The way out for Moscow?

Russia’s current economic, foreign affairs and international image problems will not only impact relations with the West, but also its position vis-à-vis China and other important players around the world. Both the ongoing economic recession and the diminishing general trust in oral or written assurances by Russia’s leadership has effects beyond Russia-EU cooperation. Because of its erratic political behavior, clear breach of international law and low economic performance, and in light of continuing Western sanctions, Russia is becoming a more risky and less solvent partner, not just for Western partners but for everybody. This trend could continue, if not increase, over the coming years, and that could limit Russia’s growth prospects and further diminish its relative weight.

As the country’s economic problems and international political isolation are growing concurrently, its relative decline will become more and more acutely felt. In the next few years Russia will become an ever more junior partner of China, and a secondary player in the Shanghai Cooperation Organization (SCO), even more so if India joins. These trends will also reduce Russia’s impact within the BRICS group (Brazil, Russia, India, China and South Africa), where its presence has always been an oddity. Ever since the creation of BRICS, Russia stood out as a petro-state benefitting from growing energy prices; it was never a successfully developing economy with a dynamic industrial and/or progressive service sector as all the other BRICS members are to one degree or another.

In contrast to Western institutions like the EU or NATO, the BRICS group and the SCO are pragmatic non- or anti-Western alliances. They have considerable geopolitical weight, but without distinct ideational foundations, long-term plans or larger visions of their own. China & Co. will react with interest to the new frostiness in Russian-Western relations, as a result the Ukrainian fall-out. Beijing and other non-Western countries may be glad to see Russia getting more engaged within the SCO, BRICS and other entities (RIC, Silk Road project, Beijing-dominated development banks, etc.). Yet the Chinese and others will have fewer and fewer reasons to treat an economically weak and politically isolated Russia with the kind of respect and concern that Moscow will continue to expect. Instead, they may, as in the case of China’s spring 2014 gas deal with Russia, take advantage of Moscow’s diminishing alternative options and ties. Given the lack of common identity between the SCO and BRICS group, and the absence of coherent ideology, these ad hoc alliances will not provide Russia with a maintainable long-term geopolitical home, or a sustainable alternative path of development. They cannot offer Moscow something equivalent to Russia’s earlier gradual integration into Western structures.

Apart from the economic and cultural inconvenience of Moscow’s teaming up with Beijing, there are also specific, potentially problematic issues between the two countries. Above all, in order to be acceptable to Russia’s elite and ordinary people, the now growing Chinese economic engagement in Russia would have to be large enough to compensate for the increasing losses in investment from, and trade with, the West. Before the “Ukraine crisis,” about 75% of foreign direct investment into Russia came from the countries of the EU, and almost 50% for Russian foreign trade was with them. Thus the West contributed significantly to Russia’s earlier economic successes — an input that, especially in Germany, was seen as furthering Russia’s modernization.

Europe’s economic engagement with Russia will, to be sure, continue. Yet, the volume of Western FDI, trade and other interaction has been shrinking over the last months, and will continue to do so. More intense economic relations with Asia could make up for these losses in the Russian-Western exchanges.

But what happens if growing Chinese and other non-Western investment in Russia, and trade with it, does not sufficiently compensate for the losses in the West, and for the structural defects of Russia’s economy?

Without tangible and positive effects on Russia’s economy, Russian public opinion may turn against Moscow’s closer ties with Beijing. A skeptical, or even adversarial, view by the Russian public on Sino-Russian cooperation could undermine the entire rationale behind Moscow’s turn to the East. Many may welcome an increasing Chinese presence in Russia if the Russian economy starts to grow again. If so, Chinese investments, Asian partnerships and Russia’s integration into the Eastern world could be perceived as part of a successful anti-Western redefinition of Russia. But if these changes are not accompanied by a Russian socio-economic rebirth, the Kremlin’s pivot to the East may flop.

Finally, as experts frequently point out, Russia and China are geopolitical competitors in Central Asia for obvious geographic reasons. In terms of economic engagement, a somewhat similar argument can be made for Siberia and Russia’s Far East. So far, the warnings about the risks of this rivalry have, however, turned out to be self-defeating prophecies. All three sides — Russia, China and the Central Asian countries — have been at pains to avoid a geopolitical conflict, and have been successful in diffusing political and economic tensions. Yet it is noteworthy that China has — for instance in its energy relations with Turkmenistan — already repeatedly contradicted Moscow’s interests and policies in the region. Up till now, the Kremlin has shown remarkable restraint in its reactions towards Beijing’s growing involvement in Central Asia, and Chinese immigration in Siberia, as well as the Far East. A sort of condominium has developed that so far has secured a mutually acceptable modus vivendi.

While that is an encouraging trend, its political costs for the Kremlin could assume a dimension that may be difficult to handle. As a result of growing economic disparity, China’s pull in Central Asia will rapidly increase even if Beijing does not increase its ambitions in the region. As Moscow will have fewer resources and arguments for making its influence felt in Central Asia, the post-Soviet republics’ turning away from Russia may become a strange corollary of the Kremlin’s turn to the East. Should China use its growing relative might in Central Asia more aggressively than the Kremlin can accommodate, Moscow and Beijing may be at loggerheads in their common neighborhood, with dire consequences for Russia’s foreign affairs everywhere.

There are other possible contradictions between Russia’s and China’s interests in Asia, including those with regard to India, Vietnam and North Korea. In a worst-case scenario, disagreements over intense Chinese engagement in Siberia and the Far East could turn the world’s largest land-border into a line of conflict, rather than an economic opportunity zone.