Eurasian Econimic Union: political or economic project?

Eurasian Econimic Union: political or economic project?
Anna Tiido
On the 11th of May, 2015, the Summit of the Eurasian Economic Union took
place in Moscow, where the decision to take Kyrgyzstan into the Union was
taken. Thus, as of this writing, the Eurasian Economic Union (EEU)
comprises five member states: Russia, Kazakhstan, Belarus, Armenia, and
Kyrgyzstan.
On the same day, the meeting of President Putin with the Chinese leader Xi
Jinping also took place, all of this activity was surely connected with the
celebrations by Russia of the victory in the Great Patriotic War, as the
Russinas call their participation in the Second World War. These
celebrations were largely ignored by the Western leaders, but attended by
the leaders of the countries who find themseves in the oppostion to the
West. The Russian TV stressed that Xi Jinping spoke Russian, and the common
economic space with China is soon due. If one were to believe the pathos of
the Russian official propaganda, one could think that the regional
integration is so very successful, and it took little effort and time to
create a functioning union between former sattelite republics. It also
looks as if the cooperation will be easily extended to the new realms, such
as China.
The aim of this essay is to look more deeply into this issue, to analyse
the origins of the EEU, the ideas behind it, and the real economic
implications this regional integration has. I would also like to see this
process from the perspective of regionalism.
The idea of Eurasia itself is about a century old, stemming from the 1920s,
it has as its founding fathers the Russian immigrants in Europe, who saw
the rennaisance of Russian idea in its unification with the Asianess" it
contains, includimg the amalgam of the Orthodox christianity with Islam.
After the Second World War, Russian thinker ignored by the officialdom of
the Soviet Union, Lev Gumilev, is considered as the successor of the early
Eurasianists.
The term Eurasianism" and Eurasia" have once again comet to the fore on
the post-Soviet political and intellectual scene since 1991. In present
days, Alexandr Dugin is considered to be the main ideologist of Eurasianism
with his geopolitical approach to world order widely popular. Although it
would be a mistake to consider him an official ideologist of Russia, his
ideas certainly influenced the current leadership.
This Eurasianist terminology suggests that Russia and its margins" occupy
a dual or median position between Europe and Asia, that their specific
traits have to do with their culture being a mix" born of the fusion of
Slavic and Turko-Muslim peoples, and that Russia should specifically
highlight its Asian features. Eurasianism thus conflates the center and the
middle. It rejects the view that Russia is on the periphery of Europe, and
on the contrary it interprets the country's geographic location as grounds
for choosing a messianic third way".[1]
It is interesting to note though that so-called non-Russian options of
Eurasianism also emerged, especially in Kazakhstan, where it became the
state ideology early on. President Nursultan Nazarbaev proposed a Union of
Eurasian States as early as 1994. It was to have supranational bodies and
replace the ineffective Commonwealth of Independent States with a new post-
Soviet economic and political space, free of communist ideology. The
project spelled the way of functioning in great detail, though it was not
implemented at that time.[2]
Vladimir Putin laid out his objectives for the Eurasian Union in an article
in the Russian newspaper, Izvestia, in October 2011. The piece seemed an
encouragement to supporters of Eurasian ideology, which says that Russia
represents a unique civilisation, if not in opposition to, then at least
comparable to Europe, with a mission to unify the huge space of Eurasia.
Fiodor Lukyanov, currently the Chairman of Presidium of the Council of
Foreign and Defence Policy of Russia, in one of his articles claims that
Putin's proposals and further elaborations are not connected to the
Eurasianism philosophy as such, as the new Union is not very interested in
the Central Asia proper that much.[3]
It must be also noted that the case of the EEU space is special due to the
fact that it is being created on the terrirotory, which already used to be
integrated withih the Soviet Union. Moscow has provided the impetus for the
formation of many entities. These have ranged from transitional groupings,
such as the Commonwealth of Independent States (CIS) that aimed to mitigate
the most painful consequences of the break-up of the USSR, to action-
oriented regional structures such as the Collective Security Treaty
Organisation (CSTO) and the Shanghai Cooperation Organization (SCO).[4]
The new ideas to integrate post-Soviet space again are often seen as the
revisionist attempts by Russia to spread its sphere of influence once
again. Is the EEU attempt different from other organisations acting on the
territory adjascent to Russia, such as the Commonwealth of Independent
States or Collective Security Treaty Organisation?
The integration of the Eurasia takes place with the events in Ukraine in
the background. Ukraine was supposed to be a key country in the Eurasian
Union, and without it, the EEU is skewed towards Asia more than its
original planners foresaw. The union without Ukraine would be focused on
the east and the south-east. The consequence of Ukraine's absence is the
removal of a country that could provide some degree of symmetry within the
union. Any association that foresees collective decision-making and the
partial delegation of sovereignty must have an internal balance.
Russia must face up to a difficult dilemma. Its sheer size and its history
of expantionist ambitions make it impossible for it to implement regional
integration without scaring its neighbours. But at the same time, it is not
big enough, either economically or in terms of influence, to overcome
resistance from centres of power such as the EU or China or to define its
own stable orbit.[5]
The EEU faces this problem of Russian domination clearly. There is fear
that too much integation will result in a loss of sovereignty for smaller
member states. In effect, Belarus and Kazakhstan see a tipping point in the
integration process – at a certain level, integration enhances sovereignty,
but too much of it creates a threat. There is also a fear that Russia will
use new client-member staes, notably Armenia, to pressure Kazakhstan and
Belarus on certain issues, in effect giving Russia an additional vore in
the Supreme Council.[6]
Let us turn now to the declared objectives of the Eurasian Union. On the
webpage of the EEU, we can read that the purpose of the organisation is
comprehensive modernisation, cooperation, the increasing of the competences
of the national economies and creating the conditions for stable
development with the goal of raising the life standards of the peoples of
the member states. The EEU is to have four freedoms: movement of goods,
services, capital and labour, and to have coordinated or common policy in
different economic fields.[7] The EEU came into force in January 2015, and
it consolidates a common market of 170 million people with a combined GDP
of almost 3 trillion US dollars.[8]
The roots of the integration though are older. After the proposal by
Nazarbaev in 1994, Russia, Kazakhstan and Belarus signed a treaty on
creating a customs union. The formation of the Eurasian Economic Community
(EurAsec) in 2000 gave a renewed impetus to the idea of a common market and
in 2007 Belarus, Kazakhstan and Russia recommitted to creating a customs
union, with other EurAsec members (Kyrgyzstan and Tajikistan) earmarked to
join later.[9]
The Customs Union encompasses a common customs territory and legislation
(the Customs Code, with effect from 1 July 2010), a single commodity
nomenclature of foreign economic activity, common customs tariff and non-
tariff regulation measures, as well as common procedures for customs
clearance and control. The Treaty on the Commission of the Customs Union (6
October 2007) established a supranational body composed of one member from
each state at the level of deputy head of government. The votes in the
Commission were distributed as follows: Belarus – 21.5%; Kazakhstan –
21.5%; Russian Federation – 57%. The Commission of the CU includes the
Committee for Regulation of Foreign Trade Issues, composed of two
representatives from each member state. The member states also dispatched
at least five specialists to the Council of Experts. The Secretariat
provides informational and technical support to the Customs Union
Commission itself and the Supreme Eurasian Economic Council, which meets at
the level of heads of state or government. The Secretariat is composed of
the Executive Secretary and one deputy from each of the member states. Its
seat is in Moscow.
The ratification of the Action Plan for the establishment of the Common
Economic Space in December 2010 marked the second phase of the Eurasian
integration process. The CES, which kicked off in January 2012, aims to
ensure the effective functioning of the common market for goods, services,
capital and labour, and to establish coherent industrial, transport, energy
and agricultural policies. The CES envisions further regulatory convergence
and harmonisation of national laws in the areas established by the
agreements that constitute the legal framework of the CES. The development
and implementation of a coherent economic policy; transition to the
harmonisation of the main macroeconomic indicators of the member states;
deepening of monetary cooperation; collaboration on migration policy and
ensuring interoperability of standards of education are also an integral
part of the CES. The project also foresees cooperation between parliaments,
business communities and people, including in the sphere of culture, the
formation of effective patterns of inter-regional and cross-border
collaboration, and the development of cooperation in the sphere of foreign
policy.[10]
The creation of the EEU is not based formally on the new institutional
structures, but on the existing legal acquis, which has been expanded, re-
ordered and formulated in more detail in the EEU Treaty. The operation of
the EEU is based on already existing institutions equipped with additional
competences. The new thing is that the EEU now has a legal personality. The
task of the newly created Eurasian Intergovernmental Council is to
supervise the implementation of the treaty's provisions and of the
decisions taken by the presidents (Supreme Eurasian Economic Council).
The Eurasian Economic Commission, headquartered In Moscow, is the permanent
executive body of the EEU. The Commission consists of a Council (a
political organ made up of four deputy prime ministers, which acts in a
supervisory role (and a College (en executive body). The Commission's
Council adopts its decision by consensus, while the College does so by a
qualified majority of two-thirds of the votes, with the exception of so-
called "sensitive" subjects, for which unanimity is required (the Supreme
Eurasian Council defines the list of sensitive subjects). Each decision of
the College taken by a qualified majority of votes may be vetoed by a
member country and become the subject of debate at the prime ministerial or
presidential level. Decisions of the Supreme Eurasian Council prevail over
the decisions of the Eurasian Intergovernmental Council, and the decisions
of both these institutions prevail over the decisions of the Commission.
The Court of the Eurasian Economic Union, headquartered in Minsk, is in
charge of resolving disputes and guaranteeing the parties' compliance with
the agreements signed.[11]
The power of supranational institutions is a very important indicator of
the successful integration. We can see that in the case of the EEU, the
institutions are quite weak. First of all, the role of the Eurasian
Commission is clearly skewed towards "executive" functions. According to
the 2011 Treaty, the Commission has the right to generate "proposals for
economic integration" and adopt CU technical regulations. The executive
role is rather diluted, as the mechanisms for implementation and monitoring
of the international treaties that form the legal basis of the CU and CES
are rather weak. The roles of the Commission are also rather weak in the
budgetary field, as well as the representation in the field of trade
policy.[12]
What about the real economic integration on the ground? Could any
conclusions and trends be seen by now?
Comparing the size of units as a factual criterion can provide the
analysis. The EEC comprises one very large member state (Russia), which
accounts for over 84% of the total population and 85% of the total area,
and two member states, whose population and land mass are significantly
smaller. Russia's market size has a share of 84%. The disparity in volume
between the economies is even more striking: Russia's GDP accounted for
over 88% of the Customs Union's GDP in 2009. Another factor determining the
performance is the distance between major economic centres, which in case
of the EEU are quite large (Moscow-Minsk, 717 km, and Moscow-Astana- 2,700
km). It brings about high transportation costs, and affects the intra-bloc
trade flows.
The trends in trade of the block are also important. According to the data,
most export volumes of the CU member states are shipped to third countries,
not to each other. The share of exports to the CIS in total exports of
goods from Russia did not exceed 16% in the run-up to the formation of the
CU (2006-2010).
Another major obstacle to further economic integration within the Eurasian
grouping is the openness of its members' economies to foreign trade. For
instance, out of 125 countries listed, Russia was ranked as the 114th
economy in the World Economic Forum's 2010 Enabling Trade Index, while
Kazakhstan's higher ranking of 88 is still quite low.[13]
Next, I would like to see into the objectives of the Customs Union, if they
are being fulfilled. These objectives are the elimination of intra-bloc
tariffs, establishing a common external tariff policy and the elimination
of non-tariff barriers. There has been substantial progress in implementing
these goals over the past years; however, several gaps remain. A stumbling
block in the elimination of intra-bloc tariffs was the controversy over oil
export duties, which were only abolished by 2012. In exchange, Belarus
yielded the right to levy the duties on oil exported from the territory of
the Customs Union, thus favouring Russian exports.
In terms of establishing common tariff policy, the EEU still has to
complete the formation of the Customs Union by eliminating existing
exemptions for common external tariff and harmonizing tariffs. The other
problem is coordination of tariffs with the obligations Russia has under
the membership in the World Trade Organisation.
The problems persist with non-tariff barriers to trade as well, the most
crucial being inefficient customs procedures, poor infrastructure,
inadequate institutions and regulations.[14]
As we can see, the economic potential of the new Union is not yet clear,
and there are many obstacles on the way to the real economically viable
integration. It does not mean though that the integration will not become
important politically.
A useful distinction can be made between market-driven and policy-driven
regional integration: certainly both political and economic considerations
are involved in every regional movement. However, the relative importance
of economic and political factors differs in each. Robert Gilpin brings the
examples of the EU, NAFTA, and Pacific Asian integrations. Whereas the
movement toward integration of Western Europe has been motivated primarily
by political considerations, the motivation for North American regionalism
has been more mixed, and Pacific Asian regionalism has been principally but
not entirely market-driven.[15] I believe that on this scale, the Eurasian
Union is motivated very much by the political considerations, probably more
than the European Union has ever been.
There are different scenarios for the future of regionalism in Eurasia. The
first approach stems from the neo-liberal idea of regionalism. In a
nutshell, it suggests that any economic integration will lead to neo-
liberal economy in the member states, which will flow into the world system
as "building blocks". The examples of such integration are the European
Union and NAFTA. Some commentators define the regions within the "core" as
Europe (the EU), North America (NAFTA) and East Asia – "the Triad". These
regions have all moved in the direction of neo-liberalism. Outside the
"core" are the intermediate regions, of which the post-Soviet states are a
part. States in the intermediate zone are linked to the core regions and
gradually become incorporated into the core.[16]
The second option is the isolation of the Eurasian economy from the world.
The Eurasian Union will thus follow a route down to an economic cul-de-sac.
Most Western critics take this point of view – particularly those from the
European Union- an contend that a state-led economic union will lead to
isolation, protectionism and consequently to economic decline and political
weakness.[17]
There is also a third option: that of a political and economic
counterpoint. The Eurasian Union might well secure a polity based on more
collectivist and conservative religious values, with state economic
coordination and a form of democracy different from electoral democracy. It
would exchange with the dominant world system, but would not be embedded in
the neo-liberal world order. In this sense, it would be a competing
formation to neo-liberal capitalism. Some authors suggest that for this
model to be viable, the Eurasian Union should cooperate closely with China
and other BRICS countries.[18] This would form a coalition of sovereign
state defenders, which seek to be an alternative to the West, preserving
their independent judgment.
After analyzing the developments, I suggest that the idea of the leaders of
Eurasia, and first of all of Vladimir Putin, is to follow the third option
described above. The whole idea behind the Eurasian project is the
political alternative to the West – becoming closer to the East is
determined through the denial of the Western values. The Russian rhetoric
to a great extent emphasizes the multipolar world order with Russia being
an important pole.
In reality, the weak economic variable of the integration will probably
lead to the second scenario – that of the isolation from the world. The
integration, as seen from the description above, is state-driven, the
institutions of the Eurasian Union are dependent on the authoritarian
leaders, economic benefits are dubious. The other factor making the
mutipolar scenario less likely is the role of the other partners in
integration. For the moment, it is not clear that China will pay more than
lip service to the projects proposed by Russia, as they seem to be much
more useful to Russia than to China.
I would like to conclude by saying that the project of the Eurasian Union
seems for the moment to be dominated a great deal by political
considerations, and its economic variable remains quite weak.
-----------------------
[1] Laruelle, Marlene. 2012. Russian Eurasianism. An Ideology of Empire.
The Johns Hopkins University Press, p.1
[2] Ibid., p.177
[3] Lukyanov, Fyodor. 2014. Building Eurasia and defining Russia, in Liik,
Kadri, ed. 2014. Russia's Pivot" to Asia. European Council on Foreign
Relations., p.20
[4] Ibid., p.19
[5] Ibid., p. 22
[6] Roberts, Sean and Anais Marin, Arkady Moshes, Katri Pynnöniemi. 2014.
The Eurasian Economic Union. Breaking the Pattern of Post-Soviet
Integration? FIIA Analysis- 3, available at:
http://www.fiia.fi/en/publication/439/the_eurasian_economic_union/, p. 15
[7] http://www.eaeunion.org/#about
[8] Roberts. Op.cit., p. 5
[9] Ibid., p. 6


[10] Blockmans, Stephen and Hrant Kostonyan, Ievgen Vorobiov. 2012. Towards
a Eurasian Economic Union: The challenge of integration and unity. CEPS
Special Report No.75, December 2012, available at:
http://www.ceps.eu/system/files/CEPS%20Special%20Report%20No%2075%20-
%20Towards%20a%20Eurasian%20Economic%20Union.pdf , p.1
[11] Jarosiewicz, Aleksandra and Ewa Fischer. 2015. The Eurasian Economic
Union – more political, less economic. OSW Commentary. Centre for Eastern
Studies, No. 157, 20.01.2015, p. 4
[12] Blockmans. Op.cit., p.14
[13] Ibid., p.7
[14] Ibid., p.11

[15] Gilpin, Robert. 2001. Global Political Economy. Understanding the
International Economic Order. Princeton University Press. Princeton and
Oxford, p. 343
[16] Lane, David. 2014. Eurasian Integration: A Viable New Regionalism?
Russian Analytical Digest No. 146, 7 April 2014, p. 5
[17] Ibid., p. 5
[18] Ibid., p. 7