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. Last Updated: 07/27/2016

A New Asian Century

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At the beginning of the decade, when I first argued that Russia was moving toward an alliance with China, this was met with derision. One American scholar -- close to the Washington neocon faction then confidently gearing up to export its particular version of "democracy" to the world -- assured me that Russia was so afraid of China that it would be compelled to seek a military alliance with Washington, and this under virtually any terms the Americans dictated. Quite amazingly, these people still have jobs!

Admittedly, there was good reason for skepticism. Relations between Russia and China were historically fraught. Beginning with Peter the Great, Russia had increasingly looked to the West. During the first, disastrous post-Soviet decade, Moscow had sought desperately to ape the institutions and policies of the Atlantic alliance -- foreign flora that proved grotesquely unsuitable to the Russian climate. Furthermore, as a legacy of Soviet-era military conflicts, tens of thousands of kilometers of borderlands were under dispute. Russians feared the Yellow Peril with wild tales of the 2 million illegal immigrants ready to seize Russia's Far East. (Either the wily Chinese have learned invisibility, or they number, at most, one-tenth of that figure.)

Yet, despite the barriers, a fundamental recasting of the relationship was vitally important to both countries. Under the new administration of Vladimir Putin, both had increasingly opposed the unilateralism of Washington, seeking to restore their own spheres of influence in a multipolar world.

From an economic standpoint, China scoured the globe for resources -- energy, grain, pulp and paper, minerals, metals and ores -- to feed its voracious industry, yet virtually everything it needed was available just across its western border. For Russia, China was both a threat and a promise -- a tough competitor, but the ultimate growth market for Russian commodity exports and a reliably mercantilist partner deeply disinclined to interfere in the domestic affairs of others.

Thus, seven years later, Russian-Chinese trade has surged to more than $40 billion per year. Russian railroad and electricity networks are being built to service Chinese demand. Following a tedious hesitation waltz when Moscow flipped back and forth between choosing the rival Japan and China pipeline routes, China finally prevailed; Russia's eastern oil pipeline is now nearing completion. A parallel gas pipe will likely be laid, as China comes to realize that Exxon's attempted end-run around Gazprom for Sakhalin gas has run into the wall of Russian resource legislation.

In addition, diplomacy has been a great success. All outstanding Russian-Chinese border conflicts have been resolved. The Shanghai Cooperation Organization, now widened to include all of the main Asian and Eurasian countries, excluding U.S. allies Japan and Australia, has evolved from a talking shop into the key lever for Russian-Chinese influence in the southern republics. Russia and China are tightly aligned at the UN Security Council, where China -- somewhat reticent to antagonize its second-largest trading partner -- discreetly shelters behind a Russian government increasingly willing to assume a more confrontational stance.

Finally, the largest joint military exercises in either country's history have been conducted, and after decades of selling slightly antiquated weaponry, Moscow is now willing to export its most recent generation of military technology to Beijing, signifying a new confidence in their long-term relationship.

Intellectually shallow but profoundly convinced of their own moral superiority, the current Washington clique has missed the vital point: For the past several hundred years (and despite a brief radical interlude of the early 1920s), Russia has been a fundamentally conservative power, largely seeking to maintain the status quo and evincing no desire to overturn the global political architecture.

Rather than a revolutionary transformation, Moscow merely seeks to regain its traditional status as a great power, a stakeholder in the post-war division of power. China, on the other hand, a 5,000-year-old empire now recovering from a very temporary bout of weakness, is an essentially "disruptive" power -- one seeking a profound reordering of the global system. Last year, we heard much vacuous cant as to whether it was China rather than Russia that "deserved" to be in the Group of Eight. This is totally beside the point! Unlike Russia, China has evinced not the slightest desire to join an organization that it sees as a club of losers, an association of sunset powers solemnly gathered to discuss their fading glory.

Western hectoring of Russia -- European Union lawmakers hailing terrorist murderers as freedom fighters, oligarchic thugs suddenly transformed into heroes for liberal democracy, Dick Cheney slamming Putin's record on democracy, then the very next day praises the democratic credentials of Kazakhstan's Nursultan Nazarbayev (a man characterized as a corrupt and brutal dictator ... by Cheney's own State Department) have simply reinforced Russian's perception of Western hypocrisy and self-dealing.

While American unilateralism and the employment of tame nongovernmental organizations to sponsor regime change in what Russia views as its own historic sphere of influence did succeed in its implicit purpose of putting the fear of God into the Russians, their eminently predictable response -- a growing alienation from the West along with a fundamental rapprochement with China -- should have constituted the neoconservatives' very worst nightmare. It seems particularly ironic that, having refined policy failure to a fine art, the administration of George W. Bush managed a feat evading two generations of Communist policy makers -- building a durable alliance between the two Asian giants.

The 19th century was unambiguously European, the 20th American, and the 21st will surely be Asian. More than 50 percent of global gross domestic product (in terms of purchasing power parity) now originates in the emerging economies. As the United States slides into recession, with both Europe and Japan likely to follow, this secular shift can only accelerate.

Like Russia itself -- not one of those countries which have enjoyed a spectacular transformation from half-starved agrarian backwater to economic powerhouse in a single generation did so by the application of the strict liberal economic policies advocated by the International Monetary Fund, often referred to as the "Washington Consensus." Instead, all have employed some mix of free markets and state capitalism, rejecting equally the dogmas of Marx and Adam Smith.

It is only to be expected that these new economic powers will increasingly define a novel and fundamentally pragmatic economic and political ideology, with abstract concepts of democracy and extreme economic liberalism will be seen, at best, as luxury products -- and, at worst, as a recipe for chaos. In what has recently been described as "the world without the West," the new thinking is not so much anti-Western as it is a view that the West is gradually becoming irrelevant as the world enters into a period of intense and globalized economic competition.

A vital side of the BRIC's quadrilateral, Russia has already benefited enormously from the rapid growth in global commodity demand; its New Asian Century is just beginning.

Eric Kraus is investment adviser to the Nikitsky Russia Fund. This comment represents a summary of a presentation he delivered at the CLSA Hong Kong conference.