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Economy

Putin redirects his Asian charm offensive

MOSCOW/UFA, Russia -- The leaders of five major emerging nations vowed to enhance economic and political cooperation July 9, delivering a pledge to become a global presence rivaling Western powers. Behind the scenes, Russia danced with India while apparently keeping China at arm's length.

     The BRICS nations should work together to elevate the status of emerging countries, Chinese President Xi Jinping told the group's leaders in the Russian city of Ufa, about 1,300km east of Moscow.

     The group of emerging economies that comprises Brazil, Russia, India, China and South Africa adopted the Ufa Declaration, outlining 77 steps toward a closer partnership. The document also expresses frustration over stalled structural reforms at the International Monetary Fund. The changes, which would give rising nations greater influence, have met stiff resistance from the U.S. Congress.

     "We remain deeply disappointed with the prolonged failure by the United States to ratify the IMF 2010 reform package," the document states.

     The declaration makes a veiled reference to Greece, saying, "We share concerns regarding the challenges of sovereign debt restructurings."

     The group also continued discussing plans for the launch of the jointly funded New Development Bank, a lender they hope will help generate a new burst of growth in the five economies. Possible projects include infrastructure development in a vast area encompassing Europe and Asia.

     But while the BRICS nations are touting an all-for-one approach to international affairs, the reality is more complicated. Russian President Vladimir Putin appears to be putting a little distance between his country and China, while cozying up to India. China and Russia also seem to have different ideas about the roles of multilateral lenders. 

Yoga, anyone?

Putin played the gracious host, shaking hands with Xi and smiling for photographers. The two then sat down for a summit on the sidelines of the BRICS meeting.

     Sanctioned by the West over its military intervention in Ukraine, Russia has been emphasizing its relationship with China. Putin has held a series of meetings with Xi to solidify their ties. Unlike past summits that produced agreements on major projects, this time Putin and Xi merely confirmed principles, such as their intention to promote bilateral trade.

     According to a person familiar with the talks, the mood during the 50-minute meeting was less friendly than in the past; at times, it was awkward.  

     Putin's summit with Indian Prime Minister Narendra Modi presented a contrast. The pair spoke for an hour and a half, longer than scheduled. They agreed to cooperate on nuclear power plants and defense technology. In a light moment, Putin said he would like to try yoga -- the ancient Indian spiritual discipline, which Modi practices. 

     The Russian leader's subtle turn toward India may have something to do with energy. It appears Putin wanted China to move faster on cooperation in the field.

     Putin and Xi last year signed deals under which the two countries would build pipelines to send natural gas from eastern and western Siberia to China. The eastern pipeline, dubbed Power of Siberia, would carry 38 billion cu. meters of gas annually, for 30 years. The western one, known as Power of Siberia-2, would carry 30 billion cu. meters to China each year, also for three decades.

     People close to the eastern Power of Siberia project say it is behind schedule. While Russia began construction on its end last September, the work in China only got underway in June. Why the delay? It may be partly due to Beijing's discontent over the supply price, which was set in May 2014 -- right before crude oil and gas prices plunged.

     Russia faces challenges on its side, too. The depreciation of the ruble has made it more expensive to procure construction equipment from overseas suppliers. In March, Reuters reported that Russia might postpone the completion of the eastern Power of Siberia pipeline, currently slated for 2018. 

     Nevertheless, there is also a sense that China feels little urgency to build the western pipeline, since it can procure cheap gas from Turkmenistan. Putin and Xi on July 8 agreed to "reinforce support" for the pipelines, but few observers expect these words to push the projects along.

A tale of two banks

The Putin government, meanwhile, is wary of China's "One belt, One road" plan to expand its influence across Central Asia.

     The China-led Asian Infrastructure Investment Bank will serve as the initiative's driving force. This may explain why Putin, in a meeting with the heads of international news agencies on June 20, stressed the importance of ensuring the AIIB is managed in a transparent manner. 

     Russia and the other BRICS countries are among the 57 founding members of the AIIB. The U.K., France and Germany are on board, too. Among the European participants, there is talk that Russia wants to form a bloc to keep China's ambitions in check.

     Unlike the AIIB, in which China holds the largest stake of about 30%, contributions to the New Development Bank are split evenly. The BRICS bank was agreed on seven months before China announced the AIIB in October 2013.

     Reeling from the sanctions, Russia sees the BRICS bank as a prime opportunity to exert more sway over the emerging world. Granted, the institution's headquarters will be in Shanghai. But Beijing's acceptance of an Indian official, K.V. Kamath, as the bank's first president suggests it is confident it can throw its weight around in other ways.

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