Putin Urges More Liberal Trade, Russians Skeptical

Russians are skeptical of their president’s plans to open borders for international trade.

Russian prime minister Vladimir Putin listens to a question at the World Economic Forum in Davos, Switzerland, January 28, 2009
Russian prime minister Vladimir Putin listens to a question at the World Economic Forum in Davos, Switzerland, January 28, 2009 (WEF/Monika Flueckiger)

“Liberalizing the global economy” is the “key issue” in Vladivostok this weekend, said President Vladimir Putin in an interview with RT television before the leaders of the Asia-Pacific Economic Cooperation organization gathered in the Russian port city for their annual summit. But he knows the Russian people are less sure.

Putin, who started his third term as president in May, reiterated this pledge in Vladivostok on Friday. “We can only overcome negative trends by enhancing the volume of trade, enhancing the flow of capital,” he said.

The protectionism pill, of course, eases the pain temporarily but hampers global economic recovery on the whole. It restrains trade and investment activities.

As a member of the World Trade Organization since this year, Russia seeks to be “actively involved in the process of establishing fair international trade rules,” said Putin. “The priority goal is to fight protectionism in all its forms.”

APEC already accounts for more than 50 percent of world gross domestic product. Within ten years, the group’s internal trade volume is projected to reach $15 trillion.

In the RT interview, Putin pointed out that half of Russian trade is currently with Europe “whereas Asia only accounts for 24 percent.” He sees vast opportunities for Russian mineral, natural gas and oil exports to the emerging economies of East Asia, China in particular.

Russia-China relations are at an unprecedented high and we share mutual trust both in politically and economically. Over the coming years we are bound to achieve a $100 dollar turnover rate.

The first Russian oil pipeline to China began operation early last year. An extension of the pipeline to a port facility near Vladivostok is expected to be completed this year. Moscow has invested nearly $9 billion in Vladivostok’s infrastructure with private investors contributing a further $13 billion.

Russia’s eastern provinces also contain rich coal and metal deposits as well as undeveloped land where grain could be produced to meet rising Chinese demand.

“One billion people worldwide are currently suffering from food shortages or famine,” Putin told RT. It’s an issue, he added, that will be “the focus of attention” at APEC.

But Putin’s designs involve more than trade. In April, the president described the development of Russia’s Far East as the “most important geopolitical task” of his presidency. In Vladivostok, he spoke of plans to create a Eurasian Economic Union which he believes “can become a linking factor between Europe and the Asian Pacific region.”

“Russia’s vision for the Eurasian Union,” wrote analysts from the geostrategic consultancy firm Wikistrat at the Atlantic Sentinel in March, “is to forge itself as an economic land bridge at the center of major global supply chains, linking production and consumption.”

Russia stands to become Asia’s window to the West and Europe’s gateway to the East. If successfully implemented, Russia would gain significant geopolitical clout and the opportunity to capitalize from economic diversification and technology transfers from firms seeking to maximize production and distribution efficiencies in Russia.

The union would include former Soviet satellite states Belarus, Kazakhstan, Kyrgyzstan and Tajikistan and have as observer countries Armenia, Moldova and Ukraine. Joining them in an effective economic bloc could “be hamstrung by domestic networks of corruption and nepotism,” according to Wikistrat.

To avoid the domination of Russian interests, Central Asian countries will play Russia against Chinese economic interests and Eastern European countries will continue to vacillate between Russia and Western European interests.

Indeed, Chinese and Russian interests are increasingly divergent in Central Asia where the two are likely be competitors for access to oil and natural gas. In Europe, even pro-Russian states as Ukraine are reluctant to deepen economic integration for fear of losing control over their export infrastructure.

Wikistrat also cautioned that “the kind of liberalization required for global economic integration may prove to be destabilizing for several of the Central Asian regimes and turbulent for Russian domestic society.”

Integration necessitates legal reform and the entrenchment of transparent institutions that can facilitate economic and social activities. This may partially explain the seeming lack of enthusiasm on the part of Central Asian authoritarian regimes to the idea of a union.

Meanwhile, in Russia, apprehension is mounting about the influx of cheap Central Asian workers. The global economic downturn of 2008 displaced many migrants workers, especially in construction and services. Few returned to their home countries, however, where work was even scarcer.

Faced with mounting unemployment, the Russian government in late 2008 barred foreigners from working in retail and marketplaces which employ over 30 percent of Russia’s migrant workers. Putin amended Russian immigration policy in June to require foreign workers to pass Russian history and language exams to obtain a work permit which is expected to push more migrants to work illegally. There are also regional migration quotas supposed to be based on local labor demand.

Despite these measures, an anti-immigration sentiment is vocally present in Russian society, something Putin regards warily. He warned in January, “If a multiethnic society is infected by nationalism, it loses its strength and durability.”

The opposition movement, usually mistaken for a homogeneous liberal crowd in Western media, is increasingly nationalist and Putin must walk a tightrope between portraying himself as a proud Russian strongman and pushing for the sort of trade liberalization initiatives that he believes will sustain Russian growth in the future.

The best way to stem immigration, he argues, is to improve economic conditions in Russia’s outer regions and neighboring states — the Eurasian Union. But he could struggle to convince seniors and working-class voters that open borders are what will improve their economic prospects.

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