Article by: Robin Molnar
Having lost the trust of its European partners, Russia announced – through its Prime Minister Dmitri Medvedev – that it’s steering towards Asia and away from Europe.
Not only this does not make economic sense, but it’s also a sign of juvenile administrative capabilities, to say the least.
First and foremost, the GDP per capita in Asia is 2,941 USD. In Europe, it is 25,434 USD. This, obviously, bears the question: – Where is Russia steering to? This, also, bears the questions: – Why steer towards Asia? Why not trade with both, Europe and Asia? Why settle for less?
Either way, Europe or non-Russian Asia will win. Europe will win by manufacturing in Eastern Europe parts of the plethora of products currently originating from Russia. Asia will win by sheer increase in trade and resource consumption and conversion into goods, albeit their economies may suffer in the long term due to the fact that Russia has a more competitive economy than many Asian countries. Plus, some countries may find it uneasy negotiating with Russia, given the Ukrainian example. Again, mistrust is bad for business.
So, will Russia win, by steering towards Asia? It’s doubtful, as – due to GDP issues – the price of gas, energy and raw materials is lower in Asia than in Europe and Russia is confined in a very narrow price range with lots of competition.
Long story short, Russia is now learning that Europe has real alternatives to Russian gas, whereas Russia has no real alternative to European money.