Networks and links: why Russia’s infrastructure is holding back its pivot to Asia

This report, from UK think tank Chatham House looks at the inadequacies in Russia’s existing infrastructure in the Russian Far East and eastern Siberia.

Russia’s vast territory and varied geography mean that its transport networks are extremely important in connecting the eastern and western parts of the country, as well as in linking Russia with other countries to promote international trade. However, inadequate transport infrastructure is preventing the country from capitalizing on economic opportunities, particularly with Asian partners such as China, Japan and South Korea. Russia’s population and transport networks are unevenly distributed. A dense railway and road network exists in the west of the country, but a much sparser network serves the Russian Far East (RFE). This lack of capacity is problematic for the Kremlin’s stated goal of turning the RFE into a trade and investment hub linking Asia with Europe. Key obstacles to improved transport connectivity include overloaded port systems, an insufficient number of well-engineered bridges capable of accepting increases in cargo, and challenging seasonal weather conditions. The above factors also restrict Russia from accessing and exporting significant reserves of the natural resources – such as oil, gas, coal and precious metals – upon which the economy depends. The RFE is rich in many of these resources. Without sustained and systematic improvements to the region’s transport networks, particularly railways, bridges and ports, the Kremlin will be unable to attract the foreign investment needed to boost freight capacity and support export growth. Prospects for the development of the RFE’s economic potential have further been complicated by the international political fallout from Russia’s annexation of Crimea in 2014 and subsequent military involvement in eastern Ukraine – actions that prompted the introduction of Western sanctions and have weakened Russia’s relations with the US and Europe. As a result, Russia now must seek alternative economic partners in Asia. Although the government has introduced some measures, including favourable tax regimes, to assist foreign businesses in the RFE, this has yet to result in large-scale inward investment. Absent substantial new capital inflows, many major projects, such as the planned expansion of ports, are on hold. Better progress has been made in building energy transport infrastructure, such as the ESPO oil pipeline and the Power of Siberia gas pipeline. However, much more investment will be needed if Russia is to achieve its stated ambition of directing half of its energy exports to Asian markets. The Kremlin has revealed a preference for prioritizing political initiatives over practical projects that would link up Russia’s rural regions. Systemic corruption has also resulted in public funds being siphoned from major construction projects in the RFE, deterring foreign investors and forcing many large-scale infrastructure projects to be abandoned before completion. All these factors are exacerbated by a dearth of research on transport in Russia, which limits the scope for innovation and construction in the RFE. Should the Kremlin fail to address this knowledge gap, the resultant economic effects may damage Vladimir Putin’s legacy long after he leaves the presidency.

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