HEADLINE = Russias Asian homecoming STRAP = Russia is the new kid on the block everyone wants to be friends with.

This is because the country has displayed uncharacteristic diplomatic finesse to steer APEC in a direction that will substantially benefit the region, including its own Far East. A major spinoff from Vladivostok could be eventual membership for India. The New Zealand Institute of Economic Research is quite candid about what Kiwis are seeking at Vladivostok friends in high places. They want a free trade agreement with the Russia-Belarus-Kazakhstan (RBK) Customs Union, which is expected to evolve into a Eurasian Economic Union. An FTA is a chance to cosy up with the worlds 12th largest economy, it says (http://nzier.org.nz/publications/new-zealand-russia-fta-another-briic-in-the-wall-nzierinsight-21). This is useful in a political economy sense it is good to have global superpowers well disposed towards New Zealand. Taking the opportunity to show a willingness to engage with RBK, when other countries are not, could well have significant payoffs down the track. Clearly, the Kiwis have their eyes on RBKs growing number of wealthy consumers. We want New Zealand products to be top of mind when RBK consumers go to their supermarkets, and the publicity and goodwill that an FTA negotiation will deliver will help, says NZIER. Russian and New Zealand leaders will go into a huddle on the sidelines of APEC 2012 to thrash out an FTA between the Customs Union and New Zealand. Russia is pitching RBK as a key building block in the strategic goal of creating a common economic and human space stretching from the Atlantic to the Pacific. The local media here hasnt stopped trumpeting the news (http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10831960) that New Zealand Prime Minister John Key has secured his first face to face meeting with President Vladimir Putin. The FTA with New Zealand will be the first for Russia with a Pacific country. And the thing to note here is that it is New Zealand a firmly proAmerican country that is pressing for an early conclusion of the talks. Next in line is Vietnam which will also negotiate a free trade pact with RBK on the summits sidelines. Suddenly, Russia is the player everyone wants to be friends with. But make no mistake, this hasnt happened by accident. Russia looks East Far East If Peter the Great lived now, he would undoubtedly build Russias capital not in the Baltic region, but by the Pacific Ocean, Sergei Karaganov, dean at Moscows Higher School of Economics, wrote in an essay earlier this year, referring to the czar who built St Petersburg as Russia's "window on the West" three centuries ago. According to Karaganov, Russia should now have a window on the East. Among those who share his view is Sergei Shoigu, the governor of the Moscow Region, who has proposed that Russia move its capital to Siberia. While the chances of Moscow losing its numero uno status are subzero, Russias engagement with Asia is in step with the inevitable geopolitical and economic shift to its east. Chew on this. China has replaced Germany as Russias biggest trading partner. Mutual trade amounts to $90 billion and is likely to cross $200 billion by the end of the decade. Trade with Japan, which was hobbled by as yet unresolved territorial disputes, doubled in the five years to 2010. Trade with South Korea trebled.

But behind these figures is a sobering fact Russias share in total Asia-Pacific trade is around 1 percent. Literally and economically, Russia has been a landlubber on the edge of the Pacific, but not quite in. Even during the Cold War days when Russia was a great Pacific power, it was solely because of Admiral Gorshkovs naval might and not because of trade with Asia or other useful engagements. APEC journey: Russia walks the talk APEC 2012 changes that. After a long time in living memory, Russia has shown diplomatic dexterity in pushing forward initiatives that are of vital interest to it. From now on, the rhythm of economic growth in Russia will depend on that of APEC, Russias Finance Minister Anton Silunaov said ahead of the summit. The summit marks a key milestone in Russias relations with Asia. With Europe in decline, Russia is attempting to change its image and appear not only as a European country but as an Asia-Pacific state. Whats changed is the thinking the Kremlin now agrees that for Russia to be part of a rising Asia, it is necessary for people in the Far East to be able to live freer and richer than in European Russia. Writing in the Ogonyek weekly, Vladislav Inozemtsev, director of the Centre for Post-Industrial Society Research, says, To try to return Russia to the status of a great Pacific power, we need a widescale project of new development of Siberia and the Far East. The enormous cash being poured into the region is opening up and transforming it beyond recognition. Vladivostok, once a ramshackle port, is changing into a showpiece city. The westward migration that was threatening to depopulate the region has stopped and shows signs of reversing. Russia is walking the talk. Fuelling Eurasia APEC 2012 couldnt have come at a more opportune time for Russia. The Middle East, the worlds leading petrol station, is currently passing through turmoil. It is likely things will get a lot worse before they get better. It is in this backdrop that news arrived last week that Russias oil production topped its Soviet era production record. With 60 billion barrels in proven oil reserves and 47.6 trillion cubic meters in gas reserves, according to the US Energy Information Agency, Russia is a natural place for other countries to turn to for energy. While Europe has relied on Russian gas for well over three decades, less well known are the giant oil and gas pipelines snaking across Russias eastern territories, ready to fuel the seemingly insatiable economies of Asia. Also because of its East-West location, Russia is poised to offer another unique proposal it has called on APEC members to use its Northern Sea Route and the TransSiberian Railway to diversify their supply chain routes. PricewaterhouseCoopers estimates a $20 billion investment in the infrastructure of the East-West transport corridors in Russia would help the Asia-Pacific economies save about $600 billion by 2020 through faster and lower cost delivery to European markets. Currently, only 1.5 per cent of cargo travelling between Asia and Europe passes via Russia. The case for India Peter Drysdale, the editor of the East Asia Forum, says (http://www.eastasiaforum.org/2012/09/03/has-russia-reinvented-apec-as-well-as-itsasia-pacific-posture/) that without anyone noticing, Russia has opened an entirely new play. APEC is being transformed into a platform on which anyone that has got anything to contribute on economic cooperation can be invited to play, he says.

Theres no reason why Indonesia next year, for example, might not invite India to the APEC party to do important regional business. India is keen to join the group but according to a Filipino trade negotiator, Western countries are behind the move to keep India out because they are concerned its entry would tip the balance of power towards Asia. However, because of the very nature of APEC, current host Russia, Indonesia in 2013 and China in 2014 can prepare the stage for Indias entry. This is because decisions are made by consensus rather than through a process of formal negotiations. Consensus on Indias membership would probably be easier than negotiations. The only hitch is Indias earnestness. While New Delhis APEC ambitions tie in neatly with its unusually farsighted Look East Policy, New Delhi has not really delivered in terms of regional leadership. Tiny countries like New Zealand and Singapore outdo New Delhi in the leadership department. India has to first work on this aspect before it can expect the red carpet welcome. APEC: How it works The advantage APEC has over rivals like the Trans-Pacific Partnership which the US is pushing is that APECs lack of formal, binding agreements has been able to lower trade barriers and facilitate trade. According to a study paper by the US Congressional Research Service, Since APECs inception the average tariff rate among its members has declined from 16 percent to 5 percent, in part due to the commitments made in the IAPs. An APEC trade facilitation initiative from 2002 to 2006 lowered the cost of business transactions for APEC members by an average of 5 percent. According to some business leaders, APECs trade facilitation efforts have had a greater effect on international trade in the region than formal trade agreements that selectively lower tariff rates. Indeed, these APEC accomplishments have directly contributed to the growth in intraAPEC trade and the regions economic growth. Since 1989, intra-APEC trade has increased four-fold, significantly outpacing the growth in world trade. In 2011, APEC members had grown to account for 44 percent of global exports and 46 percent of global imports. The study adds that APEC also acts as an incubator of ideas to address next generation barriers to trade and investment in a range of areas such as supply chain connectivity. While free trade arouses fear and anger in many parts of the world, the Kremlin is making a bold play for borderless trade. If Russia can pull it off, it can change the map of the Asia-Pacific and the landscape of its Far East.