1. Russia’s Foreign Policy in Northeast Asia
Mikhail A. Molchanov
Associate Professor
Department of Political Science
St. Thomas University, Fredericton, Canada
Visiting Scholar, Waseda University, Tokyo, Japan

2. Grand narratives Utopian globalism: Gorbachev
Primitive westernism: Yeltsin-Kozyrev
Eurasianism: Primakov ( )
Pragmatism: Putin I
Nationalism/Eurasianism : Putin II
Back to pragmatism and global engagement?
"Dmitry Medvedev will be free from having to prove his liberal views. But he is no less of a Russian nationalist than me, in the good sense of the word, and I do not think our partners will have it easier with him.“ (Putin, Reuters, March 8, 2008)

3. Key Priorities Sovereignty and territorial integrity
Reclaiming the status of a global power
Multilateralism/multipolarity (UN, UNSC)
Economic development
International and regional stability
Active neighborhood policies

4. Regional priorities Integration in the framework of the CIS
Developing ties with the EU
Containing NATO’s growth
Reviving the Russia-US dialogue
The Asia-Pacific integration (APEC, ARF, SCO)
Strategic partnerships with China and India
According to the Foreign Policy Concept (КОНЦЕПЦИЯ ВНЕШНЕЙ ПОЛИТИКИ РОССИЙСКОЙ ФЕДЕРАЦИИ, 2000), as published in the November 2007 Laws of Russia database, These regional priorities are defined by such key goals of Russia’s foreign policy as preservation of sovereignty and national security, accumulation of wealth and restoration of Russia’s global status and relevance. Trade in particular is being acknowledged as the principal engine of growth and a motor in realization of the above objectives.

5. Russia’s trade with North-East Asia
The growth in Russia’s foreign trade with the countries of NE Asia has been impressive in its time series dynamics: from 1995 to 2006, total trade with China increased 6.8 times, with the Republic of Korea – 7.4 times, and with Japan – more than 3 times. By contrast, over the same time period, Russia’s trade with its largest European partner Germany has only grown 3.4 times, and with the US – 2.2 times.
Source: Goskomstat RF

6. Structure of foreign trade (%)
However, the share of NE Asia in the overall structure of Russia’s foreign trade remains relatively small. In the total volume of Russia’s exports in 2006 the share of Netherlands was 11.9%, Italy - 8.3, Germany By contrast, the share of China was 5.2, Japan – 1.8%, and South Korea – less than 1%. USA accounted for 3.0%.
Predominate in imports were shipments from Germany %, China - 9.4, Japan - 5.6, and Korea – 5.1%. USA accounted for 4.6% of Russia’s imports (Goskomstat RF).
Source: Federal Customs Service, RF

7. Trends in Russia’s foreign trade (%)
A logarithmic scale indicates that the main weight in Russia’s foreign trade is still being placed on the EU countries (growing) and countries of the CIS (stagnating). In the 1-10 percent range, China is clearly in the lead, being closely followed by Japan and the Republic of Korea. While the US share is declining, both Japan and Korea exhibit impressive dynamics in increasing their share of the Russian foreign trade over the last 5 years.

8. Largest reserves holdings
Economy
US$ bln
2004
2005
2006
2007
2008
Import coverage (2005)
China
622.9
831.4
1,068,5
1,527
1,680
14 months
Japan
844.7
846.9
895.0
973.4
1,020
16 months
Russia
126.3
182.3
304.0
476.4
494.5
11 months
India
131.6
137.8
192.0
275.3
288.3
12 months
Taiwan
247.7
260.3
266.2
270.1
272.8
Korea
199.2
210.6
238.8
262.2
262.4
8 months
Singapore
112.2
115.8
136.3
162.9
167.6
5 months
Hong Kong
123.6
124.3
133.2
150.4
159.9
4 months
Germany
97.2
101.7
111.6
136.2
153.0
1 month
USA
190.5
188.3
54.9
70.6
73.5
Oil boom has contributed to the rise of Russia’s sovereign wealth funds. The largest of them, Oil Stabilization Fund ($127 billion in assets as of August 1, 2007), invests mostly in fixed-income assets, with 44 percent investments denominated in U.S. dollars, 46 percent in euros, and 10 percent in pounds. In February this year, Finance Minister Aleksey Kudrin informed his Japanese counterpart Mr. Fukushiro Nukaga that Russian funds may start investing in Japanese financial products.
2007 WDI; IMF; Reuters; CIA; countries

9. Main security concerns
Expansion of NATO: Georgia, Ukraine
U.S. theatre missile defense in Europe
Chinese demographic and economic expansion in RFE (unvoiced)
Political Islam, terrorism and separatism
Nuclear proliferation
Global economic vulnerabilities

10. Russian defense expenditure
Since its post-cold war low in 1998, Russian military expenditure has more than doubled. In 3 years from 2003 to 2006, it grew 69% in real terms. However, this follows a decade-long decrease, and spending levels in were still much lower than at the end of the cold war. The main driving force behind Russia’s rising military expenditure has been the military reform program. It is aimed at comprehensive modernization of armed forces, with a view to restore global power projection and consolidate influence in ‘the near abroad’. Nonetheless, the scale and posture of the Russian forces in the Far East do not indicate aggressive intentions. Today, RAF are about ¼ of what they used to be circa The Far East MD is 3rd in size among 6 Russian military districts, with only 75,000 ground forces. The Pacific Fleet is clearly 2nd to the Northern Fleet, with only 23 subs and 9 principal surface combatants, cf. to 42 subs and 10 principal surface combatants in the North.
Source: SIPRI database

11. Regional policy drivers Bilateral Multilateral
China’s growth
Balancing or bandwagoning?
US & NATO expansion
Balancing/engaging
Unrealized potential in relations with Japan
Separating politics from economics
The two Koreas
The trade/security nexus
UN/UNSC
N Korea; Six-party talks
Japan’s bid for UNSC
G7/G8
Hokkaido Toyako summit
Russia’s 2006 presidency
SCO / CSTO
APEC / WTO
ASEAN /ARF
ACD, EAS, others
II.1: Multilateral, other: it is interesting to note that Russian rep is 1 of the 4 vice-chairmen of the UN Commission on the Limits of the Continental Shelf (CLCS), which, among other things, is supposed to deal with the Senkaku islands dispute.
II.2.1: Japan’s environmental initiatives for the G8 Hokkaido summit clearly link with the main topic of Russia’s G8 presidency 2006 – global energy security.
II.4: Russia proposed to host the 2012 APEC summit in Vladivostok.
II.5: Re: ARF, Russia takes keen interest in the South China Sea dispute (the Spratly & the Paracel Islands), even though its role in facilitating its resolution is clearly limited
II.6: In 2005, Russia joined Asia Cooperation Dialogue and participated in the first East Asia Summit as an observer.

12. Russo-Korean relations: Politics
Key concern – security
Denuclearization of the peninsula: the “Ukraine model”
Equal relationship with both Koreas
Conflict prevention (security cost)
Stability at the borders
Nuclear non-proliferation in NE Asia: Japan, ROK, Taiwan
Geopolitics and the balance of power
Reaffirming Russia’s relevance in NEA
Checking the US hegemonic ambitions
Soft-balancing China together with the South
Establishing spheres of influence in the North
1.2: Putin-Kim Jong Il summits – 2000 (Pyongyang), 2001 (Moscow), 2002 (Vladivostok).
Putin met South Korean leaders in (Kim Dae-Jung, Seoul), 2004 (Roh Moo-hyun, Moscow,), 2005 (Moscow, 9th May), and on the margins of the APEC summits in
1.3-4: The end of the “sunshine policy” and its replacement with “reciprocity” and “conditionality” creates new difficulties for Russia.
2.1: Lee Myung Bak’s schedule of overseas visits (US-Japan-China) is disappointing for Russia. Meanwhile, Lee’s co-national UN Secretary General Ban Ki Moon, on his official visit to Moscow, called on Russians to take a greater role in global affairs.
2.4: North Korea has recently offered Russia exclusive rights to its natural uranium deposits. Meanwhile, China is securing long-term mining rights to the Musan open-air iron mine.

13. Russo-Korean relations: Economy
Korea as Russia’s gate to NE Asia
The “Europe-Korea” railway link (TSR/TKR)
Unified energy system for continental NEA
Gas/oil trade, E&D (Sakhalin/Kamchatka)
A bridgehead to Asia Pacific
A market for high value-added exports
A partner in the development of RFE
1.3: This month, Gazprom announced its plans to build a new pipeline from Sakhalin to Vladivostok, mainly for the domestic, but also, potentially, Korean markets. The pipeline will be fed by Sakhalin 1 and Sakhalin 3 fields. Medvedev took personal charge of the project, specifically mandating both Gazprom and Rosneft with the task to extend the pipeline all the way down to Vladivostok in the shortest possible time.
3: South Korea is one of the important and growing markets for Russian arms exports, such as T-80U tanks, BMP-3 armored vehicles, hovercraft assault ships, Ka-32 helicopters, and anti-tank missiles. In July 2006, a Korean military communications satellite was launched from a Russian space launch vehicle. On Apr 8 this year, Russian spacecraft Soyuz carried Korean first-ever cosmonaut Yi So-yeon, to the international space station. Parallel to that, Korean Air Force chief General Kim Eun-gi conducted talks on cooperation in in aerospace technology with his Russian counterpart, Colonel General Alexander Zelin.
4: Lee Myung Bak: “energy diplomacy” with Russia. Lee’s special envoy to Russia Lee Jae-oh received assurances of Korea’s participation in creating an infrastructure for the Asia-Pacific Economic Cooperation summit in Vladivostok in 2012.

14. Relations with Japan: Key areas
“Creative partnership”
Trade/investment/technology
Law enforcement, defense and security
Cultural and interpersonal exchange
Political dialogue, international cooperation, peace treaty
Problem issues
Japan’s “territorial claims”
Insufficient level of trade & investments
Summits – 1998 (Moscow, Keizo Obuchi), (Okinawa-Tokyo-Irkutsk, Putin-Yoshiro Mori), 2003 (Moscow, Koizumi), 2005 (Koizumi in Moscow and Putin in Tokyo), 2007 (G8 in Heiligendamm, Putin-Shinzo Abe).
Japan-Russia Action Plan (2003): joint economic activities around the Kuril Islands, free 4-island visits, Japan’s aid.
Japan’s assistance to Russia – US$6.28 bln by 2001, of which US$680 mln in grants & US$5.6 bln in loans/credits and trade insurance, with an emphasis on RFE. Japan has contributed more than 1/3 to the $19.8 bln IMF loans extended to Russia between 1993 and 1999, and provided smaller sums of money via EBRD.
2.1: Koizumi’s visit to the islands soured relations in 2004, and Putin’s visit to Japan in 2005 produced several econ coop documents, but no joint political statement.

15. Relations with Japan: Economy Strengths Weaknesses
Trade grows 30-40% a year
Reached $19 bln in 2007
Industry leaders started taking interest in Russia
Automotive: Toyota (2005), Nissan-Suzuki-Isuzu ( )
Banks: Tokyo-Mitsubishi UFJ, Mizuho, Mitsui Sumitomo ( )
Program of development of the Far East and Trans-Baikal region up to 2013
Russian sovereign funds look to invest in Japan
Investment < 2% total
cumulative $ mln
direct $292.8 mln
Sakhalin II: A traumatic experience for Japan
The East Siberia-Pacific Ocean Oil Pipeline: A prolonged debate
Skovorodino (China) first
By rail to Kozmino Bay (Japan) second
Japanese SME in Russia suffer from regulatory burden and corruption
I.2.1. FDI: Toyota, ¥15 billion (2005) & Nissan, ¥22.66 billion (2006) assembly plants in Saint Petersburg; Suzuki announced intention to invest ¥14 billion (2007); Isuzu established a joint venture to produce its light truck Elf together with the Russian company SSA.
I.3. In response, Japanese business and government leaders proposed cooperation in the areas of energy, transportation, communication, environmental protection, security, public health, trade & investment and interregional exchanges.
II.2: Original shareholders, Royal Dutch Shell, Mitsui and Mitsubishi, each had to dilute their stakes by 50% to give room for Gazprom’s “50+1” formula. Mitsui now owns 12.5 percent and Mitsubishi 10 percent of the project. Good news: customers in Japan, South Korea and the U.S. have already bought all the gas to be produced here for the next 20 years; will cover 8-10% of Japanese LNG demand estimated benefit to Russia - $1 bln a year.

16. China: “a relationship of trust”
Drivers:
First, Russia’s fear, then – admiration
Same vision of key global issues
Economic incentives on both sides
Resisting American hegemonism
Geopolitical positioning in the world and vis-à-vis each other
Super-task: emulating China’s success
Present goals: security, stability, regime preservation, rebuilding of the state, economic revival
Instruments: trade, political and military cooperation, strategic uses of state-led regionalism in Eurasia
Summits – at least 3 times a year (SCO, APEC, bilateral). In 2006 – 6 such meetings, in 2007 – 4 (Hu’s visit to Moscow, at the margins of G8, SCO, APEC). Constant contacts between parliamentarians, bureaucrats, academics and opinion makers. Strategic partnership “not aimed against the third party” (Putin). Relations “both at their best in history and at the most important historical stage” (Wen Jiabao, 2007) Year of Russia in China, 2007 – Year of China in Russia.
1.2: There is a common desire to contain America and present a common opposition to the unipolar model of the world espoused by the United States. Both countries agree that national sovereignty should take precedence over humanitarian intervention and limited sovereignty, which are Western ideas. Russia and China have adopted similar positions on nuclear non-proliferation, the war on terror and international conflict management, recently in the case of Iraq. China has publicly supported Putin’s handling of the Chechen conflict, while Russia has supported the “one China” policy and suppression of separatists in Xinjiang and Tibet. Secondly, both Russian and Chinese leaders have called for a fairer distribution of globalization’s costs and benefits between the less developed and more developed countries.

17. Trade and investment
Trade: $28.7 bln; $40.3 bln, 41-48% growth/year
Goal – US$ 60+ bln by 2010
Interregional ties: 70 out of 89 Russian provinces have direct contacts with their Chinese counterparts.
Good outlook for the future - $5.2bln in trade contracts in 03-10/2007, incl. $500mln to Russia’s machine building industry
Oil – 10 mln ton exported in 2007 (10% of Chinese demand, 4th place in the Chinese market after Saudi Arabia, Angola, and Iran
Gas – an agreement to export bln m3/a
Chinese investments in Russia ($5bln pledged) – capital construction, pulp mills, agriculture. Potentially - port renovation & infrastructure projects (Vladivostok-2012, Sochi-2014). By Nov 2007: $1.6 bln in accumulated bilateral investment (Russia’s inward>90%). The goal is $12bln by 2020.
1. According to the Chinese statistics, bilateral trade reached $34 bln in 2006 and $48 bln in 2007.
3. 20% of all trade is generated by Heilonjiang alone; 1/8 – by Guangdong province directly dealing with the Central Federal District of RF.
4. Russia’s exports are still predominantly raw materials (>90%, with 55% in fuels). About 1/3 of Chinese exports are machines and technical equipment. Together with automobiles, consumer electronics and manufactures, more than 50% of Chinese exports are non-primary goods. Russia’s high-tech exports to China are mostly limited to arms, nuclear power plant equipment, and passenger aircraft (TU 204). Two units of Russia-built Tianwan NPP in East China’s Jiangsu Province started operations last year.
5. East Siberian pipeline design capacity is 80 million tons a year.
6. West and East pipelines respectively.

18. Political and military aspects
Treaty of Good-Neighborliness, Friendship, and Cooperation (2001)
Arts. 7-9 on security-related cooperation
The Outline on Implementing the Treaty ( )
Borders no longer an issue (Oct. 2004)
But Chinese demographic and economic pressure remains: 108 mln in 3 NE provinces vs 27 mln in all of Siberia/RFE
Joint military exercises became routine
Russia’s arms have modernized PLA
Chinese purchases saved Russian military-industrial complex
New tensions over co-production, licensing
Putin: military cooperation "will continue” (03/2007)
Arts. 7-9 refer to military cooperation, confidence building measures, security-related consultations and cooperative responses to the external threats.
During President Putin’s visit to China, Russia and China had settled remaining border issues on the 50/50 formula basis; agreed to hold joint military exercises and expand arms trade.
2.1: Heilongjiang, Jilin and Liaoning, of which only Heilongjiang borders Russia directly.
3. Joint military exercises (bilateral and multilateral): July 2005 (Shanghai: counter-terrorism, pollution prevention, with Japan, Korea and other coastal nations); Peace Mission 2005 (Aug, Vladivistok and Shangdong peninsula: counter-terrorism, regional crisis response), Peace Mission 2007 (Aug, Chelyabinsk: SCO joint exercises).
4.1: In , China bought 76 Su-27SK fighter-ground attack aircraft and a co-production license for 200 more. It also bought 100 S-300 surface-to-air missiles; ten Il-76 transport aircraft; four Kilo-class submarines, and two Sovremenny-class destroyers. In 2000, about 70 percent of all Russia's foreign arms sales went to China. With Putin, arms sales increased. Before the end of 2007, Russia sold 2 more Sovremenny destroyers, to the total of 4 now, 8 Kilo-class subs (total of 12), 80 Su-30MKK fighter aircraft, and eight battalions of S-300PMU-2 air defence systems. In 2005, US$1.2bn contract was signed for the purchase of 34 IL-76 transport aircraft and eight IL-78 tanker aircraft to be delivered over a 6-year period. In addition, the Chinese Navy acquired 28 multipurpose Su-30MK2 craft from Russia in 2003 and 2004.
4.2: A potential problem: the export of military technologies from Russia to China accounts for just 30% of the weapons trade between the two countries, and it is believed that Beijing would like to increase this share to 70%. Russia was disappointed by factual discontinuation of the SU-27 co-production agreement and China’s attempts to emulate Su-27, by reverse engineering, in the production of its own J-11B.

19. Shanghai Cooperation Organization
Neither the “Chinese” nor the “Russian” tool
interdependence, complementary interests
Central Asians not easy to push around
From confidence building measures to a multifunctional regional club in 5 years
A new “geopolitical axis” or “we did not plan it that way”?
Prospects for the future: “deepening before widening”
The Iran controversy
India vs Pakistan
Diverging attitudes toward the West
1.1: Created in 2001 (since 1996 – “Shanghai 5”), the SCO includes China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. All members of the SCO fought Islamic radical movements: Chechnya, Xinjiang, and recent history of a civil war in Tajikistan stand out in particular. All interested in regional stability & development.
1.2: Certainly not Kazakhstan or Uzbekistan: cf. the sale of PetroKazakhstan to China.
2: The SCO predecessor – “Shanghai 5” (since 1996) was mostly concerned with border demarcation and reduction of troops. SCO proclaimed objectives are peace, security and stability in the region; economic development and cooperation in political, economic, judicial, and defense matters; a just international order; and joint efforts to combat terrorism, separatism and extremism that threaten territorial integrity of the member states. As of recent: credit & investment, econ & educational projects. Created: Inter-bank consortium
3. Inviting Iran, Pakistan and India as observers has certainly alarmed Washington.
Putin: “We did not plan the SCO to be so prominent – it was established to address trivial matters such as border demarcation. But then it started to develop, and there is now a real demand …, which is why others want to join. There is an objective need for centres of power and influence in the world, so we responded, but we had not planned it that way” (Remarks to the Valdai club, Sep. 2006, as cit. by O. Antonenko).
4: Now – the expansion moratorium (since 2006), specifically to stave off Iran’s potential application. India has been approached a few times, but expressed no interest in joining. Most eager countries are also those least wanted. The necessity of further institutionalization.

20. Public opinion and foreign policy
What is Russia?
A part of Europe, their 21st century destinies will be closely intertwined – 38%
Not quite European, but a unique Eurasian civilization; in the future, its interests will be shifting to the East – 45%
Russia’s rise and strengthening
Is a threat to the European nations, which do not want this to happen – 49%
Answers the interests of the European nations, since Europe is our common home – 34%
Positive (negative) associations (%):
Europe: 77 (11), CIS: 59 (21), EU: 56 (18), Asia: 56 (24), the UN: 55 (21), the West: 52 (31), WTO: 49 (19), America: 34 (50), NATO: 19 (57)
1: Hard to say – 17%.
1.1: Moscow and SPb – 47% agree (9% above the national average).
1.2: Moscow and SPb – 40% agree (5% below the national average).
2. Hard to say – 17%.
VTsIOM, March 2007 national poll N=1600, p<3.4%

21. Conclusion Is there a Russian strategy for Asia?
Yes: Putin’s plan, Medvedev’s career
No: inconsistencies, lack of planning
Eurasian regionalism – the main avenue for Russia’s great power revival
SCO remains the key
CIS – Medvedev’s first priority
RFE – “we need to develop, finally, the system of state policies toward the Far East” (Medvedev, 07/02/2008)
2.1: Medvedev’s career – Chairman of Gazprom since 2000, Chairman of the Organizing Committee for celebrations of the Year of Russia in China in
2.2: E.g., in the construction of East Siberian pipeline, dealing with Japan on the territorial issue