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WEDNESDAY, NOVEMBER 26, 2014

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T h i s s p e c i a l a d v e r t i s i n g s u p p l e m e n t i s p r o d u c e d a n d s p o n s o r e d b y R o s s i y s k a y a G a z e t a ( R u s s i a ) a n d d i d n o t i n v o l v e t h e r e p o r t i n g o r e d i t i n g s t a f f o f t h e I n t e r n a t i o n a l N e w Yo r k T i m e s .

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RUSSIA’S UNEASY RELATIONSHIP WITH CHINA ALEXANDER GABUEV EXPERT

he Asia-Pacific Economic Cooperation (APEC) summit, which brought together the leaders of 21 economies in the region, ended in Beijing with no clear breakthroughs. The main announcement under China’s chairmanship of APEC was the removal of trade barriers, particularly starting the process of establishing a free-trade area inside APEC. This project is Beijing’s alternative to the trade association that the United States has been lobbying for over the past two years: the TransPacific Partnership (T.P.P.) Through negotiations among the 12 largest economies of the region (including the U.S., Japan, Australia and major members of the Association of Southeast Asian Nations), the agreement seeks to substantially liberalize trade and remove both tariff and nontariff barriers. Washington is sure that the high competitiveness of U.S. products will outweigh the competition risks to its economy from opening up these markets.Yet for China, with its state protectionism for sensitive industries that provide growth and employment (the ones key to political stability), the terms of the T.P.P. are unacceptable. Moreover, Beijing suspects the U.S. of wanting to create a trading bloc in Asia without China, in order to exclude it from the integration processes. China initially tried to resist the T.P.P. by promoting an alternative project: the Regional Comprehensive Economic Partnership (R.C.E.P.). In a tit-for-tat move, the talks on R.C.E.P. left out the U.S., which has, however, recently progressed in developing the T.P.P.

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The concept of Russia’s pivot toward Asia, launched with the 2012 APEC summit in Vladivostok, had foundered until Russia’s geopolitical relationship with the West broke down. In the past six months, however, deals between Russia and Asian countries, particularly China, have taken off. Russian President Vladimir Putin and Chinese Xi Jinping (pictured) have already met five times this year. What might an alliance between Russia and China mean for the world? And what does the ordinary Russian think about Moscow’s focus on Beijing? Read more in this month’s RBTH.

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DEAL TO BRING RUSSIA AND CHINA CLOSER Russia and China are planning a transition to making trade settlements in rubles and yuan, according to a statement Russian PresidentVladimir Putin made at the recent Asia-Pacific Economic Cooperation (APEC) summit in Beijing. The move is intended to reduce the U.S. dollar’s influence on the global energy market. “In the long-term, of course, settlements in rubles and yuan are very promising,”said Putin.“This will mean, if we transition to such a large-scale operation, that the influence of the dollar, say, in global energy, will objectively decline.” Shortly after Putin made the announcement, Russia’s largest bank — state retail banking giant Sberbank — began financing letters of credit in Chinese yuan and performed the first transactions in yuan with one of Russia’s largest companies.

Mutual benefits The decision is just the latest move in increased cooperation between Russia and China. While Russia has long talked about the possibility of a pivot toward Asia, the country’s increasing isolation from Western countries has proved an important catalyst in the process. Analysts say that both Russia and China will profit from closer ties, and the currency agreement is one indication. “It is a mutually beneficial idea for Russia and China to transition to making settlements in their national currencies during trade, and it is positive

New agreement allowing trade in national currencies could pose a challenge to the current global financial system in terms of cooperation in the BRICS framework,” said Dmitry Bedenkov, head of the analytical division at the investment company Russ-Invest.“First of all, it increases the diversification of currencies used by the two countries during settlements, which, given the high turbulence on the global financial market, could become another element of diversification.” Bedenkov added that this kind of currency diversification is especially important for Russia because of the financial sanctions currently imposed against it by the European Union and the United States which is preventing Russian banks from borrowing money to refinance their debt. Alexander Dorofeev, general director of the consulting company Arkaim, said the plan to gradually transition to settlements in national currencies was entirely realistic.“This has already been under way for several years because there are serious forces in the global financial elite that are interested in it,” Dorofeev said.

U.S. position Yet Dorofeev added that the United States had a vested interest in preventing this transition, as it wants to preserve the dollar’s status as the primary global currency and the unit for

international business transactions. “How this confrontation goes will depend on the speed of the transition, but the U.S.’s ability to lobby for payments in dollars everywhere is on the decline,” said Dorofeev. According to him, Putin is the only world leader really promoting trades in national currencies, despite the fact that this process is already under way. The ruble-yuan pair has been traded on the Moscow and Shanghai stock exchanges since December 2010. China has restrictions in place, however, on foreign exchange operations for Russian companies in yuan. In September, Russian Deputy Finance Minister Alexei Moiseev indicated that Russia was interested in expanding the level of cooperation, saying that Russia and China could start paying for half of their trade in yuan and rubles if China were to lift those restrictions. Large Russian companies have been working actively with the Chinese currency for some time.Vladimir Potanin, C.E.O. and co-owner of the world’s largest nickel producer, Norilsk Nickel, heads one of these. “So far, we have converted some of our free funds into Asian currencies, for example, the Hong Kong dollar and yuan,” Potanin told RBTH in an interview in September. According to Russ-Invest’s Bedenkov,

trade between Russia and China is not yet enough for Russia to ignore the demands of its European partners. Russian-Chinese trade totaled $89 billion in 2013 and $43 billion in the first half of 2014. At the same time, trade with the European Union reached $413 billion in 2013 — roughly half of Russia’s total trade.“It’s worth noting that trade is increasing. Russian exports to China accounted for 10 percent of the former’s total trade in the first half of 2014 and reached $19 billion,” said Bedenkov.

The APEC factor The recent APEC summit may end up being a turning point in Russia-China cooperation. “The APEC summit turned out to be more meaningful for Russia than the declarative nature of the G20 summit in Brisbane,” said Bedenkov. “Future prospects for Russian-Chinese cooperation in various spheres were discussed. Among other things, Russia and China fleshed out the idea of creating funds in regional financial institutions that would lend to the regional economy and finance strategic projects.” The centerpiece of this idea is the creation of the Asian Infrastructural Investment Bank and a fund to finance infrastructure development for the

Great Silk Road Economic Belt. These institutions, if created, could challenge the current global financial system, according to Alexander Dorofeev. “One of the intrigues of the summit is whether or not we’ll see changes to the rules of how the International Monetary Fund works,” he said. Alexei Kozlov, chief analyst at investment company UFS, agrees that the recent summits underscore the developing relationship between Russia and China. “The APEC and G20 summits confirmed that there is a cooling trend in Russia-West relations and a drawing together of Russia and China,”said Kozlov, noting that Putin and Chinese President Xi Jinping have already met five times this year. Roman Andreeshchev, a professor at the Russian Presidential Academy of National Economy and Public Administration, shares Kozlov’s perspective. “Europe and the U.S. have already been trying to bring China to their side for quite some time, and China has not yet issued its judgment. The U.S. and China have very strong economic ties, and China’s behavior essentially demonstrates a lack of support for the Western position and an endorsement of how Russia is acting in the global arena,” Andreeshchev said.

Pivoting toward Asia? For the moment, however, Russia’s much-hyped turn toward Asia is really only an increased interest in its relationship with China. According to Andreeshchev, Russia lacks strong ties with any other Asian country. “The problem is that the transport costs are too high for deliveries. In this case, Russia is once again tied to one main partner on the Asian market,” he said. According to Andreeshchev, the fact that the Russian Far East is perceived as the outskirts of the country hinders the development of ties with Asia. In order to solve that problem, Russia has plans to establish an entire network of territories for priority development in the Far East, offering concessionary tax conditions and simplified administrative procedures. Companies that plan to locate there will be oriented toward non-commodity exports, particularly for the AsiaPacific region. “The government should also drive a policy that will help manufacture competitive products on those territories,” said Andreeshchev. ■ALEXEI LOSSAN Alexei Lossan is the editor responsible for business and economic content at Russia Beyond the Headlines. He is also a lecturer in business journalism at Moscow State University.


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POLLS SHOW RUSSIANS WARMING TO ASIA When Russia hosted the 2012 AsiaPacific Economic Cooperation (APEC) summit in Vladivostok, the idea was to boost the integration of the Russian Far East with the economic powerhouses of northern Asia. Although they maintain a distinctly Russian/Soviet heritage, the major cities of the Russian Far East are geographically much closer to Beijing, Tokyo and Seoul than they are to Moscow. While Russia’s “pivot” toward Asia is greeted enthusiastically nationwide, residents of its Far Eastern region tend to be more cautious and, in some cases, wary of their neighbors, particularly China. Recent research has shown, however, that in the light of recent global developments, a growing number of Russians have a positive view of China. According to a September poll conducted in 130 cities and 42 regions across Russia by the All-Russia Center for Public Opinion, (VTsIOM) 51 percent of Russians see China as Russia’s main geopolitical ally, up from 23 percent in 2008. “As someone living just 32 kilometers [nearly 20 miles] away from China, I am not sure what to make of these polls,”said Ekaterina Leontieva, a resident of Khabarovsk. “We always believed that the Chinese were looking to takeover these parts of Russia and I don’t think they are really happy with what they were given when a border settlement was made.” In 2004, Vladimir Putin agreed to hand over Tarabarov Island and half of the Bolshoi Ussuriski Island on the Amur

River to China as a final settlement of the Sino-Russian border dispute.“They claimed so much land in the Far East was theirs, includingVladivostok,”said Leontieva.“I won’t be surprised if there were such claims in the future.” The Chinese demographic invasion theory is still popular in the Russian Far East, although officials rarely talk about it given the growing ties between Moscow and Beijing. About 38 million people live in the Chinese province of Heilongjiang, which is on the other side of Amur. The Russian Far East has a combined population of around 6 million. Chinese immigrants dominated the markets of Khabarovsk until a 2007 law banned foreign citizens from working in outdoor markets. The city administration now uses Chinese labor, while much of the reconstruction work in wake of last year’s flood was done by Chinese guest workers. “I’d be happy to hire Chinese workers, if it wasn’t so difficult with the bureaucracy of visas and work permits,” said Pavel Gnetov, who runs a car workshop in Khabarovsk.“They’re hard working and don’t drink, and have no connections and distractions here.” Anna Goncharova, a China specialist who lived in Beijing for three years, puts such attitudes in the Russian Far East into perspective.“People in Central Russia see images of modern Shanghai and elegant Beijing. In Khabarovsk, what most of us have seen are poor areas in northeastern China,” she said. “Life on the Russian side of the

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Residents of the Russian Far East are still wary of China, but becoming more positive.

Recent research has shown that in light of recent developments, a growing number of Russians have a positive view of China — 51 percent now see it as Russia’s main ally, up from 23 percent in 2008.

SECOND PIPELINE TO PROVIDE ADDITIONAL RUSSIAN GAS TO CHINA VIA A WESTERN ROUTE The new proposal is in addition to last summer’s landmark deal between Moscow and Beijing Gazprom’s chief executive officer, Alexei Miller, and the China National Petroleum Corporation’s chairman, Zhou Jiping, have signed a framework agreement on the supply of natural gas from Russia to China via a western route. The document, which the two parties signed at the Asia-Pacific Economic Cooperation (APEC) summit in Beijing Nov. 8-10, envisages an annual supply of 30 billion cubic meters of Russian gas from western Siberian deposits to China through the Altai gas pipeline for a period of 30 years. According to Gazprom C.E.O. Alexei Miller, this supply contract using the western route will be signed by the end of 2015. The agreement is in addition to the 30-year, $400 billion contract Moscow and Beijing signed last summer to pro-

contract] and the transfer point location for the gas. The two sides, however, still have to sign a sales contract and an intergovernmental agreement. The contract value, and consequently the gas price, have not been determined. Said analyst Grigory Birg of Investcafe, “It is clear that the price will be lower than that of the deliveries made through the eastern route [the Power of Siberia gas pipeline, whose price per cubic meter is not known, though is estimated at $350], since the investments in infrastructure (transportation and extraction) are significantly less.” According to Platon Maguta, general director at the Maguta Fund, the economically rational gas price for China is currently about $380-400 per

It is possible that both pipeline projects supplying gas to China may turn out to be economically disadvantageous for Russia. vide Russian gas to China via the Power of Siberia pipeline from the Chayanda and Kovyktinsky deposits. Pipeline construction began on Sept. 1, and gas is scheduled to begin flowing between 2018 and 2020. The document touches upon conditions such as the volume and terms of delivery, the level of “take and pay” [the buyer’s obligation to pay a certain penalty in the event that consumption volumes are less than specified in the

Amur would be a step up for the poorer Chinese than staying in their country.”

Cultural fascination trumps territorial dispute with Japan Looking at Japan, it wasn’t until the early in the previous decade that Japan even recognized the southern half of Sakhalin Island as a part of Russia. The fall of communism brought several Japanese entrepreneurs to the island, and Japanese food became popular there long before it became trendy in Moscow. Japanese citizens have also

1,000 cubic meters. This is influenced by the fact that the supplies will mostly come from harder-to-access deposits in the extreme north of Russia.

Full speed ahead Lately Gazprom has been accelerating the pace of collaboration with its Chinese partners. The construction of the Power of Siberia, which will be the world’s largest pipeline when finished, is being carried out at full speed, but the development of the Altai pipeline may overtake it. According to Gazprom C.E.O. Miller, the western route may be launched sooner than the eastern one due to the already available pipelines and infrastructure. The western Siberian oilfields are the main source of supplies for Europe, so there is plenty of pre-existing infrastructure. A spokesman for the Russian Energy Ministry noted, “The western corridor is united by a single gas transportation system and by the main deposits in Western Siberia, that is, the resource base already exists.” The Energy Ministry also pointed out that discussions over the use of the western route to China are not new. “Negotiations on the western route through Altai have been going on since 2010, but then emphasis was given to the ‘eastern’ route, since the main consumers are located in eastern China and the demand is greater there,” the Energy Ministry press office said in a

Russian President Vladimir Putin said this month that in seeking to expand trade with China, the two countries would attempt to shift away from using the dollar to cover energy transactions. “We’re moving away from the diktat of the market that denominates all the commercial oil flows in U.S. dollars,” Putin said in an interview with Russian state news agency TASS. “We’re boosting as much as possible the use of national currencies — both the ruble and the yuan.” During a trip to Beijing in November, Putin expanded an agreement reached earlier this year to sell Rus-

Losses for Europe? Russia may freeze some expensive projects related to constructing gas pipelines and gas liquefaction that are oriented toward Western consumers, since there may not be enough resources to simultaneously realize several large projects. The troubled South Stream project to transport Russian natural gas to Europe via the Black Sea may be one of the first. According to the Russian Energy Ministry, however, for the time being there are no discussions on abandoning the South Stream project, and Russia will remain a reliable supplier of gas to Europe.

Gas as big politics Some analysts put the sudden acceleration in gas cooperation between Russia and China down to political, rather than economic factors. “By all appearances, Russia is actively working with China, and Asia in general, precisely in the context of

■AJAY KAMALAKARAN SPECIAL TO RBTH

the western sanctions and the creation of alternative distribution channels for its energy resources,” said Anna Bodrova, senior analyst at the Alpari Group.“Logically speaking, all these negotiations should have been completed a few years ago, so that now it would already be possible to start intelligence work and construction.” Yet Mikhail Krutikhin, a partner at Rusenergy, says that both projects supplying gas to China may turn out to be economically disadvantageous for Russia. First, he points out, the western route pipeline will take 5,000 miles (8,047 kilometers) to reach China’s economically developed regions. For Western Siberian gas to be competitive in terms of transportation costs, the length of the route must not exceed 3,100 miles. Therefore, it may happen that China will receive the gas at a price that is advantageous only for Beijing. Moreover, it is important to note that Russia is still negotiating over gas supplies to Europe, where the market continues to grow. In 2013, Russia supplied 138 billion cubic meters of gas to Europe. The expected volumes of supplies through the eastern and western routes to China are only half as much: an annual 68 billion cubic meters until 2020. ■LEONID KHOMERIKI SPECIAL TO RBTH

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Barrels, rubles and yuan

sian natural gas to China.The two sides had made a breakthrough in May, signing a deal — worth $400 billion at the time — for Russia to supply China with natural gas for 30 years, following a decade of deadlocked negotiations. The new memorandum foresees a second pipeline route. Yet skeptics point out that the new deal is nonbinding, and that price negotiations may yet complicate reaching a final agreement. Meanwhile, Russian crude oil major Rosneft has invited the China National Petroleum Corporation to take a stake in the mammoth Siberian oil deposit, Vankor. At the same time, Western majors such as ExxonMobil and Shell are being forced to abandon oil projects they’d been developing alongside Russian partners because of U.S. and European sanctions. During a meeting in October between Russian Prime Minister Dmitri Medvedev and Chinese Premier Li Kequiang, the two sides signed a raft of 38 separate agreements covering energy, finance and technology, which Medvedev said would help double bilateral trade over the next five years to $200 billion. Among the accords was an agreement on yuan-ruble currency swaps

statement. These negotiations laid the framework for the current agreement. The route is not without challenges, however. Gazprom still has to modernize the existing gas transportation infrastructure and construct a gas pipeline to the Chinese border, which will pass through quite complicated terrain. Investments in the Altai gas pipeline are estimated to be between $11 billion and $14 billion.

RUSSIA BEYOND THE HEADLINES IS AN INTERNATIONAL MEDIA PROJECT SPONSORED BY RUSSIAN DAILY NEWSPAPER ROSSIYSKAYA GAZETA. ITS PRODUCTION DOES NOT INVOLVE THE EDITORIAL STAFF OF THE INTERNATIONAL NEW YORK TIMES. RBTH IS FUNDED THROUGH A COMBINATION OF ADVERTISING AND SPONSORSHIP TOGETHER WITH SUBSIDIES FROM RUSSIAN GOVERNMENT AGENCIES. RBTH’S EDITORIAL VOICE IS INDEPENDENT. ITS OBJECTIVE IS TO PRESENT, THROUGH QUALITY CONTENT, A RANGE OF PERSPECTIVES ABOUT RUSSIA AND RUSSIA’S PLACE IN THE WORLD. PUBLISHED SINCE 2007, RBTH IS

SANCTIONS PUSH RUSSIA TOWARD ECONOMIC COOPERATION WITH CHINA Economic uncertainty and political fallout with the West over Ukraine have forced Russian officials to take action following years of rhetoric about reaching out to China. This year the ruble has fallen to record post-Soviet lows, global prices for crude oil have dipped precipitously and Western sanctions on Russia’s oil industry have posed a challenge to the future expansion of crude output. So far, much of the negotiations between Moscow and Beijing have focused on energy and currency.

been well-integrated into society. Yutaka Miyanishi, the owner of Furusato, the oldest, most popular Japanese restaurant in Sakhalin, was named “honorary citizen of Yuzhno-Sakhalinsk.” “Japan is our closest neighbor, and since it is an ancient civilization, there is a lot we can learn from them,” said Viktor Kournikov, who worked with the Japanese television channel NHK on several projects. The southern half of Sakhalin, which was under Japanese rule from 1905 to 1945, is dotted with monuments from the days it was known as Karafuto.

The island, which is connected by a ferry service from Hokkaido, welcomes many Japanese tourists. Russia and Japan are still technically in a state of war, since they never signed a World War II peace treaty, but that has not stood in the way of cultural interaction. “Japanese is the most popular foreign language here after English,”said Tamara Chikova, a professor at Sakhalin State University. “It is quite fashionable to learn the language, and there are many exchange programs and scholarships available in the country.” According to a poll taken by the Analytical Levada Center in 2013, 67 percent of Russians said they viewed Japan mostly positively. Professor Chikova says in Sakhalin the numbers fluctuate when discussion of the territorial dispute between the countries comes up. Japan insists on Russia returning the southern Kuril Islands as a precondition for a World War II peace treaty. In 2004, when Russian Foreign Minister Sergei Lavrov offered two of the islands to Japan, there were protests from Cossacks and local citizens groups.This offer came after China and Russia settled their boundary dispute, but was rejected by Japan, where the so-called Northern Territories issue is emotive. Chikova says that Japan’s siding with the West over the crisis in Ukraine has been noticed in Sakhalin, but there is no strong anti-Japanese sentiment. “You have to understand that there is greater respect for Japan than China among the people, but that has to do with the fact that the Japanese are richer and have a much higher standard of living than the Chinese,” she added.

Brunei’s Sultan Hassanal Bolkiah, Russian President Vladimir Putin, Chinese President Xi Jinping, his wife Peng Liyuan and U.S. President Barack Obama in Beijing.

between the two countries’ central banks worth 150 billion yuan ($25.5 billion). “The bilateral national currency swap agreement entered into by the Bank of Russia and the People’s Bank of China will foster bilateral economic relations by expanding opportunities for trade financing and direct investment, as well as facilitate the use of the Russian ruble and the Chinese yuan in international trade and investment activities,” the Russian Central

Bank said in a statement. The U.S. and Europe have imposed sanctions on Russian companies in finance, energy and military equipment, after Washington and Brussels accused Moscow of providing military assistance to separatist rebels in Ukraine. Russia, in response, has banned certain U.S. and E.U. food exports from Russian markets for one year. ■DAVID MILLER RBTH

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CHINA BENEFITS FROM THE U.S.-RUSSIA CONFLICT IVAN TSVETKOV EXPERT

he process by which great nations are born and die, global empires are transformed into mediocre states and obscure upstarts turn into rulers of the world remains a mystery, despite all the best efforts of academics and politicians to crack it. Today China is at the center of the debate over this process, just as the United States was 100 years ago. At the turn of the 20th century, the United States was still waiting for its finest hour. It had already made a remarkable economic leap, but had not yet received international political recognition. There are many similarities in the historical development trajectories of the United States and China at their moments of transformation into world hegemonies. The founding father of China’s economic miracle, Deng Xiaoping, instructed his successors to be modest in their dealings with the outside world and wait for the right moment to come into their own. Similar recommendations some 200 years earlier were left by U.S. founding father George Washington in his political will. The United States began to shed its isolationism only after it had overtaken all its international economic rivals, which occurred under Theodore

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Roosevelt in the 1900s. China’s current leader, Xi Jinping, has much in common with Roosevelt. China’s“Big Stick policy” in the South China Sea, tough rhetoric, ambitious statements — all these indicate China’s desire to speed up the process of spending its economic capital on foreign policy. For the U.S., the event that removed all obstacles on its path to establishing its international political influence was World War I. A glance at today’s headlines prompts the conclusion that China does not have to wait long before it rises to the top of the global pedestal. The confrontation between Russia and the West is a true godsend for China. Just as the self-destruction of the Eurocentric world a century ago prepared the ground for building a new U.S.centric system, the weakening of the U.S. in its standoff with Putin’s Russia in the 21st century will result in its being replaced by China as the leading global power. It is sad to admit that in both cases, the role of the key spoiler — the country that ruined the balance of the global system — belongs to Russia. In the opinion of many Americans, modern Russia does not present a serious force to be reckoned with internationally and can claim only the sta-

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tus of a regional power. They may be absolutely right as far as Russia’s positive capabilities are concerned, but its negative potential is immeasurably higher. Yet this is manifested not so much in military pressure on its East European neighbors or threats to turn the United States into “radioactive ash.” The real Russian threat lies in Moscow’s ability to destroy the U.S.centric world order by starting to play the China card in the hope of hurting the United States and compensating for losses resulting from Western sanctions. The argument in favor of Russia forming an anti-American bloc with China and other countries, which is often repeated by Moscow’s politicians, is that a new international system will not be based on hegemony or bipolarity, but rather on equal partnership

The future of the global political system has become less important than the more immediate fear of losing political control. between the growing economies of Eurasia and Latin America, which form a counterbalance to the U.S. and challenge the dollar’s global domination. This utopia may have some propaganda value, but the problem is that even the masterminds of Russian foreign policy do not believe in it. It is absolutely obvious that the sluggish progress in Russian-Chinese economic relations prior to 2014 and its substitution with grandiloquent, but

TENSION BETWEEN THE U.S. AND CHINA GIVES RUSSIA AN OPENING IN THE PACIFIC GEVORG MIRZAYAN ANALYST

uring the course of the recent Asia-Pacific Economic Cooperation (APEC) summit in Beijing, the U.S. and China signed agreements in the military sphere that will help both countries reduce the risk of a military confrontation in East Asia. The agreements establish a framework for cooperation in the event that either side takes any large-scale military action, requiring the parties to inform each other in advance of any such steps. The document also sets out a code of conduct to be followed if U.S. or Chinese military, air or naval units come into contact with each other. The countries signed the agreement

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because recently there has been an increase in incidents (in particular, China’s inclusion of the East China Sea territory in its air defense zone) that are capable of placing Beijing and Washington on the verge of a conflict that would be a disadvantage for both sides.

The advantage of the “new model” of U.S.-Chinese relations is that it transforms the bilateral relationship into a state of “mature rivalry.” Some political analysts think that the current agreements are the beginning of the genuine construction of a new format of American-Chinese interactivity.“The administrations of Xi Jinping and Barack Obama, especially after their important meeting in California in June 2013, are searching for

‘a new model of relations,’ in which issues of military security and ‘the technologies’ for preventing conflict are crucial,” said Sergei Trush, an expert with the Institute for U.S. and Canada Studies at the Russian Academy of Sciences. “The agreements signed at the APEC summit can be considered one of the first results of this process.” The significance of this“new model” should not be exaggerated, however, since it will not force China to reject the pursuit of its own policies in the region. “Both elites have an understanding of the ‘negotiating red line’ and the key security criteria, and they will follow them,” said Trush. Yet according to Dmitry Suslov, deputy director of European and International Studies at the Higher School of Economics, the advantage of the “new model” is that it transforms the bilateral relationship into a state of “mature rivalry.”The countries understand that they are rivals and opponents in the military sphere, yet they are trying to make this rivalry and com-

petition manageable, to prevent an escalation, which neither side needs, says Suslov, “Something similar occurred in Soviet-American relations when in the ‘60s the countries were negotiating how to control the armament process.” This model does have a weakness, however. Pacific Rim countries may misunderstand the model and interpret it as a victory for the isolationist perspective in the U.S.“In the U.S. there are various opinions on how to react to the territorial conflicts between China and its neighbors,” Trush said. “A part of the American political-academic elite believes that Washington should not intervene in the conflicts directly. In his opinion, this elite instead believes that the U.S. should have multilateral negotiations with China with the participation of the Association of Southeast Asian Nations (ASEAN). “Such a position obviously creates great concern for American allies in the region, first and foremost Japan,” he said.

ineffective, declarations and memorandums of understanding had only one reason: President Vladimir Putin did not want to let China onto his territory. Now, however, in 2014, this resistance is no longer possible. Putin has decided that the threat of China’s economic and demographic domination of Russia is less serious than the threat of the United States provoking a“color revolution”in Russia. Suddenly, the future of the global political system has become less important than the more immediate fear of losing political control. Putin was faced with the dilemma of losing power under the Americans or retaining it under the Chinese. It could hardly be a surprise that he opted for the latter. A similar strategic choice is being presented to the United States. The recent series of East Asian summits

has clearly shown that China will not miss this opportunity to fish in these troubled waters, so the United States must now decide which is more important to it: To punish the aggressor Putin, losing its world hegemony in the process, or to find a way of resolving the conflict with Russia, thus halting the process of China’s transformation into a political and military superpower. Unfortunately for the United States leadership, the choice is not as obvious as it was for Putin. It does not have such a telling illustration of its political future as the Russian leaders got on Feb. 22, 2014, when Ukrainian President ViktorYanukovych was deposed and fled the country.

In Russia, the consequences of normalization in U.S.-Chinese relations have various interpretations, depending on the expert. “If you look at the situation from the viewpoint of a zero-sum game, then it is clear that a reduction in the confrontation between Beijing and Washington limits Moscow’s potential, depriving it of space for maneuvering,” said Trush. “Yet, if we look at it from the perspective of geo-economy and the resulting reduction of confrontation for the entire region, then Moscow certainly wins. Moscow gains a more positive context for finding its niche in the Pacific Rim economy, es-

event of a sharp deterioration in U.S.Chinese relations, “Russia will be obliged to support China, which means that it would become China’s younger partner and the attempts to establish strategic relations with other eastern and southeastern Asian nations would collapse, since many of those countries are U.S. allies and partners and in the event of an American-Chinese escalation would back Washington.” On the other hand, Russia does not need Asia to be dominated by either the U.S. or China. In the first scenario, the U.S. would have an opportunity to pressure Russia not only from the west, but also from the east. And if East Asia fell under Chinese control, then Moscow would either have to work only with China or through China. “Russia is extremely interested in specifically the multilateral participation of Pacific Rim countries in its plans, in the creation of a so-called “organization of interests,”rather than orienting toward a single monopolistic investor,”said Sergei Trush. That is why Russia needs the system that will evolve within the framework of “the new model”— preserving the U.S.-Chinese conflict, but sluggishly.

In Russia, the consequences of normalization in U.S.Chinese relations have various intepretations, depending on the expert. pecially as far as attracting investment for modernizing its Far East.” Furthermore, Moscow is interested not only in the reduction of tension between the U.S. and China, but also in a de-escalation of the situation in the East China and South China Seas to an acceptable level. In Dmitry Suslov’s opinion, in the

Ivan Tsvetkov is an associate professor at St. Petersburg State University.

Gevorg Mirzayan is a political commentator for the Russian weekly analytical magazine Expert.

RUSSIA-IRAN DEAL IS ABOUT MORE THAN NUCLEAR POWER ANDREI RETINGER EXPERT

n early November, Russia and Iran reached a new agreement for the development of Iran’s nuclear power industry. The two sides signed a series of documents providing for the construction of eight nuclear power units along with a specific contract for the construction of two power units at the already operating Bushehr nuclear power plant. Overall, this is one of the biggest deals to be signed on the world nuclear market in recent years. The value of the whole package of projects is estimated to be worth tens of billions of dollars, given that the price of building one nuclear power unit on the world market varies between $5 billion and $7 billion. The arrangement will not only generate massive profits for Russian state nuclear energy corporation Rosatom,

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but will also strengthen Russia’s position in the Middle East. According to preliminary estimates, thanks to the deals, Iran may eventually produce a minimum of 10 gigawatts of energy from nuclear power. This estimate includes power generated by the first power unit at Bushehr. As a reference, Russia currently generates 25 gigawatts of energy from nuclear power. With the agreement, Moscow and Tehran have sent a clear signal to the international community that despite a difficult political climate, the two countries are moving their relationship forward. The construction of these new nuclear power generation capacities could make Iran an exporter of electricity to the countries of the Persian Gulf, where there is an ever-increasing demand. The entire project for the construction of new nuclear power units in Iran, including equipment and fuel supplies, will be carried out under the supervision of the International Atomic Energy Agency (I.A.E.A.) and will fully comply with the regime of

nonproliferation of nuclear materials, as was the case with the construction of the first power unit at the Bushehr plant. Russia has much to gain from the new agreement in both the short and long term. The agreement provides work for Russia’s nuclear machine factories and engineers, who will have to supply all the equipment for the power plants throughout the construction period. In addition, the nine power units, including Bushehr-1, will also be buying Russian nuclear fuel for the foreseeable future. The provision of fuel alone will mean a constant inflow of revenue into Russia for many years. The profit from the sales of fuel is also estimated to be tens of billions of dollars. More importantly, the deal, like the agreement to finish the construction of Bushehr in the first place after it was abandoned by Germany, gives Russia a place from which to grow its presence in the Iranian market once sanctions on Tehran are lifted. Iran has been under some form of sanctions since its 1979 revolution,

and additional sanctions were imposed in 2006 after the country refused to curtail its nuclear enrichment program. Today, sanctions are in place against Iran’s oil and petrochemical industries, banking and insurance services, shipping and some online services such as Web hosting.

The deal gives Russia a place from which to grow its presence in the Iranian market once sanctions on Tehran are lifted. Many observers, however, believe that the country will soon be allowed back into the global economic community. The U.S. and the E.U. lifted some sanctions against Iranian oil in January after Iran stopped enriching uranium past 5 percent, and are expected to lift more restrictions before the end of 2014. In anticipation of the re-opening

of the Iranian economy, businesspeople from all over the world are flocking to Tehran. The nuclear agreement gives Moscow a boost. This is especially important since once the country is open for business, Russia will face stiff competition from China, Japan and Europe in providing goods and services. Iran, for its part, will also reap multiple benefits. The country is diversifying its energy policy. Expanding the percentage of domestic energy provided by nuclear power will free up oil and gas to sell on the world market. Additionally, the project will provide Iran with thousands of jobs for years to come. The plants will require large teams of construction workers along with specialized architects and engineers. Another plus — the Iranian scientists and engineers who will build and work at the power plants will learn from the experience of their Russian colleagues. Russia has another reason for making friends with Iran. Iran has the world’s second-largest oil reserves. Russia has only the seventh-largest.

Moscow is concerned that once Tehran is again free to sell its energy resources on the world markets, the two countries will be competing for contracts in Europe, China and India. By dealing with Iran now, Russia hopes that any future sale price of oil and gas will be agreed upon with Moscow in advance. The arrangement creates a mutual interdependence between Russia and Iran economically and geopolitically at a time when both countries need more friends in the international community. Russia wants to show the rest of the world that it is capable of working with partners on a project of global interest; Iran wants to prove yet again that its nuclear enrichment project is a peaceful one. If restrictions against Iran are indeed lifted this fall, the Russian side could be hopeful that economic sanctions against it could be lifted as well. Andrei Retinger is an independent expert who has written about the Russian nuclear industry for more than 10 years.


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RUSSIA BEYOND THE HEADLINES A global media project sponsored by Rossiyskaya Gazeta www.rbth.com

BUDDHISM IN RUSSIA: TEN FACTS The history of the followers of Buddha in Russia is a tumultuous one. Buddhists extolled the Russian tsars and presidents, served as doctors in the royal court and endured repression and the destruction of their culture under the communists. Many Buddhists were sent to camps and endured mandatory therapy. They continued to be persecuted until the 1980s. Here are 10 facts about Buddhism in Russia.

Buddhism is one of Russia’s five traditional religions, but the fate of the faith’s adherents has changed through the years. Find out more about the fascinating history of Buddhism in Russia.

What type of Buddhism is found in Russia? Tibetan Buddhism is practiced in Russia. It is found mainly in three regions: Buryatia, Kalmykia and Tuva. Buddhism first came to Russia in the 17th century, when the western Mongolian nomadic Oirat tribes, who were then known as the Kalmuks, arrived at the lower reaches of the Volga, and in the mid-17th century during the conquest of Transbaikalia, the area east of Lake Baikal where the eastern Mongolian tribes, the Buryats, lived. In about 1616, en route to the Volga, the Oirats built their first fixed monastery, Darkhan-Dorzhan-kit (meaning Seven Chambers), in the vicinity of the modern-day city of Semipalatinsk in Kazakhstan.

it held equipment that created interference in Western radio programs that were broadcast in the Soviet Union. In 1962 the temple was given to the Zoological Institute of the Russian Academy of Sciences. The building did not come under government protection until 1970. The Dalai Lama nonetheless visited this temple, but it was the 14th Dalai Lama, not the 13th, who arrived on a gray September day in 1987. Eyewitnesses to the Dalai Lama’s visit recount that on that day, a rainbow unexpectedly appeared over the Hotel Leningrad, where he was staying.

A Buddhist government existed briefly in Siberia. Buddhists tried to take advantage of the revolution and form their own government. On Feb. 25, 1919, a“pan-Mongolian”conference opened in the eastern Siberian city of Chita, proposing the creation of the Great Mongolian Buddhist government, which would unite Outer and Inner Mongolia, Buryatia, Tuva and part of Manchuria. It might have succeeded, but the communists were more organized, and the Buddhist government did not last more than a year.

When was Buddhism recognized?

What taxes did Buddhists pay?

Two hundred and fifty years ago, the empress Catherine II (the Great) allowed Buddhists to choose their own leader — Pandito Khambo Lama. Until then, all Buddhists in Russia had obeyed the Mongolian or Tibetan hierarchies. As a token of gratitude, in 1766 the Buddhists recognized Catherine as the earthly incarnation of the White Tara (a Buddhist goddess). Buddhists lived peacefully under the reign of Catherine and indeed under all the Russian monarchs. The current leader of the Russian Buddhists is the 24th Pandito Khambo Lama.

In the 1920s and 1930s, the communists destroyed practically all Buddhist monasteries and exiled or executed nearly all representatives of the Buddhist clergy. One method of battling the religion was taxes. In Kalmykia, the faithful were required to pay the following: a unified agricultural tax, a class tax, an income and property monetary tax, an equalization fee, a local duty, a civil tax, a per-capita monetary tax, a military tax, a one-time tax, a progressive tax, local taxes for construction, cattle and means of transport, a specific housing tax, and duties for the medical examination of cattle.

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Nicholas II had a Buddhist physician.

The Bolsheviks destroyed the Buddhists’ cultural legacy.

One item mentioned in connection with the influence of Buddhists in tsarist Russia is that Peter Badmayev, who was originally from Buryatia, treated Nicholas II. While Badmayev was not a Buddhist, he came from a Buddhist family, and his elder brother was Alexander Badmayev, a doctor of Tibetan medicine whose skills so impressed Alexander II that the tsar allowed him to practice in St. Petersburg. In Petersburg, where he moved following in his brother’s footsteps, Peter converted to Orthodoxy after he became Alexander III’s godson, and trained as an Orientalist and doctor. He served for many years in the Asia department of the Ministry of Foreign Affairs.

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How did Buddhists affect the formation of Russia’s territory? During his diplomatic career, Peter Badmayev tried to convince the Russian tsars to incorporate Tibet, Mongolia and China into Russia. Nicholas II called the plans fantastical, but they were partly fulfilled. After the fall of the Chinese mon-

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Block-printed boards — of which there were up to 100,000 in the Aginsky temple alone — were the most valuable objects of the Buddhist cultural legacy that were pitilessly destroyed. Many of the boards had no religious content, but rather were dictionaries, grammar books, narrative and poetic works, and essays on history, medicine, astronomy and philosophy. Equally valuable were manuscripts — some of which were unique copies that did not exist even in Tibet — and thangka works of Buddhist representational art.

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1. Novices at the Chadansky Temple, 1934. 2. The destruction of the Khurzhitaevsky Datsan during the antireligious campaign, 1937. 3. Two Buddhists in Uryankhansky Krai, today part of the Russian Republic of Tuva, 1934.

archy in 1911, Russia annexed Tuva — the third Buddhist region in Russia after Buryatia and Kalmykia. The annexation was not violent insofar as it was supported by the republic’s clergy. Interestingly, to this day, Taiwan claims this territory, considering itself to be the successor to Qing China.

temple was built in 1915), presuming that he would be able to take refuge there if British forces invaded Tibet. However, revolution then broke out in Russia, followed by the Civil War.

The 13th Dalai Lama may have wanted to hide in Russia.

The temple in St. Petersburg has now been returned to the Buddhist community, but over the course of the 20th century, the building was used for numerous purposes. During the Cold War,

According to one version of events, the 13th Dalai Lama blessed the construction of a temple in St. Petersburg (the

What was the St. Petersburg temple used for during the 20th century?

A LOOK AT RUSSIA’S UNEASY RELATIONSHIP WITH CHINA CONTINUED FROM PAGE 1

Against this backdrop, Beijing sought to use the APEC summit as a launch pad for the free-trade agreement, which is less ambitious in terms of tariff reductions but larger in scope, involving all 21 APEC economies. Summit attendees say, however, that Washington managed to drop a fly in China’s ointment. The communiqué adopted by foreign and trade ministers, and approved by APEC leaders, reported the start of negotiations to create a free-trade area, but with no specific time frame — to Beijing’s consternation. True, Washington was unable to announce the creation of the Trans-Pacific Partnership at the summit in Beijing. U.S. Trade Representative Michael Forman admitted that the signing of an agreement would have to wait “a few more weeks or months.” Russia was officially involved in the launch of the free-trade area negotiations, but has yet to conduct a detailed analysis, according to Russian officials. Going into the summit, Moscow was lukewarm about both the T.P.P. and the R.C.E.P. “It is not possible to create a trading bloc in Asia without China or the United States, so both projects are non-

starters. Why waste time?”said one senior official. The dynamics suggest that Russia is more likely to opt for the Chinese plan. The U.S.-backed T.P.P. is seen as a hostile project, within which Russia cannot fulfill the obligations to tariff and non-tariff liberalization. A similar tussle unfolded between the U.S. and China on a more specific matter: the promotion of infrastructure projects in the Asia-Pacific Region. In October, China announced the establishment of the Asian Infrastructure Investment Bank (A.I.I.B.), which is being groomed as an alternative to the World Bank and the Asian Development Bank, both dominated by the United States and its allies.Yet by no means did all countries that were initially enthusiastic about the project become cofounders — because of political pressure from Washington. “Barack Obama phoned Australian Prime Minister Tony Abbott, and his national security adviser, Susan Rice, called various officials to demand that Australia refrain from participation. And we acquiesced, which was a mistake,”said a member of the Australian team. On the eve of the APEC summit, Chinese President Xi Jinping announced the creation of a $40 billion

fund to finance infrastructure development projects for the proposed Great Silk Road Economic Belt. This alternative project, which Xi announced a year ago during a visit to Kazakhstan, provides for investments in transport infrastructure. Some of the projects involved will link China’s center and northwest (where many companies are moving production from China’s eastern provinces because of the difference in wages) to the markets of Europe via Central Asia and Russia. Another portion of the funds will be invested in port and rail infrastructure in southeast Asia. Neither the A.I.I.B. nor the Great Silk Road project was initially to Moscow’s liking. The A.I.I.B. aroused suspicion, as does any China-dominated fund, while the Great Silk Road project was seen as a threat to plans to raise the capacity of the Trans-Siberian and Baikal-Amur railways. However, sanctions are causing Russia to rethink its position. Moscow is now seeking sources of external financing for its own infrastructure projects, and is therefore interested in the A.I.I.B.. These same considerations lay behind Moscow’s support for the BRICS (Brazil, Russia, India, China and South Africa) development bank. Beijing is trying to allay Moscow’s

fears regarding the Great Silk Road project. At the September summit of the Shanghai Cooperation Organization (S.C.O.), Xi proposed to Russian President Vladimir Putin that the Trans-Siberian and Baikal-Amur railways be included within China’s mega-project. The slow progress in multilateral projects was offset by an abundance of bilateral agreements. Even the U.S. and China concluded an agreement on liberalizing trade in high-technology goods after 18 months of wrangling. Russia and China signed the biggest package of bilateral agreements, including a framework agreement on the Altai gas pipeline as well as credit agreements between Russian and Chinese state-owned banks. Russia was unfazed by the multilateral nature of the discourse. While the key APEC leaders traveled on to the East Asia Summit in Myanmar, President Putin went to Vladivostok. It was the fourth successive time that Russia’s leader has not attended the summit, even though Moscow has sought to upgrade its observer status at this high-profile forum since 2005. Alexander Gabuev is deputy editorin-chief of the weekly analytical magazine Kommersant-Vlast.

When did the repression of Russian Buddhists end? After Khrushchev’s Thaw, in the 1960s, nonethnic followers of the dharma started appearing in Moscow, Leningrad and other major Soviet cities.They were mainly an intelligentsia that needed to keep their spiritual quests secret or risk losing jobs and perhaps even freedom. The KGB’s monitoring of Buddhists was finally lifted in the late 1980s. ■GLEB FEDOROV RBTH

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December Monthly Brief: Year in Review

This new report will analyze the main events in Russia-U.S. relations over the past year and offer a look ahead to 2015. Today, bilateral contacts in most areas and at all levels are either frozen, suspended or stagnant at best. This memo reviews how that happened, and asks what choices lie ahead. As we enter a new year, what lessons should be learned and what steps can be taken to avoid further confrontation? Get the view from Moscow.

RBTH for The International New York Times  
RBTH for The International New York Times  

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