The Eurasian Economic Union: A Dead End?

In the aftermath of the 2014 Sochi Winter Olympics, one could hardly doubt Russian President Vladimir Putin’s ability to show off his extravagant pet-projects. But times have certainly changed in the region over the past year – judging not only by the significantly less fanfare received by the inauguration of the Putin-engineered Eurasian Economic Union on the 1st of January. Arguably the centerpiece of Russian foreign policy in the post-Soviet region, the Eurasian Economic Union (EEU) functions as a common market and customs union between Russia, Belarus, Kazakhstan, and Armenia, as well as Kyrgyzstan, which agreed to ascend to the union by May 2015. However, overshadowed by the crisis in Ukraine abroad and undermined by political differences and economic stagnation within the bloc, the EEU’s first few months in existence have lacked policy cohesion and direction, in turn seriously harming its prospects for long-term success.

Alexander Lukashenko, President of Belarus, Vladimir Putin, President of Russia, and Catherine Ashton (from right to left)Before the establishment of the EEU, economic integration amongst post-Soviet states first began in 2010, when Russia, Belarus, and Kazakhstan established the Eurasian Customs Union, which eradicated customs tariffs as well as barriers to capital and labour movement between the three countries. Modeled on Europe’s transition from the European Economic Community (EEC) to the deeper-integrated European Union (EU), the founding of the Eurasian Customs Union outlined the explicit objective to create a Eurasian regional institution with economic integration mechanisms to rival that of the EU. The project was of utmost importance: in 2011, Russian then-Prime Minister Putin promised that creating and ensuring the success of the EEU would be his first foreign policy initiative shortly after he announced his intention to re-run for President of Russia during the 2012 election.

At the time of the establishment of the Customs Union in 2010, Russian relations with the West and with other post-Soviet states – most, but not all, as the notable examples of the Baltic states and Georgia took steps to distance their policy course from Russia – were relatively positive, and economic (GDP) growth prevailed at rates of 4.5%, 7.7%, and 7.5% in Russia, Belarus, and Kazakhstan respectively. Five years later, however, the West stands staunchly opposed to Russia’s controversial involvement in Ukraine, and Western sanctions, corrupt business practices, and a lack of economic diversification amidst a slump in oil prices undermine the Russian, Belarusian, and Kazakh economies.

The ouster of former Ukrainian President Viktor Yanukovich, a close ally with Moscow, proved to be a watershed moment in the stunted development of the EEU as an institution. In November 2013, Yanukovich controversially rejected an Association Agreement with the EU that pledged to strengthen political and economic ties with Europe; instead, Yanukovich preferred to turn to the Kremlin, which promised natural gas subsidies and urged Ukraine to join the EEU. Ultimately, pro-European demonstrators and politicians in Kiev pushed Yanukovich, and his pro-Russian foreign policy, from power, and any prospect of Ukrainian membership in the EEU vanished.

Russia’s subsequent annexation of Crimea in March 2014, which was justified by President Putin’s doctrine enabling Russia to intervene in neighboring countries to protect ethnic Russians, sent shockwaves across the EEU. Particularly, Russian involvement in Ukraine caused Belarus and Kazakhstan, both founding members of the Eurasian Customs Union as well as countries with large ethnic-Russian minorities, to worry about potential Russian infringement along their borders. The crisis exposed a divergence in regional policy: whilst the EEU aimed to further politically integrate Belarus, Kazakhstan, and Russia, the former two countries shed the obligation to integrate politically in light of Russia’s evident policy of regional dominance. Even Belarusian President Alexander Lukashenko described Russia’s annexation of Crimea as a “bad precedent for the region,” and Kazakh President Nursultan Nazarabyev expressed fears over the “politicization” of the Eurasian Customs Union. Coming at a time during which bureaucrats were formulating the transition from the Customs Union to the EEU, these regional differences spread to the on-going implementation of the EEU, as Kazakh politicians announced opposition to the creation of a regional parliament as part of the EEU’s governing structure. Meanwhile, Russia shifted its policy priorities away from the EEU and towards the conflict in Ukraine, which acted to completely overshadow the region’s transition to the EEU, at the same time undermining the existing structure of the institution by jeopardizing prospects for political cooperation between its core member states.

While support for the political integration of the EEU eroded, conflicting economic policies further undermined the region’s transition to a common market. Many of the obstacles to economic integration within the EEU also derive from the ramifications of the war in Ukraine, including Western sanctions and increased international isolation against Russia. After placing a ban on European food products as part of its counter-sanctions regime, Russia banned Belarusian meat products in November 2014, accusing Belarus, which was unaffected by Russia’s ban on European goods, of becoming a smuggling route for illicit foods from the EU. Moreover, with the Belarusian and Kazakh economies both highly dependent on exports to Russia, the abrupt fall in the Russian rouble over the past several months harmed Belarusian and Kazakh exports and resulted in a decline in economic growth in all three countries.  Economic dependence between Russia and other post-Soviet countries will only grow deeper within the EEU, causing fears of overdependence on Russian market under the current agreement.

Setting up a complex institutional structure in just over four years was an ambitious task in the first place. Nevertheless, the EEU’s current trajectory is held back by political differences and economic decline, and these regional disagreements, such as those over the war in Ukraine, will continue to greatly undermine EEU’s credibility. They will weaken the EEU both in the short-run, as existing member states will seek to distance themselves from the union, as well as in the long-term, as the institution’s lack of structure and prosperity will fail to attract potential new member states. As a result, conflicts within the EEU stand to perpetuate mistrust between states in the region, which in turn will write off the EEU’s long-term future as simply another post-Cold War regional organization mired in diplomatic conflict and unable to reconcile the bifurcating policy visions amongst states in the post-Soviet space.

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