Russia bets billions on turn toward Asia

VLADIVOSTOK, Russia – Once a mysterious closed city during Soviet times, Vladivostok is ready to strut in the world spotlight as host of the Asia-Pacific Economic Cooperation summit.

Russia has splashed out $20 billion preparing for the summit in Vladivostok, its largest but long-neglected Pacific port, as part of a grand plan to become a bigger player in Asian markets. The spending included building the city's first sewage treatment system.

But most of what was built seems intended to impress the heads of state and business executives visiting for this week's meetings. After arriving at a new international airport, they will be whisked into the city on a new highway and then across the world's longest cable-stayed bridge to Russky Island, where a U.S.-style university campus has risen from the rocks. Some of the buildings still reek of fresh paint.

Here they will be welcomed Friday by President Vladimir Putin, who has set out to turn Russia east and tap into the growing Asian economies.

Russia has been largely oriented toward Europe, doing fully half of its foreign trade with the European Union. But a crisis among the 17 countries that use the euro is cutting demand for Russian energy supplies and undermining global growth.

Less than a quarter of Russia's trade is with APEC, whose 21 members include China, Japan and other Asian economies in addition to the United States.

"We will have a future of accelerated growth when we have two strong legs: not just one in Europe, but one in Europe and the other in Asia," said Igor Shuvalov, the first deputy prime minister responsible for economic issues.

Russia has the oil and natural gas that Asia needs to fuel its economic expansion. Until recently, though, all of its export pipelines flowed west to Europe.

Russia wants to be more than a supplier of natural resources to Asia, however, and is eager to attract the investment it needs to diversify and modernize its economy.

The first pipeline to send oil east to China began operation in early 2011. An extension of the pipeline to a port near Vladivostok is scheduled for completion by the end of this year, and Russia wants to build plants there to produce petro-chemicals and fertilizers, adding value to its exports.

The eastern regions of the country also have rich deposits of coal and metals, vast forests and plenty of undeveloped land where grain could be grown to meet rising demand in China.

High on Russia's agenda during the APEC meetings is an ambitious plan to turn Vladivostok into a transportation hub to link Asia to Europe by sea and rail. The main line of the Trans-Siberian Railroad runs between Vladivostok and Moscow, nearly 6,500 kilometers (4,000 miles) to the west.

"Building a reliable transport and logistics hub across Asia to Europe is clearly in Russia's interests, but also is something that APEC leaders want to look at as well," said Myron Brilliant, the senior vice president of international affairs at the U.S. Chamber of Commerce.

He cautioned that although Russia has made progress during the past year, it still lags far behind China and Singapore.

"You recognize that if Russia really wants to be a transportation hub, it's got to pick up its game," Brilliant said. "It's got to invest in the infrastructure."

The Trans-Siberian Railroad needs a major track upgrade before it can handle more traffic, and some of the ships in Vladivostok's ports appear to be losing their battle with rust.

Vladivostok gained 150 kilometers (90 miles) of new roads ahead of the summit, including the four-lane highway from the airport into the city. But the 40-minute ride highlights the blight of a long economic malaise.

Hyundai is building a plant near the airport to produce electrical equipment, but otherwise the road passes desolate villages and the rubble of a defunct collective farm.

In Vladivostok, the facades of gracious old buildings on the main avenues have been refurbished. Also as part of the summit preparations, the city of 600,000 has gotten its first sewage treatment system after years of discharging raw sewage into the sea.

The home of the once mighty Pacific Fleet, Vladivostok was a closed city until after the Soviet Union collapsed in 1991. Since then it has fallen into decline, and residents today complain of low wages and a lack of decent housing. Many have left for Moscow or other more prosperous Russian cities.

Some residents hold out hope that the summit will lead to new investment, but many are cynical.

"Nothing will come of all these big plans," said Irina Makhura, holding her toddler son while shopping at a market where Chinese and Vietnamese shop owners sell cheap goods. "They will forget about us as soon as the summit is over. This is all for you foreigners."

Viktor Ishayev, who was recently appointed to the new post of minister for Far East development, disagrees. Russia invested so heavily in the APEC summit, he said, "so that people, heads of state, will come here and see that they are able to do business here."