The Eurasian Economic Union: Russian «March Eastwards» or an Alternative to Rejoining the West?

_ Natalia Artemenkova, MGIMO University, researcher, Center for Eurasian Studies. Report given at Kennesaw State University. Atlanta, March 16th 2017.

The Eurasian Economic Union: politics vs. economy

The Eurasian Economic Union (the Union or the EAEU) is a young international organisation of regional economic integration that was established by Belarus, Kazakhstan and Russia in 2015.

Today the Union comprises 5 member states (Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia) that have made a commitment to pursue the following objectives (Treaty on the Eurasian Economic Union 2014[1], art. 4, § 1-3):

  • to create proper conditions for sustainable economic development of the Member States in order to improve the living standards of their population;
  • to seek the creation of a common market for goods, services, capital and labour within the Union;
  • to ensure comprehensive modernisation, cooperation and competitiveness of national economies within the global economy.

However, the Union had hardly been launched when the economic and integration potential of the three founding states was questioned. Nicu Popescu, an analyst at the EU’s Institute for Security Studies in Paris says that the EAEU «won’t really register on the radar of the global economy»[2]. Experts from the Centre for Eastern Studies argue that the way in which the integration has been unfolding and Russia’s policy over the last three years are «indications that the EEU has become primarily a political project, and the importance of its economic aspects has eroded» (Jarosiewicz, Fischer, 2015).

Consequently, there are supporters who argue that the Eurasian economic union can help member countries unlock their economic potential and create conditions for improving the countries’ global competitiveness (Tsukarev, Vinkurov, 2015). On the other hand, there are critics who portray the EAEU as a destabilising project that was created to reinforce Russian influence in the post-Soviet area[3].

This paper analyses the Eurasian vector of Russia’s foreign policy, particularly widely shared views of the Eurasian economic union. The main question is if the Eurasian integration is subordinated to relations with the West or it follows its own logic.

The paper reviews the evolution of the Eurasian integration; examines theoretical approaches to the study of the EAEU; reveals some important factors of the Eurasian integration and compares the Foreign Policy Concepts of the Russian Federation (2000 — 2016).

After information gathered and documents processed it is possible to judge the EAEU more political or more economic.

The paper argues that the current historical moment could be favourable for Russia and its partners from the EAEU to launch meaningful reforms and avoid becoming a politicized version of integration.

The evolution of Eurasian integration

The establishment of the Eurasian Economic Union («the EAEU», «the Union») by Belarus, Kazakhstan and Russia in 2015 marked a major step towards deeper economic integration in Eurasia. These three states are an ‘integration core» of Eurasian integration (Vinokurov, 2014) and their economic relations are regulated by a number of multilateral treaties.

The idea of regional economic integration in Eurasia dates back to 1994, when the president of Kazakhstan Nursultan Nazarbayev first introduced the initiative of a Eurasian Union with a focus on the economy. Nazarbaev was the first modern politician who claimed that Russia, Kazakhstan and other Central Asian countries are linked by shared history and culture, and he emphasized the need to evolve a new type of interstate ties. His support for Eurasian integration seems to be entirely motivated by economics[4].

When Nazarbaev introduced his project in 1994, it did not receive an enthusiastic response from Russia, since the new Russian elites felt «pro-western euphoria[5]». In 1993 the first foreign policy concept («Kozyrev doctrine») of post-Soviet Russia was adopted. Russia’s strategic interests were declared to be equal to «universal values of the community of democracies»[6]. The idea of the common European home went hand in hand with the idealist aspirations of Russia to rejoin Europe (Morenkova, 2014). Although eleven CIS leaders first signed a protocol on a free-trade zone in 1994, in fact, this agreement never came into force.

In 1995, Belarus, Kazakhstan and Russia signed the Customs Union Treaty. The document envisaged removing barriers to free cooperation between the countries’ commercial enterprises, promoting free trade, and fair competition (Vinokurov, 2015). Kyrgyzstan and Tajikistan joined this agreement in 1996. Despite all this, the commitments to lift tariff restrictions for members of the Customs union remained mainly on paper, since the countries were deeply divided over economic and political issues. Moreover, it was period of deepest disintegration in the post-Soviet space, e.g. a collapse of the ruble zone in 1993.

Although the proportion of mutual trade between Belarus, Kazakhstan, Kyrgyzstan and Russia grew by 20 percent in 1996, in several subsequent years the volumes of mutual trade showed a downward trend.

The table below demonstrates the change in export of goods in billion dollars from 1994 to 2000.

Merchandise exports of the ECE emerging market economies, 1994-2004 (Billion dollars)

Country 1994 1995 1996 1997 1998 1999 2000
CIS: total 90,929 113,172 125,647 123,181 106,160 106,030 145,928
of which: non-CIS 61,751 79,800 88,922 86,539 76,657 83,146 116,681
Belarus 2,510 4,707 5,652 7,301 7,070 5,909 7,331
Non-CIS 1,031 1,777 1,888 1,922 1,910 2,287 2,927
Kazakhstan 3,231 5,250 5,911 6,497 5,436 5,592 9,126
Non-CIS 1,357 2,366 2,732 3,515 3,266 4,100 6,750
Russia 67,800 82,419 90,600 86,895 74,444 75,551 105,033
Non-CIS 52,100 65,400 72,000 67,800 58,700 63,600 90,800

Source: UNECE secretariat calculations, based on national statistics and direct communications from national statistical offices[7].

Overall, throughout this period only 19% of the Russian exports of goods were destined for CIS countries, while the exports from Belarus and Kazakhstan to other CIS members amounted to 66% and 41% respectively. Consequently, it was more important for Belarus and Kazakhstan to have less trade barriers within the CIS area.

In 2000, Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan established the Eurasian Economic Community (EurAsEC) aimed at completing the formalization of a free trade regime in all respects and creating a common unified system of customs regulation.

Afterwards there was a range of other more or less successful steps to establish binding commitments or meaningful mechanisms among ‘the integration core» to ensure deeper economic integration.

In 2007, Russia, Belarus and Kazakhstan signed the Treaty on the Creation of the Common Customs Territory and Establishment of the Customs Union (CU)[8]. An action plan was to provide for the free movement of goods among the members, and to facilitate trade with third countries.

In 2009, Belarus, Kazakhstan and Russia set up the Customs Union (CU). As a result, a single customs territory was created, border control was eliminated and a single customs tariff took effect.

In 2012, the CU expanded into the Single Economic Space (SES). The three states agreed to coordinate key issues in macroeconomic policy and labour migration.

Finally, the Treaty on the Eurasian Economic Union came into force on January 1, 2015. Armenia joined the integration project on January 2, 2015, followed by the Kyrgyz Republic in May 2015. The core of this integration project is the creation of a single market for goods, services, capital, and labor (Vinokurov, 2015).

Today the EAEU sees its primary objectives in making its market more attractive for local and foreign investors and creating a network of free-trade agreements, including two key trade and investment partners, the EU and China.

In sum, economic integration projects within the CIS failed. The integration core of Belarus, Kazakhstan and Russia consistently moving towards a formation of a single market, has proved its ability to act unanimously, make commitments and abide by them. Around 140 powers were transferred to the Eurasian Economic Commission (EEC), which is the single supranational institution in charge of regulating and promoting integration.

Theoretical approaches to the study of the EAEU

While the integration process in Eurasia was unfolding, the project of the EAEU caused considerable debate on real essence and objectives of this organisation. Besides, there was a question whether the idea of deep economic integration in Eurasia could become a reality, or it would be another false start.

Western academics quite often take a purely realist approach, defining this union as Russia’s neo-imperial project. In other words, much attention is paid to issues whether the EAEU is an zeal of Moscow to become «a new Great Power in a multipolar world order» (van der Togt 2015: 27), or Putin’s instrument to «bring Russia up from its knees» (Popescu 2014: 7), or an attempt «to re-Sovietize the region»[9]. Besides, there are Russian scientists (Shevtsova, 2009, Tsygankov, 2014 and Trenin, 2011) who view this regional economic organisation as a Russian geopolitical project.

Some authors (Podberezkin, Borishpolets and Podberezkina 2013: 127) go beyond realism and advocate the theory of regionalism in international relations. From this perspective, the Eurasian Economic Union can be considered potentially beneficial for all its member-states. It is believed that nowadays «global regions» (Lagutina 2014: 95) have greater influence in the international arena than states. Therefore, the EAEU can be regarded as a product of Eurasian regionalism, which is a part of global tendency for states to form regional groupings in order to promote greater cooperation and seek protection from negative impacts of globalisation together.

Regularly, the EAEU attracts strong criticism because many scholars argue that this union is a «Russia-dominated organization» (Van der Togt 2015: 52) and it is «too weighted in favour of Russia» (Popescu 2014: 11). In any discourse, according to which the notion of hegemony is reduced to political, economic or military dominance, and where «some are entitled to command; others are required to obey» (Waltz 1979: 98), the EAEU represents a tool of achieving Russian geopolitical ambitions, e.g. to reduce the influence of the European Union and the United States in the post-Soviet space.

On the contrary, Rilka Dragneva and Kataryna Wolczuk maintain that a regional “hegemon” is not necessarily a rival, but rather a leader, attracting neighbouring states into closer cooperation (Dragneva and Wolczuk, 2013). From this perspective, the aim of Russia is to unite efforts of EAEU member states and conduct domestic reforms, strengthening the region’s role in the global political and economic arena.

Neglected factors

Many views of the EAEU, however, fail to consider an opinion of citizens living in the EAEU and interests of business groups. It would be more objective not to examine the EAEU solely through the prism of Russia’s hegemonic ambition in the region, since the role of other member states in the regional integration project becomes neglected. Besides, all states have an equal representation in EAEU institutions, for instance, all decisions of the Eurasian Economic Commission (EEC), which is the executive body of the Union, are based on a collegial basis.

First, according to public opinion surveys conducted by Eurasian Development Bank («EDB») in 2016 , with the exception of Armenia, the share of positive opinions in EAEU member states toward Eurasian integration in 2016 was greater than 60%, ranging from 63% in Belarus to 81% in Kyrgyzstan, Russia 69%, Armenia 46%.

As part of the 2016 survey[10], people in EAEU member states were asked about their attitude toward the potential introduction of a common currency, the authorization of citizens’ free movement within the EAEU, an expansion of the Union, the conclusion of an agreement on free trade and investments between the EAEU and the EU. The data reveal that in all EAEU member states and for nearly all of the proposed options, more than half citizens responded positively (except for the question about introducing a common currency in Armenia (for 45%) and Belarus (for 41%). Two options received large support in all of the union countries: «authorization of EAEU member states’ citizens’ free movement within the Union with the opportunity to take up residence, work, study, and conduct business anywhere in EAEU countries…» and «the conclusion of an agreement on free trade and investments between EAEU countries and the European Union.»

Second, according to the Monitoring of Mutual CIS Investments[11] by Eurasian Development Bank, mutual investments within the CIS fall by 12% in 2014. One of the main causes for this decline was the destabilised economic and political situation in Ukraine. At the same time, even despite the devaluation of national currencies, mutual investments (FDI) in the EAEU region in 2014 grew from $24.8 billion to $25.1 billion. At the end of 2015, total mutual FDI stock in the EAEU amounted to $23.7 billion (a 6.6% decrease year-on-year). According to the World Bank «Doing Business Ranking», over the period of from 2014 to 2016 all countries became more attractive for investors. In 2016 Armenia took 35th place (+2 vs. 2014), Kazakhstan — 41th (+16 vs. 2014), Belarus — 44th (+19 vs. 2014), Russia — 51th  (+41 vs. 2014), Kyrgyzstan — 67 (+1 vs. 2014).

Since the establishment of the Eurasian Customs Union in 2010, trade between member states rose sharply. In 2011 mutual trade was USD 63.1 billion, 33.9% more than in 2010. In 2012, mutual trade was USD 67.8 billion. The total volume of trade with third countries rose over these three years as well. In 2013 both volumes of trade started to fall and in 2015 became less than in 2011. Thus, nowadays there are obvious difficulties in EAEU economies.

Statistical information on the results of external and mutual trade in goods of the EAEU Member States[12]

  mutual trade USD (billion) trade with third countries USD (billion)
2011 63.1 907.2
2012 67.8 934.6
2013 64.5 933.0
2014 58.5 868.7
2015 45.7 579.4

Unemployment level in the EAEU, according to the results of 2015, is 5,7%, which is better than the EU value (9,4%) and similar to the USA value (5,3%).

To sum up, today it is hard to describe the EAEU as a strong economic organisation, much time was spend to unify customs regulation and to reach multilateral agreements. The Ukrainian crisis has also influenced the economic situation in the region. Although the Union has been functioning for less than 3 years, it has showed that it can be economically efficient. Today it is necessary for the EAEU to focus on economic growth and development. There are reasons to believe that Russia can advance economically by taking advantage of its geographical position between Europe and Asia, while Armenia, Belarus, Kazakhstan and Kyrgyzstan which lack direct outlet to open seas and communicative resources, also can benefit from this economic partnership.

The foreign policy concept of the Russian Federation: a comparative study

The comparative analysis of the four generations of Russian foreign policy concepts, namely concept 2000, 2008, 2013 and 2016 appear to be an appropriate method to reveal objective change in Russian regional priorities. This method is necessary to understand whether the Eurasian vector of Russia’s foreign policy can be regarded as independent, and Russia has clearly articulated its special interests in this region, or this intensification of the Eurasian integration is a temporal maneuver caused by the deteriorating relations with the West.

To begin with, the predominance of the «Atlanticist» orientation («Kozyrev doctrine» of solidarity between democracies 1993-1996) in Russian foreign policy did not last long. In the mid-1990s, it became obvious that the «equitable partnership» with Europe was hardly possible. Under the new minister of foreign affairs Yevgeny Primakov (in office 1996 — 1998) a high priority was put on former Soviet republics (i.e. Russia’s «near abroad»). Moscow reconceptualized Central Asia as a core part of its security zone, «developments in which were conceived of as of vital importance to Russia’s own security»[13]. Russia encouraged the establishment of the Shanghai Cooperation Organization (SCO), the Collective Security Treaty Organization (CSTO) to increase military and counterterrorism cooperation in the region. There is no dispute that Kremlin policies for the past 16 years have been a long series of attempts to create a belt of stable states along Russia’s borders.  

In each Russian foreign policy concept a priority importance is attached to ensuring security, combating international terrorism and extremism in Russian neighborhood. In concept 2008 particular attention is paid to maintaining economic, social and humanitarian ties with the CIS member states.

In concept 2013 an active support is expressed for the Eurasian economic integration and it is mentioned that Russia together with Belarus and Kazakhstan are going to transform the Eurasian Economic Community into the Eurasian Economic Union.

In concept 2016 Russia’s key objective in the post-Soviet space is to strengthen and expand integration within the EAEU with Armenia, Belarus, Kazakhstan and Kyrgyzstan to faster comprehensive technological modernization, and improve living standards of their populations. It is also stated the EAEU is designed to play an important role in harmonizing integration processes in Europe and Eurasia. 

Overall, each Russian foreign policy concept views the CIS as Russia’s top priority, followed by the EU. NATO takes the third place (except for 2008 when the third place was taken by the Arctic region). The USA usually is the sixth main direction of the Russian foreign policy, in concept 2016 it takes the fourth place. Asia always comes after the U.S. Latin America and Africa are usually mentioned at the end of the list.

As a result, the analysis of foreign policy concepts revealed that the post-Soviet space has always been a primary direction of Russian foreign policy. The development of the Eurasian integration seems to be a consistent further step of deeper cooperation between particular CIS member states. Concept 2008 had been adopted before the conflict in Georgia; however, the Asian region has started to play a greater role in Russian foreign policy since then. The role of the European region started to decrease since 2000.

Conclusion

The Eurasian Economic Union is a result of a long series of more or less successful attempts to establish an institutional and efficient mechanism of economic cooperation between CIS member states. The idea of a Eurasian union first formulated by Kazakhstan was put into practice by Belarus, Kazakhstan and Russia, all of which had particular economic interests in boosting mutual trade, developing a common economic space, and stimulating economic growth.

Having analysed change in Russian foreign policy concepts one can conclude that the Eurasian vector of Russian foreign policy has been always at a top of Russian regional priorities. Although the Eurasian direction has been given several boosts against the backdrop of the deteriorating relations with the U.S. and the EU, the Eurasian integration is not subordinated to relations with the West. On the contrary, the EAEU seeks to develop equal relations with the EU, while people in EAEU states are in favour of concluding an agreement on free trade and investments with the EU.

Each Russian foreign policy concept reflects Russia’s aspirations in Eurasia, which are ensuring security and countering terrorism. As appears from official documents Russia can be secure and prosperous only if it is surrounded by stable and friendly neighbours. This obsession of Russia with its security often is misinterpreted and Russian initiatives in post-Soviet space are believed to be Russian geopolitical projects. And there is hardly an irrefutable proof that it is not a Russian geopolitical project but for economic benefits from integration for all EAEU member states.

The EAEU has seen positive growth in mutual trade and investments since it was established. Nevertheless, today the economic growth of EAEU member states has slowed down, and the main task of this Union is to launch meaningful reforms and help participating states unlock their economic potential. By doing that the EAEU can prove its viability, efficiency and supranational capability.

 

References:

[1] The Treaty on the Eurasian Economic Union, Astana, 29 Mai 2014, http://www.un.org/en/ga/sixth/70/docs/treaty_on_eeu.pdf , (accessed January 2017).

[2] https://www.bloomberg.com/news/articles/2014-05-29/putin-s-eurasian-union-looks-like-a-bad-deal-even-for-russia (accessed February 2017).

[3] Crisis Group, The Eurasian Economic Union: Power, Politics and Trade, Europe and Central Asia, Report N°240 | 20 July 2016, Brussels, Belgium https://d2071andvip0wj.cloudfront.net/240-the-eurasian-economic-union-power-politics-and-trade.pdf (accessed February 2017).

[4] Eurasian integration : the view from within / edited by Piotr Dutkiewicz and Richard Sakwa, 2015, Routledge Contemporary Russia and Eastern Europe Series, New York, NY 10017, с. 61-84

[5] Trenin Dmitri, “Stratégie russe: une difficile naissance”, Politique étrangère, no.1, 1997, p. 61. 

[6] KOZYREV A.V., “Strategiia partnerstva” / “The strategy of partnership”. Foreign policy and security in modern-day Russia, 1991-1998, vol. 1, Moscow, MONF, 1999, pp. 150-166; cited in BOGATOUROV Alexei, “Three generations of Russian foreign policy doctrine”, International processes, vol. 10, no. 2 (29), May-August 2012. http://www.intertrends.ru/thirteen/005.htm#note2  

[7] Economic Survey of Europe, 2005 No. 2, STATISTICAL APPENDIX http://www.unece.org/fileadmin/DAM/ead/pub/052/052statapp.pdf

[8] Agreement on the Creation of Common Customs Territory and Establishing of Customs Union http://www.wipo.int/wipolex/en/other_treaties/text.jsp?file_id=330115

[9]Gvosdev, Nikolas K. 2014 «The Deep Policy Failures That Led to Ukraine» http://nationalinterest.org/feature/the-deep-policy-failures-led-ukraine-10267(accessed February 2017)

[10] EDB Integration Barometer, 2016 (Fifth Wave of the Survey), Saint Petersburg: EDB Centre for Integration Studies, 2016 — p. 102.

[11] EDB, 2016, MONITORING OF MUTUAL INVESTMENTS IN CIS COUNTRIES http://eabr.org/general/upload/reports/EDB_Centre_2016_Report_39_MIM_CIS_ENG.pdf

[12] EDB Integration Barometer, 2016 (Fifth Wave of the Survey), Saint Petersburg: EDB Centre for Integration Studies, 2016 — p. 11 Available at http://www.eurasiancommission.org/ru/Documents/%D0%91%D1%80%D0%BE%D1%88%D1%8E%D1%80%D0%B0%20%D0%A6%D0%B8%D1%84%D1%80%D1%8B%20%D0%B8%20%D1%84%D0%B0%D0%BA%D1%82%D1%8B%20%D0%B8%D1%82%20(%D0%90%D0%BD%D0%B3%D0%BB).pdf

[13] Clarke, Michael: Kazakhstan’s Multi-vector Foreign Policy: Diminishing Returns in an Era of Great Power «Pivots»?, 2015, http://www.theasanforum.org/kazakhstans-multi-vector-foreign-policy-diminishing-returns-in-an-era-of-great-power-pivots/#8 (accessed February 2017)

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