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. Last Updated: 07/27/2016

Trade minister bullish on 'tiger economies'

A new Russian trade strategy, announced this week in Tokyo, gives priority to the growth economies of Asia and the Pacific.


The Tokyo presentation by the first deputy minister of foreign economic relations, Sergei Glazyev, follows the visit to Beijing earlier this month of the minister of foreign economic relations, Peter Aven. Glazyev's trip to Tokyo preceded by a few days the arrival of the foreign minister, Andrei Kozyrev, who has already this week called in on Beijing and Seoul.


The flurry of Russian activity in East Asia is the first product of the debate inside the Russian policy establishment over whether to tilt the "new thinking" in the direction of Russia's traditional enemies and large creditors in the West; or whether to target the "tiger economies" of Asia as the medium-term alternative to frozen relations with Japan.


Glazyev provided an outline of his new thinking in an interview that responds to criticism in the Russian press that the government is slighting the East in favor of the West.


Glazyev is the first senior Russian policy-maker to provide details of the policy that will be pursued in the run-up to Russian President Boris Yeltsin's proposed visits to China and Japan in the autumn.


Asian Strategy without Japan


Relations with Japan are expected to be frozen indefinitely by Moscow and Tokyo's stalemate over the Kurile Island territories claimed by Japan.


Russian officials have urged the Japanese to reverse their insistence on putting the territorial issue ahead of economic relations.


They explain that the democratization of Russian political life has also encouraged new nationalist impulses. They remind the Japanese of the con-sistent opinion poll finding that Rus-sians hold highly negative attitudes towards Japan.


According to Russian advice being delivered in Tokyo this week, Japan should follow the German example, and reverse its insistence on making settlement of the territorial issue the precondition for expanding economic relations. The Russian government has told the Japanese that by putting improved economic relationships first, the Germans have largely succeeded in overcoming popular Russian antipathies. The message is that Japan should do the same, but no one in Moscow believes the Tokyo government will agree.


An Asia-Pacific strategy without Japan is likely to gravitate, Glazyev said, toward the "tiger economies" of South Korea, Hong Kong, Taiwan, and Singapore for import and export trade; and to Singapore as a center for financial and trade intermediation, as well as for investment directed at the Russian Far Eastern region.


Glazyev, a professional economist, said the new strategy is designed to shift the direction of Russian trade so as to overcome existing problems with traditional markets.


"The main problem in Russia's foreign trade", he said, "is the concentration of Russian exports in the raw material sector. More than 90 percent of our exports are raw materials, including energy. Of course, we cannot regard this situation as a good one. We are trying to change this situation, to move to more value-added exports".


A second problem, Glazyev said, is the collapse of domestic demand for "our advanced high-tech sector", which has been closed until recently for defense production. "There are a lot of market niches" which the Russian Trade Ministry wants to explore for exports, particularly aviation and aerospace products. For these China is likely, in the view of the Russians, to be a major buyer.


Glazyev denied that the economic policy-makers of the Russian government are giving a priority to the United States, Western Europe, or a "West-firststrategy".


"I do not consider the present negotiations with the G-7 and IMF as a sign of a strategy favoring the West. There is no such official strategy".


He explained that a number of problems oblige the government to address the West at the moment. "For instance, we have $80 billion in debt, and this debt is mainly to Western countries". Glazyev's debt estimate goes beyond the $61. 6 billion hard currency Soviet debt which Western institutions have calculated to the end of 1991. The discrepancy, Glazyev suggested, reflects debts owed to Eastern Europe in non-convertible currency.


He also explained that Russia's traditional trade relationships favor the West "We have a strong import dependence on wheat and grain from the U. S. and Canada; meat also from these' countries and Europe. and as for our machinery needs, they come mainly from Western and Eastern Europe.


"It is not easy to change the pattern of trade", the official noted. "We do not have a priority to push our firms to move to this or that particular market. They should make that choice for themselves. We are trying to give them the most objective information".


Membership of Pacific Blocs


"As far as the Pacific region now, I think it has much more potential for growth than traditional areas of Russian foreign trade".


Glazyev indicated that Russia will be looking for support from the Association of South East Asian Nations (ASEAN).


"We are very interested to enter the community of countries which are trading with each other in the Pacific region".


Foreshadowing Russian applications, Glazyev said: "We are preparing to take steps to join all the multilateral institutions, financial and economic ones".


Moscow can be expected to apply to the Asia Development Bank once membership of the International Monetary Fund and the World Bank is approved in a few weeks.


Glazyev indicated that he will be looking to balance bilateral trading accounts with exports of Russian-made industrial goods.


Glazyev referred to the Latin American countries where "we have very little trade. . . which cannot be explained in terms of economic efficiency".


He expressed the hope that export markets in Brazil in particular, Chile and Argentina could be developed for machine manufacturers which are "rather simple by world standards, but at the same time rather reliable and very cheap". Mining and agricultural equipment, power generating machinery, and aerospace engineering were given as examples.


The second deputy minister of foreign economic relations, Kiril Ivanov, made a pioneering trip to Colombia last month to initiate this strategy.


Speaking of Singapore, Glazyev noted that "our entrepreneurs are very active now. This is only a first step. We are trying to help our firms find niches in Singapore for export of their markets".


He also anticipated the rapid estab-lishment of non-government Russian banks in Singapore.


Glazyev disclosed that his ministry has completed drafting a decree on the regulation of foreign investments abroad which Yeltsin is expected to sign by the end of March. This will authorize commercial operations abroad for Russian banks. "I am sure that in the nearest future some of these commercial banks will open their branches in various parts of the world, especially in Singapore".


China Policy and Taiwan arms trade


Glazyev denied there has been any policy change in Moscow on the issue of relations with China and Taiwan.


He described as a "misunderstanding" a report in the Asahi Shimbun of March 3, which suggested he favored selling Russian arms to Taiwan.


Glazyev said "there are various types of dealings taking place between our firms and representatives of different Chinese regions, including Taiwan. There are also a lot of intermediary firms which come and represent the interests of Taiwanese firms". Most of that activity, he added, is for sale of consumer electronic goods to Russia.


"Now Taiwanese entrepreneurs are very active in trying to find access to the Russian market, and to compete here with Korea. There are a lot of offers from intermediate firms concerning Russian exports to Taiwan as well".


The official noted that no government authorization would be required for exporting Russian raw materials for textiles to Taiwan.


Arms exports are strictly regulated, Glazyev emphasized, and require end-user certificates provided by governments. He said that he had no specific information about arms sought by Taiwan, although he believed there may be interest in aircraft, marine vessels, and "ordinary weapons". He said his government was not certain whether intermediaries representing Taiwan firms were intending to buy arms for Taipei, or were trying to make money. for Taiwanese armsdealers in the of the weapons to third countries.


"As for Taiwan, we do not consider those offers for arms purchases which are coming to the ministry to have Taiwan as the end-users", he said. "When we understand that the end-user is the Taiwanese government, then we do not allow such transactions. This is the official position and is the same as it was before".


"We have a list of certain regions which are of special attention. We do not allow arms trade with those countries with whom we have not traded before, without special decision by the government and Supreme Soviet. So far as we know, there is until now no decision to allow us to trade with arms to Taiwan".


John Helmer is Moscow correspondent for the Australian Financial Review and the Singapore Business Times.