By John Helmer in Moscow
A new Russian trade strategy, announced this week in Tokyo, gives priority to the growth economies of Asia and the Pacific.
The Tokyo presentation by First Deputy Minister of Foreign Economic Relations, Dr Sergei Glazyev, follows the visit to Beijing earlier this month of the Minister of Foreign Economic Relations, Mr Pyotr Aven. Dr Glazyev’s trip to Tokyo preceded by a few days the arrival of the Foreign Minister, Mr Andrei Kozyrev, who has already this week called on Beijing and Seoul.
The flurry of Russian activity in East Asia is the first product of the debate inside the Russian policy establishment over whether
to tilt the “new thinking” in the direction of Russia’s traditional enemies and large creditors in the West; or whether to target the “tiger economies” of Asia as the medium-term alternative to frozen relations with Japan.
Dr Glazyev provided an outline of his new thinking in an interview that responds to criticism in the Russian press that the government is slighting the East in favour of the West.
Dr Glazyev is the first senior Russian policy-maker to provide details of the policy that will be pursued in the run-up to President
Yeltsin’s proposed visits to China and Japan in the autumn.
ASIAN STRATEGY WITHOUT JAPAN
Relations with Japan are expected to be frozen indefinitely by the inability of Moscow and Tokyo to reach a compromise for the Kurile Island territories claimed by Japan.
Russian officials have urged the Japanese to reverse their insistence on putting the territorial issue ahead of economic relations.
They explain that the democratization of Russian political life has also encouraged new nationalist impulses. They remind the Japanese of the consistent opinion poll finding that Russians hold highly negative attitudes towards Japan.
According to Russian advice being delivered in Tokyo this week, Japan should follow the German example, and reverse its insistence on making settlement of the territorial issue the precondition for expanded economic relations. The Russian government has told the Japanese that by putting improved economic relationships first, the Germans have largely succeeded in overcoming popular Russian antipathies. The message is that Japan should do the same, but noone in Moscow believes the Tokyo government will agree.
An Asia-Pacific strategy without Japan is likely to gravitate, Dr Glazyev says, toward the “tiger economies” of South Korea, Hong Kong, Taiwan, and Singapore for import and export trade; and to Singapore as a centre for financial and trade intermediation, as well as for investment directed at the Russian Far Eastern region.
Dr Glazyev, a professional economist, said the new strategy is designed to shift the direction of Russian trade so as to overcome
existing problems with traditional markets.
“The main problem in [Russia’s] foreign trade,” he said, “is the concentration of Russian exports in the raw material sector. More than 90 percent of our exports are raw materials, including energy. Of course, we cannot regard this situation as a good one. We are trying to change this situation, to move to more value-added exports.”
A second problem, Dr Glazyev said, is the collapse of domestic demand for “our advanced high-tech sector”, which has been closed until recently for defence production. “There are a lot of market niches” which the Russian trade ministry wants to explore for exports, particularly aviation and aerospace products. For these China is likely, in the view of the Russians, to be a major buyer.
Dr Glazyev denied that the economic policy-makers of the Russian government are giving a priority to the United States, Western
Europe, or a “West-first strategy”.
“I do not consider the present negotiations with the G-7 and IMF as a sign of a strategy favouring the West. There is no such official strategy.”
He explained that a number of problems oblige the government to address the West at the moment. “For instance, we have US$80 billion in debt, and this debt is mainly to Western countries.” Dr Glazyev’s debt estimate goes beyond the estimate of US$61.5 billion in convertible currency debt of the former Soviet Union, which Western institutions have calculated to the
end of 1991. The discrepancy, Dr Glazyev suggested, reflects debts owed to Eastern Europe in non-convertible currency.
He also explained that Russia’s traditional trade relationships favour the West. “We have a strong import dependence on wheat and grain from the US and Canada; meat also from these countries and Europe. And as for ourmachinery needs, they come mainly from Western and Eastern Europe.
“It is not easy to change the pattern of trade”, the official noted. “We do not have a priority to push our firms to move to this or that particular market. They should make that choice for themselves. We are trying to give them the most objective information.”
MEMBERSHIP OF PACIFIC BLOCS
“As far as the Pacific region now, I think it has much more potential for growth than traditional areas of Russian foreign trade.”
Dr Glazyev indicated that Russia will be looking for support from the Association of South East Asian Nations (ASEAN).
“We are very interested to enter the community of countries which are trading with each other in the Pacific region.”
Foreshadowing Russian applications, Dr Glazyev said: “We are preparing to take steps to join all the multilateral institutions,
financial and economic ones.”
Moscow can be expected to apply to the Asia Development Bank once membership of the International Monetary Fund and the World Bank is approved in a few weeks.
In 1990 the Soviet government applied to join the Pacific Economic Cooperation Conference (PECC), and to participate in
the activities of the Asia Pacific Economic Cooperation (APEC) forum.
According to a White Paper presented to the Australian parliament in April of last year by the Foreign Minister, Senator Gareth Evans, Australia backed the moves. However, “despite Australian support, some other PECC members still have reservations about Soviet membership, and no consensus on the Soviet application was reached.”
In the Russian view, there should no longer be the same opposition to their application, and Australia’s support will be tested very shortly.
AUSTRALIAN TRADE PROBLEMS
The Deputy Minister acknowledged that Russia’s $100 million debt for wool and other commodity imports is an obstacle to trade with Australia.
“There is no selective strategy for our debt repayments,” he explained, “not in terms of regions or countries…The amount of hard currency which we expected to come to the state currency reserve did not come.”
A decision on allocating funds for payment of 1991 wool purchases would be made by the Currency Economic Board, an inter-ministerial committee chaired by the First Deputy Prime Minister, as well as Minister of Finance, Dr Yegor Gaidar.
That decision is unlikely to be made, Dr Glazyev said, until there are negotiations with Australian officials. The officials must discuss what share of the A$500 million export credit that was drawn by the former Soviet Union, through the Soviet Bank for Foreign Economic Relations (Vnesheconombank), should be Russia’s obligation to repay, and what payments are owed by the Ukraine, Belarus and the Baltic republics which also received Australia wool, grain and meat supplies under the 1990-91
Dr Glazyev noted: “We still have no negotiations with Australia. There is nothing special about the Australian case. The negotiations will take place in the nearest future. Unfortunately, we cannot negotiate with all countries simultaneously.”
INDUSTRIAL EXPORTS TO LATIN AMERICA
Although the new Russian trade strategy holds out the hope of a significant return to wool-buying, as part of an export drive for Russian wool-processors, Dr Glaziev indicated that he will be looking to balance bilateral trading accounts with exports of Russian-made industrial goods.
Dr Glazyev referred to the Latin American countries where “we have very little trade…which cannot be explained in terms of economic efficiency.”
He expressed the hope that export markets in Brazil in particular, Chile and Argentina could be developed for machine manufactures which are “rather simple by world standards, but at the same time rather reliable and very cheap.” Mining and agricultural equipment, power generating machinery, and aerospace engineering were given as examples.
The second deputy minister of foreign economic relations, Mr Kiril Ivanov, made a pioneering trip to Colombia last month to initiate this strategy.
Speaking of Singapore, Dr Glazyev noted that “our entrepreneurs are very active now. This is only a first step. We are trying to help our firms find niches [in Singapore] for export of their markets.”
He also anticipated the rapid establishment of non-government Russian banks in Singapore.
Dr Glazyev disclosed that his ministry has completed drafting a decree on the regulation of foreign investments abroad which President Yeltsin is expected to sign by the end of March. This will authorize commercial operations abroad for Russian banks. “I am sure that in the nearest future some of these [commercial banks] will open their branches in various parts of the world, especially Singapore.”
Dr Glazyev acknowledged that up to US$40 billion (forty billion) in hard currency owned by Russian trading enterprises is believed to be on deposit in banks outside Russia. He said the government was attempting to impose currency controls to halt further capital flight. He believes that Singapore may play an intermediary role for banking these offshore funds and arranging their re-investment in Russia. “I hope this will happen, but it depends mainly on our internal situation.”
CHINA POLICY AND TAIWAN ARMS TRADE
Dr Glazyev denied there has been any policy change in Moscow on the issue of relations with China and Taiwan.
He descibed as a “misunderstanding” a report in the “Asahi Shimbun” of March 3, which suggested he favoured selling Russian arms to Taiwan.
Dr Glazyev said “there are various types of dealings taking place between our firms and representatives of different Chinese regions, including Taiwan. There are also a lot of intermediary firms which come and represent the interests of Taiwan firms.” Most of that activity, he added, is for sale of consumer electronic goods to Russia.
“Now Taiwan entrepreneurs are very active in trying to find access to the Russian market, and to compete here with Korea. There are a lot of offers from intermediate firms concerning Russian exports to Taiwan as well.”
The official noted that for export of Russian raw materials or textiles to Taiwan, no government authorization would be required.
Arms exports are strictly regulated, Dr Glazyev emphasized, and require end-user certificates provided by governments. He said
that he had no specific information about arms sought by Taiwan, although he believed there may be interest in aircraft, marine vessels, and “ordinary weapons”. He said his government was not certain whether intermediaries representing Taiwan firms were
intending to buy arms for Taipei, or were trying to make money for Taiwanese arms-dealers in the sale of weapons to third countries.
“As for Taiwan, we do not consider those offers [for arms purchases] which are coming [to the ministry] to have Taiwan as the end-user.”
“When we understand that the end-user is the Taiwanese government, then we do not allow such transactions. This is the official position and is the same as it was before.”
“We have a list of certain regions which are of especial attention. We do not allow [arms] trade with those countries with whom we have not traded before, without special decision by the government and Supreme Soviet. So far as we know, there is until now no decision to allow us to trade with arms to Taiwan.”