Russia’s much-ballyhooed turn towards China is less than it seems
|VLADIVOSTOK AND KHABAROVSK
DOWN a bumpy two-lane road through the hills north-west of Vladivostok, the Pogranichny border crossing is where Russia meets China. Bilateral relations are blossoming, and trade should be booming. Yet lorries loaded with timber idle on the roadside, as obstructive bureaucrats keep them waiting for days. On a recent visit, the electricity was out; candles flickered in the truck stop’s lavatories. “Nothing new here,” said a shopkeeper.
Over the past two years, as its relations with the West have soured, Russia has proclaimed a “pivot to the East”. Officials envisioned China replacing Western capital markets and hoovering up Russian exports of oil, minerals and food. Vladimir Putin and Xi Jinping, the countries’ presidents, visited each other’s capitals for ceremonies commemorating the end of the second world war; Western leaders stayed away. Big deals in energy, transport and arms seemed to augur a new friendship. In September Mr Putin declared that Sino-Russian relations had “probably reached a peak in their entire history”.
That was the official story, at least. “The turn to the east is happening, but in a characteristically Russian way: slowly, foolishly and with unrealistically high expectations,” says Alexander Gabuev, the chairman of the Russia in the Asia-Pacific programme at the Moscow Carnegie Centre, a think-tank. The Russian recession and China’s slowdown have put a damper on grand plans. With oil prices low and the rouble weak, bilateral trade shrank by around 30% in the first half of 2015. Corruption, bureaucracy and the rickety infrastructure of Russia’s Far East cloud the business climate.
Mr Putin is not the first Russian leader to turn towards Asia. Chinese and Soviet communists feuded during the cold war, but by the time of perestroika Mikhail Gorbachev was calling Vladivostok a “window to the East” and declaring the Soviet Union “an Asian and Pacific country”. Nor is Mr Putin’s interest in the Pacific Rim new: when Vladivostok hosted the Asia-Pacific Economic Co-operation (APEC) conference in 2012, he poured resources into the city, building two bridges and a sprawling campus for the talks. “In the 21st century, the vector of Russia’s development will be the development of the East,” Mr Putin said, in a rare echo of Mr Gorbachev.
But after the conference, Moscow’s attention shifted and funds dried up. Development projects fell by the wayside. Two five-star Hyatt hotels went unfinished. The government says funds allocated to rebuild the Pogranichny border area were stolen (by contrast, a shopping mall and a Holiday Inn await on the Chinese side).
The clash with the West over Ukraine turned Russia’s focus eastward again. In May 2014, two months after the annexation of Crimea, Mr Putin met Mr Xi and announced a 30-year, $400 billion gas deal, ending a decade of talks. Russia’s rail monopoly awarded a tender to the state-controlled China Railway Group to design a high-speed train between Moscow and Kazan. Moscow agreed to sell Beijing sophisticated S-400 anti-aircraft missiles and Su-35 fighter jets. China extended a yuan currency-swap agreement.
In the autumn of 2015 Russia declared several Far Eastern regions priority development zones. Investors will enjoy a five-year break on most taxes and streamlined bureaucracy. Foreigners arriving through Vladivostok will be allowed in without visas. Some firms have moved in: En+ Group, an energy holding company controlled by Oleg Deripaska, a Russian oligarch, has signed a deal with China’s Huawei to build data centres in Siberia.
But it has not exactly been a gold rush. Western sanctions have made Chinese lenders cautious about Russian firms. Chinese foreign direct investment in Russia more than doubled in 2014, but collapsed during the first half of 2015. Gas export volumes are up, making Russia China’s largest supplier, but falling oil prices have slashed revenues. And although China is now Russia’s largest trading partner, Russia does not crack China’s top five—a fact not lost on Chinese businessmen. “They believe, and not without good reason, that they can dictate the conditions,” says the boss of a Vladivostok-based shipping firm.
Russia, meanwhile, frets about being exploited. The desire to get closer to China is offset by a fear of becoming dependent, says Victor Larin of the Russian Academy of Sciences in Vladivostok. Russia imposes tough restrictions on businesses because of unfounded fears that the Chinese will take over its sparsely-populated Far East. Chinese businessmen complain about restrictions on hiring foreign labourers. Deals to lease farmland draw the ire of Russian nationalists.
Even innocuous projects can incur the wrath of Russian apparatchiks. In November Cai Shangjun, an internationally acclaimed Chinese film director, brought more than 50 cast and crew to Khabarovsk to shoot a new movie, but customs officials held his camera equipment at the border. The frustrated cinéaste was left cooling his heels in his hotel for over a week. “It’s a tragedy,” said Mr Cai, as his crew lingered aimlessly in the lobby. His film “Under the Ice”, about two Chinese lovers who meet in Russia, has since resumed production. But like most things under ice, and Russia’s eastern pivot itself, it is moving slower than hoped.
This article appeared in the Europe section of the print edition under the headline "Snow job"
