India’s Role in Northeast Asian Energy Security through Presence in the Russian Far East – Analysis – Eurasia Review
In September of this year, Indian Prime Minister Narendra Modi expressed his optimism that India and Russia can work together to bring stability to the global energy market in a virtual speech at the Eastern Economic Forum. Investments and close cooperation in the Russian Far East (RFE) are likely to have played a major role in this optimism. The Government of India stressed coordination with Japan and South Korea in developing infrastructure and providing investments to realize the full potential of energy capacities in Russia’s Far East.
Russia has the world’s largest known natural gas reserves. Much of these reserves are located in Russia’s Far East Region (RFE). This region is geographically linked to the Asia-Pacific region. The RFE comprises the Federal District of the Far East – the easternmost territory of Russia between Eastern Siberia and the Pacific Ocean. It shares land borders with Mongolia, China and North Korea as well as sea borders with Japan in the southeast and with the USA in the northeast, with South Korea in the immediate vicinity. From a practical point of view, the Far East of Russia is an integral part of Northeast Asia. However, the region needs large-scale infrastructure development and investment to realize its energy potential.
Since 2006 the Russian government has endeavored to establish solid state-private cooperation in the RFE. Moscow has long expressed the urgent need to attract foreign investment in order to create and maintain an energy infrastructure that can safeguard both Russian interests and the needs of regional and European energy importers. This development has often been seen against the background of Russia’s aim to present itself as a greater Asian power and regain its status as a leading world power. But Moscow’s inability to create the necessary viable investor political framework and the basic infrastructure that it wants in the region still worries potential investors.
Russia’s aspirations for the RFE
Russia’s concern and interest in the development of the RFE has long existed. In 2002, Vladmir Popatov, Deputy Secretary of the Russian Security Council, had highlighted that the development of RFE is of the utmost importance, as the region is not only rich in diverse and massive energy resources and is geographically close to densely populated countries with massive energy needs lies, but it also carries the risk of depopulation, security risks and stagnation of internal communication systems without development. Concern was reiterated in 2006 by President Vladimir Putin, who warned that the RFE’s socio-economic isolation threatened Russia’s national security. In 2008, then-President Dmitry Medvedev expressed concern that if Russia fails to develop the RFE, it could become a raw material base for more developed Asian countries and a neo-colonial pattern of energy trading could emerge. Despite several state programs and funding commitments, there was still no significant interest in development or investors in the region.
Russia’s Energy Strategy 2035 aims at Russia’s transition towards resource innovations. To this end, Russia wants to realign both its own and regional energy needs and consumption, reduce isolation from the regional economies and connect the RFE and the Arctic to the Northeast Asian markets that will be included in the upcoming projects. The North Sea route (which offers a much shorter and faster connection with the European markets) can be further integrated. Russia hopes to increase its LNG exports from 6 to 30 percent by 2035 and also to become the leading player in hydrogen energy. A large part of this increase in exports is said to come from the Northeast Asian region.
Chinese dominance in the RFE
Since 2008, after the global financial crisis and Russia’s conflicts in the post-Soviet space, China has invested heavily in the Russian energy sector. China and Russia proposed the “Loans for Oil” program, which the government agreed despite reservations and opened the RFE to Chinese interests. Russia’s involvement in China increased further with its conflicts with Ukraine in 2014 and the resulting move away from western investments and western markets. China has been the leading source of FDI as well as the leading exporter of manufactured goods in the region, particularly in the counties closer to the Russia-China border. But even though Russia has met more than 10 percent of China’s crude oil needs through pipelines from the Eastern Siberian region, China has tried to diversify its energy export basket by investing in projects in Central Asia and the Middle East.
In addition to skepticism in Russian political circles about the increasing Chinese dominance in the RFE, this factor has also slowed Chinese investment in the RFE, forcing Moscow to look to Seoul, New Delhi and Tokyo. China has not been a major importer of LNG from Russia, however greater synergy between Russia, South Korea and Japan may reduce Russia’s reliance on China for financial stability, which must worry Beijing for theirs, given the largely asymmetrical relationship between China and Russia Trading baskets.
Can India lead the way?
Japan and Russia have long expressed “strong hopes” of resolving the Kuril Islands dispute that has persisted since the end of World War II. Meaningful changes still elude the talks and political engagements that have taken place over the decades. It has been regularly pointed out that this problem has limited the potential of Russian-Japanese cooperation in almost all areas.
The Joint Declaration of the 10th Japan-India Energy Dialogue highlighted that India and Japan are working together to develop several oil and gas projects in third countries outside Russia – such as the United Arab Emirates, Canada, Mozambique and Sri Lanka. Both India and Japan will benefit from the developing LNG markets and associated emerging cleaner technologies like hydrogen and fuel cells. Since Russia is set to become a leading producer of hydrogen fuel in the coming years, India and Japan can benefit from close cooperation in the RFE. This trilateral cooperation will also create some sort of strategic balance in regional geopolitics, where China’s rise has been unrestrained over the past two decades.
The first trilateral Track II dialogue on trilateral cooperation between India, Japan and the RFE took place in January of this year. It noted the complementarity of capacities and the convergence of interests between the three nations as well as the interdependence of regional development in the RFE.
The Republic of Korea (South Korea) is now considered to be one of the leading economies in the world. The country has a diversified energy mix and, together with a strong nuclear industry, is a pioneer in LNG trading. South Korea is heavily reliant on Middle Eastern oil imports, but has done well in diversifying its fossil fuel imports from Southeast Asia and Australia. With an almost entirely privatized oil and gas industry, South Korea has participated in a long list of oil and gas development projects that span Southeast Asia, the Gulf of Mexico, and Canada.
Russia has long been engaged with South Korea from the perspective of South Korean relations with the US and the reconciliation between North Korea and South Korea and the denuclearization of the Korean peninsula. As early as 2007, the “Six Party Agreement” took shape, which should create the necessary conditions for the implementation of “a number of multilateral projects involving both North Korea and Russia – including oil gas transit, electricity transfers and a few other” connectivity projects “. The failure of this process, however, led to lower hopes of Russia-led regional integration in Northeast Asia for energy infrastructure. While North Korea is suffering from severe international sanctions today because of its arms tests and plans to become a nuclear power, Russia has sought closer cooperation with South Korea on investment and energy trading through the RFE region. Russia attaches particular importance to South Korea’s “New North Policy”. Since Russia is not worried about the establishment of South Korea in the RFE (as has been consistently observed in the case of China), the Russian-Korean partnership may have a better future.
Seoul has also recently shown interest in resuming the implementation of trilateral cooperation projects in the Russia-South Korea-North Korea format, which includes the Trans-Korea Railroad and the Trans-Korea Gas Pipeline. India’s presence in this process can provide a robust framework for optimal capacity building and use of the RFE.
As the weight of the global economy shifts to the east, the Indo-Pacific region is gaining exponential importance. This has also increased opportunities in adjacent areas such as the Arctic and Northeast Asia. Moscow’s focus on developing Russia’s Far East to benefit the region on multiple fronts in the years ahead provides India with an opportunity to step in and achieve multiple goals. With good goals, India can not only build a presence in the region and challenge China’s undisputed dominance, but India can use this to partner with Japan and South Korea, which are two very important economies in India. Pacific and also want better relations with Russia and India. India can lead a new framework that can aim to ensure the stability of the global energy market by coordinating efforts in the RFE.
* Divyanshu Jindal is a PhD student at OP Jindal Global University and a research intern at the Manohar Parrikar Institute for Defense Studies and Analysis. He is associated as a research assistant with the Center for Northeast Asian Studies at OP Jindal Global University.)