Geopolitics

Why Asia Is Russia's Best Insurance Against Sanctions

Fishing on the Chinese side of the Heixiazi Island, a border island that links China and Russia.
Fishing on the Chinese side of the Heixiazi Island, a border island that links China and Russia.
Aleksandr Gabuev

MOSCOW — The Kremlin is already busy looking for ways to compensate for the economic hit that could come if sanctions get worse or Western businesses start to shy away from working in Russia. And the direction Moscow is looking is decidely to the east.

Actively developing relationships with East Asia was on Moscow’s mind even before the crisis in Ukraine and impending sanctions imbued the issue with more urgency. Last September, the process of developing Russia’s own Far East was radically overhauled in an effort to stimulate growth. Now developing connections with Asia looks like one of the best insurance policies in the event that the West imposes paralyzing sanctions, a source in the Russian government told Kommersant.

According to Sergei Men, a managing partner at the Hong Kong investment boutique Eurasia Capital Partners, Asia is the best alternative to the current over-reliance on the European market.

The countries of East and Southeast Asia are some of the fastest-growing markets for a number of key Russian exports: fossil fuels, metals, chemicals and manufacturing. Although China doesn’t do as much trade with Russia as it does with the European Union, it has been Russia’s most important single trade partner since 2009.

For a long time the biggest obstacle for Russia in developing trade with China was the lack of infrastructure. The first and only oil pipeline from Russia to China was completed in 2010, and while talks have been held since 2006 regarding the construction of a gas pipeline, it has not yet resulted in any concrete construction plans.

Yuri Trutnev, the new vice premier in charge of the Far East, is asking for $4.7 billion over the next five years. Given that pipelines, railroads and gas liquefaction factories take at least five years to build, Trutnev warns that Russia might already be too late to truly diversify. But Russia doesn’t currently have that kind of public funding for infrastructure projects in the Far East.

Still, Men says that money is certainly not the main obstacle to doing business with Asia, noting that China has the largest gold reserves in the world, followed by Japan. Men says that the Chinese would be happy to give Russia large loans based on future deliveries of fossil fuels.

Tokyo and Seoul strategy

Energy giant Rosneft has already accepted this kind of financing — in 2013, Rosneft president Igor Sechin agreed to an $80 billion loan from Chinese oil companies based on future oil deliveries. “This is a model that 10 to 20 large fossil fuel companies could follow. If that happens, the budget can survive any sanction,” saysa government source.

Train from Russia to Manzhouli, China — Photo: Jack No1

Beijing wants to help its Russian partners, says a source from one of China’s state banks. Although China’s political reaction to the crisis in Crimea has been reserved, it is actively ready to help Moscow survive economic sanctions.

It seems like Russia is also willing to accept the offer. On March 20, the day U.S. President Barack Obama met with European leaders, there was a massive Russian-Japanese investment summit in Tokyo led by Igor Sechin, who called on Japanese corporations to invest in all of Rosneft’s projects.

The Chinese island of Hainan will host next month’s Boao forum, which is hailed as the “Asian Davos,” and this year will feature a large Russian delegation, including many leaders of Russian corporations that are now on U.S. and European blacklists.

For China, developing connections with Russia is a strategic way to increase its energy security. Beijing is trying to get access to Russian fossil fuels in order to decrease its reliance on shipping routes that the U.S. could close.

China isn’t the only Asia country interested in developing ties with Russia, and both Japan and South Korea could be part of Russia’s “insurance” policy.

“Tokyo has had great hopes of a partnership with Russia — not only to develop Japanese business in the Russian Far East, but also to prevent Russia from becoming a Chinese raw-materials colony,” explained a well-placed Japanese government official.

In an effort to improve relations with Russia, Prime Minister Shinzo Abe was the only foreign leader of a G8 country who personally visited the Olympics in Sochi. But now both Japanese and South Korean diplomats say the pressure from the West has increased.

“The U.S. is putting heavy pressure on us to join the sanctions against Russia, but we don’t want to,” says a source close to the South Korean government.

The United States has to make a serious geopolitical choice, Sergei Men says. Either Washington continues to pressure Tokyo and Seoul in order to strengthen Moscow’s isolation, or it allows its Asian allies to stop at symbolic sanctions. If Japan and South Korea don’t do business with Russia, Moscow will have no choice but to run to the embrace of its Chinese comrades.

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Queen Elizabeth II with UK PM Boris Johnson at a reception at Windsor Castle yesterday

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Hej!*

Welcome to Wednesday, where chaos hits Syria, Brazilian president Jair Bolsonaro is accused of crimes against humanity and a social media giant plans to rebrand itself. For Spanish daily La Razon, reporter Paco Rodríguez takes us to the devastated town of Belchite, where visitors are reporting paranormal phenomenons.

[*Danish]

🌎  7 THINGS TO KNOW RIGHT NOW

• Syrian violence erupts: Army shelling on residential areas of the rebel-held region of northwestern Syria killed 13 people, with school children among the victims. The attack occurred shortly after a bombing killed at least 14 military personnel in Damascus. In central Syria, a blast inside an ammunition depot kills five soldiers.

• Renewed Ethiopia air raids on capital of embattled Tigray region: Ethiopian federal government forces have launched its second air strike this week on the capital of the northern Tigray. The air raids mark a sharp escalation in the near-year-old conflict between the government forces and the Tigrayan People's Liberation Front (TPLF) that killed thousands and displaced over 2 million people.

• Bolsonaro accused of crimes against humanity: A leaked draft government report concludes that Brazilian President Jair Bolsonaro should be charged with crimes against humanity, forging documents and incitement to crime, following his handling of the country's COVID-19 pandemic. The report blames Bolsonaro's administration for more than half of Brazil's 600,000 coronavirus deaths.

• Kidnappers in Haiti demand $17 million to free a missionary group: A Haitian gang that kidnapped 17 members of a Christian aid group, including five children, demanded $1million ransom per person. Most of those being held are Americans; one is Canadian.

• Putin bows out of COP26 in Glasgow: Russian President Vladimir Putin will not fly to Glasgow to attend the COP26 climate summit. A setback for host Britain's hopes of getting support from major powers for a more radical plan to tackle climate change.

• Queen Elizabeth II cancels trip over health concerns: The 95-year-old British monarch has cancelled a visit to Northern Ireland after she was advised by her doctors to rest for the next few days. Buckingham Palace assured the queen, who attended public events yesterday, was "in good spirits."

• A new name for Facebook? According to a report by The Verge website, Mark Zuckerberg's social media giant is planning on changing the company's name next week, to reflect its focus on building the "metaverse," a virtual reality version of the internet.

🗞️  FRONT PAGE

"Oil price rise causes earthquake," titles Portuguese daily Jornal I as surging demand coupled with supply shortage have driven oil prices to seven-year highs at more than $80 per barrel.

#️⃣  BY THE NUMBERS

98

For the first time women judges have been appointed to Egypt's State Council, one of the country's main judicial bodies. The council's chief judge, Mohammed Hossam el-Din, welcomed the 98 new judges in a celebratory event in Cairo. Since its inception in 1946, the State Council has been exclusively male and until now actively rejected female applicants.

📰  STORY OF THE DAY

Spanish civil war town now a paranormal attraction

Ghosts from Spain's murderous 1930s civil war are said to roam the ruins of Belchite outside Zaragoza. Tourists are intrigued and can book a special visit to the town, reports Paco Rodríguez in Madrid-based daily La Razon.

🏚️ Between August 24 and September 6, 1937, during the Spanish Civil War, more than 5,000 people died in 14 days of intense fighting in Belchite in north-eastern Spain, and the town was flattened. The fighting began on the outskirts and ended in house-to-house fighting. Almost half the town's 3,100 residents died in the struggle. The war annihilated centuries of village history. The town was never rebuilt, though a Pueblo Nuevo (or new town) was built by the old one.

😱 Belchite became an open-air museum of the horror of the civil war of 1936-39, which left 300,000 dead and wounds that have yet to heal or, for some today, mustn't. For many locals, the battle of Belchite has yet to end, judging by reports of paranormal incidents. Some insist they have heard the screams of falling soldiers, while others say the Count of Belchite wanders the streets, unable to find a resting place after his corpse was exhumed.

🎟️ Ordinary visitors have encountered unusual situations. Currently, you can only visit Belchite at set times every day, with prior booking. More daring visitors can also visit at 10 p.m. on weekends. Your ticket does not include a guaranteed paranormal experience, but many visitors insist strange things have happened to them. These include sudden changes of temperature or the strange feeling of being observed from a street corner or a window. Furthermore, such phenomena increase as evening falls, as if night brought the devastated town to life.

➡️ Read more on Worldcrunch.com

📣 VERBATIM

We still cling to the past because back then we had security, which is the main thing that's missing in Libya today.

— Fethi al-Ahmar, an engineer living in the Libyan desert town Bani Walid, told AFP, as the country today marks the 10-year anniversary of the death of dictator Muammar Gaddafi. The leader who had reigned for 42 years over Libya was toppled in a revolt inspired by the Arab Spring uprisings and later killed by rebels. Some hope the presidential elections set in December can help the country turn the page on a decade of chaos and instability.

🇮🇷🎓  IN OTHER NEWS

Iran to offer Master's and PhD in morality enforcement

Iran will create new "master's and doctorate" programs to train state morality agents checking on people's public conduct and attire, according to several Persian-language news sources.

Mehran Samadi, a senior official of the Headquarters to Enjoin Virtues and Proscribe Vices (Amr-e be ma'ruf va nahy az monkar) said "anyone who wants to enjoin virtues must have the knowledge," the London-based broadcaster Iran International reported, citing reports from Iran.

The morality patrols, in force since the 1979 revolution, tend to focus mostly on young people and women, particularly the public appearance for the latter. Loose headscarves will send women straight to a police station, often in humiliating conditions. Five years ago, the regime announced a new force of some 7,000 additional agents checking on women's hijabs and other standards of dress and behavior.

Last week, for example, Tehran police revealed that they had "disciplined" agents who had been filmed forcefully shoving a girl into a van. Such incidents may increase under the new, conservative president, Ibrahim Raisi.

Speaking about the new academic discipline, Samadi said morals go "much further than headscarves and modesty," and those earning graduate degrees would teach agents "what the priorities are."

Iran's Islamic regime, under the guidance of Shia jurists, continuously fine tunes notions of "proper" conduct — and calibrates its own, interventionist authority. More recently the traffic police chief said women were not allowed to ride motorbikes, and "would be stopped," Prague-based Radio Farda reported.

Days before, a cleric in the holy city of Qom in central Iran insisted that people must be vaccinated by a medic of the same sex "as often as possible," and if not, there should be no pictures of mixed-sex vaccinations.

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

Thoughts on Facebook's new name? Zuckerverse? Tell us how the news look in your corner of the world: Drop us a note at info@worldcrunch.com!

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