Connect with us

Russia

Russia engages Chinese capital in North Caucasus

Published

on

Russian company Northern Caucasus Resorts (NCR OJSC) and Chinese Dalian Wanda Group Corporation and China Oceanwide Holdings Group – in the presence of Heads of both states – signed a Memorandum of Intent regarding China’s investment in the development of Northern Caucasus resorts.

The amount of the said investment is expected to reach about USD 3 bl. to facilitate building of residential premises, trade, hotel and commercial complexes.

Chinese companies intend to invest in projects on the territory of Northern Caucasus federal district, the Krasnodar territory and the Republic of Adydea. According to Russian representatives the key investments are expected to target the regions of the Caspian Lowland in Dagestan, the city of Sochi and resort Arkhyz in Karachayevo-Circassian Republic.

Earlier this region was deemed a potential target by South African, French and Turkish investors. However, the amount of the expected investments was way smaller than those announced by China.

Thus, in June last year NCR OJSC entered into a similar contract with French Caisse des Depots et Consignations group which intended to invest about USD 1.7 bl. in building of recreation infrastructure in the Northern Caucasus. At the same time, public authorities promised back then to increase capitalization of NCR to USD 2 bl. Northern Caucasus is – in theory – an attractive target for investors in tourism infrastructure. Unique climate and rich natural resources make it a promising direction for the development of this business sector. At the same time, however, high rates of crime, separatism, economic underdevelopment and the fact that the main contribution into the gross regional product is made by public administration and social (including community) services sector, abate the investment attractiveness of the region. That is why the volumes of state investments here reach 60-90%, the average Russian indicator being 30%.

High birth and unemployment rates along with the cultural and religious peculiarities bring investment risks to the maximum. The average unemployment rate in the Caucasus (18%) twice exceeds that of Russia in general. This indicator is highest in Chechnya (43.1%) and Ingushetia (49.7%).

Unfavourable social and economic indicators cause destabilization of the situation. According to Caucasian Knot periodical for the first quarter of 2012 no less than 258 people became victims of the armed conflict in the Northern Caucasus. Thus, 163 people were killed and another 95 injured. 82 of them were announced members of an underground armed organization.

Relative stability in the region today is mainly achieved due to Kremlin financing. The Northern Caucasus receives around USD 5.6 bl. annually. The main objectives of public authorities in terms of NCFD development by 2025 are annual gross regional product growth at the level of 7.7%, annual industrial growth of over 10%, reduction of the scale of unemployment to 5%.

At the same time, tremendous rates of corruption will not allow using this support to the benefit of the whole population. Thus, Plenipotentiary Envoy of the President of the Russian Federation in the NCFD Aleksandr Khloponin stated that the Northern Caucasus is the Russia’s leader in terms of money laundering.

According to the obtained information the separatist mood in the region remains the same, and in some districts even grows. In this situation, the Kremlin will need to increase financial support in the nearest future which will be distributed among the local elite. In our opinion, such strategy is not efficient, and the Kremlin’s attempts to set the vertical of the recreation industry in the Northern Caucasus are ill-fated because these tactics of implementation of projects ‘from Moscow to the regions’ is a priori much less effective than allowing local authorities to participate in their management. This will not allow for the full-scale involvement of the local elite in the projects and creation of the interested local powerful forces to ensure their secure functioning. The present-day business model de facto has nothing to do with the attempt of real integration of the NCFD in the RF economy and has a large corruption element instead.

According to our estimations Russia has faced a serious deficit of resources which are of crucial importance for the harmonious development of all the country’s regions. This triggers the necessity of attracting foreign capital to be allocated in the most underdeveloped regions. A similar scheme is now being implemented in Siberia and in the Far East where the same Chinese capital is being actively raised. Therefore, Moscow is striving to ensure provision of the necessary financial resources to the economically depressed Russian regions.

It is worth noting that on May 21st this year Vice-President of China Oceanwide Holdings Tsi Tszysin highlighted the lack of specifics of investment projects in the NCFD and the need to conduct serious work in this direction. Therefore, at the time of signing, the determination of investment volumes could not be based on the actually existing projects. Consequently, the amount of investments can hardly be deemed justified.

Press Secretary of RF Prime-Minister Dmitriy Peskov said that Chinese investors asked for support in entering investment markets of Moscow and Saint-Petersburg in lieu of the Northern Caucasian projects. According to the information provided by the sources in Moscow government, however, these Chinese companies never addressed the Mayer’s office with development project proposals. At the same time, China is one of the key foreign investors in Saint-Petersburg which may be a proof of existence of secret covenants between Moscow and Beijing related to investments in the Northern Caucasus.

In view of the aforesaid, we believe that involvement by Moscow of significant geopolitical players in the NCFD is aimed at ensuring capital inflow to the region for the purpose of levelling social and economic destabilization factors the influence of which is now growing.

The main interest for China, in our opinion, lies in the area of consistent interstate arrangements. Today Russian and China have a number of strategic projects related to the joint use of raw materials and high technologies. This refers to aircraft engineering, nuclear energy, oil and gas industry etc. Investments in the Northern Caucasus district may be one of the aspects of some broader arrangements, a sort of payment for the compromises in other areas of cooperation.

We believe that China’s participation in investing in this region will allow it to increase geopolitical competition with Turkey. Quite a lot of Turkic peoples inhabit the territory of the Northern Caucasus, the largest of them being Kumyks, Karachais, Balkarians, Nogais, Azerbaijani, Akhaltsikhe Turks. China with its serious problems with the Uigurs and concern about the activation of pan-Turkish sentiments in the region may consider investments in the Northern Caucasus as a way to strengthen its position, thus opposing Ankara. A similar system of geopolitical behaviour may be also caused by the concern about the enhancement of radical Islamist activities within the region. At this point, the key goal of Chinese geopolitics in the Caucasus is strengthening of economic connections with the region aimed at decreasing the possibility of penetration of pan-Turkism and Islamic fundamentalism in China.

These interests go in line with those of Moscow which due to the strengthening of China slows down the rapid growth of Ankara’s influence. It is not impossible that the choice of French investors in 2011 was determined by the peculiarities of France-Turkey relations. Therefore, Moscow may select investors for cooperation in the NCFD purposely – those who would have interests in the Northern Caucasus similar with the Kremlin’s aimed at the creation of a system of external balances and geopolitical counter weights in the region.

Continue Reading
Comments

Russia

Forgiving Old Debts: Russia’s Diplomatic Maneuver

Published

on

With economies experiencing contractions across the globe and with governments in the third world most vulnerable, discussions of debt relief have been revived. Yet, forgiving old debts is nothing new to the Kremlin. For the Russian government, it has been just one part of a wider diplomatic toolkit to rekindle ties that have faltered since the end of the Cold War.

Once the primary backer of numerous states over large swathes of the globe, Moscow largely retreated from the non-Soviet space during the presidency of Boris Yeltsin and it continued to not be a primary concern during Vladimir Putin’s first two terms as head of state. However, Russia’s resurgence on the international arena over the past few years has not only made the country more willing to re-engage with the region but also more capable.

International media has primarily viewed this through the lens of military strength. Whether it is sending trainers and advisors to the Central African Republic, allegedly supporting rebels in Libya, or deploying Wagner Group forces to fight an Islamic State-offshoot in Mozambique, the focus has primarily been conflict-oriented. However, less explored is the quieter and more economic measures that the Russian government has taken in order to win hearts and minds outside of the West.

As part of a debt-for-development programme, Russia has forgiven approximately $20 billion worth of debt to various African governments that was accrued during the Soviet period. Beneficiaries include the Commonwealth nation of Tanzania and Francophonie member Madagascar, along with others. In forgiving these loans, the Kremlin has acknowledged a reality that many countries continue to deny: such debts are unpayable. At the first ever Russia-Africa Summit, Putin stated explicitly that “It was not only an act of generosity, but also a manifestation of pragmatism, because many of the African states were not able to pay interest on these loans.”

These measures have yielded concrete benefits for the previously indebted countries. For example, the decision to forgive Mozambique’s $40 million debt was done in conjunction with the United Nations World Food Programme, with the money that was intended for debt repayment instead being used to provide free school meals for 150,000 children over the course of five years.

While Russia will potentially be losing some money in the short term, debt forgiveness is likely to open new doors moving forward. Many of the countries that have seen their debts written off have significant economic and geopolitical potential. With improved political relations as a consequence, it is hoped that Russian companies will get preferential treatment should contracts be offered to international firms. This could help explain the Kremlin’s decision to forgive 90% of North Korea’s $11 billion debt despite the latter’s weak position. Russia has been eager to develop a trans-Korean gas pipeline that would transport fuel to South Korea. While the likelihood of this being realised remains slim, in the context of Pyongyang’s inability to repay the debt in any case, it is a reasonable gamble to make on the part of the Russian government.

This is somewhat similar to China’s efforts over the past few years, albeit in an inverse form. With Beijing less cash-strapped than Moscow, it is able to invest directly whereas Russia is using debt forgiveness to redirect cash payments away from servicing old debts and instead towards domestic reinvestments. Free projects, such as the Chinese-funded and constructed headquarters of the African Union, have been followed by ever-growing economic and political relations.

Russia’s debt policy has been used to strengthen existing alliances and partnerships. While not all Soviet-era allies have retained close ties to Moscow, many have done so continuously since the Cold War. One of the biggest beneficiaries of Russian debt forgiveness has been Cuba. In July 2014, ahead of a visit to the island nation by Putin, the Russian government wrote off 90% of Cuban debt. Though Russia was not only the country that showed willingness to restructure Cuba’s debt obligations at the time, it was by far the most generous. China restructured approximately $6 billion while Japan and Mexico forgave $1.4 billion and $478 million, respectively; Russia forgave $32 billion.

The decision did reaffirm the close relations between Moscow and Havana. Cuba has repeatedly voted in support of the Russian Federation at the United Nations on sensitive topics, such as Crimea, and Russian firms have received multiple drilling and mining contracts from the Caribbean country.

However, this strategy has its limitations. The overwhelming majority of these debts date back to the Soviet era and are therefore limited in scope. Some countries, such as Angola and Ethiopia (which saw most of their debts forgiven in the 1990’s), were primarily recipients of military support during civil wars so their debts were not as vast as other heavily indebted countries with other creditors. Since then, despite respite from Moscow, such countries have continued to become increasingly burdened by growing debts. While Ethiopia is often heralded as an example of rapid economic growth, its debt, both in total but also has a percentage of GDP, has grown considerably during the post-Soviet era.

While debt relief is undeniably beneficial to the third world, the fact that Russian-owned debts constitute a mere fraction of all foreign-owned debts in most cases means that the act of writing debts off cannot achieve much in of themselves. Consequently, in several countries, the gesture is mostly a PR move. In the case of Afghanistan, where Russia was the largest creditor due to loans handed out during the 1980’s, Kabul had for decades refused to recognise the debt. The decision to forgive the debt was therefore more of a signal of a desire to improve relations than any hope to achieve instantaneously tangible rewards.

The largest stumbling block for the Kremlin’s efforts remain structural issues afflicting the indebted nations, the nature of which vary considerably from country to country. For example, while Russia has forgiven a majority of Iraq’s debt to the country, which in turn helped revive talks over potential oil contracts, the continued instability in the Middle Eastern nation makes it difficult to reap many benefits. Though it is true that Baghdad has continued to purchase Russian T-90 tanks and attack helicopters, this is more of a sign that Russia has partially managed to pivot Iraq away from the United States’ sphere of influence as opposed to gaining economically.

With the onset of coronavirus, however, Russia might not be the leading debt forgiver for very long. In places such as sub-Saharan Africa, where economies are expected to continue shrinking while deficits are set to grow, other creditors could potentially step in and likewise forgive debts. In April of this year, G20 leaders agreed to extend debt relief in the form of a moratorium on debt repayment yet this can only serve as a short term solution. With many governments already increasing their borrowing, creditor nations are well positioned to leverage their position in order to improve geopolitical relationships as well as set the stage for favourable contracts for their firms. If more countries follow Moscow’s path, then the significance of what the Kremlin has done will only recede and lose much of its relevance.

Debt forgiveness can win friends but can only go so far. For Russia’s diplomatic maneuvers to stick, they will need to continue complementing it with other efforts, such as improving trade and boosting security partnerships, in order to truly make the most of its financial generosity.

Continue Reading

Russia

The Case of Belarus: Russia’s Fear of Popular Revolutions

Emil Avdaliani

Published

on

For Russia, the crisis in Belarus caused by the August presidential election result is of a geopolitical nature. Moscow might not be openly stating its geopolitical calculus, but in its eyes, the Belarus problem resembles the uprisings in Ukraine, Moldova, Georgia, and Kyrgyzstan and represents a similar problem in the long run.

Whatever the arguments propounded by world analysts that protests in Belarus are not about geopolitics and more about popular grievances against President Alexander Lukashenko, the issue will ultimately transform into serious geopolitical game.

For Moscow, the Belarus problem has been about geopolitics from the very beginning, though it was only on August 27 of this year that Vladimir Putin announced the creation of a special “law enforcement reserve” for use in Belarus should the situation get “out of control.”

The Russians understand that an “Armenia-style” revolution in Belarus could theoretically take place, but it would open the country more to Europe and thereby create geopolitical dilemmas similar to those created in Ukraine before 2014. The Russians further grasp that in Ukraine, the situation was out of control even before the Maidan Revolution. Moscow’s influence was not sufficient to stop Ukraine’s gradual shift toward closer ties with the collective West.

For the Russian leadership, events in Belarus are a continuation of the “revolutionary” fervor that has been spreading across the former Soviet space since the early 2000s. What is troubling is whether or not the Russians see this process as an expression of the popular will that is largely independent of the West. Several indicators point to an ingrained belief within the Russian political elite that in fact the West has orchestrated the popular upheaval in Belarus.

Russian history might be of help here. Throughout the nineteenth century, the Russian Empire fought the spread of European revolutionary thought along and inside its borders. It built alliances to confront it and fought wars to forestall its progress. But in the end, the Bolshevik Revolution and the subsequent policies of the Communist Party were largely based on European thought, though many western ideas were changed or entirely refashioned.

Similar developments took place during the late Soviet period. By the 1980s, popular disapproval of the Soviet system had grown exponentially. A revolutionary fervor for independence ran amok in the Baltic states, Ukraine, and elsewhere. True reforms would have served as a cure, but half-hearted economic and social measures only deepened the crisis. Military power was used in a number of capitals of Soviet republics, but again only half-heartedly. Thus was the entire Soviet edifice brought down.

Modern Russian leadership should see that there is essentially no cure for popular grievances and mass movements along its borders. Russian history gives multiple examples of how military intervention against revolutionary fervor can bring immediate results but leave long-term prospects bleak. The defeat of revolutionary passions can only take place by minimizing those economic, social, and state-system problems that usually generate popular upheaval. This is the dilemma now facing modern Russia. The revolutions that occurred over the past 20 years, and the situation today in Belarus, all fit into this pattern.

For the moment, Lukashenko has won this round of strife with the protesters, and his rule is highly likely to continue. But what is equally certain is that the protests gave birth to a massive popular movement in a country that was once famous for the quiescence of its population.

Russia fears that eventually, this revolutionary tide will close in on Russian society. Lukashenko has stressed this idea, saying in an interview that mass disturbances will one day reach Moscow. Many rightly believed this was a ploy by Lukashenko to scare the Russians into supporting him—after all, Belarus is far smaller than Russia and much less important than Ukraine. Still, Lukashenko was right insofar as he pinpointed possible long-term problems Russia could face as it moves closer to 2036.

Much depends on the West as well. It faces a dilemma in which it ought to pursue a policy of vocal condemnation and perhaps even impose heavy sanctions—but from a balance of power perspective, moves like those would distance Minsk and push it closer to the Russian orbit. This dilemma of morality versus geopolitical calculus will haunt the West in the years to come.

Belarus exports 10.5 million tons of oil products per year, including about six million tons through the ports of the Baltic states to world markets and another 3–3.5 million tons to Ukraine. Redirecting flows from the Baltic ports to Russian ones has been discussed, but this option is less attractive to Minsk because of the longer distances involved. This comes at a time when the Baltic states imposed sanctions on high-ranking Belarussian officials and the EU is pondering serious measures.

With each such move from the West, Russia gets another opportunity. Russia has professed interest in encouraging Belarus to redirect its oil exports to Russian ports and has agreed to refinance a $1 billion debt to Russia.

A broader picture might help put the events in Belarus in context. In the South Caucasus, the Russians appear to have reached the limit of their influence. They more or less firmly control the overall geopolitical picture, but have nevertheless failed to derail Western resolve to compete in this region. In Central Asia, Russia has more secure positions, but the region in general is less important to the Kremlin than the western borderlands.

It is thus the western front—Belarus and Ukraine—that is a major theater for Moscow. Since 2015, many have believed that Syria is Russia’s top geopolitical theater, but this assumption is based simply on the intensity of the immediate processes that are transpiring in the Middle East. With or without Syria, Moscow’s global standing will not be fundamentally damaged. Belarus is a different matter entirely. Changes there, and by extension a potentially anti-Russian state, would constitute a direct threat to Moscow.

For Russia, Belarus is the last safe buffer zone on its western border. Ukraine is lost, as is Moldova, and the Baltic states have long been under NATO protection. Only Belarus serves as a bridge for Russia to move militarily into the heart of Europe. To lose it would be tantamount to a complete “encirclement” of Russia by the West, as argued by Russian politicians.

This geopolitical reality also means that Belarus is the country that will remain most susceptible to Russian geopolitical influence. No wonder Russia is pushing to station its air base on Belarussian soil, reinvigorate the Union state, and intensify Minsk’s economic dependence on Moscow. As was the case with Ukraine, the upheaval in Belarus is about regional geopolitics.

Author’s note: first published in besacenter.org

Continue Reading

Russia

The Navalny case: Violent maintenance of the Cold War

Slavisha Batko Milacic

Published

on

We are currently witnessing the rise of the Cold War, through the media, after the case “poisoning” of Alexei Navalny. The case was used to raise tensions between Moscow and the European Union to the maximum.

Apparently, Alexei Navalny became a victim of poisoning. Yet none of this we can know for sure. However, after the mentioned event, an avalanche of statements “about the orderers of poisoning” was initiated by prominent European and American representatives. Without any critical review, avalanches began to fall in the direction of Moscow and President Vladimir Putin as the main culprit.

One of the first countries from which the avalanche of accusations started was France. Francois Croquet, France’s ambassador for human rights, said: “We know who is to blame.” A very undiplomatic statement for a diplomat, which went beyond the official framework of communication. Francois Crockett joined the wave of accusations against Russia with his statements before any investigation.

French Foreign Minister Jean-Yves Le Drian said that in his opinion, “she (Russia) should have conducted an investigation, and when the culprits are found, they should be tried, to learn a lesson, because this is not the first case of poisoning.” ». The statement, very fierce, but outside the position held by the person in question. The statements of prominent diplomats call into question the international authority of France’s voice in the world.

These statements are aggressively joined by many politicians in Eastern Europe, especially those who feel revanchism towards Russia because of the Eastern Bloc, and further project of Russophobia, which are in line with the great energy battle over the construction of Nord Stream 2, which involved the case of Alexei Navalny.

What do we know so far about Navalny and his treatment. Navalny was initially treated in Russian hospitals, by doctors who did not detect any presence of poison, and then he was transferred to Germany, where it was determined that he was intentionally poisoned. His transport was organized by the “Cinema in the Name of Peace” organization, which was responsible for “rescuing” the group “PussyRiot”, which considered the act of imitation of abortion in the church to be an expression of artistic performance.

In the light of the situation with Russian opposition member Alexey Navalny admitted to the “Charite” hospital in Berlin with the symptoms of poisoning European and particularly German politicians and journalists opened yet another page of blatant Russophobia. Many of them push forward the theory of poisoning creating a classic image of the bloody Russian state trying to get rid of another enemy as in their vision it happened with Sergey Skripal. Even though no proofs are available and the statements of German doctors are scarce of details, this case is claimed to deepen the crisis in German-Russian relations. Some Bundestag members even call to cancel Nord Stream-2 as a punishment for the Russian government.

Despite the media hysteria encouraged by many politicians from the West, there are those who did not succumb to the first wave of Russophobia, and looked more soberly at the event related to Alexei Navalny and asked for additional evidence. For example the Vice President of the Flemish Parliament Filip Dewinter:

“Until now there is no real proof that Navalny was poisoned. I have the impression that countries like Germany are building up the pressure against Russia. The Navalny-issue is once again a perfect excuse to compromise the Russian authorities with violence and oppression against the ‘opposition’ … An objective and neutral investigation will tell“ stated Mr. Filip Dewinter.

His statements are not alone

Chairman of the “Prussian Society Berlin-Brandenburg” Volker Tschapke stated:

“Facing constant anti-Russian propaganda on different levels, I am not surprised with such an attitude, yet I can’t accept it. One of the key principles of any democratic society is the benefit of the doubt: nobody can be declared guilty until the proper investigation is conducted. Too bad, looks like this principle doesn’t work in Europe anymore. I’d like to wish Mr. Navalny to recover very soon and to call German politicians to stick to democratic values and stop pointing fingers at the Russian government without any substantial evidence base.“ said Mr. Tschapke.

Doubts about the case are also expressed by Member of the Parliament of Italy Paolo Grimoldi:

“I don’t trust the “institutional attack” to Navalny in Russia. He has many enemies, especially outside politics, in his life. In my opinion, it doesn’t look like an attempt to eliminate a political opponent. If any Russian top institutional level ever wanted to strike Navalny they would act more efficiently so let’s be serious and stop attacking Russia for nothing, stated Mr. Grimoldi.  

Divided statements regarding Navalny’s case tell us that, unlike in 2014, American power is declining and that European politicians do not make synergistic statements against Russia, but many of them view things with common sense and seek additional evidence for accusations against Russia. More and more Europeans are asking the questions: How is Russia threatening us? What will happen terribly for Europe if Nord Stream 2 is built? Most understand that the conflict in which America is pushing Europe with Russia has nothing to do with European interests, but with American ones.

Continue Reading

Publications

Latest

Trending