Russia invests in Far East to prevent Chinese influence

Putin Far East New Year

Russian President Vladimir Putin decided to celebrate the New Year in the Russian Far East. Fear of Chinese influence has prompted another sign of the “Pivot Eastward” that Putin has pledged set as an element of Russian foreign policy. 

This visit follows several recent, similar moves by the Kremlin. Putin dedicated a section of his annual State of the Nation address on December 12 to discussing the government’s latest plans for developing Russia’s massive and sparsely populated Far East. The President declared that the Kremlin would pursue partnerships with private businesses to develop industries that are not engaged in resource extraction. Furthermore, special tax regimes will be established in the Far East and Eastern Siberia that include a moratorium on corporate, real estate and property taxes for companies which are not involved in exploiting the region’s natural resources.

Putin’s administration has focused on the region following his return to the presidency in 2012. Putin labeled the development of the Far East “the most important geopolitical task” facing the Russian Federation and a special ministry charged with developing the Far East was created the same year. Putin named a new envoy, Victor Ishaev, to direct the Ministry in August 2013, following extensive flooding in the Far East that caused $1 billion in damages and attracted international attention.

Putin’s plans to develop the Far East’s infrastructure will prove a difficult task. The August 2012 flooding highlighted the decaying state of housing and transportation infrastructure in the region. Moscow has failed to invest substantially in the region since the end of the Soviet Union, and Russian specialists estimate that simply maintaining the existing infrastructure in the region will require investments equal to 2% of Russia’s GDP.

The region’s reputation for systemic corruption is just as challenging. Ishaev has admitted before that corruption exists in the region on a massive scale, and that “any problem is impossible to solve because of vast corruption networks.” The former regional director of Russian Railroads for Western Siberia was accused in December 2013 of stripping 120 kilometers of railroad track from the region, which was then sold in Kazakhstan.

The development of the region is not only related to Kremlin hopes for the establishment of Russia as an East Asian power, but is also motivated by deep concerns in Russian political establishment that the region is increasingly falling under Chinese influence.

Prime Minister Dmitry Medvedev warned in August 2012 that it is vital to protect the region from “excessive expansion by bordering states” and “the formation of enclaves made up of foreign citizens.” The population of the Far East is projected to shrink by one fifth to 4.7 million over the next decade as the population ages and increasing numbers of Russians move to the European regions of the country in search of better economic opportunity.

Despite concerns over China’s encroachment in the Far East, the region is increasingly becoming dependent on Foreign Direct Investment from Russia’s neighbors: the Chinese Development Bank announced in August that it is considering investing up to $5 billion in the region. Attracted by tax incentives, Japanese investors are preparing plans to develop large-scale agricultural projects in the region.

Given the vast mineral deposits, energy reserves, and fallow land in the Far East, the region is unlikely to remain underdeveloped for long. But with increasing Japanese and Chinese interest in the region, as well as Kremlin plans to move large numbers of Russia’s burgeoning guest worker population to the Far East to increase the region’s labor pool, it remains to be seen how much the Far East will remain a distinctively Russian region in the 21st century.

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Categories: Central Asia, Economics

Author:Luke Rodeheffer

Luke is an incoming MA student at Stanford’s Center for Russian, Eastern European, and Eurasian Studies, where he is the recipient of a Foreign Language and Area Studies scholarship for Turkish. Luke was previously a Fulbright fellow in Ukraine and research assistant at Koç University in Turkey. In addition to security analysis and political risk assessment focusing on the former Soviet Union and Middle East, he enjoys hiking and writing. He has previously contributed to a variety of publications, including Business Insider, The Diplomat, The Interpreter, and the Middle East Monitor. Follow him on Twitter at twitter.com/lukerodeheffer.

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