Written by Wolfgang Zank.

On 1 January 2015 four countries – Armenia, Belarus, Kazakhstan and Russia –  launched a Eurasian Economic Union (EEU); Kyrgyzstan joined a few months later. The member governments agreed on various types of cooperation, most important being a common outer tariff, basically an extension of the Russian tariff lines to all members.

Currently the Chinese and Russian leaders appear to act on the basis of a tacit compromise: Russia will not try to block Chinese investments in the region, as long China does not conclude separate trade or other treaties with post-Soviet republics.

The Russian president Vladimir Putin explained the project in 2013 the following way:  “The Eurasian Union is a project for maintaining the identity of nations in the historical Eurasian space in a new century and in a new world. Eurasian integration is a chance for the entire post-Soviet space to become an independent centre for global development, rather than remaining on the outskirts of Europe and Asia.” Putin’s words are not perfectly clear, but it becomes apparent that it is first and foremost a political project of transforming the member countries into an “independent” centre. And it was an offer for the “entire post-Soviet space.” But only five out of twelve countries finally joined the new club. As it is now known, when the Ukrainian President Viktor Yanukovich declared in 2013 that he intended to make Ukraine join, he provoked the Maidan Revolution, leading to his downfall. Ukraine signed an Association Agreement with the EU instead – which in turn made Putin occupy Crimea and start the insurrection in the Donbass. Georgia and Moldova also opted for EU Association.

From an economic point of view the EEU never made sense because the relatively high Russian tariffs hurt everyone – including Russia. But there has been a certain political logic behind it, namely the implementation of the Russian “Monroe Doctrine.” In particular, since Putin came to power, it has been an explicitly formulated aim of Russian politics to prioritize the “integration” of the post-Soviet space, i.e. to strengthen Russian domination. And others should stay out. This could be, as it was formulated already in the 1990s, the European Union, Turkey or Iran.  But the logic of exclusion also works, of course, against China. This policy could, however, not prevent strong centrifugal tendencies in the Commonwealth of Independent States, whose member states developed ever closer relations to the world outside. This applies also to Uzbekistan, the most populous Central Asian country, and to Azerbaijan, Tajikistan and Turkmenistan; none of them joined the EEU.

The EEU thus became a rather small club, with a rather ramshackle construction. Basic decision-making procedures are unclear, and numerous conflicts have arisen. For example, the other EEU countries did not follow Russia when it imposed counter-sanctions against the EU. Belarus was accused of being a gateway for EU agricultural products into Russia to which Russia responded with import bans; Belarus and Kazakhstan prevented the entry of Russian oil products and justified this by excessive Russian deliveries under the impact of the fallen ruble; Belarus refused to deliver oil products, preferring to send them elsewhere, against hard cash.

But this does not mean that the EEU has had no impact, perhaps best and most regrettably seen in the case of the Dordoi market outside Bishkek in Kyrgyzstan. This market developed after 1991 into an important trade hub, mainly for products from China which were re-exported from Dordoi. Various textile factories, using Chinese raw materials, also began operations. This was one of the rare success stories in an otherwise very poor country. But the combined effects of the Russian recession since 2013 and the introduction of Russian tariffs strangled this market. It has also been significant that the EEU has agreed upon a free-trade agreement, namely with Russia’s old ally, Vietnam. But so far there have been no openings in this direction towards China.

Currently the Chinese and Russian leaders appear to act on the basis of a tacit compromise: Russia will not try to block Chinese investments in the region, as long China does not conclude separate trade or other treaties with post-Soviet republics. In the context of the One Belt One Road (OBOR) initiative, China has so far not proposed any agreements of this kind. In the long run, however, this could become a serious constraint on the endeavors to increase transactions between China and countries along the New Silk Road. The main impediments to trade and investments and cooperation are not so much deficits in physical connectivity, but tariffs and non-tariff trade barriers such as legal investment restrictions or divergent safety or sanitary standards. The EU and its partner countries address these in the context of the Association Agreements, mainly through a large-scale export of EU norms to these countries. As long as the OBOR initiative does not expand to include these kinds of agreements, its impact on boosting transitions will remain comparatively moderate.

Further Reading:

Nicu Popescu, (2014), ‘Eurasian Union: the real, the imaginary and the likely’, Chaillot Paper no. 132, Paris, EU Institute for Security Studies, September, http://www.iss.europa.eu/uploads/media/CP_132.pdf.

Wolfgang Zank, ‘The Eurasian Economic Union: A Brittle Road Block on China’s “One Belt – One Road” – A Liberal Perspective’, The Journal of China and International Relations, forthcoming.

Wolfgang Zank is associate professor in the Institute for Cultural and Global Studies at Aalborg University. Image credit: CC by Wikimedia Commons.