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Sep 17, 2016 | 13:17 GMT

6 mins read

Why the Eurasian Union Will Never Be the EU

Why the Eurasian Union Will Never Be the EU
(Stratfor)
Summary

Editor's Note: This is the sixth installment of a seven-part series examining how the world's regional economic blocs are faring as the largest of them — the European Union — continues to fragment.

Like the Customs Union before it, the Eurasian Economic Union was built with one goal in mind: to cement Russia's hold over the states in its periphery. With the promise of investment and protection, the Kremlin has done just that, bringing fellow bloc members Armenia, Belarus, Kazakhstan and Kyrgyzstan firmly under its influence.

But the Eurasian Economic Union has not reached the global status Moscow hoped it would. Rather than rivaling its biggest competitor, the European Union, the Russia-led organization has limped along, struggling to overcome the problems Russia's deteriorating economy has created for it. Though Europe's fragmentation could give the bloc a temporary boost, the persistent weakness of the Eurasian Economic Union's most important member will continue to hold the organization back, stuck in the shadows of its Western adversary.

Despite having been established less than two years ago, the Eurasian Economic Union is not a new concept. Russia has a lengthy history of pulling smaller neighbors into its orbit — the Russian Empire and the Soviet Union are proof of that. Though its integration projects varied in size and scope, all rested on the same fundamental principle that guided Moscow's actions: Russia belongs to neither Europe nor Asia, and its periphery should not either. Instead, Russia's greatest imperative has been to insulate itself from continental empires by creating one of its own, surrounding the Russian heartland with buffers on its western, eastern and southern flanks.

The Eurasian Economic Union is one way to do that, though the name belies the bloc's true nature. It is not simply about economics, just as its predecessor, the Customs Union, was not simply about trade. Russia, Belarus and Kazakhstan formed the Customs Union in 2010 with the intention of increasing cooperation among themselves in economics, politics and security. Though facilitating trade among the group's members was part of its agenda, the bloc's broader purpose was to become a comprehensive system equal to the European Union. The organization was also based on the unspoken assumption that Russia would become its undisputed leader.

The Customs Union did not rely on overt force to annex its members, as the Russian Empire and the Soviet Union did, but many countries had legitimate reasons to join it voluntarily. Some former Soviet governments, as well as large segments of their citizenry, did not consider Europe's liberal democratic model appropriate for their countries. Moreover, several states looked back on their Soviet history with a degree of fondness, primarily with regard to the stability, subsidies and paternalistic governance that characterized the Soviet era. Because many of these states continued to rely heavily on Russia to get by after the Soviet Union fell, they were willing to forgo ties with the West and Asia to maintain their relationship with Moscow.

A Lopsided Organization

Since the Customs Union's debut, it has tightened the links between its members' economies and expanded its base. The bloc passed a joint customs code in 2011 and common market in 2012. Two years later, Armenia and Kyrgyzstan applied for membership, and in January 2015, the five-member group became the Eurasian Economic Union. Collectively, the bloc now boasts a population of 179 million people and a gross domestic product of about $1.9 trillion. Russia, however, accounts for the vast majority of those figures — 143 million citizens and a $1.6 trillion GDP.

Russia's weight within the Eurasian Economic Union has caused trouble for the bloc in the past few years. Low oil prices and Western sanctions have put increasing strain on the Russian economy, and by the time Moscow unveiled the Eurasian Economic Union in 2015, the ruble had plunged to an all-time low. The same year, the Russian economy contracted by 3.7 percent.

In aligning their customs controls with Russia's duties, the union's other states have become more vulnerable to economic downturns in Russia. Because Moscow's tariffs are higher than those of nearly all other bloc members, on nearly all goods, Eurasian Economic Union states have had to raise their duties across the board, effectively prioritizing trade with Russia over trade with partners outside the organization. But now that Russia's economy has entered into a steep decline, it has dragged the rest of the bloc down with it. Regional currencies, remittances and trade have fallen while inflation has soared. Meanwhile, all of the bloc's members experienced low or negative growth last year. Belarus experienced a contraction of 3.9 percent, and growth in Kazakhstan, Armenia and Kyrgyzstan slowed to a respective 1.2, 3.0 and 3.5 percent.

The Eurasian Project Stagnates

Nevertheless, from these countries' perspective, the Kremlin's ability to provide financial and military support far outweighs the risk of tying their economies to Russia's. They will therefore likely stay committed to the Eurasian Economic Union in the coming years.

As a whole, however, the bloc will continue to fall well short of the Kremlin's expectations. When Russia launched the Customs Union, it was in the process of regaining its standing within the region. With the West distracted in the Middle East, Moscow had high hopes that the project would someday spread, enveloping much of the former Soviet Union. But five years later, when the Eurasian Economic Union came into being, Russia had been hit by a recession; had lost a key ally, Ukraine; and had persuaded only two countries to join the bloc. (Even then, those members had small, weak economies that did little to add to the bloc's international heft or prestige.) Over the same period, several of the organization's targets for membership, including Ukraine, Moldova and Georgia, instead sought closer ties with Europe.

The European Union is facing its own problems, of course. The United Kingdom voted to leave the bloc, and economic and refugee crises continue to plague the Continent. The political and economic stress created by these issues has lent strength to nationalist and far-right political parties in the union's major member states, such as France and Austria. At the same time, countries such as Poland and Hungary have called for some of Brussels' powers to be repatriated to Europe's national parliaments. The weakening of the European Union could bolster the Eurasian Economic Union, not only by reducing the Continent's capacity to pursue new members in Eastern Europe but also by undermining its unanimity on sanctions against Russia.

Yet even if these things come to pass, they will not change the fact that Russia continues to grapple with its own economic and political challenges. These problems, so long as they go unresolved, make it unlikely that the Eurasian Economic Union will get much bigger or more tightly interwoven. As energy prices stay low, squeezing revenue, trade and remittances throughout Eurasia, the bloc will lose its appetite for greater connectivity — and its appeal to potential participants. Even now, the only country that has expressed interest in joining the union is Tajikistan, another fragile state.

And so, the Eurasian Economic Union will muddle along, without making any notable additions to its mission or membership in the next few years. The bloc will continue to act as a platform from which Russia can formalize its reach into the countries that surround it, but one that is far more modest than Moscow originally intended. The Eurasian Economic Union will not fall apart, but neither will its presence make much of an impression on the world outside its borders.

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