No Fear of Russia Exploiting the Developing World

Russia and China are becoming increasingly integrated in the global economy and both have stepped up their activity sharply in Africa, Latin America and Asia in recent years, trends that are only likely to accelerate in the future.

But Russia’s motives in the developing world are rather different from those of China – which explains the rather different reaction both there and in the West.

Hu Jintao’s third presidential tour of Africa last week was accompanied by local criticism that China was exploiting the continent in its continuing search for energy and minerals and that Chinese companies there only benefit China and employ ethnic Chinese.

The West, on the other hand, is becoming increasingly concerned about the rising competition for these scarce and finite resources.

President Putin’s official visit to the Middle East this week provoked no such fears of exploitation among the locals.

During the Cold War, the Soviet Union was autarkic and could find all of the twenty-plus minerals required for a modern economy on its own territory, giving it a considerable strategic advantage over the USA, which was dependent on access to some scarce resources in unstable African countries.

Nowadays, in the global race for energy and raw materials, Russia still has precious little need of imports. Quite the contrary – it is sitting pretty on some of the biggest hydrocarbon reserves in the world and last year overtook Saudi Arabia as the largest oil exporter. Russia is also a major exporter of ferrous and non-ferrous metals, timber, coal and other commodities.

Russia will therefore continue to avoid the charges of exploitation levelled at China during Hu’s recent Africa trip, but it will be harder to allay the West’s concerns.

During his many trips to the developing world since becoming president, Putin has frequently invoked the ideal of cooperation. In January 2007, for instance, he told Indian journalists in televised remarks on the eve of his official visit to India’s independence celebrations, that Russia had developed a more trusting relationship with India as a result of collaborating on joint projects in the military sphere, rather than just buying and selling.

Russia is keen to join the World Trade Organisation and continue its policy of joining the global economy, but it has few comparative and competitive advantages and therefore has little option but to exploit them as far as possible.

So in addition to arms sales, Russia’s ties with countries such as Venezuela, India, Algeria and China are mainly in energy and energy infrastructure and equipment – which means not just oil and gas, but also nuclear power.

Less noticed, however, is Russia’s close and wide-ranging cooperation in the transport sector with virtually all of Eurasia by virtue of geography. Take railways. To fulfil its strategy of a land bridge between Europe and Asia, Russia’s railways cooperate closely with countries as far apart as Germany and Finland, Iran and India, North and South Korea and China.

Putin’s visit to the Middle East reflected this concentration. In what was Russia’ biggest-ever delegation to Saudi Arabia, Qatar and Jordan, Putin’s entourage included CEOs and senior executives from most of the country’s energy majors, as well as from Russian Railways, one of Russia’s largest companies and the monopoly infrastructure owner. Russian Railways will now participate in a tender to build a railway line between Mecca and Medina and other infrastructure projects, probably in conjunction with Italy’s railways and Finmeccanica.

And picking up the theme of cooperation, Putin proposed that Russia and Saudi Arabia establish “joint financial structures”, adding that under Russian legislation it was also possible to establish banks in Russia with 100% Saudi capital.

Much of Russia’s international business and trade activities are problematic for the West, especially the U.S.A. Besides the alleged use of oil and gas as political weapons, there is some unease that Russia is developing close ties based on energy and/or arms with regimes and countries it does not approve of, such as Iran or Hugo Chavez in Venezuela.

To take Putin at his word, Russia sees these ties as purely pragmatic. But the balance of Russia’s exports is also worrying to Putin, not just the West, albeit for different reasons.

On February 6, 2007, President Putin said at a round table with Russian industrialists and businessmen that Russia must process far more of its energy and other natural resources such as coal, timber and ferrous and non-ferrous metals within the country and then export semi-finished or finished products with much higher value added rather than the raw materials.

The experience of many countries show that this will be easier said than done, but progress is visible. Russia is trying to concentrate increasingly on high-tech, particularly space and satellite technology, and has already launched 7 Saudi satellites, with another 6 scheduled. In Riyadh, Putin also emphasised Russia’s Glonas global positioning/navigation system.

Success in these areas will be a welcome and necessary diversification of Russia’s economy. But Putin’s denial that anyone in Russia had rejected the idea of a gas cartel along the lines of OPEC will cause further concern in the West following the gas wars and the closer ties now developing between Russia and Algeria, both of which supply large amounts of natural gas to Europe.

Russia’s autarky means it is much less at risk arising from dependence on energy and raw materials than China. Indeed, Russia has already benefited hugely from the high oil and commodity prices in recent years. On the other hand, it will remain very exposed to any recession in the developed world or falls in energy prices until it can develop other sectors and diversify its economy

Russia under Putin is determined to continue with its current strategy, not least because it has few options. Judging by Putin’s critical speech of the USA at the NATO gathering in Munich on 10 February, shortly before his trip to the Middle East, and the response of Bill Gates, the US defence minister, further disagreements with Washington can be expected regarding Russia’s activities in Latin America, Africa and Asia.

Ian Pryde is CEO of Eurasia Strategy & Communications, Moscow.

The opinions expressed in this article are those of the author and may not necessarily represent the opinions of the editorial board.

Originally written for Ian Pryde’s weekly column for the Opinion & Analysis section of RIA-Novosti’s English-language website.

Now available at https://sputniknews.com/analysis/2007021460707617/, the site of the Sputnik news agency, the successor to Russian state-owned RIA Novosti’s international branch, which became defunct in 2013.

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