GP Short Notes

GP Short Notes # 660, 11 September 2022

Eastern Economic Forum: Russia appeals to the Asia Pacific for investments
Avishka Ashok

Eastern Economic Forum: Russia appeals to the Asia Pacific for investments 

What happened?
On 5 September, Russia hosted the seventh Eastern Economic Forum in Vladivostok. The four-day forum themed “The path to a multipolar world” was attended by participants from more than 60 countries such as Armenia, Mongolia, Myanmar, India, China, Malaysia, and Vietnam.  

On 7 September, Russian President Vladimir Putin attended the plenary session and delivered a speech. On the theme of the forum, Putin said: “Of course, a certain polarization is taking place, both in the world and within the country, but I believe that this will only be beneficial because everything that is unnecessary, harmful and everything that prevents us from moving forward will be rejected." He also touched upon the war in Ukraine and said that Russia didn’t lose anything and continues not to lose anything while strengthening the country’s sovereignty. 

Putin also met with Myanmar’s Prime Minister Senior General Min Aung Hlaing and signed a roadmap for cooperation on the peaceful use of nuclear energy. General Hlaing addressed the forum and said: “Strengthening relations between Asian countries create an international North-South transport corridor. Strong trade and investment increase geopolitical stability in the Asia-Pacific region.” He also noted that the trade between Russia and Mongolia was growing healthily. Mongolian Prime Minister encouraged investments in Mongolia and said: “Mongolia is ready to cooperate with international investors in the framework of the implementation of projects for the arrangement of border checkpoints and other infrastructure projects, as well as in programs for the renewal of air transport and air cargo transportation.”

What is the background?
First, a brief note on the Eastern Economic Forum. It is an international forum was established in 2015 with the objective of encouraging foreign investments in Russia’s Far East. The forum is organized by the Russian government and displays the economic potential, suitable business conditions and investment opportunities in the region. The number of agreements signed between companies in the Asia-Pacific region at the Forum increased from 217 trillion Rubles to 380 agreements 3.6 trillion Rubles. 

Second, Russia’s Far East. The region encompasses one-third of Russia’s territory and is rich in natural resources such as fish, oil, natural gas, pulp, wood, diamonds, iron ore, coal, gold, silver, lead, and zinc. Moscow has strategically developed the region as it connects Russia to the Asian trading routes. With the fast modernization of cities like Vladivostok, Khabarovsk, Ulan-Ude, and Chita, Moscow aims to attract more investments in the region. The sparse population living in the region is another factor in encouraging people to move and work in the Far East. The region’s richness and resources contribute to five per cent of Russia’s GDP. However, despite the abundance and availability of materials, procuring and supplying them is an issue due to the unavailability of personnel. 

Third, the China factor. The Forum is aimed at connecting the Far East with the Asia Pacific region. China is the biggest investor in the region as it sees potential in developing the ‘rust belt’ to promote the Belt and Road Initiative and the Polar Sea Route. Russia has been welcoming the investments since 2015 but welcomes it now more than ever due to the economic pressures caused by the war in Ukraine and the consequent sanctions. The Trans-Siberian Railway has further helped Russia and China in advancing the trade between the two countries. In 2018, Xi and Putin signed a six-year cooperation road map which enabled China in investing in agriculture, tourism and transport infrastructure. 

Fourth, the Japan factor. Japan and Russia share a lucrative relationship because of the trade ties. However, there is a longstanding obstacle caused by the Kuril Islands which is claimed by both countries. During the Vostok military exercise, Japan once again raised its objections to the conduct of the drills close to the islands. Japan’s close ties with the US is another factor of apprehension for Russia. 

What does it mean?
Russia is trying to attract the Asian economies in investing and developing the far east. The Ukraine war is a worrying issue as it affects the economic growth of the country. However, Russia believes that it can survive the economic slowdown and the sanctions with the help of China and other Asian powers. 

Although, the Eastern Economic Forum is an annual gathering, the forum comes at an opportune time for Russia who is dealing with the impacts of the sanctions. Moreover, the coming together of countries like Myanmar, Armenia, Russia, and China seems to form an anti-sanctions group in the international order. China is set is increase its support and investments in the region as it extends its hand to Russia in the background of the war and the sanctions.