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Russia-Turkey: The Interdependent Relationship Shaped by Energy or a Deeper Friendship?

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Prior to the dissolution of the Soviet Union, the deepening relationship between Russia and Turkey showed itself in the first agreement designed to enhance their economic relations. The agreement was signed on March 15, 1977, between them, which mainly embraced the cooperation in the promotion of the industrial development and energy affairs. Meanwhile, the parties also inked an agreement concerning the scientific and technical cooperations.

Therefore, energy had been a significant issue amid the negotiations processes between Russia and Turkey since that time. Although the relations many times have been strained between them with regard to the different geopolitical issues. However, the two parties have always seen each other more than an economic partner. In February 1986, according to an  Intergovernmental Agreement traced back to September 18, 1984, a contract was signed with Turkey’s BOTAŞ company for delivering roughly 6 Bcm of gas per year for over 25 years between the period of 1987 and 2011.

The gas flows between Russia and Turkey via Blue Stream and Western Line during the period of between 2012 and 2016. Source: Okan Yardimci, April 2016, Energy specialist in Turkey.

By the signing of the agreement, the first shipment of natural gas to Turkey from the territory of the Soviet Union commenced in June 1987, via Romania and Bulgaria using the Trans-Balkan pipeline. The agreement, in fact, opened a new door in Russian-Turkish energy relations for the foreseeable future. Currently, in the light of bilaterally multi-dimensional relations, both parties currently, are eager to boost up their energy collaboration in a growing number of fields, including nuclear power. The increasing bilateral relations between them have always raised the specific questions regarding what are the key factors or elements of these relations. According to the policy analysts and interlocutors, Turkish-Russian relations are based on a pragmatic approach meaning an effective way of maximizing their mutual advantages. Another element of the relations stems from the political identity and the civil society (domestic and foreign policy links). The political identity within Turkey and Russia has recently changed the way that affected their foreign policy strategies and in particular, their bilateral relations. In Turkey, since the adoption of the National Security Strategy of 1997,  Russia has not been considered as a threat to the security of the country, instead, the separatist groups and Kurds have been seen as major threats to Turkey.

The political shift toward a more “Eurasianist” orientation in Turkey was not only related to the rapprochement with Russia, however, even within Russia itself, a similar approach has been taken into account as a pivotal conception. Generally, pro-Western attitudes and stances of Russia have continued till the early 1996, after that time, the appointment of Primakov as the Foreign Minister leaded to a significant alteration towards the Eurasianism conception. This orientation had been expressed again and strengthened amid the presidency of Vladimir Putin since the adoption of the 2000 Foreign Policy Concept of the Russian Federation.  Currently, as one of the main priorities of the Russian Foreign Policy, Eurasianist orientation rather than Europeanistone has taken a dominant role in Russia considering that it needs to improve its relations ina Eurasian arena with its increasingly major partners like China, India, Iran, Turkey, and etc. In this cooperation, Russia sees Turkey as an important regional counterpart, due to their recent convergent interests in some political issues. Turkey is the second major importer of Russian gas. From the standpoints of some analysts, and policymakers, the relations in economic, especially in energy sphere will last long and it is impossible to break down their relations easily due to the mutual interdependencebetween these countries.

Having seen from the practice within the political arena, currently, the relations of two parties with the EU is a bit complicated, and also strained many times due to the different political tensions, and perplexing situations. At the same time, the Eurasianist attitudes of both Russia and Turkey once again show that they have convergent interests in any field rather than divergent ones that ignite even today, the geopolitical intrigue with its European partners. Therefore, it seems necessary to comprehend and then analyze their relations emerging from convergent interests. Take a simple example of the Syrian crisis, during the crisis, two parties have been opposed to each other concerning the Assad’s regime in the region. However, the changing political roles and attitudes give a much more place to scrutinize their relations.

As a result of these political changes in their positions towards Syrian crisis, leaded to the brokering the ceasefire agreement on 28 December 2016, and in fact, the West, mainly the Obama Administration were marginalized on this issue and were not given a free place for the Administration to take its chief position on this ceasefire agreement. It is very plausible that Russia, Turkey, and Iran brokered a ceasefire in the region, and undertook the major duties to fight against terrorism. However, in face of many death and casualties, Obama Administration did not do “any significant thing” to reach a deal on a ceasefire in Syria. In fact, Russia and Turkey did well what the Obama Administration didn’t do. Thus, although they demonstrated the different positions in Middle East problems, especially in the Syrian crisis, and even this crisis caused strained relations between them for some time.

However, both Russia and Turkey found a common ground in this issue also, and their collaboration remains supported by the significant economic and energy factors. The reliable relations between them once again revealed that it is possible to reach a deal in common ground and deal with the opposing standpoints and other problems, which showed itself in the example of the Syrian crisis. On the contrary, Turkey and Russia are not able to find out their convergent interests with the EU. The relations between the EU and two parties have soured due to the accession process of Turkeythe Western sanctions on Russia after the annexation of Crimea and etc. (Take an example of coup d’état happened on 15 July, 2016, during military coup attempt, the EU does not give any hand to Turkey to cope with this crisis, instead, Russia was the first country who supported Turkey amid the bloody occasion, in this context it can be said that friend is known only on rainy days or in trouble.)

Despite the souring relations due to the downing of Russian S-24 warplane between Syrian-Turkish border on 24 November 2015, the two counterparts again found a common ground to deal with the problem. Having strained relations of Turkey with the EU, forced Turkey to take a constructive approach toward Russia.

Upon the airplane incident, in June 2016, Erdogan called Putin and expressed “deep regret” over last year’s shooting down of a Russian warplane which violated Turkey’s airspace. During the phone talking, Erdogan added that he was eager to return the pre-crisis level of bilateral relations. Turkish spokesman Ibrahim Kalin highlighted that Erdogan used the communication to call for Russia to take decisive steps and joint efforts to solve regional crises and fight against anti-terrorist cooperation. He also added that both parties had agreed to take significant steps to enhance relations at a multi-track level.

After the bloody coup attempt in Turkey, Erdogan did his first visit to Russia. Amid the meeting near St. Petersburg on 9 August 2016, they reached an agreement on lifting the sanctions gradually imposed by Russia after it downed a Russian fighter jet in last November. The two also agreed to prompt-start huge energy projects, including a gas pipeline and a nuclear power plant. (It is needed to mention that the negotiations between Russia and Turkey on Turkish Stream also was suspended after the jet incident and St. Petersburg meeting paved a way to renegotiate on the energy project). During the joint press conference following the meeting, Vladimir Putin in his answer concerning the future relations mentioned: ”Do we want a full-spectrum restoration of relations? Yes, and we will achieve that… Life changes quickly” he also added. ”Moscow-Ankara axis will again be a line of trust and friendship,” Erdogan also said.

The Petersburg meeting opened a new door towardsRussian-Turkish relations both in economic and energy field. Major steps were taken concerning the reigniting tourism cooperation and two major energy projects which are important for the development of both countries. Key factors among the plans is a Turkish Stream pipeline connecting the two countries and a nuclear power plant that Russia has to build in Turkey that is priced at 18 billion euro altogether. The Peterburg meeting became the initial step toward the future Russian-Turkish relations not only in the economic but also in the energy sector. As a result of this significant meeting, they reached a deal on medium-term agreement from the period of 2016 to 2019. Furthermore, the enhancement of the capacity of bilateral relations from $30 million up to $1 billion was considered one of the key ambitions. At the same time, taking the requests of Turkish and Russian traders and businessmen, Turkey and Russia will do the exchange of Russian ruble and Turkish lira in their trade relations and will be able to use easily rubles and lira in the next phase of their economic cooperation. Within the course of the meeting, they also agreed on several significant issues by signing the agreement composed of 12 key articles. The energy issue is the most significant part of the rapprochement between them. The main goals of 12 Articles are classified below.

Figure 7. showing the key priorities of Petersburg rapprochement based on 12 Articles for coming years.

The revival of Senior Joint Cooperation Council 7. Acceleration of Akkuyu nuclear energy project.
2. Commencement of Charter Flights 8. Establishment of Russia-Turkey Joint Investment Fund (Council) estimated at $1 billion to strengthen economic collaboration
3. Removal of prohibitions that restrict bilateral trade, including agricultural products 9. Enhancement of cooperation in the defense industry
4. Thelifting of the ban on Turkish entrepreneurs 10. Installment of Turkey-Russia-Azerbaijan tripartite summit mechanism
5. Taking steps in common in order to achieve fully regeneration of visa-free regime 11. A line of friendship and trust between Ankara and Moscow
6. Giving Akkuyu strategic investment status. 12. Acceleration of Turkish Stream project

Upon the Petersburg rapprochement, the next significant meeting took place in Istanbul during the 23rd World Energy Congress between 9 and 14 October 2016. It was the Russian leaders’ first visit to Turkey since his attendance at the Group of 20 Summit in Antalya. On 10 October, two parties came together to sign an Intergovernmental Agreement (IGA) on the construction of Turkish Stream Pipeline. The Russian and Turkish leaders have voiced support for the construction of Turkish Stream pipeline which was suspended in the course of the tensions between the two countries. Russian President Vladimir Putin and his Turkish counterpart Recep Tayyip Erdoğan underlined that they want to accelerate the implementation of the natural gas project as much as they can. Even on 10 March 2017, Turkish leader Recep Tayyip Erdoğan visited his Russian counterpart Vladimir Putin in Moscow concerning the development of further bilateral relations in some issues in particular, in Turkish Stream project. The Moscow meeting was largely hailed as a big success both in the Russian and Turkish Governments. According to the Moscow meeting, Turkey will set up an infrastructure to allow Russian National Payment system to be available in Turkey. As a result, Turkish Stream pipeline project will be implemented through the Turkish Deniz Bank. Besides, they reached an agreement on several issues, including the removal of trade sanctions gradually, the construction of the $20 billion Akkuyu nuclear power plant, cross-culturalism, and tourism.

The Turkish Stream pipeline would carry Russian natural gas to Turkey under the Black Sea and then on to European Union countries. The two leaders also agreed on the affordable gas prices in the first initiative of the pipeline project and Russia promised to reduce natural gas prices at the next delivery of gas supplies via the Turkish Stream. This delivery will not be direct, but via Turkey as an energy transit country, natural gas will be shipped to Europe. During the World Energy Congress, Putin in his speech highlighted that Russia has been providing energy for the EU for the past 50 years and again would supply via new gas projects including Nord Stream 2 and Turkish Stream pipeline projects in a more secure and a convenient way.

He also added that his country was ready to decrease the oil production and support OPEC’s initiative to cut production as a way to increase oil prices. In general, what does really Turkish Stream promise both Russia and Turkey for the coming years? What will be the consequences and future perspectives of Turkish Stream for these two countries? In order to answer these questions, first and foremost, it is necessarily needed to analyze the energy relations after the Istanbul Agreement took place on 10 October 2016. First of all, according to the IGA between Russia and Turkey, the construction of two lines of Turkish Stream accounting for 15,75 Bcm each from Russia across the Black Sea has to be started by the end of 2017 and be completed up to 2019. The first line is expected to supply gas to Turkey, while the other would connect the transit routes between Turkey and the EU to provide the EU with natural gas. The cost of the project is estimated to be $6 billion. Both lines will have to be completed by December 2019. Pursuant to the agreement, Turkey will provide special tax exemptions for the marine section of pipeline including the import of vehicles, equipment, and other necessary materials are released from the payment duties in Russia and Turkey. The Turkish side also removed the tax revenues on gas transportation. According to the Energy Minister Alexander Novak, Gazprom will construct and possess the offshore section of the pipeline. Turkey will build and own the first line of the land section for the delivery of gas to its territory. The second line via which the direction will be towards Turkey-Greece border for carrying gas to Europe will be owned by joint actions by Gazprom and BOTAŞ. As Russia mentioned before, Turkey has come to an agreement on the second line of the pipeline in exchange for a discount for gas prices promised by Russia. At the first phase of Turkish Stream project, Russia will finance the two strings of the pipeline. Reportedly, the total cost of Turkish Stream including its four strings will make up for €11.4 billion which is the half cost of South Stream estimated at €23.5 billion. The first line of the project estimated approximately €5 to 6 billion.

If Gazprom goes forward with the construction of the third and fourth lines of the project, beyond the Turkey-Greece border, the company will face the same regulatory obstacles as well as financial obstacles. Gazprom has already fulfilled the environmental impact assessment for the offshore and landline sections of Turkish Stream pipeline. In terms of challenges and perspectives of Turkish Stream, it can be said that the project will encounter several challenges due to falling oil prices, the economic sanctions imposed by the West, which have an impact on Russian companies and banks, financial constraints, and also the cost of the project. Those obstacles make it difficult to find financing for the gas pipeline. It shows itself in the example of South Stream project, in which Russia faced both financial constraints and at the same time, misperceptions with the EU and Bulgarian government caused the suspension of the project.

Regardless all these challenges mentioned above, Russia somehow will finance and complete the Turkish Stream pipeline because it wants to diversify its transit route bypassing Ukraine. Therefore, unlike South Stream, Turkish Stream’s credentials are convincing for both Russia and Turkey. For the future perspective, it seems that Russia is not inclined to politicize the Turkish Stream pipeline in the face of its economic and energy counterpart, Turkey. Both of them would get benefits from the project if they opt for the “flexible energy diplomacy” inclining to the EU. The Ukraine crisis re-emphasized the role of Turkey as an energy interconnector not only for the EU but also for. Russia well understands that via Turkish territory, it will be able to carry gas supplies to Europe and sees Turkish Stream as a potentially successful project in this way.

For the EU, the diversification of energy sources is one of the key priorities and it seeks for newly secure supply countries and considers Turkey as a potential energy hub and a transit country in order to attain the natural gas resources via secure pipelines namely TANAP, TAP constituting for the backbone of Southern Gas Corridor (SGC). Regarding the Turkish Stream pipeline, there are also possibly positive approaches and perspectives which mainly depend on the future relations between the EU and Russia and the EU and Turkey. In fact, the relations between them have been soured for the current time. Turkey is going to do negotiations with the EU concerning the future perspectives of relations after the results of 16 April Referendum, Turkish leader, Recep Tayyip Erdoğan added in his speech. Basically, the Russian-Turkish relations are based on “win-win position” or “positive sum strategy”, while it cannot be said the same for the EU because of current tensions between them.

For the future perspective, the Turkish natural gas appetite will increase significantly, and it will need to provide its natural gas demands in an effective way. In terms of energy relations, Turkish Stream is a good deal between Moscow and Ankara. However, Turkey also has to take a new energy policy to use its effective and generous geothermal energy resources at a domestic level. Before everything else, Turkey has to regulate its natural gas markets and adopt the energy saving program based on energy efficiency rather than supplying its increasing gas demands in the near future.  In 2017, its growing gas needs are expected to increase up to 46.6 Bcm out of total 50 Bcm gas consumption.

The steadily growing natural gas consumption of Turkey between from 1987 to 2017 according to March 2017. Source: Okan Yardimci, Energy specialist in Turkey.

On the other hand, if Turkey decreases its natural gas consumption in future decades, what will be the benefits of Turkish Stream?- Turkish Stream will be the significant project between the EU, Russia, and Turkey. Turkey will be the third energy party to supply gas from Russian territory along with the Black Sea on to the European countries. In this context, however, the EU side wants Turkey to regulate its gas markets based on the EU prerequisites and eliminate the monopoly on gas prices while delivering to the EU. From Turkey’s perspective, it is not a difficult deal, whereas, it will take a bit time to regulate and adopt the energy frameworks and rules requested from Europe. Regarding the EU, it has to change its way of stances and perceptions toward Turkey and Russia and should have to more elaborate on engagement with both Russia and Turkey.

If the EU wants either Turkey or Russia to undertake responsibilities coming from the EU energy rules, in turn, the EU has to give a room (place) for both countries for the sake of effective energy partnership. In terms of Russia, in the future, Russia will not politicize the Turkish Stream that it has in Ukraine because Turkish is both Russian real counterpart as well as an economic partner in Eurasia and will not restrict the improving role of Turkey in Eurasia.

Since the 1970s, bilaterally energy relations between Russia and Turkey have been developing to date.(See Annex 25 below) Russia at least for its economic development and energy revenues will provide the EU with its gas in the future. For the present time, there is not a potential alternative for the EU to meet its increasing natural gas demands. It is the overt fact that the Southern and Central European countries have over dependency on Russian gas from 60% to nearly 98%. Some of the European countries (Norway and etc.) produce energy resources for the EU countries, but it is not enough for Europe to meet its energy demands in coming years. When it comes to the revaluation of the EU stances, it should have to change its way of “non-engagement” with Russia.

Annex 25. The main energy deals and export volumes between Turkey and Russia between the period of 1970 and 2014. Source: Okan Yardimci, Energy specialist in Turkey.

At least, the EU comprehends well that at the present time it has sell-purchase issues in the energy sphere. Hence, regarding the dynamics of energy relations between Turkey and Russia, it can be said that the successful deal will be continued in the coming decades. Both of them need each other in tourism, trade, economy, and energy fields. In order to pave the way for the future collaboration between Turkey and Russia, they also evaluate the role of the EU and involve it in their projects. The involvement of the EU in Turkish Stream will gain benefits for all parties, if they choose the policy of comprehensive energy diplomacy taking into consideration the interests of each party. Therefore, the energy relations between Turkey and Russia in the foreseeable future are convincing. What will happen in the near future depends mainly on the progress of the relations with its European partners…

When it is needed to take a general view on Russian-Turkish relations, it is clear that their relationship was established on behalf of reaching their specific interests and purposes. Certainly, the relations between them can be considered both convincing and stable, because of the fact that the relationship between states based on ensuring of any kind of interests is more influential than other simple relations without any purposes. In Russian-Turkish energy relations, it is important to mention a key factor called “appropriate balancing” emphasized by Gideon Rose.  The appropriate balancing as a key element of neo-classical realism can be applied better in Russian-Turkish energy relations. “Appropriate balancing” arises when a state correctly comprehends another state’s intentions, interests and balances properly. If the appropriate balancing would be applied in the Russian-Turkish energy relations, it can be said that both of them are aware of their purposes and interests toward each other.

This relationship is a kind of preserving the balance of power, ensuring their internal and external security in the region. So that, their relationship can be called purposeful or intentional relations (In Turkish language, it called çıkarlı ilişkiler or çıkarlar) which envisage the serving of both sides’specific purposes and interests. As Russian President Vladimir Putin stated: “States do not have constant friendship relations; states have constant interests and ambitions.” Over the historical period, their relations have had a competitive character more than cooperation in the region. However, on behalf of ensuring their interests,(Turkish growing demands for gas resources, ambition of being an energy hub and energy transit country between East and West, and Russian ambition of taking huge dominance over Eurasian and European regional energy bazaar) domestic incentives and other external factors, the current situation forces them to take a constructive approach in their relations compared to the previous relations of that they had.

At least, if the pragmatic side of relations between Russia and Turkey is taken into consideration, in this case, the development of their relations both in energy and other fields is unavoidable. One of the most important strengths of neo-classical realism is its attention to systemic and unit factors as well as historical clarification simultaneously. This kind of strength makes the theory more relevant and applicable to the chosen research than any other version of the realism theory. In neo-classical realist theory, there are interconnected relations with enticements, motives, perceptions, and the foreign policy of states which make states attempt for maximizing their domestic security issue. (Turkey is eager to maximize its energy security in the region within a domestic policy through collaborating with Russia in the energy field, in turn, Russian interest of maximizing its security issue in the example of diversification of its transit routes bypassing Ukraine) Thus, by taking into consideration specific interests, purposes and security issues (mainly, domestic security which related to the energy security),it is apparent that Russia and Turkey could be strategic, an economic and particularly, energy partner more than so-called “a friendly colleague” within an international system.

Ms. Nargiz Hajiyeva is an independent researcher from Azerbaijan. She is an honored graduate student of Vytautas Magnus University and Institute D'etudes de Politique de Grenoble, Sciences PO. She got a Bachelor degree with the distinction diploma at Baku State University from International Relations and Diplomacy programme. Her main research fields concern on international security and foreign policy issues, energy security, cultural and political history, global political economy and international public law. She worked as an independent researcher at Corvinus University of Budapest, Cold War History Research Center. She is a successful participator of International Student Essay Contest, Stimson Institute, titled “how to prevent the proliferation of the world's most dangerous weapons”, held by Harvard University, Harvard Kennedy School and an honored alumnus of European Academy of Diplomacy in Warsaw Poland. Between 2014 and 2015, she worked as a Chief Adviser and First Responsible Chairman in International and Legal Affairs at the Executive Power of Ganja. At that time, she was defined to the position of Chief Economist at the Heydar Aliyev Center. In 2017, Ms. Hajiyeva has worked as an independent diplomatic researcher at International Relations Institute of Prague under the Czech Ministry of Foreign Affairs in the Czech Republic. Currently, she is pursuing her doctoral studies in Political Sciences and International Relations programme in Istanbul, Turkey.

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Russia

Russia and Japan: Inseparable Partners

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By all accounts, Japan with its strong economy and many high-quality manufactured brands is practically searching to expand into foreign markets. Japan, with an estimated population of 126 million, has a small territory. According to UN’s assessment report on global population in 2019, Japan was the world’s tenth-most populous country. That compared with Russia, its vast territory and approximately 145 million, Japan’s investment is fast growing in the Russian Federation.

Despite its large investment and admirable brands from automobiles through mega-shops to healthcare and beauty, and to social service sector, Japan is consistently looking to expand its business tentacles. Without doubt, at the St. Petersburg International Economic Forum held under the theme: “Together Again – Economy of New Reality” early June, Russia-Japan business session attracted unprecedented large number of participants.

While noting the fact that the coronavirus pandemic did not and will not hinder economic cooperation between Russia and Japan, Minister of Economic Development of the Russian Federation Maxim Reshetnikov, noted in his speech at the session, further reviewed some significant aspects of the Russia-Japanese economic cooperation, and finally painted the broad outlook for the future.

“Despite a difficult year, we managed not only to continue existing projects but were even able to launch new ones. An express test for coronavirus was created, and a container train with Japanese goods was launched for the first time on the Trans-Siberian Railway. Construction began on a centre for preventive medicine in Khabarovsk. The Japanese company Fanuc opened an engineering centre in Skolkovo,” he told the gathering.

According to Maxim Reshetnikov, the plans for cooperation with Japan include the creation of liquefied natural gas trans-shipment complexes in Kamchatka and Murmansk region and the construction of an ion therapy centre for cancer treatment in Obninsk. Both countries are preparing to enter new and promising tracks in hydrogen energy, climate change, the creative economy, and e-commerce.

That however, Russia has encouraged potential foreign investors to venture into the regions. For example, Kaluga, which is provincial city and stands on the famous Oka river about 150 kilometers southwest of Moscow, has adopted few favourable measures, among others, and as a result has attracted five foreign automobile manufacturing companies including Japanese Nissan.

Governor of the Kaluga Region Vladislav Shapshа took part in the discussion. “Japan has been and remains our most reliable partner, a partner in a variety of areas. In terms of investments, this of course includes, the development of projects with Mitsubishi and Toyota Tsusho. Mitsubishi has placed its headquarters in Kaluga this year, and together with Peugeot Citroën has been working with us since 2009. Along with Volkswagen and Volvo, it makes up the core of the automotive cluster, which accounts for 12% of the automobiles produced in the country today,” Governor Shapshа said, giving a full business profile in his region.

The Autonomous Republic of Tatarstan also attracts foreign investors and business people. As part of the Volga federal district, its capital and largest city is Kazan, one of the most important cultural cities in the Russian Federation. “We operate a wonderful plant built in Tatarstan by Mitsubishi and Sojitz. I must say that Japanese equipment has proved its reliability. We are very pleased with this plant. Its capacity is 720 thousand tonnes of ammonia and methanol. We are grateful for this contribution,” Founder and Chairman of the Board of Directors of the AEON Corporation, Roman Trotsenko.

Japanese manufacturing stories are exceptionally useful and needed to be shared among business leaders. In his contribution, General Director of Sollers Group Vadim Shvetsov told the attentive gathering: “We launched a machine shop for Mazda engine parts. It was a very difficult at first, given that cooperation was interrupted, and we could not communicate directly. On the other hand, however, we have introduced a lot of interesting digital communication methods. Thanks to such mobile cooperation and even VR technologies, we still managed to launch production.”

The new environment has pushed the countries to seek new resolutions to overcome challenges. “The coronavirus pandemic has forced us into many challenges. At the same time, it has highlighted, illuminated in a new way some of the problems that we had seen and been aware of even before the epidemic. These are the problems of healthcare, energy, and digitalization. It seems to me that now is the moment for us to start new cooperation in these areas, especially in healthcare,” emphasized the Minister of Economy, Trade and Industry of Japan Hiroshi Kajiyama.

“Our trade and economic work together probably suffered a little from that period of forced isolation. Nevertheless, I certainly believe that the crisis is pushing us to search for new ways to create benefits for our consumers,” remarked Chairman of Delovaya Rossiya (Business Russia) and Chairman of the Board of the Group R-Pharm Alexey Repik.

The speakers have acknowledged that Russia and Japan face similar environmental challenges while developing economic cooperation. “Amid the growing trend of decarbonization, in October of last year, Japanese Prime Minister Yoshihide Suga announced a goal aimed at achieving carbon neutrality by 2050. Moreover, the goal is to reduce 2013 levels of greenhouse gas emissions by 46% by 2030. Achieving these targets will require that Japanese industry be heavily involved and adaptable,” according to President of the Japan Association for Trade with Russia, and Special Advisor of Kawasaki Heavy Industries, Ltd. Shigeru Murayama.

Chairman of Delovaya Rossiya (Business Russia) and Chairman of the Board of the Group R-Pharm, Alexey Repik, reminded that it is of great significance that President Vladimir Putin in his address to the Federal Assembly set the task of significantly limiting the accumulated volume of carbon emissions in our country just as similar goals were set by the Prime Minister of Japan, Yoshihide Suga, for the Japanese economy.

For the Minister of Economy, Trade and Industry of Japan Hiroshi Kajiyama, natural gas, which can reduce carbon emissions, is a very important resource, and Russia is a leader. Thus the unification of these Russian resources and the Asian market could be highly promising area for cooperation.

Russian business needs to attract investment. “The demand for equipment and the demand for capital both remain in Russia. Russia’s capitalism, in the positive sense of the word, is young and there is little national capital in the country. Interest rates on loans remain very high, and the requirements of the national bank, the Central Bank of the Russian Federation, to credit policy remain stringent,” observes Founder and Chairman of the Board of Directors of the AEON Corporation Roman Trotsenko.

“There are forecasts that the Russian economy will resume growth this year and ultimately grow by more than 3%. Japan also aims to recover as soon as possible from pandemic-related failure. For this, of course, the primary and first step to build a healthy and sustainable post-covid society across the globe, will be to work together with Russian partners on the basis of the eight-point plan,” Director of Mitsui and Co. Ltd., Masami Iijima, informed the gathering.

Avoiding sanction-related restrictions is a key for business. “The challenge is to move the financing relationship between Japan and Russia outside of these sanctions. For example, financing in euros or in yen. This would be very positive and would allow us to take advantage of the cheap rates on loans in Japan and in Russia,” Founder and Chairman of the Board of Directors of the AEON Corporation Roman Trotsenko.

Healthcare and energy partnership also remain significant for both and, need not be overlooked. “New areas are emerging. For us it is hydrogen and ammonia; it is the capture and storage of carbon, carbon dioxide, and its use as a resource. Here, it seems to me, we must increase our work together,” according the Minister of Economy, Trade and Industry of Japan Hiroshi Kajiyama.

“The health sector is the first item in the eight-point economic cooperation plan. I think that our countries should increase cooperation in this area,” added the President of the Japan Association for Trade with Russia and Special Advisor of Kawasaki Heavy Industries, Ltd. Shigeru Murayama.

“We believe that Japan can help achieve the goal of increasing healthy life expectancy set by the government of the Russian Federation,” suggested Chairman of the Japan-Russian Committee for Economic Cooperation and the Federation of Economic Organisations Keidanren and Chairman of the Board of Directors of the Marubeni Corporation Fumiya Kokubu.

Ahead of St Petersburg forum, Japanese Ambassador in the Russian Federation, Toyohisa Kozuki gave an interview to Interfax News Agency, listed a wide-range of concrete and significant projects as part of efforts toward strengthening Russian-Japanese economic cooperation. According to the ambassador, widening economic cooperation between Japan and Russia is primarily part of the current eight-point strategic cooperation plan.

Within this plan, the Okura Hotel project in Vladivostok is an example of progress in urban development in 2020. This will be the first Japanese hotel in Russia. The Okura Hotel’s refined services will make Vladivostok more comfortable and accessible not only to its residents but also businessmen and tourists visiting this international city. Vladivostok catches the attention of the Japanese as the nearest ‘European’ city, it can be reached from Tokyo by air in 2.5 hours. That is why the opening of the Hotel Okura Vladivostok will definitely make the city more attractive to Japanese tourists.

As part of cooperation, Japan is also making an effort to develop postal services in Russia, and some results in this sphere have already been reached, the efficiency of postal deliveries was increased thanks to the use of Japanese-made sorting machines at international postal exchange centers in Moscow. Cooperation between postal services of both countries is growing stronger also through the exploration of e-commerce opportunities on both sides. In the future, it is anticipated that a system will be in place, thanks to which Japanese consumers can order Russian goods online and the EMS postal service will deliver them to Japan.

In December 2020, Japanese entertainment center Round One, which brings together arcade games, bowling and other amusements, opened at the Yevropeisky shopping mall in Moscow. Round One is the most popular closed amusement parks chain in Japan. The new venue is a unique leisure venue for Moscow residents, in the sense, that they can get acquainted with Japanese culture without leaving their native city.

There is progress in promoting the use of the Trans-Siberian Railway as far as cooperation in the Far East, primarily in transport and infrastructure, is concerned. In particular, the Ministry of Land, Infrastructure, Transport and Tourism of Japan in cooperation with the Russian Railways is implementing a pilot project to promote the use of the Trans-Siberian Railway.

The first container train carrying cargo from Japan to Europe was dispatched in 2020. And those were not individual containers as before but a whole container train. This was done in the expectation that it will make it possible to ship freight more cost effectively compared to container transportation, and many Japanese companies showed an interest and took part in the pilot project.

The companies that participated in the pilot project said that against the backdrop of destabilized logistics between Japan and Europe amid the coronavirus pandemic, the use of the Trans-Siberian Railway can be seen as a third option in addition to sea and air transport.

As an example of such expectations, Ambassador Toyohisa Kozuki informed that Japan’s logistics company Toyo Trans started regular container shipping services with consolidated freight to Europe, to the Polish city of Poznan, along the Trans-Siberian Railway in February. This service provides for regular shipments every Thursday from a Japanese port. The cargo reaches Poznan in 22 days. Transit time decreases by about half compared to sea routes. We hope that the transit along the Trans-Siberian Railway will give a boost to logistics between Japan, Russia and Europe and lead to the further development of economic cooperation.

Next, regarding agriculture, forestry and fisheries, the relevant agencies of Japan and Russia in January 2020 signed a memorandum of cooperation on a joint Japanese-Russian project to increase the efficiency of agriculture and fish production in Russia’s Far East. Current projects are now getting support, and the search is on for new projects in three areas that provide for the use of technologies and know-how of Japanese private companies.

These include, firstly, increasing the productivity and export potential of soya, corn and other crops; secondly, expanding production of vegetables through expanding vegetable greenhouses in Yakutsk and other cities; and thirdly, increasing production and deliveries of fish and seafood inside and outside Russia. Greenhouse vegetable growing in Yakutsk is a particularly large project in this sphere. Greenhouses allowing fresh vegetables to be grown all year long in severe climates and permafrost have been built in the framework of this project. Construction began in 2016, it continued in 2020, and should be completed this year, 2021.

Due to the coronavirus pandemic, the forum this year was held, a combination of off-line and online format, with all epidemiological precautions observed. The Saint Petersburg International Economic Forum (SPIEF), often dubbed the Russian Davos, is the country’s main showcase for investors, attracting political and business leaders from around the world. The SPIEF is held annually, and since 2006 it has been held under the patronage and with the participation of the President of the Russian Federation.

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Putin and Biden meeting – a chance for a better world

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The whole world is looking forward to the meeting of the new US President Joe Biden with his Russian counterpart, Vladimir Putin. Although the Kremlin and the White House urge people not to expect too much from the June 16 summit, one still wants to believe that a personal meeting by the leaders of the two rival powers will lead to a thaw in bilateral relations and help defuse global tensions. At the same time, statements coming from the White House about negotiation plans sound rather vague. The bottom line is about “understanding Russia’s position and its aspirations.” The impression is that hundreds of Russologists working for the State Department, NSA, CIA and other agencies are unable to provide a definitive answer to this question, and the not very young 46th President of the United States has been forced to personally go for information. Moscow makes it clear that negotiations are a good thing, but the initiative comes from the United States, so the agenda will largely be agreed right on the spot.

At the same time, there are a number of key topics that the leaders of the two countries simply can’t ignore. Of course, there will be questions about human rights that Biden wants to ask Putin so badly, but the Russian leader too may want to ask about certain “inconvenient” things. First of all, about the United States participation in conflicts in the Middle East, where the “liberation movements,” indirectly supported by  Washington continue to attack Russian and Syrian government forces. In fact, the parts of Syria and Iraq controlled by the Americans and their allies have become areas where there is no effective conflict against terrorists. The militants from that area are killing people in Germany and France, and spreading the ideas of extremism and radical Islam throughout Europe.

The United States has every right to defend its interests in the oil-producing regions, but such methods are hardly acceptable. The Kremlin apparently has obtained enough evidence of the “dirty methods” of warfare practiced by the United States in the Middle East. The spare parts for the numerous drones shot down over the Khmeimim airbase alone prove beyond any doubt the American involvement in organizing aerial attacks on the Russian military. However, a dialogue between Russia and the United States could quickly extinguish the flames of war in Syria and, more importantly, help ensure Europe’s security against terrorist attacks. So, Putin has a very important trump card up his sleeve, which he can’t fail to play. The only question is how Biden will react to this win-win move by Moscow.

As to the question about human rights, it may prove rather unpleasant for Biden. During preparations for the summit, the Swiss government pointedly indicated (apparently at the suggestion of the White House) that the vaccine race continues. Geneva is ready to accredit, without PCR tests, journalists who have been vaccinated with Western vaccines, but not with Sputnik, which has already proven its effectiveness. Needless to say, the Russian negotiators also used their own country’s vaccine. However, such a move, designed to show once again who is the “boss” in the upcoming meeting, only reflects a complete disregard for the European`s right to vaccination, and this is only the beginning. And the demonstrative support and financing of the Russian opposition – hardly gives Biden any reason for accusing Russia of human rights violations.

Even the case of the Belarusian oppositionist Protasevich, who was taken from  the plane which grounded in Minsk due to a terrorist threat immediately brings to mind the “arrest“ of the plane of Bolivian leader Morales, or the US-approved extrajudicial detention of Russian sociologist Shugalei in Libya. In addition, the long history of the Guantanamo detention center hardly gives US officials any moral grounds to lecture anyone about human rights.

If, during the Geneva summit the United States and Russia can heal the festering wound of the Middle East conflict, this would be a giant step forward in the war on terror. The question is whether Biden will try to turn the dialogue with Putin into a series of accusations to increase his approval rating back home. A similar incident has already taken place and made the 46th President of the United States to look not so good. That being said, we can hope that in Geneva Joe Biden will lean back on his many years of experience and good knowledge of Russia, and emotions will not prevent him from achieving a breakthrough in relations with Moscow and mending bilateral ties, thus easing tensions in Europe and allaying peoples fear of a new global conflict.

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Russia, Europe Discuss Prospects for Cooperation at SPIEF’21

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Despite the deep-seated disagreements between Russia and the European Union, Kremlin is indiscriminately courting European business leaders. Ahead of the 24th St. Petersburg International Economic Forum [SPIEF’21] on June 2-5, President Vladimir Putin, in an official message, emphasized Moscow would forge a closer economic cooperation with its foreign partners and ready to share experience in various areas and further called for building constructive partnerships between members of the global community and expand business ties to effectively tackle the current critical global challenges and achieve sustainable development.

“We are ready to share our experience in areas such as healthcare and digitalization, and to work with partners to build better telecommunications, energy, and transport infrastructure. We also recognize the importance of addressing key issues facing the environment and climate,” according to the president’s message released on the official website.

Later at the plenary session held under the theme A Collective Reckoning of the New Global Economic Reality, Putin said, particularly about energy connectivity between Russia and Europe – “that Gazprom is ready to fill Nord Stream 2 with gas. This route will create direct links between the Russian and German systems and will ensure energy security and reliable gas supplies for the Europeans, like Nord Stream 1” and, in addition, emphasized readiness to implement similar high-tech projects with European and other partners in the future, despite all sorts of artificial barriers in the current political environment.

That, however, during the business discussion exclusively devoted to Russia-Europe, leaders of European business noted that strategies are needed for the improvement of relations between Russia and the European Union, and the necessity to develop a consolidated response to global challenges.

“In 2020, Russia faced four challenges. First, the pandemic, second, the collapse of oil prices, third, the devaluation of the Russian local currency the rouble, and the fourth, which is an ongoing challenge, the geopolitical context that does not make things easier. At the same time, Russia demonstrated good economic indicators. The global challenges are so disruptive that we need to come up with a joint approach and cooperate in fighting the pandemic,” according to objective views of Johan Vanderplaetse, Chairman of the Association of European Businesses (AEB) and President for Russia and the CIS, Schneider Electric.

Taking his turn during the discussions, Maksim Reshetnikov, Minister of Economic Development of the Russian Federation explained that the ultimate goal is to combat greenhouse gas emissions. In this context, technological neutrality, mutual recognition, and implementation of projects aimed to reduce carbon dioxide emissions are crucial. Building these mechanisms is a subject for strong international discussion, and there are high hopes for the climate conference in Glasgow this November.

Development of 5G networks can become a new touch point for Russia and Europe. But, no country, and no government can cope with all the tasks on their own. For example, 5G requires joint efforts, so European Union and Russia must work together to deploy this technology. Now both need to work together on 5G technologies in Russia and in Europe, suggested Arun Bansal, Executive Vice-president, Head of Market Area Europe and Latin America, Ericsson.

“Russia has amazing technological capabilities, and there are great companies. If we compare them with Western companies, if we join forces [connecting to 5G], we will all benefit from this,” added Johan Vanderplaetse, Chairman, Association of European Businesses.

During the discussions, the participants acknowledged that existing problems, especially the need to achieve international agreements. “We are now probably at the most difficult point in the development of our relations since the end of the Cold War. I think both sides value our relationship. Why are we at this negative point in our development? Of course, there are territorial and geopolitical issues, issues of human rights violations. I believe that all these problems contributed to the suspension of our political dialogue, which is now affected by uncertainty. In this atmosphere it is difficult to go back to the normalization of these relations,” according to Markus Ederer, Ambassador of the European Union to the Russian Federation.

Vladimir Chizhov, Ambassador Extraordinary and Plenipotentiary, Permanent Representative of the Russian Federation to the European Union (EU) explained that most of the effective formats available for the members of the European Union and the Russian Federation for interaction are currently on hold. On the other hand, Russia has not closed a single door neither has it imposed restrictions for Europe. All suspensions were initiated by the European Union.

Some believe that there should be solutions, suggested expanding the list of green projects and finding a compromise between government and business. “We categorized nuclear energy as a green project, and this was a crucial decision. We believe that, based on the criterion of greenhouse gas emissions, based on the principles of technological neutrality, nuclear power should be seen as clean energy. And secondly, we have developed a number of transitional projects that may not meet some highest standards, but for many industries in our country this is a big step forward,” says Maksim Reshetnikov, Minister of Economic Development of the Russian Federation.

For Markus Ederer, Ambassador of the European Union to the Russian Federation, it is necessary to use the opportunity to strengthen relationship in the context of green transformation and creation of green economy, as it will be a new field for cooperation that is of high interest for representatives of European business community. The more policy becomes oriented towards the development of a green economy, the more seriously moving towards stabilizing relations between Russia and Europe.

Regional experiments that allow to introduce a system of emission quotas in the regions. “We are working on a soft regulatory framework that will allow us to implement climate projects, take into account the carbon footprint of products that will make our entire system more transparent, while at the same time we are launching a system of more stringent regulation based on regional experiments. Many countries have followed this path. We are currently in the final stage of the Sakhalin experiment, which will enable individual regions, at their will and in agreement with the business, to declare the goal of carbon neutrality and introduce a system of emission quotas with the trading system, and so on,” stressed Maksim Reshetnikov, Minister of Economic Development of the Russian Federation.

“We need to focus on reducing carbon emissions and strengthening other areas. The Sakhalin project is also a great example of enhancing our cooperation, including in the future. These are efforts that we should focus on, excluding the political context. We must work on issues of compliance with the obligations of WTO member countries. The obligations of all WTO members must correspond,” concluded Markus Ederer, Ambassador of the European Union to the Russian Federation.

The St. Petersburg International Economic Forum, popularly referred to as SPIEF, brings together international business leaders, government officials and representatives of expert and media communities to discuss various topics and jointly search for effective solutions to the most pressing challenges in Russian and global economies. The SPIEF is held annually, and since 2006 it has been held under the patronage and with the participation of the President of the Russian Federation.

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