Last Friday, fireworks displays in Sevastopol, Simferopol and Moscow marked Crimea's accession to the Russian Federation. Just before that, the United States introduced first real economic sanctions against Russia by targeting a bank. Half a million Russian MasterCard/Visa cardholders were immediately affected. Responding to this, the Russian government reactivated the suspended project for a national electronic payments system, broadly analogous to Japan's JCB. The French government has postponed its decision as regards the Mistral ships which France is building for the Russian Navy. It may well be that that order will be canceled. Ukraine, faced with the prospect of losing the special gas price granted by President Vladimir Putin to Viktor Yanukovych, will begin receiving some of the gas it needs via Germany. Meanwhile, Germany and other EU countries, encouraged by the United States, are considering steps to fundamentally reduce Europe's dependence on Russian energy supplies.
Russia's economic, political and strategic environment in the West is fast deteriorating. One obvious way to respond to this is to reach out to Asia and the Pacific. China, of course, will not follow Western sanctions: it is more likely to exploit them for its own benefit. Gazprom, which has long been haggling about the price for its gas with Beijing, may become more flexible now that its European market is under threat. Moscow will also have to be more welcoming toward Chinese investments in Russia's energy projects, which heretofore have been seen as a geopolitical risk. In its new Cold War with the West, Russia will need China more—as a source of cash, an investor, and a market. With Russia more dependent on it, China's international influence will substantially grow.
China, however, cannot be a source of high technology for Russia, and Moscow is probing the Japanese as to how far they will be prepared to go in their economic relations with Russia. At a business forum last week in Tokyo, Rosneft's Igor Sechin was inviting the Japanese to invest in energy projects in Siberia and the Arctic. Japan's businessmen are certainly interested. Prime Minister Shinzō Abe has long been known to take a strategic view vis-a-vis Russia. In the run-up to Crimea's referendum, the head of Japan's newly-formed National Security Council visited Moscow. Some in Tokyo wonder whether, after having returned Crimea to Russia, President Putin might become more flexible on the Kuril Islands dispute with Japan. Abe, however, will have a hard job convincing President Barack Obama that, even under the current circumstances, a Japan-Russia rapprochement will actually benefit U.S. strategy in the Asia-Pacific.
South Korea is another potential purveyor of technology and investment to Russia—and another U.S. ally. The Koreans, of course, will not break ranks with the Americans on Russia. Seoul, however, is worried that the breakdown in U.S.-Russian relations may lead to Russia turning less cooperative on the Korean Peninsula. Pyongyang, for its part, by making statements in support of Moscow, is already seeking to exploit the Russian-Western cold war in its own interest. What Moscow needs, however, is new economic opportunities rather than statements. The Trans-Korean gas pipeline and rail link projects it advocates could help—and they would also improve the general situation on the Peninsula.
As with Japan, Moscow will understand South Korea siding with the United States rhetorically, while continuing or even expanding business relations with Russia. However, either country joining U.S. economic sanctions against Russia will have an adverse geopolitical effect for them, something which Tokyo and Seoul would want to avoid. Beyond North-East Asia, Russia looks to the advanced economies of Singapore and Taiwan as sources of technology, investment, and best practices. Again, the United States, in principle, can check the economic moves of its Asian allies toward Russia. By doing so, it will help make the China-Russia link stronger.
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