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Russia, China and the 'reset' with the West

India and Russia should consider a broad-based technological partnership, as the existing military-technology cooperation has not helped modernise either economy.

Russia and China marked a strengthened energy and strategic partnership at their recent summit. They called for foreign policy coordination in the Asia-Pacific region, a multipolar world and the democratisation of international relations, and endorsed each other’s “core interests”. Interestingly, they also called for tripartite cooperation between India, China and Russia “to create an enabling environment in the Asia-Pacific region and the world”, signalling that they considered India an insider. The summit ended with major oil, gas, nuclear, renewable and coal energy sector accords. The two leaders inaugurated the China spur of the ESPO oil pipeline, linking East Siberian oilfields with Russia’s Pacific coast, from where some supplies have reached the US market. China had agreed to loan Russia $25 billion for oil deliveries over 20 years, with a similar long-term-deal for gas supplies under negotiation. Russia and China are also building a huge oil refinery and two additional 1,000 Mw nuclear reactors at the Tianwan complex, where Russia has already built two reactors for China earlier.

The energy accords represented progress in China’s quest to tie up Eurasian energy supplies to reduce its vulnerability to possible sea-based oil blockades. An agreement on rouble-yuan trade was also part of a strategy to reduce the share of transactions conducted in American dollars and move towards an alternate international reserve currency.

But it would be simplistic to deduce that the agreements were at the expense of Russia’s relations with the West. Russia has to maintain substantive relations with both East and West. While mutual interdependence is bound to intensify, both China and Russia have taken care to diversify their sources and markets (for China, Central Asian States and traditional suppliers; for Russia, Europe, United States and the Far East) so that neither exercises exclusive leverage over the other.

Bilateral trade indeed increased by 157 per cent to $36 billion in Jan-Aug 2010, but China’s exports were nearly double its imports, while Russia exported primarily commodities. At the same time, Russian military exports to China were falling. According to Jane’s, “Russia…looked to emerging markets…to offset the anticipated reduced orders from India and China”, especially as high-tech Chinese capacities came on-stream. But China’s exports of military equipment to these very markets, often developed with Russian technology, stirred a vigorous debate in the Russian press. The director general of MIG/Sukhoi Corp, Mr Mikhail Pogosyan, was reported to be opposing exports of Russian RD 93 aero-engines to China, amid allegations that China cloned the SU 27SK, among other items.

The imbalance in the economic relationship with China is symptomatic of the weak innovation base of the Russian economy. Russia’s GDP fell by 7.9 per cent last year, demonstrating the fallacy of relying on its raw material base and energy exports.

Realising this, President Medvedev issued passionate calls for technological rejuvenation, based on Russia’s considerable scientific and latent economic strengths. Earlier this year, a leaked draft foreign policy doctrine called for increased engagement with the West to modernise the economy. At the July 2010 summit with President Obama, Medvedev emphasised technological cooperation, and visited Silicon Valley to drum up business support for his new technology city Skolkovo, patterned on Silicon Valley. The governor of California, Arnold Schwarzenegger, paid a return visit, exploring the possibilities of tech partnerships. Germany is also emphasising high-tech cooperation with Russia.

The US is reciprocating the palpable Russian desire to improve relations. The summit with China may have prompted the West to fast-forward its “reset” with Russia, as the decision to supply Russian helicopters in Afghanistan was taken during the summit, but the process had started much earlier. President Obama rescinded the decision to station ballistic missile defences in Poland and the Czech Republic (although the issue of European missile defences has not been settled conclusively) and made good on his June 2010 summit offer to settle remaining issues on Russia’s admission to the WTO by September 30.

Nato invited Russia to participate at its November summit. France, Germany and Russia are meeting to consider the Russian proposal for a European security architecture, which they cold-shouldered when Russia first mooted it in June 2008. The West may have realised it is time to move beyond Cold War containment strategies, although significant opposition to the Reset with Russia remains in some western circles.

Interestingly, Russia has involved Indian nationals like Vivek Wadhwa and Ratan Tata in multinational ventures such as Skolkovo and the “Yaroslavl Roadmap 10-15-20”, which culls 15 recommendations from the innovation experiences of Israel, Finland, India, the US, and Taiwan Province, China.

India is also taking initiatives to become a technology power. Russia can partner these, as: it has a sophisticated science base and excellent pedagogies; India’s legacy cooperation and respect for Russia’s intellectual property rights and Russia’s willingness to share high technology with India provide a good foundation; and China has expressed interest in Skolkovo. India should therefore consider deepening its knowledge ties with Russia.

However, even as India and Russia have achieved excellence in the space, nuclear, and defence sectors, neither has achieved great success in diffusing best practices into their civilian economy, without which national competitive advantage has remained elusive. Indians can produce world-beating technologies in the Indian R&D centres of western multinationals. Clearly, then, the problem is not with Indian abilities but the lack of the right ecosystems. R&D cooperation with Russia should therefore extend beyond the defence sector, as experience has shown that it will remain walled off from the rest of the economy.

China’s successful experiment in integrating military defence and civilian technologies could be studied. China has not achieved technological breakthroughs merely by copying technology. It has a huge state-supported programme to diffuse technology from the defence to the civilian sector.

India’s defence offset policy could also include wider programmes to boost the country’s competitive advantage and incentivise foreign investors to transfer major technologies. Supposing EADS was to set up a vocational education university, along the lines of the prestigious Universities of Applied Sciences in Germany, or Boeing were to fund centres of excellence for aviation sector engineers as offset obligations? This could probably benefit the Indian people more in the long run.

The sky is the limit for an Indo-Russian technology partnership if the right approach is adopted.

The author is a diplomat, on loan to the Institute for Defence Studies and Analyses as senior fellow. The views are personal

Courtsey: Business Standard, 7 November 2010


(Disclaimer: The views expressed in this article are those of the author and do not represent the views either of the Editorial Committee or the Centre for Land Warfare Studies). 


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Smita Purushottam
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