The leaders of Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan met on December 9, 2022, for a meeting of the Supreme Eurasian Economic Council (SEEC), the highest supranational body of Eurasian Economic Union’s (EAEU).[i] The SEEC had earlier convened for a meeting in May this year in a virtual format and had also organised the first Eurasian Economic Forum.[ii] The December 9 meeting was in fact the union’s first in-person meeting after a gap of three years owing to Covid-related restrictions. The first part of the meeting was held in a closed-door format. It was then followed by extended talks, which also included two observer states – Uzbekistan and Cuba. While these meetings are part of the usual format of the EAEU, the frequency and scope of the discussions have assumed greater significance in the backdrop of the Russia-Ukraine conflict since February this year.
Topical issues of the EAEU activities, prospects for further deepening of integration processes, in particular, improving the functioning of the single market for goods and services were discussed during the December 9 meeting. A package of 15 documents was signed, chief among those being decisions on “the start of negotiations with the United Arab Emirates on the conclusion of a free trade agreement” and setting up “the Council of Heads of Authorized Bodies of the member states of the Eurasian Economic Union in the energy sector".[iii]The countries have also agreed to create a mechanism to support their cooperative activities in production in industries. This step is crucial for enhancing common technological independence and sovereignty.
From January 1, 2023, service sectors, including meteorological services, household and other support services, will move to the format of the common market of the EAEU. This is a step towards increasing the competitiveness of goods, works and services, as well as to reduce prices and tariffs for consumers, service providers' costs arising from re-obtaining permits, etc.[iv] The long-term goal of the union is to achieve the creation of a single gas market over the next two years, to form the principles of its work and move on to the practical implementation of a common electricity market.
EAEU and its Significance for Russia
The Russia-led EAEU[v] has been operating as a customs union since 2011 and as an economic union since 2015.[vi] The EAEU is governed by the SEEC, the Eurasian Intergovernmental Council (EIC), the Eurasian Economic Commission (EEC), and the Court of the Eurasian Economic Union (CEEU) (Figure 1). Chairmanship in the SEEC, EIC and the EEC is arranged on a rotational basis with one member country chairing each year. The current presidency of the Union is held by Kyrgyzstan and will pass to Russia in 2023.
The EAEU is designed to provide freedom of movement of goods, services, capital and labour to the participating countries. It is mostly seen as an attempt by Russia to develop a project to counter the Eastern Partnership (EaP) initiative[vii] of the European Union (EU). EU launched the EaP as an offshoot of the European Neighbourhood Policy (ENP) in 2009 to foster political association and greater economic integration with six Eastern European (Ukraine, Moldova, and Belarus) and South Caucasus (Georgia, Armenia, Azerbaijan) partner countries. Deep and Comprehensive Trade Agreements (DCFTA) form the core of EU’s ‘association agreement’ with partner countries within the aegis of the EaP. It is important to note that the full membership of the EAEU cannot be combined with DCFTA offered by the EU because “membership of the Customs Union implies a loss of sovereignty of member countries over trade policy and sets common tariffs that are incompatible with the elimination of tariffs planned under the DCFTA.” This makes the two integration initiatives “mutually exclusive.”[viii]
Apart from being a counterbalance to the EU, the EAEU is also seen as a Russian initiative to balance the growing influence of China in the Central Asian region. Thus, the initiative provides Russia with a platform to showcase itself as a great Eurasian power. With the EAEU, Russia has sought to restore Russia’s influence in what the country considers as its traditional sphere of influence, which had been impacted post the dissolution of the Soviet Union. For the remaining member countries, a union with Russia provides greater political support, cheaper energy, as well as security guarantees, given that these countries also form part of the Russia-led Collective Security Treaty Organisation (CSTO).
Source: Maksim Karliuk[ix]
In addition to these geopolitical objectives, the EAEU is also premised on a specific long-term economic agenda.[x] The EAEU’s trade turnover surpassed $73 billion in 2021, with the Russian currency (ruble) serving as the primary currency, accounting for about 72% of all payments.[xi]This aspect has gained further significance following the Russia-Ukraine conflict since February this year given that Russia has been expelled from the Society for Worldwide Interbank Financial Telecommunications (SWIFT) system. As a result, Russia has been pushing for alternative ways of trading with other countries, preferably in domestic currencies.
Till date, the EAEU has entered into Free Trade Agreements with Vietnam[xii], Singapore[xiii], Serbia[xiv], and finalised terms with Iran. It has also started negotiations with Saudi Arabia. The EAEU also aims to further expand its scope by including countries like Indonesia, India, Egypt and Thailand among others.[xv]
Conclusion
It is worth noting that the chairmanship of the EAEU, which is currently held by the Kyrgyzstan, will pass on to Russia in 2023. The relevance of EAEU has increased for Russia in the aftermath of the February Ukraine conflict and consequent sanctions imposed on it by the West. As Moscow looks for alternative markets, its cooperation with the member states of the EAEU is crucial on a bilateral as well as the multilateral level. The FTAs with other non Western countries also hold greater salience in the aftermath of the Russia-Ukraine conflict which has caused further disruptions in the global and regional supply chains after the Covid-19 pandemic. In this backdrop, the EAEU has received further momentum and it has been projected as “Russia’s initiative to form a Greater Eurasian Partnership”.[xvi]
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*Dr. Himani Pant, Research Fellow, Indian Council of World Affairs, New Delhi.
Disclaimer: Views expressed are personal.
[i] Meeting of the Supreme Eurasian Economic Council, The Kremlin, 9 December 2022, http://en.kremlin.ru/events/ president/news/70058, Accessed on 10 December 2022.
[ii] Meeting of the Supreme Eurasian Economic Council, The Kremlin, 27 May 2022, http://en.kremlin.ru/events/ president/news/68494, Accessed on 10 December 2022.
[iii]Documents signed following the meeting of the Supreme Eurasian Economic Council, The Kremlin, 9 December 2022, http://kremlin.ru/supplement/5879, Accessed on 4 December 2022
[iv]EAEU common market of services expanding, Eurasian Economic Union, 9 December 2022, https://eec.eaeunion.org/en/news/edinyy-rynok-uslug-eaes-rasshiryaetsya/, Accessed on 11 December 2022.
[v] Russia, Belarus, Kazakhstan and Kyrgyzstan signed a treaty on forming a customs union and common economic space in 1999. The treaty was based on the model proposed by the Kazakh President Nursultan Nazarbayev in 1994 who envisioned the formation of a unified customs zone to facilitate “free movement of goods, services, capital and workforce”. This culminated in the creation of a Eurasian Economic Community (EEC or EurAsEC) a year later. In May 2014, the treaty of the Eurasian Economic Union was signed and it came into effect from1 January 2015
[vi] Eurasian Economic Union, About the union, http://www.eaeunion.org/?lang=en#
[vii] EU launched the Eastern Partnership as an offshoot of the European Neighbourhood Policy in May 2009 to enchance the EU's relationship with six East European and south Caucasian partners – Belarus, Ukraine, Moldova, Georgia, Armenia and Azerbaijan to facilitate closer co-operation with the region.
[viii] Laure Delcour and Hrant Kostanyan, Towards a Fragmented Neighbourhood: Policies of the EU and Russia and their consequences for the area that lies in between
[ix] Maksim Karliuk, “The Eurasian Economic Union: An EU-Inspired Legal Order and Its Limits”, Review of Central and East European Law, 2017 42. 1, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3590678.
[x]E. Vinokurov, Eurasian Economic Union: Current state and preliminary results. Russian Journal of Economics, 2017, 3(1): 54–70, Accessed on 5 December 2022
[xi]Does the Eurasian Economic Union have a place in Central Asia’s future? The Diplomat, 2 December 2022, https://thediplomat.com/2022/12/does-the-eurasian-economic-union-have-a-place-in-central-asias-future/, Accessed on 8 December 2022
[xii]Vietnam – EAEU full free trade agreement, 23 November 2017, https://www.vietnam-briefing.com/news/vietnam-eaeu-full-free-trade-agreement.html/
[xiii] Singapore and the Eurasian Economic Union deepen economic relations through a free trade agreement, Ministry of Trade and Industry Singapore, 1 October 2019, https://www.mti.gov.sg/Newsroom/Press-Releases/ 2019/09/Singapore-and-the-Eurasian-Economic-Union-deepen-economic-relations-through-a-free-trade-agreement
[xiv] Serbia - Country Commercial Guide, Official Website of the International Trade Administration, 5 August 2022, https://www.google.com/search?q=EAEU+serbia+FTA&oq=EAEU+serbia+FTA&aqs=chrome..69i57j0i390l5.3352j0j7&sourceid=chrome&ie=UTF-8
[xv] Tokayev Addresses Economic Challenges, Digitalization Prospects at Supreme Eurasian Economic Council Meeting in Bishkek, The Astana Times, 10 December 2022, https://astanatimes.com/2022/12/tokayev-addresses-economic-challenges-digitalization-prospects-at-supreme-eurasian-economic-council-meeting-in-bishkek/, accessed on 11 December 2022.
[xvi]First Eurasian Economic Forum, The Kremlin, 26 May 2022, http://en.kremlin.ru/events/president/news/68484, Accessed on 10 December 2022.