Russia’s Latest Moves in the Eurasian Economic Union

The Eurasian Economic Union (EEU, also known as the EAEU) is a regionalization scheme (with economic cooperation as one of its main objectives) started in 2015 by Russia, Belarus, and Kazakhstan, followed by Armenia and Kyrgyzstan. It is now acknowledged as one of the world’s major blocs organized for intra-regional cooperation and trade. In 2016, a non-Eurasian and the first Southeast Asian country, Vietnam, joined the group. Israel, Egypt, and Iran are queuing up behind Vietnam for possible membership status and/or trade engagement consideration at very preliminary stages.

The group consists of 182 million people in terms of intra-regional population and a large sub-continental land mass. Kazakhstan alone is about the same size as Western Europe. On January 1, 2018, the EEU celebrated its third-year anniversary. Part of the rationale for its formation was to re-integrate post-Soviet splinter republics, like Kazakhstan, into an economic cooperation organization. An important stakeholder in this arrangement is Russian President Vladimir Putin who launched it in 2015. Credit for its conceptualization goes to Kazakh President Nursultan Nazarbayev who was the first person to outline the EEU idea. His vision was succeeded by Russian enthusiasm on its development and is now driven by Putin.

Russia continues to hold a strong position in leading the EEU due to its strength in military affairs, economic power, large size both in terms of land mass and population, as well as manpower. Some EEU members are dependent on Russian state power for their defense and economic development. Armenia for example falls under the Russian security and economic umbrellas. In the arena of trade, Russia and Kazakhstan are also Kyrgyzstan’s major trading partners.

In terms of makeup, some observers argue that the governments of the countries in the group tend towards governments of strength and strongman regimes. Because of the nature of strongman regimes, decision-making on issues of common interest are fast but decisions that concern varying national interests tend to see the various stakeholders put state interests and priorities above collective agreement. Also, the group lacks any unifying ideology, in contrast to the Cold War-era Soviet Union, which was built on the communist fraternity. It is often thought of in economic (specifically customs union) terms than in terms of ideological beliefs. A commonality that links up Russia, Kyrgyzstan, and Kazakhstan are that they are major net energy exporters.

In the West, the EEU is perceived as the Russian counterpart to the European Union (EU). There is a hope nursed by the Russians and others to promote the Eurasian internal market and its intra-regional trade, very much like the EU. The latter, which is far advanced in this regionalization game, is facing some pushback in the anti-globalization movement following Brexit. Currently, it is firmly in the political orbit of center-right and conservative politicians. When discussing the differences between the EEU and EU in terms of progress, time may be an important factor as it took a number of decades for the EU to reach this status whereas the EEU is barely 3 years old.

The EEU has similar ambitions as the Association of Southeast Asian Nations (ASEAN) which quietly formed the ASEAN Economic Community (AEC) at the end of 2015. In some ways, there are similarities between the EEU and ASEAN in that there is no common parliament or common ideological interests. The member states are still very much cognizant of their national interests. Compliance with customs’ union obligations is still very much dependent on national mechanisms and monitoring systems. In that sense, pragmatism seems to be a hallmark of the arrangement and to move together at a pace comfortable and manageable to all parties. The dominant party in the case of the EEU is Russia. ASEAN is more established in its economic exchanges compared to the EEU and it grew out of a post-war history with exchanges between market economies and setting up production networks to attract foreign direct investment. ASEAN’s philosophy (the ASEAN Way) is dependent on consensus-seeking amongst its member states.

The West’s response to the EEU ranges from enquiries for more information to geopolitical suspicions, depending on which end of the political spectrum in their liberal democracies. In many ways, the EU is way ahead of the EEU in terms of regionalization, union, and community building. Other than the EU, the other emerging player in the region is China with its Belt and Road Initiative (BRI). Currently, Russia and China enjoy some form of friendship and common interests. Due to developments in Ukraine, Russia has experienced sanctions imposed by the EU, compelling Russia to turn to the East, especially countries like China, for its energy exports (e.g. natural gas that was destined originally for the EU).

Due to common interests, Russia and China have seen some alignment of interests in the Central Asian region, leading to the co-existence of the EEU and the BRI as China lays high speed railway (HSR) tracks in that region, including those that will reach Moscow under the rubric of the BRI. Both are also engaged through another Central Asian regional organization, the Shanghai Cooperation Organization.

In 2017, Russia announced its latest hopes for the EEU which is the inclusion of Serbia in the organization’s free trade area (FTA). Like the BRI, Russia hopes to increase connectivity with Serbia through transport/logistical infrastructure, energy (Russian natural gas), as well as in the finance and banking sectors. In the past, there have been calls from the EEU stakeholders to look at cooperation in fields like medicine.

Other East Asian countries have expressed some interest in communicating with Russia and other EEU members on trade matters. They include Indonesia and South Korea. During the Cold War, South Korea and Russia were on the opposite sides of the geopolitical spectrum and the period witnessed non-active bilateral exchanges between the two. But the rise of South Korea as a middle power and as a leading economy in the post-Cold War world has changed that. South Korea is keen to pursue a FTA with both Russia and the EEU even as it pursues close ties with its traditional ally the US through other trade agreement negotiations and with China.

South Korea’s focus on Russian trade and economic ties as well as Russia’s working relationship with China appears to benefit Russia as well. Since the Tsarist days, Russia has been more focused on developing its European sub-continental landmass and somewhat neglected the Russian Far East. President Putin may want to reverse this as a way to buffer Russia’s relationship with both East and West so that it is not over-dependent on any side. Russia’s EEU engagement with Serbia and others on its Western flank and its increasing activities with Northeast Asia on its Eastern flank may just help it achieve this balance or at least mitigate over-dependence on one side to a certain extent.