Russia’s hosting of the 21-member Asia Pacific Economic Conference summit, which opened today in the Far East port Vladivostok, predictably prompted the latest series of reports about how Russia is looking east for business. Should be is more like it.
Moscow has scarcely lived up to its potential of a dozen years ago, when, for example, Gazprom was poised to export gas to China from a huge new field near Lake Baikal it had agreed to develop with BP. Instead, it reneged on its contract and shut down the project.
A trans-Siberian oil pipeline to the Chinese border still doesn’t reach a port near Japan as planned after having taken many more years to complete than first projected.
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Those and other examples indicate Russia’s approach to business in the east is not unlike its dealings in the countries of its main trading partner, the European Union, which is investigating Gazprom over anti-trust allegations. Moscow wants profit, but only on its own terms and under its firm control, an attitude that has put the brakes on investment and the opening of trade that would help minimize Russia’s vast corruption and inefficiency.
Although two thirds of the country lie in Asia, trade with APEC countries accounts for only 23 percent of Russia’s total. Despite Moscow’s possession of natural resources Asian countries crave, it provides only 1 percent of trade for the rest of APEC.
The Kremlin’s serious neglect of its own people in the Far East is far worse for Russians. Soviet-era infrastructure has crumbled, as I recently experienced when stranded near the city of Khabarovsk after I found an airport there padlocked, the weekly plane having departed ahead of schedule unannounced.
An exodus of residents from Vladivostok is reported to have stopped probably only because most people who could have already left the region in droves — by up to 20 percent in the last two decades, according to some estimates. Crooked politicians govern many provinces in connection with the organized criminal groups from which some of them emerged. They are illegally chopping down forests, poaching fish and otherwise control the lion’s share of the region’s commerce.
Putin never aimed to reform that scheme because it’s central to how he rules the provinces: allowing local leaders to govern as they see fit in return for fealty and a share of cash flows. Instead, he chose the APEC summit as justification for grand investment projects, including new roads and an airport terminal, meant to paper over the region’s dysfunction in the way Soviet space rockets obscured miserable living standards for the USSR’s 99 percent.
The state has sunk about $20 billion into Vladivostok to showcase the city for the one event, including by building the world’s longest cable bridge, a controversial two-mile project that alone cost a billion dollars.
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Some deals will be signed during the APEC summit. However far from doing anything serious to promote the kind of regional trade and cooperation that might significantly improve the lives of ordinary people in the Far East, Putin used a speech on the summit’s first day to reveal his true modus operandi. Having just agreed for Russia to join the World Trade Organization after a dozen years of negotiations, he announced he’s already seeking to undermine it.
He said he would push to change WTO rules to allow member countries to protect industries at times of global instability.
"As a full-fledged member of this organization, we intend to become rigorously involved in the process of shaping fair rules of international trade," he said.
So it goes.