CESRAN Blog, Russia and Eurasia

What’s The EEU And What Are Its Chances?

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Five years ago, Moscow had every reason to feel secure about its neighborhood.

Ally Kazakhstan was settling in as the first post-Soviet state to chair the Organization for Security and Cooperation in Europe. Belarus had acquiesced to new oil-supply terms from Russia. And all three countries had just joined forces in a new Common Economic Space, a partnership they hoped would eventually outweigh or even absorb the European Union.

The common space, formally known as the Eurasian Customs Union, this week emerged from its five-year cocoon as the Eurasian Economic Union (EEU), an organization once anxiously anticipated by former U.S. Secretary of State Hillary Clinton as a move to “re-Sovietize” the former U.S.S.R.

But as the new union quietly steps into existence, any threat of a reemerging Soviet empire seem wildly off the mark.

Here’s what you need to know about the EEU.

What It Is

Structurally, the EEU is modeled on the EU, comprising a single market with its own commission, court, and bank — based in Moscow, Minsk, and Almaty, respectively. But while Russian President Vladimir Putin would like to see its writ expanded to include a political function, the union remains largely economic at the insistence of its other members, focusing on the free flow of capital, goods and services, and workforce throughout a common market with an estimated output of $2.4 trillion and comprising more than 170 million people.

It Started Out With Three Members. Now It Has… Four

Vladimir Putin once spoke grandiosely of a Common Economic Space stretching from Vladivostok to Lisbon. But so far, the EU has rejected direct negotiations with the supranational body. Post-Soviet neighbors have had doubts, as well. Ukraine has steered clear of the group since narrowly avoiding being pressured into membership ahead of the Maidan protests. Energy-rich Azerbaijan has nixed any interest in the group. Armenia, which abandoned closer ties with Europe in the face of Russian coercion, joined the group on January 2; Kyrgyzstan is set to join the group in May.

But the absence of a populous country like Ukraine and a rich one like Baku leave the EEU decidedly lopsided, with Russia playing the dominant partner both in terms of population and GDP.

Two Of The Members Already Have Doubts. Big Ones

Kazakh President Nursultan Nazarbaev was, in fact, the first to conceive of a Common Economic Space, more than 20 years ago. But his thoughts on the issue have evolved along with his country’s economic well-being. While the notion of open borders and free trade appealed to an impoverished Kazakhstan in its early years of independence, it now enjoys handsome profits from its vast energy and mineral resources.

Nazarbaev has said the Kremlin’s growing isolation from the West over Ukraine will “impact” attempts to build the EEU, and has stressed that Kazakhstan will leave the EEU if its interests are infringed — an apparent reference to the Russian majority in its territorial north and the Kremlin’s stated aim of protecting its cross-border kin.

Belarusian leader Alyaksandr Lukashenka, meanwhile, has criticized Moscow for banning imports of Belarusian meat and dairy out of fears they may be repackaged versions of EU products, which are currently banned by Moscow in retaliation for Western sanctions over Ukraine.

It’s Hard To Launch An Economic Union When Someone’s Economy Is Tanking

Moscow may seem like an appealing partner when oil’s at $100 a barrel or the ruble’s trading at 30 to the dollar. But with Russia currently struggling to survive low oil prices and sweeping Western sanctions, it’s considerably less alluring to its union partners. The Kazakh exports to Russia are dropping as businesses fear a loss in profits; remittances from Kazakh, Kyrgyz, and Armenian workers in Russia are also expected to drop. Belarus has been forced to impose price freezes to avoid a run on foreign currency. Lukashenka, who likes things steady, has purged a number of major government officials in recent days, including his prime minister and national bank chief.

Post from: RFE/RL

Copyright (c) 2014. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave NW, Ste 400, Washington DC 20036.

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