Defining The Disruptive Geopolitics Of The Global Farms Race
January 20th, 2017
Courtesy of the Wall Street Journal, a look at how China is not conquering Russia but leasing it, or buying it, a trend that we can expect to grow as Russian food production to skyrocket with climate change, making it an ever more strategic water and agricultural resource for China:
When Chinese delegations visit the sprawling Central Food Market in Khabarovsk, 18 miles from the Russia-China border, they head for the main attraction: butcher stalls heaped with pork, chicken and beef.
“They come to see what our quality of meat is like,” said Valery Slutsky, head of advertising for the market, where more than 3,000 vendors sell everything from honey and caviar to cottage cheese and Siberian chocolate.
Khabarovsk, a handsome city on the Amur river, is the capital of Russia’s Far East District. It is also the hub of expanding Russian efforts to feed China, not least to satisfy the carnivorous cravings of its economically powerful neighbor.
China bought more than $1 billion in food products from Russia last year, replacing Turkey as the top importer of Russian foodstuffs. Now the world’s most sprawling country is seeking to further expand its food sales to the world’s most populous one.
That ambition is central to Russia’s economic and political pivot toward Asia, as the Russian economy continues to suffer under Western sanctions and the low price of oil, and U.S.-Russian relations deteriorate to their worst level in decades.
As American allegations of Russian interference in the 2016 presidential elections revive Cold War-style rhetoric, Russia and China, once rivals for pre-eminence in the Communist world, describe current relations as the best in years.
Food production is at the heart of their deepening ties, even in the traditional exchange of gifts between leaders: Russian President Vladimir Putin presented his Chinese counterpart Xi Jinping with a tub of Russian ice cream after Mr. Xi said how much he liked it.
Russia’s trade with China slumped in recent years as the Chinese economy slowed, though China remains Russia’s largest trading partner. It is expected to edge up slightly in 2016 compared with the year before, helped partly by agricultural exports and an attractively low ruble.
Overall trade between the two countries stood at $56 billion in January-October, sharply down from the nearly $100 billion seen in 2014, according to China’s Customs Administration. Still, both countries say they are on track to achieve their goal of $200 billion of trade by 2020.
To meet their target, there seems no limit to the Russian foodstuffs that China will buy—an appetite that boosts Russia’s hopes of joining Brazil, Australia, Thailand, Indonesia, Malaysia, Canada and Argentina as the leading suppliers of food to China and its 1.3 billion people. The U.S. is the top provider, selling $26 billion worth of food there annually.
“Frankly, they want everything,” said Petr Shelakhaev, head of the Russian government’s Far East Investment and Export Agency. “Everything that can be consumed by a human being in China is something they’re interested in.”
Mr. Shelakhaev pointed to China’s scandal-plagued food industry, where genetically modified products and poor sanitation have created serious health problems. Russian products, by contrast, are seen as safe and sanitary, like those of a Western European country.
“The Chinese view Russian food the way we view Swiss food,” a senior Russian official said.
Among Russian foodstuffs, it is meat that China hungers for most.
Negotiations to allow Russian pork, chicken and beef into China’s market are expected to be completed soon, Russian officials say. The export of pork is slated to begin early this year, followed with chicken and beef by 2019.
In the region of Primorye near Khabarovsk, Russian farming conglomerate Rusagro is leading the construction of a large pig-breeding complex to help meet demand in China, where 57 million tons of pork, the nation’s favorite meat, are consumed annually, double what the U.S. eats.
Russian meat producer Miratorg, the top supplier of meat to McDonald’s in Russia, has said it is eyeing beef sales to China as the Golden Arches expand there.
Russia also is racing to restore Soviet-era arable land in the Far East. By 2020, it hopes to increase cultivable land in the region by nearly 50%, to some 7 million acres. Most of it will be farmed to benefit land-poor China, Mr. Shelakhaev said.
Since trade with China benefits Moscow far more than it does Beijing, Russia has begun to make controversial concessions in the area of land use.
The head of the Russian Direct Investment Fund, Kirill Dmitriev, said Russia is considering more long-term land leases to Chinese businesses of the sort seen in the eastern Zabaikalsky region, where 284,000 acres of Russian land is being rented to a Chinese agricultural firm for the equivalent of $30 per acre a year over 49 years.
That 2015 deal reignited deep-seated Russian uneasiness about China. The two countries share a 2,500-mile border that, during the Soviet era, was volatile. There are also demographic fears: China’s population is 10 times as large as Russia’s, and Russia’s Far East, which makes up 35% of country’s land mass, is occupied by a mere six million people. The Chinese language signs seen everywhere in Khabarovsk and elsewhere in the region are just one small measure of how Chinese influence has grown.
Chinese pressure for more Russian farmland is expected only to increase. The country’s expanding deserts, caused by poor farming practices and drought, make land across the border in sparsely populated Russia particularly attractive.
“We’re becoming a desert country,” Lu Jianzhong, chairman of the nongovernmental Silk Road Chamber of International Commerce, said in Moscow late last year. “Russian agriculture can help.”
As Russia seeks to satisfy the appetites of the people next door, the Chinese appear to have no misgivings about the measures being taken to supply their tables.
“We want to eat more Russian food,” Cai Guiru, deputy president of state-owned transportation firm China Chengtong Holdings Group, told a business summit in Russia in November.
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Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has long held a keen interest in natural resource policy and the geopolitical implications of anticipated stresses in the areas of freshwater scarcity, biodiversity reserves & parks, and farm land. Monty has lived, worked, and traveled in more than forty countries spanning Africa, China, western Europe, the Middle East, South America, and Southeast & Central Asia, and his personal interests comprise economic development, policy, investment, technology, natural resources, and the environment, with a particular focus on globalization’s impact upon these subject areas. Monty writes about freshwater scarcity issues at www.waterpolitics.com and frontier investment markets at www.wildcatsandblacksheep.com.