Putin wins with Eurasian Economic Union

Putin wins with Eurasian Economic Union
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Russia, Kazakhstan and Belarus recently agreed to establish the Eurasian Economic Union. Like the Custom Union before it, Russia looks to benefit the most.

On May 29, Russian President Vladimir Putin, Kazakh President Nursultan Nazarbayev and Belarusian President Alexander Lukashenka met in the Kazakh capital of Astana to sign a treaty authorizing the establishment of the Eurasian Economic Union on January 1, 2015. The signing took place despite a number of long-standing disagreements, particularly concerning the elimination of Russia’s duties on oil and gas exports.

Economic unions one-sided

The Customs Union, which was launched in 2009, is credited with nearly doubling trade volume between the three member states. Yet, a closer examination of the numbers indicates asymmetric trends. Russian exports into Kazakhstan in 2013 were 28.5% higher than in 2008, but Kazakh exports into the Russian Federation have experienced little growth.

Ironically, trade with other Customs Union members constitutes only 6.9% of Russia’s trade volume, in comparison to 18.4% for Kazakhstan and 50.6% for Belarus. In the first quarter of 2014, Russia’s trade volume with the other two states was 14.6% lower than in the same quarter last year. Trade with Belarus constitutes less than 1% of Kazakhstan’s total trade volume.

The Customs Union has also brought with it high import tariffs to protect Russian industry. Russia has also assumed an increasingly protectionist stance, which could lead to the trade bloc becoming more isolationist instead of acting as a bridge between Europe and Asia. One third of all protectionist legislation enacted worldwide in 2013 originated from the post-Soviet trade bloc, a phenomenon that will likely accelerate as Russia’s economy enters recession.

Uncertainty about currencies, member expansion

Rumors have continued surrounding the formation of a common currency for Belarus, Russia and Kazakhstan, which would be called the “altyn,” a Kazakh word for gold. Specialists at the Eurasian Economic Commission have been quick to point out that there are no official plans as of yet for the creation of such a currency, and it should not be expected in the near future.

Armenia has agreed to sign an agreement on its entrance into the Eurasian Union in May or June, according to the Ministry of Economics. Armenia’s interest in Eurasian Union membership has been marked by an increasingly pro-Russia foreign policy, raising concerns in Armenia’s civil society that it will lose sovereignty as a result of the union.

Kyrgyzstan has attempted to assuage concerns about its entrance into the Eurasian Union by pressing Moscow for financial support. The pressure bore fruit with the announcement that Russia would provide the impoverished Central Asian state with $1.2 billion to be spent on the protection of border regions and modernization of infrastructure.

Businessmen in Kyrgyzstan are anxious that the increase in import tariffs will damage the shuttle trade between China and the former Soviet Union that constitutes an important element of Kyrgyzstan’s economy.

The signing of the Eurasian Economic Union has taken place amidst an increasingly tense situation across the post-Soviet space as leaders anxiously await Russia’s next move toward Ukraine and any further redrawing of international boundaries.

Valery Tishkov, a former Russian nationalities minister and influential public figure, recently warned that Kazakhstan’s ethnically Russian regions could face a scenario similar to that unfolding in southeast Ukraine if nationalist forces gain power after the end of Nazarbayev’s presidency.

Fears that Moscow will eventually attempt to turn the Union into a full-fledged political project have proven difficult to assuage, particularly concerning Russia’s aggressive foreign policy in Ukraine. Regardless, the successful creation of a Eurasian Economic Union represents a major victory for Putin, as the establishment of the trade bloc has been his most important foreign policy priority.

About Author

Luke Rodeheffer

Luke Rodeheffer is a cyberthreat researcher at Flashpoint in New York City. He holds an MA from Stanford University, where he was a FLAS Fellow for Turkish. Luke was previously a Fulbright Fellow in Ukraine and a research assistant at Koç University in Istanbul. You can follow him on Twitter @LukeRodeheffer