At the end of the Cold War, the dissolution of the Soviet empire appeared to endanger Russia’s future status as a global power.
But with the surge in world energy prices in recent years and under the strong leadership of President Putin, Russia is determined to show it is back on the global scene.
Its two most famous exports are military arms and energy (oil, natural gas). In terms of military weapons, China and India are its largest customers, absorbing 45% and 40% of Russian arms respectively. Chinese purchases add up to US$6 billion in 2005. Ironically, this is driven by Washington opposition to selling strategic items to China and its hold on forbidding Euro exports of weapons and weapons-capable materiel to the Chinese under the COCOM restrictions. In other words, Chinahas no choice but to buy from the Russians.
Russia has no such strategic restrictions. In fact, quite the opposite, the Russians have an amorphous strategic alliance with the Chinese which saw them having large-scale joint exercises on a regular basis. Part of the rationale for these exercises is familiarization with Russian arms and demonstration of their lethal power so that the Chinese can be persuaded to buy these arms in the name of strategic alliances. The Chinese are now seriously considering Russian long-range bombers, useful in possible conflicts with Taiwan and capable of changing the global strategic balance of military power.
The Chinese are also good customers of Russian oil and thus weapons and energy are a good combination to try to offset any trade deficits from imports of Chinese manufactured products. Ironically, the Americans could have used the same route to pare down the world’s greatest bilateral trade deficit in its trade with China but strategic interests have prevented this from taking place.
The countries shunned by Washington almost immediately became the Russians’ largest customer by default. When the US banned the sale of spare parts for US-supplied fighters and transport aircraft to the Indonesians after human rights violations in East Timor and the British Hawks jets did not work that well, the Indonesians looked towards the Russians for possible alternative sources of arms. This culminated in the most recent deal signed in December 2006 during President Yudhoyono’s visit to Russia. The Russians will be providing the Indonesians with US$1 billion worth of credits for arms purchase.
In Southeast Asia, the Indonesians are not alone. The Malaysians have also been buying arms from the Russians for some time using barter trade through commodities like palm oil. Buying from the Russians has the added advantage of flexibility of payment. Other advantage include affordability – Russians arms are cheap, rugged and reliable. The manufacture of spare parts through licensed technological transfers to Indian and Chinese arms industries also ensures the availability of Russian spare parts in the region. Thus, even though the US lifted its arms embargo in the wake of the tsunami disaster and Washington’s policy to encircle Chinastrategically, the Indonesians did not immediately rush back to the US for arms deals. Indonesia had learnt its lessons well.
Russia’s rising clout in East Asian affairs can also be seen by North Korea’s offer of uranium rights to Russia in exchange for the latter’s backing in the six-party talks. The deal said to have started in 2002 would involve Russian importation of North Korean-mined uranium for enrichment and then re-export to China andVietnam. It would also be part of Pyongyang’s efforts to rely less on the Chinese who had disappointed the North Koreans recently from their selective support in the missile and nuclear tests.
The North Korean energy deal is only a small part of Russian efforts to penetrate the regional energy market. In fact, the Russians have skillfully twisted the arms of feuding East Asian giants China and Japan, turning their rivalry into a profitable venture by making both powers outbid each other for its Siberian oil. The Russians have also stalled Chinese attempts to buy its state oil firms and Japanese dominance of its natural gas industries to keep Japanese ambitions on its four Far Eastern islands at bay. East Asia will have to learn to cope with a resurgent Russia.