The Great Game in Asia 2.0: New Trends
Asian tailspins of Washington
It is obvious that the Biden administration is torn between maintaining influence in the Asia-Pacific region (APAC) and on the European vector.
The May 12-13 US—ASEAN summit attended by leaders of the Southeast Asia countries in which the fastest-growing economies of the world are located, designed to launch a "new era in relations", did not justify Washington's hopes and ended without condemning the Russian Federation in the final statement. The United States was unable to offer anything to Asian partners other than deterring China.
Recall that ASEAN includes Thailand, Malaysia, Indonesia, Brunei, Singapore, the Philippines, Laos, Vietnam, Cambodia and Myanmar.
And although the White House has announced initiatives worth $150 million in areas such as clean energy, maritime security and digital development (in addition to the $100 million allocated in October 2021), the Biden administration still avoids granting countries in the region wider access to its market. Meanwhile, in January-April, ASEAN became China's largest trading partner, surpassing even the EU and the United States. By the way, China signed a free trade agreement with ASEAN back in 2009.
However, the summit should be seen as a sign of the Americans' activation of their game in Southeast Asia, focusing on security guarantees and the growing unpopularity of China as a large and assertive neighbor, in fact, provoking instability growth in the region. In turn, the ASEAN members are primarily interested in trade and economic development, which is dissonant between Washington's policy and the expectations of local leaders.
The American Indo-Pacific Economic Framework (IPEF) was also discussed at the summit.(Indo-Pacific Economic Framework, IPEF).
By the way, Biden first announced IPEF in October 2021 as an alternative to the Trans-Pacific Partnership (TPP), from which ex-President Trump withdrew in 2017.
Biden's Asian tour on May 19-22 with a visit to South Korea and Japan, as well as the "quad" leaders meeting (Australia, India, the USA and Japan) in Tokyo, did not bring any breakthroughs either.
During his visit to Japan, emphasizing that the future of the economy of the 21 century will be written in the Asia-Pacific, Biden announced the launch of IPEF, which will initially involve the United States, Japan, India, South Korea, Australia, New Zealand, Indonesia, Thailand, Singapore, Malaysia, the Philippines, Vietnam and Brunei (representing about 40 per cent of global GDP). Taiwan, Myanmar, Cambodia and Laos, however, were not on the list.
Note that IPEF will focus on close integration between the United States and the countries of the region in four main areas: supply chain sustainability; clean energy and decarbonization; taxation and countering corruption; trade with a focus on the digital economy and new technologies.
The Biden administration expects that the implementation of the initiative will strengthen the US economic presence in Asia as opposed to China.
IPEF, however, does not provide for rates reductions and easier market access in contrast to free trade agreements, including the China-supported Comprehensive Regional Economic Partnership Agreement (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, the forerunner of the Trans-Pacific Partnership), now promoted by Japan. It is access to the American market that remains the most attractive point of economic cooperation for most Asian countries, especially developing ones.
Russia: Pivot to the East
Meanwhile, leading Russian companies continue to systematically shift towards the East. This is facilitated by enhancing of Russian foreign agencies in the Asian direction at the cost of diplomats expelled from the EU and the United States.
Following Bloomberg, since the beginning of the year, the Russian Federation budget receives $ 20 billion monthly due to the sale of oil and petroleum products.
According to the Financial Times, independent Chinese refineries have increased purchases of Russian oil with "big discounts". Unlike large state-owned companies, private refineries are not afraid of secondary US sanctions. Therefore, they assume part of the quotas falling on state-owned companies that refrain from signing new contracts but fulfill the old ones.
According to the Russian Embassy in China, payments in national currencies between Russia and China have now reached 35 percent. By the end of 2022, their share may amount to 45-65 percent, including due to the transfer of contracts for oil and gas supply to yuan, as well as the growing interest in payments in yuan from Russian business.
Russian banks show the growing amount of funds in yuan on the accounts of legal entities: 4-8 times since the beginning of the year. In addition, Moscow and Beijing are working on linking SPFS and CIPS (China International Payments System).
The Chinese Foreign Ministry also declared its readiness to purchase Russian energy carriers in rubles, and it is proposed to solve the difficulties in mutual settlements by creating a joint bank.
According to Bloomberg, China is showing interest in Russian Gazprom and Rusal.
It should be noted that Henry Kissinger, the architect of the US-China detente of 1971, recently expressed his concern about the final isolation of the Russian Federation from the West and the departure to the East at the Davos Forum, noting that such a scenario would set everyone back decades.
Russia — India: New dynamics
In April, Russia became the fourth largest oil supplier to India. In the next months, the volumes will grow as low prices stimulate demand.
Interesting that the share of Russia in oil purchases in India has grown to a record 6 percent, about 277 thousand barrels per day in April, compared with about 66 thousand barrels in March, when it ranked tenth.
In an effort to strengthen its position in the Russian market and guarantee the supply of raw materials, the Indian ONGC wants to buy shares of Shell (27.5 percent) in the Sakhalin-2 oil and gas project, and ExxonMobil (30 percent) in the Sakhalin-1 project. In addition, ONGC, Bharat Petroleum and Indian Oil have previously estimated the purchase of 20 percent of BP's shares in the Russian energy giant Rosneft.
At the same time, India has as much interest in natural gas as in oil. The purchase of shares in LNG projects in this case will be a significant increase in the share of Russian LNG in supplies to India.
In fact, Gazprom currently supplies about 2 million tons of liquefied gas to this country.
While the mechanism of trade in rupees and rubles is being polished to circumvent anti-Russian sanctions, Indian partners are using a strategy tested during the embargo against Iran. Exporters and importers, for instance, work through the UAE, where multiple currencies are freely converted.
Cargo transportation and related trade payments pass through businesses and banks in Dubai as part of transactions that look like normal bilateral trade between India and the UAE. Payments are processed as if the Russian part of transactions does not exist, although banks know the actual nature and purpose of transactions.
However, it was not without the interference of the Americans: on May 25-26, a delegation headed by Elizabeth Rosenberg, Assistant Secretary for Terrorist Financing and Financial Crimes, visited New Delhi and Mumbai. The visit program included meetings with Indian authorities on export control issues (primarily in relation to the Russian Federation), as well as... with private and state oil refining companies in India.
Asia-Pacific: the trend for new multipolarity
Cross-economic ties, despite sanctions, contribute to revitalizing the RIC format (Russia – India – China).
It is worth saying that since 2020, China has been India's main trading partner. Over 20 years, the mutual trade turnover has grown from $1.8 billion to $115 billion in 2021. India is among the top ten main trading partners of China, ranking 7th (Russia – 9th).
In the near future, BRICS (Brazil, Russia, India, China, South Africa) is expected to expand due to the possible accession of Iran, Turkey, Indonesia, the Philippines, Mexico and Argentina to the bloc.
I will give some figures. The total population of the BRICS states is about 3 billion people (41 percent of the world's population), the territory is 29.3 percent of the land. The total GDP is about 25 percent of the global figure ($21 trillion), and the share in international trade is almost 20 percent ($6.7 trillion).
The Cabinet of Ministers of Kyrgyzstan announced the launch this fall of the largest project in the country's history, the China— Kyrgyzstan— Uzbekistan railway of aproximately 200 kilometers and a cost within 2-4 billion dollars.
Thus, the southern route of the railway will be implemented: Irkeshtam — Osh — Andijan. There is also a project of a northern route through the Torugart Pass (located in the Tien Shan mountain system, on the border of the Naryn region of Kyrgyzstan and the Xinjiang Uygur Autonomous Region of China). The project (originally called "Beijing — Paris") is promoted by Beijing as part of the "One Belt and One Road" strategy. It should connect the countries of the Pacific Ocean and the Eurasian continent and reach the ports of Italy.
If implemented, China will, in fact, get direct access to Central Asia and the center of Eurasia.
The implementation of the project will provide the Chinese with three opportunities to deliver goods to Europe: via the Russian Transsib, a narrow-gauge railway in Kazakhstan and, actually, the Kyrgyz section.
However, the road construction contradicts the U.S. interests. Shortly after announcement, a certain "Badakhshan Defense Army" asserted itself, intending to "protect the Gorno-Badakhshan Autonomous region (GBAO) from all enemies". GBAO itself is located near the southern route of the railway, the capital of the region, the city of Khorugh, is connected by a direct road to the Kyrgyz town of Osh. Besides, the launch of the project coincided with the visit to Kyrgyzstan of Assistant Secretary of State for South and Central Asian Affairs Donald Lu (previously Ambassador to Bishkek) as part of the Central Asian (Kyrgyzstan, Uzbekistan, Tajikistan and Kazakhstan) tour on May 23-27.
The State Department's agenda of D. Lu with consideration of "issues of minimizing the impact of sanctions, as well as the need to intensify assistance in strengthening border security" amid escalation of conflicts in GBAO and Afghanistan has worrying connotations. It is indicative that D. Lu arrived to Kyrgyzstan from Pakistan, where, among others, he met with ex-Prime Minister Imran Khan, whose supporters continue to protest massively against his resignation. According to some reports, the American diplomat delivered an ultimatum to Imran Khan with the demand to "calm down and accept the situation."
An agreement on the joint use of the Iranian port of Chabahar was reached in New Delhi inside the 15th round of consultations between the foreign ministries of India and Uzbekistan.
In particular, the port of Chabahar, located in the province of Sistan and Baluchestan on the southern coast of Iran, is being developed by India, Iran and Afghanistan in order to increase trade ties.
The United States also does not like the strengthening of regional connectivity. The next step towards the separation of the world into zones with their own trade, currency and other rules was the agreement of the United States, Japan, Canada, South Korea, Taiwan, the Philippines and Singapore to create a collective data exchange system. The format is supposed to be introduced instead of the APEC forum, which includes the PRC and the Russian Federation, laying down a system for transmitting large arrays of various information for further expansion of e-commerce networks, introduction of regional control structures for unmanned traffic, etc.
Such a block approach is supported by the trend of APAC militarization by increasing military spending.
South Korea has become the first Asian country to join the NATO Cooperative Cyber Defense Center.
UK advocated for the creation of a "global NATO" which would allow monitoring security in the Asia-Pacific. The leading APAC countries were invited to the upcoming NATO summit in Madrid.
Chinese arbitration in the Asia-Pacific Region
Amid events in the Asia-Pacific region, the words of Chinese Foreign Minister Wang Yi attract attention. Emphasizing the threats facing the world and cloudy prospects for developing the world community, the Chinese diplomat noted the onset of the "time of Asia", when Asians not only stop being "handymen" but begin to dominate on the world stage.
According to Wang Yi, the world be more attentive to the opinion of Asian states, respect their position more and learn from their thousand-year wisdom. The emphasis was made on the fact that they have an increasing influence on the situation beyond the region, though there are many those in the world who want to drag the "cold War mentality" to Asia and undermine its peaceful development.
Wang Yi declared that countries of the region do not want to choose sides and are already in a state of integration and building an "Asia-Pacific community of a single fate." And the Indo-Pacific strategy of the United States, announced by President Biden during visits to South Korea and Japan, is self-defeating.
Belarus: the world does not end in the West
Belarus, as a country with an open economy, places huge bets on cooperation with the countries of the Asia-Pacific, Africa, the Middle East, and South America. This was recently stated by the Prime Minister of Belarus Roman Golovchenko in an interview with the Al-Arabiya TV channel.
According to the head of the Belarusian government, the pivot to the East in Belarus' foreign policy is more than a reorientation to a vector where they cooperate with us from the standpoint of mutual respect and benefit and do not impose a paradigm of thinking, a model of behavior, treat us as equal partners. The reorientation to the East is not a forced measure in response to pressure from the West, as many are attempting to present the situation. It's more of a catch-up for what we've underperformed in this part of the world.
Such theses inspire optimism for they are based not only on the economic logic and geopolitical background of today, but also reflect objective reality.
According to a survey Euler Hermes, the global economic center of gravity turned to the East in 2002. If in 2000, developed countries accounted for about 80 percent of global GDP, then in 2019 that figure dropped to 60 percent, and after the pandemic, obviously, at least equaled. According to official data, China's GDP grew by 2.3 percent in 2020 compared to 2019, and by another 8.1 percent in 2021, which exceeded the target above 6 percent. At the same time, the global economy contracted by 4.2 percent in 2020, and in 2021 its growth was 5.5 percent.
There is every reason to believe that the tendency of displacing the center of gravity of the world economy to Asia will increase amid the West's rejection of Russian energy resources. Despite the commitment to green technologies, there is no alternative to hydrocarbons, and the availability/lack of access to them will for long determine the development of most countries.
This way or another, Asia is becoming the main and most interesting scene of international politics. Especially for Belarus and Russia, since the Western vector has been suspended indefinitely (and everyone should take this for granted), and the success of the new foreign policy depends on relations with partners in the East.
Therefore, continuing to promote the expert concept of "pivot to Asia" and still insisting on the need to develop a separate comprehensive national strategy, the BISR plans to hold a number of events in early July. In particular, it prepares a thematic seminar-discussion and a sociological survey (an expert online poll), where everyone interested in this relevant issue is invited to participate.
Yuri Yarmolinsky, analyst at the Belarusian Institute of Strategic Research