Renewed acquaintances: Australia and Russia

First encounter

On 16 June 1807, the sound of a ship's cannon echoed back from the gum trees on Kirribilli Point in Sydney Harbour. On that day the first Russian ship ever to visit Australia — the sloop Neva, moored in Neutral Bay — fired a salute to the King and his colony, which at the time was led by Governor William Bligh. The Neva's captain Leontiy Gagermeister spoke fluent English; like Bligh, he had served in the British Navy under Nelson. After months at sea, the Neva was warmly feted; captain and crew were honoured with a fireworks display over Sydney harbour.

This was a meeting of allies: at that time, both Britain and Russia were at war with Napoleon. Yet it was far from a meeting of equals. Bligh was the head of a small and incredibly remote penal colony, not yet 20 years old: Melbourne did not exist yet; Hobart Town was barely four years old. Gagermeister had dropped anchor at a tense time: only six months later, Sydney would witness Australia's one and only armed insurrection: the army's 'Rum Rebellion' would topple the unpopular Bligh.

Contrasted with such haphazard colonial beginnings, Russia in 1807 was a stable, front-rank power. Five years after the Neva's visit to Sydney, Russia would find itself sacrificing perhaps over two hundred thousand of its soldiers to repel Napoleon from the burned-out remains of Moscow. By 1807 the poet Zhukovsky — Pushkin's tutor — was beginning the great 19th century Russian literary tradition that would soon nurture Tolstoy and Dostoevsky, alongside many others. The Tsar's empire at that time stretched all the way into Alaska — which incidentally, was the Neva's next stop after Sydney.

Despite such contrasts, Captain Gagermeister wrote optimistically of the fledgling British colony's potential, not only as a land of plenty, but as a future exporting powerhouse. This was one to watch, and the Russians would do well to stay involved:

'The soil is fertile... eventually, one should guess, this land will abound in bread and almost everything needed for life, and due to the short distance from China and East-Indies, as soon as the local demand grows and products become recognised, a good trade will take place...(Russia) could find advantage in trade with this part of the world'.

A relationship that began with a small ship visiting a distant colony is now over 200 years old. To be blunt, the very different paths that these two countries have walked since that time have meant the relationship has delivered something far less than these first impressions would have suggested. But any such relationship is made up of two perspectives. Each party will make their own assumption about what the relationship means to the other. For Australia's part — excepting perhaps a fear of invasion in the late 19th century and some tense moments in the struggle against Communism — it might be argued that Russia has never really occupied any prominent place in the Australian consciousness. Yet for a long time until the Russian Revolution, the situation was quite different when it came to Australia's place in the Russian thinking. For historically speaking, Russia held Australia in increasing regard since the Neva's first contact. Today, this historical regard — a sentiment cruelly cut short by the arrival of Communism — holds new promise for forging greater bilateral trade and cultural interactions. But this will only occur if Australia takes note of this forgotten slice of its own history and sees Russia today for the cooperative opportunities that it offers.

Eyes Opened

As the nineteenth century unfolded, many more Russian ships followed the Neva in visiting Australia. More and more Russian visitors sent back stories of a growing, energetic community in a warm and sunny new land, forging an enterprising way of life; a country that was even producing some worthwhile lessons for Russia along the way. Russia in the nineteenth century was a country in which land and how it should be worked and divided was always a vexed issue, so Russians of the time closely scrutinized the development of Australian agriculture and each of the new colonies' respective approaches to land ownership and improvement. What they observed clearly impressed them. The Russian agriculturalist Tsimmerman wrote that once his farm had been paid off, the Australian farmer 'will know neither taxes, nor conscription, nor any constraints which burdened them in the distant motherland'. The Russian Government had made sweeping reforms to agriculture by the early 1900s. Russian farmers lapped up farming journals describing pioneering Australian techniques for meat and dairy production. Trade between the two countries began. Even prior to World War One, frozen Australian mutton was appearing in St Petersburg.

The new Australian way of life influenced Russia well beyond trade statistics: it even affected Russian social and political thinking. Increasingly, Russia saw the British penal colony on the southern continent as a success story. From a distance, Russians watched the fledgling colonies growing into something different — their own people with their own national character, living a way of life that was in many respects unlike that of the British, and perhaps closer to their ideal of a more democratic, less formalized society. The absence of class structures and servants — serving yourself at the dinner table — speaking freely, the outdoor lifestyle; many little things were noticed by the northern visitors. 'Lawn tennis courts were as typical of an Australian farm as water tanks' wrote Kryukov in 1906. 'Australian farmers are fond of all kinds of out-of-door sports; here this love of sport is even stronger than in England'. In his letters to friends, Anton Chekhov imagined Australia a place of pastoral tranquility, a whole country that seemed to mirror the lazy summer days on his country estate outside Moscow. More prosaically, in 1894 Alexei Putiata, Russia's first regular consul to Australia, gave the Age newspaper a sense of his country's formal interest:

'You ask if Russia considers Australia a place of special importance. Yes, and I think it now occupies a position of importance in the estimation of the whole world'.

Putiata would later describe Australia as 'an extensive potential market', and importantly, one that Russia should consider 'near'; well over one hundred years ago, Russia's Department of Trade actively considered the new trans-Siberian rail link from western Russia to its Pacific ports — alongside a connecting sea link to eastern Australia — as a strategic and profitable trade route for the two nations to share.

Australia's move to Federation, its democratization of public institutions, compulsory voting, the vote for women and the eight-hour working day all stoked fervour amongst Russia's political agitators. Revolutionary books and pamphlets with titles like Lucky Australia and In the Land of True Democracy (Australia) were printed in Russia in the years leading to the October Revolution of 1917; they demanded for Russia some of what they saw on offer in Australia. 'If one compared the working man's conditions in both countries', noted the Russian author of A Workers Kingdom (How Workers Live in Australia), 'one would involuntarily exclaim: we have hell, they have paradise'. An ageing Leo Tolstoy, ever the moralizer, wrote that Australia possessed 'the most favourable conditions for establishing a way of life free from the sins of the Old World, a truly Christian, fraternal order'. Most interestingly, Russian observers of Federation in 1901, while acknowledging the role of the King, argued that Australia was already very near to a Republic, as it had built 'the most systematic demonstration of democratic principles' anywhere in the world and was, it was judged, possessed of 'the most democratic constitution in the world'.

Sadly, Russia's own vast and tragic experiment with political and institutional change never delivered the lasting peace and prosperity that its citizens saw reflected in Australia. The October Revolution of 1917 brought an abrupt halt to what was demonstrably a burgeoning relationship: as late as January of that year, a Russian-Australian Bureau of Commerce had been founded in Melbourne by the Russian Consul-General to Australia, who wrote with enthusiasm that 'of all the British Dominions, Australia is best situated to supply Russia many commodities that (it) needs'. Two years earlier, Australia's Financial Review newspaper had argued that after the First World War was over, Russia would supplant Germany as a prime trading partner for Australia. But these hopes would come to nothing: Russia was headed for revolution and a bloody civil war. Russian-Australian contact waned after 1917. In the torrid years that were to follow, more than a few Russians surely must have recalled with warmth and nostalgia their impressions and hopes for the Russian-Australian relationship.

Altered states

In 2009 — over 200 years after the first meeting — Russia and Australia meet each other against a very different backdrop from that which framed Captain Gagermeister's encounter with Governor Bligh. No longer a penal colony beset by a military coup, Australia today is a modern, peaceful nation, with one of the highest standards of living and oldest democracies in the world. By general agreement, its natural resources, skills, the strength of its public institutions, a relatively sound financial sector and — as Gagermeister predicted — the proximity to large Asian export markets will together see Australia recover perhaps earlier, and certainly in better condition than many others, from the modern world's worst economic and financial crisis.

In some contrast, Russia faces the greater difficulties ahead. Its empire has not altogether been lost, but its place on the map has changed; Alaska, for instance, disappeared a long time ago. In comparison to the Sydney rebellion of 1808, the tensions and hostilities in places like South Ossetia and the Ukraine — both legacy issues from the fall of the Soviet Union — pose enormous challenges. More recently, although real gains have been made in the standard of living, Russia's economy has been seduced by the high export prices paid for its bountiful oil and gas — at the expense of ensuring it can produce its own food, manufacture more products to sell to more offshore markets, and transport those goods to market efficiently. The mega-companies of the Russian oil and gas sectors dominate the domestic landscape, while small and medium enterprises remain too few in number, and often too challenged by circumstance; such companies still find life beset by much 'red tape', and lingering petty corruption.

All of these innate shortcomings are brought into the starkest of reliefs by the global financial crisis. The World Bank's last two Economic Reports on Russia both made for confronting reading: Russia's balance of payments with the world has deteriorated, brought about through a drastic loss of oil and gas revenue and a terms of trade shock. Russia's Gross Domestic Product might have declined by as much as ten percent in the first half of 2009. Russia's own Central Bank had warned that the percentage of non-performing loans across the total banking sector could exceed ten per cent by the end of the year: some of the hundreds of smaller banks in Russia may well collapse before then, casualties of the sort of haphazard and high-risk lending against low reserves that is borne of a lack of effective Government regulation. The World Bank believes the crisis will see the fragile Russian middle class contract by over six million people.

Some months ago, hundreds of angry unpaid factory workers and their families demonstrated for their arrears payments in Pykalovo, a town outside St Petersburg, blocking access to a major highway and causing a traffic jam that stretched for many miles. Prime Minister Vladimir Putin reacted quickly and firmly, visiting the town to chastise management and make certain that the workers were paid what was owed to them: Russian leaders understand better than most how quickly such dissatisfaction can spiral into something more confronting.

The World Bank reports also reflected on the policy choices ahead for Russia; Australia should too; the advice offers fertile ground for growing a mutually beneficial new relationship. The report was unequivocal about the need for Russia to diversify its economy, lose its overwhelming dependency on oil and gas revenues and become a more modern, competitive exporting nation, one that does more to interact with other world economies. In achieving this, the transparency of its financial sector and regulatory arrangements will need attention, amongst many other things. The bottom line, as far as the World Bank is concerned, is that the days of Russia being able to remain a 'petro-state' are over.

Old habits die hard

The World Bank's advice would hardly be news to the Kremlin. Russia has been here before. In 1985 the Soviet economy suffered from a sudden, massive fall in world oil prices and revenues. With so much of the Soviet State's funding going towards paying for an impossible arms race with the United States, no oil revenue meant no reserves to buy grain; at the same time, the Soviet political situation meant no terms of trade could be found with western banks. Food shortages and rationing loomed. This great economic crisis was borne of an economy that relied far too heavily on its oil exports. In its broader effect, Mikhail Gorbachev's courageous response to this challenge -one that others before him had chosen to ignore — drove the policies of glasnost and perestroika, culminating five years later in the collapse of the Soviet system itself.

It is in this sense that today's crisis is a dread reminder for the Kremlin. For several years to late 2008, most general indicators of national health showed Russia advancing steadily. Its middle class was growing. Public authorities were paid better. More funding went to health and pensions. But in under a year, the price of oil has plummeted from well over $140 per barrel to under $40. Historians in future may write about the similarities with 1985: by the time the new crash hit Russia in late 2008, the domestic economy — although now framed in a completely different social and political context — was, in structural terms, still distressingly similar to the Soviet economy of 1985.

There is cause for optimism. Fortunately, Russia in 2009 is far more globally integrated — politically, financially and socially — than in 1985. But the parallels in these 'oil busts' are surely clear to the Kremlin. This time, the path through survival to prosperity cannot involve the deconstruction of Communism itself; that card has been played. Instead, Russian leaders and policy-makers will know that from here on, long-term success rests on economic diversification, hard work and a genuine resolve to broaden Russia's trade opportunities with the rest of the world. In the years ahead, Russia can be expected to continue working at making this economic transition.

But who will be the partners in Russia's labours?

A strong and beneficial role for Australia in these efforts seems there for the taking. In such a role, Australia could help Russia best simply by playing to its own strengths — advanced technology, settled, transparent institutions and generations of expertise.

As in Australia, agriculture has always been of central importance to Russia's success. In light of the crisis, it is to agriculture that Russia and Australia should turn first, in order to renew their relationship. Russia would surely welcome some genuine assistance.

Squandered inheritance

On some estimates, since the early 1990s Russia may well have 'lost' around 33 million hectares — that's over 330,000 square kilometres — of its arable land. This 'loss' arose from productive land being left untended since the fall of the Soviet Union. There are many reasons: huge Soviet state subsidies for collective farms (farms that were non-productive in the open market) disappeared after 1990. In the same period, the internal barter trading between the Soviet states broke down — supply and demand as the Soviets knew it was turned on its head. As Russia emerged from Socialism, the true costs of farming in a risky new environment made efficient agriculture almost impossible — United Nations Food And Agriculture Organisation analysis reveals that while the price of the goods and services needed for farming increased by 9,000 times in the new Russia's first decade, farm profits over the same period — bereft of technology, expertise and ready export markets — increased only 200 times. In the face of all of these obstacles, Russia — understandably, if not advisedly — retreated to oil and gas, where the profits were large, easy and apparently reliable; the bonus was that there were no diabolical new property ownership laws to cause headaches, either.

As a result of this mixture of choices and inevitabilities, Russia's agricultural inheritance in 2009 is a massively underutilized and under-cultivated farming sector: too many meadows that once yielded crops and livestock are now overrun with pernicious weeds. Many regional roads and rail links that took the produce from these areas to domestic and export markets and brought farm supplies back with some degree of efficiency have fallen to disrepair. Like the earth itself, Russia's talent-pool for farming has been denuded too. Most of the knowledge base for productive large-scale farming is lost. Most of the Russians who knew how to work the land efficiently are either long since dead, or have moved to sectors that pay the bills, like oil and gas, or manufacturing. Farming know-how is only beginning to be rebuilt; it will be a process demanding years of dedicated public policy resolve, as well as private investment confidence in steady but unspectacular profits.

As a consequence of these ills, Russia still imports much of its food requirements; its dairy farming sector is modest, its beef herd is miniscule. The starkest symbol of this phenomenon for a foreign visitor today is that Russia's fabled chernozom — the 'black-earth' region south of Moscow that stretches to the Ukraine, the richest farming land on earth — remains in large part unfenced, whole tracts of fine carrying country lying almost empty, with barely a cow in sight. In light of all these failures, the Kremlin and regional Russian Governments alike consider it a national priority for Russia to reclaim productive land and work towards food security and efficient food exports. That is a sensible goal, but knowing how to do it is an entirely different matter.

Australia is arguably the world's most efficient farming nation, yet it enjoys few natural advantages. The most ancient continent on earth has relatively poor soils — only around six percent of Australia is considered arable. That is an amount less, proportionally, than Sudan enjoys. Yet despite these challenges, Australia is a world leader in exporting quality crops, dairy, meat, fruit and vegetables. The freight network that brings these products to market over vast distances is more efficient than anywhere else; the scientific systems by which food safety and quality are advanced are world-leading. The expertise of Australian farmers, agronomists, scientists, trainers and food and infrastructure policy experts is sorely lacking in Russia. The stable agricultural investment that comes through reliable property laws and sound, well-regulated credit facilities underpins this farming success — no major Australian bank has defaulted on a loan for almost a century. Australia has much to offer Russia on such fronts.

Logical Partners?

Whether Australia seeks involvement or not, Russia will continue to pursue its agricultural objectives. This year, it planned to export nearly 20 million tons of grain. By Soviet standards of the 1960s, this is still modest: harvests of around 60 million tonnes were the norm at that time. Today's Russian grain sector remains hamstrung, operating on a reduced amount of arable land, lacking a fully-mature grain trading market, while the latest efficiencies in agronomy, logistics and scientific research are yet to be implemented on a broad scale. In June this year, President Dmitry Medvedyev announced that Russia would seek to increase its grain exports to 50 million tons; it would do so, he said, by addressing its market structure and harnessing the latest production technology and science. In the same month, former agriculture minister Alexei Gordeyev — now a regional governor of one of the biggest 'black earth' provinces — named Australia, Canada and the USA as places Russia needs to learn from, if it is to fulfil its true grain harvest potential. Gordeyev knows Australia's capabilities well; he visited the country several times as Russia's agriculture minister.

Bringing Australian agricultural expertise and technology to bear in a partnership with Russia does little to threaten Australia's own long-term export market share, in a world where food demand will trend ever upwards. In any event, Australia's next big opportunity lies in recognizing just how extraordinarily good it is at efficient farming; when this penny drops, it will begin marketing itself as a global agri-services and technology provider, on top of its traditional export roles; Russia is certainly a willing customer for this trade. More broadly, such cooperation would improve the overall food security of the planet. Indeed, Russia and Australia have already begun a partnership in this sphere: as major grain producers, they are both contributing to the World Bank's Global Food Security facility to help poorer countries access grain supplies.

The opportunities for Australian agriculture services in Russia are mirrored in the potential for cooperation in a host of other fields: efficient and clean mining technology; infrastructure renewal (Russia has built almost no new roads in the past decade), green energy development, more effective public sector governance, financial regulation and a host of other areas in which Australian approaches and expertise often quietly lead the world, and Russia may want to know more. Much is changing very quickly. Today, even Russia's physical relationship with the global trade map is being rewritten: the melting of the arctic ice caps may soon open new shipping lanes in the far north. Before too long, the world may also witness a formal peace declaration between Russia and Japan (a matter never resolved after World War Two, largely due to a lingering territorial dispute over the islands to Japan's north). Each of these developments would reshape international shipping lanes to Russia's trading advantage. This in turn holds promise for the Asia-Pacific zone's access to more efficient world trade. A Japan-Russia peace settlement might even put in place the sort of efficient logistical links from Pacific Russia to Australia that Alexei Putiata, the first Russian consul to Australia, dreamt of over one hundred and twenty years ago. Yet Australian access to Russian ports remains today quite limited, and fixing the problem has evidently not been viewed as a high priority for either Government. Both Australia and Russia are members of the Asia-Pacific Economic Cooperation forum and can work more productively in this space, if they apply themselves to the task.

In all of these matters, the historical regard that Russia has for Australia — this forgotten slice of Australia's history — is something that should be dusted off and appreciated by Australia's government and business leaders. Memories have faded. It has been many years now since the headland over the water from Sydney's Circular Quay — where the Neva first sheltered — has been called 'Russian Point'. This ground remains almost as fallow as a Soviet collective farm. Bilateral trade arrangements seem a distant prospect; even the most straightforward trade structures are woefully under-developed. Instead, Australia's energies seem distracted towards interminable rounds of World Trade talks. Under-investment in this bilateral relationship costs Australian industry, which even now has a considerable amount of money and jobs riding on trade with Russia.

When misunderstandings cost money

Over the past few years Russia and the Commonwealth of Independent States became, rather quietly, Australia's fourth-largest consumers of Australian meat products, behind only the USA, Japan and South Korea. Despite this gain, the market access and food safety relationship which Australia maintains with Russia remains extremely immature. Australia now knows the full risk that such fragile working relations represent: in July 2009, the booming Australian trade in kangaroo meat to Russia was halted as Russia banned the product from import, citing phytosanitary breaches; hundreds of millions of dollars of trade were halted with the stroke of a pen. The whys and wherefores of this matter are, in the broader sense, a moot point: such bans find fertile ground in underdeveloped bilateral relationships. When strong co-operative relations between any two modern trading partners do not exist in sufficient depth, disputes are never likely to be far away.

Why are such relationships so underdeveloped, compared to Australia's other large export markets, almost twenty years on from the breakup of the Soviet Union? Is it all due to Russia's inability to restructure itself, communicate its requirements clearly and open up trade? Granted, the bandit economy of the mid-1990s dissuaded many countries from embarking too freely in Russian 'adventures'. But Russia is a changing place. Its best chance of prosperity and stability lies in embracing the sort of things that Australia does extremely well. In any event, a lack of engagement from countries like Australia will only ensure Russia's long-term failure: locked in on itself, without better alternatives to follow, Russian trade conditions cannot improve; domestically, such failure is dangerous: it gives succour to the most unhealthy of nationalist sentiments, encouraging isolationist politics. If Russia chooses to look out to the world with confidence, other countries need to meet this choice halfway, to engage on a worthwhile level, to offer a relationship that brings lasting benefits.

For many years Australia has not paid enough attention to making this relationship work. In any dealings with Russia, the strength and depth of Government-to-Government relations are central to success. The Russian State has an enormous influence over Russia's business and trade processes. Russia's bureaucracy is legendary. Private sector trade enthusiasm alone will not open up Russia and Australia to one another — without Government assistance, these market enthusiasms will just drown in red tape. As in the meat trade, so in other fields of endeavour, inconsistencies and misunderstandings between each bureaucracy must be run to ground and removed, to help the smooth flow of commerce and ideas. Both Governments must lay the ground for investors to work together in conditions of greater certainty. Discussion should take place at more levels of Russian and Australian governments and industry, more often.

First Steps

Happily, the last twelve months have witnessed some small but encouraging new beginnings. In Moscow in October 2008, Russian and Australian Government Ministers met for the first time in nearly fifteen years, to begin fruitful cooperation in fields such as mining and agriculture. If these structural issues are worked upon productively during this financial crisis, Russia and Australia's post-crisis trade and investment relationship will surely enjoy a much brisker and reliable pace of growth. The level of effort that both Governments now choose to make in these areas will set the tone for Russian-Australian trade relations for the next decade. Many interested investors and traders from both countries are watching the developments closely. Diplomatic niceties will bring little. Real reforms aimed at eradicting actual examples of trading uncertainty will yield the biggest profits. A strong and enthusiastic bilateral business council already exists to underpin such efforts. The ingredients are all there.

We might even allow ourselves to dream a little. Closer contact with Australia would bring Russia a much overdue relationship with the democracy it so admired from afar over a century ago. Over the course of many years of working more closely together, might not Australia's settled way of life, the lessons of its stable public institutions, its technological expertise and the very tenor of its society not have some positive influence on Russia's own choices about its political, financial and legal institutions? Would such a relationship not help bring a helpful new perspective to Russia's thinking about itself and its direction? Russia is free to choose her own destiny, but there are surely worse and less benign examples than Australia to follow.

One hundred years ago, Russia looked to Australia as the gold standard for a democratic, healthy, constitutional society — a country of optimism, wealth and promise. Why can't such regard be acknowledged through a renewed relationship? Not every country enjoys such an uncomplicated history with Russia; the play of world events has created tensions, suspicions and baggage for many countries over the centuries; Russia is no different in this respect. But Australia has no such complex history with Russia. On the contrary, more than just a tabula rasa, Australia is a country which Russia once held in some deal of affection. Such a relationship can be renewed, if Government willingness and resolve is forthcoming.

'The one little sore...'

1904 marks almost a mid-way point between the first visit of the Neva to Sydney Harbour and the present day. In 1904, the English writer John Foster Fraser, travelling through Siberia, penned his frustration at the lack of foresight he saw from his own country in engaging with Russia:

'I must refer to the one little sore I felt all the time I was in Siberia...the way the Germans and Americans are pushing forward and supplying everything in the way of foreign goods which the Siberians want...while Britain has done nothing...I never met a single English commercial traveler. I talked trade whenever opportunity presented, and the offhanded manner in which England was always dismissed as being, commercially, quite out of the running, stung my patriotism deeper than was pleasant.'

It has been a long time indeed since Australia has been Britain. Australia is a country long-admired by Russia from a distance, but equally, Australia is a country that has not bothered much to look to Russia. Will a post-financial crisis Australia do differently and grasp this new opportunity? Time will tell. A first step towards that outcome will be the recognition of an eternal truth: the value you place in your relations with others does not always equate with the value that they set on their relationship with you. The reality for Australia and Russia post-crisis might just mean that a more balanced, interested relationship will take shape: perhaps Australia will choose to do a little more of substance, a little more frequently, with a country it chooses to understand better. It is very likely that Russia will respond in kind. But as Hazlitt wrote, 'to learn what any object is, the true philosopher looks at the object itself, instead of turning to others to know what they think or say or have heard of it'. It is time to renew acquaintances.


Luke Fraser is executive director of a national transport and agriculture industry group based in Canberra. He is also a Russian scholar and member of the Australia-Russia Business Council. The views expressed in this article are his own. The author is indebted to his friend Elena Govor for her leading work in this field: Australia in the Russian Mirror: Changing Perceptions 1770–1919 Melbourne University Press 1997.

Topic tags: Luke Fraser, Australia, Russia

 

 

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