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Russia’s Economic Powerplay: The EaEU

On May 29th, Russia signed an economic treaty with Belarus and Kazakhstan that if successfully expanded, could significantly alter the balance of regional power in favor of Russia. Through free trade blocs and common programs, the Eurasian Economic Union (EaEU) also promises to reinvigorate economies that never successfully transitioned into market economies after the dissolution of the USSR. The union, however, must overcome a series of internal and external hurdles before realizing long-term success. Until then, possible outcomes sit on a wide range in between complete collapse à la USSR or growth into an economic bloc capable of challenging US, EU, and Asian interests in the region.

Although the EaEU is an explicitly economic organization, if the EU has taught the world anything, it is that common economic programs entail heavy political involvement and there is no reason to believe that a similar Eurasian Union with Russia at the helm would avoid the example. Additional political consequences of a successful union include increased cooperation between the authoritarian governments of former Soviet states, increased Russian political influence in the region, and a more influential Russian voice on international economic issues. This influence would grow as the union adds additional members. Armenia and Kyrgyzstan have already made integration plans for 2015 while Uzbekistan and Tajikistan have also expressed interest in quick accession.

Under Putin, Russia has pursued the concept of an economic bloc since 2000 when it established a Eurasian Economic Community with Belarus and Kazakhstan. In 2011, the countries established a Customs Union that eliminated customs borders between the countries in 2011. Since then, a special commission has spearheaded further integration, moving towards the goal of an official Eurasian Economic Union set to begin January 1, 2015 after each countries’ parliaments approve the recent treaty. From the beginning, Putin has touted the EaEU as the EU equivalent for post-Soviet states, describing it as a “powerful supranational association capable of becoming one of the poles in the modern world.” In 2011, Putin described the operational aspects for the EaEU, writing:

“It is crucial that the Common Economic Space is rooted in coordinated action in key institutional areas such as: macroeconomics, ensuring competition, technical regulations, agricultural subsidies, transport, and natural monopolies tariffs. Later, this framework will also include common visa and migration policies, allowing border controls between our states to be lifted…we will no longer have to equip the 7,000 kilometre-long Russian-Kazakh border…For the general public, the lifting of migration, border and other barriers, including what are known as labour quotas, will mean that they have a free choice about where to live, study, or work. Incidentally, the Soviet Union with its system of registered domicile did not offer anything like this complete freedom.”

In short, Putin’s EaEU bloc is to be an updated Soviet Union rebuilt on market economy principles in order to enjoy the same economic benefits as the EU. And, although Putin says that the lessons of the EU’s failures will allow the EaEU to avoid “mistakes and unnecessary bureaucratic superstructures,” it will still deal with these basic dangers and others that are far more ominous; its member countries will introduce their own myriad weaknesses into the new organization, namely rampant corruption, cronyism, organized crime, and authoritarian control. Former Soviet states have grappled with these problems with little success and remain some of the most corrupt governments in the world. These weaknesses alone threaten to cripple the internal effectiveness of the union. There is a chance, however, that these weaknesses can be successfully incorporated into the union. If they are successfully integrated into the common policy, the regional influence of the bloc will increase greatly.

In recognition of this potential, Europe has confronted states that have courted both the EU and the EaEU, warning that “one cannot at the same time be a member of a customs union and be in a deep common free-trade area with the European Union.” Unfortunately, this insistence on a clear definition of allegiances may only further empower the EaEU as Eastern European and Eurasian states struggle to meet the stringent criteria for EU membership or close involvement. Russia is only too eager to join hands with these border states in an ironic market economy reproduction of the Soviet iron curtain.

Although announcing the danger of a new Cold War is both alarmist and farfetched, these recent developments hint at declining relationships and future conflicts. Since 2001 the US transit center base in Kyrgyzstan has been essential for ISAF’s mission in Afghanistan and has accounted for 98% of troop movement into the country. The Kyrgyzstani parliament, however, in a move dictated by Russia, recently ordered the closing of the base, giving the US and ISAF forces just over a month to vacate the base. This move marks the end of Russia’s acquiescence to US requests to use Central Asia as a strategic staging ground for nearby campaigns, something they reluctantly agreed to after the September 11th attacks.

The US has responded to these realities with the European Assurance Initiative, designed to strengthen US and NATO presence and influence in Central and Eastern Europe where the White House’s declared intention is a “show of support to allies who have contributed robustly and bravely to Alliance operations in Afghanistan and elsewhere and who are now deeply concerned by Russia’s occupation and attempted annexation of Crimea and other provocative actions in Ukraine.” To this end they are augmenting existing land, air, and sea forces in Estonia, Latvia, Lithuania, Poland, the Black Sea, Romania, and Georgia with a focus on the “newest allies” furthest to the East. Both Russia and the US are working to solidify their economic and political influence on their side of the border of interests. The EaEU’s role in future tensions, however, is not confirmed and the fledgling organization still has many organization difficulties to overcome including territorial disputes, specific common policies, and push-back from the EU and other interested parties.

Although the union will likely increase Russia’s voice in the region, it will not be large enough to exercise a sufficiently powerful economic influence on a global scale to significantly alter the current balance of global economic power. Even when union membership increases to seven countries, the GDP of the bloc will still sit around three trillion dollars. Although this number is enough to exercise heavy regional influence, when compared with the GDPs of the EU at seventeen billion, the US at sixteen billion, and China at nine billion, there is no reasonable basis for fear of global Russian economic dominance. Still, the union combines strategic territories and valuable natural resources that will only serve to enhance its regional influence and increase its GDP vis-a-vis its competitors.

Russia’s foreign policy surrounding the EaEU is clear cut. They seek to increase their economic and political leverage in the region. In all likelihood, the EaEU will serve a successful tool towards that end. It can not, however, reinstate its member countries to the position of a world power capable of surpassing the US, the EU, or China. Statistical proof of its partial successes or failures should be quick to follow its 2015 formal creation. Until then, future events in the Ukraine and political changes in the member countries will offer hints as to whether the EaEU will be a quickly forgotten experiment or a lasting economic bloc capable of reshaping the region in their favor.

Michael Brooks

Michael Brooks

Michael Brooks is an OSINT researcher and OODA Analyst and with a background in international development and security across Central Africa and the Middle East. Currently based in Berlin, Germany, he holds a BA in International Policy from Patrick Henry College and a Masters in International Security from the University of St. Andrews.