APEC: Russia’s window to the Pacific

APEC: Russia’s window to the Pacific

Kirill Muradov, HSE

September 2nd, 2012

Russia’s leadership in APEC is about to reach its zenith next week when APEC Economic Leaders meet in Vladivostok for their next annual summit.

Analysts and stakeholders have seen the summit as a unique opportunity for Russia to articulate its Pacific vision, but what’s really on Russia’s agenda for the APEC summit?

Having been largely silent on APEC matters for years, Russia flooded APEC committees and groups in early 2012 with dozens of proposals centred on four key priorities: regional economic integration, food security, transportation and supply chains and innovations for growth. Only a few of those proposals have survived the discussions and have the chance of becoming deliverables in 2012.

An important and largely unnoticed achievement was Russia’s progress in implementing the APEC Business Travel Card arrangement, which waives Russian visa requirements for APEC member card holders.

The underlying rationale behind the Putin-Medvedev government’s move to host APEC is the ambition to revive the economy of the depopulated and de-industrialised Russian Far East. Vladivostok — formerly a naval port with restricted public access and a grim transit point for cargo and prisoners bound for northeast Russia — became a recipient of previously unprecedented public investment in infrastructure development. These investments totalled US$22 billion in 2008–12, according to official data, and have served to convince the populace that the government was serious about the development of Russia’s Pacific region.

The Far East issue received even more serious consideration after Putin’s inauguration in May 2012. The 7 May presidential executive order on foreign policy omitted mention of APEC but stressed the need for broader involvement in Asia Pacific regional integration. This was to support the accelerated socio-economic development of eastern Siberia and the Far East. Consequently, a new Ministry for the Development of the Far East was established, with Victor Ishaev as the head — who is also the chairman of the dormant Russian National Committee for Pacific Economic Cooperation.

Besides showcasing Vladivostok as a flagship Far East development project, Russia has come up with its own integration initiative, namely the Customs Union with Belarus and Kazakhstan, which is expected to evolve into a Eurasian Economic Union. The May 2012 executive order declared the strategic goal of creating a ‘common economic and human space’ with the European Union, spanning from the Atlantic to the Pacific Ocean, and the Customs Union is obviously an important building block for this.

Russia will likely promote this strategy at APEC, touting the Customs Union as a building block for a common economic space where APEC members can reach out to Europe. And according to an article published by Medvedev in January 2012, Russia and its Customs Union partners are ready to negotiate FTAs with APEC members to ‘pave the way to a fundamentally new form of APEC integration and help expand the Asia-Pacific market to the whole of the Eurasian continent’.

Russia intends to secure the presence of Victor Khristenko, chairman of the Council of the Eurasian Economic Commission (the Customs Union governing body), at the APEC ministerial and other meetings within the summit week. From the sidelines of these meetings, the outcomes may include the signing of an FTA between the Belarus-Kazakhstan-Russia Customs Union and New Zealand, which has been the subject of negotiations since early 2011, and the announcement of the launch of free trade negotiations between the Customs Union and Vietnam. The FTA with New Zealand will be the first for Russia with a Pacific country and the first modern-generation comprehensive trade agreement.

It is not only the Customs Union that Russia intends to use as a vehicle for its Eurasian aspirations. Another proposal has called on APEC members to consider the diversification of supply chain routes and is meant to encourage the future potential of the Northern Sea Route and Trans-Siberian Railway. In an effort to give substance to this proposal, the Russian APEC National Business Centre employed PricewaterhouseCoopers, which has estimated that a US$20 billion investment in the infrastructure of the East-West transport corridors in Russia would help Asia Pacific economies save about US$600 billion by 2020 through faster and lower cost delivery to European markets. Only 1.5 per cent of cargo travelling between Asia and Europe currently passes via Russia.

It will be a long road ahead to implement these ambitious ideas. Meanwhile, Putin is impatient to open Russia’s window to the East in Vladivostok, emulating Peter the Great, who once opened Russia’s window to the West by founding St Petersburg. APEC delegates can expect to see in the Far East what Ishaev calls ‘Russia’s face in the Asia-Pacific and a platform for the development of partnership, cooperation, and integration between Russia and the Asia-Pacific region’. They will also see a bridge that, according to Medvedev, outshines San Francisco’s Golden Gate and the new campus of the Far Eastern Federal University on Russky Island at the backdrop of a fireworks and laser show worth nearly US$9 million.

Kirill Muradov is Research and Education Programs Coordinator at the International Institute for Education in Statistics, Higher School of Economics, National Research University, Moscow.