Fear and Loathing in Siberia

Vladimir Putin, like Russia's double-headed imperial eagle, has two faces. Both have lately been very much in evidence. At a meeting of G8 energy ministers in Moscow last week, the Russian president showed his Western visage, presenting Russia as a reliable energy partner and playing the superpower alongside the big hitters of the democratic, industrialized world. This week he travels to Beijing to cement a growing partnership with Asia's other booming authoritarian-capitalist country, China. There he will sign deals on oil pipelines, sales of sophisticated weaponry and nuclear reactors, and security accords reminiscent of the old days of Sino-Soviet entente.

Putin clearly relishes his--and Russia's--newfound clout. But his visit to China raises an interesting question: which of the two nations, in fact, is the real superpower? On the surface, Russia seems to take the laurel, playing an energy-hungry East and West to its advantage. Awash in oil money, Moscow has recently been asserting itself as never before in the post-Soviet era--involving itself in Iran and the Middle East, wielding oil and natural gas as a political weapon against its neighbors in Eastern (and Western) Europe and reasserting control over its near abroad from Belarus to Uzbekistan.

Yet for all its new bullishness, Moscow looks East with a fearful eye. The reality is that China is rising as a military power--thanks in large part to the $5 billion of high-tech Russian arms it buys every year. And long ago it surpassed Russia economically. Yes, Russia may be sloshing with petrodollars. But China's surplus of trade capital is even bigger--to the point that Chinese investment threatens to swamp Russia's dysfunctional economy, particularly in its impoverished but strategically critical Far East. Western G8 members may have objected, fruitlessly, to Putin's inviting China to the Moscow summit. But in truth, it's China--the world's fourth largest economy, with Russia just ahead of Mexico in 12th place--that has the greater claim to a place at the top table. "Russia is shifting from being a junior partner of the United States to a junior partner of China," says Dmitry Trenin, director of Moscow's Carnegie Fund.

Nowhere is China's growing dominance more evident than in Siberia, a vast land far larger than China itself but inhabited by a mere 30 million Russians. Chinese goods are everywhere. In Novosibirsk, the owner of a new hotel can't think of a single thing in the place that isn't from China, from the electric sockets to the beds and furniture. The town's citizens will soon ride to work on Chinese buses; in the markets of Khabarovsk bargain-hungry Russian babushkas even know the Chinese names for the vegetables they buy from Chinese traders. "Everything we have comes from China--our dishes, leather goods, even the meat we eat is from China," complains Vyacheslav Ilyukhin, head of the Building Department at Novosobirsk's city hall. "Siberia is becoming Chinese."

But Siberia is more than just a market for Chinese goods. Its vast oil and gas reserves make it the ideal gas tank to power China's growth. Earlier this month Putin ordered officials to speed up plans for an $11.5 billion, 4,100km crude-oil pipeline from eastern Siberia to the Pacific Ocean that will eventually carry 1.6 million barrels per day to China and Japan. And Russia's state energy utility, Unified Energy Systems, plans to spend $8.2 billion to build four giant hydropower complexes on the Aldan, Uchur and Timpton rivers in eastern Siberia to help meet China's annual demand for 40 billion kilowatt-hours of power.

China's soaring energy needs would seem to put Russia in the catbird seat. But in fact, it works the other way. There's no denying China's need for Russian natural resources. By some estimates, China will look to Russia to supply 20 percent of its energy imports by 2011. Ditto for other resources like lumber and aluminum. But China is developing other sources of supply as well, like Iran and Kazakhstan for oil. Chinese companies have been buying iron-ore mines in Australia, as well as Canada's largest nickel and zinc mining company, Noranda. China isn't about to become critically dependent on Russia, while Russia is becoming dependent on China--which will account for half of Russia's energy exports by 2015, according to some estimates.

Meanwhile, china is grabbing other Russian assets. Siberia is home to a vast and underemployed brain trust of technological and scientific talent, which Beijing is busily buying up. Take Akademgorodok, a Soviet-era suburb of Novosibirsk, home to 52 scientific institutes and some 18,000 scientists, including half a dozen Nobel Prize winners. Already, estimates Novosibirsk councilor Aleksandr Lyulko, 80 percent of Akademgorodok's income derives from China. And after years of post-Soviet neglect, the scientists of Siberia are only too happy to fill Chinese orders for everything from wind tunnels and soil analyzers to lasers, DNA labs and electron accelerators. "The West is wary of selling their technologies to the Chinese, so they come here," explains Vasily Areshenko, foreign-relations chief for the Siberian chapter of the Russian Academy of Sciences. "Our own government doesn't give much importance to science. We need China's money."

Moscow politicians have long talked about making Novosibirsk the heart of a new Indian-style knowledge economy. But while Moscow's promises have stayed on paper, Chinese cash is actually kick-starting a rebirth of Russian science. Krasnoyarsk's Institute of Solar-Earth Physics, for instance, has formed a joint venture with the Chinese Center of Space Science; in Novosibirsk, the Institute of Precision Electronics now makes high-powered lasers together with the Shenyan Technological Institute. Last year more than 400 Chinese scientists visited Akademgorodok, notebooks in hand. "China has an enormous interest in learning about new technologies," says Vasily Fomin, director of Akademgorodok's Institute of Theoretical and Applied Mechanics. "They say: 'Give us a scientist who can win us a Nobel Prize and we will do anything for you'."

That doesn't sit well with many Russians, particularly back in Moscow. Raised on history texts describing how Russia was overrun by Mongol hordes from the East in the 13th century, they are uneasy about the influx of Chinese money, goods and people. They worry about selling technology that China could use to create its own home-grown tech industries. "A long time ago we taught Chinese to put cars together; now they sell us their Chinese cars," says Vasily Fomin. Less-rational fears of Chinese domination are rife, too. Last month Russia's nationalist Rodina party introduced legislation seeking to restrict the number of foreign (read: Chinese and Caucasian) traders allowed to sell goods at Russian markets. The bill is not likely to pass, but it's an indicator of just how deep the undercurrents of xenophobia run. Rodina's leader, Dmitry Rogozin, has previously accused China of plotting to take over Siberia, if not by force then by demography, and he's called for new laws "to restore Russia's control over its borders"--specifically to stem the inflow of Chinese migrants, nearly half a million of whom already live in Russia. Russians should be encouraged to move to borderareas, he has said, to counter the Chinese "threat to Mother Russia."

Rogozin is not alone in his fear of the "yellow peril." In Novosibirsk, the proposed purchase of 100 hectares of land on the city's outskirts by a Chinese shopping-center developer for $1.6 billion has raised vehement opposition among local politicians. "Novosibirsk will become half Chinese," complains Ilyukhin. "The authorities are too blind to see that we are selling a piece of our motherland." Even elite Kremlin bureaucrats share some of these concerns. Chinese companies have been blocked from buying strategic oil and gas assets, most recently in December, when the China National Offshore Oil Corp. sought to buy up the remains of the once mighty Yukos oil major. And just this month, the Chinese-owned Sinopec Group, Asia's largest petrochemical refiner, expressed interest in buying Udmurtneft, a subsidiary of the private oil joint venture TNK-BP. But that, too, is likely to be barred. The Kremlin, it seems, will tolerate Western majors like BP buying up medium-size Russian oil companies like TNK--but when it comes to the Chinese, the answer is no. Clearly, Putin wants China's money, but not at the cost of giving Beijing control of Russian assets.

At bottom, the Kremlin is deeply conflicted about its emerging eastern partner. Despite their fears, Russian strategists, smarting from the loss of their cold-war superpower status, also dream of creating a Pan-Asian alliance as a counterweight to U.S. hegemony. According to a poll carried out by the liberal Ekho Moskvy radio station last year, 74 percent of listeners thought Russia should join in an alliance with China against the United States. "Together, we will be greater than the Americans," one listener wrote on the station's Web site--a fair description of the Kremlin's goal.

Recently, Putin has been talking up the Shanghai Cooperation Organization, a loose security alliance that includes Russia, China and the Central Asian nations of Uzbekistan, Kazakhstan, Kyrgyzstan and Tajikistan. Its stated aim is to control "terrorism" in the region, specifically, Islamic militants who threaten a repressive but Moscow-friendly regime in Uzbekistan and who have fomented unrest in China's Muslim-majority Xinjiang province. But it's also dedicated to evicting the United States from its bases in Central Asia, which make both Moscow and Beijing uneasy. Putin has also been trying to position Russia as an Asian, as well as a European, power--to the point of formally requesting membership in the Association of Southeast Asian Nations, headquartered in Jakarta. "Moscow is irritated by Western criticism," says Dmitry Trenin. "It's looking east for new alliances."

Already, over the course of regular visits, Chinese President Hu Jintao and Putin have formed a common anti-U.S. front on major diplomatic issues ranging from Iraq to, most recently, how to deal with Iran's nuclear ambitions. Hu will also seek to build on that common ground by lobbying for increased Russian support for its claims to Taiwan, according to one Russian diplomat not authorized to speak on the record. Last May, the two men ended a long-running border dispute after Putin agreed to cede 120 square kilometers of the 4,300-kilometer Russo-Chinese border to Beijing. Slowly but surely, Russia is being pulled into China's economic and political orbit.

Closeness to Beijing, though, poses as many problems as distance. Even at home, with its erosion of free speech, its "managed democracy" and growing state control of the economy, the country seems to be taking a leaf from China's authoritarian book. But that doesn't sit well with Russia's craving for recognition by the West, tangibly expressed by memberships in such clubs as the WTO and G8, whose members are increasingly grumbling that perhaps Russia doesn't deserve such lofty standing among industrialized democracies.

So Russia finds itself in an awkward place, stranded between two poles, east and west. As China's economic and political pull grows, so Western good will ebbs as the United States and Europe grow more outspoken about Putin's rollback of democracy and support for despots like Belarus's Aleksandr Lukashenka. Putin may be too canny a player not to recognize the danger to the east. But as it runs out of friends in the West, Russia may find itself with little choice but to turn its face to China.