Russia hosted the Asia Pacific Economic Cooperation (APEC) forum this past weekend in its Pacific port of Vladivostok. It was a clear signal that Moscow’s interest in Asia is rising as the traditional market for its energy and raw materials—the euro zone—wallows in crisis and stagnation. And After America’s much-ballyhooed “pivot to Asia,” it is now Russia’s turn.

Hillary Clinton represented the United States at the summit, which President Obama missed because of the Democratic Party convention. (Washington had announced the president’s absence earlier, a move some have told me was retaliation for the fact that APEC host President Vladimir Putin was a no-show at the G-8 Camp David meeting hosted by Obama.)

As summit host, Russia had a great opportunity to court Western investors for its resource-rich Far East region, and it made more than a little effort to dress for the occasion. Moscow built a modern bridge across the Eastern Bosphorus Strait, from Vladivostok to Russky Island over a kilometer away. The airport got a major face-lift. And a gas pipeline from Sakhalin will finally bring natural gas to the mainland. But even after a $20 billion sprucing up, the city and the region still face a myriad of systemic challenges.

A Mixed History

Russia and the United States have been developing their respective Pacific coasts for over one hundred and fifty years with starkly different results. There is just no comparison between Vladivostok and the American metropolises of Seattle, San Francisco, Los Angeles and San Diego, with their mighty aircraft, IT and entertainment industries. Vladivostok harbors a rusting Pacific Fleet, while Russia’s other Pacific ports such as Nakhodka and Vanino struggle to sustain fishing trawlers and merchant-marine shipping. Further inland, Komsomolsk-na-Amure cranks out Sukhoi fighter jets, while the Magadan region and Chukotka peninsula, across the Bering Strait from Alaska, produce considerable amounts of gold.

Yet, with the Pacific Rim growing by leaps and bounds, Russia is strategically located to benefit from the Asian boom. Vladivostok is only one to two hours away from Beijing, Tokyo and Seoul. The problem is, most of development in Russia’s Far East is controlled by Moscow, ten time zones away, and the cost of bribes and the central government’s rents is high.

The regional government is even worse. The Russian Far East has long been a seat of criminality, especially in fishing, lumber and second-hand cars (imported from nearby Japan) sectors. The deputy governor, Sergei Sidorov, admitted:

"Our brand now is (red) caviar, crab, a bit of criminality, and lumber. . . . We want you to look at our territory with different eyes. Our region has the two greatest Russian problems: fools and roads. We started to address the roads, while you [western and Asian investors] have to help us with the former."

It didn’t have to be that way. After the Romanovs took millions of square miles in Eastern Siberia from the crumbling Qing dynasty (1644–1912) in the seventeenth and eighteenth centuries, they founded Vladivostok (literally, “ruler of the east”) as Russia’s principal Pacific naval base in the 1860s. That land-acquisition spree—on of the largest in history—was often compared with America’s continental expansion.

In the second half of the nineteenth century, Russia’s most brilliant administrator, Finance and Prime Minister Count Sergei Witte, spearheaded Asian development by building the Trans-Siberian railroad, the longest in the world. The empire added the Chinese-Eastern Railroad across Manchuria, which later reverted to Chinese control. These still work better than the Soviet-era Baikal-Amur railroad, which was primarily built to supply Soviet troops in case of a war with China.

The first blow came when Russia lost a war to the rising Empire of Japan in 1904–1905. As the Romanov Empire collapsed in 1917, Russia’s Far East declared independence, and American and Japanese troops temporarily occupied the region. When the communists took over, a few businessmen, engineers and lawyers ran. Under Stalin, the Gulag generals and the military administered the vast, faraway lands, which experienced repeated clashes with the Japanese. Hundreds of thousands perished in the Kolyma camps, mining for gold and cutting primeval forests.

The Soviet and postcommunist-Russia period was particularly hard on the Far East. The Russian population east of Lake Baikal is only six million and falling. Ethnic Russians are leaving for its European part. Today, the region borders Chinese provinces, such as Heilongjiang, each sevenfold more populous than East Siberia and the Russian Far East combined.

A Long Way to Go

Despite all the sweet talk, Moscow and the Russian elites still do not trust Beijing, feeling dwarfed by its burgeoning economic power and growing military might. It resents becoming China’s “raw-materials appendage”—as it resented it a decade before being one of the West’s.

In 2010, for the first time in decades, Russia ordered an “East 2010” military exercise, which dispatched two divisions by train across Siberia and simulated tactical nuclear strikes to repel unnamed foreign aggression. It was a message clearly addressed to China.

Russian relations with Japan are frozen because of the Kurile Islands (the Northern Territories) problem. The USSR occupied the four islands in 1945, when, at President Roosevelt’s request, Stalin broke a nonaggression treaty with Tokyo at the tail end of World War II and occupied the southern part of Sakhalin as well as the islands. Today, Russia benefits from rich fisheries in the Kurile Islands’ waters, but Japanese investment is frozen.

Foreign investment and economic development need three preconditions: a positive security climate; the rule of law; and basic infrastructure. Russia has a long way to go on all three. It needs to have good relations with the major pacific powers—the United States, China and Japan—while further developing ties with Canada, Korea, Australia and others.

It needs to overhaul its courts and eradicate corruption. Most importantly, it needs to continue developing modern infrastructure and attract high-quality personnel to the Far East. The potential is tremendous. Can Russia rise to the challenge?

Ariel Cohen, Ph.D., is senior research fellow in Russian and Eurasian Studies and International Energy Policy at The Heritage Foundation (www.heritage.org).