Asian powerhouses · Recent Updates · Regional Trade Agreements/FTAs · Western World

Playing by the rules?: EEU, vested interests and economic integration

Regional integration has quicky emerged as the new age global trend in the field of international trade. ARecently a lot of people have been taken in with the Eurasian Economic Union (EEU), a trading bloc forged between three ex-Soviet economies: Russia, Belarus and Kazakhastan.Opinions regarding the Russia-fueled merger were all over the news.
Though the deal is still awaiting final accent from the Parliaments of the three countries, it is hoped that the treaty establishing the aforementioned Union will be active by January, 2015.

This particular development is significant and of acute interest for two reasons. Firstly, because taken together, the three nations have a combined economy of $2.7 trillion and a collective population of 170 million, not to mention the vast energy resources that they currently possess. The second noteworthy aspect is that this ambitious plan to form a single centre of economic power in the area, originating from the 2010 Common Customs Union, just stops short of introducing a single currency. Though a long delay in the creation of a common energy market is expected, the initiative must be given due credit.

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At Thursday’s signing in Astana, Kazakhstan, Russian President, Vladimir Putin said  that the Eurasian bloc would enable the trio to strengthen their positions in global markets – alongside the EU, US and China. Armenia and Kyrgyszstan have expressed interest in joining the union later and the former’s deputy foreign minister, Shavarsh Kocharian, has said that Yerevan will be ready to join the customs union by mid-April. But as Reuters maintains points out, both hopefuls are tiny and poor countries, whereas other ex-Soviet republics, including big energy producers like Azerbaijan and Turkmenistan, have steered clear of the same.

The idea was in the pipeline for several years and some claim that it is only because of Mr. Putin’s continuing effort to create an independent economic force led by Russia, that this deal was possible . When we consider that Russia has only recently landed a massive gas-supply deal with China, we can see that the Russian head is quite serious about his country’s economy and is refusing to be deterred by the recent sanctions from the West.

But I guess it does all does make political sense, for the Russians atleast. Back in 2005, Russian President Vladimir Putin had publicly lamented the collapse of the Soviet Union, calling it a “major geopolitical disaster of the century”. His solution? Get all the ex-Soviet nations back into the one fold, the only difference being that this time around it would be an economic collaboration instead  of a political one. A simple case of reverse-engineering. But Mr. Putin, ex-KGB and a man with a certain knack for excellent rhetoric seems to have already foreseen such analysis and in the Russian daily Izvestia, said:

“None of this [referring to the EEU] entails any kind of revival of the Soviet Union.It would be naïve to revive or emulate something that has been consigned to history. But these times call for a close integration based on new values and a new political and economic foundation.”

Even though Mr. Putin can barely seem to keep the word “political” away from the word “economical”, currently it seems that the central philosophy of the EEU is the almost identical to the one adopted by the EU: free transit of goods, services, capital and workforce. Most authors agree that the EU model was a success ( the Danish success story can be found here) but it remains to be seen whether the same can be replicated by its Eastern cousin. Amanda Paul, an expert on the Eurasian region at the European Policy Centre has heaped criticism on the new bloc for not giving adequate emphasis on democracy and human rights.

In light of this, an investigation in the form of some serious questions are warranted here:

What about Ukraine?

We all know about the Russian efforts to prevent Kiev from joining the EU and how the Ukranian President Viktor Yanukovych  was ultimately ousted due to his last-minute decision to go Moscow’s way. It is really too early for the public conscience to have forgotten about the riots caused by Yanukovych’s failure to stand strong against its powerful neighbour. The ongoing unrest isis is already reaponsible for the loss of thousands of innocent lives. Not to rain down on Mr. Putins enthusiasm for regional incluaiveness but it seems almost barbaric to allow the deafening drumbeats of “Development! Integration!” to engulf the cries of the Ukrainian public.

Actually, Ukraine has been driven even further into the West’s arms by the de-facto Russian annexation of the Black Sea peninsula recently.Trouble just doesn’t seem to stop because the new pro-EU president, Petro Poroshenko, clarified that he was in favor of following through with Ukraine’s integration with EU as soon as possible. Russia would hardly be pleased with this.
[For those who enjoy visual representations: http://graphics.wsj.com/ukraine-conflict-map/%5D

Belarus’ preaident, Alexander Lukashenko added some rather gloomy words at the signing of the deal, “We lost someone, Ukraine … for Ukraine, the burden was too heavy,” the Belarus leader said. “Sooner or later the Ukrainian authorities will know where happiness is.”

The last line, if read in isolation, is enough to shoot chills down the spines of human right advocates. Which brings me to my next inquiry.

Economics? Or just good ol’ politics?

The first thing to note here is that there are severly differing opinions that the three leaders have regarding the pact. While Mr. Putin was clearly content with the deal, Belarus’ authoritarian President  Lukashenko said that he was “not fully happy” with the agreement, but hailed it as a “compromise”. On the other hand, President Nursultan Nazabayev of Kazakhstan called the agreement “well-balanced”. It seems that Kazakhastan’s energy riches left Russia with very little leverage in the negotiations.

Lilia Shevtsova, an expert on Russian affairs, is correct in wondering whether Lukashenko opted to join in simply because he “could not go to Europe” due to his repressive policies and “he cannot survive by himself” because of the country’s economic problems. Meanwhile, the Kazakh President hopes to utilize the Russian influence to balance out China’s economic influence in the Central Asian country. It is questionable whether three nations, with such vested interests, will be able to focus on economic integration at all.

[Picture source]
Special thanks to Vinayak Panikkar for the news update and Prakhar Bhardwaj for the editing tips.

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