ASIA: by Jeffry Babb News Weekly
Siberia - China's 'great game' to reshape Asian region
, November 1, 2003
The recent growth of a trilateral relationship between China, Russia and India looms large in future relations in the Asian region, particularly the Russian Far East.
Russians traditionally have been very wary of China, for long-standing political and cultural reasons. Recently, the movement of Chinese immigrants into the Russian Far East - as the Russian population in this vast area slips to six or seven million - has caused disquiet in Moscow, especially as adjacent areas of China have a population of 300 million.
In the days of the Soviet Union, the Russians offered incentives for people to live in these far-flung provinces, but now with the new market economy, such subsidies are long gone.
For the Chinese, this is fertile soil. Chinese traders and farmers are flooding into the Far East region, where for the Russians, agriculture is difficult and unproductive. Cheap Chinese goods dominate the markets and cross-border trade - both official and on the black market - is booming.
This area is potentially very wealthy - the Russian Far East has massive resources of minerals, timber and particularly oil.
The Japanese, in particular, are keen to diversify their sources of oil way from the Middle East - likely to remain unstable as far as anyone can foresee - and gain access to Russian oil fields which are likely to remain gushing long after Middle East reserves have been exhausted.
But China is also becoming desperate for oil - it is no longer self sufficient and will have to import tens of millions of tons of oil in the next ten years to fuel its hungry factories and growing fleet of cars. China is likely to be the world's third biggest market for cars next year, with some 1.2 million cars being sold to China's increasingly well-off middle class. And these cars will guzzle a lot of petrol.
While various deals for Russia's oil have been reported, it is still unclear who will win this strategic prize.
For Russia, there are prizes beyond just oil. Russia and Japan have yet to decide on the fate of a group of small islands to the north of Japan, known in Japan as the "northern territories."
A satisfactory reconciliation of these claims would give Japan's Prime Minister Junichiro Koizumi an enormous boost in the polls before the looming election.
Plenty of people on both sides would balk at a solution to this problem, but it is an enormous incentive for Japan and Russian to normalize their relations.Enormous price
The Western nations and their allies are now paying an enormous price for relying on a basic energy source from an unstable region; pumping oil to the Pacific from Russia would be an effective way of redressing this reliance and the strategic costs involved.
Will Australia be excluded from the proposed formation of a vast free trade area in Asia, with Southeast Asia to join with China, India and South Korea, the major trade development of the decade?
It is likely that Australia can only respond by signing bilateral free trade agreements with the various partners.
Taiwan has an active economy and capital to spare, it could also have left its run for regional influence too late. China, of course, while welcoming Taiwan's money, technology and talent, is squeezing the nation's freedom of political action harder and harder - as evidenced by the enormous pressure placed on Liberia to drop Taiwan as a formal diplomatic partner.
As China begins to show the promise that many have held out for it for centuries, so does its public influence grow. China is interested in securing raw materials for its booming industries and is also desperate to import Russian oil, as it is no longer self-sufficient in this vital commodity.
In the case of Japan, one of the key players in Siberia's "great game," Japan has made a strategic decision to diversify its source of supply for oil and other energy sources, for reasons that go far beyond short term financial calculations.
This makes the prospect of a spectacular reconciliation between the two parties - with the worst relationship between any of the Group of Eight - a more likely prospect.
This began to unfold in January, when Prime Minister Junichiro Koizumi went to Moscow and made clear his intention to fund a US$5 billion pipeline from southern Siberia to the Russian Pacific port of Nakhodka, a stone's throw from Japan.
Unlike the US or Australia, the Japanese Government has no qualms about spending vast sums in the interest of energy security.
Clearly such as pipeline would be more viable if oil prices stay high and instability persists in the Middle East. But the pipeline will remain strategic even if prices stabilise at a lower level.
The truth is, the Japanese have made a strategic decision to diversify their sources of energy away from the volatile Middle East, and Siberia is the best candidate.
China is also hungry for Siberian oil, and the Russians and the Chinese have reached agreement in principle on a shorter and cheaper pipeline to to the south.
Thus, the unfolding of this commercial drama could shape the world for centuries to come and it would pay Australia - another vital supplier of raw materials to the Chinese - to pay close attention.
- Jeff Babb is an editor with The China Post, Taiwan's leading English-language newspaper