EEU I: Overflight


Part I of an ongoing series analyzing the Eurasian Economic Union


Background

Since the fall of the Soviet Union, Russia has launched numerous integration projects aimed at bringing post-Soviet states back within its reach. In 2010, Russia, Belarus, and Kazakhstan formed the Eurasian Customs Union. Armenia and Kyrgyzstan were later added as members. This was the precursor to the Eurasian Economic Union (EEU), which was signed into effect on 1 January 2015. Kyrgyzstan is the only member of the Customs Union that has yet join the EEU, but is scheduled to do so in May. Although Russia had hoped for more extensive measures of integration (the introduction of a common currency for example), the EEU was formed exclusively as an economic partnership between sovereign states.

 

Terms & Motives

The EEU has been formed solely on economic terms, an assurance that each member state’s sovereignty will be protected. For around two decades, Russia has sought integration with former Soviet states. While some, such as Belarus, have been easier to manipulate, others have been more adamant about preserving their sovereignty.

President Nursultan Nazarbaev of Kazakhstan was adamant about the EEU being purely economic in nature. As a result, the official treaty mandates that each country’s political system must be respected and that member states do not have to make political changes to enter the union.

Since 1999, Belarus has been on a slow path to becoming a Union State with Russia. It has been a mostly unsuccessful process of integration, the pinnacle of which has been the formation of the EEU. Recently, there have been disagreements between Russia and Belarus over sanctioned goods. In a counter-move against EU sanctions, Russia banned food exports from the EU. It is now also banning some food imports from Belarus, claiming that they are being re-exported from the EU. 

For Armenia, the decision to join the EEU was a complete turn of events after Armenia withdrew from an Association Agreement with the EU in 2013 to join the Customs Union.  Russian gas company Gazprom, which provides about one third of Armenia’s gas resources, significantly reduced gas prices after Armenia joined the Customs Union. Russia also accounts for just under one quarter of Armenia’s foreign trade.

 

Organization

The EEU is split up into various governing bodies. The heads of each member state make up the Supreme Eurasian Economic Council, the authority figure of the EEU. The regulatory branch is the Eurasian Economic Commission (EEC), which has a court located in Minsk. There are 12 members, or “ministers,” of the EEC; three representing each member state with one that acts as chairman. These ministers are chosen to serve a four year term by the Supreme Eurasian Economic Council, giving the executive branch control over the regulatory branch.

The EEU’s development bank is located in Astana. Members of the Eurasian Development Bank include EEU member states as well as Tajikistan and Kyrgyzstan. As of June 2014, the EDB assets totaled 4.3 billion USD.

 

Prospects for Success

During the formation of the EEU, President Putin said that the EEU would be “a model of a powerful supranational association capable of becoming one of the poles of the modern world.” However, the EEU is already falling short of this mark. Economic integration is off to a slow start, and both Belarus and Kazakhstan have suggested that they may leave the union for political reasons.  

It is likely that any future success for the EEU depends upon the expansion of its market and the introduction of new investors to refresh Russia’s hurting economy. Russia, the largest EEU member state, has experienced economic decline in recent months, with the value of the Ruble falling to approximately 65 Rubles to the dollar.

President Putin had originally conceptualized Ukraine being a part of the EEU, which would have been advantageous since Ukraine is one of Russia’s biggest trading partners. They will now have to look elsewhere for trade deals. However, offers are not in short supply. By quickly securing trade partnerships with outside sources, the EEU will benefit from the stability foreign markets can offer.

 

Foreign Interest

The EEU has already attracted business interest from states across the Eurasian landmass. Egypt was among the first to secure a deal, creating a free trade zone between parties. According to Iran’s Ambassador to Russia, Iran and the EEU plan to sign trade agreements in the near future. Similarly, reports have speculated as to Israel’s interest in establishing a free trade agreement with the EEU. Other interested parties include Vietnam, Turkey, Tajikistan, and India.