Russia looks east to get more from its cross-border trade with China

Twelve years ago, Russia pulled its troops out of the military town of Bezrechnaya, several hours' drive from the country's main border crossing into China. The abandoned buildings were then stripped to their foundations by jobless locals, some of whom lost their lives scavenging for the second-hand bricks that sell for less than a penny each.

The few inhabitants that remain today expect the village to be completely abandoned within a decade. "It looks like the aftermath of a bombing raid," said Evgeniya Arameeva, 38, who works in Bezrechnaya's small shop. "People higher up probably don't even know we are here."

Bezrechnaya is a symbol of how a thawing relationship between Moscow and Beijing after the fall of the Soviet Union in 1991 has led to the gradual demilitarisation of a once tense area. But it is also a reminder of the demographic trends in the Sino-Russian border region, which extends for more than 2,600 miles from the eastern fringes of the Mongolian steppe to the Pacific Ocean. There are fewer than five million people in the five Russian regions facing China across the Amur and Argun rivers – and more than 100 million people living in the three Chinese regions on the opposite banks.

A Soviet-era MiG fighter jet abandoned in the Russian steppes near China. Photograph: Howard Amos for the Guardian

For the Kremlin, this is both a problem and an opportunity. Russia has given multiple signals in recent months that it wants to shift its focus east, and shore up state authority in the farthest reaches of the nation, seven time zones east of the capital. The designation of Vladivostok as the host city for this year's Asia-Pacific Economic Co-operation Forum was supposed to be a catalyst for development.

In an echo of policies followed by both Tsarist and Soviet governments, several special far-east agencies, including a new government ministry, were set up in the wake of Vladimir Putin's inauguration for a third term as president in May.

"In the 21st century, the vector of Russia's development is to the east," Putin told more than 1,000 politicians in the Kremlin during an annual address earlier this month.

China replaced Germany as Russia's most important commercial partner in 2010, and the total volume of trade between the two countries is likely to reach $90bn (£55.4bn) this year. The first Russia-China oil pipeline, pumping more than a million tons of crude a month, was opened last year.

Russia's exports to China are principally raw materials, including timber, coal, electricity and metals. But the scale of the cross-border trade falls short of the potential implied by the apparently perfect economic fit between China's hunger for resources and Siberia's great bounty.

Agreements have stalled over a reluctance to shoulder huge infrastructure costs and arguments over how profits will be shared. In the most high-profile case, state-owned gas giant Gazprom has been locked in negotiations over gas exports with the China National Petroleum Company for longer than a decade.

While China has gained visibly from its economic growth, Russia appears to be treading water.

At the Zabaikalsk-Manzhouli border crossing, through which passes 70% of Russia-China trade, the disparities are clear.

Twenty years ago, Zabaikalsk and Manzhouli, which face each other across the border marked by a few strips of barbed wire, were settlements of about 15,000 people. But while Zabaikalsk remains a dusty border town, Manzhouli now has high-rise buildings, an indoor skiing facility, 3D cinemas and a population approaching half a million people. Russians flock to it for the shopping opportunities.

To help rectify the problem, the Kremlin is trying to cultivate domestic manufacturing, rather than simply shipping raw materials to China.

"Just because there is a big demand for natural resources in China does not mean that the far east should turn into one big mine," said Alexander Bazhenov, head of a state development fund set up last year to invest in the far east.

Ruined apartment blocks in Bezrechnaya, only left standing because they are made of concrete and couldn't be scavenged for bricks.

But it will not be easy. Bazhenov estimates that the region needs at least $94bn over the next 15 years.

Chinese demand also fuels criminal networks in Russia that cash in on lucrative export opportunities. Russia supplied China with $1.3bn of illegally logged wood in 2011, according to the Environmental Investigation Agency.

Hunters in the far east's Primorsky region can easily make up to $5,000 from poaching rare Amur tigers, whose body parts are used in Chinese medicine, according to Sergei Aramilev from the World Wildlife Fund's Vladivostok office. Chains of middle-men and smugglers also make large profits.

The entrance to the Chinese market in Chita. Photograph: Howard Amos for the Guardian

There are few signs of a mass influx of Chinese seeking to forge new lives in the harsh climate of southern Siberia. The Chinese presence is instead driven by economics. Chinese markets and restaurants are ubiquitous across the region, and Chinese labourers, valued for their work ethic and low wages, are employed even hundreds of miles from the border.

Chinese companies are even crowding out their Russian competitors. In Chita, 500 miles from the border, the main square is paved with Chinese tiles engraved with Mandarin script, and the construction of fairy-tale ice parks, where Russian children play during winter months, is contracted to Chinese companies.

About 30 miles from the shattered ex-military town of Bezrechnaya, residents of the Soviet rocket base Yasnaya are fearful they could soon be living amid ruins after troops finally left last year. They complain that the few jobs available are given to Chinese workers.

Mikhail Shagirev, 63, who served in the Soviet army in the 1980s, criticised the new Russian relationship with China and the loosening up of the once tightly controlled frontier. "Mongolia guards its border with China better than we do," he said.