August 28, 2012 / 2:31 PM / 7 years ago

Russia, looking east for business, cool on US-led Asia trade group

MOSCOW (Reuters) - Russia wants to increase business in the Asia-Pacific region through regional group APEC, a senior member of the government said on Tuesday, and sees no place for itself in a new U.S.-led free-trade body.

Russia, which has just joined the World Trade Organization, sees no need for the Trans-Pacific Partnership (TPP), a trade initiative backed by Washington, First Deputy Prime Minister Igor Shuvalov said.

“We don’t share the conviction of the Americans of the need to build a trans-Pacific free-trade zone,” Shuvalov told a news briefing before a regional summit that Russia will host next week in the eastern coastal city of Vladivostok.

The summit, an annual meeting of the 21-member Asia-Pacific Cooperation (APEC), set for September 8-9, offers Russia a chance to develop its growing ties with Asia.

U.S. President Barack Obama, who is seeking re-election, will not attend the APEC summit and will be represented by Secretary of State Hillary Clinton.

Trade Representative Ron Kirk will also skip the Vladivostok gathering, and the United States is due to host a further round of talks in September to push ahead with the TPP process.

Discussions on creating the new regional trade group now involve the United States, Australia, New Zealand, Peru, Chile, Singapore, Malaysia, Vietnam and Brunei. Canada and Mexico are set to join the TPP discussions in the coming months.

All the TPP players are members of APEC, a loose grouping that operates on a voluntary basis. China, the region’s export powerhouse and world’s second-largest economy, is notable by its absence from the initiative.

U.S. officials deny that the TPP amounts to an attempt to contain China economically. In remarks on Monday, Treasury Under Secretary Lael Brainard said Washington would pursue its efforts to rebalance its economic and trade relationship with China on a bilateral basis.

“The United States and its trading partners are determined to complete a broad-based, high-standard TPP agreement and one that can serve as an important engine for economic expansion in the region,” Brainard told reporters before a meeting of APEC finance ministers in Moscow on Thursday.

RUSSIA PUSHES EASTWARDS

Moscow has made transport and infrastructure one of the agenda priorities of its one-year chairmanship of APEC.

“If we set ourselves the task of diversifying our economy, reducing our resource dependency and being much more valuable to different economies, then the balance of our trade must change,” Shuvalov said.

“At least 50 percent of our trade should come from the Asia-Pacific region ... because the investment and trade potential of these countries has not been one-quarter realised.”

Half of Russia’s exports go to the European Union, while the APEC markets account for barely a quarter, according to Russian trade figures for the first half of this year.

A Russian think tank has estimated that an investment of $20-$30 billion in Russian infrastructure by APEC members could deliver trade savings of over $600 billion by 2020 by boosting goods transit across Russia - the world’s largest country - and by opening up a northern sea trade route to the Asia-Pacific.

Consultants PwC estimate, meanwhile, that exports within APEC will nearly treble to $14.6 trillion by the year 2021, dwarfing the region’s exports to the rest of the world, which are expected to double to $5.6 trillion.

Russia, whose $1.9 trillion economy is the world’s ninth-largest, formally joined the WTO this month after a 19-year accession process, and the rules of the global trade club have little bearing on its main exports of oil and gas.

Most of Russia’s oil and gas pipelines point westward, towards Europe, but that region’s economic slump has forced the Kremlin to rethink its economic strategy.

Shuvalov made clear that Russia would seek to strengthen its position in the global trade arena by building a newly formed customs union with its ex-Soviet neighbours, Kazakhstan and Belarus, both of which have yet to join the WTO.

Editing by Timothy Heritage and Louise Ireland

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