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Increasing trade and economic ties with Asian countries is needed in the context of sanctions war declared by the West

The "Pivot to Asia" as a moment of truth

The West’s collective reflection of the events in Ukraine draws a line under the 30-year era of Russia's search for its place in the western-centric world. But history teaches us that "everything passes. This too shall pass" (eternal words on the Solomon's ring). After some time, the shock, pain and other emotions will be settled and the time will come again for at least selective pragmatic interaction and diplomacy. However, this will be a fundamentally different reality, in which the collective West will be at the bottom of the priority list of the Russian Federation.

Increasing trade and economic ties with Asian countries is needed in the context of sanctions war declared by the West


Reconfiguring external priorities

Nevertheless, the die is cast, and the current chapter of cooperation with the West is closed. This does not mean any self-isolation — it's just that the previously important vector of Russia's foreign policy will be on pause for an indefinite period. The lifting (suspension) of sanctions, even in a favorable scenario, takes many years, the restoration of ties is slow and selective (we know this first-hand). Therefore, a new cold war will reign for a long time and with all the accompanying attributes.

Reconfiguring external priorities will require the introduction of a qualitatively new development paradigm. Russian society, especially the passionary part, will have to go through all stages of accepting the inevitable and realize that there is practically no return to an earlier way of living.

The consequences of the "Russian Winter" in Ukraine, in addition to adjusting the geopolitical settings, finally consolidate in Russian foreign policy the course of "Pivot to Asia", which under the circumstances at this stage remains the only resource for development and a reasonable solution to the problem.

The Ministry for Economic Development of Russia has already stated that in the conditions of a massive sanctions war declared by Western countries, Russia will increase trade and economic ties with other countries, first of all with Asian.

It is obvious that the Russian leadership, deciding on a special operation in Ukraine, was aware of the possible consequences and weighed them carefully. It is logical, therefore, to assume that the problems induced by sanctions will be overcome one way or another. The adopted package of measures to support the Russian economy is intended to help successfully solve this problem.

Complete exclusion of the Russian Federation from the world, trade, economic and financial system (as much as one in Washington might wish otherwise) is objectively impossible. The imposed US and EU sanctions will accelerate the refusal from the dollar in international settlements. In addition, each new sanctions package are hitting not only Russia itself, but Europe as well, and through it, the global economy.

Problems for everyone

While Russia is being "canceled" everywhere in real time, the world is already experiencing the sharp rise in the price of gas and oil, and after them –of fuel. The escalation of pressure (regarding sanctions against the energy sector) can coerce Russia to stop supplies, which will be nothing to replace with at the same time — Qatar, Norway, Algeria and the United States are not capable to supply gas in the required volumes. Moreover, a fierce struggle is unfolding for American liquefied gas in the Asian market, which is already ready to pay more than 1.5 thousand dollars per cubic meter. This year, only spot prices of about this order have been storming the EU economy, to say nothing of long-term contracts.

Apart from energy sphere where Russia interacts with the country's global markets, the sanctions initiators are facing problems in the following key areas.

Aviation. Thousands of planes fly through Russia to Asia and back every day. Now, they are canceled or have to be diverted that makes logistics more expensive. This state of affairs puts the global air transport system at risk. It is also appropriate to mention here the effects of terminating leasing agreements with Russian airlines.

Goods transit from China to Europe. The Trans-Siberian Railway and BAM have not been able to handle the load, both with transportation for a long time, both railways are being expanded in a hurry. Stopping this branch will also hit the EU economy.

Bread and metal. For some reason, the West does not notice that no bread and metallurgy exports can be expected at the moment, including from Ukraine. At the same time, Russia and Ukraine rank the first and fourth in the ranking of countries exporting these goods, respectively. Past two years, the bread and steel products markets have been reeling from growing prices, and the possible withdrawal of Russia and Ukraine from this game will just destroy them.

It would also be useful to recall that Russia produces 42 per cent of the world's palladium, 12 per cent of platinum, 9 per cent of nickel, 4 per cent of copper, 6 per cent of aluminum, 5 per cent of iron ore, 4 per cent of thermal coal, 7 per cent of coking coal and 3 per cent of steel.

China, Russia's strategic partner, is a key player in the ongoing transformations. Although Beijing is still careful, it nevertheless signals its interest in creating a polycentric world order. In addition, the Celestial Empire is also in solidarity with Russia to demonstrate to the West that it is impossible to push anyone with sanctions. The balanced positions of other Asia's "tigers" also demonstrate their national interests differ from the West's vision of the European security model. Such closest US allies as the UAE and Israel did not support the sanctions. Even Japan and South Korea are extremely restraint.

India can play a unique role in this situation. By maintaining good relations with the West and the Russian Federation at the same time, even if sanctions are maintained, it can become a transit hub for goods and technologies, thus contributing to the growth of its economy and helping the parties to the conflict to gradually revitalise broken ties. In addition, India may balance China in Russia's Asian policy. To do this, it is critical for New Delhi stay neutral, resist emotional and other pressure from the outside and be guided primarily by strategic considerations of its own development.

Sanctions risks and their addressing

It is obvious that the "Pivot to Asia" in the face of unprecedented pressure from the West will not be an easy walk. The effects of sanctions (including psychological), at least at the very beginning, can be very painful. Some foreign partners of Russian companies are already sending alarm signals.

The Indian authorities are concerned about the possible impact of Western sanctions on the purchase of Russian weapons, in particular the implementation of the contract for supplying S-400 Triumph. Though restrictions may affect cooperation in many areas, the defense sector is more vulnerable than others.

At the same time, amid the news about the suspending cooperation between the Russian Federation and container operators controlling 47 per cent of global ¬shipments, PJSC TransContainer recently signed a cooperation agreement with Chinese freight forwarders on transit container transportation from China to Europe.

On the Chinese side, the agreement was signed by operator of the Qingdao dry port Qingdao New Port Industrial And Logistics Development Co., Ltd. and Shandong Jitie Land Port Group Limited, part of the Jinan Railway Bureau of Chinese Railways (China Railway, CR).

The document is aimed at increasing the competitiveness of freight traffic through the Russian Federation, expand their volume and speed, improving the efficiency of land border crossings through cooperation with the Chinese Railway, creating a transport hub in Qingdao in the next five years, improve the quality of service for customers.

The estimated portion of the world's container traffic for Russia is 3 per cent.

Thus, amid tough Western sanctions, the national transit potential of the Russian Federation is becoming a strategic resource, which is also relevant for Belarus.

Due to Ukraine events, the global stock market is in turmoil, the IPO in Asia on the whole is at risk. In February, it was possible to attract only 5.1 billion dollars, – the minimum since May 2020. The situation in Ukraine has caused volatility outbursts in all asset classes, which reduces the activity of investors. The large-scale plans of a number of large companies that determine their listings remain in question.

Of course, almost all of the above aspects to a particular degree affect Belarus as an ally and strategic partner of Russia. Therefore, in addition to scrupulous calculation of sanctions risks in relations with Asian counterparts, there might be a need to simultaneously develop joint approaches and models with the Russian Federation necessary for their elimination.

Joint conquest of new markets

In early February, the State Secretary of the Belarus-Russia Union State Dmitry Mezentsev announced an empirical formula for a joint response to the sanctions restrictions to the collective West.

The response included economic integration, reconciliation of positions and plans of enterprises of a similar profile, avoidance of unreasonable competition, expansion and deepening of regional cooperation. According to Dmitry Mezentsev, to achieve this goal, Belarus and Russia need to provide more support for business environment, make scientific developments of greater demand, and support socio-economic development plans at the national and regional levels. At the same time, the thesis about the joint conquest of new markets sounded very expressive.

In September 2021, Belarus and Russia already agreed at the level of heads of government a joint response to Western sanctions based on further deepening and harmonization of integration processes within the Union State, the CIS and the ¬EEU, including in order to form a Large Eurasian Partnership and a single economic space from the Atlantic to the Pacific Ocean.

Within the framework of the resolution of the Council of Ministers of the Union State on the main directions in implementing the Union State Treaty for 2021-2023, the convergence of macroeconomic and monetary policy, common actions in the social and labor sphere, etc. are envisaged.

In such rhetoric, and especially considering legally binding agreements signed, the progressive synchronization of key economic parameters of national "Pivot to Asia" inside the Union State could become a catalyst for Union construction and a tool for countering Western sanctions.

It is generally believed that Russia’s “Pivot to Asia” policy took shape structurally and meaningfully in 2013, and was officially justified by the need to take advantage of the advanced development of the Asia-Pacific economies. However, the search for new allies in Asia, and first of all attempts to expand and enhance strategic partnership with China, originated from the desire to pursue a multi-vector policy that is natural for a Eurasian country. As part of its "Pivot to Asia", Russia is not only building up relations with the countries of the region, but is also trying to solve the socio-economic problems of its Far East and Siberia by employing the resources extended by these countries.

In May 2017, Russia officially joined the global Chinese project "One Belt, One Road", inside which the Celestial Empire is building a land and sea corridor with Europe.

Taking into account such initial data, it seems that to launch the union's "Pivot to Asia" pairing the ¬EAEU with the “One Belt, One Road” initiative could be a way forward, as said during the meeting of the Supreme Eurasian Economic Council by the President of Belarus who also urged to intensify work in this direction and implement it.

Returning to the Mezentsev formula, it is obvious that in the light of the proposed synergetic approach, the concentration of joint efforts and resources within the Union State, on certain geographical vectors, coupled with the proposal of the Belarusian Head of State to build digital transport corridors and promote the goods export will certainly open up new horizons for joint development of new market niches, including in the Asia-Pacific region.

It is essential, however, that the promotion of the Asian vector of Belarus’ foreign policy, including through the Union State, will not be perceived as a final and irrevocable rejection of our traditional national interests in the western vector, which, although radically pragmatised in recent years, have been put on pause, as in the case with allied Russia.

In the meantime, with all the twists and turns of sanctions today, the priority for Belarus is an active assistance to the cessation of hostilities in Ukraine, followed by gradual reconciliation, crisis settlement, and stabilisation of the situation. Even though it will be hard to achieve, it will take time and require political will and statesmanship of all stakeholders.