From Volume 37, Issue 37 of EIR Online, Published Sept 24, 2010
Russia and the CIS News Digest

Russia Must Have Asian Investment To Develop Far East

Sept. 19 (EIRNS)—Russian President Dmitri Medvedev's visit to China this month will focus on economic cooperation, essential for the development of Russia's vast eastern region, Russian experts told the Chinese and international press before the visit. This area of northeast Asia has huge reserves of mineral and other resources, and is the potential hub of great infrastructure projects which will link Eurasia and the Americas, if Lyndon LaRouche's concept of infrastructure is put to work.

Russian trade is increasing more rapidly in Asia than Europe, and this is happening much faster than Moscow had anticipated, Russian Railways president Vladimir Yakunin told Reuters in an interview Sept. 15. "At the end of 2008, beginning 2009, our cargo flows shifted," Yakunin said. "The main volumes went to Far Eastern ports, because shippers have reoriented toward Southeast Asian markets." These cargoes include steel, coking coal, petrochemicals, and fertilizers. However, the scale of trade remains small. While China overtook Germany this year to become Russia's largest trade partner, it accounts for only 9% of Russia's total; the whole EU, with a population just 40% of China's, makes up 50% of the trade. Most of this is concentrated in oil and other mineral exports.

This could change, Yakunin indicated. He told Reuters he regrets the lack of infrastructure investment over the past 20 years, and that without some key projects, such as the Kuznetsov tunnel in Komsomolsk-on-Amur, the situation would be critical in 2015. He added, "I think that cooperation, if not economic integration, is more in the interest of the European states than of Russia."

Russia must develop its eastern economy, to expand relations with Asian nations, Sergei Sanakoyev, head of the Russia-China Center of Trade and Economic Collaboration, told Xinhua in an interview in Moscow published Sept. 17. "It is in Russia's best interests not to put all our eggs in one basket, by narrowing all trade with China down to raw materials. Russia needs Chinese investments for development of advanced technologies and machine-building. We need to increase the share of the machine-building industry in our exports. This share has been growing by 70% a year, but in sheer numbers, the volume of non-commodity exports has still been negligible."

Alexander Lukin, director of the Center for East Asia and Shanghai Cooperation Organization Studies at the Moscow State Institute for International Relations (MGIMO), told Xinhua that Chinese investment will be essential for many Russian projects, including the massive reconstruction of Russia's key Pacific port, Vladivostok, for the 2012 Asia Pacific Economic Cooperation (APEC) summit. "Every country should make effective use of its resources. Russia should utilize income from energy export to boost development in other sectors," he said. "Russia really needs new technologies, and naturally in the European part of Russia, the majority of the investment comes from Europe. But in the Far East and Siberia, the majority of investment will arrive from Japan, South Korea and China."

Putin: Save Russian Industry and Workforce

Sept. 19 (EIRNS)—Russian Prime Minister Vladimir Putin stressed the need to save Russia's industry and workforce, from the ravages of more globalization, in two statements this week. While some of his proposals were limited, given the need for development of Russia's scientific and technological potential, Putin was emphatic that Russia must not go down the deadly globalization spiral, as Western Europe has done.

Putin told a meeting of the General Council of the Federation of Independent Trade Unions (FITU) of Russia yesterday: "The [Russian] government and trade unions should interact on the issue of level of wages. Russia risks the possibility of repetition of the experience of the Western European nations, which are shifting manufacturing to other countries and are unable to stop it," Putin said. "Soon everything will be [made] in India and China, even the hi-tech production, because the cost of labor in these countries is [low] beyond comparison."

Russia is pursuing a policy aimed at the formation of a civilized labor market, including attracting workers from abroad, he said. For Russia, "the most important problem today is the quality of the economic development. It is in line with our common interests to ensure the economic growth, mostly as a result of the modernization of production, the creation of effective jobs and the growth of labor productivity. Otherwise Russian enterprises will not be able to remain competitive, and new jobs will be created outside Russia, the way it is taking place in many countries."

Earlier, in the city of Nizhny Novgorod Sept. 14, Putin reiterated his commitment to using national funds to save industry from the world financial crisis, which hit Russia extremely hard. "We often hear people say: Why bother with our own production when we can buy everything abroad—planes, ships, cars, and even some weapons?" Putin said to a meeting of the United Russia party. "Yes, we can [buy everything], by selling oil and gas. We will even save money. But I am deeply convinced that the deindustrialization of Russia is a dead end."

Allowing major industry to die would push Russia to "the bottom of the pyramid of the international division of labor," he said. "We will continue the policy of support for technologically advanced sectors of economy. We will continue doing it until market demand is fully restored." The Russian government has supported the nuclear energy, aviation, auto (unfortunately also by a cash-for-clunkers operation), fishing, and other critical industries, and has allocated emergency funds to keep alive the devastated single-industry towns.

Ex-Clinton Official Calls for Ratification of Nuclear Pact

Sept. 15 (EIRNS)—Thomas Graham, senior director for Russia on the Clinton National Security Council and presently president of Kissinger Associates, in an article in the Russian weekly Expert, called on Congress to quickly ratify the 1-2-3 nuclear framework agreement between Russia and the United States. Expressing concern that the "re-set" with Russia is not yet on firm ground, he argued that ratification of this "framework agreement" would create a number of possibilities for further cooperation between the two countries.

"The two sides could move quickly to give it substance by, for example, creating a U.S.-Russian joint venture to build a civil nuclear reactor in a third country," Graham wrote, "undertaking joint work on the disposal of nuclear waste, showing U.S.-Russian leadership in creating an international fuel bank for the expected global renaissance of civil nuclear energy, or setting up a joint venture to build an enrichment facility in the United States to produce fuel for the U.S. domestic market."

Although not mentioning proposals for a Bering Strait tunnel, Graham cited a convergence of interests between the West Coast of the United States and Siberia: "Yet another possibility, which would tie into the current modernization effort in Russia, is to build a university consortium linking Russian institutions in Siberia and the Russian Far East to counterparts in Alaska and on the American West Coast with a focus on innovation in selected fields. This would provide a powerful impulse to the economic development of those Russian regions."

The Russian-American Pacific Partnership forum, bringing together Siberian and U.S. West Coast political and business leaders, took place Sept. 14-16 in Portland, Oregon.

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