Russia turns its gaze eastward with APEC economic summit

Russia hopes to transform Vladivostok, the host city for this year's Asia-Pacific Economic Cooperation forum, into a gateway for commercial trade with East Asia.

The far eastern port of Vladivostok, where Russia is hosting this year's summit of the 21-member Asia-Pacific Economic Cooperation (APEC) forum, is set to become the pivot for a massive Russian effort to integrate economically and politically with the dynamic and increasingly important nations of East Asia.

The Kremlin has invested $21 billion in preparing for the week-long event, far more than most countries spend to hold the Olympic Games, mostly to reinforce sagging infrastructure in Vladivostok – a city of 600,000 seven time zones ahead of Moscow – and to turn the city's once almost inaccessible Russky Island into a world-class conference venue. Russian President Vladimir Putin will address the summit this weekend, and is expected to lay out ambitious Russian plans for pipelines, roads, and rail links through Russia that could soon directly link the booming economies of the far east with the markets of western Europe.

Mr. Putin is also expected to at least subtly oppose US initiatives in the region, particularly the Trans-Pacific Strategic Economic Partnership plan, a Pacific-area free-trade arrangement that some Asian countries have been invited to join but not Russia or China.

"In the 20th century. the heart of superpower confrontation was Eastern Europe, but in the future the center will be East Asia," says Anastasia Mitrofanova, a professor at the Russian Foreign Ministry's Diplomatic Academy in Moscow.

"The competition will be between many powers, not just Russia and the US, and it will take new forms," she says. "At the APEC summit we can expect new initiatives from Putin aimed at countering efforts to exclude Russia from the Asia-Pacific zone. We know the US is trying to reserve this region for itself."

President Obama, busy with the Democratic convention this week, will not be attending. In his place will be Secretary of State Hillary Rodham Clinton, who's completing a swing through the Pacific region to reassure allies of ongoing US support. The Russians insist they scheduled the meeting in September, even though they knew no US president was going to be able to attend in that time frame only because it's the most pleasant season in Vladivostok.

"In early September Vladivostok is sunny and warm; that changes even by the second half of the month. It's all about the weather," says Gleb Ivanshevtsov, deputy director of the Russian Center for APEC Studies, a governmental think tank. "It's no big deal. There are lots of precedents where top leaders have been unable to attend an APEC summit."

But presidents and prime ministers of most member countries will be on hand to view the transformation of Vladivostok, formerly a major Soviet naval base that was closed to foreigners, and hear the Russian pitch for greater trade, investment, and political dialogue.

"Vladivostok used to be mainly a military center, but now we're going to turn it into a major economic and commercial hub," says Mr. Ivanshevtsov.

"Russia is still at the periphery of Asia, and it accounts for just about a fifth of our total trade. That's got to change. Two-thirds of our territory is in Asia and we have the longest Pacific coastline of any country. We have a border with the US out here, but none in the West. This is the fastest-growing economic region in the world, and we aim to be part of it," he says.

Trade turnover with APEC countries – mainly China – was about $100 billion, or 23 percent of Russia's total, in the first half of this year, according to the Russian State Statistics Service. Russia's trade with Europe is currently about twice that. Officials say they hope that up to 50 percent of Russia's trade will be with the United States and Asia within a few years.

Russia's huge investment in the Vladivostok summit is just one sign of Russia's eastward pivot. Another is Putin's plan to develop a Eurasian Union of former Soviet states, with Russia at its core, to restore some of the economic synergies that were lost when the USSR disintegrated.

Moscow has also steadily increased its involvement in the Shanghai Cooperation Organization, whose members are former Soviet central Asia republics plus Russia and China. Originally established to help settle border issues, the SCO has expanded into an economic forum and, increasingly, what looks like an incipient security alliance.

In May, Putin promoted the Kremlin's special envoy to Russia's far east, Viktor Ishayev, making him the first minister for far eastern development. Mr. Ishayev has become Russia's point man on the policy shift to Asia.

"Unlike crisis-ridden Europe, the Asia-Pacific region has developed rapidly, and the APEC countries, including China, are our important economic and political partners," he told journalists recently. "We are developing key transport and energy infrastructures [in Siberia and the Russian far east] as well as enterprises and social projects of all sorts."

Some Russians have ventured to criticize the staggering price tag for holding the week-long event, much of which will give Russia little more than a bit of transitory prestige. Much of the more than $21 billion went to construct two modern suspension bridges, conference facilities on the formerly fortified Russky Island, a new airport terminal, and an airport rail link. The cost of hosting the summit was estimated this week by the Moscow business daily Vedimosti at about $200 million, including a lavish $8.5 million fireworks display for the closing ceremony.

"I understand that it's important for Russia to demonstrate that we are in the circle of states that have heavy geopolitical weight," says Kirill Kabanov, head of the nongovernmental National Anti-Corruption Committee. "But from a Russian citizen's point of view, the budget for this summit looks incomprehensible and nontransparent."

"All that money might have been invested in many more productive ways for the economy and society....  Also, bear in mind that in Russia all such projects have a big element of corruption. It's the reason everything like this is so much more expensive to do in Russia than anywhere else," he adds.

But boosters say the money is well spent if it forwards the Putin era strategy of positioning Russia as a key economic and political player in Asia. Currently, trade with Russia makes up barely 1 percent of the APEC economies' total, but experts say that could change. Siberia is potentially the region's most important source of natural resources; new Russian road, rail, and pipeline infrastructure could create an indispensable transport corridor between the far east and Europe; and Vladivostok might become the new commercial hub of East Asia.

"Russia's been here in the far east for a long time, and will be here," says Ivanshevtsov. "Now the world's center is shifting right here. There is no way Russia can allow itself to miss this fast-accelerating train."