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Eurasian Economic Union: A Preliminary Assessment

Professor Gulshan Dietl is an ICSSR Senior Fellow affiliated to the Institute for Defence Studies and Analyses (IDSA). Click here for more details.
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  • December 01, 2014

    The Eurasian Economic Union (EEU) has come to the present stage in its evolution within a remarkably compressed time-frame. Although the idea was first mooted by the Kazakh president Nursultan Nazarbaev in 1994, it lay in hibernation until late 2011 when Vladimir Putin revived the idea. Visualising the EEU as one of the major centres of economic power alongside the European Union (EU), the US, China and Asia Pacific Economic Cooperation (APEC), Putin initiated the process of its implementation. In November 2011, the presidents of Russia, Kazakhstan and Belarus signed an agreement to establish the Eurasian Economic Space (EES) that would graduate towards the Eurasian Union. The EES came into existence on 1 January 2012.

    The project has since been rechristened the Eurasian Economic Union (EEU), which has been established by a treaty signed between the leaders of Russia, Kazakhstan and Belarus on 29 May 2014. The EEU was enlarged to include Armenia on 9 October 2014. Kyrgyzstan is in the process of implementing the roadmap to accession and hopes to sign the treaty by the end of the year. The EEU will officially come into existence on 1 January 2015 after ratification by member parliaments.

    Eurasian Union: The Origins, Rationale and Organization

    On the ground, the “Treaty on the Creation of a Union State of Russia and Belarus” already existed when Putin explicated his vision. The Treaty envisaged a federation between the two countries with a common constitution, flag, national anthem, citizenship, currency, president, parliament and army. On 26 January 2000, the Treaty came into effect after the due ratification by the Russian Duma and the Belarus Assembly. Russia and Belarus became a single political entity. Whether the Treaty laid down a proto Eurasian Union remained to be seen.

    The EU announcement in 2008 of its Eastern Partnership Programme (EPP) may have inspired the Russian drive towards reintegration of the Eurasian space. The EPP was initiated to improve political and economic relations between the EU and six "strategic" post-Soviet states -- Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine -- in the core areas of democracy, the rule of law, human rights, the promotion of market economy, and sustainable development. There was much debate over whether to include Belarus, whose authoritarian dictatorship disqualified it. The eventual invitation to Belarus was driven by the concern over an excessive Russian influence in that country. On 21 March 2014, Moldova, Ukraine and Georgia signed association agreements with the European Union – thus ruling out their membership of the EEU.

    China is emerging as a serious player in the region through its heavy investments in energy and infrastructure. The Free Trade Zone in Khorgos on the Kazakh-Chinese border alone poses a serious economic challenge to Russian interests. The vast 528-hectare territory, officially called the International Centre for Boundary Cooperation, opened in December 2011, letting enormous amounts of Chinese goods enter Kazakhstan; and transiting from there to Germany. For Russia, it represented a surreptitious Chinese entry into the Eurasian space.

    The US plan to deploy the NATO missile defence system in Poland and the Czech Republic was already a source of concern for the Russians. The Russian determination to keep the post-Soviet states away from the US, the EU and China made Eurasian integration a priority in its foreign policy.

    The Eurasian Economic Union is an economic grouping. Its objective is to expand markets and rebuild some of the manufacturing chains destroyed by the collapse of the Soviet Union. The Eurasian Customs Union has set the process toward this goal. It has created a single market of 170 million consumers, a common customs code, a common customs tariff, common foreign trade and customs regulations, and a common legal framework of technical regulations.

    The Eurasian Economic Commission (EEC), the governing body of the European Economic Space is set up in Moscow for the time being. Kazakhstan has already staked claim to host the permanent headquarters. The formula under which the 350-member body would be filled has been worked out on the basis of the population of the member countries. The expenses towards accommodation and infrastructure would be borne by Russia.
    The Supreme Eurasian Economic Union Council will be the apex body of the group. The vice-premiers of the three countries would be leading their countries’ delegations in this body. There are differing opinions on the powers of its apex body.

    EEU versus EU

    In many respects, the EEU and the EU are mirror images in their ambitions and activities. The EEU is, at times, called the Eastern Empire or the East’s EU. They remain competitors and adversaries, nonetheless. The total Gross Domestic Product (GDP) of the EEU stands at 3 trillion dollars, which is roughly one-fifth the GDP generated by the EU. In terms of economic strength, therefore, the competition is between two highly unequal adversaries.

    The West sees the Eurasian integration initiative as an opportunistic attempt by Russia to increase its influence in the post-Soviet region. Putin’s perception of the EU, on the other hand, is more nuanced. He boasts about the compressed time frame in which the EEU has evolved compared to the EU; but also shows willingness to learn from the earlier experience of the latter.

    Eurasian Member States: Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan

    The Russians aim to retain the former Soviet space within their own sphere of influence, seeking to diminish the US, Chinese and the EU presence to the extent possible. The Kazakhs are keeping all their options open: seeking a central role in the US-sponsored war on terror and the New Silk Road, permitting pervasive Chinese presence in their economy, promoting bilateral and institutional ties with the EU, and becoming a member of the Eurasian Union. “Diversify” is the name of the Kazakh game. Belarus is landlocked and dependent on Russia for its trade exports and imports, and the Belarus president is persona non grata in much of the West. Under the circumstances, the Eurasian Union is a solution to much of its problems. Armenia is caught up in the issue of the ethnic Armenian enclave of Nagorno-Karabakh inside Azerbaijan and its resultant adverse economic consequences; and Kyrgyzstan is chafing under the presence of its big neighbour China. Armenia seeks economic succour and Kyrgyzstan desires security assurances.

    Conclusions and Queries

    There is no Eurasian Economic Union till date. And yet, it has been the subject of intense scholarly scrutiny as also of prescriptive analysis. Its future membership, the direction of its evolution and the gamut of its activities must remain matters of speculation in the meanwhile. In lieu of final conclusions, a few hard queries need to be raised.

    The first, and the most obvious, is its rechristening. The original version the “Eurasian Union” has now been watered down to “Eurasian Economic Union”. It is believed that it was the Kazakh President Nursultan Nazarbayev who lobbied hard to insert the word “economic” in the title.

    A second query facing the EEU is whether it aims at a reincarnation of the Soviet Union minus the Marxist ideology. Some in Russia assert that the term “union” symbolically harkens back to the Soviet Union; many outside Russia fear that it could be so.

    And the last query before the EEU is obvious. What will Russia get from subsidising the poorer economies? Only time will tell.

    Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India

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