Originally Published 2014-01-31 06:33:52 Published on Jan 31, 2014
If the Indian government appropriately leverages Russia's goodwill, Russian Far East could turn out to be a growth area for Indian business. Innovatively implemented, India's ties with the Russian Far East could help cement Indo-Russian relations as well as bolster its ties with Central Asia and East Asia.
Russian Far East & opportunities for India
" Cold", "inhospitable", "unfriendly" are the adjectives used to describe the Russian Far East.

However, if the Indian government appropriately leverages Russia's goodwill, the region could turn out to be a growth area for Indian business. Innovatively implemented, India's ties with the Russian Far East could help cement Indo-Russian relations as well as bolster its ties with Central Asia and East Asia.

The Russian Far East is increasingly at the forefront of geopolitics centred on the Indo-Pacific and is key in Moscow's pivot to Asia. The region occupying 40 per cent of Russia's total territory is rich in natural resources, particularly diamonds, gold, oil, natural gas, coal, timber, silver, platinum, tin, lead, and zinc. It also has rich fishing grounds.

However, the region also faces the threat of depopulation. About 6 million to 7 million people, about 4 per cent of Russia's population, occupy a territory of 6.2 million sq. km. Prime Minister Dmitry Medvedev has described the depopulation of the Far East as "the most alarming, most dangerous tendency which we have to deal with".

The region is economically undeveloped, lacks good infrastructure and communications. According to Mr Medvedev, many of the region's administrative districts survive on federal subsidies, while one person in five earns below the subsistence minimum.

The region borders the Chinese provinces of Heilongjiang, Liaoning and Jilin. This border is one of the longest in the world. Some Russian strategists believe that these areas will gravitate to China if not integrated quickly, economically and socially, with the rest of the country.

Noted analyst Dmitri Trenin suggests that if Russia were to lose its eastern territories, it would not be because of Chinese aggression but because of Russia's inability to develop the region.

President Vladimir Putin has described the isolation of the Far East and the failure to exploit its natural resources as a threat to "national security" and a "serious threat to our political and economic positions in the Asia-Pacific".

In 2009, the Russian government adopted a 15-year plan to develop the Far East, which committed federal funds to infrastructure investment. In 2012, approximately 200 billion roubles were spent for infrastructure development. Mirroring Russia's anxieties about the situation, a new ministry for the development of the Far East was set up.

There are efforts to integrate the Far East with the fast growing Asia Pacific economies that have the resources to invest in the region. In September 2012, President Vladimir Putin in an article for the Wall Street Journal, wrote that "Russia has long been an intrinsic part of the Asian-Pacific region... We view this dynamic region as the most important factor for the successful future of the whole country, as well as the development of Siberia and the (Russian) Far East."

Some Russian officials suggest that given the availability of vast arable lands, the Russian Far East could become a "breadbasket", exporting grain to the world through Pacific ports. They argue that with the Arctic trade routes opening up and the modernisation of its railways, Russia could become a transportation corridor between Europe and Asia.

However, Russia's trade with the Asia Pacific region remains low at less than 23 per cent of total trade. Investments from APEC countries only accounted for 16 per cent of total investments in Russia.

Although a recent survey of APEC business leaders shows that Russia is among the top five investment destinations over the next five years, European and Russian domestic investors are currently making most of the foreign investments in the region.

These are primarily in the resource-rich provinces like Sakhalin and Sakha Republic and not in the poorer provinces on the Russia has given China a special place in its Far Eastern economic strategy through an agreement in September 2009 which spelled out 284 areas of cooperation, 201 "key cooperative projects" (90 in Russia and 111 in China), in addition to 65 target areas for upgrading border crossings and transportation infrastructure on both sides.

China, by virtue of its ability to finance big projects and provide cheap labour in addition to the obvious fact that China has more accessibility to the Far East, will therefore have a big role to play in the region's development.

However, the 2009 agreement has come under fire from several experts who feel that it will only turn Russia into China's resource appendage.

Thus, while Moscow realises the need to develop the Far East and integrate it with the region, it faces a bigger dilemma: whom should it collaborate with in developing the Far East? Should it be Japan or South Korea or China or all of these?

India has an opportunity in all of this. The rich hydrocarbon reserves in the region throw up immense opportunities for Indian companies. ONGC Videsh has already invested in the Sakhalin-1 project and its terminal is acknowledged as the best in Russia. India is set to get gas from Gazprom that will probably be liquefied at a plant near Vladivostok. The large diamond reserves in the region should be a magnet for the Indian diamond cutting and polishing industry, which is already facing tough competition in Africa from the Chinese.

Infrastructure, pharmaceuticals, and agriculture development are also areas of opportunity for Indian business and labour. Tele-medicine and long distance education are other areas where Indian companies can make a mark. The need to learn Russian and develop an understanding of Russian culture could be a minor hurdle. Equally important, India could help mediate and partner Japanese involvement in the development of Russia's Far East.

It is time the Indian government wakes up to the possibilities in the Russian Far East — a region that might well define the dynamics of great power interactions in the Indo-Pacific in the future.

(Nandan Unnikrishnan is Senior Fellow and Uma Purushothaman an Associate Fellow at Observer Research Foundation, Delhi)

Courtesy: Asian Age, Delhi, January 31, 2014

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