Despite the enduring hardships due to the global pandemics, the Russian Federation continue its efforts to organize high-level international events aimed at stimulating regional cooperation and economic recovery.
Last June, Saint Petersburg was the scene of the International Economic Forum, an outstanding business event in the current conjuncture, where some 13,000 entrepreneurs and decision-makers from 140 different countries agreed on 800 deals worth 55 billion USD.
This week (2-4 September), Russia will relaunch the momentum in the capital of its Far East region, Vladivostok, which will host the VI Eastern Economic Forum (VEF according to the Russian acronym of Vostochnyj Ekonomicheskij Forum). The VEFs take place on yearly basis since 2015. The timing suggest that these platforms are part of Russia’s economic turn to Asia which resulted from the Western encroachment on Ukraine and the consequent deterioration of Russian-European relations. As a result, one of the main priorities for Moscow has become the pursuit of investments to make up for the losses on the Western front. In addition, Russia needs resource to revitalize the underdeveloped Far Eastern regions. The importance attached to the VEF by the Russian diplomacy is underlined by the regular attendance of President Vladimir Putin.
Vladivostok’s name means literally “Master of the Orient”, a vocation that the VEF forum is meant to buttress creating new connections between the countries of the Pacific and the Eurasian economies gravitating towards the Russian economic system. Apart from enhancing the position of its vast eastern territories, for Russia it is important to further consolidate its role of integration pole in the former Soviet space, firstly expressed in the functioning of the Eurasian Economic Union (EAEU). Along with Armenia and Belorussia, the EAEU includes Kazakhstan, the main engine of Central Asian economy, Kyrgyzstan and has recently associated as an observer the Republic of Uzbekistan. Given the latter’s considerable demographic, agricultural and natural resources, the Central Asian dimension of the EAEU is growing foresee a great potential from the associated status that obtained this year. The Central Asian countries can of course access the Pacific area directly through neighbouring China. This perspective is actively sought by Beijing in the framework of the large infrastructure investments of the Belt and Road Initiative (BRI). However, along with opportunities the BRI is fraught with risks as well, since it may create the conditions for excessive Chinese inroads into regional affairs leading to a pervasive sinization of local economies. Accordingly, the structuring of mechanisms pat to make the BRI and Chinese economic power more aligned with local interests is one of the priorities of Central Asian as well as Russian political and economic agendas.
For the Central Asian republics, agriculture represent one of the leading sectors of their economies, especially in terms of connectivity to regional trade exchanges. To this end, Central Asian agricultural products should find new markets. Countries of Southeast Asia as Vietnam, Korea, Laos and Vietnam stand as potential markets of absorption for Central Asian agricultural production. In a trend increasingly common at global level, growing populations and lack of cultivated areas create for these countries food security’s problems, notably in terms of availability of healthy food products. At the same time, these markets are quite competitive and well connected to global flows so that the access to them is not easy. In addition, those East Asian countries which are part of ASEAN are actively working on diversifying their purchases and are well connected with European markets. For example, with regard to eggs, ASEAN importers have made great efforts to diversify traditional sources and expanded the import network to include new sources in Europe. The states of the region are looking for new suppliers of meat (first of all, poultry), eggs and dairy products, all categories of products which are produced in abundance in the CA countries.
However, to connect this demand with the Central Asian offer is a hard task in a moment when Central Asians are already facing competition to maintain their positions on traditional markets, also in view of the logistic hurdles connected to their land-locked condition. Hence, to successfully maintain their international commercial positions, the Central Asian states should make use of multilateral schemes of trade preferences and have access to the assistance of specialized financial institutions.
The EAEU can assist the countries of the region in this sense. The organisation has signed several preferential free trade agreements, notably with East Asian countries as Singapore, Vietnam and Thailand. This network of agreements can create opportunities for exporting Central Asian goods. In particular, Vietnam has concluded a significant number of commercial treaties with the ASEAN countries. By this way, Vietnam can serve as the EAEU gateway to ASEAN.
On its side, Russia provides to Central Asian countries its transport network mainly the Trans-Siberian railway. From this perspective, Kazakhstani and Kyrgyz entrepreneurs are advantaged since they can bypass custom barriers and deliver their products through the territory of the EAEU single customs space up to Vladivostok.
The EAEU is also supported by specific financial institutions as the Eurasian Development Bank and the Russian-Kyrgyz Development Fund. The resources of these institutions can be employed to create productive value chains. For example, a Russian investor can develop a Kyrgyz natural resource to further process the materials in Russia or Kazakhstan and then realize the final product in Vietnam. Overall, entering East Asian markets under a single brand “Made in EAEU” will allow Central Asian manufacturers to receive the support of all relevant Eurasian infrastructure (Eurasian Economic Commission, EDB, VEB, Russian Export Center, etc.). It is advisable for Central Asian economy’s institutions, investors and entrepreneurs to consider these possibilities.
On a larger scale, all these schemes and perspectives fit well into the concept of the Greater Eurasian Partnership that Moscow and Beijing put at the foundations of their cooperation. Also called “Integration of integrations” the concept foresees the conjugation of the Chinese BRI and the Russian EAEU projects for the sake of stability of the whole Central Eurasia. The uncertainties looming over the future of Afghanistan after the US disastrous rout and the looming instability of the country increase the rational of proceeding towards this overarching plan. Economic arrangements that can be fostered on platforms like the VEF are important components of this design.
It is also worth noting that the settlements of sales realized through the channels established by the EAEU with ASEAN and other Asian markets are carried out in the national currencies. It is important to further develop such kind of schemes for the sake to proceed further in the de-dollarization of world trade flows. On one side this contributes to further retreat of the negative influence that Washington exerts on world affairs. On the other, de-dollarization trends reduce the effect of existing and potential sanctions that the US impose against countries which resist their geopolitical adventures.
All in all, the Eastern Economic Forum stands as one of the most effective platforms for discussing these important issues, creating partnerships between the EAEU, ASEAN and other Asian players and work to the important aim to build a multi-polar world.
Fabrizio Vielmini – Specialist of Russia and Central Asia, Research Fellow at Vision & Global Trend – International Institute for Global Analyses