Can there really be any “postindustrial epoch” in today’s Russia, when the country is being swiftly de-industrialized at a precipitous rate before our very eyes? The occasional “heartfelt” confessions of our topmost leaders, about how we are living thanks to the vestiges of the Soviet technological and industrial potential, remain empty sounds. Heavily huffing and puffing at our neighbors, this country is doing nothing to get out of a deep raw-material hole. On the contrary, we can clearly see that the authorities are loath to do anything to reduce the country’s addiction. Apart from exporting oil and gas, we are looking for every opportunity to open the door still wider, i.e., to sell other raw materials in exchange for foreign-made finished products, in order not to trouble ourselves with the manufacturing of the latter. Of course, this is more difficult to do than to scoop natural wealth from under the ground and sell it abroad.
For example, it was officially announced that there is an estimated four trillion (!) tons of coal in the bowels of Russia, almost a third of worldwide deposits. As oil and gas are inevitably going to be exhausted, why not make this huge wealth a basis for Russia’s new fuel strategy, which is in turn needed for economic revival? Well, this work seems to be too hard for the current Russian leaders who are only capable of drawing up a long-term project of exporting coal — this time to our eastern neighbor. Indeed, in its all-out effort to get the upper hand in the world economy, the People’s Republic of China needs colossal supplies of oil, gas, and coal for its burgeoning industry and agriculture. So it is only natural that they want to secure guaranteed deliveries of raw materials, including some from Russia. Now that the Skovorodino-Daqing Russian-Chinese oil pipeline has been unveiled, China will be receiving at least 15-17 million tons of “black gold” a year from us. As we have reported before, the Chinese side invested billions for these supplies. Is it not time that we began to use our own raw materials? What do we see instead?
Here is this month’s information about coal. According to Russia’s Ministry of Energy, China is planning to give Russia a billion worth target-oriented loan for developing coal deposits in the Amur area and other eastern regions. The loan is guaranteed by Russian coal supplies to China. What is more, the loan is repayable within not 15-20 years, as is usually the case in this kind of intergovernmental agreements, but within a far longer period. Under the agreement, Russia is to annually supply at least 15 million tons of coal to China in the first 25 years, followed by at least 20 million onwards.
The world’s second-largest economy can afford to conclude this kind of loan agreements. Tellingly, this agreement with China has a very essential clause: one of the binding conditions is Russia’s import of Chinese mining equipment, including the machinery for coal processing and enrichment. This means that the whole cycle of coal deposit development in eastern Russia will be carried out not only at the expense of Chinese loans but also exclusively using Chinese equipment. This also proves that Russia not only does not have the modern industrial facilities needed to produce up-to-date equipment, it is not even going to build any! So what kind of “modernization” is there in this situation?
Meanwhile, there are many examples around the world of how one can extract raw materials by means of foreign investments and loans without detriment to one’s own industry, or even developing the latter. Let us take oil again. Dozens of countries are extracting it, but in a different way. For instance, Norway, a small but extremely well-developed country, uses various forms of foreign involvement in its offshore oil extraction. But there is one mandatory condition: the most sophisticated and high-tech element of this process — the famous sea and ocean platforms — are produced in Norway itself. Their production is a very expensive process which involves a lot of industries and cutting-edge scientific and technological designs.
Why not apply this experience to Russia when it concludes loan agreements on oil and gas? But nobody wants to trouble themselves. Indeed, do we really need any industry if we have oil, gas, and genuine coal to boot? What is more, we do not seem to need either of these products for our own development. It is so nice that burgeoning neighbors are sure to consume it all.
However, should this tendency continue, a day will come when we will be importing not only the mining equipment, state-of-the-art machine tools, vacuum cleaners, irons, and computers, but also the classroom desks on which these computers are installed. Add to this tables and chairs in kindergartens, offices, etc., where, according to glib Russian political scientists, the proverbial “postindustrial services” ought to be produced. What may thus remain as the only domestically-produced item is loincloths which Russians will be wearing, like aborigines on faraway islands, bowing to all sides and saying: “All our doors are wide open: please come in, we’ve got enough raw materials so far!”
There is just one snag: our climate is, you see, very far form tropical and you will not make do with a loincloth alone, while the remaining clothes will very soon be imported because we will have nothing to make them with. And will we have enough raw materials for this?
Meanwhile, there is a small country next to Russia, which has no oil, gas or coal but, unlike Russia, arouses specific interest in China as a research and technological partner. But this is a subject for another conversation.
Oleg Cherkovets is a Moscow-based Doctor of Sciences (Economics)
