to rise. As of 2013, four out of China’s ten top imports were raw materials or commodities: oil (16.1 percent of China’s total imports); ores, slag, ash (7.6 percent); copper (2.6 percent); and oil seed (2.2 percent). 4 By 2020, out of forty-five main minerals, China will be able to fully satisfy its domestic demand in twenty-four minerals and partially in two minerals while it will face a shortage in ten minerals and an acute shortage in the remaining nine minerals. It is expected that the demand for iron ore, copper, and aluminum will be the highest.5 Most of the commodities that China buys to satiate its growing demand are shipped by sea from various parts of the world, particularly the Middle East, Southeast Asia, Australia, Africa, and South America. This makes China highly vulnerable to potential disruptions in its maritime trade flows. Of special concern to the Chinese is the reliability of their hydrocarbon imports (oil and natural gas), 90 percent of which are shipped in sea tankers from the Middle East, Africa, Latin America, and Australia. It is wellknown that China harbors “deep distrust of international energy markets, which it feels are controlled by the United States and other major industrial countries” and is haunted by the “fear of a blockade of sea lanes.”6 Even back in the early 2000s, when China’s dependence on imported hydrocarbons was significantly lower than today, Chinese analysts expressed concern about the security of sea-lanes: China’s vulnerability on oil imports is made clear by the fact that the Chinese naval force does not have the capability to hold sea lanes and China depends on oil from the Middle East and Africa and a single sea lane. Under particular circumstances, it might have a severe impact on people’s lives, economic management and national defense in our nation.7

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As Andrew Erickson and Gabriel Collins point out, “A wide variety of influential Chinese experts, including scholars, policy analysts, and members of the military, believe that the United States can sever China’s seaborne energy supplies at will and in a crisis might well choose to do so.”8 Steadily mounting geopolitical rivalry between Asia Pacific’s two main players, especially after Xi Jinping’s ascent to power led to more assertive behavior by China, has only intensified Beijing’s feeling of maritime insecurity vis-à-vis the United States. Moreover, observing Western moves to economically strangle Russia over the Ukraine crisis, Beijing might well have concluded that, should China clash with the United States or its allies in Asia, it is likely to become a target of sanctions. Such sanctions could possibly culminate in a naval blockade of all or some of China’s vital imports that China would be virtually helpless to break, given the vast superiority of the US Navy. The perennial, and ever worsening, instability in the Middle East is the second-largest reason why the Chinese worry about their supplies. Not wishing to put their faith in the freedom of navigation guaranteed by the United States, China seems to have emphasized overland supplies of vital commodities, even if it means higher end costs.9 There are four broad directions from which China can receive overland commodities supplies: Southeast Asia in the south, South Asia in the southwest, Central Asia in the west, and Russia and Mongolia in the north. The southern route, which connects China to Southeast Asia’s resources, looks secure at the moment. However, it could become complicated due to tensions with Vietnam. In addition, Myanmar, with which China shares the longest land border in the south, seems no longer to be unequivocally loyal to Beijing and is seeking to improve its relations with the West. Add to that a host of ethnic insurgencies in Myanmar’s border areas. The southwestern corridor, which gives China overland access to Middle Eastern energy via Afghanistan and Pakistan, with India in the close vicinity, is perhaps the least secure. This is due to both Afghanistan’s and Pakistan’s chronic instability and China’s fraught relationship with India. In Central Asia, China enjoys a proximate overland route to rich hydrocarbon reserves. The region is more or less quiet now, but potential disturbances in fragile Central Asian “stans,” mostly related to the spread of radical Islamism, are just below the surface. The South Asian and Central Asian routes also have a common major risk—they both pass via China’s most restive territories, Xinjiang and Tibet. Thus, compared to other overland corridors, the northern direction, with Russia’s Far Eastern and Trans-Baikal region and Mongolia, is probably the safest bet for China geopolitically, at least as long as Beijing main-

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tains friendly ties to Moscow.10 Xi Jinping’s first official visit to Moscow as head of state in March 2013 indicated that China began to see the RFE and Eastern Siberia through this strategic lens.11 Eastern Russia can be both a secure source of many of the commodities that China needs and the main transit route for supplies from elsewhere in Russia. From Oil Fields to Casinos Recent years have seen major developments, with China acquiring an everincreasing foothold in the most strategic sectors of eastern Russia’s resource base. Oil

In 2013, China consumed 487 million metric tons of oil, up 2.8 percent from the previous year.12 Although growth in China’s oil use has decelerated since 2011, the nation’s demand for oil is expected only to rise for the foreseeable future. In 2009 China became the second-largest net oil importer in the world behind the United States, and average net total oil imports reached 6.2 million barrels per day in 2013. Notably, for the fourth quarter of 2013, China actually became the largest global net importer of oil. The US Energy Information Administration projects that China is likely to surpass the United States in net oil imports on an annual basis by 2014. 13 As of 2013 Russia provided 9 percent of China’s oil imports, with the state-owned company Rosneft being the main supplier. Rosneft’s first major contract with China’s CNPC was signed in 2009, under which it undertook to deliver 15 million tons of oil annually until 2030. In 2013, Rosneft and CNPC struck another long-term deal to supply 365 million tons of oil to China over thirty years. In both cases, the contracts were locked in by hefty prepayments from China. In 2009 Rosneft and Transneft, the pipeline operator, received $25 billion while in 2013 Rosneft got as much as $70 billion.14 According to press reports, there was an informal agreement that the advance payments Rosneft is receiving from CNPC should be spent, in the first place, on the development of oil extraction projects and their infrastructure in the RFE and Eastern Siberia.15 The prepayments are in essence loans-for-oil—China’s preferred method of guaranteeing long-term contracts with oil-rich, but capital-deficient, countries. In exchange for advance payments, the oil suppliers usually have to agree to a fixed price of oil with a discount to the world market benchmark. In October 2013, Rosneft and China’s second-largest national oil company, Sinopec, signed a MoU on the delivery of 100 million tons of oil over ten years. Most of the oil that Rosneft sells to China is shipped via the Eastern Siberia−Pacific Ocean

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pipeline and its spur line from Russia’s Skovorodino in Amur Oblast to Daqing in northeastern China.16 Until 2013 Russian-Chinese oil cooperation in the RFE, and generally, was mostly limited to trade, without any substantial deals in the upstream sector. The only exception was Sinopec’s involvement in the development of the new Venino block of the Sakhalin-3 project, where in 2006 the Chinese company received a 25.1 percent stake (with Rosneft holding 74.9 percent), with Sinopec agreeing to cover most of the exploration costs. However, Sinopec withdrew from the project in 2010, having failed to make any substantial discoveries. At that time, Moscow was reluctant to let the Chinese into more attractive and surefire oil fields.17 A watershed event came in October 2013 when Rosneft and CNPC agreed on a joint venture to explore and develop oil deposits in the RFE and Eastern Siberia, with Rosneft having a 51 percent stake and CNPC 49 percent. The core asset of the joint venture was to be the Srednebotuobinskoye (Taas-Yuryakh) oil and gas field in the Sakha Republic.18 A substantial part of eastern Siberian crude oil will be shipped to a refinery in Tianjin, another joint venture of CNPC and Rosneft, which is slated to come online by 2020. In the Tianjin oil refinery venture, CNPC holds 51 percent and Rosneft 49 percent.19 To reciprocate, in February 2013, Rosneft offered the Chinese a stake in its own refinery business, Eastern Petrochemical Company, a large oil- and gas-processing complex currently under construction on the Sea of Japan shore near Nakhodka.20 Another landmark event occurred in September 2014, when Vladimir Putin announced that Rosneft would sell China a minority stake in the Vankor oil and gas field in the north of Krasnoyarsk Krai in Eastern Siberia.21 Vankor has been the biggest oil discovery in Russia in the past quarter-century and one of Rosneft’s main jewels, with an estimated recoverable capacity of 500 million tons and current annual output of over 21 million tons.22 Vankor is the main source for Rosneft’s shipments of crude to China. The deal was seen both as an opportunity for the debt-ridden Rosneft to get quick cash and as a symbolic gesture meant to underline the growing closeness of the Russian-Chinese energy alliance. 23 Commenting on the Vankor deal, Putin emphasized this latter aspect: “Vankor is today one of our principal oil extraction enterprises, a very promising one. Normally, we are very cautious in letting our foreign partners into [such major fields], but, of course, we have no limitations for our Chinese friends.”24 Rosneft’s chief executive officer Igor Sechin, who is dubbed the Kremlin’s Darth Vader due to being the most trusted and ruthlessly efficient disciple of Putin, is often portrayed as the main force in favor of an energy alliance with China.25 He has a long-running business relationship with China. In 2004 CNPC helped Rosneft, where Sechin was the board chairman at the time, to refinance the $6 billion debt that Rosneft had incurred

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to buy the core assets of the Yukos Oil Company, which had been confiscated by the state in the wake of Mikhail Khodorkovsky’s trial.26 Two years later, Sinopec helped Rosneft purchase one of Russia’s minor oil producers, Udmurtneft.27 Yet Sechin’s apparently pro-China stance may best be explained by pure business logic: Rosneft needs a lot of cash to refinance its vast debts and continue its ambitious expansion while China is willing to provide the money in exchange for long-term contracts and access to upstream assets in eastern Russia. If Rosneft had had another chief executive officer, he probably would have acted toward China in a similar fashion.28 This convergence of interests became even more compelling after Rosneft was barred from Western capital markets as a result of the Ukraine crisis. In 2013 Russia’s share of 9 percent in China’s crude oil imports put it on par with such suppliers as Oman (9 percent), Iran (8 percent), and Iraq (8 percent), but far behind Angola (14 percent) and Saudi Arabia (19 percent).29 Will Russia’s share in China’s oil imports rise? Beijing may be willing to allow Russia to provide a bigger chunk of China’s crude shipments. The problem is that Russia does not have easily available oil deposits to dramatically increase production. After all, in proven reserves, Russia ranks eighth in the world. Its principal oil fields in the plains of Western Siberia are now being depleted. Russia will have to rely increasingly on the more challenging deposits, especially in the northern and Far North areas as well as in offshore waters, which will substantially raise the cost of exploration for and extraction of crude oil.30 Most of the oil reserves in the RFE and Eastern Siberia belong to the technically difficult categories. Some experts believe that eastern Russia has the potential capacity to export as much as 59 million to 60 million tons of oil in 2020 and up to 68 million to 73 million tons in 2030.31 However, this oil will be costly. Thus, China as the main consumer of the oil from eastern Russia will face a dilemma: how big a premium is it prepared to pay for extra amounts of Russian oil, which is geopolitically secure coming via overland routes but likely more expensive than the seaborne hydrocarbons from the Middle East and elsewhere? Russia’s leading economist Mikhail Dmitriev believes that, for security reasons, China will continue to be interested in Russian oil from Eastern Siberia and the RFE, even though this oil is considerably more expensive than the crude oil imported from the Middle East.32 According to some assessments, Russia can realistically increase its oil shipments to at least 30 million tons per annum, which perhaps will make it the third- or second-largest supplier to China, holding 10 percent or slightly more of its oil imports. Yet this will probably be the maximum Russia can hope for in the short to medium term—due to both its limited production capacity and China’s wish to keep its sources diversified.33 However, Russia’s share may rise above that level, if China’s existential

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concerns about energy security and security of maritime routes continue to grow. It may be predicted that Beijing’s willingness to buy, and invest in, costly Russian oil will be directly proportionate to the degree of tensions in US-Chinese relations. Natural Gas

Russia’s ability to contribute to China’s energy security is the greatest in natural gas. The country ranks number one in the world’s gas reserves, with a sizable portion located in Eastern Siberia and the RFE. The initial recoverable reserves on the Siberian platform are estimated at about 8,000 billion cubic meters and those on the Sakhalin Shelf at more than 1,200 billion cubic meters, which makes it possible to create a large-scale gas industry in eastern Russia with a yearly production of about 180 billion to 200 billion cubic meters of gas.34 At the same time, the role of natural gas is slated to rise rapidly in China’s energy mix—from 4 percent in 2011 to 10 percent by 2020—with the imports covering nearly one-third of its total gas consumption as of 2013.35 In 2013, China’s gas use grew 13.9 percent to 167.6 billion cubic meters and was estimated to reach 186 billion cubic meters in 2014, driven in large part by the desire to reduce air pollution from the burning of coal.36 Discussions of gas exports from eastern Russia to China began in the 1990s, but official negotiations between Gazprom and CNPC started in 2004. Two possible routes for Russian gas shipment were on the table—the western route from the mature gas fields of Western Siberia and the eastern route from the yet to be developed big deposits in the east of the country. By the early 2010s, Beijing prioritized the eastern option, as it had already secured gas supplies from Turkmenistan via its northwestern regions and needed proximate sources of gas for its energy-hungry and air-polluted northeast.37 The price was the main sticking point that threatened to hold up the negotiations indefinitely. The Chinese insisted on a price commensurate with what they pay for Central Asian gas while Gazprom insisted on the much-higher European benchmark. The deadlock was finally broken at the summit between Xi Jinping and Putin in Shanghai in May 2014, when a deal was announced under which Gazprom will start delivering gas from the RFE from 2019. The total volume to be delivered is 38 billion cubic meters annually for thirty years with an overall price tag of $400 billion. However, the specific conditions of the contract—most importantly, the price formula and the end price per cubic meter—were not revealed, leading observers to speculate. The widespread opinion was that China and Russia reached a middle ground, with CNPC agreeing to pay more than it pays for Central Asian gas and Gazprom accepting a price lower than it

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charges its customers in Europe. To clinch the deal, Putin agreed to exempt the project from the natural resources extraction tax—one of the main sources of revenue for the Russian budget. As US researcher Elizabeth Wishnick points out, “Both sides gained and had to compromise to achieve a deal.”38 The proponents of the deal stressed that it came just in time for Russia to get a foothold in China’s booming gas market. Without Chinese financing, Russia hardly would ever be able to unlock its immense but costly-todevelop gas resources in the east. The arrival of gas from the RFE and Eastern Siberia would increase the overall supply on the international market and, thus, should benefit all gas consumers. Moreover, investments in gas production and transmission would help create a domestic gas infrastructure in the RFE and boost the region’s development. The megadeal was instantly criticized—mostly by Putin’s opponents— as disadvantageous to Russia since huge spending is required to develop the maiden gas fields, located in remote corners of the RFE and Eastern Siberia with harsh climate and rough terrain, and build the pipelines to bring gas to China. Even by the Russian government’s estimates, the project would need some $55 billion in investments. The critics pointed out that it was dubious that, given the negotiated price and huge costs involved, the deal would generate any profits or even reach the breakeven point.39 It is interesting that on the Chinese side also, some experts saw the deal as not economically beneficial—to China. According to them, Beijing made a significant concession, agreeing to the price of Gazprom’s pipeline gas, which was a little lower than the one of the European premium market.40 Controversy over the deal testifies to its being motivated at least as much geopolitically as commercially. The gargantuan gas contract was probably the most potent sign yet of the emerging energy alliance between Russia and China. Moscow sought to lower its dependence on the European market, which was becoming ever less a secure customer as a result of the political tensions. Beijing determined to finally get access to Russia’s huge gas reserves—a major and secure source of energy beyond the reach of adversarial naval power—though China would have to pay more than it traditionally was willing to pay for natural gas from other sources. One remarkable aspect of the deal was that the final price of the gas to be shipped to China might not have been set by the time of the signing century—and, quite possibly, is still not agreed on41—because the costs of development of difficult fields in remote corners of the Russian Far East and Eastern Siberia could not be accurately assessed when the deal was announced and signed in Shanghai in May 2014. However, for energy security reasons, China seems to have agreed to take the gas and help finance the entire project, even if it turns out to be not so cheap after all.

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The strategic aspect of the natural gas deal was also highlighted by the fact that China so far repeatedly refused Mongolia’s offers to use its territory as a shorter and more economical route for the pipeline from eastern Russia’s gas deposits to China.42 This may signify that the desire for secure deliveries, free from any third-country risks, was put ahead of minimizing the economic costs. The principal sources for the Gazprom-CNPC deal will be two giant gas fields—Chayanda in the Sakha Republic and Kovykta in Irkutsk Oblast, with their combined reserves of more than 3,000 billion cubic meters of natural gas (see Figure 10.1).43 Chayanda is scheduled to come online first—in 2019. The gas from Chayanda and Kovykta will be transported to China via the Power of Siberia pipeline system. In September 2014, Putin and China’s vice premier Zhang Gaoli inaugurated the construction of the Power of Siberia on-site in the Sakha Republic. To help fund the gigantic undertaking, the two sides also began discussing a possible prepayment or loan from China (to the tune of $25 billion) against the future gas deliveries. If China provides this loan, it would in effect become an investor and equity holder in the Power of Siberia project.44 The 2014 gas deal will make eastern Russia China’s second-largest gas supplier after Turkmenistan.45 The expansion of Russian gas shipments beyond the initially contracted 38 billion cubic meters is also possible: reserves in the east are abundant and it will be up to China whether it wants more Russian gas.46 Coal

China is largely self-sufficient in coal, being the world’s largest consumer as well as producer, and having vast reserves of this energy source. However, since 2009 China began to import coal. China’s main coal supply regions are in the north and west whereas its coal demand areas are in the east and south. Given bottlenecks in China’s internal railway transportation system, it became more cost-efficient to bring in inexpensive Indonesian and Australian coal by sea. In 2013, China’s net coal imports rose to 360 million short tons while consumption stood at 4 billion short tons, 47 representing about half of the world total.48 Russia already has some portion of China’s coal market and is likely to expand it, including by creating new mining and port capacities in the RFE and Eastern Siberia. There are at least several projects under way targeting China’s market. The most significant among them is the development of the Elga coal field in the Sakha Republic. Owned by the steelmaking and coalmining company Mechel, Elga is expected to produce its first coal for export in 2017. A 49 percent stake in Elga, as well as the Vanino port coal terminal, could be sold to Chinese investors, probably Baosteel.49

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Figure 10.1 Map of Energy Routes in the RFE

Urengoy

Oil and gas routes Proposed routes

R U S S I A Krasnoyarsk OGCF Oil and Gas Condensate Fields

Sakhalin I-II Chayandinskoye

Kovyktinskoye KAZAKHSTAN

CHINA J

CHINA

MONGOLIA

Source: ArcGIS webmap, ESRI.com (courtesy of John Simeone).

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Company Colmar, controlled by Gennady Timchenko, a shadowy oligarch from Putin’s inner circle, also plans to start exporting high-quality coal from Neryungry deposits in the Sakha Republic. For this purpose, it teamed up with China Harbour Engineering Co. to upgrade coal port facilities in Khabarovsk Krai. A third major project is in Amur Oblast, where Russia’s state-owned Rostec and China’s biggest coal company Shenhua plan to extract up to 30 million tons from the Gerbikano-Ogodzhinskoye field. Finally, Oleg Deripaska’s En+ and Shenhua intend to develop the Zashulanskoye field in Zabaikal Krai.50 Chinese investors also have shown some interest in Chukotka’s mine deposits, but the high costs involved make their development a prospect for the more distant future. It is estimated that, although Russia will not be able to beat Australia and Indonesia as main overseas suppliers of coal to China, it can occupy up to 10 percent of China’s coal imports. 51 Unlike oil and gas, China is selfreliant in coal reserves, so any imports and their sources would be considered on a purely commercial rather than strategic basis. Electricity

Electricity supplies from eastern Russia to China, accompanied by Chinese investment in the RFE’s power generation facilities, can become another area of their energy alliance. Electricity exports from the RFE and Eastern Siberia, via Amur Oblast, to neighboring provinces of China began in 2005 and have been rising. In 2012 Russia sold to China 2.6 billion kilowatthours while in 2013 the volume grew to 3.6 billion kilowatt-hours.52 This constitutes 35 percent of China’s electricity imports or a mere 0.05 percent of China’s own generation.53 However, there are plans to expand the trade considerably, up to 48 billion kilowatt-hours. This increase may be achieved by building an extra-large coal power plant in Amur Oblast, whose capacity will be commensurate with the entire capacity of all the RFE’s existing power stations. Russia’s state company Inter RAO is negotiating the project with China State Grid Corporation.54 In November 2014, Russia’s RusHydro and China’s Sanxia (the owner of the world’s largest Three Gorges hydropower station) agreed to set up a joint venture for construction of flood control hydroelectric power stations in the Amur River basin. Also, RusHydro reportedly considered selling Sanxia a 25 percent stake in the RFE’s principal electricity provider “RAO ES of the East,” which would give the Chinese company a blocking minority.55 In May 2015, it was announced that China’s Dongfang Electric intended to finance the upgrade of Vladivostok’s main power plant, which will use natural gas. Chinese companies also showed interest in the planned construction of a new coal-fired power plant near Vladivostok. To secure Chinese funding, Russia’s RAO ES of the East expressed will-

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ingness to install Chinese-made equipment and use Chinese construction services.56 Iron Ore

At present, most of the imported ore for Chinese steel mills comes from Australia and Brazil while Russia’s share is negligible. It may increase with the completion of the construction of the Kumkano-Suntarsky mining and enrichment plant in the Jewish Autonomous Oblast, just across the border from China. The plant came into operation in early 2015. Its main owner is Russian-British mining company Petropavlovsk, with Hong Kong−based General Nice and Minmetals Cheer Glory holding minority stakes. The construction was performed by Chinese contractors and funded mainly by the Industrial and Commercial Bank of China. It is expected that the Kumkano-Suntarsky plant will produce up to 10 million tons of iron ore. More iron ore projects are in the pipeline—the development of Garinskoye field in Amur Oblast and Berezovskoye field in Zabaikal Krai.57 To transport increasing amounts of iron ore, and other commodities, from the RFE and Eastern Siberia, a railway bridge will be built across the Amur in the JAO. Eighty percent of the $400 million cost of the project is being covered by the China Investment Corporation while the rest is being provided by Russian state-owned investment funds. The bridge will have the throughput capacity of 21 million tons a year and is scheduled to be completed in 2016.58 It will become the first permanent transportation link connecting Russian and Chinese sides of the Amur River. Copper

In 2014, China secured a 10 percent stake in the Udokan copper field in Zabaikal Krai, Russia’s biggest and the world’s third largest. This giant deposit of copper, located atop the Udokan mountain ridge, was discovered in 1949, but production never began due to the field’s remoteness from transport lines and harsh natural conditions. It seems that Udokan’s hour has finally come, with Chinese companies agreeing to finance the costs of its development and taking most of its future yield. Udokan will allow China to diversify its copper supplies, which are currently dominated by seaborne shipments from Chile.59 Food and Agriculture

China must feed 20 percent of the world’s population while possessing only 7 percent of the planet’s arable land.60 Moreover, the country’s increasingly wealthy population is shifting to fatter, more protein-intensive diets, increasing food consumption per capita. The quest for food security has become an

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important driver of China’s foreign policy. Since it relies more and more on foreign imports, particularly of soybeans, wheat, rice, corn, and barley, China aims to diversify these away from the United States and US allies and build its own global food supply system by investing in overseas agricultural resources. Russia and the RFE, with their abundance of arable land, pastures, and fish stocks, can be an important component in China’s food security strategy. 61 Chinese traders have shown increasing interest in importing various foodstuffs from the RFE, especially because they are considered more organic compared to Chinese-produced foods. One of Russia’s major agribusiness corporations, Rusagro, plans to launch production of pork, soybeans, sugar, and seafood aquaculture in Primorsky and Amur Oblast, specifically targeting China’s market. 62 The devaluation of the ruble in 2014 made Russia’s agricultural products even more attractive. According to Primorsky’s vice governor for agriculture, “China is willing to buy up everything—even the stuff which has yet to be produced.” 63 Agriculture is one economic sector in the RFE where Chinese labor and investment are especially visible. Many Far Eastern agriculture enterprises and individual farmers lease their land to Chinese who work on it as tenants, usually for no longer than several seasons. The Chinese agricultural tenants are often accused of using techniques damaging to the soil, and environment as well as food consumers’ health. To get the maximum yield, the tenants unsparingly use growth accelerators, fertilizers, pesticides, and herbicides, including those not allowed in Russia for health and environmental safety reasons.64 The Far Eastern department of Rosselkhoznadzor (Russia’s agriculture and foodstuffs regulator) has repeatedly reported illicit practices by the Chinese such as leaving refuse dumps on the land plots they have tilled and using agrochemicals that contaminate the soil as well as the surrounding rivers and lakes.65 Apart from being short-term tenants, the Chinese can also acquire agriculture lands on a more long-term basis. Russian law bars foreigners from owning arable lands and pastures, but long-term leases are permitted. Moreover, some Chinese buy and control land through Russian citizens and firms who pose as owners. For example, in the JAO, it is estimated that as much as half of the agricultural land is under Chinese control—either by leases or through de facto ownership66—even though this case is somewhat extreme, reflecting the JAO’s overall and almost absolute economic dependence on China. Similarly, in Primorsky Krai there is a strong Chinese presence in agriculture, although it is not always transparent, with Russian entities often serving as fronts for actual Chinese landowners.67 The largest Chinese agricultural enterprise in Primorsky is the company Armada, which, according to a local official, “like an octopus spreads its tentacles up and down Primorsky Krai.”68 Armada is a part of the Chinese corporation Huaxin from

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Heilongjiang province, which now not only deals with agriculture but also with real estate development in Vladivostok. The company has seven branch offices in Primorsky Krai. Its cultivated fields cover an area of about 50,000 hectares while the total cropland area in Primorsky Krai is about 380,000 hectares.69 Forestry

In October 2013 Russia-China Investment Fund, co-owned by Moscow and Beijing, acquired a 42 percent stake in the Russian Forest Products Group (RFP Group), a leading forestry holding company in the RFE. As reported, Russia-China Investment Fund’s investment in the company will support the construction of a center for value-added (deep) wood processing, the biggest in the RFE. RFP Group ranks second in Russia for leased forest area, controlling 5 million hectares of forest with permission to harvest over 4.6 million cubic meters annually. RFP Group is Russia’s largest exporter of forest products to the Asia Pacific region. The company is responsible for more than 10 percent and 15 percent of Russian wood exports to China and Japan, respectively.70 Transport

Recent Chinese-Russian deals in the RFE have not been limited to resource extraction industries. In 2014, Russian and Chinese governmentaffiliated companies announced they would jointly develop Zarubino port (Trinity Bay), strategically located in the south of the RFE at the junction of Russian, North Korean, and Chinese borders. The Chinese will acquire a stake in the port in exchange for massive investments in its expansion and modernization. The port at Zarubino will give China direct access to the Sea of Japan, which it has long coveted. The port, with the expected throughput capacity of 100 million tons a year, will handle mostly Chinese cargoes.71 Chinese companies, mainly from Jilin and Heilongjiang, are also considering investments in a number of other transport infrastructure projects in Primorsky Krai. Currently, three projects are being discussed with Chinese investors: (1) construction of a high-speed railway linking the border city of Hunchun in Jilin province with Vladivostok;72 (2) construction of a circular highway around Vladivostok coupled with a bridge across the Amur Bay directly connecting Vladivostok to the southernmost areas of Primorsky Krai and from there continuing into northeastern China; 73 and (3) construction of a commercial highway from Vladivostok to Nakhodka. 74

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Information and Telecommunication Technologies

The RFE’s information and telecommunication technologies (ICT) sector has seen a rising Chinese penetration. For example, the region’s cellular networks are increasingly relying on Chinese-made hardware. Also, in May 2014 state-owned Rostelecom awarded China’s Huawei a $73 million contract to construct a fiber optic underwater mainline connecting Sakhalin, Magadan, and Kamchatka. The line will provide broadband Internet to the three regions. Huawei will supply the equipment and be in charge of construction.75 Moscow appears willing to go much further in the ICT collaboration with China. According to the minister for the RFE’s development, Alexander Galushka, the government “is studying a proposal from Chinese IT companies to create new telecommunication corridors in the Far East, so that we no longer have to rely on US servers to exchange data between our countries.”76 Finance

Recent years have also witnessed the arrival of large Chinese financial institutions in the RFE. In 2012–2013 one of China’s biggest banks, Bank of China, opened branches in Khabarovsk and Vladivostok, aiming not only to service RFE-China commerce but also to provide a full range of banking services to Russian corporate and individual customers.77 In April 2014, China Development Bank Corporation committed to invest $5 billion in business projects in the RFE, with much of the money apparently meant for infrastructure projects in which Chinese construction companies could be involved as contractors.78 Meanwhile, the use of renminbi has been rapidly growing in the RFE. For instance, in 2013 the Khabarovsk branch of Vneshtorgbank, one of Russia’s major banks servicing international transactions, reported a 43 percent increase in the use of yuan as a currency for settlements by its customers against the previous year.79 As another indication of the increased profile of Chinese financial institutions in the RFE and Russia generally, China’s UnionPay cards are now widely available and steadily gaining popularity among Russians. Entertainment

Chinese companies have also become the principal investors in a largescale integrated gambling resort near Vladivostok—the Primorye resort is 50 kilometers from the city and 15 kilometers from Vladivostok International Airport. Its first casinos are slated to open in 2015 and aim to serve

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mostly visitors from northeast China. To attract more visitors to the resort, Russian authorities plan to significantly reduce immigration formalities for the Chinese.80 According to one of the resort’s executives, the total revenue from the gambling business may reach $1.7 billion by 2020. By the year of 2025, when the construction of the casino resort is expected to be completed, it will be able to receive as many as 10 million visitors annually.81 Will China Gain a Controlling Stake in the RFE? Already in the second half of the 2000s, Russian analysts observed that the RFE’s dependence on China reached such an extent that the region was becoming China’s “raw material periphery.”82 In terms of consumer goods and foodstuffs, the RFE’s dependence on China was estimated to be as high as 60–70 percent.83 However, at a closer look, until recently the Far East’s ties with China were essentially limited. The region dealt mostly with China’s northeastern provinces, particularly Heilongjiang, while Beijing paid little attention to the RFE. The commercial interaction between Dongbei and the RFE might have looked brisk, but in reality it was little more than a primitive trade exchange of the RFE’s primary products for Chinese goods. There were next to zero Chinese investments in the RFE—due to Heilongjiang’s lack of capital, Beijing’s lack of interest, and Moscow’s reluctance to let the Chinese into the most attractive sectors. Yet this period appears to be coming to an end and a new stage may be in the offing when the scale of Chinese penetration could increase substantially in quantity and quality. In 2013–2014, Moscow and Beijing struck an array of landmark deals that gave China unprecedented access to Eastern Russia’s most valuable assets such as oil, gas, and copper. Rather than provincial firms from Dongbei, China’s major state-owned companies, led by CNPC, are now moving into the RFE. This means that the RFE has gone up on the list of Beijing’s priorities. Although never stated publicly by Chinese officials, there is little doubt that the heightened interest in the RFE, at least to some degree, has to do with strategic calculations. China needs eastern Russia, in the words of one Chinese academic, as a “reliable backyard”84—a provider of energy, mineral, and biological resources, whose overland supplies cannot be interdicted by naval forces of the United States and its allies. In this respect, China probably views eastern Russia in the way that it does Central Asia and Indochina, seeking to turn it into a safe rear area and acquiring a substantial degree of control over it. Crucially, the Moscow-Beijing deals were not just about the sale of Russian oil, gas, and other commodities to China. They called for Chinese financing of the projects in the RFE and acquiring stakes in them. China’s acquiring interests in the resource and infrastructure projects on Far Eastern

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territory may take the form of loans or prepayments rather than a formal equity stake. Yet this does not change the nature of the deals: they are made with the understanding that China, which provides money, should get upstream investment opportunities and exercise a sizable influence in decisionmaking regarding the projects. Given that most of the ventures in question are supposed to form the backbone of eastern Russia’s economy in the decades ahead, China will gain a significant measure of control over the Far East and Eastern Siberia. We could see many of eastern Russia’s key enterprises being financed by China, being built and operated by Chinese workers, using Chinese-made machinery, and being managed by boards staffed by Chinese executives. In a decade’s time or even less, executive boards of the RFE’s most prized enterprises could look like that of Udmurtneft—a Russian oil producer co-owned by Rosneft and Sinopec—where three of the six board members are Chinese.85 Closer links with China will be a mixed blessing for Russia and its Far East. It is true that at present the Chinese have the financial wherewithal that neither Russia itself nor hardly anyone else has. And of course, development of the resources of Russia’s Far East requires a huge amount of money. Another asset that China has is labor, which can also be put to use in exploiting Russia’s natural riches. What it critically lacks, though, are technologies and managerial know-how. China may manufacture a lot of run-of-the-mill drilling and mining equipment and other kinds of machinery, and these already have a lot of customers in Russia, but it has a long way to go to compete with the West in making and operating cutting-edge and dependable equipment. Yet it is high technologies, apart from money, that Russia needs to tap the riches of the Far East and Siberia, most of which are located in the Far North and icy offshore areas. It is unclear how fast, if at all, China will be able to develop the technologies to be at least comparable with the West’s. Thus, partnership with China would do little to promote the RFE’s modernization, making it even more of a raw resources appendage than it is now. So far, the impact of China has been felt mainly in the southern provinces of the Far East, which are contiguous with the border. Territories farther north and east, such as Sakha, Sakhalin, Magadan, Kamchatka, and Chukotka, have seen much less Chinese presence.86 This may begin to change, however. Sakha is a case in point. Until recently, this large northern territory seemed outside the perimeter of any Chinese interests. However, with the signing of the Gazprom-CNPC contract in May 2014, Sakha’s Chayanda field will become the main source for the gas pipeline to China. Another deal, between Rosneft and CNPC, gives China an equity stake in exploring and developing Yakutian oil. Sakha’s rich Elga coal field is also likely to be bought by Chinese investors. If current trends continue, China is on track to acquire something close to economic hegemony over the RFE—with Chinese as the most-significant

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buyer, supplier, and outside investor. One question is whether the Chinese might then attempt to use their monopolistic position to impose conditions on Russia. Previous experience with China has not been reassuring in this regard. As an analyst of the RFE-China relations points out, the Chinese are quick to take advantage of Russian economic weakness and “often dictate the Russian side unfavorable contract terms, disregarding the basic interests of the partner.”87 Even when commercial agreements are signed and sealed, there is no guarantee that the Chinese would not try to renegotiate them. The most prominent example so far is a dispute in 2011 between CNPC and Russian energy companies Rosneft and Transneft over the implementation of a major oil contract, where China remitted payments to Russia at a unilaterally discounted price, eventually forcing the Russian oil suppliers to agree to a lower price.88 In another controversial case, Russia had to accept to sell electricity to China at rates considerably lower than the price paid for the same electricity by consumers in the RFE.89 The fear of losing economic sovereignty over the RFE, the awareness of China’s heavy-handedness when dealing with a weaker party, and the desire to acquire advanced technologies and know-how that China lacks all push Russia to diversify the RFE’s links with foreign partners. Yet with access to Western capital and expertise now limited or foreclosed, the RFE could drift into a consequential and long-term dependency on China. A strong and controlling Chinese presence in a region as strategically vital as the RFE could alter the balance of economic and political forces in East Asia to China’s advantage—a chain of circumstances as yet unacknowledged in Western policy circles. While previous chapters have focused on China’s rise and the deepening Russian-Chinese partnership, in the next chapter we view the RFE and Asia Pacific generally from a US strategic perspective. Like China, the United States has long-standing historical and security interests in the RFE (which compete in important ways with China’s), though these interests are obscured by current tensions over Ukraine and post-Soviet space generally. We conclude that the United States and Russia have important common interests: in balancing China, in dealing with terrorism and piracy, and in maritime environmental issues. But we note that the United States does not now treat Russia seriously as a Pacific partner and that irrational elements often override the objective rationale for cooperation, in any case. Notes 1. This assessment is shared by the authors of an authoritative Russian report who point out that, factoring out fuel supplies, “Russia is a key economic partner

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only for the Chinese province of Heilongjiang, which has close ties with border areas in the Russian Far East.” See Sergey Karaganov, Victor Larin, Igor Makarov, et al., Toward the Great Ocean-2, or Russia’s Breakthrough to Asia, Valdai Discussion Club Report (Moscow: Valdai Discussion Club, February 2014), 23–24. 2. “Vitse-prem’er KNR—Primorsky krai predstavlyaet ogromnyy interes dlya kitayskogo biznesa,” PrimaMedia, April 18, 2014, http://primamedia.ru/news/show .php?id=351551&printmode=1. 3. Chinese vice-president Li Yuanchao, quoted in “Rossiiskie vlasti gotovyat Dal’niy Vostok dlya zaselenia kitaitsami,” Online812, July 7, 2014, www .online812.ru/2014/07/07/019/. 4. See “World’s Richest Countries” for the top Chinese imports in the world, www.worldsrichestcountries.com/top_china_imports.html. 5. Pavel Minakir, ed., Economic Policy: Regional Dimension [in Russian] (Vladivostok: Dalnauka, 2001), 76. 6. Kenji Horiuchi, “Russia and Energy Cooperation in East Asia,” in Russia and East Asia: Informal and Gradual Integration, ed. Tsuneo Akaha and Anna Vassilieva (New York: Routledge, 2014), 165. 7. Chinese analysts, quoted in Kenji Horiuchi, “Russia and Energy Cooperation in East Asia,” in Russia and East Asia: Informal and Gradual Integration, ed. Tsuneo Akaha and Anna Vassilieva (New York: Routledge, 2014), 165. 8. Andrew Erickson and Gabriel Collins, “China’s Oil Security Pipe Dream,” Naval War College Review 63, no. 2 (Spring 2010): 90, http://china.praguesummer schools.org/files/china/1china2012.pdf. 9. Ibid. 10. As long as China enjoys an entente with Russia, Mongolia’s reliability as a supplier of whatever resources it possesses and China needs is guaranteed. 11. Alexander Gabuev, “Vzyat’ syr’em,” Kommersant, March 18, 2013, http:// kommersant.ru/doc/2143819. 12. Du Juan, “Gas Imports to Rise by 19%,” ChinaDaily Asia, January 16, 2014, www.chinadailyasia.com/business/2014-01/16/content_15112682.html. 13. “China” (Washington, DC: US Energy Information Administration, February 4, 2014), www.eia.gov/countries/cab.cfm?fips=ch. 14. Galina Starinskaya, “Zachem Rosnefti Kitay na Vankore,” Vedomosti, September 4, 2014, www.vedomosti.ru/opinion/news/32981821/rosneft. 15. Ibid. 16. The spur line into China became operational in 2011. Before that, the oil was shipped by rail. 17. Yuri Barsukov and Alexander Gabuev, “Kak razobrat’ kitayskuyu gramotu,” Kommersant, September 15, 2014, http://www.kommersant.ru/doc/2567331. 18. The initial plan, under which Rosneft intended to sell China a 49 percent stake in the Srednebotuobinskoye field, did not work out due to disagreements about price. In June 2015, Rosneft announced a new deal to sell a 20 percent stake in the Srednebotuobinskoye/Taas-Yuryakh oil field to British Petroleum, while a 29 percent stake would go to Skyland Petroleum Group, a British-registered company allegedly controlled by Chinese interests, possibly CNPC or Sinopec. See Georgy Peremitin and Lyudmila Podobedova, “Rosneft prodast 29% mestorozhdeniya TaasYuryakh kitayskoy kompanii,” RBC Daily, June 19, 2015, http://top.rbc.ru /business/19/06/2015/5584703c9a7947a9ab0d0225. 19. Anna Solodovnikova, “‘Rosneft’ nashla neft’ dlya CNPC,” Kommersant, October 21, 2013, www.kommersant.ru/doc/2324696.

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20. Alexey Topalov, “‘Rosneft’ zovyot kitaitsev na Vostok,” Gazeta.ru, February 7 2014, www.gazeta.ru/business/2014/02/07/5887889.shtml. 21. It was later revealed that China’s CNPC would get a 10 percent stake in Vankor. 22. Galina Starinskaya, “Zachem Rosnefti Kitai na Vankore,” Vedomosti, September 4, 2014, www.vedomosti.ru/opinion/news/32981821/rosneft. 23. Prior to Vankor, there was only one precedent of a Chinese company owning a stake in Russia’s oil production: Sinopec’s 49 percent share in Udmurtneft, acquired in 2006. However, unlike Vankor, Udmurtneft is a relatively small producer, with an annual output of only 6 million tons of crude. 24. Vladimir Putin, quoted in Evgeny Kalyukov and Timofei Dzyadko, “Putin odobril vklyuchenie Kitaya v chislo aktsionerov Vankora,” RBC Daily, September 1, 2014, http://top.rbc.ru/economics/01/09/2014/946328.shtml. 25. Galina Starisnkaya, “Sechin predlozhil Kitayu dolyu v Vankorskom proekte,” Vedomosti, September 2, 2014, www.vedomosti.ru/companies/news /32865731/v-rossii-dlya-kitaya-ogranichenij-net?full#cut. See also Marcin Kaczmarski, “Domestic Power Relations and Russia’s Foreign Policy,” Demokratizatsiya 22, no. 3 (2014): 383–410. 26. Igor Sechin is widely believed to have been one of the main architects of Mikhail Khodorkovsky’s downfall. 27. Galina Starinskaya, “Zachem Rosnefti Kitay na Vankore,” Vedomosti, September 4, 2014, www.vedomosti.ru/opinion/news/32981821/rosneft. 28. The person who, in the early 2000s, first pushed for a pipeline from Eastern Siberia to China was Mikhail Khodorkovsky, then chief executive officer and principal owner of Yukos Oil Company. Should he also be regarded as a pro-China lobbyist? 29. Rostislav Turovsky, “Kiraiskiy impul’s,” EastRussia, July 25, 2014, http://eastrussia.ru/country/63/2517/. 30. It is estimated that exploration costs alone are 1.5 times higher than in Western Siberia. Horiuchi, “Russia and Energy Cooperation in East Asia,” 170. 31. Boris Saneev and Dmitry Sokolov, “Russia’s Energy Development in Eastern Siberia and the Far East and Relations with East Asian Countries in the Energy Sector,” in Russia and East Asia: Informal and Gradual Integration, ed. Tsuneo Akaha and Anna Vassilieva (New York: Routledge, 2014), 193. 32. Interview with Mikhail Dmitriev, Novaya Gazeta, February 6, 2015, www.novayagazeta.ru/politics/67153.html. 33. Rostislav Turovsky, “Kitaiskiy impul’s,” EastRussia, July 25, 2014, http:// eastrussia.ru/country/63/2517/. 34. Saneev and Sokolov, “Russia’s Energy Development in Eastern Siberia and the Far East and Relations with East Asian Countries in the Energy Sector,” 194. 35. “China” (Washington, DC: US Energy Information Administration, February 4, 2014), www.eia.gov/countries/cab.cfm?fips=ch. 36. Du Juan, “Gas Imports to Rise by 19%.” 37. That China prefers the eastern route to the western one is consistently highlighted by Chinese experts. See, for example, Li Lifan and Wang Chengzhi, “Energy Cooperation Between China and Russia: Uncertainty and Prospect for Development,” Russian Analytical Digest, no. 163, February 24, 2015, 11–13. 38. Elizabeth Wishnick, “The ‘Power of Siberia’: No Longer a Pipe Dream,” PONARS Eurasia, August 2014, www.ponarseurasia.org/memo/%E2%80%9C power-siberia%E2%80%9D-no-longer-pipe-dream. 39. Vladimir Milov, “Kitaiskiy kontrakt: voprosy i fakty,” Echo Moskvy, May 29, 2014, www.echo.msk.ru/blog/milov/1330024-echo/. See also Mikhail Krutikhin,

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“A Mystery, Wrapped in a Puzzle,” Carnegie Moscow Center, May 23, 2014, http:// carnegie.ru/eurasiaoutlook/?fa=55680. 40. Shanghai-based Chinese expert, personal communication with Rensselaer Lee, May 30, 2014. 41. See, for example, a comment by Russian energy expert Mikhail Krutikhin, Facebook post, September 24, 2014, www.facebook.com/permalink.php?story_fbid =348339988675950&id=100004998549135. 42. “President Elbegdorj Continues to Press China and Russia for Trans-Mongolia Gas Pipeline Route,” North America-Mongolia Busin ess Council Newsletter, June 12, 2014. 43. They also contain some oil that will be extracted and pumped into the Eastern Siberia–Pacific Ocean pipeline. 44. As of this writing, Gazprom had not made a decision on accepting a loan or advance payment from China. Moscow obviously prefers to retain full ownership of the Power of Siberia project. Also, Gazprom is reluctant to allow Chinese companies to participate in the building of the gas infrastructure—a standard condition attached to large-scale Chinese funding—because that would reduce the share of profits going to Russian construction businesses. Yet unless the Russian financial situation improves, Moscow could have no other choice than to accept Chinese money, and attached conditions, for the Power of Siberia construction. 45. Turkmenistan is to send 65 billion cubic meters of gas a year to China by 2020. “Turkmen gas exports to China to hit 65 bcm/year by 2020,” Reuters, September 3, 2013, http://www.reuters.com/article/2013/09/03/gas-turkmenistan-china -idUSL6N0GZ0OT20130903. 46. Apart from the pipeline and LNG supplies from eastern Russia, the gas pipeline from Western Siberia to China, via the Altay Mountains, was being negotiated in 2014, which if realized will further increase Russia’s role as China’s overland gas supplier. 47. The US short ton is equivalent to 907.18474 kilograms. 48. “China” (Washington, DC: US Energy Information Administration, May 14, 2015), http://www.eia.gov/beta/international/analysis.cfm?iso=CHN. 49. “Aziya gotova vesti biznes c Rossiyey,” Vedomosti, May 13, 2014, http:// www.vedomosti.ru/newspaper/articles/2014/05/13/aziya-gotova-vesti-biznes-s -rossiej. 50. Rostislav Turovsky, “Kiraiskiy impul’s,” EastRussia, July 25, 2014, http:// eastrussia.ru/country/63/2517/. 51. Ibid. 52. “Rossiya dovedyot postavki elektroenergii v Kitay v etom godu do 3.6 mlrd kvtch—glava Minenergo RF,” ITAR-TASS, October 22, 2013, http://tass.ru /ekonomika/694058. 53. Turovsky, “Kiraiskiy impul’s.” 54. Even if the electricity export projects in negotiations go ahead as planned, Russia is unlikely to have more than 1 percent of China’s power market, with China being eager to produce most of its electric power on its own soil. See Turovsky, “Kiraiskiy impul’s.” 55. Natalia Skorlygina and Vladimir Dzaguto, “Kitay vol’yetsya v rossiyskuyu energosistemu,” Kommersant, November 21, 2014, www.kommersant.ru/doc /2615293. 56. “Energoproekty Primorya profinansiruet Kitay,” Zolotoy Rog, May 5, 2015, www.zrpress.ru/business/primorje_05.05.2015_72291_energoproekty-primorja-pro finansiruet-kitaj.html.

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57. Turovsky, “Kiraiskii impul’s.” 58. Yulia Gallyamova, “Kitaytsy skinutsya na dorogu v Rossiyu,” Kommersant, May 20, 2014, http://kommersant.ru/doc/2474942. 59. Mari Mesropyan, “Kitayskaya ‘Hopu’ poluchit 10% v Udokane,” Vedomosti, May 23, 2014, http://www.vedomosti.ru/business/articles/2014/05/23/kitajskaya. 60. Jonathan Watts, “China’s Farmers Cannot Feed Hungry Cities,” Guardian, August 26, 2004, www.guardian.co.uk/china/story/0,7369,1290852,00.html. 61. Zhang Hongzhou, “China Is Marching West for Food” (Singapore: S. Rajaratnam School of International Studies, February 4, 2014), www.rsis.edu.sg /rsis-publication/rsis/2148-china-is-marching-west-for-foo/#.VVqlg5PmUqM. 62. “Rusagro zaydyot na rynok Kitaya cherez Primorye—Maksim Basov,” PrimaMedia, September 19, 2014, http://primamedia.ru/news/show.php?id=387730 &printmode=1. 63. “Sergey Sidorenko: Krestyane Primoray chuvstvuyut sebya luchshe ekonomicheski v etom godu,” PrimaMedia, May 5, 2015, http://primamedia.ru/news /show.php?id=435902&printmode=1. 64. Nadezhda Brazhina, “Otravlennyy ris,” Vladnews, July 21, 2009, http://vlad news.ru/2565/ekologija/otravlennyj_ris. 65. See, for example, “Grazhdane KNR zakhlamili primorskuyu zemlyu,” Deita.ru, April 3, 2013, http://deita.ru/news/incidents/03.04.2013/834399-kitaets -zakhlamil-primorskuju-zemlju/; “Sel’khozproizvoditeli v Primor’e zagryaznili zemli khimikatami, soderzhashchimi tyazhelye metally,” PrimaMedia, October 11, 2013, http://primamedia.ru/news/show.php?id=308017&printmode=1; and “Viktor Gorchakov: Kitaiskie pestitsidy otravliaiut vodu v samom bol’shom ozere Primor’ia,” PrimaMedia, October 11, 2013, http://primamedia.ru/news/show.php?id =307999&printmode=1. 66. JAO regional government official, interviewed by Artyom Lukin, Birobidzhan, November 10, 2013. In June 2015, JAO’s acting governor, Alexander Levintal, estimated that as much as 80 percent of the territory’s agricultural land is controlled by China. “Gubernator Evreyskoy AO zayavil, chto kitaitsy kontroliruyut 80% zemli regiona,” News.rambler.ru, June 18, 2015, http://news.rambler.ru /business/30536012/. 67. “Sergey Sidorenko.” 68. Local official, quoted in Ivan Zuenko and Sergei Ivanov, “Preliminary Report of the Research Project ‘The State and Chinese Capital in the South of the Russian Far East’” (Vladivostok: Institute of History, Far Eastern Branch of Russian Academy of Sciences, February 2015). 69. Ivan Zuenko and Sergei Ivanov, “Report of the Research Project ‘The State and Chinese Capital in the South of the Russian Far East’” (Vladivostok: Institute of History, Far Eastern Branch of Russian Academy of Sciences, February 2015). 70. “Russia-China Investment Fund Secures 42% Stake in RFP Group,” RussiaChina Investment Fund, October 18, 2013, www.rcif.com/articles_7.htm. 71. Yulia Gallyamova and Egor Popov, “‘Summa’ nashla partnyora v Gonkonge.” Kommersant, November 11, 2014, http://www.kommersant.ru/doc /2607724. 72. “Kitay planiruyet stroitel’stvo skorostnoy zheleznoy dorogi Khun’chun’— Vladivostok,” PrimaMedia, February 11, 2015, http://primamedia.ru/news/show .php?id=420473&printmode=1. 73. “Kitay mozhet prinyat’ uchastiye v stroitel’stve VKADa i mosta cherez Amurskiy zaliv v Primor’ye,” PrimaMedia, February 3, 2015, http://primamedia.ru /news/show.php?id=418745&printmode=1.

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74. “Kitay zainteresovalsya stroitel’stvom platnoy trassy ot Vladivostoka do Nakhodki,” February 13, 2015, PrimaMedia, http://primamedia.ru/news/show.php ?id=420771&printmode=1. 75. “Optovolokno doberyotsya do Kamchatki,” EastRussia, June 10, 2014, http://www.eastrussia.ru/material/optovolokno_doberetsya_do_kamchatki/. 76. Alexander Galushka, “Blizkiy sosed luchshe dal’nego rodstvennika,” SinoRus, May 24, 2014, http://sino-rus.org/dalnyvostok. 77. Dmitri Shcherbakov and Oleg Belov, “Bank of China zakinul set’,” Kommersant, June 20, 2012, www.kommersant.ru/doc/1962059. See also “Bank of China zarabotal v Primor’e,” PrimaMedia, January 22, 2013, http://primamedia.ru/news /show.php?id=252446&printmode=1. 78. “Kitay kredituet svoi eksportnye vozmozhnosti,” Kommersant, April 4, 2014, www.kommersant.ru/doc/2452091. 79. Marina Galkina, “Yuan v banke,” EastRussia, June 11, 2014, www .eastrussia.ru/country/63/1713/. 80. “Primorsty budut ezdit’ v Kitay po-novomu,” Deita.ru, January 14, 2015, http://deita.ru/news/tourism/14.01.2015/4815284-primortsy-budut-ezdit-v-kitay-po -novomu/. 81. Interview with Craig Ballantyne, executive director of the “Primorye” resort [in Russian], Konkurent, January 20, 2015, http://konkurent.ru/ekonomika/558 -kreyg-ballantayan-igornyy-biznes-finansovyy-instrument.html. 82. Alexey Voskresensky, “Rossiya i Kitay: potentsyal, perspectivy, vyzovy i problemy regional’nogo izmereniya otnosheniy,” in Vzaimodeystvie Rossii i Kitaya v global’nom i regional’nom kontekste, ed. Anna Khamatova, Valery Dikarev, Alexander Kozhevnikov, and Artyom Lukin (Vladivostok: Far Eastern University Press, 2008), 96; Sergey Luzianin, “Rossiysko-kitayskoye strategicheskoye partnerstvo,” in Vzaimodeystvie Rossii i Kitaya v global’nom i regional’nom kontekste, ed. Anna Khamatova, Valery Dikarev, Alexander Kozhevnikov, and Artyom Lukin (Vladivostok: Far Eastern University Press, 2008), 171. 83. Victor Larin and Lylia Larina, Okruzhayushchiy Mir Glazami Dal’nevostochnikov (Vladivostok: Dal’nauka, 2011), 124. 84. Li Jingjie, “Sino-Russian Strategic Partnership Cooperative Relations and the US Factor,” Asan Forum, November 22, 2013, www.theasanforum.org/sino -russian-strategic-partnership-cooperative-relations-and-the-us-factor/. 85. “The Executive Board of JSC Udmurtneft,” Udmurtneft website, www .udmurtneft.ru/about_board.html. 86. This is reflected in trade, investment, and migration data. It is also borne out by the interviews that we conducted in Magadan, Yuzhno-Sakhalinsk, and Yakutsk (November 2013–June 2014). 87. Maria Alexandrova, “Programma sotrudnichestva smezhnykh territoriy Rossii i Kitaya: istoriya, fakty, puti osushchestvleniya” (Moscow: Institute for Far Eastern Studies, 2010), www.ifes-ras.ru/online-library/book/6-papers/12-Alexan drovaRegionalny15. 88. Kenji Horiuchi, “Russia and Energy Cooperation in East Asia,” 170. See also Alexander Gabuev and Kirill Melnikov, “Syr’evoi zadatok,” Kommersant, October 23, 2013, www.kommersant.ru/doc/2326062. 89. “Ishayev predlagaet forsirovannoe razvitie Dal’nego Vostoka za shchyot vozmozhnostey,” MK–v Khabarovske, February 20, 2013, http://hab.mk.ru /article/2013/02/20/815298-ishaev-predlagaet-forsirovannoe-razvitie-dalnego-vos toka-za-schet-vozmozhnostey.html.

11 Russia and the United States in Asia Pacific: Is Collaboration Possible?

section for Moscow’s and Washington’s interests, and these interests have conflicted on a number of issues such as missile defense, NATO enlargement, and Ukrainian sovereignty. In contrast, contacts between Russia and the United States in Asia Pacific region are of much lower density. At present, the relationship between Russia and the United States certainly is not counted among the most important strategic dyads in Asia Pacific. It is overshadowed by other bilateral links such as those between the United States and China, Japan and China, the United States and Japan, and China and India. This is hardly surprising, given Russia’s relative lack of influence in Asia Pacific. Russia is a major Eurasian power no doubt, but its credentials as an Asia Pacific actor are less convincing. There is neither much cooperation nor conflict between Moscow and Washington in Asia Pacific these days, but this was not always the case. There were times when developments in the Pacific defined the nature of Russian-US relations. It is quite possible that this may happen once again, especially if the sides perceive a common threat from a third country. The record of the past two centuries provides instructive examples of such collaboration, most prominently against Japan. The Cold War ushered in a period of relative tension in relations in Asia, but this ended with the collapse of the Soviet Union. IN RECENT TIMES, EUROPE HAS BEEN THE MAIN ARENA OF INTER-

Historical Perspectives Russian-US contacts in the Pacific can be traced back over 200 years. In the late eighteenth century, two transcontinental flows of Russian and US citizens, moving toward each other, came into contact in the Pacific North203

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west. Initial isolated encounters began to evolve into a fairly stable relationship, with enterprising New Englanders trading food and other provisions for the otter furs harvested by the Russians.1 The Russian-US interaction featured both cooperation and competition. The state-owned Russian American Company, based in Alaska, found its monopoly being increasingly undermined by US merchants who were depleting sea otter stocks and engaging in trade with the natives. For its part, the United States was concerned about Russia’s expansionist territorial and maritime claims to North America’s western seaboard. Incidentally, the dispute over Russian presence in the Pacific contributed to the formulation of the Monroe Doctrine.2 Without waiting for the conflict of interests to escalate, the two sides resolved the dispute diplomatically through concluding an agreement on maritime sovereignty and the northwest territorial boundary. Known as the Russian-American Convention of 1824, it was the first formal treaty between the United States and Russia. It set the southern boundary of Russian holdings in the northwest at 54°40ʹ latitude, and promised the United States access to the region, as long as they did not supply the native peoples with weapons, ammunition, or liquor.3 As Charles Ziegler points out: Washington and St. Petersburg had negotiated from a position of mutual respect, both made some concessions, and neither gave in to the more extreme demands of domestic forces. The United States preserved its commercial rights in the Pacific, and retained Russia as a potent balancer to British claims in the Northwest. Mutual interests in preserving the balance of power would subsequently shape relations during the American Civil War, and influenced Russia’s decision to sell Alaska to the United States.4

Balancing Britain

Though there is a 200-year history of Russian-US relations in the Pacific, we begin our narrative in the second part of the nineteenth century, with the decision in 1867 by Alexander II’s government to sell Alaska. The decision was based on financial considerations—Alaska was a burden on the Russian treasury that diverted resources from new, and more important, geopolitical priorities—the Amur River basin and Central Asia. The territory was also seen as difficult to defend because of its extreme remoteness from the imperial center. As for the United States, it saw substantial benefits in the Alaska purchase such as a great enlargement of the national territory, acquisition of abundant natural resources, and facilitation of US trade in Asia. However, both governments also had geopolitical considerations resulting from their troubled relationships with “the superpower of the nineteenth century,” the British empire. In the 1860s, Britain was the main adversary for Russia and the United States. Russia had fresh memories of a humiliat-

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ing defeat at the hands of the British-led alliance in the Crimean War. In 1863, London vigorously supported the Polish uprising, threatening Saint Petersburg with a new war. Meanwhile, the Great Game between the Russian and British empires was getting more intense in Central Asia. At the same time, there was a possibility of Britain intervening in the American Civil War and giving its support to the Confederacy.5 In those circumstances, the strategic alignment between Moscow and Washington looked natural. The Russian government gave the United States moral and diplomatic backing during the war. It even dispatched two naval squadrons to New York and San Francisco in a show of support in September 1863. During the American Civil War and immediately after it, Russian-US relations were warm, perhaps the best ever in their history. The anti-British quasi-alliance of Washington and Petersburg created favorable conditions for the sale of Alaska. Many among the US ruling elite liked the idea of using Alaska in the pincer strategy to annex British Columbia (the western part of a future Canada, which was then Britain’s colonial possession). The United States was also worried that, if it did not acquire Alaska, the British might get it sooner or later.6 The tsarist government, making the decision to sell its North American possessions, was also greatly influenced by anti-British motives. “If the United States takes hold of our possessions,” a Russian envoy in Washington wrote, “the British Oregon will find itself sandwiched by the Americans both from north and south and will hardly avoid their attacks.”7 Therefore, as Canadian historian Ilya Vinkovetskiy points out, the Alaska deal was viewed by the Russian leaders as a geopolitical maneuver aimed against Britain. The Russian government simultaneously tried to please the United States, cementing mutual friendship, and intimidate the British by threatening their colonial possessions in North America.8 Saving the Russian Far East for Russia

US-Russian relations deteriorated in the later years of the tsarist empire. The United States had expanded westward to Hawaii and the Philippines, and Asia was increasingly a focus of US policy interest. Russia, meanwhile, harbored imperial ambitions in Northeast Asia, especially vis-à-vis Manchuria and Korea. The countries thus seemed destined to become geopolitical rivals. The anti-Russian position of the US government was not based exclusively on geopolitical considerations. It is important to note that by the late nineteenth century Russia was viewed in a very negative light—as a backward, aggressive, and reactionary state—by the US public. Explorer and journalist George Kennan, who was the most prominent Russia expert in the United States at the time, contributed a great deal to that image. After

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traveling to Siberia in 1885–1886 and seeing the darker side of Russia, he became an ardent critic of the Tsarist autocracy, and upon his return to the United States began propagating the view that Russia was a country of poverty, lawlessness, and tyranny.9 The anti-Russian shift of US foreign policy was also greatly affected by the pogroms of Jews that were often abetted by Tsarist authorities. The United States remained officially neutral in the Russo-Japanese war of 1904–1905, but US sympathies rested with Japan and the US banking community provided Japan with substantial financial support (this included helping Japan sell bond issues in the United States totaling almost $350 million, nearly half the cost of Tokyo’s entire war effort).10 But with Russia’s swift and stunning military losses in the war, Washington’s position toward the sides shifted, and Japan came to be viewed as potentially a more dangerous threat to the United States’ newfound interests in East Asia. Washington brokered a peace treaty in 1905 (the Treaty of Portsmouth), which was mildly favorable to Russian interests; for example, forcing Japan to drop demands for war reparations. But Japan now emerged as the military power to be reckoned with in Asia Pacific. The Russian empire collapsed in 1917. With the giant country breaking chaotically apart, a vacuum of power emerged in Eastern Siberia and the RFE. In February 1918 Japan, acting formally under the mandate of the Entente Powers, landed its troops in Vladivostok and deployed military units to northern Manchuria. A little later US, British, and French contingents arrived in the RFE. The deployment of US troops was, to a great extent, intended to prevent Japan from monopolizing control over Russia’s eastern territories.11 There was a good reason to worry: the size of the Japanese contingent quickly exceeded the limit sanctioned by the Entente12 and the Japanese indicated no signs of leaving the Far East, even after World War I was over. Japan harbored plans to create a dependent Russian administration in the Far Eastern and Eastern Siberian area stretching as far west as Lake Baikal. This was to be followed by their de facto separation from Russia and inclusion in the Japanese sphere of influence. The Japanese aspirations were unacceptable not only for Russia but also for the United States, which was aware that Japan’s control of the RFE and Eastern Siberia would significantly increase its geopolitical might. In May 1921, the US government issued a note stating that “the United States cannot accept the violation by Japan of Russia’s sovereignty and territorial integrity. The United States hopes that Japan will be able in the nearest future to end its Siberian expedition and return Sakhalin to the Russian people.”13 In such circumstances there arose a natural opportunity for Soviet Russia and the United States to find common ground. In March 1920, the Far Eastern Republic was proclaimed, which included the area east of Baikal.14 The republic was created by Moscow to act as a buffer between

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Bolshevik Russia and Japan. Besides, the Bolsheviks hoped that the new quasi-state would be able to serve as a legal communication channel with Washington to collaborate against Japan. The US administration would not deal with the Bolshevik authorities, but could take a more favorable view of the Far Eastern Republic, which, albeit under Moscow’s control, was not openly communist. Those expectations were realized, to some extent. Although the Far Eastern Republic was never officially recognized by the United States, its representatives were allowed to visit Washington when the international conference on Pacific affairs was held there from November 1921 to February 1922. Acting in an unofficial capacity, the Far Eastern Republic delegation met with Secretary of State Charles Hughes and conducted a successful propaganda campaign in the United States, exposing the expansionist intentions of the Japanese toward the RFE. The delegation also tried to tempt the United States with opportunities for profitable business deals and natural resources concessions. Holding out alluring prospects to US businessmen, the Russian representatives hoped that the business circles would pressure the US government to become more active in squeezing Japan out of the RFE.15 “The Russian question” was discussed at the Washington conference in January 1922. Tokyo found itself in isolation. Under US pressure, which was supported by the other powers, Japan had to agree to withdraw its forces from the Russian territory (Primorsky and northern Sakhalin). By November 1922, all the Japanese troops left Russia’s mainland.16 The United States’ geopolitical interests helped Russia retain its Far Eastern territories. Washington needed Russia, although it was under the Bolshevik rule at the time, as a counterweight to Japan and its Pacific expansionism.17 The anti-Japanese partnership of Moscow and Washington, which began in the 1920s, continued into the 1930s. Diplomatic recognition of the Soviet Union by the United States in November 1933 was, to a large extent, determined by the necessity of joint counteraction to the expanding Japanese aggression in China. According to the Russian-US researcher Eduard Lozanskiy, “Roosevelt was keen on establishing ties with a country that shared with the United States an acute feeling of danger posed by Japan. In the mid- and late 1930s, Washington was mainly interested in Moscow as a factor in the Pacific balance of power.”18 It is also noteworthy that, at that time, a common view in Washington was that the Eastern European area was the least important region in the world from the perspective of US interests.19 This anti-Japanese alignment of Moscow and Washington culminated with the USSR entering the Pacific war in August 1945. During the war, as mentioned in Chapter 1, the RFE became a focal point of US-Soviet logistical cooperation, a vital transit area for wartime Lend-Lease effort. Of course, the target at the time was Nazi Germany, not Japan, but Lend-Lease

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can count as an example of US-Soviet collaboration in Asia Pacific, even if the enemy was in a different theater. The Cold War, Proxy Conflicts, and Post-Soviet Transformation

The end of World War II dramatically transformed the global geopolitical configuration. Having become superpowers, the United States and the Soviet Union literally overnight switched from alliance to confrontation. Northeast Asia and later Southeast Asia became the most important regional theaters of the Cold War, after Europe. The San Francisco Peace Treaty of 1951, which formally closed World War II in Asia Pacific, was signed without the Soviet Union. The Soviet Union sent a delegation to San Francisco but refused to sign the treaty, which had been drafted by the United States, because communist China, Moscow’s ally at the time, was not invited to the conference. Another major reason was the absence of express recognition in the treaty of the Soviet Union’s sovereignty over southern Sakhalin and the Kuril Islands.20 As in the rest of the world, Moscow and Washington avoided direct clashes in Asia Pacific, but they squared off in different ways. For instance, Moscow provided substantial assistance to the communist forces fighting the United States in the Korean and Vietnam Wars, while the United States more than reciprocated later by opening relations with China, then the Soviet Union’s sworn enemy, in the 1970s. A new front in the proxy war opened in the 1980s when the United States along with China, Saudi Arabia, and others funded and equipped the mujahidin insurgency against the Soviet occupation of Afghanistan. The success of the insurgents helped speed the departure of Soviet forces, which occurred at the end of the decade. The collapse of the Soviet Union radically transformed Moscow’s foreign policy on all fronts, including in the Pacific. The United States, as well as Japan and South Korea, which had previously been seen as the main adversaries in Northeast Asia, began to be treated as valued partners. By contrast, the ties to the former ally, North Korea, were reduced to almost zero. Moscow’s military strategy in the Pacific changed too. While in the 1970s and 1980s the clout of the Soviet Pacific Fleet was rapidly built up, alarming the United States and its allies, in the 1990s the Russian naval presence in the Pacific virtually ceased to exist. Due to drastic cuts in funding, Russia’s ground and naval forces in the Pacific experienced considerable degradation. Having lost its military-strategic leverage, Russia at the same time was unable to integrate into Asia Pacific regional economic system. In fact, in the 1990s, Russia ceased to be a major actor in Asia Pacific. Those circumstances shaped the character of Pacific relations between the United States and Russia in the post–Cold War period. Washington no longer perceived Moscow as posing any threat to its interests in the region.

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Yet this did not result in any substantial increase in political cooperation between Russia and the United States. Politically, Russia was too weak in the Pacific for Washington to have any significant interest in establishing meaningful bilateral collaboration with Moscow. On the economic front, following a brief period of high expectations, the US business community became disillusioned with the RFE. The local market was too small and could not generate substantial profits whereas the risks related to rampant crime and corruption were too high. The only exception was the Sakhalin oil and gas projects, with Exxon as a major investor. The US attitude toward Russia in the Pacific in the 1990s could be characterized as benevolent indifference. Washington did not obstruct Moscow’s attempts at integration into Asia Pacific, but did little to help them. One of the few exceptions was diplomatic support that the United States extended to Russia when it was applying for APEC membership in 1997. Several APEC member states opposed Russia joining the organization, citing the insignificance of Russian participation in the regional economy. The United States, along with some support from Japan and China, backed Moscow’s application, which decided the matter. However, some saw this as the US desire to compensate Russia for NATO’s eastward enlargement, which was happening at the time. As former Australian prime minister Paul Keating remarked, “Russia’s membership was supported by the United States in part, I believe, to atone for another bad decision—to expand NATO to the borders of the old Soviet Union. This sent a signal to Russia that it wasn’t wanted as part of the European system. Instead it was offered APEC membership as a consolation prize in the Asia Pacific.”21 US-Russian Relations in the Pacific in the Modern Era It is remarkable that, despite the turbulent character of the contemporary Russian-US relations, in Asia Pacific they remained quite stable. Of all the areas where Moscow’s and Washington’s geopolitical concerns overlap, it is Asia Pacific where their interests are least conflicting and most compatible. While in Eastern Europe, the Caucasus, Central Asia, and the Middle East, Russia and the United States are competitors rather than partners, they do not have irreconcilable disagreements in the Pacific. This is unsurprising. Moscow makes it clear that it considers the post-Soviet space as the area of Russia’s “privileged interests.”22 Furthermore, Russia still wields effective political, economic, and military leverage over its Eastern European, Caucasian, and Central Asian neighbors, many of whom are weak and vulnerable states. Meanwhile, the United States, traditionally fearing a single-power domination in northern Eurasia, is eager to counteract the spread of Russian

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influence in the post-Soviet space, and all the more so in larger Europe. Thus, the clash of Moscow’s and Washington’s geopolitical interests in volatile regions west and south of Russia is almost assured from the realpolitik standpoint. In Northeast Asia, the situation is quite different. Although Moscow’s influence has grown in recent years, it is too weak to be perceived by Washington as an actual, or even potential, challenge. Russia’s central geopolitical interest in the region is to retain effective control over its Pacific territories, not to expand at the expense of others. This is well understood in Washington as well as in Northeast Asian capitals. In a similar way, Russia does not see any major threat in the US presence in the Pacific, if only because Moscow claims no exclusive interests in Northeast Asia that could be encroached on by Washington. That said, Russia and the United States do have a number of disagreements and actual or potential concerns about each other in the Pacific. Moscow, obviously the weaker and more vulnerable side vis-à-vis the United States in the Pacific, tends to fret more about the US posture in the region than the other way around. Where the Countries Disagree Missile Defense

Like China, Russia disapproves of the US-led efforts to build a missile defense system in Northeast Asia. Moscow believes that such missile defenses, created on a unilateral basis, would undermine strategic stability and trigger dangerous arms races. Moreover, the Russian government questions Washington’s assertions that the Northeast Asian missile defense will be directed only at the North Korean threat, suspecting that it could also be used against Russian and Chinese strategic forces.23 According to Russian defense minister Sergey Shoigu, Russia has “serious concerns” about the US-Japanese missile defense system because it “may disrupt the strategic balance of power in Asia Pacific region.”24 Yet Russia chose not to make Asia Pacific theater missile defense a top issue in its relations with the United States, in a sharp contrast to its harsh stance on the US missile shield planned for Europe. However, if the US-led missile defense systems in East Asia develop new capabilities and become increasingly integrated with the US global missile defense umbrella, Russia may take a tougher position on this issue. US Military Presence in the Pacific

Moscow does not see the US military predominance in the North Pacific as a clear and present danger, but it certainly takes it into account in its strate-

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gic planning. For example, the main highlight of Russia’s armed forces’ large-scale military exercises Vostok 2014, which took place in the Far East in September 2014, was the simulation of defense of Kamchatka Peninsula’s coast against an amphibious assault.25 It is apparent that it was not China, but rather the United States or Japan that could hypothetically mount such an assault on Kamchatka from the sea.26 The United States seems to have far fewer concerns about the Russian military posture in the Pacific. The base of nuclear strategic submarines in Kamchatka remains a potential threat, although not related to the North Pacific per se but rather as part of the general nuclear balance between Russia and the United States. Moreover, Washington is not happy with Russia’s increased military activities in the Arctic. The Bering Sea Dispute

There is an unresolved, although relatively low-profile, issue over the Russian-US maritime border stretching from the Bering Sea into the Arctic Ocean. The Russian-US maritime boundary de facto follows the 1990 Maritime Boundary Agreement, also known as the Baker-Shevardnadze agreement after US secretary of state James A. Baker III and Soviet foreign minister Eduard Shevardnadze. Although ratified promptly by the US Senate, it has yet to be approved by the Russian parliament. The Baker-Shevardnadze agreement aimed to divide 15,000 nautical miles of disputed area in the sea.27 The larger portion of the disputed area in the Bering Sea was agreed to belong to the United States. Many in Russia have criticized Mikhail Gorbachev and Shevardnadze for rushing the deal, by ceding Russian fishing rights and other maritime benefits, and insist on renegotiation. The United States continues efforts to enforce the boundary line against the encroaching Russian fishing vessels, to build up the evidence of “general state practice” that the 1990 agreement is indeed the marine border between the two countries.28 Moscow now links the ratification of the treaty with the United States’ agreeing to grant Russia’s fishermen fishing rights in the northern portion of the Bering Sea.29 The Arctic

One question that could become a bone of contention between Russia and the United States concerns the Arctic regions adjacent to the North Pacific. The competition over the Arctic has been heating up in recent years, involving not only Russia and the United States, but also Canada, Norway, Denmark, and some other countries. Consequently, Moscow is worried that Washington might try to put together an anti-Russian Arctic coalition. Among the countries with stakes in the Arctic, presently it is the United States whose stance on the Arctic issues is the most divergent from Russia’s

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position. Some of the disputes are about differing approaches to the jurisdiction over the continental shelf. More important disagreements concern the legal status of the Arctic sea-lanes, including the Russia-controlled Northern Sea Route. In accordance with its principle of freedom of navigation, the United States seeks internationalization of those Arctic sea-lanes. US Competition in Hydrocarbon Markets

Russia’s grand designs of securing a significant share in Asia’s energy imports, by exporting ever increasing quantities of oil and gas, may be confounded by the competition from US shale oil and, particularly, shale gas. According to some Russian experts, the United States’ touting of the “shale revolution” primarily seeks “to undermine Gazprom’s positions in Europe and block the advance of Russian natural gas to the Asia-Pacific markets.”30 At the same time, they downplay the US energy competition, pointing out that, apart from many technological difficulties and environmental risks in extracting shale gas, the creation of infrastructure for massive exports of North American LNG to Asia will take quite a while.31 The Fear of the United States Seizing Siberia

However ludicrous it might seem to the US audience, some people in Russia worry that the United States is desirous of the Far East and Siberia to take hold of their immense natural resources. They believe that the United States harbors plans of internationalizing or outright annexing Siberia. To substantiate this concern, they frequently refer to a statement allegedly made by former US secretary of state Madeleine Albright that “Siberia holds too many natural resources for just one country’s use.”32 Some Russian intellectuals of the ultrapatriotic strain assert that the United States “sub-consciously covets” Siberia.33 It is true that such beliefs are not shared by many, but if anti-US sentiment continues to rise in Russia, it undoubtedly will gain more of a following. Areas of Convergence and Possible Collaboration As is evident from the above analysis, territorial issues, areas of economic and strategic competition, and (on the Russian side) irrational phobias significantly impact on US-Russian relations in Asia Pacific. Yet one senses that these differences are relatively minor and can be papered over, if not ultimately negotiated away. Importantly, they are outweighed by potential areas of collaboration on the region’s fundamental issues, many of them political.

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Balancing China

Concerns about the risks connected with the rise of China could establish the principal basis for a strategic dialogue and perhaps active collaboration between Moscow and Washington in Asia Pacific. In theory, collaboration could proceed along political, economic, and security dimensions. Neither Russia nor the United States is interested in seeing China become Asia’s hegemon, though current East-West conflicts over Ukrainian sovereignty appear to cloud this obvious common interest. Before the Ukraine crisis, a number of influential Russian experts called for closer strategic interaction between the two countries in Asia Pacific, pointing to the China factor as the primary incentive. A 2011 policy paper prepared by a group of prominent Russian experts emphasized that Russia and the United States had to be concerned not with one another, but with other threats and challenges.34 Both Russia and the United States experience the diminution of their relative power in the face of “the global diffusion of power” and the rise of new ambitious players in Asia, especially China. This makes it necessary that Russia and the United States become close friends, even to the point of “selective military-political alliance in order to counter a wide range of new threats and challenges.”35 As the authors of the policy paper indicate, the biggest regional challenge in global politics lies in the uncertainty of China’s future behavior.36 Strategic alignment with the United States would allow Russia to feel more confident vis-à-vis China. The United States’ friendship and support will avert the possibility of Russia becoming China’s periphery and its client state, a development that could greatly strengthen Beijing’s geopolitical might to the detriment of US national interests.37 The policy paper is careful not to use the word “containment,” but it is quite clear that one of the main goals of the proposed Russian-US rapprochement is to hedge against the rise of China. Some Russian public intellectuals are more straightforward on this. For instance, Kremlin-affiliated political scientist Andranik Migranyan published an article in the official Rossiyskaya Gazeta in which he mentions that Russia and the United States could become “constructive partners. . . in a number of regions,” as well as in “the containment of China.”38 In the same vein, a Russian-US report coauthored by Oleg Barabanov and Jeffrey Mankoff, released in July 2013 just before the Edward Snowden affair and the Ukraine crisis, reiterated that “uncertainty about China’s long-term intentions is a major concern for both Washington and Moscow.”39 In the United States, quite a few leading strategic thinkers, both before and after the Ukraine crisis, have argued that Russia is indispensable in maintaining a balance of power in Asia, which would preclude Chinese hegemony. According to Aaron Friedberg,

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Friedberg’s position is echoed by Edward Luttwak, who asserts that, in countering China’s possible bid for dominance: The alignment of the Russian Federation would . . . be exceedingly important and could indeed be decisive, both because of itself and because of the neighboring states—Mongolia, Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, and Turkmenistan—which the Russians continue to influence in important ways. . . . [I]f a China/anti-China world does emerge . . . Moscow would be its strategic pivot.41

In a similar fashion, writing on the Ukraine crisis John Mearsheimer points out: “The United States will . . . someday need Russia’s help containing a rising China. Current US policy, however, is only driving Moscow and Beijing closer together.”42 Unfortunately, current US policy toward Russia reflects none of this strategic thinking, and indeed could not be better designed to further cement the Russia-China partnership and encourage the countries to march in lockstep on the international stage. Dealing with North Korea

North Korea is another important geostrategic problem on which the United States and Russia could find a lot of common ground, despite the current differences in their approaches to the Pyongyang regime. While Washington takes a hard line on Pyongyang and wants regime change, 43 Moscow seeks continuation of the status quo on the peninsula and preservation of North Korea as an independent player. 44 There is a prevailing view in the Russian foreign policy community that North Korean collapse would likely cause radical changes in the Northeast Asian balance of power that might be detrimental to Russia’s national interests. The proponents of this view argue that the forced demise of North Korea would essentially mean the revision of the World War II outcomes, enabling the United States to strategically encircle China, and incidentally Russia, by extending the US military presence into the north of the Korean Peninsula. They are concerned that an isolated and weakened North Korea would be annexed by US-allied South Korea, expanding the US sphere of influence in Northeast Asia. That is why Moscow should maintain good relations with Pyongyang and help keep it afloat, despite the eccentricity of the Kims’ dynastic regime. 45

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Nonetheless, Moscow’s commitment to North Korea should not be overestimated. It is quite likely that Moscow will eventually conclude that continuation of the North Korean regime benefits China much more than Russia. After all, it is Chinese, not Russian, companies that enjoy the dominant position in North Korea. Furthermore, even if US troops were eventually deployed to North Korea, they would be of much more concern to China than to Russia, if only because China shares a much longer border with North Korea.46 One may also consider the economic gains that Russia is well positioned to reap as a result of Korean reunification. Major projects that are now stalled due to the inter-Korean conflict, such as oil and gas pipelines from Russia to Korea and the linking of Korean railways to the Russian Trans-Siberian Railway, would go ahead if the North Korean problem was finally resolved.47 Finally, Moscow is not happy with North Korea’s steady progress in the development of nuclear warheads and ballistic missiles. First, because of the immediate safety and security risks this poses to the RFE and, second, because the increase in the number of nuclear powers devalues Russia’s own nuclear deterrent, undermining a crucial basis of Moscow’s great-power standing in the world. Such considerations might lead Moscow to a tougher stance on Pyongyang and acceptance of a swift Korean reunification in the future, even if it should be carried out as absorption of North Korea by a pro-US South Korea48—precisely the scenario that Washington wishes for. According to the State Department representative for North Korea policy, Sung Kim, even amidst the Ukraine crisis “alignment on the core goal of denuclearization remains as strong as ever.” He goes on to state that “Russia will remain an important player in our diplomacy with the DPRK.”49 That said, Moscow’s willingness to cooperate with the United States on the Korean Peninsula issues will be directly linked to the general condition of Russian-US relations: if they remain tense, or become even more contentious, Russia would rather obstruct Washington’s Korea policies and instead choose to play second fiddle to China on the Korean affairs. Institutional Architecture

Another point of convergence between the United States and Russia could be found in the construction of Asia Pacific institutional architecture. It is true that Russia advocates a non-bloc approach to Asia Pacific security, which does not dovetail with the United States’ hub-and-spokes system of bilateral military-political alliances traditionally seen by Washington as the linchpin of the region’s security. However, under the Barack Obama administration, the United States started to pay more attention to multilateral security mechanisms, particularly the East Asia Summit (EAS), which Washington characterizes as the region’s premier forum for security issues.

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The United States ultimately hopes to build a regional multilateral architecture centered on the EAS, with the other bodies providing input to help define the agenda for its annual summits and for implementing its decisions.50 One rationale for promoting the EAS is that the grouping includes all major Asia Pacific countries, eighteen members in all, thus diluting and balancing Chinese centrality in East Asian order. This emphasis on the EAS coincides with the Russian position, with Moscow seeing the body, which it joined in 2010 simultaneously with Washington, as the “key element in the construction of the new regional security architecture.”51 Moscow and Washington have also worked together within the framework of the SixParty Talks on North Korean issues, which many see as a precursor to a future full-blown security organization in Northeast Asia.52 While promoting their preferred models of the regional architecture, a common interest between the United States and Russia is to prevent the creation of exclusive Asia-only institutions. Hence, Moscow and Washington face the risk of being marginalized if Asian economic and political integration evolves toward an exclusive Asian club—a model championed by Beijing, which would like to have the Chinese-dominated ASEAN+3 grouping as the institutional foundation of East Asian order. Washington and Moscow are interested in the development of more inclusive versions of East Asian multilateralism, which would guarantee them a seat at the table and preclude Chinese domination in regional institutions. On the economic integration front, the US-promoted Trans-Pacific Partnership (TPP), which is designed as a high-quality multilateral freetrade agreement in the Pacific, could also be of interest to Russia, although in the long run rather than in the short to medium term. The TPP’s liberalizing criteria offer a useful road map for Russian economic reform that could help Moscow boost investment in the RFE.53 Marine Environmental Protection

Being the North Pacific powers, the United States and Russia share a vital interest in preserving the basin’s rich environment. Albeit functional rather than strategic, environmental cooperation can make a substantial contribution to the trans-Pacific links between the two countries. A major move on this front was Joint Statement Pursuing a Transboundary Area of Shared Beringian Heritage signed by Russian foreign minister Sergey Lavrov and US secretary of state Hillary Clinton on the sidelines of the APEC summit in September 2012 in Vladivostok. The transboundary-protected area will link the proposed 4 million-acre Beringia National Park in Chukotka with the Bering Land Bridge National Preserve and Cape Krusenstern National Monument in Alaska that total 3.2 million acres. Formalization of the relationship between the US National Park Service and Russia’s Ministry of

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Natural Resources acknowledges the mutual interests of both countries in conservation, protection, and management of protected areas in the Beringia region. Under the agreement, kinship ties, cultural traditions, the subsistence lifestyle, and the languages of the indigenous peoples of the region will be preserved.54 Russia and the United States also collaborate on the North Pacific environment using minilateral settings. They are members of the North Pacific Anadromous Fish Commission (NPAFC), which also includes Japan, South Korea, and Canada. NPAFC was established under the 1992 Convention for Conservation of Anadromous Stocks in the North Pacific Ocean. The primary objective is to promote the conservation of anadromous stocks, such as salmon, in the convention area.55 Russian and US coast guard agencies maintain good working relations via the North Pacific Coast Guard Forum (NPCGF). Apart from Russia and the United States, the membership includes agencies from Canada, China, Japan, and South Korea. The forum has had success in documenting best practices from the member countries in areas of illegal drug trafficking, maritime security, fisheries enforcement, and illegal migration. It has a Web-based information exchange system and has published a manual for combined operations. The Arctic

Although as noted earlier, Russia and the United States have had their share of disagreements in the Arctic, there are even more important points of convergence in their interests. As retired US Coast Guard vice admiral Roger Rufe and senior officer of the Pew Charitable Trusts’ International Arctic Henry Huntington stress, Russia and the United States have many similar interests in the Arctic. In particular, it is essential that Russia and the United States collaborate in the area of the Bering Strait, through which all Pacific-Arctic and Arctic-Pacific vessels must go. This cooperation will build on a long history of partnership across the Bering Sea and Bering Strait, especially on search and rescue, fisheries conservation, and environmental protection.56 Andreas Kuersten, a legal fellow with the National Oceanic and Atmospheric Administration at the Department of Commerce, suggests that another likely area for Russian-US cooperation in the Arctic could be “measures aimed at reinforcing Arctic state authority and outlining limits to the influence of outside actors in the region through the Arctic Council”— something in which Russia has always been extremely interested. This could involve coordinated approaches to managing China’s entry into the Arctic, whose arrival, and expanding ambitions, in the polar region can complicate “already tense Arctic relations where Arctic states have a host of

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conflicting claims.” Kuersten points to the Arctic Council, which the United States will chair for a two-year term starting 2015, as an important avenue to pursue US-Russian diplomatic collaboration in the Arctic.57 Attempts at Pacific Strategic Dialogue Even before the Ukraine crisis, when Russian-US relations were relatively normal, there was scant cooperation between Moscow and Washington in Asia Pacific. While there was active discussion in Russia on the subject of a potential Pacific collaboration between Moscow and Washington, it is remarkable that in the United States the issue received little attention. Apart from occasional scholarly articles, there did not seem to be much interest in establishing strategic cooperation with Russia in Asia. An explanation may be that, while Washington was certainly interested in hedging against Beijing, the United States simply did not see Russia as an important player to have on its side in its dealings with China. The prevailing view was that Russia could not be counted as a significant power in Asia Pacific, economically or militarily.58 Underscoring this unfortunate reality was then secretary of state Clinton’s 2011 article in Foreign Policy that laid out the case for the Obama administration’s “pivot” to Asia the following year. Clinton touted Asia’s vital significance for US national interests such as opening new markets, containing nuclear proliferation, and ensuring freedom of navigation. She emphasized the need to maintain existing alliances and build new partnerships, managing to mention nearly every Asia Pacific country in this connection—but not Russia.59 A tempting alternative explanation is poor staff work: that some at the State Department had not yet realized that Russia is an Asian as well as a European power. That said, Washington sometimes has signaled its willingness to enhance cooperation with Russia on Asia Pacific affairs. In particular, the 2011 edition of the National Military Strategy maintained that the United States welcomed Russia “playing a more active role in preserving security and stability in Asia.”60 A sign of increased security cooperation between Moscow and Washington in Asia Pacific was the Russian naval forces’ participation, for the first time, in the US-led international Rim of the Pacific (RIMPAC) exercise in July 2012. RIMPAC is the world’s largest multilateral naval drill, which is held biennially off Hawaii. Another development was a Japanese-Russian-US trilateral conference on the security challenges in Northeast Asia—a Track 2 event organized jointly by the Institute of World Economics and International Relations of the Russian Academy of Sciences, the Japan Institute of International Affairs, and the Washington-based Center for Strategic and International Studies. The conference met three times, with the final meeting held in

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Moscow in June 2012. The meeting’s concluding document opened with a statement that clearly sounded alarm about China: The rise of Chinese influence and power on both political and economic issues is the most significant development in the strategic environment of Northeast Asia, posing both opportunities and challenges. . . . China’s increased military capability and assertive behavior can have serious repercussions. . . . The experts are unanimous that policies to contain China are inappropriate and counterproductive. . . . At the same time necessary precautions should be taken to hedge against undesirable developments.61

The statement carried all the more weight considering that the three participating think-tanks had close connections with their respective governments. In the case of Russia’s Institute of World Economy and International Relations, it likely would not have gotten involved in such a project without first receiving the Kremlin’s blessing. The final document also recommended upgrading the level of the conference from a Track 2 dialogue to a Track 1.5 format “to more directly promote efforts to develop greater cooperation between Japan, Russia, and the United States.”62 This, however, never happened, as the Snowden affair and the Ukraine crisis started to unfold beginning in the summer of 2013. The dramatic deterioration of US-Russian relations has also frozen their incipient Pacific dialogue. For instance, the Russian navy was not invited to join 2014 RIMPAC multilateral naval drills even though China was invited to participate for the first time in the exercise’s history. 63 Track 2 exchanges were curtailed, and the 2014 meeting of the US-sponsored Northeast Asian Cooperation Dialogue, originally scheduled to take place in Vladivostok, was canceled and moved to San Diego. Sources of US Animosity Toward Russia Despite the existence of a shared strategic rationale for bilateral collaboration, there are powerful forces that work, from both sides, against the USRussian rapprochement in Asia Pacific—and elsewhere. We already discussed in the preceding chapters the reasons for Moscow’s animosity toward the United States, which has resulted in Russia seeing the United States and the US-led West as its biggest contemporary threat. In this section, we briefly focus on the question why the United States views Russia largely in the negative light. First, US attitudes toward Russia are to a large degree ideological and moralistic—suppositions that rank countries according to their perceived commitment, or lack of it, to liberal institutions and values. From this exacting perspective, Russia fails the democratic litmus test. In tsarist

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times, especially in the empire’s later years, Russia came to be seen as the epitome of tyrannical autocracy—antithetical to almost everything the United States stood for. This unfavorable perception, of course, lived on and was greatly reinforced when Russia embraced communism. The Soviet Union was viewed as a godless, totalitarian, and expansionist state—an evil empire. The fall of the USSR did little to change this negative perception. Under Boris Yeltsin US expectations were raised for a transition to some version of democracy, but Vladimir Putin’s accession to power in 2000 began a reversion to Russia’s precommunist authoritarian past. The contemporary Russia of Putin is seen as a thoroughly undemocratic and illiberal regime, abusing individual and minority rights, seeking subjugation of its weaker neighbors, and aggressively challenging the US vision of the right and just world order. The strain of democratic universalism tends to treat foreign policy as a teleological struggle for justice and “rights” (as the United States defines them) rather than a prudent pursuit of contingent aims,64 which has been applied to Russia in full measure. As Charles Ziegler notes, Russia and the United States are not able “to conduct diplomacy based on power and interests, objectively defined by their respective leadership and shielded largely from political posturing aimed at public opinion.”65 This strain of thinking is reflected in an article by a former director of policy planning at the State Department (2009 to 2011) who advocates a values-based approach to foreign policy, as opposed to traditional balance of power statecraft (the article is a review of Henry Kissinger’s book World Order).66 Values-based diplomacy is ill-suited to great-power politics; among other things, it has pushed Russia into a closer economic and strategic relationship with China, the United States’ principal peer competitor in Asia Pacific. Also, US universalist and democracy-promotion agendas tend to be selective: Russia is more likely to be singled out as a transgressor of democratic norms than is China, though China definitively is not a democracy and has no plans of becoming one, at least in the foreseeable future. Second, a wary, and sometimes openly hostile, attitude toward Russia among influential quarters of the US political establishment is sustained, to some extent, by an archaic geopolitical mind-set. Russia’s huge landmass in northern Eurasia, its so-called Heartland, is viewed as a constant threat that Moscow would attempt to seek regional, and then possibly global, hegemony. Hence, it is imperative to weaken Russia, even to the point of encouraging its fragmentation as a single entity.67 This thinking, portraying Russia as a natural threat, due to its sheer size, geographical location, and not fully Western identity, pushes the United States to permanent conflict with Russia. Third, the prevalence of anti-Russian sentiments in the US polity may also have something to do with the fact that there is no pro-Russian lobby

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while there are a number of well-organized and vocal anti-Russian groups. To some extent, this is because Russia made limited efforts to influence opinion in the United States. In contrast, China, which has spread money handsomely around US universities, think-tanks, and other institutions, has been fairly successful in creating a broad coterie of supporters and in stifling pro-Taiwan sentiment. Leading the anti-Russia charge today are ethnic communities with roots in Eastern Europe, such as Poles, Ukrainians, and Lithuanians, who hold historical grievances against the tsarist empire or the Soviet Union. Certainly, memories of the Soviet occupation of East European states are fresh in many minds. It is perhaps no coincidence that Senator Chris Murphy, chairman of the Foreign Relations Subcommittee on European Affairs, who has taken a tough stance on Russia in connection with the events in Ukraine, comes from the state of Connecticut where there is a strong Ukrainian diaspora.68 Russia’s recent antigay legislation has, predictably, earned the Kremlin another vociferous adversary in the United States—the lesbian, gay, bisexual, and transgender community and its allies. The United States’ Footprint in the RFE: Too Small to Make a Difference? Today, the United States is a comparatively minor player in the RFE, being much less involved there than are other Pacific Rim states. Trade and investment figures tell much of the story. Bilateral US-RFE trade in the years 2012 to 2013 ($1.6 billion) barely exceeded 2 percent of total RFE external trade. Although trade has increased in absolute terms in recent years (30 percent from 2006 to 2013), it has not kept pace with the region’s overall trade growth. By contrast, China’s share of the RFE’s foreign trade averaged 28 percent, South Korea’s 26 percent, and Japan’s 25 percent. Similarly, US investment in those years was just $31 million, less than 0.2 percent of the region’s foreign investment inflows.69 Actually, the interest of US companies and their expectations vis-à-vis the RFE had peaked many years earlier, in the mid-1990s. For instance, in 1996 the governor of Washington State, a prime actor in Russian-US business relations, described the RFE as a “perfect market: for our state’s food products, building materials, and for mining, fishing and maritime equipment among others.”70 Yet the market did not prove as lucrative as expected. Trade promotion with the RFE is no longer a priority for Washington State officials, and a trade office set up by the state in Vladivostok in 1994 has closed. Similarly, US investors who had flocked to the RFE in the 1990s found the signature traits of the local business scene—an “unbelievable bureaucracy, poorly developed institutions and rampant crime and

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corruption”—extremely daunting.71 Many became disillusioned and pulled out. In one case, a US company with a stake in a port facility in Sovietskaya Gavan was effectively expropriated by its Russian partner—an action that local law enforcement and the courts did nothing to reverse.72 There were, of course, survivors of those turbulent years. The principal one was ExxonMobil, the operator and a 30 percent stakeholder of the Sakhalin-1 venture—currently a significant producer of oil and natural gas on the island. Most US corporate activity in the RFE today is concentrated in and around Sakhalin. Aside from the operator, this includes scores of service providers in areas such as deepwater drilling, accounting, chemical engineering, and electricity supply. Another important US company with a presence in the Far East is Tiger Machinery—a successful Caterpillar dealership with representative offices in Blagoveshchensk, Khabarovsk, and Yuzhno-Sakhalinsk. Beyond the Sakhalin-linked companies and Tiger Machinery, there is not much US economic activity of consequence in the RFE. If this seems a low point in US-RFE commercial relations, the same is true of official relations. Today, US policymakers do not view the RFE as distinct from Russia as a whole, which, of course, is subject to stiff economic sanctions. This was not always the case. When Russia was emerging from post-Soviet chaos, the United States most definitely attached special importance to the RFE as a pivotal region in Russia’s transition from communism to democracy and economic freedom. As a Senate Committee Report to the 106th Congress (1999–2000) stated, “The Russian Far East has been recognized as vital to the overall future development of Russia’s market economy.”73 Beginning with the Freedom Support Act of 1992, Congress supported a host of programs that focused directly on the RFE or included important RFE components. Much of the emphasis was on technical assistance and business development, though instilling respect for democratic values was certainly a complementary objective. Six such programs, only one of which still exists, are especially worthy of note. One was the US-Russia Investment Fund (TUSRIF), supported by a $40 million grant from the US Agency for International Development (USAID), which worked in a variety of Far Eastern locations. Originally, TUSRIF’s main activity was to provide a funding mechanism to grow Russian companies, but its presence and networks also proved helpful to US companies seeking contact information in the region. TUSRIF had a mixed track record: according to a 2000 Government Accountability Office (GAO) report, the fund had invested $3 million in a supermarket chain, $200,000 in an ice cream parlor, and $8.2 million in a seafood and marine equipment distributor. Of the three, only the latter enjoyed any success. The fund blamed the losses on the poor investment climate in the RFE and, according to GAO, planned to diversify into the lower-risk equipment leas-

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ing business as a “better financial opportunity to fulfill their $40 million requirement.”74 A second program, the Business Information Service for the Newly Independent States (BISNIS), funded by the Department of Commerce, was essentially a business leads and outreach service, with capable Russian staffs in Vladivostok, Khabarovsk, and Yuzhno-Sakhalinsk. The representatives evaluated projects in the RFE seeking US partners or suppliers and sent their reports to a central BISNIS administrator, from which the information was transmitted electronically to a wide range of US client companies. BISNIS was especially designed to help small to medium US businesses to enter the Russian market. The program shut down in 2007. The third was a network of American Business Centers (ABCs) distributed widely around the former Soviet Union, which included locations also in the Far Eastern cities mentioned above. The ABCs offered office space, business facilities, and market analysis to visiting US firms and trade associations and, like BISNIS, served an outreach function for small and medium businesses. Originally supported by the Department of Commerce, the ABC closed in 1999, except for the office in Sakhalin that lingered on under different organizational auspices until 2011. A fourth entity, the Foundation for Russian-American Economic Cooperation (FRAEC), supported with USAID funds, ran the Sakhalin ABC. This was a highly successful operation—more so than the other ABCs— which did much to solidify the US business presence on the island.75 A fifth important initiative was the America-Russia Center (ARC), created in 1993, and headquartered in Anchorage, Alaska. For a time, the ARC also had branch representation in several RFE cities: Khabarovsk, Magadan, Yakutsk, and Yuzhno-Sakhalinsk. The ARC had an extremely broad mandate—“to assist the RFE in dealing with political, social and economic change”—and a principal function was to organize educational-cultural exchanges of various complexions, including teachers, public officials, business executives, Aboriginal peoples, and women. But the ARC was also heavily involved in the business of promoting transition to a market economy and, under its auspices, thousands of Russians participated in on-site business and management training and technical assistance workshops in Alaska. In this context, dual degree programs were set up with several Russian universities to allow students to obtain both Russian and US degrees over a four- to six-year period. USAID provided some $26 million over a thirteen-year period to support the program, which gradually petered out after 2007. Significant political support for the ARC came from Alaska senator Ted Stevens. In his capacity as chairman of the Senate Appropriations Committee (1997 to 2005), Stevens managed to attach riders to appropriations bills for USAID, requiring the agency to spend a significant portion of its Russia budget on the RFE; unsurprisingly, a good piece of this went to the ARC.76

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Apart from Washington State, Alaska was another major stakeholder in establishing contacts with the RFE. This was especially the case under the charismatic and visionary governor of Alaska Walter Hickel (1990– 1994), who was eager to promote ties with the neighbors across the Bering Strait, especially with the northern RFE’s territories of Chukotka, Kamchatka, Magadan, and the Sakha Republic.77 His signature international initiative was the creation of the Northern Forum, an organization composed of regional governments from eight northern countries, including the United States, Russia, Canada, Norway, Japan, China, Mongolia, and South Korea.78 This edifice of US programs had collapsed at least by 2011, but one important support initiative that remains is the Russian American Pacific Partnership (RAPP). Originally constituted as the US West Coast–Russian Far East Ad Hoc Working Group (AHWG), and renamed RAPP in 2002, the organization was a direct outgrowth of a visit by then president Yeltsin to Seattle in September 1994. Reputedly, the idea of partnering the Pacific Northwest with the RFE for trade and economic development purposes came from the Russian side during that visit. RAPP-AHWG received significant government funding from the Department of Commerce and later USAID—about $300,000 a year—until 2002, after which the funding dwindled and ended entirely in 2010. Hence, RAPP’s US operations subsist entirely on private sector donations, mostly from the business community. RAPP serves as a general contact and information channel for US-Russian exchanges, and sponsors yearly meetings—twenty of them so far—alternately on the US West Coast and in the RFE. Over the years, such forums have facilitated interaction between regional-level US and Russian officials and businesspeople. The forums have also featured representatives from Moscow and Washington, to provide additional legitimation for the events. The highest-level Russian participant was Deputy Foreign Minister Sergei Ryabkov who attended the eighteenth annual meeting in Vladivostok in 2013.79 Four Russian central ministry officials arrived at the RAPP meeting in San Diego in September 2014 but, reflecting the policy stated by President Obama of punishing Russia over Ukraine, not a single US government official showed up. The political standoff also threatens to cut private business donations to RAPP, now its main economic lifeline. Thus the organization—virtually the last remnant of an earlier proactive policy toward the RFE—faces an uncertain future as of this writing in mid-2015.80 Interviews that we conducted in the RFE in 2013–2014 as part of the research for this book tell the same story of a declining US presence. Most of our interviewees felt that the US economic profile in the region was insignificant—and becoming smaller.81 As one interviewee in Vladivostok put it, “There is next to zero American presence here, apart from Hollywood movies.”82

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Historically, it was the northern part of the RFE that had the most intensive ties to the United States. However, even the northern provinces have seen a pronounced drop in US activities. Magadan Oblast is a case in point. While until 2005 the commercial relationship with the United States was the principal external link for the province, it has declined significantly with a falling share of trade volume and almost no US investments. At the same time, China’s business presence, which was almost nonexistent a decade ago, is rising in Magadan.83 A symptom of the degraded ties was the termination of regular flight service between Magadan and Anchorage, which had been inaugurated in the early 1990s. This further contributed to the winding down of educational, humanitarian, and business contacts between the region and the United States. 84 The same trend of the United States’ shrinking presence is true for Sakhalin, which only a decade ago was the focal point of the US business, civic, and humanitarian engagement with the RFE. The United States is now represented by only ExxonMobil in the Sakhalin-1 venture.85 Adding to the North American Presence: Canada’s Engagement with the RFE While assessing the scope of US presence in the RFE, it may make sense to also take another North American and North Pacific country, Canada, into account. Ottawa and Washington are close allies and members of the same integration bloc—the North American Free Trade Agreement (NAFTA)— whose strategic interests with regard to the RFE converge to a large degree. Aside from normal market competition, Canada’s and the United States’ activities in the RFE should be mutually supportive. Like the United States’ business profile in the RFE, Canada’s is not particularly impressive. Yet there is a notable exception. Kinross, Canada’s major gold mining company, owns and operates two gold and silver mines in Chukotka—Kupol and Dvoinoye. Kinross is the largest foreign mining company operating in Russia, with an accumulated investment of over $2.2 billion. The share of Russian production exceeds 20 percent in Kinross’s worldwide business operations. Kinross has earned a generally positive reputation in Chukotka and Magadan (where it has the regional office), providing jobs to local people, introducing advanced mining technologies, building infrastructure, and maintaining solid environmental standards. The company itself is quite satisfied with its results in the RFE and plans to stay.86 Like the United States with Alaska, Canada has a wealth of experience in developing frontier northern territories, which, in their rough natural conditions and mineral riches, resemble Eastern Siberia and the RFE. This gives the two North American allies a better fit with the RFE.

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The Impact of Sanctions The imposition of Western sanctions against Russia in the wake of the Ukraine crisis has substantially exacerbated the trend of decreasing US economic influence in the RFE. The sanctions, introduced in 2014 in concert by the United States, European Union, and some other Western countries, targeted Russia’s financial, energy, and defense sectors. In particular, Russian oil and gas companies lost access to Western equipment, technology, and services for deepwater, Arctic offshore, and shale projects. According to the assessments from both Russian and Western experts, Russia is highly dependent on the West’s equipment and know-how in the exploration and production of technically challenging oil and gas.87 Another major blow was in the form of restrictions placed on Russian major financial institutions and energy companies in attracting financing from the West. To be on the safer side, many Western corporations have begun to avoid dealing with Russia, even when particular transactions are not directly prohibited. The sanctions are of direct relevance to the RFE, as the region’s economic well-being and development are increasingly linked to the hydrocarbon sector. The immediate victim is the strategic partnership between Rosneft and ExxonMobil, much of which is focused on the RFE. Although the ongoing Sakhalin-1 production-sharing venture is not directly affected by the sanctions, new projects face uncertainty. Exxon reportedly reconsidered its participation in the $15 billion plan to build, jointly with Rosneft, an LNG plant in Sakhalin. Exxon was initially supposed to provide financing and technology for the project.88 By October 2014, Exxon had to suspend nine of ten projects in Russia in which it had partnered with Rosneft.89 Gazprom’s plans to build an LNG plant near Vladivostok were also put at risk, as the facility was initially expected to use US gas-liquefying technology, which, if the sanctions regime is strengthened, may become off limits.90 This is one of the reasons why Gazprom may abandon plans to build an LNG facility, which could have given it the option of diversifying its range of customers, and choose instead to sell pipeline gas to China.91 The sanctions, even at their current level, essentially freeze all new oil and gas projects with Western involvement in Russia, including of course the RFE. The state-owned United Shipbuilding Corporation, which has major assets in the RFE, is also targeted by the sanctions, which effectively bar the company from doing business with US and EU firms and can also affect its dealings with Japan and South Korea.92 Many other nonenergy projects, even those owned by Russian companies not placed on the sanctions lists, will be impacted as Western loans for Russia dry up and Russian companies themselves do not have enough capital for costly investments. Anticipating the devastating effects of the sanctions on collaboration with Russia, major Western oil companies, including Exxon, tried to push back against such measures by lobbying in Washington.93 That was largely in vain

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as in Western capitals the impulse of political confrontation still prevailed over diplomacy and commercial interests, even though some influential figures, like Senate Intelligence Committee chairman Dianne Feinstein, openly questioned the wisdom of placing severe economic penalties on Russia.94 Anti-US Sentiments on the Rise Like its business presence, the United States’ soft power in the RFE has been on the decline. While in 1995 the United States was the most-liked foreign country, with 45 percent of the Far Eastern respondents choosing it, by 2010 its popularity rating dwindled down to a mere 13 percent.95 According to a 2009 survey, 38 percent of Far Easterners firmly believed the United States posed a threat, equal to the number of those who perceived a North Korean threat,96 while just 15 percent denied the existence of the US threat. Thus, the level of anti-US sentiment in the RFE more or less correlates with the Russian average. According to a leading researcher in Blagoveshchensk, who is regularly engaged in conducting public opinion surveys in the southern Far East, wariness toward the United States is even higher than toward China.97 When asked about the desirability of expanding the US presence in the RFE, some of our interviewees gave a negative response because they felt the United States was a power inherently adversarial to Russia.98 Anti-US sentiment surged in the wake of the Ukraine crisis, with several publicized incidents underlining the trend. In one case, as widely reported by the local news media, the owner of a duty-free shop at the Vladivostok airport announced that President Obama, as well as some other Western leaders, are not welcome in his store.99 In another case, the owner of a pizzeria outlet that opened in an Amur town under the name of “New York” quickly changed it to “Amur-bistro” after indignant local residents filed petitions and the local authorities “recommended” the restaurateur to show more patriotism.100 Yet even under the recent adverse circumstances, the United States’ appeal remains significant. There are many signs of it. For example, a US higher education continues to attract young people from the RFE, and the work and travel program for university students wishing to spend a summer in the United States is popular. Far Eastern Federal University, the largest and most privileged education institution in eastern Russia, collaborates closely with US consultants on organizing campus life101 and an American football team was formed among the university’s students.102 Most of our interviewees agreed that more US presence would be beneficial to the RFE, most often citing the United States’ advantages in industrial high technologies, managerial know-how, and experience in managing the environment in a sustainable way. Education and health care were also

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mentioned as promising areas for cooperation. One of the interviewees referred to the United States’ effective system of municipal self-government as something the Far East should learn from.103 Another reason that may predispose the RFE to closer contacts with the United States has to do with the fact that Russian and US cultures, as different as they are, are more congruent with each other in comparison with cultural barriers that separate Russia from its Asian neighbors.104 Is US-Russian Pacific Entente Still Possible? In 2012 Artyom Lukin wrote that, “if Russia and the United States are to establish an effective partnership in Asia Pacific, they will need to resolve, or at least moderate, their disagreements in other areas, especially in the post-Soviet space.”105 Unfortunately, since 2013 the worst-case scenario has been unfolding in US-Russian relations. Tensions between Moscow and Washington mounted, culminating in the Ukraine crisis. Under such circumstances, any substantive Russian-US collaboration, to say nothing of entente, in the Pacific and in the RFE has become all but inconceivable. However, there are some grounds not to be overly pessimistic. The fundamental factors that, before the Ukraine disaster, made the United States and Russia potential partners in Asia Pacific are valid today. The rise of China continues to pose challenges, and long-term security risks, to both the United States and Russia. Meanwhile, Russia desperately needs the United States’ and its Western allies’ technologies, capital, and experience in developing the RFE. On the other hand, US companies, despite some past disappointments, continue to see business potential in the RFE, and Washington should hardly be happy if this potential is exploited predominantly by the Chinese. Russia wants to diversify its links in Asia Pacific and sees the United States as an important player in this respect. Much attention has been given to the strategic partnership between Rosneft and CNPC, but it is often overlooked that in 2011−2013 Rosneft also formed a strategic alliance with Exxon and highly valued this relationship. The partnership with Rosneft was seen as one of Exxon’s most promising prospects for future growth.106 Neither side has renounced this relationship even after Washington introduced tough sanctions on Russia in 2014. At the political level, the Kremlin has repeatedly signaled that it is eager to restore, and possibly expand, collaboration with the United States once the ongoing crisis is over.107 By contrast, Washington currently appears to be less interested in a prompt normalization of relations with Russia, which is due, to a significant extent, to domestic public opinion and ideological posturing dominated by anti-Russian narratives. However, this may change over

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time, if the United States feels increased geopolitical pressure from its only feasible peer competitor—China. Then, Washington will inevitably pay much more attention to Russia. After all, there has already been a historical precedent when, in the early 1920s, the 1930s, and the first half of 1940s, Washington collaborated with the communist Moscow to contain the growth of a menacing Asian power—at that time, Japan. Whether a somewhat similar story will be replayed in the next few decades, and exactly how, remains to be seen. Like it or not, Russia is going to remain a substantial geopolitical force in Northeast Asia and the North Pacific, which the United States will have to factor into its calculations. Notes

1. Charles E. Ziegler, “Russian-American Relations: From Tsarism to Putin,” International Politics, 51, no. 6 (2014): 680–683. 2. Ibid. 3. Ibid. 4. Ibid., 683. 5. In the end, Britain chose to stay neutral. 6. Ilya Vinkovetskiy, “Nachalo i konets zamorskogo imperializma Rossiyskoi Imperii na severnom Tikhom okeane” [The Beginning and End of the Russian Empire’s Overseas Colonialism in the North Pacific], paper presented at the Conference on Russia in the North Pacific, Vladivostok, May 21−22, 2009. 7. Russian envoy in Washington, quoted in Nikolai Bolkhovitinov, Russkoamerikanskiye otnosheniya i prodazha Alyaski, 1834−1867 [Russian-American Relations and the Sale of Alaska, 1834−1867] (Moscow: Nauka, 1990), 114. 8. Vinkovetskiy, “Nachalo i konets zamorskogo imperializma,” 2009. 9. Eugene P. Trani and Donald E. Davis, “Roosevelt and the U.S. Role: Perception Makes Policy,” in Treaty of Portsmouth and Its Legacies, ed. Steven Ericson and Allen Hockley (Hanover, NH: Dartmouth College Press, 2008), 62–74. 10. Kent Calder and Min Ye, The Making of Northeast Asia (Stanford, CA: Stanford University Press, 2010), 229–230. 11. Alexey Bogaturov, Sistemnaya istoriya mezhdunarodnyh otnosheniy (Moscow: Moscovskiy rabochii, 2000), 138–139. 12. US, British, and French contingents in the RFE had around 7,000 troops each whereas the number of the Japanese forces fluctuated between 55,000 and 120,000. Ibid., 139. 13. Ibid., 140. 14. The capital of the republic was Chita in Eastern Siberia. 15. Elena Frolova, “Deyatel’nost’ russkih predstaviteley v period raboty Vashingtonskoy konferentsii (1921−1922)” [The Activities of Russian Representatives During the Washington Conference, 1921−1922], Problemy Dal’nego Vostoka [The Far Eastern Affairs], no. 2 (2009): 123−130. 16. Japanese occupation of northern Sakhalin lasted until 1925, ending only after the establishment of Soviet-Japanese diplomatic relations. 17. Frolova, “Deyatel’nost’ russkih predstaviteley.” 18. Eduard Lozanskiy, Rossiya mezhdu Amerikoy i Kitayem [Russia Between America and China] (Moscow: Mezhdunarodnye otnosheniya, 2007), 224.

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19. Lozanskiy, Rossiya mezhdu Amerikoy i Kitayem, 224. 20. “The Statement of Soviet Deputy FM Andrey Gromyko,” Khronos, September 8, 1951, www.hrono.ru/dokum/195_dok/19510908gromy.php. 21. Paul J. Keating, “APEC`s Sixth Leaders’ Summit Meeting: Implications for the Strategic Architecture of the Asian Hemisphere (Speech to 1998 Pacific Rim Forum),” Shanghai, September 22, 1998, Australian APEC Study Centre Issues Paper 14, http://www.apec.org.au/docs/iss14.htm. 22. Andrew Kramer, “Russia Claims Its Sphere of Influence in the World,” New York Times, August 31, 2008, http://www.nytimes.com/2008/09/01/world/europe /01russia.html?_r=0. 23. “S. Lavrov: Russia Against US-China Missile Defense Systems,” RBC Daily, October 17, 2007, http://top.rbc.ru/politics/17/10/2007/122727.shtml?print. 24. Pavel Tarasenko, “Yaponia predlozhila Rossii nich’iu,” Kommersant, November 5, 2013, http://kommersant.ru/doc/2335785. 25. “Na Kamchatke sostoyalsya kul’minatsionnyy etap ucheniy Vostok-2014,” Vostokmedia, September 23, 2014, www.vostokmedia.com/n207911.html. 26. “Rossiya pokazala ‘zuby’ Yaponii i SShA—geopolitiki ob ucheniyakh Vostok-2014,” PrimaMedia, September 24, 2014, http://primamedia.ru/news/show .php?id=388870&printmode=1. 27. Vlad Kaczynski, “US-Russian Bering Sea Marine Border Dispute: Control over Strategic Assets, Fisheries and Energy Resources,” Russian Analytical Digest, no. 20 (2007): 2–5. 28. Ibid. 29. Interview with the director of the Russian Ministry of Foreign Affairs’ North America department, Igor Neverov, to the Interfax news agency on the dispute between Russia and the United States concerning the agreement on boundary lines in the Bering Sea and Chukotka Sea (Moscow: Ministry of Foreign Affairs, November 5, 2007), http://www.mid.ru/BRP_4.NSF/76bbf733e3936d4543256999 005bcbb7/9554b2aaaa2e844bc32573a8002bf76d?OpenDocument. 30. “Gleb Ivashentsov, “Rossiyskaya energetika: razvorot k Azii, vyzovy, zadachi, perspektivy,” Russian International Affairs Council, October 2, 2014, http://russiancouncil.ru/blogs/riacexperts/?id_4=1449. 31. Ibid. 32. Most likely, Madeleine Albright never said anything like this. See Joshua Keating, “Madeleine Albright’s Mind,” Foreign Policy, November 7, 2007, http://blog.foreignpolicy.com/posts/2007/11/07/russian_spies_can_read_madeleine _albrights_mind. 33. Valery Aleksandov, “Sibir’ ne dolzhna stat’ ‘Novoy Alyaskoy,’” Russkaya Narodnaya Liniya, October 3, 2008, www.ruskline.ru/monitoring_smi/2008/10/03 /sibir_ne_dolzhna_stat_novoj_alyaskoj/. 34. Sergei Karaganov, et al., The U.S.-Russia Relations After the “Reset”: Building a New Agenda. A View from Russia, Report by the Russian Participants of the Working Group on the Future of the Russian-U.S. Relations (Moscow: Valdai Discussion Club, March 2011), http://vid-1.rian.ru/ig/valdai/US-Russia%20rela tions_eng.pdf. 35. Ibid., 4. 36. Ibid., 10. 37. Ibid., 16, 19. 38. Andranik Migranyan, “Vzryvy nazrevali iznutri [Explosions were brewing from within],” Rossiyskaya Gazeta, March 11, 2011, http://www.rg.ru/2011/03/10 /migranian-poln.html.

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39. Jeffrey Mankoff and Oleg Barabanov, Prospects for US-Russia Cooperation in the Asia-Pacific Region (Moscow and Cambridge, MA: Working Group on the Future of US-Russia Relations, July 2013), 10, http://us-russsiafuture.org/publications. 40. Aaron L. Friedberg, A Contest for Supremacy: China, America, and the Struggle for Mastery in Asia (New York: W. W. Norton, 2012), 281. 41. Edward Luttwak, The Rise of China vs. the Logic of Strategy (Cambridge, MA: Belknap Press of Harvard University Press, 2012), 139−141. 42. John Mearsheimer, “Why the Ukraine Crisis Is the West’s Fault,” Foreign Affairs 93, no. 5 (September−October 2014), www.foreignaffairs.com/articles /141769/john-j-mearsheimer/why-the-ukraine-crisis-is-the-wests-fault. 43. There is little doubt that if the United States saw any opportunity to depose the North Korean regime without provoking major armed conflict, it would attempt to do so. 44. Moscow does not explicitly call for the continuation of the status quo, but its emphasis on the need to seek diplomatic solutions to the North Korean issue in effect means conservation of the existing geopolitical realities. 45. Georgiy Toloraya, “Ocherednoy Tsykl Koreyskogo Krizisa, 2008–2010: rossiyskiye interesy i perspektivy vyhoda iz koreyskogo tupika” [Another Cycle of the Korean Crisis, 2008–2010: Russia’s interests and the prospects for getting out of the Korean impasse], Problemy Dal’nego Vostoka [Far Eastern Affairs], no. 5 (September−October 2010): 3–19. 46. China’s border with North Korea is 1,416 kilometers long while Russia’s is only 19 kilometers. 47. At their meeting in August 2011, Russian president Dmitry Medvedev and North Korean leader Kim Jong-il agreed in principle to lay a natural gas pipeline through North Korea to South Korea. However, this agreement likely will remain little more than a declaration of intent until the political situation on the Korean Peninsula gets decidedly better. 48. We share this view with Dmitri Trenin, who argues that, unlike Beijing, the Kremlin does not worry about the prospect of North Korea disappearing from the political map since Pyongyang serves as a protective buffer for China rather than Russia. Dmitri Trenin, Post-Imperium: A Eurasian Story (Moscow: Carnegie Moscow Center, 2012), 194. 49. State Department Representative for North Korea Policy, Sung Kim, Testimony Before the House Foreign Affairs Committee, Washington, DC, January 13, 2015, http://translations.state.gov/st/english/texttrans/2015/01/20150113312954 .html#axzz3aYM7JEs. 50. Mankoff and Barabanov, Prospects for US-Russia Cooperation in the AsiaPacific Region. See also Hillary Clinton, “Intervention at East Asia Summit,” US Department of State, July 12, 2012, www.state.gov/secretary/rm/2012/07/194988 .htm. 51. “Commentary of the Russian Ministry of Foreign Affairs in Connection with Foreign Minister Sergey Lavrov’s Participation at the East Asia Summit,” Ministry of Foreign Affairs, Moscow, October 8, 2013, http://mid.ru/bdomp/ns-rasia .nsf/3a0108443c964002432569e7004199c0/44257b100055e10444257bfe0043ae04 !OpenDocument. 52. The Six-Party Talks have been stalled since 2009. 53. Mankoff and Barabanov, Prospects for US-Russia Cooperation in the AsiaPacific Region. 54. “US and Russia Link Parks Across Bering Strait,” September 10, 2012, http://ens-newswire.com/2012/09/10/u-s-and-russia-link-parks-across-bering-strait/.

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See also “Park ‘Beringia’ stanet chastiu rossyisko-amerikanskoi zapovednoi zoni na Chukotke,” InfoRos, October 2, 2013, http://inforos.ru/ru/?module=news&action =view&id=35731. 55. See the North Pacific Coast Guard Forum website, http://www.npafc.org /new/index.html. 56. Henry Huntington and Roger Rufe, “Arctic Shipping: A Route to RussianAmerican Cooperation” (Moscow: Russian International Affairs Council, November 20, 2014), http://russiancouncil.ru/en/inner/?id_4=4806#top. 57. Andreas Kuersten, “Russian Sanctions, China, and the Arctic,” The Diplomat, January 3, 2015, http://thediplomat.com/2015/01/russian-sanctions-china-and -the-arctic/. 58. William H. Overholt, Asia, America, and the Transformation of Geopolitics (Cambridge: Cambridge University Press, 2008), 211, 213, 264. 59. Hillary Clinton, “America’s Pacific Century,” Foreign Policy, October 11, 2011, http://foreignpolicy.com/2011/10/11/americas-pacific-century/. 60. US Department of Defense, “The National Military Strategy of the United States of America” (Washington, DC: US Department of Defense, February 8, 2011), 13, www.defense.gov/news/2008%20National%20Defense%20Strategy.pdf. 61. “Japan-Russia-US Trilateral Conference on the Security Challenges in Northeast Asia” (Moscow: Institute of World Economy and International Relations, June 16, 2012), http://imemo.ru/en/conf/2012/19062012/19062012_statement_M_EN.pdf. 62. Ibid. 63. Russia’s first participation in the US-led RIMPAC took place in the summer of 2012. 64. Henry Kissinger, World Order (New York: Penguin Press, 2014). 65. Ziegler, “Russian-American Relations: from Tsarism to Putin,” 688–689. 66. Slaughter, “How to Fix America’s Foreign Policy.” 67. See, for example, Zbigniew Brzezinskiy, The Grand Chessboard (New York: Basic Books, 1998). See also George Friedman, The Next 100 Years (New York: Doubleday, 2009). 68. Senator Chris Murphy, chairman of the Foreign Relations Subcommittee on European Affairs, Statement on situation in eastern Ukraine, April 14, 2014, www.murphy.senate.gov/newsroom/press-releases/murphy-statement-on-situation -in-eastern-ukraine. See also Alexander Gabuev, “Iarye sovetchiki,” Kommersant, May 19, 2014, http://kommersant.ru/doc/2469723. 69. Interregional Association for the Far East and Zabaikalye, “Inostrannye Investitsii v 2012, 2011, 2010” [various years], http://assoc.khv.gov.ru/regions /foreign-economic-activities/investment. See also Russian Far East Federal Region Customs Data, www.dvtu.customs.ru. 70. State of Washington Governor’s Communication Office, “Lowry to Visit Russian Far East to Expand State’s Trade Opportunities,” press release, September 19, 1996. 71. Judith Thornton and Nadezhda Mikheeva, “The Strategies of Foreign and Foreign-Assisted Firms in the Russian Far East: Alternatives to Missing Information,” Comparative Economic Studies 38, no. 4 (Winter 1996): 87. 72. Overseas Private Investment Corporation (OPIC), “Memorandum of Determination: Expropriation Claim of Global Forestry Management Group OPIC Contract of Insurance F339,” April 16, 2011. The company was granted compensation of $1,014,574 by OPIC, on grounds of blatant inaction by Russian government authorities. On investment conditions in the 1990s, see Judith Thornton and Nadezhda Mikeeva, “The Strategies of Foreign and Foreign-Assisted Firms—Alter-

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natives to Missing Infrastructure,” ACES Panel Paper, Comparative Economic Studies38, no. 4 (Winter 1996): 85–93. 73. “Russian Far East” in U.S. Senate Report 106-081 Foreign Operations, Export Financing and Related Programs, Appropriations Bill 2000. 74. US Government Accountability Office, “Foreign Assistance: U.S-Russia Fund Is Following Its Investment Selection Process and Criteria” (Washington, DC: GAO, October 2000), Appendix I, 12. Eventually, TUSRIF spun off a separate company, Delta Leasing Far East, to manage this new business line. Delta Leasing was sold to a German firm in 2011. 75. Derek Norberg, director of the Russian American Pacific Partnership, personal communications with Rensselaer Lee, March 3, 2014, and October 9, 2014. 76. Victor Fisher, “Alaska-Russian Far East Connection: Experiments in the Development of Local Governance,” in Development Prospects in the North Pacific Region, ed. Douglas Barry and Kazuiko Okuda (Anchorage: University of Alaska Center for International Business, July 1996), 110. See also Douglas Barry, “Alaska and the World—The Achievements, Potential and Limits of Public Policy,” in Alaska Politics and Public Policy: The Dynamics of Beliefs, Institutions, Personalities and Power, ed. Clive Thomas (Fairbanks: University of Alaska Press, forthcoming), 28–30. The ARC program and other Alaska-RFE exchanges probably peaked in the mid-1990s. In 1995 to 1997, the number of passengers flying between the state and the RFE averaged over a thousand; between 2005 and 2007, it was less than 100. See Mark Dudley, “Alaska-Russian Far East: Passenger Loads 1991 to 2014,” presentation at the annual meeting of the Russian American Pacific Partnership, San Diego, September 2014. 77. One of Walter Hickel’s “big ideas” was building a transportation, pipeline, and communication tunnel across the Bering Strait. “Bering Strait Tunnel Project Gets Promotional Website,” Alaska Dispatch News, March 29, 2012, www.adn.com /article/bering-strait-tunnel-project-gets-promotional-website. 78. The forum’s headquarters was in Anchorage. However, the Alaskan authorities subsequently lost interest in transboundary cooperation and the state’s ties with the RFE petered out. Due to lack of support from Alaska, the Northern Forum’s Secretariat was moved to Russian Yakutsk in 2013. 79. The highest-ranking US government representative to attend a RAPP meeting was assistant secretary for the environment, Department of State, Dan Reifssnyder, in 2011. Deputy assistant secretaries for Europe and Eurasia attended in 2007 and 2008 (Paul Dyke) and in 2004 (Eric Stewart). 80. Norberg personal communications. 81. Interviews with more than 30 experts from academia, government, business, and mass media, conducted by Artyom Lukin and Rensselaer Lee in Vladivostok, Khabarovsk, Blagoveshchensk, Birobidzhan, Yakutsk, Magadan, and YuzhnoSakhalinsk, October 2013–October 2014. 82. A Vladivostok-based scholar, interviewed by Artyom Lukin, Vladivostok, July 20, 2015. 83. Irina Penyevskya, minister for economic development of Magadan Oblast, interviewed by Artyom Lukin, Magadan, December 20, 2013. 84. Interview with Alexey Lipinsky, chairperson of Magadan Chamber of Industry and Commerce, interviewed by Artyom Lukin, Magadan, December 20, 2013. 85. Interviews with six experts from academia, government, business, and mass media, conducted by Artyom Lukin in Yuzhno-Sakhalinsk, February 15–18, 2014. 86. “S rossiyskimi proektami Kinross Gold chuvstvuet sebya komfortno,” Vestnik Zolotopromyshlennika, October 21, 2013, http://nedradv.ru/news/branch/?id

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_obj=2aeb2a316171c204432400d7d405228b; “Vitse-prezident po Rossii Kinross Gold: ‘My rabotaem v RF 16 let, i khotim prorabotat’ eshchyo kak minimum stol’ko zhe,” Finmarket, March 30, 2012, www.finmarket.ru/interview/?id=2849893. 87. Alexander Zotin, “Dobyt i peregnat,” Kommersant, September 8, 2014, http://kommersant.ru/doc/2553871. 88. Kiril Melnikov and Olga Morziushenko, “Sanktsii razhzihzaiut rossiiskiy gaz,” Kommersant, September 23, 2014, http://kommersant.ru/doc/2573041. 89. “Shell postepenno priostanavlivaet sotrudnichestvo s Gazpromneft’iu,” Newsru.com, October 3, 2014, http://newsru.com/finance/03oct2014/shellsnctns.html. 90. “Novye nadezhdy ‘Gazproma’ svyazany s proektom ‘Vladivostok-SPG’— Aleksandr Medvedev,” PrimaMedia, September 27, 2014, http://primamedia.ru /news/show.php?id=389570&printmode=1. 91. “Kitay predlagaet Gazpromu pustit’ Vladivostok-SPG v trubu,” PrimaMedia, October 13, 2013, http://primamedia.ru/news/show.php?id=393116&print mode =1. 92. Vladimir Shtanov, “SShA vveli sanktsii protiv Ob’edinennoy Sudostroitel’noy Korporatsii,” Vedomosti, July 31, 2014, www.vedomosti.ru /companies/news/29674261/korabelnye-sankcii. 93. Andrew Kramer and Stanley Reed, “For Western Oil Companies, Expanding in Russia Is a Dance Around Sanctions,” New York Times, June 9, 2014, www .nytimes.com/2014/06/10/business/international/for-western-oil-companies -expanding-in-russia-is-a-dance-around-sanctions.html?hp&_r=0. 94. Feinsteim argued that as long as Russians support president Putin, sanctions would have a very limited impact. See “Dianne Feinstein: More Sanctions Might Not Work Against Russia,” Washington Examiner, August 31, 2014, http://washing tonexaminer.com/dianne-feinstein-more-sanctions-might-not-work-against -russia/article/2552668. 95. Victor Larin and Lylia Larina, Okruzhayushchiy Mir Glazami Dal’nevostochnikov (Vladivostok: Dal’nauka, 2011), 98–101. 96. Ibid., 82–83. 97. Andrey Zabiyako, professor at Amur State University, interviewed by Artyom Lukin, Blagoveshchensk, October 27, 2013. 98. Interviews with more than 30 experts from academia, government, business, and mass media, conducted by Artyom Lukin and Rensselaer Lee in Vladivostok, Khabarovsk, Blagoveshchensk, Birobidzhan, Yakutsk, Magadan, and YuzhnoSakhalinsk, October 2013–October 2014. 99. “Duty-Free aeroporta Vladivostoka otkazalsya prodavat’ alkogol’ Obame,” OTV, September 1, 2014, http://otvprim.ru/blog/12/15125. 100. “Bylo ‘New York’ stalo Amur Bistro,” October 17, 2014, available on the town of Belogorsk’s website, http://belogorck.ru/novosti/segodnya-v-gorode/23156 -bylo-new-york-stalo-amur-bistro. 101. “Kampusom DVFU pomogaet upravlyat’ Amerikanskaya kompaniya,” Far Eastern Federal University, April 30, 2014, http://ostrov.dvfu.ru/-/kampusom-dvfu -pomogaet-upravlat-amerikanskaa-kompania. 102. “Amerikanskiy futbol prishel vo Vladivostok,” Rookies, September 30, 2014, www.rookies.ru/posts/26-amerikanskiy-futbol-prishel-vo-vladivostok. 103. Local politician, interviewed by Artyom Lukin, Blagoveshchensk, October 27, 2013. 104. Leading Vladivostok journalist, interviewed by Artyom Lukin, Vladivostok, November 10, 2013.

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105. Artyom Lukin, “Russia and America in the Asia-Pacific: A New Entente?” Asian Politics and Policy 4, no. 2 (2012): 153−171. 106. Jack Farchy and Ed Crooks, “Rosneft and Exxon Strike Oil in Crucial Arctic Well,” Financial Times, September 27, 2014, 12. 107. Commenting on Moscow’s relations with Washington, Vladimir Putin said: “As for the Russian-US ties, our aim has always been to build open partnership relations with the United States . . . this is not the first downturn in relations between our countries . . . we are ready to develop constructive cooperation based on the principles of equality and genuine respect for each other’s interests.” Vladimir Putin, interviewed by Politika, October 15, 2014, http://eng.kremlin.ru/news/23099.

12 What Next for the Russian Far East?

Russia. This huge expanse of northeastern Eurasia stretching from east of Lake Baikal to the shores of the Pacific Ocean contains all kinds of natural resources—oil and natural gas, coal, iron ore and copper, gold, diamonds, uranium, pristine freshwater, timber, and fish stocks. The RFE occupies a unique geographical location that boasts 25,000 kilometers of Pacific coastline and controls the eastern reaches of the Northern Sea Route. Importantly, the RFE also gives Russia direct access to the Pacific Ocean, which makes it a truly transcontinental nation spanning the Euro-Atlantic and Asia Pacific. At the same time, its location remote from and with tenuous transportation links to the country’s core as well as its underpopulation, underdevelopment, and the lack of basic infrastructure make the RFE a source of constant concern for Moscow. Since Russia acquired these valuable lands, it has faced a recurring risk of losing control over them as a result of external aggression, foreign encroachment, internal separatism, or combination of all three. In recent memory, such anxieties were most acutely felt in the 1990s when the Russian state seemed on the brink of collapse and the Far East was all but abandoned by Moscow. The region’s economic links with the rest of Russia were dramatically curtailed. The local economy essentially tanked, losing almost 60 percent of its value between 1990 and the end of the decade. Autonomist and even separatist tendencies were on full display. Reflecting such sentiment, the ethnic Sakha Republic pressed for, and gained, a semi-independent status from Moscow. Even in ethnically Russian territories, there was talk of creating a Far Eastern Republic while their popularly elected governors often behaved like barons in their fiefdoms. Vladimir Putin’s accession to power in 2000 marked a change in fortunes for Russia and the RFE. Boosted by high oil prices, the economy THE RUSSIAN FAR EAST CONSTITUTES AN ASSET AND A LIABILITY FOR

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grew more than eightfold in the first decade of the new millennium. The central government began to restore control over provinces, including the RFE, as part of its overall political centralization agenda. By the end of Putin’s first term in office in 2004, the RFE no longer seemed in imminent danger of drifting away or being detached from the rest of Russia. Yet Putin’s government set a much more ambitious goal than that of securing the RFE within the confines of the Russian state. Since around 2007, Moscow has initiated an array of measures and policies designed to significantly accelerate the development of the RFE. This task was proclaimed by the Kremlin as a top national priority for Russia in the new millennium, and featured large-scale state-funded investments, mostly in infrastructure projects. Heightened attention to the RFE has been linked with Moscow’s broader strategic priorities such as the enhancement and expansion of economic cooperation with East Asia to take full advantage of the rise of Asian economies and diversify away from stagnating Europe. Holding the 2012 Asia-Pacific Economic Cooperation summit on Russky Island off Vladivostok—the biggest ever international event in the RFE—was meant to showcase the RFE to the world and underscore the Kremlin’s commitment to engagement with Asia Pacific. In 2013 Putin appointed one of his close aides, Yuri Trutnev, as the point man for the RFE’s development while Moscow granted the region wide-ranging tax and regulatory preferences to improve the business climate and attract private investors, both domestic and foreign. The most important steps include establishing special economic zones (territories of accelerated development) and making Vladivostok (and its surrounding environs) a “free port” area, with streamlined customs and administrative procedures, lowered taxes and duties, and visa-on-arrival procedures for foreign visitors. Yet the results of Moscow’s strategy to invigorate the RFE and advance economic interaction with Asia have been mixed. The RFE’s economic and social situation improved, compared to what it was a decade before, but by 2013 the region’s economic growth petered out, along with Russia’s. The RFE remains an economic backwater that accounts for only 5 percent to 6 percent of Russia’s GDP and about 4 percent of its population, while occupying 36 percent of the nation’s territory. Moreover, the RFE’s future development prospects are uncertain at best. The Kremlin’s attention and resources are distracted because of the Ukraine crisis and associated Western sanctions. Add to that the dramatic fall in oil prices, whose high levels had hitherto helped finance Moscow priority projects. The mounting financial constraints facing the central government, regional authorities, and domestic businesses threaten the previously approved plans for the RFE’s development while—thanks to Western sanctions—private foreign companies are still in no hurry to set up shop or increase their presence in the region.

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China’s Looming Shadow The RFE historically has had an ambivalent relationship with its giant Chinese neighbor. Certainly, China is perceived as an indispensable economic partner—a provider of essential goods and services as well as a major consumer of the RFE’s staples. Yet China is simultaneously a potential threat. Consider, for example, that the southern part of what is now the RFE was under the nominal sovereignty of the Qing dynasty until the second half of the nineteenth century. Granted, at the official level, the border issue between Moscow and Beijing has been fully settled by legal treaties. But concerns linger in Russia that China might reclaim these lands in the future. Widespread sentiment exists among Chinese that the nineteenth-century treaties with the Russian empire were unfair and emblematic of the country’s century of humiliation. China’s rising power and wealth have tended to accentuate Russia’s fears. Yet Moscow and Beijing currently are strategic partners, with the relationship increasingly resembling a quasi-alliance or entente. This union, which began to form in the mid-1990s, is cemented by the shared perception of the United States as the main threat to both of their geopolitical interests, civilizational identities, and domestic political regimes. Defying the predictions by many Western analysts and policymakers that RussianChinese axis is inherently fragile and bound to break up, the ties so far have only grown stronger. The partnership has deepened in recent years, and has acquired a significant economic dimension. In the 2000s Moscow’s vision was for a single European space from Lisbon to Vladivostok, which would be based on shared values, interests, and partnership with the European Union. Today, the Russian leadership talks of building a continental Eurasian “common economic space” in collaboration with China.1 Instead of a Europe from Lisbon to Vladivostok, could we eventually see a Eurasia “from St. Petersburg to Shanghai,”2 with Beijing as its soft or maybe notso-soft hegemon? Of course, the Ukraine crisis was a major game changer that drove Moscow away from Brussels and Washington—and toward Beijing. Ostracized by the West over its actions with regard to Crimea and Donbas, Russia has become increasingly dependent on China, both as a market for raw materials and as a source of financing for development projects. For the RFE, the prognosis is for a more active Chinese role in shaping regional development efforts, and for linking these to China’s own industrial requirements. China’s interests in the RFE combine economic and strategic imperatives. Beijing wants a secure and peaceful northern border with Russia so that it can concentrate military resources and planning on other strategic theaters, above all in the western Pacific. The memories of confrontation

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with the Soviet Union, when China had to expend enormous efforts on reinforcing its frontiers with a hostile neighbor to the north, have not yet faded. Additionally, and related, China needs the RFE as a proximate overland supplier of vital raw materials. Of course, China can get these resources elsewhere, but its stake in the RFE is directly related to its intensifying contest with the United States for primacy in Asia Pacific. Beijing is increasingly worried that, if this rivalry comes to a head, Washington may use its trump card—launching a naval blockade of the sea-lanes through which China receives most of its imported primary products.3 Beijing’s strategic thinking may also be informed by the lessons of another contender for Asian primacy—the Japanese empire—that found itself in a desperate situation when it lost access to vital commodities due to the US-imposed embargo.4 If anything, these concerns have increased in recent years and so has the priority that China attaches to the RFE. From 1990 through 2010, China’s economic presence in the RFE was mostly represented by the northeastern province of Heilongjiang and limited to primitive trade exchange—with little investment, little participation in upstream sectors, and few, if any, big Chinese players operating in the region. The number of Chinese migrants in the RFE was also modest—no more than 300,000— most of them as sojourners rather than permanent residents. Yet China’s economic footprint in the RFE and Eastern Siberia has begun to grow quantitatively and qualitatively in recent years, a trend reflected in a number of Russian-Chinese energy, natural resource, infrastructure, and tourism projects announced since 2013, many of them involving partnerships with Chinese state-owned companies. The largest of these deals was the 2014 signing of a huge $400 billion natural gas deal between Gazprom and China National Petroleum Corporation that would supply northeastern China with pipeline gas from fields in the RFE and Eastern Siberia starting from 2019. Other recent Chinese investments in eastern Russia have targeted oil, copper, iron ore, coal mining, gold, forestry, and electric power generation. Russian-Chinese commercial agreements are not limited to natural resources. In 2014, Russia and China also began construction of a railway bridge—the first permanent link between the two countries across the Amur River—which will connect the RFE’s hinterland and Heilongjiang province. Furthermore, in 2014 Russian- and Chinese-affiliated companies announced plans to develop the port of Zarubino that is strategically located at the junction of the Russian, Chinese, and North Korean borders. The port will provide China with direct access to the Sea of Japan, which it has long coveted. The Chinese will acquire a stake in the port in exchange for massive investments in construction and modernization. Chinese companies have also become the principal investors in a large casino-resort complex near Vladivostok, which is slated

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to open in 2015. The complex targets the millions of would-be gamblers in northeast China, thus linking the RFE closely to the economic coattails of its powerful and populous Chinese neighbor. Fortunately for Beijing, China’s growing interest in the RFE has coincided with Moscow’s hour of need. Although only a few years ago the Kremlin was reluctant to allow the Chinese direct access to the most valuable industries of Siberia and the Far East, it had to change its mind when faced with Western isolation over Ukraine and, thus, having few alternatives but China. Moving, or rather being pushed, closer to China amidst confrontation with the West, Moscow has lifted informal restrictions on Chinese investments that hitherto existed and has begun to actively court Chinese capital. A significant case in point is Moscow’s stated willingness, in early 2015, to allow Chinese investors to hold majority stakes in Russia’s major oil and gas fields.5 And in the RFE, the strategic economic partnership seems to be acquiring symbiotic proportions. Speaking at the Saint Petersburg Economic Forum in May 2014, Chinese vice president Li Yuanchao called for the linking up of the RFE with northeast China to create “a single economic integration zone” and “a new economic bloc for Asia.”6 Since China’s northeast provinces have eleven times the GDP and seventeen times the population of the RFE, one might expect that border integration would occur largely on terms dictated by China. Also, in dealing with the RFE, China can deploy its giant state corporations that have some of the deepest pockets in the world and are driven by the government’s strategic calculations as much as by purely commercial logic. Despite their seemingly limitless financial resources, Chinese corporations are striving to buy Russian assets on offer as cheap as possible, biding their time and betting that cash-strapped Moscow would eventually accept their terms. Disagreements over price between Russia’s Metalloinvest and China’s Hopu Investments have led to suspension of negotiations on the sale of a stake in the giant Udokan copper field in Zabaikal Krai, even though, in May 2014, they reached a preliminary agreement for the Chinese company to buy 10 percent of shares in Udokan and finance the field’s development.7 A similar fate befell Rosneft’s agreements with CNPC on the sale of stakes in Taas-Yuryuakh and Vankor oil fields in Eastern Siberia through Memorandums of Understanding that were signed in 2013 and 2014, respectively. As of this writing, neither deal has been finalized because the parties were still haggling over price.8 It remains to be seen for how long Moscow is able to hold out. If Russia’s isolation from Western markets continues and possibly becomes worse, the chances are China will get their bargain. Viewed in a broader foreign policy context, the RFE represents one piece in a long-term geopolitical game plan aimed at creating zones of influence along China’s continental periphery. Two other directions where

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Beijing pursues goals of securing China’s borders and gaining preferential access to raw materials (and probably also a measure of political control) are continental Southeast Asia and the Central Asian republics. Incidentally, large parts of these regions, as well as the RFE, were in the past under Chinese sovereignty or suzerainty, or were perceived as such by Beijing. Another feature of Beijing’s policy toward the strategic rear areas is to bind them up, to the extent possible, with neighboring regions of China: southwestern China with Southeast Asia, western China with Central Asia, and northeastern China with the RFE. Sino-centric integration of continental Eurasia is being aggressively promoted under the aegis of Beijing’s Silk Road blueprint. Tellingly, the RFE is highlighted in the “One Belt, One Road” strategy, which seeks to “strengthen cooperation between China’s Heilongjiang, Jilin and Liaoning provinces and Russia’s Far East region on sea-land multi-modal transport, and advance the construction of an Eurasian high-speed transport corridor linking Beijing and Moscow with the goal of building key windows opening to the north.”9 As eastern Russia drifts increasingly into China’s economic orbit, Moscow should begin to assess the implications of its highly touted strategic partnership with the Chinese. Growing intimacy with Beijing provides material benefits, but also carries significant costs and risks. China’s political and economic support for Russia, while the latter struggles with the West, will most likely come at a heavy price. First, Russia will have to show much more deference to China’s core interests in East Asia, in effect abandoning its ambitions to be an independent major player in Asia Pacific. Xi Jinping talks about Asian affairs being managed by Asians themselves,10 taking the aim at the United States in the first place, but it is by no means certain whether Beijing considers Moscow as a legitimate Asian great power. Second, China’s privileged access to the RFE’s territory and resources would allow it to shape the region’s development path. This not only could squeeze other external players out of the RFE, but also possibly could restrict commercial opportunities for Russian companies in the region because most lack wherewithal to compete on equal terms with Chinese corporate behemoths. Economic sinicization may, sooner or later, set the stage for the erosion of Russian sovereign control over that area. To be sure, China will always be a significant force in the RFE’s economic life. Yet significant does not have to mean overwhelming. A preponderance of Chinese influence in the RFE could have wide consequences, not just for Russia as a Eurasian power, but for the balance of economic and political forces in Asia Pacific as a whole. Moscow doubtless is aware of this hard reality and, for all its friendship with Beijing, displays intense interest in expanding collaboration with other Asia Pacific players, above all Japan and South Korea.

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Japan and Korea as Alternatives to China? Until recently, the RFE’s economic links were more or less balanced between China, Japan, and South Korea. Although China was probably somewhat ahead by trade volume,11 Chinese investments in the RFE lagged behind those from Japan and South Korea. For instance, in 2013, Japan accounted for 34 percent of the foreign investment in the RFE−TransBaikal area while China accounted for a mere 2 percent. Japan looks like the most obvious option as a regional counterweight to China. Indeed, some prominent Russian analysts single it out as the most promising Pacific partner, suggesting it could become “Russia’s Germany in the East”; that is, a reliable source of technologies and capital.12 Faced with the post-Fukushima nuclear energy crisis, Japan has to rely more on fossil fuels, necessitating an increase in imports of oil and natural gas from the nearby RFE. Japan is the Asia Pacific country that shows the most alarm concerning the rise of China, and this alone should make it predisposed to take steps countervailing the growth of Chinese influence in the neighboring RFE. However, the ill-fated dispute over the South Kurils and Northern Territories still poisons the bilateral relationship and stands in the way of expanding Russian-Japanese collaboration and moving it beyond the hydrocarbon sector. Furthermore, the stagnant Japanese economy makes Tokyo a less attractive partner than it could have been, say, twenty years ago. In particular, energy consumption in Japan is flat and is not going to increase, which puts basic limitations on the prospects for Russian-Japanese energy cooperation. Another constraint is related to the RFE’s notoriously unruly climate for doing business that deters traditionally risk-averse Japanese investors.13 Finally, and importantly in the present context, Tokyo’s alliance with Washington and its membership in the Group of 7 (G7) major democracies place restrictions on how far it can advance economic cooperation with Moscow, at least for the time being. One casualty was the abandonment of the plan by Gazprom to build an LNG facility in Primorsky, which was supposed to liquefy the gas coming from Sakhalin and export it to consumers in Asia Pacific. Prior to the Ukraine crisis, Japanese companies were considered Gazprom’s main partners in this project and Japan was to be the principal importer of its LNG. The sanctions dealt a blow to the project and, having lost a Japanese option, Gazprom turned to China. In September 2015, a preliminary agreement was signed between Gazprom and CNPC, according to which, instead of the LNG plant, Russia would build a gas pipeline spur from Primorsky to northeastern China. Some observers see reasons to be cautiously optimistic about the prospects for Russian-Japanese relations, at least with respect to the border dispute. Japanese prime minister Shinzo Abe is eager to improve relations

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with the northern neighbor, which is being reciprocated by the Kremlin. He and Putin seem to have established rapport, meeting seven times over the period of 2013 and 2014. It is important that the two sides continue to quietly negotiate the territorial issue. There are some indications that its possible solution increasingly revolves around the so-called two plus alpha formula.14 The “two” stands for the two smaller islands (Shikotan and Habomai) that Moscow has already in principle agreed to transfer to Japan, but which Tokyo considers insufficient to close the dispute. Thus, “alpha” could be a compromise—something more than just the two minor islands that Moscow is now willing to give up, but something less than all of the four South Kuril Islands that Tokyo has claimed. The economic and international predicament in which Russia finds itself, due to the Ukraine crisis, Western sanctions, and falling oil prices, may make Moscow even more willing to consider the two plus alpha solution. The Kremlin could link the exact amount of alpha with Tokyo’s readiness to make major investments in the RFE and conclude long-term contracts for Russian gas. Although, again, such a deal might have to await reestablishment of some sort of modus vivendi between Moscow and Washington. Like Japan, South Korea is important as a source of capital and modern technologies for the RFE as well as a major consumer of its primary products. It is also significant that, in contrast to Russian-Japanese or RussianChinese relationships, there is no negative historical legacy between Russia and South Korea. As opposed to China, which is viewed as a strategic challenge by many in Russia, and unlike Japan with which Russia has an unresolved territorial dispute, South Korea is not considered a geopolitical concern for the RFE, making it much easier for the two sides to cooperate in vital economic areas. The ties are assisted by the presence of a fairly large and active community of Russian-speaking ethnic Koreans in the RFE. There are also political motives why Seoul wants a strong presence in the RFE. This is viewed as a way of gaining additional leverage over North Korea, which borders the RFE and has some links to it, and thus facilitating prospective reunification. Despite the generally positive tone of Russian−South Korean relations, Seoul is a less than ideal balancing partner in several respects. South Korea’s economy is relatively small—one-fourth the size of Japan’s and one-seventh that of China. Also, like Japan’s, South Korea’s economic growth is slowing down, thus moderating the country’s demand for the RFE’s commodity exports. Additionally, South Korea, though not a G7 member and not theoretically required to join in anti-Russian sanctions, is allied to the United States militarily. Hence, Seoul cannot but take into account the state of US-Russian relations in developing cooperation with Moscow.15 Finally, Korea finds itself in a delicate position with regard to China, being increasingly pulled into its geoeconomic orbit. Due to the

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growing dependence on Beijing, Seoul will likely be cautious about taking any steps in the RFE that could be seen as aimed at counterbalancing China. Unification may significantly increase the economic and geopolitical potential of Seoul leading to a united Korea’s bigger role for the RFE but if, and when, unification ever happens is, of course, a big question. Summing up, Japan and Korea are strong economic players, with important stakes in the RFE’s future, but they may not be able by themselves to effectively counteract China’s regional influence and clout. Any such strategic design would require a broader involvement of more players, and that is where US power, now on the sidelines as far as the RFE is concerned, might come into play. The United States: Taking Leadership The RFE is not vitally important to the United States in economic terms, as the United States has its own abundant supply of many of the natural resources that the RFE has to offer. This has become even more true since the shale oil and gas boom began in the United States, making the nation less reliant on imports of fossil fuels, including those from Russia and its Far East. However, from a geopolitical perspective, the RFE’s significance for the United States is only growing, as Sino-US rivalry in Asia Pacific shows no signs of abatement and is likely to become more intense. A growing number of prominent analysts argue that China will remain the most significant competitor to the United States for decades to come and advocate a more vigorous strategy for dealing with the Chinese challenge.16 As previously noted, China seeks to secure rear areas along its continental periphery—in mainland Southeast Asia, Central Asia, and the RFE. The United States should obviously be interested in checking, or offsetting, Chinese advances into these regions, as control over them would greatly expand Beijing’s sway in Asia and make it feel more confident vis-à-vis Washington. Of the three mentioned areas, the RFE carries an added significance because of its adjacency to North America—the United States and Russia are only two miles apart in the Bering Strait at their closest meeting point where Chukotka’s Big Diomede and Alaska’s Little Diomede Islands overlook each other. The higher the level of Chinese penetration of the RFE, the more risks it poses for the United States unless, of course, Washington and Beijing achieve some sort of grand settlement or durable rapprochement, which seems improbable in the foreseeable future. Might Beijing view the RFE as a stepping stone to project its influence into the Arctic and even toward Alaska and beyond? US policymakers might take note of a plan being floated in China to construct a railroad linking the RFE to North America via a tunnel under the Bering Strait. Whether fantasy or not, the

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idea may reflect elements of China’s broadened imperial vision under Xi Jinping’s presidency.17 In contrast to Chinese-US relations, the United States and Russia do not have serious disagreements in Asia Pacific. At the same time, they have one major common interest—neither Washington nor Moscow wish to see a China-dominated Asia. This may form the basis for Russian-US strategic dialogue in Asia Pacific, including on the issues relating to the RFE. In fact, Russia and the United States already have a long record of geopolitical collaboration in the Pacific to counter their common challengers and rivals. In the 1860s it was the British empire that was seen as a shared threat, while from the 1920s through the 1940s it was Imperial Japan. Indeed, it was partly thanks to the US diplomatic intervention that the RFE remained Russian, when in the early 1920s Washington pressed Japan to pull its forces from the region. Granted, US-Russian relations in the Pacific cannot be insulated from their entire relationship, which is now in tenuous shape. Russia is adamant in defending what it sees as its vital and legitimate interests in Ukraine and elsewhere in the post-Soviet space while the United States has led the Western coalition to punish Russia for its actions in Crimea and Eastern Ukraine. So far, Washington’s policy has failed to make Russia back down. Rather, the main effect has been to push Russia further into China’s embrace, raising the possibility of a Eurasian anti-US alliance. Whereas prior to the Ukraine crisis, Russia and the United States were beginning to discuss in semiofficial settings possible security collaboration in Asia Pacific—finding a lot of common ground—this is all gone now. USRussian strategic dialogue on the Pacific issues has not just stopped—even worse, their relations in Asia Pacific have started to acquire the same confrontational pitch as seen in Eastern Europe. Washington has leaned on its East Asian allies to sign up to the sanctions regime against Russia while it expelled Russia from the US-led RIMPAC naval exercises in 2014. At the same time, Russian defense minister Sergei Shoigu, after talks with his Chinese counterpart in Beijing, expressed “concern over US attempts to strengthen its military and political clout in the Asia-Pacific” and called for the establishment of “a collective regional security system.”18 Never before has a high-ranking Russian official made such explicit remarks challenging the US-centered security order in East Asia. To reinforce the message, Russian strategic bombers increased their activities in the Pacific, circling Guam during one especially provocative mission.19 Russia joined China in vocally objecting to the planned deployment of a US missile defense system in South Korea—something that was of little concern to Moscow just a couple of years earlier. Meanwhile, Putin denounced the Trans-Pacific Partnership, a US-promoted trade agreement that China sees as a thinly veiled attempt at its containment.20

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Despite the heated rhetoric and impulsive steps that currently prevail on both sides, there is a chance for accommodation. Even when he lashes out at the US “unilateral diktat,” Putin calls for “finding collective answers to increasing challenges” and “joint risk management,” obliquely signaling interest in compromise with the West.21 He hardly wants to jettison the entire international order based on Western-led institutions and backed by US power, though he wants Russia to have a larger say in it. Moscow has even fewer objective reasons to pursue a radical remaking of Asia Pacific security architecture, which, even in its present US-dominated form, does not run against Russia’s basic preferences. Moscow remains focused mainly on safeguarding its security and geoeconomic interests in the Russian near abroad, although this does not rule out opportunistic involvements in other regions. True, it may be unpalatable for Washington to acknowledge that Moscow’s autocrats should enjoy any special privileges in the post-Soviet space and have a major role to play in Eastern Europe. However, the price to pay for continued confrontation with Moscow over Ukraine would be the strengthening of China in East Asia and the western Pacific. As Robert Legvold points out, the “New Cold War” with Russia will compromise Washington’s intended rebalancing of diplomatic and military forces to Asia Pacific, and its ability to maintain commitments to allies there. Moreover, he warns that “a belligerent Russia will have every incentive to hinder, rather than help, the United States’ efforts to manage the delicate task of deterring Chinese aggression while widening the sphere of U.S.-China cooperation.”22 If Russia and the United States, with its European allies, manage to achieve a grand bargain on the post-Soviet space, this will open the way for Russian-US dialogue in Asia Pacific. It would be unreasonable to expect that Russia would agree to take part in containing China—it would never do so, unless Moscow perceives a direct and clear threat from Beijing. However, Russia can be a major independent player in Asia Pacific, thus contributing to maintaining a stable equilibrium and posing a counterweight to potential bids for Asian hegemony from whoever they might emerge. This is the political role to which Moscow aspires in Asia, and one with which US interests are fully compatible. This brings us back to the RFE. For Russia cannot be a meaningful actor in Asia Pacific, unless its Far East is economically successful, stable, and well integrated with the international economy. Furthermore, the RFE, which is in economic distress and dysfunction, would become a soft target for an expansionist China. The United States needs the RFE, which is sustainable, prosperous, and remains under full Russian sovereignty. As noted earlier, the United States does not have a large economic stake in the RFE. This is not to say that US firms cannot play a role in the RFE development while making profits. The US commercial presence would be especially relevant and effective in the sectors that put a premium not on the sheer volume of cash infusions—

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where the United States is unable to outdo China in most cases—but, rather, on state-of-the art technologies and management. However, the United States’ most important role with respect to the RFE is not about its own commercial presence there. It is about international leadership. The looming preponderance of China in the RFE is a concern for several Indo-Pacific states that worry about the changing equilibrium in the region. Just as some sort of collective balancing may be required to forestall Chinese geopolitical dominance of Asia, there may need to be a coordinated international effort to avert the risk of Chinese monopolization of the RFE. Today, there is only one country that is capable of initiating, leading, and sustaining broad international coalitions. That is the United States, which maintains an extensive and still unrivaled network of alliances, friendships, and partnerships. The main goal of the United States and its friends should not be to keep China out of the RFE, for that is neither possible nor desirable. Rather, they should work toward enabling the RFE, to the extent possible, to integrate with Asia Pacific economies so that China does not become the predominant player and other stakeholders can also be involved.23 Indeed, a coordinated Western approach to development of eastern Russia should be open to the possibility of collaboration with China on projects of mutual interest. The difference is that China would not be able to dictate the rules and boundaries of that collaboration. Russia should welcome such a strategy, as it fully corresponds with its own strong interest in having economic alternatives to China while enjoying the benefits of Chinese participation. Moreover, Russians are aware that China is not able to provide the RFE with what it needs in addition to cash—advanced technologies and expertise for the modernization of backward industries. This is precisely where the United States and many of its friends retain a remarkable edge over China. Scenarios What will become of the RFE in future years? Will it remain an integral part of Russia? Will it become a de facto part of greater China? Will it become a focal point of geopolitical conflict or, alternatively, cooperation? There are several alternative trajectories for the RFE within the next—ten to twenty-five years. The RFE as China’s “Outer Manchuria”

The Outer Manchuria scenario is extrapolated from recent trends in Russian-Chinese relations—Russia moving ever closer to China strategi-

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cally and China increasing its economic profile and influence in the RFE. China becomes the dominant economic force in the RFE, gaining direct or indirect control over the region’s key assets. Its influence is strongest in the southern part of the RFE, but has also expanded farther north and east—up to the Sakha Republic, Sakhalin, Magadan, Kamchatka, and Chukotka. Thus, China’s reach extends close to the US borders as well as adjacent to the zones of the Northern Sea Route in the Arctic Ocean. Control over the RFE and Eastern Siberia also gives China command of Mongolia, making it an enclave within Chinese zone of geostrategic influence. Massive Chinese investments in the RFE come with Chinese manpower, as one of their attached conditions. This means that the RFE’s demography may begin to change significantly. The established large-scale economic presence and a large ethnic community may lead to the emergence of pro-Chinese political lobbies—a phenomenon unprecedented in the region. Quite possibly, China’s exclusive economic penetration of the RFE would eventually be followed by a rising degree of geopolitical control. This could ultimately jeopardize Russian sovereignty and threaten to turn the RFE into not just a raw material appendage but also a militarystrategic base for China in the North Pacific, especially if Moscow enters a full-fledged military-political alliance with Beijing. In essence, the RFE will become Outer Manchuria24—a territory, where Russian sovereignty is getting increasingly tenuous and where matters are decided in Beijing and Harbin rather than Moscow or Vladivostok. The RFE as a Perpetual Backwater

In the perpetual backwater scenario, the RFE reverts to the situation of the 1990s and early 2000s, when there was not much interest in the region— neither from Moscow nor from China and other countries. This future will materialize if, for example, China’s economic growth founders and leads to a decline in demand for the RFE’s commodities. At the same time, Moscow’s attempts to develop the region, and make it an attractive investment destination, will fail or cease altogether due to lack of wherewithal, distraction by other problems, inept governance or, most likely, all of these combined. The RFE reverts to its tsarist and Soviet status as an outpost of empire when the impetus for modernization there falters. Population outflow from the region accelerates, exposing the RFE to the risk of demographic insolvency and ensuing economic irrelevancy. In the event of adversarial relations with both the West and China, Russia might regress to a kind of Stalinist self-isolation, thus further negating prospects for serious development of the region.

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The RFE as an Area of International Economic Cooperation and Integration

In this scenario, overcoming the Ukraine crisis and its fallout, Russia and the West normalize relations. Moscow encourages investments in the RFE from all interested parties—with Russian sovereignty fully preserved. China remains a major—and perhaps still the biggest—partner, but far from being the dominant one. Japan, South Korea, the United States, and other advanced Asia Pacific economies will collectively present an effective counterbalance to the risk of China’s economic hegemony over the RFE and contribute significantly to the region’s overall modernization. The West maintains an edge in advanced technologies that Russia will use to develop its vast resource base. For some projects in the RFE, which require multibillion-dollar investments, multilateral international consortiums will be set up to include China, Japan, Korea, the United States, and others. This is the best-case scenario, which is premised on an economically dynamic Russia that maintains healthy relations with both China and the West and makes successful efforts to integrate the RFE with Asia Pacific. Wildcard Scenarios

This category covers a wide range of extreme scenarios. Perhaps the most prominent among them is China attempting to annex the RFE by a surprise attack launched from the northeast or from Inner Mongolia. This is not to say that such an invasion is imminent or likely. However, it cannot be ruled out completely if and when Russia weakens and, particularly, if it descends into chaos due to a severe political or economic crisis. In the past century, there were two moments (in the aftermath of the 1917 Russian Revolution and in the wake of the Soviet Union breakup in the 1990s) when Russia was on the brink of collapse as a unified polity and its ability to defend itself against external encroachment or invasion was greatly diminished. At present, there is little to suggest that China harbors any designs to seize the RFE by force (gradual soft power assimilation of the region is a much likelier prospect), but it may not be able to resist temptation for a power grab if an opportunity presents itself 25—say a significant weakening or crumbling of Russian state authority following a domestic crisis. A Chinese attempt to annex the RFE or part of it might draw in other players, particularly if Beijing’s intense rivalry with the United States and its Pacific allies continues to dominate the Asian scene. Would the United States move to preemptively occupy Chukotka, Magadan, Kamchatka, and the Arctic shore of the Sakha Republic before Chinese enter these territories? And would Japan, in turn, take control of Sakhalin and the Kuril Islands?

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Recommendations to US Policymakers The United States’ long-standing special relationship with the RFE, reflecting common security concerns and a shared North Pacific space, receives little attention in Washington these days. The tapering off of US assistance programs, the decline in commerce, and—most recently—the impact of the Ukraine crisis can be cited as reasons. Yet the underlying principles of the special relationship remain valid today—indeed with the rapidly changing geopolitical environment in East and Northeast Asia, they may be more important than ever. Rather than forcing Russia into ever greater dependency on China, the United States and its allies should cultivate Moscow as an independent pole in the Asian power equilibrium, and even as a potential partner on regional security issues. Our recommendations focus on ways to engage Pacific Russia, while recognizing that relations with Russia in the East cannot be isolated from the overall US-Russian relationship, now defined largely by the events in Eastern Europe. Determine the Peer Competitor

Washington should think hard about its strategic threat priorities. The current policy of dual containment—of Russia in Eastern Europe and China in East Asia—has not worked well. In fact, it could wind up creating a new Moscow-Beijing axis that broadly threatens US security interests in Asia and elsewhere. Balance-of-power logic dictates that Washington should identify which one of two countries—Russia or China—represents the biggest long-term threat to US interests, and then try to reach at least some measure of accommodation with the other. By almost all material measures, it is China that is poised to be the United States’ peer competitor and the principal geopolitical challenge while Russia is a potential partner. This view is shared by several prominent US analysts of international relations—Aaron Friedberg, John Mearsheimer, Edward Luttwak, and Dmitri Simes, among others.26 However, the prescribed change in strategic direction will require a stronger grasp of the fine points of triangular diplomacy than now seems to be the case in Washington. China’s Behavior Toward the RFE as an Indicator of Its Strategic Expectations

As discussed earlier, China’s policy toward the RFE may well be determined by its grand strategic calculus as much as purely commercial logic. A major reason for China’s interest in eastern Russia is to safeguard its northern rear and ensure against a naval blockade by the United States by securing overland access to Russia’s natural resources. Thus, the degree of

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Beijing’s interest in the RFE could be a measure of its anticipation of a future clash with the United States. The more pessimistic China is about its relations with the United States, the more priority it will give to penetrating eastern Russia as well as other rear areas along its continental borders. At least for this reason alone, Washington should closely monitor China’s moves in the RFE. Ease the Sanctions’ Effect on the RFE

Given all of the bad blood between Washington and Moscow, it may be unrealistic to expect that the US-led Western sanctions against Russia will be lifted soon. However, as advocates of RFE exceptionalism, we argue for modification of the present one-size-fits-all sanctions policy. Steps could be taken to at least insulate, to the extent possible, the activities of US companies in the RFE from the effects of these restrictions. For example, the US government could apply sanctions less rigorously when it comes to US energy and mining companies working in the RFE. Restrictions might be lifted selectively on financing for RFE-based projects of Russian companies (though probably not for projects with Chinese-held controlling stakes). Such measures would help keep a Western business presence in the RFE and maintain at least some alternative to China. Also, in anticipation of a postsanctions environment, economic ties should be revived on an official level. Here, an important step would be to establish a commercial service desk in the US Consulate General in Vladivostok—no such representation has existed for years—and to add support staffs in other RFE cities that could serve as points of contact for US companies seeking opportunities in the region. Encourage Russia’s Balanced Integration with Asia Pacific

For one thing, the US government should refrain from exercising pressure to join Western sanctions against Russia on Japan, South Korea, Singapore, and other US friends in Asia who may otherwise be willing to trade with, and invest in, the RFE. The greater involvement of Asia’s developed economies would help offset China’s rising economic influence in the RFE and Russia generally. Second, the United States should do what it can to help Japan and Russia to finally normalize relations. Back in the 1950s, the United States helped create a territorial dispute between Moscow and Tokyo. Perhaps now is the time to help them reconcile. Third, the United States should be more receptive than it has been (because of its frozen relations with North Korea) toward infrastructure projects on the Korean Peninsula in which Russia is involved. They include the Trans-Korean Railway between North and South Korea and its connection to the Trans-

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Siberian Railway, the Trans-Korean gas pipeline from Russia, and the Trans-Korean grid to export Russian electric power to South Korea via the North. So far the United States has tacitly opposed these projects on the grounds that they might benefit the pariah Pyongyang regime. However, if implemented, they could considerably enhance links between the RFE and the two Koreas, boosting the RFE’s economy and helping it diversify away from China. Encourage the US Pacific States’ Partnerships with the RFE

In the 1990s, cooperation at the subnational level, between the US West Coast states (particularly Alaska and Washington State) and Russia’s Far Eastern provinces, was an important driver of US-Russia trans-Pacific links. This cooperation should be resuscitated and brought to a new level, including through reinvigorating the existing Russian-American Pacific Partnership mechanism. The US government should encourage, and assist, Alaska and Washington State—the two states best positioned to do so—to expand their links with the RFE. Many positive results of the US-Russian subnational cooperation in the 1990s were due to the fact that an ad hoc working group for promoting the RFE-US West Coast ties was set up under the governmental GoreChernomyrdin commission on US-Russian economic and technological cooperation. In 2009, a US-Russian bilateral presidential commission was set up as part of the reset process,27 but its activities were frozen in 2014. If and when the commission resumes its operation, a working group on USRussian Pacific partnership could be established under its auspices. Resume Inviting Russia to RIMPAC Multilateral Naval Exercises

This would be an important move in promoting the US-Russian militaryto-military dialogue in the Pacific. In 2012 when the Russian naval forces participated for the first time in the US-led international RIMPAC exercise, it was seen as a sign of increased security cooperation between Moscow and Washington in Asia Pacific. However, due to the Ukraine crisis, Russia was not invited to join RIMPAC in 2014. Assist with Russia’s Admission into the Asian Development Bank

Russia is not a member of Asia Pacific’s principal multilateral lending institution, the Asian Development Bank (ADB). This deprives the RFE of a major potential source of financing for infrastructure and other projects. Russia applied to join the ADB in the past, but was denied entry by Japan

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and the United States, the countries wielding the greatest decisionmaking power in the bank.28 It may be high time for them to reconsider and welcome Russia into the ADB. If admitted, Russia would gain access to much-needed cash and technical expertise for the RFE’s modernization agenda, with the ADB becoming a major source of high-quality investments alternative to China. Russia’s membership in the bank will signal that the United States, Japan, and other advanced economies want to see Russia as part of a wider Asia Pacific economic community rather than as China’s raw materials appendage. Having Russia in the Japanese and US-led ADB is likely to upgrade Asia Pacific dialogue between Moscow, Tokyo, and Washington. Finally, Russia’s accession to the ADB will strengthen this institution, which is facing a tough challenge from the recently created China-led Asian Infrastructure Investment Bank.29 The ADB’s failure to include Russia stands in stark contrast to the Beijing-initiated AIIB. Not only did China invite Russia to join the new institution, but also allowed it to be designated as an “Asian” member, thus entitling it more voting rights than “non-Asian” members (in the World Bank, for comparison, Russia is categorized as a “European” country).30 Work Toward Establishing a Northeast Asian Cooperation and Development Financial Institution

The idea of a multilateral bank or investment fund focused on infrastructure and transborder projects in Northeast Asia has been around since 1991.31 Once established, such an institution could become the chief multilateral financer for the RFE’s development. China can, and should, be a major shareholder in such a bank or fund, along with Japan, South Korea, and Russia. Other countries, such as the United States, Singapore, India, Canada, Australia, and the EU, could also become shareholders. The United States should promote a Northeast Asian bank or fund, as it may be the best way to attract multilateral financing for the RFE without making China the dominant player. Form an Ad Hoc International Group to Guide RFE Development Efforts

Finally, Washington should consider initiating an informal ad hoc group or consortium consisting of Asia Pacific nations with a stake in the RFE’s political and economic future. The magnitude of the problems facing the region, its distance from Russia’s power centers, and Chinese expansionist inclinations in East and Northeast Asia are strong arguments for creating such an entity. Apart from the United States, the most logical participants could include Japan, South Korea, Canada, Australia, Singapore, and possi-

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bly India.32 China should also be invited to join the group. Singapore may be best positioned to act as the lead coordinator for the group. The choice of Singapore as the chair will help dispel the worries that the group is a US plot to contain China. Singapore is also renowned for its business acumen and high standards of management that will be extremely valuable in realizing big commercial ventures in the RFE. Besides, the Singaporean government and companies have displayed some interest in doing business with the RFE.33 The primary function of the group would be to coordinate the members’ moves with respect to economic development of the RFE, particularly within the framework of multilateral lending institutions like the ADB or a prospective Northeast Asian bank like that envisaged above. Looking forward, the Russian Far East could be one of the building blocks of a revitalized US-Russian relationship—one based on common security concerns and a shared Pacific space. Engaging the region not only could benefit the relationship as a whole but also could contribute to a stable equilibrium in Asia Pacific, which is a vital US interest. Hedging against Chinese power, of course, is part of the game. But Washington should also think in terms of institutional arrangements that recognize China’s legitimate interests in the RFE while not granting it a sphere of exclusivity. This will be a challenge for US policy—one of many on the horizon in the United States’ new Pacific century. Notes 1. Press statement by Vladimir Putin following Russian-Chinese talks, President of Russia website, May 8, 2015, http://en.kremlin.ru/events/president/tran scripts/49433. 2. Dmitri Trenin, From Greater Europe to Greater Asia: The Sino-Russian Entente (Moscow: Carnegie Moscow Center, April 2015), 3. 3. Sean Mirski, “Stranglehold: The Context, Conduct and Consequences of an American Naval Blockade of China,” Journal of Strategic Studies 36, no. 3 (2013): 385–421. 4. Dale Copeland, “Economic Interdependence and the Future of U.S.-Chinese Relations,” in International Relations Theory and the Asia-Pacific, ed. G. John Ikenberry and Michael Mastanduno (New York: Columbia University Press, 2003), 323–352. 5. “‘No Political Obstacles’ to Grant China 50% Stake in Russian Oil and Gas Fields—Deputy PM,” Russia Today, February 27, 2015, www.rt.com/business /236211-russia-china-oil-gas. 6. “Zampred KNR: Kitayu nuzhno bol’she investirovat’ v Rossiyu” [China’s Vice President: China Should Invest More in Russia], ITAR-TASS, May 24, 2014, http://itar-tass.com/ekonomika/1212483. 7. Vitaly Petlevoy, “Metalloinvest i kitayskaya Hopu priostanovili peregovory po Udokanu,” Vedomosti, July 14, 2015, http://www.vedomosti.ru/business /articles/2015/07/14/600427-metalloinvest-i-kitaiskaya-hopu-priostanovili-peregov ori-po-udokanu. 8. “U Rosnefti i CNPC voznikli raznoglasiya po usloviyam prodazhi nefti v

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Vankore,” Interfax, May 5, 2015, http://www.interfax.ru/business/440074. See also Interview with Rosneft CEO, Igor Sechin, Vesti Ekonomika, June 22, 2015, http:// www.vestifinance.ru/articles/59048. 9. “Vision and Actions on Jointly Building Silk Road Economic Belt and 21stCentury Maritime Silk Road,” issued by the National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, with State Council authorization, March 2015, http://en .ndrc.gov.cn/newsrelease/201503/t20150330_669367.html. 10. “China Focus: China’s Xi Proposes Security Concept for Asia,” Xinhua, May 21, 2014, http://news.xinhuanet.com/english/china/2014-05/21/c_133351210 .htm. 11. As explained in Chapter 8, taking into account informal and unregistered cross-border commerce, China surpasses Japan and South Korea in terms of trade volume with the RFE. 12. Dmitri Trenin, interviewed by Kommersant, September 25, 2012, www.kom mersant.ru/doc/2029312. 13. Here, a residue of past bad business experiences has had a noticeable dampening effect, especially among small and medium Japanese investors. In two highprofile cases in the 1990s, Japanese investors in hotel joint ventures in YuzhnoSakhalinsk (Santa Hotel) and Khabarovsk (Sapporo Hotel) were effectively expropriated by their Russian partners, and the bad memories linger on. Derek Norberg, personal communication with Rensselaer Lee, August 14, 2013. 14. For an excellent treatment of the issue see Matthew Ouimet, “The ‘Northern Territories’ and the Future of the Russia-Japan Relationship,” hosted talk, International Institute for Strategic Studies, Washington, DC , February 11, 2014, www .youtube.com/watch?v=KjLfWeKodWw. 15. Tellingly, both Japan’s prime minister Shinzo Abe and South Korea’s president Park Geun-hye declined Vladimir Putin’s invitation to attend the Victory Day’s 70th anniversary celebrations in Moscow in May 2015. 16. See, for example, Robert Blackwill and Ashley Tellis, Revising U.S. Grand Strategy Toward China (New York: Council on Foreign Relations Press, April 2015). 17. Elizabeth Economy, “China’s Imperial President: Xi Jinping Tightens His Grip,” Foreign Affairs 6, no. 6 (November−December 2014): 88. 18. “Russia, China Seek to Form Asia-Pacific Collective Security System— Defense Minister,” TASS, November 18, 2015, http://tass.ru/en/russia/760322. 19. Bill Gertz, “Russian Bombers Threaten Guam,” Washington Free Beacon, November 19, 2014, http://freebeacon.com/national-security/russian-bombers -threaten-guam/. 20. “Putin Objects to Setting Up Trans-Pacific Partnership Without Russia, China,” TASS, November 6, 2014, http://tass.ru/en/russia/758460. 21. Neil Buckley, “Putin Makes West an Offer Wrapped Up in a Warning,” Financial Times, October 26, 2014, www.ft.com/intl/cms/s/0/8adeb6d0-5d0d-11e4 -9753-00144feabdc0.html?siteedition=intl#axzz3HMMUedmn. 22. Robert Legvold, “Managing the New Cold War,” Foreign Affairs 93, no. 4 (July−August 2014): 78. 23. Somewhat ironically, this strategy might be reminiscent of the Open Door policy that the United States pursued with respect to China in the late nineteenth and early twentieth century. The Open Door Doctrine aimed to guarantee equal access to the Chinese market and protect China’s sovereignty and territorial integrity against encroachments by European imperialistic powers and Japan. In that case, the policy was not very successful due to the United States’ relative weakness at the time and lack of support from other players.

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24. “Outer Manchuria” is a term sometimes used in China to denote the southern part of the RFE, with an implicit connotation that the land constitutes part of Chinese Manchuria and was unfairly taken away from the Qing empire by Imperial Russia. See, for example, “When Will Russia Return the Outer Manchuria to China,” ChinaDaily Forum, July 31, 2014, http://blog.chinadaily.com.cn/thread-708 116-6-1.html. 25. Aaron Friedberg points to a “flexible and open-ended approach to strategic thinking and planning” characteristic of Chinese leaders. Aaron Friedberg, A Contest for Supremacy (New York: W. W. Norton, 2011), 124. Applied to the RFE, it means that China may not have nefarious intentions toward the Russian territory at the moment, but could quickly change its goals and the game plan when circumstances are different. 26. Friedberg, A Contest for Supremacy, 281. See also Edward Luttwak, The Rise of China vs. the Logic of Strategy (Cambridge, MA: Belknap Press of Harvard University Press, 2012), 139−141; John Mearsheimer, “Why the Ukraine Crisis Is the West’s Fault,” Foreign Affairs (September−October 2014), www.foreign affairs.com/articles/141769/john-j-mearsheimer/why-the-ukraine-crisis-is-the -wests-fault; and Dimitri Simes, “How Obama Is Driving Russia and China Together,” The National Interest, July−August 2014, http://nationalinterest.org /feature/how-obama-driving-russia-china-together-10735. 27. US Department of State, “2009 U.S.-Russian Bilateral Presidential Commission: Mission Statement,” www.state.gov/p/eur/ci/rs/usrussiabilat/c38418.htm. 28. Turdakun Tashbolotov, “Russia and the East,” Mr Globalization, April 17, 2012, www.mrglobalization.com/governing-globalisation/453-russia-and-the-east. 29. Bree Feng, “Deal Set on China-Led Infrastructure Bank,” New York Times, October 24, 2014, www.nytimes.com/2014/10/25/world/asia/china-signs-agreement -with-20-other-nations-to-establish-international-development-bank.html?mab Reward=RI%3A9. 30. “Will Russia Join China’s AIIB as an ‘Asian’ Member?” Asia Times, April 30, 2015, http://atimes.com/2015/04/will-russia-join-chinas-aiib-as-an-asian-member/. 31. Bo Min Kim, “Northeast Asian Bank for Cooperation and Development,” Opinions (Seoul: Korea Institute for International Economic Policy, May 30, 2014), www.kiep.go.kr. See Masahiro Kawai, “Financing Development Cooperation in Northeast Asia,” ADBI Working Paper Series No. 407 (Tokyo: Asian Development Bank Institute, February 2013), http://www.adb.org/sites/default/files/publication /156262/adbi-wp407.pdf. See also Lee-Jay Cho and S. Stanley Katz, “A Northeast Asian Development Bank?” NIRA Review 8, no. 1 (Winter 2001): 41−47. 32. India has long showed an interest in the RFE. In particular, India’s stateowned Oil and Natural Gas Corporation Limited (ONGC) holds a 20 percent stake in the Sakhalin-1 oil venture operated by ExxonMobil, which is considered one of India’s best energy investments abroad. See Anna Kuchma, “Could ONGC Pick Up Part of Exxon Stake’s in Sakhalin-1?” Russia and India Report, May 19, 2014, http://in.rbth.com/economics/2014/05/19/could_ongc_pick_up_part_of_exxon _stakes_in_sakhalin-1_35333.html. India is also much interested in the Sakha Republic’s diamonds. Incidentally, India’s Consulate General was the first foreign diplomatic mission to appear in Vladivostok after the city was opened to foreigners in 1992. India’s interest in the RFE may be explained not only by commercial matters, but also by strategic motives relating to China. 33. In recent years, Russia and Singapore have established an active working dialogue at the governmental level, one of its major foci being the RFE.

Selected Bibliography

Alexandrova, Maria. “Programma sotrudnichestva smezhnykh territorii Rossii i Kitaia: istoria, fakty, puti osushestvlenia.” In Kitai v mirovoi i regionalnoi politike: istoria I sovremennost: Vipusk XV, 198–222. Moscow: Russian Academy of Sciences, Institute of the Russian Far East, 2010. www.ifes-ras.ru /images/abook_file/AlexandrovaRegionalny15.pdf. Andreeva, Olga. “Uroven kachestva zhizni nasaleniya v Primorskom krae.” Oikumena [Regional Studies Journal], no. 4 (2013): 48−55. www.ojkum.ru/arc/lib /2013_04_06.pdf. Blank, Stephen. Toward a New Chinese Order in Asia: Russia’s Failure. Seattle: National Bureau of Asian Research. NBR Special Report No. 26 (March 2011). “Byvshemu zamglavy Minregiona pred’yavleno obvinenie v moshennichestve.” Kommersant, November 15, 2012. www.kommersant.ru/doc-y/2067580. “China Focus: China’s Xi Proposes Security Concept for Asia.” Xinhua, May 21, 2014. http://news.xinhuanet.com/english/china/2014-05/21/c_133351210.htm. Cho, Lee-Jay, and S. Stanley Katz. “A Northeast Asian Development Bank?” NIRA (National Institute for Research Advancement) Review (Winter 2001): 41−47. www.nira.or.jp/past/publ/review/2001winter/choandkatz.pdf. Clinton, Hillary. “America’s Pacific Century.” Foreign Policy (October 11, 2011). http://foreignpolicy.com/2011/10/11/americas-pacific-century/. Cooley, Alexander. Great Games, Local Rules: The New Great Power Contest in Central Asia. New York: Oxford University Press, 2012. Economy, Elizabeth. “China’s Imperial President: Xi Jinping Tightens His Grip.” Foreign Affairs 6, no. 6 (November–December 2014): 88. Engel, Valeri. “Imperiya natsional’noe gosudarstvo Ili dozhivyot li Rossiya do 2014 goda?” Mir i politika, no. 10, October 2012, 30. www.intelros.ru/readroom /mir-i-politika/mp-10-2012/16842-imperiya-nacionalnoe-gosudarstvo-ili -dozhivet-li-rossiya-do-2014-g.html. Ermak, Galina. “Sotsial’no-mirovozzrencheskie ustanovki zhitelei kraya: identifikatsii.” In Sotsial’naya sfera Primorya: sostoyanie i otsenka zhiteliami kraya, ed. Elena Vasilyeva, 130–131. Vladivostok: Far Eastern State University Press, 2008. Feng, Bree. “Deal Set on China-Led Infrastructure Bank.” New York Times, October 24, 2014. www.nytimes.com/2014/10/25 /world/asia/china-signs-agreement

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Index

ABCs. See American Business Centers Aboriginal tribes, 27–29 Academy of Sciences, USSR, 40 Ad hoc international group, 254–255 ADB. See Asian Development Bank Adomanis, Mark, 167 Agricultural land, 8, 18 Agriculture: in Amur River basin, 16; border farmland and China, 18; Russian-Chinese relations on food and, 190–192 AIIB. See Asian Infrastructure Investment Bank Air travel, 81–82, 148 Aircraft: helicopters, 16; light, 16; spacecraft, 148; US warplanes, 38 Alaska, 29, 233n78; ARC in, 223; environmental protection of, 216–217; under Hickel, 224; purchase of, 204, 205; World War II and, 38 Albright, Madeleine, 212 Alekseyev, Evgeny, 33–34 American Business Centers (ABCs), 223 American Civil War, 205 America-Russia Center (ARC), 223 Amur Governate General, 35–36 Amur River basin: agriculture in, 16; flooding in, 97n69; Russian colonization in, 26–27; in Treaty of Aigun, 26–27 Amur River bridge, 179 Anti-US sentiments, 227–228 APEC. See Asia-Pacific Economic Cooperation

APR. See Asia Pacific region ARC. See America-Russia Center Arctic: Ocean, 9; Russian-Chinese relations and, 126–127; Russian-US relations and, 211–212, 217–218 Armed forces, 48 Arms trade, 148–149 ASEAN. See Association of Southeast Asian Nations Asia Pacific region (APR): ad hoc international group in, 254–255; growth in, 83; institutional architecture in, 215– 216; integration with, 82–83, 252, 254– 255; Ministry of Far East Development relating to, 83; policy on, 10, 252; relational patterns with, 77; reorientation to, 82–84; Russian-US relations on, 245–246, 252; trade with, 49–51 Asian Development Bank (ADB), 253– 254 Asian Infrastructure Investment Bank (AIIB), 124 Asia-Pacific Economic Cooperation (APEC), 10, 209; 2009 summit, 94n17; 2012 summit, 80; in Vladivostok, 80 Asia’s power balance, 127–128 Association of Southeast Asian Nations (ASEAN), 88 Australia, 30

Baikal region, 2, 6n2, 49–50, 78; federal program for, 86tab Baker, James, III, 211 Baker-Shevardnadze agreement, 211

265

266

Index

Banking: by ADB, 253–254; Chinese, 177n95, 179, 193; credit cards and, 145 Barabanov, Oleg, 213 Barter exchange, 29 Basin, Yefim, 106 Beijing Convention, 26, 30 Bering Sea dispute, 211 Bering Strait, 217 BISNIS. See Business Information Service for the Newly Independent States Blagoveshchensk-Heihe, 156–157 Blyakher, Leonid, 65–66 Bolsheviks, 35 Border conflict, 39–40, 128–129 Border control: under Gorbachev, 153–154; trade and, 153–158 Border Economic Cooperation Zone, 90 Border farmland, 18 Border trade: in Dongbei, 159–160; Russian-Chinese, 153–158 Boxer Rebellion, 31 Brezhnev, Leonid, 39 Britain, 204–205 Bureaucracy, 62 Bureaya hydropower plant, 81, 94n19 Business Information Service for the Newly Independent States (BISNIS), 223

Canada, 225 Capital investments, 19; fixed, 57tab Cars and vehicles, 16; car manufacturing, 66–67; car tariffs, 19; Japanese cars, 66–67; production of, 82 Catherine the Great, 29 Center-region relations, 19 Central Asia: China relating to, 181; national security relating to, 126; Russian-Chinese relations and, 124, 125–126 Central Committee of the Communist Party, 40, 41 Central Powers, 125, 134n44 Centralization, 61; of government, 76, 92; politics and, 76, 92 Chekhov, Anton, 63 Chief executives, 62 China, 2–3; ADB relating to, 253–254; Border Economic Cooperation Zone in, 90; border farmland and, 18; Central Asia relating to, 181; challenges in, 59; development relating to, 11; Dongbei, 158–165, 240; ecological threat from,

171; exports to, 140tab–141tab; Far Eastern Separatism and, 68; forest sector and, 18, 192; as geopolitical challenge, to US, 3–4; Hong Kong, 128; imports from, 140tab–141tab; maritime activity in, 180–181; oil consumption in, 182; Open Door Doctrine relating to, 256n23; in Outer Manchuria scenario, 248–249, 256n24; political elite on, 171; production in, 90; public opinions on, 169–171; during Qing empire, 26, 27; Russian views on, 107–111, 169–171; Russian-US relations and, 4, 213–214, 218–219; Silk Road Economic Belt and, 3, 124, 126; US-Russian policy and, 4. See also Russian-Chinese relations; Russian-Chinese trade China Eastern Railway, 32, 34 China National Petroleum Corporation (CNPC), 143, 182–184; on natural gas, 185–187 China Railway Construction Corporation (CRCC), 147 China-US relations, 181 Chinese banking, 177n95, 179, 193 Chinese demographics, in RFE, 166–169 Chinese education, 170, 177n101 Chinese immigrants, 31, 37 Chinese lobby, 111–112 Chinese migrants, 31, 37, 58–59, 167–169, 240; labor by, 172n1 Chinese philosophy, 109–110 Chinese Triad organizations, 63 Chita-Khabarovsk highway, 81 Christianity, 114n27 Chukchi, 26, 27 Chukotka: gold in, 16; Russian colonization of, 26; United Party and, 21 CICA. See Conference on Interaction and Confidence-Building Measures in Asia Civil airlines, 16 Civil authority, 33 Civil War: American, 205; Far Eastern region during, 35–36; history of, to World War II, 35–37; history of, Treaty of Aigun to, 30–35; Japan in, 35; natural resources during, 35; population during, 35; tensions leading to, 34–35 Climate, 12, 51–52 Clinton, Hilary, 218 CNPC. See China National Petroleum Corporation Coal, 187, 189

Index Cold War: lessons from, 6n5; Russian-US relations and, 208–209 Committee for the Russian Far East Colonization, 30 Communist Party of the Russian Federation (KPRF), 62 Concessions, 36, 43n23 Conference on Interaction and ConfidenceBuilding Measures in Asia (CICA), 123 Consumer goods: price of fixed basket of goods and services, 53tab; after World War II, 37–39 Container traffic, 9 Copper, 190 Corruption: crime and, 63–65, 92; financial fraud, 64 Cossacks, 26, 42n1 Cost of living, 52 Council of Ministers, 40 CRCC. See China Railway Construction Corporation Credit cards, 145 Crime, 47; by Chinese migrants, 168–169; corruption and, 63–65, 92; Darkin relating to, 63–64; embezzlement, 64; financial fraud, 64; history of, 63; organized, 63 Crimea: annexation of, 6n1, 95n37, 142; crisis over, 79, 91; Ministry for Crimean Affairs, 95n37; RussianChinese relations and, 103

Dalian, 174n47 Dalstroy gulags, 37 Darkin, Sergey: crime relating to, 63–64; Primorsky under, 61; after removal from office, 72n64 Data: international data centers, 96n48; from Ministry of Economic Development, 97n58 Decision making: chaotic, 112n1; politics and, 76 Deindustrialization, 54 Demographics: Chinese, in RFE, 166–169; of migrants, 58; population, 68; of RFE, 68, 166–169 Deportation, 37 Development, 2, 32–33; ad hoc international group for, 254–255; Central Committee of the Communist Party on, 40, 41; challenges in, 10–11; China relating to, 11; Council of Ministers on, 40; of financial institutions, 254; and Long-term

267

Government Program of Complex Industrial Development, 41; Ministry of Economic Development, 97n58; Ministry of Far East Development, 83; Moscow relating to, 78–79, 91; of natural resources, 40; in 1960s and 1970s, 40; under Putin era, 78; social, 78; socioeconomic development resources, 86tab; UNIDO and, 46 Diamonds, 16 Diversity: in RFE, 12–21; unity in, 12, 16, 18–19, 21 Dongbei: border trade in, 159–160; Heilongjiang, 162–164, 240; industrialization in, 158–159; Jilin, 161–162, 174n51; Kangji Trade and Economic Cooperation Zone and, 163; population of, 158; Russian-Chinese relations and, 158–165; RussianChinese trade and, 160–165; Suifenhe, 160 Dvorkovich, Arkady, 108 Dynkin, Alexander, 108 East Asia Summit (EAS), 215–216 East Asian geopolitics, 8 Eastern Gas Program, 81 Eastern Siberia–Pacific Ocean Pipeline, 81 Ecological threats, 171 Economic crisis, 46–47 Economic recovery, 47–48 Economic zones, 90, 96n41 Economy, 7–8; crisis-related factors of, 91; current economic conditions, 48–49; Europe relating, 137–138; external sector and, 49; global, 137; under Gorbachev, 153–154; growth rates of, 48; industrialization and, 36–37; international economic cooperation and integration, in RFE, 249–250; Japan relating to, 243–245; Ministry of Economic Development, 97n58; Moscow-RFE relations and, 18–19, 78– 79, 237–238; in 1990s, 154; NSR relating to, 9; peer competitors in, 251; Russian-Chinese relations and, 137– 149, 153–158, 180, 239–242; sanctions relating to, 226–227, 252; Socioeconomic development resources, 86tab; Sovetskaya Gavan relating to, 96n41; after Soviet Union’s collapse, 154; in 2012, 48; US relating to, 221– 225; value-added economic activity, 13tab–14tab; under Yeltsin, 154

268

Index

Eco-tourism, 54 Education, 170, 177n101 Eighteenth century, 28–29 Elections: control of, 71n55; gubernatorial, 60, 61 Electricity, 52, 81; Russian-Chinese relations on, 189–190, 199n54 Embezzlement, 64 Energy routes, 188fig Energy sector: megaprojects on, 81; Russian-Chinese relations in, 143–144; Ukraine relating to, 143 Entertainment, 193–194 Environment, 54; Alaska, protection of, 216–217; ecological threat, from China, 171; flooding, 97n69; marine environmental protection, 216–217 Eurasian Economic Union, 3 Europe, 137–138 Executive branch, 62 Export duties, on timber, 156 Exporting labor, 161 Exports, 12; to China, 140tab–141tab. See also Trade External sector, 49 Exxon, 226, 228

Far East exodus, 54–59 Far Eastern Concessional Committee, 36 Far Eastern Federal District, 7, 60 Far Eastern megacompany, 84–85, 87 Far Eastern Migration Department, 37 Far Eastern region, 35–36 Far Eastern Republic, 207 Far Eastern Separatism, 67–68 Far Eastern Shipping Company, 40 Far Eastern Viceroyalty, 33–34, 84–87 FDIs. See Foreign direct investments February Revolution (1917), 34–35 Federal subsidies, 49 Federalism, 59–62 Finance: banks and credit cards, 145; national currencies and, 144–145; Russian-Chinese relations in, 144–147, 193, 240–241. See also Banking Financial fraud, 64 Financial institution development, 254 Fishing industry, 8, 36–37; Maritime Boundary Agreement on, 211 Fixed capital investments, 57tab Flooding, 97n69 Food: during Russian colonization, 28; Russian-Chinese relations on, 190– 192

Foreign capital inflows, 50 Foreign direct investments (FDIs), 50–51, 139, 158 Foreign investments, 12, 16, 18; concessions relating to, 36, 43n23; modernization relating to, 92 Foreign policy, 100; on APR, 10, 252 Foreign relations, 17tab. See also RussianChinese relations; Russian-US relations Foreign trade, 50, 78. See also RussianChinese trade; Trade Forest sector, 8; China and, 18, 192; export duties, on timber, 156; Russian-Chinese relations in, 192 Foundation for Russian-American Economic Cooperation (FRAEC), 223 France, 43n11 Franco-Ottoman alliance, 122 Free trade, 32–33, 43n13; in Nakhodka, 46 Freedom, for Siberia, 88–89 Free-port regime, 43n13 Free-port zones, 33 Friedberg, Aaron, 213–214, 257n25 Fur trade, 28–29

Galushka, Aleksandr, 83–84, 95n36 Gambling resort, 193–194, 240–241 Gazprom, 185–187, 199n44, 212, 226 Global economy, 137 Global financial crisis, 48, 79 Gold, 16 Gorbachev, Mikhail: border control under, 153–154; economy under, 153–154; government under, 41–42; history, from Khrushchev to, 39–42; perestroika program under, 41 Government: centralization of, 76, 92; under Gorbachev, 41–42; during industrial militarization, 36–37; under Khrushchev, 39–41; on migration, 37; under Prikaz, 29 Governors, 62 Grachev, Pavel, 106 Greater Tumen Initiative (GTI), 46, 69n4, 161–162 Great-power nationalists, 107 Great-power relations, 5 Gross regional product (GRP), 1–2; indexes of, 57tab; of RFE, 1–2; in 2012, 48; by value-added economic activity, 13tab–14tab GTI. See Greater Tumen Initiative Guandong territory, 43n16 Gubernatorial elections, 60, 61

Index Haushofer, Karl, 125, 134n45 Heilongjiang, 162–164, 240 Hickel, Walter, 224 History: from Civil War to World War II, 35–37; conclusion on, 42; of crime, 63; in eighteenth century, 28–29; from Khrushchev to Gorbachev, 39–42; of Russian colonization, of Siberia, 25–29; of Russian-Chinese relations, 105–106; of Russian-US relations, 203–205; in seventeenth century, 25–26; in sixteenth century, 25–26; during Stalin era, 35–37; from Treaty of Aigun to Civil War, 30– 35; of World War II aftermath, 37–39 Hong Kong, 128 Huntington, Henry, 217 Huntington, Samuel, 113n20 Hydrocarbon, 212 Hydropower plants, 81, 94n19

Identity, 65–67 Ignatiev, Nikolai, 27 Imports, from China, 140tab–141tab Income, 52, 53tab, 54 India, 257n32 Industrial militarization, 36–37 Industrial production, 82 Industrialization, 32; deindustrialization, 54; in Dongbei, 158–159; economy and, 36–37 Information technology (IT) companies, 138, 193 Infrastructure, 52; AIIB on, 124; Far Eastern megacompany on, 84–85; Korean, 252; megaprojects on, 81–82; modernization of, 78; quality of life relating to, 52; roads, 28, 81; Russian-Chinese relations and, 147 Inozemtsev, Vladislav, 88–89 Institutional architecture, 215–216 International data centers, 96n48 International economic cooperation and integration, 249–250 Investments, 2; capital, 19; fixed capital, 57tab; National Rating of Investment Climate of Subjects of Russian Federation on, 50; Russian-Chinese relations in, 144–147, 193, 240–241; shortages in, 41; TUSRIF and, 222– 223. See also Foreign investments Irkutsk Guberniya, 29 Iron ore, 190 Ishayev, Victor, 59–60, 79, 84–85, 95n33, 110, 171

269

IT companies. See Information technology companies Ivan the Terrible, 25 Ivanov, Sergey, 144

Japan: ADB and, 253–254; in Civil War, 35; economy relating to, 243–245; Khrushchev on, 39; in RFE, 206–207, 243–245; in Russo-Japanese War, 31, 34, 206; Treaty of Shimoda and, 27; United States and, 206–207; World War II and, 38 Japanese cars, 66–67 Japanese-Soviet Non-Aggression Pact, 38 Jilin, 161–162, 174n51 Jinping, Xi, 102–103; Putin and, 117–118, 121–122, 124, 131n6; Russian-Chinese relations and, 121–122, 182 Jintao, Hu, 102, 164–165

Kamchatsk Oblast, 29 Kangji Trade and Economic Cooperation Zone, 163 Karaganov, Sergey, 108 Karyakin, Vladimir, 128–129 Kennan, George, 205–206 Khloponin, Alexander, 95n33 Khoroshavin, Alexander, 64 Khrushchev, Nikita, 44n35; government under, 39–41; history, to Gorbachev, 39– 42; on Japan, 39; migration under, 41 Kolchak, Alexander, 35, 43n20 Korean immigrants, 31, 37 Korean infrastructure, 252 Korf, Andrey, 31 KPRF. See Communist Party of the Russian Federation Kudrin, Alexei, 108 Kuersten, Andreas, 217–218 Kuznetsov, Vladimir, 46; Primorsky under, 60

Labor: by Chinese migrants, 172n1; exporting, 161; migrant, 58, 172n1; from prisoners, 37 Land: agricultural, 8, 18; East Asian geopolitics and, 8; migration relating to, 30; during Russian colonization, 28 LDPR. See Liberal-Democratic Party of Russia Lend-lease goods, 38 Levgold, Robert, 6n5 Liberal-Democratic Party of Russia (LDPR), 62

270

Index

Liberals: moderate liberals, 107–108; proWestern liberal perspective, 88–89 Life expectancy, 52 Light aircraft, 16 Liquified natural gas (LNG), 8, 16, 187 Long-term Government Program of Complex Industrial Development, 41 Lukin, Alexander, 101 Lukin, Artyom, 228 Luzhkov, Yuri, 110–111

Mafias, 47, 64 Manchuria, 33–34 Mankoff, Jeffrey, 213 Manufacturing: for cars, 66–67; production and, 12 Marine environmental protection, 216–217 Maritime activity: in Arctic Ocean, 9; in China, 180–181; container traffic, 9; NSR, 9; seaports and, 8–9; shipping and, 16, 31, 40 Maritime Boundary Agreement, 211 MasterCard, 145 Mayors, 62 Mearsheimer, John, 214 Medvedev, Dmitry, 54, 84, 85, 108; on Russian-Chinese relations, 164–165 Megaprojects: APEC Summit, 80; on energy, 81; industrial production, 82; on infrastructure, 81–82; in RFE, 79–82; on science, 82; on technology, 92; on transport, 81–82; Vladivostok renovation, 80 Metallurgy, 29 Middle East, 181 Migrant labor, 58, 172n1 Migrants: Chinese, 31, 37, 58–59, 167– 169, 240; demographics of, 58; salaries for, 41, 44n42 Migranyan, Andranik, 213 Migration: Far East exodus and, 54–59; Far Eastern Migration Department, 37; government on, 37; under Khrushchev, 41; land relating to, 30; out- , 54–55; to RFE, 30–31 Miklushevsky, Vladimir, 51, 61 Military: armed forces, under Putin, 48; arms trade, 148–149; authority, 33; industrial militarization, 36–37; missile defense, 210–211; modernization of, 89; recruitment, 30; Russian-Chinese relations and, 122–123, 133n32, 148– 149; in United States, 105; US presence of, in Pacific, 210–211; war effort, 37–38

Mining, 28–29 Ministry for Crimean Affairs, 95n37 Ministry of Economic Development, 97n58 Ministry of Far East Development, 83 Missile defense, 210–211 Moderate liberals, 107–108 Modernization, 75–76; features of, 91–92; foreign investments relating to, 92; of infrastructure, 78; of military, 89 Moiseev, Alexey, 144 Moscow: development relating to, 78–79, 91; Far Eastern separatism relating to, 67 Moscow-RFE relations, 9–10, 75–76; economy and, 18–19, 78–79, 237–238 Muravyov, Nikolay, 26 Myanmar, 181

Nakhodka, 46 National currencies, 144–145 National Rating of Investment Climate of Subjects of Russian Federation, 50 National security: Central Asia relating to, 126; Putin on, 77 Nationalistic ideology, 73n90 Nationalists, 107 NATO. See North Atlantic Treaty Organization Natural gas: CNPC on, 185–187; LNG, 8, 16, 187; North Korea, 215, 231n47; Russian-Chinese relations and, 185– 187; sanctions on, 226 Natural resources, 1; during Civil War, 35; coal, 187, 189; concessions relating to, 36; copper, 190; development of, 40; fishing industry and, 8, 36–37; forest sector, 8, 18, 156, 192; gold, 16; iron ore, 190; Pacific coastline and, 8–9; Russian-Chinese relations and, 180, 240; in United States, 245. See also Oil Naval vessels, 16 Nazdratenko, Evgeny, 59–61 Neofeudalism, 91–92 Nevelskoy, Gennady, 26 Nicholas II, 34 Nikolayev, Vladimir, 64 North Atlantic Treaty Organization (NATO), 100, 101 North Korea: natural gas, 215, 231n47; oil in, 215; pipelines in, 215, 231n47; Russian-US relations and, 214–215 North Pacific Anadromous Fish Commission (NPAFC), 217

Index North Pacific Coast Guard Forum (NPCGF), 217 Northeast Asian cooperation, 254 Northern Sea Route (NSR), 9 NPAFC. See North Pacific Anadromous Fish Commission NPCGF. See North Pacific Coast Guard Forum NSR. See Northern Sea Route

Obama, Barack, 104, 227 October Revolution, 35 Oil, 2, 8, 16; China’s consumption of, 182; CNPC and, 143, 182–184; controversy over, 101, 228; in North Korea, 215; Rosneft and, 182–184, 197n18, 226, 228, 241; Russian-Chinese relations on, 143–144, 182–185; sanctions on, 226; trade, 143–144; in Vankor, 183 Okhotsky Uyezds, 29 Open Door Doctrine, 256n23 Organized crime, 63 Outer Manchuria scenario, 248–249, 256n24 Out-migration, 54–55

Pacific coastline, 8–9 Pacific strategic dialogue, 209–210, 218– 219 Per capita income, 52, 53tab, 54 Perestroika program, 41 Perpetual backwater scenario, 249 Peter the Great, 29 Petrograd, 35 Pipelines, 81, 101, 143, 150n18; in North Korea, 215, 231n47 Pogranichny/Grodekovo-Suifenhe, 156– 157 Politics: centralization and, 76, 92; decisionmaking and, 76; geopolitics, 8; in Primorsky, 60; pro-Western liberal perspective on, 88–89; Putin era, 9–10, 77–78 Population: birth rates and, 54–55; during Civil War, 35; demographics, 68; density imbalance, 58–59; of Dongbei, 158; Far East exodus and, 54–59; indexes of, 57tab; 1990–2014, 56tab; of RFE, 2, 7–8, 12, 54–59; The Strategy for the Social and Economic Development of the Far East and the Baikal Region for the Period Till 2025 on, 78; 2000–2013, 57tab Portyakov, Vladimir, 107

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Post-Soviet transformation, 208–209 Prikaz, Sibirsky, 29 Primorsky, 31; under Darkin, 61; Greater Vladivostok and, 46; under Kuznetsov, 60; under Miklushevsky, 51, 61; Nakhodka, 46; under Nazdratenko, 60– 61; politics in, 60; UNIDO and, 46 Production: of cars and vehicles, 82; in China, 90; industrial, 82; manufacturing and, 12; profile, 12 Project Siberia, 87–88 Provinces, 7; foreign relations of, 17tab; provincial profiles, 15tab, 16; wealth concentrations in, 16. See also specific provinces Provincial hostility, 19 Pro-Western liberal perspective, 88–89 Proxy conflicts, 208–209 Pulikovskiy, Konstantin, 60 Putin, Vladimir, 42; armed forces under, 48; federalism relating to, 60; Jinping and, 117–118, 121–122, 124, 131n6; on national security, 77; Russian-Chinese relations under, 100–103, 118–119, 121–122, 132n9; on threat perceptions, 106; visits by, to RFE, 97n59 Putin era: development under, 78; politics, 9–10, 77–78; RFE during, 77–79, 237– 238 Qing empire, 26, 27 Quality of life: climate relating to, 51–52; cost of living and, 52; indicators, 54; infrastructure relating to, 52; life expectancy and, 52; per capita income and, 52, 53tab, 54; in RFE, 51–54; The Strategy for the Social and Economic Development of the Far East and the Baikal Region for the Period Till 2025 on, 78

Railways, 9; China Eastern Railway, 32, 34; CRCC, 147; Russian Railways, 81; Trans-Siberian Railway, 30–32, 43n12 RAPP. See Russian-American Pacific Partnership Regional identity, 65 Religion: Baptism, of Aboriginal tribes, 28; Christianity, 114n27; Russian Orthodox Church, 28 Renminbi, 144–145, 193 Reshetnikov, Leonid, 106 RFE. See Russian Far East

272

Index

Rim of Pacific exercise (RIMPAC), 218, 253 RIMPAC. See Rim of Pacific exercise Roads, 28, 81. See also Infrastructure Rogozin, Dmitry, 89 Rosneft, 182–184, 197n18, 226, 228, 241 Rufe, Roger, 217 Russian American Company, 204 Russian colonization: in Amur River basin, 26–27; of Chukotka, 26; Committee for the Russian Far East Colonization and, 30; food during, 28; land acquisition during, 28; Qing empire relating to, 26, 27; of Sakhalin, 27; of Siberia, 25–29; Treaty of Aigun and, 26–27; Treaty of Shimoda and, 27; of Ussuri region, 26– 27 Russian cross pattern, 54 Russian Far East (RFE): ad hoc international group for, 254–255; alternative visions for, 87–90; Canada relating to, 225; China’s strategic expectations for, 251; Chinese demographics in, 166–169; climate of, 12, 51–52; decline of, 41–42, 46–47; demographics of, 68, 166–169; description of, 7–11; diversity in, 12– 21; energy routes in, 188fig; future of, 90–93, 237–255; geopolitical significance of, 2, 76–77; growth of, 2; identity of, 65–67; international economic cooperation and integration in, 249–250; Japan in, 206–207, 243– 245; main trade partners, by region, 11fig; megaprojects in, 79–82; migration to, 30–31; in 1990s, 46–47; Northeast Asian cooperation with, 254; in Outer Manchuria scenario, 248–249, 256n24; in perpetual backwater scenario, 249; population of, 2, 7–8, 12, 54–59; during Putin era, 77–79, 237– 238; quality of life in, 51–54; RussianUS relations and, 205–208, 221–225; size of, 1, 7; territorial division in, 33; in 2000s, 47–49; United States in, 221– 225; US Pacific States’ partnerships with, 253; vulnerability of, 2; wildcard scenarios for, 250. See also specific topics Russian Orthodox Church, 28 Russian pioneers and settlers, 27–29 Russian Railways, 81 Russian Revolution, 1905–1907, 32 Russian-American Convention (1824), 204

Russian-American Pacific Partnership (RAPP), 224 Russian-Chinese relations, 2–4; on agriculture and food, 190–192; Arctic and, 126–127; arms trade and, 148– 149; Asia’s power balance and, 127– 128; border conflict and, 39–40, 128– 129; Central Asia, competition over, 124, 125–126; China’s needs for Russia, 119–121; China’s stake, in RFE, 194–196, 239–240; China’s strategic expectations, for RFE, 251; Chinese lobby, 111–112; on coal, 187, 189; contours, of Russian-Chinese alliance, 122–125; copper and, 190; Crimea and, 103; dominant views on, 117–118, 129–130; Dongbei and, 158– 165; economy and, 137–149, 153–158, 180, 239–242; on electricity, 189–190, 199n54; in energy sector, 143–144; entertainment and, 193–194; in finance and investments, 144–147, 193, 240– 241; in forest sector, 192; in future, 239–242; history of, 105–106; infrastructure and, 147; iron ore and, 190; Jinping and, 121–122, 182; lack of mutual understanding on, 129–130; Medvedev on, 164–165; military relating to, 122–123, 133n32, 148–149; natural gas and, 185–187; natural resources and, 180, 240; on oil, 143– 144, 182–185; Outer Manchuria scenario and, 248–249, 256n24; potential rifts and conflict in, 125–131; public opinion surveys on, 129–130; under Putin, 100–103, 118–119, 121– 122, 132n9; Russian views, on China, 107–111, 169–171; Russia’s needs for China, 118–119; SCO and, 100–101; strategic partnership, under Putin, 100– 103; on technology and telecommunication, 147–148, 193; threat perceptions and, 103–106; on transportation, 192; Treaty of Aigun and, 26–27, 32; Treaty of Good Neighborly Friendship and Cooperation on, 101; Treaty of Kyakhta and, 29; Treaty of Nerchinsk and, 26, 28, 105; Ukraine and, 103, 113n18, 119, 124, 213–214, 239; United States and, 99, 101–105, 118, 120; Yeltsin and, 99– 100; Li Yuanchao on, 179–180 Russian-Chinese trade, 11, 18, 138–139, 140tab–141tab; border trade, 153–158;

Index Dongbei and, 160–165; statistics on, 165–166 Russian-US relations, 1, 3, 5; anti-US sentiments, 227–228; on APR, 245– 246, 252; Arctic and, 211–212, 217– 218; Bering Sea dispute and, 211; Britain relating to, 204–205; China and, 4, 213–214, 218–219; Cold War, proxy conflicts, and post-Soviet transformation, 208–209; collaborations and convergence in, 212–218; conflict in, 210–212, 246; in future, 228–229, 245–248; history of, 203–205; on hydrocarbon, 212; institutional architecture and, 215–216; on marine environmental protection, 216–217; on missile defense, 210–211; in modern era, 209–210; North Korea and, 214– 215; in Pacific, 209–210; Pacific strategic dialogue, 209–210, 218–219; RAPP and, 224; RFE and, 205–208, 221–225; Russian-American Convention (1824), 204; sanctions, impact of, 226–227, 252; on Siberia, 212; US animosity, toward Russia, 205–206, 219–221; on US military presence, in Pacific, 210–211; US policymakers, recommendations for, 250–255 Russian-West relations, 3, 101–105 Russo-Japanese war, 31, 34, 206

Sakha Republic, 12 Sakhalin: bureaucracy in, 62; Far Eastern separatism and, 68; Russian colonization of, 27, 30; United States in, 225 Salaries, 41, 44n42 San Francisco Peace Treaty, 208 Sanctions, 226–227, 252 Science, 82 SCO. See Shanghai Cooperation Organization Sea of Okhotsk, 26 Sea routes, 31 Seaports, 8–9 Sechin, Igor, 183–184 Separatism, 67–68 Services, price of, 53tab Settlement patterns, 57–58 Seventeenth century, 25–26 Shanghai Cooperation Organization (SCO), 100–101 Shepelyavy, Seryoga, 63

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Shevardnadze, Eduard, 211 Shipping, 16; Far Eastern Shipping Company, 40; Sea routes and, 31 Shoigu, Sergey, 84, 95n30, 210 Shschedrovitsky, Pyotr, 89–90 Siberia: Aboriginal tribes of, 27–28; Eastern Siberia–Pacific Ocean Pipeline in, 81; freedom for, 88–89; identity of, 65; Project Siberia relating to, 87–88; pro-Western liberal perspective on, 88– 89; roads in, 28; Russian colonization of, 25–29; Russian-US relations on, 212 Siberian Guberniya, 29 Siberian Route, 28 Silk Road Economic Belt, 3, 124, 126 Sinopec, 182–183 Sinophiles, 109–110 Sinophobes, 110–111 Sino-Russian relationship. See RussianChinese relations Sixteenth century, 25–26 Slyunyaev, Igor, 57 Smuggling, 153 Social development, 78 Socioeconomic development resources, 86tab South Korea, 243–245 Sovetskaya Gavan, 96n41 Soviet Union collapse, 46, 154 Spacecraft, 148 Stalin era, 35–37 Stalinist purges, 37 Stephan, John, 27, 38 Stevens, Ted, 223 Stolypin, Pyotr, 30 The Strategy for the Social and Economic Development of the Far East and the Baikal Region for the Period Till 2025, 78 Stroganov family, 42n1 Suez Canal, 31 Suifenhe, 156, 160 Supreme War Council of the Entente Powers, 35

Taiwan embassy, 112n1 Tavrovsky, Yuri, 107 Technofuturistic vision, 89–90 Technology: IT companies and, 138; megaprojects on, 92; Russian-Chinese relations on, 147–148, 193 Telecommunication, 148, 193 Territorial division, 33 Thornton, Judith, 93n1

274

Index

Threat perceptions: Putin on, 106; RussianChinese relations and, 103–106; of United States, 104–105 Timber, 8; export duties on, 156. See also Forest sector Timofeev, Ivan, 89 Titarenko, Mikhail, 109–110 TPP. See Trans-Pacific Partnership Track 2 event, 218–219 Trade: with Aboriginal tribes, 28–29; with APR, 49–51; arms, 148–149; by barter exchange, 29; border, 153–160; border control and, 153–158; composition of, 138–139; exporting labor relating to, 161; exports, 12, 140tab–141tab; foreign, 50, 78; free, 32–33, 46; during free-port regime, 43n13; fur, 28–29; imports, from China, 140tab–141tab; in Kangji Trade and Economic Cooperation Zone, 163; in 1990s, 154– 155; oil, 143–144; patterns, 12, 139; RFE main trade partners, by region, 11fig; smuggling and, 153; in Suifenhe, 160; top trade partners, 49, 165–166; totals, 139tab; in Trans-Baikal provinces, 49–50; with United States, 221–222; under Yeltsin, 154. See also Russian-Chinese trade Trans-Baikal provinces, 2, 6n2; trade in, 49–50 Trans-Pacific Partnership (TPP), 216 Transport megaprojects, 81–82 Transportation, 192. See also Cars and vehicles Trans-Siberian Railway, 30–32, 43n12 Treaty of Aigun: Amur River basin in, 26– 27; history of, to Civil War, 30–35; Russian colonization and, 26–27; Russian-Chinese relations and, 26–27, 32; signing of, 32 Treaty of Good Neighborly Friendship and Cooperation, 101 Treaty of Kyakhta, 29 Treaty of Nerchinsk, 26, 28, 105 Treaty of Shimoda, 27 Trenin, Dmitry, 122 Trutnev, Yuri, 85, 87, 95n36 Tsarist autocracy, 205–206 Tse-tung, Mao, 40 Tsvetkov, Valentin, 63 Tumen River, 46 TUSRIF. See US-Russia Investment Fund

Ukraine, 2; crisis over, 3, 79, 91, 213–214; energy sector relating to, 143; Russian-

Chinese relations and, 103, 113n18, 119, 124, 213–214, 239 UN Industrial Development Organization (UNIDO), 46 UnionPay, 145 United Russia (UR): Chukotka and, 21; votes for, 19, 20tab, 21 United States (US): ABCs and, 223; ad hoc international group for, 254–255; ADB relating to, 253–254; in American Civil War, 205; anti-US sentiments, 227–228; China, as geopolitical challenge to, 3–4; China-US relations, 181; economy relating to, 221–225; Japan and, 206– 207; military in, 105; military presence of, in Pacific, 210–211; natural resources in, 245; Northeast Asian cooperation with, 254; Open Door Doctrine relating to, 256n23; Pacific States’ partnerships, 253; peer competitors with, 251; policymakers, recommendations for, 250–255; in RFE, 221–225; RIMPAC and, 218, 253; Russian-Chinese relations and, 99, 101– 105, 118, 120; on Russo-Japanese War, 206; in Sakhalin, 225; San Francisco Peace Treaty and, 208; sanctions relating to, 226–227, 252; threat perceptions of, 104–105; trade with, 221–222; on Ukraine crisis, 3, 213– 214; warplanes of, 38; World War II and, 38. See also Russian-US relations UR. See United Russia Urbanization, 32 US-Russia Investment Fund (TUSRIF), 222–223 Ussuri region, 26–27 Ust-Srednekan hydropower plant, 81, 94n19 Valdai Discussion Club reports, 87–88 Value-added economic activity, 13tab– 14tab Vankor, 183 Vasin, Evgeny, 63 Viceroyalty, 33–34, 84–87 Vladivostok: APEC in, 80; Fortress, 34; Greater Vladivostok, 46; prisoners in, 37; protests and demonstrations, 19, 73n82; renovation of, 80 Voting patterns, 21, 62 War effort, 37–38 Warplanes, US, 38 Wealth concentrations, 16

Index Western sanctions, 226–227, 252 Westernizers, 108–109 Wilkins, Thomas, 100 Witte, Sergey, 31–32 World War I, 30; Central Powers and, 125, 134n44 World War II: aftermath of, 37–39; Alaska and, 38; consumer goods after, 37–39; end of, 208; history, from Civil War to, 35–37; Japan and, 38; United States and, 38; war effort during, 37–38 Xenophobia, 31

Yakutsk, 29 Yakutsk-Magadan highway, 81

275

Yang, Wang, 179 “Yellow Peril,” 31 Yeltsin, Boris, 42, 59; economy under, 154; Russian-Chinese relations and, 99–100; Taiwan embassy relating to, 112n1; trade under, 154 Yermak, 26 Yuan currency, 145 Yuanchao, Li, 241; on Russian-Chinese relations, 179–180 Zabaikalsk-Manzhouli, 156–157 Zemin, Jiang, 101 Zhirinovsky, Vladimir, 62 Ziegler, Charles, 204, 220 Zubov, Valery, 88–89

About the Book

stretching from Lake Baikal to the Pacific Ocean—is notable not only for its rich natural resources, but also for the economic challenges, internal dissent, and risks of foreign encroachment that it faces. Rensselaer Lee and Artyom Lukin explore the history, economics, and politics of the RFE in the context of its geopolitical significance both regionally and internationally. Lee and Lukin address questions that have become increasingly important in current global politics: What are the implications, for example, of Russia’s growing economic dependence on China? Could the emerging Sino-Russian entente result in the RFE becoming a de facto appendage of the PRC? To what extent is Moscow willing, or able, to strengthen its links to its neighbors other than China? Can Russia and the United States act in partnership to further their common interests in the region? As they suggest answers, the authors shed much-needed light on a previously understudied topic. THE STRATEGICALLY LOCATED RUSSIAN FAR EAST—A VAST EXPANSE

Rensselaer Lee is senior fellow at the Foreign Policy Research Institute. His previous books include Smuggling Armageddon: The Nuclear Black Market in the Former Soviet Union and Europe. Artyom Lukin is associate professor of international relations and deputy director for research in the School of Regional and International Studies at Russia’s Far Eastern Federal University.

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