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With input from Senior Officials and Prime Ministers from China, India, Malaysia, Myanmar, Mongolia, Armenia, and Vietnam, we discuss what was actually said, and the implications.

Russian President Vladimir Putin gave a significant speech at the Eastern Economic Forum in Vladivostok, Far East Russia on Wednesday (September 7) in which attendees also included China’s Li Zhanshu, Chairman of the Standing Committee of China’s National People’s Congress, Armenian Prime Minister Nikol Pashinyan, Mongolian Prime Minister Luvsannamsrai Oyun-Erdene, and Prime Minister of the Provisional Government of Myanmar, Min Aung Hlaing. Video addresses were also given by Narendra Modi, Prime Minister of India, Ismail Sabri Yaakob, Prime Minister of Malaysia, and Pham Minh Chinh, the Prime Minister of Vietnam.

I attended this session personally. In this article I will discuss what was said, what the intent was, and the implications.  Some of the statements made have already appeared in Western media, often either abridged or taken out of context. I will also discuss the most contentious of these.

President Putin’s Address

Firstly, the Russian President looked in good health, had no limp or other awkwardness save for an element of stretching exercises in his chair – not unusual given the session lasted over two and a half hours. His speech was given standing up and lasted over an hour. I will deal with the two most important points covered by global media first, then detail other commentary.

Did Putin Say ‘Europe Will Freeze’?  

It was mentioned in the guise of a Russian folk tale, where a punishment given to a naughty wolf is to have its tail frozen, but yes, the implication was made. However, this was not made as a threat, as Western media have stated, but more as a statement of fact. To put that into context, Putin made the remark after explaining the problems of supplying various European nations with gas from Russia. Firstly, the United States and the EU placed sanctions on the Nordstream 2 pipeline and various operating and maintenance aspects related to that, making it a punishable offense to utilize the system, which was ready and due to start pumping gas to Europe from the early part of 2022. That was followed by Poland then cutting off its Yamal gas pipeline from Russia, while Ukraine also reduced its pipeline capacity from Russia which additionally feeds Slovakia and other parts of eastern Europe.

This was further compounded by two other factors; firstly, that sanctions imposed upon Russia, SWIFT disconnection and the freezing of Russia’s financial assets overseas made it impossible for Russia to receive Euros or US dollars for its gas supplies, although contracts between the EU and Russia had specified this. Should such payments have been made, they would have automatically been frozen and not remitted to Russia.

Russia suggested payment be made in Rubles instead – however most (but not all) EU nations have declined to do so, while at the same time saying that Russia has reneged on its delivery promises. This is a situation as it stands today.

Putin did say that Russia was ready to turn on Nordstream 2 whenever the EU is ready and is willing to purchase gas for Rubles at any time. But Putin has said that Russia will not provide any gas or any other products to Europe or anyone else without being paid. This seems a rational, and normal approach.

There is an additional, longer standing issue, which the EU was warned about by Moscow prior to the Ukraine conflict. This relates to the EU gas supply contracts with Russia coming to an end in October 2022, and which both the EU and Russia had been negotiating. Russia had wanted long-term supply agreements, which the EU avoided, saying it preferred short-term deals at spot prices. Russia wants long-term commitments because the development and supply chain costs of delivering gas (and oil) are capital intensive.

At the time, gas was selling on the global markets for US$100 a metric tonne. By early 2023 (this coming Winter) it is likely to reach US$3,000. The problem here is a very poor EU energy policy that has left it without reserves, no contractual renewals and an increasingly expensive global spot market.

Concerning the Nordstream 1 pipeline, which the EU expected to receive supplies through, Putin mentioned there were additional legal contractual and sanctions issues with maintenance and equipment repairs. He stated that the legal contracts for these are regulated under UK law, however maintenance for Russian gas pipelines is also sanctioned and the contracts cannot proceed as no-one in the UK will sign them off. The much-mentioned gas turbine that was sent to Canada for repairs was returned to Germany, and then should have been shipped to Russia, but ports are closed and again the UK legal contractual issue on the maintenance and supply to Russia also kicks in preventing shipment in any event. This also raises, Putin said, questions about who actually has legal ownership of the turbine.

As Putin pointed out, Russia didn’t turn off supplies, the EU did, sanctioning both Nordstream 1 and 2, and refusing the ability for Russia to be paid. Hence the comment that ‘Europe will freeze’.

Gazprom have issued a short video, featuring a traditional song ‘Winter Will Be Big’ explaining this in very basic terms here.

 

 

What Were Putin’s Complaints About Ukraine Grain Shipping?   

Tellingly, European media and EU has been relatively silent in explaining this issue except to say they were ‘flabbergasted’ at Russia trying to dictate where Ukraine should send its own grain exports. That may be true, however the crux of the complaint is that Russia agreed to allow shipments, provided Turkiye monitored cargo contents and accompanied the vessels through the Bosphorus.

Apparently, Russia was told that these shipments would be sent to developing nations and especially countries in Africa, such as Egypt, which is reliant on grain for its stable component foods for much of its 100 million population. Other African nations are in a similar position. However, it turns out that according to Putin, of the 87 ships containing Ukrainian grain sent so far, only two have been sent to developing countries (Ethiopia and Yemen) – the rest went to the EU.

Putin was visibly angry about this and accused the EU of deceiving not just Russia but also the developing world. He claimed that many EU nations had treated numerous countries in Africa as colonies in the past and that now they were doing so again. The agreement between Ukraine and Russia over grain shipments is due to be reviewed on October 22. It will be interesting to see whether Russia agrees to continue with the current situation or wishes to impose quotas to insist Ukrainian grain is sent to the developing world, rather than the EU.

On The Russian Economy

Putin said that the Russian economy appeared to have weathered the worst of the sanctions, and that it was apparent that many had backfired. (Interestingly, this was a view endorsed later by China’s Li Zhanshu, with Beijing following the situation as concerns Russia and sanctions in fine detail). Putin said that Russia had stabilized its currency market and that Russia’s economic dynamics has also stabilized. In terms of sanctions, there had been obvious effects, but the exit of Western brands from Russia was being absorbed and apart from high-profile names, were not being missed.

(Here, I should point out that of Western brands in Russia, about 40% have in fact exited, meaning over half remain. Those that have left are also seeing their own brands reappear on Russian shelves, due to parallel imports being both legalized, and now encouraged by entrepreneurs shipping goods to Russia from China, India, Kazakhstan, Turkiye and Armenia, among others.

For example, the new Apple iphone 14 is already being advertised  for sale on Russian marketplaces. I can also vouchsafe personally that Russian supermarkets are full, and no shortages of any kind are apparent).

Putin stated that during the 7 months January-July 2022, throughput at Russian ports had not declined, and in some areas of Russia had grown in volume, with this being especially true of the Russian Far East and Vladivostok. This is because while the Western ports next to Europe have been sanctioned, Asia has taken a far more understanding attitude to Russia. China trade is up, as is trade from ASEAN. Russia’s Vladivostok Port may seem a long way away, however both India (Chennai) and Vietnam (HCMC) have direct shipping to Vladivostok as do many Chinese ports. Given that Vladivostok is only just over 1,000km north from the major Chinese port of Dalian, it is perhaps closer than generally appreciated.

Vladivostok is also important as it is the Eastern Terminus for the Trans-Siberian railway, which can transport goods to the numerous Russian cities along the route and to European Russia – the wealthy consumer markets of Moscow and St. Petersburg – in just five days. To put that into an Asian perspective, goods can be loaded in Chennai and unloaded in Moscow in two weeks, and from Vietnam in ten days.

There are other indicators that Putin spelled out. While the initial shock of sanctions had resulted in problems with the value of the Ruble, that has been dealt with and is now the world’s best performing currency, although he said it would be to Russia’s advantage if it depreciated a bit – an issue for the Central Bank of Russia. He pointed out that the damage done to Russia’s GDP growth was less than expected, stating that his ‘macroeconomic experts’ suggested a decline of about minus 2.2% this year, which is probably optimistic but not that far off the mark either.

Inflation, he said, had been bought under control and was trending downwards – he said that it was now expected to be about 5% in Q4 2022. That was the reverse of both the United States and European Union, he said, where inflation was trending up and would be 8 to 10% in Q4 and even higher. He was highly critical of the United States printing money, saying an additional US$5 trillion had appeared over the past twelve months and it was this that had caused global inflationary pressures.

Russia’s unemployment levels, a key indicator, he said had remained steady at 3%. Overall, Putin stated, during 2022 Russia had not cancelled any national or federal development projects, and that federal budgets to cope with the transition towards an increasingly self-sufficient economy, would be increased by 20% for the 2023 fiscal year.

 

Chris Devonshire-Ellis (left) attending the Eastern Economic Forum Plenary Session

A Multipolar Society

In previous years, this issue has also been discussed with warnings about the United States moving to a unilateral position in taking over global leadership dating back several years to 2015. Back then, lest it cause offense amidst hoped for détente, the US was not named as the protagonist, just referred to as ‘a leading economy’ to preserve an element of diplomatic criticism. Now, those gloves are off. Putin laid into the United States with some aplomb, directly accusing it of making up its own rules in contravention of international laws, and of the West in not seeing that it was now subservient to Washington. ‘Globalization’ he stated, ‘has been sacrificed to support US dominance’.

Putin also observed that the United Nations Article 51 provided only the ability to self-defense – and that the United States had disregarded this in attacking over the years Iraq, Libya and overseeing the NATO bombing of Yugoslavia. He stated that the US was not in compliance with the United Nations own rules and instead just made up their own when it suited US policy to do so.

This was a theme taken up by all of Putin’s guests, including China, in addition to the Prime Ministers of India, Malaysia, Myanmar, Mongolia and Armenia. There was, Putin said, a broad consensus in Asia and across the developing world – Africa, Latin America, Central Asia, and the Middle East, that the development of a multipolar world was now irreversible. The only question left to answer is how far the United States is prepared to go in its desire to prevent it. The West, he stated, was in danger of building up resentment, resorting to colonial tactics, and were destabilizing the global economy in attempting to do so.

Global Poverty & Grain Supplies

Putin went further and effectively labelled the West as ‘greedy’ as well as ‘devious’ in terms of ignoring the developing world and of only being concerned with their own interests. He pointed out that global poverty and food security were becoming real problems and that it was EU self-interests that had been both responsible for shortages and driving up prices beyond the reach of smaller economies. This had the potential to develop into a serious global crisis.

Food security was an issue also mentioned by China, India, Myanmar, and Malaysia, with all mentioning this was now an issue for all their respective nations. The BRICS grouping was highlighted as a focal point for discussions to deal with this, while it will also be a subject at the Shanghai Cooperation Organisation heads of state meeting in Uzbekistan next week. In hearing the various comments, it became clear that global food security in the developing world was an issue that Russia and China, with BRICS and SCO partners would be tackling, while the implication from the statements made is that the West has become too selfish and self-protecting to be entrusted with creating global solutions.

Reference To EU Development

In terms of the EU, Putin said that aligning itself with the United States was damaging European competitiveness. The following of US sanctions has diminished the EU by raising its production costs, as it can no longer source more competitive Russian energy, instead this will now come from alternative, more expensive sources – including buying from the United States, which fits in exactly with US policy. It has become a major energy supplier to the EU but at the expense of European competitiveness, meaning EU production costs will rise. The same applies to other commodities the EU needs and imports, and a decline in its manufacturing capabilities will inevitably result.

Putin also said that the Euro had lost, and the US dollar would continue to lose global market share, and that other currencies such as the Chinese Yuan, would compete with them, form alternative currency trading relations and partnerships and this would also negatively impact the EU. This was significant to Asia, he stated, as the Asia-Pacific region was already growing faster than the EU at a rate of 5% now, and that by 2027, the Asia-Pacific region (which includes the Russian Far East) would possess 47% of global GDP.

Russia would share in that, Putin suggested, as the Russian Far East had already grown its GDP by 25% over the past five years and was poised to continue this – and take part in the new developing trends in Northeast and Southeast Asia. Asia-Pacific growth would further stimulate the Russian economy.

In terms of EU gas supplies, Putin stated that ‘the EU had been a primary market, but now they are not’, and that Russia would simply sell its gas elsewhere. Russia, he said, could meet the entire global demand, and that this demand is both at increasingly record levels – and that Russia would be able to continue to supply this. ASEAN’s energy demands for example are poised to double in a decade. Putin concluded by stated that ‘if the EU doesn’t wish to be globally competitive then as far as Russia is concerned, this is fine.’

Concerning Russia imposing restrictions on European nationals applying for Russian visas, he stated that Russia has rejected such a stance, and that there would be no restrictions. ‘Many people love and respect Russia. We will not cut them off and they will remain welcome in our country.’

In terms of the other speakers, I briefly summarize as follows:

China

A comprehensive overview of the China-Russia discussions, trade and investment and other issues discussed at the Forum can be found in this related, comprehensive overview here. This is of special attention as the Chinese and Russian Presidents are scheduled to meet next week, and this report brings their trade, investment and geopolitical alignment up to date.

India

Prime Minister Modi stated that India had a ‘Far East’ policy and was intent on expanding trade and development with and in Russia. It fully intended to make full use of the INSTC corridor (linking India to Russia via multimodal routes through Iran and the Caspian Sea) as well as the existing Chennai-Vladivostok direct shipping route. India was also interested partnering with Russia in the Arctic and the NSR and was already invested in energy, agriculture, pharmaceuticals, and diamond processing industries amongst others and would continue to look to Russia for opportunities.

Malaysia

The Malaysian Prime Minister, Ismail Sabri Yaakob, addressed the Plenary session of the Eastern Economic Forum by videoconference, stating that Malaysia did not agree with isolating countries and that all nations should prepare for a multipolar world order. This seemingly confirmed Malaysia’s decision to support the position given by Moscow and Beijing in calling for ‘global imbalances’ to be addressed. He noted that the RCEP agreement was of relevance to Malaysia in developing ties in Northeast Asia.

Myanmar

Myanmar signed a small-scale nuclear power plant deal with Rostacom at the Forum, while Prime Minister Min stated he was also concerned with food and water security. Myanmar was quite prepared to drop the US dollar and trade in Rubles, RMB and Rupees, while offering Russian energy plays investment in Myanmar’s significant domestic oil and gas fields, in addition to investment in agricultural development. Much of Myanmar’s land is subsistence farming and requires greater productivity techniques. Min stated that Myanmar needed to develop a maritime link to Russia as well as an overland route from ASEAN to Russia. The first would presumably be a link from Myanmar’s Yangon Port, to Vladivostok, while the second, overland route would appear to be a reference to China’s national G213 highway, which reaches China’s southern Yunnan Province – and shares a border with Myanmar. This highway runs north into Xinjiang province and onto Kazakhstan, where it links with connections with Russia’s highway network.  Min also stated that Myanmar was interested in developing tourism facilities for Russian travelers.

Mongolia

The Mongolia Prime Minister pointed out that Mongolia had a total of 42 border checkpoints between Russia and China, with 29 of these being with Russia. Landlocked, and situated between the two countries, he perceived Mongolia as a transit hub for both, and stated that the Power of Siberia pipeline was now agreed, and work on this would now commence. He pointed out that the project wasn’t just a gas pipeline, it also included rail, highway, and port facilities, and should be completed by 2029. Mongolia would be developed as an alternative energy source, with both solar and hydropower capabilities. With a large landmass but a small population, Mongolia would become an energy exporter in its own right.

Armenia

Armenian Prime Minister Nikol Pashinyan said that Armenia was weathering the global situation well and was on course for GDP growth of 7% in 2022. He was quick to give praise to the Eurasian Economic Union, which includes Russia, as assisting with this dynamic, and stated that some 1 million Russian nationals had migrated to Russia since March. This was influencing Armenia’s growth, with many engaged in parallel imports from Armenia to Russia or conducting WFH from Armenia for their employers or businesses back in Russia, as they could access payments from Armenian banks.

This created some interesting debate between Pashinyan and Putin about whether these were Russians fleeing Russia or a pragmatic reaction from the dual Armenian-Russian diaspora merely reacting to yet another regional upset following the recent 2020 war over the Nagorno-Karabakh conflict. Either way, the benefits appear to be split between increased local expenditure in Armenia adding to local VAT coffers, while business revenues and taxation remain realized in Russia. The issue was a surprising one that has implications for the Russian diaspora and other economies experiencing the migration of Russian nationals and could lead to win-win taxation possibilities for both Russia and the recipient migrant destinations, including other EAEU destinations as well as locations such as Dubai and Turkiye. The newly created 2022 Russian diaspora, it seems, is not moving too far away from the Motherlode.

Pashinyan mentioned the INSTC corridor would assist Armenia as it now had access to the Persian Gulf and other markets from the Caspian Sea and was looking to develop better ties with Turkiye. He expressed some concern that the Ukraine conflict could destabilize the Caucasus, noting an increase in Ukrainian weapons being smuggled into the region.

Vietnam

Vietnam signed a Free Trade Agreement with the Eurasian Economic Union, (EAEU) which includes Russia, as well as Armenia, Belarus, Kazakhstan, and Kyrgyzstan, in October 2016. That has been a success, with mutual trade and investment skyrocketing upwards from near-negligible levels. In 2021, bilateral trade reached US$2.2 billion, of which US$1.3 billion was in Russia’s favor. Both 2021 and 2022 show declines, which have been due to the knock-on effects of covid, and the sanctions imposed on Russia.

Steps are being taken to correct this. As mentioned, the HCMC-Vladivostok direct maritime route, which heads up the east China coast before being loaded on the Trans-Siberian railway accessing all areas of Russia all the way to Moscow and St. Petersburg is now operational (your writer can attest to this with bags of frozen Vietnamese shrimp now a common sight in Moscow supermarkets). Pork, which makes up 50 percent of all Russian exports to Vietnam, heads in the opposite direction.

The Vietnam-EAEU agreement is also in the process of being overhauled to encourage higher trade volumes. This will mean specific tariff reductions as well as improvements in the bilateral standardization and technical recognition areas.

That said, there are very specific correlations between the two countries in the timber industry – Vietnam has become the world’s second-largest supplier of processed timber products. Russia has the world’s largest timber reserves. Yet the two sides are not fully coordinated – maybe the development of a ‘Timber Exchange’ where spot prices, futures, and options could allow Russian suppliers some guidance as to what is required when, and Vietnamese buyers can enjoy some market stability.

Russian forestry management should be coordinated with Vietnamese processors, while Russian timber businesses themselves should be looking at adding value – in Vietnam. It makes sense – Vietnam exported US$14.8 billion of processed timber in 2021, while the EU has banned the import of Russian timber products.

Elsewhere, Vietnam is looking at increasing trade in agriculture, seafood, grains, timber (as mentioned), and even dairy products.

Vietnamese Prime Minister Pham Minh Chinh stated that Ruble-Dong currency transactions are also being discussed, while the Vietnamese side also mentioned the possibility of cryptocurrency development – an apt area as the Central Bank of Russia appears likely to approve its use for cross-border trade in the near future.

Executive Summary

The striking feature overall was the solidarity that appears to be developing behind Russia in what is increasingly being perceived not purely being a conflict with Ukraine, although discussions were held about this, but the wider view that there is a larger global struggle going on between the West, with its desire to impose a unipolar global society, and the developing world, which is actively resisting this.

It also illustrated that in Asia, the emphasis is on trade and development, rather than conflict. It was also quite apparent that China and Russia, along with the ASEAN, EAEU, CPTPP and RCEP trade blocs, in addition to developing groups such as BRICS and the SCO, are actively engaged in free trade and the development of a multipolar world – the exact same elements that had been pushed by a democratic seeking West, 30 years ago.

Now it appears that it is the West that is becoming less democratic and less desirous of free trade. (The appointment of Liz Truss as British Prime Minister, which took place during the forum, yet occurred without an election being held in the UK, was viewed with some bafflement and a small amount of derision by the attendees as an example of democratic ‘double standards’) Concerning trade, it was noted that the EU had pulled out of the China CAI trade deal and that the US had walked away from the TPP agreement, both of which had been years in preparation but were now abandoned.

It became clear that for China and Russia, the issue of self-sufficiency and self-determination is now paramount, and to an increased extent the consensus is that the West is becoming ‘deluded’ in terms of what Moscow and Beijing believe are doomed attempts to maintain global dominance. They both realize there is a long way to go, but the forum outlined a belief I have not heard before – that China, and Russia are quite prepared, and increasingly confident, of prospering in a global market that excludes both the United States and European Union. That is an extraordinary development in attitude and perception.