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"Our philosophy of relations with the most important regional partners in the East is changing"

The turn of Russia to the East, the intermediate results and the problems that need to be solved, Timofey Bordachev, the Director of the Eurasian program of the International Discussion Club "Valdai", the director of the Central Research Institute of Higher School of Economics

"Turning to the East" is a large-scale project of diversifying foreign economic relations towards the growing economies of Asia and increasing participation in regional affairs of the APR.

"Our philosophy of relations with the most important regional partners in the East is changing"
The most important part of the "turn" and the national task is to stabilize the course to raise the economic and political significance of Siberia and the Far East. The whole philosophy of relations with the most important regional partners is changing. China, Russia and other states of the region initiated the creation of a number of new institutions of international economic management (the Asian Bank for Infrastructure Investments, BRICS Development Bank, Silk Road Fund). So for the last 2 - 3 years, relations between China and Russia have acquired a fundamentally new quality. Their distinctive features are trustworthiness, an attentive attitude to the interests of the partner and an ever greater economic openness.

But other regional partners are not far behind. Although their capabilities are significantly less than Chinese ones. The Republic of Korea is active. At the end of last year in Seoul 2-e Meeting of the "high-level dialogue" within the consortium to promote the development of Siberia and the Far East, scientific institutes and universities of Russia, Singapore, China, South Korea, Norway. The aim of the dialogue was to clarify the positions of key regional partners on the issues of "turning Russia to the East", current relations between Russia and Western countries, progress in measures to attract foreign investors to Siberia and the Far East. In general, foreign participants, especially Asian countries, confirmed their interest in activating the Russian presence in the APR, intensification of economic relations and dialogue at the expert level.

As for the prospects for the actual development of Asian countries, now many people point out as an important factor in the future possibility of changing the demographic situation not in favor of the leading states of the Asia-Pacific region (China, Japan, South Korea), the aging of the population and its relative reduction in comparison with the projected population growth in USA. It also draws attention to the existence in the region of several varieties of the market capitalist model, depending on the larger (China) or smaller (medium and small states) state intervention in the economy and the direct management of large enterprises. This can also stimulate intra-regional differences in the pace of economic development.

For their part, the representatives of South Korea point to the DPRK authorities as the main obstacle to the implementation of joint transport and energy projects with China and Russia, South Korean cooperation with the Eurasian Economic Union (EAEU) and the Silk Road Economic Belt Project (SREB). The topic of the role of the South Korean authorities in curbing the most promising transit projects involving North Korea does not naturally come up. Chinese experts often draw attention to a number of problems associated with the “conjugation” of the EAEU and the SREB. In particular, they are increasingly pushing for greater participation in the dialogue between the partners of Russia in the EEU and the Eurasian Economic Commission (EEC), the need to create joint working bodies of China and the EEU (joint commission) and other permanent institutions.

At various levels, it is recognized that certain problems in the development of interaction between the EAEU and the SREB are associated with the economic crisis in Russia and problems in China. At the same time, Chinese experts agreed with the Russian concept of strengthening precisely the bilateral interaction between the EAEU and the SREB, as well as giving a new dimension to the SCO as, potentially, the main institution of security and development in Eurasia. In the meantime, for the Chinese, the SCO development plan is not obvious. Korean colleagues have expressed interest in joining the SCO. They believe that within the framework of the SCO, it will be possible to balance China’s power with other strong powers - Russia, as well as India and Iran.

The problems of regional financial institutions (ABIA, ADB, the Silk Road Fund, the new BRICS Development Bank) and cooperation in the energy sector are discussed separately. The Chinese participants stressed that all these institutions are aimed at improving the system of international economic management, but do not constitute a tough alternative to long-standing organizations (the World Bank, IMF and WTO). At the same time, the Chinese emphasize the need to reform the quota of votes in the IMF and the World Bank in favor of new emerging economies. Also, experts drew attention to the emergence of the Asian market as more independent and less susceptible to possible global shocks.

However, the United States, for its part, is in fact questioning the viability of universal institutions, primarily the WTO, and are working towards the creation of new regional associations (the Trans-Pacific Partnership), which should in effect substitute for non-complying universal organizations and impose rules on the game for other states . About this, American representatives are already quite openly talking on other expert sites.

As for energy, Russia's full-fledged access to the Asian gas market can lead to a change in the overall alignment of forces, increased competition and lower prices. In particular, the attractiveness of supplies to the ATR market of liquefied natural gas from other suppliers will decrease. Regional experts pay attention to the already occurring changes in the regional energy balance in favor of Russia. Over the past ten years, energy exports to the APR countries from Russia grew by 15, and the share of APR countries in the total Russian energy export reached 24%. In the structure of Russian exports of energy resources, crude oil and petroleum products prevail in the Asia-Pacific region - they account for 64 and 21%, respectively.

The key to export will be the energy resources of Eastern Siberia and the Far East. In these regions, more than 13% of Russian oil reserves (about 4 billion tons) and 16,2% of natural gas (42 trillion cubic meters) are concentrated. (According to the Ministry of Energy, the geological study of resources in these regions on land is 8%, and on the shelf, only 6% .This is why the forecasted volume of oil and gas production in old and new fields to 2035 will be 118 million tons and 135 billion cubic meters respectively.)

However, so far, Russia is far behind the countries of the Middle East as a supplier of oil and gas to the Asian market. They provide 46% of Chinese oil imports, 58 - Indian, 83 - Japanese and more 80% - Korean. In the Chinese gas import to one country (Turkmenistan), 46% of supplies, and in Indian - 85% (Qatar). Japan and the Republic of Korea, the world's largest gas importers, have a more diversified supply structure.

There are also objective factors contributing to a more active entry of Russia into the energy market of the Asia-Pacific Region - the stagnation of the European economy, EU plans to diversify suppliers, and growing demand in Asia. Japan also demonstrates willingness to invest in projects for the extraction and distribution of the natural resources of Siberia and the Far East, if political relations allow it. It was noted that Japan is already increasing imports of Russian coal. In 2014, it grew by 20% and reached 9,66 million tons. Japan depends on coal imports from Australia (this country accounts for 74% Japanese imports) and would like to diversify its sources of supply. But Russian coal supplies to China in the first months of 2015 were reduced by more than 40%. The reason was that since January 2015 of China banned the import of coal with ash content more than 40% and sulfur content above 3%, as well as brown coal with ash content more than 30%, sulfur content above 1,5%.

In the long term, the demand for gas in Europe will not be subject to significant fluctuations, and growth will be observed in China and a number of other countries in Asia - as a result of economic growth and increased use of gas in power generation instead of coal. For China itself, it is economically effective to buy gas abroad, rather than investing in the production of its own shale gas.

Do not underestimate the seriousness of the US intention to enter the Asian LNG market. It is known that already now on the west coast of the US are building 6 plants for the production of LNG, and in 2017 - 2018. It is planned to start construction of another 3 similar enterprises. All of them are on the west coast and are oriented to the Asian market. The first deliveries should begin in 2016 year. At the same time, a similar infrastructure is not created in the European direction at all.

Special attention should be paid to the involvement of Asian investments in Siberia and the Far East, subject to the continued sanctions imposed on the Russian Federation by the United States and its allies. How big is the threat from sanctions?

Based on the experience of communication with representatives of regional business circles, we can safely assume that if the conditions of activity in the Far East and Siberia for small and medium-sized enterprises are noticeably improved, then the Asian business will find a way to bypass the American “radar”. It is also quite often that ideas are expressed that an increase in the volume of Russian investments in Siberia and the Far East will also be viewed by companies from the APR as a positive sign.

At the same time, experts recognize that the policy of US sanctions against Russia cannot be considered only from a political point of view. They apply to all types of energy activities and should limit Russia's ability to enter regional energy markets and compete with the US there. If the sanctions continue, the production of gas and LNG in Russia will fall.

There are, however, other, hidden, dangers associated with delaying the sanctions regime. First of all, this applies to small and medium-sized businesses, which, having no opportunity to raise funds in international financial markets, are gradually turning down their activities in "sub-countries". With the prospect that the price of return to these markets will be higher for them than potential benefits. The likelihood that sanctions would lead to a situation where cross-border investment will be increasingly limited is underlined. This could pose a threat to attracting medium and small investors from Asian countries to the Russian Territory.

And, quite restrained, the development potential at the present stage of the Northern Sea Route is still being assessed in the region. Many believe that the "northern" transit has good long-term prospects, but so far the use of NSR is associated with major energy projects that are suspended due to the sanctions pressure on Russia. Although representatives of business and note the strategic interest in participating in the development of the Russian North.

Summing up this review, we can say that the very idea of ​​"turning Russia to the East" has already taken root in the perception and discussions of regional experts and businessmen. Now it is necessary to work long and laboriously over its practical filling. And this can be the subject of joint concern and cooperation between Russia and its leading regional partners.
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