Russia’s European future

As relations with the West continue to deteriorate, Russia has tried to build a future by looking to Asia. But economic weaknesses, alienating foreign policy, and the rise of China have stunted Russia’s pivot to Asia. Although a reset with Europeans is the best way forward, Russia and Europe are likely to grow more isolated.

A photo of Chinese President Xi Jinping shaking hands with Russian President Vladimir Putin at a June 2019 meeting in St. Petersburg.
President Vladimir Putin has looked to deepen economic and political ties all across the continent, but Russia’s pivot to Asia largely comes down to a partnership with China. © dpa

In a nutshell

  • Russia is looking East to replace fraying European ties
  • The pivot to Asia has run into economic realities
  • A reset with Europe is the best way forward

Russia belongs to Europe. As relations between Russia and the West continue to deteriorate, this may seem like an odd statement. Yet it remains a fact, backed by historical experience, that both sides must come to terms with. 

The current state of mutual animosity has longer-term implications that are quite disturbing. How it came to be is not important; there is enough blame to go around. The key question looking forward is whether a defiant Russia can build a future in which it does not belong to Europe.

If that Eurasian project succeeds, the Kremlin would enjoy a greater sense of stability and security, allowing it to interact with Europe on more equal terms. Europe, for its part, would have to accept a greatly reduced role in the east and show respect, however grudgingly.

If Russia fails, however, it would mean having severed bonds with Europe without building compensatory links within Eurasia. That would deepen the country’s socioeconomic problems and potentially threaten the regime’s stability. Deep resentment over the associated loss in prestige would also encourage blame to be shifted onto the West.

The plan to pivot

While the crisis in Ukraine was a watershed moment in setting Russia and Europe on a collision course, Russia’s plan to turn eastward began well before. The inception of the centerpiece policy of a “pivot to Asia” may be dated to 2012, when Russia hosted the Asia-Pacific Economic Cooperation (APEC) Summit in Vladivostok. President Vladimir Putin’s clarion call at the time was for the Russian economy to “catch Chinese wind” in its sails.

The idea was that looking to Asia would help attract much-needed investment and propel Russia’s moribund economy on a path to sustainable growth. While economic concerns were undoubtedly important, a deeper understanding of what is at stake requires going beyond commercial gain. 

The broader political framework concerns the “civilizational identity” of Russia, which boils down to its emotionally complex relationship to Europe. Although this has been a topic of intense debate over the past half millennium, it has never had the geopolitical implications that it does today.

If Russia fails, it will have broke European ties without building new links in Eurasia.

The core of the problem became clear after the collapse of the Soviet Union. Against the Russian vision of a “Greater Europe,” where all vestiges of Cold War separation would be removed, Europeans touted a “Wider Europe,” in which Brussels would decide who is included. In 2010, then-Prime Minister Vladimir Putin still espoused a free trade zone that would stretch “from Lisbon to Vladivostok.” In an interview with the German magazine Spiegel, he envisioned “a unified continental market with a capacity worth trillions of euros.”

The ambition at the time was to build a set of institutions that would make it possible for Moscow and Brussels to cooperate on equal terms. The Eurasian Union (EEU) was largely patterned on the European Union, much as the earlier conception of the Collective Security Treaty Organization mimicked NATO. One of the EEU’s very first moves after its 2015 launch was to seek cooperation with the EU.

Fraying relationship

This was less than five years ago, but already seems like ancient history. After the Ukraine crisis, the promise of cooperation on equal terms has been replaced by a regime of sanctions and countersanctions that has been deeply harmful to trade and development. 

Russia’s pivot to Asia has thus also become a matter of defying Europe, which is a major change. Even more challenging is the more recent vision of a “Greater Eurasian Partnership,” which entails a dual approach to China. While seeking to profit from the Belt and Road Initiative (BRI), it also aims to build a network of partnerships with other countries in the region to rein in the mounting influence of the Middle Kingdom. The outlook for success in either of these ambitions is bleak. 

As the crisis between Russia and the West has deepened, many Russian voices have boasted about an economic recovery and restoration of the country to its (allegedly) rightful place in global politics. They claim that Western sanctions have actually been a boon, helping the Russian economy shake off inefficiencies and hone its competitive edge. 

To appreciate just how hollow this argument is, recall Russia’s transition from central planning to a market economy. During the first two terms of the Putin presidency (2000-2008), the Russian economy grew by about 7 percent per year. This was chalked up as a great achievement and credited to President Putin. The problem is that during the chaos of the 1990s, the Russian economy contracted by about 45 percent. It was only toward the end of 2007 that Russian gross domestic product (GDP) had again reached the level of 1990, showing that the country had recorded close to two decades of zero growth. 

A photo of the Christophe de Margerie ice-breaking LNG carrier in Russia, in March 2017.
The Yamal LNG project in Siberia, partly owned by a Chinese fund, opened in 2017. Russia has struggled to diversify its trade flows to China beyond raw materials. © dpa

It was during these years that the Chinese economy really took off. Meanwhile, Russia’s “recovery growth” did not produce the technological change and investment in critical infrastructure needed to develop a modern, globally competitive high-tech economy. The fact that few Russian companies went bankrupt during the 1990s implied that when the petrodollar boom set in, there was plenty of spare capacity. Many of the enterprises that were brought back online presumably dated from Soviet times, with that era’s obsolete technology.

Since the hallmark of the Russian economy in the decade after 2007 was short-term profit-taking and capital export – known as “offshorization” – it is not surprising that performance has been lackluster at best.

Few options

Any assessment of Russia’s prospects for global integration must start with the economy’s strong focus on primary sector development (digging, drilling and pumping), which is very different from integration into global value chains. Except for the energy flows, the global economy would hardly notice if Russia were to disappear. 

Viewed against this background, a successful Russian pivot to Asia would require a boost in foreign direct investment and a transformation in the composition of trade flows. The exchange of raw materials for manufactured goods would be replaced by the kind of intra-industry trade that promotes knowledge transfer and human capital development. Neither has happened. 

Japan could theoretically provide a real boost. Yet the conflict over the Kuril Islands sometimes appears to be an excuse to cover up Japan’s lack of interest in getting involved in the Russian economy. South Korea could be another such source. But again, its recent agreement on an investment fund to support Russian-South Korean projects was limited to a measly $100 million through 2022.

Chinese interest has remained limited to energy flows and predatory logging, plus some ambitions to lease land. Russian hopes for an investment spillover from the BRI have been largely frustrated. Even construction of the much-publicized Moscow-Kazan high-speed railway has not yet started.

To put it bluntly, Russia has very little to offer China but raw materials. Even its weapons exports have an uncertain future. All of this magnifies the dangers inherent in turning away from long-standing economic relations with Europe.

Looking for friends

Turning to the political recovery, it is a sobering fact that Russia had few genuine friends before Crimea, and even fewer thereafter. Countries like Uzbekistan, Tajikistan and Turkmenistan have remained outside the EEU, diluting Russian influence in Central Asia, and that those that have been cajoled into joining have held back from taking the next step into full union with Russia. The Eurasian Union has remained limited to trade and economic cooperation.

It is true that by intervening in Syria, Russia has carved out a niche for itself in global politics. In addition to having saved the Assad regime – and thus thwarting U.S. ambitions to orchestrate yet another case of regime change – Moscow has become the hub of diplomacy on Syria, along with Astana. It is striking that Russia has managed to keep on reasonably good terms with all other regional actors, including Israel. 

Russia has little to offer China but raw materials.

How long this will last is beside the point. Much like the intervention to prop up the Maduro regime in Venezuela, the Syria operation remains a sideshow to the Kremlin’s main, existential ambition of fostering the Greater Eurasian Partnership. The mainstay of the latter has been for Russia to emerge as an “independent pole” in Eurasia.

A quick tour d’horizon suggests that this vision was lacking in realism from the start. In North Korea, Pyongyang clearly views China as the only pole conceivable. Moving to South Korea and Japan, it is hard to see what Seoul and Tokyo would stand to gain from a more important Russia. In the ASEAN group, Russia has growing free trade with Vietnam, but minute nonmilitary trade with the other members. On the subcontinent, India resents Moscow’s move toward closer ties with Beijing. In Central Asia, Kazakhstan and Uzbekistan are leading a charge to show that the region can solve its own problems without “outside tutelage.” And in Iran, the focus is on seeking European support against U.S. sanctions. 

The tie that binds

Both the pivot to Asia and the Greater Eurasian Partnership boil down to securing a “strategic partnership” with China — a relationship that is neither strategic nor a real partnership. As veteran China analyst Bobo Lo suggested in a 2008 book, it is an “axis of convenience,” based on a common interest in blocking a unipolar world order dominated by the United States. 

One Russian source recently showed signs of frustration that despite undisputed successes, a tactical pause with the EEU may be prudent. There are good reasons for the Kremlin to be concerned. Its current belief in import substitution as an economic panacea stands in sharp contrast to the philosophy of connectivity that is driving the BRI. The sorry state of the Russian machine tool industry is also emerging as a major threat to military modernization. Simply remaining relevant to the rollout of the BRI will be an uphill battle.

This is the defining feature of the Sino-Russian relationship. While Beijing is quite happy to support the Kremlin’s pronouncements about how well the partnership is evolving, it has little to gain from helping Russia become an independent pole in Eurasia.

Is a reset possible?

The strategic question before Russian and European leaders is whether a reset in relations is possible. There would seem to be plenty of reasons in favor. The costs to Europe in terms of reduced trade have been quite substantial. Internal differences on how to deal with Russia have added to the already deepening divisions between EU member states, while pressure to increase defense spending is not welcome. 

Russia, meanwhile, is faced with the increasingly obvious fact that the only path to true integration into the global economy is through Europe. German and other businesses stand ready to resume business and investment, and Western energy giants are prepared to support the technology transfer and absorption that looked so promising before the sanctions. A reset could trigger an economic revival benefiting both sides. 

The only path to true integration into the global economy is through Europe.

The obstacles are largely emotional. On the Russian side, there is the old obsession with great power status and the associated demand to be treated with respect. European leaders, on the other hand, cling to the moral imperative that there can be no reset unless Russia first retreats and recants on Ukraine, which is not in the cards. If both sides stick to their illusions, the longer-term implications could be dire. 

As Russia isolates itself from Europe, it is also losing influence on the western periphery of Eurasia. Georgia and Ukraine will not return to the fold any time soon, and even the much-vaunted union with neighboring Belarus is not going anywhere. China will be happy to play along with Russian rhetoric about the pivot to Asia representing a “return home,” but it will have no qualms about exploiting Russia’s growing weakness for its own gain.

Although Europe does have obvious national interests in supporting a reset of relations with Russia, it is more likely to remain supportive of the U.S. sanctions policy, which by now has been reduced to mere retribution. The outlook for Russia must be one of stagnation and decline, fueling further estrangement and increasing displays of Russian resentment, perhaps including additional military adventures.

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