The Geopolitics and Evolution of the Eurasian Economic Union

11 MINS READMay 29, 2014 | 09:14 GMT
Russia's goals for the Eurasian Economic Union
Russian President Vladimir Putin (back C) attends a meeting of the Supreme Eurasian Economic Council at the Kremlin in Moscow on Dec. 24, 2013

Russia, Belarus and Kazakhstan will sign the foundation treaty of the Eurasian Economic Union on May 29, with the bloc set to formally debut on Jan. 1, 2015. The Eurasian Economic Union is about much more than economics; it is a bloc meant to rival the European Union and the United States in its influence in Russia's near abroad. The crisis in Ukraine has aggravated long-standing tensions between Russia and the West, and the Eurasian Economic Union will serve as a primary platform for Moscow to challenge EU and U.S. influence in the former Soviet periphery in coming years. 

The very name of the Eurasian Economic Union implies that it is something other than European. This is not merely a geographic distinction; it is a political distinction showing that to be part of this grouping means not being either European or Asian.

The union is not a new concept. Russia has had various integration projects throughout history: the Russian Empire, the Soviet Union, the Customs Union and now the Eurasian Economic Union. Each of these groupings has varied in size and scope, and each has fluctuated over time. But they were all built around the same underlying idea — that Russia is not European (at least not completely), and that Russia does not want its periphery to be European either. This was driven by Russia's fundamental geopolitical imperative of insulating itself from foreign threats, particularly from those in Europe, but from Asian powers as well, and establishing buffers in order to do so. In other words, Russia sees itself and its immediate periphery as part of an altogether different bloc, separate from Europe and Asia.

But in a sense, the bloc also belies its name. The Eurasian Economic Union is not only about economics or, like its predecessor the Customs Union, simply about trade. This is a significant aspect of the grouping, but far from the only one, and probably not the most important one.

Rather, the Eurasian Economic Union is a grouping that spans several forms of integration and cooperation, from politics to finance to security matters. Indeed, it represents a comprehensive system, one meant to be altogether different from its rival system, the European Union. It is also meant to rival the European Union not only in matters of economic integration but also in foreign policy orientation and security and military affiliation. And just as important, the bloc rests on the idea that Russia is its undisputed leader.

Given that this grouping is not incorporated by force or annexation — as was the Russian Empire and many parts of the Soviet Union — there are legitimate reasons that some countries would want to be a part of it. Though the specific interests vary by country, there are a few fundamental interests shared by each member state.

First, these countries, both the regimes in power and a large portion of the citizens they govern, do not believe the European liberal democratic model of governance is appropriate for them. Second, these states look back on the Soviet Union with a certain degree of fondness, primarily over aspects like stability, subsidies and general state paternalism. Finally, these states strongly depend on Russia, ties with which necessarily come at the expense of ties with the West — in other words, the European Union and NATO — and Asia, particularly China.

Evolution of the Bloc

This context is important to keep in mind when assessing how the Customs Union has evolved so far and how it will evolve in the future.

The Customs Union debuted Jan. 1, 2010, with Russia, Belarus and Kazakhstan as its founding members. The union's formal purpose was to facilitate and expand trade and economic ties between member countries, and thus be mutually beneficial, but in practice the union has reoriented the member countries' economic systems toward Russia and away from partners outside the union. This is because the integration of members' customs duties meant that Belarus and Kazakhstan had to align their customs controls with Russia's. Because Russia's customs are higher on almost all goods, Belarus and Kazakhstan have raised their external tariffs and prioritized trade with Russia.

The Eurasian Economic Union is meant to be altogether different from its rival system, the European Union. It is also meant to rival the European Union not only in matters of economic integration but also in foreign policy orientation and security and military affiliation.

The Customs Union has gone through several stages of its evolution since its debut, including the Customs Code in 2011 and the Single Economic Space in 2012. This has tightened integration over time, although its members have yet to completely eliminate customs duties on all products or completely synchronize their customs laws. Russia has exempted oil and natural gas from customs elimination within the three countries, and there have been several exemptions for strategic or "sensitive" goods from Belarus and Kazakhstan as well, including foodstuffs and pharmaceutical supplies.

However, the union has had some real economic effects. Trade among Customs Union members increased by 18 percent between 2009 and the end of 2010 and then by more than 40 percent by the end of 2011. Trade flows have slowed in the past two years, however, contracting by 3 percent by the end of 2012 and growing only 2.7 percent the following year. By late 2013, though, trade turnover between member countries increased by 30 percent overall since the Customs Union debuted, according to Russian President Vladimir Putin.

But the main driving force behind the union is not trade or economics; it is broader geopolitical conditions. The Customs Union debuted amid Russia's resurgence in its former Soviet periphery and not long after Moscow's victory in the 2008 Russo-Georgian war. That war was meant to send a message to all the former Soviet countries that they should reconsider any desire to meaningfully integrate with Western blocs like NATO or the European Union. The introduction of the Customs Union shortly thereafter presented an alternative to the European Union as a political and economic bloc (with the Collective Security Treaty Organization serving the same purpose on the military side) and gave Russia a way to institutionalize its influence in the bloc's member states.

Belarus and Kazakhstan were logical choices to become founding members of the Customs Union. Both states' political structures were largely unreformed from the Soviet era, employing a highly centralized executive. Both were also not interested in adopting Western-style democracies as espoused by the European Union and the United States. Belarus and Kazakhstan also have retained a high degree of Russian cultural influence since their independence. Their leaders, Aleksandr Lukashenko and Nursultan Nazarbayev, are former Soviet apparatchiks. Finally, neither country was interested in membership in the European Union or NATO, and both were already highly integrated with Russia in the areas of economics and security. Belarus has had occasional economic spats with Russia, and Kazakhstan cooperates with several Western companies to develop and export its energy resources (it has also faced some trade disruptions with China). But their strategic alignments with Russia have never been significantly threatened.

The Bloc's Future Evolution

As the Customs Union is set to transition into the Eurasian Economic Union over the course of the year, the bloc will undergo changes on a technical level in both scope and size. In terms of scope, Russia, Belarus and Kazakhstan will further integrate their economies by introducing uniform competition policies and by stipulating greater integration in the fields of energy, industry, transport and agriculture in the Eurasian Economic Union treaty. The member states still need to work out certain issues on the specific legislation of the treaty, but Eurasian Economic Commission Chairman Viktor Khristenko has said that all principal disagreements on the draft treaty have been settled.

Armenia and Kyrgyzstan have also applied for membership in the Customs Union. Armenia formally announced it wanted to join the Customs Union in September 2013, and Russian President Vladimir Putin announced that Armenia's roadmap for accession to the bloc had been endorsed at the end of 2013. Like Belarus and Kazakhstan, Armenia is conceptually suited to join the bloc. It has a strongly centralized political system, and its economy and security apparatuses are already deeply integrated with Russia's. Armenia is also willing to forego establishing serious ties with the West, something it showed when it broke off negotiations to sign an association and free trade agreement with the European Union to join the Customs Union. Therefore, Armenia's accession to the Customs Union-turned-Eurasian Economic Union is scheduled to be drafted and likely approved without issue by June 1.

Kyrgyzstan's accession process began earlier than Armenia's. It formally applied in 2012, but Bishkek encountered a much more complicated process than Yerevan did. Kyrgyzstan fits the broader pattern of Customs Union states; it has strong economic links to Russia and is aligned with Moscow on security issues, including the hosting of Russian troops at the Kant military airbase. However, Kyrgyzstan's divided political system has posed significant challenges for a strong executive power. The country has experienced two revolutions in the past 10 years. Kyrgyzstan also has a stronger protest culture than the other states, and several issues, including Customs Union membership, incite demonstrations. The government has remained committed to accession, but the roadmap has been subject to numerous debates in parliamentary committees, and these debates have prolonged the accession process. Still, Kyrgyzstan is likely to join the bloc eventually, though its chaotic political system and weak economy will make it a more unstable member than the others.

Despite Russia's substantial influence in its near abroad, the Eurasian Economic Union is still one of the least ambitious and most constrained regional integration platforms that Moscow has used. This is rooted mainly in Russia's unwillingness and inability to bring former Soviet countries into the fold by force, as it did during the eras of the Russian Empire and the Soviet Union.

Beyond the specific administrative changes that the Eurasian Economic Union will experience, the bloc will be an important platform for Russia to interact with and gauge the status of other states in the former Soviet periphery. Tajikistan is another country that, like Kyrgyzstan, is closely aligned with Russia on economic and security matters, but also has a fragile and unstable domestic political system that complicates its interactions with Moscow. Tajikistan could join the Eurasian Economic Union following Kyrgyzstan's eventual accession, or at least maintain close ties with the bloc.

Reluctance Among Other Former Soviet States

Other countries in the former Soviet periphery have more ambivalent relations with Russia and are thus likely to be more skeptical of cooperating in the Eurasian Economic Union format. These countries include AzerbaijanUzbekistan and Turkmenistan, which are all independent-minded and energy-producing countries that prefer to avoid entangling alliances, whether the Eurasian Economic Union or Western blocs. Russia has significant influence in these countries but not to the extent that it can directly shape decision-making as it can in the aforementioned states.

Other countries in the former Soviet space are hostile to the Eurasian Economic Union and other Russia-dominated political or security blocs. These include Georgia and Moldova, both of which have Western-oriented governments and are trying to integrate more closely with the European Union (and, in Georgia's case, with NATO). While these are likely to stay out of the Eurasian Economic Union for the foreseeable future, Russia does have leverage in both countries. This comes primarily via Russia's military presence in the breakaway territories of Transdniestria, Abkhazia and South Ossetia. However, Moscow has threatened to use these countries' economic and energy dependence on Russia against them if they follow through with their Western integration efforts.

Finally, there is Ukraine, a unique country torn between the rival models of the Russian-backed Eurasian Economic Union and the Western-backed European Union. Ukraine's internal divisions are aggravated by these external blocs, whose desire to pull the country in opposite directions has resulted in the current Ukrainian crisis. While Ukraine is too divided and too chaotic to become a member of the Eurasian Economic Union or the European Union anytime soon, Russia's new bloc and its underlying concepts are likely to be major factors in shaping the evolution of the country, as well as the wider region, for the foreseeable future.

Despite Russia's substantial influence in its near abroad, the Eurasian Economic Union is still one of the least ambitious and most constrained regional integration platforms that Moscow has used. This is rooted mainly in Russia's unwillingness and inability to bring former Soviet countries into the fold by force, as it did during the eras of the Russian Empire and the Soviet Union. Essentially, this grouping will bring together countries that truly want to be part of Russia's sphere of influence, whether for ideological, economic or cultural reasons. That this grouping is small compared to previous integration projects shows that Russia's grip on its periphery is far from what it was during the height of the Soviet Union. However, while Russian influence is likely to continue to weaken in the longer term, the Eurasian Economic Union is a reminder that it is still very relevant in the short to medium term.

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